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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File Number: 0-24970
SAINT ANDREWS GOLF CORPORATION
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0203976
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5325 South Valley View Boulevard, Suite 10, Las Vegas, Nevada 89118
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(Address of principal executive offices including zip code)
(702) 798-7777
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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___
As of November 15, 1997, 3,000,000 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X
SAINT ANDREWS GOLF CORPORATION
FORM 10-QSB
INDEX
Page No.
Part I: Financial Information
Item 1. Financial Information:
Unaudited Condensed Consolidated Balance Sheets 3
Unaudited Condensed Consolidated Statements of
Income 4
Unaudited Condensed Consolidated Statement of
Cash Flows 6
Notes to Unaudited Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis or Plans
of Operations 9
Part II: Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security
Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
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SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1997 1996
------------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,423,000 $ 5,818,000
Other receivables 37,000 480,000
Prepaid expenses and other 24,000 17,000
Preopening expenses 386,000 -
----------- -----------
Total current assets 1,870,000 6,315,000
FURNITURE, EQUIPMENT AND
LEASEHOLD IMPROVEMENTS, NET 144,000 84,000
PROJECT DEVELOPMENT COSTS 13,657,000 2,103,000
NET ASSETS OF DISCONTINUED OPERATIONS - 120,000
----------- -----------
$15,671,000 $ 8,622,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,328,000 $ 742,000
Deferred income - 63,000
Other payables - -
Income taxes payable 113,000 -
----------- -----------
Total current liabilities 1,441,000 805,000
DEFERRED INCOME 143,000 91,000
NOTE PAYABLE 3,938,000 -
MINORITY INTEREST 750,000 -
STOCKHOLDERS' EQUITY:
Common stock 3,000 3,000
Preferred stock 4,740,000 4,740,000
Options issued in connection with
preferred stock 260,000 260,000
Additional paid in capital 3,333,000 3,333,000
Common stock purchase warrants 187,000 187,000
Retained earnings (deficit) 876,000 (797,000)
----------- -----------
Total stockholders' equity 9,399,000 7,726,000
----------- -----------
$15,671,000 $ 8,622,000
NOTE: The balance sheet at December 31, 1996 has been taken from the
consolidated audited financial statements at that date and condensed.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED
STATEMENTS OF INCOME
For the Three Months
Ended September 30,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
REVENUES:
Interest income $ 45,000 $ -
Royalties 6,000 -
Other key money 1,000 -
----------- -----------
Total revenues 52,000 -
EXPENSES:
Selling, general and administrative 177,000 107,000
SportPark development costs - 6,000
----------- -----------
Total expenses 177,000 113,000
LOSS BEFORE PROVISION FOR INCOME TAXES (125,000) (113,000)
PROVISION (BENEFIT) FOR INCOME TAXES - -
----------- -----------
LOSS FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST (125,000) (113,000)
DISCONTINUED OPERATIONS
Income (loss) from operations of dis-
continued franchise operations - (11,000)
Additional gain on disposal of
franchise operations (less applicable
income taxes of $450,000) - -
----------- -----------
NET LOSS $ (125,000) $ (124,000)
INCOME (LOSS) PER SHARE:
Income (loss) from operations $ (.04) $ (.04)
Income (loss) from discontinued
operations - -
----------- -----------
NET INCOME (LOSS) PER SHARE $ (.04) $ (.04)
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED
STATEMENTS OF INCOME
For the Nine Months
Ended September 30,
1997 1996
---------- ----------
(Unaudited) (Unaudited)
INCOME:
Interest income $ 208,000 $ 5,000
Royalties 18,000 -
Other 5,000 -
----------- -----------
Total revenues 231,000 5,000
EXPENSES:
Selling, general and administrative 527,000 315,000
SportPark development costs 152,000 207,000
----------- -----------
Total expenses 679,000 522,000
LOSS BEFORE PROVISION FOR INCOME TAXES (448,000) (517,000)
PROVISION (BENEFIT) FOR INCOME TAXES - -
----------- -----------
LOSS FROM CONTINUING OPERATIONS BEFORE
MINORITY INTEREST (448,000) (517,000)
Loss from operations of discontinued
franchise operations (41,000) (26,000)
Gain on disposal of franchise operations
(less applicable income taxes of
$450,000) 2,162,000 -
----------- -----------
NET INCOME (LOSS) $ 1,673,000 $ (543,000)
INCOME (LOSS) PER SHARE:
Income (loss) from operations $ (.15) $ (.07)
Income (loss) from discontinued
operations .70 (.01)
----------- -----------
NET INCOME (LOSS) PER SHARE $ .55 $ (.08)
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SAINT ANDREWS GOLF CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
For the Nine Months
Ended September 30,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,673,000 $ (543,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 6,000 16,000
Gain on sale of franchise operations (2,612,000) -
Changes in assets and liabilities:
Decrease in accounts receivable 271,000
Decrease in other receivables 443,000 21,000
Increase in inventory - (57,000)
Increase in lease termination receivable - (123,000)
(Increase) decrease in prepaid
expenses and other 4,000 407,000
Increase in preopening expenses (386,000) -
Increase (decrease) in accounts payable 478,000 (68,000)
Increase (decrease) in deferred income (71,000) 63,000
Increase in other payables - 459,000
Increase in income tax payable 113,000 -
----------- -----------
Net cash provided (used) by operating
activities (81,000) 289,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Project development costs (11,554,000) (986,000)
Development cost refund - 85,000
Purchases of equipment (136,000) -
Proceeds from sale of franchise operations 2,688,000 -
----------- -----------
Net cash provided (used) by investing
activities (9,002,000) (901,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from preferred stock - 4,000,000
Preferred stock issuance costs (162,000)
Proceeds from note payable 3,938,000 -
Proceeds from minority interest in
Callaway Golf Center 750,000 -
----------- -----------
Net cash provided by financing activities 4,688,000 3,838,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (4,395,000) 3,226,000
CASH AND CASH EQUIVALENTS-Beginning of period 5,818,000 125,000
----------- -----------
CASH AND CASH EQUIVALENTS-End of period $ 1,423,000 $ 3,351,000
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SAINT ANDREWS GOLF CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1. CONDENSED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements include the
accounts
of Saint Andrews Golf Corporation and its wholly-owned subsidiary All-American
SportPark, Inc. (collective, the "Company"). All significant intercompany
transactions have been eliminated.
The accompanying financial statements have been prepared by the Company without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments necessary to present
fairly the financial position, results of operations and cash flows at September
30, 1997 and for all periods presented have been made.
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. The total purchase 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
unsecured 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 $2,688,000 was allocated to the Company.
The Company's operations, subsequent to the sale, consist solely of the
SportPark
facility which is currently under development on the Las Vegas strip in Las
Vegas, Nevada. The assets, liabilities and operations related to the franchise
business have been presented as "Net Assets of Discontinued Operations" and
"Discontinued Operations," respectively, in the accompanying balance sheet at
December 31, 1996 and statement of operations as of and for the three and nine
months ended September 30, 1997 and 1996.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's December 31, 1996 audited financial
statements. The results of operations for the periods ended September 30, 1997
and 1996 are not necessarily indicative of the operating results for the full
year.
NOTE 2. EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share,"
effective for fiscal years ending after December 15, 1997. The Company will
adopt SFAS 128 for the year ending December 31, 1997. SFAS 128 requires the
computation and presentation of basic and diluted earnings per share for all
periods an income statement is presented. For the three and nine months ended
September 30, 1997 and 1996 the proforma calculations were as follows:
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September 30, 1997 September 30, 1996
Three Months Basic Diluted Basic Diluted
----- ------- ----- -------
Income (loss) from operations $(.04) $(.04) $(.04) $(.04)
Loss from discontinued operations - - - -
----- ------- ----- -------
Net income (loss) per share $(.04) $(.04) $(.04) $(.04)
September 30, 1997 September 30, 1996
Nine Months Basic Diluted Basic Diluted
----- ------- ----- -------
Income (loss) from operations $(.15) $(.15) $(.07) $(.07)
Loss from discontinued operations .70 .70 (.01) (.01)
----- ----- ----- -----
Net income (loss) per share $ .55 $ .55 $(.08) $(.08)
Options to purchase 657,000 and 677,000 shares of common stock were outstanding
at September 30, 1997 and 1996, respectively. On June 9, 1997, the Board of
Directors approved the repricing of 617,000 of the outstanding stock options
granted under the 1994 Stock Option Plan at an exercise price of $3.06 per
share,
which was the average price on that day. The remaining 40,000 options retained
their original exercise price of $5.00. These options had exercise prices of
$4.625 to $5.40 at September 30, 1997 and of $5.00 to $5.40 at September 30,
1996, respectively, prior to the repricing.
NOTE 3. NOTE PAYABLE AND AGREEMENT WITH CALLAWAY
On June 13, 1997 the Company and Callaway Golf Company ("Callaway") announced
the
formation of the All American Golf, LLC, a limited liability California
corporation, to construct, manage and operate "Callaway Golf Center", a premier
golf facility at the site of the All-American Sportpark. The total budgeted
costs for the Callaway Golf Center are approximately $9.0 million.
Callaway will provide $5,250,000 in debt financing which bears interest at 10
percent with interest only payments commencing 60 days after the opening of the
golf center through a date ten years after the opening at which point the
remaining accrued interest and principal will be due in full. As of September
30, 1997, $3,937,500 had been drawn under this agreement. On November 12, 1997
Callaway remitted the remaining $1,312,500 pursuant to the Agreement. The
Company owns 80 percent of the members' units of the LLC while Callaway
purchased
the remaining 20 percent for $750,000. The minority interest presented in the
accompanying financial statements represents Callaway's interest in All American
Golf, LLC. The Company will manage the driving range, golf course and tenant
facilities in the clubhouse.
NOTE 4. STATEMENT OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers all highly
liquid debt investments purchased with a maturity of three months or less to be
cash equivalents.
Cash paid during the nine months ended on: September 30,
1997 1996
-------- --------
Interest - $ 31,000
Income taxes $338,000 -
-8-
NOTE 5. COMMITMENTS AND CONTINGENCIES
In December 1994, the Company entered into an agreement with Major League
Baseball ("MLB") concerning a license for the use of MLB logos, marks and
mascots
in the decor, advertising and promotions of the Company's Slugger Stadium
concept. This agreement was amended during August 1997. Pursuant to the
amended
agreement, the Company holds the exclusive right to identify its indoor and
outdoor baseball batting stadiums as Major League Baseball Slugger Stadiums.
The
license covers the United States and expires on November 30, 2000, subject to
the
right to extend for three additional years provided certain conditions are met.
As consideration for the license, the Company agreed to pay $50,000 for each
stadium opened provided that in any year of the term of the agreement a stadium
is not opened, the Company must pay $50,000 during such year. The Company has
made the payments required for 1995 and 1996. In addition to and as an offset
against the minimum payments set out above, the company is required to pay to
MLB
a royal based on the revenue from the batting cages of the great of (i) six and
one-quarter percent (6-1/4%) or (ii) the royalty rate payable by the Company to
any other individual or entity for the right to open or operate any attraction
or event in the Sports Entertainment Complex.
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.
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 operations of SpeedParks as a
part
of the All-American SportPark or as a stand-alone NASCAR SpeedPark.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
SALE OF FRANCHISE OPERATIONS.
On December 16, 1996, the Company entered into an agreement to sell its
franchise
operations including all rights under existing franchise agreements; all trade
names and trademarks; specific depreciable assets and a modified covenant not to
compete. The sale was consummated on February 26, 1997 with the Company
receiving proceeds of $2,688,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Total income increased $52,000 compared to 1996. The increase in income was
attributable primarily to an increase in interest income resulting from the
increase in cash on interest bearing accounts.
Selling, general and administrative expenses were $70,000 (65%) higher than in
the prior year as a result of increased advertising costs and personnel
associated with the Sportpark. No Sportpark development costs were incurred in
the quarter as all Company personnel were dedicated the opening of the Callaway
Golf Center which occurred on October 1, 1997 and continuing development of the
Sportpark.
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NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
Total revenues increased to $231,000 from $5,000 for the same period in 1996.
The increase in revenues was primarily attributable to increased interest income
resulting from the increase in cash on interest bearing accounts.
Selling, general and administrative expenses were $212,000 (70%) higher than in
the prior year as the result of a $100,000 bonus paid to the Company's President
and increased advertising and personnel costs associated with the Sportpark.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had working capital of approximately $429,000
as compared to working capital of approximately $5,419,000 at December 31,
1996.
Cash decreased from $5,818,000 at December 31, 1996, to $1,423,000 at September
30, 1997. This decrease in cash was attributable to Sportpark expenditures of
$11,554,000 and was offset by $2,688,000 in proceeds from the sale of franchise
operations; $4,688,000 in debt and minority interest proceeds from Callaway for
the golf facility.
On June 13, 1997 the Company and Callaway Golf Company ("Callaway") announced
the
formation of the All American Golf, LLC, a limited liability California
corporation, to construct, manage and operate "Callaway Golf Center", a premier
golf facility at the site of the All-American Sportpark. The total budgeted
costs for the Callaway Golf Center are approximately $9.0 million. Callaway
Golf
will provide $5,250,000 in debt financing which bears interest at 10 percent
with
interest only payments commencing 60 days after the opening of the golf center
through a date ten years after the opening at which point the remaining accrued
interest and principal will be due in full. As of September 30, 1997,
$3,937,500
had been drawn under this agreement. On November 12, 1997 Callaway remitted the
remaining $1,312,500 pursuant to the Agreement. The Company owns 80 percent of
the members' units of the LLC for a contribution of $3 million while Callaway
Golf owns 20% for a contribution of $750,000. The Callaway Golf Center
commenced
operations on October 1, 1997. The Company will manage the driving range, golf
course and tenant facilities in the clubhouse.
While the Company has entered into the Callaway arrangement as previously
described, the Company currently has not secured financing for the construction
of the sports entertainment complex portion of the 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. As
of September 30, 1997 a non-refundable fee of $70,000 was received from CTS who
will operate the amusement portion of the SportsPark. This amount has been
deferred and will be amortized over the life of the agreement. Additionally, in
November the Company received the remaining $30,000 from CTS pursuant to the
agreement as well as $100,000 from Sports Service which will operate the food
concessions for the Golf Center and Sportpark. The Company expects to receive
the balance of the financing from a combination of sources including sponsorship
and tenant fees, outside equity and/or debt investors, bank financing, and the
Company's own cash. There is no assurance that required financing will be
obtained from any of these sources.
FACTORS AFFECTING FORWARD-LOOKING INFORMATION
This Report contains forward-looking statements within the meaning of Section
21E
of the Securities Exchange Act of 1934, as amended. Among others, such forward-
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looking statements include statements with respect to (i) the availability to
the
Company of additional equity and/or debt proceeds on terms acceptable to the
Company and at the times necessary to satisfy capital expenditure, debt
repayment
and other requirements, (ii) the availability of operating cash flow in amounts
and at the times anticipated by management, (iii) the adequacy of budgeted
amounts for capital expenditure projects and the adequacy of the Company's
liquidity and capital resources generally, and (iv) the anticipated time of
completion of capital projects.
These forward-looking statements involve important risks and uncertainties, many
of which will be beyond the control of the Company, and which could
significantly
affect anticipated future results, both short-term and long-term. As a result,
actual results may differ, in some cases materially, from those anticipated or
contemplated by forward-looking statements in this Report. In addition to the
cautionary statements included in this section and elsewhere throughout this
Report, attention is directed to the cautionary statements included in the
Company's other publicly available reports filed with the Securities and
Exchange
Commission under the Securities Exchange Act of 1934, including without
limitation the cautionary statements set forth or referenced in the Company's
Form 10-KSB for the year ended December 31, 1996, under the caption "Part II,
Item 6., Management's Discussion and Analysis or Plan of Operations - Safe
Harbor
Provision."
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAINT ANDREWS GOLF CORPORATION
Date: November 15, 1997 By:/s/ Ronald Boreta
Ronald Boreta, President and Chief
Financial Officer
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited
condensed balance sheets and unaudited condensed statements of income found on
pages 3 and 4 of the Company's Form 10-QSB for the year to date, and is
qualified
in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 1,423,000
<SECURITIES> 0
<RECEIVABLES> 37,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,870,000
<PP&E> 144,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,671,000
<CURRENT-LIABILITIES> 1,441,000
<BONDS> 0
<COMMON> 3,000
0
4,740,000
<OTHER-SE> 4,656,000
<TOTAL-LIABILITY-AND-EQUITY> 15,671,000
<SALES> 0
<TOTAL-REVENUES> 231,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 679,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (448,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 2,121,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,673,000
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
