U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2006
Commission File Number: 0-24970
ALL-AMERICAN SPORTPARK, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0203976
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6730 South Las Vegas Boulevard, Las Vegas, Nevada 89119
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(Address of principal executive offices including zip code)
(702) 798-7777
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or
for such shorter period that the Registrant was required to file such
reports), and (2)has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of March 31, 2006 3,400,000 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
ALL-AMERICAN SPORTPARK, INC.
FORM 10-QSB
INDEX
Page Number
PART I: FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements:
Consolidated Balance Sheets
March 31, 2006 (unaudited) and December 31, 2005 3
Consolidated Statements of Operations
Three Months Ended March 31, 2006 and 2005 (unaudited) 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2006 and 2005 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis or
Plan of Operation .................................. 8
Item 3. Controls and Procedures ............................. 11
PART II: OTHER INFORMATION
Item 1. Legal Proceedings .................................. 12
Item 2. Changes in Securities .............................. 12
Item 3. Defaults Upon Senior Securities .................... 12
Item 4. Submission of Matters to a Vote of Security
Holders ............................................ 12
Item 5. Other Information .................................. 12
Item 6. Exhibits ........................................... 12
SIGNATURES .................................................. 13
2
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2006 AND DECEMBER 31, 2005
ASSETS
2006 2005
----------- -----------
(Unaudited)
Current assets:
Cash $ 23,961 $ 14,164
Accounts receivable 5,025 2,664
Prepaid expenses 20,750 27,363
----------- -----------
Total current assets 49,736 44,191
Leasehold improvements and equipment, net 952,432 971,010
Other assets 125,000 125,000
----------- -----------
Total assets $ 1,127,168 $ 1,140,201
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities:
Current portion of long-term debt $ 81,865 $ 79,944
Current portion of notes payable to
related entities 1,410,156 1,410,156
Interest payable to related entities 384,905 206,035
Accounts payable and accrued expenses 237,022 223,335
----------- -----------
Total current liabilities 2,113,948 1,919,470
Notes payable to related entities, net of
current portion 3,766,998 3,776,441
Interest payable to related entities 1,750,828 1,809,790
Due to related entities 801,420 720,206
Long-term debt, net of current portion 138,228 159,437
----------- -----------
Total liabilities 8,571,422 8,385,344
----------- -----------
Minority interest in subsidiary 131,444 160,089
----------- -----------
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 September 30, 2004,
and December 31, 2003, respectively 3,400 3,400
Additional paid-in capital 13,306,875 13,306,875
Accumulated deficit (20,885,973) (20,715,507)
----------- -----------
Total shareholders' equity deficiency (7,575,698) (7,405,232)
----------- -----------
Total liabilities and shareholders'
equity deficiency $ 1,127,168 $ 1,140,201
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(UNAUDITED)
2006 2005
----------- -----------
Revenues $ 546,405 $ 542,499
Cost of revenues 144,342 110,911
----------- -----------
Gross profit 402,063 431,588
----------- -----------
Operating expenses:
Selling, general and administrative 456,973 438,100
Depreciation and amortization 18,578 16,079
----------- -----------
Total operating expenses 475,551 454,179
----------- -----------
Operating loss (73,488) (22,591)
Other income (expense):
Interest expense, net (125,620) (119,139)
Gain on extinguishment of debt -
Other income - 6,621
----------- -----------
Loss before minority
interest (199,108) (135,109)
Minority interest 28,642 1,011
----------- -----------
Net loss (loss) $ (170,466) $ (134,098)
=========== ===========
NET LOSS PER SHARE:
Basic and diluted net loss
per share $ (0.05) $ (0.04)
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(UNAUDITED)
2006 2005
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (170,466) $ (134,098)
Adjustment to reconcile net income
(loss) to net cash provided by
operating activities:
Minority interest (28,642) (1,011)
Depreciation and amortization 18,578 16,079
Changes in operating assets and
liabilities:
Decrease in accounts receivable (2,361) (5,969)
Prepaid expenses and other assets 6,613 (140,228)
Increase (decrease) in accounts payable
and accrued expenses 13,687 (44,135)
Increase in interest payable to
related entities 119,906 95,337
Increase (decrease) in deferred income - (13,104)
----------- -----------
Net cash provided by
operating activities (42,685) (227,129)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital asset expenditures - -
----------- -----------
Net cash used in
investing activities - -
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to
related entities 81,214 214,948
Proceeds from notes payable to
related entities - 55,000
Principal payments on notes payable
to related entities (9,444) (8,821)
Principal payments on notes payable (19,288) (17,552)
----------- -----------
Net cash provided by (used in)
financing activities 52,482 243,575
----------- -----------
NET (DECREASE) INCREASE IN CASH 9,797 16,446
CASH, beginning of period 14,164 6,125
----------- -----------
CASH, end of period $ 23,961 $ 22,571
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 7,115 $ 26,058
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
5
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of All-American SportPark,
Inc. ("AASP" or the "Company"), include the accounts of AASP and its 65%
owned subsidiary, All-American Golf Center, Inc. ("AAGC"), collectively the
"Company". All significant intercompany accounts and transactions have been
eliminated. The operations of the Callaway Golf Center ("CGC") are included
in AASP.
The accompanying interim unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission relating to interim financial statements.
Accordingly, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. In the opinion of
management, all necessary adjustments have been made to present fairly, in
all material respects, the financial position, and results of operations and
cash flows of the Company at March 31, 2006 and for all periods presented.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that may require revision in future periods.
These consolidated financial statements should be read in conjunction with
the Company's Annual Report on Form 10-KSB for the year ended December 31,
2005, from which the December 31, 2005, audited balance sheet information was
derived.
The Company's operations consist of the Callaway Golf Center located on 42
acres of land on the south end of the Las Vegas "Strip".
2. LOSS PER SHARE AND SHAREHOLDER'S EQUITY DEFICIENCY
Basic and diluted income (loss) per share is computed by dividing the
reported net income or loss by the weighted average number of common shares
outstanding during the period. The weighted-average number of common and
common equivalent shares used in the calculation of basic and diluted loss
per share was 3,400,000 for the three-month periods ended March 31, 2006 and
2005.
3. LEASES
The land underlying the Callaway Golf Center is leased by AAGC. The lease
expires in 2012 and has two five-year renewal options. Also, the lease has a
provision for contingent rent to be paid by AAGC upon reaching certain levels
of gross revenues. The lease has a corporate guarantee by AASP.
4. RELATED PARTY TRANSACTIONS
The Company has transactions and relationships with (a) an entity owned by
the Company Chairman that operates two wholly-owned golf retail stores in Las
Vegas, Nevada (the "Paradise Store" and "Rainbow Store") and, (b) two other
golf retail stores, both named Saint Andrews Golf Shop ("SAGS"), owned by the
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Company's President and his brother. During the three months ended March 31,
2006, related party transactions consisted primarily of allocated
administrative and accounting payroll and employee benefits based on an
annual review of the personnel time expended for each entity and debt related
transactions. Amounts allocated these related parties by the Company were
$10,953 and $10,905 for the three months ended March 31, 2006 and 2005,
respectively. There were no additional debt issues made to the company from
related entities for the period. Related party interest expense was $119,900
for the three months ended March 31, 2006.
5. GOING CONCERN MATTERS
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Historically,
with some exceptions, the Company has incurred net losses. As of March 31,
2006, the Company had a working capital deficit of $2,064,212 and a
shareholders' equity deficiency of $7,575,698. CGC has generated positive
cash flow since 1998. However, this positive cash flow, which has diminished
in the current period, has been used to fund corporate overhead that is in
place in support of the CGC and public company operations, and there is no
assurance that it will continue.
Management believes that its operations, and existing cash balances as of
March 31, 2006 may not be sufficient to fund operating cash needs and debt
service requirements over the next 12 months. Management continues to seek
other sources of funding, which may include Company officers or directors or
other related parties. In addition, management continues to analyze all
operational and administrative costs of the Company and has made and will
continue to make the necessary cost reductions as appropriate.
Among its alternative courses of action, management of the Company may seek
out and pursue a business combination transaction with an existing private
business enterprise that might have a desire to take advantage of the
Company's status as a public corporation. There is no assurance that the
Company will acquire a favorable business opportunity through a business
combination. In addition, even if the Company becomes involved in such a
business opportunity, there is no assurance that it would generate revenues
or profits, or that the market price of the Company's common stock would be
increased thereby.
Management continues to seek out financing to help fund working capital needs
of the Company. In this regard, management believes that additional
borrowings against the CGC could be arranged although there can be no
assurance that the Company would be successful in securing such financing or
with terms acceptable to the Company.
The consolidated financial statements do not include any adjustments relating
to the recoverability of assets and the classification of liabilities that
might be necessary should the Company be unable to continue as a going
concern.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the Company's
consolidated financial statements and related notes included in this report.
OVERVIEW
The Company's operations consist of the managing and operating the Callaway
Golf Center ("CGC"). The CGC includes the Divine Nine par 3 golf course
fully lighted for night golf, a 110-tee two-tiered driving range and a 20,000
square foot clubhouse which includes the Callaway Golf fitting center. Also
located within the clubhouse are two spaces that have been leased to tenants.
One of the spaces is occupied by an affiliated retail store. The other space
was for a restaurant and bar that was unoccupied as of the beginning of 2006.
A lease was signed with a new tenant on January 25, 2006 and the restaurant
re-opened in February 2006. The lease is for one year and there is an option
to extend the lease after one year for additional four year term through
2011.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2006 AS COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 2005
REVENUES. Revenues of the Callaway Golf Center ("CGC") for the three months
ended March 31, 2006 increased $3,906 to $546,405 from $542,499 reported for
the three months ended March 31, 2005. The increase in revenue is due a
higher rental and golf lesson revenues offset by a decrease in tenant
revenues. Green fees decreased by $11,615 to $178,260 in 2006 from $189,875
in 2005 as a result of weekend rates not being charged throughout the quarter
because the golf course was under repairs. The lower green fees were offset
by higher golf cart and club rentals. Golf cart rental increased by $6,089
from $43,410 in 2006 to $37,321 in 2005 due to an increase in the rental
rates. Club rentals revenue also increased by $5,498 to $29,304 from $23,807
due to higher rental rates in 2006 compared to 2005. Group activities
revenue increased by $2,641 due primarily to a local university conducted
golf lessons at the CGC facilities in 2006. Golf lesson revenue increased
$2,053 to $46,975 in 2006 from $44,922 in 2005. Driving range revenue
remains consistent at $192,062 and $191,367 for the three months ended 2006
and 2005 respectively. Merchandise sales were $1,239 for the three months
ended March 31, 2006 as the CGC sold snacks during the closure of the
restaurant at the beginning of 2006. Tenant revenue decreased by $2,700 to
$47,312 in 2006 from $50,124 in 2005 due to the new tenant not occupying the
restaurant space until the end of February.
COST OF REVENUES. Cost of revenues consist mainly of commissions paid to the
golf instructors, the payroll and benefits paid expenses of the CGC staff,
cost of merchandise sold and operating supplies. Costs of revenues increased
by $33,431 to $144,342 in 2006 as compared to $110,911 in 2005. Cost of
revenue as a percentage of revenues was 26.4% in 2006 as compared to 20.4% in
2005. The increase is primarily due to increase of $21,271 in golf operating
supplies to $23,450 from $2,179 in golf operating supplies for the purchase
of range balls, range mats, and other miscellaneous operating supplies for
the driving range. Payroll and benefits for range park services increased by
$10,176 primarily due to the addition of a supervisor for the staff.
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SELLING, GENERAL AND ADMINISTRATIVE. These expenses consist principally of
administrative payroll, rent, professional fees and other corporate costs.
These expenses increased by $18,873 or 2.2% to $456,973 as compared to
$438,100 in 2005. Lease expense increased an additional $9,950 to $109,471
from $99,521 in 2005 for the land that the CGC is located. The lease contains
provision to periodically raise the minimum rent by 10% and the rent was
increased starting in September 2005. The Company is protesting the rent
increase and the matter is currently under litigation. Administrative
salaries and payroll taxes were $25,116 in 2006 compared to $14,624 in 2005
or $10,492 higher because the payroll expense for the first three months of
2005 did not have the salary for the Company's controller for the entire
three months of 2005 as the position was not occupied from the start of the
quarter until mid-February. Legal and audit fees increased 22,642 in 2006
compared to 2005. This was offset by no bad debt expense in 2006 compared to
$24,764 in 2005 related to the Sports Entertainment Enterprises, Inc. sale on
February 7, 2005. The Company received 10,000 shares of Sports Entertainment
Enterprises, Inc. (CKX) stock as compensation for the debt owed. The stock
was valued at $125,000. Additional amounts owed to the Company for 2005 were
written off in the first quarter of 2005.
OTHER INCOME AND EXPENSE. Other income and expense consists principally of
interest income and expense and non-operating income. For the three months
ended March 2005 the company had other income of $6,621 from insurance
proceeds. Interest expense increased to $125,620 for the three months ended
March 31, 2006 from $119,139 for the three months ended March 31, 2005 due to
borrowing of additional funds from an affiliated store of $445,000 during
2005 offset by forgiveness of debt of $350,000 at the end of 2005.
NET LOSS. The net loss before minority interest is $199,108 as compared to
net loss of $135,109 in 2005. The difference of $71,973 is due to increased
in cost of revenues, selling, general and administrative expenses and a net
increase in interest expense.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2006, the Company had a working capital deficit of $2,061,212
as compared to a working capital deficit of $1,875,279 at December 31, 2005.
The CGC has generated positive cash flow since 1998. However, this positive
cash flow has been used to fund corporate overhead that is in place in
support of the CGC and public company operations. There is no assurance that
it will continue to provide positive cash flow.
Management believes that the CGC operations and existing cash balances as of
March 31, 2006, may not be sufficient to fund operating cash needs and debt
service requirements over the next 12 months. In its report on the Company's
annual financial statements for 2005, the Company's auditors expressed
substantial doubt about the Company's ability to continue as a going concern.
Management continues to seek other sources of funding, which may include
Company officers or directors or other related parties. In addition,
management continues to analyze all operational and administrative costs of
the Company and has made and will continue to make the necessary cost
reductions as appropriate.
Among its alternative courses of action, management of the Company may seek
out and pursue a business combination transaction with an existing private
business enterprise that might have a desire to take advantage of the
Company's status as a public corporation. At this time, management does not
9
intend to target any particular industry but, rather, intends to judge any
opportunity on its individual merits. Any such transaction would likely have
a dilutive effect on the interests of the Company's stockholders that would,
in turn, reduce each shareholders proportionate ownership and voting power in
the Company. There is no assurance that the Company will acquire a favorable
business opportunity through a business combination. In addition, even if
the Company becomes involved in such a business opportunity, there is no
assurance that it would generate revenues or profits, or that the market
price of the Company's common stock would be increased thereby.
The Company has no commitments to enter into or acquire a specific business
opportunity and, therefore, is able to disclose the risks of a business or
opportunity that it may enter into only in a general manner, and unable to
disclose the risks of any specific business or opportunity that it may enter
into. An investor can expect a potential business opportunity to be quite
risky. Any business opportunity acquired may be currently unprofitable or
present other negative factors.
Working capital needs have been helped by deferring payments of interest and
notes payable balances due to an Affiliate. Management believes that
additional deferrals or such payments can be negotiated, if necessary.
Management continues to seek out financing to help fund working capital needs
of the Company. In this regard, management believes that additional
borrowings against the CGC could be arranged although there can be no
assurance that the Company would be successful in securing such financing or
with terms acceptable to the Company.
The Company has raised considerable capital in the past for development
projects. Expansion programs in other locations are not expected to take
place until the Company achieves an appropriate level of profitability and
positive cash flow. If and when expansion does occur, such expansion is
expected to be funded primarily by third parties.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included in this quarterly report contains statements
that are forward-looking such as statements relating to plans for future
expansion and other business development activities, as well as other capital
spending and financing sources. Such forward-looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ from those
expressed in any forward-looking statements made by or on behalf of the
Company. These risks and uncertainties include, but are not limited to,
those relating to dependence on existing management, leverage and debt
service (including sensitivity to fluctuations in interest rates), domestic
or global economic conditions, changes in federal or state tax laws or the
administration of such laws, and changes in regulations and application for
licenses and approvals under applicable jurisdictional laws and regulations.
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ITEM 3. CONTROLS AND PROCEDURES
As of March 31, 2006, under the supervision and with the participation of the
Company's Chief Executive Officer and Principal Financial Officer, management
has evaluated the effectiveness of the design and operations of the Company's
disclosure controls and procedures. Based on that evaluation, the Chief
Executive Officer and Principal Financial Officer concluded that the
Company's disclosure controls and procedures were effective as of March 31,
2006. There have been no changes in internal control over financial reporting
that occurred during the first quarter of the fiscal year covered by this
report that have materially affected, or are reasonably likely to affect, the
Company's internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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 is expected to hear arguments in the case in summer 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.
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 also disputing
the rent increase under the ground lease. Legal counsel has been hired and
has advised the company to pay all amounts due pending litigation. The
company has paid all amounts due as of May 22, 2006.
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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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None.
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits
31 Certification of Chief Filed herewith electronically
Executive Officer and Principal
Financial Officer Pursuant
to Section 302 of the
Sarbanes-Oxley Act of 2002
32 Certification of Chief Filed herewith electronically
Executive Officer and Principal
Financial Officer Pursuant
to Section 18 U.S.C. Section 1350
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALL-AMERICAN SPORTPARK, INC.
Date: May 22, 2006
By:/s/ Ronald Boreta
Ronald Boreta, President and
Chief Executive Officer (Principal
Executive Officer) and Treasurer
(Principal Financial Officer)
13