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 September 30, 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
---------------------------
(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 September 30, 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. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets
September 30, 2006 (unaudited) and December 31,
2005 ................................................ 3
Condensed Consolidated Statements of Operations
Three Months Ended September 30, 2006 and 2005
(unaudited) ......................................... 4
Condensed Consolidated Statements of Operations
Nine Months Ended September 30, 2006 and 2005
(unaudited) ......................................... 5
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2006 and 2005
(unaudited) ......................................... 6
Notes to Condensed Consolidated Financial Statements
(unaudited) ......................................... 7-8
Item 2. Management's Discussion and Analysis or
Plan of Operation ................................... 9
Item 3. Controls and Procedures ............................ 13
PART II: OTHER INFORMATION
Item 1. Legal Proceedings .................................. 13
Item 2. Changes in Securities .............................. 14
Item 3. Defaults Upon Senior Securities .................... 14
Item 4. Submission of Matters to a Vote of Security
Holders ............................................ 14
Item 5. Other Information .................................. 14
Item 6. Exhibits and Reports on Form 8-K ................... 14
SIGNATURES .................................................. 15
2
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2006 AND DECEMBER 31, 2005
ASSETS
2006 2005
----------- -----------
(Unaudited)
Current assets:
Cash $ 44,083 $ 14,164
Accounts receivable 5,445 2,664
Prepaid expenses and other 7,109 27,363
----------- -----------
Total current assets 56,637 44,191
Leasehold improvements and equipment, net 915,693 971,010
Other assets _ 125,000
----------- -----------
Total assets $ 972,330 $1,140,201
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities:
Current portion of notes payable to
related entities $ 1,435,156 $ 1,410,156
Current portion of other long-term debt 85,818 79,944
Interest payable to related entities 462,412 206,035
Accounts payable and accrued expenses 305,581 223,335
Deferred Income 9,167 -
----------- -----------
Total current liabilities 2,298,134 1,919,470
Notes payable to related entities, net of
current portion 3,766,997 3,776,441
Interest payable to related entities 1,913,011 1,809,790
Due to related entities 891,012 720,206
Long-term debt, net of current portion 94,308 159,437
----------- -----------
Total liabilities 8,963,462 8,385,344
----------- -----------
Minority interest in subsidiary 33,003 160,089
----------- -----------
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, 2006,
and December 31, 2005, respectively 3,400 3,400
Additional paid-in capital 13,306,875 13,306,875
Accumulated deficit (21,334,410) (20,715,507)
----------- -----------
Total shareholders' equity deficiency (8,024,135) (7,405,232)
----------- -----------
Total liabilities and shareholders'
equity deficiency $ 972,330 $ 1,140,201
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(UNAUDITED)
2006 2005
----------- -----------
Revenues $ 502,121 $ 502,855
Cost of revenues, excluding depreciation 158,096 130,646
----------- -----------
Gross profit 344,025 372,209
----------- -----------
Operating expenses:
Selling, general and administrative 514,509 631,032
Depreciation and amortization 18,360 28,703
----------- -----------
Total operating expenses 532,869 659,735
----------- -----------
Operating loss (188,844) (287,526)
Other income (expense):
Interest expense (125,041) (124,942)
Loss on stock sale (11,033) -
Other income (loss) 812 (4,475)
----------- -----------
Loss before minority interest (324,106) (416,943)
Minority interest 67,360 104,312
----------- -----------
Net loss $ (256,746) $ (312,631)
=========== ===========
NET LOSS PER SHARE:
Basic and diluted net loss
per share $ (0.08) $ (0.09)
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(UNAUDITED)
2006 2005
----------- -----------
Revenues $ 1,702,976 $ 1,683,527
Cost of revenues, excluding depreciation 465,288 382,738
----------- -----------
Gross profit 1,237,688 1,300,789
----------- -----------
Operating expenses:
Selling, general and administrative 1,542,777 1,584,222
Depreciation and amortization 55,317 60,911
----------- -----------
Total operating expenses 1,598,094 1,645,133
----------- -----------
Operating loss (360,406) (344,344)
Other income (expense):
Interest expense, net (375,359) (366,443)
Loss on stock sale (11,033) -
Other income (expense) 812 (4,247)
----------- -----------
Loss before minority interest (745,986) (715,034)
Minority interest 127,083 122,087
----------- ----------
Net loss $ (618,903) $ (592,947)
=========== ==========
NET LOSS PER SHARE:
Basic and diluted net loss
per share $ (0.18) $ (0.17)
=========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(UNAUDITED)
2006 2005
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (618,903) $ (592,947)
Adjustment to reconcile net loss
to net cash provided by
operating activities:
Decrease in minority interest (127,086) (122,088)
Depreciation and amortization 55,317 60,911
Loss on sale of capital assets - 4,475
Loss on Disposal of stock 11,033 -
Bad Debts - 24,764
Changes in operating assets and liabilities:
Increase in accounts receivable (2,781) (6,459)
(Increase) decrease prepaid expenses
and other 20,254 (126,268)
Increase in accounts payable and
accrued expenses 82,246 31,202
Increase in interest payable to
related entities 359,598 345,914
(Increase) decrease in deferred income 9,167 (13,104)
----------- -----------
Net cash used in operating activities (211,155) (393,600)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of stock 113,967 -
Capital asset expenditures - (32,100)
----------- -----------
Net cash provided by (used in)
investing activities 113,967 (32,100)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to
related entities 100,000 283,606
Principal payments on notes payable
to related entities (84,444) (24,328)
Principal payments on other notes payable (59,255) (53,921)
Increase (decrease) in due to related entities 170,806 264,415
----------- -----------
Net cash provided by financing activities 127,107 469,772
----------- -----------
NET (INCREASE IN CASH 29,919 44,072
CASH, beginning of period 14,164 6,125
----------- -----------
CASH, end of period $ 44,083 $ 50,197
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 15,745 $ 22,786
=========== ===========
Cash paid for taxes $ - $ -
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed 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 AAGC.
The accompanying interim unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission relating to interim financial statements.
Accordingly, certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted. In
the opinion of management, all necessary adjustments have been made to
present fairly, in all material respects, the financial position, results of
operations and cash flows of the Company at September 30, 2006 and for all
prior periods presented.
The 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.
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.
2. INCOME (LOSS) PER SHARE AND SHAREHOLDER's EQUITY DEFICIENCY
Basic and diluted income (loss) per share is computed by dividing the
reported net income or loss by the weighted average number of common shares
outstanding during the period. The weighted-average number of common shares
used in the calculation of basic and diluted loss per share were 3,400,000
for the three-month and nine-month periods ended September 30, 2006 and 2005.
3. RELATED PARTY TRANSACTIONS
The Company provides administrative/accounting support for (a) The Company
Chairman's two wholly-owned golf retail stores in Las Vegas, Nevada, (the
"Paradise Store" and "Rainbow Store"), (b) three golf retail stores, two are
named Saint Andrews Golf Shop ("SAGS") and one is a Las Vegas Golf and
Tennis, owned by the Company's President and his brother, and Sports
Entertainment Enterprises, Inc. until February 2005. 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 $43,449 and $36,570 for the
nine-months ended September 30, 2006 and 2005, respectively. During the third
quarter three separate notes totaling $100,000 were issued from SAGS and each
note had a maturity date of one year. These notes have been classified in
the current portion of debt to related parties on the balance sheet. The
Company made $75,000 in principal payments on these notes in the third
7
quarter of 2006. Related party interest expense was $120,261 and $118,337
for the three months ended and $359,614 and $347,616 for the nine months
ended September, 30, 2006 and 2005, respectively.
4. GOING CONCERN MATTERS
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Historically,
with some exceptions, the Company has incurred net losses. As of September
30, 2006, the Company had a working capital deficit of $2,241,497 and a
shareholders' equity deficiency of $8,024,135. CGC has generated positive
cash flow before corporate overhead that is in place for support of the CGC
and public company operations. However, this positive cash flow has
diminished in 2006 and there is no assurance that it will continue.
Management believes that its operations, and existing cash balances as of
September 30, 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.
5. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the current
period presentation.
8
ITEM 2. MANAGEMENT's DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the Company's
consolidated financial statements and related notes included in this report.
OVERVIEW
The Company's operations consist of the management and operation of the
Callaway Golf Center ("CGC"). The CGC includes a par 3 golf course fully
lighted for night golf, a 110-tee two-tiered driving range, and a 20,000
square foot clubhouse which includes the Callaway Golf fitting center. Also
located within the clubhouse are two sub-leased spaces. The first is
occupied by the Saint Andrews Golf Shop retail store. The other space was
for a restaurant and bar that was unoccupied from May 31, 2005 to early 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 an additional four-year term through
2011.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2006 AS COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 2005.
REVENUES. Revenues of the CGC during the three months ended September 30,
2006 were consistent at $502,121 and $502,855 for the three months ended
September 30, 2006 and 2005 respectively. Golf course green fees decreased
by $23,087 to $116,587 during the three months ended September 30, 2006 from
$139,674 during the same period in 2005. This was due to unusually hot
weather in 2006 that caused the golf center to discount its green fees
earlier than it had in the prior year. For the same reason there was a
decrease of $6,599 in group activities revenues to $5,780 during the three
months ended September 30, 2006 from $12,379 during the same period in 2005.
Offsetting this decrease was an increase of $13,843 in driving range revenue
to $192,670 during the three months ended September 30, 2006 from $178,827
during the three months ended September 30, 2005 because customers preferred
to use the shaded driving range instead of the golf course. Golf cart rental
revenue also increased by $13,541 to $57,989 during the three months ended
September 30, 2006 from $44,448 during the same period in 2005 due to an
increase in rental rates. In addition, there was $12,000 in restaurant rent
during the three months ended September 30, 2006 as compared to no restaurant
rent in the same period of 2005 since the restaurant was closed in May 2005
and did not reopen until the start of 2006. With the restaurant being open
in 2006, merchandise sales decrease by $6,592 during the three months ended
September 30, 2006 as compared to the same period in the prior year since the
golf center could no longer sell candy bars and refreshments at the
activities counter of the golf center.
COST OF REVENUES. Cost of revenues consists mainly of commissions paid to
the golf instructors, the payroll and benefits expenses of ACG staff, and
operating supplies. Cost of revenues increased by $27,450, or 21.0%, to
$158,096 during the three months ended September 30, 2006 as compared to
$130,646 during the same period in the prior year. This increase is
primarily due to an increase of $18,515 in golf operating supplies which
resulted from the purchase of new golf balls for the driving range during the
current period. The payroll and payroll taxes for the park services
increased by $7,795 to $25,353 during the three months ended September 30,
2006 from $17,558 in during the same period last year due to the addition of
a salaried manager in 2006.
9
SELLING, GENERAL AND ADMINISTRATIVE. These expenses consist principally of
landscaping services and professional fees, ground lease, utilities,
insurance and administrative payroll. These expenses decreased $116,523, or
18.5%, to $514,509 for the three months ended September 30, 2006 as compared
to $631,032 during the same period in 2005. Lease expense decreased by
$126,971 from $236,442 during the three months ended September 30, 2005 to
$109,471 during the three months ended September 30, 2006 as a payment was
made in September 2005 to pay all unpaid incremental increases in rent for
the land on which the CGC is located. The lease contains provision to
periodically raise the minimum rent by 10%. The Company is protesting these
rent increases and the matter is currently in litigation. This decrease was
offset by an increase of $4,648 in repairs and maintenance for landscaping
services as a result of installing new engines and making miscellaneous
repairs on range carts. Salaries for graphics marketing increased by $3,583
as a result of hiring a graphic artist in the second quarter of 2006 to
design advertising and other marketing materials.
OTHER INCOME AND EXPENSE. Other income and expense consists principally of
interest income and expense and non-operating income. For the three months
ended September 30, 2006 there was an $11,033 loss from the sale of 10,000
shares of CKx, Inc. stock that occurred in August 2006. There was no write-
off of fixed assets in 2006 as there was in 2005 for the disposal of old
nettings of $4,475.
NET LOSS. The net loss before minority interest for the three months ended
September 30, 2006 is a net loss of $324,106 compared to a net loss of
$416,943 in the same period of the prior year. The difference of $92,837 is
primarily due to lower operating expenses from rent paid to the CGC's
landlord offset by the increase in golf operating supplies.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2006 AS COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2005.
REVENUES. Revenues of the CGC during the nine months ended September 30,
2006 increased by $19,449 or 1.2% to $1,702,976 from $1,683,527 reported for
the same period in 2005. Revenues increased due to higher golf cart rentals,
golf lesson fees and driving range revenues offset by lower green fees. Golf
cart rental revenue during the nine months ended September 30, 2006 increased
by $28,954 to $162,294 from $133,340 during the same period last year due to
an increase in price of cart rentals at the end of the second quarter of
2006. Golf lesson fees increased by $22,306 to $183,161 during the nine
months ended September 30, 2006 compared to $160,855 in the same period of
2005 because of an upgrade in the golf professionals on staff and the
addition of a golf pro to the staff. Driving range revenue increased by
$13,477 to $609,455 during the nine months ended September 30, 2006 compared
to $595,978 during the same period in 2005 due to the unusually hot weather
in the third quarter of 2006 which resulted in customers preferring to use
the shaded golf range instead of the golf course. Offsetting these increases
in revenues was a decrease in golf course green fees. Golf course green fees
decreased by $55,630 to $487,783 during the nine months ended September 30,
2006 from $543,413 during the nine months ended September 2005. This
decrease is due to the hot weather that resulted in a 25% decrease in green
fees during mid-day hours, and also as a result of the CGC distributing more
coupons giving discounts to golfers. In addition, there was additional
$19,064 in restaurant rent since the restaurant was closed in May 2005 and
did not reopen until March 2006.
10
COST OF REVENUES. Cost of revenues consists mainly of commissions paid to
the golf instructors, the payroll and benefits expenses of CGC staff, cost of
merchandise sold and operating supplies. Cost of revenues increased by
$82,550, or 21.6%, to $465,288 during the nine months ended September 30,
2006 from $382,738 for the same period of the prior year. Commissions paid
to golf instructors increased $9,500 to $118,190 from $108,690 due to the
addition of a golf instructor in 2006. The payroll for the activities
counter increased by $14,062 to $56,665 during the nine months September 2006
compared to $42,603 during the nine months ended September 2005 due to the
addition of assistant manager at the end of 2005 and addition of mid-shift
cashier in the second quarter of 2006. The payroll for the park services
increased by $20,326 to $65,044 during the nine months ended September 30,
2006 from $44,718 in the same period last year due to the addition of a
salaried manager in February 2006. Golf operating supplies increased $39,199
during the current year due to purchases of golf range balls in January and
September of 2006 and other miscellaneous operating supplies for the nine
months ended September 30, 2006.
SELLING, GENERAL AND ADMINISTRATIVE. These expenses consist principally of
landscaping services and professional fees, ground lease, utilities,
insurance and administrative payroll. These expenses decreased by $41,445,
or 2.6%, to $1,542,777 during the nine months ended September 30, 2006 as
compared to $1,584,222 during the nine months ended September 30, 2005.
Lease expense decreased by $107,069 from $435,482 during the nine months
ended September 30, 2005 to $328,413 in the same period of 2006 as a payment
was made in September 2005 to pay all unpaid incremental increases in the
rent for the land on which CGC is located offset by the rent increase that
occurred in September 2005. There was no bad debt expense in 2006 compared
to $24,764 of expense in 2005 related to the Sports Entertainment
Enterprises, Inc. sale on February 7, 2005. The Company received 10,000
shares of CKx,Inc. stock as compensation for the debt owed. Additional
amounts owed to the Company were written off in the first quarter of 2005.
This stock was subsequently sold in August 2006 as noted above. Audit and
taxes increased by $56,667 from $75,667 during the nine months ended
September 30, 2006 from $19,000 in the same period of 2005. The increased
expenses were related to responding to SEC comment letters and a change of
Company's registered public accounting firm that occurred in April 2006.
Legal expenses increased by $18,411 during the nine months ended September
30, from the same period last year due to the arbitration with Urban Land
related to the settlement of Sierra SportService matter. Salaries for
graphics marketing increased by $8,720 as a result of hiring a graphic artist
in the second quarter of 2006 to design advertising and other marketing
materials. Finally, contract services for lighting increased by $7,731 to
$15,503 during the nine months ended September 30, 2006 from $7,772 in the
same period of 2005 due to Company entered into monthly service contract at
the start of 2006.
OTHER INCOME AND EXPENSE. Other income and expense consists principally of
interest income and expense and non-operating income. As noted above there
was a $11,033 loss on sale of 10,000 shares of CKx, Inc. stock. Interest
expense increased $8,916 to $375,359 during the nine months ended September
30, 2006 compared to $366,443 in the same period of 2005 due to a net
increase in borrowing from related parties.
11
NET LOSS. The net loss before minority interest for the nine months ended
September 30, 2006 was $745,986 compared to a loss of $715,034 in the same
period of the prior year. The difference of $30,952 is primarily due to the
increase in operating supplies and payroll costs offset by the net increase
in golf revenues and lower operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2006, the Company had a working capital deficit of
$2,241,497 as compared to a working capital deficit of $1,875,279 at December
31, 2005. The CGC has generated positive cash flow before corporate overhead.
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
September 30, 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
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 favorable payment terms and
conditions included in our notes payable to an Affiliate. Management
believes that additional notes could be negotiated, if necessary, with
similar payment terms and conditions. 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.
12
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included in this quarterly report contains statements
that are forward-looking such as statements relating to plans for future
expansion and other business development activities, as well as other capital
spending and financing sources. Such forward-looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ from those
expressed in any forward-looking statements made by or on behalf of the
Company. These risks and uncertainties include, but are not limited to,
those relating to dependence on existing management, leverage and debt
service (including sensitivity to fluctuations in interest rates), domestic
or global economic conditions, changes in federal or state tax laws or the
administration of such laws, and changes in regulations and application for
licenses and approvals under applicable jurisdictional laws and regulations.
ITEM 3. CONTROLS AND PROCEDURES
As of September 30, 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
September 30, 2006. At the start of the third quarter additional accounting
staff was added to further segregate accounting processes from financial
reporting and thus strengthen the internal controls 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 to the Nevada Supreme Court. 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. In October 2006, the Court ruled in favor of the defendants but the
company's attorney believes that the Company may continue to pursue this
lawsuit.
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
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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 and 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
advised the Company to pay all amounts due pending litigation. 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 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.
On October 12, 2006 the Board of Directors approved the issuance of shares of
the Company's common stock to two of the Company's Directors, Robert Rosburg
and William Kilmer, who had previously not received any payment for their
services as Directors, as compensation for their services. An employee was
also granted shares of the Company's common stock. Each of these persons was
issued 34,000 shares of common stock and the Board of Directors determined
the value of the shares to be $0.20 per share. These shares have been issued
as restricted securities under the Securities Act of 1933.
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
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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: November 14, 2006
By: /s/ Ronald Boreta
Ronald Boreta, President and
Chief Executive Officer (Principal
Executive Officer) and Treasurer
(Principal Financial Officer)
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