UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended: December 31, 2005
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 is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act. [ ]
Note - Checking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
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]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State issuer's revenues for its most recent fiscal year: $2,152,867.
As of March 13, 2006, 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]
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.
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.
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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 and was disposed of 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 with a base rent of $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.
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
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] ("CGC")," on approximately forty-two (42) acres of land located on
Las Vegas Boulevard in Las Vegas, Nevada. The CGC opened to the public on
October 1, 1997.
The Company's operations consist of the CGC, located on 42 acres of
leased land and strategically positioned within a few miles of the largest
hotels and casinos in the world. There are over 135,000 hotel rooms in Las
Vegas with an average occupancy of 85%, and seventeen of the top twenty
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. The CGC is
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also adjacent to McCarran International Airport, the eleventh busiest airport
in the world for passenger traffic with 44.3 million passengers passing
through the terminal in 2005. The Las Vegas valley residential population
approximates 1.9 million.
The CGC includes a two tiered, 110-station, 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 to the driving
range, the CGC has 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,
and two tenant operations: (a) the St. Andrews Golf Shop featuring the latest
in Callaway Golf equipment and accessories, and (b) a restaurant, 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 LLC's original ownership was 80% by the Company and 20% by Callaway.
Callaway 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'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 CGC 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 CGC. Under the 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 the CGC.
In connection with this acquisition, the Company executed a trademark
license agreement with Callaway pursuant to which the Company licenses the
right to use the marks "Callaway Golf Center" and "Divine Nine" from Callaway
for a term beginning on December 30, 1998 and ending upon termination of the
land lease on the CGC. The Company paid a one-time fee for this license
agreement that was a component of the purchase price the Company paid for the
CGC upon acquisition of the facility on December 30, 1998. Pursuant to this
agreement, Callaway has the right to terminate the agreement upon the
occurrence of any "Event of Termination" as defined in the agreement.
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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 CGC for periods
through April 30, 2001. The CGC remains the only 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 CGC. This subsidiary is All-American Golf Center, Inc. ("AAGC"). In
connection with the issuance of the 35 percent interest in AAGC 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.
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 CGC'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, a 30 ft. pylon sign with a reader
board was installed in front of the CGC. The sign makes the general public
aware of various programs, specials and information on events and other
activities taking place within the CGC. Once installed, the CGC began random
customer information surveys to provide information on how guests heard of the
CGC. Over half stated that they came into the CGC because they saw the new
sign.
The CGC, which includes a nine-hole par 3 golf course, driving range, and
clubhouse, is designed to provide a country club atmosphere for the general
public.
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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 PROGRAM
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 a program 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 area 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.
EMPLOYEES
As of March 13, 2006, there were 2 full- and 2 part-time employees at the
Company's executive offices, and 9 full- and 12 part-time employees at CGC.
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ITEM 2. DESCRIPTION OF THE PROPERTY.
The Company's corporate offices are located inside the clubhouse building
of the CGC at 6730 South Las Vegas Boulevard, Las Vegas, Nevada 89119. The
CGC 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. There were certain construction defects that are discussed below
in ITEM 3. LEGAL PROCEEDINGS. There were minor defects to the building but
they have been repaired. Other construction not related to the building
involved adjoining concrete sidewalks and walkways. Temporary repairs have
been made and a permanent correction will be made upon final settlement of the
lawsuit. The Company owns 65% of the CGC through its subsidiary, AAGC.
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 tenant operations: (1) The St. Andrews Golf Shop that
occupies approximately 4,300 square feet for golf retail sales and pays a
fixed monthly rent that includes a prorated portion of maintenance and
property tax expenses of $13,104 for its retail and office space. The lease
is for fifteen years ending in 2012, and (2) a restaurant that features an
outdoor patio overlooking the golf course and driving range with the Las Vegas
"Strip" in the background. Beginning in the first quarter of 2006, restaurant
lease revenue will be equal to the greater of $4,000 per month or 8% of gross
sales (as defined in the contract). The lease expires in one year unless the
optional four year extension is exercised.
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.
The Company is plaintiff in a lawsuit against Western Technologies and
was awarded a judgment of $660,000 in March 2003. Western Technologies has
appealed the judgment, and it is currently pending before the Nevada Supreme
Court (the "Court"). The Court is expected to hear arguments in the case in
the spring of 2006. 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 attorney's fees.
On May 31, 2005, Sierra SportService, Inc. the Company's tenant, who
operated the restaurant in CGC, ceased operations. Sierra SportService filed
a notice of default pertaining to the restaurant concession agreement and
against all guarantors of that agreement. A settlement was reached on
November 18, 2005 for a total amount of $800,000, of which the Company paid
$700,000 and the remaining $100,000 was paid by AAGC, which is 65% owned by
the Company. The funds used to make these payments were borrowed from ANR,
LLC, an entity owned by Andre K. Agassi and Perry Craig Rogers.
In December 2005, the Company commenced an arbitration proceeding before
the American Arbitration Association against Urban Land of Nevada ("Urban
Land") seeking reimbursement of the $800,000 paid in settlement of the Sierra
SportService matter plus fees and costs pursuant to the terms of the Company's
agreements with Urban Land which owns the property on which the CGC is
located. Urban Land filed a counterclaim against the Company and claims
against other parties in the arbitration proceeding. The other parties
include, among others, Ronald S. Boreta, the President of the Company; Vaso
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Boreta, Chairman of the Board of the Company; and Boreta Enterprise, Ltd., a
principal shareholder of the Company. The counterclaims and other party claims
allege that the Company and others defrauded otherwise injured Urban Land in
connection with Urban Land entering into certain agreements in which the
Company is a party. Urban Land is seeking damages and other relief under
various claims.
On February 10, 2006, Urban Land filed a notice of default on the CGC
ground lease claiming that certain repairs to the property had not been
performed or documented. It is expected that the issues in the notice of
default will be included in the above arbitration proceeding.
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, 2005:
First Quarter $1.19 $0.23
Second Quarter $0.81 $0.32
Third Quarter $0.44 $0.28
Fourth Quarter $0.45 $0.28
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
HOLDERS. The number of holders of record of the Company's $.001 par
value common stock at March 31, 2006 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.
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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. The provisions of SFAS 123R are effective as of
the first interim period that begins after January 1, 2006. The adoption of
SFAS 123R's fair value method is expected to have a significant impact on
future results of operations only when new options are granted, none of which
are presently contemplated.
OVERVIEW
The Company's operations consist of the management and operation of the
CGC. The CGC 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 Pro Shop and two tenants,
the Saint Andrews Golf Shop retail store and a restaurant. In the
January/February 2006 issue of GOLF RANGE MAGAZINE, the CGC was named as the
second best Pro Shop in America. As discussed below additional business
opportunities are currently being sought.
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
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. 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 and continuing into 2006, 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 recognition to increase significantly
and revenues to be impacted favorably but to an extent that cannot be
predicted.
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2005 VERSUS YEAR ENDED
DECEMBER 31, 2004.
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REVENUES. Revenues of the Callaway Golf Center ("CGC") for 2005
decreased 0.7% to $2,152,867 compared to $2,168,802 in 2004. The decrease was
minimal and primarily attributed to the reduction in tenant income resulting
from the termination of a restaurant lease. Income from golf activities
increased 1.8% to $1,966,160 compared to $1,930,990 in 2004. In this revenue
group, Golf lesson fees increased by 73.1% to $209,025 compared to $120,770 in
2004. Golf club rentals increased by 23.7% to $101,434 compared to $82,007 in
2004. Merchandise sales, consisting mainly of snack sales to compensate for
the restaurant closure, increased 344.0% to $10,110 compared to $2,277 in
2004. Golf cart rentals increased by 12.8% to $181,522 compared to $160,984
in 2004. Green fees decreased by 12.4% to $704,450 compared to $804,560 in
2004. Driving range fees decreased only slightly by 0.1% to $759,590 compared
to $760,392 in 2004. Tenant income decreased by 17.2% to $176,143 compared to
$212,777 in 2004. This is due to the termination of a restaurant lease.
Other revenues decreased 57.8% to $10,563 compared to $25,035 in 2004. This
is mainly due to insurance recoveries received in the prior year.
COST OF REVENUES. Costs of revenues increased by 4.7% in 2005 to
$529,261 compared to $505,555 in 2004. The overall increase can be attributed
to the golf pro salaries, which increased to $141,911 in 2005 compared to
$75,713 in 2004. This is due the related increased in teaching revenue and
also to the fact that during 2004 this service was outsourced for part of the
prior year. Direct payroll costs were nearly identical changing approximately
0.1%. Other cost of goods, mainly comprised of driving range supplies like
golf balls, decreased 40.0% to $69,058 compared to $115,117 in 2004.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). SG&A expenses consist
principally of administrative payroll, rent, professional fees and other
corporate costs. These expenses increased by 48.5% to $2,938,551 in 2005 from
$1,978,385 in 2004. The increase is mainly due to an increase of $800,000 in
settlement and litigation expenses compared to having none in the prior year
and an increase in land lease expense of $146,869.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
33.7% to $95,122 in 2005 compared to $71,154 in 2004 due to 2004 asset
additions.
INTEREST EXPENSE. Interest expense increased 0.8% to $503,811 in 2005
compared to $499,949 in 2004 due mainly to issuance of additional notes
payable to related parties.
LIQUIDITY AND CAPITAL RESOURCES
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.
The Company has various notes payable to related parties (ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS). In December 2005 and 2004,
the current note balance due including the related interest totaling $617,690
and $669,887, 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.
10
In 2005, the Company's cash flows from investing activities were
comprised of cash expenditures of approximately $32,100 for capital asset
additions and proceeds of loans from related parties of approximately
$1,245,000, net of current year repayments, which constitutes substantially
all of the Company's financing cash activities.
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 2004, the Company began implementing new marketing strategies that
resulted in increased revenues during the year. The Company has 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.
During the first two months of 2006, unaudited revenue increased approximately
$50,000 over the same period in 2005. In addition, a new tenet for the
restaurant space was acquired on January 25, 2006.
Nevertheless for reasons described below and in Note 1.d. to the
consolidated financial statements, in its report dated March 24, 2006, 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, 2005, the Company had a working capital deficit of
$1,875,279 as compared to a working capital deficit of $871,980 at December
31, 2004. The increase in the working capital deficit is primarily due to the
issuance of new notes payable to related parties.
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.
11
There are no planned material capital expenditures in 2006.
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 consolidated financial statements are set forth on pages F-1 through
F-14 hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 8A. CONTROLS AND PROCEDURES.
As of December 31, 2005, under the supervision and with the participation
of the Company's Chief Executive Officer and Principal Financial Officer,
management has evaluated the effectiveness of the design and operations of the
Company's disclosure controls and procedures. Based on that evaluation, the
Chief Executive Officer and Principal Financial Officer concluded that the
Company's disclosure controls and procedures were effective as of December 31,
2005. 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.
ITEM 8B. OTHER INFORMATION
None
12
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 43 President, Chief Executive Officer,
Treasurer, Secretary and Director
Vaso Boreta 71 Chairman of the Board of Directors
Robert R. Rosburg 78 Director
William Kilmer 65 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 or an "audit
committee financial expert" 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.
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 (Principal Executive Officer) since August 1994, Principal
Financial Officer since February 2004, 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.
13
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.
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 the CFO in February of 2004, there have
been significant accounting personnel changes. 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 that
received compensation in excess of $100,000 for the years ended December 31,
2005, 2004 and 2003 from the Company:
14
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, 2005 $120,000 -- $32,027 -- -- -- --
President and CEO 2004 $120,000 -- $29,996 -- -- -- --
2003 $120,000 -- $25,732 -- -- -- --
Kirk Hartle, Chief 2003 $120,000 -- -- -- -- -- --
Financial Officer
________________
Represents amounts paid for country club memberships for Ronald S. Boreta, and an
automobile and related auto expenses for his personal use. For 2005, 2004, and 2003
respectively, these amounts were $8,971, $10,530, and $11,132, for club memberships; and
$23,056, $19,466, and $14,600 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 meetings that they attend, but they are entitled to
reimbursement for reasonable expenses incurred while attending such
meetings.
EMPLOYMENT AGREEMENTS
Effective August 1, 1994, the Company entered into an employment
agreement with Ronald S. Boreta, the Company's President and Chief
Executive Officer, pursuant to which he receives a base salary of
$100,000 per year plus annual increases as determined by the Board of
Directors. His salary was increased to $120,000 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.
15
STOCK OPTION PLAN
During July 1994, the Board of Directors (the "Board") 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 (the "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 does 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 expired unexercised in October 28, 2004.
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 expired unexercised in 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 in December 1998.
16
The purpose of the Plan is to advance the interests of the Company and
its subsidiary 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 subsidiary, 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.
Key employees of the Company and its subsidiary and other persons or entities,
not employees of the Company and its subsidiary, who are in a position to make
a significant contribution to the success of the Company or its subsidiary 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 are
eligible to receive awards under the Plan.
STOCK OPTIONS. The exercise price of an incentive stock option 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-incentive stock option granted under the Plan is determined by
the Board. Options granted under the Plan will expire and terminate not later
than 10 years from the date of grant. The exercise price may be paid in cash
or by check, bank draft or money order, payable to the order of the Company.
Subject to certain additional limitations, the Board may also permit the
exercise price to be paid with Stock, a promissory note, an undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or a combination of the foregoing.
STOCK APPRECIATION RIGHTS. Stock appreciation rights ("SAR") 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. SAR 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 approved an award to Ronald S. Boreta,
President of the Company, of SAR equal to 125,000 shares independent of any
stock option under the Company's 1998 Stock Incentive Plan. The base value of
the SAR 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 expire on October 26, 2008.
17
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, SAR, stock awards (including restricted stock, unrestricted stock or
deferred stock) or other stock-based awards are granted, the Board may impose
the additional condition that performance goals must be met prior to the
participant's realization of any vesting, payment or benefit under the award.
In addition, the Board may make awards entitling the participant to receive an
amount in cash upon attainment of specified performance goals.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 31, 2006, 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
18
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.
(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, 2005:
19
----------------------------------------------------------------------------------------
Number of
securities remain-
ing available for
future issuance
Number of secure- 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 400,000 $0.79 1,050,000
plans approved by
security holders
----------------------------------------------------------------------------------------
Equity compensation -- -- --
plans not approved
by security holders
----------------------------------------------------------------------------------------
Total 400,000 $0.79 1,050,000
----------------------------------------------------------------------------------------
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, both named Las Vegas
Discount Golf and Tennis (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) SPEN until February 2005. One of
the SAGS stores is the retail tenant in the CGC. Administrative/accounting
payroll and employee benefits are allocated based on an annual review of the
personnel time expended for each entity. Amounts allocated to these related
parties by the Company approximated $47,500 and $92,500 in 2005 and 2004,
respectively.
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. These
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, 2005 was $3,363,473 and $1,859,725, respectively. The note payable and
accrued interest payable balance at December 31, 2004 was $3,713,473 and
$1,756,068, respectively. In December 2005 and 2004, Vaso Boreta, Chairman of
the Board and owner of the Paradise Store, forgave the current note balance
due including the related interest totaling $617,690 and $669,887,
respectively, and also agreed to not accelerate the maturities of the
remaining notes due to these defaults.
20
In 2004, SAGS loaned the Company approximately $527,000, to fund
operations, of which approximately $50,000 was repaid in 2004. Interest
accrues at 10% per annum and is payable out of available cash flows, if any.
Also in 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 2005, SAGS loaned the Company approximately $445,000, to fund
operations, of which approximately $390,000 is due prior to December 31, 2005
and $55,000 is payable out of available cash flows, if any. Interest accrues
at 10% per annum.
In November 2005, ANR, LLC loaned the Company and All-American Golf
Center, Inc. ("AAGC"), which is 65% owned by the Company, an aggregate of
$800,000 in order to provide funds to complete the settlement of a legal
action involving Sierra SportService, Inc. ANR, LLC is owned by Andre K.
Agassi and Perry Craig Rogers. Messrs. Agassi and Rogers are also owners of
ASI Group LLC, which is a principal shareholder of the Company. The
promissory notes representing these obligations are due on demand and are
personally guaranteed by Ronald Boreta, the Company's President. The interest
rate of the notes is 5% per annum, compounded annually. To the extent that
the outstanding principal and accrued interest are not paid within five days
of demand, ANR, LLC will be entitled to receive a late charge of 10% of the
amount not paid.
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 unrelated 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
21
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)
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 Incorporated by reference to
Andrews Golf, Ltd. Exhibit 10.10 to the Registrant's
Annual Report on Form 10-KSB for
the year ended December 31, 2004
22
10.11 Promissory Note to BE Incorporated by reference to
Holdings I, LLC Exhibit 10.11 to the Registrants
Annual Report on Form 10-KSB for
the year ended December 31, 2004
10.12 Demand Promissory Note of Filed herewith electronically
All-American SportPark,
Inc. to ANR, LLC
10.13 Demand Promissory Note of Filed herewith electronically
All-American Golf Center,
Inc. to ANR, 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
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 ACCOUNTANTS' FEES AND SERVICES.
AUDIT FEES
The aggregate fees billed for each of the last two fiscal years ended
December 31, 2005 and 2004 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 $44,500 and $28,000, respectively.
AUDIT RELATED FEES
The aggregate fees billed by Piercy Bowler Taylor & Kern for consultation
concerning financial accounting standards in connection with preparation of
the Company's response to a SEC comment letter dated July 11, 2005, was
$12,624.
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, 2005 and 2004, were $7,500 and $6,675, respectively.
23
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 audit and
permissible non-audit services. The Company's Board has not established any
policies or procedures other than those required by applicable laws and
regulations.
24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2005 and 2004,
and the related consolidated statements of operations, shareholders' equity
deficiency and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated 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, 2005 and 2004, and the results of its operations
and 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, 2005; these factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1d.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
PIERCY BOWLER TAYLOR & KERN
/s/ Piercy Bowler Taylor & Kern
Certified Public Accountants & Business Advisors
A Professional Corporation
Las Vegas, Nevada
March 24, 2006
F-1
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2005 AND 2004
ASSETS
2005 2004
----------- ----------
Current assets:
Cash $ 14,164 $ 6,125
Accounts receivable 2,664 902
Prepaid expenses and other 27,363 11,626
----------- ----------
44,191 18,653
Leasehold improvements and equipment, net 971,010 1,034,033
Other assets 125,000 1,367
---------- ----------
$1,140,201 $1,054,053
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities:
Current portion of notes payable to
related parties $1,410,156 $ 385,896
Current portion of other long-term debt 79,944 72,760
Interest payable to related parties 206,035 232,690
Accounts payable and accrued expenses 223,335 199,287
---------- ----------
1,919,470 890,633
Notes payable to related parties,
net of current portion 3,776,441 3,999,299
Other long-term debt, net of current portion 159,437 239,381
Interest payable to related parties 1,809,790 1,525,044
Due to related parties 720,206 344,425
Deferred income - 13,104
---------- ----------
8,385,344 7,011,886
---------- ----------
Minority interest in subsidiary 160,089 411,508
---------- ----------
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,
2005 and 2004, respectively 3,400 3,400
Additional paid-in capital 13,306,875 12,689,185
Deficit (20,715,507) (19,061,926)
---------- ----------
(7,405,232) (6,369,341)
---------- ----------
$1,140,201 $1,054,053
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004
----------- -----------
Revenues $ 2,152,867 $ 2,168,802
Cost of revenues 529,261 505,555
----------- -----------
Gross profit 1,623,606 1,663,247
----------- -----------
Operating expenses:
Selling, general and administrative:
Land rent 544,954 398,085
Landscape maintenance 404,812 361,172
Settlements and litigation 800,000 -
Payroll, taxes and benefits 359,748 346,553
Utilities and Telephone 295,076 304,931
Other 533,961 567,644
----------- -----------
2,938,551 1,978,385
Depreciation and amortization 95,122 71,154
----------- -----------
3,033,673 2,049,539
----------- -----------
Operating loss (1,410,067) (386,292)
Other income (expense):
Interest income 2,256 16,157
Interest expense (503,811) (499,949)
Other income 8,394 254,703
Other expense (1,772) (1,154)
----------- -----------
Loss before minority interest (1,905,000) (616,535)
Minority interest 251,419 24,019
----------- -----------
Net loss $(1,653,581) $ (592,516)
=========== ===========
NET LOSS PER SHARE:
Basic net loss per share $ (0.49) $ (0.17)
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
ADDITIONAL
COMMON PAID-IN
STOCK CAPITAL DEFICIT TOTAL
-------- ----------- ------------ -----------
Balances,
January 1, 2004 $ 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 3,400 12,689,185 (19,061,926) (6,369,341)
Capital contributions
in the form of
debt extinguishment 617,690 617,690
Net loss (1,653,581) (1,653,581)
------- ----------- ------------ -----------
Balances,
December 31, 2005 $ 3,400 $13,306,875 $(20,715,507) $(7,405,232)
======= =========== ============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,653,581) $ (592,516)
Adjustment to reconcile net
loss to net cash used in
operating activities:
Minority interest (251,419) (24,019)
Depreciation and amortization 95,122 71,154
Other income 26,950
Bad debts 24,764 109,871
Increase in operating (assets) and
liabilities:
Accounts receivable (1,762) 3,919
Prepaid expenses and other assets (139,370) 7,157
Accounts payable and
accrued expenses 24,048 (112,433)
Interest payable to related parties 525,781 411,918
Decrease in deferred income (13,104) 11,604
----------- -----------
Net cash used in
operating activities (1,389,521) (86,395)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of capital assets (32,099) (324,025)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in due to related parties 257,263 (36,526)
Proceeds of loan from related parties 1,245,156 688,334
Principal payments on notes payable
related parties - (186,574)
Principal payments on other
notes payable (72,760) (66,210)
----------- -----------
Net cash provided by
financing activities 1,429,659 399,024
----------- -----------
NET INCREASE (DECREASE) IN CASH 8,039 (11,396)
Cash, beginning of year 6,125 17,521
----------- -----------
Cash, end of year $ 14,164 $ 6,125
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 27,240 $ 88,030
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
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. ("Urban Land") owns the remaining 35% of AAGC. All
significant intercompany accounts and transactions have been eliminated. The
Company's business operations consisting of the Callaway Golf Center ("CGC")
are included in AAGC.
b. BUSINESS ACTIVITIES
The CGC 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 St. Andrews
Golf Shop retail store, and a restaurant.
Because our business activities are not structured on the basis of different
services provided, the above activities are reviewed, evaluated and reported
as a single reportable segment. The Company is based in and operates solely
in Las Vegas, Nevada, and does not receive revenues from other geographic
areas although its tourist customers come from elsewhere. No one customer of
the Company comprises more than 10% of the Company's revenues.
c. CONCENTRATIONS OF RISK
The Company has implemented various strategies to market the CGC to Las Vegas
tourists and local residents. Should attendance levels at the CGC 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 12 months.
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 2005 and 2004, the Company
had net loss of $1,653,581 and $592,516, respectively. As of December 31,
2005, the Company had a working capital deficit of $1,875,279 and a
shareholders' equity deficiency of $7,405,232.
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. The inability to build attendance to
profitable levels beyond a 12-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.
Nevertheless, management continues to seek out financing to help fund working
capital needs of the Company. In this regard, management believes that
F-6
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. 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.
f. 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
As permitted by SFAS 123, to date the Company has accounted for share-based
payments to employees using APB 25's intrinsic value method and, as such,
generally recognizes no compensation cost for employee stock options.
In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004),
("SFAS 123R"), Share-Based Payment. This statement replaces SFAS 123,
Accounting for Stock-Based Compensation, and supersedes Accounting Principles
Board's Opinion No. 25 ("ABP 25"), Accounting for Stock Issued to Employees.
SFAS 123R will require the Company to measure the cost of employee stock-based
compensation awards granted after the effective date of SFAS 123R based on the
grant date fair value of those awards and to record that cost as compensation
expense over the period during which the employee is required to perform
services in exchange for the award (generally over the vesting period of the
award). Since the Company's outstanding employee stock options are all fully
vested, the adoption of SFAS 123R's fair value method will not have any impact
on the Company's financial statements with regard to currently outstanding
options. The adoption of SFAS 123R's fair value method is expected to have a
significant impact on future results of operations only when new options are
granted, none of which are presently contemplated.
Pro forma information regarding net loss and loss per share has been presented
below as if the Company had accounted for its employee stock options under the
fair value method of SFAS No. 123, Accounting for Stock-Based Compensation.
The fair value for these options were estimated at the date of grant using a
Black-Scholes option pricing model.
F-7
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,
2005 2004
---------------- ----------------
Net loss
As reported $ (1,653,581) $ (592,516)
Pro forma (1,653,581) (592,516)
Basic net loss
per share
As reported (0.49) (0.17)
Pro forma (0.49) (0.17)
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 has
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 $74,990 and $92,885 in 2005 and 2004,
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.
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.).
F-8
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, 2005.
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. LOSS PER SHARE
Loss per share is computed by dividing reported net loss by the weighted
average number of common shares outstanding during the period. Common
equivalent shares are not used to compute a diluted loss per share because to
do so would be anti-dilutive. The weighted-average number of common shares
used in the calculation of basic loss per share was 3,400,000 in 2005 and
2004.
4. RELATED PARTY TRANSACTIONS
The Company provides administrative/accounting support for (a) two golf retail
stores wholly-owned by the Company's Chairman, both named Las Vegas Discount
Golf and Tennis (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. One of the SAGS stores is the retail tenant in the CGC.
Administrative/accounting payroll and employee benefits are allocated based on
an annual review of the personnel time expended for each entity. Amounts
allocated to these related parties by the Company approximated $47,500 and
$92,500 in 2005 and 2004, respectively.
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, 2005,
were $3,363,473 and $1,859,725, respectively. The note payable and accrued
interest payable balances at December 31, 2004, were $3,713,473 and
$1,756,068, respectively. In December 2005 and 2004, Vaso Boreta, the
Company's Chairman and owner of the Paradise Store, caused the portion of the
notes related interest then currently due totaling $617,690 and $669,887,
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 2004, SAGS loaned the Company approximately $527,000, to fund operations,
of which approximately $50,000 was repaid in 2004. Interest accrues at 10%
per annum and is payable only out of available cash flows, if any.
Also in 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 only out of available cash
flows, if any.
F-9
In 2005, SAGS loaned the Company approximately $445,000 to fund operations, of
which approximately $390,000 is due prior to December 31, 2006, and an
additional $55,000 is payable only out of available cash flows, if any.
Interest accrues at 10% per annum.
Also in 2005, ANR, LLC ("ANR"), advanced the Company $800,000, to complete the
settlement of action involving Sierra SportService Inc. ANR is owned by Andre
K. Agassi and Perry Craig Rogers. Messrs. Agassi and Rogers are also owners
of ASI Group LLC, which is a principal shareholder of the Company. The
promissory notes representing these obligations are personally guaranteed by
Ronald S. Boreta, the Company's President. Interest accrues at 5% per annum,
and the notes, including related interest, are payable on demand.
Aggregate maturities of related party notes and the related accrued interest
payable for the five years subsequent to December 31, 2005, are as follows:
2006 $ 1,616,191
2007 190,788
2008 4,610,759
2009 --
2010 --
Thereafter 784,684
------------
$ 7,202,422
============
At December 31, 2005, 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:
2005 2004
----------------- -----------------
Building $ 252,866 $ 252,866
Land improvements 450,390 450,390
Furniture and equipment 215,855 243,108
Signs 208,688 208,688
Other leasehold
improvements 326,400 326,400
Other 40,179 13,789
----------------- -----------------
1,494,378 1,495,241
Less accumulated
depreciation and
amortization (523,368) (461,208)
----------------- -----------------
$ 971,010 $ 1,034,033
================= =================
F-10
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 subsequent to December 31, 2005, are
as follows:
2006 $ 79,944
2007 87,858
2008 71,579
-----------
Balance, which is net
of unamortized discount
of $36,619 $ 239,381
===========
7. LEASES
The land underlying the CGC 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, 2005, minimum future lease payments under non-cancelable
operating leases are as follows:
2006 452,311
2007 441,151
2008 437,885
2009 437,885
2010 437,885
Thereafter 766,296
----------
Total $2,973,413
==========
Total rent expense for operating leases was $581,442 for 2005 and $440,448 for
2004.
8. INCOME TAXES
Income tax expense (benefit) consists of the following:
2005 2004
------------ ------------
Current $ (561,735) $ 29,253
Deferred 561,735 (29,253)
------------ ------------
$ - $ -
============ ============
F-11
The components of the deferred tax asset (liability) consisted of the
following at December 31:
2005 2004
----------- -----------
Deferred tax liabilities:
Temporary differences related to:
Depreciation $ (255,000) $ (239,316)
Minority interest (54,430) (139,913)
Deferred tax assets:
Net operating loss carryforward 6,389,830 5,788,234
Related party interest 685,380 597,063
Deferred income - 4,455
Other 5,484 2,107
----------- -----------
Net deferred tax asset before
valuation allowance 6,771,264 6,012,630
Valuation allowance (6,771,264) (6,012,630)
----------- -----------
$ - $ -
=========== ===========
As of December 31, 2005, the Company has available for income tax purposes
approximately $18.8 million in federal net operating loss carryforwards, which
may be available to offset future taxable income. These loss carryforwards
expire in 2019 through 2025. The Company may be limited by Internal Revenue
Code Section 382 in its ability to fully utilize its net operating loss
carryforwards due to possible future ownership changes. A 100% valuation
allowance has been effectively 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. CAPITAL STOCK
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-12
b. STOCK OPTION PLANS
The Company's Board of Directors adopted an incentive stock option plan in
1994(the "1994 Plan").
In 1996, 325,000 options were granted to the Company's President under the
1994 Plan 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 in April 2006.
In 1999, 50,000 additional options were granted at an exercise price of
$0.65625 per share, the closing market price on the date of grant. These
options expired unexercised in October 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 expired unexercised in April 2005.
In 1998, the Board of Directors and shareholders approved the 1998 stock
incentive plan (the "1998 Plan").
Pursuant to the 1998 Plan, in 1999, the Board of Directors of the Company
approved an award to the President of the Company, stock appreciation rights
("SAR") equal to 125,000 shares independent of any stock option under the
Plan. The base value of the SAR 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 SAR expire on October 26,
2008.
In 1998, Urban Land of Nevada Inc. (Urban Land) (Note 10), 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. 10,000 of these
options vested upon grant of the options, and 10,000 per year thereafter until
fully vested.
A summary of changes in the status of the Company's outstanding stock options
for the years ended December 31, 2005 and 2004 is presented below:
2005 2004
----------------------- ----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
----------------------- ----------------------
Beginning of year 450,000 $ 0.79 500,000 $ 0.80
Granted - - - -
Exercised - - - -
Forfeited - - - -
Expired (50,000) - (50,000) -
----------------------- ----------------------
End of year 400,000 $ 0.79 450,000 $ 0.80
======================= ======================
Exercisable at
end of year 400,000 $ 0.79 445,000 $ 0.76
======================= ======================
F-13
The following table summarizes information about stock options outstanding at
December 31, 2005:
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 0.33 325,000
$4.00 75,000 3.00 75,000
----------- ----------
400,000 $ 0.79 400,000 $ 0.79
=========== ===========
10. LEGAL MATTERS
The Company is plaintiff in a lawsuit against Western Technologies and was
awarded a judgment of $660,000 in March 2003. Western Technologies has
appealed the judgment, and it is currently pending before the Nevada Supreme
Court (the "Court"). The Court is expected to hear arguments in the case in
the spring of 2006. 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 attorney's fees.
On May 31, 2005, Sierra SportService, Inc. the Company's tenant, who operated
the restaurant in CGC, ceased operations. Sierra SportService filed a notice
of default pertaining to the restaurant concession agreement and against all
guarantors of that agreement. A settlement was reached on November 18,
2005 for a total amount of $800,000, of which the AASP paid $700,000 and the
remaining $100,000 was paid by AAGC, which is 65% owned by the Company. The
funds used to make these payments were borrowed from ANR, LLC, an entity owned
by Andre K. Agassi and Perry Craig Rogers.
In December 2005, the Company commenced an arbitration proceeding before the
American Arbitration Association against Urban Land of Nevada ("Urban Land")
seeking reimbursement of the $800,000 paid in settlement of the Sierra
SportService matter plus fees and costs pursuant to the terms of the Company's
agreements with Urban Land which owns the property on which the CGC is
located. Urban Land filed a counterclaim against the Company and claims
against other parties in the arbitration proceeding. The other parties
include, among others, Ronald S. Boreta, the President of the Company; Vaso
Boreta, Chairman of the Board of the Company; and Boreta Enterprise, Ltd., a
principal shareholder of the Company. The counterclaims and other party claims
allege that the Company and others defrauded otherwise injured Urban Land in
connection with Urban Land entering into certain agreements in which the
Company is a party. Urban Land is seeking damages and other relief under
various claims.
On February 10, 2006, Urban Land filed a notice of default on the CGC ground
lease claiming that certain repairs to the property had not been performed or
documented. It is expected that the issues in the notice of default will be
included in the above arbitration proceeding.
The Company is involved in certain other 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
and the forgoing matters will have a material adverse effect, if any, upon the
Company. Accordingly, no provision has been made for any estimated losses in
connection with such matters.
F-14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunder duly authorized.
ALL-AMERICAN SPORTPARK, INC.
Dated: April 17, 2006 By:/s/ Ronald S. Boreta
Ronald S. Boreta, Chief Executive
Officer (Principal Executive Officer
and Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Vaso Boreta Chairman of the Board April 17, 2006
Vaso Boreta and Director
/s/ Ronald S. Boreta President (Chief April 17, 2006
Ronald S. Boreta Executive Officer),
Treasurer (Principal
Financial Officer)
and Director
/s/ Ronald S. Rosburg Director April 17, 2006
Robert S. Rosburg
______________________ Director
William Kilmer