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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 June 30, 2000
Commission File Number: 0-24970
ALL-AMERICAN SPORTPARK, INC.
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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)
6730 South Las Vegas Boulevard, Las Vegas, Nevada 89119
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(Address of principal executive offices including zip code)
(702) 798-7777
---------------------------
(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 August 11, 2000, 3,150,000 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X
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ALL-AMERICAN SPORTPARK, INC.
FORM 10-QSB
INDEX
Page Number
PART I: FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations
Three Months Ended June 30, 2000 and 1999 5
Consolidated Statements of Operations
Six Months Ended June 30, 2000 and 1999 6
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or
Plan of Operation 13
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security
Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
2
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ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 260,204 $ 118,796
Accounts receivable 142,855 122,847
Inventory 38,908 52,796
Prepaid expenses and other 336,285 231,251
----------- -----------
Total current assets 778,252 525,690
Leasehold improvements and equipment, net 23,169,833 24,040,832
Due from related entities 847,933 588,051
Due from affiliated stores 162,581 123,243
Note receivable - related party 20,000 20,000
Debt issuance costs, net 333,459 353,425
Deposit for land lease 37,821 37,821
Other assets 36,060 21,311
----------- -----------
Total assets $25,385,939 $25,710,373
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
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ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
(Unaudited)
Current liabilities:
Current portion of long-term debt $13,104,813 $13,102,310
Current portion of obligations under
capital leases 122,557 164,897
Accounts payable and accrued expenses 3,170,261 2,184,624
----------- -----------
Total current liabilities 16,397,631 15,451,831
Note payable to shareholder 1,543,553 1,484,616
Due to affiliated stores 470,980 408,254
Due to related entities 1,534,845 1,389,931
Long-term debt, net of current portion 542,442 570,527
Obligation under capital leases, net
of current portion 299,229 395,505
Deferred income 780,464 694,396
----------- -----------
Total liabilities 21,569,144 20,395,060
Shareholders' equity:
Series A Convertible Preferred stock,
$.001 par value, 500,000 shares
authorized and outstanding at June 30,
2000 and December 31, 1999 4,740,000 4,740,000
Series B Convertible Preferred Stock,
$.001 par value, 250,000 shares
authorized and outstanding at June 30,
2000 and December 31, 1999 2,500,000 2,500,000
Options issued in connection with Series A
Convertible Preferred Stock to purchase
250,000 shares of Common stock 260,000 260,000
Options issued in connection with
financing 174,000 174,000
Common stock, $.001 par value, 10,000,000
shares authorized, 3,150,000 and
3,000,000 shares issued and outstanding
at June 30, 2000 and December 31, 1999,
respectively 3,150 3,000
Additional paid-in-capital 3,637,380 3,520,800
Accumulated deficit (7,497,735) (5,882,487)
----------- -----------
Total shareholders' equity 3,816,795 5,315,313
----------- -----------
Total liabilities and shareholders'
equity $25,385,939 $25,710,373
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
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ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
Revenues:
SportPark Las Vegas $ 1,037,180 $ 1,174,911
Callaway Golf Center[TM] 590,246 525,767
Other 10,069 6,250
----------- -----------
Total revenues 1,637,495 1,706,928
Cost of Revenues:
SportPark Las Vegas 213,439 362,676
Callaway Golf Center[TM] 74,121 98,323
----------- -----------
Total cost of revenues 287,560 460,999
----------- -----------
Gross profit 1,349,935 1,245,929
Operating expenses:
Selling, general and administrative 1,272,259 1,512,909
Depreciation and amortization 424,417 414,271
----------- -----------
Total operating expenses 1,696,676 1,927,180
----------- -----------
Operating loss (346,741) (681,251)
----------- -----------
Other income (expense):
Interest income (expense), net (376,421) (376,706)
----------- -----------
Loss before provision (benefit) for
income taxes (723,162) (1,057,957)
Provision (benefit) for income taxes - -
----------- -----------
Net loss (723,162) (1,057,957)
=========== ===========
NET LOSS PER SHARE:
Basic and Diluted:
Net loss per share $ (0.23) $ (0.35)
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
5
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ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
Revenues:
SportPark Las Vegas $ 1,943,863 $ 2,130,648
Callaway Golf Center[TM] 1,236,592 1,008,770
Other 20,436 12,500
----------- -----------
Total revenues 3,200,891 3,151,918
Cost of Revenues:
SportPark Las Vegas 446,587 582,110
Callaway Golf Center[TM] 197,370 169,453
----------- -----------
Total cost of revenues 643,957 751,563
----------- -----------
Gross profit 2,556,934 2,400,355
Operating expenses:
Selling, general and administrative 2,555,228 2,774,988
Depreciation and amortization 858,323 819,114
----------- -----------
Total operating expenses 3,413,551 3,594,102
----------- -----------
Operating loss (856,617) (1,193,747)
----------- -----------
Other income (expense):
Interest income (expense), net (758,631) (722,865)
----------- -----------
Loss before provision (benefit) for income
taxes (1,615,248) (1,916,612)
Provision (benefit) for income taxes - -
----------- -----------
Net loss (1,615,248) (1,916,612)
=========== ===========
NET LOSS PER SHARE:
Basic and Diluted:
Net loss per share $ (0.52) $ (0.64)
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
6
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ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,615,248) $(1,916,612)
Adjustment to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 858,323 1,006,893
Gain on sale of equipment (3,818) -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (20,008) 385,465
(Increase) decrease in inventories 13,888 (2,982)
Increase in prepaid expenses and other (3,053) (193,964)
Increase in accounts payable and accrued
expenses 985,637 267,977
Increase (decrease) in deferred income 86,068 (18,649)
----------- -----------
Net cash provided by (used in) operating
activities 301,789 (471,872)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Leasehold improvements expenditures (71,585) -
Proceeds from sale of equipment 35,964 (540,529)
----------- -----------
Net cash used in investing activities (35,621) (540,529)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to Affiliated Stores and
Related Entities (91,580) (44,530)
Increase (decrease) in notes payable and
notes payable to shareholder and related
entity 33,355 (462,543)
Principal payments on capital leases (66,535) (64,451)
----------- -----------
Net cash used in financing activities (124,760) (571,524)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 141,408 (1,583,925)
----------- -----------
CASH AND CASH EQUIVALENTS, Beginning of
period 118,796 2,494,300
----------- -----------
CASH AND CASH EQUIVALENTS, End of period $ 260,204 $ 910,375
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 36,041 $ 677,806
=========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment financed through notes and
capital leases $ - $ 39,847
=========== ===========
Common stock issued in exchange for
consulting services $ 116,730 $ -
=========== ===========
Capital lease obligation reduced in
connection with sale of equipment $ 72,081 $ -
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
7
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ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements include the
accounts of All-American SportPark, Inc. ("AASP"), a Nevada corporation, and
its subsidiaries, All-American Golf Center, Inc. ("AAGC"), and SportPark Las
Vegas, Inc. ("SPLV"), (collectively the "Company"). All significant
inter-company accounts and transactions have been eliminated. The operations
of the All-American SportPark facility are included in SPLV. The operations
of the Callaway Golf Center ("CGC") are included in AAGC.
The accompanying financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission relating to interim financial statements. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. In the opinion of management, all necessary adjustments
have been made to present fairly, in all material respects, the financial
position, results of operations and cash flows of the Company at June 30, 2000
and for all periods presented.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that may require revision in future periods.
Certain reclassifications have been made to amounts in the 1999
statements of operations to conform to the 2000 presentation.
These consolidated financial statements should be read in conjunction
with the Company's Annual Report on Form 10-KSB for the year ended December
31, 1999 and the Company's report on Form 10-QSB for the quarter ended March
31, 2000.
The Company's current operations consist of 65 acres of sports
entertainment located on the south end of the Las Vegas "Strip" including the
following: (1) The Callaway Golf Center located on 42 acres of land that
includes the Divine Nine par 3 golf course fully lighted for night golf, a
110-tee two-tiered driving range which has been ranked the Number 2 golf
practice facility in the United States since it opened in October 1997, a
20,000 square foot clubhouse which includes the St. Andrews Golf Shop,
Callaway Performance Center, Giant Golf teaching academy, and the Bistro 10
restaurant and bar. (2) The SportPark Las Vegas which is a family-oriented
sports-themed amusement venue named "All-American SportPark" ("SportPark" or
"SPLV"). The SportPark comprises 23 acres adjacent to the Callaway Golf
Center and opened for business on October 9, 1998. The SportPark's major
attractions include NASCAR SpeedPark, Major League Baseball Slugger Stadium,
the 100,000 square foot Arena Pavilion which houses the Pepsi AllSport Arena,
"The Rock" 47-foot rock climbing wall, Namco Timeout Arcade, Indoor putting
challenge, Boston Garden restaurant and bar, Skybox suites and several other
interactive experiences and retail shops.
As of June 30, 2000, Sports Entertainment Enterprise, Inc. ("SPEN"), a
publicly traded company, owns approximately 63.5% of the Company's outstanding
common stock and one-third of the Company's outstanding preferred stock.
8
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2. SPORTPARK LAS VEGAS LOAN AGREEMENT
On September 15, 1998 the Company entered into a $13,500,000 loan
agreement with Nevada State Bank ("Lender"). The original term of the loan is
15 years with interest measured at a fixed rate of 4% above the Lender's
five-year LIBOR rate measured September 1, 1998, 2003 and 2008. The initial
interest rate through 2003 is 9.38%. The loan is secured by substantially all
the assets of the Company that existed at the time the financing was completed
as well as corporate guarantees of AASP and SPEN. The Callaway Golf Center
was not owned by the Company at the time this financing was completed and
therefore is not security for this loan. To facilitate this financing
transaction, the owner of the leasehold interest in the land underlying the
SportPark executed a trust deed granting a security interest in the leased
property to the Lender to secure repayment of the loan. As consideration for
the Landlord's willingness to provide collateral for the loan, the Company's
President and CEO, its Chairman, and a related entity pledged their stock in
SPEN to the landlord. The landlord was also issued 75,000 stock options
exercisable at $4.00 per share through the year 2005. Additionally, the
Chairman of the Company pledged three parcels of land owned by him (the
"Chairman's parcels") as additional collateral to secure the loan. Provisions
in the loan agreement allowed for the reconveyance of these three parcels to
the Chairman of the Company upon the SportPark achieving certain debt service
coverage milestones.
The Company has not been in compliance with certain debt covenants
related to this loan since September 1999. Also, because of cash constraints,
the Company did not make its September 1999 loan payment to the Lender and
since then has not made any loan payments. The Company has had discussions
with the Lender in an attempt to renegotiate the terms of the loan. As part
of these discussions, the Lender and the Company agreed that an amusement park
industry consultant should be retained to evaluate all operational aspects of
the SportPark and provide recommendations to improve the SportPark performance
from revenue, utilization, and cost standpoints. This consultant, Management
Resources, Inc. ("MRI") was hired in December 1999 and completed its
assignment in February 2000. The Lender hired a different industry consultant
to review MRI's recommendations. The Company met with the Lender's
representative on March 21, 2000 to discuss the results of both consultant's
reports and to present the Company's proposal for a work-out plan. Since that
meeting, the Lender had its consultant update its analysis of MRI's report
based on detailed information provided to the Lender by the Company at the
March 21 meeting. The Lender did not accept the SportPark's plan as presented
at the March 21 meeting.
The Company has been working diligently for some time with the objective
to either (1) sell the SportPark to a buyer that will assume, renegotiate, or
refinance the bank loan and provide for the full release of the Company and
its related parties from any further obligation on the loan, or (2) locate
another lender or partner to facilitate a refinancing of the bank loan. Since
these efforts were initiated, the Company has received two formal offers from
independent buyers to acquire the SportPark. Both offers were rejected
because they were not deemed to be in the best interest of the Company and its
shareholders. The Company is in active discussions with other prospective
buyers to determine their degree of interest and ability to consummate a
possible transaction.
9
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The Lender has filed a notice of sale and foreclosure on the Chairman's
parcels with a sale date set for August 17, 2000. On August 3, 2000, the
Company met with the Lender's representative again to discuss final
negotiating points for a possible workout arrangement that would include
delaying the sale and foreclosure on the Chairman's parcels. The Lender is
aware of the Company's efforts to sell or refinance the SportPark. The
Company expects to submit a final proposal to the Bank requesting sufficient
time to consummate a transaction that satisfies the Company's obligation to
the Bank. Although management of the Company is optimistic that a favorable
resolution will be achieved with regard to this Bank issue, there can be no
assurance that the Company will be successful in doing so. See also Note 8.
3. LOSS PER SHARE AND SHAREHOLDER'S EQUITY
Basic and diluted loss per share is computed by dividing the reported net
loss by the weighted average number of common shares outstanding during the
period. The weighted-average number of common and common equivalent shares
used in the calculation of basic and diluted loss per share were 3,129,396 and
3,000,000 for the six-month periods ended June 30, 2000 and 1999,
respectively, and 3,150,000 and 3,000,000 for the three-month periods ended
June 30, 2000 and 1999, respectively.
In January and February 2000, the Company issued an aggregate of 150,000
restricted shares of its common stock to a consultant and a person affiliated
with the consultant in exchange for business consulting services. The
issuance of these shares was valued at a forty percent discount from the
closing market price of AASP's common stock on or about the date that the
shares were issued.
4. RELATED PARTY TRANSACTIONS
The Company has unsecured, ten percent notes payable to its Chairman of
$1,259,702 and $1,250,000 at June 30, 2000 and December 31, 1999,
respectively. Accrued interest payable of $283,851 and $234,616 at June 30,
2000 and December 31, 1999, respectively, is included in the balance due under
the caption "Note payable to Shareholder" in the accompanying consolidated
balance sheets.
The Company has unsecured, ten percent notes payable to the Paradise
Store of $264,967 and $230,000 as of June 30, 2000 and December 31, 1999,
respectively. The Paradise Store is a golf retail store owned 100% by the
Company's Chairman. Accrued interest payable of $48,577 and $62,712 at June
30, 2000 and December 31, 1999, respectively, is included with the note
payable balance under the caption "Due to Affiliated Stores" in the
accompanying consolidated balance sheets.
The Company normally has extensive transactions and relationships with
SPEN and subsidiaries ("Related Entities"), the chairman and principal
shareholder of SPEN, and the Paradise Store. In 2000, no significant
transactions occurred with the Related Entities or the Paradise Store.
10
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5. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment include the following as of June 30,
2000 and December 31, 1999:
2000 1999
----------- -----------
Building $18,090,736 $18,049,814
Land Improvements 3,456,134 3,433,769
Furniture and equipment 2,038,240 2,030,412
Leased equipment 583,262 734,296
Signs 685,400 685,400
Leasehold improvements 476,519 476,519
Go-Karts 457,115 457,115
Other 97,661 98,704
----------- -----------
25,885,067 25,966,029
----------- -----------
Accumulated depreciation and
amortization (2,715,234) (1,925,197)
----------- -----------
$23,169,833 $24,040,832
=========== ===========
6. LEASES
The land underlying the SPLV and CGC is leased to the Company at a base
amount of $52,083 per month allocated $33,173 to CGC and $18,910 to SPLV.
Also, the lease has provisions for contingent rent to be paid by the Company
upon reaching certain gross revenue levels. The lease commenced October 1,
1997 for CGC and February 1, 1998 for SPLV. The terms of both leases are 15
years with two five-year renewal options.
Due to cash constraints, the Company negotiated an agreement with the
landlord to defer the land lease payments on both the SPLV and CGC beginning
September 1999 with no specified ending date. Management of the Company
believes that the landlord is willing to defer land lease payments until such
time as adequate capital resources are available to the Company to make such
payments.
The Company is also obligated under various other capital and
non-cancelable operating leases for equipment that expire at various dates
over the next five years.
7. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with its President, as well as
other key employees which will require the payment of fixed and incentive
based compensation.
The Company has a comprehensive general liability insurance policy to
cover possible claims for injury and damages from accidents and similar
activities. Although management of the Company believes that its insurance
levels are sufficient to cover all future claims, there is no assurance that
it will be sufficient to cover all future claims.
11
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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 on the Company.
8. GOING CONCERN MATTERS
The accompanying consolidated financial statements have been prepared on
a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
accompanying consolidated financial statements, for the six months ended June
30, 2000, the Company had a net loss of $1,615,248 and has experienced cash
flow problems since September of 1999. For the year ended December 31, 1999,
the Company had a net loss of $3,818,787 and negative cash flow from
operations of $697,710. Additionally, as of June 30, 2000, the Company had a
working capital deficit of $15,619,379 and cash and cash equivalents of
$260,204. Approximately $14.2 million of this working capital deficit relates
to the note payable secured by a first deed of trust on the SportPark that has
been in default since September 1999. Because of the Company's default on the
note, accounting rules require that the full amount owing be classified as
current for financial reporting purposes. If this note payable was not
classified as current in its entirety, the working capital deficit as of June
30, 2000 would be about $1.4 million. See Note 2 for further information on
the note payable in default.
Management believes that (1) negotiation of a reasonable work-out plan
with the Bank which may include the sale or refinancing of the SportPark, (2)
the successful execution of its business plan in the Year 2000 and beyond as
recommended by MRI, and (3) a working capital infusion to the Company of at
least $1 million will be necessary to sufficiently fund operating cash needs
and debt service requirements over at least the next twelve months. If
required to fund corporate operations, management believes that additional
borrowings against the Callaway Golf Center could be arranged. Should
additional financing to fund operations be required, the Company will explore
all funding options, as necessary. There can be no assurance such lending
sources would be willing, on terms acceptable to the Company, to provide
additional financing.
The consolidated financial statements do not include any adjustments
relating to the recoverability of assets and the classification of
liabilities, except the note payable referred to above, that might be
necessary should the Company be unable to continue as a going concern.
9. RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated statements of operations and of cash flows
for the three and six month periods ended June 30, 1999 have been restated to
present, in the proper 1999 quarter, audit adjustments that were made in the
fourth quarter of 1999. The impact of this restatement is as follows:
12
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THREE SIX
MONTHS MONTHS
ENDED ENDED
JUNE 30 JUNE 30
--------- ---------
Decrease in revenues from the SportPark $ (93,750) $(187,500)
Increase in interest expense (26,352) (52,704)
--------- ---------
Increase in net loss $(120,102) $(240,204)
Increase in net loss per share $ (.04) $ (.08)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the
Company's condensed consolidated financial statements and related footnotes
included in this report.
OVERVIEW
The Company's current operations consist of the management and operation
of 2 sports entertainment venues in Las Vegas, Nevada: The Callaway Golf
Center ("CGC") and the All-American SportPark ("SportPark"). Results of
operations for the three and six months ended June 30, 2000 and 1999 include
the results of the CGC and the SportPark. The SportPark commenced operations
on October 9, 1998. The CGC commenced operations in October 1997, the Company
sold its 80% interest in it on May 5, 1998 and, the Company reacquired 100% of
the CGC on December 31, 1998.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2000 AS COMPARED TO THREE
MONTHS ENDED JUNE 30, 1999
REVENUES. Revenues decreased 4.1% to $1,637,495 in 2000 compared to
$1,706,928 in 1999. Revenue for the CGC increased 12.3% to $590,246 in 2000
compared to $525,767 in 1999 due to increased traffic flow and per capita
spending. Revenue for the SportPark declined 11.7% to $1,037,180 in 2000
compared to $1,174,911 in 1999. This decline is due mainly to lower
attendance levels in 2000 compared to 1999 due to very little advertising by
the SportPark in January and February 2000 because of cash constraints and
fewer operating days in 2000 versus 1999. Effective January 10, 2000,
management of the Company made the decision to close the SportPark to the
general public Monday through Wednesday because the revenue generated on these
days was not covering variable expenses. As part of this strategy, management
reserved Monday through Wednesday for group sales and special events. This
decision by management was agreed to by the industry consultant hired by the
Company in December 1999 and is a key part of the SportPark's plan going
forward to capitalize on the higher margin group sales market.
COST OF REVENUES. Cost of revenues decreased 37.6% to $287,560 in 2000
compared to $460,999 in 1999. Cost of revenues as a percentage of Revenues
was 17.6% in 2000 compared to 27.0% in 1999. This decrease is due mainly to
fewer operating days at the SportPark and lower staffing and payroll costs in
2000 at both the SportPark and CGC.
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SELLING, GENERAL AND ADMINISTRATIVE (SG&A). These expenses consist
principally of administrative payroll, rent, professional fees and other
corporate costs. These expenses decreased 15.9% to $1,272,259 in 2000 compared
to $1,512,909 in 1999. Corporate overhead decreased 25.3% in 2000 versus
1999. SG&A costs for the CGC increased 7.7% due mainly to the 12.3% increase
in CGC revenue. SG&A for the SportPark decreased 24.0% due to reduced
marketing expenses, fewer operating days and streamlined payroll costs.
DEPRECIATION AND AMORTIZATION. These costs increased to $424,417 in 2000
compared to $414,271 in 1999 reflecting the higher overall depreciable base of
fixed assets resulting from fixed asset additions throughout 1999 and in 2000.
NET INTEREST (EXPENSE) INCOME. Net interest expense decreased slightly
to $376,421 in 2000 compared to $376,706 in 1999 due to lower principal
balances of debt in 2000 compared to 1999 and lower interest income in 2000
compared to 1999 because of substantially lower cash balances.
INCOME TAXES. Due to operating losses, the Company has recorded no tax
provision nor has it recorded any tax benefits.
NET LOSS. Net loss for 2000 of $723,162 represents a 31.6% decrease from
the net loss incurred in the comparable 1999 period of $1,057,957. The lower
net loss in 2000 is due to primarily to the reasons already described which
includes significant cost reductions at the SportPark property and in
corporate overhead. Comparing 2000 to 1999, the SportPark net loss decreased
27.2%, CGC recorded net income of 63,509 in 2000 compared to a net loss in
1999 of $7,032, and the decrease in 2000 compared to 1999 in the corporate
overhead portion of the net loss was 15.1%.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000 AS COMPARED TO SIX
MONTHS ENDED JUNE 30, 1999
REVENUES. Revenues increased 1.6% to $3,200,891 in 2000 compared to
$3,151,918 in 1999. Revenue for the CGC increased 22.6% to $1,236,592 in 2000
compared to $1,008,770 in 1999 due to increased traffic flow and per capita
spending. Revenue for the SportPark declined 8.8% to $1,943,863 in 2000
compared to $2,130,648 in 1999. This decline is due mainly to lower
attendance levels in 2000 compared to 1999 due to very little advertising by
the SportPark in January and February 2000 because of cash constraints and
fewer operating days in 2000 versus 1999. Effective January 10, 2000,
management of the Company made the decision to close the SportPark to the
general public Monday through Wednesday because the revenue generated on these
days was not covering variable expenses. As part of this strategy, management
reserved Monday through Wednesday for group sales and special events. This
decision by management was agreed to by the industry consultant hired by the
Company in December 1999 and is a key part of the SportPark's plan going
forward to capitalize on the higher margin group sales market.
COST OF REVENUES. Cost of revenues decreased 14.3% to $643,957 in 2000
compared to $751,563 in 1999. Cost of revenues as a percentage of Revenues
was 20.1% in 2000 compared to 23.8% in 1999. This decrease is due mainly to
fewer operating days at the SportPark and lower staffing and payroll costs in
2000 at both the SportPark and CGC.
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SELLING, GENERAL AND ADMINISTRATIVE (SG&A). These expenses consist
principally of administrative payroll, rent, professional fees and other
corporate costs. These expenses decreased 7.9% to $2,555,228 in 2000 compared
to $2,774,988 in 1999. Corporate overhead decreased 22.5% in 2000 versus
1999. SG&A costs for the CGC increased 21.8% due mainly to the 22.6% increase
in CGC revenue. SG&A for the SportPark decreased 16.6% due to reduced
marketing expenses, fewer operating days and streamlined payroll costs.
DEPRECIATION AND AMORTIZATION. These costs increased to $858,323 in 2000
compared to $819,114 in 1999 reflecting the higher overall depreciable base of
fixed assets resulting from fixed asset additions throughout 1999 and in 2000.
NET INTEREST (EXPENSE) INCOME. Net interest expense increased 4.9% to
$758,631 in 2000 compared to $722,865 in 1999 due mainly to lower interest
income in 2000 compared to 1999 because of substantially lower cash balances.
INCOME TAXES. Due to operating losses, the Company has recorded no tax
provision nor has it recorded any tax benefits.
NET LOSS. Net loss for 2000 of $1,615,248 represents a 15.7% decrease
from the net loss incurred in the comparable 1999 period of $1,916,612. The
lower net loss in 2000 is due to primarily to the reasons already described
which includes significant cost reductions at the SportPark property and in
corporate overhead. Comparing 2000 to 1999, the SportPark net loss decreased
10.4%, CGC recorded a 74.7% increase in net income of 143,080 in 2000 compared
to a net income in 1999 of $81,889, and the decrease in 2000 compared to 1999
in the corporate overhead portion of the net loss was 18.2%.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had negative working capital of
$15,619,379. This deficit in working capital is largely due to the note
payable on the SportPark that is in default (see discussion below). Since it
is in default, the entire balance of the note is classified as current for
financial reporting purposes. If this note was classified for financial
reporting purposes under its normal amortization schedule, the working capital
deficit at June 30, 2000 would be approximately $1.4 million.
On September 15, 1998 the Company entered into a $13,500,000 loan
agreement with Nevada State Bank ("Lender"). The original term of the loan is
15 years with interest measured at a fixed rate of 4% above the Lender's
five-year LIBOR rate measured September 1, 1998, 2003 and 2008. The initial
interest rate through 2003 is 9.38%. Debt service for this loan approximates
$140,000 per month. The loan is secured by substantially all the assets of
the Company that existed at the time the financing was completed as well as
corporate guarantees of the Company and Sports Entertainment Enterprises, Inc.
("SPEN"), the Company's majority shareholder. The Callaway Golf Center was
not owned by the Company at the time this financing was completed and
therefore is not security for this loan. To facilitate this financing
transaction, the owner of the leasehold interest in the land underlying the
SportPark executed a trust deed granting a security interest in the leased
property to the Lender to secure repayment of the loan. As consideration for
the Landlord's willingness to provide collateral for the loan, the Company's
President and CEO, its Chairman, and a related entity pledged their stock in
SPEN to the landlord. The landlord was also issued 75,000 stock options
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exercisable at $4.00 per share through the year 2005. Additionally, the
Chairman of the Company pledged three parcels of land owned by him (the
"Chairman's parcels") as additional collateral to secure the loan. Provisions
in the loan agreement allowed for the reconveyance of these three parcels to
the Chairman of the Company upon the SportPark achieving certain debt service
coverage milestones.
The Company has not been in compliance with certain debt covenants
related to this loan since September 1999. Also, because of cash constraints,
the Company did not make its September loan payment to the Lender and since
then has not made any loan payments. The Company has had discussions with the
Lender in an attempt to renegotiate the terms of the loan. As part of these
discussions, the Lender and the Company agreed that an amusement park industry
consultant should be retained to evaluate all operational aspects of the
SportPark and provide recommendations to improve the SportPark performance
from revenue, utilization, and cost standpoints. This consultant, Management
Resources, Inc. ("MRI") was hired in December 1999 and completed its
assignment in February 2000. The Lender hired a different industry consultant
to review MRI's recommendations. The Company met with the Lender's
representative on March 21, 2000 to discuss the results of both consultant's
reports and to present the Company's proposal for a work-out plan. Since that
meeting, the Lender had its consultant update its analysis of MRI's report
based on detailed information provided to the Lender by the Company at the
March 21 meeting. The Lender did not accept the SportPark's plan as presented
at the March 21 meeting.
MRI's report includes detailed revenue and cost projections and a
detailed sales and marketing plan. This report suggests (1) refocusing on the
local individual customer base rather than individual tourists, (2) focusing
significant resources on group sales and special events, (3) adding new
products to supplement the performance of the Park during peak operating times
(weekends) to maximize revenue, and (4) simplifying and providing consistency
in the Park's ticketing programs. Management of the Company believes that the
plans included in this report provide the necessary focus and detailed goals
and action plans to substantially improve the SportPark's operating results in
the Year 2000 and beyond. Although the Company is confident it can eventually
achieve profitability and positive cash flow by successfully executing this
plan, there can be no assurance that the Company will be successful in doing
so.
The Company has been working diligently for some time with the objective
to either (1) sell the SportPark to a buyer that will assume, renegotiate, or
refinance the bank loan and provide for the full release of the Company and
its related parties from any further obligation on the loan, or (2) locate
another lender or partner to facilitate a refinancing of the bank loan. Since
these efforts were initiated, the Company has received two formal offers from
independent buyers to acquire the SportPark. Both offers were rejected
because they were not deemed to be in the best interest of the Company and its
shareholders. The Company is in active discussions with other prospective
buyers to determine their degree of interest and ability to consummate a
possible transaction.
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The Lender has filed a notice of sale and foreclosure on the Chairman's
parcels with a sale date set for August 17, 2000. On August 3, 2000, the
Company met with the Lender's representative again to discuss final
negotiating points for a possible work-out arrangement that would include
delaying the sale and foreclosure on the Chairman's parcels. The Lender is
aware of our efforts to sell or refinance the SportPark. The Company expects
to submit a final proposal to the Bank requesting sufficient time to
consummate a transaction that satisfies the Company's obligation to the Bank.
Although management of the Company is optimistic that a favorable resolution
will be achieved with regard to this Bank issue, there can be no assurance
that the Company will be successful in doing so.
Also, management is continually evaluating new revenue opportunities that
provide a more broad and exciting customer experience as well as maximizing
the utilization of the SportPark and CGC. At the same time, management has
instituted aggressive cost containment strategies that began in September 1999
and will continue until the Company is operating as efficiently as possible.
Also, since September 1999, because of the Company's cash constraints, the
Company's President is deferring half of his salary until such time as the
Company has sufficient capital resources.
On December 31, 1998 the Company purchased substantially all the assets
and assumed certain liabilities of the Callaway Golf Center for $1,000,000
payable in quarterly installments of $25,000 for a 10 year period with no
interest. The Golf Center has generated positive cash flow in 2000 and 1999.
If required to fund corporate operations, management believes that additional
borrowings against the CGC could be arranged although there can be no
assurance that the Company would be successful in securing such financing, or
at terms acceptable to the Company.
The Company's Chairman through personal loans and through advances from
his personally owned retail store (one of the "Affiliated Stores") has
historically loaned funds to the Company as needed. Loans from the Company's
Chairman along with accrued interest payable were $1,543,553 and $1,484,616 at
June 30, 2000 and December 31, 1999, respectively. Loans from his personally
owned retail store along with accrued interest payable were $313,544 and
$292,712 at June 30, 2000 and December 31, 1999, respectively. The increases
relate to accrued interest payable on the balances outstanding. The loans are
due beginning in November 2000 and bear interest at ten percent per annum.
Accrued interest payable of $332,428 at June 30, 2000 has been deferred, a
practice which is expected to continue in 2000, if necessary.
There are no planned material capital expenditures in 2000.
The Company in the normal course of its business receives sponsorship
fees and various advance payments of different kinds, which are recorded as
deferred income until earned. Such amounts are typically earned over the term
of the contract with the applicable sponsor. Deferred income was $780,464 at
June 30, 2000 compared to $694,396 at December 31, 1999. A sponsorship fee of
$250,000 was received in the first quarter of 2000. It is anticipated, but
cannot be guaranteed, that sponsorship fees and advances will be a continued
source of cash flow in 2000.
OPERATING ACTIVITIES. Net cash provided by operating activities was
$301,789 for the six months ended June 30, 2000 compared to net cash used in
operating activities of $471,872 for the six months ended June 30, 1999. The
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primary reason for the positive operating cash flow in 2000 versus negative
operating cash flow in 1999 relates to a larger increase in 2000 in accounts
payable and accrued expenses.
INVESTING ACTIVITIES. Net cash used in investing activities was $35,621
and $540,529 for the six months ended June 30, 2000 and 1999, respectively.
The larger expenditures in 1999 are attributed to the SportPark being newly
opened (the SportPark opened in October 1998) and the refinements that were
being made to the facility at that time.
FINANCING ACTIVITIES. Net cash used in financing activities was $124,760
and $571,524 for the six months ended June 30, 2000 and 1999, respectively.
The primary reason for the smaller use of cash in 2000 is due to the Company
not paying the debt service on the SportPark loan.
The Company's current and expected sources of working capital are its
cash balances that were $260,204 at June 30, 2000 and cash flow from
operations including sponsorship fees and advance deposits of various kinds.
Working capital needs have been helped by deferring payments to the Lender on
the SportPark, land lease payments to the landlord for both the SportPark and
CGC, and interest and notes payable balances due to the Company's Chairman and
Affiliated Store. Deferrals of payments to the Company's Chairman and
Affiliated Store and landlord are expected to continue until the Company has
sufficient cash flow to begin making payments.
The Company has raised considerable capital in the past 5 years for
development projects. The SportPark is now fully operational and well into its
second full year of operation. The Callaway Golf Center is generating
positive cash flow and its prospects are expected to become even more positive
as it moves into its third full year of operation. The Company believes that
any working capital deficiency that may occur could be funded from a
combination of existing cash balances and, if necessary, additional borrowings
from lenders or other sources. Management believes that additional borrowings
against the CGC could be arranged to fund corporate operations. However,
there can be no assurance that any borrowings would be available or at terms
acceptable to the Company. Expansion programs in other locations are not
expected to take place until the Company resolves the issue with the Bank on
the SportPark loan, achieves an appropriate level of profitability and
positive cash flow. If and when expansion does occur, such expansion is
expected to be funded primarily by third parties.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Quarterly 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 and financing
sources. 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 made by or on behalf of the Company. These risks
and uncertainties include, but are not limited to, those relating to
dependence on existing management, leverage and debt service (including
sensitivity to fluctuations in interest rates), domestic or global economic
conditions, 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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On March 22, 2000, D&R Builders, Inc., doing business as Breslin
Builders, filed a complaint in the District Court of Clark County, Nevada
against the Company and its landlord, seeking damages for breach of contract,
mechanics' lien foreclosure and unjust enrichment. The plaintiff contends
that it is entitled to $243,883 for work performed. The Company has not yet
filed an answer to this complaint. At June 30, 2000 and December 31, 1999,
the Company had accrued a liability for the amount claimed.
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.
(a) Exhibits.
27 Financial Data Schedule Filed herewith electronically
(b) Reports on Form 8-K.
None.
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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.
ALL-AMERICAN SPORTPARK, INC.
Date: August 11, 2000 By:/s/ Ronald Boreta
Ronald Boreta, President and
Chief Executive Officer
By:/s/ Kirk Hartle
Kirk Hartle, Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. FINANCIAL DATA SCHEDULE Filed herewith electronically
