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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year ended: December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from: _____ to _____
Commission File No. 0-024970
SAINT ANDREWS GOLF CORPORATION
(Exact Name of Small Business Issuer as Specified in its Charter)
NEVADA 88-0203976
(State or Other Jurisdiction of (I.R.S. Employer Identi-
Incorporation or Organization) fication Number)
5325 SOUTH VALLEY VIEW BOULEVARD, SUITE 10
LAS VEGAS, NEVADA 89118
(Address of Principal Executive Offices, Including Zip Code)
Issuer's Telephone Number, Including Area Code: (702) 798-7777
Securities Registered Pursuant to Section 12(b) of the Act: None.
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE CLASS A COMMON STOCK PURCHASE WARRANTS
(Title of Class) (Title of Class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained in this Form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: $-0-.
As of March 6, 1997, 3,000,000 shares of common stock were outstanding, and
the aggregate market value of the common stock of the Registrant held by
non-affiliates was approximately $3,250,000.
Transitional Small Business Disclosure Format (check one): Yes __ No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Saint Andrews Golf Corporation (the "Company" or "Saint Andrews") 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 facility, 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".
The Company has been engaged in the business of 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 Company's business began in 1974 when Vaso Boreta, the President and
Chairman of the Board of the Company, opened a "Las Vegas Discount Golf &
Tennis" retail store in Las Vegas, Nevada. This store, which is still owned
by Mr. Boreta as an affiliated store of the Company (the "Affiliated Store"),
subsequently began distributing catalogs and developing a mail order business
for the sale, principally of golf, and, to a lesser extent, tennis products.
In 1984, the Company began to franchise the "Las Vegas Discount Golf & Tennis"
retail store concept and commenced the sale of franchises. As of February 26,
1997, the Company had 43 franchised stores in operation in 17 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 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 of the Company's common stock, which represents approximately
66.7% of the Company's capital stock outstanding.
During July 1994, the Company set up a wholly-owned Nevada subsidiary
named All-American SportPark, Inc., which will be the entity under which the
All-American SportPark is to be operated. 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.
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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. The net proceeds to the Company from this public
offering were approximately $3,684,000.
On July 29, 1996, 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"). TOI purchased 300,000 additional shares of Series A Convertible
Preferred Stock for an additional $3,000,000 in September and October 1996,
pursuant to the Agreement. The Company will use the proceeds of these sales
for the SportPark segment of its business.
On December 16, 1996, the Company and its majority shareholder, Las
Vegas Discount Golf & Tennis, Inc. ("LVDG"), entered into negotiations
pursuant to an "Agreement for the Purchase and Sale of Assets" to dispose of
all but one of the four retail stores owned by LVDG, all of LVDG's wholesale
operations and the entire franchising business of the Company. Accordingly,
at December 31, 1996, the Company accounted for its franchise business segment
as "discontinued operations" and three retail stores to be sold as "held for
sale" in the consolidated financial statements included in this Report. On
February 26, 1997, the Company and LVDG completed this transaction, and as a
result the Company's operations, assets and liabilities now relate solely to
the development and operation of "All-American SportParks".
Also in December 1996, the Company and LVDG announced that they intend
to merge LVDG into the Company, however, the terms of this merger have not
been negotiated pending the completion of an independent valuation of the two
companies. The proposed merger has not been approved by the Board of
Directors of either company, and would be subject to a number of contingencies
including, among other things, the effectiveness of a registration statement
which would be filed with the Securities and Exchange Commission, and the
approval of the respective shareholders of each company.
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.
SALE OF ASSETS
On February 26, 1997, LVDG and the Company completed the sale of all but
one of the retail stores owned by LVDG, LVDG's wholesale operations and the
Company's franchising business to an unaffiliated entity.
The total price for the transaction was $5,354,287.25 of which
$4,600,000.00 was paid in cash, $264,176.62 was paid with a short-term
unsecured receivable, $200,000 was placed in escrow pending the accounting of
inventory and trade payables, $200,000 was placed in escrow for two years to
cover potential indemnification obligations, $60,475 was withheld for sales
taxes, and $29,635.63 was withheld for accrued vacation liabilities. Of the
total purchase price, $2,603,787.25 was allocated to LVDG and $2,750,500 was
allocated to the Company.
In connection with the sale of the above-described assets, LVDG and the
Company agreed not to compete with the Buyer in the golf equipment business
except that the Company is permitted to sell golf equipment at SportPark and
driving range facilities which it may operate. In addition, the Buyer granted
Boreta Enterprises, Ltd., a limited partnership owned by Vaso Boreta, the
President of LVDG, Ron Boreta, the President of the Company, and John Boreta,
a
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principal shareholder of LVDG, the right to operate "Las Vegas Discount Golf &
Tennis" stores in southern Nevada, except for Summerlin, Nevada.
BUSINESS OF THE COMPANY
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 facility, 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 agreement 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 Major League Baseball Slugger
Stadium; a NASCAR SpeedPark; an off-ice hockey complex; an All-American
SportPark Pavilion 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 McCarran 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 Saint Andrews will have two options to extend
for five years each. The landlord may cancel the lease if the SportPark is
not completed by February 1, 1999.
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 Report, 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 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. There is no assurance that financing will be obtained
from any of these sources.
The design of the project is completed for the golf facilities and
approximately 90% completed for the arena pavilion and other sports
activities. All design work should be completed during April 1997. The
Company anticipates that the golf facilities may open by Labor Day 1997 and
the arena pavilion and other sports facilities by mid-November 1997. The
projected opening dates are subject to change due to delays in obtaining
financing; construction delays due to availability of construction personnel,
materials, adverse weather and other
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factors; delays in obtaining governmental permits and approvals; and other
factors.
The Company has obtained project zoning, use permits and variances from
Clark County; Federal Aviation Administration approval for construction (due
to the SportPark's proximity to McCarran International Airport); approval of
the Clark County Department of Aviation; and architectural review approval by
the Planning Commission. The Company has submitted a comprehensive Water Plan
which is currently being reviewed. It is anticipated that all building plans
will be submitted for review in April 1997.
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
Properties to own and operate Major League Baseball Slugger Stadiums through
December 31, 1997. 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 16 batter boxes and 16 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. Completing 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 driving range 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, the
SportPark will include an executive nine hole, par three golf course. The
golf course is being designed to be challenging, and will include a pond and
other water hazards. The facility will also include a clubhouse with a
country club atmosphere including a tree-lined driveway with PGA Tour Player
personality banners and an eight-foot tall bronze statue of Bobby Jones.
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 NASCAR SpeedPark. The license expires on December 31, 1997. The
SpeedPark will include three tracks to accommodate three styles of racing:
family, adult and junior tracks. The family go-kart track will be a 1,200
linear foot road course for five horsepower go-karts designed for families and
children 10 and up, and the other track will be a 2,200-foot road course track
for eighteen 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 Winner's Circle, the Infield RV
Park, Victory Lane, the
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NASCAR Jr. Track, the Tailgater's Dining Circle and the NASCAR Retail
Trackside Trailer Merchandising Experience.
In May 1996, the Company entered into an agreement with Jeff Gordon, the
1995 NASCAR Winston Cup Champion and the 1997 Daytona 500 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.
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 NASCAR Craftsman Trucks.
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 10% 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 Saint Andrews' 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.
LETTER OF INTENT WITH PEPSI-COLA COMPANY
In January 1997, the Company entered into a non-binding letter of intent
with the Pepsi-Cola Company ("Pepsi") concerning an exclusive sponsorship
agreement. Under the proposed agreement, Pepsi would receive certain
exclusive rights related to soft drinks, tea products, juice products, bottled
water and similar products in exchange for a series of payments beginning when
the
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SportPark opens. The rights to be granted to Pepsi are expected to include
that Pepsi's products will be exclusively sold for the categories listed, that
only Pepsi identified cups will be used in the SportPark, and that Pepsi would
have the right to name the arena. In addition, the agreement is expected to
provide that Pepsi will provide the equipment needed to dispense its products
at the SporkPark.
The Company also anticipates that the agreement with Pepsi will provide
that the Company and Pepsi will participate in joint marketing programs such
as promotions on Pepsi's products and local radio advertising.
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. 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.
MARKETING
Major League Baseball Slugger Stadium is the "Official Batting Stadium
of Major League Baseball". The unique baseball stadium concept is expected to
be expanded to other locations in the United States using the prototype
installation at the All-American SportPark as a demonstration facility.
Considerable market research by management has indicated a large potential
market for Slugger Stadium. Possible locations include new gated sites inside
major theme parks, attachments to regional and value oriented shopping malls,
inside new sports stadium and Major League Ballpark complexes which are either
in the planning and design phase or currently under construction and other
All-American SportParks or as stand alone sites. Target consumers include the
family, adults, softball players and all youth baseball organizations.
The golf facility concept which includes the executive nine-hole par 3
golf course, driving range, clubhouse and practice putting and chipping areas
are designed as a country club atmosphere for the general public. The golf
portion may be expanded into various hotel and resort areas throughout the
United States and can also be included in the SportPark opportunities
described above or as a stand alone business.
NASCAR SpeedPark is the "Only Officially Licensed NASCAR Go-Kart
Facility in the World". Management plans to develop the concept to include
installations alongside Superspeedways, NASCAR Team Race/Shops Racing Retail &
Entertainment Centers, stand alone facilities and as a separate gated
attraction inside major theme parks throughout the United States.
The All-American SportPark Pavilion area of the project can be recreated
as a stand alone development in a downtown urban setting alongside new arenas,
shopping malls, and football/baseball stadiums. It can also be adapted to a
multi-level attraction including a portion of the golf center on the roof to
the structure.
The Company's marketing efforts are directed towards a number of large
existing and potential markets for which there can be no assurance of
financial success. Further, to expand the concepts beyond the first location
in Las Vegas would require considerably more financial resources than the
Company presently has and more management and human resources than presently
exist at the Company.
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COMPETITION
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.
TRADE NAMES AND TRADEMARKS
Saint Andrews has filed an "intent to use" trademark application for
"All-American SportPark" and a related design and "Slugger Stadium". The
Company 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 intends to
maintain the integrity of the trademarks, other proprietary names and marks
against unauthorized use.
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. Management of the Company also believes that it and/or the
Company have developed proprietary rights to the name "Birdie Golf". In
February 1997, the rights to the trademarks "Las Vegas Discount Golf & Tennis"
and "Birdie Golf" were assigned to the purchaser in the sale of assets
transaction.
The purchaser of the assets granted back to Boreta Enterprises, Ltd. a
perpetual license to use the name Las Vegas Discount Golf & Tennis for retail
equipment stores in the State of Nevada, south of a line between Pahrump,
Nevada and Mesquite, Nevada, except for Summerlin, Nevada.
EMPLOYEES
As of March 3, 1997, the Company employed a total of seven persons on a
full-time basis. The Company is also sharing nine persons with the entity
which purchased the franchise business for an unspecified period. None of the
Company's employees are represented by a union, and the Company believes that
its employee relations are good.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's majority shareholder, LVDG, leases approximately 15,500
square feet of warehouse space and approximately 6,000 square feet of office
space at 5325 South Valley View Boulevard, Suite 10, Las Vegas, Nevada, at an
aggregate monthly rent of approximately $14,000 from its Chairman of the
Board. The rent is adjustable annually based on increases in the consumer
price index and the lease expires January 31, 2005. The Company and LVDG
share this space and allocate the rent pro-rata based on usage. From July
1994 until June 1996, the Company was allocated 33% of the rent and LVDG was
allocated 67% of the rent. Commencing July 1, 1996 the allocation was
reversed and the Company was allocated 67% of the rent and LVDG was allocated
33%. The Company believes that the rent paid is comparable to that which it
could obtain from an unaffiliated party.
In February 1997, LVDG subleased a majority of the warehouse space and
approximately one-half of the office space to the purchaser in the asset sale.
The purchaser will pay its pro rata share of the rent, but this amount had not
been calculated as of the date this report was filed.
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On July 22, 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
SportPark. The terms of the lease are described above under the heading
"BUSINESS OF THE COMPANY -- ALL AMERICAN SPORTPARK."
ITEM 3. LEGAL PROCEEDINGS.
Except for the lawsuits described 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.
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 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 refused to make any payment to the Company, even the amount
which both parties agreed was reimbursable. The Complaint sought an
unspecified amount of compensatory damages, punitive damages, attorneys' fees
and costs.
In October 1996, a settlement of $3,217,500 was reached and paid to the
Company.
In 1995, Giant Ride, Inc. filed suit in the District Court of Clark
County, Nevada against the Company claiming that the Company had breached a
contract to purchase a giant slide for the Company's Las Vegas SportPark.
Giant Ride, Inc. is seeking an unspecified amount of damages. The Company
denies that it had a contract to purchase such a slide.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION. 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 sales prices
of the Common Stock for the periods indicated.
HIGH LOW
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Year Ended December 31, 1995:
First Quarter $6.25 $4.50
Second Quarter $7.75 $5.625
Third Quarter $8.50 $4.875
Fourth Quarter $6.50 $4.375
Year Ended December 31, 1996:
First Quarter $6.375 $3.625
Second Quarter $7.875 $4.5625
Third Quarter $6.875 $3.875
Fourth Quarter $5.25 $3.25
HOLDERS. The number of holders of record of the Company's $.001 par
value common stock at March 2, 1997, was 24. This does not include
approximately 700 shareholders who hold stock in their accounts at
broker/dealers.
DIVIDENDS. 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.
PRIVATE SALES OF SECURITIES. During July, September and October 1996,
the Company sold an aggregate of 500,000 shares of Series A Convertible
Preferred Stock to Three Oceans, Inc., a subsidiary of Sanyo North America
Corporation for $5,000,000 in cash. Such shares of Series A Convertible
Preferred are convertible into 500,000 shares of the Company's Common Stock.
In connection with this sale, the Company issued an option to Three Oceans,
Inc. to purchase 250,000 shares of the Company's Common Stock at $5.00 per
share. The option expires on July 29, 2001.
In connection with these issuances, the Company relied on Section 4(2)
of the Securities Act of 1933, as amended. The shares were offered for
investment only to an accredited investor and not for the purpose of resale or
distribution, and the transfer thereof was appropriately restricted by the
Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
RESULTS OF OPERATIONS
The Company historically engaged in franchising retail stores which use
the name "Las Vegas Discount Golf & Tennis". The Company received a fee from
each franchise sold and thereafter received a royalty based on the sales
volume at the franchised location. The Company, in return, provided
advertising, training and
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other services to franchisees. As of December 31, 1996, the Company had 45
franchise stores in operation located in 16 states and 2 foreign countries.
In addition to the franchise business, the Company is currently involved in
the development of sport-oriented theme parks under the name "All-American
SportPark."
On February 26, 1997, the Company and Las Vegas Discount Golf & Tennis,
Inc., the majority shareholder of the Company, sold certain assets and
transferred certain liabilities to an unrelated buyer in a transaction
pursuant to an "Agreement for the Purchase and Sale of Assets." The total
consideration received was approximately $5.3 million of which $2.8 million
was allocated to the Company. Specifically, the Company sold all of its
interest in its franchise business, including its rights under agreements with
franchisees, the right to franchise such stores and the rights to related
trademarks. The buyer assumed certain trade payables of the Company and Las
Vegas Discount Golf & Tennis, Inc. The Company expects to recognize a gain of
approximately $2.6 million from this sale in the first quarter of 1997.
The Company's future operations will consist of the development and
operation of sports-oriented theme parks.
1996 VERSUS 1995
DISCONTINUED OPERATIONS
Franchise fees and royalties revenues and expenses have been classified
as discontinued operations due to the disposal of the franchise business
segment.
Franchise fee revenue in 1996 was $240,000 compared to $245,000 in 1995.
Six new franchise locations were sold in both 1996 and 1995. Royalties
generated by the Company's 45 franchise stores in operation in 1996 totaled
approximately $1.2 million. The fifty franchises in operation in 1995 produced
approximately $25,000 more in royalty revenue for the Company.
Selling, general and administrative expenses related to the franchise
business segment totaled $1.7 million for the year ended December 31, 1996,
versus $1.5 million in 1995. The increase is due to higher marketing costs to
secure franchise locations and increases in training and other support service
costs related to administration of the franchise program.
The loss from discontinued operations of $329,000 in 1996 versus $24,400
in 1995 is principally due to increased selling, general and administrative
costs of $195,000 and increased bad debt expense of $52,000 in addition to the
decrease in $25,000 in royalty revenue.
CONTINUING OPERATIONS
INCOME. Interest income decreased from $86,200 in 1995 to $69,800 in
1996. Other income was $25,700 in 1996 versus $8,300 in 1995 representing an
increase in income recognition of deferred income related to advance royalty
payments from an agreement with a national credit card company.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses related to continuing operations consist principally
of payroll, rent and other corporate costs. The increase from $279,100 in
1995 to $305,600 in 1996 relates to an increase in allocated rental expense of
$25,000 related to the SportPark operations.
-11-
<PAGE>
SPORTPARK DEVELOPMENT COSTS. The Company's strategic emphasis at this
point is the development of sports-oriented theme parks under the name "All-
American SportPark." During 1996, the Company expensed $207,000 in
development of this concept versus $108,000 in 1995. The Company has leased a
site for its first "All-American SportPark" development in Las Vegas, Nevada
which is scheduled to open in November 1997 (see discussion under "Liquidity
and Capital Resources.")
INCOME TAXES. Due to operating losses, the Company has no tax provision
nor has it recorded any tax benefits.
NET LOSS. The loss from continuing operations for the year ended
December 31, 1996 of $421,100 compared to a loss of $292,600 in 1995. The
losses are principally attributed to the startup nature of the Company's new
business focus involving the development of the "All-American SportPark"
operations.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996 and 1995, the Company held cash and cash
equivalents of $5,818,100 and $125,100, respectively. Cash used in operating
activities in 1996 was $680,600. This compares to cash provided by operating
activities during 1995 of $661,200.
During the year ended December 31, 1996, the Company's principal source
of cash resulted from the sale of $5 million in Series A Convertible Preferred
Stock through a private placement.
Capital expenditures during the year related primarily to the Company's
on-going development efforts for the "All-American SportPark" concept.
Project development costs, both those expensed and deferred, totaled $763,000
in 1996. In July 1996, the Company entered into a lease for 65 acres of
undeveloped land in Las Vegas, Nevada, which will be the site of the Company's
first "All-American SportPark." As part of the lease arrangements, the
Company was required to post a refundable $500,000 deposit with the lessor.
Capital expenditures for 1997 are expected to be approximately $20
million and relate predominately to the Las Vegas SportPark development. As
previously noted, the Company received initial proceeds of $3.1 million on
February 26, 1997, from the sale of the franchise businesses. The cash
balance for the Company as of February 28, 1997, totals approximately $8.1
million.
Overall, the Company expects to finance future operations and capital
expenditures through its existing cash balance and other financing vehicles
including corporate sponsorships as they relate to the All-American SportPark.
Cash flows from operations in 1997 will be negligible until the November 1997
opening of the All-American SportPark in Las Vegas, Nevada.
SAFE HARBOR PROVISION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Annual Report contains statements that are forward-looking, such as statements
relating to plans for future expansion and other business development
activities, as well as other capital spending, financing sources, the effects
of regulations and competition. Such forward-looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ from those
expressed in any forward-looking statements by or on behalf of the Company.
These risks and uncertainties
-12-
<PAGE>
include, but are not limited to, those relating to development and
construction activities, dependence on existing management, leverage and debt
service (including sensitivity to fluctuations in interest rates), domestic or
global economic conditions (including sensitivity to fluctuations in foreign
currencies), changes in federal or state tax laws or the administration of
such laws, changes in regulations and application for licenses and approvals
under applicable jurisdictional laws and regulations.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements are set forth on pages F-1 through F-18 hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE.
No response required.
-13-
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
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
John A. Hoover, Jr. 42 General Manager of All-American SportParks
Kevin B. Donovan 34 Vice President of New Business Development
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
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.
-14-
<PAGE>
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.
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
-15-
<PAGE>
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.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and certain written representations, no persons who were either a
director, officer, beneficial owner of more than 10% of the Company's common
stock, failed to file on a timely basis reports required by Section 16(a) of
the Exchange Act during the most recent fiscal year, except that Three Oceans,
Inc., a 10% or greater shareholder and its parent, Sanyo North American
Corporation, filed Form 3's late and Hideki Yamagata, a Director of the
Company, did not file a Form 3.
ITEM 10. 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,
1996, 1995 and 1994 from the Company:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
SECURI-
TIES
UNDERLY-
OTHER RE- ING ALL
ANNUAL STRICTED OPTIONS/ OTHER
NAME AND PRINCIPAL COMPEN- STOCK SARs LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S) (NUMBER)PAYOUTS SATION
- ------------------ ---- -------- ------ ------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald S. Boreta, 1996 $120,000 $5,500 $39,160 -- 325,000 -- $8,265
President and CEO <FN2> <FN3>
<FN1> 1995 $100,000 -0- $19,071 -- -0- -- -0-
<FN2>
1994 $100,000 -0- $14,190 -- 110,000 -- -0-
<FN2>
Charles Hohl, 1996 $100,000 $22,000 $10,000 -- -0- -- -0-
Executive Vice <FN5>
President<FN4> 1995 $100,000 -0- $ 2,346 -- -0- -- -0-
<FN5>
_________________
<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
-16-
<PAGE>
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 made by the Company to retirement plans on his behalf. For
1996, these amounts were $14,160 for club memberships and $25,000 to the
Company's Supplemental Retirement Plan.
<FN3>
Represents premiums paid on a life insurance policy for Ronald S. Boreta's
benefit.
<FN4>
Mr. Hohl's employment as Executive Vice President ended on February 26, 1997.
<FN5>
Represents amount contributed to the Company's retirement plan on behalf of
Mr. Hohl.
</FN>
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS/SARs
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARs EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE ($/SH) DATE
- ---------------- ------------ ------------ ----------- ----------
Ronald S. Boreta 125,000 36.1% $4.75 4-16-2001
200,000 57.8% $4.625 4-24-2001
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
SECURITIES
UNDERLYING VALUE OF UNEXER-
SHARES UNEXERCISED CISED IN-THE
ACQUIRED OPTIONS MONEY OPTIONS/
ON SARs AT FY-END SARs AT FY-END
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (NUMBER) REALIZED UNEXERCISABLE UNEXERCISABLE
- ---------------- -------- -------- -------------- ---------------
Ronald S. Boreta -0- -0- 110,000/325,000 $0 / $0
Charles Hohl -0- -0- 40,000/ 20,000 $0 / $0
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. 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, Saint Andrews 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. His salary was in-
-17-
<PAGE>
creased to $120,000 for the year ended December 31, 1996. 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 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 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
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.
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 received a base salary of $100,000 per
year plus annual increases as determined by the Board of Directors. This
employment agreement ended on February 26, 1997, in connection with the sale
of the Company's franchise business and the termination of Mr. Hohl's
employment.
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
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<PAGE>
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 persons who were then 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.
</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. Such
approval will occur on April 15, 1997.
<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> $4.625
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 was not to vest until the Company completed a transaction with a
major business or investor made it probable that the Company will be able to
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<PAGE>
pursue its plan of building and operating Sportparks. This condition was met
in September 1996 as a result of the investment by Three Oceans, Inc. of
$5,000,000 in 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.
SUPPLEMENTAL RETIREMENT PLAN
In November 1996, the Company and its majority shareholder established a
Supplemental Retirement Plan, pursuant to which certain employees selected by
the Company's Chief Executive Officer receive benefits based on the amount of
compensation elected to be deferred by the employee and the amount of
contributions made on behalf of the employee by the Company. Company
contributions to the Supplemental Retirement Plan are immediately vested for
Category I employees, and vest 20% per year of employment for Category II
employees. Vested amounts under the Supplemental Retirement Plan are paid out
over 5 to 20 years upon retirement, disability, death or termination of
employment.
For 1996, Ronald S. Boreta (the President of the Company) was
designated as a Category I employee, and Charles Hohl (then Executive Vice
President of the Company) was designated as a Category II employee. The
Company made contributions to the Supplemental Retirement Plan on behalf of
these persons for 1996 as follows: Ronald S. Boreta - $25,000; and Charles
Hohl - $10,000.
The Company's Board of Directors has not yet determined the amounts, if
any, which will be contributed to the Supplemental Retirement Plan for 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 31, 1997, the stock
ownership of each person known by the Company to be the beneficial owner of
five percent or more of the Company's Common Stock, each Officer and Director
individually, and all Directors and Officers of the Company as a group.
Except as noted, each person has sole voting and investment power with respect
to the shares shown.
<TABLE>
<CAPTION>
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<PAGE>
AMOUNT AND
NAME AND ADDRESS NATURE OF BENE- PERCENT
OF BENEFICIAL OWNERS FICIAL OWNERSHIP OF CLASS
- ------------------------- --------------- --------
<S> <C> <C>
Las Vegas Discount Golf &
Tennis, Inc.<FN1> 2,000,000 66.7%
Suite 10
5325 S. Valley View Blvd
Las Vegas, Nevada 89118
Vaso Boreta 110,000<FN2> 3.5%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Ronald S. Boreta 435,000<FN2> 14.5%
Suite 10
5325 S. Valley View Blvd.
Las Vegas, Nevada 89118
Robert R. Rosburg 5,000<FN2> 0.2%
49-425 Avenida Club La Quinta
La Quinta, California 92253
William Kilmer 5,000<FN2> 0.2%
1500 Sea Breeze Boulevard
Ft. Lauderdale, Florida 33316
Hideki Yamagata 750,000<FN3> 20.0%
666 - 5th Avenue
New York, New York 10103
Three Oceans Inc. 750,000<FN4> 20.0%
2001 Sanyo Avenue
San Diego, California 92173
All Directors and Officers 1,325,000<FN5> 30.6%
as a Group (7 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
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 21.8%
Robert Rosburg 0.1%
William Kilmer 0.1%
John Boreta 12.2%
<FN2>
Represents shares underlying options exercisable within 60 days 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.
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<PAGE>
<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 held by Three Oceans Inc. and 250,000
shares underlying stock options held by Three Oceans, Inc.
<FN5>
Includes shares beneficially held by the five named Directors, 10,000 shares
underlying stock options held by Kevin B. Donovan and 10,000 shares underlying
options held by John Hoover, Executive Officers of the Company.
</FN>
</TABLE>
As of February 28, 1997, there were 33 record holders of the Company's
Common Stock. Based on securities position listings, the Company estimates
that it has approximately 750 beneficial owners of its Common Stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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, starting July 1, 1996 LVDG paid 33% of the
monthly lease payments and the Company paid 67%.
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.
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.
Through February 1997, certain facilities used by the Company and LVDG
were leased by the Company from Vaso Boreta, the Company's Chairman of the
Board. LVDG leased 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. The Board of Directors of the Company believes that the terms of
this lease were at least as favorable as those which could have been obtained
from an unaffiliated entity.
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
-22-
<PAGE>
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 did not pay any royalties to the Company even
though he may have received a benefit from the Company's activities including
any advertising conducted by the Company.
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. During 1996, the amount due was reduced to $36,000 and this amount
was paid. 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, 1996, the Company had a $461,500 receivable from LVDG and its
subsidiaries.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) 3. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- -------------------------- ------------------------------
2 Agreement for the Purchase Incorporated by reference to
and Sale of Assets, as Exhibit 10 to the Registrant's
amended Current Report on Form 8-K
dated February 26, 1997
3.1 Restated Articles of Incorporated by reference to
Incorporation Exhibit 3.1 to the Registrant's
Form SB-2 Registration State-
ment (No. 33-84024)
-23-
<PAGE>
3.2 Certificate of Amendment Incorporated by reference to
to Articles of Incorporation Exhibit 3.2 to the Registrant's
Form SB-2 Registration State-
ment (No. 33-84024)
3.3 Revised Bylaws Incorporated by reference to
Exhibit 3.3 to the Registrant's
Form SB-2 Registration State-
ment (No. 33-84024)
10.1 Employment Agreement with Incorporated by reference to
Ronald S. Boreta Exhibit 10.1 to the Registrant's
Form SB-2 Registration State-
ment (No. 33-84024)
10.2 Stock Option Plan Incorporated by reference to
Exhibit 10.2 to the Registrant's
Form SB-2 Registration State-
ment (No. 33-84024)
10.3 Ground Lease with Summa Incorporated by reference to
Corporation Exhibit 10.3 to the Registrant's
Form SB-2 Registration State-
ment (No. 33-84024)
10.4 Agreement between the Incorporated by reference to
Company and Las Vegas Exhibit 10.4 to the Registrant's
Discount Golf & Tennis, Form SB-2 Registration State-
Inc. ment (No. 33-84024)
10.5 License Agreement between Incorporated by reference to
The Company and Las Vegas Exhibit 10.5 to the Registrant's
Discount Golf & Tennis, Form SB-2 Registration State-
Inc. ment (No. 33-84024)
10.6 Employment Agreement with Incorporated by reference to
Kevin Donovan Exhibit 10.6 to the Registrant's
Form SB-2 Registration State-
ment (No. 33-84024)
10.7 Employment Agreement with Incorporated by reference to
Charles Hohl Exhibit 10.7 to the Registrant's
Form SB-2 Registration State-
ment (No. 33-84024)
10.8 Lease Agreement with A&R Incorporated by reference to
Management and Development Exhibit 10.8 to the Registrant's
Co., et al., and Sublease Form SB-2 Registration State-
to Las Vegas Discount Golf ment (No. 33-84024)
& Tennis, Inc.
10.9 Lease Agreement with Vaso Incorporated by reference to
Boreta, as amended, and Exhibit 10.9 to the Registrant's
Assignment to Las Vegas Form SB-2 Registration State-
Discount Golf & Tennis, Inc. ment (No. 33-84024)
10.10 Letter Agreement with Oracle Incorporated by reference to
One Partners, Inc. Exhibit 10.10 to the Registrant's
Form SB-2 Registration State-
ment (No. 33-84024)
-24-
<PAGE>
10.11 Promissory Note to Vaso Incorporated by reference to
Boreta Exhibit 10.11 to the Registrant's
Form SB-2 Registration State-
ment (No. 33-84024)
10.12 Agreement with Major League Incorporated by reference to
Baseball Properties, Inc. Exhibit 10.12 to the Registrant's
Form 10-KSB for the year ended
December 31, 1995
10.13 License Agreement with Incorporated by reference to
National Association for Exhibit 10.13 to the Registrant's
Stock Car Auto Racing, Inc. Form 10-KSB for the year ended
dated August 1, 1995 December 31, 1995
10.14 Concept Development and Incorporated by reference to
Trademark License Agreement Exhibit 10.14 to the Registrant's
with Callaway Golf Company Form 10-KSB for the year ended
Dated May 23, 1995 December 31, 1995
21 Subsidiaries of the Incorporated by reference to
Registrant Exhibit 21 to the Registrant's
Form 10-KSB for the year ended
December 31, 1995
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the
quarter ended December 31, 1996.
-25-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Saint Andrews Golf Corporation:
We have audited the accompanying consolidated balance sheets of SAINT ANDREWS
GOLF CORPORATION (a Nevada Corporation) and subsidiary as of December 31, 1996
and 1995, and the related consolidated 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 and subsidiary as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
January 17, 1997 (except with respect
to the matter discussed in Note 13,
as to which the date is February 26,
1997)
F-1
<PAGE>
SAINT ANDREWS GOLF CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS-DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $5,818,100 $ 125,100
Lease termination receivable - 3,000,000
Due from Affiliate Store 5,400 -
Due from officer 13,000 -
Receivable from related entities 461,500 60,500
Prepaid expenses and other 17,000 7,400
Other receivables - 365,000
Total current assets 6,315,000 3,558,000
LEASEHOLD IMPROVEMENTS, net of accumulated
depreciation of $29,800 and $26,200,
respectively 83,800 87,400
DEPOSIT FOR LAND LEASE 500,000 -
PROJECT DEVELOPMENT COSTS 1,603,400 1,047,000
OTHER ASSETS - 1,000
NET ASSETS OF DISCONTINUED OPERATIONS 119,500 209,900
$8,621,700 $4,903,300
(Continued)
F-2
<PAGE>
SAINT ANDREWS GOLF CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS-DECEMBER 31, 1996 AND 1995
(Continued)
LIABILITIES AND SHAREHOLDERS EQUITY
1996 1995
---------- ----------
CURRENT LIABILITIES:
Accounts payable $ 661,700 $1,031,900
Accrued expenses 79,900 53,300
Payable to related entities - 2,600
Deferred franchise fees 62,500 60,000
Total current liabilities 804,100 1,147,800
DEFERRED INCOME 91,000 116,700
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER' EQUITY:
Preferred stock, $.01 par value, 5,000,000
shares authorized, no shares issued and
outstanding - -
Series A Convertible Preferred stock, $1
par value, 500,000 shares authorized and
outstanding 4,740,000 -
Options issued in connection with Series A
Convertible Preferred Stock to purchase
250,000 shares of Common stock 260,000 -
Common stock, $.001 par value, 10,000,000
shares authorized, 3,000,000 shares
issued and outstanding at December 31,
1996 and 1995 3,000 3,000
Additional paid-in-capital 3,333,300 3,495,300
Common stock purchase warrants, class A,
authorized and outstanding-1,000,000
warrants 187,500 187,500
Accumulated deficit (797,200) (47,000)
Total shareholders' equity 7,726,600 3,638,800
$8,621,700 $4,903,300
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SAINT ANDREWS GOLF CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---------- ----------
INCOME:
Interest $ 69,800 $ 86,200
Other 25,700 8,300
95,500 94,500
EXPENSES:
Selling, general and administrative 305,600 279,100
Sportpark development costs 207,000 108,000
Interest 4,000 -
Total expenses 516,600 387,100
LOSS BEFORE INCOME TAX PROVISION (421,100) (292,600)
Income tax provision - -
LOSS FROM CONTINUING OPERATIONS (421,100) (292,600)
DISCONTINUED OPERATIONS:
Loss from operations of franchise business
to be disposed of (no income taxes were
recorded in 1996 or 1995) (329,100) (24,400)
NET LOSS $ (750,200) $ (317,000)
LOSS PER SHARE:
Loss from continuing operations $ (.14) $ (.10)
Loss from discontinued operations (.11) (.01)
NET LOSS PER SHARE $ (.25) $ (.11)
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
SAINT ANDREWS GOLF CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
RETAINED
COMMON COMMON EARNINGS
STOCK ADDITIONAL STOCK (ACCUMU-
PREFERRED PURCHASE COMMON PAID IN PURHASE LATED) TOTAL
STOCK OPTIONS STOCK CAPITAL WARRANTS DEFICIT EQUITY
- ------------ --------- -------- ------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31,
1994 $ - - $3,000 $3,495,300 $187,500 $ 270,000 $3,955,800
Net loss - - - - - (317,000) (317,000)
Balance,
December 31,
1995 - - 3,000 3,495,300 187,500 (47,000) 3,638,800
Issuance of
Series A
Convertible
Preferred
Stock 4,740,000 - - (162,000) - - 4,578,000
Issuance of
Common Stock
Purchase Op-
tions in Con-
nection with
Series A Con-
vertible Pre-
ferred Stock 260,000 - - - - 260,000
Net loss - - - - - (750,200) (750,200)
Balance,
December 31,
1996 $4,740,000 $260,000 $3,000 $3,333,300 $187,500 $(797,200) $7,726,600
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SAINT ANDREWS GOLF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (750,200) $ (317,000)
Adjustment to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 10,800 22,000
Changes in assets and liabilities:
Decrease in accounts and notes receivable 35,500 48,900
Decrease in inventories 56,900 16,700
(Increase) decrease in due from officer (13,000) 15,400
(Increase) decrease in prepaid expenses
and other (12,700) 18,800
Decrease (increase) in other receivables 365,100 (143,600)
Increase (decrease) in accounts payable
and accrued expenses (349,800) 883,300
Increase in deferred franchise fees 2,500 -
(Decrease) increase in deferred revenues (25,700) 116,700
Net cash provided by (used in) operating
activities (680,600) 661,200
CASH FLOWS FROM INVESTING ACTIVITIES:
Lease termination receivable 3,000,000 (3,000,000)
Decrease in other assets 1,000 -
Land lease deposit (500,000) -
Project development costs (556,400) (493,300)
Net cash provided by (used in)
investing activities 1,944,600 (3,493,300)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase to Affiliate Store and related
entities (409,000) (284,800)
Net proceeds from issuance of preferred
stock and options to purchase Common Stock 4,838,000 -
Net cash provided by (used in)
financing activities: 4,429,000 (284,800)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,693,000 (3,116,900)
CASH AND CASH EQUIVALENTS,
Beginning of year 125,100 3,242,000
CASH AND CASH EQUIVALENTS,
End of year $5,818,100 $ 125,100
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
SAINT ANDREWS GOLF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(continued)
SUPPLEMENTAL CASH FLOW INFORMATION:
1996 1995
---------- --------
Cash paid for:
Interest $ 4,000 $ -
NON-CASH DISCLOSURES:
During 1995, the Company reclassified deposits totaling $221,500 from other
long-term assets to current assets - other receivables. The Company
subsequently collected the deposit in 1996.
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
SAINT ANDREWS GOLF CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATIONAL STRUCTURE AND BASIS OF PRESENTATION
a. PRINCIPALS OF CONSOLIDATION
The consolidated financial statements of Saint Andrews Golf Corporation
("SAGC"), a Nevada corporation, include the accounts of SAGC and its
subsidiary, All-American Sportpark Inc., a Nevada corporation (collectively
the "Company"). All significant intercompany accounts and transactions have
been eliminated.
b. COMPANY BACKGROUND
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.
Until December 13, 1994, Saint Andrews Golf Corporation 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) at a price of
$4.50 per Unit, 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 expired
on December 13, 1996. The Company is extending the expiration date of the
warrants until written communication is sent to warrant holders that fully
describe the impact of the sale of the franchise business of the Company as
described in Note 1(d). LVDGT currently owns 66-2/3% of the Company's
outstanding common stock.
During July 1994, the Company established a wholly-owned subsidiary,
All-American Sportpark, Inc. which will operate the Company's All-American
Sportparks (see Note 5). As of December 31, 1996, All-American Sportpark,
Inc. had not yet conducted any business.
The Company's Chairman owns 100 percent of the original Las Vegas Discount
Golf & Tennis location opened in Las Vegas, Nevada in 1974. This store, which
is not a franchise store, is referred to herein as the "Affiliated Store" and
operates under an agreement with LVDGT (see Note 3).
c. PRIMARY BUSINESS ACTIVITIES
The primary business activity of the Company has historically been 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."
The Company is also engaged in developing a concept for sports-oriented theme
parks. The theme parks will use the name All-American Sportpark ("Sportpark")
and are 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 restaurant facilities.
F-8
<PAGE>
d. DISCONTINUED OPERATIONS
On December 16, 1996, the Company jointly entered into negotiations pursuant
to an "Agreement for the Purchase and Sale of Assets" (the "Agreement") along
with Las Vegas Discount Golf & Tennis, Inc. which will result in the disposal
of the Company's franchise business. The agreement also provides for the
assignment of all franchisor rights under existing franchise agreements.
Furthermore, the Company assigns all trade names and trade marks associated
with the business. The agreement also includes a covenant not to compete
which prohibits the Company, and its officers and directors from engaging in
the ownership or operation of franchised retail golf equipment outlets within
the continental United States. Certain exemptions have been granted by the
purchaser to Boreta Enterprises, Ltd., a related entity owned by the President
of the Company and the President of Las Vegas Discount Golf & Tennis, Inc.
with respect to the Company's right to own or operate retail golf equipment
outlets in connection with Saint Andrews Golf Corporation's Sportparks or
driving ranges.
The base purchase price to be paid by the buyer to the Company and Las Vegas
Discount Golf & Tennis, Inc. for all of the assets, subject to certain
adjustments for trade payables and inventory related to Las Vegas Discount
Golf & Tennis, Inc. is $5,000,000. To the extent that inventory exceeds trade
payables by $800,000 the base purchase price shall be increased by the excess.
Conversely, to the extent that inventory does not exceed trade payables by
$800,000 the base purchase price shall be reduced by such amount.
The Company's operations after the sale has been consummated will consist
solely of the Sportpark operations currently under development. The sale of
all assets, liabilities and rights related to the franchise business have been
presented as "Discontinued Operations" in the accompanying balance sheets and
statements of operations as of and for the years ended December 31, 1996 and
1995.
Assets and liabilities of the Company's franchise business to be disposed of
consisted of the following at December 31:
1996 1995
-------- --------
Accounts receivable, net of allowance
of $111,400 and $72,400, respectively $270,600 $306,100
Inventory - 57,000
Prepaid and other assets 10,500 7,400
Property, plant and equipment, net 6,000 13,200
Total assets 287,100 383,700
Accounts payable 75,600 82,300
Accrued liabilities 32,000 31,500
Deferred franchise fees 60,000 60,000
Net assets to be disposed of $119,500 $209,900
Revenues related to discontinued operations totaled $1,424,000 and $1,456,000
for the years ended December 31, 1996 and 1995, respectively. The Company and
Las Vegas Discount Golf & Tennis, Inc. anticipate that a gain will be
recognized on the sale of the franchise segment and, accordingly, has deferred
such gain until it is realized.
F-9
<PAGE>
e. 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. 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.
b. ACCOUNTS RECEIVABLE AND DEFERRED INCOME
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. (MBNA) which allows MBNA to use the Company's trademark on its credit
cards. The agreement provides for a $125,000 Advance Royalty payment which
was deferred and is being amortized into income over the 5 year period of the
agreement. LVDGT will receive royalties for the generation of credit card
accounts.
c. SPORTPARK DEVELOPMENT COSTS
The Company has applied an accounting policy regarding capitalization of
project development costs related to the All-American Sportpark concept which
excludes internal overhead costs and includes direct, incremental third party
expenditures including architectural and design costs and licensing
agreements. In July, 1996, SAGC entered into a land lease for the site of its
first All-American Sportpark in Las Vegas, Nevada. Since that time SAGC has
capitalized direct incremental payroll associated with such development.
During the years ended 1996 and 1995, the Company incurred and expensed
$207,000 and $108,000, respectively, in costs for the development of the
Sportpark concept. These costs included certain direct and indirect costs
including salaries and other administrative expenses.
d. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization is
provided for on a straight-line basis over the lesser of the lease term or
estimated useful lives of the assets. Normal repairs and maintenance are
charged to expense when incurred. Expenditures which materially extend the
useful life of assets are capitalized.
e. 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.
F-10
<PAGE>
f. LOSS PER COMMON SHARE
Loss per common share is computed using the weighted average number of common
shares outstanding. Weighted average shares outstanding at December 31, 1996
and 1995 were 3,000,000 shares.
g. CONCENTRATION OF SERVICES
Subsequent to the completion of the sale of the franchise business, the
Company's activities will consist solely of the development of the Sportpark
in Las Vegas, Nevada. There can be no assurance that the Company will be able
to operate the Sportpark on a profitable basis. Further, to expand beyond the
Las Vegas Sportpark will require considerably more financial and management
resources than presently exist at the Company.
h. RECLASSIFICATIONS
Certain reclassifications, which had no impact on the Company's results of
operations, have been made in prior year amounts to conform them to the
current year presentation.
3. RELATED PARTY TRANSACTIONS
The Company has extensive transactions and relationships with LVDGT and
subsidiaries ("the related entities"), the chairman and principal shareholder
of LVDGT, and the retail store owned by the Chairman of LVDGT (the "Affiliated
Store"). 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 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. As of December 31, 1996 and 1995, the Company had $461,500 and
$60,500 in receivables from related entities, respectively, and a $5,400
receivables due from the Affiliated Store as of December 31, 1996. As of
December 31, 1995 the Company also had a $2,600 payable to related entities.
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.
This agreement will expire on July 31, 1997.
The Company had outstanding non-interest bearing advances to the President of
the Company of $13,000 as of December 31, 1996.
F-11
<PAGE>
4. LEASE TERMINATION RECEIVABLE
In May of 1994, the Company entered into a Ground 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 Ground 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 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 Ground 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. The purchaser of the parcel assumed the
obligations relating to the termination of the lease.
Upon notification of the Ground Lease termination, the Company ceased
construction activities and submitted substantiation for construction costs
totaling approximately $3.9 million. Utilizing applicable formulas derived
from the Ground Lease the Company believed that $3,279,465 in costs were
reimbursable by the purchaser who assumed the original lessor's obligations
relating to the lease termination. Based upon all of the information
available as of December 31, 1995 the Company believed that the amount would
be collected in 1996 in the amount of $3,000,000 with regards to this
litigation and, accordingly, recorded the lease termination receivable as a
current asset.
In October, 1996 this matter was settled for $3,217,000 of which $3,000,000
was applied to the lease termination receivable balance while the remaining
$217,000 in proceeds was applied against legal fees incurred with respect to
the matter in the current year.
5. PROJECT DEVELOPMENT COSTS
The Company has a capitalized balance of costs incurred related to the
Sportpark of $1,603,000 and $1,047,000 as of December 31, 1996 and 1995,
respectively. These costs consist primarily of concept development and
design, exclusive long-term licensing fees, consulting fees, training and
procedures manuals for Sportpark operations and computer software. All of the
costs related to the balance as December 31, 1995 were to unrelated
third-parties vendors while the balance as of December 31, 1996 includes
$116,700 in capitalized payroll for those direct, incremental employees
working exclusively on the Las Vegas Sportpark.
SAGC is currently engaged in the planning and design of All-American
Sportparks. The first phase of the All-American Sportpark planned for Las
Vegas, Nevada will consist of an executive golf course and other related
amenities and is scheduled for completion by November 1997. The remaining
components of the project are expected to be completed by year-end 1997.
The Company currently 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 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.
There is no assurance that financing will be obtained from any of these
sources.
F-12
<PAGE>
6. 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
expires on January 31, 2005. The lease provides for initial monthly lease
payments which may be increased based on increases in the consumer price
index. Beginning August 1, 1994, the Company was allocated 33 percent of the
rent with the remaining 67 percent being allocated to LVDGT. Beginning on
July 1, 1996, the Company was allocated 67 percent and LVDGT was allocated 33
percent. Rent expenses for the Company's allocated share of this lease
totaled $76,800 and $51,800 for 1996 and 1995, respectively.
At December 31, 1996, 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 of the Board are as follows:
Year ending
1997 $ 136,700
1998 129,800
1999 128,600
2000 116,700
2001 115,600
Thereafter 577,900
$1,205,300
In July 1996, SAGC entered into a lease for 65 acres of undeveloped land in
Las Vegas, Nevada for the development of its first Las Vegas "All-American
Sportpark". The lease term is for a period of fifteen years with two
consecutive five year renewal periods and commences upon the satisfaction of
certain conditions. These conditions include a determination of economic
feasibility, secured estimates of reasonable infrastructure costs, Federal
Aviation Administration approvals (as the site is located near McCarran
International Airport), and the receipt of all necessary zoning approvals from
other governmental entities.
Beginning the earlier of twelve months after the lease commences, or after
SAGC opens substantially all of the facilities, SAGC will pay the lessor an
annual base amount of $625,000 due in monthly installments of $52,083.
Additionally, the Lease contains contingent rent based upon gross sales at the
park ranging from three to ten percent of the different sources of gross
revenues if such percentage revenues exceed $625,000 annually. If SAGC opens
a portion of the facility prior to the completion of the entire facility, the
fixed monthly rent will be $30,000 per month until the remainder of the
facility is opened. The minimum rent shall be increased at the end of the
fifth year of the term and every five years thereafter by an amount equal to
ten percent of the minimum monthly installment immediately preceding the
adjustment date.
As a condition to the lease, SAGC also entered into a Deposit Agreement which
required SAGC to post a refundable deposit to the lessor of $500,000. The
$500,000 deposit is secured by promissory notes which in turn are
collateralized by a first trust deed in certain unrelated parcels of real
estate owned by the lessor. The deposit will be returned to SAGC if the
conditions previously described are not met.
If SAGC satisfactorily resolves the conditions noted above the $500,000
deposit will be applied as follows: $104,166 as security deposit and the
remainder as prepaid rent to be amortized until exhausted. Future minimum
rental commitments under this lease, assuming the contingencies noted above
are resolved, would be as follows:
F-13
<PAGE>
Year ending
1997 $ 60,000
1998 625,000
1999 625,000
2000 625,000
2001 625,000
Thereafter 7,783,750
$10,343,750
7. INCOME TAXES
The federal income tax provision (benefit) consists of the following at
December 31, 1996 and 1995:
1996 1995
Deferred benefit $(262,600) $(104,700)
Change in deferred tax asset
valuation allowance 262,600 104,700
$ - $ -
Deferred tax assets (liabilities) are related to the following at December 31,
1996 and 1995:
1996 1995
Provision for bad debt $ 39,000 $ 25,000
Deferred franchise fees 43,000 41,000
Vacation accrual 11,000 11,000
Commissions (7,000) (5,000)
Depreciation (2,000) (2,000)
Net operating loss carryforward 373,300 124,700
Other, net 1,000 1,000
458,300 195,700
Valuation allowance (458,300) (195,700)
Net deferred tax asset $ - $ -
A reconciliation of income tax expense computed by applying the federal
statutory income tax rate to the Company's income from continuing operations
before provision (benefit) for income taxes is as follows:
1996 1995
----------------- -----------------
Amount % Amount %
Federal income tax
provision (benefit)
at statutory rate $(262,600) (35) $(107,800) (34)
Change in deferred tax
asset valuation allowance 262,600 35 104,700 33
Other - - 3,100 1
$ - - $ - -
As of December 31, 1996, the Company has net operating loss carryforwards of
$875,000 which are available through 2010.
F-14
<PAGE>
8. 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 authorizing the issuance of up to 300,000 shares of the
Company's common stock. On April 16, 1996, the Board of Directors voted to
increase the number of authorized shares by 500,000 and on April 24, 1996
voted to increase total shares eligible for grant to 700,000. Three hundred
thousand options to purchase shares of common stock of Saint Andrew Golf
Corporation at an exercise price of $5.00 per share were granted in 1994. Two
hundred and forty thousand of these options are exercisable anytime on or
before August 8, 1999 while the remaining 60,000 options vest in increments of
20,000 annually commencing on August 8, 1995.
In April 1996, a total of 377,000 options were granted in connection with the
increase in shares available. These grants increased the total shares issued
under the plan to 677,000. All of the shares issued in April 1996 are
exercisable at an exercise price ranging between $4.625 and $4.75 through
April 2001. Three hundred and sixty-seven thousand of the shares are
exercisable anytime while 10,000 shares vest ratably over a four year period.
All shares issued by the Board of Directors in 1996 are subject to shareholder
approval which is anticipated to occur on April 16, 1997. The exercise price
was equal to or exceeded the fair market value of the common stock at the date
of grant. At December 31, 1996, 23,000 additional shares are reserved for
future options.
b. PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of preferred stock. As of
December 31, 1996, there were no preferred shares issued or outstanding.
c. SERIES A CONVERTIBLE PREFERRED STOCK
On July 11, 1996 the SAGC Board of Directors authorized the creation of
500,000 shares of Series A Convertible Preferred Stock with a $.001 par value.
On July 29, 1996, SAGC entered into an agreement which resulted in the sale,
on an installment basis, of the 500,000 shares of the Series A Convertible
Preferred Stock to Three Oceans Inc. ("TOI"), an affiliate of Sanyo North
America Corporation, at $10.00 per share for a total of $5,000,000. The
agreement also resulted in the assignment of certain rights to TOI. All
proceeds related to the agreement were received in accordance with the stated
terms to this agreement on October 7, 1996. Issuance costs totaling $162,000
were incurred related to the preferred stock and have been netted against
retained earnings.
Each share of the Series A Convertible Preferred Stock issued to TOI is
convertible at the option of TOI into one share of SAGC's common stock. In
the event of liquidation or dissolution of the Company, each share of Series A
Convertible Preferred Stock will have a $10.00 liquidation preference over all
other shareholders. In addition, holders of the Series A Convertible
Preferred Stock shall be entitled to receive dividends at a rate equal to the
rate per share payable to common stock holders, assuming conversion of the
Preferred shares. The Preferred shares can be redeemed by the Company upon a
registration statement being declared effective by the Securities and Exchange
Commission covering the issuance of the common stock upon conversion of the
Preferred Stock and the following two conditions being satisfied: (1) SAGC
earns $1,000,000 of pre-tax income for a fiscal year according to the year-end
audited financial statements; and (2) the closing bid price for the Company s
common stock is at
F-15
<PAGE>
least $15.00 for 20 consecutive trading days. If SAGC notifies TOI of its
intent to redeem the Preferred Stock, TOI will have at least 30 days to elect
to convert its Preferred Stock or accept the redemption price of $12.50. Each
share of Series A Convertible Preferred Stock is entitled to vote along with
the holders of SAGC's common stock.
The rights granted to TOI in accordance with the agreement include the
following: (1) rights of first refusal with respect to debt and or equity
financing arrangements for Sportparks developed by SAGC's subsidiary
All-American Sportpark, Inc. for a period of 5 years commencing July 29, 1996
and for a period of 3 years for Anaheim, California and Las Vegas, Nevada, (2)
an obligation to obtain electrical and electronic equipment for such
Sportparks for a period of 5 years, (3) certain signage rights for TOI or its
designees at the first two Sportparks and (4) other miscellaneous rights as
defined. Pursuant to the agreement, SAGC also granted TOI an option to
purchase up to 250,000 shares of SAGC's common stock at $5.00 per share for a
period of 5 years from the date of the agreement.
The agreement also 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, SAGC expanded the number of Directors of SAGC from
four to five, and elected Hideki Yamagata as a Director of SAGC. Mr. Yamagata
is president of Three Oceans Inc.
d. 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. In connection with the December 1996
announcement by the Company that they had entered into a letter of intent to
sell the franchise business segment (see Note 1), the expiration date of the
Class A Warrants has been extended until after the sale is completed and
written communication to the warrantholders that fully describes the impact of
the sale occurs.
In connection with the initial 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 December 31, 1996, no warrants have been exercised.
e. ACCOUNTING FOR STOCK-BASED COMPENSATION
In 1995, 80,000 options were granted with exercise prices ranging between
$5.00 and $6.00. However, these options expired due to the fact that the
Company's shareholders did not approve the amendment to the 1994 Plan which
would have increased the number of shares eligible for grant.
F-16
<PAGE>
The 377,000 options granted in 1996 are also subject to shareholder approval
which will be put to a vote in April 1997. As these options are not
authorized, no pro forma compensation expense and pro forma net income
disclosures required under Statement of Financial Accounting Standards No. 123
has been presented.
10. 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 provides for purchases of
certain investment vehicles by eligible employees through annual payroll
deductions of up to 15% of base compensation. For 1996 and 1995, the Company
matched 50% and 25%, respectively, of employees contributions up to a maximum
of 6% and 1-1/2% of an employee's base compensation. The Company had expenses
related to the Plan of $34,300 and $13,200 for 1996 and 1995, respectively.
11. SUPPLEMENTAL NON-QUALIFIED RETIREMENT PLAN
In 1995, the Company entered into a Supplemental Retirement Plan for certain
key employees of which the President of SAGC is included. This plan became
effective on January 1, 1996. During 1996, the Company expensed $35,000
related to the plan.
12. 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 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 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.
In December 1994, the Company entered into an agreement with Major League
Baseball ("MLB") concerning a license for the use of MLB logos, trade 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 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 trade marks at its
baseball batting stadiums is dependent upon certain conditions set forth in
the agreement.
In May 1996, the Company entered into an agreement with Jeff Gordon, the 1995
NASCAR Winston Cup Champion and the 1997 Daytona 500 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).
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 standalone NASDCAR SpeedPark.
F-17
<PAGE>
In January 1997, the Company entered into a non-binding letter of intent with
the Pepsi-Cola Company ("Pepsi") concerning an exclusive sponsorship
agreement. Under the proposed agreement, Pepsi would receive certain
exclusive rights related to soft drinks, tea products, juice products, bottled
water and similar products in exchange for a series of payments beginning when
the SportPark opens. The rights to be granted to Pepsi are expected to
include that Pepsi's products will be exclusively sold for the categories
listed, that only Pepsi identified cups will be used in the SportPark, and
that Pepsi would have the right to name the arena. In addition, the agreement
is expected to provide that Pepsi will provide the equipment needed to
dispense its products at the SportPark. The Company also anticipates that the
agreement with Pepsi will provide that the Company and Pepsi will participate
in joint marketing programs such as promotions on Pepsi's products and local
radio advertising.
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.
13. SUBSEQUENT EVENT
On February 26, 1997, Las Vegas Discount Golf & Tennis, Inc. and the Company
completed the sale of certain of their assets and transferred certain
liabilities to an unrelated buyer who has incorporated under the name Las
Vegas Golf & Tennis, Inc. in a transaction whose terms were substantially in
accordance with the "Agreement for the Purchase and Sale of Assets" described
in Note 1. The total consideration received was $5.3 million of which $4.6
million was paid in cash, $264,000 was received in the form of a short-term
receivable, $200,000 was placed in escrow pending the accounting for inventory
and trade payables, and $200,000 was placed in escrow for two years to cover
potential indemnification obligations. Of the total consideration received,
approximately $2,750,000 was allocated to SAGC.
F-18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunder duly authorized.
SAINT ANDREWS GOLF CORPORATION
Dated: April 15, 1997 By /s/ Ronald S. Boreta
Ronald S. Boreta, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Vaso Boreta Chairman of the Board April 15, 1997
Vaso Boreta and Director
/s/ Ronald S. Boreta President, Treasurer April 15, 1997
Ronald S. Boreta (Chief Executive
Officer, Principal
Financial and Account-
ing Officer) and Director
/s/ Robert S. Rosburg Director April 15, 1997
Robert S. Rosburg
/s/ William Kilmer Director April 15, 1997
William Kilmer
__________________________ Director
Hideki Yamagata
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages F-2 and F-3 of the
Company's Form 10-KSB for the fiscal year ended December 31, 1996, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,818,100
<SECURITIES> 0
<RECEIVABLES> 461,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,315,000
<PP&E> 113,600
<DEPRECIATION> 29,800
<TOTAL-ASSETS> 8,621,700
<CURRENT-LIABILITIES> 804,100
<BONDS> 0
0
4,740,000
<COMMON> 3,000
<OTHER-SE> 2,983,600
<TOTAL-LIABILITY-AND-EQUITY> 8,621,700
<SALES> 0
<TOTAL-REVENUES> 95,500
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 516,600
<LOSS-PROVISION> (421,100)
<INTEREST-EXPENSE> (4,000)
<INCOME-PRETAX> (421,100)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (329,100)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (750,200)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
