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 June 30, 2003
Commission File Number: 0-24970
ALL-AMERICAN SPORTPARK, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0203976
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6730 South Las Vegas Boulevard, Las Vegas, Nevada 89119
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(Address of principal executive offices including zip code)
(702) 798-7777
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 12, 2003, 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. Consolidated Financial Statements:
Consolidated Balance Sheets
June 30, 2003 and December 31, 2002 3
Consolidated Statements of Operations
Three Months Ended June 30, 2003 and 2002 5
Consolidated Statements of Operations
Six Months Ended June 30, 2003 and 2002 6
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2003 and 2002 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or
Plan of Operation 11
Item 3. Control and Procedures 13
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 14
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
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND DECEMBER 31, 2002
ASSETS
2003 2002
---------- ----------
(Unaudited)
Current assets:
Cash $ 326,219 $ 30,108
Accounts receivable 46,215 36,968
Prepaid expenses and other 62,588 54,431
---------- ----------
Total current assets 435,022 121,507
Leasehold improvements and equipment, net 780,970 801,513
Due from affiliated stores 137,490 136,507
Note receivable - related party 20,000 20,000
Due from other related entities 67,070 20,017
Other assets 3,954 3,488
---------- ----------
Total assets $1,444,506 $1,103,032
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND DECEMBER 31, 2002
LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIENCY
2003 2002
---------- ----------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 119,761 $ 106,917
Current portion of notes payable to
affiliate 200,000 200,000
Interest payable to affiliate 103,658 98,658
Accounts payable and accrued expenses 407,576 726,981
------------ ------------
Total current liabilities 830,995 1,132,556
Notes payable to affiliate, net of current
portion 4,113,473 4,113,473
Interest payable to affiliate 1,413,934 1,203,260
Due to affiliated stores 106,877 157,910
Due to other related entities 522,951 534,099
Long-term debt, net of current portion 349,455 378,352
Deferred income 31,728 82,408
------------ ------------
Total liabilities 7,369,413 7,602,058
------------ ------------
Minority interest in subsidiary 537,867 285,110
------------ ------------
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, 2003 and
December 31, 2002, respectively 3,400 3,400
Additional paid-in capital 11,462,882 11,462,882
Accumulated deficit (17,929,056) (18,250,418)
------------ ------------
Total shareholders' equity deficiency (6,462,774) (6,784,136)
------------ ------------
Total liabilities and shareholders'
equity deficiency $ 1,444,506 $ 1,103,032
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
4
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
2003 2002
---------- ----------
Revenues $ 663,811 $ 674,660
Cost of revenues 82,307 77,081
---------- ----------
Gross profit 581,504 597,579
---------- ----------
Operating expenses:
Selling, general and administrative 512,168 485,688
Depreciation and amortization 16,972 23,167
---------- ----------
Total operating expenses 529,140 508,855
---------- ----------
Operating income 52,364 88,724
Interest expense, net (117,446) (126,854)
---------- ----------
Loss before minority interest (65,082) (38,130)
Minority interest in income of subsidiary (3,783) (7,605)
---------- ----------
Net loss $ (68,865) $ (45,735)
========== ==========
NET LOSS PER SHARE:
Basic and diluted net loss per share $ (0.02) $ (0.01)
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
5
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
2003 2002
---------- ----------
Revenues $1,278,736 $1,263,482
Cost of revenues 167,681 147,734
---------- ----------
Gross profit 1,111,055 1,115,748
---------- ----------
Operating expenses:
Selling, general and administrative 1,143,805 946,253
Depreciation and amortization 33,406 45,377
---------- ----------
Total operating expenses 1,177,211 991,630
Operating income (loss) (66,156) 124,118
Interest expense, net (239,725) (254,299)
Other income 880,000 -
---------- ----------
Income (loss) before minority interest 574,119 (130,181)
Minority interest in income of subsidiary (252,757) (2,662)
---------- ----------
Net income (loss) $ 321,362 $ (132,843)
========== ==========
NET INCOME (LOSS) PER SHARE:
Basic and diluted net income (loss)
per share $ 0.09 $ (0.04)
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
6
ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
2003 2002
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 321,362 $ (132,843)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Minority interest 252,757 2,662
Depreciation and amortization 33,406 45,377
Gain on sale of securities - (1,061)
Changes in operating assets and liabilities:
Increase in accounts receivable (9,247) (10,407)
(Increase) decrease in prepaid expenses
and other (8,623) 35,754
Decrease in accounts payable and accrued
expenses (319,405) (118,488)
Increase in interest payable to
shareholder and affiliated store 215,674 211,797
Decrease in deferred income (50,680) (50,001)
---------- ----------
Net cash provided by (used in)
operating activities 435,244 (17,210)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of securities - 76,306
Leasehold improvements (12,863) (578)
---------- ----------
Net cash provided by (used in)
investing activities (12,863) 75,728
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in due to affiliated
stores and other related entities (110,217) 34,618
Principal payments on notes payable
to shareholder - (76,306)
Principal payments on notes payable and
capital leases (16,053) (21,460)
---------- ----------
Net cash used in financing activities (126,270) (63,148)
---------- ----------
NET INCREASE (DECREASE) IN CASH 296,111 (4,630)
CASH, beginning of period 30,108 27,322
---------- ----------
CASH, end of period $ 326,219 $ 22,692
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 47,907 $ 26,784
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
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ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of All-American
SportPark, Inc. ("AASP"), include the accounts of AASP and its 65% owned
subsidiary, All-American Golf Center, Inc. ("AAGC"), collectively the
"Company." All significant intercompany accounts and transactions have been
eliminated. The operations of the Callaway Golf Center ("CGC") are included
in AAGC.
The accompanying financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission relating to interim financial statements. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. In the opinion of management, all necessary adjustments
have been made to present fairly, in all material respects, the financial
position, results of operations and cash flows of the Company at June 30,
2003, and for all periods presented.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that may require revision in future periods.
These consolidated financial statements should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2002,
from which the December 31, 2002 audited balance sheet information was
derived.
The Company's operations consist of the Callaway Golf Center located on 42
acres of land on the south end of the Las Vegas "Strip". The Callaway Golf
Center includes the Divine Nine par 3 golf course, fully lighted for night
golf, a 110-tee two-tiered driving range which has been ranked the Number 2
golf practice facility in the United States since it opened in October 1997, a
20,000 square foot clubhouse which includes the Callaway Golf fitting center
and three tenants: the Saint Andrews Golf Shop retail store (Note 5), Giant
Golf teaching academy, and the Bistro 10 restaurant and bar.
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 and common equivalent
shares used in the calculation of basic and diluted loss per share were
3,400,000 and 3,389,011 for the three-month periods, and 3,400,000 and
3,270,166 for the six-month periods ended June 30, 2003 and 2002,
respectively.
3. LEASES
The land underlying the Callaway Golf Center is leased to AAGC. The lease
expires in 2012 and has two five-year renewal options. Also, the lease has a
provision for contingent rent to be paid by AAGC upon reaching certain levels
of gross revenues. The lease has a corporate guarantee of AASP.
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4. LONG-TERM DEBT
The Company has outstanding a promissory note payable to Active Media Services
("Active") in the original amount of $1 million due in quarterly installments
of $25,000 through September 2008 without interest. This note has been
discounted to reflect its present value.
Because of cash flow constraints, the Company negotiated an agreement with
Active to restructure its payments due under the Note. Certain amounts due
under the Note in 2002 were deferred into 2003. As noted above, the normal
quarterly payments are $25,000. In 2003, the amount due for each quarterly
payment is $36,667. The required payments have been made for the quarters
ended March 31 and June 30, 2003. After 2003, the quarterly installments
return to the $25,000 payment.
5. RELATED PARTY TRANSACTIONS
The Company has transactions and relationships with (a) The Company Chairman's
two wholly-owned golf retail stores in Las Vegas, Nevada (the "Paradise Store"
and "Rainbow Store") and, (b) two golf retail stores, both named Saint Andrews
Golf Shop ("SAGS"), owned by the Company's President and his brother. One of
the SAGS stores is the retail tenant in the Callaway Golf Center. The
Paradise Store, Rainbow Store, and SAGS are referred to herein as the
"Affiliated Stores." The types of costs and expenses that are shared by these
entities are advertising, payroll and employee benefits, warehouse rent,
equipment leases, and miscellaneous office expenses. Costs are allocated to
each entity based on relative benefits received. Amounts allocated to these
related parties by the Company approximated $60,000 for the quarters ended
June 30, 2003 and 2002.
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,
the Company has incurred net losses. As of June 30, 2003, the Company had a
working capital deficit of $395,973 and a shareholders' equity deficiency of
$6,462,774.
AASP management believes that its operations, and existing cash balances of
$326,219 as of June 30, 2003, will likely be sufficient to fund operating cash
needs and debt service requirements over at least the next 12 months, although
this cannot be assured. In March 2003, the Company reached a settlement with
the general contractor and other entities responsible for building the CGC
wherein the Company received $880,000. Of this amount, approximately $200,000
was used to pay outstanding legal and expert fee costs related to the lawsuit.
Also, in the second quarter, approximately $230,000 was used to reduce
obligations to related parties. Part of these settlement proceeds is expected
to fund continuing operations. Management continues to seek other sources of
funding, which may
9
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.
The Callaway Golf Center has generated positive cash flow since 1998.
However, this positive cash flow is used to fund corporate overhead that is in
place in support of the CGC and public company operations.
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.
7. SUBSEQUENT EVENT
In August 2003, the Company paid approximately $100,000 to reduce obligations
due related parties.
10
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 a golf
course and driving range property called the Callaway Golf Center.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2003 AS COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 2002
REVENUES. Revenues of the Callaway Golf Center ("CGC") decreased 1.6% to
$663,811 in 2003 compared to $674,660 in 2002. This decrease is due mainly to
an approximate 2% decrease in golf course rounds played due to less favorable
weather conditions in 2003.
COST OF REVENUES. Cost of revenues increased 6.8%, to $82,307 in 2003
compared to $77,081 in 2002. Cost of revenues as a percentage of Revenues was
12.4 in 2003 compared to 11.4% in 2002. This increase is due mainly to
driving range equipment repairs in 2003 that did not occur in 2002.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A). These expenses consist
principally of administrative payroll, rent, professional fees and other
corporate costs. These expenses increased 5.5% to $512,168 in 2003 compared
to $485,688 in 2002 due almost exclusively to legal fees and costs associated
with the Company's lawsuit as plaintiff against the general contractor that
built the CGC.
INTEREST EXPENSE, NET. Interest expense, net decreased 7.4% to $117,446
in 2003 compared to $126,854 in 2002. The decrease in 2003 is attributed to
$168,363 less in notes payable in 2003; $168,363 in notes payable were
forgiven by an affiliate of the Company at the end of 2002.
RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2003 AS COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 2002
REVENUES. Revenues of the Callaway Golf Center ("CGC") increased 1.2% to
$1,278,736 in 2003 compared to $1,263,482 in 2002. This increase is due
mainly to more favorable weather conditions in the first quarter of 2003
compared to 2002.
COST OF REVENUES. Cost of revenues increased 13.5%, to $167,681 in 2003
compared to $147,734 in 2002. Cost of revenues as a percentage of Revenues
was 13.1% in 2003 compared to 11.7% in 2002. This increase is due mainly to
driving range equipment repairs in 2003 that did not occur in 2002.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A). These expenses consist
principally of administrative payroll, rent, professional fees and other
corporate costs. These expenses increased 20.9% to $1,143,805 in 2003
compared to $946,253 in 2002 due almost exclusively to legal fees and costs
associated with the Company's lawsuit as plaintiff against the general
contractor that built the CGC. Approximately $200,000 in legal fees and costs
were incurred for this lawsuit; it was settled with the general contractor in
March 2003.
11
INTEREST EXPENSE, NET. Interest expense, net decreased 5.7% to $239,725
in 2003 compared to $254,299 in 2002. The decrease in 2003 is attributed to
$168,363 less in notes payable in 2003; $168,363 in notes payable were
forgiven by an affiliate of the Company at the end of 2002.
NET INCOME (LOSS). Net income was $321,362 in 2003 compared to a net
loss in 2002 of $132,843. The primary differences in 2003 are described above
coupled with income derived from the Company's settlement for $880,000 of its
lawsuit as plaintiff against the general contractor that built the CGC.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2003, the Company had a working capital deficit of
$395,973 and a shareholders' equity deficiency of $6,462,774.
AASP management believes that its operations, and existing cash balances
of $326,219 as of June 30, 2003, will likely be sufficient to fund operating
cash needs and debt service requirements over at least the next 12 months,
although this cannot be assured. However, in its report on the Company's
annual financial statements for 2002, the Company's auditors expressed
substantial doubt about the Company's ability to continue as a going concern.
In March 2003, the Company reached a settlement with the general contractor
and other entities responsible for building the CGC wherein the Company
received $880,000. Of this amount, approximately $200,000 was used to pay
outstanding legal and expert fee costs related to the lawsuit. Also, in the
second quarter of 2003, approximately $230,000 was used to reduce obligations
to related parties. Part of these settlement proceeds is expected to fund
continuing operations. 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 can disclose the risks of a business or
opportunity that it may enter into in only a general manner, and cannot
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.
12
The Callaway Golf Center has generated positive cash flow since 1998.
However, this positive cash flow is used to fund corporate overhead that is in
place in support of the CGC and public company operations.
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 could be negotiated, if necessary.
Management continues to seek out financing to help fund working capital
needs of the Company. In this regard, management believes that additional
borrowings against the CGC could be arranged although there can be no
assurance that the Company would be successful in securing such financing or
with terms acceptable to the Company.
The Company has raised considerable capital in the past for development
projects. Expansion programs in other locations are not expected to take
place until the Company achieves an appropriate level of profitability and
positive cash flow. If and when expansion does occur, such expansion is
expected to be funded primarily by third parties.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included in this Quarterly Report contains statements that
are forward-looking such as statements relating to plans for future expansion
and other business development activities, as well as other capital spending
and financing sources. Such forward-looking information involves important
risks and uncertainties that could significantly affect anticipated results in
the future and, accordingly, such results may differ from those expressed in
any forward-looking statements made by or on behalf of the Company. These
risks and uncertainties include, but are not limited to, those relating to
dependence on existing management, leverage and debt service (including
sensitivity to fluctuations in interest rates), domestic or global economic
conditions, changes in federal or state tax laws or the administration of such
laws, changes in regulations and application for licenses and approvals under
applicable jurisdictional laws and regulations.
ITEM 3. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures within 90 days of the filing date of this quarterly
report, and, based upon their evaluation, our principal executive officer and
principal financial officer have concluded that these controls and procedures
are effective. There were no significant changes in our internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. 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 and Reports on Form 8-K.
(a) Exhibits:
31.1 Certification of Chief Filed herewith
Executive Officer Pursuant electronically
to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Filed herewith
Financial Officer Pursuant electronically
to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Filed herewith
Executive Officer Pursuant electronically
to 18 U.S.C. Section 1350
32.2 Certification of Chief Filed herewith
Financial Officer Pursuant electronically
to 18 U.S.C. Section 1350
(b) Reports on Form 8-K. None.
14
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: August 12, 2003 By:/s/ Ronald Boreta
Ronald Boreta, President and
Chief Executive Officer
Date: August 12, 2003 By:/s/ Kirk Hartle
Kirk Hartle, Chief Financial Officer
15