U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007
Commission File Number: 0-24970
ALL-AMERICAN SPORTPARK, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0203976
------------------------------- ---------------------------------
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6730 South Las Vegas Boulevard, Las Vegas, Nevada 89119
----------------------------------------------------------
(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 June 30, 2007 3,502,000 shares of common stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
EXPLANATORY NOTE: On March 10, 2008, the President and Principal Financial
and Accounting Officer of All-American SportPark, Inc. (the "Company")
concluded that the previously issued financial statements contained in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2006,
and its Quarterly Reports on Form 10-QSB for the quarters ended March 31,
2007, June 30, 2007 and September 30, 2007 should not be relied upon because
of the accounting errors contained therein. In particular the Company has
determined that it has not correctly account for its land lease in accordance
with Statement of Financial Accounting Standards No. 13 - Accounting for
Leases ("SFAS 13"). SFAS 13 provides that operating leases with fixed rent
escalations should be recognized on a straight-line basis over the lease
term. This amended Form 10-QSB is filed to make changes needed to restate
the financial information as a result of the previous error.
ALL-AMERICAN SPORTPARK, INC.
FORM 10-QSB
INDEX
Page Number
PART I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets
June 30, 2007 (unaudited) and December 31, 2006....... 3
Condensed Consolidated Statements of Operations
Three Months Ended June 30, 2007 and 2006 (unaudited). 4
Condensed Consolidated Statements of Operations
Six Months Ended June 30, 2007 and 2006 (unaudited)... 5
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2007 and 2006 (unaudited)... 6
Notes to Condensed Consolidated Financial Statements
(unaudited) .......................................... 7
Item 2. Management's Discussion and Analysis or
Plan of Operation .................................... 15
Item 3. Controls and Procedures .............................. 19
PART II: OTHER INFORMATION
Item 1. Legal Proceedings .................................... 19
Item 2. Changes in Securities ................................ 20
Item 3. Defaults Upon Senior Securities ...................... 20
Item 4. Submission of Matters to a Vote of Security
Holders .............................................. 20
Item 5. Other Information .................................... 20
Item 6. Exhibits and Reports on Form 8-K ..................... 20
SIGNATURES ..................................................... 21
2
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2007 AND DECEMBER 31, 2006
ASSETS
2007 2006
(restated) (restated)
----------- -----------
(Unaudited)
Current assets:
Cash $ 1,900 $ 44,914
Accounts receivable 1,337 5,446
Prepaid expenses and other 20,234 4,345
----------- -----------
Total current assets 23,471 54,705
Leasehold improvements and equipment, net 922,901 937,501
----------- -----------
Total assets $ 946,372 992,206
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities:
Current portion of notes payable to
related entities $ 2,066,156 $ 1,966,156
Current portion of other long-term debt 92,108 87,866
Interest payable to related entities 686,509 594,486
Accounts payable and accrued expenses 231,287 280,940
----------- -----------
Total current liabilities 3,076,060 2,929,448
Notes payable to related entities, net of
current portion 3,359,220 3,361,963
Interest payable to related entities 2,058,973 1,902,300
Due to related entities 993,195 944,391
Long-term debt, net of current portion 24,418 71,558
Deferred Income 1,667 6,667
Deferred rent liability 668,747 644,659
----------- -----------
Total liabilities 10,182,280 9,860,986
----------- -----------
Minority interest in subsidiary - -
----------- -----------
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, 3,502,000 shares
issued and outstanding at June 30, 2007,
and December 31, 2006, respectively 3,502 3,502
Additional paid-in capital 13,327,173 13,327,173
Accumulated deficit (22,566,583) (22,199,455)
----------- -----------
Total shareholders' equity deficiency (9,235,908) (8,868,780)
----------- -----------
Total liabilities and shareholders'
equity deficiency $ 946,372 $ 992,206
=========== ===========
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 JUNE 30, 2007 AND 2006
(UNAUDITED)
2007 2006
(restated) (restated)
----------- -----------
Revenues $ 673,317 $ 654,450
Cost of revenues, excluding depreciation 190,896 162,850
----------- -----------
Gross profit 482,421 491,600
----------- -----------
Operating expenses:
Selling, general and administrative 517,918 583,339
Depreciation and amortization 20,483 18,379
----------- -----------
Total operating expenses 538,401 601,718
----------- -----------
Operating loss (55,980) (110,118)
Other income (expense):
Interest expense (134,978) (124,696)
Other income 129 -
----------- -----------
Loss before minority
interest (190,829) (234,814)
Minority interest - -
----------- ------------
Net loss $ (190,829) $ (234,814)
=========== ============
NET LOSS PER SHARE:
Basic and diluted net loss
per share $ (0.05) $ (0.07)
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(UNAUDITED)
2007 2006
(restated) (restated)
----------- -----------
Revenues $ 1,220,226 $ 1,200,855
Cost of revenues, excluding depreciation 323,603 307,192
----------- -----------
Gross profit 896,623 893,663
----------- -----------
Operating expenses:
Selling, general and administrative 954,899 1,052,356
Depreciation and amortization 40,909 36,957
----------- -----------
Total operating expenses 995,808 1,089,313
----------- -----------
Operating loss (99,185) (195,560)
Other income (expense):
Interest expense (268,203) (250,317)
Other expense 260 -
----------- -----------
Loss before minority
interest (367,128) (445,877)
Minority interest - -
----------- -----------
Net loss $ (367,128) $ (445,877)
=========== ============
NET LOSS PER SHARE:
Basic and diluted net loss
per share $ (0.10) $ (0.13)
=========== ===========
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 SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(UNAUDITED)
2007 2006
(restated) (restated)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (367,128) $ (445,877)
Adjustment to reconcile net loss
to net cash used in operating
activities:
Decrease in minority interest - -
Depreciation and amortization 40,909 36,957
Changes in operating assets and liabilities:
Decrease in accounts receivable 4,109 2,282
(Increase) decrease prepaid expenses
and other (15,889) 17,534
(Decrease)increase in accounts payable
and accrued expenses (49,653) 64,880
Increase in interest payable to
related entities 248,696 239,337
(Decrease) in deferred expense (5,000) -
Increase in deferred rent liability 24,088 24,088
----------- ----------
Net cash used in operating
activities (119,868) (60,891)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital asset expenditures (26,309) -
----------- ----------
Net cash used in
investing activities (26,309) -
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to
related entities 100,000 -
Principal payments on notes payable
to related entities (2,743) (9,444)
Principal payments on other notes payable (42,898) (39,037)
Increase in due to related entities 48,804 129,890
----------- ----------
Net cash provided by financing
activities 103,163 81,409
----------- ----------
NET (DECREASE) INCREASE IN CASH (43,014) 20,518
CASH, beginning of period 44,914 14,164
----------- -----------
CASH, end of period $ 1,900 $ 34,682
=========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 7,102 $ 10,963
=========== ===========
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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited 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 condensed 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
June 30, 2007 and for all prior periods presented.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that may require revision in future periods.
These consolidated financial statements should be read in conjunction with
the Company's Annual Report on Form 10-KSB for the year ended December 31,
2006, from which the December 31, 2006, 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 3,502,000
and 3,400,000 for the three-month and six-month periods ended June 30, 2007
and 2006 respectively.
3. LEASES
The land underlying the Callaway Golf Center is leased by AAGC. The original
lease expires in 2012 and the Company has exercised one of two five year
renewal options extending the lease through 2017. Also, the lease has a
provision for contingent rent to be paid by AAGC upon reaching certain levels
of gross revenues. The CGC did not reach the gross revenues that would
require the payment of contingent rent as of June 30, 2007. The lease has a
corporate guarantee by AASP.
4. RELATED PARTY TRANSACTIONS
The Company provides administrative/accounting support for (a) The Company
Chairman's two wholly-owned golf retail stores in Las Vegas, Nevada, (the
"Paradise Store" and "Rainbow Store"), (b) three golf retail stores, two are
7
named Saint Andrews Golf Shop ("SAGS")and one is a Las Vegas Golf and Tennis,
owned by the Company's President and his brother. Administrative/accounting
payroll and employee benefits are allocated based on an annual review the
personnel time expended for each entity. Amounts allocated to these related
parties by the Company approximated $81,534 and $22,404 for the six-months
ended June 30, 2007 and 2006, respectively. During the first six months
ending June 30, 2007 three notes totaling $100,000 were issued by the
District store and each note has a maturity date of one year and accrues
interest at 10 percent per annum. Related party interest expense was
$131,681 and $119,453 for the three months period and $261,101 and $239,353
for the six month period ending June 30, 2007 and 2006 respectively.
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 June 30,
2007, the Company had a working capital deficit of $3,052,589 and a
shareholders' equity deficiency of $9,235,908. CGC has generated positive
cash flow before corporate overhead that is in place to support of the CGC
and public company operations and interest expense. There is no assurance
that the positive cash flow will continue.
Management believes that its operations, and existing cash balances as of
June 30, 2007 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.
6. CORRECTION OF AN ERROR - PRIOR PERIOD ADJUSTMENTS
On March 10, 2008, the President and Principal Financial and Accounting
Officer of All-American SportPark, Inc. (the "Company") concluded that the
previously issued financial statements contained in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2006, and its Quarterly
8
Reports on Form 10-QSB for the quarters ended March 31, 2007; June 30, 2007
and September 30, 2007 should not be relied upon because of the accounting
errors contained therein. In particular the Company has determined that it
has not correctly account for its land lease in accordance with Statement of
Financial Accounting Standards No. 13 - Accounting for Leases ("SFAS 13").
SFAS 13 provides that operating leases with fixed rent escalations should be
recognized on a straight-line basis over the lease term.
The following table provides additional details regarding the changes to the
income statement for the three months ended June 30, 2007:
As restated As previously Change
reported
------------ ------------ ----------
Revenues $ 673,317 $ 673,317 $ -
Cost of revenues 190,896 190,896 -
------------ ------------ ----------
482,421 482,421 -
------------ ------------ ----------
Operating expenses:
Selling, general & administrative 517,918 505,874 12,044
Depreciation and amortization 20,483 20,483 -
------------ ------------ ----------
538,401 526,357 12,044
------------ ------------ ----------
Operating loss (55,980) (43,936) 12,044
Interest expense, net (134,978) (134,978) -
Other income 129 129 -
------------ ------------ ----------
Income (loss) before
Minority interest (190,829) (178,785) 12,044
Minority interest (income) loss
of subsidiary - - -
------------ ------------ ----------
Net income (loss) $ (190,829) $ (178,785) $ 12,044
============ =========== ==========
NET INCOME (LOSS) PER SHARE:
Basic and diluted net income
(loss) per share $ (0.05) $ (0.05) $ (0.00)
============ =========== ==========
9
The following table provides additional details regarding the changes to the
income statement for the six months ended June 30, 2007:
As restated As previously Change
reported
------------ ------------ ----------
Revenues $ 1,220,226 $ 1,220,226 $ -
Cost of revenues 323,603 323,603 -
------------ ------------ ----------
896,623 896,623 -
------------ ------------ ----------
Operating expenses:
Selling, general & administrative 954,899 930,811 24,088
Depreciation and amortization 40,909 40,909 -
------------ ------------ ----------
995,808 971,720 24,088
------------ ------------ ----------
Operating loss (99,185) (75,097) 24,088
Interest expense, net (268,203) (268,203) -
Other income 260 260 -
------------ ------------ ----------
Income (loss) before
Minority interest (367,128) (343,040) 24,088
Minority interest (income) loss
of subsidiary - - -
------------ ------------ ----------
Net income (loss) $ (367,128) $ (343,040) $ 24,088
============ ============ ==========
NET INCOME (LOSS) PER SHARE:
Basic and diluted net income
(loss) per share $ (0.10) $ (0.10) $ -
============ ============ ===========
10
The following table provides details regarding the changes to the balance
sheet as of June 30, 2007:
As restated As previously Change
reported
------------ ------------ ----------
ASSETS
Current assets:
Cash $ 1,900 $ 1,900 $ -
Accounts receivable 1,337 1,337 -
Prepaid expenses and other 20,234 20,234 -
------------ ------------ ----------
23,471 23,471 -
Leasehold improvements and
equipment, net of accumulated
depreciation 922,901 922,901 -
Other assets - - -
------------ ------------ ----------
$ 946,372 $ 946,372 -
============ ============ ==========
LIABILITY AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities
Current portion of notes
payable to related parties $ 2,066,156 $ 2,066,156 -
Current portion of other
long-term debt 92,108 92,108 -
Interest payable to related
parties 686,509 686,509 -
Accounts payable and
accrued expenses 231,287 231,287 -
------------ ------------ ----------
3,076,060 3,076,060 -
Notes payable to related parties,
net of current portion 3,359,220 3,359,220 -
Other long-term debt, net of
current portion 24,418 24,418 -
Interest payable to related parties 2,058,973 2,058,973 -
Due to related parties 993,195 993,195 -
Deferred income 1,667 1,667 -
Deferred rent liability 668,747 - (668,747)
------------ ------------ ----------
10,182,280 9,513,533 (668,747)
------------ ------------ ----------
Minority interest in subsidiary - - -
------------ ------------ ----------
11
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 June 30, 2007
and December 31,2006,respectively 3,502 3,502 -
Additional paid-in capital 13,327,173 13,327,173 -
Accumulated deficit (22,566,583) (21,897,836) (668,747)
------------ ------------ ----------
(9,235,908) (8,567,161) (668,747)
------------ ------------ ----------
$ 946,372 $ 946,372 -
============ ============ ==========
The following table provides additional details regarding the changes to the
income statement for the three months ended June 30, 2006:
As restated As previously Change
reported
------------ ------------ ----------
Revenues $ 654,450 $ 654,450 $ -
Cost of revenues 162,850 162,850 -
------------ ------------ ----------
491,600 491,600 -
------------ ------------ ----------
Operating expenses:
Selling, general & administrative 583,339 571,295 12,044
Depreciation and amortization 18,379 18,379 -
------------ ------------ ----------
601,718 589,674 12,044
------------ ------------ ----------
Operating loss (110,118) (98,074) 12,044
Interest expense, net (124,696) (124,696) -
Other income - - -
------------ ------------ ----------
Income (loss) before
Minority interest (234,814) (222,770) 12,044
Minority interest (income) loss
of subsidiary - 31,080 31,080
------------ ------------ ----------
Net income (loss) $ (234,814) $ (191,690) $ 43,124
============ ============ ==========
NET INCOME (LOSS) PER SHARE:
Basic and diluted net income
(loss) per share $ (0.07) $ (0.06) $ (0.01)
============ ============ ==========
12
The following table provides additional details regarding the changes to the
income statement six months ended June 30, 2006:
As restated As previously Change
reported
------------ ------------ ----------
Revenues $ 1,200,855 $ 1,200,855 $ -
Cost of revenues 307,192 307,192 -
------------ ------------ ----------
893,663 893,663 -
------------ ------------ ----------
Operating expenses:
Selling, general & administrative 1,052,356 1,028,268 24,088
Depreciation and amortization 36,957 36,957 -
------------ ------------ ----------
1,089,313 1,065,225 24,088
------------ ------------ ----------
Operating loss (195,650) (171,562) 24,088
Interest expense, net (250,317) (250,317) -
Other income - - -
------------ ------------ ----------
Income (loss) before
Minority interest (445,967) (421,879) 24,088
Minority interest (income) loss
of subsidiary - 59,723 59,723
------------ ------------ ----------
Net income (loss) $ (445,967) $ (362,156) $ 83,811
============ ============ ==========
NET INCOME (LOSS) PER SHARE:
Basic and diluted net income
(loss) per share $ (0.13) $ (0.05) $ (0.07)
============ ============ ==========
The following table provides details regarding the changes to the balance
sheet as of December 31, 2006:
As restated As previously Change
reported
------------ ------------ ----------
ASSETS
Current assets:
Cash $ 44,914 $ 44,914 $ -
Accounts receivable 5,446 5,446 -
Prepaid expenses and other 4,345 4,345 -
------------ ------------ ----------
54,705 54,705 -
Leasehold improvements and
equipment, net of accumulated
depreciation 937,501 937,501 -
------------ ------------ ----------
$ 992,206 $ 992,206 $ -
============ ============ ==========
13
LIABILITY AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities
Current portion of notes
payable to related parties $ 1,966,156 $ 1,966,156 $ -
Current portion of other
long-term debt 87,866 87,866 -
Interest payable to related
parties 594,486 594,486 -
Accounts payable and
accrued expenses 280,940 280,940 -
------------ ------------ ----------
2,929,448 2,929,448 -
Notes payable to related parties,
net of current portion 3,361,963 3,361,963 -
Other long-term debt, net of
current portion 71,558 71,558 -
Interest payable to related parties 1,902,300 1,902,300 -
Due to related parties 944,391 944,391 -
Deferred income 6,667 6,667 -
Deferred rent liability 644,659 - 644,659
------------ ------------ ----------
9,860,986 9,216,327 644,659
------------ ------------ ----------
Minority interest in subsidiary - - -
------------ ------------ ----------
Shareholders' equity deficiency:
Series B Convertible Preferred Stock,
$.001 par value, no shares issued
and outstanding - - -
Common Stock, $.001 par value
10,000,000 shares authorized,
3,400,000 shares issued and
outstanding at December 31, 2004 3,502 3,502 -
Additional paid-in capital 13,327,173 13,327,173 -
Accumulated deficit (22,199,455) (21,554,796) (644,659)
------------ ------------ ----------
(8,868,780) (8,224,121) (644,659)
------------ ------------ ----------
$ 992,206 $ 992,206 $ -
============ ============ ==========
14
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 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 was for an initial one-year period. The
Company and the tenant agreed to extend the lease for an additional one-year
term through 2008.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2007 AS COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 2006.
REVENUES. Revenues of the Callaway Golf Center ("CGC") for the three months
ended June 30, 2007 increased $18,867 or 2.6% to $673,317 from $654,450
reported for the three months ended June 30, 2006. The increase in revenues
is attributed to an increase in golf course green fees, driving range
revenues and golf cart rentals offset by a decrease in golf lesson fees. Golf
course green fees increased by $18,901 to $211,837 in 2007 from $192,936 in
2006 due to a change in the summer rates. Effective June 1, 2007, summer
rates were increased by 22% for locals and 33.3% for tourists which resulted
in an additional $12,737 in green fees in the month of June 2007 compared to
June 2006. In addition, summer rates were not offered on weekends as it had
in the prior year. Golf cart rentals increased by $8,808 from $69,703 to
$60,895 for the three months ending June 30, 2007 compared to the same period
in 2006. This is the result of the increased rental rates that were charged
during the quarter. Driving range revenues increased by $7,838 to $232,562
in 2007 from $224,724 in 2006. This increase is due to implementation of new
E-range system on the driving range that occurred at the beginning of June
2007. This system replaced tokens and with electronic PIN numbers printed on
each customer receipt. The new system prevents counterfeit tokens from being
placed in the ball dispensers which resulted in a $15,113 or 24.7% increase
in June's range revenues compared to the same month in the prior year and
also help offset a slow month of May 2007. There was a decrease in golf
lesson fees of $16,910 to $63,640 in 2007 compared to $80,550 in 2006 due to
turnover in golf pro staff. Three golf pros moved to other courses at the
start of the second quarter and were not replaced until the start of the
third quarter 2007. Golf club rentals were consistent at $32,884 for the
three months ended in June 30, 2007 compared to $30,369 for the three months
ended in June 2006.
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 $28,046 or 17.2% to
$190,896 from $162,850 for the same period in the prior year. Commissions
paid to golf instructors decreased by $4,295 from $47,594 in 2007 to $51,889
in 2006 due directly to reduced golf lesson fees incurred in the third
quarter. In April 2007 a purchase of $26,419 of new range balls for the
course increased golf operating supplies by $25,285 to $37,278 in 2007 from
15
$11,993 in 2006. The payroll and payroll taxes for park services increased
by $9,285 to $29,509 in 2007 from $20,225 in 2006 compared to last year due
to the addition of rangers during the weekdays and part-time maintenance
personnel to help service the golf carts at the beginning of the year.
SELLING, GENERAL AND ADMINISTRATIVE. These expenses consist principally of
landscaping services and professional fees, ground lease, utilities,
insurance and administrative payroll. These expenses increased $65,421 or
11.2% to $517,918 from $583,339 for the three months ending June 30, 2007 and
2006 respectively. Audit and tax expense decreased by $41,417 to $14,000
from $55,417 in the prior year. The decrease in expenses was due to the fact
that the Company had to respond to several SEC comment letters and also had
to change the Company's registered public accounting firm in the prior year.
As noted earlier in the related party footnote, the Company annually reviews
the amount of personnel time spent on providing accounting and administrative
services to other related entities. There was a large change in allocated
salaries due primarily to the addition of a store owned by the Company's
President and his brother (the "District Store") that opened in May 2006.
This revised salary allocation caused administrative salaries, payroll taxes
and benefits to decrease by a net $20,488 to $45,648 in 2007 from $66,136 in
2006. This was partially offset by an increase in payroll for an office
assistant hired in the second quarter of 2007 and higher salary for a new
accountant.
OTHER INCOME AND EXPENSE. Other income and expense consists principally of
interest expense and non-operating income. For the three months ended June
30, 2007 there was an increased in interest expense of $10,282 due to
additional borrowings from affiliated stores to fund operations.
NET LOSS. The net loss before minority interest for the three months ending
June 30, 2007 is a net loss of $(190,829) compared to a loss of $(234,814) in
the prior year. The difference of $43,985 is due to a lower gross profit and
a decrease in audit fees and net payroll offset by an increase in interest
expense.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2007 AS COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 2006.
REVENUES. Revenues of the Callaway Golf Center ("CGC") for the six months
ended June 30, 2007 increased by $19,371 or 1.6% to $1,220,226 from
$1,200,855 reported for the same period in 2006. This increase in revenues
is due to golf course green fees, driving range fees, golf cart rentals and
restaurant lease income offset by golf lesson fees. The golf lesson fees
increased by $9,833 to $381,029 in 2007 compared to $371,196 in 2006 because
of the improved course condition that allowed summer rates to be raised by
22% for locals and 33.3% for tourists in June 2007 and also allowed no
discounts to be on weekends and help offset the lowered revenues from the
first quarter that resulted from bad weather. Driving range revenues
increased due to the purchase and implementation of the new E-Range system by
$7,315 to $424,101 in 2007 from $416,786 in 2006. Prior to the purchase
revenues were flat for the first five months of 2007. The improved safeguard
against counterfeit tokens and ease of use will continue to increase revenues
in the following periods. Golf cart rentals also increased by $12,028 or
11.5% to $116,333 from $104,305 for six months ended 2007 and 2006. This was
due in an increase in rental rates of 12.5%. Restaurant lease income
increased by $8,800 in 2007 to $24,800 in 2007 from $16,000 in 2006 due to
new tenant did not occupy the restaurant until end of the first quarter of
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2006 and 4% increase in the base rent after the initial one year term of the
lease. Golf lesson fees decreased by $13,385 to $114,160 in 2007 from
$127,525 in 2006 as a result of the turnover in the golf pro staff that
occurred in the second quarter.
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
$16,411 or 5.3% to $323,603 from $307,192 for the same period of the prior
year. The payroll and payroll taxes for park services increased by $17,001 to
$58,677 in 2007 from $41,676 in 2006 due to additional golf course rangers
added in the first quarter of the year to help control traffic on the course
and a part-time maintenance personnel to help service the golf carts. Golf
operating supplies for the range increased by $7,483 to $38,051 in 2007 from
$30,568 in 2006 due to purchase of additional range matts and miscellaneous
supplies. Wages for caddies decreased by $8,220 to $28,057 in 2007 compared
to $36,277 in 2006 due to inclement weather in the first quarter of 2007
resulted in less caddies being scheduled to work at the CGC.
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 $97,457 to
$954,811 from $1,028,1,052,356 by $42,917 to $19,000 from $61,917 in the
prior year. The decrease in expenses was due to the Company had to respond
to several SEC comment letters and also changed their public accounting firm
in the prior year which resulted in billings from two separate auditing
firms. The decreased expenses were related to responding to SEC comment
letters and a change of Company's registered public accounting firm that
occurred in April 2006. As noted earlier in the three month ended 2007,
there was a change in the annual allocation of administrative/accounting
payroll and benefits. This revised salary allocation caused administrative
salaries, payroll taxes and benefits to decrease by a net $49,720 to $86,974
in 2007 from $136,694 in 2006. Legal expenses decreased by a $11,353 from
$44,162 in 2007, to $55,515 in 2006, due to a payment to the arbitrators on
the Urban Land Litigation in 2006. There was an increase of $6,538 in HVAC
repairs and maintenance to $10,090 in 2007 from $3,552 in 2006 for the air
conditioned unit over the restaurant.
OTHER INCOME AND EXPENSE. Other income and expense consists principally of
interest expense and non-operating income. Interest expense increased
$17,886 to $268,203 in 2007 compared to $250,317 in 2006 due to an increase
in borrowing from affiliated stores.
NET LOSS. The net loss before minority interest for the six months ending
June 30, 2007 is $367,128 compared to a loss of $445,877 in the prior year.
The difference of $78,839 is due to lower gross profit and selling and
general administrative expenses offset by an increase in interest expense.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2007, the Company had a working capital deficit of $3,052,589,
as compared to a working capital deficit of $2,874,743 at December 31, 2006.
The CGC has generated positive cash flow before corporate overhead. There is
no assurance that it will continue to provide positive cash flow.
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Management believes that the CGC operations and existing cash balances as of
June 30, 2007, 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 2006, 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 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.
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 June 30, 2007, 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 June 30,
2007. There have been no changes in internal control over financial reporting
that occurred during the second 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 appealed
the judgment to the Nevada Supreme Court (the "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 defendant
and remanded the case to the district court for further action. A settlement
hearing has been scheduled in the district court for August 2007.
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 seeking to
recover damages related to back rent allegedly owed by Company of
approximately $600,000. In addition, Urban Land claims the Company misused
an alleged $880,000 settlement related to construction defects lawsuits. An
arbitrator has been appointed by the American Arbitration Association and
arbitration is scheduled for October 2007.
Urban land has also filed another lawsuit against the Company and claims
against other parties in the arbitration proceeding. The claims against the
Company remain essentially identical to the claims above. 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 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.
The Company has filed a motion to dismiss against the plaintiff's claims in
this lawsuit but the Court provided the plaintiff with a limited amount of
discovery. The discovery process has begun and depositions are expected to
continue until October 2007.
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. The Company filed a lawsuit to prevent Urban land from declaring
the Company in default of its lease. These claims in the notice of default
have been added in the above arbitration proceeding.
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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
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
ALL-AMERICAN SPORTPARK, INC.
Date: April 14, 2008
By: /s/ Ronald Boreta
Ronald Boreta, President and
Chief Executive Officer (Principal
Executive Officer) and Treasurer
(Principal Financial Officer)
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