<PAGE>
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO 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):
September 25, 1996
FAMILY GOLF CENTERS, INC.
- ------------------------------------------------------------------------------
(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)
- ------------------------------------------------------------------------------
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
By Current Report on Form 8-K, dated October 9, 1996 (the "Original Form
8-K"), Family Golf Centers, Inc. (the "Company") reported the completion of
its acquisitions of Privatization Plus, Inc. and certain assets of Tri-Town
Sports, Inc., Colbert Ballard Golf Learning Centers, Inc., KKL Golf
Partnership, USA Golf Centers, Ltd. #2 and Swingmaster Golf at Centennial,
L.P. At the time of the filing of the Original Form 8-K with the Securities
and Exchange Commission it was impractical to file the financial statements of
the businesses acquired as required by Item 7(a) of Form 8-K and the pro forma
financial information as required by Item 7(b) of Form 8-K. The financial
information required by Item 7 of Form 8-K is now available. Accordingly, 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
1 through 5 are the financial statements of Privatization Plus, Inc., Tri-Town
Sports, Inc., KKL Golf Partnership, USA Golf Centers, Ltd. #2 and Swingmaster
Golf at Centennial, L.P. prepared pursuant to Regulation S-X. The financial
statements of Colbert Ballard Golf Learning Centers, Inc. are not included
since they are not required pursuant to Item 310(c) of Regulation S-B.
(b) Pro Forma Financial Information.
In accordance with Item 7(b)(2) of Form 8-K, attached hereto as Exhibit 6
are the pro form financial statements required by Article 11 of Regulation
S-X.
(c) Exhibits.
1. Audited Financial Statements of Privatization Plus, Inc. for the year
ended December 31, 1995.
2. Audited Financial Statements of Tri-Town Sports, Inc. for the year
ended December 31, 1995.
3. Audited Financial Statements of KKL Golf Partnership for the year
ended December 31, 1995.
4. Audited Financial Statements of USA Golf Centers, Ltd. #2 for the year
ended December 31, 1995.
5. Audited Financial Statements of Swingmaster Golf at Centennial, L.P.
for the year ended December 31, 1995.
6. Unaudited pro forma condensed statements of operations of the Company
and its subsidiaries for the year ended December 31, 1995 and for the nine
months ended September 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 6, 1996
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
----------------------------
Dominic Chang,
President and Chief Executive Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit Page Number
------- -----------
1. Audited Financial Statements of Privatization Plus, Inc.
for the year ended December 31, 1995.
2. Audited Financial Statements of Tri-Town Sports, Inc.
for the year ended December 31, 1995.
3. Audited Financial Statements of KKL Golf Partnership
for the year ended December 31, 1995.
4. Audited Financial Statements of USA Golf Centers, Ltd.
#2 for the year ended December 31, 1995.
5. Audited Financial Statements of Swingmaster Golf at
Centennial, L.P. for the year ended December 31, 1995.
6. Unaudited pro forma condensed statements of operations
of the Company and its subsidiaries for the year ended
December 31, 1995 and for the nine months ended
September 30, 1996.
<PAGE>
PRIVATAZATION PLUS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
Independent auditor's report 1
Financial statements
Balance sheet 2-3
Statement of income and retained earnings 4-5
Statement of cash flows 6
Notes to financial statments 7-10
<PAGE>
[COMPANY LETTERHEAD]
MULLEN, SONDBERG, WIMBUSH & STONE, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
900 Bestgate Road, Suite 200, Annapolis, Maryland 21401
To the Board of Directors
Privatization Plus, Inc.
Davidsonville, Maryland
We have audited the accompanying balance sheet of Privatization Plus,
Inc. (an S Corporation) as of December 31, 1995, and the related statements of
income and retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsabilty 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 finacial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accountiing 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 Privatization
Plus, Incorporated 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.
/s/Mullen, Sondberg, Wimbish And Stone,
MULLEN, SONDBERG, WIMBISH and STONE, P.A.
Annapolis, Maryland
September 11, 1996
1
<PAGE>
Privatization Plus, Inc.
BALANCE SHEET
December 31, 1995
ASSETS
CURRENT ASSETS
Cash $ 1,856
Inventories at cost 17,456
Refundable deposits 5,368
Prepaid insurance 6,142
--------
Total current assets 30,822
--------
PROPERTY AND EQUIPMENT
Furniture and fixtures 9,242
Machinery and equipment 171,899
Leasehold improvements 646,180
-------
827,321
Less accumulated depreciation (155,779)
-------
Total property and equipment 671,542
-------
OTHER ASSETS
Organization expenses 4,567
Less accumulated amortization (2,967)
-------
Total other assets 1,600
-------
Total assets $703,964
========
2
<PAGE>
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 30,148
Accrued interest on notes payable 8,848
Notes payable-current(Note 2) 55,079
Payroll and sales taxes payable 22,674
---------
Total current liabilities 116,749
---------
LONG-TERM LIABLITIES
Notes payable-(Note 2) 239,027
Stockholder loans (Notes 3) 573,587
---------
Total long-term liabilites 812,614
---------
Total liabilites 929,363
---------
STOCKHOLDERS' EQUITY
Common stock-10,000 shares authorized,
issued, and outstanding 10,000
Retained earnings (deficit) (235,399)
---------
Total stockholders' equity (deficit) (225,399)
---------
Total liabilites and stockholders' equity $ 703,964
=========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
Privatization Plus, Inc.
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Year Ended December 31, 1995
NET SALES
Mini golf $ 71,865
Driving range 183,768
Batting cages 41,587
Other sales 51,186
---------
Total net sales 348,406
---------
COST of SALES
Merchandise 29,142
Supplies 17,312
Grounds maintenance 20,612
Salaries and payroll taxes 111,739
----------
Total cost of sales 178,805
----------
Gross profit 169,601
----------
OPERATING EXPENSES
Advertising and promotions 8,962
Casual labor 10,937
Depreciation and amortization 61,915
Directors' fees 1,755
Equipment rental 5,116
Insurance 20,176
Interest 64,440
Legal and Accounting 9,504
Office and miscellaneous expenses 17,100
Rent 50,000
Repairs and Maintenance 11,048
Taxes and licenses 3,586
Telephone and utlities 17,817
----------
Total operating expenses 282,316
----------
Loss from operations $ (112,715)
----------
4
<PAGE>
PRIVATIZATION PLUS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS (CONT.)
FOR THE YEAR ENDED DECEMBER 31, 1995
OTHER INCOME
Miscellaneous $ 731
Interest 113
---------
Total other income 844
---------
Net loss (111,871)
Retained deficit, January 1 (123,528)
---------
Retained deficit, December 31 $(235,399)
=========
The accompanying notes are an integral part of these financial statements.
- 5 -
<PAGE>
PRIVATIZATION PLUS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(111,871)
Adjustments needed to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 61,915
(Increase) in inventories (1,279)
(Increase) in prepaid insurance (6,142)
(Decrease) in accounts payable (132)
Increase in accrued interest on notes payable 8,848
Increase in payroll and sales taxes payable 16,639
---------
Net cash used by operating activities (32,022)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (5,441)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from new loans 158,500
Repayments on loans (163,545)
Interest accrued on stockholders loans 37,021
---------
Net cash used by financing activities 31,976
---------
Net increase in cash (5,487)
Cash at January 1 7,342
---------
Cash at December 31 $ 1,855
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 18,531
=========
The accompanying notes are in an integral part of these financial statements.
- 6 -
<PAGE>
PRIVATIZATION PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE AND ORGANIZATION
Privatization Plus, Inc. (the Corporation) was incorporated on
April 10, 1992 pursuant to the laws of the State of Maryland. The
Corporation's principal business activity is operating a recreation
complex located in Glen Burnie, Maryland.
FINANCIAL STATEMENT PRESENTATION
The financial statements are presented on the accrual basis of
accounting which is in conformity with generally accepted accounting
principles. Revenue is recognized when earned and expenses are
recognized when incurred.
INVENTORIES
Inventories are stated at cost based on the first in-first out method.
PLANT AND EQUIPMENT
Plant and equipment is recorded at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets.
Maintenance and repairs are charged to expense as incurred; major
renewals and betterments are capitalized. Property and equipment are
being depreciated over the following estimated lives:
Furniture and fixtures 5-7 years
Machinery and equipment 5-7 years
Leasehold improvements 31.5 years
INCOME TAXES
Effective April 10, 1992, the Corporation elected by consent of its
shareholders to be taxes as an S-corporation. The corporation does not
pay federal corporate income taxes on its taxable income. The
Corporation's taxable income is passed to the shareholders who are
liable for individual income taxes on their respective shares.
- 7 -
<PAGE>
PRIVATIZATION PLUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1995
NOTE 2 - NOTES PAYABLE
Notes payable at December 31, 1995, consisted of the following:
<TABLE>
<CAPTION>
CURRENT LONG-TERM ACCRUED
PORTION PORTION TOTAL INTEREST
--------- --------- ----- --------
<S> <C> <C> <C> <C>
Note payable to Allied Trailer, face
amount $24,000, payable in 30 monthly
installments of $625, secured by
a trailer. $ 7,500 $ 5,231 $ 12,731 $ --
Note payable to Henry A. Bachman,
face amount $130,000, payable in
120 monthly installments of $1,717
which includes interest at 10%. 7,974 122,026 130,000 --
Note payable to Henry A. Bachman,
face amount $125,000, payable in
181 monthly installments of $1,231
which include interest at 8.5%. At
12/31/95, 9 payments were in arrears 5,036 111,770 116,806 7,447
Note payable to Henry A. Bachman,
face amount $48,500, payable in
24 monthly installments of $2,189
which include interest at 6.5%. At
12/31/95, 8 payments were in arrears 23,320 -- 23,320 1,011
Note payable to Raymond Sears,
face amount of $18,071, payable in
24 monthly installments of $816
which include interest at 6.5%. At
12/31/95, 7 payments were in arrears 7,920 -- 7,920 300
Note payable to Raymond Sears,
face amount of $9,445, payable in
24 monthly payments of $426 which
include interest at 6.5%. At
12/31/95, 5 payments were in arrears 3,329 -- 3,329 90
--------- -------- -------- ------
$ 55,079 $239,027 $294,106 $8,848
========= ======== ======== ======
</TABLE>
Interest expense associated with the above notes payable amounted to
$14,592 for the year ended December 31, 1995.
- 8 -
<PAGE>
PRIVATIZATION PLUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1995
NOTE 3 - STOCKHOLDER LOANS
The following summarizes stockholder loans at December 31, 1995. These
loans are subordinated to notes payable and, accordingly, have been classified
as long-term.
INTEREST ACCRUED
RATE PRINCIPAL INTEREST TOTAL
-------- --------- -------- -----
Henry A. Bachman 7% $ 198,000 $ 48,749 $246,749
Donald Sears 7% 98,000 19,384 117,384
Raymond Sears 7% 146,000 39,383 185,383
Raymond Sears 10% 23,000 1,071 24,071
--------- -------- --------
Total $ 465,000 $108,587 $573,587
========= ======== ========
Interest expense associated with the above loans payable amounted to
$37,021 for the year ended December 31, 1995.
NOTE 4 - RELATED PARTY TRANSACTIONS
The following information pertains to related companies with stockholders
having a common interest in Privatization Plus, Inc.:
Accounts Payable - Trade 12/31/95
------------------------ --------
Ray Sears & Sons, Inc. $ 12,517
========
NOTE 5 - SUBSEQUENT EVENT
As of the date of this report, the stockholders of Privatization Plus,
Inc. have entered into a tentative agreement to sell 100% of their shares. If
the sale occurs, the prospective buyers will be required to repay all existing
stockholder loans with accrued interest.
- 9 -
<PAGE>
PRIVATIZATION PLUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1995
NOTE 6 - OPERATING LEASE
The corporation entered into a lease agreement with Anne Arundel
County and the State of Maryland to occupy the premises known as Glen
Burnie Golf Center, 1501 Dorsey Road (Formerly Friendship Park),
Glen Burnie, Maryland. The lease agreement dated January 1, 1993
called for a minimum monthly rent of 5% of gross revenue until the
miniature golf course was open to the public. After that date the
monthly rent became the greater of 5% of gross revenues or $50,000
annually. Effective 1/1/96 the lease agreement was amended and the
monthly rent was changed to $2,510.83 per month retroactive to 1/1/95.
- LTD. #2 FOR THE YEAR ENDED DECEMBER 31, 1995. -
<PAGE>
Exhibit 2
AUDITED
FINANCIAL STATEMENTS
TRI-TOWN SPORTS, INC.
DECEMBER 31, 1995
[ G.T. REILLY LOGO]
<PAGE>
TRI-TOWN SPORTS, INC.
==============================================================================
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1995
INDEPENDENT AUDITORS' REPORT 1
AUDITED FINANCIAL STATEMENTS
BALANCE SHEETS 2
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) 4
STATEMENTS OF CASH FLOWS 5
NOTES TO FINANCIAL STATEMENTS 6
<PAGE>
[G.T. REILLY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Tri-Town Sports, Inc.
We have audited the accompanying balance sheets of Tri-Town Sports, Inc. as of
December 31, 1995 and 1994, and the related statements of operations and
retained earnings (deficit), and cash flows for the years 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 audits.
We conducted our audits 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 audits provide 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 Tri-Town Sports, Inc. as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Gerald T. Reilly & Company
-------------------------------------
Gerald T. Reilly & Company
Milton, Massachusetts
September 20, 1996
<PAGE>
BALANCE SHEETS
TRI-TOWN SPORTS, INC.
- --------------------------------------------------------------------------------
BALANCE SHEETS
DECEMBER 31
(See Accountants' Report)
1995 1994
---- ----
ASSETS
- ------
CURRENT ASSETS
Cash $ 1,890 $ 54,709
Prepaid expenses 14,504 9,886
--------- ---------
TOTAL CURRENT ASSETS 16,394 64,595
--------- ---------
PROPERTY AND EQUIPMENT
Land 992,000 992,000
Land improvements 253,890 208,169
Mini-golf course 490,851 490,851
Golf driving range 448,779 448,779
Buildings 187,814 176,438
Batting cages 119,277 119,277
Furniture, fixtures and equipment 120,251 95,048
--------- ---------
2,612,862 2,530,562
Less accumulated provisions for depreciation 410,163 293,430
--------- ---------
2,202,699 2,237,132
--------- ---------
OTHER ASSETS
Organization costs, less amortization of $7,674 in
1995 and $5,581 in 1994 2,791 4,884
Deferred financing costs, less amortization of
$6,508 in 1995 and $3,989 in 1994 6,088 8,607
--------- ----------
8,879 13,491
--------- ----------
$2,227,972 $2,315,218
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 22,473 $ 12,947
Account payable, management agent (Note 4) 28,235 8,632
Accrued interest, first mortgage 6,233 5,743
Accrued interest, second mortgage 46,978 48,921
First mortgage note payable, due in one year 48,000 48,000
Second mortgage note payable, due in one year 33,268 26,701
Equipment note payable, due in one year 3,503 0
------------ ---------------
TOTAL CURRENT LIABILITIES 188,690 150,944
---------- ----------
LONG-TERM DEBT, due after one year
First mortgage note payable to bank (Note 3) 907,000 955,000
Second mortgage note payable to related party (Note 4) 254,778 272,423
Equipment note payable (Note 3) 5,249 0
Loans payable to stockholders/officers (Note 4) 870,000 860,000
---------- ----------
2,037,027 2,087,423
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, no par value:
Authorized 20,000 shares; issued and
outstanding 10,000 shares 150,000 150,000
Retained earnings (deficit) (147,745) (73,149)
---------- -----------
2,255 76,851
---------- -----------
$2,227,972 $2,315,218
========== ===========
</TABLE>
3
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRI-TOWN SPORTS, INC.
==============================================================================================================================
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
YEAR ENDED DECEMBER 31
1995 1994
---- ----
<S> <C> <C>
REVENUES
Mini-golf and batting cages $ 296,090 $ 293,797
Golf driving range 156,476 121,921
Refreshments 73,877 68,764
----------- -----------
526,443 484,482
---------- ----------
COST OF REVENUES
Mini-golf and batting cages 49,058 63,514
Golf driving range 78,659 79,808
Refreshments 52,920 45,356
----------- -----------
180,637 188,678
---------- ----------
GROSS PROFIT 345,806 295,804
---------- ----------
OTHER COSTS AND EXPENSES
Maintenance, general and administrative 153,613 96,423
Interest expense 145,444 133,544
Depreciation 116,733 110,802
Amortization 4,612 4,612
------------ ------------
420,402 345,381
---------- ----------
NET LOSS (74,596) (49,577)
RETAINED EARNINGS (DEFICIT) AT BEGINNING OF YEAR (73,149) (23,572)
----------- -----------
RETAINED EARNINGS (DEFICIT) AT END OF YEAR $ (147,745) $ (73,149)
========== ===========
</TABLE>
4
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
Tri-TOWN SPORTS, INC.
===================================================================================================================================
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (74,596) $ (49,577)
Adjustments to reconcile net loss to net
cash from operations:
Depreciation 116,733 110,802
Amortization of other assets 4,612 4,613
Changes in operating assets and liabilities:
Accounts receivable, management agent 0 1,573
Prepaid expenses (4,618) (901)
Accounts payable 9,526 8,837
Accounts payable, management agent 19,603 8,632
Accrued interest, first mortgage 490 1,308
Accrued interest, second mortgage (1,943) (9,403)
Lease deposits 0 1,380
-------------- ------------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 69,807 77,264
----------- -----------
CASH FLOWS APPLIED TO INVESTING ACTIVITIES
Additions to property and equipment (71,791) (37,734)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from stockholders 10,000 50,000
Payments on first mortgage note (48,000) (48,000)
Payments on second mortgage note (11,078) (876)
Payments on equipment note (1,757) 0
------------ --------------
NET CASH PROVIDED FROM (APPLIED TO)
FINANCING ACTIVITIES (50,835) 1,124
----------- ------------
RESULTING IN A NET INCREASE (DECREASE) IN CASH (52,819) 40,654
CASH AT BEGINNING OF YEAR 54,709 14,055
----------- -----------
CASH AT END OF YEAR $ 1,890 $ 54,709
============ ===========
CASH PAID DURING THE YEAR FOR INTEREST $ 146,897 $ 141,639
========== ==========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Note issued on equipment acquisition $ 10,509
===========
</TABLE>
5
The accompanying notes are an integral part of these financial statements.
<PAGE>
Tri-TOWN SPORTS, INC.
==============================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - ORGANIZATION AND BUSINESS ACTIVITIES
Tri-Town Sports, Inc. (the Corporation) was organized and incorporated in
1991. In 1992, the Corporation acquired land, completed construction and
commenced operating a miniature golf and baseball batting cage facility under
the name of Dixies Hit & Putt. In 1993, the Corporation completed development
and commenced operating a golf driving range on additional land it acquired.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting 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.
Cash - For purposes of balance sheet classifications and presenting the
statement of cash flows, cash consists of an operating checking account.
Property and Equipment - Land is stated at cost. Land improvements and other
property and equipment are stated at cost less accumulated depreciation
provisions. Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets which are summarized as follows:
Land improvements 15 years
Mini-golf course 15 years
Golf driving range construction 15 years
Buildings 31 years
Batting cages 7 years
Furniture, fixtures and equipment 7 years
Organization Costs - Costs incurred in organizing the Corporation were
deferred and are being amortized on a straight-line basis over a five-year
period.
Deferred Financing Costs - Costs incurred in procuring bank financing were
deferred and are being amortized on a straight-line basis over the five-year
term of the debt.
6
The accompanying notes are an integral part of these financial statements.
<PAGE>
Note 3 - BANK MORTGAGE NOTE AND EQUIPMENT NOTE
The following summarizes mortgage and equipment notes with unrelated parties:
<TABLE>
<CAPTION>
December 31
-----------
1995 1994
---------- ---------
<S> <C> <C>
Bank Mortgage Note
$1,075,000 mortgage note payable to bank in monthly principal
installments of $4,000 plus interest at a prime rate plus 1%,
maturing on June 7, 1998 with a balloon payment of the remaining
balance, collateralized by a first mortgage interest in the
Corporation's real estate and facilities, and including
the personal guarantees of certain corporate stockholders $ 955,000 $1,003,000
Less amounts due in one year 48,000 48,000
----------- -----------
Amounts due after one year $ 907,000 $ 955,000
========== ==========
Equipment Note
8.5% equipment note payable to finance company in monthly principal and
interest installments of $332 through July of 1998, collateralized by
a security interest in landscaping equipment. $ 8,752 $ 0
Less amounts due within one year 3,503 0
------------ ---------------
Amounts due after one year $ 5,249 $ 0
============ ===============
</TABLE>
Principal maturities on the above-mentioned notes approximate the following:
<TABLE>
<CAPTION>
Year Ending Mortgage Equipment
December 31 Note Note Total
----------- ------------ ------------- -----
<S> <C> <C> <C>
1996 $ 48,000 $ 3,503 $ 51,503
1997 48,000 3,600 51,600
1998 859,000 1,649 860,649
---------- ------------ ----------
$ 955,000 $ 8,752 $ 963,752
========== ============ ==========
</TABLE>
NOTE 4 - LOANS AND OTHER TRANSACTIONS WITH RELATED PARTIES
Second Mortgage Note Payable
The Corporation has outstanding a second mortgage note, in the original amount
of $300,000, payable to J. C. Higgins Co., Inc., the stockholders of which
also hold 50% of the Corporation's stock. The note is payable in varying
annual installments due on December 31 of each year through the year 2006,
with interest imputed at 15%.
7
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTE 4 - LOANS AND OTHER TRANSACTIONS WITH RELATED PARTIES (CONT.)
The principal balance outstanding is $288,046 at December 31, 1995 ($299,124
at December 31, 1994). Interest charged to expense for the year, which
remained unpaid at year-end, totalled $46,978 for 1995 ($48,921 for 1994).
The following is a summary of the remaining annual installments at December
31, 1995:
Year Ending Required Less Interest Principal
December 31 Installment Imputed Maturity
----------- ----------- ------------- --------
1996 $ 77,822 $ 44,554 $ 33,268
1997 62,000 41,668 20,332
1998 61,200 38,343 22,857
1999 59,800 34,605 25,195
2000 57,800 30,484 27,316
Later years 255,200 96,122 159,078
---------- ----------- ----------
$ 573,822 $ 285,776 $ 288,046
========== ========== ==========
Loans Payable to Stockholders/Officers
Loans from stockholders, and former stockholders and corporate officers, are
evidenced by unsecured demand notes bearing interest at 6%. The aggregate
outstanding balance of such loans is $870,000 at December 31, 1995 ($860,000
at December 31, 1994). In connection with a bank mortgage note agreement,
$472,500 of these loans are subordinated in that principal and interest may
not be paid during the term of the bank note, subject to bank's review in
1996. Interest charges on all loans have been suspended and waived by the
holders since inception.
Management Agreement
The Corporation's golf driving range is managed and operated by a company
whose stockholders also hold 50% of the Corporation's outstanding stock, under
a management agreement which is cancellable by the Corporation. The management
agent substantially operates the range and provides personnel. Management fees
charged totalled $63,657 in 1995 and $66,894 in 1994. Amounts payable to the
management agent totalled $28,235 at December 31, 1995 ($8,632 at December 31,
1994).
NOTE 5 - FINANCIAL INSTRUMENTS
The Corporation's financial instruments that are potentially subject to
concentrations of credit risk consist of cash. The Corporation maintains its
cash accounts in a high-quality financial institution in amounts that do not
exceed the insured limits.
The reported amounts of cash are equivalent to their fair values as the
Corporation's cash does not include any time deposits or other equivalents.
8
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTE 5 - FINANCIAL INSTRUMENTS (CONT.)
The fair values of the Corporation's loans, as estimated by discounting their
cash requirements based on current rates available in the market for the
approximate remaining maturities, are compared to their reported amounts as
follows at December 31, 1995:
Reported Estimated
Amount Fair Value
------------ -----------
First mortgage note payable $ 955,000 $ 955,000
Second mortgage note payable 288,046 355,000
Equipment note payable 8,752 8,752
Loans payable to stockholders 870,000 650,000
---------- ----------
$2,121,798 $1,968,752
========== ==========
NOTE 6 - INCOME TAX STATUS
The stockholders of Tri-Town Sports, Inc. have elected S-corporation status
for the Corporation whereby the income or losses of the Corporation are
allocated to the stockholders and reportable on their respective individual
income tax returns in a manner similar to that of a partnership. As a result,
the accompanying financial statements do not include provisions for taxes on
corporate income.
NOTE 7 - PROPOSED SALE OF BUSINESS
In August of 1996, the Corporation signed a letter of intent to sell its
business and substantially all related assets for $2.6 million. The proposed
sale would take place in September of 1996, with the Corporation receiving
$1.9 million in cash at the closing, along with a $700,000 promissory note due
within one year. The sale would generate a financial reporting gain of
approximately $390,000 in September of 1996, after related selling costs. (The
pro-forma effect of this proposed sale on the 1995 financial statements of the
Corporation, assuming the sale occurred on December 31, 1995 would have been a
gain of approximately $300,000.)
The cash proceeds of the sale would be sufficient to liquidate all
non-stockholder debt and liabilities and a portion of loans payable to
stockholders/officers. The proceeds of the promissory note would be sufficient
to liquidate any remaining stockholder loan balances.
9
The accompanying notes are an integral part of these financial statements.
<PAGE>
Exhibit 3
KKL GOLF PARTNERSHIP
(AN ILLINOIS GENERAL PARTNERSHIP)
INDEPENDENT AUDITORS' REPORT AND
FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
KKL GOLF PARTNERSHIP
(AN ILLINOIS GENERAL PARTNERSHIP)
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 2
FINANCIAL STATEMENTS:
Balance Sheets, December 31, 1995 and 1994
(Exhibit A) 3
Statement of Operations, Years Ended
December 31, 1995 and 1994 (Exhibit B) 4
Statement of Changes in Partners' Capital,
Years Ended December 31, 1995 and 1994
(Exhibit C) 5
Statement of Cash Flows, Years Ended December 31,
1995 and 1994 (Exhibit D) 6
Notes to the Financial Statements 7-11
<PAGE>
[AMG LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
KKL Golf Partnership
We have audited the accompanying balance sheets of KKL GOLF PARTNERSHIP (an
Illinois general partnership) as of December 31, 1995 and 1994 and the related
statements of operations, changes in partners' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide 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 KKL Golf Partnership as of
December 31, 1995 and 1994, and the results of its operations and cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Altschuler, Melvoin and Glasser LLP
Chicago, Illinois
February 7, 1996
2
<PAGE>
Exhibit A
KKL GOLF PARTNERSHIP
(An Illinois General Partnership)
Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
---------------------------
<S> <C> <C>
Current Assets:
Cash (Note 4) $ 32,905 $ 54,547
Accounts receivable 5,778 4,971
Inventories (Note 2) 58,490 59,732
Other current assets 6,394 18,325
---------- ----------
103,567 137,575
---------- ----------
Property and Equipment (net of accumulated depreciation--Notes 1, 2, 4 and 5):
Land 1,336,453 1,336,453
Land improvements 887,257 837,223
Buildings 765,828 754,922
Machinery and equipment 275,062 259,844
Furniture and fixtures 83,678 83,678
Vehicles 18,125 4,822
---------- ----------
3,366,403 3,276,942
Accumulated depreciation and amortization 382,701 251,645
---------- ----------
2,983,702 3,025,297
---------- ----------
Deferred Charges (Notes 2 and 3) 5,971 51,854
---------- ----------
$3,093,240 $3,214,726
========== ==========
Liabilities and Partners' Capital
Current Liabilities:
Current maturities of long-term debt
(Notes 1 and 4) $ 69,721 $ 64,122
Current obligations under capital leases
(Note 5) 32,709 32,883
Accounts payable and accrued expenses
(Note 8) 351,090 236,916
---------- ----------
453,520 333,921
Long-term Debt, Net of Current Maturities
(Notes 1 and 4) 2,084,363 2,153,720
Obligations under Capital Leases, Net of
Current Maturities (Note 5) 79,889 77,929
Partners' Capital 475,468 649,156
---------- ----------
$3,093,240 $3,214,726
========== ==========
</TABLE>
3
The accompanying notes are an integral part of this statement.
<PAGE>
Exhibit B
KKL GOLF PARTNERSHIP
(An Illinois General Partnership)
Statement of Operations
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---------------------------
<S> <C> <C>
Revenue $1,196,320 $1,113,581
Cost of Sales 153,698 147,684
---------- ----------
Gross Profit 1,042,622 965,897
Operating Expenses (Notes 5, 6 and 7) 838,976 816,118
---------- ----------
Income from Operations before Interest Expense,
Depreciation and Amortization 203,646 149,779
---------- ----------
Interest Expense 195,604 199,893
Depreciation and Amortization (Notes 2 and 3) 181,730 217,859
---------- ----------
377,334 417,752
---------- ----------
Net Loss (Exhibit C) ($ 173,688) ($ 267,973)
========== ==========
</TABLE>
4
The accompanying notes are an integral part of this statement.
<PAGE>
Exhibit C
KKL GOLF PARTNERSHIP
(An Illinois General Partnership)
Statement of Changes in Partners' Capital
Years Ended December 31, 1995 and 1994
Partners' Capital Balance, December 31, 1993 $ 717,129
Additional Capital Contribution 200,000
Net Loss, Year Ended December 31, 1994
(Exhibit B) ( 267,973)
----------
Partners' Capital Balance, December 31, 1994
(to Exhibit A) 649,156
Net Loss, Year Ended December 31, 1995
(Exhibit B) ( 173,688)
----------
Partners' Capital Balance, December 31, 1995
(To Exhibit A) $ 475,468
==========
5
The accompanying notes are an integral part of this statement.
<PAGE>
Exhibit D
KKL GOLF PARTNERSHIP
(An Illinois General Partnership)
Statement of Cash Flows
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss (Exhibit B) ($ 173,688) ($ 267,973)
---------- ----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 181,730 217,859
Loss on disposition of property and equipment 4,684 0
Changes in assets and liabilities:
Decrease in accounts receivable ( 807) 1,993
Decrease (Increase) in inventories 1,242 ( 8,516)
Decrease (Increase) in other current assets 11,931 ( 18,325)
(Decrease) Increase in accounts payable
and accrued expenses 114,175 ( 52,640)
---------- ----------
Total adjustments 312,955 140,371
---------- ----------
Net cash provided by (used in) operating activities 139,267 ( 127,602)
---------- ----------
Cash Flows Used in Investing Activities:
Acquisition of property and equipment ( 60,939) ( 204,435)
--------- ----------
Cash Flows from Financing Activities:
Proceeds from partners' capital contributions 0 200,000
Repayment of long-term debt ( 63,759) ( 59,956)
Payments on obligations under capital leases ( 36,211) ( 33,879)
--------- ----------
Net cash provided by (used in) financing activities ( 99,970) 106,165
--------- ----------
Decrease in Cash ( 21,642) ( 225,872)
Cash, Beginning of Year 54,547 280,419
--------- ----------
Cash, End of Year $ 32,905 $ 54,547
========== ==========
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest $ 175,845 $ 190,980
========== ==========
Supplemental Schedule of Noncash
Investing and Financing Activities:
Equipment and Auto acquired under capital leases $ 37,996 $ 70,085
========== ==========
</TABLE>
6
The accompanying notes are an integral part of this statement.
<PAGE>
KKL GOLF PARTNERSHIP
(An Illinois General Partnership)
Notes to the Financial Statements
December 31, 1995 and 1994
Note 1--Organization and Nature of Activities:
KKL Golf Partnership (the "Partnership"), an Illinois general partnership,
is engaged in acquiring, developing, owning and operating golf and other
related properties. The Partnership currently owns and operates the Carolina
Springs Golf & Country Club, located in Fountain Inn, South Carolina, which
was acquired on June 8, 1992.
Net operating income or loss is allocated and net cash flow (as defined) is
distributed as specified in the partnership agreement.
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Note 2--Significant Accounting Policies:
A summary of significant accounting policies followed by the Partnership is
as follows:
Inventories--Inventories are stated at the lower of cost or market.
Cost is determined by the first-in, first-out method.
Depreciation--For financial reporting purposes, depreciation of
property and equipment is computed using the straight-line method over
the estimated useful lives of the assets as follows:
Assets Life
------ ----
Buildings 31 years
Land improvements 15 to 20 years
Machinery and equipment 7 years
Furniture and fixtures 7 years
Vehicles 3 years
For income tax reporting purposes property and equipment is being
depreciated using both straight-line and accelerated methods over the
applicable statutory recovery periods, commencing upon the date the
property was placed into service.
Deferred Charges--Amortization of deferred charges is provided as
follows:
Noncompete Agreement--Fees paid to the previous owners are being
amortized on the straight-line method over the three-year term
of the agreement. The agreement was fully amortized in June
1995.
7
<PAGE>
KKL GOLF PARTNERSHIP
(An Illinois General Partnership)
Notes to the Financial Statements
December 31, 1995 and 1994
Note 2--Significant Accounting Policies, Continued:
Financing Fees--Fees and costs incurred in connection with
obtaining the first mortgage (Note 4) are being amortized over
the term of the mortgage.
Income Taxes--The Partnership is not subject to federal income taxes
since the income or loss of the Partnership (as allocated) is
includable in the respective income tax returns of the partners.
Fair Value of Financial Investments--Management believes that the fair
value of its mortgage loans and capital leases are not materially
different from their carrying value. Management has estimated the fair
value by discounting expected cash flows using interest rates that
management believes approximate the interest rates currently available
for similar mortgages and leases.
Note 3--Deferred Charges:
Unamortized deferred charges consist of the following at the respective
balance sheet dates:
1995 1994
---------- ----------
Noncompete agreement $ 0 $ 41,667
Financing fees 5,971 10,187
---------- ----------
$ 5,971 $ 51,854
========== ==========
Amortization of deferred charges amounted to $45,883 and $104,216 at
December 31, 1995 and 1994, respectively.
Note 4--Long-term Debt:
Long-term debt consists of the following:
(a) First Mortgage Loan:
On June 8, 1992, the Partnership entered into a first mortgage
loan agreement with NationsBank in the amount of $1,550,000.
The loan bears interest at 8.56% per annum, payable in monthly
installments of principal and interest of $15,323, with the
then outstanding principal balance due June 8, 1997. The loan
may be prepaid without penalty, however, the Partnership must
pay the mortgagee an amount equal to 1/2% of the outstanding
principal balance if such prepayment is a result of the
refinancing of the loan with a financial institution other
than the mortgagee.
8
<PAGE>
KKL GOLF PARTNERSHIP
(An Illinois General Partnership)
Notes to the Financial Statements
December 31, 1995 and 1994
Note 4--Long-term Debt, Continued:
The loan is secured by a first mortgage on the project, an
assignment of leases, rents, profits and membership agreements
with respect to the Project, the proceeds of an escrow account
maintained with the mortgagee in the minimum amount of one
monthly payment of principal and interest (balances of $16,642
and $16,224 at December 31, 1995 and 1994, respectively) and a
guaranty of the entire indebtedness by one of the
Partnership's partners.
The loan contains covenants restricting certain Partnership
acts and requiring the maintenance of certain financial
ratios. At December 31, 1995, the Partnership was in
compliance with these covenants.
(b) Second Mortgage Loan:
On June 8, 1992, the Partnership entered into a loan agreement
with the seller, in the amount of $809,663.
The loan, which is secured by a second mortgage on the
Project, bears interest at 8% per annum, payable in monthly
installments of $5,398, with the entire principal balance due
on June 8, 1999.
The Partnership has the right to prepay the loan at any time
without penalty.
Principal maturities of long-term debt are as follows:
First Second
Year Ending Mortgage Mortgage
December 31, Loan Loan Total
------------ ---------- ---------- ----------
1996 $ 69,721 $ 69,721
1997 1,274,700 1,274,700
1998 0
1999 $ 809,663 809,663
---------- ---------- ----------
$1,344,421 $ 809,663 $2,154,084
========== ========== ==========
9
<PAGE>
KKL GOLF PARTNERSHIP
(An Illinois General Partnership)
Notes to the Financial Statements
December 31, 1995 and 1994
Note 5--Obligations under Capital Leases:
Pursuant to the terms of several capital leases, the Partnership leases
machinery and equipment and an auto with a net book value of $131,223 and
$141,947 at December 31, 1995 and 1994, respectively.
A schedule of future minimum lease payments is as follows:
Year Ending
December 31, Amount
- ----------------- ----------
1996 $ 41,538
1997 39,603
1998 29,848
1999 16,029
2000 4,335
----------
131,353
Less amount representing interest 18,755
----------
Present value of minimum lease payments 112,598
Less current portion 32,709
----------
$ 79,889
==========
Interest expense pertaining to capital lease obligations charged to
operations at December 31, 1995 and 1994 amounted to $10,714 and $10,110,
respectively.
Amortization expense pertaining to equipment and the auto under capital
leases amounted to $31,989 and $22,939 at December 31, 1995 and 1994,
respectively.
Note 6--Management Agreement:
The Partnership entered into a management agreement with Kemper Golf
Management, Inc., an affiliated corporation, to provide management services
to the Project for a monthly fee equal to 4% of gross monthly revenue. In
addition, the agreement provides for the payment of a contingent management
fee of up to 4% of the Project's annual gross revenue subject to the
availability of "distributable cash flow" for such year, as defined.
Management fee expense amounted to $47,853 and $44,597 at December 31, 1995
and 1994, respectively. No contingent fee was payable for 1995 or 1994.
The term of this agreement is concurrent with the term of the Partnership
Agreement, which extends until December 31, 2022, unless terminated by
mutual agreement of the partners.
10
<PAGE>
KKL GOLF PARTNERSHIP
(An Illinois General Partnership)
Notes to the Financial Statements
December 31, 1995 and 1994
Note 7--Commitments and Contingencies:
The partnership entered into a consulting agreement with each of the
previous owners to provide golfing, public relations and membership services
to the Partnership. A consulting fee is payable on a monthly basis in the
amount of $2,966 and the agreement continues through July 1999.
Consulting fee expense amounted to $35,600 for the years ended December 31,
1995 and 1994, respectively.
Note 8--Related-party Transactions:
As of December 31, 1995 and 1994, accounts payable and accrued expenses
included $341,725 and $231,920 due to Kemper Sports Management, Inc. ("KSM,"
a partner in the Partnership) for reimbursement of normal recurring
operating expenses paid on behalf of KKL Golf Partnership, which KSM intends
to continue when required.
See Note 6 for other related-party transactions.
11
<PAGE>
LTD. #2 FOR THE YEAR ENDED DECEMBER 31, 1995.
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
Year Ended December 31, 1995
<PAGE>
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
------------------------------------------------
FINANCIAL STATEMENTS
Year Ended December 31, 1995
<PAGE>
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
CONTENTS
- -----------------------------------------------------------------------------
Independent Auditors' Report 3
Financial Statements
Balance sheet 4
Statement of income 5
Statement of partners' capital 6
Statement of cash flows 7
Summary of Accounting Policies 8-9
Notes to Financial Statements 10-11
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners
USA Golf Centers, Ltd. 2
Newport Beach, California
We have audited the accompanying balance sheet of USA Golf Centers, Ltd. 2, a
California limited partnership, as of December 31, 1995 and the related
statements of income, partners' capital, and cash flows for the year then
ended. These financial statements are the responsibility of the Partnership'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 principals 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 USA Golf Centers, Ltd. 2 at
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.
December 5, 1996
3
<PAGE>
- ------------------------------------------------------------------------------
DECEMBER 31,
1995
-----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 41,765
Prepaid expenses 10,137
--------
Total current assets 51,902
Leasehold improvements and equipment (Note 2) 918,108
Deposits 24,000
--------
Total assets $994,010
========
<PAGE>
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEET
- ------------------------------------------------------------------------------
DECEMBER 31,
1995
-----------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Note payable to related party (Note 3) $ 84,024
Accounts payable 30,394
--------
Total current liabilities 104,418
Deferred rent 63,749
--------
Total liabilities 168,167
Commitments (Note 4)
Subsequent event (Note 7)
Partners' capital 825,843
--------
Total liabilities and partners' capital $994,010
========
See accompanying summary of accounting policies and notes to
financial statements.
4
<PAGE>
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF INCOME
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995
----------------------
REVENUE $ 600,105
---------
OPERATING EXPENSES
Depreciation and amortization 138,403
Salaries and benefits 121,950
Ground lease 84,535
Utilities 41,827
Golf balls 32,342
Professional fees 26,560
Rent 23,008
Repairs and maintenance 20,434
Management fee 18,000
Advertising 15,399
Insurance 14,576
Supplies 12,745
Administration 7,183
Equipment 6,243
Interest 4,545
Other expenses 1,457
Property taxes 1,176
Security 832
---------
Total operating expenses 571,215
---------
NET INCOME $ 28,890
==========
See accompanying summary of accounting policies and notes to
financial statements.
5
<PAGE>
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995
----------------------
PARTNERS' CAPITAL, January 1, 1995 $ 948,203
Cash distributions (151,250)
Net income for the year 28,890
---------
PARTNERS' CAPITAL, December 31, 1995 $ 825,843
=========
See accompanying summary of accounting policies and notes to
financial statements.
6
<PAGE>
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (NOTE 6)
YEAR ENDED DECEMBER 31,
1995
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 28,890
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 138,403
Changes in operating assets and liabilities:
Prepaid expenses (510)
Accounts payable 15,398
Deferred rent 13,575
---------
Net cash provided by operating activities 195,756
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (28,001)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party debt $ 38,000
Principal payments on related party debt (20,050)
Cash distributions (151,250)
---------
Net cash used in financing activities (133,300
---------
Net increase in cash and cash equivalents 34,455
CASH AND CASH EQUIVALENTS, beginning of year 7,310
---------
CASH AND CASH EQUIVALENTS, end of year $ 41,765
=========
See accompanying summary of accounting policies and notes to
financial statements.
7
<PAGE>
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
PRINCIPLES The accounts are maintained on the accrual basis of
OF ACCOUNTING accounting in accordance with generally accepted
accounting principles. These financial statements
include only items relating to the business of the
Partnership.
CASH EQUIVALENTS For the purpose of the statement of cash flows, the
Partnership considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents.
LEASEHOLD Leasehold improvements and equipment are stated at cost
IMPROVEMENTS and are depreciated using the double declining method
AND EQUIPMENT over the following estimated useful lives;
ESTIMATED
CLASSIFICATION USEFUL LIFE
-------------- -----------
Leasehold improvements 15 years
Machinery and Equipment 7 years
PROVISION Income taxes have not been provided for in these
FOR TAXES financial statements. All profits, losses and credits
flow through to the partners and are recognized on
their respective income tax returns.
ALLOCATION OF Operating profits of the Partnership are allocated as
PROFITS AND follows: (1) to the extent of previous losses, (2) to
LOSSES the extent and in the proportion that cash has been
distributed to the partners during the year, (3) to the
extent of any accrued but unpaid preferred return,
(4) any excess is allocated 75% to the limited partners
and 25% to the general partner until all the limited
partners have received their cash capital plus 12% on
original capital, and (5) 25% to limited partners and
75% to the general partner thereafter.
8
<PAGE>
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ALLOCATION OF Profits from disposition are distributed in a similar
PROFITS AND manner as operating profits except under item (4)
LOSSES above the excess profits are disbursed 50% to the
(CONTINUED) limited partners and 50% to the general partner.
Losses are allocated in a similar manner to items (1)
and (2) above and thereafter losses shall be allocated
as net cash flow is allocated.
USE OF 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 The carrying amount of cash, accounts payable and note
FINANCIAL payable are believed by the Partnership's management to
INSTRUMENTS be reasonable estimates of their fair value.
9
<PAGE>
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. ORGANIZATION USA Golf Centers, Ltd. 2, a California limited
partnership (the "Partnership"), was formed on
September 24, 1992. The Partnership entered into a
fifteen-year ground lease for the purpose of developing
and operating a golf driving range in the city of
Westminster, California.
2. LEASEHOLD DECEMBER 31,
IMPROVEMENTS 1995
AND EQUIPMENT -----------
Leasehold improvements $1,008,523
Machinery and equipment 304,808
----------
Less accumulated depreciation 1,313,331
395,223
----------
$ 918,108
==========
3. NOTE PAYABLE The note payable to related party is an unsecured note
TO RELATED PARTY payable to a partner, payable in monthly installments
of $2,850 including interest at 10% per annum.
4. COMMITMENTS The Partnership leases the land on which its golf range
is located under a 15-year operating lease which expires
in 2008. The monthly rent is increased annually by a
minimum of 104% and a maximum of 108% of the minimum
annual rent payable for the year prior to such
adjustment, with additional rent in an amount equal to
the difference between the minimum annual rent payable
for each calendar quarter and 11.5% of the Partnership's
gross sales. The Partnership pays all taxes and
insurance on the property.
Future minimum annual lease payments for the land lease
are as follows:
YEAR AMOUNT
------ ----------
1996 $ 73,350
1997 75,931
1998 78,512
1999 81,093
2000 83,674
Thereafter 700,184
----------
$1,092,744
==========
10
<PAGE>
USA GOLF CENTERS, LTD. 2
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. COMMITMENTS The Partnership uses certain equipment under operating
(CONTINUED) leases for the operation of the golf range. Those
leases expire between one and five years.
Future minimum annual lease payments for the equipment
leases are as follows:
YEAR AMOUNT
------ ----------
1996 $ 57,850
1997 60,444
1998 61,862
1999 45,650
2000 42,839
Thereafter 2,400
----------
$ 271,045
==========
5. SUPPLEMENTAL Supplemental disclosures of cash flow information:
DISCLOSURES OF
CASH FLOW YEAR ENDED DECEMBER 31,
INFORMATION 1995
----------------------
Cash paid during the year for:
Interest $ 4,545
==========
Income taxes $ 800
==========
6. RELATED PARTY Management fees of $18,000 included in operating
TRANSACTIONS expenses were paid to the general partner during the
year ended December 31, 1995. These fees were paid
under a management fee agreement whereby the general
partner is paid the higher of 3% of gross monthly
sales or $1,500 per month.
7. SUBSEQUENT On September 30, 1996, the Partnership sold all of its
EVENT improvement, leasehold interests and equipment to
Family Golf Center for $1,500,000. The sale was for
cash subject to a $50,000 hold back for any
contingencies. The Partnership will be dissolved in
1996 upon receiving the remaining funds in accordance
with the terms of the partnership agreement.
11
<PAGE>
Exhibit 5
SWINGMASTER GOLF AT CENTENNIAL, LTD.
A COLORADO LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND JUNE 30, 1996
<PAGE>
MICHAEL B. JOHNSON & CO., P.C.
[LETTERHEAD]
Board of Directors
Swingmaster Golf at Centennial, Ltd.
A Colorado Limited Partnership
Englewood, Colorado 80112
We have audited the accompanying balance sheet of Swingmaster Golf at
Centennial, Ltd. (A Colorado Limited Partnership) as of June 30, 1996 and
December 31, 1995 and the related statements of operations, cash flows, and
changes in partners' equity for the six month period ended June 30, 1996 and the
year ended December 31, 1995. 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 audits.
We conducted our audits 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 audits provide 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 Swingmaster Golf at Centennial,
Ltd., A Colorado Limited Partnership at June 30, 1996 and December 31, 1995, and
the results of its operations and its cash flows for the six month period
through June 30, 1996, and the fiscal year ended December 31, 1995, in
conformity with generally accepted accounting principles.
MICHAEL B. JOHNSON & CO., P.C.
Denver, Colorado
August 16, 1996
<PAGE>
SWINGMASTER GOLF AT CENTENNIAL, LTD.
A COLORADO LIMITED PARTNERSHIP
BALANCE SHEET
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
ASSETS:
Current Assets:
Cash in Bank $ 1,992 $ 1,258
Note Receivable 7,000 7,000
Inventory 30,174 21,200
-------- --------
TOTAL CURRENT ASSETS 29,186 29,458
FIXED ASSETS:
Furniture, Fixtures and Equipment 32,092 30,084
Leashold Improvement - Building 30,720 59,138
Leashold Improvement - Range 721,765 696,872
Less Accumulated Depreciation (28,634) (18,634)
--------- --------
NET FIXED ASSETS 815,943 767,460
OTHER ASSETS:
Escrow Deposits 22,041 21,755
-------- --------
TOTAL OTHER ASSETS 22,041 21,755
TOTAL ASSETS $ 877,150 $ 818,673
-------- --------
LIABILITIES AND PARTNERS' EQUITY:
CURRENT LIABILITIES:
Accounts Payable $ 114,101 $ 59,968
Accrued Expense Payable 70,742 45,764
Current Portion - L/T Debt 17,315 15,467
-------- --------
TOTAL CURRENT LIABILITIES 202,158 121,199
LONG TERM LIABILITIES:
S.B.A. Note Payable 465,467 465,467
Note Payable - Partners 115,692 12,500
-------- --------
TOTAL LONG TERM LIABILITIES 581,159 477,967
TOTAL LIABILITIES 783,317 599,166
PARTNERS' EQUITY:
Partners' Capital 219,507 431,709
Current Period Deficit (125,674) (212,202)
-------- --------
TOTAL PARTNERS' EQUITY 93,833 219,507
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 877,150 $ 816,673
======== =========
<PAGE>
SWINGMASTER GOLF AT CENTENNIAL, LTD.
A COLORADO LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS (LOSS)
<TABLE>
<CAPTION>
SIX MONTH YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, 1996 1995
-------------- --------------
<S> <C> <C>
INCOME:
Operating Revenue $ 206,283 $ 73,294
Other--Interest income 344 486
-------------- --------------
TOTAL INCOME 206,627 73,780
COST OF SALES 39,364 17,961
-------------- --------------
NET PROFIT 167,263 55,819
OPERATING EXPENSES:
Advertising 12,292 13,729
Professional Fees 2,325 12,018
Management Fees 36,981 35,153
Office Expenses 4,836 4,942
Building & Land Rent 39,637 35,543
Loan Fees -- 12,004
Employee & Labor Expense 80,313 49,322
Insurance Expense 6,120 10,186
Payroll Taxes 10,841 9,102
Printing 1,013 2,604
Supplies 9,864 18,709
Equipment Rental 8,057 11,475
Repair & Maintenance 5,519 335
Taxes & Licenses 17,270 977
Telephone 2,359 2,642
Utilities 14,690 7,913
Depreciation 10,000 18,634
Interest Expense 29,756 22,362
Miscellaneous Expense 1,064 371
-------------- --------------
TOTAL EXPENSES 292,937 268,021
NET (LOSS) $(125,674) $(212,202)
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SWINGMASTER GOLF AT CENTENNIAL, LTD.
A COLORADO LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED
1996 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET (LOSS) $(125,674) $(212,202)
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH USED FOR OPERATING ACTIVITIES:
Depreciation 10,000 18,634
CHANGES IN CURRENT ASSETS AND CURRENT LIABILITIES:
Increase in Note Receivable -- (7,000)
Increase in Inventory (8,974) (21,200)
Increase (Decrease) in Payable/Accrual 82,928 121,199
Increase (Decrease) in Notes Payable 1,848 15,467
Increase in Deposits (286) (21,755)
-------------- -----------------
NET CASH USED FOR OPERATING ACTIVITIES: (40,158) (106,857)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Leasehold Improvements, Furniture and
Equipment (58,483) (786,094)
-------------- -----------------
NET CASH USED FOR INVESTING ACTIVITIES (58,483) (786,094)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Change S.B.A. Note Payable (3,817) 450,000
Net Change Partners' Note Payable 103,192 12,500
Proceed From Partners' Capital Contribution -- 431,559
-------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 99,375 894,059
NET INCREASE (DECREASE) IN CASH 734 1,108
BEGINNING CASH 1,258 150
-------------- -----------------
ENDING CASH $ 1,992 $ 1,258
============== =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SWINGMASTER GOLF AT CENTENNIAL, LTD.
A COLORADO LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND DECEMBER 31, 1995
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
Swingmaster Golf at Centennial, Ltd. (the Company) began from a private
placement memorandum dated November 7, 1994 in the state of Colorado. The
partnership was established to have the General Partner on behalf of the
Partnership to construct, furnish and operate a "Golf Practice Facility". The
golf facility has been appraised at over One Million Dollars.
The Following is a summary of significant accounting policies consistently
followed by the Company in the preparation of its financial statements.
BASIS OF PRESENTATION:
1--Cash and Cash Equivalents:
For purposes of the statements of cash flows, the Company considers all
instruments with a maturity of three months or less to be cash equivalents.
2--Revenue Recognition:
Net sales consists primarily of golf clothing and equipment and service
revenue. Revenue is recognized for when the Company delivers the product.
Service contact revenue is recognized over the term of the related service
contract.
3--Inventories:
Inventories consist of golf clothing, equipment and supplies and are valued at
the lower of cost (first-in, first-out method) or market.
4--Leasehold Improvements, Furniture, Fixtures and Depreciation:
Leasehold improvements, furniture, fixtures and equipment is stated at cost.
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives on a
straight-line basis using a forty year and seven year service life.
5--Use of Estimates in the Preparation of Financial Statements:
The preparation of financial statements in conformity with generally accepted
accounting principal requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE>
SWINGMASTER GOLF AT CENTENNIAL, LTD.
A COLORADO LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND DECEMBER 31, 1995
NOTE 2-NOTES PAYABLE:
A $450,000 Small Business Administration note payable to First National Bank of
Parker (nka Norwest Bank) was signed dated May 15, 1995. This note is payable in
fifteen years with monthly payments of principal and interest in the amount of
$5,186. The interest rate shall be eleven and three quarters percent (11-3/4%)
per annum. The interest rate shall be adjusted up or down on the first business
day of each quarter thereafter, by adding two and three quarters (2-3/4%)
percentage points to the lowest New York prime rate. The Company has been paying
interest only since the inception of the note and per management has a verbal
agreement with the bank to continue this procedure. Two partner's personal
residence as well as equipment is used for collateral.
The general partner which is a corporation, loaned the partnership $115,692 with
an unsecured note with no interest rate and no maturity date.
NOTE 3-LEASE COMMITMENT:
The Company entered into a ground lease agreement with the County Airport
Authority. The golf facility was developed on this ground.
The term of this Lease shall be for a period of twenty (20) years, commencing on
the 1st day of November, 1994, ("Lease Commencement Date"), and terminating on
the 31st day of October, 2014. At the option of Lessee, the term may be extended
twice to an additional ten (10) years each time until the 31st day of October,
2034, if approved by the Federal Aviation Administration.
Commencing October 1, 1995, ten cents ($.10) per square foot per year, with an
increase at the compounded rate of three percent (3%) per annum, effective
October 1 of each Lease Year, commencing October 1, 1996, and two hundred per
acre per year for the venues with an increase at the compounded rate of three
percent (3%) per annum effective October 1 of each Lease Year, commencing
October 1, 1996, plus a minimum of fifteen thousand ($15,000) if the Gross
Income, measured from October 1 to September 30 of each year until the lease
term expires ("Annual Gross Income") is up to five hundred thousand ($500,000),
plus four percent (4%) of the Annual Gross Income greater than five hundred
thousand ($500,000) and up to one million ($1,000,000) (collectively defined as
"Percentage Rent"). The basic Rent shall be payable quarterly in advance i.e. on
or before October 1, January 1, April 1, and July 1 of each Lease Year. The
Lease Year commences October 1 and ends September 30 ("Lease Year"). Percentage
Rent is payable within sixty (60) days after the end of each Lease Year.
The Company also entered into a lease agreement to lease the modular office
building presently being utilized as the pro golf shop and administration office
for a term of three years beginning June 1, 1996 and terminating on May 31,
1999. The monthly lease amount is $2,250.
<PAGE>
SWINGMASTER GOLF AT CENTENNIAL, LTD.
A COLORADO LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND DECEMBER 31, 1995
NOTE 3-LEASE COMMITMENT CONT.:
The Company's ground and building lease expense for the six month period ended
June 30, 1996 and the year ended December 31, 1995 was approximately $39,600 and
$35,500, respectively. Approximate minimum annual future rental payments under
the lease are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
<S> <C>
1996 $ 69,387
1997 42,000
1998 42,000
1999 26,250
2000 15,000
Beyond 210,000
------------
$ 404,637
=============
</TABLE>
NOTE 4-RELATED PARTY MANAGEMENT AGREEMENT:
The Company has entered into a Management Agreement with the general partner to
receive ten percent of the gross revenue. The general partner, a corporation,
has entered into an employment agreement with the President of the Corporation
who is also the managing partner of Swingmaster. Compensation under this
agreement for the six month period ended June 30, 1996 and the year ended
December 31, 1995 amounted to approximately $34,000 and $50,000 respectively.
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
The following pro forma condensed statements of operations reflect the
acquisitions of the Pelham Enterprises, Inc., 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"), Owls' Creek Golf Center, Inc., ("Virginia Beach"), Flemington
Golf and Sports Center, LLC ("Flemington") and associated land, 202 Golf
Associates Inc., ("Yorktown") Indian River Golf-O-Rama, Inc. ("Indian River"),
K.G. Golf, Inc. ("Fairfield"), Catalina Golf Center ("Tucson"), Tree Court
Golf & Recreational Facility, Inc. ("St. Louis"), Golf and Sports Center of
the Palm Beaches, Inc. ("West Palm Beach"), Pin High Golf Center ("San Jose"),
Privatization Plus, Inc. ("Glen Burnie"), Tri-Town Sports, Inc. ("Easton"), KKL
Golf Partnership ("Carolina Springs"), Swingmaster Golf at Centennial, Ltd.
("Denver"), Mount Olive Golf Center ("Flanders") and USA Golf Centers, Ltd. 2
("Westminster") (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 and the related notes thereto, each included
elsewhere in this filing. 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
---------------------------------------------
HOLLAND 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>
VALLEY VIRGINIA YORKTOWN
TPT(A) VIEW 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.
1
<PAGE>
<TABLE>
<CAPTION>
ACQUIRED COMPANIES
- -----------------------------------------------------------------------------------
INDIAN WEST SAN JOSE GLEN
RIVER(B) FAIRFIELD(B) TUCSON(B) ST. LOUIS(B) PALM BEACH PIN HIGH BURNIE
- -------- ------------ --------- ------------ ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
$510 $ 791 $ 156 $ 443 $ 863 $ 533 $ 310
98 195 39
- -------- ------------ --------- ------------ ------------ ---------- --------
608 791 156 443 863 728 349
- -------- ------------ --------- ------------ ------------ ---------- --------
607 800 214 544 1,029 53 309
72 130 29
161 33 589 56
- -------- ------------ --------- ------------ ------------ ---------- --------
(232) (9) (91) (101) (166) (44) (45)
104 132 77 182 172 71
(5) 2 (1)
- -------- ------------ --------- ------------ ------------ ---------- --------
(232) (113) (218) (180) (348) (216) (115)
1
- -------- ------------ --------- ------------ ------------ ---------- --------
$(232) $(113) $(218) $(180) $ (348) $(217) $(115)
======== ============ ========= ============ ============ ========== ========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ACQUIRED COMPANIES
- --------------------------------------------------------------------------------------
CAROLINA PRO FORMA PRO
EASTON SPRINGS DENVER FLANDERS WESTMINSTER ADJUSTMENTS FORMA
-------- ---------- -------- ---------- ------------- ------------- -----------
<C> <C> <C> <C> <C> <C> <C>
$526 $ 991 $ 73 $461 $600 $ 19,435
205 386 3,863
-------- ---------- -------- ---------- ------------- ------------- -----------
526 1,196 73 847 600 0 23,298
-------- ---------- -------- ---------- ------------- ------------- -----------
302 1,021 179 289 511 (81)(a) 15,504
154 277 2,812
154 84 94 70 (13)(a) 3,623
-------- ---------- -------- ---------- ------------- ------------- -----------
70 21 (190) 187 19 68 1,359
145 196 22 4 4 (121)(a) 2,637
(2,448)(a) (77)
-------- ---------- -------- ---------- ------------- ------------- -----------
(75) (175) (212) 183 15 2,637 (1,201)
(1,162)(b) (491)
-------- ---------- -------- ---------- ------------- ------------- -----------
$(75) $ (175) $ (212) $183 $ 15 $ 3,799 $ (710)
======== ========== ======== ========== ============= ============= ===========
$(0.13)
40,000 5,677,000
</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 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 January 1, 1995:
<TABLE>
<CAPTION>
IMPAIRMENT
DATE INTEREST DEPRECIATION AMORTIZATION IN VALUE OF
COMPANY 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)
San Jose July 1996 (172) 78
Glen Burnie August 1996 38
Easton July 1996 7 (21)
Carolina Springs August 1996 (127)
Denver August 1996 86
Flanders August 1996 54
Westminster September 1996 (18)
------------- -------------- -------------- ------------
(121) (81) 13 (2,448)
============= ============== ============== ============
</TABLE>
- ------------
(1) Assumes average borrowing at 8%
(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
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
ACQUIRED COMPANIES
-----------------------------------------------------------------------
THE VIRGINIA YORKTOWN INDIAN
COMPANY BEACH FLEMINGTON HEIGHTS RIVER TUCSON ST. LOUIS CINCINNATI
---------- -------- ---------- -------- ------ -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues 16,234 35 74 54 39 164 83
Merchandise Sales 4,634 2 3 102
---------- -------- ---------- -------- ------ -------- --------- ----------
Total revenue 20,858 37 74 57 39 164 185
Operating expenses 9,109 39 25 88 40 11 188 106
Cost of merchandise
sold 3,043 2 3 77
Selling, general and
administrative
expenses 2,149 27 22 8 26 19
---------- -------- ---------- -------- ------ -------- --------- ----------
Operating income 6,567 (31) (25) (36) 6 2 (24) (17)
Interest expense 288 34 26 40 42 33
Other income
(expense) 1,155 (14) 3
---------- -------- ---------- -------- ------ -------- --------- ----------
Income before income
taxes 7,434 (79) (25) (59) 6 (38) (66) (50)
Income tax expense 2,676 0
---------- -------- ---------- -------- ------ -------- --------- ----------
Net income 4,758 (79) (25) (59) 6 (38) (66) (50)
========== ======== ========== ======== ====== ======== ========= ==========
Net income per share 0.48
Weighted average
shares outstanding 9,830 50 100 30
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEST
PALM GLEN CAROLINA PRO FORMA
BEACH PIN HIGH BURNIE EASTON SPRINGS DENVER FLANDERS WESTMINSTER ADJUSTMENTS PRO FORMA
------- -------- -------- -------- -------- --------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues 221 294 183 203 668 154 286 311 19,003
Merchandise Sales 114 30 53 52 206 5,196
------- -------- -------- -------- -------- --------- -------- ----------- ----------- ----------
Total revenue 221 408 213 203 721 206 492 311 0 24,199
Operating expenses 191 288 164 194 499 141 200 109(A) 11,392
Cost of merchandise
sold 71 23 48 39 146 3,452
Selling, general and
administrative
expenses 7 33 22 17 87 263 53 13 2,746
------- -------- -------- -------- -------- --------- -------- ----------- ----------- ----------
Operating income 23 16 4 (8) 87 (96) 152 98 (109) 6,609
Interest expense 102 36 69 30 4 4 148(A) 856
Other income
(expense) 1 0 96(A) 1,241
------- -------- -------- -------- -------- --------- -------- ----------- ----------- ----------
Income before income
taxes 23 (85) (32) (77) 87 (126) 148 94 (161) 6,994
Income tax expense (58)(B) 2,618
------- -------- -------- -------- -------- --------- -------- ----------- ----------- ----------
Net income 23 (85) (32) (77) 87 (126) 148 94 (103) 4,376
======= ======== ======== ======== ======== ========= ======== =========== =========== ==========
Net income per share 0.43
Weighted average
shares outstanding 220,900(C) 10,271,800
</TABLE>
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(A) Expense adjustments for the period ended September 30, 1996 to reflect
the acquisition of the Acquired Companies as if the acquisitions had
taken place at January 1, 1996:
<TABLE>
<CAPTION>
OTHER
INTERST DEPRECIATION (INCOME)
COMPANY DATE 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 14 4
West Palm Beach June 1996 20 (19) $ 9
San Jose July 1996 30 25
Glen Burnie August 1996 17 10
Easton July 1996 12 (46)
Carolina Springs August 1996 (50) 14
Denver August 1996 60 7
Flanders August 1996 32 13
Westminster September 1996 11 67
------------- -------------- --------- -------
$148 $ 86 $96 $23
============= ============== ========= =======
</TABLE>
- ------------
(1) Assumes average borrowing at 8%.
(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.
