As filed with the Securities and Exchange Commission on _________, 1996
SEC Registration No. 33-84024
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
POST EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SAINT ANDREWS GOLF CORPORATION
(Name of Small Business Issuer in its Charter)
Nevada 6794 88-0203976
(State or Other Jurisdic- (Primary Standard (IRS Employer Iden-
tion of Incorporation) Industrial Classi- tification Number)
fication Code
Number)
5325 South Valley View Boulevard, Suite 10
Las Vegas, Nevada 89118
(702) 798-7777
(Address and Telephone Number of Principal
Executive Offices and Principal Place of Business)
Ronald Boreta, President
5325 South Valley View Boulevard, Suite 10
Las Vegas, Nevada 89118
(702) 798-7777
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Jon D. Sawyer, Esq.
Jon D. Sawyer, P.C.
1401 Seventeenth Street, Suite 460
Denver, Colorado 80202
(303) 295-2355
- ------------------------------------------------------------------------------
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
<PAGE>
PROSPECTUS
SAINT ANDREWS GOLF CORPORATION
500,000 Shares of Common Stock Obtainable on
Exercise of Class A Warrants
50,000 Shares of Common Stock Obtainable Upon Exercise of
Representative's Class A Warrants
100,000 Shares of Common Stock Obtainable Upon Exercise of
Representative's Warrants to Purchase Common Stock
100,000 Representative's Class A Warrants
100,000 Representative's Warrants to Purchase Common Stock
The securities offered hereby include 500,000 shares of common stock,
$.001 par value ("Common Stock") of Saint Andrews Golf Corporation (the
"Company") obtainable upon the exercise of outstanding Class A Warrants to
purchase Common Stock (the "Class A Warrants"). Two Class A Warrants entitle
the holder to purchase one share of Common Stock at an exercise price of $6.50
per share at any time until December 13, 1996. The Class A Warrants may be
redeemed by the Company upon certain conditions. (See "DESCRIPTION OF
SECURITIES.")
The securities offered hereby also include 50,000 shares of Common Stock
obtainable upon the exercise of outstanding Representative's Class A Warrants
to purchase Common Stock (the "Representative's Class A Warrants"). Two
Representative's Class A Warrants entitle the holder to purchase one share of
Common Stock at an exercise price of $7.80 per share at any time until
December 13, 1996. The Representative's Class A Warrants may be redeemed by
the Company upon certain conditions. (See "DESCRIPTION OF SECURITIES.")
Also included in the securities offered hereby are 100,000 shares of
Common Stock, obtainable upon the exercise of outstanding Representative's
Warrants to Purchase Common Stock ("Representative's Warrants"). Each
Representative's Warrant entitles the holder to purchase one share of Common
Stock at an exercise price of $5.40 per share until December 12, 1999.
Also included in the securities offered hereby are 100,000
Representative's Class A Warrants, 100,000 Representative's Warrants and
150,000 shares of Common Stock issuable upon the exercise of such Warrants
being offered by certain Selling Security Holders. Any person purchasing
Representative's Class A Warrants and/or Representative's Warrants from the
Selling Security Holders must immediately exercise such warrants or they will
immediately expire. (See "DESCRIPTION OF SECURITIES.")
The Company's Common Stock is traded in the over-the-counter market and
is quoted on the Nasdaq Small Cap Market (Symbol: SAGC). On __________, 1996,
the closing price of the Company's Common Stock was $______. (See "PRICE
RANGE OF COMMON STOCK.")
__________________
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. PERSONS INVESTING IN
THESE SECURITIES SHOULD BE ABLE TO SUSTAIN A TOTAL LOSS OF THEIR INVESTMENT.
(SEE "RISK FACTORS.")
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
1
<PAGE>
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to the
Warrantholders Commissions<FN1> Company<FN2>
<S> <C> <C> <C>
Per Share on Exercise
of Class A Warrants $ 6.50 -0- $ 6.50
Total $3,250,000 -0- $3,250,000
Per Share on Exercise
of Representative's
Class A Warrants $ 7.80 -0- $ 7.80
Total $ 390,000 -0- $ 390,000
Per Share on Exercise
of Representative's
Warrants $ 5.40 -0- $ 5.40
Total $ 540,000 -0- $ 540,000
<FN>
<FN1> No discounts or commissions will be paid in connection with the exercise
of the Class A Warrants, Representative's Class A Warrants or Representative's
Warrants.
<FN2> Before deducting expenses of this offering estimated at $25,000.
</FN>
</TABLE>
The date of this Prospectus is __________, 1996.
2
<PAGE>
ADDITIONAL INFORMATION
A Registration Statement on Form SB-2, including amendments thereto,
relating to the securities offered hereby has been filed by the Company with
the Securities and Exchange Commission, Washington, D.C. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits thereto. For further information with respect to the Company and
the securities offered hereby, reference is made to such Registration
Statement and exhibits. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement may be inspected without charge at the Commission's
principal offices in Washington, D.C., and copies of all or any part thereof
may be obtained from the Commission upon the payment of certain fees
prescribed by the Commission.
The Company is subject to the reporting requirements of Section 13(a)
and to the proxy requirements of Section 14 of the Securities Exchange Act of
1934, as amended, and in accordance therewith files periodic reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information concerning the Company may be inspected or
copied at the public reference facilities at the Commission located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices in New York, 7 World Trade Center, New York, New York 10048,
and in Chicago, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such documents can be obtained at
the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
3
<PAGE>
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY ...................................................
RISK FACTORS .........................................................
THE COMPANY ..........................................................
MARKET FOR COMMON STOCK AND RELATED STOPKHOLDER MATTERS ..............
USE OF PROCEEDS ......................................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .........................................
BUSINESS .............................................................
MANAGEMENT ...........................................................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .......
CERTAIN TRANSACTIONS .................................................
CONFLICTS OF INTEREST ................................................
DESCRIPTION OF SECURITIES ............................................
SELLING SECURITY HOLDERS .............................................
PLAN OF DISTRIBUTION .................................................
LEGAL MATTERS ........................................................
EXPERTS ..............................................................
INDEX TO FINANCIAL STATEMENTS ........................................
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
THE COMPANY
Saint Andrews Golf Corporation (the "Company") is engaged in franchising
retail stores which use the name "Las Vegas Discount Golf & Tennis" and which
sell a variety of golf and tennis equipment, including apparel and
accessories. The products sold by franchise stores, which are generally
offered at discount prices, include pro-line and private label merchandise.
As of August 20, 1996, the Company had 44 franchise stores in operation in 16
states and 2 foreign countries.
The Company has developed a concept for family-oriented sports theme
parks named "All-American SportPark," which includes a live action sports
entertainment complex that features a Major League Baseball Slugger Stadium; a
NASCAR SpeedPark; a major sponsored Golf Experience, which is comprised of an
executive golf course, driving range, putting course, clubhouse and training
center; a SportsCenter pavilion including a multi-purpose sports arena, sports
bar and clubhouse grill, brand name food court, sporting goods retail
superstore, specialty retail areas, special events space and a number of lease
tenant facilities.
On July 12, 1996, the Company entered into a lease covering
approximately 65 acres of land in Las Vegas, Nevada, on which the Company
intends to develop its first All-American SportPark. The property is located
south of the Luxor Hotel on "The Strip" and borders the new I-215 Loop around
the City of Las Vegas. The land is adjacent to McCarran International Airport
and in the vicinity of the new Circus Circus multi-billion dollar hotel resort
development referred to as "The Millennium Project".
On July 29, 1996, Saint Andrews Golf Corporation (the "Company") sold
200,000 shares of its newly designated Series A Convertible Preferred Stock to
Three Oceans Inc. ("TOI"), an affiliate of SANYO North America Corporation,
for $2,000,000 in cash pursuant to an Investment Agreement between the Company
and TOI (the "Agreement"). An additional 200,000 shares of Series A
Convertible Preferred Stock was sold to TOI for $2,000,000 on September 12,
1996 pursuant to the Agreement. The Agreement provides that TOI will purchase
an additional 100,000 shares of Series A Convertible Preferred Stock for an
additional $1,000,000 by October 27, 1996. The Company will use the proceeds
of these sales for the SportPark segment of its business.
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Offered Upon 500,000 Shares of Common Stock
Exercise of Class A Warrants
Securities Offered Upon 50,000 Shares of Common Stock
Exercise of Representative's
Class A Warrants
Securities Offered Upon 100,000 Shares of Common Stock
Exercise of Representative's
Warrants
5
<PAGE>
Securities Offered by Selling 100,000 Representative's Class A
Security Holders Warrants and 100,000 Representa-
tive's Warrants
Common Stock Outstanding 3,000,000 Shares <FN1>
Preferred Stock Outstanding 400,000 Shares <FN2>
Nasdaq Small-Cap Symbol SAGC
<FN>
<FN1>
As of August 20, 1996. Does not include 677,000 shares of Common Stock which
may be issued in the future upon the exercise of outstanding options or
500,000 shares which may be issued upon conversion of Preferred Stock. (See
"MANAGEMENT" and "DESCRIPTION OF SECURITIES.")
<FN2>
Does not include 100,000 shares which an affiliate of SANYO North America
Corporation has agreed to purchase.
</FN>
</TABLE>
RISK FACTORS
The purchase of these securities involves a high degree of risk.
Prospective investors should review carefully and consider the factors
described under "RISK FACTORS."
USE OF PROCEEDS
The Company intends to use the proceeds from the exercise of the Class A
Warrants, Class A Representative's Warrants and Representative's Warrants for
the SportPark segment of the Company's business.
SUMMARY FINANCIAL DATA
The following table sets forth certain selected financial data with
respect to the Company, which has been extracted from financial statements and
is qualified in its entirety by reference to the financial statements and
notes thereto included in this Prospectus.
<TABLE>
<CAPTION>
At June 30, At December 31,
Balance Sheet Data<FN1>: 1996 1995 1994
<S> <C> <C> <C>
Current Assets $3,518,700 $3,928,500 $3,719,600
Total Assets $4,442,000 $5,077,100 $4,618,400
Current Liabilities $1,105,400 $1,321,600 $ 662,600
Working Capital $2,413,300 $2,606,900 $3,057,000
Long-Term Debt $ 0 $ 0 $ 0
Cash Dividends Per Share $ 0 $ 0 $ 0
__________________
<FN>
<FN1>
On July 29, 1996, an affiliate of SANYO North America Corporation signed an
agreement to purchase 500,000 shares of Series A Convertible Preferred Stock
6
<PAGE>
for a total purchase price of $5,000,000. Of this amount, $2,000,000 was
received on July 29, 1996, $2,000,000 was received on September 12, 1996, and
the balance of $1,000,000 is due by October 27, 1996. See "BUSINESS --
Certain Transactions."
</FN>
</TABLE>
<TABLE>
<CAPTION>
For the Six Months For the Year Ended
Statement of Operations Ended June 30, December 31,
Data<FN1>: 1996 1995 1995 1994
<S> <C> <C> <C> <C>
Total Revenues $ 826,700 $ 745,200 $1,661,700 $1,746,500
Net (Loss) $(419,000) $(153,000) $ (200,300) $ (40,700)
Net (Loss) Per Common
Share $ (.14) $ (.05) $ (.07) $ (.02)
_________________
<FN>
<FN1>
The net losses for the year ended December 31, 1995, and the two six month
periods shown are primarily due to the increased expenses related to the
development of the All-American SportPark. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
</FN>
</TABLE>
7
<PAGE>
RISK FACTORS
The securities offered hereby represent a speculative investment and
involve a high degree of risk of a loss of part or all of the investment.
Therefore, prospective investors should read this entire Prospectus and
carefully consider the following risk factors in addition to the other
information set forth elsewhere in this Prospectus prior to making an
investment.
RISK FACTORS RELATING TO EXISTING BUSINESS OF THE COMPANY
1. OPERATING LOSSES. The Company reported net losses for the six
months ended June 30, 1996, and for the years ended December 31, 1995 and
1994. The Company's profitability in the future will be affected by
anticipated start-up expenses prior to the opening of any proposed sports
theme parks. See "FINANCIAL STATEMENTS" and "BUSINESS." Further, there are
no assurances that any sports theme park will be profitable once it is open.
2. DEPENDENCE ON PARENT. The Company is presently a majority-owned
subsidiary of Las Vegas Discount Golf & Tennis, Inc. (the "Parent"). The
Parent currently provides and shares the cost with the Company of office
facilities and administrative and accounting personnel. The Parent has also
agreed to maintain an inventory of merchandise for sale to the Company's
franchisees under an agreement which expires on July 31, 1997. The Parent
has also licensed the use of trademarks, trade names and other symbols and
marks to the Company on a perpetual basis. The Company's operations, are
dependent upon the Parent until the successful operation of an All American
SportPark. Upon termination of this agreement, the Company will evaluate the
costs and benefits of whether to continue with the Parent or whether to pursue
other alternatives. In addition, the Parent has four stores which are not
franchises of the Company and do not pay royalties to the Company, even though
they may benefit from the Company's activities, including any national
advertising which the Company may conduct. See "CONFLICTS OF INTEREST."
3. ARRANGEMENTS WITH COMPANY'S CHAIRMAN OF THE BOARD. Vaso Boreta,
the Company's Chairman of the Board, has certain arrangements with the
Company's Parent under which he may benefit from the Company's operations.
Mr. Boreta owns and operates a "Las Vegas Discount Golf & Tennis" store in Las
Vegas, Nevada which is not a franchise of the Company. As a result, this
store pays no royalties to the Company even though this store may benefit from
the Company's activities, including any national advertising which the Company
may conduct. In addition, the Company pays the Parent for the use of office
facilities which the Parent leases from Vaso Boreta. See "CONFLICTS OF
INTEREST."
4. FRANCHISE ACTIVITIES. During the last three years the number of
franchise stores in operation has declined and the number of franchises sold
each year has remained relatively constant. Franchise fees received by the
Company represent the initial fee of normally $40,000 paid by a franchisee
upon the execution of a franchise agreement. Therefore, in any year in which
the Company does not sell a substantial number of new franchises the amount of
revenue derived from initial franchise fees (as well as revenues relating to
computer equipment sold to certain new franchisees) will decrease substan-
tially. Furthermore, royalties received by the Company from franchisees,
which were $1,209,100 in 1995 and $613,000 during the six months ended June
30, 1996, are dependent upon the number of franchised stores in operation and
their level of sales, as well as the timely performance by franchisees of
their obligations under the franchise agreement. To the extent the Company is
8
<PAGE>
unable to continue expanding its network of retail stores, their overall sales
level, or franchisees fail to honor their franchise agreements, the Company's
franchise related revenues will be adversely affected. See "BUSINESS --
Summary of Franchise Store Development."
5. DEPENDENCE UPON MANAGEMENT. The Company is materially dependent
on the continued active participation in the Company's business of Ronald S.
Boreta, its President. The Company does not have any "key-man" life insurance
on Ron Boreta. The loss of Mr. Boreta's services would materially adversely
affect the Company's business. See "MANAGEMENT."
6. COMPETITION IN FRANCHISE BUSINESS. The business of franchising
discount golf and tennis stores is highly competitive. A number of the
Company's competitors are larger and have greater financial and other
resources than the Company. See "BUSINESS -- Competition."
7. GOVERNMENTAL REGULATION OF FRANCHISES. The franchise industry is
highly regulated and the Company is subject to extensive rules and regulations
governing franchise activities. The Federal Trade Commission has promulgated
rules and regulations requiring franchisors to provide prospective franchisees
with a disclosure document containing detailed information regarding the
franchisor, its principals, financial condition, the franchise program and the
services that the franchisor provides to the franchisees. Many states have
adopted laws similar to those of the Federal Trade Commission and some require
that the franchisor first register the franchise before any offer and sale of
a franchise may be conducted. States which require registration also require
annual updating of such registration to enable the Company to continue the
offer and sale of franchises therein. There can be no assurance that the
Company's franchise activities will be acceptable to those states requiring
registration and approval, or that the Company will be able to keep such
registrations and approvals current. The Company is currently registered to
sell franchises in the 15 states where the Company intends to sell franchises.
See "BUSINESS -- Government Regulation."
8. CONTINUING AVAILABILITY OF NAME BRAND MERCHANDISE. The Company's
Parent regularly assists the Company's franchisees in obtaining name brand
merchandise from golf and tennis manufacturers. Although the Company believes
that its franchisees will be able to continue to obtain such merchandise in
the future, there is no assurance that all of such manufacturers will continue
to sell to the Company's franchisees. Any such discontinuance could have an
adverse impact on the Company's franchise business.
RISK FACTORS RELATING TO THE PROPOSED BUSINESS OF THE COMPANY
1. POSSIBLE OBSTACLES TO CONSTRUCTION. The Company's proposed sports
theme park must meet various requirements of city, county and state regulatory
agencies with respect to land planning, drainage, operational safety and
related issues. An adverse regulatory decision on any one of these matters
could severely impact the timing of the opening and the cost of a park and/or
its future operation, or it could result in the Company being denied
permission to construct the park at the proposed location. While management
will attempt to foresee the issues in these areas, it is possible that all
such contingencies will not have been fully explored nor been the subject of
adequate planning and costing. See "BUSINESS -- All American SportPark."
2. POSSIBLE CONSTRUCTION COSTS OVERRUNS. The Company's estimated
construction costs related to any sports theme park will be based on cost
estimates of the Company's engineering firm, bids from various contractors,
9
<PAGE>
and discussions with contractors and others. Since none of these estimates
are based on binding contracts, it is possible that at least some of the costs
will be higher than the estimated amounts. Although the Company will allow a
contingency for cost overruns, there is no assurance that actual costs will
not be significantly higher. If total costs exceed estimated costs, the
Company may be required to seek additional financing, and there can be no
assurance that such financing could be obtained on favorable terms.
3. GOVERNMENT REGULATIONS AFFECTING THEME PARKS. The construction
and operation of a proposed theme park will be subject to governmental
regulation and approval with respect to zoning requirements, traffic impact
issues and other matters. Upon the opening of a theme park, the Company will
also be required to comply with government regulations concerning sanitation,
health and safety. Compliance with governmental regulations could have an
adverse effect on the Company's ability to build and operate a theme park.
4. THEME PARK PROFITABILITY IS UNCERTAIN. Although the Company's
Management believes that a substantial demand exists for the type of
facilities which are proposed to be included in the All American SportParks,
the Company is unable to gauge with any degree of certainty the amount of
patronage and/or the revenues of any proposed park. Even if a first rate park
is constructed, maintained and operated as contemplated herein, there is no
assurance that attendance will be sufficient to pay operational costs and
provide a return on the capital investment. See "BUSINESS -- All American
SportPark."
5. COMPETITION IN THEME PARK BUSINESS. The Company's proposed theme
park will face substantial competition from other attractions in Las Vegas
including gambling, free entertainment, for-free activities and inexpensive
food outlets. See "BUSINESS -- Competition."
6. SEASONAL EFFECTS ON OPERATION OF THEME PARK. Patronage at the
proposed sports theme park in Las Vegas, Nevada, is expected to be affected by
the desert climate of Las Vegas. During the hot summer months daytime use of
the facilities could be limited; however, the park is expected to remain open
in the evening. The Company's revenues could be cyclical both with respect to
the time of year and daytime versus nighttime attendance.
7. EXPOSURE TO LIABILITY FROM OPERATION OF THEME PARK; INSURANCE.
Risk of serious injury by patron participation in activities available at the
proposed park is substantial notwithstanding efforts to be employed by the
Company to reduce such risk by event design features. In view of this, the
Company intends to maintain liability insurance in the amount of at least $5
million per occurrence on each proposed facility. Regardless of the
foregoing, it is possible the Company's assets will become subject to claims
of patrons for injuries and losses and damages resulting therefrom arising out
of accidents or incidents at a proposed sports theme park. The Company
probably would not build a sports theme park anywhere else unless it could
obtain such insurance or use a self-insurance program. See "BUSINESS -- All
American SportPark."
8. LACK OF THEME PARK EXPERIENCE OF MANAGEMENT. While the officers
and directors of the Company are experienced businessmen, only one of the
members of the Company's management has direct experience in the theme park
business. See "MANAGEMENT."
9. UNCERTAIN USE OF PROCEEDS. If the Company is unable to construct
its proposed sports theme park in Las Vegas, the proceeds allocated for such
10
<PAGE>
purpose could be used for (1) a similar facility at another location in Las
Vegas or Southern California; (2) a smaller version of the sports theme park
at some other location; (3) one or more Slugger Stadiums; (4) one or more
NASCAR SpeedParks; or (5) working capital. Investors in this offering can
only be given limited assurances that the proceeds of this offering will be
used to construct the proposed sports theme park even though that is the
Company's plan and where its efforts are being focused. See "USE OF
PROCEEDS."
GENERAL RISK FACTORS
1. DIVIDEND POLICY. The Company has not paid dividends on its shares
of Common Stock since its inception and does not contemplate paying cash
dividends in the foreseeable future. See "DIVIDEND POLICY."
2. NASDAQ MAINTENANCE REQUIREMENTS AND EFFECTS OF POSSIBLE DELISTING.
Although the Company's Common Stock is currently listed on the Nasdaq
Small-Cap
Market, the Company must continue to meet certain maintenance requirements
in order for such securities to continue to be listed on Nasdaq. If the
Company's securities are delisted from Nasdaq, this could restrict investors'
interest in the Company's securities and could materially and adversely affect
the trading market and prices for such securities. In addition, if the
Company's securities were to be delisted from Nasdaq, and if the Company's net
tangible assets do not exceed $2 million, and if the Company's Common Stock is
trading for less than $5.00 per share, then the Company's Common Stock would
be considered a "penny stock" under federal securities law. Additional
regulatory requirements apply to trading by broker-dealers of penny stocks
which could result in the loss of an effective trading market for the
Company's Common Stock.
3. ARBITRARY DETERMINATION OF WARRANT EXERCISE PRICES. The exercise
prices of the Class A Warrants, the Representative's Class A Warrants and the
Representative's Warrants were arbitrarily set at prices above the Unit
offering price in the Company's initial public offering through negotiations
between the Company and the Representative of the underwriters in the initial
public offering, and bear no relationship to any other objective criteria of
value, and in no event should they be regarded as an indication of any future
market price of the Company's securities.
4. OUTSTANDING OPTIONS. Currently, the Company has outstanding
options to purchase up to 677,000 shares of Common Stock at prices ranging
from $4.75 to $5.00 per share under its existing stock option plan. For the
term of such options, the holders thereof will have an opportunity to profit
from the rise in the market price of the Company's Common Stock without
assuming the risks of ownership. This may have an adverse effect on the terms
upon which the Company could obtain additional capital. Furthermore, it might
be expected that the holders of such options and warrants would exercise them
at a time when the Company would be able to obtain equity capital on terms
more favorable than those provided for by the options. See "MANAGEMENT."
5. CONTROL BY PARENT CORPORATION AND OFFICERS AND DIRECTORS. The
Company's Officers and Directors presently have beneficial ownership of
approximately 74% of the common stock of Las Vegas Discount Golf & Tennis,
Inc., the Company's Parent, which presently owns 66.7% of the shares
outstanding. Assuming that all of the Common Stock offered by this Prospectus
is purchased upon the exercise of Warrants, such persons will have control
over approximately 54.8% of the shares outstanding through the Company's
Parent. As a result, the Company's Officers and Directors currently are, and
11
<PAGE>
in the foreseeable future will continue to be, in a position to effectively
control the Company. See "PRINCIPAL SHAREHOLDERS."
6. POSSIBLE CONFLICTS OF INTEREST. The Company, its Parent, and the
Company's Chairman of the Board have a number of potential conflicts of
interest concerning office facilities, trademarks and trade names, inventory,
future corporate opportunities, and other matters relating to their respective
businesses. Although the Company and its Parent have adopted procedures to
resolve possible conflicts of interest, Officers and Directors of the Company
may be presented with situations which give rise to apparent conflicts of
interest which cannot be resolved by such procedures but only through the
exercise of their judgment consistent with their fiduciary duties under
corporate law. See "CONFLICTS OF INTEREST."
7. CURRENT REGISTRATION NEEDED TO EXERCISE WARRANTS; POSSIBLE
REDEMPTION OF WARRANTS. Investors holding warrants to purchase shares of the
Company's Common Stock will not be able to exercise such Warrants unless at
the time of exercise the registration statement of which this Prospectus is a
part is current or a post-effective amendment or new registration statement
registering the Common Stock issuable upon exercise of the Warrants is
effective and such shares have been registered under the Act and qualified or
deemed to be exempt under the securities laws of the state of residence of the
holder of the Warrants. The Company has agreed to maintain a current
prospectus relating thereto until the expiration of the Warrants. While the
Company has undertaken to do so in the Underwriting Agreement, there is no
assurance that it will be able to do so. The Warrants are subject to
redemption by the Company on 30 days prior written notice under certain
conditions. If the Warrants are redeemed, Warrantholders will lose their
right to exercise the Warrants except during such 30 day redemption period.
See "DESCRIPTION OF SECURITIES -- Warrants."
8. INVESTMENT COMPANY STATUS OF LAS VEGAS DISCOUNT GOLF & TENNIS,
INC. Las Vegas Discount Golf & Tennis, Inc. ("LVDG") presently owns 66.7% of
the Company's Common Stock outstanding. If all of the Class A Warrants,
Representative's Class A Warrants and Representative's Warrants are exercised,
and all of the 700,000 options in the Company's stock option plan are
exercised, LVDG's ownership would drop to approximately 45.7%.
If LVDG's ownership percentage is reduced below 50%, LVDG could be
deemed to be an "investment company" as that term is defined in the Investment
Company Act of 1940, and this would cause adverse consequences to LVDG if LVDG
were not able to obtain a ruling from the SEC that it is not an investment
company. LVDG is an operating company which owns and operates four retail
golf stores and sells golf and tennis merchandise to franchisees of the
Company. Its revenues for the year ended December 31, 1995, were $13,193,000.
Since the Company is dependent upon LVDG for certain services (see Risk Factor
No. 2 on page 8), the Company could be required to seek other alternative
sources for the services provided by LVDG, and such alternatives may not be
available on terms as favorable as the terms provided by LVDG. In order to
avoid having its ownership percentage reduced below 50%, LVDG might cause the
Company to reject certain equity-based transactions which, though otherwise in
the best interests of the Company, could result in the issuance of additional
Common Stock.
9. POSSIBLE ISSUANCE OF PREFERRED STOCK. The Company is authorized
to issue 5,000,000 shares of Preferred Stock, $.001 par value. The Preferred
Stock may be issued in series from time to time with such designation, rights,
preferences and limitations as the Board of Directors of the Company may
12
<PAGE>
determine by resolution. The potential exists, therefore, that preferred
stock might be issued which would grant dividend preferences and liquidation
preferences to preferred shareholders over common shareholders. Unless the
nature of a particular transaction and applicable statutes require such
approval, the Board of Directors has the authority to issue these shares
without shareholder approval. The Board of Directors has authorized the
issuance of 500,000 shares of Series A Convertible Preferred Stock to SANYO
North America Corporation, and these shares are convertible into Common Stock
at the price of $10.00 per share. The Company presently has no plans to issue
any other shares of Preferred Stock. (See "DESCRIPTION OF SECURITIES.")
10. NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES UNDERLYING THE
CLASS A WARRANTS. Although Units in the Company's initial public offering
were not knowingly sold to purchasers in jurisdictions in which the Units
were not registered or otherwise qualified for sale, investors may buy
Warrants in the aftermarket or may move to jurisdictions in which the shares
underlying the Warrants are not so registered or qualified during the period
that the Warrants are exercisable. In this event, the Company would be unable
to issue shares to those persons desiring to exercise their Warrants unless
and until the shares could be registered or qualified for sale in
jurisdictions in which such persons reside, or an exemption to such qualifica-
tion exists in such jurisdictions. Although the Company has agreed to use its
best efforts to register or qualify its shares for sale upon the exercise of
the Warrants in any jurisdiction where the registered holders of 5% or more of
the Class A Warrants reside, no assurances can be given that the Company will
be able to effect any such registration or qualification. Further, the
Company may determine not to register or qualify the shares issuable upon the
exercise of the Warrants in jurisdictions where holders of less than 5% of the
Class A Warrants reside and where the time and expense do not justify such
registration or qualification. In the event that for any reason the shares
are not registered or qualified in particular jurisdictions, persons holding
Warrants in such jurisdictions would either have to sell their Warrants to
persons in states where the Warrants may be exercised, or allow them to expire
unexercised.
11. POSSIBLE RESALES OF COMMON STOCK. Of the 3,000,000 shares
outstanding as of the date of this Prospectus, 2,000,000 have not been
registered under the Securities Act of 1933, as amended (the "Act") but are,
under certain circumstances, available for public sale pursuant to Rule 144,
promulgated under the Act. The Representative has obtained the agreement of
Las Vegas Discount Golf & Tennis, Inc., the holder of the 2,000,000 shares, to
not sell, publicly transfer or assign the 2,000,000 Common Shares until
December 12, 1997, without the prior written consent of the Representative.
The possibility of sales under Rule 144 may adversely affect the market price
of the Company's securities. See "DESCRIPTION OF SECURITIES -- Shares
Eligible For Future Sale."
13
<PAGE>
THE COMPANY
Saint Andrews Golf Corporation (the "Company") is engaged in franchising
retail stores which use the name "Las Vegas Discount Golf & Tennis" and which
sell a variety of golf and tennis equipment, including apparel and
accessories. The products sold by franchise stores, which are generally
offered at discount prices, include pro-line and private label merchandise.
As of August 20, 1996, the Company had 44 franchise stores in operation in 16
states and 2 foreign countries.
The Company is a Nevada corporation which was incorporated on March 6,
1984, under the name "Sporting Life, Inc." The Company's name was changed to
"St. Andrews Golf Corporation" on December 27, 1988, and was further changed
to "Saint Andrews Golf Corporation" on August 12, 1994.
The Company's business began in 1974 when Vaso Boreta, the Chairman of
the Board of the Company, opened a "Las Vegas Discount Golf & Tennis" retail
store in Las Vegas, Nevada. In 1984, the Company began to franchise the "Las
Vegas Discount Golf & Tennis" retail store concept and commenced the sale of
franchises.
The Company was acquired by Las Vegas Discount Golf & Tennis, Inc., a
publicly-held company, in February 1988, from Vaso Boreta, who was its sole
shareholder. Vaso Boreta presently owns 49.3% of the outstanding stock of Las
Vegas Discount Golf & Tennis, Inc., and serves as the Chairman of the Board of
the Company and Chairman of the Board, President and CEO of Las Vegas Discount
Golf & Tennis, Inc. Las Vegas Discount Golf & Tennis, Inc. presently owns
2,000,000 shares (66.7%) of the Company's outstanding Common Stock.
During July 1994, the Company set up a wholly-owned Nevada subsidiary
named All-American SportPark, Inc., which will be the entity through which the
Company will participate in the SportParks. Saint Andrews Golf Corporation and
All-American SportPark, Inc. are referred to herein collectively as the
"Company."
On August 12, 1994, the Company effected a 4,000 for 1 stock split of
its Common Stock. All financial information and share data in this Report
gives retroactive effect to the stock split.
In December 1994, the Company completed an initial public offering of
1,000,000 Units, each Unit consisting of one share of Common Stock and one
Class A Warrant. Two Class A Warrants entitle the holder to purchase one
share of Common Stock at $6.50 per share. The net proceeds to the Company
from the initial public offering were approximately $3,684,000.
The Company's offices are located at 5325 South Valley View Boulevard,
Suite 10, Las Vegas, Nevada 89118. Its telephone number is (702) 798-7777.
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<PAGE>
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market and
is quoted on the NASDAQ Small-Cap Market under the symbol "SAGC." The
following table sets forth the high and low bid prices of the Common Stock for
the periods indicated. These prices are believed to be representative
interdealer quotations, without retail markup, markdown or commissions, and
may not represent actual transactions. No public market existed for the
Company's Common Stock prior to December 21, 1994.
BID
PERIOD HIGH LOW
December 21, 1994 to December 31, 1994 $4.750 $4.50
Year Ended December 31, 1995:
First Quarter $5.875 $4.50
Second Quarter $7.4375 $5.375
Third Quarter $8.25 $5.375
Fourth Quarter $6.25 $4.375
Year Ended December 31, 1996:
First Quarter $6.125 $3.625
Second Quarter $7.625 $4.5625
A recent closing price for the Company's Common Stock is set forth on
the cover page of this Prospectus.
The number of holders of record of the Company's $.001 par value Common
Stock at August 20, 1996, was 21. This does not include shareholders who hold
stock in their accounts at broker/dealers.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends have been paid
with respect to the Company's Common Stock and no dividends are anticipated to
be paid in the foreseeable future. It is the present policy of the Board of
Directors to retain all earnings to provide for the growth of the Company.
Payment of cash dividends in the future will depend, among other things, upon
the Company's future earnings, requirements for capital improvements and
financial condition.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to be realized from the exercise of the Class A
Warrants will be approximately $3,225,000 if all of the Class A Warrants are
exercised, an additional $390,000 will be realized if all of the
Representative's Warrants are exercised, and an additional $540,000 will be
realized if all of the Representative's Warrants are exercised. Management
anticipates that the net proceeds from these exercises will be used
substantially as follows and applied in the following order of priority:
<TABLE>
<CAPTION>
Represen-
tative's Represen-
Class A Class A tative's
Application of Proceeds Warrants Warrants Warrants
<S> <C> <C> <C>
Development of SportPark $3,000,000 $300,000 $500,000
General Corporate
Purposes<FN1> 225,000 90,000 40,000
---------- -------- --------
Total $3,225,000 $390,000 $540,000
_______________
<FN>
<FN1>
Amounts allocated to general corporate purposes may be used for payment of
accounts payable, financing possible operating losses and other general
working capital.
</FN>
</TABLE>
The amounts set forth above are only an estimate. The Company is unable
to predict precisely what amount will be used for any particular purpose. To
the extent the proceeds received are inadequate in any area of expenditures,
supplemental amounts may be drawn from working capital, if any. Conversely,
any amounts not required for proposed expenditures will be retained and used
for working capital. Should the proceeds actually received, if any, be
insufficient to accomplish the purposes set forth above, the Company may be
required to seek other sources to finance the Company's operations, including
individuals and commercial lenders.
Pending utilization, management intends to make temporary investment of
the proceeds in bank certificates of deposit, interest-bearing savings
accounts, prime commercial paper or government obligations. Such investment
in interest-bearing assets, if continued for an excessive period of time
within the definition of the Investment Company Act of 1940, could subject the
Company to classification as an "investment company" under the Act and to
registration and reporting requirements thereunder.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEASONALITY
Saint Andrews Golf Corporation's (the "Company") business is seasonal.
The Company typically experiences sales peaks in the Spring and pre-Christmas
seasons. Accordingly, the results of interim periods may not be indicative of
results for the full year.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996, COMPARED TO SIX MONTHS ENDED JUNE 30,
1995
Total revenues increased $81,500 (11%) compared to 1995. The increase
in revenues was attributable primarily to an increase in royalties and
advertising income.
Selling, general and administrative expenses increased by $131,700 (15%)
in 1996 as compared to 1995, primarily as a result of development expenses
associated with the All-American SportPark.
In May of 1994, the Company entered into a Ground Lease (the "Lease")
for approximately 33 acres of land on Las Vegas Boulevard which it intended to
use for the development of a golf/sports park. The lease contained provisions
which allowed the lessor to terminate the lease within the first 6 years of
the 15 year lease term in the event that the lessor entered into a sale of the
property.
In June 1995 the lessor notified the Company that it had entered into a
sale agreement for the parcel and that it was exercising its right of
termination. Pursuant to cancellation provisions contained within the Lease
the Company was entitled to reimbursement of unamortized construction costs
which it incurred, based upon criteria contained within the lease, up to an
aggregate amount of $3.5 million.
Upon notification of the Lease termination the Company ceased
construction activities and submitted substantiation for construction costs
totaling approximately $3.9 million. Utilizing applicable formulas derived
from the Lease the Company believes that, based on the maximum expenditures
available for reimbursement of $3.5 million, $3,279,465 in costs are
reimbursable by the purchaser. The purchaser has reviewed such support and
has indicated that it believes that only a portion of the construction costs
submitted are reimbursable within the context of the Lease agreement.
No settlement was reached regarding the disputed amount and on February
27, 1996 the Company filed a complaint with the District Court, Clark County,
Nevada, against the purchaser of the parcel seeking an unspecified amount of
compensatory damages, punitive damages, attorney fees and costs.
Management believes, and legal counsel concurs, that a recovery of
$3,000,000 is probable with regards to this litigation and that the amount
will be collected in 1996. The Company has, accordingly, recorded the lease
termination receivable as a current asset in the accompanying balance sheet as
of June 30, 1996.
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<PAGE>
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994
During the year ended December 31, 1995, the Company had a net loss of
$200,300 as compared to a net loss of $40,700 for 1994. The Company had net
income before intercompany charge in lieu of income taxes of $124,300 in 1994;
however, the Company had a non-recurring, non-cash write-off of $140,000 due
to a change in the deferred tax asset valuation allowance.
Total revenues for 1995 decreased by 5% compared to 1994. The decrease
in revenues was attributable primarily to a reduction in franchise fees from
$303,100 in 1994 to $245,000 in 1995, and a reduction in wholesale revenues
from $76,300 in 1994 to $1,000 in 1995. Since franchise fees are recognized
essentially when the applicable franchised store is opened, the decrease in
franchise fees reflects a decrease in stores opened of 6 in 1995 as compared
to 8 in 1994. Wholesale revenues, which is the sale of computer equipment and
supplies to franchisees, was discontinued in February 1995. Royalties were
down during 1995 by approximately 5% over the prior year as a result of
decreased retail sales at the franchise level. The Company attributes this to
a slight decrease in the U.S. economy and poorer weather conditions. During
1995, 6 new franchises were opened and 10 stores closed as compared with 8 new
franchises opened and 10 stores closed during 1994. There were 2 stores under
development at December 31, 1995.
Total expenses as a percentage of revenue in 1995 were up 21% as
compared to 1994, primarily because of an increase in selling, general and
administrative expenses and development costs of the Saint Andrews golf
centers concept and the SportParks.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of approximately
$2,413,000 as compared to working capital of approximately $2,607,000 at
December 31, 1995. The decline in working capital was primarily due to the
net loss for the six month period. Cash increased from $125,000 at December
31, 1995, to $126,000 at June 30, 1996. This increase in cash was primarily
attributable to a decrease in prepaid expenses of $410,000, an increase in
other payables of $274,000, an increase in deferred franchise fees of $23,000
and an $85,000 refund of development costs. These amounts were offset by the
net loss of $419,000, a $59,000 decrease in accounts payable, and $324,000 of
capital expenditures which were related to the All-America SportPark.
The Company's sources of working capital are cash flows from operations
and the issuance of 500,000 shares of Series A Convertible Preferred Stock.
On July 29, 1996, Saint Andrews Golf Corporation (the "Company") sold 200,000
shares of its newly designated Series A Convertible Preferred Stock to Three
Oceans Inc. ("TOI"), an affiliate of SANYO North America Corporation, for
$2,000,000 in cash. The sale was made pursuant to an Investment Agreement
between the Company and TOI dated July 29, 1996 (the "Agreement"). An
additional 200,000 shares of Series A Convertible Preferred Stock were sold to
TOI for $2,000,000 on September 12, 1996 pursuant to the Agreement. The
Agreement provides that TOI will purchase an additional 100,000 shares of
Series A Convertible Preferred Stock for an additional $1,000,000 by October
27, 1996. The Company will use the proceeds of these sales for the SportPark
segment of its business.
18
<PAGE>
Management believes that these sources of cash will be adequate to fund
operations through the balance of 1996. The Company has, in the past, funded
a portion of its cash needs through loans from its Parent, however, there is
no assurance that the Parent will be able to make any loans in the future.
The Company expects to have significant capital expenditures when
construction of the first SportPark is commenced.
At December 31, 1995, the Company had working capital of approximately
$2,606,900, as compared to working capital of approximately $3,057,000 at
December 31, 1994. Cash decreased from $3,242,000 at December 31, 1994, to
$125,100 at December 31, 1995. This decrease in cash was primarily
attributable to $3,000,000 in project costs for the first Las Vegas site of
the SportPark and $493,300 of capitalized costs of SportParks under
development. The Company also repaid $287,400 owed to the Company's Parent
and its affiliates. The decrease in cash was offset by an increase in
accounts payable and accruals in the amount of $883,300. The Company is
seeking recovery of at least $3,000,000 of the project costs for the first Las
Vegas site in litigation which is currently pending. See "BUSINESS -- Legal
Proceedings."
The most significant use of cash during 1994 was for the All-American
SportPark. This includes $514,400 for pre-construction costs and a $220,000
non-refundable security deposit on the ground lease for the park.
19
<PAGE>
BUSINESS
ALL-AMERICAN SPORTPARK
The Company has developed a concept for family-oriented sports theme
parks named "All-American SportPark," which will be a live action sports
entertainment complex that will feature a Major League Baseball Slugger
Stadium; a NASCAR SpeedPark; a major sponsored Golf Experience, which is
comprised of an executive golf course, driving range, putting course,
clubhouse and training center; a SportsCenter pavilion including a
multi-purpose
sports arena, sports bar and clubhouse grill, brand name food court,
sporting goods retail superstore, specialty retail areas, special events space
and a number of lease tenant facilities.
On July 12, 1996, the Company entered into a lease covering
approximately 65 acres of land in Las Vegas, Nevada, on which the Company
intends to develop its first All-American SportPark. The project is expected
to include a golf driving range; a pro shop/clubhouse; a training and custom
club-fitting center; a par 3 golf course; a 27-hole putting course; a Major
League Baseball Slugger Stadium; a NASCAR SpeedPark; an off-ice hockey
complex; an All-American SportPark Pavillion and Arena; and other facilities.
The property is located south of the Luxor Hotel on "The Strip" and borders
the new I-215 Loop around the City of Las Vegas. The land is adjacent to
McCarron International Airport and in the vicinity of the new Circus Circus
multi-billion dollar hotel resort development referred to as "The Millennium
Project". The lease will be for an initial term of 15 years, and the Company
will have two options to extend for five years each. The landlord may cancel
the lease if the SportPark is not completed by July 12, 1998.
The lease provides for a minimum rental during the first five years of
$625,000 per year. The minimum rental will begin to accrue when the SportPark
opens or 12 months after the lease period commences, whichever occurs first.
The minimum rental will be increased 10% at the end of each five years during
the term of the lease. The Company will be required to pay additional rent to
the extent that percentages ranging from 3% to 10% of gross receipts,
depending on the type of revenue, exceeds the minimum rental. In connection
with the signing of the lease, the Company paid a deposit of $500,000 which
will be applied to minimum rental payments, and to a security deposit of
approximately $104,000 which will be applied to minimum rental payments at the
end of the fourth year of the lease.
As of the date of this Prospectus, the Company has not secured financing
for the construction of the first SportPark. The Company has been holding
discussions with a number of potential corporate sponsors who have expressed
an interest in participating in the SportPark, and management expects that
corporate sponsors will contribute a significant portion of the financing
needed. The Company expects to receive the balance of the financing from a
combination of sources including outside equity and/or debt investors, bank
financing, and the Company's own cash, including potentially proceeds received
from the exercise of warrants being covered by the registration statement of
which this Prospectus is a part. There is no assurance that financing will be
obtained from any of these sources.
FEATURE ATTRACTIONS
MAJOR LEAGUE BASEBALL "SLUGGER STADIUM." The Slugger Stadium will be a
full size replica of a major league ballpark for batting and baseball
training. The Company has been granted a license from Major League Baseball
20
<PAGE>
Properties to own and operate Major League Baseball Slugger Stadiums. Under
the license agreement, the Company also has the right to utilize certain Major
League Baseball trademarks including those of the All Star Game, Division
Series, League Championship Series and World Series. Slugger Stadium is a
nostalgic formatted batting stadium which attempts to duplicate a major league
experience for its patrons. Unlike batting cages which are the normal
industry standard, the Company's design is a full size stadium that replicates
many of the features of a modern baseball stadium. Plans include 17 batter
boxes and 17 on-deck circles. Batters will have the option of hitting hard or
soft balls delivered at three different speeds. Outfield wall replicas of
Fenway Park's "Green Monster" Wall, Baltimore's Camden Yards, Chicago's
Wrigley Field, Yankee Stadium, and the ball park in Arlington, Texas will be
designed to challenge batters to hit the balls out of the park. To complete
the Major League experience will be authentic turnstiles, classic ballpark
food and beverage concessions, baseball memorabilia, electronic scoreboard and
specially designed sound systems that provide typical baseball sounds
including proprietary designed umpire calls of balls and strikes.
GOLF COUNTRY CLUB DRIVING RANGE, PAR 3 GOLF COURSE, GOLF CLUBHOUSE AND
TRAINING CENTER. The Company is in discussions with several potential
corporate sponsors for the driving range facility. The range is expected to
house 110 stations in a two-tiered format. The range is designed to have the
appearance of an actual golf course with grass greens surrounded by sand traps
and lakes as hitting targets. Pro-line equipment and popular brand name golf
balls will be utilized. Plans also include a putting and chipping green and
state-of-the-art training center. In addition to the driving range area there
will be a 3,000-square foot golf center featuring company brand and pro-line
merchandise, and a small area for offices.
NASCAR SPEEDPARK. The Company has an exclusive license agreement with
The National Association of Stock Car Auto Racing, Inc. ("NASCAR") for the
operation of SpeedParks as a part of the All-American SportPark or as a stand-
alone All-American NASCAR SpeedPark. The SpeedPark will include two tracks to
accommodate three styles of racing: NASCAR, sprint and go-kart. The go-kart
track will be a 1,400 linear foot road course for five horsepower go-karts
designed for families and children 14 and under, and the other track will be a
900-foot oval track for nine horsepower NASCAR-style go-karts designed for
youths and adults 16 years and older. The SpeedParks will be comprised
generally of the NASCAR Go-Kart SpeedPark, the Garage Experience, the Pit Stop
Challenge, the Infield RV Park, Victory Lane, the NASCAR Jr. Track, the
Tailgater Picnic Grounds and the NASCAR Retail Trailer Merchandising
Experience.
In May 1996, the Company entered into an agreement with Jeff Gordon, the
1995 NASCAR Winston Cup Champion, to serve as spokesperson of the NASCAR
SpeedPark through April 30, 2000. Mr. Gordon will be paid $25,000 for his
services during 1996, $25,000 per SpeedPark per year thereafter ($325,000
guaranteed over the life of the agreement); .25% of net profits to go to a
charity designated by Mr. Gordon; and additional fees for recording television
and radio spots and making more than six appearances per year. Mr. Gordon was
also granted options under the Company's Stock Option Plan. (See "MANAGEMENT
- -- Stock Option Plan.")
The Company is working with Roush Racing to develop the go-karts for the
NASCAR SpeedParks. Roush Racing fields three NASCAR Winston Cup teams, two
NASCAR Busch Grand National teams, and two NASCAR Craftsman teams. Roush is
working with the Company to develop replicas of NASCAR Winston Cup Stock Cars
and Craftsman trucks.
21
<PAGE>
OTHER ATTRACTIONS. The SportPark will also include a sports pavilion
with a multipurpose sports arena, food courts, meeting rooms, specialty retail
areas, special events space and leased tenant facilities for food and beverage
service, retail merchandise, video game and sports skill redemption games, and
other possible ancillary businesses.
AGREEMENT WITH ORACLE ONE PARTNERS, INC.
The Company has entered into a letter agreement with Oracle One
Partners, Inc. ("Oracle") whereby Oracle has been retained to assist the
Company in obtaining corporate sponsorship for certain areas of the Sports
Park including a license agreement from Major League Baseball for the Slugger
Stadium. The initial period of the agreement was for the three month period
ending September 30, 1994, and the agreement has been continued on a month-to-
month basis since then. The Company is paying Oracle $4,000 a month and has
agreed to pay Oracle 15% of the gross of any sponsorship fees for sponsors
obtained through the efforts of Oracle. The Company paid Oracle $60,000 for
its efforts in obtaining the license agreement with Major League Baseball.
During April 1996, the Company issued options to a principal of Oracle to
purchase 10,000 shares of the Company's Common Stock.
AGREEMENT WITH MAJOR LEAGUE BASEBALL
In December 1994, the Company entered into an agreement with Major
League Baseball ("MLB") concerning a license for the use of MLB logos, marks
and mascots in the decor, advertising and promotions of the Company's Slugger
Stadium concept. The Company obtained a license for indoor and outdoor
baseball batting stadiums in the United States through December 31, 1997, and
in return the Company will pay a royalty of the gross revenues from the
batting cages with a minimum annual royalty for each stadium.
The Company's right to exclusively use MLB logos and other marks at its
baseball batting stadiums is dependent upon certain conditions set forth in
the agreement.
LIABILITY INSURANCE
The Company intends to purchase a comprehensive general liability
insurance policy to cover possible claims for injury and damages from
accidents and similar activities. The Company has not obtained premium
quotations for such insurance and there is no assurance that such coverage can
be obtained, or if obtained, that it can be obtained at reasonable rates nor
that it will be sufficient to cover or be available for future claims.
FRANCHISE BUSINESS
SUMMARY OF FRANCHISE STORE DEVELOPMENT
Set forth below is a summary of the development of the Company's
franchise stores during the past two years.
Year Ended December 31,
1995 1994
Sold during the year, net 8 11
Opened during the year 6 8
Closed during the year (10) (10)
In operation at year-end 50 54
Sold but not in operation at year-end 2 3
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<PAGE>
As of August 20, 1996, the Company had 44 stores in 16 states and 2
foreign countries in operation. The Company also had two franchises under
development pursuant to signed contracts. One of the franchises under
development is to be located in the flagship Houston superstore of the
Oshman's SuperSports USA Sporting Goods Chain. This store will be a test
center for the Company and Oshman's. In addition, the Company's Parent, Las
Vegas Discount Golf & Tennis, Inc., owns four stores. These stores are
located in Las Vegas, Nevada; Los Angeles, California (2); and Encino,
California. Vaso Boreta, the Company's Chairman of the Board, owns a store in
Las Vegas, Nevada.
During the past two years, the Company has been releasing smaller, older
franchise locations, primarily through mutual releases, and opening fewer,
much larger franchise locations to better compete in the changing marketplace.
This strategy has contributed to the increased royalties in 1996.
Following is the geographical location of stores open or under
development as of August 20, 1996, and where applicable, the year each store
was opened:
ALABAMA
Huntsville (1991)
Foley (1996)
ARIZONA
Goodyear (1995)
CALIFORNIA
Cerritos (1994)
Costa Mesa (1992)
Mission Viejo (1992)
Orange (1992)
Orange (1994)**
Palm Desert (1994)
San Mateo (1986)
San Ramon (1993)
COLORADO
Fort Collins (1990)
Greeley (1993)
Denver (1995)
FLORIDA
Naples (1990)
Plantation (1993)
GEORGIA
Marietta (1992)
IDAHO
Boise (1990)
ILLINOIS
Schaumburg*
MICHIGAN
Canton (1989)
Monroe (1996)
NEW JERSEY
Cherry Hill (1994)
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NEW YORK
Albany (1985)
White Plains (1986)
OREGON
Bend (1992)
SOUTH CAROLINA
Bluffton (1994)
Myrtle Beach (1996)
TENNESSEE
Antioch (1991)
TEXAS
Arlington (1993)
Dallas (1988)
Lewisville (1995)
Ft. Worth (1995)
Houston*
VIRGINIA
Manassas (1993)
Woodbridge (1995)
UTAH
Layton (1994)
Sunset (1994)
CANADA
Calgary, Alberta
(1984)
S. Calgary, Alberta
(1994)
Coquitlam, British
Columbia (1989)
Kelowna, British
Columbia (1991)
Medicine Hat,
Alberta (1993)
Surrey, British
Columbia (1990)
Vancouver, British
Columbia (1991)
Victoria, British
Columbia (1992)
MARIANA ISLANDS
Saipan (1991)
____________________
* Under development.
** St. Andrews Golf Center License.
DESCRIPTION OF FRANCHISE PROGRAM
The Company's franchising business was originally started in 1984,
involving the sale of franchises known as Las Vegas Discount Golf or Las
Vegas Discount Golf & Tennis stores (collectively, "Las Vegas Discount Golf &
Tennis"). The following discussion is a summary of the material rights and
obligations of the Company and a franchisee under the Company's standard
franchise agreement.
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<PAGE>
The Company licenses to the franchisee the right to use the "Las Vegas
Discount Golf & Tennis" trademark and other proprietary names and marks in a
single store generally within a designated area ranging from five to 10 miles
in radius. Franchisees may not relocate their store without the Company's
permission.
The Company, as franchisor, enforces a strict quality control program to
promote the quality, service and maintenance of the store's appearance and
image. Each franchisee is required to adhere to the Company's special stan-
dardized decor. Franchisees are required to devote their full time and energy
to actual management and operation of the store, except as otherwise permitted
by the Company.
Generally, the franchise agreements are for a period of fifteen years
and are renewable for varying periods of up to 15 years at the option of the
franchisee if certain conditions are met. Franchise agreements do not give
franchisees the right to unilaterally terminate. The Company has the right to
unilaterally terminate the franchise under certain conditions such as
bankruptcy or insolvency of the franchisee, or the franchisee's failure to
comply with the terms of the franchise agreement. Franchises are trans-
ferrable only with the prior approval of the Company.
The Company generally receives an initial non-refundable franchise fee
of $40,000 upon execution of the franchise agreement. In addition, the
Company receives a royalty which is normally 3% of the franchisee's gross
sales, payable weekly. The Company has the right to audit sales reports to
verify that such payments are correct. In 1994, the Company earned $1,270,900
in royalties and $303,100 in franchise fees. These amounts were $1,209,100
and $245,000, respectively, during 1995.
The estimated cost of establishing a new Las Vegas Discount Golf &
Tennis store is between $345,500 to $656,000. The components of the fran-
chisee's initial investment are estimated to be as follows:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
<S> <C> <C>
Initial Franchise Fee<FN1> $ 20,000 $ 40,000
Opening and Grand Opening 15,000 15,000
Business Premises 5,000 12,000
Tenant Improvements 20,000 60,000
Fixtures and Equipment 70,000 100,000
Deposits 500 3,000
Insurance 3,000 12,000
Organizational Expenses 1,000 4,000
Opening Inventory 150,000 300,000
Signage 5,000 20,000
Additional Funds 1,000 5,000
Labor and Payroll Taxes 5,000 10,000
Working Capital 50,000 75,000
Total $345,500 $656,000
__________________
<FN>
<FN1>
The initial fee is $40,000 for the first unit and $20,000 for each additional
unit.
</FN>
</TABLE>
25
<PAGE>
Franchisees are not obligated to purchase inventories from the Company
or its designated suppliers. However, all merchandise suppliers and vendors
to a franchise must be approved by the Company. In addition, if a franchisee
plans to purchase any inventories or services from sources other than the
Company or previously approved sources, the franchisee is required to give the
Company sufficient advance notice. The proposed suppliers' merchandise must
conform to the standards and specifications for clothing, equipment, and
accessories prescribed by the Company.
Although franchisees are not required to purchase inventory from the
Company, the Company's Parent corporation, Las Vegas Discount Golf & Tennis,
Inc., is the only source available for certain private label merchandise
marketed by the Parent company. The Parent company offers payment terms
similar to those prevalent in the industry for purchases made directly from
it.
COMPANY SERVICES FOR FRANCHISEES
The Company attempts to provide a good support program for its
franchisees. As of August 20, 1996, the Company employed three field
representatives and support personnel for franchise operations. Important
programs include the following:
FORMAL FRANCHISE TRAINING. Each franchisee receives two weeks extensive
training at the Company's headquarters in Las Vegas, Nevada, in nearly all
facets of the sports retailing business including product knowledge,
merchandising techniques, cost and inventory control, computerized information
systems and management skills. Classes are conducted by the Company's
management staff of skilled and experienced personnel. Franchisees and their
staff are invited to attend additional training classes at no extra cost on an
as-needed basis.
IN-FIELD OPERATIONAL SUPPORT. On a regular basis, at least several
times a year, all domestic franchisees receive regular visits and
consultations by Company staff personnel. The objective is to provide across-
the-board assistance to improve the overall business and profits of the
franchise stores.
PRODUCT INVENTORY. Pursuant to an August 1994 agreement with the
Company, the Company's Parent maintains an inventory consisting primarily of
the Company's private label golf and tennis merchandise in a 15,500 square
foot multi-story warehouse at its headquarters. Distribution systems are in
place to provide for 24-hour turnaround of most product requests by
franchisees. This inventory back-up and product capability provides valuable
merchandising support to franchises and a valuable service to their customers.
EXCLUSIVE PRODUCT LINE. A diversified line of proprietary products
manufactured to the Company's specifications by leading manufacturers in the
world are made available to franchisees. These products are value priced and
merchandised under the trade marks "St. Andrews", "Birdie Golf" and "Royal
Scot". Product introductions in recent years include: high tech men's
graphite perimeter-weighted irons and metalwoods; two-tone colored graphite
shafts on matching irons and woods; extra length oversized boron-graphite
shafts and compression molded graphite head drivers; and colored graphite
shafted ladies clubs.
26
<PAGE>
PRO-LINE PRODUCTS. The Company's Parent has regularly assisted the
Company's franchisees to obtain a broad selection of "pro-line" merchandise at
attractive prices. Merchandise is regularly obtained from such names as
Taylor Made, Callaway, Titleist, Spalding, McGregor, Wilson, Hogan, Ping,
Cobra, Foot Joy, Etonic, Dunlop, Nike, Yamaha, Prince, and Head. Building
upon long-standing relations and continuing support of its franchises, the
Company's Parent has agreements with many pro-line suppliers to provide to the
Company's franchisees expanded product lines, attractive prices, and
additional services for clubs, balls, shoes, apparel, accessories and tennis
items.
CATALOG AND ADVERTISING PROGRAMS. Historically, the Company's Parent
prepared and distributed an extensive four-color product catalog in the Spring
and Fall which was mailed to a select list of past customers in the trade area
serviced by its franchisees. To reduce costs, the catalog was replaced in
1993 by a four-color mailer which is distributed by individual franchise
stores. The Company continues to work with individual franchisees on mailers
and advertising. Utilizing state-of-the-art computer graphics and reduced
size, the Company is able to provide high image quality and low cost
promotional material. These are prepared by the Company's Graphic
Arts/Advertising Department, where graphic services are available throughout
the year to all franchisees.
TARGET FRANCHISE MARKETING PROGRAM. Company personnel work closely with
real estate and demographic professionals to identify optimum locations for
potential franchisees. Such locations are pre-selected and made available to
prospective franchisees and/or Company personnel will prepare a special study
of a geographical area for a prospective franchisee. Occasionally, the
Company selects attractive sites for itself and then searches for a franchisee
to develop the site.
ACTIVE FRANCHISE PROMOTIONS. A nine-minute professionally prepared
video tape describes the Company franchise story to potential franchisees.
This tape and other Company video productions have been shown on various cable
networks including CNBC and ESPN. The Company regularly advertises in "Golf
Digest", "Golf Magazine", "Inc.", "Entrepreneur" and other sport and
investment trade publications, and in various newspapers including "The Wall
Street Journal" and "USA Today". The Company and its franchisees have been
featured in local and national newspapers. The Company is active in promotion
at various industry trade shows.
SPECIAL FEATURES. In keeping with its commitment to provide a quality
franchise product, the Company has introduced to its franchise network a
number of innovations. These include a proprietary computer-based management
information system owned by the Company which provides complete inventory and
operational control, top-of-the-line modular standardized fixtures, and in
1991, a golf club repair center designed to build traffic and service
customers. The golf club repair center is a 12-foot by 12-foot free standing
fixture which is sold to the franchisees as part of the fixture package.
INTERNET. On March 1, 1996, the Company and its Parent established a
home page on the World Wide Web which allows people to view information on
certain of the Company's products on the computer and place orders directly
from their computers. The web site address is http://www.lvgolf.com.
The Company's home page/web site is also an information center to let
people know about the Company and Saint Andrews. This site includes
historical information about the Company, latest news releases and financial
27
<PAGE>
reports. It also provides information about the franchise opportunities and a
list of current franchise locations.
LAS VEGAS DISCOUNT GOLF & TENNIS CREDIT CARD
During March 1996, the Company and its Parent launched a program to
offer Las Vegas Discount Golf & Tennis branded Visa credit cards. The Company
believes that this will be a vehicle to create customer loyalty by giving the
customer an incentive to return to the Company's franchisees stores each time
they plan to purchase a golf or tennis related product. The Company selected
Maryland Bank of North America (MBNA) to service the credit cards and
coordinate the marketing of the credit cards.
The launch of the credit card project included an initial direct mailing
to over 200,000 prescreened preferred customers of the franchisees and
corporate stores. This mailing was then followed up by telemarketing
conducted by MBNA. All advertising done by the corporate or franchise stores
that is generated by the Company's advertising department will include
marketing of the credit card.
SAINT ANDREWS LOGO MERCHANDISE PROGRAM
During 1993 the Company worked with a retail consulting firm to develop
a comprehensive marketing program to exploit the Company's foundation of a
multi-store sports retailer and its trademark based proprietary position with
the Saint Andrews logos. This design is already included on business cards,
corporate stationery and various miscellaneous items. Preliminary design work
has been completed for over 150 separate items featuring the new logo.
Emphasis has been on golf hard goods and a complete line of sports soft goods
as well as items not directly tied to sports such as colognes, perfumes, ties,
etc. Plans for an initial marketing roll-out program have been completed;
however, the timing has not been set. These design and packaging features
have not been included in Company products to date because additional capital
is required to manufacture prototypes, finalize the products and purchase
initial inventory. The Company only has limited capital available for this
program and at the current time Management's first priority has been to open
the All-American SportPark.
The Company's Parent has marketed a limited line of St. Andrews
products, mostly golf clubs, accessories and golf balls, on an exclusive basis
through franchise stores. The Company plans to market the proposed new line
of Saint Andrews products not only to franchise outlets but also to other
wholesale and retail distribution channels and to provide a marketing support
program as is normal in the trade. There are no assurances of the degree of
success, if any, the Company will experience in this new business.
MARKETING
The Company relies on outside statistical sources of marketing
information and internal market research to develop its expansion programs.
According to the National Golf Foundation, the U.S. sports and
recreation industry represented approximately a $70 billion market in 1994, an
increase of 10% from 1993. Golf equipment sales were $5.25 billion, of which
an estimated $2.3 billion was for golf clubs.
28
<PAGE>
The number of golf participants and rounds of golf played in the U.S.
have held steady the last several years at about 25 million and 490 million,
respectively. In 1995, the mean annual household income for all golfers was
greater than $46,920, above the national average.
According to a 1989 study on franchises authored by Arthur Andersen &
Co. and published in "Success" magazine, the Company's franchise program was
ranked fifth based on information provided by 252 franchises that responded to
the 2,100 questionnaire mailing. According to the International Franchise
Association, all retail sales at franchise outlets was $678 billion in 1989
and increased to $803 billion in 1992. In 1992 franchise sales represented
approximately 40.9% of all retail sales.
In 1995, the Company had franchise royalty income of $1,209,100 and
franchise fee income of $245,000. Management estimates that golf related
items represent more than 90% of franchise system retail sales with the
balance being primarily tennis related. The Company's marketing focus
continues to emphasize sale of golf related merchandise through its existing
franchise program. See "-- Franchising" above.
COMPETITION
SPORTPARK SEGMENT. Any SportParks built by the Company will compete
with any other family/sports attractions in the city where the SportPark is
located. Such attractions could include amusement parks, driving ranges,
water parks, and any other type of family or sports entertainment. The
Company will be relying on the combination of active user participation in the
sports activities and competitive pricing to encourage visitors and patrons.
There can be no assurance that the Company will be able to operate the park on
a profitable basis.
FRANCHISE BUSINESS SEGMENT. The Company's franchise sales operations
compete with the operations of other companies which offer franchises for
similar types of retail stores. The Company has identified five other
companies which offer franchises for discount golf and tennis stores, at least
two of which may be larger than the Company. Nevada Bob's Discount Golf &
Tennis and Pro Golf Discount are the Company's largest competitors.
The Company and its franchisees also compete with general sporting goods
stores, especially discount stores such as Herman's, other discount golf and
tennis stores such as the Nevada Bob's and Pro Golf Discount franchise stores
described above, discount department stores such as K-Mart, catalog stores and
other retailers. The Company believes that the greatest competition to its
franchised retail stores comes from the other discount golf and tennis stores,
the number of which has grown substantially in recent years.
The Company and its franchisees also compete with entities engaged in
the sale of similar merchandise by telephone and mail order sales. The
largest telephone and mail order competitor which advertises through catalogs
is Austad's, which is much larger and has greater financial resources than
does the Company. Major competitors that advertise through national magazine
advertisements are Nevada Bob's Discount Golf & Tennis and Edwin Watts.
Principal competitive factors faced by the Company in connection with
the sale of franchises include territory availability, availability of
exclusive products, training and support, assistance in site selection and the
initial investment required of a franchisee. The Company believes that the
support, training and other assistance offered to potential franchisees is
29
<PAGE>
more responsive to the needs of franchisees than that provided by its
competitors. In addition, the Company believes that the customized,
integrated point of sale and management computer system which it has developed
for its franchisees offers certain competitive advantages.
Principal competitive factors faced by the Company and its franchisees
in the sale of merchandise generally are price, quality, personal service,
merchandise, convenience, and customer loyalty. The Company believes that the
prices of the merchandise offered by franchisees is generally below those
offered by non-discount retail outlets. The Company's franchisees offer top
name-brand and quality private label merchandise, and the Company requires
that its franchisees obtain the Company's approval on all merchandise to be
sold to ensure the quality of the merchandise offered. The Company believes
that its Parent, Las Vegas Discount Golf & Tennis, Inc., will be able to
continue to assist the Company's franchisees to obtain regular and close-out
merchandise at attractive prices from name-brand manufacturers, but there is
no assurance how long this will continue.
TRADE NAMES AND TRADEMARKS
The trademarks "Las Vegas Discount Golf & Tennis" and "St. Andrews" on
golf clubs and golf bags, are registered on the principal register of the
United States Patent and Trademark Office as well as in Canada and in the
State of Nevada. These trademarks have been licensed to the Company by its
Parent corporation, Las Vegas Discount Golf & Tennis, Inc. Management of the
Company also believes that the Company and/or its Parent have developed
proprietary rights to the names "Birdie Golf" and "Royal Scot", as well as
variations of its registered trademarks. These names and marks are licensed
to franchisees under franchise agreement provisions which strictly regulate
their use.
The Company's Parent has also filed "intent to use" trademark
applications with regard to the "St. Andrews" name and related designs with
respect to mens' and womens' clothing and certain golf equipment and
accessories. The Company has also recently filed an "intent to use" trademark
application for "All-American Family Sports Park" and a related design and
Slugger Stadium, and it intends to file a similar application for the "Saint
Andrews" name.
The Company intends to maintain the integrity of the trademarks, other
proprietary names and marks against unauthorized use and to protect the
franchisees' use against claims of infringement and unfair competition where
circumstances warrant. Failure to defend and protect such trade name and
other proprietary names and marks could adversely affect the Company's sales
of franchises under such trade names and other proprietary names and marks.
The Company's Operations Manual provides operation, management and
marketing guidelines for its franchise stores. The Operations Manual is the
sole property of the Company but is available for use by a franchisee of the
Company so long as the franchisee operates the store pursuant to the terms of
the franchise agreement.
GOVERNMENTAL REGULATION
The Company's franchising activities are subject to Federal Trade
Commission ("FTC") regulation and state laws which regulate the offer and sale
of franchises. The Company is also subject to a number of state laws which
regulate substantive aspects of the franchisor-franchisee relationship.
30
<PAGE>
The FTC's Trade Regulation Rule on Franchising ("FTC Rule") requires the
Company to furnish to all prospective franchisees a franchise offering
circular containing information prescribed by the FTC Rule. In addition, at
least 15 states presently regulate the offer and sale of franchises in such
states by laws requiring both disclosure to prospective franchisees and, in
most cases, registration of the franchise offering with state authorities.
The Company is currently registered to sell franchises in all 15 states where
the Company intends to sell franchises.
State laws which regulate the franchisor-franchisee relationship
presently exist in at least 17 states and the District of Columbia. Such laws
regulate the franchise relationship by, for example, requiring the franchisor
to deal with its franchisees in good faith, prohibiting interference with the
right of free association among franchisees, limiting the imposition of
standards of performance on a franchisee, and regulating discrimination among
franchisees in charges, royalties and fees. Such laws have not precluded the
Company from seeking franchisees in a given area. Such laws also restrict a
franchisor in the termination of a franchise agreement by, for example,
requiring "good cause" to exist as a basis for the termination, advance notice
to the franchisee of the termination, an opportunity to cure and repurchase of
inventory or other compensation.
The Company is not aware of any pending franchise legislation which in
its view is likely to affect significantly the operations of the Company. The
Company believes that its operations comply substantially with the FTC Rule
and state franchise laws.
At present, none of the foreign countries in which the Company has
granted franchises directly regulate franchising activities except for the
Province of Alberta in Canada, which has franchise requirements similar to
those of many states in the U.S.
EMPLOYEES
As of August 20, 1996, the Company employed a total of 24 persons on a
full-time basis. Many of these employees also work for the Company's Parent
and the payroll costs for these persons are shared. None of the Company's
employees are represented by a union, and the Company believes that its
employee relations are good.
FOREIGN OPERATIONS
The Company presently has franchise stores located in Canada and the
Mariana Islands, and receives franchise fees and royalties from these stores.
During the years ended December 31, 1995, 1994 and 1993, the Company received
approximately $137,000, $148,000 and $109,000, respectively, in fees and
royalty revenue from foreign franchisees.
OFFICE FACILITIES
The Company utilizes approximately 3,000 square feet of office space at
5325 South Valley View Boulevard, Suite 10, Las Vegas, Nevada. The space is
provided by the Company's Parent corporation and the Company pays
approximately 33% of the total lease payments which are approximately $13,000
per month.
On July 12, 1996, the Company entered into a lease for 65 acres of land
in Las Vegas, Nevada, on which the Company intends to build its first
31
<PAGE>
SportPark. The terms of the lease are described above under the heading "--
ALL AMERICAN SPORTPARK."
LEGAL PROCEEDINGS
Except for the lawsuit discussed in the following paragraphs, the
Company is not presently a party to any legal proceedings, except for routine
litigation that is incidental to the Company's business. As of August 20,
1996, the Company had pending three lawsuits it had filed against former
franchisees for failure to pay amounts due and other breaches of their
franchise agreements. In two of these lawsuits, the franchisees have filed
counterclaims against the Company requesting specified and unspecified
compensatory damages and other relief including attorneys' fees, interest and
exemplary damages. The Company believes that it is normal for franchisees to
assert counterclaims in such lawsuits as a defense tactic.
On February 27, 1996, the Company filed a Complaint in the District
Court, Clark County, Nevada, against Gordon Gaming Corporation ("Gordon"), the
company which purchased from Howard Hughes Corporation ("Hughes") the property
in Las Vegas where the Company was preparing to build its first All-American
SportPark. The lawsuit is based on a lease which the Company entered into
with Hughes on May 31, 1994, for approximately 33 acres located at the corner
of Sahara and Las Vegas Boulevard South. Pursuant to the lease, Hughes had
the right to terminate the lease if the property was sold provided that the
Company would be reimbursed for certain expenditures up to a maximum of $3.5
million.
The lease was terminated on June 21, 1995, and according to the terms of
the lease, Hughes was required to pay the Company its reimbursable amount no
later than 30 days after the termination. When Gordon purchased the property
from Hughes, it assumed Hughes' obligations relating to the termination of the
lease. Gordon has continued to refuse to make any payment to the Company,
even the amount which both parties agreed was reimbursable. The Complaint
seeks an unspecified amount of compensatory damages, punitive damages,
attorneys' fees and costs.
32
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of the Company are as follows:
NAME AGE POSITIONS AND OFFICES HELD
Vaso Boreta 64 Chairman of the Board
Ronald S. Boreta 34 President, Chief Executive Officer, Treasurer,
Secretary and Director
Robert R. Rosburg 70 Director
William Kilmer 57 Director
Hideki Yamagata 50 Director
Charles L. Hohl 46 Executive Vice President, Franchise Systems
John A. Hoover, Jr. 43 General Manager of All-American SportParks
Kevin B. Donovan 34 Vice President of New Business Development
Thomas K. Rojas 35 Vice President of Franchise Sales and Marketing
Except for the fact that Vaso Boreta and Ronald Boreta are father and son,
respectively, there is no family relationship between any Director or Officer
of the Company. The Company presently has no audit, compensation or
nominating committee, but has agreed to establish an audit committee and a
compensation committee.
All Directors hold office until the next Annual Meeting of Shareholders.
The Company has agreed with RAF Financial Corporation, the
Representative of the Underwriters of the Company's initial public offering,
that the Company will permit a representative of RAF Financial Corporation to
be present at all meetings of the Board of Directors of the Company for a
period of three years from December 13, 1994. However, such representative
will not have any voting rights.
Officers of the Company are elected annually by, and serve at the
discretion of, the Board of Directors.
The following sets forth biographical information as to the business
experience of each officer and director of the Company for at least the past
five years.
RONALD S. BORETA has served as President of the Company since 1992,
Chief Executive Officer since August 1994, and a Director since its inception
in 1984. He also served as an officer and director of the Company's Parent,
Las Vegas Discount Golf & Tennis, Inc., from 1988 until July 1994, and he
continues to serve as a director. He has been employed by the Company since
its inception in March 1984, with the exception of a 6-month period in 1985
when he was employed by a franchisee of the Company located in San Francisco,
California. Prior to his employment by the Company, Mr. Boreta was an
33
<PAGE>
assistant golf professional at San Jose Municipal Golf Course in San Jose,
California, and had worked for two years in the areas of sales and warehousing
activities with a golf discount store in South San Francisco, California. Mr.
Boreta devotes 100% of his time to the business of the Company.
VASO BORETA has served as Chairman of the Board of Directors since
August 1994, and has been an Officer and Director of the Company since its
formation in 1984. He has also been an officer and director of the Company's
Parent, Las Vegas Discount Golf & Tennis, Inc., since 1988. In 1974, Mr.
Boreta first opened a specialty business named "Las Vegas Discount Golf &
Tennis," which retailed golf and tennis equipment and accessories. He was one
of the first retailers to offer golf merchandise at a discount. He also
developed a major mail order catalog sales program from his original store.
Mr. Boreta continues to operate his original store, which has been moved to a
new location adjacent to the Hard Rock Cafe in Las Vegas. Mr. Boreta devotes
approximately 10% of his time to the business of the Company, and the balance
to the Company's Parent and to operating his store.
ROBERT R. ROSBURG has served as a Director of the Company since August
1994, and has been a director of the Company's Parent, Las Vegas Discount Golf
& Tennis, Inc., since November 1989. Mr. Rosburg has been a professional
golfer since 1953. From 1953 to 1974 he was active on the Professional Golf
Association tours, and since 1974 he has played professionally on a limited
basis. Since 1975 he has been a sportscaster on ABC Sports golf tournament
telecasts. Since 1985 he has also been the Director of Golf for Rams Hill
Country Club in Borrego Springs, California. Mr. Rosburg received a
Bachelor's Degree in Humanities from Stanford University in 1948.
WILLIAM KILMER has served as a Director of the Company since August
1994, and has been a director of the Company's Parent, Las Vegas Discount Golf
& Tennis, Inc., since July 1990. Mr. Kilmer is a retired professional
football player, having played from 1961 to 1978 for the San Francisco Forty-
Niners, the New Orleans Saints and the Washington Redskins. Since 1978, he
has toured as a public speaker and also has served as a television analyst.
Mr. Kilmer received a Bachelor's Degree in Physical Education from the
University of California at Los Angeles.
HIDEKI YAMAGATA has served as a Director of the Company since July 1996.
Mr. Yamagata graduated from Yokahama National University in Japan in March
1969. In April 1969, he joined SANYO Electric Co. Ltd. in Osaka, Japan, and
he has been employed by SANYO Electric Co. and affiliated companies since
1969. His most recent positions include: President of Three Oceans, Inc. (a
wholly owned subsidiary of SANYO Electric Co., Ltd.) since September 1995;
Executive Vice President of SANYO North America Corporation since February
1996; Senior Vice President of the Tax and Legal Department of SANYO North
America Corporation from August 1993 until February 1996; Senior Vice
President of Tax Department of SANYO North America Corporation from August
1992 until August 1993.
CHARLES L. HOHL has served as Executive Vice President - Franchise
Systems since August 1994. Prior to joining the Company, Mr. Hohl was Western
United States Regional Franchise Development and Senior Operating Director for
Meineke Discount Muffler, Inc. from March 1993 to August 1994. From May 1991
to March 1993, he was self-employed and worked on a personal real estate
development project. From 1985 to 1991, Mr. Hohl was President of Pay N Play
Racquetball of America, Inc., El Toro, California, which was engaged in
franchising racquetball centers. He received a Bachelors Degree in Health and
Recreation from Boston University in 1972. Mr. Hohl devotes his full time to
the business of the Company.
34
<PAGE>
JOHN A. HOOVER, JR. has served as General Manager of All-American
SportParks since April 1995. From June 1993 until April 1995, he served as
Director of Operations of the MGM Grand Adventure Theme Park, a $120 million
theme park associated with the MGM Grand Hotel Resort in Las Vegas. From
January 1990 until June 1993, he served as operations manager for the Fiesta
Texas Theme Park in San Antonio, Texas, and from October 1986 until December
1990, he served as general manager for the Malibu Grand Prix/Castle Golf &
Games in San Antonio, Texas.
KEVIN B. DONOVAN has served as Vice President of New Business
Development since April 1994. Prior to joining the Company, from March 1992
to March 1994, he was President and Creative Director of Donovan Design
Agency, Dallas, Texas, which is engaged in designing corporate logos and
graphics, and providing marketing and package designs. From June 1989 to
March 1992, he was President, Chief Executive Officer and Creative Director
for Donovan & Houston Design For Retail, Dallas, Texas, which was engaged in
providing design services to retail oriented companies. From March 1986 to
June 1989, Mr. Donovan was Art Director and Creative Director for John Ryan &
Co. Retail Marketing Agency in Minneapolis, Minnesota, which was engaged in
providing design services to retail and banking companies. Mr. Donovan
received a B.A. Degree in Commercial Arts from St. Paul Technical College, St.
Paul, Minnesota, in 1983. He devotes his full time to the business of the
Company.
THOMAS K. ROJAS has served as Vice President of Franchise Sales and
Marketing since June 1994, and as the Company's Director of Marketing from
August 1992 to June 1994. Prior to joining the Company, he was employed by
Taylor Made Golf Company, a golf equipment manufacturer located in Carlsbad,
California, as Promotions Manager from January 1990 to June 1991, and as
Director of Marketing from June 1991 to November 1991. From November 1991 to
June 1992, Mr. Rojas was traveling and playing in golf tournaments. From
January 1985 to December 1989, he was a Golf Professional with Spanish Trail
Country Club in Las Vegas, Nevada. He has been a member of the Professional
Golfers Association of America ("PGA") since 1987. Mr. Rojas received a B.S.
Degree in Business Administration from the University of Southern California
in 1984.
EXECUTIVE COMPENSATION
The following table sets forth information regarding the executive
compensation for the Company's President and each other executive officer who
received compensation in excess of $100,000 for the years ended December 30,
1995, 1994 and 1993 from the Company:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
NAME AND PRINCIPAL OTHER ANNUAL
POSITION YEAR SALARY BONUS COMPENSATION
<S> <C> <C> <C> <C>
Ronald S. Boreta, 1995 $100,000 -0- $19,071<FN2>
President and CEO<FN1> 1994 $100,000 -0- $14,190<FN2>
1993 $ 80,000 -0- $ 8,959<FN2>
Charles Hohl, Executive 1995 $100,000 -0- $ 2,346<FN3>
Vice President
35
<PAGE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS PAYOUTS ALL
RESTRICTED OPTIONS/ OTHER
NAME AND PRINCIPAL STOCK SARs LTIP COMPEN-
POSITION YEAR AWARDS (NUMBER) PAYOUTS SATION
<S> <C> <C> <C> <C> <C>
Ronald S. Boreta, 1995 -- -- -- -0-
President and CEO<FN1> 1994 -- -- -- -0-
1993 -- -- -- -0-
Charles Hohl, Executive 1995 -- -- -- -0-
Vice President
__________________
<FN>
<FN1>
Ronald S. Boreta served as Vice President, Secretary and Treasurer of the
Company and Las Vegas Discount Golf & Tennis, Inc. until June 1992 when he
became President of the Company and Las Vegas Discount Golf & Tennis, Inc.
Until July 31, 1994, the Company paid one-half of Ronald S. Boreta's salary
and Las Vegas Discount Golf & Tennis, Inc. paid the other one-half. Effective
August 1, 1994, the Company pays all of Mr. Boreta's salary.
<FN2>
Represents amounts paid for country club memberships for Ronald S. Boreta and
contributions to the Company's 401(k) plan on his behalf.
<FN3>
Represents contributions to the Company's 401(k) plan on behalf of Charles
Hohl.
</FN>
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Number of Percent of
Securities Total Options/
Underlying SARs Granted Exercise
Options/SARs to Employees or Base Expiration
Name Granted (#) in Fiscal Year Price ($/Sh) Date
Ronald S. Boreta None
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Securities Value of
Underlying Unexercised-
Shares Unexercised in-the-
Acquired Options/ Money Options/
On SARs at FY-End SARs at FY-End
Exercise Exercisable/ Exercisable/
Name (Number) Value Realized Unexercisable Unexercisable
Ronald S. Boreta -0- -0- 110,000 / 0 $ -0- / 0
37
<PAGE>
EMPLOYMENT AGREEMENTS
In February 1988, the Company entered into a seven year employment
agreement with Mr. Vaso Boreta pursuant to which he received a base salary of
$100,000 per year plus annual increases as determined by the Board of
Directors. This salary was paid one-half by the Company and one-half by Las
Vegas Discount Golf & Tennis, Inc. Mr. Boreta deferred his entire 1988 salary
and was paid only $50,000 of his 1989 salary. In February 1990, the Company's
Parent issued a promissory note to Mr. Boreta in the principal amount of
$131,000 in payment of his accrued salaries. This note was combined into a
new note from the Company's Parent on December 31, 1993, which note is due
April 30, 1996, and bears interest at 10% per annum. Mr. Vaso Boreta's
employment agreement with the Company was terminated as of July 31, 1994, and
he no longer receives any salary from the Company. The Company does not owe
Mr. Boreta any money for past salary.
Effective August 1, 1994, the Company entered into an employment
agreement with Ronald S. Boreta, the Company's President and Chief Executive
Officer, pursuant to which he receives a base salary of $100,000 per year plus
annual increases as determined by the Board of Directors. The employment
agreement terminates on December 31, 1996, but will be automatically extended
for additional one year periods unless 60 days' notice of the intention not to
extend is given by either party. In addition to his base salary, Ronald S.
Boreta also will receive a $1,000 bonus for each new franchise which is sold
and a royalty equal to 2% of all gross revenues directly related to the All-
American SportPark and Slugger Stadium concepts. However, such royalty is
only payable to the extent that the Company's annual consolidated income
before taxes after the payment of the royalty exceeds $1,000,000. Ronald S.
Boreta also receives the use of an automobile, for which the Company pays all
expenses, and full medical and dental coverage. The Company also pays all
dues and expenses for membership at two local country clubs at which Ronald S.
Boreta entertains business contacts for the Company. Ronald S. Boreta has
agreed that for a period of three years from the termination of his employment
agreement that he will not engage in a trade or business similar to that of
the Company. In the event of a change of more than 25% of the beneficial
ownership of the Company or its parent, the termination date is extended from
December 31, 1996 to December 31, 1998, and it may be extended up to an
additional five years under certain conditions.
Effective August 8, 1994, the Company entered into an employment
agreement with Charles L. Hohl, the Company's Executive Vice President,
Franchise Systems, pursuant to which he receives a base salary of $100,000 per
year plus annual increases as determined by the Board of Directors. The
employment agreement terminates on August 8, 1997, but will be automatically
extended for additional one year periods unless 60 days' notice of the
intention not to extend is given by either party. In addition to his base
salary, Mr. Hohl also will receive a commission of $4,000 for each new Las
Vegas Discount Golf & Tennis franchise sold during the term of his employment,
and $1,500 for each new St. Andrews Golf Center sold during the term of his
employment. He will also receive medical insurance for himself and his wife
and $10,000 to cover moving expenses. Mr. Hohl has agreed that for a period of
one year from the termination of his employment agreement that he will not
engage in a trade or business similar to that of the Company.
Effective April 1, 1994, the Company entered into an employment
agreement with Kevin B. Donovan, pursuant to which he receives a base salary
of $85,000 per year. The employment agreement terminates on March 31, 1996.
In addition to his base salary, Mr. Donovan will receive royalties or
38
<PAGE>
commissions of 3% of gross sales of new products designed by Mr. Donovan, as
well as T-shirts and other soft goods which he designs and which are sold at
the Company's All-American SportPark and Slugger Stadium, and $10,000 for each
All-American SportPark and Slugger Stadium which is opened. Mr. Donovan also
receives the use of an automobile provided by the Company and received $5,000
for moving expenses.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company do not receive any fees
for Board meetings they attend but are entitled to be reimbursed for
reasonable expenses incurred in attending such meetings.
STOCK OPTION PLAN
During July 1994, the Board of Directors adopted a Stock Option Plan
(the "Plan"). The Plan authorizes the issuance of options to purchase up to
300,000 shares of the Company's Common Stock.
The Plan allows the Board to grant stock options from time to time to
employees, officers, directors and consultants of the Company. The Board has
the power to determine at the time the option is granted whether the option
will be an Incentive Stock Option (an option which qualifies under Section 422
of the Internal Revenue Code of 1986) or an option which is not an Incentive
Stock Option. Vesting provisions are determined by the Board at the time
options are granted. The option price for any option will be no less than the
fair market value of the Common Stock on the date the option is granted.
Since all options granted under the Plan must have an exercise price no
less than the fair market value on the date of grant, the Company will not
record any expense upon the grant of options, regardless of whether or not
they are incentive stock options. Generally, there will be no federal income
tax consequences to the Company in connection with Incentive Stock Options
granted under the Plan. With regard to options that are not Incentive Stock
Options, the Company will ordinarily be entitled to deductions for income tax
purposes of the amount that option holders report as ordinary income upon the
exercise of such options, in the year such income is reported.
In August 1994, the Board of Directors granted stock options to the
following Officers and Directors of the Company, to purchase shares of the
Company's Common Stock at $5.00 per share. These options expire on August 8,
1999.
<TABLE>
<CAPTION>
Name Shares Subject to Option
<S> <C>
Vaso Boreta 110,000
Ronald Boreta 110,000
Charles Hohl 60,000<FN1>
Glenn Raynes 10,000
Robert R. Rosburg 5,000
William Kilmer 5,000
Total 300,000
__________________
<FN>
<FN1>
Mr. Hohl's options vest in increments of 20,000 each year beginning on
August 8, 1995.
39
<PAGE>
</FN>
</TABLE>
In April 1996, the Company's Board of Directors approved increases in
the number of shares of Common Stock which may be issued under the Plan from
300,000 to 700,000, subject to approval by the Company's shareholders within
one year. Also in April 1996, the Company's Board of Directors granted stock
options as indicated below. Except as noted, the options will be fully vested
upon shareholder approval of the Plan Amendment by April 16, 1997. If the
shareholders do not approve the Plan amendment by that date, the options will
expire.
<TABLE>
<CAPTION>
RELATIONSHIP SHARES SUBJECT EXERCISE
NAME TO THE COMPANY TO OPTION PRICE
<S> <C> <C> <C>
Joel Rubenstein Consultant 10,000 $5.00
Ronald S. Boreta Officer and Director 125,000 $4.75
Ronald S. Boreta Officer and Director 200,000<FN1> $4.75
Kevin B. Donovan Officer 10,000 $4.75
John Hoover Officer 10,000 $4.75
Robert Finley Employee 1,000 $4.75
Ted Abbruzzese Consultant 10,000 $4.75
Jeff Gordon Consultant 10,000<FN2> $4.75
Hal Price Consultant 1,000 $4.75
___________________
<FN>
<FN1>
This option will not vest until the Company has completed a transaction with a
major business or investor which makes its probable that the Company will be
able to pursue the plan of building and operating Sportsparks, and an
investment in the Company, or its first Sportspark, in excess of $3,000,000
will satisfy this requirement. Management expects that this option will vest
during September 1996 when SANYO is required to invest $2,000,000 under its
agreement with the Company.
<FN2>
This option will be immediately vested as to 2,500 shares upon shareholder
approval of the Plan amendment by April 16, 1997, and will vest as to an
additional 2,500 on April 24, 1997, April 24, 1998, and April 24, 1999.
</FN>
</TABLE>
401(K) PLAN
The Company's Parent maintains a 401(k) employee retirement and savings
program (the "401(k) Plan") which covers the Company's employees. Under the
401(k) Plan, an employee may contribute up to 15% of his or her gross annual
earnings, subject to a statutory maximum, for investment in one or more funds
identified under the plan. The Company's Parent makes matching contributions
equal to 25% of participants' contributions.
40
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of
the Company's no par value Common Stock owned beneficially, as of August 20,
1996, by any person, who is known to the Company to be the beneficial owner of
5% or more of such Common Stock, and, in addition, by each Director of the
Company, and Nominee for Director, and by all Directors, Nominees for Director
and Officers of the Company as a group. Information as to beneficial owner-
ship is based upon statements furnished to the Company by such persons.
<TABLE>
<CAPTION>
Amount and Percent of Class
Name and Address Nature of Bene- Before After
Of Beneficial Owner ficial Ownership Offering Offering
<S> <C> <C> <C>
Las Vegas Discount Golf &
Tennis, Inc.<FN1> 2,000,000 66.7% 54.8%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Vaso Boreta 110,000<FN2> 3.5% 2.9%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Ronald S. Boreta 110,000<FN2> 3.5% 2.9%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Robert R. Rosburg 5,000<FN2> 0.2% 0.1%
49-425 Avenida Club La Quinta
La Quinta, California 92253
William Kilmer 5,000<FN2> 0.2% 0.1%
1500 Sea Breeze Boulevard
Ft. Lauderdale, Florida 33316
Hideki Yamagata 750,000<FN3> 20.0% 16.7%
666 - 5th Avenue
New York, New York 10103
Three Oceans Inc. 750,000<FN4> 20.0% 16.7%
2001 Sanyo Avenue
San Diego, California 92173
All Directors and 1,030,000 25.6% 21.6%
Officers as a Group
(9 Persons)
___________________
<FN>
<FN1>
Las Vegas Discount Golf & Tennis, Inc. is a publicly-held corporation of which
Vaso Boreta is President, Director and a principal shareholder; Ronald S.
Boreta is a Director and a principal shareholder; and Robert R. Rosburg and
William Kilmer are Directors. In addition, John Boreta, a son of Vaso Boreta,
is a principal shareholder of Las Vegas Discount Golf & Tennis, Inc. The
41
<PAGE>
following sets forth the percentage ownership beneficially held by such
persons in Las Vegas Discount Golf & Tennis, Inc.:
Vaso Boreta 49.3%
Ronald S. Boreta 25.0%
Robert Rosburg 0.1%
William Kilmer 0.1%
John Boreta 12.2%
<FN2>
Represents shares underlying currently exercisable options at an exercise
price of $5.00 per share held by the named person. Does not include shares
held by Las Vegas Discount Golf & Tennis, Inc. of which such person is an
Officer, Director and/or principal shareholder.
<FN3>
Represents shares beneficially owned by Three Oceans, Inc., of which Mr.
Yamagata is President. These are the same shares listed under the name Three
Oceans, Inc.
<FN4>
Represents 500,000 shares of Common Stock issuable upon the conversion of
Series A Convertible Preferred Stock issued or to be issued to Three Oceans
Inc. and 250,000 shares underlying stock options held by Three Oceans, Inc.
(See "CERTAIN TRANSACTIONS.")
</FN>
</TABLE>
42
<PAGE>
CERTAIN TRANSACTIONS
Las Vegas Discount Golf & Tennis, Inc. ("LVDG"), a publicly-held
corporation, owns 66.7% of the Company's outstanding Common Stock. Vaso
Boreta, the Company's Chairman of the Board, is an Officer, Director and
principal shareholder of LVDG. Ronald S. Boreta, President and a Director of
the Company, is a Director and principal shareholder of LVDG. Robert S.
Rosburg and William Kilmer, Directors of the Company, are also Directors of
LVDG. In addition, John Boreta, the son of Vaso Boreta and the brother of
Ronald S. Boreta, is a principal shareholder of LVDG.
Until August 1, 1994, the Company and LVDG shared the expenses of
jointly-used facilities and administrative and accounting personnel on a 50-50
basis under a verbal agreement. Since August 1, 1994, the Company and LVDG
have allocated these costs on a pro rata basis based on which entity receives
the benefit of the particular expense. With respect to the lease for the
office and warehouse facilities, LVDG pays 67% of the monthly lease payments
and the Company pays 33%.
Effective August 1, 1994, LVDG also agreed to purchase, warehouse and
make available to the Company and its franchisees certain merchandise. In
exchange, the Company agreed to pay $350,000 from the proceeds of its December
1994 initial public offering to retire certain bank indebtedness described
below. The agreement will terminate on July 31, 1997.
Effective August 1, 1994, LVDG granted the Company a license to use all
of its trademarks, trade names and other commercial names and symbols for so
long as such trademarks, tradenames and other commercial names and symbols are
being used by the Company and its franchisees.
The facilities used by the Company are leased by LVDG from Vaso Boreta,
the Company's Chairman of the Board. LVDG leases approximately 15,500 square
feet of warehouse space and 6,000 square feet of office space from Mr. Boreta
at a base monthly rent of $13,000. This lease expires January 31, 2005. The
Board of Directors of LVDG believes that the terms of this lease are at least
as favorable as those which could be obtained from an unaffiliated entity.
The Company is contingently liable for leased space in Los Angeles,
California occupied by a retail store owned by the Parent under a non-
cancelable operating lease agreement that expires October 1998. The lease
provides for monthly base rental payments of $5,344 and is subject to increase
based on the consumer price index and taxes.
Effective October 1, 1990, a franchise agreement with Vaso Boreta, the
Company's Chairman of the Board, was mutually terminated, and a new agreement
was entered into with him pursuant to which he was permitted to operate a Las
Vegas Discount Golf & Tennis store in Las Vegas, Nevada, which is not a
franchise store. The agreement also provided that Mr. Boreta may purchase
certain merchandise for his store at the same cost as the Company, use the
facilities and personnel of the Company on a limited basis, and operate a
limited mail order business from his store. In exchange for these rights, Mr.
Boreta paid the Company a fee of $3,000 per month. This agreement with the
Company was terminated on July 31, 1994. Mr. Vaso Boreta now has a similar
agreement with Las Vegas Discount Golf & Tennis, Inc. As a result of this
arrangement, Mr. Vaso Boreta does not pay any royalties to the Company even
though he may receive a benefit from the Company's activities including any
advertising conducted by the Company.
43
<PAGE>
The Company and LVDG obtained $1,011,000 in loans from an unaffiliated
bank which Vaso Boreta and his wife personally guaranteed. The loans were
also collateralized by inventory and accounts receivable. This loan was
completely paid off during December 1994, and approximately $350,000 of the
proceeds from the Company's public offering was used to pay off the loan. The
loan proceeds were originally used for the purchase of property and equipment
and working capital.
Prior to becoming the Company's Vice President of New Business
Development in April 1994, Kevin B. Donovan was President and a major
shareholder of Donovan Design Agency, Inc., which performed certain design
services for the Company. During 1993, Donovan Design Agency billed the
Company $136,000 for such services of which $59,000 had been paid as of
December 31, 1993. During 1994, Donovan Design Agency billed the Company
$9,300 for additional services, and the Company paid $32,000 on its account.
As of December 31, 1995 and 1994, the Company owed Donovan Design Agency
$54,300. Kevin B. Donovan presently owns all of the outstanding stock of
Donovan Design Agency, however, this receivable has been assigned to an entity
with which Mr. Donovan has no affiliation.
In September 1994, Vaso Boreta, the Company's Chairman of the Board,
loaned the Company $120,000. This note was repaid in full during December
1994, and no interest was charged or paid.
As indicated above, the Company has extensive transactions with LVDG,
LVDG's other subsidiaries, and Voss Boreta's Las Vegas store. As of December
31, 1995, the Company had a $60,500 receivable from LVDG and its subsidiaries.
On July 29, 1996, Saint Andrews Golf Corporation (the "Company") sold
200,000 shares of its newly designated Series A Convertible Preferred Stock to
Three Oceans Inc. ("TOI"), an affiliate of SANYO North America Corporation,
for $2,000,000 in cash. The sale was made pursuant to an Investment Agreement
between the Company and TOI dated July 29, 1996 (the "Agreement"). An
additional 200,000 shares of Series A Convertible Preferred Stock were sold to
TOI for $2,000,000 on September 12, 1996 pursuant to the Agreement. The
Agreement provides that TOI will purchase an additional 100,000 shares of
Series A Convertible Preferred Stock for an additional $1,000,000 by October
27, 1996. The Company will use the proceeds of these sales for the SportPark
segment of its business. Costs of approximately $200,000 will be associated
with the issuance of this 500,000 shares of Series A Convertible Preferred
Stock.
Each share of the Series A Convertible Preferred Stock issued to TOI is
convertible into one share of the Company's Common Stock at any time. The
Series A Convertible Preferred Stock has a liquidation preference of $10 per
share and the holder is entitled to receive dividends equal to any declared on
the Company's Common Stock. Under certain circumstances, the Company may
redeem the Series A Convertible Preferred Stock at a redemption price of
$12.50 per share. Each share of Series A Convertible Preferred Stock is
entitled to one vote and will vote along with the holders of the Company's
Common Stock.
Pursuant to the term of the Agreement, TOI also received an option to
purchase up to 250,000 shares of the Company's Common Stock at $5.00 per share
at any time until July 29, 2001.
The Agreement provides for certain demand and piggyback registration
rights with respect to the shares of Common Stock issuable upon the conversion
of the Series A Convertible Preferred Stock and the exercise of the option.
44
<PAGE>
Pursuant to the Agreement, the Company expanded the number of Directors
of the Company from four to five, and elected Hideki Yamagata as an additional
Director of the Company. Mr. Yamagata is President of Three Oceans Inc.
In connection with the initial closing of the Agreement, the Company
granted TOI certain first refusal rights with respect to debt and/or equity
financing arrangements for SportParks developed by the Company and any
arrangements to obtain electrical and electronic equipment for such
SportParks. In addition, the Company granted TOI and its designees certain
signage rights at the Company's first two SportParks.
45
<PAGE>
CONFLICTS OF INTEREST
Of the Company's outstanding Common Stock, 66.7% is owned by Las Vegas
Discount Golf & Tennis, Inc. ("LVDG"). All four of the Company's directors
are also directors of LVDG and Vaso Boreta, the Company's Chairman of the
Board, is also Chairman of the Board and President of LVDG.
LVDG sells golf and tennis related merchandise to franchisees of the
Company and others, and owns and operates four "Las Vegas Discount Golf &
Tennis" stores - one in Las Vegas, Nevada, two in Los Angeles, California, and
one in Encino, California. These stores are not franchises of the Company and
do not pay royalties to the Company, even though they may benefit from the
Company's activities, including any national advertising which the Company may
do. In addition, LVDG holds the rights to certain trademarks and trade names
which have been licensed to the Company on a perpetual basis. LVDG and the
Company share office and warehouse facilities and certain administrative and
accounting personnel, and LVDG has agreed to maintain an inventory of
merchandise for sale to the Company's franchisees under an agreement which
expires July 31, 1997. (See "Certain Transactions" above.) The merchandise
which LVDG sells to the franchisees is generally the Company's private label
merchandise, but LVDG occasionally purchases close out merchandise from name
brand manufacturers which it also sells to franchisees. LVDG has agreed to
sell the merchandise to the Company's franchisees at competitive prices which
allow a reasonable profit to LVDG.
Vaso Boreta owns and operates a "Las Vegas Discount Golf & Tennis" store
in Las Vegas, Nevada, which is not a franchise of the Company, under an
agreement with LVDG. This store does not pay royalties to the Company, even
though the store may benefit from the Company's activities, including any
national advertising which the Company may conduct.
The Parent has in the past, and in the future is expected to continue,
to negotiate with the name brand manufacturers for the purchase of golf and
tennis merchandise by the Company's franchise system, the Parent's store and
Mr. Boreta's store. The combined buying power of the franchise system, the
Parent's store and Mr. Boreta's store enables the group to obtain better terms
than they might be able to obtain separately. As a result, the Parent, Mr.
Boreta and the Company receive a benefit from this arrangement. Generally,
the franchisees, the Parent and Mr. Boreta will buy merchandise from the name
brand manufacturers at the same price.
By virtue of the relationships and arrangements described above,
operation of the Company has and will in the future involve transactions
between the Company and related individuals and entities which result in
potential conflicts between the interests of the Company and those of such
persons or entities.
The Company and LVDG have agreed upon a means of resolving future
conflicts of interest between the two corporations which relate to corporate
opportunities by defining certain areas of interest for each corporation. Any
opportunities which come to the attention of officers or directors of either
corporation in the areas of interest set forth below must be disclosed
promptly to the appropriate corporation and made available to it. The board
of directors of such corporation may reject any such business opportunity if
it believes that it is in the best interest of the corporation to do so. In
such case, the opportunity will then be made available to the other
corporation. The Company and LVDG have agreed that the areas of interest will
continue indefinitely beyond the July 31, 1997, termination of their agreement
46
<PAGE>
until such time as the two companies may mutually agreed to amend the
provisions of the agreement.
AREAS OF INTEREST OF THE COMPANY
1. All potential franchisees and all potential future sites for Las
Vegas Discount Golf & Tennis stores or Saint Andrews Golf Centers.
2. All opportunities for All-American SportParks, Slugger Stadiums or
other sports oriented theme parks.
3. All opportunities related to the sale of Saint Andrews logo
merchandise, except that LVDG will be allowed to purchase such merchandise at
wholesale prices for resale in its two corporate stores.
AREA OF INTEREST OF LVDG
All future opportunities related to the purchase, sale and distribution
of name brand merchandise and private label merchandise which does not use the
St. Andrews or Saint Andrews names or logos. Opportunities related to the
purchase, sale and distribution of private label merchandise using the St.
Andrews or Saint Andrews names or logos will belong to the Company.
In an effort to minimize future conflicts of interest with the Company's
officers and directors, the Company's Board of Directors has established a
corporate opportunities doctrine. The Company's bylaws have been amended to
provide that all business opportunities within areas of interest determined
from time to time by the Board of Directors, as evidenced by resolutions
appearing in the Company's Minutes, which come to the attention of the
officers, directors and other members of management of the Company, shall be
disclosed promptly to the Company and made available to it. The Board of
Directors may reject any business opportunity presented to it and thereafter
any officer, director or other member of management may avail himself of such
opportunity. The areas of interest which have been delineated include any
opportunities which relate to (1) the Company's franchise business; (2) the
Company's proposed All-American SportPark; (3) the Company's proposed Slugger
Stadium; or (4) the Company's proposed Saint Andrews logo merchandise program.
The Company's Board of Directors has resolved that any transactions with
interested officers and directors will be negotiated, evaluated and approved
or rejected on behalf of the Company by a majority of the disinterested
members of the Board of Directors, if there are any disinterested Directors.
If there are no disinterested directors, the Board of Directors will select
someone who is disinterested and compensate such person to perform these
functions.
In addition, the Board of Directors has agreed that if any affiliated
party, including principal shareholders and members of the Board of Directors,
conducts or proposes to conduct any business with the Company, the Board of
Directors will take whatever steps it deems necessary under the circumstances
to insure that any such transactions are conducted on terms which are as
favorable to the Company as those which could be obtained from unaffiliated
parties.
Notwithstanding the Company's corporate opportunities doctrine, officers
and directors of the Company may be presented with situations or opportunities
which give rise to apparent conflicts of interest which cannot be resolved by
arm's-length negotiation but only through the exercise of their judgment
47
<PAGE>
consistent with their fiduciary duties under corporate law. Further, the
Company's shareholders will not be notified prior to any transactions
involving officers, directors or principal shareholders of the Company. Any
such transactions will, however, be disclosed in the Company's annual reports
and/or proxy materials.
48
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The authorized capital stock of the Company includes 10,000,000 shares
of $.001 par value Common Stock. All shares have equal voting rights and,
when issued, are fully paid and non-assessable. Voting rights are not
cumulative, and, therefore, the holders of more than 50% of the Common Stock
of the Company could, if they chose to do so, elect all the Directors.
Upon liquidation, dissolution or winding up of the Company, the assets
of the Company, after the payment of liabilities, will be distributed pro rata
to the holders of the Common Stock. The holders of the Common Stock do not
have preemptive rights to subscribe for any securities of the Company and have
no right to require the Company to redeem or purchase their shares. The
shares of Common Stock presently outstanding are, and the shares of Common
Stock to be sold pursuant to this offering will be, upon issuance, fully paid
and non-assessable.
Holders of Common Stock are entitled to share equally in dividends when,
as and if declared by the Board of Directors of the Company, out of funds
legally available therefor. The Company has not paid any cash dividends on
its Common Stock, and it is unlikely that any such dividends will be declared
in the foreseeable future.
CLASS A WARRANTS
The following discussion of certain terms and provisions of the Class A
Warrants is qualified in its entirety by reference to the Warrant Agreement
(as hereinafter defined) and also the detailed provisions of the form of
Warrant attached to the Warrant Agreement between the Company and Corporate
Stock Transfer, Inc. (the "Warrant Agent").
Two Class A Warrants entitle the holder to purchase, at a price of
$6.50, subject to adjustment, one share of Common Stock at any time until
December 13, 1996. The Company may redeem the Class A Warrants at $.10 per
Warrant upon 30 days' prior written notice in the event that the Common Stock
has traded above $9.75 for 20 consecutive trading days ending not more than
ten days prior to the mailing of the notice of redemption.
For purposes of determining the daily trading price of the Company's
Common Stock, if the Common Stock is listed on a national securities exchange,
is admitted to unlisted trading privileges on a national securities exchange,
or is on NASDAQ, then the last reported sale price of the Common Stock on such
exchange or NASDAQ each day shall be used. If the Common Stock is not so
listed on such exchange or system or admitted to unlisted trading privileges
then the average of the last reported bid prices reported by the National
Quotation Bureau, Inc. each day shall be used to determine such daily trading
price.
The Class A Warrants may only be redeemed if a current registration
statement is in effect. Any Warrantholder who does not exercise prior to the
redemption date, as set forth in the Company's notice of redemption, will
forfeit the right to purchase the shares of Common Stock underlying such
Warrants and, after the redemption date, any outstanding Warrants will become
void and be of no further force or effect. If the Company does not redeem the
Class A Warrants, such Warrants will expire, become void and be of no further
force or effect on conclusion of the exercise period. All of the Warrants of
a Class must be redeemed if any are to be redeemed of such Class.
49
<PAGE>
The Class A Warrants have been issued pursuant to a Warrant Agreement
between the Company and the Warrant Agent. The Company has authorized and
reserved for issuance the shares of Common Stock issuable upon exercise of the
Class A Warrants. When delivered, all shares of Common Stock issued upon
exercise of the Class A Warrants will be duly and validly authorized and
issued, fully paid and non-assessable, and no preemptive rights or rights of
first refusal will exist with respect thereto.
Class A Warrants may be exercised upon surrender of the Warrant
certificate on or prior to its expiration date (or earlier redemption date) at
the offices of Corporate Stock Transfer, Inc., the Warrant Agent, with the
form of "Election to Purchase" on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by payment of the full
exercise price (by certified or bank check payable to the order of the
Company) for the number of shares with respect to which such Warrant is being
exercised.
The exercise price of the Class A Warrants and the number of shares to
be obtained upon exercise of such Warrants are subject to adjustment in
certain circumstances including a stock split of, or stock dividend on, or a
subdivision, combination, or recapitalization of the Common Stock. In the
event of liquidation, dissolution or winding up of the Company, holders of the
Class A Warrants, unless exercised, will not be entitled to participate in the
assets of the Company. Holders of the Class A Warrants will have no voting,
preemptive, liquidation or other rights of a shareholder, and no dividends
will be declared on the Class A Warrants.
REPRESENTATIVE'S CLASS A WARRANTS
The following discussion of certain terms and provisions of the
Representative's Class A Warrants is qualified in its entirety by reference to
the Warrant Agreement (as hereinafter defined) and also the detailed
provisions of the form of Warrant attached to the Warrant Agreement between
the Company and Corporate Stock Transfer, Inc. (the "Warrant Agent").
Two Representative's Class A Warrants entitle the holder to purchase, at
a price of $7.80, subject to adjustment, one share of Common Stock at any time
until December 13, 1996. The Company may redeem the Representative's Class A
Warrants at $.10 per Warrant upon 30 days' prior written notice in the event
that the Common Stock has traded above $9.75 for 20 consecutive trading days
ending not more than ten days prior to the mailing of the notice of redemp-
tion.
For purposes of determining the daily trading price of the Company's
Common Stock, if the Common Stock is listed on a national securities exchange,
is admitted to unlisted trading privileges on a national securities exchange,
or is on NASDAQ, then the last reported sale price of the Common Stock on such
exchange or NASDAQ each day shall be used. If the Common Stock is not so
listed on such exchange or system or admitted to unlisted trading privileges
then the average of the last reported bid prices reported by the National
Quotation Bureau, Inc. each day shall be used to determine such daily trading
price.
The Representative's Class A Warrants may only be redeemed if a current
registration statement is in effect. Any Warrantholder who does not exercise
prior to the redemption date, as set forth in the Company's notice of
redemption, will forfeit the right to purchase the shares of Common Stock
underlying such Warrants and, after the redemption date, any outstanding
50
<PAGE>
Warrants will become void and be of no further force or effect. If the
Company does not redeem the Representative's Class A Warrants, such Warrants
will expire, become void and be of no further force or effect on conclusion of
the exercise period. All of the Warrants of a Class must be redeemed if any
are to be redeemed of such Class.
The Representative's Class A Warrants have been issued pursuant to a
Warrant Agreement between the Company and the Warrant Agent. The Company has
authorized and reserved for issuance the shares of Common Stock issuable upon
exercise of the Representative's Class A Warrants. When delivered, all shares
of Common Stock issued upon exercise of the Representative's Class A Warrants
will be duly and validly authorized and issued, fully paid and non-assessable,
and no preemptive rights or rights of first refusal will exist with respect
thereto.
Representative's Class A Warrants may be exercised upon surrender of the
Warrant certificate on or prior to its expiration date (or earlier redemption
date) at the offices of Corporate Stock Transfer, Inc., the Warrant Agent,
with the form of "Election to Purchase" on the reverse side of the Warrant
certificate completed and executed as indicated, accompanied by payment of the
full exercise price (by certified or bank check payable to the order of the
Company) for the number of shares with respect to which such Warrant is being
exercised.
The exercise price of the Representative's Class A Warrants and the
number of shares to be obtained upon exercise of such Warrants are subject to
adjustment in certain circumstances including a stock split of, or stock
dividend on, or a subdivision, combination, or recapitalization of the Common
Stock. In the event of liquidation, dissolution or winding up of the Company,
holders of the Representative's Class A Warrants, unless exercised, will not
be entitled to participate in the assets of the Company. Holders of the
Representative's Class A Warrants will have no voting, preemptive, liquidation
or other rights of a shareholder, and no dividends will be declared on the
Representative's Class A Warrants.
The Representative's Class A Warrants are generally non-transferable,
except that they may be transferred to officers of RAF Financial Corporation
and to other persons who immediately exercise such Warrants. In the event of
a transfer to a person who is not an officer of RAF Financial Corporation, the
Class A Warrants will expire if not exercised within three business days of
transfer.
REPRESENTATIVE'S WARRANTS
In connection with the Company's initial public offering, the Company
issued to the Representative of the Underwriter's Representative's Warrants to
purchase 100,000 shares of Common Stock. The Representative's Warrants are
exercisable at $5.40 per share through December 12, 1999. The
Representative's Warrants contain certain demand and piggyback registration
rights. The demand registration rights contained in the Representative's
Warrants are for a term of five years from December 13, 1994, and the
piggyback registration rights contained in the Representative's Warrants are
for a term of seven years after such date. The Representative's Warrants are
protected against dilution only in the event the Company makes a distribution
of securities to its shareholders. The Representative's Warrants may not be
transferred other than by will or pursuant to the laws of descent and
distribution, except that (i) the Representative's Warrants may be transferred
to a partner of an underwriter participating in the Offering which is a
51
<PAGE>
partnership; or to a stockholder, officer, or director of an underwriter
participating in the Offering which is a corporation; or to a beneficiary of a
trust which is a stockholder of an underwriter participating in the Offering
which is a corporation, and (ii) the Representative's Warrants may be
transferred if, immediately after such transfer, such Warrants are exercised;
provided, however, if such exercise does not occur immediately after such
transfer then the Warrants transferred under item (ii) above shall expire.
TRANSFER AND WARRANT AGENT
Corporate Stock Transfer, Inc., Denver, Colorado, serves as transfer and
warrant agent for the Company's Common Stock and Class A Warrants.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of Preferred Stock,
$.001 par value. The Preferred Stock may be issued in series from time to
time with such designation, rights, preferences and limitations as the Board
of Directors of the Company may determine by resolution. The rights,
preferences and limitations of separate series of Preferred Stock may differ
with respect to such matters as may be determined by the Board of Directors,
including, without limitation, the rate of dividends, method and nature of
payment of dividends, terms of redemption, amounts payable on liquidation,
sinking fund provisions (if any), conversion rights (if any), and voting
rights. The potential exists, therefore, that preferred stock might be issued
which would grant dividend preferences and liquidation preferences to
preferred shareholders over common shareholders. Unless the nature of a
particular transaction and applicable statutes require such approval, the
Board of Directors has the authority to issue these shares without shareholder
approval. The issuance of Preferred Stock may have the affect of delaying or
preventing a change in control of the Company without any further action by
shareholders.
In July 1996, the Board of Directors designated 500,000 shares of its
Preferred Stock as Series A Convertible Preferred Stock. Each share of the
Series A Convertible Preferred Stock is convertible into one share of the
Company's Common Stock at any time. The Series A Convertible Preferred Stock
has a liquidation preference of $10 per share and the holder is entitled to
receive dividends equal to any declared on the Company's Common Stock. Under
certain circumstances, the Company may redeem the Series A Convertible
Preferred Stock at a redemption price of $12.50 per share. Each share of
Series A Convertible Preferred Stock is entitled to one vote and will vote
along with the holders of the Company's Common Stock. As of July 29, 1996,
200,000 shares of Series A Convertible Preferred Stock has been issued. The
remaining 300,000 shares are expected to be issued by October 27, 1996.
SHARES ELIGIBLE FOR FUTURE SALE
There are presently 2,000,000 shares of Common Stock outstanding which
are "restricted securities" as defined by Rule 144. In general, Rule 144
provides that a person (or persons whose shares are aggregated) who has
satisfied a two-year holding period may, under certain circumstances, sell
within any three-month period a number of securities which does not exceed the
greater of 1% of the then outstanding Common Stock or the average weekly
trading volume of the class during the four calendar weeks prior to such sale.
Rule 144 also permits, under certain circumstances, the sale of securities,
without any limitation, by a person who is not an affiliate of the Company and
who has satisfied a three-year holding period.
53
<PAGE>
The Representative of the Underwriters in the Company's initial public
offering obtained the agreement of Las Vegas Discount Golf & Tennis, Inc. not
sell, publicly transfer or assign the 2,000,000 shares of Common Stock until
December 12, 1997, without the prior written consent of the Representative.
REPORTS TO SHAREHOLDERS
The Company intends to furnish annual reports to shareholders which will
include audited financial statements reported on by its independent auditors.
In addition, the Company may issue unaudited quarterly or other interim
reports to shareholders as it deems appropriate.
55
<PAGE>
SELLING SECURITY HOLDERS
Included in the securities being offered by this Prospectus are 100,000
Representative's Class A Warrants, 100,000 Representative's Warrants and
150,000 shares of Common Stock issuable upon the exercise of such Warrants, as
shown in the following table:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
REPRESENTA- REPRESEN-
NUMBER OF SHARES TIVE'S CLASS TATIVE'S
OF COMMON STOCK A WARRANTS WARRANTS
NAME OF SELLING BENEFICIALLY OWNED BEING BEING
SHAREHOLDER RECORD OTHER OFFERED OFFERED
<S> <C> <C> <C> <C>
RAF Financial -0- 75,000<FN1> 50,000 50,000
Corporation
Robert L. Long -0- 75,000<FN1> 50,000 50,000
__________________
<FN>
<FN1>
Represents 25,000 shares underlying Representative's Class A Warrants and
50,000 shares underlying Representative's Warrants.
</FN>
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK
NUMBER OF TO BE BENEFICIALLY OWNED
SHARES OF ON COMPLETION OF THE OFFERING
NAME OF SELLING COMMON STOCK PERCENT
SHAREHOLDER OFFERED RECORD OTHER OF CLASS
<S> <C>
RAF Financial 75,000 -0- -0- -0-
Corporation
Robert L. Long 75,000 -0- -0- -0-
__________________
<FN>
<FN1>
Represents 25,000 shares underlying Representative's Class A Warrants and
50,000 shares underlying Representative's Warrants.
</FN>
</TABLE>
55
<PAGE>
PLAN OF DISTRIBUTION
EXERCISE OF CLASS A WARRANTS AND REPRESENTATIVE'S CLASS A WARRANTS
The shares of the Company's Common Stock which may be purchased upon the
exercise of the outstanding Class A Warrants and Representative's Class A
Warrants are being offered by the Company on a "best efforts" basis. No
commissions or fees will be paid to anyone for the solicitation of the
exercise of such Warrants.
Two Class A Warrants are exercisable to purchase one share of Common
Stock at a price of $6.50 per share until December 13, 1996.
Two Representative's Class A Warrants are exercisable to purchase one
share of Common Stock at a price of $7.80 per share until December 13, 1996.
Persons who wish to exercise Class A Warrants or Representative's Class
A Warrants must deliver an executed Warrant Certificate with the form of
Election to Purchase duly executed, accompanied with payment in check or money
order payable to Corporate Stock Transfer, Inc. (the "Warrant Agent") for the
number of shares subscribed. All payments must be received by the Warrant
Agent prior to the termination of the exercise period, and Warrants not
exercised prior to the termination of the exercise period will expire. (See
"DESCRIPTION OF SECURITIES.")
EXERCISE OF REPRESENTATIVE'S WARRANTS
The shares of the Company's Common Stock which may be purchased upon the
exercise of the outstanding Representative's Warrants are being offered by the
Company on a "best efforts" basis. No commissions or fees will be paid to
anyone for the solicitation of the exercise of the Representative's Warrants.
Each Representative's Warrant is exercisable to purchase one share of Common
Stock at a price of $5.40 per share until December 12, 1999.
Persons who wish to exercise their Representative's Warrants must
deliver an executed Warrant Certificate with the form of Election to Purchase,
duly executed, accompanied with payment in check or money order payable to
Saint Andrews Golf Corporation for the number of shares subscribed to the
Company. All payments must be received by the Company prior to the
termination of the exercise period, and Representative's Warrants not
exercised prior to the termination of the exercise period will expire. (See
"DESCRIPTION OF SECURITIES.")
SELLING SECURITY HOLDERS
Included in the securities offered by this Prospectus are 100,000
Representative's Class A Warrants, 100,000 Representative's Warrants, and
150,000 shares of Common Stock issuable upon exercise of such Warrants being
offered by the holders of such securities. (See "SELLING SECURITY HOLDERS.")
The Common Shares may be sold by the Selling Security Holders from time
to time, in ordinary brokers' transaction through Nasdaq at the market price
prevailing at the time of such sales, or in negotiated transactions, or a
combination of such methods of sale. The commissions payable will be the
regular commissions a broker receives for effecting such sales. The Common
Shares may sold be offered in block trades, private transactions or otherwise.
The net proceeds to the Selling Security Holders will be the proceeds received
by them upon such sales, less brokerage commissions. No market presently
56
<PAGE>
exists for the Representative's Class A Warrants or Representative's Warrants,
and it is not expected that any such market will develop in the future. Sales
of the Common Shares, the Representative's Class A Warrants and
Representative's Warrants may be made pursuant to this Prospectus or Rule 144
under the Securities Act of 1933. The Company knows of no underwriting
arrangements with respect to the Common Shares, Representative's Class A
Warrants and Representative's Warrants. There can be no assurance that the
Selling Security Holders will sell any or all of the securities registered
hereunder.
Investors are advised that if they purchase Representative's Class A
Warrants or Representative's Warrants from the Selling Security Holders that
they must immediately exercise such Warrants, or they will immediately expire.
(See "DESCRIPTION OF SECURITIES.")
57
<PAGE>
LEGAL MATTERS
The legality of the securities of the Company offered will be passed on
for the Company by Jon D. Sawyer, P.C., 1401 Seventeenth Street, Suite 460,
Denver, Colorado 80202.
EXPERTS
The financial statements of the Company as of and for the years ended
December 31, 1995 and 1994 included in this Prospectus and in the Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authorty of said firm as experts in
auditing and accounting in giving such reports.
58
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE(S)
Report of Independent Public Accountants . . . . . . . . . . . . F-1
Unaudited Consolidated Balance Sheets as of June 30,
1996 and audited Consolidated Balance sheets as of
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . F-2 - F-3
Unaudited Condensed Statements of Operations for
the six months ended June 30, 1996 and 1995 and
audited Consolidated Statements of Operations for
the years ended December 31, 1995 and 1994 . . . . . . . . . . . F-4
Unaudited Statement of Shareholders' Equity for the
six month period ended June 30, 1996 and audited
Statements of Shareholders' Equity for the years
ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . F-5
Unaudited Consolidated Statements of Cash Flows for
the six months ended June 30, 1996 and 1995 and
audited Consolidated Statements of Cash Flows for
the years ended December 31, 1995 and 1994 . . . . . . . . . . . F-6 - F-8
Notes to Financial Statements. . . . . . . . . . . . . . . . . .F-9 - F-18
59
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors and Shareholders of
SAINT ANDREWS GOLF CORPORATION:
We have audited the accompanying balance sheets of SAINT ANDREWS GOLF
CORPORATION, (a Nevada Corporation), as of December 31, 1995 and 1994, and the
related statements of operations, shareholders' equity 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 Saint Andrews Golf
Corporation 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/ Arthur Andersen LLP
ARTHUR ANDERSEN LP
Las Vegas, Nevada
March 5, 1996
F-1
SAINT ANDREWS GOLF CORPORATION
BALANCE SHEETS
ASSETS
June 30, December 31,
1996 1995 1994
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 125,900 $ 125,100 $3,242,000
Accounts receivable, less
allowance for doubtful
accounts of $90,500,
$72,400 and $153,100 298,300 304,300 353,100
Lease termination receivable 3,000,000 3,000,000 -
Notes receivable 1,800 1,800 1,900
Inventories 61,600 56,900 73,600
Due from officer - - 15,400
Prepaid expenses and other 31,100 14,800 33,600
Receivable from Affiliates - 60,500 -
Other receivables - 365,100 -
--------- --------- ---------
Total current assets 3,518,700 3,928,500 3,719,600
--------- --------- ---------
PROPERTY AND EQUIPMENT, Net 89,900 100,600 122,600
--------- --------- ---------
PROJECT DEVELOPMENT COSTS 832,400 1,047,000 53,700
--------- ----------- ---------
OTHER ASSETS 1,000 1,000 222,500
--------- ---------- ---------
$ 4,442,000 $ 5,077,100 $ 4,618,400
=========== =========== ===========
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE>
SAINT ANDREWS GOLF CORPORATION
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
1996 1995 1994
(Unaudited)
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 685,800 $1,199,000 $ 315,700
Deferred franchise fees 142,500 120,000 120,000
Payable to Las Vegas
Discount Golf &
Tennis, Inc. - - 184,800
Payable to Affiliates 277,100 2,600 42,100
---------- ---------- ----------
Total current liabilities 1,105,400 1,321,600 662,600
---------- ---------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par
value, 5,000,000 shares
authorized, no share issued
and outstanding - - -
Common stock, $.001 par value,
10,000,000 shares authorized,
3,000,000 shares issued and
outstanding at June 30, 1996,
December 31, 1995 and 1994 3,000 3,000 3,000
Additional paid-in-capital 3,495,300 3,495,300 3,495,300
Common stock purchase
warrants, class A,
authorized and outstanding-
1,000,000 warrants 187,500 187,500 187,500
Retained earnings
(accumulated deficit) (349,200) 69,700 270,000
---------- ---------- ----------
Total shareholders' equity 3,336,600 3,755,500 3,955,800
---------- ---------- ----------
$ 4,442,000 $ 5,077,100 $ 4,618,400
=========== =========== ===========
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE>
SAINT ANDREWS GOLF CORPORATION
STATEMENTS OF OPERATIONS
Six months ended Years ended
June 30, December 31,
1996 1995 1995 1994
(Unaudited) (Unaudited)
REVENUES:
Franchise fees $ 120,000 $ 125,000 $ 245,000 $ 303,100
Royalties 613,000 593,900 1,209,100 1,270,900
Wholesale - 7,200 1,000 76,300
Other 93,700 19,100 206,600 96,200
----------- ----------- ----------- -----------
Total revenues 826,700 745,200 1,661,700 1,746,500
----------- ----------- ----------- -----------
EXPENSES:
Cost of sales-
wholesale 34,600 31,200 57,200 45,900
Selling, general
and administrative 996,800 865,100 1,749,200 1,415,900
Provision for
doubtful accounts 18,000 28,900 33,600 153,400
Golf centers and
driving range
development costs 201,500 37,400 108,200 -
----------- ----------- ----------- -----------
Total expenses 1,250,900 962,600 1,948,200 1,615,200
----------- ----------- ----------- -----------
INCOME (LOSS) FROM
OPERATIONS (424,200) (217,400) (286,500) 131,300
----------- ----------- ----------- -----------
INTEREST INCOME AND
EXPENSE
Income 5,300 64,300 86,200 15,100
Expense - - - (22,100)
----------- ----------- ----------- -----------
5,300 64,300 86,200 (7,000)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INTERCOMPANY
CHARGE (CREDIT) IN
LIEU OF INCOME
TAXES BENEFIT (418,900) (153,100) (200,300) 124,300
Intercompany charge-
income tax
provision - - - 165,000
----------- ----------- ----------- -----------
NET LOSS $ (418,900)$ (153,100)$ (200,300)$ (40,700)
=========== =========== =========== ===========
LOSS PER SHARE $ (.14)$ (.05)$ (.07)$ (.02)
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE>
SAINT ANDREWS GOLF CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
Common Retained
Additional Stock Earnings
Common Stock Paid in Purchase (Accumulated Total
Shares Amount Capital Warrants Deficit) Equity
------ ------ ---------- -------- ------------ ------
Balance
December 31,
1993 2,000,000 $2,000 $ - $ - $ 310,700 $ 312,700
Net loss - - - - (40,700) (40,700)
Issuance of
common stock
and common
stock purchase
warrants, net
of issuance
costs of
$816,200 1,000,000 1,000 3,495,300 187,500 - 3,683,800
--------- ----- --------- -------- --------- ---------
Balance,
December 31,
1994 3,000,000 3,000 3,495,300 187,500 270,000 3,955,800
--------- ----- --------- -------- --------- ---------
Net loss - - - - (200,300) (200,300)
--------- ----- --------- -------- --------- ---------
Balance,
December 31,
1995 3,000,000 3,000 3,495,300 187,500 69,700 3,755,500
Net loss
(Unaudited) - - - 418,900) (418,900)
--------- ----- --------- -------- --------- ---------
Balance June 30,
1996
(Unaudited) 3,000,000 $3,000 $3,495,300 $187,500 $ (349,200) $3,336,600
========= ====== ========== ======== ========== ==========
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE>
SAINT ANDREWS GOLF CORPORATION
STATEMENTS OF CASH FLOWS
Six months ended Years ended
June 30, December 31,
1996 1995 1995 1994
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $(418,900) $ (153,100) $ (200,300) $ (40,700)
Adjustment to
reconcile net loss
to net cash provided
by (used in)
operating activities:
Depreciation and
amortization 11,000 11,000 22,000 32,400
Changes in assets and
liabilities:
(Increase) decrease
in accounts
receivable 6,000 67,300 48,800 (13,400)
Decrease in notes
receivable - - 100 44,900
(Increase) decrease
in inventories (4,700) 16,000 16,700 (5,400)
Decrease in due
from officer - - 15,400 11,300
(Increase) decrease
in prepaid expenses
and other (16,300) (80,100) 18,800 (20,000)
(Increase) decrease
in other receivables 365,100 - (143,600) -
Decrease in deferred
income tax benefit - - - 165,000
Increase (decrease)
in accounts payable
and accrued expenses (58,800) 520,500 883,300 96,600
Increase (decrease)
in deferred
franchise fees 22,500 30,000 - (10,000)
--------- --------- --------- --------
Net cash provided
by (used in)
operating
activities (94,100) 411,600 661,200 260,700
--------- --------- --------- --------
(continued)
F-6
<PAGE>
SAINT ANDREWS GOLF CORPORATION
STATEMENTS OF CASH FLOWS
(continued)
Six months ended Years ended
June 30, December 31,
1996 1995 1995 1994
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Terminated project
costs - (2,984,000) (3,000,000) -
Acquisition of
property and
equipment (300) - - 2,500)
Refund development
costs 85,000 - - -
Non-refundable
leasehold deposit - - - (222,500)
Project development
costs (324,800) - (493,300) (514,400)
--------- ---------- ---------- ---------
Net cash used in
investing
activities (240,100) (2,984,000) (3,493,300) (739,400)
--------- --------- --------- --------
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Principal payments
on note payable - - - (350,000)
(Increase) decrease
to Affiliates and
LVDGT 335,000 (361,300) (284,800) 372,300
Proceeds from
issuance of common
stock - - - 3,496,300
Proceeds from issuance
of stock warrants - - - 187,500
--------- ---------- ---------- ---------
Net cash provided
by (used in)
financing
activities 335,000 (361,300) (284,800) 3,706,100
--------- ---------- ---------- ---------
(continued)
F-7
<PAGE>
SAINT ANDREWS GOLF CORPORATION
STATEMENTS OF CASH FLOWS
(continued)
Six months ended Years ended
June 30, December 31,
1996 1995 1995 1994
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS 800 (2,933,700) (3,116,900) 3,227,400
CASH AND CASH
EQUIVALENTS,
Beginning of
period 125,100 3,242,000 3,242,000 14,600
--------- ---------- ---------- ---------
CASH AND CASH
EQUIVALENTS,
End of period $ 125,900 $ 308,300 $ 125,100 $3,242,000
========== ========== =========== ==========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Six months ended Years ended
June 30, December 31,
1996 1995 1995 1994
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Cash paid for:
Interest $ - $ - $ - $ 22,100
Income taxes $ - $ - $ - $ -
NON-CASH DISCLOSURES:
During 1996, $454,400 of goods that had been capitalized to project
development costs were returned to suppliers with a corresponding reduction to
accounts payable.
During 1995, the Company reclassified deposits totaling $221,500 from
long-term assets to current assets - other receivables. The Company collected
the deposit in 1996.
The accompanying notes are an integral part of these financial
statements.
F-8
<PAGE>
SAINT ANDREWS GOLF CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
a. Company Background
Until December 13, 1994, Saint Andrews Golf Corporation (the "Company" or
"SAGC") was a wholly-owned subsidiary of Las Vegas Discount Golf & Tennis,
Inc. ("LVDGT"). On December 13, 1994, the Company completed an initial public
offering of 1,000,000 Units (representing one-third of the post offering
shares outstanding), each Unit consisting of one share of common stock and one
Class A Warrant. The net proceeds of this offering were $3,683,800. Two
Class A Common Stock Purchase Warrants entitle the holders to purchase one
share of the Company's common stock for $6.50 per share. The warrants expire
on December 13, 1996.
In March 1984, the chairman and principal shareholder of LVDGT formed a
corporation named Sporting Life, Inc. ("SLI"). On December 27, 1988, the name
SLI was changed to St. Andrews Golf Corporation, and on August 12, 1994, the
name was further changed to SAGC. LVDGT acquired SAGC in February 1988.
During July 1994, the Company set up a wholly-owned subsidiary, All-American
SportPark, Inc., which will operate the Company's All-American SportPark (see
Note 6). As of December 31, 1995, All-American SportPark, Inc. had not been
capitalized and had not yet conducted any business.
b. Primary Business Activities
The primary business activity of the Company is the sale of franchises and the
after-sale servicing of franchise retail sporting goods stores specializing in
golf and tennis merchandise and apparel. The franchise stores operate under
the name "Las Vegas Discount Golf & Tennis." In 1993, the Company also
started granting licenses for Saint Andrews Golf Centers which are designed
for mini or scaled down driving ranges, golf course pro shops and other small
retail stand alone locations.
The Company is currently engaged in developing a family-oriented theme park.
The theme parks will use the name All-American SportPark and is planned to
include a golf driving range and training center, a baseball batting stadium,
a golf pro shop, car racing tracks, a sports festival, a video arcade, shops
and eating facilities.
The Company's chairman and principal shareholder owns 100 percent of the
original Las Vegas Discount Golf & Tennis location opened in Las Vegas, Nevada
in 1974. This store, which is referred to herein as the Affiliated Store,
operates under a license agreement with the Company.
c. 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 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.
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The Company has recorded a $3,000,000 lease termination receivable which is
the subject of litigation (see Note 5). While the Company believes that it
will be successful in the collection of this amount, the ultimate resolution
of the litigation could result in the collection of an amount which is less
than that reflected in the financial statements.
In addition, the Company has capitalized certain project development costs
related to its All-American SportPark concept. No definitive sites have been
secured or contracts entered into for such developments. Although management
believes that it will be successful in its efforts to develop such projects,
there can be no assurance that the Company will commence such operations, or
if such operations are commenced that they will be profitable.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounts Receivable
Accounts receivable consists of amounts due from franchisees for royalties and
the sale of merchandise, computer equipment and supplies. Additionally,
during 1995, the Company entered into an agreement with MBNA America Bank,
N.A. which allows MBNA to use SAGC's trademark on its credit cards. The
Company recognized $125,000 in income related to a non-refundable payment
received under this agreement and will receive royalties for the generation of
credit card accounts. As of December 31, 1995, $100,000 of the balance was
included in accounts receivable and was collected by June 30, 1996.
b. Inventories
Inventories, primarily computer equipment and supplies held for sale to
franchisees, are stated at the lower of cost (first-in, first-out method) or
market.
c. Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization is
computed using the straight-line method over the estimated useful lives of the
assets, which are as follows:
Furniture and equipment 5-10 years
Leasehold improvements 15-31.5 years
d. Sales to Franchisees
All wholesale and computer equipment sales and related cost of goods sold
relate to sales to franchisees. In early 1995, the Company outsourced the
future sales and ongoing maintenance of all franchise computer equipment to an
unrelated third party.
e. Royalties
The Company receives a three percent royalty on net franchise sales. Royalty
revenue is recognized when earned.
f. Franchise Fee Revenue and Commission Expense
Franchise fees received and commissions paid are initially deferred, and are
recognized in the statement of operations when all material services or
conditions related to the sale of a franchise have been performed by the
Company, typically when the franchise store opens.
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g. Loss Per Common Share
Loss per common share is computed using the weighted average number of common
shares outstanding. On August 12, 1994, the Company effected a 4,000 to 1
stock split of its common stock. All per share data gives retroactive effect
to the stock split. Weighted average shares outstanding at June 30, 1996 and
1995, and December 31, 1995 were 3,000,000 and proforma weighted shares
outstanding at December 31, 1994 were 3,000,000.
h. Income Taxes
In May 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". The Company adopted SFAS No. 109 during the year ended December 31,
1993. Previously, the Company accounted for income taxes under Opinion No. 11
of the Accounting Principles Board. Adoption of the new standard did not have
a significant effect on the Company's financial position or results of
operations.
i. Cash and Cash Equivalents
The Company considers all highly liquid debt investments with an original
maturity of three months or less to be cash equivalents.
j. Cost of Developing Golf Centers and Driving Range
The Company incurred and expensed $201,500, $37,400 and $108,200, for the six
months ended June 30, 1996 and 1995 and the year ended December 31, 1995,
respectively, in costs for the development of its golf centers concept and a
driving range park. These costs include certain direct and indirect costs
allocated to the project including salaries and other administrative expenses.
k. Unaudited Financial Information
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which include normal recurring
adjustments) necessary to present fairly the financial position as of June 30,
1996 and the results of operations for the six month periods ended June 30,
1996 and 1995. The results of operations for such periods are not necessarily
indicative of the results to be expected for the full year.
3. RELATED PARTY TRANSACTIONS
The Company has extensive transactions and relationships with LVDGT and its
subsidiaries (the "Affiliates"), the chairman and principal shareholder of
LVDGT, and the Affiliated Store. As of June 30, 1996, the Company has a
$277,100 payable to the Affiliates. As of December 31, 1995, the Company had
a $60,500 receivable from the Affiliates and a $2,600 payable to the
Affiliates. As of December 31, 1994, the Company had outstanding payables to
LVDGT and the Affiliates of $184,800 and $42,100, respectively.
In September 1994, the Company's Chairman of the Board loaned the Company
$120,000. This note was repaid in full during December 1994, and no interest
was charged or paid.
The Affiliated Store operates in Las Vegas, Nevada and is not a franchise of
the Company. As a result, this store pays no royalties to the Company but
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purchases merchandise for the Affiliated Store at the same cost as the
Company. The Affiliated Store also may benefit from the Company's activities,
including any local and national advertising conducted by the Company.
The Company and LVDGT share office and warehouse facilities and LVDGT provides
certain administrative personnel in accounting, purchasing and warehousing.
These occupancy and administrative expenses are allocated proportionately
between the Company and LVDGT in ratios management believes are reasonable.
The monthly payments are subject to adjustment in the event LVDGT enters into
new office lease arrangements or if any salary increases or decreases are
effected by LVDGT with respect to the administrative or accounting personnel
that provide services to the Company.
On August 1, 1994, the Company and LVDGT entered into a written agreement
pursuant to which LVDGT agreed to grant the Company a license to use all of
its trademarks, trade names and other commercial names and symbols. LVDGT
also agreed to purchase, warehouse and make available to the Company and its
franchisees certain merchandise. In exchange, the Company subsequently repaid
with proceeds from its initial public offering loans previously obtained by
the Company and LVDGT from an unaffiliated bank in the amount of $350,000 (see
Note 7.). The agreement will expire on July 31, 1997.
In 1994, the Company hired a new Vice President of Business Development.
Prior to joining the Company, this individual was the President and a major
shareholder of a design agency which performed certain design services for the
Company. The Company owes the agency, which no longer has any relationship
with the Company's Vice President of Business Development, approximately
$54,000 as of December 31, 1995 and 1994, respectively. In 1996, the Company
agreed to pay the agency $40,600. As of June 30, 1996, the Company owed the
agency $24,400.
The Company had outstanding non-interest bearing advances to the President of
the Company of $15,400 as of December 31, 1994. During 1995, this advance was
offset against amounts owed by the Company to LVDGT.
4. PROPERTY AND EQUIPMENT
Property and equipment included the following:
June 30, December 31,
1996 1995 1994
--------- -------- --------
(Unaudited)
Furniture and equipment $151,800 $151,500 $151,500
Leasehold improvements 113,600 113,600 113,600
Less--Accumulated
depreciation and
amortization (175,500) (164,500) (142,500)
-------- -------- --------
$ 89,900 $100,600 $122,600
5. LEASE TERMINATION RECEIVABLE
In May of 1994 the Company entered into a Ground Lease (the "Lease") for
approximately 33 acres of land on Las Vegas Boulevard which it intended to use
for the development of an All-American SportPark. The lease contained
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provisions which allowed the lessor to terminate the lease within the first 6
years of the 15 year lease term in the event that the lessor entered into a
sale of property as long as the intended use of the property after the sale
was not a golf/sports park as contemplated by the Company.
In June 1995 the lessor notified the Company that it had entered into a sale
agreement for the parcel and that it was exercising its right of termination.
Pursuant to cancellation provisions contained within the Lease the Company was
entitled to reimbursement of unamortized construction costs which it incurred,
based upon criterion contained within the Lease, up to an aggregate amount of
$3.5 million.
Upon notification of the Lease termination the Company ceased construction
activities and submitted claims for reimbursement of construction costs
totaling approximately $3.9 million. Utilizing applicable formulas derived
from the Lease, the Company believes that, based on the maximum expenditures
available for reimbursement of $3.5 million, $3,279,465 in costs are
reimbursable by the purchaser who assumed the original lessor's obligations
relating to the lease termination. The purchaser has reviewed such support
and has indicated that it believes that only a portion of the construction
costs submitted are reimbursable within the context of the Lease agreement.
No settlement was reached regarding the disputed amount and on February 27,
1996, the Company filed a complaint in District Court, Clark County, Nevada
against the purchaser of the parcel seeking an unspecified amount of
compensatory damages, punitive damages, attorney fees and costs.
Management believes, and legal counsel concurs, that a recovery of $3,000,000
is probable with regards to this litigation and that the amount will be
collected in the later part of 1996. The Company has, accordingly, recorded
the lease termination receivable as a current asset in the accompanying
balance sheet as of June 30, 1996.
6. PROJECT UNDER DEVELOPMENT
The Company is currently engaged in the ongoing planning and design of the
All-American SportPark concept. While no definitive site has been selected,
the Company has costs of $832,400, $1,047,000 and $553,700 as of June 30,
1996, December 31, 1995 and 1994, respectively, which consist primarily of
SportPark concept development, training and procedures manuals for SportPark
operations, computer software and payment for various exclusive license
agreements.
7. NOTE PAYABLE
In August 1994, the Company agreed to assume $350,000 of bank indebtedness
originally obtained by the Company and LVDGT totaling $1,011,000. This amount
was retroactively recorded by the Company effective as of the inception of
related bank loans. The Company's portion of the loans was paid off in
December 1994 with proceeds from the Company's initial public offering.
8. LEASES
The Company and LVDGT share office and warehouse facilities leased from the
Chairman of the Board under a non-cancelable operating lease agreement which
was renewed subsequent to year-end and now expires January 31, 2005. The lease
provides for initial monthly lease payments which may be increased based on
increases in the consumer price index. As of June 30, 1996, the monthly
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rental payment was approximately $13,000. Until August 1994, the Company and
LVDGT shared the rent equally. Beginning August 1, 1994, the allocation was
changed to 67 percent to LVDGT and 33 percent to the Company, based on the new
ownership percentages effected with the public offering. Rent expense for the
Company's allocated share of this lease totaled $51,800 and $66,000 for the
years ended December 31, 1995 and 1994, respectively and $27,100 and $25,900
for the six months ended June 30, 1996 and 1995, respectively.
At December 31, 1995, minimum future rental commitments under all of the
Company's non-cancelable operating leases, including the Company's share of
the office and warehouse lease with the chairman and principal shareholder of
LVDGT, are as follows:
Year ending
-----------
1996 $ 73,000
1997 66,000
1998 59,000
1999 51,000
2000 51,000
Thereafter 210,000
---------
$ 510,000
=========
9. INCOME TAXES
Historically, the Company's results have been included in the consolidated tax
return of LVDGT. Subsequent to the date of the initial public offering, the
Company must file a separate tax return. For the year ended December 31,
1994, the Company's operations from January 1, 1994 to December 13, 1994 will
be included in the consolidated return of LVDGT. A separate return was filed
for the stub period, from December 13, 1994 to December 31, 1994.
The federal income tax provision (benefit) consists of the following:
Six months ended Years ended
June 30, December 31,
1996 1995 1995 1994
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Intercompany charge
(credit) in lieu of
income taxes $ - $ - $ - $ -
Deferred (148,000) - 65,000) 25,000
Change in deferred tax
asset valuation
allowance 148,000 - 65,000 140,000
----------- ---------- ---------- ----------
Current (deferred) $ - $ - $ - $ 165,000
=========== ========== ========== ==========
Deferred tax assets are related to the following:
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June 30, December 31,
1996 1995 1994
----------- ----------- -----------
(Unaudited)
Provision for bad debt $ 31,000 $ 25,000 $ 52,000
Deferred franchise fees 41,000 41,000 41,000
Vacation accrual 11,000 11,000 -
Commissions (5,000) (5,000) -
Depreciation (2,000) (2,000) -
Net operating loss carry-
forward 227,000 85,000 -
Other, net 1,000 1,000 (2,000)
--------- --------- ---------
304,000 156,000 91,000
Valuation allowance (304,000) (156,000) 91,000)
--------- --------- ---------
Net deferred tax asset $ - $ - $ -
--------- --------- ---------
A reconciliation of income tax expense computed by applying the statutory
federal income tax rate to the Company's income from continuing operations
before provision (benefit) for income taxes is as follows:
Six months ended Years ended
June 30, December 31,
1996 1995 1995 1994
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
Dollars % Dollars % Dollars % Dollars %
------- --- ------- --- ------- --- ------- --
Federal income
tax at statu-
tory rate $(142,000) (34) $(52,000) (34) $(68,100) (34) $ 42,000 34
Intercompany
benefit
resulting
from the
utilization
of LVDGT
consolidated
net operating
loss - - - - - - (42,000) (34)
Deferred - - - - - - 25,000 17
Change in
deferred
tax asset
valuation
allowance 148,000 35 9,000 6 65,000 29 - -
Other (6,000) (1) 43,000 28 3,100 5 140,000 97
--------- -- ------- -- ------ -- -------- --
$ - - $ - - $ - - $165,000 114
========= == ======== == ====== == ======== ===
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As of June 30, 1996, the Company has net operating loss carryforwards of
$251,000 which are available through 2010.
10. FRANCHISE INFORMATION
Franchise activity is summarized as:
Number of Franchises
June 30, December 31,
1996 1995 1994
--------- ------ ------
(Unaudited)
Sold during the period, net 4 8 11
Opened during the period 3 6 8
Closed during the period (6) (10) (10)
In operation at period-end 47 50 54
Sold but not in operation
at period end 4 2 3
11. CAPITAL STOCK, STOCK OPTIONS, AND INCENTIVES
a. Stock Option Plans
The Company's Board of Directors adopted a stock option plan (the "1994 Plan")
on August 8, 1994 and granted 240,000 options to purchase 240,000 shares of
common stock of Saint Andrews Golf Corporation at an exercise price of $5.00
per share. These options are exercisable anytime on or before August 8, 1999.
In addition, 60,000 options were granted to an employee, which vest in annual
increments of 20,000 options beginning on August 8, 1995.
In April 1996, the Company's Board of Directors approved increases in the
number of shares of Common Stock which may be issued under the 1994 Plan from
300,000 shares to 700,000, shares subject to approval by the Company's
shareholders within one year. Also in April 1996, the Company's Board of
Directors granted approximately 210,000 stock options. The options will be
fully vested upon shareholder approval of the Plan Amendment by April 16,
1997. If the shareholders do not approve the amendment to the 1994 Plan by
that date, the options will expire.
200,000 of the options granted in 1996 will not vest until the Company has
completed a transaction with a major business or investor which makes its
probable that the Company will be able to pursue the plan of building and
operating SportParks, and an investment in the Company, or its first
SportPark, in excess of $3,000,000 will satisfy this requirement. Management
expects that this option will vest during September 1996, when Sanyo North
American Corporation is required to invest $2,000,000 under its agreement with
the Company.
The remaining 10,000 options granted in 1996 will be immediately vested as to
2,500 shares upon shareholder approval of the 1994 Plan amendment by April 16,
1997, and will vest as to an additional 2,500 on April 24, 1997, April 24,
1998, and April 24, 1999.
b. Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock. As of
June 30, 1996, there were no preferred shares issued or outstanding.
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c. Common Stock and Common Stock Purchase Warrants
On December 13, 1994, the Company completed a public offering of 1,000,000
Units, each Unit consisting of one share of Common Stock and one Class A
Common Stock Purchase Warrant. As a result 1,000,000 shares of Common Stock
and 1,000,000 Class A Warrants were issued. Net proceeds from the offering
were $3,684,000. Two Class A Warrants entitle the holder to purchase one
share of SAGC common stock for $6.50, $2 above the initial public offering
price. The Class A Warrants have been assigned a value of $.1875 for
financial reporting purposes.
Also, in connection with the public offering the Company issued to the
Representative of the Underwriters, Representative's Warrants to purchase
100,000 shares (10 percent of the units purchased by the underwriters), with
an exercise price of $5.40 for a four year period beginning on December 13,
1995. These Representative's Warrants contain certain demand and piggyback
registration rights. The Company also issued to the Representative 100,000
Class A Warrants which entitle the Underwriter to purchase 50,000 shares of
Common Stock (5 percent of the units purchased by the underwriters), with an
exercise price of $7.80 per share exercisable beginning on December 13, 1995.
As of June 30, 1996, no Class A Purchase Warrants have been exercised.
12. EMPLOYEES' 401(k) PROFIT SHARING PLAN
The Company offers all its eligible employees participation in the Employees'
401(k) LVDGT Profit Sharing Plan ("Plan"). The Plan provided for purchases of
certain investment vehicles by eligible employees through annual payroll
deductions of up to 15% of base compensation. Pursuant to the Plan, the
Company matches 25% of employee contributions up to a maximum of 1 1/2% of an
employee's base compensation. The Company had expenses related to the Plan of
$13,209 and $7,910 for the years ended December 31, 1995 and 1994,
respectively and $21,200 and $3,000 for the six months ended June 30, 1996 and
1995, respectively.
13. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with its President, as well as other key
employees which require the payment of fixed and incentive based amounts of
compensation.
The Company is involved in certain litigation as both plaintiff and defendant
related to its business activities. Management, based upon consultation with
legal counsel, does not believe that the resolution of these matters will have
a materially adverse effect upon the Company.
The Company has entered into a letter agreement with Oracle One Partners, Inc.
("Oracle") whereby Oracle has been retained to assist the Company in obtaining
corporate sponsorship for certain areas of All-American SportPark projects
including a license agreement from Major League Baseball for a Slugger
Stadium. The initial period of the agreement was for the three month period
ending September 30, 1994, and the agreement has been continued on a
month-to-month basis since then. The Company is paying Oracle $4,000 a month
and has agreed to pay Oracle 15% of the gross of any sponsorship fees for
sponsors obtained through the efforts of Oracle. The Company paid Oracle
$60,000 for its efforts in obtaining the exclusive license agreement with
Major League Baseball described below.
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In December 1994, the Company entered into a agreement with Major League
Baseball ("MLB") concerning a license for the use of MLB logos, marks and
mascots in the decor, advertising and promotions of the Company's Slugger
Stadium concept. The Company obtained an exclusive license for indoor and
outdoor baseball stadiums in the United States through December 31, 1997, and
in return the Company will pay a royalty of the gross revenues from the
batting cages with a minimum annual royalty for each stadium. The Company's
right to exclusively use MLB logos and other marks at its baseball stadiums is
dependent upon certain conditions set forth in the agreement.
14. SUBSEQUENT EVENTS
On July 29, 1996, Saint Andrews Golf Corporation entered into an Investment
Agreement (the "Agreement") with Three Oceans, Inc. ("TOI"), an affiliate of
Sanyo North America Corporation. Pursuant to the Agreement, the Company sold
200,000 shares of its newly designated Series A Convertible Preferred Stock to
TOI for $2,000,000 in cash on each of July 29, 1996 and September 12, 1996 for
a total of 400,000 shares and $4,000,000. The Agreement provides that TOI
will purchase an additional 100,000 shares of Series A Convertible Preferred
Stock for an additional $1,000,000 by October 27, 1996. The Company will use
the proceeds of these sales for the SportPark segment of its business. Costs
of approximately $200,000 will be associated with the issuance of this 500,000
shares of Series A Convertible Preferred Stock.
Each share of the Series A Convertible Preferred Stock issued to TOI is
convertible into one share of the Company's Common Stock at any time. The
Series A Convertible Preferred Stock has a liquidation preference of $10 per
share and the holder is entitled to receive dividends equal to any declared on
the Company's Common Stock. Under certain circumstances, the Company may
redeem the Series A Convertible Preferred Stock at a redemption price of
$12.50 per share. Each share of Series A Convertible Preferred Stock is
entitled to one vote and will vote along with the holders of the Company's
Common Stock.
Pursuant to the term of the Agreement, TOI also received an option to purchase
up to 250,000 shares of the Company's Common Stock at $5.00 per share at any
time until July 29, 2001.
The Agreement provides for certain demand and piggyback registration rights
with respect to the shares of Common Stock issuable upon the conversion of the
Series A Convertible Preferred Stock and the exercise of the option.
Pursuant to the Agreement, the Company expanded the number of Directors of the
Company from four to five, and elected Hideki Yamagata as an additional
Director of the Company. Mr. Yamagata is president of TOI.
In connection with the initial closing of the Agreement, the Company granted
TOI certain first refusal rights with respect to debt and/or equity financing
arrangements for SportParks developed by the Company and any arrangements to
obtain electrical and electronic equipment for such SportParks. In addition,
the Company granted TOI and its designees certain signage rights at the
Company's first two SportParks.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other arrange-
ment under which any controlling person, Director or Officer of the Registrant
is insured or indemnified in any manner against any liability which he may
incur in his capacity as such, is as follows:
(a) Section 78.751 of the Nevada Business Corporation Act provides
that each corporation shall have the following powers:
"1. A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the action, suit or proceeding
if he acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and that, with respect
to any criminal action or proceeding, he had reasonable cause to believe that
his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement of
the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction, determines upon application that in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
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3. To the extent that a director, officer, employee or agent of
a corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense
of any claim, issue or matter therein, he must be indemnified by the
corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless
ordered by a court or advanced pursuant to subsection 5, must be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors
who were not parties to the act, suit or proceeding so orders, by independent
legal counsel, in a written opinion; or
(d) If a quorum consisting of directors who were not
parties to the act, suit or proceeding cannot be obtained, by independent
legal counsel in a written opinion.
5. The certificate or articles of incorporation, the bylaws or
an agreement made by the corporation may provide that the expenses of officers
and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in advance
of the final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if
it is ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than director or officers may be entitled under any
contract or otherwise by law.
6. The indemnification and advancement of expenses authorized
in or ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may be entitled under the
certificate or articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court pursuant to
subsection 2 or for the advancement of expenses made pursuant to subsection 5,
may not be made to or on behalf of any director or officer if a final
adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action.
(b) Continues for a person who has ceased to be a
director, officer, employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person."
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(b) Article VII of the Registrant's Articles of Incorporation provides
in general that the Registrant shall indemnify its Officers and Directors to
the full extent permitted by the Nevada Business Corporation Act.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering of the shares of the Registrant's
Common Stock underlying Warrants, all of which are to be borne by the
Registrant, are as follows:
Printing Expenses . . . . . . . . . . . . . . . . . . $ 2,000
Accounting Fees and Expenses. . . . . . . . . . . . . $ 5,000
Legal Fees and Expenses . . . . . . . . . . . . . . . $14,000
Blue Sky Fees and Expenses. . . . . . . . . . . . . . $ 2,500
Registrar and Transfer Agent Fees . . . . . . . . . . $ 500
Miscellaneous . . . . . . . . . . . . . . . . . . . . $ 1,000
Total . . . . . . . . . . . . . . . . . . . . . . $25,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On July 29, 1996, Saint Andrews Golf Corporation (the "Company") sold
200,000 shares of its newly designated Series A Convertible Preferred Stock to
Three Oceans, Inc. ("TOI"), an affiliate of SANYO North America Corporation,
for $2,000,000 in cash pursuant to an Investment Agreement between the Company
and TOI (the "Agreement"). An additional 200,000 shres of Series A
Convertible Preferred Stock were sold to TOI for $2,000,000 on September 12,
1996 pursuant to the Agreement. The Agreement provides that TOI will purchase
an additional 100,000 shares of Series A Convertible Preferred Stock for an
additional $1,000,000 by October 27, 1996. The Company will use the proceeds
of these sales for the SportPark segment of its business.
ITEM 27. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B:
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
<S> <C>
1.1 Form of Underwriting Agreement<FN1>
1.2 Form of Selected Dealers Agreement<FN1>
1.3 Form of Agreement Among Underwriters<FN1>
3.1 Restated Articles of Incorporation and Bylaws<FN1>
3.2 Certificate of Amendment to Articles of Incorporation<FN1>
3.3 Revised Bylaws<FN1>
3.4 Certificate of Amendment to Articles of Incorporation
(Series A Convertible Preferred Stock)
4.1 Form of Warrant Agreement<FN1>
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<PAGE>
4.2 Form of Class A Warrant Certificate<FN1>
4.3 Form of Representative's Warrants<FN1>
5 Opinion of Jon D. Sawyer, P.C. regarding the legality
of the securities being registered<FN1>
10.1 Employment Agreement with Ronald S. Boreta<FN1>
10.2 Stock Option Plan<FN1>
10.3 Ground Lease with Summa Corporation<FN1>
10.4 Agreement between the Company and Las Vegas Discount
Golf & Tennis, Inc.<FN1>
10.5 License Agreement between the Company and Las Vegas
Discount Golf & Tennis, Inc.<FN1>
10.6 Employment Agreement with Kevin Donovan<FN1>
10.7 Employment Agreement with Charles Hohl<FN1>
10.8 Lease Agreement with A&R Management and Development
Co., et al., and Sublease to Las Vegas Discount
Golf & Tennis, Inc.<FN1>
10.9 Lease Agreement with Vaso Boreta, as amended, and
Assignment to Las Vegas Discount Golf & Tennis, Inc.<FN1>
10.10 Letter Agreement with Oracle One Partners, Inc.<FN1>
10.11 Promissory Note to Vaso Boreta<FN1>
10.12 Agreement with Major League Baseball Properties, Inc.<FN2>
10.13 License Agreement with National Association for Stock Car
Auto Racing, Inc. dated August 1, 1995<FN3>
10.14 Concept Development and Trademark License Agreement with
Callaway Golf Company dated May 23, 1995<FN4>
10.15 Investment Agreement with Three Oceans, Inc.<FN5>
10.16 Indenture of Lease between Urban Land of Nevada and All-
American SportPark, Inc.
21 Subsidiaries of the Registrant<FN5>
23.1 Consent of Jon D. Sawyer, P.C. (contained in the Opinion
of Jon D. Sawyer, P.C., Exhibit 5)<FN1>
23.2 Consent of Piercy, Bowler, Taylor & Kern, Certified
Public Accountants & Business Advisors, a
Professional Corporation<FN1>
23.3 Consent of Arthur Andersen LLP
__________________
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<PAGE>
<FN>
<FN1>
Previously filed
<FN2>
Incorporated by reference to Exhibit No. 10.12 to Registrant's Form 10-KSB for
the year ended December 31, 1994.
<FN3>
Incorporated by reference to Exhibit No. 10.13 to Registrant's Form 10-KSB for
the year ended December 31, 1995.
<FN4>
Incorporated by reference to Exhibit 10.14 to Registrant's Form 10-KSB for the
year ended December 31, 1995.
<FN5>
Incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K dated July
29, 1996.
</FN>
</TABLE>
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for indemni-
fication against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) For purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
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<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(6) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this Post
Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Las
Vegas, State of Nevada, on the 26th day of September, 1996.
SAINT ANDREWS GOLF CORPORATION
By: /s/ Ronald S. Boreta
Ronald S. Boreta, President
In accordance with the requirements of the Securities Act of 1933,
this
Post Effective Amendment No. 1 to the Registration Statement has been signed
by the following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Vaso Boreta Chairman of the Board September 26, 1996
Vaso Boreta and Director
/s/ Ronald S. Boreta President, Treasurer, September 26, 1996
Ronald S. Boreta (Chief Executive Of-
ficer, Principal Finan-
cial and Accounting Of-
ficer) and Director
/s/ Robert R. Rosburg Director September 26, 1996
Robert R. Rosburg
/s/ William Kilmer Director September 26, 1996
William Kilmer
____________________________ Director
Hideki Yamagata
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation in
this Registration Statement on Form SB-2 (File No. 33-84024) of our report
dated March 5, 1996 included in Saint Andrews Golf Corporation's Form 10-KSB
for the year ended December 31, 1995.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
September 23, 1996
