<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
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):
July 25, 1997
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 August 11, 1997 (the "Original
Form 8-K"), Family Golf Centers, Inc. (the "Company") reported, among other
things, the completion of its (i) acquisition of Leisure Complexes, Inc., by
means of a merger, (ii) acquisition of certain assets of Divot City, and (iii)
acquisition of certain assets of Active Sports Marketing, LLC. 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 Leisure Complexes, Inc.,
Divot City or Active Sports Marketing, LLC as required by Item 7(a) of Form
8-K, or pro forma financial information with respect to the disclosed
acquisitions as required by Item 7(b) of Form 8-K. The financial information
required by Item 7(a) of Form 8-K with respect to Leisure Complexes, Inc.,
Divot City and Active Sports Marketing, LLC, and the pro forma financial
information required by Item 7(b) 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 are the financial statements of (i) Leisure Complexes, Inc.,
(ii) Divot City and (iii) Active Sports Marketing, LLC prepared pursuant
to Regulation S-X.
(b) Pro Forma Financial Information.
In accordance with Item 7(b) of Form 8-K, attached hereto are
pro forma financial statements of the Company which reflect the discussed
acquisitions.
(c) Exhibits.
1. Unaudited Financial Statements of Leisure Complexes, Inc. for and
as of the six months ended June 30, 1997.
2. Audited Financial Statements of Divot City for and as of the year
ended December 31, 1996 and December 31, 1995.
3. Audited Financial Statements of Active Sports Marketing, LLC for
and as of the year ended December 31, 1996.
4. Pro Forma Financial Statements of the Company.
2
<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: August 22, 1997
FAMILY GOLF CENTERS, INC.
/s/ Dominic Chang
---------------------------
Dominic Chang,
President and Chief Executive Officer
3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page Number
<S> <C> <C>
1. Unaudited Financial Statements of Leisure Complexes, Inc. for and
as of the six months ended June 30, 1997.
2. Audited Financial Statements of Divot City for and as of the year
ended December 31, 1996 and December 31, 1995.
3. Audited Financial Statements of Active Sports Marketing, LLC for and
as of the year ended December 31, 1996.
4. Pro Forma Financial Statements of the Company.
</TABLE>
4
<PAGE>
LEISURE COMPLEXES, INC.
FINANCIAL STATEMENTS
FOR THE SIX MONTH INTERIM PERIOD ENDED JUNE 30, 1997
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES INC.
CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Accountants' Compilation Report............. 1
Balance Sheet............................... 2-3
Statement of Income and Accumulated
Deficit.................................... 4
Statement of Cash Flows..................... 5-6
Notes to Financial Statements............... 7-17
</TABLE>
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
[FGM & CO. LETTERHEAD]
To the Shareholders of
Leisure Complexes, Inc.:
We have compiled the accompanying balance sheet of Leisure Complexes, Inc. as
of June 30, 1997 and the related statements of income and accumulated deficit
and cash flows for the six month interim period then ended, in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and accordingly, do not
express an opinion or any other form of assurance on them.
As discussed in Note 7 to the financial statements, subsequent to June 30,
1997, the Company was acquired.
August 5, 1997
Manhasset, New York
<PAGE>
LEISURE COMPLEXES, INC.
BALANCE SHEET
JUNE 30, 1997
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current Assets:
Cash in bank................................................. $ 601,005
Parts, product & beverage inventory.......................... 275,472
Trade accounts receivables................................... 136,643
Dividend receivable - workman's compensation................. 23,992
Deferred tax assets.......................................... 83,565
Prepaid real estate taxes.................................... 183,209
Prepaid assets............................................... 170,892
------------
Total Current Assets........................................ 1,474,778
------------
Property and Equipment, net of accumulated depreciation ...... 26,574,254
------------
Other Assets:
Goodwill..................................................... 100,351
Deferred charges, net of amortization........................ 382,459
Deferred tax asset, net of deferred tax liability of
$224,311................................................... 85,776
Security deposits............................................ 10,572
------------
Total Other Assets.......................................... 579,158
------------
Total Assets................................................ $28,628,190
============
</TABLE>
See Accountants' Compilation Report
and
Notes to Financial Statements.
-2-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
BALANCE SHEET
JUNE 30, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
<S> <C>
Current Liabilities:
Accounts payable & accrued expenses and taxes payable ....... $ 1,947,507
Construction related payables - Sports Plus.................. 230,310
Accrued interest payable..................................... 474,735
Mortgages payable............................................ 789,736
Notes payable................................................ 536,038
Suffolk County National Bank................................. 62,521
Line of credit - State Bank of Long Island................... 100,000
Line of credit - Chase Manhattan Bank........................ 400,000
Loan payable - Family Golf Centers, Inc...................... 500,000
Due to affiliates............................................ 303,344
League deposits.............................................. 164,511
Tournaments & exchanges...................................... 150,613
Vending & amusement games, advance deposits.................. 34,783
-------------
Total Current Liabilities................................... 5,694,098
-------------
Long-term Liabilities:
Mortgages payable............................................ 9,009,309
Notes payable................................................ 1,552,794
Suffolk County National Bank................................. 137,768
Construction loan............................................ 10,503,125
Equipment loan............................................... 3,684,375
Loan guarantee fee........................................... 154,204
Notes payable - shareholders - Series I...................... 64,487
Notes payable - shareholders - Series II..................... 450,000
Other shareholder loans...................................... 1,257,000
Sports Plus associated bank fees & costs payable ............ 712,500
-------------
Total Long-term Liabilities................................. 27,525,562
-------------
Total Liabilities........................................... 33,219,660
-------------
Redeemable Preferred stock (net of issuance costs of
$310,539).................................................... 1,439,461
-------------
Shareholders' Equity (Deficit):
Capital stock................................................ 50,000
Additional paid in capital................................... (3,810,689)
Accumulated deficit.......................................... (2,270,242)
-------------
Total Shareholders' Equity (Deficit)........................ (6,030,931)
-------------
Total Liabilities & Shareholders' Equity (Deficit) ......... $28,628,190
=============
</TABLE>
See Accountants' Compilation Report
and
Notes to Financial Statements
-3-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THE SIX MONTH INTERIM PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
<S> <C>
Sales ....................................... $10,558,710
Operating Expenses........................... 8,209,432
Selling, General and Administrative
Expenses.................................... 1,050,802
-------------
Income from Operations....................... 1,298,476
Interest Expense............................. (1,405,513)
Other Income................................. 203,686
-------------
Income before (Provision) for Income Taxes . 96,649
(Provision) for Income Taxes--Deferred ...... (33,829)
-------------
Net Income................................... 62,820
Accumulated Deficit--Beginning of Period .... (2,333,062)
-------------
Accumulated Deficit--End of Period........... $(2,270,242)
=============
</TABLE>
See Accountants' Compilation Report
and
Notes to Financial Statements.
-4-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTH INTERIM PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
<S> <C>
Cash Flows From Operating Activities:
Net Income........................................................... $ 62,280
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization charges ............................. 987,716
(Provision) for income taxes....................................... 33,829
(Increase) decrease in assets:
Cash escrow released for operations.............................. 1,300,000
Trade accounts receivable........................................ (19,733)
Dividend receivable--workmens compensation ...................... (4,436)
Loan receivables--employee....................................... 46,982
Product and beverage inventory................................... (6,301)
Prepaid real estate taxes and tax escrow......................... (183,209)
Prepaid assets .................................................. 18,756
Deferred charges................................................. (123,463)
Increase (decrease) in liabilities:
Accounts and accrued expenses and taxes payable.................. 191,219
Accrued interest payable......................................... 16,463
Due to affiliates................................................ 211,064
League deposits.................................................. (41,171)
Tournaments and exchanges........................................ (2,783)
Pro Am tournament advance deposits............................... (159,593)
Vending and amusement games, advance deposits.................... (32,654)
------------
Cash Provided By Operating Activities............................ 2,295,506
------------
Cash Flows From Investing Activities:
Capital improvements and purchases of fixtures & equipment ......... (1,834,758)
------------
</TABLE>
(Continued on next page)
See Accountants' Compilation Report
and
Notes to Financial Statements.
-5-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTH INTERIM PERIOD ENDED JUNE 30, 1997
(CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
Proceeds from State Bank of Long Island - line of credit ............. $ 400,000
Aggregate principal repayments on mortgages/notes payable ............ (377,400)
Advance from Family Golf Center, Inc.................................. 500,000
Costs associated with issuance of preferred stock..................... (255,611)
------------
Cash Provided From Financing Activities............................ 266,989
------------
(Increase) in Cash................................................. 727,737
Cash - Beginning of Year........................................... (126,732)
------------
Cash - End of Year................................................. $ 601,005
============
Supplemental Disclosure of Cash Flow Information
Cash Paid for Interest................................................ $1,405,513
============
Supplemental Disclosure of Non Cash Investing and Financing
Activities:
* In January 1997, a shareholder elected to convert their $50,000 Series II
Note to the Company's new issuance of Convertible Redeemable Preferred
Stock. This conversion is reflected at December 31, 1996.
Upon the closing on August 8, 1996 of the sports and entertainment loan
with Chase Manhattan, Chase Manhattan is deemed to have earned and
therefore the Company has accrued $87,500 in commitment and success fees.
</TABLE>
See Accountants' Compilation Report
and
Notes to Financial Statements.
-6-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying interim financial statements represent a six month period
of operations. The intended purpose of these financial statements is to
assist the management and owners of Leisure Complexes, Inc. in evaluating
the six month period ended June 30th.
In the opinion of the management of the Company, the financial statements
include all adjustments consisting of only normal recurring adjustments
necessary to fairly present the results for the interim period to which
these financial statements relate.
All interdivision accounts and transactions have been eliminated.
Organization:
Leisure Complexes, Inc. ("The Company") formerly known as Melville Bowling
Center, Inc. (prior to the February 1, 1991 merger) was incorporated
May 1976 under the laws of the State of New York and elected Small Business
Corporation ("S" Corporation) status for both Federal and New York State
income tax purposes (see Note 4).
On July 1, 1996 the Company commenced partial business operations at
Sports Plus(Trade Mark). Sports Plus(Trade Mark) is a Company created
concept that operates a year round indoor family oriented active leisure
and recreation center designed to provide a wide variety of entertainment
for all ages. The facilities include bowling, ice skating, lasertag,
virtual reality interactive sports, motion theater, restaurant,
"Edutainment" center for tiny tots, lounge, snack bar, sports bar, and
event center that will be used for large meetings, corporate gatherings,
concerts, trade shows and conventions. The Company also manages an 18 hole
executive golf course, driving range, and club house that is adjacent to
the Sports Plus facility.
Capital Structure:
Redeemable Preferred Stock:
On October 25, 1996 and again in April 1997, the Company released and
issued a Private Placement Memorandum Offering to raise $6,000,000 of
additional capital by issuing $100 Convertible Redeemable Preferred
Stock. As of June 30, 1997, the Company raised $1,750,000 in gross
proceeds from this offering, exclusive of selling commissions and
offering costs.
The holder of the Company's preferred stock will be entitled to receive
dividends at the rate of $20 per share accruing annually and warrants
that will be valued based upon a future initial public offering of
$30,000 for each $100,000 unit of preferred stock. The warrants will be
exercisable and convertible at 120% of the IPO price. The Company
presently intends to pay an annual dividend on its Cumulative,
Non-Voting, Non-Participating, Convertible Redeemable Preferred Stock
at the rate of $8 per share. It is the present intent of the Company
that the remaining $12 dividend per share will accrue on the books of
the Company and be paid in full, without interest, not earlier than any
conversion or redemption of such preferred stock. When the Company
calls the preferred stock prior to the IPO, the shareholder is entitled
to an additional $15 per share for each share redeemed in addition to
the call price (see Note 7).
-7-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
Capital Structure: (continued)
At June 30, 1997 dividends in arrears on the $20 cumulative redeemable
preferred stock amounted to $164,294. This was paid upon liquidation of
the cumulative redeemable preferred stock on July 24, 1997 when the
Company was acquired (see Note 7).
Common Stock:
In March 1997, the Board of Directors authorized a reclassification of the
shares of no par value common stock of the Company at a value of $500,530,
to common stock having a par value of $.01 per share, thus shares of
common stock increased changing the number of shares authorized to
10,000,000, and issued and outstanding from 400 shares to 5,000,000
shares. This transaction was accounted for by issuing 5,000,000 shares of
$.01 par value of common stock by increasing additional paid in capital in
the amount of $450,530. This transaction is reflected in these financial
statements.
Since the Company plans to issue Convertible Redeemable Preferred Stock in
connection with their private placement memorandum offering, they have
reserved 1,409,524 shares as a result of the reclassification for issuance
upon the sale and conversion of the maximum amount of the Convertible
Redeemable Preferred Stock to be sold by this offering. The determination
of how many shares need to be reserved is based upon managements and their
placement and investment advisors, Josephthal Lyon & Ross, Inc. best
estimate of what the Company's initial public offering (IPO) will price
out at.
Concentration of Credit Risk:
At June 30, 1997, the Company had cash or cash equivalents (short-term,
highly liquid investments readily convertible into cash with a maturity of
three months or less) in excess of federally insured limits of $100,000.
Income Taxes:
Effective October 1, 1996, the Company elected to revoke their small
business "S" corporation status and will thereafter be treated and taxed
as a "C" corporation. Accordingly, a benefit for federal and state income
taxes has been provided for in accordance with FASB 109 by the Company for
the six month period ended June 30, 1997.
Inventory:
The Company maintains inventory on machine parts and replacements and
redemption prizes. Additionally, the Company maintains inventory for their
food, beverage, liquor and beer purchases.
-8-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
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.
Employee Benefit Plan:
The Company has a defined contributions plan (401-K) covering all
employees who meet the eligibility requirements. To be eligible, an
employee must be a full time employee who has one year of service and must
be age twenty-one or older. The Company contributes fifty percent (50%) of
the first six percent (6%) of base compensation that a participant
contributes to the plan through their elected deferrals. Additional
amounts may be contributed at the discretion of Company's Board of
Directors.
2. REAL PROPERTY, FIXED ASSETS AND EQUIPMENT AT JUNE 30, 1997:
Property and equipment is stated at cost. The costs of additions and
betterments are capitalized and expenditures for repairs and maintenance
are expensed in the period incurred. Assets placed into service during and
after 1981 use either the straight line or accelerated methods for
depreciation.
<TABLE>
<CAPTION>
TOTAL
--------------
<S> <C>
Building............................. $ 20,423,393
Building improvements................ 2,740,778
Equipment............................ 15,236,839
Furniture & fixtures................. 886,268
Leasehold improvements............... 64,512
Site development..................... 36,160
Other assets......................... 192,817
--------------
39,580,767
Land............................... 884,305
--------------
Total Before Depreciation.......... 40,465,072
Less: Accumulated Depreciation .... (13,890,818)
--------------
Total Assets -Net of Depreciation . $ 26,574,254
==============
</TABLE>
-9-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
3. MORTGAGES AND NOTES PAYABLE:
Long term debt at June 30, 1997 consists of the following:
<TABLE>
<CAPTION>
PRINCIPAL BALANCE INTEREST MATURITY
LENDER PROPERTY CURRENT MATURITY NON CURRENT MATURITY RATE DATE
- -------------------------- ------------- ---------------- -------------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Consolidated Mortgage
-Chase Manhattan-I Melville } $ 252,704 $ 3,168,139 11.42% August 17, 2000
Bayshore }
Consolidated Mortgage
-Chase Manhattan-II Sayville }
Shirley }
Centereach } 220,360 3,196,756 10.57% August 14, 2001
Consolidated Mortgage
Chase Manhattan Syosset 156,672 1,671,088 P+1.5% January 1, 2009
Note Payable-
-Junior Mortgages -- 160,000 973,326 P+1.5% June 1, 2004
---------------- --------------------
789,736 9,009,309
---------------- --------------------
Chase Manhattan
-term loan Syosset 247,200 576,840 P+1.0% August 31, 2000
Note Payable - Property
Acquisition - Shareholder Bayshore 68,838 297,621 9.25% February 1, 2001
State Bank -term loan Sports Plus 220,000 678,333 P+1.5% August, 2001
---------------- --------------------
536,038 1,552,794
---------------- --------------------
Total $1,325,774 $10,562,103
================ ====================
</TABLE>
(CONTINUED ON NEXT PAGE)
-10-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED FROM PRECEDING PAGE)
3. MORTGAGE AND NOTES PAYABLE: (continued)
The future principal maturities as of the above date are as follows:
<TABLE>
<CAPTION>
CONSOLIDATED MORTGAGE CHASE MANHATTAN
YEAR END CHASE MANHATTAN CHASE MANHATTAN NOTE PAYABLE SYOSSET ACQUISITION SPORTS PLUS
DECEMBER 31 TOTAL I II MORTGAGES ACQUISITION MORTGAGE TERM LOAN TERM LOAN
- ------------- ------------- --------------- --------------- -------------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $ 1,325,774 $ 252,704 $ 220,360 $ 160,000 $ 68,838 $ 156,672 $247,200 $220,000
1998 1,387,288 283,122 244,814 160,000 75,480 156,672 247,200 220,000
1999 1,455,824 317,202 271,982 160,000 82,768 156,672 247,200 220,000
2000 3,579,850 2,567,815 302,165 160,000 90,758 156,672 82,440 220,000
2001 2,761,415 -- 2,177,795 160,000 48,615 156,672 -- 18,333
THEREAFTER 1,377,726 -- -- 333,326 - 1,044,400 -- --
------------- --------------- --------------- -------------- ------------- ------------ ----------- -------------
$11,887,877 $3,420,843 $3,417,116 $1,133,326 $366,459 $1,827,760 $824,040 $898,333
============= =============== =============== ============== ============= ============ =========== =============
</TABLE>
-11-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
3. MORTGAGES AND NOTES PAYABLE: (continued)
Consolidated Mortgage -- Chase Manhattan-I:
On August 17, 1990, Location Service Corp. (DBA Bayshore Bowl) and
Melville Bowling Center, Inc. (Melville), entered into a loan agreement
with Chase Manhattan (Chase) (formerly Chemical Bank) to increase
Melville's existing mortgage of $841,625. At this closing, Chase Manhattan
loaned to Bayshore Bowl, and to Melville, an additional sum of $3,758,375.
The additional sum was consolidated with Melville's existing mortgage to
Chemical to create a single mortgage lien of $4,600,000.
Bayshore's portion of the mortgage with Chase was $3,200,000, the balance
of $1,400,000 was attributable to Melville.
The mortgage loan bears interest at a fixed rate of 11.42%. Commencing
September 17, 1990 payments of principal and interest are due and monthly
thereafter in the amount of $53,503 to be applied first against interest
and the balance against principal. The entire principal balance is due and
payable August 17, 2000.
Consolidated Mortgage -- Chase Manhattan-II:
On August 14, 1991, the Company refinanced with Chase Manhattan existing
mortgages held on the following properties:
<TABLE>
<CAPTION>
PROPERTY MORTGAGE HELD BY
- --------------------------- ---------------------
<S> <C>
Shirley Lanes Marine Midland
Sayville Bowling Center Southhold Savings
Recreational Concepts Marine Midland
Recon Associates Marine Midland
</TABLE>
The new consolidated mortgage with Chase Manhattan as originally issued
aggregated $4,359,000 and is in addition to the previous $4,600,000
mortgage that was executed August 17, 1990 by Location Service Corp. and
Melville Bowling Center, Inc.
The mortgage bears interest at a fixed rate of 10.57% per annum commencing
September 14, 1991 with payments of principal and interest due monthly in
the amount of $48,373. The mortgage is based upon a fifteen year
amortization payout with a ten year balloon that calls for the entire
principal balance to be due and payable on August 14, 2001.
Stock Buyout Acquisition:
On August 16, 1990, the then principal shareholders of the former Company,
Arthur J. Calace, Jr. and Jay Orloff, reached an agreement whereby Calace
acquired Orloff's ownership interest in the Company and its former
affiliates.
The consideration paid for this acquisition was $2,800,000. Upon the
execution of the agreement, $500,000 was paid to Orloff and an installment
note in the amount of $2,300,000 was issued by Calace to Orloff. This note
was subsequently refinanced on May 19, 1994 and incorporated by Chase
Manhattan as junior debt (see Note 3--Junior Mortgage).
-12-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
3. MORTGAGES AND NOTES PAYABLE (continued)
Stock Buyout Acquisition: (continued)
Subsequent to the plan of reorganization (see note 1), Mr. Calace assigned
both his interest acquired from Jay Orloff and the resulting obligation of
$2,300,000 to the new corporation.
Syosset Bowl Acquisition and Financing:
On April 14, 1993, the Company purchased for $2,000,000 the real property
that was previously known as Syosset Bowl. The real property purchased was
a vacant building that occupied one parcel of land.
In connection with this acquisition, the Company obtained the necessary
financing from its shareholders', Chase Manhattan and current operations.
The funds obtained for this acquisition and improvement were received from
the following sources:
<TABLE>
<CAPTION>
<S> <C> <C>
- -Shareholders' Series II--Notes Payable .. $ 500,000
- -Chase Manhattan Acquisition Mortgage .... $1,612,500
- -Chase Manhattan Construction Loan ....... 737,500 2,350,000
------------
- -Chase Manhattan Equipment Term Loan ..... 1,450,000
-----------
Total Financing Obtained................ $4,300,000
===========
</TABLE>
The Shareholders Series II notes payable of $450,000 bear interest at ten
percent (10%) per annum payable quarterly. The notes mature and are
payable in full on January 1, 1998. The series of notes consists of five
(5) separate notes payable to five different shareholders ranging from
$25,000 to $300,000 per note. On January 1, 1997, a note in the amount of
$50,000 was converted to Convertible Redeemable Preferred Stock.
On January 20, 1994, Chase Manhattan consolidated its original acquisition
mortgage of $1,612,500 and construction loan of $737,500 with the Company
into a single first mortgage of $2,350,000. This new consolidated first
mortgage bears interest at the rate of one and one half percent (1 1/2%)
over the Chase Manhattan prime rate. The principal is payable in 180 equal
monthly installments of $13,056 commencing on February 1, 1994.
The Chase Manhattan Term loan of $1,450,000 was used to finance the
purchase of equipment. The loan bears interest at one and one half percent
(1 1/2%) per annum above prime and is amortized over seven (7) years
according to the following amortization schedule:
<TABLE>
<CAPTION>
<S> <C>
- -Twenty four (24) equal payments commencing on
September 30, 1993 of $8,915 and $ 213,960
- -Fifty nine (59) equal payments commencing on
September 30, 1995 of $20,600 and 1,215,400
- -One final principal payment due on August 31, 2000 of 20,640
-----------
$1,450,000
===========
</TABLE>
-13-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
3. MORTGAGES AND NOTES PAYABLE: (continued)
Junior Mortgage:
On May 19, 1994, the Company entered into a new loan agreement with Chase
Manhattan to refinance the "Orloff" acquisition note for $1,600,000. The
loan bears interest at the floating rate of 1.5% over the Bank's prime
rate. The payments of principal are fixed in the amount of $13,334 and
begin on July 1, 1994. The entire balance of the mortgage is due with
accrued interest on June 1, 2004.
Line of Credit:
The Company had established a line of credit at Chase Manhattan for funds
up to $400,000.
Loan Covenants:
As a condition for providing the Company with the long-term financing
detailed above, Chase Manhattan has included in their mortgage and note
agreements certain loan covenants. These loan covenants specify certain
financial statement amounts and ratios that are to be maintained by the
Company. At June 30, 1997, the Company is not in compliance with the loan
covenants. However, the Company did receive a waiver from Chase Manhattan
regarding the loan covenants.
As an additional condition for providing the Company with the long term
financing, Chase Manhattan requested that Mr. Calace in addition to the
Corporation provide Chase Manhattan with his personal guarantee on all
existing loans and mortgages. In consideration for this guarantee the
Company has agreed to accrue a loan guarantee fee at a rate of one quarter
of one percent (1/4%) per annum on the average outstanding principal
balance each year, payable to Mr. Calace. Since this fee is not being paid
currently, the Company has recorded and recognized the obligation.
Sports Plus Construction and Equipment Loan:
In August 1996, the Company executed with Chase Manhattan an extension and
modification agreement on their existing loan for an additional $1,250,000
bringing the total construction financing commitment by Chase to
$14,250,000.
On August 25, 1995 the Company entered into a loan agreement with Chase
Manhattan to finance the construction and purchase of equipment for the
development of their Sports Plus project (see Note 6). The loan is secured
by a commercial mortgage for an amount not to exceed $14,250,000.
Both the construction and equipment loans bear interest at the rate of 2%
over the prime lending rate and is payable monthly.
Construction is to be completed within eighteen months of the closing of
this loan. At the time of completion Chase Manhattan will convert this
construction loan and the equipment loan to permanent financing in
accordance with the mortgage commitment.
-14-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
3. MORTGAGES AND NOTES PAYABLE: (continued)
Sports Plus Construction and Equipment Loan: (continued)
The permanent loan will bear interest at a rate equal to 2% plus the prime
rate payable monthly. The loan will be amortized as follows:
o During the first two (2) year term of the permanent loan, twenty-four
(24) consecutive monthly principal payments based upon a nineteen (19)
year amortization rate commencing on the first day of the month after
the conversion from a construction (interest only) loan to a permanent
loan.
o During the last eight (8) year term of the permanent loan, ninety-five
(95) consecutive monthly principal payments based upon a fourteen and a
third (14 1/3) year amortization rate.
o One final principal payment equal to the unpaid principal plus the
accrued but unpaid interest.
The loan is subject to various fees of which some were paid on exercising
the commitment, some at the time of closing, and the balance to be paid
over four years. In addition to the corporate guarantee, collateral, and
security interests assigned, the loan is also personally guaranteed by Mr.
Calace, the Company's chairman and largest single shareholder.
Additionally, Chase Manhattan required and received from the shareholders'
of the Company their stock pledge as collateral for fifty-one percent
(51%) of the Company's stock.
This loan like previous existing loans with Chase Manhattan is also
subject to certain loan covenants, financial ratios and minimum balances
to be maintained.
Sports and Entertainment Facility - Term Loan - State Bank of Long Island:
In April, 1996, the Company increased their line of credit by $100,000
from $1,000,000 to $1,100,000 and converted the line of credit to a sixty
(60) month term loan. The payments of principal are fixed in the amount of
$18,333 and began in August 1996. The loan is a five (5) year term loan
payable at an interest rate of 1.5% over the banks prime rate.
State Bank of Long Island - Line of Credit:
On July 29, 1996, the Company established a line of credit and borrowed
the maximum funds of $100,000. These funds are to be used for the day to
day operation of the facility. The line bears interest at the rate of 1%
over the Bank's prime rate. The line of credit is due and payable on
August 29, 1997.
Kitchen Equipment:
In May 1997, the catering facility of a related party, Three Grove
Partners, transferred its kitchen equipment and related loan with Suffolk
County National Bank in the amount of $207,722. This loan bears interest
at the rate of prime plus 2% and is due May 31, 2000.
-15-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
4. INCOME TAXES:
As of June 30, 1997, the Company adopted FASB 109 since it now reports and
files as a "C" corporation. As a result of adopting FASB 109, the Company
has recognized deferred tax assets that are deductible temporary
differences which aggregate to $393,652, primarily related to the basis of
fixed assets and deferred tax liabilities for taxable temporary
differences which aggregate to $224,311, primarily related to
depreciation. At December 31, 1996, the Company had a net operating loss
(NOL) in the amount of $141,662, which will be used to offset future
taxable income. This NOL will expire in the year 2011.
5. COMMITMENTS:
Rocky Point:
On July 1, 1989 Rocky Point extended its existing lease agreement with In
Towne Shopping Center Co. to run through June 30, 2009. The Company had
originally entered into a lease agreement with In Towne Shopping Center
Co., Inc., on March 30, 1973 for the rental of 30,880 square feet to be
used for their bowling operations. The original lease agreement was for a
twenty year period with escalating base rents and cost of living index
adjustments commencing June 1, 1976.
During the period ended June 30, 1997, rental expense under the long-term
lease obligation was $67,093.
Future obligations over the primary terms of the Company's long-term
leases as of December 31, 1996 are:
<TABLE>
<CAPTION>
*AMOUNT PER ANNUM TOTAL
------------------ -----------
<S> <C> <C>
7/1/94-6/30/99 $100,000 $ 250,000
7/1/99-6/30/04 110,000 550,000
7/1/04-6/30/09 120,000 600,000
----------------- -----------
$330,000 $1,400,000
================= ===========
</TABLE>
* Note -- These amounts are exclusive of any future cost of living
index adjustments.
Stony Brook:
Stony Brook Bowl entered into a lease agreement with S&E Realty on June 1,
1976 for the rental of 34,500 square feet to be used for their bowling
operations. The original lease agreement was for a twenty year period with
escalating base rents commencing June 1, 1976.
In August, 1996, the Company did not renew their lease with S&E Realty
when it expired. The Company instead moved the business into the new
Sports Plus facility location (Lake Grove Bowl).
-16-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
LEISURE COMPLEXES, INC.
NOTES TO FINANCIAL STATEMENTS
5. COMMITMENTS: (continued)
Sports Plus:
The Company entered into a lease agreement with a related party (Three
Grove Partners) to lease the land on which the Sports Plus facility is
located. The lease is for a term of 48 years with annual base rents of
$256,000, payable in equal monthly installments of $21,334. In addition to
the base rent, the Company shall pay an additional 5% on the amount of
revenues earned in excess of the Companies gross operating income base
level of $8,000,000 in any calendar year. As a condition to this lease,
Three Grove Partners agreed to subordinate their land value to Chase
Manhattan Bank for up to $14,250,000.
During the period ended June 30, 1997, the rental expense under the above
long-term lease obligation was $238,255.
Private Placement Agreement:
The Company signed an agreement with Josephthal Lyon & Ross Incorporated
(Josephthal) to act as their exclusive placement agent to sell $4,000,000
of its preferred stock subscriptions. Josephthal will be paid at each
closing of sales a cash commission of eight percent (8%) of the
subscription price of each share sold by or through Josephthal. This
agreement was subsequently canceled on June 10, 1997.
Guarantee:
Barclays Bank, in exchange for releasing Leisure's corporate guarantee on
their mortgage with Three Grove Partners (a related party), agreed to
release their first lien and priority position to Chase Manhattan Bank on
the 16 acre parcel of land that Three Grove Partners owns and leases to
Sports Plus and Leisure Complexes, Inc. under a long term ground lease.
6. TRANSACTIONS WITH RELATED PARTIES:
In the normal course of business, receivables, payables, revenues, and
expenses have been, and will continue to be generated from transactions
with related parties. The Company had entered into various agreements with
a number of entities controlled by, and or affiliated with, its
shareholders and officers.
One such agreement calls for a management fee to be charged by the Company
to their affiliates, The Ponds. This management fee is being accrued at a
rate of three percent (3%) per annum of their total gross revenues.
7. SUBSEQUENT EVENT:
Sale of Business:
On July 24, 1997, the Company and its shareholders agreed to sell its
business pursuant to an acquisition agreement with Family Golf Centers,
Inc. ("FGCI") that will be treated as a tax free merger to the existing
Company shareholders.
In exchange for the Company's net assets and continuing business
operations, FGCI assumed all existing debt and liabilities of the Company
and issued stock of 509,090 of FGCI to the existing shareholders of the
Company.
-17-
[FELDMAN, GUTTERMAN, MEINBERG AND COMPANY LETTERHEAD]
<PAGE>
DIVOT CITY, L.P.
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE>
[LOGO]
INDEPENDENT AUDITORS' REPORT
Member of:
American Institute of CPA's
California Society of CPA's
KS International
The Partners
Divot City, L.P.
Milpitas, California
We have audited the accompanying balance sheet of DIVOT CITY, L.P. (a
California limited partnership), as of December 31, 1996 and 1995 and the
related statements of income and expense, partners' capital, 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 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 DIVOT CITY, L.P., as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
Ireland SanFilippo, LLP
San Jose, CA
April 3, 1997
<PAGE>
DIVOT CITY, L.P.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
------------ -----------
<S> <C> <C>
Current assets:
Cash.......................................... $ 81,776 58,228
Prepaid expenses.............................. 4,466 19,294
------------ -----------
Total current assets......................... 86,242 77,522
------------ -----------
Fixed assets:
Ground lease improvements..................... 1,829,424 1,654,168
Furniture and equipment....................... 80,988 74,057
------------ -----------
Less accumulated depreciation and
amortization................................. 1,910,412 1,728,225
314,097 175,022
------------ -----------
1,596,315 1,553,203
47,080 59,286
------------ -----------
Deposit and other.............................. $1,729,637 $1,690,011
============ ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
DIVOT CITY, L.P.
BALANCE SHEET
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
------------ -----------
<S> <C> <C>
Current liabilities:
Notes and contracts payable...................... $ 357,953 $ 171,301
Accounts payable................................. 4,672 6,283
Security deposit................................. 1,600 1,600
Accrued liabilities:.............................
Accrued property taxes.......................... 42,402 --
Interest........................................ 7,669 9,414
Accrued legal settlement........................ 6,667 --
Salaries, wages and payroll taxes............... 4,221 9,304
Other........................................... 1,092 2,854
------------ -----------
Total current liabilities...................... 426,276 200,756
Long-term liabilities:
Notes and contracts payable...................... 239,359 337,750
------------ -----------
Total liabilities............................... 665,635 538,506
Commitments.......................................
Accrued compensation issuable as equity
interests........................................ 100,000 150,000
Partners' capital................................. 964,002 1,001,505
------------ -----------
$1,729,637 $1,690,011
============ ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
DIVOT CITY, L.P.
STATEMENT OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1996 1995
----------- ----------
<S> <C> <C>
Revenues.................... $540,504 $468,580
Cost of revenues............ 452,103 444,110
----------- ----------
Gross profit............... 88,401 24,470
General and administrative . 107,158 72,515
----------- ----------
Loss from operations....... (18,757) (43,045)
----------- ----------
Other income and
(expense):.................
Interest expense........... (63,497) (37,952)
Legal settlement........... (6,667) --
Interest income............ 1,418 1,185
----------- ----------
(68,746) (36,767)
----------- ----------
Net loss.................. $(87,503) $(84,812)
=========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1996 1995
------------ ------------
<S> <C> <C>
Balance, beginning of year .................. $1,001,505 $1,036,317
Net loss.................................... (87,503) (84,812)
Conversion of accrued compensation to
equity..................................... 50,000 50,000
------------ ------------
Balance, end of year......................... $ 964,002 $1,001,505
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (87,503) $(84,812)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization........................... 151,281 132,290
Movement in operating assets and liabilities:
Prepaid expenses....................................... 14,828 7,039
Accounts payable....................................... (1,611) (34,030)
Accrued liabilities.................................... 40,479 (4,522)
----------- -----------
Net cash provided by operating activities.................. 117,474 15,965
----------- -----------
Cash flows used by investing activities:
Acquisition of fixed assets............................... (175,257) (8,073)
----------- -----------
Cash flows from financing activities:
Decrease in security deposit.............................. -- (6,016)
Proceeds from long-term debt.............................. 175,000 --
Principal payments on debt................................ (93,669) (23,484)
----------- -----------
Net cash provided by (used by) financing activities ....... 81,331 (29,500)
----------- -----------
Net increase (decrease) in cash............................ 23,548 (21,608)
Cash, beginning of year.................................... 58,228 79,836
----------- -----------
Cash, end of year.......................................... $ 81,776 $ 58,228
=========== ===========
Supplemental disclosures of cash flow information
-------------------------------------------------
Cash paid during the year for:.............................
Interest................................................... $ 65,242 $ 33,652
Income taxes............................................... $ 800 $ 800
Supplemental disclosures of non-cash transactions
-------------------------------------------------
Acquisition of fixed assets in exchange for notes ......... $ 6,932 $ --
Conversion of accrued compensation into limited
partnership interests..................................... $ 50,000 $ 50,000
</TABLE>
<PAGE>
December 31, 1996
NOTE 1 -- ORGANIZATION AND OPERATIONS:
Divot City, L.P., (the "Partnership"), organized as a California limited
partnership in 1993, developed and operates a gold practice center in
Milpitas, California. The Partnership commenced operations in March 1993, and
will terminate in August 2009, unless the ground lease with Santa Clara
County is extended as discussed at Note 4.
Under the terms of the partnership agreement (the "Agreement"), the
Partnership is obligated to compensate, in the form of limited partner equity
interests, the shareholders of the developer of the golf practice center upon
completion of the development of such facilities. This compensation, totaling
$250,000, was accrued by the Partnership upon the completion of the
facilities' development effort in August, 1994. The equity interests are
distributable in $50,000 increments upon completion of the development effort
and at each annual anniversary date thereafter until the entire $250,000 of
such equity interests have been distributed. At December 31, 1996, a total of
$150,000 of limited partnership interests have been issued to the
shareholders of the developer pursuant to the Agreement.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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.
Method of accounting--The Partnership maintains its books on the cash basis
and also maintains memorandum accrual basis records. The accompanying
statements have been prepared on the accrual basis.
Cash and cash equivalents--Cash includes all amounts in checking accounts,
money market funds and certificates of deposit with a maturity of less than
three months.
Equipment--Equipment is recorded at cost and is being depreciated over its
estimated useful life using the straight-line method.
Organization expense--Organization expense is stated at cost and is amortized
over sixty months using the straight-line method.
Ground lease improvements--Ground lease improvements consist principally of
grading costs, irrigation and drainage systems, buildings, landscaping and
paving. These improvements are being amortized on a straight-line basis over
the initial term (fifteen years) of the lease agreement with Santa Clara
County (see Note 4). For income tax reporting purposes, these improvements
are being amortized over a thirty-nine year life. Amounts capitalized as
ground lease improvements include construction management fees paid to the
shareholders of the developer as discussed at Note 1 above.
Income taxes--The income of the Partnership is reportable by the partners on
their individual tax returns. Accordingly, other than the statutory state tax
on limited partnerships ($800) included in operating expenses, no provision
for taxes on income is included in the accompanying statements of income and
expense.
Reclassification--Certain 1995 balances have been reclassified to conform to
1996 financial statement presentation. These reclassifications have no effect
on the previously reported net loss.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 3--NOTES AND CONTRACTS PAYABLE:
At December 31, 1996 and 1995, notes and contracts payable are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Due to limited partners, secured by equipment,
interest at 10% per annum, maturing at various
dates through April, 1999......................... $135,303 $185,880
Due to limited partner, unsecured, $1,166 payable
monthly, interest at prime plus 3% (currently
11.5%), maturing July, 2004....................... 124,750 136,123
Due to limited partner, unsecured demand note
interest at 4.85% per annum....................... 96,745 100,000
Due to limited partners, unsecured, $1,833
payable monthly, plus interest at prime plus 3%
(currently 11.5%) per annum, maturing July, 1999 . 58,656 80,657
Associates Leasing, Inc. secured by equipment,
due in monthly installments of $321 including
interest at 10.5%, through November, 1997 ........ 3,060 6,391
Due to general partner, secured by certificate of
deposit owned by a limited partner, interest only
payments, interest at 2% above certificate of
deposit rate (currently 10%), maturing April,
1997.............................................. 175,000 --
John Deere, secured by equipment, due in monthly
installments of $251, including interest of 7.9%
through May, 1998................................. 3,798 --
---------- ----------
597,312 509,051
Less current portion.............................. 357,953 171,301
---------- ----------
Long-term portion................................. $239,359 $337,750
========== ==========
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 3--NOTES AND CONTRACTS PAYABLE (CONTINUED):
At December 31, 1996, future note payments are due as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- -------------- ----------
<S> <C>
1997 $357,953
1998 79,826
1999 75,927
2000 16,443
2001 18,030
Thereafter 49,133
----------
$597,312
==========
</TABLE>
NOTE 4--COMMITMENT:
The Partnership has a noncancelable ground lease agreement, expiring in 2009,
with Santa Clara County (the "County"), under which the partnership is
obligated to construct certain buildings, structures, improvements and other
facilities on land owned by the County. The monthly rent under the agreement
is the greater of the base rent of $7,000 or 11% of adjusted monthly
revenues, as defined in the lease agreement, increasing to 12% in January
2001. At December 31, 1996, the minimum annual base rent commitment is
$84,000 through 2009. The base rent is subject to annual increases based on
the consumer price index. At least two years prior to the expiration of the
lease agreement, the County must notify the Partnership of the County's
intention either to allow the lease to expire or to offer to enter into
negotiations for the extension of the lease.
The net rent expense for the year ended December 31, 1996, was approximately
$63,000, which is net of approximately $37,000 sublet rental income. The net
rent expense for the year ended December 31, 1995, was approximately $58,000,
which is net of approximately $8,000 sublet rental income.
NOTE 5--SUBSEQUENT EVENT:
During March 1997, the Partnership settled a lawsuit in which is was involved
as of December 31, 1996, and accordingly, the total liability of
approximately $7,000 has been accrued at December 31, 1996.
<PAGE>
ACTIVE SPORTS MARKETING, LLC
FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE>
MICHAEL B. JOHNSON & CO., P.C.
(A PROFESSIONAL CORPORATION)
CERTIFIED PUBLIC ACCOUNTANTS
9175 EAST KENYON AVE., SUITE 100
DENVER, COLORADO 80237
(303) 796-0099
Michael B. Johnson C.P.A.
Member: A.I.C.P.A.
Colorado Society of C.P.A.'s
Board of Directors
Active Sports Marketing, LLC
We have examined the accompanying balance sheet of Active Sports Marketing,
LLC as of December 31, 1996, and the related statements of operations and
cash flows for the year ended December 31, 1996. 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 text 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 statements 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 Active Sports Marketing,
LLC, and the results of its operations and its cash flows for the year ended
December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Michael B. Johnson & Co., P.C.
-----------------------------------
Denver, Colorado
August 12, 1997
<PAGE>
ACTIVE SPORTS MARKETING, LLC
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents ............. $ 10,930
Accounts Receivable ................... 113,968
Inventory ............................. 91,522
----------
TOTAL CURRENT ASSETS ................. 216,420
----------
FIXED ASSETS:
Computer .............................. 3,500
Furniture & Fixtures .................. 1,400
----------
4,900
Accumulated Depreciation .............. (1,447)
----------
TOTAL FIXED ASSETS ................... 3,453
----------
TOTAL ASSETS ........................... $219,873
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 58,376
----------
TOTAL CURRENT LIABILITIES ............ 58,376
----------
TOTAL LIABILITIES ...................... 58,376
EQUITY:
Equity ................................ 2
Retained Earnings ..................... 161,495
----------
TOTAL EQUITY ........................... 161,497
----------
TOTAL LIABILITIES AND EQUITY ........... $219,873
==========
</TABLE>
The accompanying notes are considered an integral part of these financial
statements.
<PAGE>
ACTIVE SPORTS MARKETING, LLC
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
REVENUES:
Sales ..................... $396,925
----------
396,925
COST OF GOODS SOLD:
Purchases ................. 121,147
Freight ................... 20,341
Commissions ............... 75,197
Advertising ............... 2,753
Supplies .................. 6,723
Telephone ................. 2,173
Travel .................... 4,094
Association Fees .......... 1,555
----------
Total Cost of Goods Sold 233,983
GROSS PROFIT ............... 162,942
EXPENSES:
Depreciation .............. 1,447
----------
NET INCOME ................. $161,495
==========
</TABLE>
The accompanying notes are considered an integral part of these financial
statements.
<PAGE>
ACTIVE SPORTS MARKETING, LLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit (Loss) ........................... $ 161,495
Depreciation ................................ 1,447
(Decrease) Increase in Accounts Payable .... 58,376
(Increase) Decrease in Inventory ............ (91,522)
(Increase) Decrease in Accounts Receivable . (113,968)
-----------
NET CASH FLOWS USED FOR OPERATING ACTIVITIES 15,828
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Fixed Assets ................. (4,900)
Proceeds from Sale of Fixed Assets ......... --
-----------
NET CASH FLOWS USED FOR INVESTING ACTIVITIES (4,900)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Owner's Equity ................ 2
-----------
NET CASH FLOWS USED FOR INVESTING ACTIVITIES 2
INCREASE (DECREASE) IN CASH .................. 10,930
-----------
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR --
-----------
CASH AND CASH EQUIVALENTS--END OF YEAR ...... $ 10,930
===========
</TABLE>
The accompanying notes are considered an integral part of these financial
statements.
<PAGE>
ACTIVE SPORTS MARKETING, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of Active Sports Marketing, LLC's (Company)
significant accounting policies:
ORGANIZATION
The Company was incorporated March 31, 1996 under the laws of Colorado for
the purpose of marketing and selling soft spikes for golf shoes.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
ACCOUNTS RECEIVABLE
The Company has accounts receivable from several of its customers. The amount
due at December 31, 1996 is $113,968.
FIXED ASSETS AND DEPRECIATION
The purchased equipment is recorded at cost. The useful lives of Computers,
Furniture and Equipment for purposes of computing depreciation are:
<TABLE>
<CAPTION>
<S> <C>
Computers ................... 3 years
Furniture and Equipment .... 5 years
</TABLE>
INVENTORIES
Inventories are valued at the lower of cost and net realizable value, on a
first-in first-out basis.
ACCOUNTS PAYABLE
Accounts payable are to one main supplier and the amount as of December 31,
1996 was $58,376.
TAXES
The Company has no tax liability since it is governed by the Federal Internal
Revenue Service laws of a Limited Liability Corporation and the Colorado
Department of Revenue. Under these statutes, net income or loss is reflected
in the members personal tax return.
<PAGE>
ACTIVE SPORTS MARKETING, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 2--FIXED ASSETS:
<TABLE>
<CAPTION>
U.S. DOLLARS
--------------
<S> <C>
Computers ..................... $ 3,500
Furniture & Fixtures .......... 1,400
--------------
4,900
Less Accumulated Depreciation (1,447)
--------------
$ 3,543
==============
</TABLE>
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
LEISURE PRO FORMA
THE COMPLEXES REFLECTING THE
COMPANY INC. PRO FORMA ACQUISITION
6/30/97 6/30/97 ADJUSTMENTS 6/30/97
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Assets
Cash & Cash Equivalents.................. 4,538,000 601,000 5,139,000
Marketable Securities.................... 4,668,000 4,668,000
Inventory................................ 10,676,000 275,000 10,951,000
Prepaid Expenses & Other Current Assets.. 4,221,000 598,000 4,819,000
Prepaid Income Taxes..................... 1,704,000 1,704,000
----------- ---------- -----------
Total Current Assets..................... 25,807,000 1,474,000 27,281,000
Property, Plant & Equipment.............. 134,876,000 26,574,000 14,426,000 175,876,000
Loan Acquisition Costs................... 267,000 267,000
Other Assets............................. 6,353,000 479,000 6,832,000
Excess of cost over fair value........... 3,579,000 100,000 9,986,000 13,665,000
----------- ---------- -----------
Total Assets............................. 170,882,000 28,627,000 223,921,000
=========== ========== ===========
Liabilities
Accounts Payable & Accrued Expenses...... 8,701,000 2,652,000 (22,000) 11,331,000
Short-term loan payable.................. 0
Current portion Long term debt........... 3,785,000 2,388,000 6,173,000
Taxes Payable............................ 0
Other Current Liabilities................ 653,000 653,000
----------- ---------- -----------
Total Current Liabilities................ 12,486,000 5,693,000 18,157,000
Long term debt........................... 13,097,000 27,526,000 2,688,000 43,311,000
Deferred Rent............................ 323,000 323,000
Deferred Tax Liability................... 254,000 5,700,000 5,954,000
Other Liabilities........................ 401,000 401,000
----------- ---------- -----------
Total Liabilities........................ 26,561,000 33,219,000 68,146,000
Redeemable Preferred Stock............... 1,439,000 (1,439,000) 0
Common Stock............................. 120,000 50,000 (45,000) 125,000
Treasury Stock........................... (47,000) (47,000)
Paid-in Capital.......................... 133,452,000 (3,811,000) 15,260,000 144,901,000
Retained Earnings........................ 10,796,000 (2,270,000) 2,270,000 10,796,000
----------- ---------- -----------
Total Stockholders Equity................ 144,321,000 (6,031,000) 155,775,000
----------- ---------- -----------
Total Liabilities & Equity............... 170,882,000 28,627,000 223,921,000
=========== ========== ===========
</TABLE>
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
THE VIRGINIA YORKTOWN INDIAN
COMPANY BEACH FLEMINGTON HEIGHTS RIVER TUCSON ST. LOUIS
------- -------- ---------- -------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues....... 21,368 35 74 54 39 164
Merchandise Sales........ 6,536 2 3
------- -------- ---------- -------- ------ ------ ---------
Total revenue.......... 27,904 37 74 57 39 164
Operating expenses....... 13,268 39 25 88 40 11 188
Cost of merchandise
sold.................... 4,458 2 3
Selling, general and
administrative
expenses................ 3,580 27 22 8 26
------- -------- ---------- -------- ------ ------ ---------
Operating income......... 6,598 (31) (25) (36) 6 2 (24)
Interest expense......... 370 34 26 40 42
Other income (expense) .. 2,172 (14) 3
------- -------- ---------- -------- ------ ------ ---------
Income before income
taxes................... 8,400 (79) (25) (59) 6 (38) (66)
Income tax expense....... 3,192 0
------- -------- ---------- -------- ------ ------ ---------
Net income............... 5,208 (79) (25) (59) 6 (38) (66)
======= ======== ========== ======== ====== ====== =========
Net income per share .... 0.51
Weighted average shares
outstanding............. 10,290 50 100 30
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEST PIN GLEN CAROLINA
CINCINNATI PALM BEACH HIGH BURNIE EASTON SPRINGS DENVER FLANDERS
---------- ---------- ---- ------ ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues....... 83 221 294 183 203 668 154 286
Merchandise Sales........ 102 114 30 53 52 206
---------- ---------- ---- ------ ------ -------- ------ --------
Total revenue.......... 185 221 408 213 203 721 206 492
Operating expenses....... 106 191 288 164 194 499 141
Cost of merchandise
sold.................... 77 71 23 48 39 146
Selling, general and
administrative
expenses................ 19 7 33 22 17 87 263 53
---------- ---------- ---- ------ ------ -------- ------ --------
Operating income......... (17) 23 16 4 (8) 87 (96) 152
Interest expense......... 33 102 38 69 30 4
Other income (expense) .. 1
---------- ---------- ---- ------ ------ -------- ------ --------
Income before income
taxes................... (50) 23 (85) (32) (77) 87 (126) 148
Income tax expense.......
---------- ---------- ---- ------ ------ -------- ------ --------
Net income............... (50) 23 (85) (32) (77) 87 (126) 148
========== ========== ==== ====== ====== ======== ====== ========
Net income per share ...
Weighted average shares
outstanding............. 40
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
</TABLE>
<TABLE>
<CAPTION>
WESTMINSTER SEVEN IRON MARGATE MAINEVILLE MILWAUKEE
----------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Operating Revenues....... 311 683 452 420
Merchandise Sales........ 48
----------- ---------- -------- ---------- ---------
Total revenue.......... 311 731 0 452 420
Operating expenses....... 200 576 261 326
Cost of merchandise
sold.................... 38
Selling, general and
administrative
expenses................ 13 73 79 70
----------- ---------- -------- ---------- ---------
Operating income ........ 98 44 0 112 24
Interest expense......... 4 38 125 98
Other income (expense) .. 29 2
----------- ---------- -------- ---------- ---------
Income before income
taxes................... 94 35 0 (11) (74)
Income tax expense.......
----------- ---------- -------- ---------- ---------
Net income............... 94 35 0 (11) (74)
=========== ========== ======== ========== =========
Net income per share ....
Weighted average shares
outstanding............. 75 40
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
RANDALLS GREEN
RALEIGH DARLINGTON ISLAND OAKS
------- ---------- -------- ----- -----
<S> <C> <C> <C> <C>
Operating Revenues....... 729 701 797 203
Merchandise Sales........
------ ------- ------- -----
Total revenue.......... 729 701 797 203
Operating expenses....... 304 999 147
Cost of merchandise
sold.................... 427 44 80 115
Selling, general and
administrative
expenses................ 166 238 466
------ ------- ------- -----
Operating income ........ 136 115 (748) (59)
Interest expense......... 34 142
Other income (expense) ..
------ ------- ------- -----
Income before income
taxes................... 136 81 (890) (59)
Income tax expense.......
------ ------- ------- -----
Net income............... 136 81 (890) (59)
====== ======= ========= =====
Net income per share ....
Weighted average shares
outstanding............. 0 0 0 8
</TABLE>
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SAN
BRUNO SOUTHAMPTON DIVOT CITY
------- -------------- ----------
<S> <C> <C> <C>
Operating Revenues...... 1,342 286 541
Merchandise Sales.......
------- -------------- ----------
Total revenue......... 1,342 286 541
Operating expenses...... 70 275
Cost of merchandise
sold................... 125 452
Selling, general and
administrative
expenses............... 1,164 107
------- -------------- ----------
Operating income........ (17) 11 (18)
Interest expense........ 35 63
Other income (expense) . (6)
------- -------------- ----------
Income before income
taxes.................. (52) 11 (87)
Income tax expense......
------- -------------- ----------
Net income.............. (52) 11 (87)
======= ============== ==========
Net income per share ...
Weighted average shares
outstanding............ 0 20 0
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ACTIVE
SPORTS LEISURE
PALM MARKETING COMPLEXES PRO FORMA
CARVER ROYALE LLC INC. ADJUSTMENTS PRO FORMA
-------- -------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues....... 1,100 310 397 14,093 46,189
Merchandise Sales........ 7,148
-------- -------- --------- --------- ----------- ----------
Total revenue.......... 1,100 310 397 14,093 0 53,337
Operating expenses....... 1,708 376 1 11,972 496 32,952
Cost of merchandise
sold.................... 234 6,382
Selling, general and
administrative
expenses................ 1,632 8,172
-------- -------- --------- --------- ----------- ----------
Operating income......... (608) (66) 162 489 (496) 5,831
Interest expense......... 307 85 1,975 345 4,037
Other income (expense) .. (8) 5 420 46 2,557
-------- -------- --------- --------- ----------- ----------
Income before income
taxes................... (923) (148) 162 (1,066) (1,379) 4,351
Income tax expense....... (203) (1,398) 1,591
-------- -------- --------- --------- ----------- ----------
Net income............... (923) (146) 162 (863) 21 2,760
======== ======== ========= ========= =========== ==========
Net income per share .... 0.24
Weighted average shares
outstanding............. 114 0 16 509 11,292
</TABLE>
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(A) Expense adjustments for the period ended December 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>
DATE INTEREST DEPRECIATION
COMPANY ACQUIRED ADJUSTMENT(1) ADJUSTMENT
- -------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
Virginia Beach.......... March 1996 $ 34 $ (9)
Flemington.............. March 1996
Yorktown Heights........ April 1996 26
Indian River............ May 1996 (1)
Fairfield............... June 1996 (11) 6
Tucson.................. June 1996 12
St. Louis............... June 1996 14 4
West Palm Beach......... June 1996 20 (19)
San Jose................ July 1996 30 25
Glen Burnie............. August 1996 17
Easton.................. July 1996 41 (46)
Carolina Springs........ August 1996 (50)
Denver.................. August 1996 34 60
Flanders................ August 1996 32
Westminster............. September 1996 57 47
Seven Iron.............. November 1996 172 223
Maineville.............. December 1996 43 8
Milwaukee............... December 1996 22 39
Raleigh................. Mar-97 24 13
Darlington.............. Mar-97 23 41
Randalls Island......... Mar-97 (90) (104)
Green Oaks (Arlington) . Apr-97 27 21
San Bruno............... Apr-97 81 65
Southampton............. Jun-97 (20) (37)
Divot City.............. Jun-97 48 40
Carver.................. Jun-97 (307) (291)
Palm Royale............. Jun-97 (35) (35)
Active Sports Marketing. Jun-97 25 47
Leisure Complexes, Inc.. Jul-97 75 400
------------- --------------
345 496
============= ==============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
OTHER
(INCOME)
COMPANY EXPENSE OTHER
- -------------------------- --------- -------
<S> <C> <C>
Virginia Beach.......... $ 15 $ 14
Flemington..............
Yorktown Heights........ 20
Indian River............ 17
Fairfield...............
Tucson..................
St. Louis...............
West Palm Beach......... 9
San Jose................
Glen Burnie............. 10
Easton..................
Carolina Springs........ 14
Denver.................. 7
Flanders................ 156
Westminster ............
Seven Iron .............
Maineville.............. 29
Milwaukee...............
Raleigh.................
Darlington..............
Randalls Island.........
Green Oaks (Arlington) .
San Bruno...............
Southampton.............
Divot City..............
Carver..................
Palm Royale.............
Active Sports Marketing.
Leisure Complexes, Inc.. (245)
--------- -------
277 (231)
========= =======
</TABLE>
- ------------
(1) Assumes average borrowing at 8%.
<PAGE>
(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 4
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
THE RANDALLS GREEN
COMPANY RALEIGH DARLINGTON ISLAND OAKS SAN BRUNO SOUTHAMPTON
------- ------- ---------- -------- ----- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues....... 19,079 103 26 33 0 551 77
Merchandise Sales........ 7,478 2 27
------- ------- ---------- -------- ----- --------- ------------
Total revenue.......... 26,557 103 28 33 0 578 77
Operating expenses....... 12,250 13 95 228 0 406 39
Cost of merchandise
sold.................... 4,904 66 1 0 0 41
Selling, general and
administrative
expenses................ 2,310 0 0 0 0
------- ------- ---------- -------- ----- --------- ------------
Operating income......... 7,093 24 (68) (195) 0 131 38
Interest expenses........ 386 3 0 0 0 31
Other income (expense) . 760
------- ------- ---------- -------- ----- --------- ------------
Income before income
taxes................... 7,467 21 (68) (195) 0 131 7
Income tax expense....... 2,637 1
------- ------- ---------- -------- ----- --------- ------------
Net income............... 4,630 21 (68) (195) 0 131 6
======= ======= ========== ======== ===== ========= ============
Net income per share .... 0.38
Weighted average shares
outstanding............. 12,102 0 0 0 8 0 20
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ACTIVE
DIVOT PALM SPORTS LEISURE PRO FORMA
CITY CARVER ROYALE MARKETING COMPLEXES,INC. ADJUSTMENTS PRO FORM
-------- ------ ------ ------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues....... 142 35 265 123 10,559 30,993
Merchandise Sales........ 7 7,514
-------- ------ ------ ------ --------- ----------- ---------
Total revenue.......... 142 35 272 123 10,559 0 38,507
Operating expenses....... 145 231 97 8,209 76 21,789
Cost of merchandise
sold.................... 5 119 5,136
Selling, general and
administrative
expenses................ 92 1,051 3,453
-------- ------ ------ ------ --------- ----------- ---------
Operating income......... (3) (196) 78 4 1,299 (76) 8,129
Interest expenses........ 12 79 41 1,406 (390) 1,568
Other income (expense) . 8 204 245 1,217
-------- ------ ------ ------ --------- ----------- ---------
Income before income
taxes................... (7) (275) 37 4 97 559 7,778
Income tax expense....... 33 92 2,963
-------- ------ ------ ------ --------- ----------- ---------
Net income............... (7) (275) 37 4 64 467 4,815
======== ====== ====== ====== ========= =========== =========
Net income per share .... 0.38
Weighted average shares
outstanding............. 0 114 0 16 509 12,769
</TABLE>
<PAGE>
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
PERIOD ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(A) Expense adjustments for the period ended June 30, 1997 to reflect the
acquisition of the Acquired Companies as if the acquisitions had taken
place at the beginning of the period:
<TABLE>
<CAPTION>
DATE INTEREST DEPRECIATION
COMPANY ACQUIRED ADJUSTMENT(1) ADJUSTMENT
- -------------------------- ---------- ------------- --------------
<S> <C> <C> <C>
Raleigh.................... Mar-97 7 7
Darlington................. Mar-97 14 21
Randalls Island............ Mar-97 13 26
Green Oaks ................ Apr-97
San Bruno.................. Apr-97 39 45
Southampton................ Jun-97 (8) 1
Divot City................. Jun-97 16 10
Carver..................... Jun-97 (78) (20)
Palm Royale................ Jun-97 (16) 7
Active Sports Marketing.... Jun-97 4 12
Leisure Complexes, Inc..... (381) (33)
---------- -----------
(390) 76
========== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
OTHER
(INCOME)
COMPANY EXPENSE OTHER
- -------------------------- --------- -------
<S> <C> <C>
Raleigh....................
Darlington.................
Randalls Island............
Green Oaks.................
San Bruno..................
Southampton................
Divot City.................
Carver.....................
Palm Royale................
Active Sports Marketing....
Leisure Complexes, Inc. (245)
--------- -------
0 (245)
========= =======
</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 1
