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, 2004
Commission File Number: 0-24970
ALL-AMERICAN SPORTPARK, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0203976
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6730 South Las Vegas Boulevard, Las Vegas, Nevada 89119
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(Address of principal executive offices including zip code)
(702) 798-7777
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No___
As of May 12, 2003, 3,400,000 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X
ALL-AMERICAN SPORTPARK, INC.
FORM 10-QSB
INDEX
Page Number
PART I: FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets
March 31, 2004 and December 31, 2003 ............... 3
Consolidated Statements of Operations
Three Months Ended March 31, 2004 and 2003 ......... 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2004 and 2003 ......... 5
Notes to Consolidated Financial Statements ......... 6
Item 2. Management's Discussion and Analysis or
Plan of Operation .................................. 9
Item 3. Control and Procedures ............................. 11
PART II: OTHER INFORMATION
Item 1. Legal Proceedings .................................. 12
Item 2. Changes in Securities .............................. 12
Item 3. Defaults Upon Senior Securities .................... 12
Item 4. Submission of Matters to a Vote of Security
Holders ............................................ 12
Item 5. Other Information .................................. 12
Item 6. Exhibits and Reports on Form 8-K ................... 12
SIGNATURES .................................................. 13
2
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2004 AND DECEMBER 31, 2003
ASSETS
2004 2003
----------- -----------
(Unaudited)
Current assets:
Cash $ 31,617 $ 17,521
Accounts receivable 44,804 23,696
Prepaid expenses and other 3,416 16,278
----------- -----------
Total current assets 79,837 57,495
Leasehold improvements and equipment, net 809,826 808,112
Due from affiliated stores 145,757 132,375
Due from other related entities 137,003 110,221
Other assets 3,488 3,872
----------- -----------
Total assets $ 1,175,911 $ 1,112,075
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities:
Current portion of long-term debt $ 67,790 $ 66,210
Current portion of notes payable to
affiliates 470,000 500,000
Interest payable to affiliates 241,661 230,983
Accounts payable and accrued expenses 300,358 311,720
----------- -----------
Total current liabilities 1,079,809 1,108,913
Notes payable to affiliate, net of
current portion 3,713,473 3,713,473
Interest payable to affiliate 1,477,557 1,384,720
Due to affiliated stores 219,563 187,966
Due to other related entities 414,547 414,547
Long-term debt, net of current portion 303,617 312,141
Deferred income 91,898 1,500
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Total liabilities 7,300,464 7,123,260
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Minority interest in subsidiary 420,096 435,527
----------- -----------
Shareholders' equity deficiency:
Series B Convertible Preferred Stock,
$.001 par value, no shares issued
and outstanding - -
Common Stock, $.001 par value, 10,000,000
shares authorized, 3,400,000 shares
issued and outstanding at March 31, 2004,
and December 31, 2003, respectively 3,400 3,400
Additional paid-in capital 11,462,882 11,462,882
Accumulated deficit (18,010,931) (17,912,994)
----------- -----------
Total shareholders' equity deficiency (6,544,649) (6,446,712)
Total liabilities and shareholders'
equity deficiency $ 1,175,911 $ 1,112,075
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
2004 2003
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Revenues $ 564,475 $ 614,925
Cost of revenues 90,646 85,374
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Gross profit 473,829 529,551
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Operating expenses:
Selling, general and administrative 446,073 631,637
Depreciation and amortization 17,072 16,434
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Total operating expenses 463,145 648,071
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Operating income (loss) 10,684 (118,520)
Interest expense, net (123,452) (122,279)
Other income (expense) (600) 880,000
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Income (loss) before minority
interest (113,368) 639,201
Minority interest in (income) loss of
subsidiary 15,431 (248,974)
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Net income (loss) $ (97,937) $ 390,227
=========== ===========
NET INCOME (LOSS) PER SHARE:
Basic and diluted net income (loss)
per share $ (0.03) $ 0.11
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (97,937) $ 390,227
Adjustment to reconcile net income
(loss) to net cash provided by
operating activities:
Minority interest (15,431) 248,974
Depreciation and amortization 17,072 16,434
Loss of sale of capital assets 1,000
Changes in operating assets and
liabilities:
Increase in accounts receivable (21,108) (44,174)
Decrease in prepaid expenses and other 13,246 11,504
Decrease in accounts payable and
accrued expenses (11,362) (101,528)
Increase in interest payable to
affiliated stores and other
related entities 103,515 107,837
Increase (decrease) in deferred income 90,398 (23,500)
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Net cash provided by
operating activities 79,393 605,774
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of capital assets 2,100 -
Purchases of capital assets (21,886) (6,463)
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Net cash used in
investing activities (19,786) (6,463)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to affiliated
stores and other related entities (8,567) (2,976)
Proceed from notes payable to
affiliated stores 114,958 -
Principal payments on notes payable
to affiliated stores (144,958) -
Principal payments on notes payable (6,944) (26,173)
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Net cash used in financing
activities (45,511) (29,149)
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NET INCREASE IN CASH 14,096 570,162
CASH, beginning of period 17,521 30,108
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CASH, end of period $ 31,617 $ 600,270
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 24,698 $ 12,599
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
5
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of All-American
SportPark, Inc. ("AASP"), include the accounts of AASP and its 65% owned
subsidiary, All-American Golf Center, Inc. ("AAGC"), collectively the
"Company. All significant intercompany accounts and transactions have been
eliminated. The operations of the Callaway Golf Center ("CGC") are included
in AAGC.
The accompanying unaudited consolidated 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, 2004 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, 2003,
from which the December 31, 2003, audited balance sheet was derived.
The Company's operations consist of the Callaway Golf Center located on 42
acres of land on the south end of the Las Vegas "Strip." 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 Callaway Golf fitting center
and two tenants: the Saint Andrews Golf Shop retail store, and the Bistro 10
restaurant and bar.
2. INCOME (LOSS) PER SHARE AND SHAREHOLDER'S EQUITY DEFICIENCY
Basic and diluted income (loss) per share is computed by dividing the reported
net income or 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
3,400,000 for both of the three-month periods ended March 31, 2004 and 2003.
3. LEASES
The land underlying the Callaway Golf Center is leased to AAGC. The lease
expires in 2012 and has two five-year renewal options. Also, the lease has a
provision for contingent rent to be paid by AAGC upon reaching certain levels
of gross revenues. The lease has a corporate guarantee of AASP.
4. LONG-TERM DEBT
The Company has outstanding a promissory note payable (the "Note") to Active
Media Services ("Active") in the original amount of $1 million due in
quarterly installments of $25,000 through September 2008, without interest.
This note has been discounted to reflect its present value.
6
Because of cash flow constraints, the Company negotiated an agreement with
Active to restructure its payments due under the Note. Certain amounts due
under the Note in 2002 were deferred into 2003. As noted above, the normal
quarterly payments are $25,000. In 2003, the amount due for each quarterly
payment was $36,667. In 2004, the quarterly installments returned to the
$25,000 payment. The required payment was made as scheduled on March 31, 2004.
5. RELATED PARTY TRANSACTIONS
The Company has transactions and relationships with (a) The Company Chairman's
two wholly-owned golf retail stores in Las Vegas, Nevada (the "Paradise Store"
and "Rainbow Store") and, (b) two golf retail stores, both named Saint Andrews
Golf Shop ("SAGS"), owned by the Company's President and his brother. One of
the SAGS stores is the retail tenant in the Callaway Golf Center. The
Paradise Store, Rainbow Store, and SAGS are referred to herein as the
"Affiliated Stores." The types of activities that are shared by 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. Amounts allocated to the Affiliated
Stores by the Company approximated $60,000, for both of the quarters ended
March 31, 2004 and 2003.
6. 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. Historically,
the Company has incurred net losses. As of March 31, 2004, the Company had a
working capital deficit of $999,972 and a shareholders' equity deficiency of
$6,544,649.
The Callaway Golf Center has generated positive cash flow since 1998.
However, this positive cash flow is used to fund corporate overhead that is in
place in support of the CGC and public company operations, and there is no
assurance that it will continue.
AASP management believes that its operations, and existing cash balances as of
March 31, 2004, may not be sufficient to fund operating cash needs and debt
service requirements over at least the next 12 months. In March 2003, the
Company reached a settlement with the general contractor and other entities
responsible for building the CGC wherein the Company received $880,000. Of
this amount, approximately $200,000 was used to pay outstanding legal and
expert fees related to the lawsuit. Part of these settlement proceeds were
used to fund continuing operations. Management continues to seek other
sources of funding, which may include Company officers or directors or other
related parties. In addition, management continues to analyze all operational
and administrative costs of the Company and has made and will continue to make
the necessary cost reductions as appropriate.
Among its alternative courses of action, management of the Company may seek
out and pursue a business combination transaction with an existing private
business enterprise that might have a desire to take advantage of the
Company's status as a public corporation. There is no assurance that the
Company will acquire a favorable business opportunity through a business
combination. In addition, even if the Company becomes involved in such a
business opportunity, there is no assurance that it would generate revenues or
profits, or that the market price of the Company's common stock would be
increased thereby.
7
Management continues to seek out financing to help fund working capital needs
of the Company. In this regard, 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
with terms acceptable to the Company.
The consolidated financial statements do not include any adjustments relating
to the recoverability of assets and the classification of liabilities that
might be necessary should the Company be unable to continue as a going
concern.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the Company's
consolidated financial statements and related footnotes included in this
report.
OVERVIEW
The Company's operations consist of the management and operation of a golf
course and driving range property called the Callaway Golf Center. As
discussed below it is currently seeking other business opportunities.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2004, AS COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2003
REVENUES. Revenues of the Callaway Golf Center ("CGC") decreased 8.2% to
$564,475 in 2004, compared to $614,925 in 2003. This decrease is mainly due
to the termination of a sponsorship agreement with a soft drink bottler and
its associated sponsorship income. The decrease was also partially due to
unseasonably cold and rainy weather experienced in the first quarter of 2004,
as compared to much more favorable weather conditions in the same months of
2003, resulting in a reduction in golf course rounds played and driving range
buckets sold. The decrease is also partially due to a reduction in the base
rent of one of AAGC's primary tenants, the St. Andrews Golf Shop.
COST OF REVENUES. Cost of revenues increased $5,272, or 6.2%, to $90,646 in
2004, compared to $85,374 in 2003. Cost of revenues as a percentage of
revenues was 16.1% in 2004, compared to 13.9% in 2003. This increase in cost
of revenues percentage is due mainly to lower total revenues that are
unrelated to direct payroll costs and to a much lesser degree due to a
reclassification of certain payroll items to direct costs.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A). These expenses consist
principally of administrative payroll, rent, professional fees and other
corporate costs. These expenses decreased $185,564, or 29.4%, to $446,073 in
2004, compared to $631,637 in 2003. The reduction is primarily due to an
approximate $176,000 decrease in legal fees and costs associated with the
Company's lawsuit as plaintiff against the general contractor that built the
CGC. That lawsuit was completed in March 2003.
NET INCOME (LOSS). Net loss was ($97,937) in 2004, compared to net income of
$390,227 in 2003. The primary differences in 2004, compared to 2003, are as
follows: (1) the Company received an $880,000 settlement in 2003, from a
lawsuit filed against the general contractor that built the CGC, which was
offset by approximately $176,000 in legal fees and expenses, (2) a minority
interest of $248,974 calculated as 35% of the income generated by the AAGC in
2003, which is due almost entirely to the income generated from the lawsuit
settlement compared to the minority interest calculated at ($15,431) in 2004,
and (3) a decrease in sponsorship income of approximately $25,000 in 2004.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2004, the Company had a working capital deficit of $999,972
and a shareholders' equity deficiency of $6,544,649.
The Callaway Golf Center has generated positive cash flow since 1998.
However, this positive cash flow is used to fund corporate overhead that is in
place in support of the CGC and public company operations. There is no
assurance that it will continue to do so.
9
AASP management believes that its operations, and existing cash balances as of
March 31, 2004, may not be sufficient to fund operating cash needs and debt
service requirements over at least the next 12 months. However, in its report
on the Company's annual financial statements for 2003, the Company's auditors
expressed substantial doubt about the Company's ability to continue as a going
concern. In the first quarter of 2004, CGC converted a portion of its driving
range to a water saving desert landscape known as "xeriscape." The costs of
this conversion were ultimately funded by a rebate from the Southern Nevada
Water Authority; additionally the amount of the rebate exceeded the costs of
the conversion with the excess to be used to fund future turf conversion.
This turf conversion project is expected to significantly reduce ongoing
utility expenses as well as reduce the future costs of landscape maintenance.
Management has also undertaken a restructuring of the administrative staff of
AASP, which is expected to result in additional payroll cost reductions in
future periods. Management continues to seek other sources of funding, which
may include Company officers or directors or other related parties. In
addition, management continues to analyze all operational and administrative
costs of the Company and has made and will continue to make the necessary cost
reductions as appropriate.
Among its alternative courses of action, management of the Company may seek
out and pursue a business combination transaction with an existing private
business enterprise that might have a desire to take advantage of the
Company's status as a public corporation. At this time, management does not
intend to target any particular industry but, rather, intends to judge any
opportunity on its individual merits. Any such transaction would likely have
a dilutive effect on the interests of the Company's stockholders that would,
in turn, reduce each shareholders proportionate ownership and voting power in
the Company. There is no assurance that the Company will acquire a favorable
business opportunity through a business combination. In addition, even if the
Company becomes involved in such a business opportunity, there is no assurance
that it would generate revenues or profits, or that the market price of the
Company's common stock would be increased thereby.
The Company has no commitments to enter into or acquire a specific business
opportunity and, therefore, is able to disclose the risks of a business or
opportunity that it may enter into only in a general manner, and unable to
disclose the risks of any specific business or opportunity that it may enter
into. An investor can expect a potential business opportunity to be quite
risky. Any business opportunity acquired may be currently unprofitable or
present other negative factors.
Working capital needs have been helped by deferring payments of interest and
notes payable balances due to an Affiliate. Management believes that
additional deferrals or such payments could be negotiated, if necessary.
Management continues to seek out financing to help fund working capital needs
of the Company. In this regard, 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
with terms acceptable to the Company.
The Company has raised considerable capital in the past for development
projects. 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.
10
Special Cautionary Notice Regarding 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, and changes in regulations and application for licenses and approvals
under applicable jurisdictional laws and regulations.
ITEM 3. CONTROLS AND PROCEDURES
As of March 31, 2004, under the supervision and with the participation of the
Company's Chief Executive Officer and Principal Financial Officer, management
has evaluated the effectiveness of the design and operations of the Company's
disclosure controls and procedures. Based on that evaluation, the Chief
Executive Officer and Principal Financial Officer concluded that the Company's
disclosure controls and procedures were effective as of March 31, 2004. There
have been no changes in internal control over financial reporting that
occurred during the fourth quarter of the fiscal year covered by this report
that have materially affected, or are reasonably likely to affect, the
Company's internal control over financial reporting.
11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On September 12, 2000, the Company filed a complaint against Bentar
Development, Inc. and Contractors Bonding & Insurance Company in the District
Court of Clark County, Nevada, seeking damages for breach of contract, unjust
enrichment, and license bond claim. Bentar Development, Inc. was the general
contractor on the construction of the Callaway Golf Center. The Company
settled the case in March 2003 with Bentar and all other involved parties,
except for one subcontractor named Western Technologies. The settlement with
Bentar resulted in the Company receiving $880,000 in cash. Subsequent to the
settlement, the Company continued its suit against Western Technologies and
was awarded a judgment against Western Technologies of $660,000 in March
2003.Western Technologies has appealed the judgment and they are in the
process of obtaining the court records needed to draft their appeal. Their
opening brief is due April 12, 2004. Western Technologies was required to and
did file a bond in the amount of the judgment to date, which is approximately
$1,180,000 (including the judgment, interest, and attorneys fees).
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
31 Certification of Chief Filed herewith electronically
Executive Officer and Principal
Financial Officer Pursuant
to Section 302 of the
Sarbanes-Oxley Act of 2002
32 Certification of Chief Filed herewith electronically
Executive Officer and Principal
Financial Officer Pursuant
to Section 18 U.S.C. Section 1350
(b) Reports on Form 8-K. None.
12
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 12, 2004 By:/s/ Ronald Boreta
Ronald Boreta, President and
Chief Executive Officer(Principal
Executive Officer) and Treasurer
(Principal Financial Officer)
13