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, 2008
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
----------------------------------------------------------
(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, 2008 3,502,000 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
March 31, 2008 (unaudited) and December 31, 2007............ 3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2008 and 2007 (unaudited)...... 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2008 and 2007 (unaudited)...... 5
Notes to Condensed Consolidated Financial Statements
(unaudited) ................................................ 6
Item 2. Management's Discussion and Analysis or
Plan of Operation .......................................... 9
Item 3. Controls and Procedures .................................... 11
PART II: OTHER INFORMATION
Item 1. Legal Proceedings .......................................... 11
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 and Reports on Form 8-K ........................... 12
SIGNATURES .......................................................... 13
2
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2008 AND DECEMBER 31, 2007
ASSETS
2008 2007
----------- -----------
(Unaudited)
Current assets:
Cash $ 44,529 $ -
Accounts receivable 1,322 5,667
Prepaid expenses and other 14,110 5,473
----------- -----------
Total current assets 59,961 11,140
Leasehold improvements and equipment, net 950,365 972,127
Due From related entities - -
Other Assets 412 -
----------- -----------
Total assets $ 1,010,738 $ 983,267
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
Current liabilities:
Bank overdraft $ - $ 53,473
Current portion of notes payable to
related entities 5,127,948 5,205,504
Current portion of other long-term debt 48,266 71,558
Interest payable to related entities 3,077,466 2,957,454
Accounts payable and accrued expenses 201,628 193,159
----------- -----------
Total current liabilities 8,455,308 8,481,148
Notes payable to related entities, net of
current portion 119,205 121,035
Interest payable to related entities 34,167 31,666
Due to related entities 1,304,554 1,011,952
Deferred Rent Liability 682,981 681,887
----------- -----------
Total liabilities 10,596,215 10,274,688
----------- -----------
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 March 31,
2008, and December 31, 2007, respectively 3,502 3,502
Additional paid-in capital 13,677,008 13,677,008
Accumulated deficit (23,265,987) (23,024,931)
----------- -----------
Total shareholders' equity deficiency (9,585,477) (9,344,421)
----------- -----------
Total liabilities and shareholders'
equity deficiency $ 1,010,738 $ 983,267
=========== ===========
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 MARCH 31, 2008 AND 2007
(UNAUDITED)
2008 2007
----------- -----------
Revenues $ 590,947 $ 546,908
Cost of revenues, excluding depreciation 151,042 132,707
----------- -----------
Gross profit 439,905 414,201
----------- -----------
Operating expenses:
Selling, general and administrative 530,823 436,982
Depreciation and amortization 21,762 20,426
----------- -----------
Total operating expenses 552,585 457,408
----------- -----------
Operating loss (112,680) (43,207)
Other income (expense):
Interest expense (135,144) (133,224)
Other income 6,768 132
----------- -----------
Loss before minority
interest (241,056) (176,299)
Minority interest - -
----------- ------------
Net loss $ (241,056) $ (176,299)
=========== ============
NET LOSS PER SHARE:
Basic and diluted net loss
per share $ (0.07) $ (0.05)
=========== ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(UNAUDITED)
2008 2007
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (241,056) $ (176,299)
Adjustment to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 21,762 20,426
Changes in operating assets and liabilities:
(Increase) decrease in accounts 4,345 1,065
receivable
(Increase) decrease prepaid expenses
and other (9,049) (14,648)
(Decrease)increase in accounts payable
and accrued expenses 8,469 (98,390)
Increase in interest payable to
related entities 122,513 124,180
Increase (decrease) in deferred - (2,500)
Expense
Increase in deferred rent liability 1,094 12,044
----------- ----------
Net cash used in operating
activities (91,922) (134,122)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in bank overdraft (53,473) -
Increase in due to related entities 292,602 41,403
Proceeds from notes payable to
related entities 25,000 75,000
Principal payments on notes payable
to related entities (104,386) (1,371)
Principal payments on other notes payable (23,292) (21,196)
----------- ----------
Net cash provided by financing
activities 136,451 93,836
----------- ----------
NET INCREASE IN CASH 44,529 (40,286)
CASH, beginning of period - 44,914
----------- -----------
CASH, end of period $ 44,529 $ 4,628
=========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 1,708 $ 3,804
=========== ==========
Cash paid for taxes $ - $ -
=========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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
March 31, 2008 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,
2007, from which the December 31, 2007, 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 numbers of common shares
used in the calculation of basic and diluted loss per share were 3,502,000
for the three-month periods ended March 31, 2008 and 2007.
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 March 31, 2008. 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
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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 of the
personnel time expended for each entity. Amounts allocated to these related
parties by the Company approximated $30,663 and $55,558 for the three months
ended March 31, 2008 and 2007, respectively. Related party interest expense
was $135,144 and $133,224 for the three months period ending March 31, 2008
and 2007.
5. LEGAL MATTERS
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 in the American Arbitration Association and
arbitration is scheduled for July 2008.
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 began in 2007 and depositions were taken in
September. The hearing before the American Arbitration Association is
scheduled for July 2008.
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 in the Eighth Judical District Court
of Clark County Nevada to prevent Urban Land from declaring the Company in
default of its lease. The claims in the notice of default have been added to
the above arbitration proceeding. A Summary Judgment was awarded to the
Company in February 2008 in this proceeding. Urban Land has requested that
the court review the decision and a hearing on that matter is scheduled for
July 14, 2008.
6. 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,
2008, the Company had a working capital deficit of $8,395,347 and a
shareholders' equity deficiency of $9,585,477. CGC did not generate a
positive cash flow before corporate overhead that is in place to support of
the CGC and public company operations and interest expense.
7
Management believes that its operations, and existing cash balances as of
March 31, 2008 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.
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 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 January 2009.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2008 AS COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2007.
REVENUES. Revenues of the Callaway Golf Center ("CGC") for the three months
ended March 31, 2008 increased $44,039 or 8.1% to $590,947 from $546,908.
The increase in revenues is attributed to an increase in golf course green
fees, driving range and golf club. Driving range business increased by
$25,000 as compared to the three months ended in March 2007. Golf course
green fees increased by $9,000 to $178,000 in 2008 from $169,000 in 2007 due
to an increase in business. Golf cart rentals were flat year-to-year from
$50,000 to $48,500 for the three months ending March 31, 2008 compared to the
same period in 2007. Golf lesson fees were also flat at $50,970 in 2008
compared to $50,520 in 2007. Golf club rentals increased by $5,286 to
$32,051 for the three months ended in March 31, 2008 compared to $26,765 for
the three months ended in March 2007 due to the increased level of business.
COST OF REVENUES. Cost of revenues consists mainly of commissions paid to
the golf instructors, the payroll and benefits expenses of Golf Center staff,
and operating supplies. Cost of revenues increased by $18,335 to $151,042
from $132,707 for the same period in the prior year. Commissions paid to golf
instructors increased by $5,391 from $38,137 in 2008 to $32,746 in 2007 due
directly to increased golf lesson fees incurred in the first quarter. In
February 2008, a $21,725 purchase of new range balls for the course increased
golf operating supplies to $26,000 in 2008 as compared to $3,320 in 2007.
SELLING, GENERAL AND ADMINISTRATIVE. These expenses consist principally of
landscaping services and professional fees, ground lease, utilities,
insurance and administrative payroll. These expenses increased by $93,841 to
$530,823 for the three months ending March 31, 2008 as compared to $436,982
during the same period in 2007. An increase was seen in two areas: legal
expenses for the Urban Land litigation of $70,000, and occupancy costs for
$24,000 due to an increase in the land lease.
OTHER INCOME AND EXPENSE. Other income and expense consists principally of
interest expense and non-operating income. For the three months ended March
31, 2008 there was an increased in interest expense of $1,920 as compared to
the same period in 2007 due to additional borrowings from affiliated stores
to fund operations.
9
NET LOSS. The net loss before minority interest for the three months ending
September 30, 2007 was $241,056 compared to a net loss of $176,299 in the
prior year. The increase in the net loss of $64,757 is primarily due the
increase in legal expenses for the Urban Land litigation.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2008, the Company had a working capital deficit of $8,395,347
as compared to a working capital deficit of $8,470,008 at December 31, 2007.
The CGC did not generate a positive cash flow before corporate overhead.
Management believes that the CGC operations and existing cash balances as of
March 31, 2008, 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 2007, the Company's auditors expressed
substantial doubt about the Company's ability to continue as a going concern.
The Company anticipates that the Town Square project will continue to
increase traffic flow in the area of the golf center, which expected to
result in increased revenues for the golf center. The Town Square is a 1.5
million square foot super regional lifestyle center with a mix of retail,
dining and office space that is being developed across the street from the
golf center. In addition, the continued aggressive level of growth at the
south end of the Las Vegas strip is expected to draw more local and tourist
business to the golf center.
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.
10
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.
ITEM 3. CONTROLS AND PROCEDURES
As of March 31, 2008, 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,
2008.
There have been no changes in internal control over financial reporting that
occurred during the period 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.
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 in the American Arbitration Association and
arbitration is scheduled for July 2008.
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
11
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 began in 2007 and depositions were taken in
September.
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. The Court awarded a
Summary Judgment to the Company in February 2008. Urban Land has requested
that the Court review the decision and a hearing on that matter is scheduled
for July 14, 2008.
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 15, 2008
By:/s/ Ronald Boreta
Ronald Boreta, President and
Chief Executive (Officer
Principal Executive Officer) and
Treasurer (Principal Financial Officer)
13