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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
For the Fiscal Year ended: December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: _____ to ____
Commission File No. 0-024970
ALL-AMERICAN SPORTPARK, INC.
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(Name of Small Business Issuer in its Charter)
NEVADA 88-0203976
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(State or Other Jurisdiction of (I.R.S. Employer Identi-
Incorporation or Organization) fication No.)
6730 South Las Vegas Boulevard, Las Vegas, NV 89119
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(Address of Principal Executive Offices, Including Zip Code)
Issuer's Telephone Number: (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
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(Title of each class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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 there is no disclosure of delinquent filers in response 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: $7,006,670
As of March 2, 2000, 3,150,000 shares of common stock were outstanding, and
the aggregate market value of the common stock of the Registrant held by
non-affiliates was approximately $1,581,250.
Transitional Small Business Disclosure Format (check one): Yes __ No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
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, 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, when the franchise business was sold,
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, to "Saint Andrews Golf
Corporation" on August 12, 1994, and to All-American SportPark, Inc. on
December 14, 1998. Saint Andrews Golf Corporation changed its name to
All-American SportPark, Inc. to more accurately reflect the Company's main
line of business activity.
The Company was acquired by Sports Entertainment Enterprises, Inc.
("SPEN"), formerly known as Las Vegas Discount Golf & Tennis, Inc. ("LVDG"), a
publicly traded company, in February 1988, from Vaso Boreta, who was its sole
shareholder. As of December 31, 1999, Vaso Boreta owns 22.6% of the
outstanding common stock of SPEN, and serves as its Chairman of the Board,
President and CEO. He also serves as the Chairman of the Board of the
Company. SPEN owns 2,000,000 shares of the Company's common stock, which
represents approximately two-thirds of the Company's common stock outstanding.
In October 1998, SPEN purchased 250,000 shares of Series B Convertible
Preferred Stock of the Company which represents one-third of the Company's
outstanding preferred stock.
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 entitled the holder to purchase one
share of Common Stock at an exercise price of $6.50 per share. The net
proceeds to the Company from this public offering were approximately
$3,684,000. The Class A Warrants expired on March 15, 1999.
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 used the proceeds from these sales to fund part of the
development costs of its first All-American SportPark in Las Vegas.
On December 16, 1996, the Company and its majority shareholder, SPEN,
entered into negotiations pursuant to an "Agreement for the Purchase and Sale
of Assets" to sell all but one of the four retail stores owned by SPEN, all of
SPEN's wholesale operations and the entire franchising business of the Company
to Las Vegas Golf & Tennis, Inc., an unaffiliated company. On February 26,
1997, the Company and SPEN completed this transaction, and as a result the
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Company's operations, assets and liabilities now relate solely to the
development and operation of "All-American SportParks". See "BUSINESS OF THE
COMPANY."
The total sales price for the golf distribution system was $5,354,287 of
which $2,603,787 was allocated to SPEN and $2,750,500 was allocated to the
Company.
In connection with the sale of the above-described assets, SPEN 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 its
All-American SportPark business 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 SPEN, Ron Boreta, the
President of the Company, and John Boreta, a principal shareholder of SPEN,
the right to operate "Las Vegas Discount Golf & Tennis" stores in southern
Nevada, except for the Summerlin area of Las Vegas, Nevada.
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 has
developed its first All-American SportPark. The property is located on the
world famous Las Vegas "Strip" at the corner of Las Vegas Boulevard and Sunset
Road which is just south of McCarran International Airport and several of Las
Vegas' major hotel/casino properties such as Mandalay Bay and the MGM Grand.
The property is also adjacent to the new Interstate 215 beltway that will
completely encircle the Las Vegas Valley. On 42 acres of the property is the
Callaway Golf Center that opened for business in October 1997. The remaining
23 acres is home to the All-American SportPark (also known as SportPark Las
Vegas, "SPLV") which opened for business in October 1998. See "BUSINESS OF
THE COMPANY".
On June 20, 1997, the lessor of the 65 acre tract agreed with the Company
to cancel the original lease and replace it with two separate leases: one
lease for the Callaway Golf Center and the second lease for the All-American
SportPark. Both leases are fifteen-year leases with options to extend for two
additional five-year terms. The lease for the Callaway Golf Center commenced
on October 1, 1997 when the golf center opened; base rent is $33,173 per
month. The other lease commenced on February 1, 1998 with a base rent of
$18,910.
During June 1997 the Company and Callaway Golf Company formed
All-American Golf LLC, a California limited liability company which was owned
80% by the Company and 20% by Callaway Golf Company, and which owned and
operated the Callaway Golf Center . In May 1998, the Company sold its 80%
interest in All-American Golf LLC to Callaway Golf Company. (See "BUSINESS OF
THE COMPANY"). On December 31, 1998 the Company acquired substantially all
the assets subject to certain liabilities of All-American Golf, LLC which
resulted in the Company owning 100% of the Callaway Golf Center .
On October 19, 1998 the Company sold 250,000 shares of the Series B
Convertible Preferred Stock to SPEN for $2,500,000. SPEN had earlier issued
2,303,290 shares of its Common Stock for $2,500,000 in a private transaction
to ASI Group, L.L.C. ("ASI"). ASI also received 347,975 stock options for
SPEN Common Stock at an exercise price of $1.8392 per share through October
19, 2008. ASI is a Nevada limited liability company whose members include
Andre Agassi, a professional tennis player, and Sunbelt Communications Company
that is engaged in the broadcasting business including the NBC affiliate in
Las Vegas.
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BUSINESS OF THE COMPANY
The Company has developed a concept for family-oriented sports-themed
amusement parks named "All-American SportPark". The All-American SportPark is
a live-action, 65-acre, sports and entertainment venue located at the south
end of the world famous Las Vegas "Strip" at the corner of Las Vegas Boulevard
and Sunset Road. The SportPark is strategically positioned within a few miles
of the largest hotels and casinos in the world. There are over 125,000 hotel
rooms in Las Vegas, and seven of the top ten largest hotels in the world are
within a few miles from the SportPark including the MGM Grand, Mandalay Bay,
Luxor, Bellagio, and the Monte Carlo to name a few. The SportPark is also
adjacent to McCarran International Airport that services nearly 35 million
visitors annually. The local residential population approximates 1.3 million.
The All-American SportPark is comprised of two primary businesses: The
All-American SportPark (also known as SportPark Las Vegas, "SPLV"), and the
Callaway Golf Center ("CGC").
ALL-AMERICAN SPORTPARK
The All-American SportPark ("AASP" or "SPLV") opened for business on
October 9, 1998 and operates on 23 acres of land. Key attractions and
alliances are as follows:
NASCAR SPEEDPARK. The Company has a 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 agreement, as amended, provides that the Company has an
exclusive license to use certain trademarks and service marks in the
development, design and operation of go-kart racing facilities having a NASCAR
racing theme in the territories of Las Vegas, Nevada and Southern California
through December 31, 2003.
As consideration for the license, the Company paid an initial fee of
$25,000 and is required to pay a fee of $25,000 for each new SpeedPark opened
after the first SpeedPark. In addition, the Company has agreed to pay NASCAR a
royalty based on each SpeedPark's gross revenue from racing activities plus a
royalty on revenues received from sponsors and promoters of SpeedPark
activities. As of December 31, 1999, the Company is current in its required
payments to NASCAR.
The SpeedPark includes three unique tracks to accommodate three styles of
racing: (1) the family Challenge track, (2) the adult Performance track and,
(3) the Sprint junior track. The Challenge track is a 1,200 linear foot
reversible road course for nine-horsepower go-karts designed for families and
children 10 and up; the Performance track is a 2,200 linear foot road course
for twenty-horsepower NASCAR-style go-karts designed for youths and adults 16
years and older; the Sprint track is a 500 linear foot figure eight track for
adults and smaller children. The SpeedParks are comprised generally of the
NASCAR Go-Kart SpeedPark, the Garage Experience, the Winner's Circle, the
Infield RV Park, Victory Lane, the NASCAR Jr. Track, the Tailgater's Dining
Circle and the NASCAR Retail Trackside Trailer Merchandising Experience.
Scale model, near emissions-free, gas-powered, stock cars complete with
sponsorship graphics and signage compete on the three tracks. The cars are
various scale versions of NASCAR replicas each designed and engineered to fit
each of the three tracks.
Jeff Gordon, Inc. In May 1996, the Company entered into an agreement
with Jeff Gordon, the 1997 and 1998 NASCAR Winston Cup Champion, 1998 and 1999
Daytona 500 Champion, 1997 Coca-Cola 600 Champion, 1995 Winston Cup Champion
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and former NASCAR Winston Cup Rookie of the year, to serve as spokesperson of
the NASCAR SpeedPark through April 30, 2000. According to the original
agreement, Mr. Gordon was paid $25,000 for his services during 1996, and is to
be paid $25,000 per SpeedPark opening per year with a minimum guarantee over
the life of the agreement. Mr. Gordon was also granted options under the
Company's stock option plan. On November 20, 1997, the agreement with Mr.
Gordon was amended to, among other things, reduce the amount of services to be
provided by him, to make his services non-exclusive to the Company, to limit
his services to the AASP in Las Vegas and to set his base fee at $25,000 per
year. As of December 31, 1999, the Company is current in its payments to Jeff
Gordon, Inc. The Company is currently evaluating its extension options under
this agreement.
MAJOR LEAGUE BASEBALL SLUGGER STADIUM. The Slugger Stadium is 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. 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 open-air batting stadium that 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. There are 16 batter boxes
and 16 on-deck circles. Batters have the option of hitting hard or softballs
delivered at five different speeds. Outfield wall replicas of Fenway Park's
"Green Monster", Baltimore's Oriole Park at Camden Yards, Chicago's Wrigley
Field, Yankee Stadium, and The Ball Park in Arlington, Texas are designed to
challenge batters to hit the balls out of the park. Completing the Major
League experience is authentic turnstiles, classic ballpark food and beverage
concessions, and baseball memorabilia. In the advanced planning stage are an
electronic scoreboard and specially designed sound systems that provide
typical baseball sounds including proprietary designed umpire calls of balls
and strikes.
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. In addition to and as an offset against the minimum payments
set out above, the Company is required to pay to MLB a royalty based on the
gross revenue derived from Slugger Stadium. The Company has made the payments
required for 1995, 1996 and 1997. As of December 31, 1999, the Company owes
MLB approximately $78,000 for 1998 and a portion of the 1999 required
payments. A payment arrangement has been established with MLB. The Company
expects to meet with MLB in the second quarter of 2000 to renegotiate its
licensing agreement.
ALL-AMERICAN SPORTPARK PAVILION. The 100,000 square foot Pavilion
Building includes a multi-purpose sports arena (the "Pepsi Allsport Arena"),
specialty retail areas, food courts, meeting rooms, special events space and
leased tenant facilities for food and beverage service and other Company and
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tenant operated sports activities including the "Boston Garden Experience"
Restaurant & Bar, Augusta National Putting Experience, Namco's Time Out
Arcade, "The Rock" Sport Climbing Wall, and All-American SportPark Logo Shop.
Other attractions are planned including the RealRide SkatePark and Retail Shop
scheduled opening March 17, 2000. The SkatePark will feature the B3 Street
Course ramps used in the ESPN X-Games.
PEPSI ALLSPORT ARENA. At the epicenter of the Pavilion building is the
25,000 square foot Allsport Arena which can be customized from in-line to
traditional skating, league play for a variety of sports, an artificial turf
indoor playing field, concerts, boxing matches, expos, seminars, cultural and
civic events, and large group functions. The Allsport Arena has played host
to indoor professional beach volleyball tournaments, professional roller
hockey exhibition games, basketball tournaments, tennis matches, ESPN2 Friday
Night Fights, annual super bowl parties, large group events featuring top
entertainers, corporate rallies, music and entertainment events. It includes
a giant 32 foot video display, state of the art audio, video, and lighting
system, and movable seating which is adaptable for 1,500 to 3,000 people to
view an event. When the arena is not in use for a scheduled event, it
accommodates the core business use for in-line skaters who are able to skate
to an entertaining multimedia light and sound performance.
Beginning March 17, 2000, the Allsport Arena will be the site of the
RealRide SkatePark featuring the ESPN X-Games B3 Street Course. The Skatepark
will be the core business in the Arena when not being used for a scheduled
event. RealRide SkatePark is a tenant that will be required to pay the Company
percentage rent at escalating rates depending on gross sales levels. In
addition to operating the SkatePark, RealRide will also be operating a retail
store inside the SportPark Pavilion building. RealRide is responsible for all
capital improvements for all facilities it uses and is required to carry
appropriate levels of insurance for its operations. Plans are for RealRide
SkatePark, at its sole expense, to construct a permanent outdoor SkatePark on
the exterior of the SportPark property by summer 2000.
SPONSORSHIP AGREEMENT WITH PEPSI-COLA COMPANY
In December 1997, the Company entered into a sponsorship agreement with
the Pepsi-Cola Company ("Pepsi") under which Pepsi received certain exclusive
rights related to all non-alcoholic beverage products, except for certain
specialty tenants which may use their products such as Starbucks Coffee Shop,
and a few other minor exceptions, in exchange for an annual fee and
advertising support expenditures. In addition, the agreement provides that
Pepsi will have specified signage rights and the multipurpose arena will be
named the AllSport Arena after Pepsi's AllSport drink product. In addition,
the agreement provides that Pepsi will provide, without charge, all equipment
needed to dispense its products at the SportPark.
The agreement with Pepsi provides that the Company and Pepsi will
participate in joint marketing programs such as promotions on Pepsi's products
and the SportPark. In addition, Pepsi will have the right to provide three
marketing events per year. These events are to be used to promote the
business of the Company and Pepsi.
In consideration for the above rights, Pepsi agreed to pay the Company a
fixed payment when any portion of the SportPark was officially opened; an
additional payment when the SportPark was 100% completed and all attractions
were accessible by the public; and make additional comparable payments on an
annual basis for the remaining term of the agreement such that five total
payments are received. The sponsorship agreement terminates in October 2003,
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unless earlier terminated as provided in the agreement. Pepsi is current in
its payments per the terms of the agreement.
AGREEMENT WITH SPORTSERVICE CORPORATION
In September 1997, the Company entered into a lease and concession
agreement with Sportservice Corporation ("Sportservice") which provides that
Sportservice has the exclusive right to prepare and sell all food, beverages
(alcoholic and non-alcoholic), candy and other refreshments throughout the All
American SportPark, including the Callaway Golf Center , during the ten year
term of the agreement. Sportservice has agreed to pay rent based on a
percentage of gross sales depending upon the level of sales, whether the
receipts are from concession sales, the Arena restaurant, the Clubhouse,
vending machines, mobile stands, or catering sales.
Sportservice invested approximately $3.85 million into the concessions
and operations which includes all food service leasehold improvements.
Sportservice is a wholly-owned subsidiary of Delaware North Company. Other
Delaware North Companies include the Fleet Center in Boston, and food service
clients which include the Ballpark in Arlington, Texas, California Speedway,
Miller Park in Milwaukee, Space Port USA at Kennedy Space Center and Yosemite
National Park.
The agreement also provides Sportservice with a right of first refusal
for future parks to be built by the Company in consideration for a $100,000
payment. An additional payment of up to $100,000 is due depending on whether
Sportservice's development costs for its leasehold improvements and food
service assets exceed the estimate of $3.85 million. The Company is awaiting
documentation from Sportservice to determine additional monies due, if any.
CALLAWAY GOLF CENTER. In June 1997, the Company completed a final
agreement with Callaway Golf Company ("Callaway Golf") to form a limited
liability company named All American Golf LLC (the "LLC") for the purpose of
operating a golf facility, to be called the "Callaway Golf Center ," on
approximately forty-two (42) acres of land which is inside the All-American
SportPark located on approximately sixty-five (65) acres adjacent to Las Vegas
Boulevard in Las Vegas. The Callaway Golf Center opened to the public on
October 1, 1997.
The Callaway Golf Center includes a 110-tee driving range in a
two-tiered format. The driving range is designed to have the appearance of an
actual golf course with ten impact greens and a 1-1/2 acre lake with cascading
waterfalls and an island green. Pro-line equipment and popular brand name
golf balls are utilized. In addition, the golf center includes a lighted nine
hole, par three golf course named the "Divine Nine". The golf course has been
designed to be challenging, and has several water features including lakes,
creeks, water rapids and waterfalls, golf cart paths and designated practice
putting and chipping areas. At the entrance to the golf center is a 20,000
square foot clubhouse which includes an advanced state of the art golf swing
analyzing system, the St. Andrews Golf Shop featuring the latest in Callaway
Golf equipment and accessories, a restaurant and bar, and an outdoor patio
overlooking the golf course and driving range with the Las Vegas "Strip" in
the background.
The LLC was originally owned 80% by the Company and 20% by Callaway Golf.
Callaway Golf agreed to contribute $750,000 of equity capital and loan the LLC
$5,250,000. The Company contributed the value of expenses incurred by the
Company relating to the design and construction of the golf center and cash in
the combined amount of $3,000,000. Callaway Golf's loan to the LLC had a ten
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year term with interest at ten percent per annum. The principal was due in 60
equal monthly payments commencing five years after the golf center opened.
The LLC had executed a license agreement with Callaway Golf pursuant to
which the LLC licenses the right to use the mark "Callaway Golf Center " from
Callaway Golf for an annual royalty not to exceed $50,000. Pursuant to this
agreement, Callaway Golf had the right to terminate the agreement at any time
without cause on ninety days prior written notice and with payment of
$500,000.
As a result of the sale of its interest in the LLC, on May 5, 1998, the
Company had no ownership of or involvement with the Callaway Golf Center
until the end of 1998 (as described in the following paragraph), and the
Callaway Golf Center was operated separately from the Sport Park Las Vegas.
However, the Company had the option to repurchase the 80% membership interest
for a period of two years on essentially the same financial terms that it sold
its interest. This transaction was completed in order to improve the Company's
financial condition which in turn improved the Company's ability to complete
the financing needed for the final construction stage of the SportPark Las
Vegas and for the business activities going forward.
On December 31, 1998 AASP acquired substantially all the assets subject
to certain liabilities of All-American LLC which managed and operated the
Callaway Golf Center . Under terms of the asset purchase agreement, the
consideration paid by the Company consisted of payment to Active Media
Services $1,000,000 in the form of a $1,000,000 promissory note payable in
quarterly installments of $25,000 over a 10-year period without interest. In
turn, Active Media delivered a trade credit of $4,000,000 to Callaway Golf.
LIABILITY INSURANCE
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 it
will be sufficient to cover all future claims.
MARKETING
The marketing programs in place for the CGC and the SPLV are separate and
distinct. The CGC is focused primarily on the local individual customers with
some emphasis on the individual tourist market because of the facility's
proximity to most of the major resorts in Las Vegas. The CGC focuses its
marketing efforts principally on print media that has proven to be effective.
The CGC, which includes the nine-hole par 3 golf course, driving range,
and clubhouse is designed as a country club atmosphere for the general public.
This concept may be expanded into various hotel and resort areas throughout
the United States and overseas and can also be included in the SportPark
opportunities described below or as a stand alone business.
For the SPLV, differences in the marketing plan for the year 2000
compared to the 1999 plan are (1) marketing efforts will be focused on the
resident individual consumers rather than individual tourists, except where it
supports group sales and, (2) a major focus will be on group sales. In 1999,
more emphasis was placed on attracting individual tourists that did not prove
effective. A trend began developing in the latter half of 1999 that indicated
increasing demand for group and special events at the SPLV. After thorough
analysis by Company management and Management Resources, Inc., an industry
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consultant hired by the Company in December 1999, the Company determined that
it was necessary to close the SPLV to the general public during the slower and
less profitable weekdays and reserve such days for group and special events.
Effective January 10, 2000, the SPLV closed to the general public Monday
through Wednesday, reserving these days for group sale and special event
business. Groups generally have the ability and interest in having their
events primarily on weekdays whereas the general public did not historically
visit the SPLV at the attendance levels necessary to support opening to the
general public. The SPLV marketing and sales team has been staffed with
experienced professionals in distinct market segments to capitalize on this
opportunity. Additionally, the Company has plans for new attractions and
changes in product mix to enhance efforts to entice more local resident
consumers on normal operating days as well as enhancing the experience for
group sale and special event customers.
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 and overseas using the
prototype installation at the SPLV 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.
NASCAR SpeedPark is "The Official Go-Kart Racing Facility Licensed by
NASCAR". Management plans to develop the concept to include installations
alongside Super speedways, 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.
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 could require considerably more financial resources than the
Company presently has and more management and human resources than presently
exists at the Company.
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
uniqueness of the Park features, attractive designs, and competitive pricing
to encourage visitors and patrons.
In the Las Vegas market, the Company has competition from other golf
courses, theme parks, family entertainment centers, and hotel/casinos.
Company management believes it has a competitive advantage in the Las Vegas
market because of its strategic location, product branding, alliances, and
product mix which is unlike any competitor in the market. Also, with a new
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focused marketing and sales strategy, the Company believes its aggressive
approach will further its goal of becoming the top family sports entertainment
venue in Las Vegas.
TRADE NAMES AND TRADEMARKS
The Company has filed an "intent to use" trademark application for
"All-American SportPark" and a related design and "Slugger Stadium". The
Company intends to maintain the integrity of the trademarks, other proprietary
names and marks against unauthorized use.
EMPLOYEES
As of March 2, 2000, there were 10 full time employees at the Company's
executive offices, 36 at CGC, and 57 at SPLV. There were also 46 part-time
employees at the SPLV.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's corporate offices are located inside the clubhouse building
of the Company's Callaway Golf Center property at 6730 South Las Vegas
Boulevard, Las Vegas, Nevada 89119. The Company's other principal asset, the
SportPark Las Vegas is located adjacent to the CGC at 121 East Sunset Road.
The two properties occupy approximately 65 acres of leased land described in
"ITEM 1. DESCRIPTION OF BUSINESS BUSINESS DEVELOPMENT." The CGC was opened
October 1, 1997 and the SPLV was opened October 9, 1998. Both properties are
in good condition both structurally and in appearance. The CGC is owned 100%
by the Company through a wholly-owned subsidiary, All-American Golf Center,
Inc. The SPLV is owned 100% by the Company through a wholly-owned subsidiary,
SportPark Las Vegas, Inc.
A ten-year note payable secured by a first deed of trust exists on the
CGC in the original amount of $1 million payable without interest, in
quarterly installments of $25,000 beginning December 1998. A fifteen-year
note payable secured by a first deed of trust exists on the SPLV in the
original amount of $13.5 million with interest at 4% above the Bank's
five-year LIBOR rate (9.38% at December 31, 1999) payable in monthly
installments of approximately $140,000 beginning November 1998. This note is
currently in default. (See "ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.")
ITEM 3. LEGAL PROCEEDINGS.
Except for the complaints 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 December 28, 1998 Sorensen Construction, Inc. filed a complaint in the
District Court of Clark County, Nevada against All-American SportPark LLC
seeking damages in the amount of $104,514. Sorensen claims that it provided
steel and labor to the All-American SportPark pursuant to a contract but was
not paid. The complaint alleged breach of contract, unjust enrichment,
declaratory relief, interest and attorneys fees. No discovery has been
conducted and a trial has not been set. Management intends to vigorously
defend the case.
On October 14, 1999, Joel Rubenstein, Oracle One Partners, Inc., and Hal
Price, doing business as Mach One Marketing Group, filed a complaint against
the Company in the U.S. District Court of the District of Nevada, seeking
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compensatory damages in the amount of $333,333, as well as an accounting and
other relief based on an alleged breach of an agreement to develop sponsors
for the SPLV. This case is in the discovery stage.
On December 22, 1999, Nevada State Bank recorded a formal notice of
default with respect to indebtedness alleged to be in default. The bank
asserts an unpaid principal balance of $13,049,922 plus late charges, interest
and expenses. See ITEM 6 "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES" for a
discussion of the Company's negotiations with Nevada State Bank.
On March 22, 2000, D&R Builders, Inc., doing business as Breslin
Buildings, filed a complaint against the Company 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 December 31, 1999,
the Company had accrued a liability for the amount claimed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held an annual meeting of shareholders on December 6, 1999.
Matters voted upon at the meeting were (1) to elect five directors of the
Company to serve until the next annual meeting of shareholders and (2) to
ratify the appointment of Arthur Andersen LLP as the independent auditors of
the Company.
The votes on the matters were as follows:
Election of Directors Vaso Boreta, Ronald S. Boreta, William Kilmer and
Robert S. Rosburg were all 3,589,306 votes for election and 17,288 withheld.
The Series A Convertible Preferred Stock Director, Motoharu Iue was
unanimously elected with all 500,000 votes.
Ratification of the appointment of Arthur Andersen LLP as the Company's
independent auditors was 3,592,136 votes for, 11,238 votes against, and 220
abstentions.
Subsequent of the annual meeting, management of the Company with Board of
Directors approval selected new auditors Piercy, Bowler, Taylor & Kern
through a formal bid process. This resulted in the dismissal of Arthur
Andersen, LLP as the Company's auditors.
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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 "AASP." The following table sets forth the closing high and low sales
prices of the Common Stock for the periods indicated.
HIGH LOW
----------------------------- ------- -------
Year Ended December 31, 1999:
First Quarter $2.000 $1.000
Second Quarter $1.938 $1.031
Third Quarter $1.750 $0.844
Fourth Quarter $2.125 $0.500
Year Ended December 31, 1998:
First Quarter $5.438 $1.250
Second Quarter $5.375 $2.750
Third Quarter $4.375 $1.500
Fourth Quarter $3.625 $1.125
HOLDERS. The number of holders of record of the Company's $.001 par
value common stock at March 2, 2000, was 66. 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following information should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto included in
this report.
OVERVIEW
The Company's operations consist of the management and operation of a
family and sport-oriented theme park under the name "All-American SportPark".
Results of operations for 1999 include results of the All-American SportPark
in Las Vegas, Nevada which includes the SportPark Las Vegas and the Callaway
Golf Center. The SportPark Las Vegas commenced operations on October 9, 1998.
The Callaway Golf Center commenced operations on October 1, 1997, the Company
sold its 80% interest in the Callaway Golf Center on May 5, 1998 and then
reacquired 100% of the Callaway Golf Center on December 31, 1998.
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1999 VERSUS YEAR ENDED
DECEMBER 31, 1998
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REVENUES. Revenues increased to $7,006,670 in 1999 compared to
$1,583,800 in 1998. Revenues from SPLV were $4,814,575 in 1999 compared to
$811,400 in 1998. This increase is attributed to (1) a full year of SPLV
operations in 1999 compared to only 2-1/2 months in 1998; the SPLV opened for
business on October 9, 1998 and (2) group sales revenues in 1999 of about $1.4
million compared to essentially no group sales in 1998. Revenues from the CGC
were $2,154,222 in 1999 compared to $724,900 in 1998. The increase for CGC is
due mainly to the fact that the Company operated the CGC for just slightly
over four months in 1998 compared to a full twelve months in 1999. The CGC
commenced operations on October 1, 1997, the Company sold its 80% interest in
the CGC on May 5, 1998 and then acquired 100% of the CGC on December 31, 1998.
OTHER INCOME. Other income in 1999 remained consistent with 1998 and
relates primarily to credit card royalty income.
COST OF REVENUES. Cost of revenues increased by $1,931,618 in 1999
compared to 1998. Cost of revenues as a percentage of revenues was 32% in
1999 compared to 21% in 1998. The increase for 1999 results from a full 12
months of operation for SPLV and CGC in 1999 compared to 2-1/2 and 4 months,
respectively, in 1998. The full year of operations for each in 1999 provides
for a seasonal blend of costs to revenues which was not the case in 1998.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). SG&A expenses consist
principally of payroll, rent, professional fees and other corporate costs.
The increase to $5,627,371 in 1999 from $2,433,800 in 1998 reflects higher
payroll, sales and marketing, and other costs associated with a full twelve
months of operation in 1999 at SPLV and CGC compared to 2-1/2 and 4 months,
respectively, in 1998. In 1998 compared with 1999, a greater proportion of
professional fees were incurred, mostly accounting and legal, related to
multiple financing transactions in 1998. In 1999, significantly more sales
and marketing costs were incurred in increasing customer traffic to create
heightened awareness and repeat visitation to both properties.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was
$1,675,273 in 1999 compared to $464,400 in 1998 due mainly to the SPLV being
in operation for a full twelve months in 1999 compared to 2-1/2 in 1998.
PREOPENING EXPENSES. In 1998, preopening expenses were $1,179,300, which
consisted of payroll and operating expenses incurred before opening the SPLV.
OTHER INCOME (EXPENSE). Net interest expense was $1,523,127 in 1999
compared to $552,000 in 1998. This increase is due mainly to interest on debt
associated with the SPLV that was incurred for twelve months in 1999 compared
to 2-1/2 in 1998. Interest costs incurred prior to the opening of the SPLV in
1998 were capitalized due to it being under development. The Company recorded
a gain of $1,638,900 in 1998 related to the sale of its 80% interest in the
CGC on May 5, 1998.
INCOME TAXES. Due to net losses in 1999 and 1998, the Company has
recorded no tax provision. However, the benefit of $269,332 in 1999 relates
to (1) a tax refund of $156,832 which arose from the carryback of the 1998 net
loss for income tax purposes to 1997 where the Company had net taxable income;
this had resulted from the Company's 1997 sale of its franchised retail
stores, and (2) $112,500 related to overpayment of taxes from 1997.
MINORITY INTEREST. Minority interest in 1998 represents Callaway Golf
Company's 20% interest in the CGC net loss through May 5, 1998, the date that
the Company sold its 80% interest to Callaway Golf Company. On December 31,
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1998, the Company acquired 100% of the CGC from Callaway Golf Company and, as
a result, there is no minority interest in 1999.
DISCONTINUED OPERATIONS. The $180,700 in 1998 results from a tax refund
relating to a gain on disposal of the Company's franchise operations.
NET LOSS. The Company incurred a net loss of $3,818,787 in 1999 compared
to $1,487,200 in 1998. The net loss for 1998 includes a gain of $1,638,900
resulting from the Company's sale of its interest in All-American Golf, LLC.
Excluding this non-recurring transaction, the Company's net loss for 1998 was
$3,126,100. The larger net loss in 1999 is due primarily to continued first
year start up, sales and marketing, and other fixed costs of the SPLV that
opened in October 1998 and similar expenses for the CGC due to the
reacquisition of this facility on December 31, 1998. The SPLV accounted for
approximately 87% of the 1999 net loss, the CGC accounted for 1%, and the
remainder relates to corporate overhead. The Company spent the majority of
1999 aggressively marketing the SPLV to increase traffic flow. Included in
this marketing campaign were aggressive sales strategies to lure large groups
and special events to the Park which are expected to create the basis for
recurring events and groups returning year after year for group parties.
Management of the Company is committed to this strategy and will continue to
focus on methods to attract and retain customer loyalty. 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
Park. 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. In this regard, in December 1999 the
Company hired an amusement industry consultant, Management Resources, Inc.
("MRI") to evaluate all operational and marketing elements of the SPLV. MRI
completed Phase I of its report January 2000 and Phase II in February 2000.
See further discussion under the heading: "LIQUIDITY AND CAPITAL RESOURCES."
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had a working capital deficit of
approximately $14,926,141 compared to positive working capital of $1,488,200
at December 31, 1998. Approximately $13.5 million of the 1999 working capital
deficit relates to the note payable secured by a first deed of trust on the
SPLV 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 was not
classified as all current, the Company's working capital deficit at December
31, 1999 would be about $1.8 million. This decrease in working capital
resulted mainly to heavy first year start-up type costs incurred in 1999 to
operate, promote and market the SPLV. In addition, working capital was used
to acquire certain equipment and leasehold improvements totaling approximately
$1 million.
On September 15, 1998 the Company entered into a $13,500,000 loan
agreement with Nevada State Bank. The loan is for 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. For 1998 through August 31, 2003
the loan bears interest of 9.38%. The loan is secured by substantially all
the assets of the Company that existed at the time the financing was
completed. 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, CEO and its Chairman
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and a related entity pledged their stock in SPEN to the landlord as collateral
to protect the leased property from foreclosure. Debt service for this loan
approximates $140,000 per month.
The Company has not been in compliance with certain covenants related to
this loan since September 30, 1999. Also, because of cash constraints, the
Company did not make its September loan payment to the Bank and since then has
not made any loan payments. The Bank has notified the Company that failure to
make such monthly payments constitutes a default under the terms of the loan;
the Bank filed a formal notice of default on December 22, 1999. The Company
has had discussions with the Bank in an attempt to renegotiate the terms of
the loan. As part of these discussions, the Bank and the Company agreed that
an amusement park industry management 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 Bank hired a
different industry consultant to review MRI's recommendations. The Company met
with the Bank's representative on March 21, 2000 to discuss the results of
both reports and begin negotiations of a work-out plan. The Company presented
its proposal to the Bank; the Bank is now in the process of evaluating the
proposal and is expected to respond by early April 2000. There can be no
assurance that the Company will be successful in negotiating a work-out plan
with the Bank.
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.
In addition to the Plan recommended by MRI, the Company is aggressively
pursuing several other opportunities. The Company is developing, with the
assistance of independent qualified professionals, a comprehensive business
plan that will be used as the basis for seeking financing to either (1)
refinance existing debt, (2) infuse sufficient working capital into the
Company to insure future success, and (3) accelerate expansion plans into
other markets. Several options are being evaluated to raise capital for the
Company. Also, management is in discussions with several established
companies in its industry that have the necessary capital and human resources
that could facilitate the Company's expansion plans; several possible business
structures will be evaluated. An important element of the Company's plan will
be to increase the Company's exposure in the financial community. There can
be no assurance that the Company will be successful in its efforts to raise
capital for the Company nor can there be any assurance that the Company will
be successful in its efforts to structure a relationship with a well-known,
established company in its industry to facilitate the Company's expansion
plans.
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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 $694,396 at
December 31, 1999 compared to $877,100 at December 31, 1998. Pursuant to the
Company's agreement with Pepsi, the Company received its fourth of five
sponsorship installment payments in January 2000. It is anticipated but
cannot be guaranteed that other sponsorship fees and advances will be a source
of cash flow in 2000.
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 generated positive cash flow in 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.
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. Such lendings were
$1,705,300 at December 31, 1998 and have increased to $1,777,328 at December
31, 1999. The Company paid back $225,000 of these amounts in late March 1999;
the offsetting increase relates to accrued interest payable on the remaining
balances outstanding. The loans are due in the year 2001 and bear interest at
ten percent per annum. Accrued interest payable of $297,328 at December 31,
1999 has been deferred, a practice which is expected to continue in 2000, if
necessary.
The Company's accounts payable and accrued expenses increased in 1999 to
$2,184,624 from $1,277,200 in 1998. The 1999 balance includes $520,280 of
accrued interest payable to Nevada State Bank.
OPERATING ACTIVITIES. During 1999, net cash used in operating activities
was $697,710 compared to $3,067,500 in 1998. The primary reasons for the
difference relate to (1) more favorable changes in accounts receivable and
inventories in 1999 compared to 1998 of approximately $1.5 million, (2) a
larger increase in accounts payable and accrued expense balances of
approximately $700,000, (3) a $1,638,900 gain on sale of the Company's
investment in CGC in 1998; no such transaction occurred in 1999, (4) higher
depreciation and amortization of approximately $1.8 million in 1999 compared
to $470,000 in 1998, (5) a smaller operating loss in 1999 compared to 1998 by
about $270,000, and (5) a decrease in deferred income in 1999 compared to an
increase in deferred income in 1998 resulting in a less favorable change in
1999 of about $540,000.
INVESTING ACTIVITIES. During 1999, net cash used in investing activities
totaled $1,000,023 compared to $14,285,600 in 1998. The primary uses of cash
for investing activities in 1998 relate to the development of the SportPark.
Of the 1999 cash used in investing activities, approximately $765,000 was used
at SPLV for leasehold and land improvements, furniture and equipment.
Approximately $220,000 was used at the CGC for leasehold improvements.
FINANCING ACTIVITIES. During 1999, net cash used in financing activities
was $677,771 compared to net cash provided by financing activities during 1998
of $19,671,400. The sources of borrowings in 1998 related to increases in
notes payable to shareholder, the Nevada State Bank financing of $13,500,000,
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and to proceeds of $2,500,000 from issuance of Series B preferred stock to
SPEN. The 1999 uses relate principally to normal paydowns on various forms of
debt.
The Company's current and expected sources of working capital are its
cash balances that were $118,796 at December 31, 1999 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 SPLV, land lease payments to the landlord for both the SPLV 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 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.
GAIN ON SALE OF INVESTMENT IN ALL-AMERICAN GOLF, LLC
On May 5, 1998, the Company sold its 80% interest in All-American Golf,
LLC to Callaway Golf Company in exchange for $1.5 million in cash and the
cancellation of a $3 million collateralized note evidencing amounts loaned to
the Company in March 1998 by Callaway, and related accrued interest thereon.
In connection with the sale of its membership units, the Company resigned as
manager of the LLC and agreed not to compete with the Callaway Golf Center in
Clark County, Nevada for a period of two years. The agreement also provided
for a buy back option to the Company which enabled it to repurchase its 80%
equity ownership for a period of 2 years on essentially the same financial
terms that it sold its interest to the Callaway Golf Company. The Company
recorded a gain of $1,638,900 on the disposal of its 80% interest in
All-American Golf, LLC.
On December 31, 1998, the Company acquired substantially all of the
assets subject to certain liabilities of All-American Golf, LLC that had been
managing and operating the Callaway Golf Center. Under terms of this asset
purchase agreement, the Company paid Active Media Services, an entity related
to Callaway Golf Company, $1,000,000 in the form of a promissory note payable
in quarterly installments of $25,000 over a 10-year period without interest.
In turn, Active Media Services issued a $4 million trade credit to Callaway
Golf Company.
YEAR 2000 COMPLIANCE
The Company's accounting system was updated during the first quarter of
1998 and is year 2000 compliant. The Company experienced no significant
problems as a result of the changeover to the Year 2000 and does not expect
any residual effects to significantly impact the Company.
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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 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 (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-22 hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On December 16 1999, management of the Company with Board of Directors
approval selected new auditors Piercy, Bowler, Taylor & Kern through a
formal bid process. This resulted in the dismissal of Arthur Andersen, LLP as
the Company's auditors. For the year ended December 31, 1998, Arthur
Andersen, LLP issued a qualified opinion modified as to a going concern
uncertainty. There were no disagreements with Arthur Andersen LLP on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The Directors and Executive Officers of the Company are as follows:
NAME AGE POSITIONS AND OFFICES HELD
- ------------------ --- -------------------------------------------------
Vaso Boreta 66 Chairman of the Board
Ronald S. Boreta 37 President, Chief Executive Officer, Treasurer,
Secretary and Director
Robert R. Rosburg 72 Director
William Kilmer 59 Director
Motoharu Iue 61 Director
Kirk Hartle 34 Chief Financial Officer
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.
In February 1998, the Board of Directors of the Company established an
audit committee whose members are William Kilmer and Robert Rosburg, both of
whom are independent Directors of the Company. The Company presently has no
compensation or nominating committee.
All Directors hold office until the next Annual Meeting of Shareholders.
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, SPEN,
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.
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,
SPEN, since 1988. In 1974, Mr. Boreta first opened a specialty business named
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"Las Vegas Discount Golf & Tennis," which retailed golf and tennis equipment
and accessories. He was one of the first retailers to offer pro-line 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 near the corner of Flamingo and
Paradise roads in Las Vegas. Mr. Boreta devotes approximately ten percent of
his time to the business of the Company, and the balance to the Company's
Parent and to operating his retail 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, SPEN, 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, SPEN, 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.
MOTOHARU IUE has served as a Director of the Company since April 1997.
Mr. Iue has served as Chairman of the Board of Sanyo North America Corporation
("Sanyo") and President of Three Oceans Inc. ("Three Oceans") since October
1996. Mr. Iue previously served as President of Sanyo and as Chairman of the
Board of Three Oceans from 1992 to 1996 and served as Chief Executive Officer
of Sanyo and Three Oceans until 1999. He currently serves as Executive
Director of Sanyo Electric Corp. of Japan. From 1989 to 1992, he was
Executive Vice President of Tottori Sanyo Electric Co., Ltd. All three
companies are affiliates of Sanyo Electric Co., Ltd. ("Sanyo Electric"), and
Three Oceans Inc. is a shareholder of the Company. Mr. Iue has bee a director
of Sanyo Electric since 1977.
KIRK HARTLE has served as Chief Financial Officer of the Company since
June 1, 1999 and serves in the same capacity for the Company's Parent, SPEN.
Prior to his employment with the Company that began April 5, 1999, Mr. Hartle
was a Senior Manager with KPMG LLP. His experience spans over 11 years in
public accounting with both KPMG LLP and Deloitte & Touche LLP, 6 of which
were in a management capacity. Mr. Hartle is a Nevada CPA and received a
Bachelor's Degree in Business Administration-Accounting from the University of
Nevada, Las Vegas. He devotes approximately 80% of his time to the business of
the Company with the remainder devoted to the Company's Parent, SPEN.
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 ten percent 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 the
Form 3 for Kirk Hartle, the Company's Chief Financial Officer, was filed late.
20
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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 31,
1999, 1998 and 1997 from the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------ -----------------------
SECURITIES
OTHER RE- UNDERLYING ALL
ANNUAL STRICTED OPTIONS/ OTHER
NAME AND PRINCIPAL COMPEN- STOCK SARs COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S) (NUMBER) SATION
- ------------------ ---- -------- -------- ------- --------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald S. Boreta, 1999 $121,939 -- $29,301 -- 125,000 --
President and CEO <FN1>
1998 $100,000 -- $39,348 -- -- --
<FN2>
1997 $101,000 $100,000 $58,183 -- 110,000 $4,231
<FN3> <FN4>
Kevin B. Donovan, 1998 $100,000 -- $ 6,410 -- -- --
Vice President <FN5>
of New Business 1997 $117,166 $ 25,000 $ 6,212 -- 10,000 --
Development
_______________
<FN>
<FN1>
Includes $21,074 deferred by Ron Boreta until such time as the Company's cash flow is
stabilized. This election was made by Ron Boreta in September 1999.
<FN2>
Represents amounts paid for country club memberships for Ronald S. Boreta, an automobile for his
personal use, and contributions made by the Company to retirement plans on his behalf. For
1999, these amounts were $13,446 for club memberships, $7,188 for an automobile, and $8,667 to
the Company's Supplemental Retirement Plan. For 1998, these amounts were $11,148 for club
memberships, $7,200 for an automobile and $21,000 to the Company's Supplemental Retirement Plan.
<FN3>
Ronald Boreta received $68,202 of this bonus in 1998.
<FN4>
Represents premiums paid on a life insurance policy for Ronald S. Boreta's benefit.
<FN5>
Represents $6,410 paid for an automobile provided for Mr. Donovan's personal use. Mr. Donovan's
employment as Vice President of New Business Development ended in 1998.
21
<PAGE>
</FN>
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR - INDIVIDUAL GRANTS
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS/SARs
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARs EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE
- ---------------- ----------- ----------- ---------- ----------
Ronald S. Boreta (1) 125,000 71% $ 6.00 10/26/08
(1) Represents Stock Appreciation Rights (SAR's) as to 125,000 shares
independent of any stock option under the Company's 1998 Stock Incentive
Plan. The base is equal to $6 per share, however no SAR may be exercised
unless and until the market price of AASP's Common Stock equals or
exceeds $10 per share. The maximum amount to be paid on the exercise
of all 125,000 SAR's is $500,000.
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- 325,000/125,000 $0 / $0
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.
EMPLOYMENT AGREEMENTS
Effective August 1, 1994, the Company entered into an employment
agreement with Ronald S. Boreta, the Company's President and Chief Executive
Officer, pursuant to which he receives a base salary of $100,000 per year plus
annual increases as determined by the Board of Directors. His salary was
increased to $120,000 for the year ended December 31, 1996 and returned to
$100,000 for the year ended December 31, 1997. Beginning September 1999, Mr.
Boreta elected to defer half of his base salary until such time as the
Company's cash flow stabilizes and the work-out plan with the Bank is
consummated. The employment agreement is 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
22
<PAGE>
$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 June 1997, a majority of the Company's Board of Directors awarded a
$100,000 bonus to Ronald S. Boreta for his extraordinary services related to
the raising of capital and development of the Company's All-American
SportPark. $68,202 of this bonus was paid in October 1998.
Effective October 1, 1996, the Company entered into a one-year employment
agreement with Kevin B. Donovan, pursuant to which he received a base salary
of $100,000 per year. In addition to his base salary, Mr. Donovan received a
$25,000 bonus upon the opening of a portion of the All-American SportPark, and
received a commission of 5% of all sponsorship sales related to the
All-American SportPark. Mr. Donovan also received the use of an automobile
provided by the Company. Mr. Donovan's employment agreement ended on
September 30, 1997, but his employment continued on the same terms through
November 10, 1998 when Mr. Donovan's employment terminated.
STOCK OPTION PLAN
During July 1994, the Board of Directors adopted a Stock Option Plan (the
"Plan"). The Plan originally authorized the issuance of options to purchase
up to 300,000 shares of the Company's Common Stock.
The Plan allows the Board to grant stock options from time to time to
employees, officers, directors and consultants of the Company. The Board has
the power to determine at the time the option is granted whether the option
will be an Incentive Stock Option (an option which qualifies under Section 422
of the Internal Revenue Code of 1986) or an option which is not an Incentive
Stock Option. Vesting provisions are determined by the Board at the time
options are granted. The option price for any option will be no less than the
fair market value of the Common Stock on the date the option is granted.
Since all options granted under the Plan must have an exercise price no
less than the fair market value on the date of grant, the Company will not
record any expense upon the grant of options, regardless of whether or not
they are incentive stock options. Generally, there will be no federal income
tax consequences to the Company in connection with Incentive Stock Options
granted under the Plan. With regard to options that are not Incentive Stock
Options, the Company will ordinarily be entitled to deductions for income tax
purposes of the amount that option holders report as ordinary income upon the
exercise of such options, in the year such income is reported.
In August 1994, the Board of Directors granted stock options to the
following persons who were then Officers and Directors of the Company, to
purchase shares of the Company's Common Stock at $5.00 per share. On June 9,
1997, each of these options (except Charles Hohl's) were reissued at an
exercise price of $3.0625. These options expired on August 8, 1999.
NAME SHARES SUBJECT TO OPTION
----------------- ------------------------
Vaso Boreta 110,000
Ronald Boreta 110,000
Charles Hohl 60,000 (1)
Glenn Raynes 10,000
Robert R. Rosburg 5,000
William Kilmer 5,000
-------
Total 300,000
=======
23
<PAGE>
<PAGE>
__________________
(1) Mr. Hohl's options vested in increments of 20,000 each year beginning on
August 8, 1995. Upon Mr. Hohl's termination of employment, 20,000 of
these options expired unvested.
In April 1996, the Company's Board of Directors approved increases in the
number of shares of Common Stock that may be issued under the Plan from
500,000 to 700,000, subject to approval by the Company's shareholders within
one year. Shareholder approval was obtained in April 1997. Also in April
1996, the Company's Board of Directors granted stock options as indicated
below that are all 100% vested, expire at various dates in April 2001, and
were still outstanding as of March 20, 2000.
RELATIONSHIP SHARES SUBJECT EXERCISE
NAME TO THE COMPANY TO OPTION PRICE
- ---------------- -------------------- -------------- --------
Joel Rubenstein Consultant 10,000 $3.0625
Ronald S. Boreta Officer and Director 125,000 $3.0625
Ronald S. Boreta Officer and Director 200,000 $3.0625
Ted Abbruzzese Consultant 10,000 $3.0625
Jeff Gordon Consultant 10,000 $3.0625
Hal Price Consultant 1,000 $3.0625
In October 1999, the Company's Board of Directors approved the grant of
an option to Kirk Hartle, the Company's Chief Financial Officer, to purchase
an aggregate 50,000 shares of the Company's common stock at the price of
$0.65625 per share which is equivalent to the closing market price on the date
of grant. The option vests as to 25,000 shares on April 5, 2000 and the
remaining 25,000 shares vest on April 5, 2001. This option expires October
28, 2004.
401(k) PLAN
The Company's Parent, SPEN 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 50% of participants' contributions up to six percent of
the participants' salary.
SUPPLEMENTAL RETIREMENT PLAN
In November 1996, the Company and its majority shareholder, SPEN
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
24
<PAGE>
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 1999 and 1998, Ronald S. Boreta (the President of the Company) was
designated as a Category I employee. The Company made contributions to the
Supplemental Retirement Plan on behalf of Ronald S. Boreta in the amount of
$8,667 and $25,000 for 1999 and 1998, respectively.
The Company's Board of Directors has not yet determined the amounts, if
any, which will be contributed to the Supplemental Retirement Plan for 2000.
1998 STOCK INCENTIVE PLAN
During October 1998, the Board of Directors approved, subject to
stockholder approval, the 1998 Stock Incentive Plan (the "Plan"), and the
Company's shareholders approved the Plan during December 1998.
The purpose of the Plan is to advance the interests of the Company and
its subsidiaries by enhancing their ability to attract and retain employees
and other persons or entities who are in a position to make significant
contributions to the success of the Company and its subsidiaries, through
ownership of shares of Stock of the Company and cash incentives. The Plan is
intended to accomplish these goals by enabling the Company to grant awards in
the form of options, stock appreciation rights, restricted stock or
unrestricted stock awards, deferred stock awards, or performance awards (in
cash or stock), other stock-based awards, or combinations thereof, all as more
fully described below.
GENERAL
The Plan is administered and awards are granted by the Company's Board of
Directors (the "Board"). Key employees of the Company and its subsidiaries
and other persons or entities, not employees of the Company and its
subsidiaries, who are in a position to make a significant contribution to the
success of the Company or its subsidiaries are eligible to receive awards
under the Plan. In addition, individuals who have accepted offers of
employment from the Company and who the Company reasonably believes will be
key employees upon commencing employment with the Company ("New Hires") are
eligible to receive awards under the Plan.
STOCK OPTIONS. The exercise price of an incentive stock option ("ISO")
granted under the Plan or an option intended to qualify for the
performance-based compensation exception under Section 162(m) of the Code may
not be less than 100% of the fair market value of the Stock at the time of
grant. The exercise price of a non-ISO granted under the Plan is determined
by the Board. Options granted under the Plan will expire and terminate not
later than 10 years from the date of grant. The exercise price may be paid in
cash or by check, bank draft or money order, payable to the order of the
Company. Subject to certain additional limitations, the Board may also permit
the exercise price to be paid with Stock, a promissory note, an undertaking by
a broker to deliver promptly to the Company sufficient funds to pay the
exercise price, or a combination of the foregoing.
STOCK APPRECIATION RIGHTS (SARs). Stock appreciation rights ("SARs") may
be granted either alone or in tandem with stock option grants. Each SAR
entitles the holder on exercise to receive an amount in cash or Stock or a
combination thereof (such form to be determined by the Board) determined in
whole or in part by reference to appreciation in the fair market value of a
25
<PAGE>
share of Stock. SARs may be based solely on appreciation in the fair market
value of Stock or on a comparison of such appreciation with some other measure
of market growth. The data at which such appreciation or other measure is
determined shall be the exercise date unless another date is specified by the
Board. If an SAR is granted in tandem with an option, the SAR will be
exercisable only to the extent the option is exercisable. To the extent the
option is exercised, the accompanying SAR will cease to be exercisable, and
vice versa. An SAR not granted in tandem with an option will become
exercisable at such time or times, and on such conditions, as the Board may
specify.
On February 16, 1999, the Board of Directors of the Company approved an
award to Ron Boreta, President of the Company, Stock Appreciation Rights
("SAR's") as to 125,000 shares independent of any stock option under the
Company's 1998 Stock Incentive Plan. The base value of the SAR's shall be
equal to $6 per share, however no SAR may be exercised unless and until the
market price of the Company's Common Stock equals or exceeds $10 per share.
Amounts to be paid under this agreement are solely in cash and are not to
exceed $500,000. The SAR's expire on October 26, 2008.
RESTRICTED AND UNRESTRICTED STOCK AWARDS: DEFERRED STOCK. The Plan
provides for awards of nontransferable shares of restricted Stock subject to
forfeiture ("Restricted Stock"), as well as awards of unrestricted shares of
Stock. Except as otherwise determined by the Board, shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated until the end of the applicable restriction period and the
satisfaction of any other conditions or restrictions established by the Board.
Other awards under the Plan may also be settled with Restricted Stock. The
Plan also provides for deferred grants entitling the recipient to receive
shares of Stock in the future at such times and on such conditions as the
Board may specify.
OTHER STOCK-BASED AWARDS. The Board may grant other types of awards
under which stock is or may in the future be acquired. Such awards may
include debt securities convertible into or exchangeable for shares of Stock
upon such conditions, including attainment of performance goals, as the Board
may determine.
PERFORMANCE AWARDS. The Plan provides that at the time any stock
options, SARs, stock awards (including restricted stock, unrestricted stock or
deferred stock) or other stock-based awards are granted, the Board may impose
the additional condition that performance goals must be met prior to the
participant's realization of any vesting, payment or benefit under the award.
In addition, the Board may make awards entitling the participant to receive an
amount in cash upon attainment of specified performance goals.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of December 31, 1999, 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.
26
<PAGE>
AMOUNT AND
NAME AND ADDRESS NATURE OF BENE- PERCENT
OF BENEFICIAL OWNERS FICIAL OWNERSHIP OF CLASS
- ------------------------- --------------- --------
Sports Entertainment
Enterprises, Inc. 2,250,000 (1) 66.2%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
Ronald S. Boreta 325,000 (2) 9.4%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
Vaso Boreta 0 (3) --
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
Kirk Hartle 25,000 (2) .7%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
Robert R. Rosburg 0 (3) --
49-425 Avenida Club La Quinta
La Quinta, CA 92253
William Kilmer 0 (3) --
1500 Sea Breeze Boulevard
Ft. Lauderdale, FL 33316
Motoharu Iue 0 (4) --
666 - 5th Avenue
New York, New York 10103
Three Oceans Inc. 750,000 (5) 19.2%
2001 Sanyo Avenue
San Diego, California 92173
All Directors and Officers 350,000 (6) 10.0%
as a Group (6 persons)
___________________
(1) Includes 2,000,000 shares of Common Stock and 250,000 shares of Common
Stock issuable upon the conversion of Series B Convertible Preferred
Stock held by Sports Entertainment Enterprises, Inc.
Sports Entertainment Enterprises, 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, and Boreta Enterprises Ltd., a limited liability
company owned by Vaso, Ronald and John Boreta, are principal shareholders
of Sports Entertainment Enterprises, Inc. The following sets forth the
percentage ownership beneficially held by such persons in Sports
Entertainment Enterprises, Inc.:
Vaso Boreta 22.6%
Ronald S. Boreta 20.5%
Robert Rosburg 0.1%
William Kilmer 0.1%
John Boreta 12.8%
Boreta Enterprises Ltd. 16.0%
27
<PAGE>
<PAGE>
Boreta Enterprises Ltd percentage ownership is as follows:
Ronald S. Boreta 68.81%
John Boreta 30.13%
Vaso Boreta 1.06%
(2) Represents shares underlying options exercisable within 60 days held by
the named person. Does not include shares held by Sports Entertainment
Enterprises, Inc. of which such person is an Officer, Director and/or
principal shareholder.
(3) Does not include shares held by Sports Entertainment Enterprises, Inc. of
which such person is an Officer, Director and/or principal shareholder.
(4) Mr. Iue is President of Three Oceans, Inc. and the shares held by Three
Oceans, Inc. are not being treated as beneficially owned by Mr. Iue.
(5) 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.
(6) Includes shares beneficially held by the six named Directors and
executive officers.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Sports Entertainment Enterprises, Inc. ("SPEN"), a publicly-held
corporation, owns 66.7% of the Company's outstanding Common Stock and 250,000
shares of Series B Convertible Preferred Stock. Vaso Boreta, the Company's
Chairman of the Board, is an Officer, Director and principal shareholder of
SPEN. Ronald S. Boreta, President and a Director of the Company, is a Director
and principal shareholder of SPEN. Robert S. Rosburg and William Kilmer,
Directors of the Company, are also Directors of SPEN. In addition, John
Boreta, the son of Vaso Boreta and the brother of Ronald S. Boreta, is a
principal shareholder of SPEN.
The Company has extensive transactions and relationships with SPEN and
subsidiaries ("Related Entities"), Vaso Boreta, the golf retail store owned by
Vaso Boreta (the "Paradise Store") and the SAGS which is the golf retail store
in the Callaway Golf Center owned by Ronald S. Boreta and John Boreta (the
"Affiliated Stores"). The Paradise Store operates in Las Vegas, Nevada. The
types of activities that are shared amongst all of these entities are
advertising, payroll and employee benefits, warehouse rent, equipment leases,
and miscellaneous office expenses. Costs are allocated to each entity based on
relative benefits received.
The Company has unsecured, ten percent notes payable of $230,000 and
$455,300 for December 31, 1999 and 1998 with the Paradise Store. A payment of
$225,300 was made on these notes in late March 1999. These notes are due at
various dates in 2001. The principal amount, interest rate, and payment terms
are substantially similar to borrowings that the Paradise Store obtained from
a bank to fund these loans to the Company. Accrued interest payable of
$62,712 and $35,500 at December 31, 1999 and 1998, respectively, is included
with the note payable. Interest payments of $27,212 and $35,500 have been
deferred in 1999 and 1998, respectively, a practice which is expected to
continue in 2000 if necessary.
28
<PAGE>
The Company has unsecured, ten percent notes payable of $1,250,000 as of
December 31, 1999 and 1998 with Vaso Boreta. These notes are due at various
dates from November 30, 2000 to July 20, 2001. Amounts due in 2000 are
$200,000 with the balance due in 2001. The principal amount, interest rate,
and payment terms are substantially similar to borrowings which Vaso Boreta
obtained from a bank to fund these loans to the Company. Accrued interest
payable of $234,616 and $107,200 at December 31, 1999 and 1998, respectively,
is included in the balance due. Interest payments of $127,397 and $102,200
have been deferred in 1999 and 1998, respectively, a practice which is
expected to continue in 2000 if necessary.
During September 1997, a majority of the Board of Directors of the
Company agreed to sell the Company's rights to the St. Andrews name to Boreta
Enterprises, Ltd. for a $20,000 promissory note since the Company has
committed all of its efforts to the development and management of the
All-American SportPark and no longer intends to engage in the business of
selling golf equipment or apparel.
On September 15, 1998 the Company entered into a $13,500,000 loan
agreement with Nevada State Bank. The loan is for 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. For 1998 through August 31, 2003
the loan bears interest of 9.38%. The loan is secured by substantially all
the assets of the Company that existed at the time the financing was
completed. The Company and SPEN are corporate guarantors on 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, CEO and its Chairman and a related entity
pledged their stock in SPEN to the landlord as collateral to protect the
leased property from foreclosure and the landlord was issued 75,000 stock
options exercisable at $4.00 per share through the year 2005.
A majority of the Company's Board of Directors believes that the terms of
the above transactions were on terms no less favorable to the Company than if
the transactions were with unaffiliated third parties.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
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
29
<PAGE>
3.1 Restated Articles of Incorporated by reference to
Incorporation Exhibit 3.1 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
3.2 Certificate of Amendment Incorporated by reference to
to Articles of Incorporation Exhibit 3.2 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
3.3 Revised Bylaws Incorporated by reference to
Exhibit 3.3 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
3.4 Certificate of Amendment Incorporated by reference to
Articles of Incorporation Exhibit 3.4 to the Registrant's
Series A Convertible Annual Report on Form 10-KSB for
Preferred the year ended December 31, 1998
3.5 Certificate of Designation Incorporated by reference to
Series B Convertible Exhibit 3.5 to the Registrant's
Preferred Annual Report on Form 10-KSB for
the year ended December 31, 1998
3.6 Certificate of Amendment to Incorporated by reference to
Articles of Incorporation - Exhibit 3.6 to the Registrant's
Name change Annual Report on Form 10-KSB for
the year ended December 31, 1998
10.1 Employment Agreement with Incorporated by reference to
Ronald S. Boreta Exhibit 10.1 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.2 Stock Option Plan Incorporated by reference to
Exhibit 10.2 to the Registrant's
Form SB-2 Registration Statement
(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 Statement
Inc. (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 Statement
Inc. (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 Statement
to Las Vegas Discount Golf (No. 33-84024)
& Tennis, Inc.
30
<PAGE>
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 Statement
Discount Golf & Tennis, Inc. (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 Statement
(No. 33-84024)
10.11 Promissory Note to Vaso Incorporated by reference to
Boreta Exhibit 10.11 to the Registrant's
Form SB-2 Registration Statement
(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
10.15 Investment Agreement with Incorporated by reference to
Three Oceans, Inc. Exhibit 10.1 to Registrant's
Form 8-K dated July 29, 1996
10.16 Lease Agreement between Incorporated by reference to
Urban Land of Nevada and Exhibit 10.16 to the Registrant's
All-American SportPark, Form SB-2 Registration Statement
Inc. (No. 33-84024)
10.17 Lease Agreement between Incorporated by reference to
Urban Land of Nevada and Exhibit 10.17 to the Registrant's
All-American Golf Center, Form SB-2 Registration Statement
LLC (No. 33-84024)
10.18 Operating Agreement for Incorporated by reference to
All-American Golf, LLC, Exhibit 10.18 to the Registrant's
a limited liability Form SB-2 Registration Statement
Company (No. 33-84024)
10.20 Lease and Concession Agree- Incorporated by reference to
ment with Sportservice Exhibit 10.20 to the Registrant's
Corporation Form SB-2 Registration Statement
(No. 33-84024)
10.21 Sponsorship Agreement Incorporated by reference to
with Pepsi-Cola Company Exhibit 10.21 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
31
<PAGE>
10.23 Promissory Note of All- Incorporated by reference to
American SportPark, Inc. Exhibit 10.23 to the Registrant's
for $3 million payable to Annual Report on Form 10-KSB for
Callaway Golf Company the year ended December 31, 1998
10.24 Guaranty of Note to Incorporated by reference to
Callaway Golf Company Exhibit 10.24 to the Registrant's
Annual Report on Form 10-KSB for
the year ended December 31, 1998
10.25 Forbearance Agreement dated Incorporated by reference to
March 18, 1998 with Callaway Exhibit 10.25 to the Registrant's
Golf Company Annual Report on Form 10-KSB for
the year ended December 31, 1998
10.26 Amendment No. 2 to License Incorporated by reference to
Agreement with National Exhibit 10.26 to the Registrant's
Assoc, for Stock Car Auto Annual Report on Form 10-KSB for
Racing, Inc. the year ended December 31, 1998
21 Subsidiaries of the Incorporated by reference to
Registrant Exhibit 21 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
27 Financial Data Schedule Filed electronically herewith
(b) REPORTS ON FORM 8-K. A Form 8-K was filed on December 16, 1999 to
report a change in the Company's certifying accountants. No other reports on
Form 8-K were filed during the quarter ended December 31, 1999.
32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
All-American SportPark, Inc.:
We have audited the accompanying consolidated balance sheet of ALL-AMERICAN
SPORTPARK, INC. (formerly Saint Andrews Golf Corporation, a Nevada
Corporation) and subsidiaries (the "Company") as of December 31, 1999 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of All-American SportPark, Inc.
and subsidiaries as of December 31, 1999, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1d to
the consolidated financial statements, the Company has had recurring operating
losses from continuing operations and has generated negative cash flow from
continuing operations for the year ended December 31, 1999, that raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1d.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Piercy Bowler Taylor & Kern
PIERCY BOWLER TAYLOR & KERN
Las Vegas, Nevada
March 17, 2000
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
All-American SportPark, Inc.:
We have audited the accompanying consolidated balance sheet of ALL-AMERICAN
SPORTPARK, INC. (formerly Saint Andrews Golf Corporation, a Nevada
Corporation) and subsidiaries (the "Company") as of December 31, 1998, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of All-American SportPark, Inc.
and subsidiaries as of December 31, 1998, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discusssed in Note 1d
to the consolidated financial statements, the Company has had recurring
operating losses from continuing operations and generated negative cash flow
from continuing operations for the year ended December 31, 1998, which raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1d.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 24, 1999
F-2
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
1999 1998
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 118,796 $ 2,494,300
Accounts receivable 122,847 799,200
Inventory 52,796 99,500
Prepaid expenses and other 231,251 50,100
----------- -----------
Total current assets 525,690 3,443,100
Leasehold improvements and equipment, net 24,040,832 24,513,600
Due from related entities 588,051 257,900
Due from affiliated stores 123,243 14,900
Note receivable - related party 20,000 20,000
Debt issuance costs, net 353,425 393,300
Deposit for land lease 37,821 225,600
Other assets 21,311 82,900
----------- -----------
Total assets $25,710,373 $28,951,300
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
DECEMBER 31,
1999 1998
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $13,102,310 $ 559,300
Current portion of obligations under
capital leases 164,897 118,400
Accounts payable and accrued expenses 2,184,624 1,277,200
----------- -----------
Total current liabilities 15,451,831 1,954,900
Note payable to shareholder 1,484,616 1,357,200
Due to affiliated stores 408,254 517,300
Due to related entities 1,389,931 1,172,300
Long-term debt, net of current portion 570,527 13,408,100
Obligation under capital leases, net
of current portion 395,505 530,300
Deferred income 694,396 877,100
----------- -----------
Total liabilities 20,395,060 19,817,200
Shareholders' equity:
Series A Convertible Preferred stock, $.001
par value, 500,000 shares authorized and
outstanding at December 31, 1999 and 1998 4,740,000 4,740,000
Series B Convertible Preferred Stock, $.001
par value, 250,000 shares authorized and
outstanding at December 31, 1999 and 1998 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, 3,000,000 shares
issued and outstanding at December 31,
1999 and 1998 3,000 3,000
Additional paid-in-capital 3,520,800 3,333,300
Common stock purchase warrants, 0 and
1,000,000 authorized and outstanding
at December 31, 1999 and 1998 - 187,500
Accumulated deficit (5,882,487) (2,063,700)
----------- -----------
Total shareholders' equity 5,315,313 9,134,100
Total liabilities and shareholders'
equity $25,710,373 $28,951,300
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
DECEMBER 31,
1999 1998
----------- -----------
Revenues:
SportPark Las Vegas $ 4,814,575 $ 811,400
Callaway Golf Center[TM] 2,154,222 724,900
Other 37,873 47,500
----------- -----------
Total revenues 7,006,670 1,583,800
Cost of Revenues:
SportPark Las Vegas 1,845,074 225,400
Callaway Golf Center[TM] 423,944 112,000
----------- -----------
Total cost of revenues 2,269,018 337,400
Gross profit 4,737,652 1,246,400
Operating expenses:
Selling, general and administrative 5,627,371 2,433,800
Depreciation and amortization 1,675,273 464,400
Preopening expenses - 1,179,300
----------- -----------
Total operating expenses 7,302,644 4,077,500
Operating loss (2,564,992) (2,831,100)
Other income (expense):
Interest income (expense), net (1,523,127) (552,000)
Gain on sale of interest in All-American
Golf, LLC - 1,638,900
----------- -----------
Loss from continuing operations before
income taxes and minority interest (4,088,119) (1,744,200)
Provision (benefit) for income taxes (269,332) -
----------- -----------
Loss from continuing operations before
minority interest (3,818,787) (1,744,200)
Minority interest in loss of subsidiary - 76,300
DISCONTINUED OPERATIONS:
Gain on disposal of franchise operations - 180,700
----------- -----------
Income from discontinued operations - 180,700
----------- -----------
Net loss (3,818,787) (1,487,200)
=========== ===========
NET LOSS PER SHARE:
Basic and Diluted:
Loss from continuing operations $ (1.27) $ (0.56)
Income from discontinued operations - 0.06
----------- -----------
Net loss per share $ (1.27) $ (0.50)
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
COMMON COMMON
STOCK ADDITIONAL STOCK
PREFERRED PURCHASE COMMON PAID-IN PURCHASE ACCUMULATED
STOCK OPTIONS STOCK CAPITAL WARRANTS DEFICIT TOTAL
---------- -------- ------ ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1997 $4,740,000 $260,000 $3,000 $3,333,300 $187,500 $( 576,500) $7,947,300
Series B
Preferred Stock 2,500,000 2,500,000
Options issued 174,000 174,000
Net loss (1,487,200) (1,487,200)
---------- -------- ------ ---------- -------- ----------- ----------
Balance,
December 31, 1998 7,240,000 434,000 3,000 3,333,300 187,500 (2,063,700) 9,134,100
Expiration of
common stock
purchase warrants 187,500 (187,500) -
Net loss (3,818,787) (3,818,787)
---------- -------- ------ ---------- -------- ----------- ----------
Balance
December 31, 1999 $7,240,000 $434,000 $3,000 $3,520,800 $ - $(5,882,487) $5,315,313
========== ======== ====== ========== ======== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,818,787) $(1,487,200)
Adjustment to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,675,294 470,400
Amortization of land lease deposit 187,779 -
Gain on sale of investment in Callaway
Golf Center[TM] - (1,638,900)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 606,142 (789,900)
(Increase) decrease in inventories 46,704 (99,500)
Decrease in due from officer - 3,000
Increase in prepaid expenses and other (119,562) (100,800)
Increase in accounts payable and accrued
expenses 907,424 215,100
Increase (decrease) in deferred income (182,704) 360,300
----------- -----------
Net cash used in operating activities (697,710) (3,067,500)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of interest in 80%
owned subsidiary - 1,204,500
Leasehold improvements expenditures (1,000,023) (15,490,100)
----------- -----------
Net cash used in investing activities (1,000,023) (14,285,600)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in due to Affiliated
Stores and Related Entities (329,909) 1,176,800
Payments on notes payable and notes payable
to shareholder and related entity (206,994) (1,362,100)
Loan fees paid - (226,200)
Proceeds from issuance of Series B
Preferred Stock - 2,500,000
Payments on bank line of credit - (668,400)
Proceeds from notes payable and note
payable to shareholder and related entity - 18,335,300
Principal payments on capital leases (140,868) (84,000)
----------- -----------
Net cash provided by (used in) financing
activities (677,771) 19,671,400
----------- -----------
NET INCREASE(DECREASE)IN CASH AND CASH
EQUIVALENTS (2,375,504) 2,318,300
----------- -----------
CASH AND CASH EQUIVALENTS, Beginning of year 2,494,300 176,000
----------- -----------
CASH AND CASH EQUIVALENTS, End of year 118,796 2,494,300
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest, net of amounts capitalized 901,888 321,900
=========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment financed through notes and capital
leases 92,417 699,600
=========== ===========
Issuance of stock options in connection with
financing - 174,000
=========== ===========
Asset acquisition through reduction in
note receivable 70,211 -
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATIONAL STRUCTURE AND BASIS OF PRESENTATION
a. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of All-American SportPark, Inc. ("AASP")
(formerly Saint Andrews Golf Corporation), a Nevada corporation, include the
accounts of AASP and its subsidiaries, SportPark Las Vegas, Inc. ("SPLV") and
All-American Golf Center, Inc. ("AAGC"), both Nevada corporations,
collectively the "Company". All significant intercompany 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 are included in AAGC.
b. COMPANY BACKGROUND AND PRIMARY BUSINESS ACTIVITIES
Until December 13, 1994, AASP was a wholly-owned subsidiary of Las Vegas
Discount Golf & Tennis, Inc. ("LVDG") which is now known as Sports
Entertainment Enterprises, Inc. ("SPEN"), a public company. 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 entitled the holders to purchase one
share of the Company's common stock for $6.50 per share. These Warrants
expired in March 1999. As of December 31, 1999, SPEN owns two-thirds (2/3) of
the Company's outstanding common stock and one third (1/3) of the Company's
Convertible Preferred Stock.
The Company's Chairman owns one hundred percent (100%) of the original Las
Vegas Discount Golf & Tennis location on Paradise Road, which opened in Las
Vegas, Nevada in 1974. This store along with the St. Andrews Golf Shop
("SAGS") described below are referred to herein as the "Affiliated Stores."
On June 13, 1997 the Company and Callaway Golf Company ("Callaway") formed
All-American Golf, LLC (the "LLC") to construct, manage and operate the
Callaway Golf Center[TM], premier golf facility on 42 acres located at the
south end of the world famous Las Vegas "Strip" at Las Vegas Boulevard and
Sunset Road. The Company contributed $3 million for 80 percent of the
members' units of the LLC while Callaway purchased the remaining 20 percent
for $750,000. The Callaway Golf Center opened for business in October 1997.
Through May 5, 1998 the Company managed the Callaway Golf Center for a fee of
five percent of gross revenues pursuant to the LLC Operating Agreement.
On May 5, 1998, the Company sold its 80% membership interest in the LLC to
Callaway for $1.5 million in cash and the forgiveness of $3 million of debt,
including accrued interest thereon, owed to Callaway by the Company. This
transaction resulted in a gain to the Company of $1,638,900. In connection
with this transaction, the Company resigned as the manager of the LLC, and
agreed not to compete with the Callaway Golf Center[TM] in Clark County,
Nevada for a period of two years. However, the Company retained the option to
repurchase the 80% membership interest for a period of two years. On December
31, 1998 the Company acquired substantially all the assets subject to certain
liabilities of the LLC from Callaway. This acquisition resulted in the
F-8
<PAGE>
Company owning 100% of the Callaway Golf Center. The minority interest
presented in the accompanying financial statements for 1998 represents
Callaway's interest in the LLC through May 5, 1998.
The Callaway Golf Center 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.
The Company has developed a concept for family-oriented sports-themed
amusement venues named "All-American SportPark" ("SportPark" or "SPLV"). The
first SportPark, comprising 23 acres adjacent to the Callaway Golf Center,
opened for business on October 9, 1998. The SportPark includes 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.
c. CONCENTRATIONS OF RISK
The Company operates one Sportpark and the Callaway Golf Center in Las Vegas,
Nevada. The level of sustained customer demand for these types of
recreational facilities is undetermined. The Company has implemented various
strategies to market the facilities to both tourists and local residents.
Should attendance levels at the Sportpark and Golf Center not meet
expectations in the short-term, management believes existing cash balances
will not be sufficient to fund operating expenses and debt service
requirements for at least the next twelve months. The inability to build
attendance to profitable levels beyond a twelve month period may require the
Company to seek additional debt or equity financing to meet its obligations as
they come due. There is no assurance that the Company would be successful in
securing such debt or equity financing in amounts or with terms acceptable to
the Company.
d. 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, during the years ended December
31, 1999 and 1998, the Company had a net loss of $3,818,787 and $1,487,200,
respectively, and negative cash flow from operations of $697,710 and $3,067,500,
respectively. Additionally, as of December 31, 1999 the Company had
a working capital deficit of $14,926,141 and cash and cash equivalents of
$118,796. Approximately $13.5 million of the 1999 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 December 31, 1999 would be about $1.8 million. See Note 7 for further
information on the note payable in default.
F-9
<PAGE>
Additionally, the Company negotiated an agreement with the landlord to defer
the land lease payments, totaling $52,083 per month, on both the SportPark and
Callaway Golf Center 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.
Management believes that (1) negotiation of a reasonable work-out plan with
the Bank, (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.
e. ESTIMATES USED IN THE PREPARATION OF FINANCIAL STATEMENTS
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.
b. ACCOUNTS RECEIVABLE
Accounts receivable consists primarily of amounts due from tenants at the
Callaway Golf Center[TM] and the SportPark.
c. INVENTORIES
Inventories, which consist primarily of sporting goods merchandise are stated
at the lower of cost or market. Cost is determined using the average cost
method.
d. PREOPENING EXPENSES
Preopening costs are expensed as incurred and represent direct personnel and
other operating costs incurred before the opening of the SportPark in October
1998.
F-10
<PAGE>
e. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements 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 the following estimated useful lives of the assets:
Furniture and equipment 3-10 years
Leasehold improvements 15 years
Normal repairs and maintenance are charged to expense when incurred.
Expenditures that materially extend the useful life of assets are capitalized.
f. DEFERRED INCOME
Deferred income consists primarily of sponsorship fees received from tenants
and corporate sponsors of the SportPark. Deferred income is amortized to
income over the life of the applicable agreement.
g. ADVERTISING
The Company expenses advertising costs as incurred. Advertising costs
amounted to $658,187 and $171,570 in 1999 and 1998, respectively.
h. RECLASSIFICATIONS
Certain items previously reported in specific financial statement captions
have been reclassified to conform with the 1999 presentation.
i. RECOVERABILITY OF LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever events or
changes in the circumstances indicate that the carrying amount of an asset or
a group of assets may not be recoverable. The Company deems an asset to be
impaired if a forecast or undiscounted future operating cash flows directly
related to the asset, including disposal value if any, is less than its
carrying amount. If an asset is determined to be impaired, the loss is
measured as the amount by which the carrying amount of the asset exceeds fair
value. The Company generally measures value by discounting estimated cash
flows. Considerable management judgement is necessary to estimate discounted
cash flows. Accordingly, actual results could vary significantly from such
estimates. Based upon the short duration of operations at the SportPark and
cash flow projections for the SportPark, the Company does not believe that a
triggering event has occurred with respect to the operating losses incurred.
3. LOSS PER SHARE
Basic and diluted loss per share is computed by dividing reported earnings 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 3,000,000 for both 1999
and 1998.
4. RELATED PARTY TRANSACTIONS
The Company has extensive transactions and relationships with SPEN and
subsidiaries ("Related Entities"), the chairman and principal shareholder of
SPEN, the golf retail store owned by the Chairman of SPEN (the "Paradise
F-11
<PAGE>
Store") and the SAGS which is the golf retail store in the Callaway Golf
Center owned by the President of the Company and his brother (the "Affiliated
Stores"). The Paradise Store operates in Las Vegas, Nevada. The types of
activities that are shared amongst all of these entities are advertising,
payroll and employee benefits, warehouse rent, equipment leases, and
miscellaneous office expenses. Costs are allocated to each entity based on
relative benefits received.
The Company has unsecured, ten percent notes payable of $230,000 and $455,300
for December 31, 1999 and 1998 with the Paradise Store. A payment of $225,300
was made on these notes in late March 1999. These notes are due at various
dates in 2001. The principal amount, interest rate, and payment terms are
substantially similar to borrowings that the Paradise Store obtained from a
bank to fund these loans to the Company. Accrued interest payable of $62,712
and $35,500 at December 31, 1999 and 1998, respectively, is included with the
note payable balance under the caption "Due to Affiliated Stores" in the
accompanying consolidated balance sheets. Interest payments of $27,212 and
$35,500 have been deferred in 1999 and 1998, respectively, a practice which is
expected to continue in 2000 if necessary.
The Company has unsecured, ten percent notes payable of $1,250,000 as of
December 31, 1999 and 1998 with the Company's chairman and principal
shareholder. These notes are due at various dates from November 30, 2000 to
July 20, 2001. Amounts due in 2000 are $200,000 with the balance due in 2001.
The principal amount, interest rate, and payment terms are substantially
similar to borrowings which the Company's chairman and principal shareholder
obtained from a bank to fund these loans to the Company. Accrued interest
payable of $234,616 and $107,200 at December 31, 1999 and 1998, respectively,
is included in the balance due under the caption "Note payable to Shareholder"
in the accompanying consolidated balance sheets. Interest payments of
$127,397 and $102,200 have been deferred in 1999 and 1998, respectively, a
practice which is expected to continue in 2000 if necessary.
5. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment included the following as of December 31:
1999 1998
---------- -----------
Building $18,049,814 $17,959,987
Land Improvements 3,433,769 3,127,150
Furniture and equipment 2,030,412 1,674,900
Signs 685,400 600,900
Leasehold improvements 476,519 194,600
Go-Karts 457,115 479,500
Roller skates 19,935 20,000
Equipment under Capital leases 734,296 672,600
Other 78,769 74,663
----------- -----------
25,966,029 24,804,300
Less accumulated depreciation
and amortization (1,925,197) (290,700)
=========== ===========
$24,040,832 $24,513,600
=========== ===========
F-12
<PAGE>
6. BANK LINE OF CREDIT
As of December 31, 1997, the Company had a $800,000 bank line of credit, which
was paid off and canceled in February, 1998.
7. LONG-TERM DEBT
On September 15, 1998 the Company completed a $13,500,000 secured loan with
Nevada State Bank. The loan is for 15 years with the interest measured at a
fixed rate of 4% above the Bank's five-year LIBOR rate measured September 1,
1998, 2003 and 2008. Through August 31, 2003, the loan bears interest of
9.38%. The loan is secured by substantially all the assets of the Company
that existed at the time the financing was completed. 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 Bank to secure repayment of the loan. As
consideration for the landlord's willingness to provide collateral for the
loan, the Company's President, CEO and its Chairman and a related entity
pledged their stock in SPEN to the landlord as collateral. Additionally, the
landlord was issued 75,000 stock options exercisable at $4.00 per share
through the year 2005.
The Company is not in compliance with certain debt covenants related to this
loan as of September 30, 1999. Also, because of cash constraints, the Company
did not make its September loan payment to the Bank and since then has not
made any loan payments. The Bank has notified the Company that failure to
make such monthly payments constitutes a default under the terms of the loan;
the Bank filed a formal notice of default on December 22, 1999. The Company
has had discussions with the Bank in an attempt to renegotiate the terms of
the loan. As part of these discussions, the Bank and the Company agreed that
an amusement park industry management 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 Bank hired a
different industry consultant to review MRI's recommendations. The Company met
with the Bank's representative on March 21, 2000 to discuss the results of
both reports and begin negotiations of a work-out plan. The Company presented
its proposal to the Bank; the Bank is now in the process of evaluating the
proposal and is expected to respond by early April 2000. There can be no
assurance that the Company will be successful in negotiating a work-out plan
with the Bank. As a result of the default, the entire outstanding balance of
the note is classified as a current liability in the accompanying consolidated
balance sheet at December 31, 1999.
On December 31, 1998 the Company reacquired substantially all the assets
subject to certain liabilities of the Callaway Golf Center. Under terms of
the asset purchase agreement, the consideration paid by the Company consisted
of payment to Active Media Services $1,000,000 in the form of a promissory
note payable due in quarterly installments of $25,000 over 10 years without
interest. This promissory note has been discounted to reflect the notes'
present value. As of December 31, 1999 and 1998 the note is recorded at
$588,719 and $645,000, respectively, in the accompanying consolidated balance
sheets.
F-13
<PAGE>
The only other note payable is for equipment at the SportPark in the original
amount of $39,055. Payments are $808 per month with interest at 8.75% per
annum. The note matures March 18, 2004. The balance owing at December 31,
1999 was $34,196.
Aggregate maturities of long-term debt for the five years subsequent to
December 31, 1999, are as follows:
Year ending:
2000 $13,102,310
2001 57,515
2002 63,145
2003 69,326
2004 68,400
Thereafter 312,141
-----------
$13,672,837
===========
8. LEASES
The Company and SPEN 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. Rent is allocated 50% to the Company and 50% to
SPEN. Rent expense for the Company's allocated share of this lease was $7,924
and $33,970 for 1999 and 1998, respectively.
The land underlying the All-American SportPark and Callaway Golf Center is
leased to the Company at a base amount of $52,083 per month allocated $18,910
and $33,173, respectively. Also, the lease has provisions for contingent rent
to be paid by the Company upon reaching certain levels of gross revenues. The
lease commenced October 1, 1997 for AAGC and February 1, 1998 for SPLV. The
terms of both leases are 15 years with two five-year renewal options. 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, AASP entered into a Deposit Agreement, which
required the Company to post a refundable deposit to the lessor of $500,000.
The deposit has been applied as prepaid rent to be amortized until a balance
of $37,821 remains which is the balance at December 31, 1999.
Due to cash constraints, the Company negotiated an agreement with the landlord
to defer the land lease payments on both the SportPark and Callaway Golf
Center 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 obligated under various other capital and non-cancelable
operating leases for equipment that expire at various dates over the next five
years. Total rent expense for operating leases was $625,000 and $488,980 for
1999 and 1998, respectively.
F-14
<PAGE>
At December 31, 1999, minimum future lease payments are as follows:
Capital Operating
Year Leases Leases Total
---- ------- --------- -----
2000 $214,862 $ 776,029 $ 990,891
2001 199,262 759,450 958,712
2002 143,417 720,207 863,624
2003 108,600 721,040 829,640
2004 9,051 692,600 701,651
Thereafter - 5,848,850 5,848,850
-------- ----------- -----------
Total $675,192 $ 9,518,176 $10,193,368
=========== ===========
Less amount representing
interest (114,790)
--------
Present value of net minimum
capital leases payments 560,402
Current portion 164,897
--------
Obligations under capital
leases net of current
portion $395,505
========
9. INCOME TAXES
The federal income tax provision (benefit) consisted of the following for the
years ended December 31:
1999 1998
------------ ---------
Current $(2,992,134) $(347,812)
Deferred 1,675,145 (134,911)
Less valuation allowance 1,316,989 482,723
----------- ---------
Total $ - $ -
=========== =========
The benefits from the net operating loss carry forwards from continuing
operations generated in 1997 of $621,556 was realized through an offset
against the taxable gain from discontinued operations. The company received a
tax refund of approximately $180,000 in 1998 related to a gain on disposal of
its franchised operations which is reflected in the accompanying statement of
operations under discontinued operations.
F-15
<PAGE>
The components of the deferred tax asset (liability) consisted of the
following at December 31:
Deferred Tax Liabilities: 1999 1998
----------- ---------
Temporary differences related to
Property and Equipment $(1,887,326) $ (49,782)
Deferred Tax Assets:
Deferred Income 236,094 298,500
Other 119,075 17,000
Net Operating Loss Carryforward 3,462,870 348,005
----------- ---------
Net Deferred Tax Asset Before
Valuation Allowance 1,930,712 613,723
Valuation allowance (1,930,712) (613,723)
----------- ---------
Net Deferred Tax asset $ - $ -
=========== =========
As of December 31, 1999, the Company has available for income tax purposes
approximately $348,000 in federal net operating loss carryforwards, which may
offset future taxable income. These loss carryforwards begin to expire in
fiscal year 2003. A valuation allowance has been established to reserve the
net deferred tax asset since management does not believe it is more likely
than not that it will be realized.
The provision (benefit) for income taxes attributable to income (loss) from
continuing operations does not differ materially from the amount computed at
the federal income tax statutory rate.
10. CAPITAL STOCK, STOCK OPTIONS, AND INCENTIVES
a. STOCK OPTION PLANS
The Company's Board of Directors adopted an incentive 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 to 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 AASP at
an exercise price of $5.00 per share were granted in 1994. Twenty thousand of
these options expired unvested. Of the remaining 280,000 options, 240,000
were canceled and replaced on June 9, 1997 with a new exercise price of $3.06,
the fair market value on the date of reissuance. These options expired
unexercised on August 7, 1999.
In April 1996, a total of 377,000 options were granted in connection with the
increase in shares available. All of these options issued in April 1996 were
cancelled and replaced on June 9, 1997. The original options had an exercise
price ranging between $4.625 and $4.75 through April 2001. The replacement
options are exercisable at an exercise price of $3.06, the fair market value
on the date of reissuance, through April 2001. In 1998, 21,000 options were
forfeited due to employee terminations. The remaining 356,000 options are
exercisable anytime.
F-16
<PAGE>
Pursuant to the 1994 Plan, in October 1999, 50,000 options were granted to the
Company's Chief Financial Officer at an exercise price of $0.65625 per share
that is equivalent to the closing market price on the date of grant. The
options vest as to 25,000 shares on April 5, 2000 and the remaining 25,000
shares vest on April 5, 2001. These options expire October 28, 2004.
During October 1998, the Board of Directors approved, subject to stockholder
approval, the 1998 stock incentive plan (the "1998 Plan"), and the Company's
shareholders approved the Plan during December 1998. The purpose of the Plan
is to advance the interests of the Company and its subsidiaries by enhancing
their ability to attract and retain employees and other persons or entities
who are in a position to make significant contributions to the success of the
Company and its subsidiaries, through ownership of shares of stock of the
Company and cash incentives. The Plan is intended to accomplish these goals
by enabling the Company to grant awards in the form of options, stock
appreciation rights, restricted stock or unrestricted stock awards, deferred
stock awards, or performance awards (in cash or stock), other stock-based
awards, or combinations thereof, all as more fully described below.
Pursuant to the 1998 Plan, on February 16, 1999, the Board of Directors of the
Company approved an award to the president of the Company, stock appreciation
rights ("SARs") as to 125,000 shares independent of any stock option under the
Company's 1998 Plan. The base value of the SARs is $6 per share, however no
SAR may be exercised unless and until the market price of the Company's Common
Stock equals or exceeds $10 per share. Amounts to be paid under this
agreement are solely in cash and are not to exceed $500,000. The SARs expire
on October 26, 2008.
Pursuant to the Preferred Stock agreement described in subpart c of this
footnote 11, on July 29, 1996 Three Oceans, Inc. was granted an option to
purchase up to 250,000 shares of the Company's common stock at $3.06 per share
for a period of 5 years from the date of the agreement.
As described in footnote 7 above, in 1998 the landlord of the property
underlying the SportPark was granted 75,000 stock options as part of the
compensation for subordinating his land to the Bank. These options are
exercisable at $4.00 per share through the year 2005.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under SFAS
123 requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1999: risk-free interest rate of 4.20; dividend yield of 0.0%;
volatility factor of the expected market price of the Company's common stock
of 1.15; and a weighted-average expected life of 2.08 years. The assumptions
for 1998 were: risk-free interest rate of 4.20; dividend yield of 0.0%;
volatility factor of the expected market price of the Company's common stock
of 1.36; and a weighted average expected life of 4.5 years.
F-17
<PAGE>
The Black-Scholes option pricing model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
YEARS ENDED DECEMBER 31,
1999 1998
------------ ------------
Net loss
As reported $(3,818,787) $(1,487,200)
Pro forma (3,818,787) (1,487,200)
Basic and diluted net loss
per share
As reported (1.27) (.50)
Pro forma (1.27) (.50)
A summary of changes in the status of the Company's outstanding stock options
for the years ended December 31, 1999 and 1998 is presented below:
1999 1998
---------------------- ----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
----------------------- ----------------------
Outstanding at beginning
of year 961,000 $3.21 907,000 $3.15
Granted 50,000 .65 75,000 4.00
Exercised - - - -
Forfeited - - (21,000) 3.06
Expired (280,000) 3.06 - -
---------------------- ----------------------
Outstanding at end of year 731,000 $2.99 961,000 $3.21
====================== ======================
Exercisable at end of year 626,000 $3.09 951,000 $3.22
====================== ======================
Weighted average fair value
of options granted $0.52 $2.32
====================== ======================
F-18
<PAGE>
The following table summarizes information about stock options outstanding at
December 31, 1999:
Options Outstanding Options Exercisable
------------------------- ------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Outstanding Life (Years) Price Exercisable Price
------------------------- ------------------------------
Range of exercise
prices $0.65-$4.00 731,000 2.08 $2.99 676,000 $2.91
========================= ==============================
b. PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of preferred stock. As of
December 31, 1999 and 1998, there were 500,000 Series A Convertible Preferred
shares and 250,000 Series B Convertible Preferred Shares issued and
outstanding.
c. SERIES A CONVERTIBLE PREFERRED STOCK
On July 11, 1996 the Company's 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, the Company entered into an agreement that resulted in the
sale, on an installment basis, of the 500,000 shares of the Series A
Convertible Preferred Stock at $10.00 per share for a total of $5,000,000.
The agreement also resulted in the assignment of certain rights. All proceeds
related to the agreement were received in accordance with the stated terms to
this agreement on October 7, 1996.
Each share of the Series A Convertible Preferred Stock is convertible into one
share of the Company'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) the Company 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 least $15.00 for 20 consecutive trading days. If the Company
notifies the holder of its intent to redeem the Preferred Stock, the holder
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 the Company's common
stock.
The rights granted to the Series A preferred stockholder in accordance with
the agreement include the following: (1) right of first refusal with respect
to debt and or equity financing arrangements for SportParks developed by the
Company for a period of five years ending July 29, 2001, (2) an obligation to
F-19
<PAGE>
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 in the agreement.
Pursuant to the agreement, the Company also granted the Series A preferred
stockholder an option to purchase up to 250,000 shares of the Company's common
stock at $3.06 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 options.
d. SERIES B CONVERTIBLE PREFERRED STOCK
On September 22, 1998, the Company's Board of Directors authorized the
creation of 250,000 shares of Series B Convertible Preferred Stock with a
$.001 par value.
On October 19, 1998, the Company issued 250,000 shares of Series B Convertible
Preferred Stock to its majority shareholder, SPEN for $2,500,000 in cash.
Each share of the Series B Convertible Preferred Stock issued to SPEN is
convertible at the option of SPEN into one share of the Company's common
stock. In the event of liquidation or dissolution of the Company, each share
of Series B Convertible Preferred Stock will have a $10.00 liquidation
preference over all other shareholders. In addition, holders of the Series B
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 meeting certain conditions. Each share of Series B
Convertible Preferred Stock is entitled to vote along with the holders of the
Company's common stock.
e. COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS
In 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 entitled the holder to purchase one share of AASP common
stock for $6.50, $2 above the initial public offering price. The Class A
Warrants were assigned a value of $.1875 for financial reporting purposes. The
Class A Warrants expired unexercised March 15, 1999.
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 contained certain demand and piggyback
registration rights. The Company also issued to the Representative 100,000
Class A Warrants which entitled 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.
These warrants expired unexercised December 12, 1999.
F-20
<PAGE>
11. EMPLOYEES 401(k) PROFIT SHARING PLAN
The Company offers all its eligible employees participation in the Employees
401(k) LVDG 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 1999 and 1998, the Company
matched 50% of employees contributions up to a maximum of 6% of an employee's
base compensation. The Company had expenses related to the Plan of $6,770 and
$6,000 for 1999 and 1998, respectively.
12. SUPPLEMENTAL NON-QUALIFIED RETIREMENT PLAN
In 1995, the Company entered into a Supplemental Retirement Plan for certain
key employees of which the President of AASP is included. This plan became
effective on January 1, 1996. The Company made contributions to the plan of
$8,667 and $21,000 for 1999 and 1998, respectively.
13. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with its President, as well as other key
employees who require the payment of fixed and incentive based compensation.
In 1994, the Company entered into an agreement with Major League Baseball
("MLB") to license the use of MLB logos, trade marks and mascots in the decor,
advertising and promotions of the Company's Slugger Stadium concept. This
agreement was amended during 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 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. In
addition to and as an offset against the minimum payments set out above, the
Company is required to pay to MLB a royalty based on the gross revenue derived
from Slugger Stadium. The Company has made the payments required for 1995,
1996 and 1997.
In 1996, AASP entered into an agreement with Jeff Gordon, the 1997 NASCAR
Winston Cup Champion, 1997 Daytona 500 Champion, 1997 Coca-Cola 600 Champion,
1995 Winston Cup Champion and former NASCAR Winston Cup Rookie of the year, to
serve as spokesperson of the NASCAR SpeedPark through April 30, 2000.
The Company has a license agreement with The National Association of Stock Car
Auto Racing, Inc. ("NASCAR") for the operation of SpeedParks as a part of SPLV
or as a stand-alone NASCAR SpeedPark. The agreement, as amended, provides
that the Company has an exclusive license to use certain trademarks and
service marks in the development, design and operation of go-kart racing
facilities having a NASCAR racing theme in the territories of Las Vegas,
Nevada and Southern California through December 31, 2003.
In December 1997, AASP entered into an agreement with the Pepsi-Cola Company
("Pepsi") concerning an exclusive sponsorship agreement. Under the agreement,
Pepsi receives 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 opened. The rights granted to Pepsi
include that Pepsi's products will be exclusively sold for the categories
listed, that only Pepsi identified cups will be used in SPLV, and that Pepsi
F-21
<PAGE>
would have the right to name the multipurpose arena the AllSport Arena. In
addition, Pepsi will provide the equipment needed to dispense its products at
the SportPark. The agreement with Pepsi provides that AASP and Pepsi will
participate in joint marketing programs such as promotions on Pepsi's products
and local radio advertising. In addition, Pepsi will have the right to
provide three marketing events per year. These events are to be used to
promote the business of the Company and Pepsi. The sponsorship agreement
terminates in October 2003, unless earlier terminated as provided in the
agreement.
In 1997, the Company entered into a lease and concession agreement with
Sportservice Corporation ("Sportservice") which provides SportService with the
exclusive right to prepare and sell all food, beverages (alcoholic and
non-alcoholic), candy and other refreshments throughout SPLV, including the
Callaway Golf Center , during the ten year term of the agreement.
Sportservice has agreed to pay rent based on a percentage of gross sales
depending upon the level of sales, whether the receipts are from concession
sales, the Arena restaurant, the Clubhouse, vending machines, mobile stands,
or catering sales. The agreement also provides Sportservice with a right of
first refusal for future parks to be built by AASP in consideration for a
fixed payment.
In September 1998, the Company entered into a revenue sharing tenant agreement
with NAMCO Cybertainment Inc. to provide arcade, video games and multi-sport
simulation attractions. NAMCO is the world's largest operator of video
arcades. The lease term is for 6 years commencing on the date of opening of
the SPLV.
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.
14. SUBSEQUENT EVENT
In January and February 2000, the Company issued an aggregate of 150,000
shares of common stock to a consultant and a person affiliated with the
consultant in exchange for business consulting services.
F-22
<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.
ALL-AMERICAN SPORTPARK, INC.
Dated: April 12, 2000 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 12, 2000
Vaso Boreta and Director
/s/ Ronald S. Boreta President (Chief April 12, 2000
Ronald S. Boreta Executive Officer),
Treasurer and Director
/s/ Kirk Hartle Chief Financial Officer April 12, 2000
Kirk Hartle
/s/ Robert S. Rosburg Director April 12, 2000
Robert S. Rosburg
/s/ William Kilmer Director April 12, 2000
William Kilmer
/s/ Motoharu Iue Director April 12, 2000
Motoharu Iue
<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-3 through F-6 of
the Company's Form 10-KSB for the fiscal year ended December 31, 1999, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 118,796
<SECURITIES> 0
<RECEIVABLES> 122,847
<ALLOWANCES> 0
<INVENTORY> 52,796
<CURRENT-ASSETS> 525,690
<PP&E> 25,966,029
<DEPRECIATION> 1,925,197
<TOTAL-ASSETS> 25,710,373
<CURRENT-LIABILITIES> 15,451,831
<BONDS> 0
0
7,240,000
<COMMON> 3,000
<OTHER-SE> (1,927,687)
<TOTAL-LIABILITY-AND-EQUITY> 25,710,373
<SALES> 7,006,670
<TOTAL-REVENUES> 7,006,670
<CGS> 2,269,018
<TOTAL-COSTS> 2,269,018
<OTHER-EXPENSES> 7,302,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,523,127
<INCOME-PRETAX> (4,088,119)
<INCOME-TAX> (269,332)
<INCOME-CONTINUING> (3,818,787)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,818,787)
<EPS-BASIC> (1.27)
<EPS-DILUTED> (1.27)
</TABLE>
