- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
June 7, 1996
FAMILY GOLF CENTERS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-25098 11-3223246
- ---------------- ---------------- ---------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) No.)
225 Broadhollow Road
Melville, New York 11747
------------------------------------------
(Address of principal executive offices)
Registrant's Telephone Number, including
area code: (516) 694-1666
------------------------------------------------
(Former Address, if changed since last report)
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<PAGE>
Item 2. Acquisition or Disposition of Assets.
The Cincinnati, Ohio Golf Center
On June 7, 1996, Family Golf Centers, Inc. (the "Company"),
pursuant to a stock purchase agreement, acquired K.G. Golf, Inc., an Ohio
corporation ("KGG"). The assets owned by KGG include (i) a lease of
approximately 24 acres of real property in Fairfield, Ohio (near Cincinnati)
on which there is a driving range, pro shop and related facilities used and
operated as a golf center, and (ii) certain equipment, fixtures and personal
property used in connection with the operation of the golf center (the "Ohio
Assets").
Pursuant to the stock purchase agreement, dated as of June
7, 1996, among the three individual stockholders of KGG, KGG and the Company,
the Company purchased the Ohio Assets in exchange for (i) $1,400,000 in cash,
and (ii) the assumption of liabilities of $70,000 in connection with the Ohio
Assets. The source of funds for the acquisition was $1,400,000 from the
Company's line of credit with Chemical Bank. This line of credit (the
"Chemical Bank Credit Line") bears interest at the prime rate of interest plus
1.5% and is secured by the Company's pledge of all the outstanding shares of
Pelham Family Golf Centers, Inc. (a wholly owned subsidiary of the Company
which owns the Pelham Golf Center located in Greenville, South Carolina).
The Company intends to continue operating this property as a
golf center and to make various capital improvements to it.
The foregoing summary of the acquisition and related
transactions is incomplete and is qualified in its entirety by reference to
the copy of the agreement filed as Exhibit 1 annexed hereto.
The Tucson, Arizona Golf Center
On June 7, 1996, the Company, pursuant to a purchase
agreement, acquired from four individuals (the "Sellers") (i) approximately 18
acres of
- 2 -
<PAGE>
real property in Tucson, Arizona, on which property there is a driving range,
pro shop and related facilities used and operated as the "Catalina Golf
Center", and (ii) certain equipment, fixtures and personal property used in
connection with the operation of the golf center (the "Tucson Assets").
Pursuant to the purchase agreement, dated as of June 7,
1996, among the Sellers and a wholly-owned subsidiary of the Company (the
"Tucson Purchase Agreement"), the Company purchased the Tucson Assets for
$1,100,000 in cash, all of which was derived from the Company's Chemical Bank
Credit Line.
As part of the acquisition, the Sellers placed $50,000 in
cash in escrow as security for the performance of certain obligations of the
Sellers under the Tucson Purchase Agreement.
The Company intends to continue operating the Catalina Golf
Center as a golf center and to make various capital improvements to it.
The foregoing summary of the acquisition and related
transactions is incomplete and is qualified in its entirety by reference to
the copy of the agreement filed as Exhibit 2 annexed hereto.
The St. Louis, Missouri Golf Center
On June 7, 1996, the Company, pursuant to a purchase
agreement, acquired certain assets from Tree Court Golf & Recreational
Complex, Inc. (the "St. Louis Seller"). The acquired assets included (i) a
lease of approximately 42 acres of real property in St. Louis, Missouri
("Missouri Lease") on which there is a nine-hole executive golf course, driving
range, pro shop and related facilities used and operated as a golf center, and
(ii) certain equipment, fixtures and personal property used in connection with
the operation of the golf center (the "St. Louis Assets").
Pursuant to the purchase agreement, dated as of June 7,
1996, among the St. Louis Seller and a wholly-owned subsidiary of the
Company, the Company
- 3 -
<PAGE>
purchased the St. Louis Assets for $1,300,000 in cash, all of which was
derived from the Company's Chemical Bank Credit Line. The Company has
guaranteed the obligations of its wholly owned subsidiary under the Missouri
Lease.
The Company intends to operate the property as the "St.
Louis Family Golf Center" and to make various capital improvements to it.
The foregoing summary of the acquisition and related
transactions is incomplete and is qualified in its entirety by reference to
the copy of the agreement filed as Exhibit 3 annexed hereto.
The West Palm Beach, Florida Golf Center
On June 10, 1996, the Company, pursuant to a purchase
agreement, acquired certain assets from W.A.G.N. Partners (the "WPB Seller").
The acquired assets included (i) approximately 32 acres of real property in
West Palm Beach, Florida on which there is an 18-hole, par-3 golf course,
driving range, pro shop and related facilities used and operated as a golf
center, and (ii) certain equipment, fixtures and personal property used in
connection with the operation of the golf center (the "West Palm Beach
Assets").
Pursuant to the purchase agreement, dated as of June 10, 1996, among
the WPB Seller and a wholly-owned subsidiary of the Company, the Company
purchased the West Palm Beach Assets for $1,750,000 in cash. The source of
funds for the acquisition consisted of (i) $1,130,000 derived from the
Company's Chemical Bank Credit Line and (ii) $620,000 derived from working
capital.
The Company intends to operate the property as the "West Palm Beach
Golf Center" and to make various capital improvements to it.
The foregoing summary of the acquisition and related transactions in
incomplete and is qualified in its entirety by reference to the copy of the
agreement filed as Exhibit 4 annexed hereto.
- 4 -
<PAGE>
Annexed hereto as Exhibit 5 is a press release issued by the
Company on June 11, 1996 announcing, among other things, the Company's
acquisitions of the four golf centers referenced above.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
Item 7 is supplemented by the addition of the
following:
(a) Financial Statements of Businesses Acquired
In accordance with Item 7(a)(4) of Form
8-K, attached hereto as Exhibits 6, 7, 8, 9 and 10 respectively are the
financial statements of K.G. Golf, Inc., Catalina Golf Center, Tree Court Golf
& Recreational Complex, Inc., Golf and Sports Center of the Palm Beaches, Inc.
and W.A.G.N. Partners.
(b) Pro Forma Financial Information
In accordance with Item 7(b)(2) of Form
8-K, attached hereto as Exhibit 11 are the pro forma financial statements
required by Article 11 of Regulation S-X, which pro forma financial statements
include in addition to the four golf centers referenced above, the acquisitions
of Owl's Creek Golf Center, Inc., Flemington Golf and Sports Center, LLC and
associated land, 202 Golf Associates, Inc., Indian River Golf-O-Rama, Inc. and
all of the acquisitions made by the Company in 1995.
(c) Exhibits
*1. Stock Purchase Agreement, dated
June 7, 1996, among Joseph E. Wolf, Kenneth R. Gibbons and Richard Johnson, as
sellers, K.G. Golf, Inc., and Family Golf Centers, Inc.
*2. Purchase Agreement, dated June 7,
1996, among Ruth Perillo, Lynn Perillo, Glen Perillo and Oscar Ramirez, as
sellers, and Tucson
- 5 -
<PAGE>
Family Golf Centers, Inc., a wholly owned subsidiary of Family Golf Centers,
Inc.
*3. Assignment and Assumption of Lease,
dated June 7, 1996, by and between Tree Court Golf & Recreational Complex,
Inc. and St. Louis Family Golf Centers, Inc., a wholly owned subsidiary of
Family Golf Centers, Inc.
*4. Purchase Agreement, dated June
10, 1996, by and between W.A.G.N. Partners and West Palm Beach Family Golf
Centers, Inc., a wholly owned subsidiary of Family Golf Centers, Inc.
5. Press Release issued by the Company
on June 11, 1996.
6. Audited Financial Statements of K.G.
Golf, Inc. for the year ended December 31, 1995 and unaudited financial
statements for the three months ended March 31, 1996.
7. Audited Financial Statements of
Catalina Golf Center for the year ended December 31, 1995 and unaudited
financial statements for the three months ended March 31, 1996.
8. Audited Financial Statements of Tree
Court Golf & Recreational Complex, Inc. for the year ended December 31, 1995 and
unaudited financial statements for the three months ended March 31, 1996.
9. Audited Financial Statements of Golf
and Sports Center of the Palm Beaches, Inc. for the year ended December 31,
1995 and unaudited financial statements for the three months ended March 31,
1996.
10. Audited Financial Statements of
W.A.G.N. Partners for the year ended December 31, 1995.
11. Unaudited pro forma condensed
balance sheet of the Company and its subsidiaries as of March 31, 1996 and
unaudited pro forma condensed statements of operations of the Company and its
subsidiaries for the year ended December 31, 1995 and for the three months ended
March 31, 1996.
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<PAGE>
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* Incorporated by reference to Amendment No. 1 to the Company's
Registration Statement (Registration No. 333-4541) filed on June 12,
1996.
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<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
June 24, 1996
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
----------------------------------
Dominic Chang,
President and Chief Executive Officer
- 8 -
EXHIBIT INDEX
EXHIBIT NOS. AND DESCRIPTON
---------------------------
*1. Stock Purchase Agreement, dated
June 7, 1996, among Joseph E. Wolf, Kenneth R. Gibbons and Richard Johnson, as
sellers, K.G. Golf, Inc., and Family Golf Centers, Inc.
*2. Purchase Agreement, dated June 7,
1996, among Ruth Perillo, Lynn Perillo, Glen Perillo and Oscar Ramirez, as
sellers, and Tucson Family Golf Centers, Inc., a wholly owned subsidiary of
Family Golf Centers, Inc.
*3. Assignment and Assumption of Lease,
dated June 7, 1996, by and between Tree Court Golf & Recreational Complex,
Inc. and St. Louis Family Golf Centers, Inc., a wholly owned subsidiary of
Family Golf Centers, Inc.
*4. Purchase Agreement, dated June
10, 1996, by and between W.A.G.N. Partners and West Palm Beach Family Golf
Centers, Inc., a wholly owned subsidiary of Family Golf Centers, Inc.
5. Press Release issued by the Company
on June 11, 1996.
6. Audited Financial Statements of K.G.
Golf, Inc. for the year ended December 31, 1995 and unaudited financial
statements for the three months ended March 31, 1996.
7. Audited Financial Statements of
Catalina Golf Center for the year ended December 31, 1995 and unaudited
financial statements for the three months ended March 31, 1996.
8. Audited Financial Statements of Tree
Court Golf & Recreational Complex, Inc. for the year ended December 31, 1995 and
unaudited financial statements for the three months ended March 31, 1996.
9. Audited Financial Statements of Golf
and Sports Center of the Palm Beaches, Inc. for the year ended December 31,
1995 and unaudited financial statements for the three months ended March 31,
1996.
10. Audited Financial Statements of
W.A.G.N. Partners for the year ended December 31, 1995.
11. Unaudited pro forma condensed
balance sheet of the Company and its subsidiaries as of March 31, 1996 and
unaudited pro forma condensed statements of operations of the Company and its
subsidiaries for the year ended December 31, 1995 and for the three months ended
March 31, 1996.
- -------------------
* Incorporated by reference to Amendment No. 1 to the Company's
Registration Statement (Registration No. 333-4541) filed on June 12,
1996.
For: FAMILY GOLF CENTERS, INC.
FROM: Hal Le Vay
COMANY: Krishan Thampi
CONTACT: (516) 694-1666
FOR IMMEDIATE RELEASE
FAMILY GOLF CENTERS ACQUIRES FIVE ADDITIONAL FACILITIES
MELVILLE, NY, June 11 -- Family Golf Centers, Inc. (NASDAQ,NM:FGCI)
which owns, operates and manages golf-related facilities, announced today that
it has acquired five additional centers for an undisclosed amount of cash,
increasing the number of company centers to 24 in 10 states.
The facilities being acquired include Golf-O-Rama in Virginia Beach, VA;
Ken Gibbons Golf and Learning Center, Cincinnati, OH; Tree Court Golf and
Recreational Complex, St. Louis, MO; Catalina Driving Range, Tucson, AZ; Golf
and Sport Center of West Palm Beach, West Palm Beach, FL. The acquistions mark
the company's entry into the Missouri and Florida markets and add a second
center in the Virginia Beach\Norfolk area.
-more-
<PAGE>
"The centers aggregate 228 tees and include other facilities including
pro shops, miniature golf courses, putting greens and short game practice
areas," Dominic Chang, president and chief executive officer, said. Two of the
centers also have batting cages, the West Palm Beach center has a lighted 18-
hole par three golf course and the St. Louis center has a nine-hole executive
golf course.
The September 1995 survey of the top 50 golf ranges in the U.S. by Golf
Range and Recreation Magazine includes four golf centers acquired by the company
in 1996: The Virginia Beach, Cincinnati and St. Louis centers and the previously
acquired Mesa, AZ center.
########
1996
Independent Auditors' Report
To the Board of Directors and
Stockholders of K.G. Golf, Inc.
We have audited the accompanying balance sheet of K.G. Golf, Inc. (an Ohio
Corporation) as of December 31, 1995, and the related statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of K.G. Golf, Inc. as of
December 31, 1995 and the results of operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Goffena & Baker, CPA
Fairfield, Ohio
June 6, 1996
<PAGE>
K.G. GOLF, INC.
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash ............................................................ $ 8,497
Accounts Receivable ............................................. 465
Inventory ....................................................... 94,184
---------
TOTAL CURRENT ASSETS .......................................... $ 103,146
PROPERTY AND EQUIPMENT
Furniture and Fixtures (Net of Accumulated Depreciation of
$31,742) ........................................................ $ 29,708
Equipment (Net of Accumulated Depreciation of $39,192) ......... 41,733
Leasehold Improvements (Net of Accumulated Depreciation of
$122,861) ...................................................... 955,240
---------
TOTAL PROPERTY AND EQUIPMENT ................................... 1,026,681
OTHER ASSETS
Organization Costs .............................................. $ 370
Deposits ........................................................ 900
---------
TOTAL OTHER ASSETS ............................................. 1,270
-----------
TOTAL ASSETS ..................................................... $1,131,097
===========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable ....................................... $ 56,935
Payroll Taxes Withheld ................................. 765
Accrued Expenses ....................................... 12,991
Sales Tax Payable ...................................... 2,353
Note Payable--Bank ..................................... 850,000
-----------
TOTAL CURRENT LIABILITIES ............................. $ 923,044
LONG TERM DEBT
Notes payable--Officer ................................. 483,625
STOCKHOLDERS' EQUITY
Common Stock--750 shares authorized, 300 shares issued
and outstanding ....................................... $ 75,000
Retained Earnings ...................................... (350,572)
-----------
TOTAL STOCKHOLDERS' EQUITY ............................ (275,572)
-----------
TOTAL LIABILITIES AND EQUITY ............................ $1,131,097
===========
</TABLE>
The Accompanying Notes are an integral part of the Financial Statements.
<PAGE>
K.G. GOLF, INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
SALES ....................................... $ 791,182
COST OF SALES ............................... 283,712
---------
GROSS PROFIT ................................ $ 507,470
OPERATING EXPENSES
Wages and Payroll Tax ...................... $189,719
Interest ................................... 103,851
Rent ....................................... 65,680
Depreciation ............................... 60,636
Other Operating ............................ 200,513
--------
Total Operating Expenses ................. 620,399
---------
NET (LOSS) .................................. $(112,929)
=========
</TABLE>
K.G. GOLF, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
BEGINNING BALANCE, JANUARY 1, 1995 $(237,643)
Net (Loss) for the year ended ... (112,929)
------------
ENDING BALANCE, DECEMBER 31, 1995 $(350,572)
============
The Accompanying Notes are an integral part of the Financial Statements.
<PAGE>
K.G. GOLF, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>
CASH FLOWS FROM OPERATING EXPENSES:
Net Loss ........................................................... $(112,929)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating
Activities:
Depreciation and Amortization ..................................... $61,079
Shareholder Interest not requiring cash ........................... 26,250
Decrease in Account Receivable .................................... 830
Decrease in Inventory ............................................. 4,737
Increase in Accounts Payable ...................................... 20,534
(Decrease) in Payroll Tax Withholding ............................. (237)
(Decrease) in Accrued Expenses .................................... (1,351)
(Decrease) in Sales Tax Payable ................................... (103)
(Decrease) in Accrued Interest .................................... (6,222) 105,517
--------- ------------
Net Cash Used by Operating Activities ........................... $ (7,412)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment ................................. (15,397)
CASH FLOWS FROM FINANCING ACTIVITIES ............................... -0-
NET CASH (DECREASE) IN CASH BALANCE ................................ (22,809)
CASH, JANUARY 1, 1995 .............................................. 31,306
------------
CASH, DECEMBER 31, 1995 ............................................ $ 8,497
============
SUPPLEMENTAL INFORMATION:
Cash Flows from operating activities include interest paid of
$77,601.
</TABLE>
The Accompanying Notes are an integral part of the Financial Statements.
<PAGE>
K.G. GOLF, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
K.G. Golf, Inc. (the "Company") was incorporated on September 30, 1991 and
operates a golf center consisting of a driving range, a golf supply shop, a
putt-putt center and golf instruction. The center is located in Fairfield,
Ohio.
Accounts Receivable
The Company does not sell on open account. Thus, trade receivables are
minor.
Inventory
Inventories are maintained through a perpetual inventory system. A
physical inventory is taken as of year end for financial statement purposes
and perpetual inventory quantities are adjusted to physical inventory counts.
Inventory on hand at December 31, 1995 was valued at the lower of cost or
market.
Property and Equipment
Physical assets are recorded at their original cost or at their fair
market value at the date of their contribution to the business, if lower.
Major additions and betterments are added to the property accounts while
maintenance and repairs which do not appreciably extend the useful lives of
the related assets are expensed when incurred. Management has not recorded
salvage value as it believes there will be negligible value to these assets
at the end of their useful lives.
Depreciation expense is computed for financial statement purposes using
the straight-line depreciation method over the anticipated useful lives of
owned assets. Leasehold improvements are amortized over the estimated useful
life of each property being leased.
Income Taxes
The Company has elected to be taxed under the provision of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
corporate income taxes on its taxable income (loss). Instead, the
stockholders are liable for individual income taxes on their respective
shares of the Company's net operating income (loss) in their individual
income tax returns. Therefore, no income tax expense appears on these
financial statements.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or
less to be cash equivalents.
<PAGE>
K.G. GOLF, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995
RELATED PARTY TRANSACTIONS
A note, dated October 31, 1992, was signed by each of the three
shareholders. The total amount due is $375,000. The notes are due October 31,
1997. Interest is payable annually at 7% on the unpaid balance. The notes are
unsecured, but are subordinated to a revolving line of credit to Fifth Third
Bank. Interest has accrued unpaid on the notes since 1992 and currently total
$83,125.
An additional $8,500 was loaned to the Company by each shareholder
totalling $25,500. This amount is unsecured and non-interest bearing.
The total of all amounts due shareholders is as stated on the balance
sheet of $483,625.
NOTE PAYABLE -- BANK
A note is payable to Fifth Third Bank in the amount of $850,000. Interest
accrues at the bank's "Prime Rate" and shall vary as changes are announced.
Interest is payable quarterly beginning March 27, 1996. Principal is due at
$4,000 per month for seven months beginning March 27, 1996, then $2,000 per
month for two months, then the entire balance is due on December 27, 1996.
The note is secured by Company assets and various securities held in Trust
and it is cross collateralized to other K.G. Golf, Inc. notes.
GROUND LEASE AGREEMENT
The Company entered into a ground lease agreement on October 17, 1991 for
the property on which the facility currently operates in Fairfield, Ohio. The
agreement details a primary term of five years beginning with the opening of
the facility. During this period, monthly rent is equal to 15% of gross
income collected by the lessee from the Fairfield operation, except for the
pro shop, which is 7 1/2 % of gross income. There is a minimum annual rental
of $48,000. The lessee will owe the lessor 35% of any sublease income, if
applicable, for the facility. There are three consecutive five year options
to renew the lease beginning after the end of the primary term. The minimum
annual rental will be adjusted for inflation during this period.
Future minimum rental payments required as of December 31, 1995 are as
follows:
1996 ..... $48,000
1997 ..... $40,000
<PAGE>
K.G. GOLF, INC.
BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
<S><C>
ASSETS
CURRENT
Cash .................................................. $ 4,469
Accounts Receivable ................................... 2,255
Inventory ............................................. 106,024
---------
TOTAL CURRENT ASSETS ................................ $ 112,748
PROPERTY AND EQUIPMENT
Furniture and Fixtures (Net of Accumulated
Depreciation) ........................................ $ 39,652
Equipment (Net of Accumulated Depreciation) .......... 52,060
Leasehold Improvements (Net of Accumulated
Depreciation) ........................................ 901,699
TOTAL PROPERTY AND EQUIPMENT ........................ 993,411
-----------
TOTAL ASSETS ........................................... $1,106,159
===========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable ....................................... $ 113,599
Sales Tax Payable ...................................... 1,477
-----------
TOTAL CURRENT LIABILITIES ............................ $ 115,233
LONG TERM DEBT
Notes Payable .......................................... 1,302,480
STOCKHOLDERS' EQUITY
Common Stock--750 shares authorized, 300 shares issued
and outstanding ....................................... $ 75,000
Retained Earnings ...................................... (386,554)
TOTAL STOCKHOLDERS' EQUITY ........................... (311,554)
-----------
TOTAL LIABILITIES AND EQUITY ............................ $1,106,159
===========
</TABLE>
<PAGE>
K.G. GOLF, INC.
INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1996
SALES ..................... $119,991
COST OF SALES ............. 52,387
----------
GROSS PROFIT .............. 67,604
OPERATING EXPENSES
Wages and Payroll Tax ... 17,933
Interest ................. 24,453
Rent ..................... 8,804
Depreciation ............. 20,256
Other Operating .......... 32,140
----------
Total Operating Expenses 103,586
----------
NET (LOSS) ................ $(35,982)
==========
The Accompanying Notes are an integral part of the Financial Statements.
<PAGE>
K.G. GOLF, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
<S><C>
CASH FLOWS FROM OPERATING EXPENSES:
Net (Loss) .................................................................................................... $ (35,982)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:
Depreciation and Amortization ................................................................................ 33,640
Shareholder Interest not requiring cash ...................................................................... 18,953
Increase in Account Receivable ............................................................................... (1,789)
Increase in Inventory ........................................................................................ (11,841)
Increase in Accounts Payable ................................................................................. 86,019
(Decrease) in Payroll Tax Withholding ........................................................................ (608)
(Decrease) in Accrued Expenses ............................................................................... (5,319)
(Decrease) in Sales Tax Payable .............................................................................. (876)
-----------
Net Cash provided by Operating Activities ................................................................... 82,197
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in Deposits .......................................................................................... 900
-----------
Net cash provided by investing activities ..................................................................... 900
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Notes Payable--Bank .............................................................................. (850,000)
Borrowings from Shareholders .................................................................................. 762,875
Net cash (used in) financing activities ..................................................................... (87,125)
===========
NET CASH (DECREASE) IN CASH BALANCE ........................................................................... (4,028)
CASH, JANUARY 1, 1996 ......................................................................................... 8,497
-----------
CASH, MARCH 31, 1996 .......................................................................................... $ 4,469
===========
SUPPLEMENTAL INFORMATION:
Cash Flows from operating activities include Interest Paid of $5,500
</TABLE>
<PAGE>
K.G. GOLF, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
K.G. Golf was incorporated on September 30, 1991. They operate a Golf
Center consisting of a driving range, a golf supply shop, a putt-putt center
and golf instruction. The center is located in Fairfield, Ohio.
Accounts Receivable
The Company does not sell on open account. Thus, trade receivables are
minor.
Inventory
Inventories are maintained through a perpetual inventory system. A
physical inventory is taken as of year end for financial statement purposes
and perpetual inventory quantities are adjusted to physical inventory counts.
Property and Equipment
Physical assets are recorded at their original cost or at their fair
market value at the date of their contribution to the business, if lower.
Major additions and betterments are added to the property accounts while
maintenance and repairs which do not appreciably extend the useful lives of
the related assets are expensed when incurred. Management has not recorded
salvage value as it believes there will be negligible value to these assets
at the end of their useful lives.
Depreciation expense is computed for financial statement purposes using
the straight-line depreciation method over the anticipated useful lives of
owned assets. Leasehold improvements are amortized over the estimated useful
life of each property being leased.
Income Taxes
The Company has elected to be taxed under the provision of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
corporate income taxes on its taxable income (loss). Instead, the
stockholders are liable for individual income taxes on their respective
shares of the Company's net operating income (loss) in their individual
income tax returns. Therefore, no income tax expense appears on these
financial statements.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or
less to be cash equivalents.
NOTE B -- INTERIM FINANCIAL STATEMENTS
The financial statements as of March 31, 1996 and for the three months
then ended are unaudited and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. In the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the Company's
financial position and results of operations.
INDEPENDENT AUDITOR'S REPORT
To the Owner
Catalina Golf Center
We have audited the accompanying balance sheet of Catalina Golf Center, as
of December 31, 1995, the related statements of income and proprietor's
capital and cash flows for the year then ended. These financial statements
are the responsibility of the management of Catalina Golf Center. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Catalina Golf Center, as
of December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
ROBERT DECKER,
C.P.A.
Tucson, Arizona
June 6, 1996
<PAGE>
CATALINA GOLF CENTER
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
CURRENT ASSETS
Cash ....................................... $ 4,657
Inventory .................................. 1,523
-----------
TOTAL CURRENT ASSETS ...................... 6,180
PROPERTY AND EQUIPMENT
Property and equipment, net ................ 573,037
OTHER ASSETS
Loan origination fees, net ................. 32,204
-----------
TOTAL ASSETS .............................. $ 611,421
===========
LIABILITIES AND PROPRIETOR'S CAPITAL
CURRENT LIABILITIES
Notes payable .............................. $ 722,120
Street assessment payable .................. 44,267
Property taxes payable ..................... 43,126
Accrued payroll and payroll taxes .......... 6,248
Accounts payable ........................... 103,106
Accrued interest ........................... 53,574
Litigation payable ......................... 363,091
-----------
TOTAL CURRENT LIABILITIES ................. 1,335,532
PROPRIETOR'S CAPITAL (DEFICIT) .............. (724,111)
-----------
TOTAL LIABILITIES AND PROPRIETOR'S CAPITAL $ 611,421
===========
See notes to financial statements
<PAGE>
CATALINA GOLF CENTER
STATEMENT OF INCOME AND PROPRIETOR'S CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>
REVENUE
Sales .............................................................................. $ 156,515
-----------
COSTS AND EXPENSES
Salaries and benefits .............................................................. 51,682
Taxes .............................................................................. 45,071
Utilities .......................................................................... 24,847
Landscaping ........................................................................ 16,471
Depreciation and amortization ...................................................... 36,394
Commissions ........................................................................ 18,392
Operational and golf supplies ...................................................... 36,439
Repairs and maintenance ............................................................ 3,434
General and administrative ......................................................... 8,895
Advertising and promotion .......................................................... 5,453
-----------
TOTAL COSTS AND EXPENSES .......................................................... 247,078
-----------
OPERATING LOSS .................................................................. (90,563)
-----------
OTHER INCOME (EXPENSE)
Interest expense ................................................................... (132,398)
Rental income ...................................................................... 4,500
-----------
TOTAL OTHER INCOME (EXPENSE) ...................................................... (127,898)
-----------
LOSS BEFORE EXTRAORDINARY ITEM ...................................................... (218,461)
-----------
EXTRAORDINARY ITEM (Note 6)
Litigation judgment against owner related to original agreement to build golf
center ............................................................................. (363,091)
-----------
NET LOSS ......................................................................... (581,552)
PROPRIETOR'S CAPITAL (DEFICIT) -- BEGINNING OF YEAR ................................. (190,609)
Capital contributed ................................................................ 48,050
-----------
PROPRIETOR'S CAPITAL (DEFICIT) -- END OF YEAR ....................................... $(724,111)
===========
</TABLE>
See notes to financial statements
<PAGE>
CATALINA GOLF CENTER
STATEMENT OF CASH FLOW
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................... $(581,552)
Adjustments to reconcile net loss to net cash from operating
activities:
Extraordinary item .................................................... 363,091
Depreciation and amortization ......................................... 36,394
Decrease in current assets:
Inventory ............................................................ 477
Increase in current liabilities:
Property taxes payable ............................................... 43,126
Accrued payroll and payroll taxes .................................... 6,248
Accounts payable ..................................................... 56,528
Accrued interest ..................................................... 40,241
------------
Net cash used in operating activities ............................... (35,447)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on street assessment .......................................... (984)
Capital contributions .................................................. 48,050
Payment for loan origination fees ...................................... (10,000)
------------
Net cash provided by financing activities ........................... 37,066
------------
NET INCREASE IN CASH .................................................... 1,619
CASH -- BEGINNING OF YEAR ............................................... 3,038
------------
CASH -- END OF YEAR ..................................................... $ 4,657
============
SUPPLEMENTAL DISCLOSURES
Operating activities reflect the following cash payments:
Interest .............................................................. $ 92,157
============
</TABLE>
See notes to financial statements
<PAGE>
CATALINA GOLF CENTER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
Catalina Golf Center (the "Business"), is a proprietorship owned by Ruth
Perillo. The proprietorship owns and operates a golf driving range located in
Tucson, Arizona. Ruth Perillo's other personal assets have not been included
in these financial statements.
Basis of Accounting:
These financial statements reflect the accrual method of accounting.
Income Taxes:
No provision for income taxes has been made in these statements. All
income taxes are paid for by Ruth Perillo at the personal level.
Inventory:
Inventory consists of golf balls, related golf supplies and soft drinks
for sale and is stated at lower of cost or market on the FIFO basis.
Property and Equipment:
Property and equipment is carried at cost. The cost of property and
equipment is depreciated over the estimated useful lives of the related
assets. Depreciation is computed using the straight-line method for financial
reporting purposes and on the accelerated cost recovery system method for
income tax purposes. The estimated useful lives of the assets for purposes of
computing depreciation are as follows:
Building and improvements .... 40 years
Furniture and equipment ...... 5 years
Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred.
Loan Origination Fees:
Costs of obtaining the development loan have been capitalized and are
being amortized over the life of the loan. During 1995, the Business incurred
a $10,000 fee to extend the loan for one year. Amortization expense was
$17,048 for the year ended December 31, 1995.
Accounts payable reserve:
In the normal course of business there arises various commitments and
contingent liabilities with various vendors. Since the Business is a sole
proprietorship, the liabilities of the owner and the Business become
difficult to separate. Management has estimated a reserve of $50,000 for such
liabilities which are included in accounts payable. The amount of reserve is
reflected in prior years earnings.
Statement of Cash Flows:
For purposes of the statement of cash flows, the Business considers all
highly liquid debt instruments purchased with a maturity of three months or
less, to be cash equivalents. There were no cash equivalents at December 31,
1995.
<PAGE>
CATALINA GOLF CENTER
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE 2 -- FUTURE FINANCING
As shown in the accompanying financial statements, the Business incurred a
net loss of $581,552 for the year ended December 31, 1995. The Business
continues to operate at a negative cash flow and finance charges and accounts
payable deficiencies continue to increase. Those factors, as well as the
litigation judgment placed against the Business owner and the Business
owner's inability to contribute additional capital, create an uncertainty
about the Business' ability to continue operations. Unless the Business
obtains significant additional financing, the Business will be unable to
continue operations in the near future. The financial statements do not
include any adjustments that might be necessary if the Business is unable to
continue as a going concern.
NOTE 3 -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Building and improvements $539,169
Furniture and equipment .. 10,785
Land ...................... 65,000
----------
614,954
Accumulated depreciation . (41,917)
----------
Net property and equipment $573,037
==========
Depreciation expense was $19,346 for the year ended December 31, 1995.
NOTE 4 -- LAND
The land upon which the Business operates is owned as follows:
Ruth Perillo ......27%
Lyn Perillo ....... 24%
Glenn Perillo ..... 24%
Oscar Ramirez ..... 25%
-------
100%
=======
The land has been recorded at the lower of cost or market. For the year
ended December 31, 1995, the Business is under no obligation to make lease
payments to the other owners for usage of the land.
<PAGE>
CATALINA GOLF CENTER
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE 5 -- NOTES PAYABLE
Notes payable consists of the following at December 31, 1995:
<TABLE>
<CAPTION>
<S><C>
Note payable dated June 10, 1993, interest at 16% due monthly on
outstanding balance, originally matured June 1995, extended for
one year until June 10, 1996, secured by Business land, building
and improvements, property and equipment and by the assignment of
rents, income and receipts of the Business. The note is in
default and interest has been paid through October, 1995 ........ $500,000
Note payable to King & Frisch, P.C., Employees Profit Sharing
Plan, interest at 15%, original principal of $61,000, accrued
interest of $11,120 applied to the note, secured by deed of trust
on the Business land. The note is in default and is past due,
interest has been paid through September, 1994 ................... 72,120
Note payable to William D. King, interest at 13.5%, original
principal loaned of $200,000, secured by deed of trust on the
Business land. The note is in default and is past due, interest
has been paid through August, 1995 ............................... 150,000
----------
Total notes payable ............................................... $722,120
==========
</TABLE>
The owner of the Business has secured other loans with the land on which
the golf driving range operates.
NOTE 6 -- LITIGATION
The owner of the Business and other related parties were defendants in a
lawsuit in connection with the original agreement to build the Business. The
judgment was awarded in favor of the plaintiffs on their claims for breach of
contract, breach of fiduciary duty, breach of duty of good faith and fair
dealing, and racketeering in September, 1995. The judgment awarded was
$300,000 in compensatory damages and $63,091 in plaintiffs' legal fees, cost
of suit fees and jury fees. The judgment bears interest at 10% per annum from
the date of judgment until paid. The owner and other related parties are
filing an appeal to the Appellate Court. The land upon which the Business
operates is only subject to the owner's equity.
<PAGE>
CATALINA GOLF CENTER
BALANCE SHEET
MARCH 31, 1996
ASSETS
CURRENT ASSETS:
Checking account .............. $ 6,841.80
Petty cash .................... 250.00
Inventory ..................... 1,523.00
-------------
TOTAL CURRENT ASSETS ...... $ 8,614.80
PROPERTY AND EQUIPMENT:
Land .......................... $ 65,000.00
Property improvements ......... 539,169.21
Furniture and equipment ...... 10,785.00
Accumulated depreciation ..... (46,316.00)
-------------
TOTAL PROPERTY AND
EQUIPMENT ..................... $568,638.21
OTHER ASSETS:
Finance fees .................. $ 66,073.59
Accum amort -- Finance fees .. (39,174.00)
-------------
TOTAL OTHER ASSETS ......... $ 26,899.59
-------------
TOTAL ASSETS ............... $604,152.60
===========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable ........... $ 98,484.54
Property taxes payable ..... 43,125.69
Street assessment payable .. 44,266.80
PAYROLL TAXES PAYABLE ...... 5,766.07
OTHER ACCRUED EXPENSES ..... 451,597.59
---------------
TOTAL CURRENT LIABILITIES . $ 643,240.69
NON-CURRENT LIABILITIES:
LONG-TERM DEBT NET OF CURRENT $ 722,120.20
---------------
TOTAL NON-CURRENT
LIABILITIES .............. $ 722,120.20
EQUITY:
Capital .................... $(724,111.28)
Capital contribution ....... 1,200.00
NET INCOME (LOSS) .......... (38,297.01)
---------------
TOTAL EQUITY .............. $(761,208.29)
---------------
TOTAL LIABILITIES AND
EQUITY ................... $604,152.60
============
<PAGE>
CATALINA GOLF CENTER
INCOME STATEMENT
FOR THE PERIOD
JANUARY 1, 1996
TO MARCH 31,
1996 ACTUAL $
---------------
SALES:
Sales ......................... $ 38,775.48
---------------
TOTAL SALES .................. 38,775.48
COST OF SALES:
BEGINNING INVENTORY ........... 1,523.00
Golf supplies ................. 453.99
Beverages ..................... 812.55
Outside services .............. 1,100.50
Equipment rental .............. 315.57
Landscaping ................... 375.80
Wages ......................... 8,410.00
ENDING INVENTORY .............. (1,523.00)
---------------
TOTAL COST OF SALES .......... 11,468.41
---------------
GROSS PROFIT ................. 27,307.07
SELLING EXPENSES:
Commissions ................... 1,564.50
---------------
TOTAL SELLING EXPENSES ....... 1,564.50
GENERAL AND ADMINISTRATIVE:
Auto expense .................. 637.10
Amortization .................. 5,304.00
Bank service charges .......... 80.08
Bookkeeping fees .............. 559.00
Depreciation expense .......... 4,399.00
Utilities ..................... 357.33
Insurance--General ............ 46.00
Interest expense .............. 39,520.00
License and fees .............. 75.00
Miscellaneous expense ......... 17.00
Office expense ................ 240.92
Postage expense ............... 35.42
Repairs and maintenance ....... 208.97
Security ...................... 50.00
Taxes--Real estate ............ 11,045.41
Taxes--Payroll ................ 346.92
Telephone ..................... 662.43
Bad debts ..................... 455.00
---------------
TOTAL GENERAL AND
ADMINISTRATIVE .............. 64,039.58
---------------
NET OPERATING INCOME (LOSS) .. (38,297.01)
NET INCOME (LOSS) BEFORE TAX . $(38,297.01)
---------------
NET INCOME (LOSS) ............ $(38,297.01)
===============
<PAGE>
CATALINA GOLF CENTER
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
<S><C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................. $(38,297)
Adjustments to reconcile net loss to net cash from operating
activities:
Extraordinary item ................................................... --
Depreciation and amortization ....................................... 9,703
Decrease in current assets:
Inventory ............................................................
Increase (decrease) in current liabilities:
Accrued payroll and payroll taxes .................................... (482)
Accounts payable .................................................... (4,622)
Accrued expenses .................................................... 34,933
-----------
Net cash provided by operating activities ........................ 1,235
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions ................................................ 1,200
-----------
Net cash provided by financing activities ........................ 1,200
-----------
NET INCREASE IN CASH ................................................... 2,435
CASH -- BEGINNING OF PERIOD ............................................ 4,657
-----------
CASH -- END OF PERIOD .................................................. $ 7,092
===========
</TABLE>
<PAGE>
CATALINA GOLF CENTER
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
Catalina Golf Center, (the Business), is a proprietorship owned by Ruth
Perillo. The proprietorship owns and operates a golf driving range located in
Tucson, Arizona. Ruth Perillo's other personal assets have not been included
in these financial statements.
Basis of Accounting:
These financial statements reflect the accrual method of accounting.
Income Taxes:
No provision for income taxes has been made in these statements. All
income taxes are paid for by Ruth Perillo at the personal level.
Inventory:
Inventory consists of golf balls, related golf supplies and soft drinks
for sale and is stated at lower of cost or market on the FIFO basis.
Property and Equipment:
Property and equipment is carried at cost. The cost of property and
equipment is depreciated over the estimated useful lives of the related
assets. Depreciation is computed using the straight-line method for financial
reporting purposes and on the accelerated cost recovery system method for
income tax purposes. The estimated useful lives of the assets for purposes of
computing depreciation are as follows:
Building and improvements ...40 years
Furniture and equipment ..... 5 years
Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred.
Loan Origination Fees:
Costs of obtaining the development loan have been capitalized and are
being amortized over the life of the loan.
Statement of Cash Flows:
For purposes of the statement of cash flows, the Business considers all
highly liquid debt instruments purchased with a maturity of three months or
less, to be cash equivalents. There were no cash equivalents at March 31,
1996.
NOTE 2 -- INTERIM FINANCIAL STATEMENTS
The financial statements as of March 31, 1996 and for the three months
then ended are unaudited and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. In the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the Business'
financial position and results of operations.
INDEPENDENT AUDITORS' REPORT
Board of Directors
Tree Court Golf &
Recreational Complex, Inc.
St. Louis, Missouri
We have audited the accompanying balance sheet of Tree Court Golf &
Recreational Complex, Inc. (an S Corporation) as of December 31, 1995 and the
related statements of operations, stockholders' deficit and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tree Court Golf &
Recreational Complex, Inc. as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
BDO Seidman, LLP
St. Louis, Missouri
June 5, 1996
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
<S><C>
DECEMBER 31,
1995
--------------
ASSETS
Leasehold Improvements and Equipment (Notes 2 and 6) ................ $ 927,308
Less accumulated depreciation ...................................... (301,523)
--------------
625,785
Cash ................................................................ 3,004
Due From Employees .................................................. 2,250
Organization Costs, net of accumulated amortization of $7,721 ...... 4,470
Deposits ............................................................ 12,700
--------------
$ 648,209
==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Notes Payable -- other (Note 5) ..................................... $ 555,557
Notes Payable -- related parties (Note 4) ........................... 548,500
Accounts Payable and Accrued Expenses (Note 3) ...................... 184,118
Unearned Revenue .................................................... 3,000
--------------
Total Liabilities ................................................... 1,291,175
==============
STOCKHOLDERS' DEFICIT
Common stock, $1 par -- shares authorized, 30,000; outstanding,
1,500 .............................................................. 1,500
Additional paid-in capital ......................................... 148,500
Accumulated deficit ................................................ (792,966)
--------------
Total Stockholders' Deficit ......................................... (642,966)
--------------
$ 648,209
==============
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
STATEMENT OF OPERATIONS
YEAR ENDING
DECEMBER 31,
1995
--------------
Revenue .............. $ 443,341
Cost of Revenue ...... 238,013
--------------
Gross Profit ......... 205,328
Operating Expenses .. 306,490
--------------
Loss from Operations (101,162)
--------------
Other Expense
Interest expense ... (76,839)
Miscellaneous ....... (2,438)
--------------
(79,277)
--------------
Net Loss ............. $(180,439)
==============
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
<S><C>
ADDITIONAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT DEFICIT
-------- ------------ ------------- ---------------
Balance, January 1, 1995 . $1,500 $148,500 $(612,527) $(462,527)
Net loss .................. -- -- (180,439) (180,439)
-------- ------------ ------------- ---------------
Balance, December 31, 1995 $1,500 $148,500 $(792,966) $(642,966)
======== ============ ============= ===============
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
<S><C>
YEAR ENDING
DECEMBER 31,
1995
--------------
Operating Activities
Net loss ...................................................................... $(180,439)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization ................................................ 86,299
Change in assets and liabilities:
Due from employees .......................................................... (850)
Accounts payable and accrued expenses ....................................... 95,494
Unearned revenue ............................................................ 3,000
--------------
Cash Provided by Operating Activities .......................................... 3,504
--------------
Financing Activities
Principal payments on notes payable ........................................... (7,537)
Proceeds from issuance of note payable ........................................ 6,000
--------------
Cash Used in Financing Activities .............................................. (1,537)
--------------
Net Increase in Cash ........................................................... 1,967
Cash, beginning of year ........................................................ 1,037
--------------
Cash, end of year .............................................................. $ 3,004
==============
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
SUMMARY OF ACCOUNTING POLICIES
LEASEHOLD IMPROVEMENTS, EQUIPMENT AND DEPRECATION
Leasehold improvements and equipment are carried at cost. Leased equipment
acquired under capital leases is recorded at the present value of the future
minimum lease payments. Depreciation is computed using accelerated methods
over the useful life as determined by industry standards.
Leasehold improvements are depreciated over the lesser of their estimated
useful lives or the lease term.
ORGANIZATION COSTS AND AMORTIZATION
Organizations costs are carried at cost and are comprised of pre-opening
expenditures. Amortization is computed using the straight-line method over 60
months.
INCOME TAXES
The Company has elected to be taxed under Subchapter S of the Internal
Revenue Code. Accordingly, the current taxable income of the Company is
taxable to the stockholders who are responsible for the payment of taxes
thereon.
ACCOUNTING 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. The
carrying amounts of notes payable to stockholders and the bank approximate
their fair values.
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
The Company operates a family recreation center in St. Louis, Missouri
that offers a lighted golf driving range, an 18 hole miniature golf course
and a 9 hole executive golf course.
2. PROPERTY AND EQUIPMENT
The Company leased land in 1991 to develop the recreation center.
Development cost of the amenities and their associated financing costs were
capitalized during the construction period. Leasehold improvements and
equipment at December 31, 1995 consist of the following:
1995
------------
Leasehold improvements . $ 318,155
Miniature golf course .. 181,014
Building ................ 311,641
Equipment (Note 6) ...... 116,498
------------
927,308
Accumulated depreciation (301,523)
------------
$ 625,785
============
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
At December 31, 1995, accounts payable and accrued expenses consist of the
following:
1995
----------
Real estate taxes ........ $ 62,689
Accrued interest (Note 4) 53,917
Other .................... 67,513
----------
$184,119
==========
4. NOTES PAYABLE TO RELATED PARTIES
The Company has entered into unsecured notes payable agreements with each
of the stockholders and a related party totalling $548,500 at December 31,
1995. These notes payable are due upon demand and have an interest rate of
7%. Accrued interest on these notes payable at December 31, 1995 is $48,250.
5. NOTES PAYABLE--OTHER
Notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
<S><C>
1995
----------
Note payable to bank with quarterly interest only payments.
Interest computed at the corporate base rate plus 1/2 % (9 1/4
% at December 31, 1995); due December 1, 1996, collateralized
by stockholder's personal residence ........................... $285,683
Notes payable to U.S. Small Business Administration (disaster
loans) with monthly principal and interest payments totalling
$1,177 to be paid over 30 years. Interest is at 4% per annum;
collateralized by stockholder's personal residence and assets
of the Company ................................................ 241,500
Capital leases (see Note 6) .................................... 24,822
Other .......................................................... 3,552
----------
$555,557
==========
</TABLE>
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Maturities of notes payable are as follows:
1996 ........ $301,964
1997 ........ 13,892
1998 ........ 12,417
1999 ........ 5,126
2000 ........ 5,335
Thereafter . 216,823
----------
$555,557
==========
6. LEASES
The Company conducts its operations on leased property which is accounted
for as an operating lease. The lease requires monthly payments of $2,000
through February 28, 1997. The Company has four, five-year renewal options
which can be exercised at the Company's discretion. The lease also provides
for a purchase option at any time during the lease term at fair market value.
This lease requires the Company to pay all maintenance, real estate taxes,
insurance and utility costs.
The Company also leases various equipment which is accounted for as a
capital lease. Monthly lease payments of $862 extend through 1998.
Rental expense, for operating leases, charged to operations was $22,564 in
1995.
As of December 31, 1995, future net minimum lease payments under capital
leases and future minimum rental payments required under operating leases
that have initial or remaining noncancellable terms in excess of one year are
as follows:
CAPITAL OPERATING
LEASES LEASES
--------- -----------
1996 ................................... $10,344 $24,000
1997 ................................... 10,344 4,000
1998 ................................... 6,068 --
--------- -----------
Total minimum lease payments ........... 26,756 28,000
Less amounts representing interest .... (1,934) --
--------- -----------
Present value of minimum lease payments $24,822 $28,000
========= ===========
7. SUBSEQUENT EVENT
On June 1, 1996, the Company entered into a letter of intent with Family
Golf Centers, Inc. to sell the leasehold improvements and equipment for
$1,300,000. This letter of intent does not include the sale of any other
assets, i.e., cash and receivables, or the assumptions of any liabilities.
This transaction is expected to close on June 7, 1996.
8. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid $41,350 for interest during 1995. The Company also had in
1995 non-cash activity of $9,655 relating to capital leases.
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
BALANCE SHEET
MARCH 31, 1996
UNAUDITED
Current Assets:
Cash ................................... $ 4,527
Employee advances ...................... 2,250
-----------
6,777
Property & Equipment:
Buildings .............................. 311,641
Leasehold improvements ................. 289,280
Miniature golf ......................... 181,014
Machinery & equipment .................. 116,498
Capitalized interest ................... 28,875
-----------
927,308
Less accumulated depreciation .......... (318,597)
-----------
608,711
Other Assets:
Organization costs ..................... 3,861
Deposits ............................... 12,700
-----------
16,561
-----------
Total Assets ........................... $ 632,049
===========
Current Liabilities:
Accounts payable ....................... 162,482
Accrued expenses ....................... 7,120
Unearned revenue ....................... 3,000
Current maturities of long-term debt .. 886,464
-----------
1,059,066
Long-term Debt, less current maturities 251,454
Total Liabilities ...................... 1,310,520
Common Stock ........................... 1,500
Additional Paid-in Capital ............. 148,500
Stockholders' Deficit .................. (828,471)
-----------
Total Liabilities and Equity ........... $ 632,049
===========
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
UNAUDITED
Revenue ..................... $ 63,281
Cost of Revenue ............. 13,139
----------
Gross Profit ................ 50,142
Operating Expenses .......... 46,167
----------
Income from Operations ..... 3,975
Other Income (Expense)
Interest expense ............ (21,795)
Depreciation & amortization (17,684)
----------
(39,479)
----------
Net Loss .................... $(35,504)
==========
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996
UNAUDITED
<TABLE>
<CAPTION>
<S><C>
Operating Activities
Net loss ...................................................................... $(35,504)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization ................................................ 17,683
Change in assets and liabilities:
Accounts payable and accrued expenses ....................................... (14,517)
-----------
Cash (used in) Operating Activities ............................................ (32,338)
-----------
Financing Activities
Proceeds from issuance of note payable ........................................ 33,861
-----------
Cash Provided by Financing Activities .......................................... 33,861
-----------
Net Increase in Cash ........................................................... 1,523
Cash, beginning of Period ...................................................... 3,004
-----------
Cash, end of Period ............................................................ $ 4,527
===========
</TABLE>
<PAGE>
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE A -- SUMMARY OF ACCOUNTING POLICIES
LEASEHOLD IMPROVEMENTS, EQUIPMENT AND DEPRECIATION
Leasehold improvements and equipment are carried at cost. Leased equipment
acquired under capital leases is recorded at the present value of the future
minimum lease payments. Depreciation is computed using accelerated methods
over the useful life as determined by industry standards.
Leasehold improvements are depreciated over the lesser of their estimated
useful lives or the lease term.
ORGANIZATION COSTS AND AMORTIZATION
Organizations costs are carried at cost and are comprised of pre-opening
expenditures. Amortization is computed using the straight-line method over 60
months.
INCOME TAXES
The Company has elected to be taxed under Subchapter S of the Internal
Revenue Code. Accordingly, the current taxable income of the Company is
taxable to the stockholders who are responsible for the payment of taxes
thereon.
ACCOUNTING 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. The
carrying amounts of notes payable to stockholders and the bank approximate
their fair values.
NOTE B -- INTERIM FINANCIAL STATEMENTS
The financial statements as of March 31, 1996 and for the three months
then ended are unaudited and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. In the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the
Partnership's financial position and results of operations.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Golf and Sports Center of the Palm Beaches, Inc.
I have audited the accompanying balance sheet of Golf and Sports Center of
the Palm Beaches, Inc. as of December 31, 1995, and the related statements of
loss, accumulated deficit, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Golf and Sports Center of
the Palm Beaches, Inc. as of December 31, 1995, and the results of its
operations and cash flows for the year then ended in conformity with
generally accepted accounting principles.
Charles W. Cairnes Jr. P.A.
Palm Beach Gardens, Florida
June 8, 1996
<PAGE>
GOLF AND SPORTS CENTER OF THE PALM BEACHES, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>
ASSETS
CURRENT ASSETS:
Cash ..................................................................... $ 4,629
Inventory ................................................................ 10,761
Prepaid insurance ........................................................ 7,447
Employee advances ........................................................ 2,623
-----------
Total .................................................................. 25,460
UTILITY DEPOSITS .......................................................... 7,895
$ 33,355
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade ................................................... $ 36,512
Taxes payable ............................................................ 7,169
Unearned income .......................................................... 33,908
-----------
Total .................................................................. 77,589
DUE TO W.A.G.N. Partners .................................................. 76,369
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 1,000 shares authorized, 200 shares issued
and outstanding ......................................................... 200
Paid in capital in excess of par value ................................... 9,800
Accumulated deficit ...................................................... (130,603)
-----------
Total shareholders' equity ............................................. (120,603)
-----------
$ 33,355
===========
</TABLE>
Read the accountants' report and the Notes to Financial Statements.
<PAGE>
GOLF AND SPORTS CENTER OF THE PALM BEACHES, INC.
STATEMENT OF LOSS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenues ............................... $ 862,871
Cost of Revenues ....................... 154,694
-----------
Gross Profit .......................... 708,177
Operating Expenses ..................... 711,291
-----------
Net loss .............................. (3,114)
Accumulated Deficit -- January 1, 1995 (127,489)
Accumulated Deficit -- December 31,
1995 .................................. $(130,603)
===========
Read the accountants' report and the Notes to Financial Statements.
<PAGE>
GOLF AND SPORTS CENTER OF THE PALM BEACHES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>
Cash Flows from Operating Activities
Net loss .................................................................... $ (3,114)
Adjustments to reconcile net income to net cash used by operating
activities:
(Increase) decrease in:
Inventory ................................................................. 2,310
Prepaid insurance ......................................................... 838
Employee advances ......................................................... (2,100)
Increase (decrease) in:
Accounts payable .......................................................... (4,119)
Taxes payable ............................................................. 1,152
Unearned income ........................................................... (10,440)
Due to W.A.G.N. ........................................................... 15,954
----------
Net cash used by operating activities ....................................... 481
----------
Net Increase in Cash ........................................................ 481
Cash -- Beginning of year ................................................... 4,148
----------
Cash -- End of year ......................................................... $ 4,629
==========
</TABLE>
Read the accountants' report and the Notes to Financial Statements.
<PAGE>
GOLF AND SPORTS CENTER OF THE PALM BEACHES, INC.
NOTES TO THE FINANCIAL STATEMENTS
As of and for the Year ended December 31, 1995
1. FORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Formation
Golf & Sports Center of the Palm Beaches, Inc. (the "Company"), was formed
on March 12, 1990 to lease an executive public golf course in West Palm
Beach, Florida. The Company has entered into a lease with W.A.G.N. Partners
to operate and manage the golf course.
Basis of Accounting
The Company's policy is to prepare its financial statements on the accrual
basis of accounting; consequently, revenue is recognized when earned and
expenses are recognized when the obligation is incurred. Golf membership
income is recorded as income over the months in which it is earned.
Inventories
Inventories consist of merchandise for resale stated at the lower of cost
or market. The cost is determined by the first-in, first-out (FIFO) method.
Federal Income Taxes
The Company has made an election to be treated as an S Corporation whereby
profits and losses are passed directly to the shareholders for inclusion in
their personal income tax returns. Accordingly, no provision for income taxes
is made in these statements.
2. RELATED PARTY TRANSACTIONS
A related partnership, W.A.G.N. Partners, has leased the golf course to
the Company for a base rent of $277,000 per annum. There is a provision in
the lease that if the lessee is unable to pay rent the lessor can defer the
rent. The lessee has not been able to pay any rent as of December 31, 1995
and does not appear to be able to in the future so no rent expense has been
accrued.
3. BUSINESS CONDITION
The Company has experienced net losses and used cash in operating
activities since 1990. Loans from W.A.G.N. Partners have provided the
financial support necessary for the Company to satisfy its obligations
through 1995. The partners have indicated that they do not intend to continue
to provide financial support to fund the Company's 1996 projected cash flow
deficiency.
As of June 1, 1996 W.A.G.N. Partners has found a buyer and intends to
liquidate. The financial statements do not include any adjustments relating
to the recoverability of recorded asset amounts or the amounts of liabilities
that might be necessary should the Company be unable to continue as a going
concern.
<PAGE>
GOLF & SPORTS CENTER OF THE PALM BEACHES, INC.
BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
<S><C>
ASSETS
Current Assets
Cash .................................................................... $ 6,380.25
Inventory ............................................................... 10,194.10
Due from WAGN ........................................................... 11,000.00
Employee advances ....................................................... 2,298.00
--------------
Total Current Assets ................................................. 29,872.35
Other assets
Utility deposits ........................................................ 7,895.00
--------------
Total other assets ................................................... 7,895.00
--------------
Total assets ......................................................... $ 37,767.35
==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable ........................................................ $ 29,586.43
Sales tax payable ....................................................... 4,919.78
Federal payroll taxes ................................................... 1,350.64
FUTA payable ............................................................ 611.64
SUTA payroll taxes ...................................................... 4,128.58
Unearned membership rev. ................................................ 24,909.88
Unearned bag storage rev. ............................................... 484.88
Unredeemed gift certif .................................................. 20,413.08
Due to WAGN ............................................................. 75,314.41
--------------
Total curent liabilities ............................................. 161,719.32
Shareholders' Equity .....................................................
Common stock, $1.00 par value, 1,000 shares authorized, 200 shares
issued
and outstanding ........................................................ 200.00
Additional paid-in capital .............................................. 9,800.00
Accumulated deficit ..................................................... (133,951.97)
--------------
Total shareholders' equity ........................................... (123,951.97)
--------------
Total liabilities and shareholders' equity ........................... $ 37,767.35
==============
</TABLE>
Read independent accountant's compilation report.
<PAGE>
GOLF & SPORTS CENTER OF THE PALM BEACHES, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
Revenue .................................... $220,867
Cost of Sales .............................. 35,665
----------
Gross Profit .............................. 185,202
Operating Expenses ......................... 154,921
Selling, General & Administrative Expenses 7,356
Net Income ................................ $ 22,925
==========
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Partners of
W.A.G.N. Partners
I have audited the accompanying balance sheet of W.A.G.N. Partners (a
partnership) as of December 31, 1995, and the related statements of loss,
partners' capital, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of W.A.G.N. Partners as of
December 31, 1995, and the results of its operations and cash flows for the
year then ended in conformity with generally accepted accounting principles.
Charles W. Cairnes Jr. P.A.
Palm Beach Gardens, Florida
June 8, 1996
<PAGE>
W.A.G.N. PARTNERS
BALANCE SHEET
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>
ASSETS
CURRENT ASSETS:
Cash .................................................. $ 5,446
------------
Total .............................................. 5,446
PROPERTY AND EQUIPMENT, at cost
Land .................................................. $ 700,000
Buildings and improvements ............................ 3,238,196
Machinery and equipment ............................... 71,863
Furniture and fixtures ................................ 171,287
-----------
4,181,346
Less accumulated depreciation ......................... (644,880)
-----------
3,536,466
DUE FROM GOLF & SPORTS CENTER OF THE PALM BEACHES, INC. 76,369
OTHER ASSETS, net of ($30,878) accumulated amortization 47,450
------------
$3,665,731
============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Mortgage payable ...................................... $1,609,643
Accrued interest ...................................... 41,773
Taxes payable ......................................... 21,527
------------
Total .............................................. 1,672,943
LOANS FROM PARTNERS .................................... 711,258
PARTNERS' CAPITAL ...................................... 1,281,530
------------
$3,665,731
============
</TABLE>
Read the accountants' report and the Notes to Financial Statements.
<PAGE>
W.A.G.N. PARTNERS
STATEMENT OF LOSS AND PARTNERS' CAPITAL
For the Year Ended December 31, 1995
AMORTIZATION .............................. $ 5,087
PROFESSIONAL FEES ......................... 13,444
INTEREST EXPENSE .......................... 182,309
TAXES ..................................... 21,527
DEPRECIATION .............................. 122,655
-----------
Net loss .............................. (345,022)
Add: Partners' Capital -- January 1, 1995 1,626,552
PARTNERS' CAPITAL -- December 31, 1995 ... $1,281,530
===========
Read the accountants' report and the Notes to Financial Statements.
<PAGE>
W.A.G.N. PARTNERS
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S><C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss .................................................................... $(345,022)
Adjustments to reconcile net income to net cash used by operating
activities:
Depreciation ............................................................... 122,655
Amortization ............................................................... 5,087
(Increase) decrease in:
Due from Golf and Sports .................................................. (15,954)
Increase (decrease) in:
Accrued interest .......................................................... 41,773
Taxes payable ............................................................. (234)
------------
Net cash used by operating activities ....................................... (191,695)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment ......................................... (2,969)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgage payable .............................................. (62,787)
Proceeds from loans from partners .......................................... 262,781
------------
Net cash provided by financing activities ................................... 199,994
------------
NET INCREASE IN CASH ........................................................ 5,330
Cash -- Beginning of year ................................................... 116
------------
Cash -- End of year ......................................................... $ 5,446
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest ..................................... $ 140,536
</TABLE>
Read the accountants' report and the Notes to Financial Statements.
<PAGE>
W.A.G.N. PARTNERS
NOTES TO THE FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995
1. FORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Formation
W.A.G.N. Partners, a Florida partnership (the "Partnership"), was formed
on January 1, 1990 to purchase an executive public golf course in West Palm
Beach, Florida. The Partnership has engaged a related corporation, Golf and
Sports Center of the Palm Beaches, Inc., to operate and manage the course.
Federal Income Taxes
The Partnership itself is not a taxpaying entity for purposes of Federal
income taxes. Federal income taxes on each partner are computed on total
income from all sources; accordingly, no provision for income taxes is made
in these statements.
Depreciation
Depreciation is calculated using the straight-line method over the useful
lives of the assets.
2. RELATED PARTY TRANSACTIONS:
A related corporation, Golf and Sports Center of the Palm Beaches, Inc.,
has leased the golf course from the Partnership for a base rent of $277,000
per annum. There is a provision in the lease that if the lessee is unable to
pay rent the lessor can defer the rent. The lessee has not been able to pay
any rent as of December 31, 1995 and does not appear to be able to in the
future so no rent income has been accrued.
3. MORTGAGE PAYABLE:
The First United Bank has started foreclosure proceedings against the
property so the entire amount of the mortgage and the accrued interest are
current liabilities.
4. BUSINESS CONDITION
The Partnership has experienced net losses and used cash in operating
activities since 1990. Capital calls to the partners and loans from the
partners have provided the financial support necessary for the Partnership to
satisfy its obligations through 1995. The partners have indicated that they
do not intend to continue to provide financial support to fund the
Partnership's 1996 projected cash flow deficiency.
As of June 1, 1996 the Partnership has found a buyer and intends to
liquidate. The financial statements do not include any adjustments relating
to the recoverability of recorded asset amounts or the amounts of liabilities
that might be necessary should the Partnership be unable to continue as a
going concern.
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1996
The following pro forma condensed balance sheet reflects the acquisitions
(the "Acquisitions") of 202 Golf Associates, Inc. ("Yorktown Heights"),
Indian River Golf-O-Rama, Inc. ("Indian River"), K.G. Golf Inc.
("Fairfield"), Catalina Golf Center ("Tucson"), Tree Court Golf &
Recreational Complex, Inc. ("St. Louis") and Golf & Sports Center of the Palm
Beaches, Inc. and W.A.G.N. Partners (collectively, "West Palm Beach") as if
they had occurred on March 31, 1996. The Acquisitions are accounted for as
purchases in accordance with Accounting Principles Board Opinion No. 16. In
the opinion of management of Family Golf Centers, Inc. and its subsidiaries
(the "Company"), all adjustments necessary to present fairly such pro forma
condensed balance sheet have been made.
The pro forma condensed balance sheet should be read in conjunction with
the notes thereto, the financial statements of the Company, Yorktown Heights,
Indian River, Fairfield, Tuscon, St. Louis and West Palm Beach and the
related notes thereto. The pro forma condensed balance sheet is not
necessarily indicative of what the actual financial position would have been
had the transactions occurred at March 31, 1996, nor does it purport to
represent the future financial position of the Company.
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE YORKTOWN INDIAN
COMPANY HEIGHTS RIVER FAIRFIELD
--------- ---------- -------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............. $11,147 $ 5
Inventories ............................ 3,019 106
Prepaid expenses ....................... 2,358 2
--------- ---------- -------- -----------
Total current assets .................. 16,524 113
Property and equipment .................. 44,027 $2,100 $1,549 $ 993
Loan acquisition costs .................. 222
Deferred tax benefit .................... 116
Other assets ............................ 1,567
Excess of cost over fair value of assets 674
--------- ---------- -------- -----------
TOTAL ................................. $63,130 $2,100 $1,549 $1,106
========= ========== ======== ===========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 2,051 $ 70
Current portion of long-term
obligations ........................... 1,523
--------- ---------- -------- -----------
Total current liabilities ............. 3,574 70
Long-term obligations (less current
portion) ............................... 7,229
Deferred rent ........................... 103
Other liabilities ....................... 238
--------- ---------- -------- -----------
Total liabilities ..................... 11,144 70
--------- -----------
Common stock ............................ 85
Additional paid-in capital .............. 50,909
Retained earnings ....................... 1,027
Treasury stock .......................... (35)
Net assets acquired ..................... $2,100 $1,549 $1,036
--------- ---------- -------- -----------
Total stockholders' equity ............ 51,986 2,100 1,549 1,036
--------- ---------- -------- -----------
TOTAL ................................. $63,130 $2,100 $1,549 $1,106
========= ========== ======== ===========
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEST PRO FORMA
TUCSON ST. LOUIS PALM BEACH ADJUSTMENTS PRO FORMA
-------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............. $(3,620)(A) $ 7,532
Inventories ............................ 3,125
Prepaid expenses ....................... 2,360
-------- ----------- ------------ ------------- -----------
Total current assets .................. (3,620) 13,017
Property and equipment .................. $569 $609 $3,506 (149)(A) 53,204
Loan acquisition costs .................. 222
Deferred tax benefit .................... 116
Other assets ............................ 1,567
Excess of cost over fair value of assets 674
-------- ----------- ------------ ------------- -----------
TOTAL ................................. $569 $609 $3,506 $(3,769) $68,800
======== =========== ============ ============= ===========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 2,121
Current portion of long-term
obligations ........................... $ 5,000 (A) 6,523
-------- ----------- ------------ ------------- -----------
Total current liabilities ............. 5,000 8,644
Long-term obligations (less current
portion) ............................... 7,229
Deferred rent ........................... 103
Other liabilities ....................... 238
-------- ----------- ------------ ------------- -----------
Total liabilities ..................... 5,000 16,214
-------- ------------- -----------
Common stock ............................ 85
Additional paid-in capital .............. 600 51,509
Retained earnings ....................... 1,027
Treasury stock .......................... (35)
Net assets acquired ..................... $569 $609 $3,506 (9,369)(A) --
-------- ----------- ------------ ------------- -----------
Total stockholders' equity ............ 569 609 3,506 (8,769) 52,586
-------- ----------- ------------ ------------- -----------
TOTAL ................................. $569 $609 $3,506 $(3,769) $68,800
======== =========== ============ ============= ===========
</TABLE>
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
To reflect the acquisition of Yorktown Heights, Indian River, Fairfield,
Tucson, St. Louis and West Palm Beach after March 31, 1996 as follows:
<TABLE>
<CAPTION>
ADJUSTMENT BOOK VALUE
TO FAIR OF NET
VALUE ASSETS ASSETS COMMON DEBT
COMPANY ACQUIRED ACQUIRED STOCK ISSUED CASH
- ---------------- ------------ ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Yorktown Heights $ 100 $2,100 $600 $1,600
Indian River ... (149) 1,549 1,400
Fairfield ....... 434 1,036 $1,470
Tucson .......... 531 569 1,100
St. Louis ....... 691 609 1,300
West Palm Beach (1,756) 3,506 1,130 620
------------ ------------ -------- -------- --------
$ (149) $9,369 $600 $5,000 $3,620
============ ============ ======== ======== ========
</TABLE>
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1996
The following pro forma condensed statements of operations reflect the
acquisitions of Pelham Enterprises, Inc., the Hiland Park Golf Course, RFC
Enterprises, Inc., Upper Hembree Partners, L.P., The Practice Tee, Inc.
("TPT"), Golf Masters Limited Partnership and Air Dome Limited Partnership
(collectively, "Valley View"), Owl's Creek Golf Center, Inc., ("Virginia
Beach"), Flemington Golf and Sports Center, LLC ("Flemington") and associated
land, Yorktown Heights, Indian River, Fairfield, Tucson, St. Louis and West
Palm Beach (collectively, the "Acquired Companies") acquired during 1995 and
1996 as if the Acquired Companies had been acquired on January 1, 1995. The
acquisitions of the Acquired Companies except TPT have been accounted for as
purchases in accordance with Accounting Principles Board Opinion No. 16.
Since TPT has been acquired from related parties, the acquisition has been
recorded using historical basis. In the opinion of management of the Company,
all adjustments necessary to present fairly such pro forma statements of
operations have been made.
These pro forma condensed statements of operations should be read in
conjunction with the notes thereto, the financial statements of the Company
and the Acquired Companies. The pro forma condensed statements of operations
are not necessarily indicative of what the actual results of operations would
have been had the transactions occurred at January 1, 1995, or January 1,
1996, nor do they purport to indicate the results of future operations.
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
ACQUIRED COMPANIES
---------------------------------------------
HILAND UPPER
PELHAM PARK RFC HEMBREE
THE ENTERPRISES, GOLF ENTERPRISES PARTNERS,
COMPANY INC.(A) COURSE(A) INC.(A) L.P.(A)
------- ------------ ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues ................... $ 9,795 $117 $ 100 $363 $386
Merchandise sales .................... 2,637 150 17
------- ------------ ------- ----------- ---------
Total revenue ....................... 12,432 267 117 363 386
------- ------------ ------- ----------- ---------
Operating expenses ................... 6,614 87 297 234 317
Cost of merchandise sold ............. 1,779 111 152
Selling, general and administrative
expenses ............................ 1,242 39 44 110 46
------- ------------ ------- ----------- ---------
Operating income (loss) .............. 2,797 30 (376) 19 23
Interest expense ..................... 939 16 61 112
Other (income) expense ............... (66) (6)
------- ------------ ------- ----------- ---------
Income (loss) before income taxes and
extraordinary item .................. 1,924 14 (376) (42) (83)
Income tax expense (benefit) ......... 669
------- ------------ ------- ----------- ---------
INCOME (LOSS) before extraordinary
item ................................ $ 1,255 $ 14 $(376) $(42) $(83)
======= ============ ======= =========== =========
Income (loss) per share before
extraordinary item .................. $ 0.24
=======
Weighted average shares outstanding .. 5,271
=======
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ACQUIRED COMPANIES
---------------------------------------------
VALLEY VIRGINIA YORKTOWN
TPT(A) VIEW(A) BEACH(B) FLEMINGTON(B) HEIGHTS(B)
------ ------ -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues ................... $ 244 $ 668 $616 $ 501 $ 388
Merchandise sales .................... 44 92
------ ------ -------- ----------- ---------
Total revenue ....................... 244 712 708 501 388
------ ------ -------- ----------- ---------
Operating expenses ................... 86 395 404 900 393
Cost of merchandise sold ............. 36 72
Selling, general and administrative
expenses ............................ 264 404 119 101
------ ------ -------- ----------- ---------
Operating income (loss) .............. (106) (123) 113 (399) (106)
Interest expense ..................... 3 34 192 128 164
Other (income) expense ............... (1) (2) 2 2,448
------ ------ -------- ----------- ---------
Income (loss) before income taxes and
extraordinary item .................. (108) (155) (81) (2,975) (270)
Income tax expense (benefit) ......... 1
------ ------ -------- ----------- ---------
INCOME (LOSS) before extraordinary
item ................................ $(109) $(155) $(81) $(2,975) $(270)
====== ====== ======== =========== =========
Income (loss) per share before
extraordinary item ..................
Weighted average shares outstanding .
</TABLE>
(a) Represents operations from January 1, 1995 through date of
acquisition.
(b) Represents operations for the year ended December 31, 1995.
<PAGE>
<TABLE>
<CAPTION>
ACQUIRED COMPANIES
--------------------------------------------------------------
INDIAN WEST PALM
RIVER(B) FAIRFIELD(B) TUCSON(B) ST. LOUIS(B) BEACH(B)
-------- ------------ --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
$ 510 $ 791 $ 156 $ 443 $ 863
98
-------- ------------ --------- ------------ -------------
608 791 156 443 863
-------- ------------ --------- ------------ -------------
607 800 214 544 1,029
72
161 33
-------- ------------ --------- ------------ -------------
(232) (9) (91) (101) (166)
104 132 77 182
(5) 2
-------- ------------ --------- ------------ -------------
(232) (113) (218) (180) (348)
-------- ------------ --------- ------------ -------------
$(232) $(113) $(218) $(180) $ (348)
======== ============ ========= ============ =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
------------- -----------
<S> <C> <C> <C>
$ 15,941
3,038
------------- -----------
18,9799
------------- -----------
$ (171)(A) 12,750
2,222
13 (A) 2,576
------------- -----------
158 1,431
44 (A) 2,188
(2,448)(A) (76)
------------- -----------
2,562 (681)
(916)(B) (246)
------------- -----------
$ 3,478 $ (435)
============= ===========
$ (0.08)
============= ===========
366 (C) 5,637
============= ===========
</TABLE>
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(A) Expense adjustments for the period ended December 31, 1995 to reflect
the acquisition of the Acquired Companies as if the acquisitions had
taken place at the beginning of the period:
<TABLE>
<CAPTION>
IMPAIRMENT
INTEREST DEPRECIATION AMORTIZATION IN VALUE OF
COMPANY DATE ACQUIRED ADJUSTMENT(1) ADJUSTMENT OF GOODWILL ASSETS
- ------------------------------ --------------- ------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Pelham Enterprises, Inc. ..... April 1995 $ (30) $ 12
Hiland Park Golf Course ...... May 1995 (212) 14
RFC Enterprises, Inc. ......... August 1995 9 (33) $ 8
Upper Hembree Partners, L.P. . August 1995 (4) (108)
TPT ........................... November 1995 26
Valley View ................... November 1995 (56)
Virginia Beach ................ March 1996 12 22
Flemington .................... March 1996 39 $(2,448)
Yorktown Heights .............. April 1996 4 5
Indian River .................. May 1996 140 (4)
Fairfield ..................... June 1996 36 25
Tucson ........................ June 1996 (22)
St. Louis ..................... June 1996 53 34
West Palm Beach ............... June 1996 (7) (77)
------------- -------------- -------------- ------------
$ 44 $(171) $13 $(2,448)
============= ============== ============== ============
</TABLE>
(1) Assumes average rate of borrowing at 10%.
(B) To reflect the income tax effect arising from the losses of the
Acquired Companies.
(C) To reflect the issuance of Common Stock for the Acquired Companies.
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
ACQUIRED COMPANIES
----------------------------------------------
THE VIRGINIA FLEMINGTON YORKTOWN INDIAN
COMPANY BEACH(A) (B) HEIGHTS(C) RIVER(C)
--------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Operating revenues .. $2,691 $ 35 $ 74 $54
Merchandise sales ... 671 2 3
--------- ---------- ------------ ---------- --------
Total revenue ....... 3,362 37 74 57
--------- ---------- ------------ ---------- --------
Operating expenses .. 2,252 39 $ 25 88 40
Cost of merchandise
sold ................ 457 2 3
Selling, general and
administrative
expenses ............ 643 27 22 8
--------- ---------- ------------ ---------- --------
Operating income
(loss) .............. 10 (31) (25) (36) 6
Interest expense .... 100 34 26
Other income
(expense) ........... 197 (14) 3
--------- ---------- ------------ ---------- --------
Income before income
taxes ............... 107 (79) (25) (59) 6
Income tax expense
(benefit) ........... 38
--------- ---------- ------------ ---------- --------
Net income (loss) ... $ 69 $(79) $(25) $(59) $6
========= ========== ============ ========== ========
Net income (loss) per
share ............... $ 0.01
=========
Weighted average
shares outstanding . 8,648
=========
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ACQUIRED COMPANIES
--------------------------------------------
WEST
FAIRFIELD TUCSON ST. LOUIS PALM PRO FORMA
(C) (C) (C) BEACH(C) ADJUSTMENTS PRO FORMA
----------- -------- ----------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues .. $ 52 $ 39 $ 63 $221 $3,229
Merchandise sales ... 68 744
----------- -------- ----------- -------- ------------- -----------
Total revenue ....... 120 39 63 221 3,973
----------- -------- ----------- -------- ------------- -----------
Operating expenses .. 61 11 77 191 $ (29) 2,755
Cost of merchandise
sold ................ 61 523
Selling, general and
administrative
expenses ............ 10 26 7 743
----------- -------- ----------- -------- ------------- -----------
Operating income
(loss) .............. (12) 2 (14) 23 29 (48)
Interest expense .... 24 40 22 (70) (A) 176
Other income
(expense) ........... (61) (A) 125
----------- -------- ----------- -------- ------------- -----------
Income before income
taxes ............... (36) (38) (36) 23 38 (99)
Income tax expense
(benefit) ........... (74) (B) (36)
----------- -------- ----------- -------- ------------- -----------
Net income (loss) ... $(36) $(38) $(36) $ 23 $ 112 $ (63)
=========== ======== =========== ======== ============= ===========
Net income (loss) per
share ............... $(0.01)
=========== ===========
Weighted average
shares outstanding . 131 (C) 8,779
=========== ============= ===========
</TABLE>
(a) Represents operations from January 1, 1996 through date of acquisition.
(b) Represents estimated operations from January 1, 1996 through date of
acquisition.
(c) Represents operations for the three months ended March 31, 1996.
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(A) Expense adjustments for the period ended March 31, 1996 to reflect the
acquisition of the Acquired Companies as if the acquisitions had taken place at
the beginning of the period:
<TABLE>
<CAPTION>
OTHER
DATE INTEREST EXPENSE DEPRECIATION (INCOME)
COMPANY ACQUIRED ADJUSTMENT (1) ADJUSTMENT EXPENSE OTHER
- ----------------- ------------ ---------------- -------------- --------- -------
<S> <C> <C> <C> <C> <C>
Virginia Beach .. March 1996 $ 34 $ (9) $15 $14
Flemington ....... March 1996
Yorktown Heights April 1996 26 20
Indian River ..... May 1996 (1) 17
Fairfield ........ June 1996 (11) 6
Tucson ........... June 1996 12
St. Louis ........ June 1996 (11) 8
West Palm Beach . June 1996 20 (19) 9
---------------- -------------- --------- -------
$ 70 $(15) $61 $14
================ ============== ========= =======
</TABLE>
(1) Assumes average rate of borrowing at 10%
(B) To reflect the income tax effect arising from the losses of the
Acquired Companies.
(C) To reflect the issuance of Common Stock for the Acquired Companies.
