UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended: December 31, 2004
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. [X]
State issuer's revenues for its most recent fiscal year: $2,168,802.
As of March 29, 2005, 3,400,000 shares of common stock were outstanding, and
the aggregate market value of the common stock of the Registrant held by non-
affiliates was approximately $1,099,000.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
EXPLANATORY NOTE: On April 5, 2006, the President and Principal Financial
and Accounting Officer of All-American Sportpark, Inc. (the Company)
concluded that the previously issued consolidated financial statements
contained in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2004, required restatement as a result of accounting errors
contained therein. In particular, it was determined that reported gains from
the extinguishment of debt from related parties should have been treated as
capital contributions during the years ended December 31, 2004, 2003 and
2002. Other revisions were also made to present additional detailed
information and do not have an effect on net income (loss).
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
The Company's business began in 1974 when Vaso Boreta, the Company's
Chairman of the Board, 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 of golf and 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 was incorporated in Nevada 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. ("AASP") on December 14,
1998.
Sports Entertainment Enterprises, Inc. ("SPEN"), formerly known as Las
Vegas Discount Golf & Tennis, Inc. ("LVDG"), a publicly traded company,
acquired the Company in February 1988, from Vaso Boreta, who was the
Company's sole shareholder. Vaso Boreta also served as SPEN's Chairman of
the Board, President and CEO until February 2005.
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. The net proceeds to the Company from this public offering
were approximately $3,684,000. The Class A Warrants expired unexercised on
March 15, 1999.
In 1996, the Company sold 500,000 shares of Series A Convertible
Preferred Stock to Three Oceans Inc. ("TOI"), an affiliate of SANYO North
America Corporation, for $5,000,000 in cash pursuant to an Investment
Agreement between the Company and TOI. The Company used these proceeds to
fund part of the development costs of its All-American SportPark property in
Las Vegas. In March 2001, the Company repurchased all of the shares of
Series A Convertible Preferred Stock from TOI for $5,000 in cash. Once
repurchased, the shares were retired.
2
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.
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 Callaway
Golf Center business. In addition, the Buyer granted Boreta Enterprises,
Ltd., a limited partnership owned by Vaso Boreta, Ron Boreta, Vaso's son and
President of the Company, and John Boreta, Vaso's son and 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. Likewise, the Buyer is restricted from operating 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
developed its Callaway Golf Center and All-American SportPark ("SportPark")
properties. 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 eventually encircle the
entire 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 was
home to the now discontinued SportPark that opened for business in October
1998; the Company disposed of the SportPark business in May 2001.
On June 20, 1997, the lessor of the 65-acre tract ("Landlord") agreed
with the Company to cancel the original lease and replace it with two
separate leases. The lease for the SportPark commenced on February 1, 1998
with a base rent of $18,910 per month and was cancelled in connection with
the disposition of the SportPark in May 2001; the lease for the Callaway Golf
Center is for fifteen years with options to extend for two additional five-
year terms. The lease for the Callaway Golf Center[TM] commenced on October
1, 1997 when the golf center opened; base rent is $33,173 per month.
During June 1997 the Company and Callaway Golf Company ("Callaway")
formed All-American Golf LLC ("LLC"), a California limited liability company
that was owned 80% by the Company and 20% by Callaway; the LLC owned and
operated the Callaway Golf Center. In May 1998, the Company sold its 80%
interest in LLC to Callaway. On December 31, 1998 the Company acquired
substantially all the assets of LLC subject to certain liabilities that
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. ASI is a Nevada limited liability company whose members
include Andre Agassi, a professional tennis player.
3
Beginning in September 1999, the Company ceased making loan payments on
its SportPark property due to financial difficulties. Ultimately, this
resulted in the disposition of the SportPark property in May 2001.
SPEN owned 2,000,000 shares of the Company's common stock and 250,000
shares of the Company's Series B Convertible Preferred Stock. In the
aggregate, this represented approximately two-thirds ownership in the
Company. On April 5, 2002, SPEN elected to convert its Series B Convertible
Preferred Stock into common stock on a 1 for 1 basis. On May 8, 2002, SPEN
completed a spin-off of the Company's shares held by SPEN to SPEN's
shareholders. This resulted in SPEN no longer having any ownership interest
in the Company.
BUSINESS OF THE COMPANY
The Company's operations consist of the Callaway Golf Center ("CGC"), on
42 acres of leased land and 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 of the CGC including the MGM Grand, Mandalay Bay, Luxor,
Bellagio, and the Monte Carlo to name a few. The CGC is also adjacent to
McCarran International Airport that services nearly 35 million visitors
annually. The local residential population approximates 1.5 million.
In June 1997, the Company completed a final agreement with Callaway 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[TM]," on approximately forty-two (42) acres of land on Las Vegas
Boulevard in Las Vegas, Nevada. The Callaway Golf Center[TM] opened to the
public on October 1, 1997.
The Callaway Golf Center[TM] includes a 110-station, two-tiered driving
range. The driving range is designed to have the appearance of an actual golf
course with ten impact greens, waterfall features, and an island green. Pro-
line equipment and popular brand name golf balls are utilized. In addition,
the CGC 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 CGC is a 20,000 square foot clubhouse which includes an
advanced state of the art golf swing analyzing system developed by Callaway
Golf Company, and two tenant operations: (a) the St. Andrews Golf Shop
featuring the latest in Callaway Golf equipment and accessories, and (b) the
Bistro 10 restaurant and bar which features an outdoor patio overlooking the
golf course and driving range with the Las Vegas "Strip" in the background.
The CGC has a lease agreement with St. Andrews Golf Shop for the
provision of sales of golf retail merchandise. The lease is for fifteen
years ending in October 2012. The lessee pays a fixed monthly rental for its
office and retail space.
The CGC had a lease and concession agreement with Giant Golf Academy
which was terminated by Giant Golf's receivership due to internal business
issues in March of 2004.
4
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
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-
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.
On May 5, 1998, the Company sold its 80% interest in the LLC to Callaway
for $1.5 million in cash and the forgiveness of $3 million in debt, including
accrued interest thereon, owed to Callaway by the Company. The Company
retained the option to repurchase the 80% interest for a period of two years
on essentially the same financial terms that it sold its interest. The sale
of the Company's 80% interest in the LLC was completed in order to improve
the Company's financial condition that, in turn, improved the Company's
ability to complete the financing needed for the final construction stage of
the SportPark.
On December 30, 1998 the Company acquired substantially all the assets
of the LLC subject to certain liabilities. This resulted in the Company
owning 100% of the Callaway Golf Center. Under terms of the asset purchase
agreement, the Company paid $1 million to Active Media Services 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 delivered a trade credit
of $4,000,000 to Callaway Golf.
In connection with this acquisition, the Company executed a trademark
license agreement with Callaway Golf pursuant to which the Company licenses
the right to use the marks "Callaway Golf Center " and "Divine Nine" from
Callaway Golf for a term beginning on December 30, 1998 and ending upon
termination of the land lease on the Golf Center. The Company paid a one-
time fee for this license agreement that was a component of the purchase
price the Company paid for the Callaway Golf Center upon acquisition of the
facility on December 30, 1998. Pursuant to this agreement, Callaway Golf has
the right to terminate the agreement upon the occurrence of any Event of
Termination as defined in the agreement.
On June 1, 2001, the Company completed a transaction pursuant to a
Restructuring and Settlement Agreement with Urban Land of Nevada, Inc. (the
"Landlord") to terminate the land lease for the discontinued SportPark, and
to transfer all of the leasehold improvements and personal property located
on the premises to the Landlord.
As part of the agreement, the Landlord agreed to waive all liabilities
of the Company to the Landlord with respect to the discontinued SportPark,
and with the exception of a limited amount of unsecured trade payables, the
Landlord agreed to assume responsibility of all other continuing and
contingent liabilities related to the SportPark. The Landlord also agreed to
cancel all of the Company's back rent obligations for the Callaway Golf
Center for periods through April 30, 2001. The Callaway Golf Center remains
an operating business of the Company.
As part of the transaction, the Company transferred to the Landlord a 35
percent ownership interest in the Company's subsidiary that owns and operates
the Callaway Golf Center. This subsidiary is All-American Golf Center, Inc.
("AAGC"). In connection with the issuance of the 35 percent interest in AAGC
5
to the Landlord, the Company and the Landlord entered into a Stockholders
Agreement that provides certain restrictions and rights on the AAGC shares
issued to the Landlord. The Landlord is permitted to designate a non-voting
observer of meetings of AAGC's board of directors. In the event of an
uncured default of the lease for the CGC, so long as the Landlord holds a 25%
interest in AAGC, the Landlord will have the right to select one director of
AAGC. As to matters other than the election of Directors, the Landlord has
agreed to vote its shares of AAGC as designated by the Company.
AGREEMENT WITH SPORTSERVICE CORPORATION
In September 1997, the Company entered into a lease and concession
agreement with Sportservice Corporation ("Sportservice") that provides
Sportservice with the exclusive right for all food, beverages (alcoholic and
non-alcoholic), candy and other refreshments throughout the SportPark and
CGC, during the ten-year term of the agreement. Sportservice pays rent based
on a percentage of gross sales.
Sportservice is a wholly-owned subsidiary of Delaware North Company.
The agreement remains in effect for the CGC and the portion related to the
SportPark was assumed by the Landlord in connection with his acquisition of
the SportPark.
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 program for the CGC is focused primarily on the local
individual customers with increasing 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 for the local market. For the tourist
market, the Company has instituted taxi programs, rack cards, and print media
in tourist publications that are located in the Las Vegas hotels and hotel
rooms. Also, the CGC, has implemented programs to attract more group events,
clinics, and other special promotional events. In February of 2004, the golf
center installed a 30' (ft.) pylon sign with a reader board in front of the
center. The sign makes the general public aware of various programs,
specials and other information taking place within the facility. Once
installed, the CGC began random customer information survey's to provide
information on how guests heard of the facility. Over half stated that they
came into the facility because they saw the new sign.
The CGC, which includes a nine-hole par 3 golf course, driving range,
and clubhouse, is designed as a country club atmosphere for the general
public.
6
The Company's marketing efforts toward establishing additional CGC-type
locations have been directed towards a number of large existing and potential
markets for which there can be no assurance of financial success. Further,
to expand the concept for CGC-type facilities beyond the Las Vegas location
could require considerably more financial and human resources than presently
exists at the Company.
FIRST TEE
In March 2002, the CGC became the official home in Southern Nevada for
the national First Tee program. The First Tee program is a national
initiative started in November 1997 by the World Golf Foundation. First Tee
is sponsored by the PGA Tour, the LPGA, the PGA of America, the United States
Golf Association, and Augusta National Golf Club. The First Tee program was
formed to eliminate access and affordability issues for children, especially
economically disadvantaged children, to participate in the game of golf. In
research conducted by the National Golf Foundation, it was noted that only
two percent of children through age 17 ever try golf and only five percent of
our nation's golfers were minorities. The CGC is proud to be part of the
First Tee program and believes it will offer many opportunities for the
Company in the years ahead.
COMPETITION
Any golf/amusement facilities developed by the Company will compete with
any other family/sports attractions in the city where such facilities are
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 visitation and patronage.
In the Las Vegas market, the Company has competition from other golf
courses, family entertainment centers, and entertainment provided by
hotel/casinos. Company management believes the CGC has a competitive
advantage in the Las Vegas market because of its strategic location, product
branding, alliances, and extent of facilities balanced with competitive
pricing that is unlike any competitor in the market.
The Company's competition includes other golf facilities within the Las
Vegas area that provide a golf course and driving range combination and/or a
night lighted golf course. Management believes that the CGC is able to
compete because it is unique in providing a branded partnership with Callaway
and giving the Las Vegas community one of the largest golf training
facilities in the western United States. In addition, several Las Vegas
hotel/casinos own their own golf courses that cater to high-roller/VIP
tourists. The CGC is able to compete against these facilities because it
offers a competitively priced golf facility with close proximity to the Las
Vegas "Strip" properties where a non-high-roller/VIP tourist can come to
enjoy a Las Vegas golf experience.
7
EMPLOYEES
As of March 12, 2005, there were 3 full-time and 1 part-time employee at
the Company's executive offices, and 8 full-time and 11 part-time employees
at CGC.
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 Callaway Golf Center property
occupies approximately 42 acres of leased land described in "ITEM 1.
DESCRIPTION OF BUSINESS - BUSINESS DEVELOPMENT." The CGC was opened October
1, 1997. The property is in good condition both structurally and in
appearance. The Company owns 65% of the CGC through a subsidiary, All-
American Golf Center, 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.
The CGC has two tenants: (1) the St. Andrews Golf Shop occupies
approximately 4,300 square feet for golf retail sales and pays a fixed
monthly rental of $13,104 for its retail and office space. The lease is for
fifteen years ending in 2012. (2) Sierra Sportservice occupies about 2,500
square feet for food and beverage services. The lease is for ten years
ending in 2007. SportService operates the Bistro 10 restaurant and pays rent
based on a percentage of their gross revenue by category (6% of restaurant
sales, 12% of catering and beverage cart, and 4% of the combined total gross
sales for common area maintenance (CAM) charges).
Rent paid by SportService in 2004 is summarized as follows:
Restaurant sales $ 15,144
Catering 465
Beverage Cart 7,173
CAM 12,637
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Total $ 35,419
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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 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's
claim asserts construction defects related to the CGC's driving range tee
line which has experienced large cracks in the concrete and ground level
differentials on each side of the cracks of more than one inch as the result
8
of ground subsidence arising primarily from Bentar's failure to properly
compact the earth in and around the tee line. 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 appealed the judgment. 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). The appeal has been fully submitted to the Nevada Supreme Court for
its decision.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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 OTC Bulletin Board under the symbol
AASP. The following table sets forth the closing high and low sales prices
of the common stock for the periods indicated. The quotations reflect inter-
dealer prices, without retail markup, markdown or commission and may not
represent actual transactions.
HIGH LOW
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Year Ended December 31, 2004:
First Quarter $0.08 $0.03
Second Quarter $0.20 $0.04
Third Quarter $0.21 $0.05
Fourth Quarter $1.01 $0.05
Year Ended December 31, 2003:
First Quarter $ 0.03 $ 0.01
Second Quarter $ 0.15 $ 0.01
Third Quarter $ 0.17 $ 0.04
Fourth Quarter $ 0.12 $ 0.03
HOLDERS. The number of holders of record of the Company's $.001 par
value common stock at March 1, 2005 was approximately 1,050. This does not
include approximately 1,000 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 expected 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.
9
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.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company has elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees and related interpretations
in accounting for its employee stock options. However, in December 2004, the
Financial Accounting Standards Board (FASB) issued SFAS No. 123 (Revised
2004), Share-Based Payment (SFAS 123R). SFAS 123R requires that compensation
cost related to share-based employee compensation transactions be recognized
in the financial statements. Share-based employee compensation transactions
within the scope of SFAS 123R include stock options, restricted stock plans,
performance-based awards, stock appreciation rights and employee share
purchase plans. The provisions of SFAS 123R are effective as of the first
interim period that begins after June 15, 2005. Accordingly, we will
implement the revised standard in the third quarter of fiscal year 2005.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets, and Amendment of APB Opinion 29, Accounting for Nonmonetary
Transactions. The amendments made by SFAS 153 are based on the principle
that exchanges of nonmonetary assets should be measured based on the fair
value of the assets exchanged. Further, the amendments eliminate the narrow
exception for nonmonetary exchanges of similar productive assets and replace
it with a broader exception for exchanges of nonmonetary assets that do not
have commercial substance. SFAS 153 is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. We do
not expect to enter into any transactions that would be affected by adopting
SFAS 153.
OVERVIEW
The Company's operations consist of the management and operation of a
golf course and driving range property called the Callaway Golf Center. The
Callaway Golf Center includes the Divine Nine 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 Callaway Golf fitting center and two tenants:
the Saint Andrews Golf Shop retail store and the Bistro 10 restaurant and
bar. As discussed below it is currently seeking other business opportunities.
The National Golf Foundation (NGF) stated in a press release dated
February 5, 2005, that, "the National Golf Course Owners Association had
reported that 2004 finished up nationally compared to a decline in the
previous two years." NGF also stated that, "private clubs were flat while
public courses saw the increases." Additionally, the Las Vegas Convention
10
Center and Visitors Authority (LVCVA) announced on February 10, 2005, that
the number of 2004 visitors broke all previous records by more than 2
million. Furthermore, the LVCVA projected that visitor growth will be
significant through 2009. Given this information, expectations for both
public golf courses and Las Vegas tourism are increasing.
We expect that Calloway Golf Center (CGC) revenues will remain flat or
increase slightly in 2005. The CGC has an ideal location at the end of the
Las Vegas "Strip" and near the international airport; however, much of the
land immediately adjacent to the CGC has not yet been developed. In 2005,
significant commercial, industrial and residential development, along with an
expansion of the international airport, is planned. As a result of this
planned development, in 2006 the Company expects the CGC name recogni tion to
increase significantly and revenues to be impacted favorably.
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2004 VERSUS YEAR ENDED
DECEMBER 31, 2003.
REVENUES. Revenues of the Callaway Golf Center ("CGC") for 2004
decreased 2.1% to $2,168,802 compared to $2,214,675 in 2003. The decrease
was due to an overall decrease in golf course revenue. This decrease is due
primarily to a reduction in league play revenue of $12,340 and a decrease in
golf course green fees of $12,405; the termination of a sponsorship agreement
with a soft drink bottler resulting in loss of $78,928 in sponsorship
revenue; a decrease in rental income of $76,034 from Giant Golf and Saint
Andrews Golf and the fact that $21,583 in insurance recoveries and
miscellaneous income were received in 2003. The revenue reductions were
offset by increased driving range revenue of $34,036 and golf lesson revenue
of $120,770.
COST OF REVENUES. Costs of revenues increased by 47.8% in 2004 to
$505,555 compared to $342,050 in 2003. The overall increase can be primarily
attributed to increased driving range supply purchases and CGC providing golf
lessons that had been previously provided through a contract with Giant Golf.
In 2004, CGC terminated the arrangement with Giant Golf and hired golf
professionals to provide golf lessons resulting in a significant increase in
direct payroll costs. However, the lost lease revenues approximated the golf
lesson revenues resulting in a negligible impact on revenues.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). SG&A expenses consist
principally of land lease, landscape maintenance, payroll, utilities,
professional fees and other corporate costs. These expenses decreased by 3.3%
to $1,978,385 in 2004 from $2,046,919 in 2003. Salaries and wages decreased
by $70,039 or 1680% from 416,592 to 346,553 primarily due to decreased
accounting personnel costs as a result of our CFO leaving and our employing a
controller. The increase in utilities of $49,238 or 1926% from $255,693 to
$304,931 resulted from increased water and electric rates, not increased
consumption thereof. The decrease in other expenses is mainly due to
incurring higher legal expenses, in 2003 (ITEM 3 LEGAL PROCEEDINGS). The
decreased legal expenses were offset, in 2004, by an increase in
uncollectible receivables largely due to the write-off of amounts due from
SPEN (ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS).
11
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
4.8% to $71,154 in 2004 compared to $67,905 in 2003 due to 2004 asset
additions including the driving range turf conversion of $148,000 and a new
point of sale system for the golf center of $14,000.
INTEREST EXPENSE. Interest expense increased 4.6% to $499,949 in 2004
compared to $478,040 in 2003 due mainly to issuance of additional notes
payable to related parties.
NET INCOME (LOSS). Net income decreased $612,949 to a loss of $592,516
in 2004 from income of $20,433 in 2003. The primary differences in 2004
compared to 2003 were the receipt of a lawsuit settlement in 2003 which
resulted in income of $880,000 that was partially offset by legal expenses of
$200,000 and an increase in cost of revenues of $158,254 in 2004.
LIQUIDITY AND CAPITAL RESOURCES
The Southern Nevada Water Authority (SNWA) sponsors the Water Smart
Landscapes Program (Program), which is intended to reduce the future water
usage. This Program is available to all business owners and provides a
monetary incentive based on the square-footage of high water usage landscapes
(primarily grass) converted to water conserving "xeriscape". In 2004, CGC
completed a two-phase "xeriscape" conversion project (consisting of
approximately 420,000 square feet) and received incentives of approximately
$272,000 from the SNWA. The cost to complete the "xeriscape" conversion,
which totaled approximately $148,000, was substantially less than the
incentive received from SNWA due to obtaining favorable contract terms with
our existing landscape contractor. As a result of "xeriscape" conversion
project, CGC expects an annual reduction in operating expenses of
approximately $50,000.
The Company has various notes payable to related parties (ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS). In December 2004 and 2003,
the current note balance due including the related interest totaling $669,887
and $316,991, respectively, was forgiven. The effects of these
extinguishments on the Company's current and future liquidity was, of course,
to permanently eliminate the obligations for the related short-term cash
outflows for the amounts of each forgiveness, thus enabling the Company to
meet other obligations timely and continue its business operations without
interruption at least for the short-term.
Working capital needs have been helped by favorable payment terms and
conditions included in our notes payable to related parties. Management
believes that additional notes could be negotiated, if necessary, with
similar payment terms and conditions.
Interest payable to related parties was $1,757,734 and $1,615,703 as of
December 31, 2004 and 2003, respectively. This interest is payable as
follows:
2005 $ 232,690
2006 179,651
2007 69,788
2008 1,273,939
2009 -0-
Thereafter 1,666
12
In 2004, the Company began implementing new marketing strategies that
resulted in increased revenues during the year. We have advertised in various
magazines within the southern California area and in the Southwest Airlines
Magazine, which is available to all passengers on every Southwest Airlines
flight. We also started marketing the CGC as a family facility that has
something for all ages and have constructed a pylon sign in front of the CGC,
on the Las Vegas "Strip". We believe that the expansion of our marketing and
advertising strategies will continue to result in increased revenues.
In 2004, the Company received cash incentives from the Southern Nevada
Water Authority (SNWA) of approximately $272,000, which is included in cash
flows from operations. The Company's cash flows from investing activities
were comprised of cash expenditures of approximately $324,000 for capital
asset additions, which were financed in part by the incentives received from
SNWA and proceeds of loans from related parties of approximately $500,000,
net of current year repayments, which constitutes substantially all of the
Company's financing cash activities.
In 2003, the Company received approximately $880,000 from the
settlement of a lawsuit, which was used primarily to fund current year
operations and is included in cash flows from operating activities. Capital
asset additions were purchased for approximately $74,000 and the Company made
payments on debt of approximately $160,000, net of current year proceeds
received from related party loans, which constitutes substantially all of the
Company's investing and financing activities.
Nevertheless for reasons described below and in Note 1.d. to the
consolidated financial statements, in its report dated March 25, 2005, the
Company's independent auditors have expressed substantial doubt as to the
Company's ability to continue as a going concern.
As of December 31, 2004, the Company had a working capital deficit of
$871,980, as compared to a working capital deficit of $1,051,418 at December
31, 2003. The reduction in the working capital deficit is primarily due to
the overall net income for 2004 and a refinancing of a $100,000 note from
Saint Andrews Golf Shop to long term debt.
AASP management believes that its continuing operations may not be
sufficient to fund operating cash needs and debt service requirements over at
least the next 12 months. As such, management plans on seeking other sources
of funding as needed, 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.
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.
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
13
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.
There are no planned material capital expenditures in 2005.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
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-20 hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 8A. CONTROLS AND PROCEDURES.
As of December 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 December 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.
On April 5, 2006, the President and Principal Financial and Accounting
Officer of the Company concluded that the previously issued consolidated
financial statements contained in the Company's Annual Report on Form 10-KSB
14
for the year ended December 31, 2004, required restatement as a result of
accounting errors contained therein. In particular, it was determined that
reported gains from the extinguishment of debt from related parties of
$669,887, $316,991 and $239,425, should have been treated as capital
contributions during the years ended December 31, 2004, 2003 and 2002,
respectively.
As a result of the subject matter of the restatement, management agrees
to be more highly sensitized to the accounting literature relative to related
party transactions. However, since we believe the difference between the
original and the revised accounting for the specific matter involved is
traceable to difference in a good faith exercise of informed judgment, we do
not believe a specific internal control deficiency was involved or is in need
of any remedial action by management.
ITEM 8B. OTHER INFORMATION
None
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
------------------ ----- ------------------------------------
Ronald S. Boreta 42 President, Chief Executive Officer,
Treasurer, Secretary and Director
Vaso Boreta 70 Chairman of the Board and Director
Robert R. Rosburg 77 Director
William Kilmer 64 Director
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.
The Company does not currently have an audit committee. The full Board
of Directors serves as the audit committee. The Company has no "audit
committee financial expert" on the Board of Directors because it is not
legally required to have one and, due to the limited size of the Company's
operations, it is not deemed necessary. 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.
15
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. The Company has employed him 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 90% 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. In 1974, Mr. Boreta first opened a specialty business
named "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.
ROBERT R. ROSBURG has served as a Director of the Company since August
1994. 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. 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.
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.
16
CODE OF ETHICS
The Company has not yet adopted a code of ethics that applies to the
Company's principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
due to the limited size of the Company's operations and limited financial
resources. Since the resignation of our CFO in February of 2004, there have
been significant accounting personnel changes which has not allowed us to
implement a Code of Ethics as required. The Board of Directors may consider
adopting a code of ethics in the future.
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,
2004, 2003 and 2002 from the Company:
SUMMARY COMPENSATION TABLE
Long-Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------ --------------------- -------
Securi-
ties
Underly-
Other ing All
Annual Restricted Options Other
Name and Principal Compen- Stock /SARs LTIP Compen-
Position Year Salary Bonus sation Award(s) (Number) Payouts sation
------------------ ---- ------- ----- ------ ---------- -------- ------- -------
Ronald S. Boreta, 2004 $120,000 -- $29,996 -- -- -- --
President and CEO 2003 $120,000 -- $25,732 -- -- -- --
2002 $120,000 -- $26,482 -- -- -- --
Kirk Hartle, Chief 2003 $120,000 -- -- -- -- -- --
Financial Officer 2002 $116,723 -- -- -- -- -- --
________________
Represents amounts paid for country club memberships for Ronald S. Boreta, and an automobile
for his personal use. For 2004, 2003, and 2002 respectively, these amounts were $ 10,530, $11,132,
and $7,808, for club memberships; and $19,466, $14,600, and $18,674 for an automobile.
Mr. Hartle resigned as Chief Financial Officer effective February 20, 2004.
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.
17
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 beginning the year ended December 31, 1996. 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. 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 a local country
club 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.
STOCK OPTION PLAN
During July 1994, the Board of Directors adopted a Stock Option Plan
(the "Plan"). The Plan allows the Board to grant stock options from time to
time to employees, officers, directors and consultants of the Company. The
number of shares of Common Stock that may be issued under the Plan is
700,000. 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 that is not an Incentive Stock Option. The Board determines vesting
provisions 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 April 1996, the Company's Board of Directors granted stock options for
325,000 shares at an exercise price of $3.0625 to Ronald S. Boreta, the
Company's President, that expired in April 2001. In April 2001, 325,000 new
options were granted to Ronald S. Boreta at the price of $0.055 per share
that is equivalent to the closing market price on the date of grant. These
options vested upon grant and expire April 30, 2006.
In October 1999, the Company's Board of Directors approved the grant of
an option to Kirk Hartle, the Company's former Chief Financial Officer, to
purchase an aggregate 50,000 shares of the Company's common stock at the
price of $0.65625 per share that is equivalent to the closing market price on
the date of grant. The options are fully vested and expire October 28, 2004.
18
In April 2000, the Company's Board of Directors approved the grant of an
option to Kirk Hartle, the Company's former Chief Financial Officer, to
purchase an aggregate 50,000 shares of the Company's common stock at the
price of $0.8125 per share that is equivalent to the closing market price on
the date of grant. The options are fully vested and expire April 24, 2005.
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 received 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.
For 2001, the Company made or accrued contributions to the Supplemental
Retirement Plan on behalf of Ronald S. Boreta (the President of the Company)
in the amount of $3,000. Contributions to this plan ceased in 2002 due to
cash flow constraints.
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. Up to 750,000 shares of Stock may be issued
under the Plan.
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
19
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
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 the Board specifies
another date. 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
20
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 March 1, 2005, 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.
AMOUNT AND
NAME AND ADDRESS NATURE OF BENE- PERCENT
OF BENEFICIAL OWNERS FICIAL OWNERSHIP OF CLASS
-------------------- ---------------- --------
Ronald S. Boreta 975,484 (1) 26.2%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
ASI Group LLC (5) 637,044 (6) 18.7%
c/o Agassi Enterprises, Inc.
Suite 750
3960 Howard Hughes Parkway
Las Vegas, NV 89109
John Boreta 500,439 (2) 14.7%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
Boreta Enterprises, Ltd. 360,784 (4) 10.6%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
Vaso Boreta 3,853 (3) 0.1%
6730 South Las Vegas Blvd.
Las Vegas, Nevada 89119
Robert R. Rosburg 1,383 --
49-425 Avenida Club La Quinta
La Quinta, CA 92253
William Kilmer 1,383 --
1853 Monte Carlo Way
Coral Springs, FL 33071
All Directors and Officers 982,103 (7) 25.7%
as a Group (4 persons)
___________________
(1) Includes 402,229 shares held directly, 248,255 shares which represents
Ronald Boreta's share of the Common Stock held by Boreta Enterprises
Ltd., and 325,000 shares underlying options exercisable within 60 days
held by Ronald Boreta.
21
(2) Includes 391,735 shares held directly, and 108,704 shares which
represents John Boreta's share of the Common Stock held by Boreta
Enterprises Ltd.
(3) Includes 28 shares held directly, and 3,825 shares which represents
Vaso Boreta's share of the Common Stock held by Boreta Enterprises
Ltd.
(4) Direct ownership of shares held by Boreta Enterprise Ltd., a limited
liability company owned by Vaso, Ronald and John Boreta. Boreta
Enterprises Ltd. percentage ownership is as follows:
Ronald S. Boreta 68.81%
John Boreta 30.13%
Vaso Boreta 1.06%
(5) ASI Group LLC is a Nevada limited liability company whose members are
Andre K. Agassi and Perry Craig Rogers.
(6) All shares are owned directly.
(7) Includes shares beneficially held by the four named Directors and
executive officers.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes share and exercise price information
about the Company's equity compensation plans as of December 31, 2004:
-----------------------------------------------------------------------------------------
Number of
securities remain-
ing available for
future issuance
Number of securi- under equity
ties to be issued Weighted-average compensation plans
upon exercise of exercise price of (excluding secure-
outstanding options, outstanding options, ties reflected
warrants and rights warrants and rights in column (a))
Plan Category (a) (b) (c)
----------------------------------------------------------------------------------------
Equity compensation 450,000 $0.80 1,000,000
plans approved by
security holders
----------------------------------------------------------------------------------------
Equity compensation -- -- --
plans not approved
by security holders
----------------------------------------------------------------------------------------
Total 450,000 $0.80 1,000,000
----------------------------------------------------------------------------------------
22
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Sports Entertainment Enterprises, Inc. ("SPEN"), a publicly-held
corporation, owned approximately 67% of the Company's outstanding shares
prior to May 8, 2002. Effective as of that date, the shares of the Company
held by SPEN were distributed to SPEN's shareholders. Until February 2005,
Vaso Boreta, the Company's Chairman of the Board, was an Officer and Director
of SPEN. Ronald S. Boreta, President and a Director of the Company, was a
Director and principal shareholder of SPEN. Robert S. Rosburg and William
Kilmer, Directors of the Company, were also Directors of SPEN. In addition,
John Boreta, the son of Vaso Boreta and the brother of Ronald S. Boreta, was
a principal shareholder of SPEN.
The Company provides administrative/accounting support for (a) the
Company Chairman's two wholly-owned golf retail stores in Las Vegas, Nevada,
(the "Paradise Store" and "Rainbow Store"), (b) two golf retail stores, both
named Saint Andrews Golf Shop ("SAGS"), owned by the Company's President and
his brother, and (c) Sports Entertainment Enterprises, Inc. until February
2005. Administrative/accounting payroll and employee benefits are allocated
based on an annual review the personnel time expended for each entity.
Amounts allocated to these related parties by the Company approximated
$92,500 and $116,000 in 2004 and 2003, respectively.
The Company has various notes payable to Las Vegas Golf and Tennis
Paradise owned by our Company's Chairman. These notes are due in varying
amounts on December 1 each year through year 2008. The notes bear interest
at 10% per annum and are secured by the assets of the Company. The note
payable and accrued interest payable balance at December 31, 2004 was
$3,713,473 and $1,756,068, respectively. The note payable and accrued
interest payable balance at December 31, 2003 was $4,113,473 and $1,614,607,
respectively.
In February 2002, the Company repaid $76,306 in principal on the
Chairman Notes. The Company did not have the resources to pay the required
note payments due December 1, 2002 and 2003. The Chairman forgave the 2002
note balance due of $168,363 and the related accrued interest payable of
$71,062 for a total of $239,425, the 2003 note balance due of $200,000 and
the related accrued interest payable of $116,991 for a total of $316,991, and
the 2004 note balance due of $400,000 and the related interest payable of
$269,887. The Chairman also agreed to not accelerate the maturities of the
remaining notes due to these defaults.
In the third quarter of 2003, SAGS secured financing on behalf of AAGC
to construct a pylon sign at the entrance of the golf center facility. The
total financing for the sign was approximately $170,000. SAGS pays the debt
service on the financing and bills AAGC for the amount paid. The financing
is for five years with monthly payments of approximately $3,600.
In November and December 2003, SAGS loaned the Company a total of
$100,000 to fund operations. The loans are $50,000 each and are both due one
year from date of issuance with interest accruing at ten percent per annum.
In 2004 an additional note was issued to SAGS for approximately $553,000,
which includes the refinancing of the two $50,000 notes issued in 2003,
interest accrues at 10% per annum and is payable out of available cash flows,
if any.
23
In November 2004, BE Holdings 1, LLC, which is owned by Vaso Boreta,
Chairman of the Board, advanced the Company $100,000 to fund operations.
This note accrues interest at 10% per annum and is payable out of available
cash flows, if any.
In February 2005, the Company agreed to forgive all of the amounts owed
to it by SPEN in exchange for the issuance to it of 10,000 shares of SPEN's
common stock. The amount forgiven was $99,012, recorded in 2004.
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
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
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 Incorporated by reference to
with Ronald S. Boreta Exhibit 10.1 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
24
10.2 Stock Option Plan Incorporated by reference to
Exhibit 10.2 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.3 Promissory Note to Vaso Incorporated by reference to
Boreta Exhibit 10.11 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
10.4 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)
10.5 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)
10.6 Lease and Concession Incorporated by reference to
Agreement with Exhibit 10.20 to the Registrant's
Sportservice Corporation Form SB-2 Registration Statement
(No. 33-84024)
10.7 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
10.8 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
10.9 Forbearance Agreement Incorporated by reference to
dated March 18, 1998 Exhibit 10.25 to the Registrant's
with Callaway Golf Annual Report on Form 10-KSB for
Company the year ended December 31, 1998
10.10 Promissory Note to Saint Previously filed
Andrews Golf, Ltd.
10.11 Promissory Note to BE Previously filed
Holdings I, LLC
21 Subsidiaries of the Incorporated by reference to
Registrant Exhibit 21 to the Registrant's
Form SB-2 Registration Statement
(No. 33-84024)
23 Consent of Piercy Bowler Filed herewith electronically
Taylor & Kern
25
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
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
The aggregate fees billed for each of the last two fiscal years ended
December 31, 2004 and 2003 by Piercy Bowler Taylor & Kern for professional
services rendered for the audit of the Company's annual financial statements
and review of financial statements included in the Company's quarterly
reports on Form 10-QSB were $28,000 and $22,500, respectively.
AUDIT RELATED FEES
None.
TAX FEES
The aggregate fees billed for tax services rendered by Piercy Bowler
Taylor & Kern for tax compliance and tax advice for the two fiscal years
ended December 31, 2004 and 2003, were $6,675 and $3,000, respectively.
ALL OTHER FEES
None.
AUDIT COMMITTEE PRE-APPROVAL POLICY
Under provisions of the Sarbanes-Oxley Act of 2002, the Company's
principal accountant may not be engaged to provide non-audit services that
are prohibited by law or regulation to be provided by it, and the Board of
Directors (which serves as the Company's audit committee) must pre-approve
the engagement of the Company's principal accountant to provide permissible
non-audit services. The Company's Board of Directors has not established any
policies or procedures other than those required by applicable laws and
regulations.
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
All-American SportPark, Inc.
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheets of All-American
SportPark, Inc. and subsidiary (the Company) as of December 31, 2004 and
2003, and the related consolidated statements of operations, shareholders'
equity deficiency and cash flows for the years 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 audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express
no such opinion. 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 audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 31, 2004 and 2003, and the results of their operations
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.
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 losses from continuing operations, and has a working capital
deficit and substantial shareholders' equity deficiency at December 31, 2004;
these factors 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/ Piercy Bowler Taylor & Kern
PIERCY BOWLER TAYLOR & KERN
Las Vegas, Nevada
March 25, 2005
F-1
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
2004 2003
(restated) (restated)
----------- ----------
ASSETS
Current assets:
Cash $ 6,125 $ 17,521
Accounts receivable 902 23,696
Prepaid expenses and other 11,626 16,278
---------- ----------
18,653 57,495
Leasehold improvements and
equipment, net of accumulated
depreciation 1,034,033 808,112
Other assets 1,367 3,872
--------- ----------
$1,054,053 $ 869,479
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
(CONTINUED)
2004 2003
(restated) (restated)
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities:
Current portion of notes payable to
related parties $ 385,896 $ 500,000
Current portion of other long-term debt 72,760 66,210
Interest payable to related parties 232,690 230,983
Accounts payable and accrued expenses 199,287 311,720
----------- ----------
890,633 1,108,913
Notes payable to related parties,
net of current portion 3,999,299 3,713,473
Other long-term debt, net of current portion 239,381 312,141
Interest payable to related parties 1,525,044 1,384,720
Due to related parties 344,425 359,917
Deferred income 13,104 1,500
----------- ----------
7,011,886 6,880,664
----------- ----------
Minority interest in subsidiary 411,508 435,527
----------- ----------
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 December 31,
2004 and 2003, respectively 3,400 3,400
Additional paid-in capital 12,689,185 12,019,298
Accumulated deficit (19,061,926) (18,469,410)
----------- -----------
(6,369,341) (6,446,712)
----------- -----------
$ 1,054,053 $ 869,479
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
(CONTINUED)
2004 2003
(restated) (restated)
----------- -----------
Revenues $ 2,168,802 $ 2,214,675
Cost of revenues 505,555 342,050
----------- -----------
1,663,247 1,872,625
----------- -----------
Operating expenses:
Selling, general and administrative:
Land lease expense 398,085 397,901
Landscape maintenance 361,172 364,230
Payroll, taxes and benefits 346,553 416,592
Utilities and telephone 304,931 255,693
Other 567,644 612,503
----------- -----------
1,978,385 2,046,919
Depreciation and amortization 71,154 67,905
----------- -----------
2,049,539 2,114,824
----------- -----------
Operating loss (386,292) (242,199)
Interest income 16,157 7,148
Interest expense (499,949) (478,040)
Other income 254,703 883,941
Other expense (1,154) -
----------- -----------
Income (loss) before minority
interest (616,535) 170,850
Minority interest (income) loss of
subsidiary 24,019 (150,417)
----------- -----------
Net income (loss) $ (592,516) $ 20,433
=========== ===========
NET INCOME (LOSS) PER SHARE:
Basic and diluted net income
(loss) per share $ (0.17) $ 0.01
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
--------- ----------- ------------ -----------
Balances,
January 1, 2003
As previously
reported $ 3,400 $11,462,882 $(18,250,418) $(6,784,136)
Adjustment 239,425 (239,425)
--------- ----------- ------------ -----------
As restated $ 3,400 $11,702,307 $(18,489,843) $(6,784,136)
Capital contributions
in the form of
debt extinguishment 316,991 316,991
Net income 20,433 20,433
--------- ----------- ------------ -----------
Balances,
December 31,
2003 (restated) 3,400 12,019,298 (18,469,410) (6,446,712)
Capital contributions
in the form of
debt extinguishment 669,887 669,887
Net loss (592,516) (592,516)
--------- ----------- ------------ -----------
Balances,
December 31,
2004 (restated) $ 3,400 $12,689,185 $(19,061,926) $(6,369,341)
========= =========== ============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
(restated) (restated)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (592,516) $ 20,433
Adjustment to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Minority interest (24,019) 150,417
Depreciation and amortization 71,154 67,903
Other income 26,950 -
Bad debts 109,871 -
Increase in operating (assets) and
liabilities:
Accounts receivable 3,919 13,272
Prepaid expenses and other assets 7,157 37,769
Accounts payable and
accrued expenses (112,433) (415,261)
Interest payable to related parties 411,918 434,545
Decrease in deferred income 11,604 (80,908)
----------- -----------
Net cash provided by (used in)
operating activities (86,395) 228,170
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of capital assets (324,025) (74,502)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to related parties (36,526) (159,337)
Proceeds of loan from related parties 688,334 100,000
Principal payments on notes payable
related parties (186,574) -
Principal payments on other
notes payable (66,210) (106,918)
----------- -----------
Net cash provided by (used
in) financing activities 399,024 (166,255)
----------- -----------
NET DECREASE IN CASH (11,396) (12,587)
CASH, beginning of year 17,521 30,108
----------- -----------
CASH, end of year $ 6,125 $ 17,521
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 88,030 $ 69,145
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
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"), include the accounts of AASP and its 65%-owned subsidiary, All-
American Golf Center, Inc. ("AAGC"), collectively the "Company". Urban Land
of Nevada, Inc. ("ULN") owns the remaining 35% of AAGC. All significant
intercompany accounts and transactions have been eliminated. The company's
business operations of the Callaway Golf Center ("CGC") are included in AAGC.
b. COMPANY BACKGROUND AND CONTINUING BUSINESS ACTIVITIES
Prior to April 5, 2002, the Company had issued and outstanding 3,150,000
shares of common stock and 250,000 shares of Series B convertible preferred
stock. Sports Entertainment Enterprises, Inc. (a publicly traded company,
"SPEA") owned 2,000,000 of the Company's common shares outstanding and all of
the Series B preferred shares that combined represented an approximate 66%
ownership in the Company. On April 5, 2002, SPEA elected to convert its
Series B convertible preferred stock into common stock on a 1 for 1 basis.
As such, commencing April 5, 2002, the Company had issued and outstanding
3,400,000 shares of common stock and no Series B preferred stock.
On May 8, 2002, SPEA completed a spin-off of its AASP common stock holdings
to SPEA shareholders that resulted in SPEA having no ownership interest in
the Company.
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 St. Andrews Golf Shop
retail store, and the Bistro 10 restaurant and bar.
Because our business activities are not structured on the basis of different
services provided, the above activities are reviewed, evaluated and reported
as single reportable segment. Therefore, revenues, from external customers,
are not presented for each service provided. The Company is based in and
operates solely in Las Vegas, Nevada, and does not receive revenues from
other geographic areas. No one customer of the Company comprises more than
10% of the Company's revenues.
c. CONCENTRATIONS OF RISK
The Company operates the Callaway Golf Center in Las Vegas, Nevada. The
probable level of sustained customer demand for this type of recreational
facility is undetermined. The Company has implemented various strategies to
market the Callaway Golf Center to both tourists and local residents. Should
attendance levels at the Golf Center not meet expectations in the short-term,
management believes existing cash balances would 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.
F-7
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, for 2004 and 2003,
although the Company had net income (loss) of $(592,516) and $20,433,
respectively, as of December 31, 2004, the Company had a working capital
deficit of $871,980 and a shareholders' equity deficiency of $6,369,341.
AASP management believes that its continuing operations may not be sufficient
to fund operating cash needs and debt service requirements over at least the
next 12 months. As such, management plans on seeking other sources of
funding as needed, 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.
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.
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.
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.
e. CORRECTION OF AN ERROR - PRIOR PERIOD ADJUSTMENTS
On April 5, 2006, the President and Principal Financial and Accounting
Officer of the Company concluded that the previously issued consolidated
financial statements contained in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2004, required restatement as a result of
accounting errors contained therein. In particular, it was determined that
reported gains from the extinguishment of debt from related parties of
$669,887, $316,991 and $239,425, should have been treated as capital
contributions during the years ended December 31, 2004, 2003 and 2002,
respectively.
The previously reported accumulated deficit at January 1, 2003, and
previously reported net income (loss) for 2003 and 2004, have been
retroactively restated and with offsetting credits to additional paid-in
capital for the effects of a series of related party capital contributions in
F-8
the form of debt forgiveness transactions previously credited to income and
now determined to be in error. Other reclassifications with no effect on net
income (loss) were also made to selling, general and administrative expenses,
interest income and expense, other income and expense, due to related
entities, and the current portion of notes payable. These changes were made
to present additional detailed information and do not have an effect on net
income (loss).
The following table provides additional details regarding the changes to the
income statement for 2004:
As previously As restated Change
reported
------------ ----------- --------
Revenues $2,168,802 $2,168,802 $ -
Cost of revenues 505,555 505,555 -
--------- --------- --------
1,663,247 1,663,247 -
--------- --------- --------
Operating expenses:
Selling, general & administrative:
Land lease expense - 398,085 398,085
Landscape maintenance - 361,172 361,172
Payroll, taxes and benefits - 346,553 346,553
Utilities and telephone - 304,931 304,931
Other 1,978,385 567,644 (1,410,741)
--------- --------- --------
1,978,385 1,978,385 -
Depreciation and amortization 71,154 71,154 -
--------- --------- --------
2,049,539 2,049,539 -
--------- --------- --------
Operating loss (386,292) (386,292) -
Interest income - 16,157 16,157
Interest expense (483,792) (499,949) (16,157)
Gain on extinguishment of debt 669,887 - (669,887)
Other income 253,549 254,703 1,154
Other expense - 1,154 (1,154)
--------- --------- --------
Income (loss) before
Minority interest 53,352 (616,535) (669,887)
Minority interest (income) loss
of subsidiary 24,019 24,019 -
--------- --------- --------
Net income (loss) $ 77,371 $ (592,516) $(669,887)
========= ========= ========
NET INCOME (LOSS) PER SHARE:
Basic and diluted net income
(loss) per share $ 0.02 $ (0.17) $ (0.19)
========= ========= ========
F-9
The following table provides details regarding the changes to the balance
sheet for 2004:
As previously As restated Change
reported
------------- ----------- --------
ASSETS
Current assets:
Cash $ 6,125 $ 6,125 $ -
Accounts receivable 902 902 -
Prepaid expenses and other 11,626 11,626 -
-------- -------- --------
18,653 18,653 -
Leasehold improvements and
equipment, net of accumulated
depreciation 1,034,033 1,034,033 -
Due from related partities 296,131 - (296,131)
Other assets 1,367 1,367 -
--------- --------- --------
$1,350,184 $1,054,053 $ (296,131)
========= ========= ========
LIABILITY AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities
Current portion of notes
payable to related parties $ 350,000 $ 385,896 $ 35,896
Current portion of other
long-term debt 108,656 72,760 (35,896)
Interest payable to related
parties 232,690 232,690 -
Accounts payable and
accrued expenses 199,287 199,287 -
--------- --------- ---------
890,633 890,633 -
Notes payable to related parties,
net of current portion 3,999,299 3,999,299 -
Other long-term debt, net of
current portion 239,381 239,381 -
Interest payable to related parties 1,525,044 1,525,044 -
Due to related parties 640,556 344,425 296,131
Deferred income 13,104 13,104 -
--------- --------- ---------
7,308,017 7,011,866 296,131
--------- --------- ---------
Minority interest in subsidiary 411,508 411,508 -
--------- --------- ---------
F-10
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 December 31, 2004 3,400 3,400 -
Additional paid-in capital 11,462,882 12,689,185 1,226,303
Accumulated deficit (17,835,623) (19,061,926) (1,226,303)
---------- ---------- ---------
(6,369,341) (6,369,341) -
--------- --------- ---------
$ 1,350,184 $ 1,054,053 $ 296,131
========= ========= ========
The following table provides additional details regarding the changes to the
income statement for 2003:
As previously As restated Change
reported
------------ ----------- --------
Revenues $2,218,617 $2,214,675 $ (3,942)
Cost of revenues 347,301 342,050 (5,251)
--------- --------- --------
1,871,316 1,872,625 1,309
--------- --------- --------
Operating expenses:
Selling, general & administrative:
Land lease expense - 397,901 397,901
Landscape maintenance - 364,230 364,230
Payroll, taxes and benefits - 416,592 416,592
Utilities and telephone - 255,693 255,693
Other 2,041,668 612,503 (1,429,165)
--------- --------- --------
2,041,668 2,046,919 5,251
Depreciation and amortization 67,903 67,905 2
--------- --------- --------
2,109,571 2,114,824 5,253
--------- --------- --------
Operating loss (238,255) (242,199) (3,944)
Interest income - 7,148 7,148
Interest expense (470,895) (478,040) (7,145)
Gain on extinguishment of debt 316,991 - (316,991)
Other income 880,000 883,941 3,941
--------- --------- --------
Income (loss) before
Minority interest 487,841 170,850 (316,991)
Minority interest (income) loss
of subsidiary (150,417) (150,417) -
--------- --------- --------
Net income (loss) $ 337,424 $ 20,433 $(316,991)
========= ========= ========
NET INCOME (LOSS) PER SHARE:
Basic and diluted net income
(loss) per share $ 0.10 $ 0.01 $ (0.09)
========= ========= ========
F-11
The following table provides details regarding the changes to the balance
sheet for 2003:
As previously As restated Change
reported
------------- ----------- --------
ASSETS
Current assets:
Cash $ 17,521 $ 17,521 $ -
Accounts receivable 23,696 23,696 -
Prepaid expenses and other 16,278 16,278 -
-------- -------- --------
57,495 57,495 -
Leasehold improvements and
equipment, net of accumulated
depreciation 808,112 808,112 -
Due from related parties 242,596 - (242,596)
Other assets 3,872 3,872 -
--------- --------- --------
$1,112,075 $ 869,479 $ (242,596)
========= ========= ========
LIABILITY AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities
Current portion of notes
payable to related parties $ 500,000 $ 500,000 $ -
Current portion of other
long-term debt 66,210 66,210 -
Interest payable to related
parties 230,983 230,983 -
Accounts payable and
accrued expenses 311,720 311,720 -
--------- --------- ---------
1,108,913 1,108,913 -
Notes payable to related parties,
net of current portion 3,713,473 3,713,473 -
Other long-term debt, net of
current portion 312,141 312,141 -
Interest payable to related parties 1,384,720 1,384,720 -
Due to related parties 602,513 359,917 242,596
Deferred income 1,500 1,500 -
--------- --------- ---------
7,123,260 6,880,664 242,596
--------- --------- ---------
Minority interest in subsidiary 435,527 435,527 -
--------- --------- ---------
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 December 31, 2004 3,400 3,400 -
Additional paid-in capital 11,462,882 12,019,298 556,416
Accumulated deficit (17,912,994) (18,469,410) (556,416)
---------- ---------- --------
(6,446,712) (6,369,341) -
---------- ---------- --------
$ 1,112,075 $ 869,479 $ 242,596
========== ========== ========
F-12
f. ESTIMATES USED IN THE PREPARATION OF FINANCIAL STATEMENTS
Preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that may require revision in future periods.
g. RECLASSIFICATIONS
Certain minor reclassifications have been made to prior year amounts to
conform to the current year presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB25) and related Interpretations
in accounting for its 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.
In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS
123 (Revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R requires that
compensation cost related to share-based employee compensation transactions
be recognized in the financial statements. Share-based employee compensation
transactions within the scope of SFAS 123R include stock options, restricted
stock plans, performance-based awards, stock appreciation rights and employee
share purchase plans. The provisions of SFAS 123R are effective as of the
first interim period that begins after June 15, 2005. Accordingly, we will
implement the revised standard in the third quarter of fiscal year 2005.
b. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment (Note 5) are stated at cost.
Depreciation and amortization is provided for on a straight-line basis over
the lesser of the lease term (including renewal periods, when the Company as
both the intent and ability to extend the lease) or the following estimated
useful lives of the assets:
Furniture and equipment 3-10 years
Leasehold improvements 15 years
c. ADVERTISING
The Company expenses advertising costs as incurred. Advertising costs
charged to continuing operations amounted to $ 92,885 and $64,337 in 2004 and
2003, respectively.
d. REVENUES
Lease and sponsorship revenues are recognized as appropriate when earned.
Substantially all other revenues including golf course green fees, driving
range ball rentals and golf cart rentals, are recognized when received as
they are payments for services provided on the same day.
F-13
e. COST OF REVENUES
Cost of revenues is primarily comprised of golf course and driving range
employee payroll and benefits, operating supplies (e.g., driving range golf
balls and golf course score-cards, etc.), and credit card/check processing
fees.
f. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses consist principally of
management, accounting and other administrative employee payroll and
benefits, land lease expense, utilities, landscape maintenance costs, and
other expenses (e.g., office supplies, marketing/advertising, and
professional fees, etc.).
g. IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets, including property and equipment, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the long-lived asset may not be recoverable. If the long-
lived asset or group of assets is considered to be impaired, an impairment
charge is recognized for the amount by which the carrying amount of the asset
or group of assets exceeds its fair value. Long-lived assets to be disposed
of are reported at the lower of the carrying amount or fair value less cost
to sell. Long-lived assets were evaluated for possible impairment and
determined not to be impaired as of December 31, 2004.
h. LEGAL DEFENSE COSTS
The Company does not accrue for estimated future legal and related defense
costs, if any, to be incurred in connection with outstanding or threatened
litigation and other disputed matters but rather, records such as period
costs when the services are rendered.
3. INCOME PER SHARE
Basic and diluted income per share is computed by dividing reported net
income by the weighted-average number of common and common equivalent shares
outstanding during the period. The weighted-average number of common and
common equivalent shares used in the calculation of basic and diluted income
per share was 3,400,000 in both 2004 and 2003.
4. RELATED PARTY TRANSACTIONS
The Company provides administrative/accounting support for (a) the Company
Chairman's two wholly-owned golf retail stores in Las Vegas, Nevada, (the
"Paradise Store" and "Rainbow Store"), (b) two golf retail stores, both named
Saint Andrews Golf Shop ("SAGS"), owned by the Company's President and his
brother, and (c) Sports Entertainment Enterprises, Inc. until February 2005.
Administrative/accounting payroll and employee benefits are allocated based
on an annual review the personnel time expended for each entity. Amounts
allocated to these related parties by the Company approximated $92,500 and
$116,000 in 2004 and 2003, respectively.
F-14
The Company has various notes payable to the Paradise Store. These notes are
due in varying amounts on December 1 each year through year 2008. The notes
bear interest at 10% per annum and are secured by the assets of the Company.
The note payable and accrued interest payable balances at December 31, 2004,
were $3,713,473 and $1,756,068, respectively. The note payable and accrued
interest payable balances at December 31, 2003, were $4,113,473 and
$1,614,607, respectively. In December 2004 and 2003, Vaso Boreta, the
Company's Chairman and owner of the Paradise Store, caused the portion of the
notes related interest then currently due totaling $669,887 and $316,991,
respectively, to be forgiven and also agreed to cause execution of a waiver
of the rights to accelerate the maturities of the remaining notes due to
these defaults.
In 2003, SAGS secured financing on behalf of AAGC to construct a pylon sign
at the entrance of the golf center facility. The total financing for the
sign was approximately $170,000. SAGS pays the debt service on the financing
and bills AAGC for the amount paid. The financing is for five years with
monthly payments of approximately $3,600.
In 2003, SAGS loaned the Company a total of $100,000 to help fund operations.
The loans were due in 2004, with interest accruing at ten percent. In 2004,
an additional note was issued to SAGS for approximately $553,000, which
includes the refinancing of the notes issued in 2003, and interest accrues at
10% and is payable only out of available cash flows, if any.
In 2004, a company owned by the Chairman of the Board, advanced the Company
$100,000 to fund operations. This note accrues interest at 10% and is also
payable only out of available cash flows, if any.
Aggregate maturities of related party notes payable for the five years
subsequent to December 31, 2004 are as follows:
2005 $ 385,896
2006 258,528
2007 151,353
2008 3,037,446
2009 --
Thereafter 551,972
------------
$ 4,385,195
============
At December 31, 2004, the Company has no loans or other obligations with
restrictive debt or similar covenants.
5. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment included the following as of December
31:
F-15
2004 2003
----------------- -----------------
Building $ 252,866 $ 252,866
Land Improvements 450,390 338,637
Furniture and equipment 243,108 287,994
Signs 208,688 52,691
Leasehold improvements 326,400 324,414
Other 13,789 13,789
----------------- -----------------
1,495,241 1,270,391
Less accumulated
depreciation and
amortization (461,208) (462,279)
----------------- -----------------
$ 1,034,033 $ 808,112
================= =================
6. OTHER LONG-TERM DEBT
The Company has outstanding a promissory note payable to an unrelated party,
due in quarterly installments of $25,000 through September 2008 without
interest. This note has been discounted to reflect its present value.
Aggregate maturities of this obligation for the five years subsequent to
December 31, 2003, are as follows:
2005 72,760
2006 79,957
2007 87,801
2008 71,623
-----------
Balance, net of
unamortized discount
of $53,839 $ 312,141
===========
7. LEASES
The land underlying the Callaway Golf Center is leased under an operating
lease that 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 Company is obligated under various other non-cancelable operating leases
for equipment that expire over the next two years.
At December 31, 2004, minimum future lease payments under non-cancelable
operating leases are as follows:
2005 $ 462,602
2006 412,503
2007 399,892
2008 398,077
2009 398,077
Thereafter 696,635
----------
Total $2,767,786
==========
F-16
Total rent expense for operating leases was $440,448 for 2004 and $432,613
for 2003.
8. INCOME TAXES
Income tax expense (benefit) consist of the following:
2004 2003
------------ ------------
Current $ 29,253 $ 73,013
Deferred (29,253) (73,013)
------------ ------------
$ - $ -
============ ============
The components of the deferred tax asset (liability) consisted of the
following at December 31:
2004 2003
----------- -----------
Deferred tax liabilities:
Temporary differences related to:
Depreciation $ (239,316) $ (209,088)
Minority interest (139,913) (87,209)
Deferred tax assets:
Net operating loss carryforward 5,788,234 5,733,181
Related party interest 597,063 548,966
Deferred income 4,455 510
Other 2,107 3,016
----------- -----------
Net deferred tax asset before
valuation allowance 6,012,630 5,989,376
Valuation allowance (6,012,630) (5,989,376)
----------- -----------
Net deferred tax asset $ - $ -
=========== ===========
As of December 31, 2004, the Company has available for income tax purposes
approximately $17 million in federal net operating loss carryforwards, which
may be available to offset future taxable income. These loss carryforwards
expire in 2018 through 2024. A one hundred percent valuation allowance has
been established against the net deferred tax asset since it appears more
likely than not that it will not 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.
9. 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; total shares of the Company's common stock
eligible for grant are 700,000.
F-17
In April 1996, 325,000 options were granted to the Company's President at an
exercise price of $3.06, the fair market value on the grant date. These
options expired unexercised in April 2001. Because of this expiration,
325,000 new options were granted to the Company's President at an exercise
price of $0.055, the market value on the date of grant; these options expire
April 30, 2006.
In October 1999, 50,000 options were granted at an exercise price of $0.65625
per share, the closing market price on the date of grant. These options
expire October 28, 2004. In April 2000, 50,000 options were granted at an
exercise price of $0.8125 per share, the closing market price on the date of
grant. These options expire April 24, 2005.
1998 Plan. In 1998, the Board of Directors and shareholders approved the
1998 stock incentive plan (the "1998 Plan"). 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 in 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.
In 1998, the landlord of the property underlying the CGC was granted 75,000
stock options. These options are exercisable at $4.00 per share through the
year 2008. These options vested as to 10,000 shares upon grant, and vest as
to 10,000 shares per year until fully vested.
Urban Land has a 35% ownership interest in the Company's subsidiary, AAGC,
which owns and operates the CGC. In connection with the issuance of the 35%
interest in AAGC to Urban Land, the Company and Urban Land entered into a
Stockholders Agreement that provides certain restrictions and rights on the
AAGC shares issued to Urban Land. Urban Land is permitted to designate a
non-voting observer of meetings of AAGC's board of directors. In the event
of an uncured default of the CGC land lease, so long as Urban Land holds at
least a 25% interest in AAGC, Urban Land will have the right to select one
director of AAGC. As to matters other than the election of Directors, Urban
Land has agreed to vote its shares of AAGC as designated by the Company.
There are no unusual rights or privileges related to the ownership of the
Company's common stock.
F-18
Pro forma information regarding net income (loss) and earnings (loss) per
share has been determined as if the Company had accounted for its employee
stock options under the fair value method of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation. The
fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following assumptions for 2003:
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 3.95; and a
weighted-average expected life of 2.43 years. The assumptions for 2002 were
the same except: volatility factor of the expected market price of the
Company's common stock of 2.26, and a weighted average expected life of 3.43
years.
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,
2004 2003
---------------- ----------------
Net income (loss)
As reported $ (592,516) $ 20,433
Pro forma (592,516) 20,433
Basic and diluted net income (loss)
per share
As reported (0.17) 0.01
Pro forma (0.17) 0.01
A summary of changes in the status of the Company's outstanding stock options
for the years ended December 31, 2004 and 2003 is presented below:
2004 2003
----------------------- ----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
----------------------- ----------------------
Beginning of year 500,000 $ 0.80 500,000 $ 0.78
Granted - - - -
Exercised - - - -
Forfeited - - - -
Expired (50,000) - - -
----------------------- ----------------------
End of year 450,000 $ 0.80 500,000 $ 0.78
======================= ======================
Exercisable at
end of year 495,000 $ 0.76 485,000 $ 0.78
======================= ======================
Weighted average fair
value of options
granted $ 0.05 $ 0.05
======================= ======================
F-19
The following table summarizes information about stock options outstanding at
December 31, 2004:
Options Outstanding Options Exercisable
------------------------------------- ---------------------
Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life (Years) Price Exercisable Price
-------- ----------- ------------- --------- ----------- --------
$0.055 325,000 1.33 325,000
$0.8125 50,000 0.25 50,000
$4.00 75,000 4.00 70,000
----------- -----------
450,000 $ 0.80 445,000 $ 0.76
=========== ===========
10. 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.
The Company has a lease and concession agreement with Sportservice
Corporation ("Sportservice"), an unrelated party, that provides SportService
with the exclusive right to prepare and sell all food, beverages (alcoholic
and non-alcoholic), candy and other refreshments, during the term of the
agreement ending in 2006. Sportservice pays rent based on a percentage of
gross sales.
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. In connection with the settlement described above, a
subcontractor involved in that matter elected not to settle and subsequently,
the Company prevailed in a judgment against said subcontractor in the amount
of $660,000. The subcontractor has appealed and has since been required to
post a bond in excess of $1 million.
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.
F-20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to be
signed on its behalf by the undersigned thereunder duly authorized.
ALL-AMERICAN SPORTPARK, INC.
Dated: April 17, 2006 By:/s/ Ronald S. Boreta
Ronald S. Boreta, Chief Executive
Officer (Principal Executive Officer)
and Principal Financial and
Accounting Officer