-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CfJPLx9COk7a9TaeL/1uvbkUhKfBX9TMcPhboL6vD3+JINNnC8u3kBWLs+Jhbkj0 +MLTfmL7EAr2whqMl9Hr/Q== 0000948830-99-000341.txt : 19990728 0000948830-99-000341.hdr.sgml : 19990728 ACCESSION NUMBER: 0000948830-99-000341 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPORTS ENTERTAINMENT ENTERPRISES INC CENTRAL INDEX KEY: 0000793044 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 841034868 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-17436 FILM NUMBER: 99670756 BUSINESS ADDRESS: STREET 1: 6730 LAS VEGAS BOULEVARD CITY: LAS VEGAS STATE: NV ZIP: 89119 BUSINESS PHONE: 7027987777 MAIL ADDRESS: STREET 1: 53 FORMER COMPANY: FORMER CONFORMED NAME: LAS VEGAS DISCOUNT GOLF & TENNIS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: LAGUNA CAPITAL CORP DATE OF NAME CHANGE: 19890123 FORMER COMPANY: FORMER CONFORMED NAME: LA JOLLA CAPITAL CORP DATE OF NAME CHANGE: 19860526 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 December 31, 1998 ------------------------------------------------ Date of Report (date of earliest event reported) Sports Entertainment Enterprises, Inc. (formerly named Las Vegas Discount Golf & Tennis, Inc.) ------------------------------------------------------- Exact name of Registrant as Specified in its Charter Colorado 0-17436 84-1034868 - --------------------------- --------------- --------------------------- State or Other Jurisdiction Commission File IRS Employer Identification of Incorporation Number Number 6730 Las Vegas Boulevard, Las Vegas, Nevada 89119 ---------------------------------------------------------- Address of Principal Executive Offices, Including Zip Code (702) 798-7777 -------------------------------------------------- Registrant's Telephone Number, Including Area Code ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On December 31, 1998, a wholly owned subsidiary of All-American SportPark, Inc. ("AASP"), which is a majority-owned subsidiary of Sports Entertainment Enterprises, Inc. (the "Company") acquired substantially all of the assets, subject to certain liabilities, of All-American Golf LLC (the "LLC"). Until the time of the sale, the LLC owned, managed and operated the "Callaway Golf Center", a premier golf facility adjacent to AASP's All-American SportPark in Las Vegas, Nevada. From 1997, when the LLC was formed, until May 1998, AASP held an 80% interest in the LLC. On May 5, 1998 AASP sold its interest in the LLC to Callaway Golf Company. The terms of that transaction are disclosed in the Company's Report on Form 8-K dated May 5, 1998. AASP purchased substantially all of the assets of the LLC pursuant to the terms of an Asset Purchase Agreement between the LLC and a newly formed, wholly-owned subsidiary of AASP. Under the terms of the Agreement, the consideration paid by the subsidiary consisted of the delivery to the LLC of a trade credit in the amount of $4,000,000 from Active Media Services, Inc. for which AASP paid Active Media Services, Inc. $1,000,000 in the form of a promissory note. The promissory note is payable in quarterly installments of $25,000 over a period of ten years, without interest. The subsidiary also assumed certain liabilities of the LLC. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The following financial statements of All-American Golf LLC are filed herewith: Page ---- Report of Independent Public Accountants F-1 Balance Sheet as of December 31, 1997, and Unaudited Interim Balance Sheet as of September 30, 1998 F-2 Statement of Operations for the Period from Inception (June 13, 1997) through December 31, 1997, and Unaudited Interim Statements of Operations for the Nine Months Ended September 30, 1998 and for the Period from Inception (June 13, 1997) through September 30, 1997 F-3 Statement of Changes in Members' Equity for the Period from Inception (June 13, 1997) through December 31, 1997, and Unaudited Interim Statements of Members' Equity for the Nine Months Ended September 30, 1998 and for the Period from Inception (June 13, 1997) through September 30, 1997 F-4 Statement of Cash Flows for the Period from Inception (June 13, 1997) through December 31, 1997, and Unaudited Interim Statements of Cash Flows for the Nine Months Ended September 30, 1998 and for the Period from Inception (June 13, 1997) through September 30, 1997 F-5 Notes to Financial Statements F-6 2 (b) PRO FORMA FINANCIAL INFORMATION. The following pro forma financial information is filed herewith: Page ---- Introduction to Unaudited Pro Forma Combined Financial Statements F-12 Forward Looking Information F-12 Unaudited Pro Forma Combined Balance Sheet as of September 30, 1998 F-13 Unaudited Pro Forma Combined Statement of Operations for the Nine Months Ended September 30, 1998 F-15 Notes to Unaudited Pro Forma Combined Financial Statements F-17 An Unaudited Pro Forma Statement of Operations for the period from inception (June 13, 1997) through September 30, 1997 is not filed herewith as no pro forma adjustments would be required to the Company's Unaudited Consolidated Condensed Statement of Operations for the nine months ended September 30, 1997, included in the Company's Form 10-QSB for the quarterly period ended September 30, 1997, as filed with the Securities and Exchange Commission on November 21, 1997. Readers should refer to this Form 10-QSB for the Company's operating results for the nine months ended September 30, 1997. (c) EXHIBITS. The following exhibits are filed herewith: EXHIBIT NUMBER DESCRIPTION LOCATION - ------- ----------- -------- 10.1 Asset Purchase Agreement between All- Incorporated by reference American Golf LLC and The All-American to Exhibit 10.29 to All- Golf Center, Inc. American SportPark, Inc.'s Report on Form 8-K dated December 31, 1998 (SEC File No. 0-24970) 10.30 Promissory Note from All-American Golf Incorporated by reference Center, Inc. to Active Media Services, to Exhibit 10.30 to All- Inc. American SportPark, Inc.'s Report on Form 8-K dated December 31, 1998 (SEC File No. 0-24970) 3 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, hereunto duly authorized. SPORTS ENTERTAINMENT ENTERPRISES, INC. Dated: July 19, 1999 By:/s/ Vaso Boreta Vaso Boreta, President 4 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Members of All-American Golf LLC: We have audited the accompanying balance sheet of ALL-AMERICAN GOLF LLC (a California limited liability company) as of December 31, 1997 and the related statements of operations, changes in members' equity and cash flows for the period from inception (June 13, 1997) to December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ALL-AMERICAN GOLF LLC as of December 31, 1997, and the results of its operations and its cash flows for the period from inception (June 13, 1997) to December 31, 1997 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Las Vegas, Nevada May 21, 1998 F-1 ALL-AMERICAN GOLF LLC BALANCE SHEETS September 30, December 31, 1998 1997 ------------- ----------- (unaudited) Assets CURRENT ASSETS: Cash and cash equivalents $ 119,000 $ 45,500 Accounts receivable 35,200 57,800 Due from Affiliated Store 16,000 33,500 Inventories and prepaid expenses 37,600 27,900 Preopening costs 25,700 99,900 ----------- ----------- Total current assets 233,500 264,600 Leasehold improvements, furniture and equipment, net 9,545,600 9,840,700 ----------- ----------- Total assets $ 9,779,100 $10,105,300 =========== =========== Liabilities and Members' Equity CURRENT LIABILITIES: Accounts payable $ 437,700 $ 240,800 Accrued expenses 20,700 357,500 Interest payable 565,000 170,800 Current portion of obligations under capital leases 65,100 65,100 Due to Affiliated Store 5,100 21,000 Due to Related Entities 524,100 564,900 ----------- ----------- Total current liabilities 1,617,700 1,420,100 ----------- ----------- LONG-TERM LIABILITIES: Obligations under capital leases, net of current portion 153,100 185,200 Note payable 5,250,000 5,250,000 ----------- ----------- Total long-term liabilities 5,403,100 5,435,200 ----------- ----------- COMMITMENTS AND CONTINGENCIES MEMBERS' EQUITY: Member contributions 4,347,700 3,750,000 Accumulated deficit (1,589,400) (500,000) ----------- ----------- Total members' equity 2,758,300 3,250,000 ----------- ----------- Total liabilities and members' equity $ 9,779,100 $10,105,300 =========== =========== The accompanying notes are an integral part of these financial statements. F-2 ALL-AMERICAN GOLF LLC STATEMENTS OF OPERATIONS
Inception Inception (June 13, 1997) Nine Months (June 13, 1997) Through Ended Through September 30, 1997 September 30, 1998 December 31, 1997 ------------------ ------------------ ----------------- (Unaudited) (Unaudited) REVENUE: Golf activities $ - $ 811,400 $ 262,000 Rental income - 303,300 45,100 Other income - 97,400 14,600 -------- ----------- ---------- Total revenue - 1,212,100 321,700 -------- ----------- ---------- OPERATING EXPENSES: Salaries and wages - 352,900 169,400 Rent - 298,500 108,700 Utilities - 170,700 67,700 Supplies - 112,800 57,900 Selling, general and administrative - 518,400 127,200 Amortization of preopening costs - 74,200 39,400 Depreciation and amortization - 368,000 130,000 -------- ----------- ---------- Total operating expenses - 1,895,500 700,300 -------- ----------- ---------- OPERATING LOSS - (683,400) (378,600) INTEREST EXPENSE - 406,000 (121,400) -------- ----------- ---------- NET LOSS $ - $(1,089,400) $ (500,000) ======== =========== ==========
The accompanying notes are an integral part of these financial statements. F-3 ALL-AMERICAN GOLF LLC STATEMENTS OF CHANGES IN MEMBERS' EQUITY Member Accumulated Total Contributions Deficit Equity ------------- ----------- ----------- BALANCE, June 13, 1997 $ - $ - $ - Member contributions 3,750,000 - 3,750,000 ---------- ----------- ----------- BALANCE, September 30, 1997 3,750,000 - 3,750,000 Net loss - (500,000) (500,000) ---------- ----------- ----------- BALANCE, December 31, 1997 3,750,000 (500,000) 3,250,000 Member contributions (unaudited) 597,700 - 597,700 Net Loss (unaudited) - (1,089,400) (1,089,400) ---------- ----------- ----------- BALANCE, September 30, 1998 (unaudited) $4,347,700 $(1,589,400) $ 2,758,300 ========== =========== =========== The accompanying notes are an integral part of these financial statements. F-4 ALL-AMERICAN GOLF LLC STATEMENTS OF CASH FLOWS
Inception Inception (June 13, 1997) Nine Months (June 13, 1997) Through Ended Through September 30, 1997 September 30, 1998 December 31, 1997 ------------------ ------------------ ----------------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ - $(1,089,400) $ (500,000) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization - 368,000 130,000 Amortization of preopening costs - 74,200 39,400 Changes in assets and liabilities: Decrease (increase) in accounts receivable (100) 22,600 (57,800) Increase in inventories and prepaid expenses (71,400) (9,700) (27,900) Increase in accounts payable 412,300 196,900 240,800 (Decrease) increase in accrued expenses 22,500 (336,800) 357,500 Increase in interest payable 54,300 394,200 170,800 ----------- ----------- ------------ Net cash provided by (used in) operating activities 417,600 (380,000) 352,800 ----------- ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures on leasehold improvements, furniture and equipment (8,010,000) (72,900) (9,701,600) Preopening costs (139,300) - (139,300) ----------- ----------- ------------ Net cash used in investing activities (8,149,300) (72,900) (9,840,900) ----------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 3,937,500 - 5,250,000 Net increase (decrease) in receivable/payable with Affiliated Store and related entities 927,900 (39,200) 552,400 Principal payments under capital lease obligations - (32,100) (18,800) Member contributions 3,750,000 597,700 3,750,000 ----------- ----------- ------------ Net cash provided by financing activities 8,615,400 526,400 9,533,600 ----------- ----------- ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 883,700 73,500 45,500 CASH AND CASH EQUIVALENTS - Beginning of period - 45,500 - ----------- ----------- ------------ CASH AND CASH EQUIVALENTS - End of period $ 883,700 $ 119,000 $ 45,500 =========== =========== ============ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ - $ - $ 3,700 =========== =========== ============ NON-CASH INVESTING AND FINANCING ACTIVITIES: Equipment financed through capital leases $ - $ - $ 269,100 =========== =========== ============
The accompanying notes are an integral part of these financial statements. F-5 ALL-AMERICAN GOLF LLC NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 1. Background and Basis of Presentation a. Background The accompanying financial statements include the accounts of All-American Golf LLC, a California limited liability company ("the Company"). The Company was formed on June 13, 1997 to construct, manage and operate the "Callaway Golf Center" in Las Vegas, Nevada. Through May 7, 1998, the Company was owned jointly by Saint Andrews Golf Corporation ("SAGC") (who contributed $3.0 million for 80 member units) and Callaway Golf Company ("Callaway") (who contributed $750,000 for 20 member units) (collectively the "Members"), and its business was conducted in accordance with the terms of the Operating Agreement for All-American Golf LLC (the "Operating Agreement"). The facility, which commenced operations on October 1, 1997, is comprised of an executive golf course, driving range, putting course, clubhouse, and golf performance center, as well as a number of food and beverage concessions. The facility is located within the All-American SportPark ("SportPark"), which is a wholly owned subsidiary of SAGC. Effective May 8, 1998, SAGC sold its 80% interest in the Company to Callaway. Effective December 31, 1998, SAGC, under its new name All-American SportPark, Inc. ("AASP"), repurchased 100% of the Company's operating assets from Callaway. See Note 11 for further discussion regarding these transactions. b. Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Summary of Significant Accounting Policies a. Cash and Cash Equivalents Cash equivalents include all highly liquid debt investments with an original maturity of three months or less. b. Accounts Receivable Accounts receivable consists of amounts due from tenants and amounts due for the sale of merchandise and/or services. c. Preopening Costs Preopening costs primarily represent direct personnel and other operating costs incurred before the opening date of the Callaway Golf Center. These costs were capitalized as incurred and are being amortized to expense on a straight-line basis over a period of 12 months. Total preopening costs capitalized were approximately $139,300 of which approximately $39,400 has been amortized as of December 31, 1997. F-6 d. Leasehold Improvements, Furniture and Equipment Leasehold improvements, furniture and equipment are stated at cost, including interest on funds borrowed to finance the acquisition or construction of major capital additions. Depreciation and amortization is provided for on a straight-line basis. Leasehold improvements are amortized over the lease term (15 years) and furniture and equipment is depreciated over its estimated useful lives (ranging from 5-10 years). Normal repairs and maintenance are charged to expense when incurred. Expenditures that materially extend the useful life of assets are capitalized. e. Income Taxes The Company, as a limited liability company, is not separately subject to taxation. Rather, the income (loss) of the Company is allocated to the Members in an amount proportionate to their membership percentages (or as otherwise stipulated in the Operating Agreement) and included in the tax return of each member. Accordingly, the accompanying financial statements do not reflect an income tax provision or benefit. See Note 4 for a discussion of the allocation of income and losses incurred by the Company. f. Recoverability of Long-Lived Assets Pursuant to Statement of Financial Accounting Standards No. 121, "Accounting for Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. The Company deems an asset to be impaired if a forecast of undiscounted future operating cash flows directly related to the asset, including disposal value, if any, is less than its carrying amount. If an asset is determined to be impaired, the loss is measured as the amount by which the carrying amount of the asset exceeds fair value. The Company generally measures fair value by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted cash flows. Accordingly, actual results could vary significantly from such estimates. Based upon the short duration of operations at the Callaway Golf Center, the Company does not believe that a triggering event has occurred with respect to the negative operating income that has been achieved. 3. Related Party Transactions The Company has extensive transactions and relationships with SAGC, SportPark and Las Vegas Discount Golf & Tennis, Inc. ("LVDG"), the majority shareholder of SAGC, (collectively the "Related Entities"). A retail store operated by Boreta Enterprises (of which the President of SAGC is a majority owner) is located at the golf center (the "Affiliated Store"). Amounts due to Related Entities consist primarily of short-term funding provided by SAGC to the Company and management fees payable to SAGC in accordance with the Operating Agreement. Under the terms of the Operating Agreement, SAGC manages the driving range, golf course, and tenant facilities in the clubhouse for a fee of 5% of gross revenues. Amounts due from the Affiliated Store represent rent and common area maintenance charges in connection with the lease agreement for the retail store located at the golf center. Amounts due to the Affiliated Store relate to purchases in the normal course of business of golf-related supplies. F-7 In addition, the Related Entities also provide certain corporate services and pay certain corporate expenses on behalf of the Company. These items include an allocation for corporate payroll and related expenses, rent and utilities at the corporate office, certain insurance payments, and other general office support provided at the corporate office. The Company believes that these costs would not have a material effect on the financial statements. The costs associated with these items have not been reflected in the accompanying financial statements. 4. Allocations of Net Income (Loss) and Distributions Net income or loss is allocated among the Members in accordance with the provisions of the Operating Agreement, which is generally in proportion to each Members' ownership interest. Distributions are to be made in accordance with the Operating Agreement. No distributions have been made to date. 5. Leasehold Improvements, Furniture and Equipment Leasehold improvements, furniture and equipment included the following as of December 31, 1997: Furniture and equipment $ 510,600 Leasehold improvements 9,259,200 Other 200,900 ----------- 9,970,700 Less - Accumulated depreciation and amortization (130,000) ----------- $ 9,840,700 =========== Furniture and equipment includes approximately $269,100 relating to equipment purchased under capital lease agreements. Additionally, leasehold improvements include approximately $54,300 of interest cost capitalized during the construction process. 6. Notes Payable Callaway provided $5,250,000 in debt financing (the "Note") for construction of the Callaway Golf Center. Interest is payable at the rate of 10 percent per annum with interest only payments to commence 60 days after the opening of the golf center. The principal is due in 60 equal monthly payments commencing October 1, 2002. As part of the financing agreement, SAGC has granted to Callaway a security interest in its 80% ownership percentage of the Company as additional security for the prompt and full repayment of all secured debts owed by the Company to Callaway. In addition, the Note is secured by substantially all the assets of the Company. The Company was unable to make its interest payment due in December 1997 and at December 31, 1997 was in default on the Note. Subsequently, the Company was unable to make its scheduled interest payments in January, February, and March 1998. On March 18, 1998, the Company entered into a forbearance agreement with Callaway that cured the default and established terms to repay the amounts in arrears. The first payment required under the forbearance agreement is due on May 21, 1998 in the amount of $80,600. F-8 Aggregate maturities of notes payable for the five years subsequent to December 31, 1997, are as follows: Year Ending: 1998 $ - 1999 - 2000 - 2001 - 2002 262,500 Thereafter 4,987,500 ---------- $5,250,000 ========== 7. Leases Effective June 20, 1997, the Company entered into a lease agreement for approximately 42 acres of land in Las Vegas, Nevada. The lease term is for a period of fifteen years, with two consecutive five-year renewal periods. The lease commenced on October 1, 1997. The annual base amount of the lease is $398,000 payable in monthly installments of approximately $33,000. Additionally, the lease contains contingent rent based upon a percentage of gross revenues ranging from three to ten percent of such revenues. Such contingent rent is payable if such percentage of revenues exceeds the annual base amount. The minimum rent shall be increased at the end of the fifth year of the lease term and every five years thereafter by an amount equal to ten percent of the minimum monthly installment immediately proceeding the adjustment date. This lease is being accounted for as an operating lease. The Company also leases certain furniture and equipment under various leases. All leases with an initial term greater than one year are accounted for under Statement of Financial Accounting Standards No. 13, "Accounting for Leases." These leases are classified as either capital leases or operating leases as appropriate. Rent expense under all of the Company's operating leases were approximately $108,700 during the period ended December 31, 1997. At December 31, 1997, minimum future rental commitments under all of the Company's non-cancelable operating leases and required future principal and interest payments under capital leases were as follows: Operating Capital Leases Leases ---------- --------- Year Ending: 1998 $ 427,000 $ 79,700 1999 427,000 79,500 2000 425,500 75,400 2001 439,100 58,700 2002 398,100 14,000 Thereafter 3,998,000 - ---------- -------- $6,114,700 $307,300 Less amounts representing interest (57,000) -------- $250,300 ======== F-9 8. Rental Income The Company leases certain space within the Callaway Golf Center to third party retailers. Current lessees include food and beverage concessions, a golf shop and a golf academy. Rents received are based on a percentage of revenues generated and generally range from three to fifteen percent of the applicable revenue source. The lease agreements do not guarantee a minimum base rate to the Company. Lease terms generally range from 5 to 10 years and may contain renewal clauses. In addition, the Company will receive annual rents not to exceed $50,000 relating to the performance and training center leased by Callaway (and will pay to Callaway an annual amount not to exceed $50,000 as a licensing fee on the Callaway trademarks). The agreement with Callaway will remain in effect until terminated in accordance with the provisions of the Operating Agreement. 9. Commitments and Contingencies In September 1997, SAGC entered into a lease and concession agreement with Sportservice Corporation ("Sportservice") which provides Sportservice with the exclusive right to prepare and sell all food, beverages (alcoholic and non-alcoholic), candy and other refreshments throughout the All-American SportPark, including the Callaway Golf Center, during the ten year term of the agreement. Sportservice has agreed to pay rent based on a percentage of gross sales depending upon the level of sales, whether the receipts are from concession sales, the Arena restaurant, the Clubhouse, vending machines, mobile stands, or catering sales. Rents from the Callaway Golf Center will be paid to the Company and all other rents will be paid to SAGC. In the normal course of business, the Company has entered into contracts and agreements with various vendors. These contracts and agreements commit the Company to various specific and contingent obligations. All such obligations have been properly reflected in the accompanying financial statements. 10. Interim Reporting The accompanying interim financial statements are unaudited; however, these financial statements contain all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position of the Company as of September 30, 1998, and the results of its operations and its cash flows for the nine months ended September 30, 1998, and for the period from inception (June 13, 1997) through September 30, 1997. The accounting policies followed by the Company are set forth in Note 2 to the financial statements. The results of operations for the nine months ended September 30, 1998, and for the period from inception (June 13, 1997) through September 30, 1997, are not necessarily indicative of the results to be expected for the full year. 11. Sale of Membership Interest On May 5, 1998, pursuant to the terms of a Purchase and Sale Agreement between the Company, SAGC and Callaway, SAGC sold its 80% membership interest in the Company to Callaway for $4,526,178. The purchase price included $1,500,000 in cash and the forgiveness of indebtedness of the SportPark totaling $3,026,000. In connection with the sale of the membership interest, SAGC resigned as the manager of the Company, and agreed not to compete with the Callaway Golf F-10 Center in Clark County, Nevada for a period of two years. As a result of the sale of its interest in the Company, SAGC had no ownership of the Callaway Golf Center, and the Callaway Golf Center is operated separately from the SportPark. 12. Subsequent Event (Unaudited) On December 31, 1998, SAGC, under its new name All-American SportPark, Inc., repurchased substantially all of the Company's assets and certain liabilities, excluding the $5.25 million promissory note and related interest, from Callaway through a newly-formed subsidiary, All-American Golf Center, Inc. The purchase price of $1,000,000 is payable in forty quarterly non-interest bearing installments through September 2008, to an unrelated third party which has, in turn, assigned a $4,000,000 trade credit to Callaway in exchange for rights to receive the quarterly payments. In connection with the repurchase, Callaway agreed to not compete with the Callaway Golf Center in Clark County, Nevada for a period of five years. F-11 SPORTS ENTERTAINMENT ENTERPRISES, INC. AND SUBSIDIARIES PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) INTRODUCTION The following unaudited pro forma combined financial information of Sports Entertainment Enterprises, Inc. (formerly named "Las Vegas Discount Golf & Tennis, Inc.") (the Company) gives effect to the aforementioned purchase (the "Acquisition"). The purpose of the pro forma combined balance sheet as of September 30, 1998, the date of the last balance sheet of the Company filed with the Securities and Exchange Commission prior to the Acquisition, is to reflect the financial condition of the Company as if the Acquisition occurred on that date. The purpose of the pro forma combined statement of operations for the nine months ended September 30, 1998, is to reflect what the results of operations might have been if the Acquisition had taken place on June 13, 1997, the inception date of the LLC. No pro forma combined statement of operations is presented for the nine months ended September 30, 1997, as no pro forma adjustments would be required to the Company's Unaudited Consolidated Condensed Statement of Operations for the nine months ended September 30, 1997, included in the Company's Form 10-QSB for the quarterly period ended September 30, 1997, as filed with the Securities and Exchange Commission on November 21, 1997. Readers should refer to this Form 10-QSB for the Company's operating results for the nine months ended September 30, 1997. The pro forma financial statements should be read in conjunction with the historical financial statements of the Company filed on Form 10-KSB for the year ended December 31, 1997 and filed on Form 10-QSB for the nine months ended September 30, 1998, as well as the historical financial statements of All-American Golf LLC included in this amendment to the related Report on Form 8-K. The unaudited pro forma combined financial information presented herein does not purport to represent what the Company's actual results of operations would have been had the Acquisition occurred on June 13, 1997, or to project the Company's results of operations for any future period. FORWARD-LOOKING INFORMATION This report contains certain forward-looking information which is based upon current expectations that involve a number of risks and uncertainties. The forward-looking information is based upon a number of assumptions, including, without limitation, those enumerated in Management's Discussion and Analysis included in the Company's 1997 annual report on Form 10-KSB, which is hereby incorporated by reference. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking information are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking information will be realized. In addition, the business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in such forward-looking information. In light of the significant uncertainties inherent in such forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other person, that the objectives or plans for the Company will be achieved. F-12 SPORTS ENTERTAINMENT ENTERPRISES, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET SEPTEMBER 30, 1998 Historical Pro Forma September 30, September 30, 1998 Adjustments 1998 ------------- ----------- ------------- (Unaudited) (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 92,200 $ - $ 92,200 Accounts receivable 2,469,400 - 2,469,400 Inventories 715,800 - 715,800 Due from affiliated store 42,200 - 42,200 Prepaid expenses and other 121,500 - 121,500 ----------- -------- ----------- Total current assets 3,441,100 - 3,441,100 LEASEHOLD IMPROVEMENTS AND EQUIPMENT, net 287,200 859,300 (A) 1,146,500 PROJECT DEVELOPMENT COSTS 22,886,800 - 22,886,800 OTHER LONG-TERM RECEIVABLES 234,200 - 234,200 DEPOSIT FOR LAND LEASE 282,400 - 282,400 OTHER ASSETS 102,900 - 102,900 ----------- -------- ----------- $27,234,600 $859,300 $28,093,900 =========== ======== =========== See accompanying notes to unaudited pro forma combined financial statements. F-13 SPORTS ENTERTAINMENT ENTERPRISES, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET SEPTEMBER 30, 1998 Historical Pro Forma September 30, September 30, 1998 Adjustments 1998 ------------- ----------- ------------- (Unaudited) (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of notes payable $ 420,000 $ 66,000 (A) $ 486,000 Current portion of obliga- tions under capital leases 14,100 65,300 (A) 79,400 Accounts payable and accrued expenses 2,375,300 - 2,375,300 Due to affiliated store 767,100 - 767,100 ----------- -------- ----------- Total current liabilities 3,576,500 131,300 3,707,800 ----------- -------- ----------- Note payable to shareholder 1,968,700 - 1,968,700 Long-term portion of notes payable 13,080,000 588,700 (B) 13,668,700 Obligation under capital leases, net of current portion 21,300 139,300 (A) 160,600 ----------- -------- ----------- Deferred income 519,200 - 519,200 DEFERRED TAX LIABILITY 743,000 - 743,000 PREFERRED STOCK OF SUBSIDIARY 5,000,000 - 5,000,000 MINORITY INTEREST 707,900 - 707,900 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares issued and outstanding - - - Common stock, no par value, 15,000,000 shares authorized, 5,831,807 shares issued and outstanding 3,876,000 - 3,876,000 Accumulated deficit (2,258,000) - (2,258,000) ----------- -------- ----------- Total shareholders' equity 1,618,000 - 1,618,000 ----------- -------- ----------- $27,234,600 $859,300 $28,093,900 =========== ======== =========== See accompanying notes to unaudited pro forma combined financial statements. F-14 SPORTS ENTERTAINMENT ENTERPRISES, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 Historical Pro Forma Nine Months Nine Months Ended Ended September 30, September 30, 1998 Adjustments 1998 ------------- ----------- ------------- (Unaudited) (Unaudited) REVENUES: Retail $ 2,187,700 $ - $ 2,187,700 Callaway Golf Center - $ 733,400 (C) 1,212,100 478,700 (D) ----------- ----------- ----------- Total revenues 2,187,700 1,212,100 3,465,200 ----------- ----------- ----------- COST OF SALES: Retail 1,686,700 - 1,686,700 Callaway Golf Center - 339,400 (C) 626,300 286,900 (D) ----------- ----------- ----------- Total cost of sales 1,686,700 626,300 2,313,000 ----------- ----------- ----------- Gross margin 566,400 585,800 1,152,200 OPERATING EXPENSES: Selling, general and administrative 2,886,900 418,300 (C) 3,788,200 483,000 (D) Depreciation and amortization 169,300 (C) 368,000 - 198,700 (D) ----------- ----------- ----------- Total operating expenses 2,157,600 1,895,600 4,053,200 Operating loss (2,353,100) (683,500) (3,036,600) Interest expense, net 15,100 187,900 (C) 421,100 218,100 (D) ----------- ----------- ----------- Loss before income taxes, discontinued operations and minority interest (2,353,200) (1,089,500) (3,457,700) Minority interest 713,200 - 713,200 Provision for income taxes - - - ----------- ----------- ----------- Net loss from continuing operations (1,655,000) (1,089,500) (2,744,500) ----------- ----------- ----------- Discontinued operations: Loss from operating, net of minority interest share of $102,00 (203,000) 203,000 (C) - Gain on disposal 1,094,000 (1,094,000)(E) - ----------- ----------- ----------- Net income from discon- tinued operations 891,000 891,000 - NET LOSS $ (764,000) $(1,980,500) $(3,457,700) =========== =========== =========== See accompanying notes to unaudited pro forma combined financial statements. F-15 SPORTS ENTERTAINMENT ENTERPRISES, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 Historical Pro Forma Nine Months Nine Months Ended Ended September 30, September 30, 1998 Adjustments 1998 ------------- ----------- ------------- (Unaudited) (Unaudited) NET INCOME (LOSS) PER COMMON SHARE: Continuing operations $ (0.28) $ (0.19) $ (.59) Discontinued operations 0.15 (0.15) - ----------- ----------- ----------- $ (0.13) $ (0.34) $ (.59) =========== =========== =========== See accompanying notes to unaudited pro forma combined financial statements. F-16 SPORTS ENTERTAINMENT ENTERPRISES, INC. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS [A] To reflect the addition of the fair value of All-American Golf LLC assets and liabilities as of September 30, 1998. [B] To reflect the net present value of the $1,000,000 note to purchase substantially all the assets of All-American Golf LLC. [C] To reclassify the operations of All-American Golf LLC from January 1, 1998 through May 5, 1998, from discontinued operations to continuing operations. [D] To reflect the operations of All-American Golf LLC from May 5, 1998 through September 30, 1998. [E] To reflect removal of the gain on sale of All-American SportPark, Inc.'s eighty percent interest in All-American Golf LLC, originally sold on May 5, 1998. F-17 -----END PRIVACY-ENHANCED MESSAGE-----