<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File Number: 0-24970
ALL-AMERICAN SPORTPARK, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0203976
- ------------------------------- ---------------------------------
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6730 South Las Vegas Boulevard, Las Vegas, Nevada 89119
--------------------------------------------------------------------
(Address of principal executive offices including zip code)
(702) 798-7777
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No___
As of May 12, 2000, 3,150,000 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X
<PAGE>
ALL-AMERICAN SPORTPARK, INC.
FORM 10-QSB
INDEX
Page Number
PART I: FINANCIAL INFORMATION
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999 3
Consolidated Statements of Operations
Three Months Ended March 31, 2000 and 1999 5
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or
Plan of Operation 12
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security
Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
2
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2000 1999
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 175,990 $ 118,796
Accounts receivable 121,255 122,847
Inventory 39,371 52,796
Prepaid expenses and other 375,079 231,251
----------- -----------
Total current assets 711,695 525,690
Leasehold improvements and equipment, net 23,634,524 24,040,832
Due from related entities 760,453 588,051
Due from affiliated stores 147,263 123,243
Note receivable - related party 20,000 20,000
Debt issuance costs, net 343,442 353,425
Deposit for land lease 37,821 37,821
Other assets 26,095 21,311
----------- -----------
Total assets $25,681,293 $25,710,373
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
2000 1999
----------- -----------
Current liabilities:
Current portion of long-term debt $13,102,927 $13,102,310
Current portion of obligations under
capital leases 166,505 164,897
Accounts payable and accrued expenses 2,656,508 2,184,624
----------- -----------
Total current liabilities 15,925,940 15,451,831
Note payable to shareholder 1,512,060 1,484,616
Due to affiliated stores 425,584 408,254
Due to related entities 1,500,970 1,389,931
Long-term debt, net of current portion 557,268 570,527
Obligation under capital leases, net
of current portion 357,021 395,505
Deferred income 862,493 694,396
----------- -----------
Total liabilities 21,141,336 20,395,060
Shareholders' equity:
Series A Convertible Preferred stock,
$.001 par value, 500,000 shares
authorized and outstanding at March 31,
2000 and December 31, 1999 4,740,000 4,740,000
Series B Convertible Preferred Stock,
$.001 par value, 250,000 shares
authorized and outstanding at March 31,
2000 and December 31, 1999 2,500,000 2,500,000
Options issued in connection with Series A
Convertible Preferred Stock to purchase
250,000 shares of Common stock 260,000 260,000
Options issued in connection with
financing 174,000 174,000
Common stock, $.001 par value, 10,000,000
shares authorized, 3,150,000 and 3,000,000
shares issued and outstanding at March 31,
2000 and December 31, 1999, respectively 3,150 3,000
Additional paid-in-capital 3,637,380 3,520,800
Accumulated deficit (6,774,573) (5,882,487)
----------- -----------
Total shareholders' equity 4,539,957 5,315,313
----------- -----------
Total liabilities and shareholders'
equity $25,681,293 $25,710,373
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
----------- -----------
Revenue:
SportPark Las Vegas $ 906,683 $ 955,737
Callaway Golf Center[TM] 646,346 483,003
Other 10,367 6,250
----------- -----------
Total revenue 1,563,396 1,444,990
Cost of Revenue:
SportPark Las Vegas 233,148 219,434
Callaway Golf Center[TM] 123,249 71,130
----------- -----------
Total cost of revenue 356,397 290,564
----------- -----------
Gross Profit 1,206,999 1,154,426
Operating Expenses:
Selling, general and administrative 1,282,969 1,262,079
Depreciation and amortization 433,906 404,843
----------- -----------
Total operating expenses 1,716,875 1,666,922
----------- -----------
Operating Loss (509,876) (512,496)
----------- -----------
Interest income (expense), net (382,210) (346,159)
----------- -----------
Loss before provision (benefit) for income
taxes (892,086) (858,655)
Provision (benefit) for income taxes - -
----------- -----------
Net loss $ (892,086) $ (858,655)
=========== ===========
NET LOSS PER SHARE:
Basic and Diluted:
Net loss per share $ (.29) $ (.29)
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (892,086) $ (858,655)
Adjustment to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 433,906 561,052
Changes in operating assets and
liabilities:
Decrease in accounts receivable 1,592 236,161
Decrease in inventories 13,425 7,638
Increase in prepaid expenses and other (31,882) (166,556)
Increase (decrease) in accounts
payable and accrued expenses 471,884 (294,163)
Increase in deferred income 168,097 108,513
----------- -----------
Net cash provided by (used in)
operating activities 164,936 (406,010)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Leasehold improvements expenditures (17,615) (154,488)
----------- -----------
Net cash used in investing activities (17,615) (154,488)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to Affiliated Stores and
Related Entities (68,053) (20,488)
Increase (decrease) in notes payable
and notes payable to shareholder and
related entity 14,802 (345,499)
Principal payments on capital leases (36,876) (28,478)
----------- -----------
Net cash used in financing activities (90,127) (394,465)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 57,194 (954,963)
----------- -----------
CASH AND CASH EQUIVALENTS, Beginning
of period 118,796 2,494,300
----------- -----------
CASH AND CASH EQUIVALENTS, End of period $ 175,990 $ 1,539,337
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 13,905 $ 341,145
=========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment financed through notes and
capital leases $ - $ 39,847
=========== ===========
Common stock issued in exchange for
consulting services $ 116,730 $ -
=========== ===========
6
<PAGE>
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements include the
accounts of All-American SportPark, Inc. ("AASP"), a Nevada corporation, and
its subsidiaries, All-American Golf Center, Inc. ("AAGC"), and SportPark Las
Vegas, Inc. ("SPLV"), (collectively the "Company"). All significant
inter-company accounts and transactions have been eliminated. The operations
of the All-American SportPark facility are included in SPLV. The operations
of the Callaway Golf Center ("CGC") are included in AAGC.
The accompanying financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission relating to interim financial statements. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. In the opinion of management, all necessary adjustments
have been made to present fairly, in all material respects, the financial
position, results of operations and cash flows of the Company at March 31,
2000 and for all periods presented.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that may require revision in future periods.
These consolidated financial statements should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.
The Company's current operations consist of 65 acres of sports entertainment
located on the south end of the Las Vegas "Strip" including the following:
(1) The Callaway Golf Center located on 42 acres of land that includes the
Divine Nine par 3 golf course fully lighted for night golf, a 110-tee two-
tiered driving range which has been ranked the Number 2 golf practice facility
in the United States since it opened in October 1997, a 20,000 square foot
clubhouse which includes the St. Andrews Golf Shop, Callaway Performance
Center, Giant Golf teaching academy, and the Bistro 10 restaurant and bar; and
(2) The SportPark Las Vegas which is a family-oriented sports-themed amusement
venue named "All-American SportPark" ("SportPark" or "SPLV"). The SportPark,
comprising 23 acres adjacent to the Callaway Golf Center, opened for business
on October 9, 1998. The SportPark's major attractions include NASCAR
SpeedPark, Major League Baseball Slugger Stadium, the 100,000 square foot
Arena Pavilion which houses the Pepsi AllSport Arena, the RealRide SkatePark
featuring the ramps used in the ESPN X-Games, "The Rock" 47-foot rock climbing
wall, Namco Timeout Arcade, Indoor putting challenge, Boston Garden restaurant
and bar, Skybox suites and several other interactive experiences and retail
shops.
As of March 31, 2000, Sports Entertainment Enterprise, Inc. ("SPEN"), a
publicly traded company, owns approximately 63.5% of the Company's outstanding
common stock and one-third of the Company's outstanding preferred stock.
7
<PAGE>
2. SPORTPARK LAS VEGAS LOAN AGREEMENT
On September 15, 1998 the Company entered into a $13,500,000 loan agreement
with Nevada State Bank ("Lender"). The term of the loan is 15 years with
interest measured at a fixed rate of 4% above the Lender's five-year LIBOR
rate measured September 1, 1998, 2003 and 2008. The initial interest rate
through 2003 is 9.38%. The loan is secured by substantially all the assets of
the Company that existed at the time the financing was completed as well as
corporate guarantees of AASP and SPEN. The Callaway Golf Center was not owned
by the Company at the time this financing was completed and therefore is not
security for this loan. To facilitate this financing transaction, the owner of
the leasehold interest in the land underlying the SportPark executed a trust
deed granting a security interest in the leased property to the Lender to
secure repayment of the loan. As consideration for the Landlord's willingness
to provide collateral for the loan, the Company's President and CEO, its
Chairman, and a related entity pledged their stock in SPEN to the landlord.
Additionally, the landlord was issued 75,000 stock options exercisable at
$4.00 per share through the year 2005.
The Company has not been in compliance with certain debt 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 Lender and since then
has not made any loan payments. The Company has had discussions with the
Lender in an attempt to renegotiate the terms of the loan. As part of these
discussions, the Lender and the Company agreed that an amusement park industry
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 Lender hired a different industry
consultant to review MRI's recommendations. The Company met with the Lender's
representative on March 21, 2000 to discuss the results of both consultant's
reports and to present the Company's proposal for a work-out plan. Since that
meeting, the Lender had its consultant update its analysis of MRI's report
based on detailed information provided to the Lender by the Company at the
March 21 meeting. The Lender has not yet responded to the Company's proposal.
Although management of the Company is optimistic that a work-out plan will be
negotiated, there can be no assurance that the Company will be successful in
doing so.
3. LOSS PER SHARE AND SHAREHOLDER'S EQUITY
Basic and diluted loss per share is computed by dividing the reported net loss
by the weighted average number of common shares outstanding during the period.
The weighted-average number of common and common equivalent shares used in the
calculation of basic and diluted loss per share were 3,107,143 and 3,000,000
for the three-month periods ended March 31, 2000 and 1999, respectively.
In January and February 2000, the Company issued an aggregate of 150,000
restricted shares of its common stock to a consultant and a person affiliated
with the consultant in exchange for business consulting services. The
issuance of these shares was valued at a forty percent discount of the closing
market price of AASP's common stock on or about the date that the shares were
issued.
8
<PAGE>
4. RELATED PARTY TRANSACTIONS
The Company has unsecured, ten percent notes payable to its Chairman of
$1,259,702 and $1,250,000 at March 31, 2000 and December 31, 1999,
respectively. Accrued interest payable of $252,358 and $234,616 at March 31,
2000 and December 31, 1999, respectively, is included in the balance due under
the caption "Note payable to Shareholder" in the accompanying consolidated
balance sheets.
The Company has unsecured, ten percent notes payable to the Paradise Store of
$264,967 and $230,000 as of March 31, 2000 and December 31, 1999,
respectively. The Paradise Store is a golf retail store owned 100% by the
Company's Chairman. Accrued interest payable of $41,953 and $62,712 at March
31, 2000 and December 31, 1999, respectively, is included with the note
payable balance under the caption "Due to Affiliated Stores" in the
accompanying consolidated balance sheets.
The Company normally has extensive transactions and relationships with SPEN
and subsidiaries ("Related Entities"), the chairman and principal shareholder
of SPEN, and the Paradise Store. In the first quarter of 2000, no significant
transactions occurred with the Related Entities or the Paradise Store.
5. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment include the following as of March 31,
2000 and December 31, 1999:
2000 1999
----------- -----------
Building $18,049,814 $18,049,814
Land Improvements 3,449,161 3,433,769
Furniture and equipment 2,032,639 2,030,412
Leased equipment 734,296 734,296
Signs 685,400 685,400
Leasehold improvements 476,519 476,519
Go-Karts 457,115 457,115
Other 98,704 98,704
----------- -----------
25,983,648 25,966,029
----------- -----------
Accumulated depreciation and
amortization (2,349,124) (1,925,197)
----------- -----------
$23,634,524 $24,040,832
=========== ===========
6. LEASES
The land underlying the SPLV and CGC is leased to the Company at a base amount
of $52,083 per month allocated $33,173 to CGC and $18,910 to SPLV. Also, the
lease has provisions for contingent rent to be paid by the Company upon
reaching certain gross revenue levels. The lease commenced October 1, 1997
for CGC and February 1, 1998 for SPLV. The terms of both leases are 15 years
with two five-year renewal options.
9
<PAGE>
Due to cash constraints, the Company negotiated an agreement with the landlord
to defer the land lease payments on both the SPLV and CGC beginning September
1999 with no specified ending date. Management of the Company believes that
the landlord is willing to defer land lease payments until such time as
adequate capital resources are available to the Company to make such payments.
The Company is also obligated under various other capital and non-cancelable
operating leases for equipment that expire at various dates over the next five
years.
7. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with its President, as well as other key
employees which will require the payment of fixed and incentive based
compensation.
The Company has a comprehensive general liability insurance policy to cover
possible claims for injury and damages from accidents and similar activities.
Although management of the Company believes that its insurance levels are
sufficient to cover all future claims, there is no assurance that it will be
sufficient to cover all future claims.
The Company is involved in certain litigation as both plaintiff and defendant
related to its business activities. Management, based upon consultation with
legal counsel, does not believe that the resolution of these matters will have
a materially adverse effect on the Company.
8. GOING CONCERN MATTERS
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
accompanying consolidated financial statements, for the three months ended
March 31, 2000, the Company had a net loss of $892,086 and has experienced
cash flow problems since September of 1999. For the year ended December 31,
1999, the Company had a net loss of $3,818,787 and negative cash flow from
operations of $697,710. Additionally, as of March 31, 2000, the Company had a
working capital deficit of $15,214,245 and cash and cash equivalents of
$175,990. Approximately $14 million of this working capital deficit relates
to the note payable secured by a first deed of trust on the SportPark that has
been in default since September 1999. Because of the Company's default on the
note, accounting rules require that the full amount owing be classified as
current for financial reporting purposes. If this note payable was not
classified as current in its entirety, the working capital deficit as of March
31, 2000 would be about $1.2 million. See Note 2 for further information on
the note payable in default.
Management believes that (1) negotiation of a reasonable work-out plan with
the Bank, (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.
10
<PAGE>
The consolidated financial statements do not include any adjustments relating
to the recoverability of assets and the classification of liabilities, except
the note payable referred to above, that might be necessary should the Company
be unable to continue as a going concern.
9. RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated statements of operations and of cash flows for
the three months ended March 31, 1999 have been restated to present, in the
proper 1999 quarter, audit adjustments that were made in the fourth quarter of
1999. The impact of this restatement is as follows:
Decrease in revenues of the SportPark $ (93,750)
Increase in interest expense (26,352)
---------
Increase in net loss $(120,102)
=========
Increase in net loss per share $ (.04)
=========
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the
Company's condensed consolidated financial statements and related footnotes
included in this report.
OVERVIEW
The Company's current operations consist of the management and operation
of 2 sports entertainment venues in Las Vegas, Nevada: The Callaway Golf
Center ("CGC") and the All-American SportPark ("SportPark"). Results of
operations for the quarters ended March 31, 2000 and 1999 include the results
of the CGC and the SportPark. The SportPark commenced operations on October 9,
1998. The CGC commenced operations in October 1997, the Company sold its 80%
interest in it on May 5, 1998 and, the Company reacquired 100% of the CGC on
December 31, 1998.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000 AS COMPARED TO THREE
MONTHS ENDED MARCH 31, 1999
REVENUES. Revenues increased 8.2% to $1,563,396 in 2000 compared to
$1,444,990 in 1999. Revenue for the CGC increased 33.8% to $646,346 in 2000
compared to $483,003 in 1999 due to increased traffic flow and per capita
spending. Revenue for the SportPark declined 5.1% to $906,683 in 2000
compared to $955,737 in 1999. This decline is due mainly to lower attendance
levels in the first quarter of 2000 compared to 1999 due, in part, to very
little advertising by the SportPark in January and February 2000 because of
cash constraints. The decline was also due to fewer operating days in 2000
versus 1999. Effective January 10, 2000, management of the Company made the
decision to close the SportPark to the general public Monday through Wednesday
because the revenue generated on these days was not covering variable
expenses. As part of this strategy, management reserved Monday through
Wednesday for group sales and special events. This decision by management was
recommended by the industry consultant hired by the Company in December 1999
and is a key part of the SportPark's plan going forward to capitalize on the
higher margin group sales market. Although attendance for the SportPark was
down in the first quarter of 2000 versus 1999, net per capita customer
spending increased nearly 54% primarily due to the increased emphasis on group
sales.
COST OF REVENUES. Cost of revenues increased 22.6% to $356,397 in 2000
compared to $290,564 in 1999. Cost of revenues as a percentage of Revenues
was 22.8% in 2000 compared to 18.9% in 1999. This increase is due mainly to
costs for the CGC which are higher as a percentage of revenue in 2000 because,
in the first quarter of 1999, the operating cost structure was not fully
established as the CGC had just been acquired from Callaway Golf Company on
December 31, 1998.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A). These expenses consist
principally of administrative payroll, rent, professional fees and other
corporate costs. These expenses increased nominally to $1,282,969 in 2000
compared to $1,262,079 in 1999. Although corporate overhead decreased
approximately 22% in 2000 versus 1999, SG&A costs for the CGC increased for
the same reason described above in "Cost of Revenues." SG&A for the SportPark
decreased approximately 2.5% and may have decreased more if not for increased
legal and professional fees related to the SportPark loan default issue
discussed in "LIQUIDITY AND CAPITAL RESOURCES" below.
12
<PAGE>
DEPRECIATION AND AMORTIZATION. These costs increased to $433,906 in 2000
compared to $404,843 in 1999 reflecting the higher overall depreciable base of
fixed assets resulting from fixed asset additions throughout 1999.
NET INTEREST (EXPENSE) INCOME. Net interest expense increased to
$382,210 in 2000 compared to $346,159 in 1999 due primarily to interest costs
on debt secured by the SportPark Las Vegas and lower interest income in 2000
because of substantially lower cash balances.
INCOME TAXES. Due to operating losses, the Company has recorded no tax
provision nor has it recorded any tax benefits.
NET LOSS. Net loss for 2000 was $892,086 compared to $858,655 for 1999.
The increased net loss for 2000 is due primarily to the reasons already
described. The SPLV accounted for approximately 88% of the 2000 net loss; the
CGC achieved net income in 2000 of $79,571; and the remainder relates to
corporate overhead.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had negative working capital of
$15,214,245. This deficit in working capital is largely due to the SPLV note
payable that is in default (see discussion below). Since it is in default,
the entire balance of the note is classified as current for financial
reporting purposes. If this note was classified for financial reporting
purposes under its normal amortization schedule, the working capital deficit
at March 31, 2000 would be approximately $1.2 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. 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. Debt
service for this loan approximates $140,000 per month.
The Company has not been compliance with certain debt 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 Lender and since then
has not made any loan payments. The Company has had discussions with the
Lender in an attempt to renegotiate the terms of the loan. As part of these
discussions, the Lender and the Company agreed that an amusement park industry
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 Lender hired a different industry
consultant to review MRI's recommendations. The Company met with the Lender's
representative on March 21, 2000 to discuss the results of both consultant's
reports and to present the Company's proposal for a work-out plan. Since that
meeting, the Lender had its consultant update its analysis of MRI's report
based on detailed information provided to the Lender by the Company at the
March 21 meeting. The Lender has not yet responded to the Company's proposal
although a response is expected before the end of the second quarter.
Although management of the Company is optimistic that a work-out plan will be
negotiated, there can be no assurance that the Company will be successful in
doing so.
13
<PAGE>
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 profitability objectives of the existing SportPark
as well as 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
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 profitability objectives of the existing
SportPark or the Company's expansion plans.
Also, management is continually evaluating new revenue opportunities that
would provide a broader and more exciting customer experience as well as
maximize the utilization of the SportPark and CGC. At the same time,
management has instituted aggressive cost containment strategies that began in
September 1999 and will continue until the Company is operating as efficiently
as possible. In addition, because of the Company's cash constraints, since
September 1999 the Company's President has been deferring half of his salary
until such time as the Company has sufficient capital resources.
On December 31, 1998 the Company purchased substantially all the assets
and assumed certain liabilities of the Callaway Golf Center[TM] for $1,000,000
payable in quarterly installments of $25,000 for a 10 year period with no
interest. The Golf Center has generated positive cash flow in 2000 and 1999.
If required to fund corporate operations, management believes that additional
borrowings against the CGC could be arranged although there can be no
assurance that the Company would be successful in securing such financing, or
at terms acceptable to the Company.
The Company's Chairman through personal loans and through advances from
his personally owned retail store (one of the "Affiliated Stores") has
historically loaned funds to the Company as needed. Loans from the Company's
Chairman were $1,512,060 and $1,484,616 at March 31, 2000 and December 31,
1999, respectively. Loans from his personally owned retail store were $306,920
and $292,712 at March 31, 2000 and December 31, 1999, respectively. The
increases relate to accrued interest payable on the balances outstanding. The
14
<PAGE>
loans are due beginning in November 2000 and bear interest at ten percent per
annum. Accrued interest payable of $294,311 at March 31, 2000 has been
deferred, a practice which is expected to continue in 2000, if necessary.
There are no planned material capital expenditures in 2000.
The Company in the normal course of its business receives sponsorship
fees and various advance payments of different kinds, which are recorded as
deferred income until earned. Such amounts are typically earned over the term
of the contract with the applicable sponsor. Deferred income was $862,493 at
March 31, 2000 compared to $694,396 at December 31, 1999. A sponsorship fee
of $250,000 was received in the first quarter of 2000. It is anticipated, but
cannot be guaranteed, that sponsorship fees and advances will be a source of
cash flow in 2000.
Operating Activities. Net cash provided by operating activities was
$164,936 for the three months ended March 31, 2000 compared to net cash used
in operating activities of $406,010 for the three months ended March 31, 1999.
The primary reason for the positive operating cash flow in 2000 versus
negative operating cash flow in 1999 relates to a more favorable change in
2000 in accounts payable and accrued expenses offset by higher collections of
receivables in 1999.
Investing Activities. Net cash used in investing activities was $17,615
and $154,488 for the three months ended March 31, 2000 and 1999, respectively.
The larger expenditures in 1999 are attributed to the SportPark being newly
opened (the SportPark opened in October 1998) and the refinements that were
being made to the facility at that time.
Financing Activities. Net cash used in financing activities was $90,127
and $394,465 for the three months ended March 31, 2000 and 1999, respectively.
The primary reason for the smaller use of cash in 2000 is due to the Company
not paying the debt service on the SportPark loan.
The Company's current and expected sources of working capital are its
cash balances that were $175,990 at March 31, 2000 and cash flow from
operations including sponsorship fees and advance deposits of various kinds.
Working capital needs have been helped by deferring payments to the Lender on
the 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.
15
<PAGE>
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this
Quarterly Report contains statements that are forward-looking such as
statements relating to plans for future expansion and other business
development activities, as well as other capital spending and financing
sources. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the
future and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. These risks
and uncertainties include, but are not limited to, those relating to
dependence on existing management, leverage and debt service (including
sensitivity to fluctuations in interest rates), domestic or global economic
conditions, changes in federal or state tax laws or the administration of such
laws, changes in regulations and application for licenses and approvals under
applicable jurisdictional laws and regulations.
16
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On March 22, 2000, D&R Builders, Inc., doing business as Breslin
Buildings, filed a complaint in the District Court of Clark County, Nevada
against the Company and its landlord, seeking damages for breach of contract,
mechanics' lien foreclosure and unjust enrichment. The plaintiff contends
that it is entitled to $243,883 for work performed. The Company has not yet
filed an answer to this complaint. At March 31, 2000 and December 31, 1999,
the Company had accrued a liability for the amount claimed.
Item 2. Changes in Securities.
During the quarter ended March 31, 2000, the Company issued 150,000
shares of its Common Stock which were not registered under the Securities Act
of 1933, as amended, to two persons who are consultants to the Company in
exchange for services valued at $116,730.
In connection with these issuances, the Company relied on Section 4(2) of
the Securities Act of 1933, as amended. The shares were offered for
investment only to sophisticated investors and not for the purpose of resale
or distribution, and the transfer thereof was appropriately restricted by the
Company.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27 Financial Data Schedule Filed herewith electronically
(b) Reports on Form 8-K.
None.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALL-AMERICAN SPORTPARK, INC.
Date: May 15, 2000 By:/s/ Ronald S. Boreta
Ronald S. Boreta, President and
Chief Executive Officer
Date: May 15, 2000 By:/s/ Kirk Hartle
Kirk Hartle, Chief Financial Officer
18
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ----------------
27. FINANCIAL DATA SCHEDULE Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited condensed balance sheets and unaudited condensed statements of
income found on pages 3 and 4 of the Company's Form 10-QSB for the year to
date, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 175,990
<SECURITIES> 0
<RECEIVABLES> 121,255
<ALLOWANCES> 0
<INVENTORY> 39,371
<CURRENT-ASSETS> 711,695
<PP&E> 23,634,524
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,681,293
<CURRENT-LIABILITIES> 15,925,940
<BONDS> 0
<COMMON> 3,150
0
7,240,000
<OTHER-SE> (2,703,193)
<TOTAL-LIABILITY-AND-EQUITY> 25,681,293
<SALES> 1,563,396
<TOTAL-REVENUES> 1,563,396
<CGS> 356,397
<TOTAL-COSTS> 356,397
<OTHER-EXPENSES> 1,716,875
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 382,210
<INCOME-PRETAX> (892,086)
<INCOME-TAX> 0
<INCOME-CONTINUING> (892,086)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (892,086)
<EPS-BASIC> (.29)
<EPS-DILUTED> (.29)
</TABLE>
