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, 2005
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, 2005, 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, 2005 and December 31, 2004 ........... 3
Consolidated Statements of Operations
Three Months Ended March 31, 2005 and 2004...... 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2005 and 2004 ..... 5
Notes to Consolidated Financial Statements ..... 6
Item 2. Management's Discussion and Analysis or
Plan of Operation .............................. 8
Item 3. Controls and Procedures ........................ 10
PART II: OTHER INFORMATION
Item 1. Legal Proceedings .............................. 10
Item 2. Changes in Securities .......................... 11
Item 3. Defaults Upon Senior Securities ................ 11
Item 4. Submission of Matters to a Vote of Security
Holders ........................................ 11
Item 5. Other Information .............................. 11
Item 6. Exhibits and Reports on Form 8-K ............... 11
SIGNATURES .............................................. 12
2
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2005 AND DECEMBER 31, 2004
ASSETS
2005 2004
----------- -----------
(Unaudited)
Current assets:
Cash $ 22,571 $ 6,125
Accounts receivable 6,871 902
Prepaid expenses 26,919 11,626
----------- -----------
Total current assets 56,361 18,653
Property and equipment, net of
accumulated depreciation 1,017,954 1,034,033
Due from related entities 173,479 296,131
Other assets 126,302 1,367
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Total assets $ 1,374,096 $ 1,350,184
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities:
Current portion of notes payable to
related entities $ 441,528 $ 385,896
Current portion of other long-term debt 74,495 72,760
Interest payable to related entities 241,440 232,690
Accounts payable and accrued expenses 155,152 199,287
----------- -----------
Total current liabilities 912,615 890,633
Notes payable to related entities, net of
current portion 4,027,419 3,999,299
Other long-term debt, net of current portion 220,094 239,381
Interest payable to related entities 1,611,631 1,525,044
Due to related entities 695,279 640,556
Deferred income - 13,104
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Total liabilities 7,467,038 7,308,017
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Minority interest in subsidiary 410,497 411,508
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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, 2005,
and December 31, 2004, respectively 3,400 3,400
Additional paid-in capital 11,462,882 11,462,882
Accumulated deficit (17,969,721) (17,835,623)
----------- -----------
Total shareholders' equity deficiency (6,503,439) (6,369,341)
----------- -----------
Total liabilities and shareholders'
equity deficiency $ 1,374,096 $ 1,350,184
=========== ===========
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, 2005 AND 2004
(UNAUDITED)
2005 2004
----------- -----------
Revenues $ 542,499 $ 564,475
Cost of revenues 110,911 90,646
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Gross profit 431,588 473,829
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Operating expenses:
Selling, general and administrative 438,100 448,656
Depreciation and amortization 16,079 18,540
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Total operating expenses 454,179 467,196
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Operating income (loss) (23,591) 6,633
Other income (expense):
Interest expense (119,139) (123,452)
Other income 6,621 169,734
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Income (loss) before minority
interest (135,109) 52,915
Minority interest 1,011 (42,768)
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Net income (loss) $ (134,098) $ 10,147
=========== ===========
NET INCOME (LOSS) PER SHARE:
Basic and diluted net income (loss)
per share $ (0.04) $ (0.00)
=========== ===========
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, 2005 AND 2004
(UNAUDITED)
2005 2004
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (134,098) $ 10,147
Adjustment to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Minority interest (1,011) 42,768
Depreciation and amortization 16,079 18,540
Changes in operating assets and
liabilities:
Increase in accounts receivable (5,969) (21,108)
Increase in prepaid expenses
and other assets (140,228) 13,246
Decrease in accounts payable
and accrued expenses (44,135) (11,362)
Increase in interest payable to
related entities 95,337 103,515
Decrease in deferred income (13,104) -
----------- -----------
Net cash provided by (used in)
operating activities (227,129) 155,746
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of capital assets - 22,702
Capital asset expenditures - (118,841)
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Net cash used in
investing activities - (96,139)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to
related entities 55,000 114,958
Principal payments on notes payable
to related entities (8,821) (144,958)
Principal payments on other long-term debt (17,552) (6,944)
Increase (decrease) in due to
related entities 214,948 (8,567)
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Net cash provided by (used in)
financing activities 243,575 (45,511)
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NET INCREASE IN CASH 16,446 14,096
CASH, beginning of period 6,125 17,521
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CASH, end of period $ 22,571 $ 31,617
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 26,058 $ 24,698
=========== ===========
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 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 interim 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, 2005 and for all prior 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, 2004,
from which the December 31, 2004, audited balance sheet information was
derived.
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 the three-month periods ended March 31, 2005 and 2004.
3. RELATED PARTY TRANSACTIONS
The Company has transactions and relationships with (a) an entity owned by the
Company Chairman that operates two wholly-owned golf retail stores in Las
Vegas, Nevada (the "Paradise Store" and "Rainbow Store") and, (b) two other
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 CGC. 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 Paradise Store,
Rainbow Store and SAGS approximated $11,000 and $21,500 for the quarters ended
March 31, 2005 and 2004, respectively.
4. 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,
with some exceptions, the Company has incurred net losses. As of March 31,
2005, the Company had a working capital deficit of $856,254 and a
shareholders' equity deficiency of $6,503,439.
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CGC has generated positive cash flow since 1998, which has diminished
substantially in the current period and there is no assurance that it will
continue.
AASP management believes that its operations, and existing cash balances as of
March 31, 2005, may not be sufficient to fund operating cash needs and debt
service requirements over the next 12 months. 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 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.
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.
Property and equipment was evaluated for possible impairment and determined
not be impaired as of December 31, 2004. 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.
5. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with current
year presentation.
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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 notes included in this report.
OVERVIEW
The Company's operations consist of the management and operation of the
Callaway Golf Center ("CGC"). The CGC includes a par 3 golf course fully
lighted for night golf, a 110-tee two-tiered driving range, a 20,000 square
foot clubhouse which includes the CGC fitting center and two tenants: a retail
store and a restaurant and bar. As discussed below it is currently seeking
other business opportunities.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company does not employ any accounting policies and estimates that are
either selected from among available alternatives or require the exercise of
significant management judgment to apply.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2005 AS COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2004
REVENUES. Revenues of the CGC for the three months ended March 31, 2005
decreased $21,976 or 3.9% to 542,499 from 564,475 reported for the same period
in 2004. Golf lesson revenue increased from zero in 2004 to $44,922 in 2005
as a result of the CGC paying golf pros directly instead of contracting with a
third party to provide lessons. As a result of the termination of its
relationship, rental revenue from the third party decreased by $20,111. Green
fees decreased by $25,071, driving range revenue decreased by $11,317, and
group activities revenue decreased by $2,303, primarily due to increased rain
days in Las Vegas during the first quarter over the same quarter a year ago.
COST OF REVENUES. Costs of revenues increased by $20,265 or 22.4% in 2005 as
compared to 2004. Cost of revenue as a percentage of revenues was 20.4% in
2005 as compared to 16.1% in 2004. These increases are due mainly to the golf
pros, who were paid $31,350 in 2005 compared to zero in 2004 due to the fact
that during a portion of 2004 this service was outsourced to a third party.
This arrangement ended in March 2004.
SELLING, GENERAL AND ADMINISTRATIVE. These expenses consist principally of
administrative payroll, rent, professional fees and other corporate costs.
These expenses decreased by a net total of $10,556 or 2.4% as compared to
2004. The following are major decreases in 2005 from 2004: payroll decreased
$8,881 due to changes in the accounting department staffing as well as cuts in
golf center staffing, advertising decreased $11,146; computer expenses
decreased $2,154 as our new point-of-sale computer system is fully operational
and additional expenses are no longer necessary; contracted services decreased
$3,388 due to work being brought in-house; and audit and tax fees decreased
$15,000. These decreases were offset by the following increases in 2005 from
2004: automobile expense $4,275, utilities $2,994 and bad debt expense of
$24,764. The bad debt increase is a result of the merger of Sports
Entertainment Enterprises, Inc. ("SPEN") with CKX, Inc. on February 7, 2005.
The Company received 10,000 shares of SPEN stock as payment for all accounts
receivable from SPEN. The market value of the SPEN shares received was
$24,764 less than the amounts owed to us by SPEN.
8
OTHER INCOME AND EXPENSE. Other income and expense consists principally of
interest income and expense and non-operating income. For the three months
ended March 31, 2005, other income decreased $162,113 compared to the same
period in 2004, primarily due to the receipt of an incentive from the Southern
Nevada Water Authority ("SNWA") for the conversion of a portion of the golf
course and driving range to drought tolerant (xeriscape) vegetation. Interest
expense decreased $4,313 due to a forgiveness of debt in December 2004.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2005, the Company had a working capital deficit of $856,254 as
compared to a working capital deficit of $871,980 at December 31, 2004. The
CGC has generated positive cash flow since 1998, which has been 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 provide positive
cash flow.
Management believes that the CGC operations and existing cash balances as of
March 31, 2005, may not be sufficient to fund operating cash needs and debt
service requirements over the next 12 months. In its report on the Company's
annual financial statements for 2004, the Company's auditors expressed
substantial doubt about the Company's ability to continue as a going concern.
In the first and third quarters of 2004, the CGC converted a portion of its
driving range and golf course to a water-saving desert landscape known as
"xeriscape." These conversion projects are expected to significantly reduce
the future costs of landscape maintenance. Water usage is also expected to be
significantly lower, however, due to water rate increases, the usage
reductions are not expected to generate cost savings compared to historical
cost.
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.
9
Working capital needs have been helped by deferring payments of interest and
notes payable balances due to a related entity. Management believes that
additional deferrals or such payments can 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.
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, 2005, 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, 2005. There
have been no changes in internal control over financial reporting that
occurred during the first 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.
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 CGC. 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 the case is expected to be heard in
June of 2005. 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).
10
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 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
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
11
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, 2005
By: /s/ Ronald S. Boreta
Ronald Boreta, President and
Chief Executive Officer(Principal
Executive Officer) and Treasurer
(Principal Financial Officer)
12