-----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, BLUxpFTnNbNfnzn4Ad+UGKLki+tYZ6bvyudC6gy5+CcWdZTnNuKK8S1xQjvf46kZ 7UdZVnmxy4CFrP/tHczw7w== 0000948830-00-000222.txt : 20000516 0000948830-00-000222.hdr.sgml : 20000516 ACCESSION NUMBER: 0000948830-00-000222 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALL AMERICAN SPORTPARK INC CENTRAL INDEX KEY: 0000930245 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 880203976 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24970 FILM NUMBER: 634878 BUSINESS ADDRESS: STREET 1: 6730 LAS VEGAS BOULEVARD STREET 2: STE 4 CITY: LAS VEGAS STATE: NV ZIP: 89119 BUSINESS PHONE: 7027987777 MAIL ADDRESS: STREET 1: 5325 S VALLEY VIEW BLVD STE 4 CITY: LAS VEGAS STATE: NV ZIP: 89118 FORMER COMPANY: FORMER CONFORMED NAME: SAINT ANDREWS GOLF CORP DATE OF NAME CHANGE: 19940916 10QSB 1 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, 2000 Commission File Number: 0-24970 ALL-AMERICAN SPORTPARK, INC. ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Nevada 88-0203976 - ------------------------------- --------------------------------- (State of other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 6730 South Las Vegas Boulevard, Las Vegas, Nevada 89119 -------------------------------------------------------------------- (Address of principal executive offices including zip code) (702) 798-7777 --------------------------- (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ As of May 12, 2000, 3,150,000 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 Consolidated Balance Sheets March 31, 2000 and December 31, 1999 3 Consolidated Statements of Operations Three Months Ended March 31, 2000 and 1999 5 Consolidated Statements of Cash Flows Three Months Ended March 31, 2000 and 1999 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis or Plan of Operation 12 PART II: OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Changes in Securities 17 Item 3. Defaults Upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18 2 ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS March 31, December 31, 2000 1999 ------------ ----------- ASSETS Current assets: Cash and cash equivalents $ 175,990 $ 118,796 Accounts receivable 121,255 122,847 Inventory 39,371 52,796 Prepaid expenses and other 375,079 231,251 ----------- ----------- Total current assets 711,695 525,690 Leasehold improvements and equipment, net 23,634,524 24,040,832 Due from related entities 760,453 588,051 Due from affiliated stores 147,263 123,243 Note receivable - related party 20,000 20,000 Debt issuance costs, net 343,442 353,425 Deposit for land lease 37,821 37,821 Other assets 26,095 21,311 ----------- ----------- Total assets $25,681,293 $25,710,373 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 3 ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) LIABILITIES AND SHAREHOLDERS' EQUITY March 31, December 31, 2000 1999 ----------- ----------- Current liabilities: Current portion of long-term debt $13,102,927 $13,102,310 Current portion of obligations under capital leases 166,505 164,897 Accounts payable and accrued expenses 2,656,508 2,184,624 ----------- ----------- Total current liabilities 15,925,940 15,451,831 Note payable to shareholder 1,512,060 1,484,616 Due to affiliated stores 425,584 408,254 Due to related entities 1,500,970 1,389,931 Long-term debt, net of current portion 557,268 570,527 Obligation under capital leases, net of current portion 357,021 395,505 Deferred income 862,493 694,396 ----------- ----------- Total liabilities 21,141,336 20,395,060 Shareholders' equity: Series A Convertible Preferred stock, $.001 par value, 500,000 shares authorized and outstanding at March 31, 2000 and December 31, 1999 4,740,000 4,740,000 Series B Convertible Preferred Stock, $.001 par value, 250,000 shares authorized and outstanding at March 31, 2000 and December 31, 1999 2,500,000 2,500,000 Options issued in connection with Series A Convertible Preferred Stock to purchase 250,000 shares of Common stock 260,000 260,000 Options issued in connection with financing 174,000 174,000 Common stock, $.001 par value, 10,000,000 shares authorized, 3,150,000 and 3,000,000 shares issued and outstanding at March 31, 2000 and December 31, 1999, respectively 3,150 3,000 Additional paid-in-capital 3,637,380 3,520,800 Accumulated deficit (6,774,573) (5,882,487) ----------- ----------- Total shareholders' equity 4,539,957 5,315,313 ----------- ----------- Total liabilities and shareholders' equity $25,681,293 $25,710,373 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 4 ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 2000 1999 ----------- ----------- Revenue: SportPark Las Vegas $ 906,683 $ 955,737 Callaway Golf Center[TM] 646,346 483,003 Other 10,367 6,250 ----------- ----------- Total revenue 1,563,396 1,444,990 Cost of Revenue: SportPark Las Vegas 233,148 219,434 Callaway Golf Center[TM] 123,249 71,130 ----------- ----------- Total cost of revenue 356,397 290,564 ----------- ----------- Gross Profit 1,206,999 1,154,426 Operating Expenses: Selling, general and administrative 1,282,969 1,262,079 Depreciation and amortization 433,906 404,843 ----------- ----------- Total operating expenses 1,716,875 1,666,922 ----------- ----------- Operating Loss (509,876) (512,496) ----------- ----------- Interest income (expense), net (382,210) (346,159) ----------- ----------- Loss before provision (benefit) for income taxes (892,086) (858,655) Provision (benefit) for income taxes - - ----------- ----------- Net loss $ (892,086) $ (858,655) =========== =========== NET LOSS PER SHARE: Basic and Diluted: Net loss per share $ (.29) $ (.29) =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 5 ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (892,086) $ (858,655) Adjustment to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 433,906 561,052 Changes in operating assets and liabilities: Decrease in accounts receivable 1,592 236,161 Decrease in inventories 13,425 7,638 Increase in prepaid expenses and other (31,882) (166,556) Increase (decrease) in accounts payable and accrued expenses 471,884 (294,163) Increase in deferred income 168,097 108,513 ----------- ----------- Net cash provided by (used in) operating activities 164,936 (406,010) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Leasehold improvements expenditures (17,615) (154,488) ----------- ----------- Net cash used in investing activities (17,615) (154,488) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in due to Affiliated Stores and Related Entities (68,053) (20,488) Increase (decrease) in notes payable and notes payable to shareholder and related entity 14,802 (345,499) Principal payments on capital leases (36,876) (28,478) ----------- ----------- Net cash used in financing activities (90,127) (394,465) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 57,194 (954,963) ----------- ----------- CASH AND CASH EQUIVALENTS, Beginning of period 118,796 2,494,300 ----------- ----------- CASH AND CASH EQUIVALENTS, End of period $ 175,990 $ 1,539,337 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 13,905 $ 341,145 =========== =========== NON-CASH INVESTING AND FINANCING ACTIVITIES: Equipment financed through notes and capital leases $ - $ 39,847 =========== =========== Common stock issued in exchange for consulting services $ 116,730 $ - =========== =========== 6 ALL-AMERICAN SPORTPARK, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements include the accounts of All-American SportPark, Inc. ("AASP"), a Nevada corporation, and its subsidiaries, All-American Golf Center, Inc. ("AAGC"), and SportPark Las Vegas, Inc. ("SPLV"), (collectively the "Company"). All significant inter-company accounts and transactions have been eliminated. The operations of the All-American SportPark facility are included in SPLV. 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 March 31, 2000 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, 1999. The Company's current operations consist of 65 acres of sports entertainment located on the south end of the Las Vegas "Strip" including the following: (1) The Callaway Golf Center located on 42 acres of land that 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 St. Andrews Golf Shop, Callaway Performance Center, Giant Golf teaching academy, and the Bistro 10 restaurant and bar; and (2) The SportPark Las Vegas which is a family-oriented sports-themed amusement venue named "All-American SportPark" ("SportPark" or "SPLV"). The SportPark, comprising 23 acres adjacent to the Callaway Golf Center, opened for business on October 9, 1998. The SportPark's major attractions include NASCAR SpeedPark, Major League Baseball Slugger Stadium, the 100,000 square foot Arena Pavilion which houses the Pepsi AllSport Arena, the RealRide SkatePark featuring the ramps used in the ESPN X-Games, "The Rock" 47-foot rock climbing wall, Namco Timeout Arcade, Indoor putting challenge, Boston Garden restaurant and bar, Skybox suites and several other interactive experiences and retail shops. As of March 31, 2000, Sports Entertainment Enterprise, Inc. ("SPEN"), a publicly traded company, owns approximately 63.5% of the Company's outstanding common stock and one-third of the Company's outstanding preferred stock. 7 2. SPORTPARK LAS VEGAS LOAN AGREEMENT On September 15, 1998 the Company entered into a $13,500,000 loan agreement with Nevada State Bank ("Lender"). The term of the loan is 15 years with interest measured at a fixed rate of 4% above the Lender's five-year LIBOR rate measured September 1, 1998, 2003 and 2008. The initial interest rate through 2003 is 9.38%. The loan is secured by substantially all the assets of the Company that existed at the time the financing was completed as well as corporate guarantees of AASP and SPEN. The Callaway Golf Center was not owned by the Company at the time this financing was completed and therefore is not security for this loan. To facilitate this financing transaction, the owner of the leasehold interest in the land underlying the SportPark executed a trust deed granting a security interest in the leased property to the Lender to secure repayment of the loan. As consideration for the Landlord's willingness to provide collateral for the loan, the Company's President and CEO, its Chairman, and a related entity pledged their stock in SPEN to the landlord. Additionally, the landlord was issued 75,000 stock options exercisable at $4.00 per share through the year 2005. The Company has not been in compliance with certain debt covenants related to this loan since September 30, 1999. Also, because of cash constraints, the Company did not make its September loan payment to the Lender and since then has not made any loan payments. The Company has had discussions with the Lender in an attempt to renegotiate the terms of the loan. As part of these discussions, the Lender and the Company agreed that an amusement park industry management consultant should be retained to evaluate all operational aspects of the SportPark and provide recommendations to improve the SportPark performance from revenue, utilization, and cost standpoints. This consultant, Management Resources, Inc. ("MRI") was hired in December 1999 and completed its assignment in February 2000. The Lender hired a different industry consultant to review MRI's recommendations. The Company met with the Lender's representative on March 21, 2000 to discuss the results of both consultant's reports and to present the Company's proposal for a work-out plan. Since that meeting, the Lender had its consultant update its analysis of MRI's report based on detailed information provided to the Lender by the Company at the March 21 meeting. The Lender has not yet responded to the Company's proposal. Although management of the Company is optimistic that a work-out plan will be negotiated, there can be no assurance that the Company will be successful in doing so. 3. LOSS PER SHARE AND SHAREHOLDER'S EQUITY Basic and diluted loss per share is computed by dividing the reported net 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 3,107,143 and 3,000,000 for the three-month periods ended March 31, 2000 and 1999, respectively. In January and February 2000, the Company issued an aggregate of 150,000 restricted shares of its common stock to a consultant and a person affiliated with the consultant in exchange for business consulting services. The issuance of these shares was valued at a forty percent discount of the closing market price of AASP's common stock on or about the date that the shares were issued. 8 4. RELATED PARTY TRANSACTIONS The Company has unsecured, ten percent notes payable to its Chairman of $1,259,702 and $1,250,000 at March 31, 2000 and December 31, 1999, respectively. Accrued interest payable of $252,358 and $234,616 at March 31, 2000 and December 31, 1999, respectively, is included in the balance due under the caption "Note payable to Shareholder" in the accompanying consolidated balance sheets. The Company has unsecured, ten percent notes payable to the Paradise Store of $264,967 and $230,000 as of March 31, 2000 and December 31, 1999, respectively. The Paradise Store is a golf retail store owned 100% by the Company's Chairman. Accrued interest payable of $41,953 and $62,712 at March 31, 2000 and December 31, 1999, respectively, is included with the note payable balance under the caption "Due to Affiliated Stores" in the accompanying consolidated balance sheets. The Company normally has extensive transactions and relationships with SPEN and subsidiaries ("Related Entities"), the chairman and principal shareholder of SPEN, and the Paradise Store. In the first quarter of 2000, no significant transactions occurred with the Related Entities or the Paradise Store. 5. LEASEHOLD IMPROVEMENTS AND EQUIPMENT Leasehold improvements and equipment include the following as of March 31, 2000 and December 31, 1999: 2000 1999 ----------- ----------- Building $18,049,814 $18,049,814 Land Improvements 3,449,161 3,433,769 Furniture and equipment 2,032,639 2,030,412 Leased equipment 734,296 734,296 Signs 685,400 685,400 Leasehold improvements 476,519 476,519 Go-Karts 457,115 457,115 Other 98,704 98,704 ----------- ----------- 25,983,648 25,966,029 ----------- ----------- Accumulated depreciation and amortization (2,349,124) (1,925,197) ----------- ----------- $23,634,524 $24,040,832 =========== =========== 6. LEASES The land underlying the SPLV and CGC is leased to the Company at a base amount of $52,083 per month allocated $33,173 to CGC and $18,910 to SPLV. Also, the lease has provisions for contingent rent to be paid by the Company upon reaching certain gross revenue levels. The lease commenced October 1, 1997 for CGC and February 1, 1998 for SPLV. The terms of both leases are 15 years with two five-year renewal options. 9 Due to cash constraints, the Company negotiated an agreement with the landlord to defer the land lease payments on both the SPLV and CGC beginning September 1999 with no specified ending date. Management of the Company believes that the landlord is willing to defer land lease payments until such time as adequate capital resources are available to the Company to make such payments. The Company is also obligated under various other capital and non-cancelable operating leases for equipment that expire at various dates over the next five years. 7. COMMITMENTS AND CONTINGENCIES The Company has employment agreements with its President, as well as other key employees which will require the payment of fixed and incentive based compensation. The Company has a comprehensive general liability insurance policy to cover possible claims for injury and damages from accidents and similar activities. Although management of the Company believes that its insurance levels are sufficient to cover all future claims, there is no assurance that it will be sufficient to cover all future claims. The Company is involved in certain litigation as both plaintiff and defendant related to its business activities. Management, based upon consultation with legal counsel, does not believe that the resolution of these matters will have a materially adverse effect on the Company. 8. 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. As shown in the accompanying consolidated financial statements, for the three months ended March 31, 2000, the Company had a net loss of $892,086 and has experienced cash flow problems since September of 1999. For the year ended December 31, 1999, the Company had a net loss of $3,818,787 and negative cash flow from operations of $697,710. Additionally, as of March 31, 2000, the Company had a working capital deficit of $15,214,245 and cash and cash equivalents of $175,990. Approximately $14 million of this working capital deficit relates to the note payable secured by a first deed of trust on the SportPark that has been in default since September 1999. Because of the Company's default on the note, accounting rules require that the full amount owing be classified as current for financial reporting purposes. If this note payable was not classified as current in its entirety, the working capital deficit as of March 31, 2000 would be about $1.2 million. See Note 2 for further information on the note payable in default. Management believes that (1) negotiation of a reasonable work-out plan with the Bank, (2) the successful execution of its business plan in the Year 2000 and beyond as recommended by MRI, and (3) a working capital infusion to the Company of at least $1 million will be necessary to sufficiently fund operating cash needs and debt service requirements over at least the next twelve months. If required to fund corporate operations, management believes that additional borrowings against the Callaway Golf Center could be arranged. Should additional financing to fund operations be required, the Company will explore all funding options, as necessary. There can be no assurance such lending sources would be willing, on terms acceptable to the Company, to provide additional financing. 10 The consolidated financial statements do not include any adjustments relating to the recoverability of assets and the classification of liabilities, except the note payable referred to above, that might be necessary should the Company be unable to continue as a going concern. 9. RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated statements of operations and of cash flows for the three months ended March 31, 1999 have been restated to present, in the proper 1999 quarter, audit adjustments that were made in the fourth quarter of 1999. The impact of this restatement is as follows: Decrease in revenues of the SportPark $ (93,750) Increase in interest expense (26,352) --------- Increase in net loss $(120,102) ========= Increase in net loss per share $ (.04) ========= 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following information should be read in conjunction with the Company's condensed consolidated financial statements and related footnotes included in this report. OVERVIEW The Company's current operations consist of the management and operation of 2 sports entertainment venues in Las Vegas, Nevada: The Callaway Golf Center ("CGC") and the All-American SportPark ("SportPark"). Results of operations for the quarters ended March 31, 2000 and 1999 include the results of the CGC and the SportPark. The SportPark commenced operations on October 9, 1998. The CGC commenced operations in October 1997, the Company sold its 80% interest in it on May 5, 1998 and, the Company reacquired 100% of the CGC on December 31, 1998. RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000 AS COMPARED TO THREE MONTHS ENDED MARCH 31, 1999 REVENUES. Revenues increased 8.2% to $1,563,396 in 2000 compared to $1,444,990 in 1999. Revenue for the CGC increased 33.8% to $646,346 in 2000 compared to $483,003 in 1999 due to increased traffic flow and per capita spending. Revenue for the SportPark declined 5.1% to $906,683 in 2000 compared to $955,737 in 1999. This decline is due mainly to lower attendance levels in the first quarter of 2000 compared to 1999 due, in part, to very little advertising by the SportPark in January and February 2000 because of cash constraints. The decline was also due to fewer operating days in 2000 versus 1999. Effective January 10, 2000, management of the Company made the decision to close the SportPark to the general public Monday through Wednesday because the revenue generated on these days was not covering variable expenses. As part of this strategy, management reserved Monday through Wednesday for group sales and special events. This decision by management was recommended by the industry consultant hired by the Company in December 1999 and is a key part of the SportPark's plan going forward to capitalize on the higher margin group sales market. Although attendance for the SportPark was down in the first quarter of 2000 versus 1999, net per capita customer spending increased nearly 54% primarily due to the increased emphasis on group sales. COST OF REVENUES. Cost of revenues increased 22.6% to $356,397 in 2000 compared to $290,564 in 1999. Cost of revenues as a percentage of Revenues was 22.8% in 2000 compared to 18.9% in 1999. This increase is due mainly to costs for the CGC which are higher as a percentage of revenue in 2000 because, in the first quarter of 1999, the operating cost structure was not fully established as the CGC had just been acquired from Callaway Golf Company on December 31, 1998. SELLING, GENERAL AND ADMINISTRATIVE (SG&A). These expenses consist principally of administrative payroll, rent, professional fees and other corporate costs. These expenses increased nominally to $1,282,969 in 2000 compared to $1,262,079 in 1999. Although corporate overhead decreased approximately 22% in 2000 versus 1999, SG&A costs for the CGC increased for the same reason described above in "Cost of Revenues." SG&A for the SportPark decreased approximately 2.5% and may have decreased more if not for increased legal and professional fees related to the SportPark loan default issue discussed in "LIQUIDITY AND CAPITAL RESOURCES" below. 12 DEPRECIATION AND AMORTIZATION. These costs increased to $433,906 in 2000 compared to $404,843 in 1999 reflecting the higher overall depreciable base of fixed assets resulting from fixed asset additions throughout 1999. NET INTEREST (EXPENSE) INCOME. Net interest expense increased to $382,210 in 2000 compared to $346,159 in 1999 due primarily to interest costs on debt secured by the SportPark Las Vegas and lower interest income in 2000 because of substantially lower cash balances. INCOME TAXES. Due to operating losses, the Company has recorded no tax provision nor has it recorded any tax benefits. NET LOSS. Net loss for 2000 was $892,086 compared to $858,655 for 1999. The increased net loss for 2000 is due primarily to the reasons already described. The SPLV accounted for approximately 88% of the 2000 net loss; the CGC achieved net income in 2000 of $79,571; and the remainder relates to corporate overhead. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000, the Company had negative working capital of $15,214,245. This deficit in working capital is largely due to the SPLV note payable that is in default (see discussion below). Since it is in default, the entire balance of the note is classified as current for financial reporting purposes. If this note was classified for financial reporting purposes under its normal amortization schedule, the working capital deficit at March 31, 2000 would be approximately $1.2 million. On September 15, 1998 the Company entered into a $13,500,000 loan agreement with Nevada State Bank. The loan is for 15 years with interest measured at a fixed rate of 4% above the lender's five-year LIBOR rate measured September 1, 1998, 2003 and 2008. Through August 31, 2003 the loan bears interest of 9.38%. The loan is secured by substantially all the assets of the Company that existed at the time the financing was completed. Debt service for this loan approximates $140,000 per month. The Company has not been compliance with certain debt covenants related to this loan since September 30, 1999. Also, because of cash constraints, the Company did not make its September loan payment to the Lender and since then has not made any loan payments. The Company has had discussions with the Lender in an attempt to renegotiate the terms of the loan. As part of these discussions, the Lender and the Company agreed that an amusement park industry management consultant should be retained to evaluate all operational aspects of the SportPark and provide recommendations to improve the SportPark performance from revenue, utilization, and cost standpoints. This consultant, Management Resources, Inc. ("MRI") was hired in December 1999 and completed its assignment in February 2000. The Lender hired a different industry consultant to review MRI's recommendations. The Company met with the Lender's representative on March 21, 2000 to discuss the results of both consultant's reports and to present the Company's proposal for a work-out plan. Since that meeting, the Lender had its consultant update its analysis of MRI's report based on detailed information provided to the Lender by the Company at the March 21 meeting. The Lender has not yet responded to the Company's proposal although a response is expected before the end of the second quarter. Although management of the Company is optimistic that a work-out plan will be negotiated, there can be no assurance that the Company will be successful in doing so. 13 MRI's report includes detailed revenue and cost projections and a detailed sales and marketing plan. This report suggests (1) refocusing on the local individual customer base rather than individual tourists, (2) focusing significant resources on group sales and special events, (3) adding new products to supplement the performance of the Park during peak operating times (weekends) to maximize revenue, and (4) simplifying and providing consistency in the Park's ticketing programs. Management of the Company believes that the plans included in this report provide the necessary focus and detailed goals and action plans to substantially improve the SportPark's operating results in the Year 2000 and beyond. Although the Company is confident it can eventually achieve profitability and positive cash flow by successfully executing this plan, there can be no assurance that the Company will be successful in doing so. In addition to the Plan recommended by MRI, the Company is aggressively pursuing several other opportunities. The Company is developing, with the assistance of independent qualified professionals, a comprehensive business plan that will be used as the basis for seeking financing to either (1) refinance existing debt, (2) infuse sufficient working capital into the Company to insure future success, and (3) accelerate expansion plans into other markets. Several options are being evaluated to raise capital for the Company. Also, management is in discussions with several established companies in its industry that have the necessary capital and human resources that could facilitate the profitability objectives of the existing SportPark as well as the Company's expansion plans; several possible business structures will be evaluated. An important element of the Company's plan will be to increase the Company's exposure in the financial community. There can be no assurance that the Company will be successful in its efforts to raise capital nor can there be any assurance that the Company will be successful in its efforts to structure a relationship with a well-known, established company in its industry to facilitate the profitability objectives of the existing SportPark or the Company's expansion plans. Also, management is continually evaluating new revenue opportunities that would provide a broader and more exciting customer experience as well as maximize the utilization of the SportPark and CGC. At the same time, management has instituted aggressive cost containment strategies that began in September 1999 and will continue until the Company is operating as efficiently as possible. In addition, because of the Company's cash constraints, since September 1999 the Company's President has been deferring half of his salary until such time as the Company has sufficient capital resources. On December 31, 1998 the Company purchased substantially all the assets and assumed certain liabilities of the Callaway Golf Center[TM] for $1,000,000 payable in quarterly installments of $25,000 for a 10 year period with no interest. The Golf Center has generated positive cash flow in 2000 and 1999. If required to fund corporate operations, 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 at terms acceptable to the Company. The Company's Chairman through personal loans and through advances from his personally owned retail store (one of the "Affiliated Stores") has historically loaned funds to the Company as needed. Loans from the Company's Chairman were $1,512,060 and $1,484,616 at March 31, 2000 and December 31, 1999, respectively. Loans from his personally owned retail store were $306,920 and $292,712 at March 31, 2000 and December 31, 1999, respectively. The increases relate to accrued interest payable on the balances outstanding. The 14 loans are due beginning in November 2000 and bear interest at ten percent per annum. Accrued interest payable of $294,311 at March 31, 2000 has been deferred, a practice which is expected to continue in 2000, if necessary. There are no planned material capital expenditures in 2000. The Company in the normal course of its business receives sponsorship fees and various advance payments of different kinds, which are recorded as deferred income until earned. Such amounts are typically earned over the term of the contract with the applicable sponsor. Deferred income was $862,493 at March 31, 2000 compared to $694,396 at December 31, 1999. A sponsorship fee of $250,000 was received in the first quarter of 2000. It is anticipated, but cannot be guaranteed, that sponsorship fees and advances will be a source of cash flow in 2000. Operating Activities. Net cash provided by operating activities was $164,936 for the three months ended March 31, 2000 compared to net cash used in operating activities of $406,010 for the three months ended March 31, 1999. The primary reason for the positive operating cash flow in 2000 versus negative operating cash flow in 1999 relates to a more favorable change in 2000 in accounts payable and accrued expenses offset by higher collections of receivables in 1999. Investing Activities. Net cash used in investing activities was $17,615 and $154,488 for the three months ended March 31, 2000 and 1999, respectively. The larger expenditures in 1999 are attributed to the SportPark being newly opened (the SportPark opened in October 1998) and the refinements that were being made to the facility at that time. Financing Activities. Net cash used in financing activities was $90,127 and $394,465 for the three months ended March 31, 2000 and 1999, respectively. The primary reason for the smaller use of cash in 2000 is due to the Company not paying the debt service on the SportPark loan. The Company's current and expected sources of working capital are its cash balances that were $175,990 at March 31, 2000 and cash flow from operations including sponsorship fees and advance deposits of various kinds. Working capital needs have been helped by deferring payments to the Lender on the SPLV, land lease payments to the landlord for both the SPLV and CGC, and interest and notes payable balances due to the Company's Chairman and Affiliated Store. Deferrals of payments to the Company's Chairman and Affiliated Store and landlord are expected to continue until the Company has sufficient cash flow to begin making payments. The Company has raised considerable capital in the past 5 years for development projects. The SportPark is now fully operational and well into its second full year of operation. The Callaway Golf Center is generating positive cash flow and its prospects are expected to become even more positive as it moves into its third full year of operation. The Company believes that any working capital deficiency that may occur could be funded from a combination of existing cash balances and, if necessary, additional borrowings from lenders or other sources. Management believes that additional borrowings against the CGC could be arranged to fund corporate operations. However, there can be no assurance that any borrowings would be available or at terms acceptable to the Company. 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. 15 SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for 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. 16 PART II - OTHER INFORMATION Item 1. Legal Proceedings. On March 22, 2000, D&R Builders, Inc., doing business as Breslin Buildings, filed a complaint in the District Court of Clark County, Nevada against the Company and its landlord, seeking damages for breach of contract, mechanics' lien foreclosure and unjust enrichment. The plaintiff contends that it is entitled to $243,883 for work performed. The Company has not yet filed an answer to this complaint. At March 31, 2000 and December 31, 1999, the Company had accrued a liability for the amount claimed. Item 2. Changes in Securities. During the quarter ended March 31, 2000, the Company issued 150,000 shares of its Common Stock which were not registered under the Securities Act of 1933, as amended, to two persons who are consultants to the Company in exchange for services valued at $116,730. In connection with these issuances, the Company relied on Section 4(2) of the Securities Act of 1933, as amended. The shares were offered for investment only to sophisticated investors and not for the purpose of resale or distribution, and the transfer thereof was appropriately restricted by the Company. 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. 27 Financial Data Schedule Filed herewith electronically (b) Reports on Form 8-K. None. 17 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, 2000 By:/s/ Ronald S. Boreta Ronald S. Boreta, President and Chief Executive Officer Date: May 15, 2000 By:/s/ Kirk Hartle Kirk Hartle, Chief Financial Officer 18 EXHIBIT INDEX EXHIBIT METHOD OF FILING - ------- ---------------- 27. FINANCIAL DATA SCHEDULE Filed herewith electronically EX-27 2
5 This schedule contains summary financial information extracted from the unaudited condensed balance sheets and unaudited condensed statements of income found on pages 3 and 4 of the Company's Form 10-QSB for the year to date, and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-2000 MAR-31-2000 175,990 0 121,255 0 39,371 711,695 23,634,524 0 25,681,293 15,925,940 0 3,150 0 7,240,000 (2,703,193) 25,681,293 1,563,396 1,563,396 356,397 356,397 1,716,875 0 382,210 (892,086) 0 (892,086) 0 0 0 (892,086) (.29) (.29)
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