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EX-31 - GLOBAL ACQUISITIONS Corpaaspexhibit31toform10-qa.htm
EX-32 - GLOBAL ACQUISITIONS Corpaaspexhibit32toform10-qa9301.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q/A

 

(Amendment No. 1)

 

x           QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

 

¨         TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 000-24970

 

All-American Sportpark, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

88-0203976

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

6730 South Las Vegas Boulevard

Las Vegas, NV  89119

(Address of principal executive offices)

 

(702) 798-7777

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes x       No ¨

               

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨     No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

                                                                                                          Large accelerated filer ¨                                                                                                  Accelerated filer ¨

 

                                                                                                          Non-accelerated filer ¨  (Do not check if a smaller reporting company)                 Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes       No x

 

The number of shares of Common Stock, $0.001 par value, outstanding on September 30, 2010 was 4,522,123 shares.

 


 

 

Explanatory Note

This Amendment No. 1 to the Form 10-Q of All American SportPark, Inc. (the "Company") for the third quarter ended September 30, 2010 is being filed to restate the financial statements and related disclosures as a result of a determination by the Company that amounts received from the Callaway Golf Company ("Callaway") under its customer agreement entered into in June 2009 were not accounted for properly. The original accounting and effects of the resulting adjustments are as follows:

·      The $750,000 received from Callaway for operating expenses of the Company under the customer agreement, which was originally recorded as deferred marketing revenue has been restated to be an offset to the general and administrative expenses of the Company. This resulted in a reduction of such expenses by $750,000.

·      The $554,552 received from Callaway for range and other leasehold improvements, which was originally recorded as deferred marketing revenue and property and equipment has been reversed. This contribution from Callaway equaled the expenditures for the property and equipment. Accordingly, this resulted in no value being included in the Company's balance sheet for such leasehold and range improvements.

·      As a result of the elimination of deferred marketing revenue, the Company's revenues were decreased by the amount of amortized marketing revenue that was recorded. In addition, depreciation expense related to the property and equipment was reduced.

·      There is a change to the non-controlling interest based on a change in the recording of the $750,000, which increases the non-controlling interest for 2009 and the original calculations for non-controlling interest recorded in 2009 was incorrect.

 


 

 

All-American Sportpark, inc.

Form 10-Q

Index

 

 

 

Page

 

 

 

Number

Part I:

Financial Information

 

 

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

 

 

 

  September 30, 2010 (unaudited) and December 31, 2009 (Restated)

 

1

 

 

 

 

 

Condensed Consolidated Statements of Operations (unaudited)

 

 

 

  For the Three and Nine Months Ended September 30, 2010

 

 

 

   and 2009 (restated)

 

3

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (unaudited)

 

 

  For the Nine Months Ended September 30, 2010 and 2009 (restated).

 

 

4

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition

 

 

 

  And Results of Operations

 

15

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

24

 

 

 

 

Item 4.

Controls and Procedures

 

25

 

 

 

 

Part II:

Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

26

 

 

 

 

Item 1A.

Risk Factors

 

26

 

 

 

 

Item 2.

Changes in Securities

 

26

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

26

 

 

 

 

Item 4.

(Removed and Reserved)

 

26

 

 

 

 

Item 5.

Other Information

 

26

 

 

 

 

Item 6.

Exhibits

 

26

 

 

 

 

Signatures

 

 

27

 


 

 

PART 1 – FINANCIAL INFORMATION

Item 1 Financial Statements

All-American SportPark, Inc.

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

September 30,

December 31,

 

 

 

 

 

2010

2009

 

 

 

 

 

(Unaudited)

(Restated)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash

 

$

89,699

$

272,750

 

Accounts receivable

 

4,033

 

1,193

 

Prepaid expenses and other

 

6,481

 

23,792

 

 

Total current assets

 

100,213

 

297,735

 

 

 

 

 

 

 

 

 

Property and equipment,

 

 

 

  

 

 net of accumulated depreciation of $762,881 and $689,006,

 

 

 

 

 

 respectively

 

781,370

 

691,895

 

 

 

Total Assets

 

 

 

 

 

 

 

 

 

$

881,583

$

989,630

Liabilities and Stockholders' (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued expenses

$

200,126  

$

154,091  

 

Current portion of notes payable related parties

 

4,095,511

 

4,025,970

 

Current portion due to related parties

 

1,145,576

 

1,089,040

 

Current portion of capital lease obligation

 

22,415

 

-

 

Accrued interest payable - related party

 

4,037,302

 

3,890,858

 

 

Total current liabilities

 

9,500,930

 

9,159,959

 

 

 

 

 

 

 

 

    

Long-term liabilities:

 

 

 

 

 

Long-term portion of capital lease obligation

 

63,710

 

 -  

 

Deferred rent liability

 

694,271

 

690,636

 

 

Total long-term liabilities

 

757,981

 

690,636

 

 

 

 

 

 

 

 

       

Stockholders' (deficit):

 

 

 

 

 

Preferred stock, Series "B", $0.001 par value, 10,000,000

 

 

 

 

shares authorized, no shares issued and outstanding

 

 

 

 

 

 

as of September 30, 2009 and December 31, 2008, respectively

   -

 

-

 

Common stock, $0.001 par value, 50,000,000 shares

 

 

 

               

 

 

authorized, 4,522,123, and 3,570,000 shares issued and

outstanding as of September 30, 2010 and

 

 

 

 

December 31, 2009, respectively

4,522

 

3,570

 

Additional paid-in capital

 

14,387,972

 

14,274,669

 

1


 

 

 

 

Accumulated (deficit)

 

(24,013,756)

 

(23,398,530)

 

 

Total All-American SportPark, Inc. stockholders' (deficit)

 

(9,621,262)

 

(9,120,291)

 

 

 

 

 

 

 

Noncontrolling interest in net assets of subsidiary

 

243,934

 

259,326

 

 

Total stockholders' deficit

 

(9,377,328)    

 

(8,860,965)

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' (Deficit)

$

881,583

$

989,630

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2


 

 

ALL-AMERICAN SPORTPARK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

For the Three Months Ending

For the Nine Months Ending

 

 

 

 

 

September 30, 2010

September 30, 2010

 

 

 

 

 

2010

 

2009

2010

 

2009

 

 

 

 

 

 

 

 

(Restated)

 

 

 

(Restated)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

401,728

 

$

467,981

$

1,414,303

 

$

    1,577,490

Revenue - Related Party

 

39,012

 

 

39,012

 

117,936

 

 

       117,936

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

440,740

 

 

506,993

 

1,532,239

 

 

    1,695,426

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

184,638

 

 

216,229

 

537,808

 

 

       670,120

 

 

 

 

 

 

256,102

 

 

290,764

 

994,431

 

 

1,025,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

402,588

 

 

(342,200)

 

1,158,574

 

 

418,962

 

Depreciation and amortization

 

26,750

 

 

24,421

 

73,875

 

 

        64,848

 

 

Total expenses

 

429,338

 

 

(317,779)

 

1,232,449

 

 

   483,810   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

(173,236)

 

 

608,543

 

(238,018)

 

 

      541,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(157,981)

 

 

(96,963)

 

(392,625)

 

 

      (344,654)

 

Interest income

 

   8

 

 

 53

 

  25

 

 

               53

 

Other income (expense)

 

 -  

 

 

(30)

 

  -  

 

 

          2,538

 

 

Total other income (expense)

 

(157,573)

 

 

(96,940)

 

(392,600)

 

 

      (342,063)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(330,809)

 

 

511,603

 

(630,618)

 

 

       199,433

Net income (loss) attributable to noncontrolling interests

 

(55,552)

 

 

359,591

 

(15,392)

 

 

       362,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to All-American SportPark, Inc.

$

(275,257)

 

$

152,012

$

(615,226)

 

$

        (163,523)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share - basic and fully diluted

$

(0.08)

 

$

0.04

$

(0.27)

 

$

(0.05)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of

 

 

 

 

 

 

 

 

 

 

 

common shares outstanding - basic and fully diluted

 

3,642,444

 

 

3,570,000

 

3,594,413

 

 

    3,570,000

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

3


 

 

ALL-AMERICAN SPORTPARK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

For the Nine Months Ending

 

 

 

 

 

 

September 30, 2010

 

 

 

 

 

 

2010

 

2009

Cash flows from operating activities

 

 

 

 

(Restated)

 

 

 

 

 

 

 

Net (loss)

 

$

(630,618)

 

$

199,433

Adjustments to reconcile net (loss) to

 

 

 

 

 

 

 

net cash (used) in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

73,875

 

 

64,848

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,840)

 

 

 (4,122)

 

 

Prepaid expenses and other

 

 

17,311

 

 

 (895)

 

 

Accounts payable and accrued expenses

 

 

 46,035

 

 

 64,825

 

 

Deferred rent liability

 

 

  3,635

 

 

123,699

 

 

Accrued interest payable - related party

 

 

260,699

 

 

324,847

Net cash (used) by operating activities

 

 

(231,903)

 

 

772,635

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(64,350)

 

 

  -  

Net cash used by operating activities

 

 

(64,350)

 

 

  -  

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Bank overdrafts

 

 

   -  

 

 

(17,631)

 

Proceeds (payments) from related parties

 

 

56,535

 

 

(267,286)

 

Payments on capital lease obligation

 

 

(12,874)

 

 

    -   

 

Proceeds from notes payable - related parties

 

 

139,082

 

 

30,000

 

Payments on notes payable - related party

 

 

(69,541)

 

 

(167,896)

Net cash provided (used) by financing activities

 

 

113,202

 

 

(422,813)

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

(183,0510)

 

 

349,821

Cash - beginning

 

 

272,750

 

 

     -  

Cash - ending

 

$

89,699

 

$

349,821

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

Interest paid

 

$

361,938

 

$

1,221

 

Income taxes paid

 

$

  -  

 

$

 -  

 

 

 

 

 

 

 

 

 

 

 

Schedule of non-cash investing and financing activities

 

 

 

 

 

 

 

Assumption of capital lease obligation

 

$

 99,000

 

$

-  

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for Accrued Interest

 

$

 114,255

 

$

-  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

 

All-American Sportpark, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 – Basis of presentation

 

The condensed consolidated interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by All-American SportPark, Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

 

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein.  It is suggested that these consolidated interim financial statements be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2009 and notes thereto included in the Company's Amendment No. 1 to the Form 10-K.  The Company follows the same accounting policies in the preparation of consolidated interim reports.

 

Results of operations for the interim periods may not be indicative of annual results.

 

Certain reclassifications have been made in prior periods’ financial statements to conform to classifications used in the current period.

 

Note 2 – Going concern

 

As of September 30, 2010, we had an accumulated deficit of $24,013,756. In addition, the Company’s current liabilities exceed its current assets by $9,400,717 as of September 30, 2010. These conditions have raised substantial doubt about the Company's ability to continue as a going concern.  Although our recent growth has greatly improved cash flows, we nonetheless need to obtain additional financing to fund payment of obligations and to provide working capital for operations.  Management is seeking additional financing, and is now looking for a merger or acquisition candidate. It is management’s objective to review the acquisition of interests in various business opportunities, which in their opinion will provide a profit to the Company.  Management believes these efforts will generate sufficient cash flows from future operations to pay the Company's obligations and working capital needs.  There is no assurance any of these transactions will occur. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

 

5


 

 

Note 3 – Recent accounting Policies

 

The FASB Accounting Standards Codification is the single official source of authoritative, nongovernmental, U.S. GAAP, in addition to guidance issued by the Securities and Exchange Commission.  This codification is designed to simplify U.S. GAAP into a single, topically ordered structure.

 

The Consolidation of Variable Interest Entities addresses the effect of the elimination of the qualifying special-purpose entity concept of “Accounting for Transfers of Financial Assets.”  This also amends the accounting and disclosure requirements of FASB to enhance the timeliness and usefulness of information about a company’s involvement in a variable interest entity.

 

                In accordance with accounting standards “Accounting for Transfers of Financial Assets”, the objective eliminates the concept of special-purpose entity, requiring the reporting entity to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk to the assets, changes the requirements for the de-recognition of financial assets, and provides for the sellers of the assets to make additional disclosures.

 

In accordance with accounting standards concerning “The Fair Value Option for Financial Assets and Financial Liabilities” relates to providing guidance on when the volume and level of activity for the asset or liability have significantly decreased and identifying transaction s that are not orderly.  The update clarifies the methodology to be used to determine fair value when there is no active market or where the price inputs being used represent distressed sales.  The update also reaffirms the objective of fair value measurement, which is to reflect how much an asset would be sold in and orderly transaction, and the need to use judgment too determine if a formerly active market has become inactive.

 

“Fair Value Measurements and Disclosures” clarifies the fair market value measurement of liabilities.  In circumstances where a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques:  a technique that uses quoted price of the identical or a similar liability or liabilities when traded as an asset or assets, or another valuation technique that is consistent with the principles such as income or market approach.

 

Fair value measurements:  An update to the accounting standards concerning fair value measurements was made in January of 2010 whereby there now exists significant transfers in and out of Levels 1 and 2 and additional disclosures that must be made for activity in Level 3.  We don not anticipate the adoption of this ASU to have a material impact on our consolidated financial statements.

 

Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality:  An improvement to the comparability by elimination of diversity in practice about treatment of modifications of loans accounted for within pools for Receivable – Loans and debt securities acquired with deteriorated credit quality was approved in April 2010.  The amendment clarifies guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration.  We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

6


 

 

 

Note 4 – Noncontrolling interest

 

Non-controlling interest represents the minority stockholders’ proportionate share of the equity of AAGC. At September 30, 2010, we owned 51% of AAGC’s capital stock, representing voting control and a majority interest. Our controlling ownership interest requires that AAGC’s operations be included in the Condensed Consolidated Financial Statements contained herein. The 49% equity interest that is not owned by us is shown as “Non-controlling interest in consolidated subsidiary” in the Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets. As of September 30, 2010, St. Andrews Golf Shop, our minority interest partner and a related party (see Note 6) held a $243,934 interest in the net asset value of our subsidiary AAGC and an $362,956 interest in the net income from operations of AAGC.

 

Note 5 – Related party transactions

Due to related parties

The Company’s employees provide administrative/accounting support for (a) a golf retail stores wholly-owned by the Company's Chairman, named Las Vegas Discount Golf and Tennis (the "Paradise Store”), b) three golf retail stores, two of which are named Saint Andrews Golf Shop ("SAGS") and the other is a Las Vegas Golf and Tennis ("District Store"), owned by the Company's President and his brother, and (c) Sports Entertainment Enterprises, Inc. until February 2005. One of the SAGS stores is the retail tenant in the CGC.

Administrative/accounting payroll and employee benefits expenses are allocated based on an annual review of the personnel time expended for each entity. Amounts allocated to these related parties by the Company approximated $82,000 and $94,000 for the years September 30, 2010 and 2009, respectively. The Company records this allocation by reducing the related expenses and allocating them to the related parties.

In addition to the administrative/accounting support provided by the Company to the above stores, the Company received funding for operations from these and various other stores owned by the Company’s President, his brother, and Chairman. These funds helped pay for office supplies, phone charges, postages, and salaries. The net amount due to these stores totaled $1,145,576 and $1,089,040 as of September 30, 2010 and December 31, 2009, respectively. The amounts are non-interest bearing and due out of available cash flows of the Company. Additionally, the Company has the right to offset the administrative/accounting support against the funds received from these stores.

7


 

 

Notes and Interest Payable to Related Parties:

The Company has various notes and interest payable to the following entities as of September 30, 2010 and December 31, 2009, respectively:

                                                                                         2010                     2009

Various notes payable to the Paradise Store
bearing 10% per annum and due on demand     $          $3,200,149            $3,200,149

Note payable to BE Holdings 1, LLC,
owned by the chairman of the board,
bearing 10% per annum and due on demand                      100,000                 100,000

Various notes payable to SAGS, bearing 10%
per annum and due on demand                                           630,846                 630,580

Various notes payable to the District Store,
bearing 10% per annum and due on demand                        85,000                   85,000

Note payable to BE, III bearing 10% per annum
and due on demand                                                             75,000 

Note payable to SAGS for phone system,
payable in monthly payments of $457 through
2011                                                                                     4,516                   10,241

Total                                                                            $4,095,511            $4,025,970

 

In 2005, ANR, LLC ("ANR"), advanced the Company $800,000, to complete the settlement of action involving Sierra SportService Inc. Andre K. Agassi owns ANR. Mr. Agassi also owns ASI Group LLC, which is a principal shareholder of the Company. The promissory notes representing these obligations are personally guaranteed by Ronald S. Boreta, the Company's President. Interest accrues at 5% per annum, and the notes, including related interest, are payable on demand. The accrued interest payable balance at December 31, 2009 was $114,255. During September 2010, the Company issued 952,123 shares of common stock in satisfaction of the $114,255 balance as discussed in Note 9.

 

All maturities of related party notes payable and the related accrued interest payable as of September 20, 2010 are due and payable upon demand. At September 30, 2010, the Company has no loans or other obligations with restrictive debt or similar covenants.

 

On June 15, 2009, the Company entered into a “Stock Transfer Agreement” with St. Andrews Golf, Ltd. a Nevada limited liability company, which is wholly-owned by Ronald Boreta, our chief executive officer and John Boreta, a principal shareholder of the Company. Pursuant to this agreement, we agreed to transfer a 49% interest in our wholly owned subsidiary, AAGC as a partial principal payment in the amount of $600,000 on the Company’s outstanding loan due to St. Andrews Golf Shop, Ltd. In March 2009, the Company engaged the services of an independent third party business valuation firm, Houlihan Valuation Advisors, to determine the fair value of the business and the corresponding minority interest. Based on the Minority Value Estimate presented in connection with this appraisal, which included valuations utilizing the income, market and transaction approaches in its valuation methodology, the fair value of a 49% interest totaled $ 600,000.

8


 

 

As of September 30, 2010 and December 31, 2009, accrued interest payable - related parties related to the notes payable – related parties totaled $4,037,302 and $3,890,858, respectively.

Lease to SAGS

The Company subleases space in the clubhouse to SAGS. Base rent includes $13,104 per month through July 2012 with a 5% increase for each of two 5-year options to extend in July 2012 and July 2017. For the nine month ending September 30, 2010 and 2009, the Company recognized rental income totaling $117,936 and $117,936 respectively.

Note 7 – Commitments

 

Lease agreements

 

The land underlying the CGC is leased under an operating lease that expires in 2012 and has two five-year renewal options.  In March 2006, the Company exercised the first of two options, extending the lease to 2018.  Also, the lease has a provision for contingent rent to be paid by AAGC upon reaching certain levels of gross revenues.  The Company recognizes the minimum rental expense on a straight-line basis over the term of the lease, which includes the two five year renewal options.

 

The Company is also obligated under a non-cancelable operating lease for equipment that expire year in 2009. 

 

At September 30, 2010, minimum future lease payments under non-cancelable operating leases are as follows:

 

2010

 

$     120,418

2011

 

481,673

2012

 

493,715

2013

 

529,840

2014

 

529,840

Thereafter

 

4,371,184

 

 

$  6,526,670

 

Total rent expense for all operating leases was $364,544 and $364,537 for the nine months ended September 30, 2010 and 2009.

 

9


 

 

Capital Lease

 

The company entered into a capital lease for new Club Car gas powered golf carts.  The lease is 47 months in length and started on March 1, 2010.  The company realizes $2,620 a month in interest expense related to the lease.

 

The following is a schedule by year of future principal payments required under this lease agreement.

 

 

                                                            2010                                        $            5,360

                                                            2011                                                    23,080

                                                            2012                                                    25,941

                                                            2013                                                    29,157

                                                            2014                                                      2,587

 

                                                                                                            $          86,125

 

 

Accumulated depreciation for the Capital Lease as of September 30, 2010 and December 31, 2009 is $14,744 and $0 respectively

Customer Agreement

On June 19, 2009, the Company entered into a “Customer Agreement” with Callaway Golf Company (“Callaway”) and St. Andrews Golf Shop, Ltd. (“SAGS”) through our majority owned subsidiary AAGC. Pursuant to this agreement, AAGC shall expend an amount equal to or exceeding $250,000 for marketing and promotion of Callaway for a period of approximately three and one half years with an automatic extension to December 31, 2018 unless written notice of termination is received by November 2013. Additionally, AAGC will expend amounts to improve both their range facility as well as the golfing center. These improvements are to include Callaway Golf® branding elements. Callaway has agreed to provide funding and resources in the minimum amount of $2,750,000 to be allocated as follows: 1) $750,000 towards operating expenses of AAGC; 2) $750,000 towards facility improvements for both AAGC and St. Andrews Golf Shop; 3) $500,000 in range landing area improvements of AAGC and 4) three payments each of $250,000 for annual advertising expenses paid by AAGC, which will be repaid in golf related products to SAGS. AAGC will then be reimbursed by SAGS for AAGC’s expenditures in advertising as incurred. In substance, due to the related party nature of SAGS, the Company is also considered a customer of Callaway as it relates to this agreement. As a result, we recognized the contributions from Callaway as follows:

·      Contribution of operating expenses totaling $750,000 (received July 2009) was treated as a reduction of operating expenses and therefore reduced our “General and administrative” expense by that amount.

·      Contribution of range and other facility improvements totaling $554,552 were recorded as a reduction of the costs for those improvements. The contributions were exactly equal to the costs and therefore, no value as been recorded for these improvements.

10


 

 

The annual payments for advertising began in 2010 and will continue as long as Callaway, AAGC and SAGS agree to maintain the agreement through the term of the Customer Agreement in December 2018.  Such contributions from Callaway of up to $250,000 annually will be recorded as a reduction of the Company’s costs for the related advertising.  Additionally, the contributions are to be paid to SAGS in the form of golf related products.  SAGS will then reimburse AAGC in the form of monies as the as the related golf products are received.  During the three and nine months ending September 30, 2010, SAGS reimbursed AAGC  $0 and $31,642 respectively.

 

Note 8 – Restatement

 

Amounts received from the Callaway Golf Company (“Callaway”) under its customer agreement entered into in June 2009 were not accounted for properly.  The original accounting and anticipated effects of the resulting adjustments are as follows:

 

The $750,000 received from Callaway for operating expenses of the Company in connection with the “Customer Agreement” referred to in Note 7 of the financial statements, which were originally recorded, as deferred marketing revenue should be immediately recognized as revenue and net with the related operating expenses of the Company.  These operating expenses were included in “General and administrative” expenses.  The result will be a reduction of such expenses by $750,000 for the three and nine month ended September 30, 2009.

 

The $554,552 received from Callaway for range and other leasehold improvements, which were originally recorded as deferred marketing revenue and property and equipment will be reversed.  This contribution from Callaway equaled the expenditures for the property and equipment.  Accordingly, the reversal will result in a value of $0.00 for such leasehold and range improvements as of December 31, 2010.

 

As a result of the deferred marketing revenue reversal, $13,899 and $13,899 amortized as marketing revenue included in the “Revenue” line item will be for the three and nine months ended September 30, 2010 and 2009, respectively.

 

In addition to the changes related to Callaway, the loss attributable to noncontrolling interest was not correctly calculated for the periods ended September 30, 2010.  As a result of the forgoing changes, the loss attributable to non-controlling interest for the three and nine months ended September 30, totaling $207,237 and $203,872, respectively, will be changed to reflect an income attributable to non-controlling interest for the three and nine months ended September 30, totaling $359,951 and $362,956, respectively.

 

11


 

 

The following table provides additional details regarding the changes to the statement of operations for the nine months ended September 30, 2009:

 

                                                                                                        As previously

                                                                            As restated               reported                  Change     

 

Revenue                                                           $      1,577,490      $      1,591,379      $         (13,889)
Revenue – Related Parties                                           117,936                 117,936                            -

 

Total Revenue                                                          1,695,426              1,709,315                 (13,889)

 

Cost of Revenue                                                          670,120             670,120(a)                             -

 

Gross Profit                                                              1,025,306          1,039,195(a)                 (13,889)

 

Expenses:

      General & administrative                                        418,962          1,168,962(a)               (750,000)

      Depreciation and amortization                                  64,848                   64,848                             -

            Total expenses                                                 483,810          1,233,810(a)              (750,000)

 

Income (loss) from operations                                      541,496               (194,615)               (736,111)

 

Other income (expense)                                             (342,063)               (342,063)                             -

 

Net income (loss)                                                        199,433               (536,678)                 736,111

 

Net income (loss) attributable to

noncontrolling Interest                                                  362,956               (203,872)          (566,828)(b)

 

Total net income (loss)                                      $       (163,523)      $       (332,806)      $         169,283

 

Net income (loss) per share – basic

and fully diluted                                                 $             (0.05)      $             (0.09)      $               0.04

 

 

(a)    Includes $288,000 in certain landscaping costs reclassified from general and administrative expenses to cost of revenues.

 

(b)    Includes the following:

 

Error in original calculation                                                                                $         206,134

Change due to corrections related to Callaway                                                             360,694

 

Total change to noncontrolling interest                                                               $         566,828

 

12


 

 

The following table provides additional details regarding the changes to the statement of operations for the three months ended September 30, 2009:

 

 

                                                                                                        As previously

                                                                            As restated               reported                  Change     

 

Revenue                                                           $         467,981      $         481,870      $         (13,889)

Revenue – Related Parties                                            39,012                    39,012                            -

 

Total Revenue                                                             506,993                 520,882                 (13,889)

 

Cost of Revenue                                                          216,229             216,229(c)                             -

 

Gross Profit                                                                 290,764             304,653(c)                 (13,889)

 

Expenses:

      General & administrative                                     (342,200)             407,800(c)               (750,000)

      Depreciation and amortization                                  24,421                   24,421                             -

            Total expenses                                              (317,779)             432,221(c)              (750,000)

 

Income (loss) from operations                                      608,543               (127,568)                 736,111

 

Other income (expense)                                               (96,940)                 (96,940)                             -

 

Net income (loss)                                                        511,603               (224,508)                 736,111

 

Net income (loss) attributable to

noncontrolling Interest                                                  359,591               (207,237)             566,828(d)

 

Total net income (loss)                                      $         152,012      $        (17,271)      $         169,283

 

Net income (loss) per share – basic

and fully diluted                                                 $               0.04      $             (0.00)      $               0.04

 

 

(c)    Includes $96,000 in certain landscaping costs reclassified from general and administrative expenses to cost of revenues.

 

(d)    Includes the following:

 

Error in original calculation                                                                                $         206,134

Change due to corrections related to Callaway                                                             360,694

 

Total change to noncontrolling interest                                                               $         566,828

 

13


 

 

The following table provides additional details regarding the changes to the balance sheet as of December 31, 2009

 

 

                                                                                                        As previously

                                                                            As restated               reported                  Change     

 

 

Current assets                                                   $         297,735      $         297,735      $                   --

 

Leasehold improvements and equipment                    1,246,447                 691,895               (554,552)

 

Total Assets                                                     $         989,630      $      1,544,182      $       (554,552)

 

Current liabilities                                               $      9,159,959      $      9,215,550      $         (55,591)

 

Long-term liabilities                                                      690,636              1,906,382            (1,215,746)

 

Total All-American SportPark, Inc. stockholders’

      (deficit)                                                            (9,120,291)            (9,393,541)               (273,250)

 

Noncontrolling interest in subsidiary                              259,326               (184,209)                 443,535

 

Total stockholders’ (deficit)                                    (8,860,965)            (9,577,750)                 716,785

 

Total liabilities and stockholders’

(deficit)                                                            $         989,630       $     1,544,182       $       (554,552)

 

Note 10 – Stockholders' deficit

 

We are authorized to issue 5,000,000 shares of $0.001 par value preferred stock and 10,000,000 shares of $0.001 par value common stock.

 

Preferred stock

 

As of September 30, 2010, we had no preferred shares issued and outstanding.

 

Common stock

 

As of September 30, 2010, we had 4,522,123 shares of our $0.001 par value common stock issued and outstanding. In September 2010 we issued stock for interest payable to AKA  Investments LLC (“AKA”) that remained from a note paid in September 2008.  This interest had remained unpaid on the Company’s books and pursuant to the terms of an agreement with AKA, 952,123 shares of stock were issued to AKA at a value of $.12 a share to settle the interest due of $114,252.  As a result of the issuance of these shares of common stock, Andre K. Agassi and certain related entities now have beneficial ownership of 1,589,167 shares of the Company's common stock which represents approximately 35.1% of the shares outstanding.

 

14


 

 

Note 11 – Subsequent events

Upon our evaluation of events and transactions that have occurred subsequent to the balance sheet date, we have determined that there are no additional material events which have occurred after the balance sheet date that would be deemed significant or require recognition or additional disclosure.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

This document contains “forward-looking statements.” All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

 

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

 

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors affecting these risks and uncertainties include, but are not limited to:

 

·        increased competitive pressures from existing competitors and new entrants;

·        deterioration in general or regional economic conditions;

·        adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;

·        loss of customers or sales weakness;

·        inability to achieve future sales levels or other operating results;

·        the inability of management to effectively implement our strategies and business plans; and

·        the other risks and uncertainties detailed in this report.

 

 

15


 

 

Overview of Current Operations

On June 19, 2009, the Company entered into a “Customer Agreement” with Callaway Golf Company (“Callaway”) and St. Andrews Golf Shop, Ltd. (“SAGS”) through our majority owned subsidiary AAGC. Pursuant to this agreement, AAGC shall expend an amount equal to or exceeding $250,000 for marketing and promotion of Callaway for a period of approximately three and one half years with an automatic extension to December 31, 2018 unless written notice of termination is received by November 2013. Additionally, AAGC will expend amounts to improve both their range facility as well as the golfing center. These improvements are to include Callaway Golf® branding elements. Callaway has agreed to provide funding and resources in the minimum amount of $2,750,000 to be allocated as follows: 1) $750,000 towards operating expenses of AAGC; 2) $750,000 towards facility improvements for both AAGC and St. Andrews Golf Shop; 3) $500,000 in range landing area improvements of AAGC and 4) three payments each of $250,000 for annual advertising expenses paid by AAGC, which will be repaid in golf related products to SAGS. AAGC will then be reimbursed by SAGS for AAGC’s expenditures in advertising as incurred. In substance, due to the related party nature of SAGS, the Company is also considered a customer of Callaway as it relates to this agreement. As a result, we recognized the contributions from Callaway as follows:

·      Contribution of operating expenses totaling $750,000 (received July 2009) was treated as a reduction of operating expenses and therefore reduced our “General and administrative” expense by that amount.

·      Contribution of range and other facility improvements totaling $554,552 were recorded as a reduction of the costs for those improvements. The contributions, which were made directly by Callaway Golf Company to the applicable contractors and vendors completing the work, were exactly equal to the costs and therefore, no value as been recorded for these improvements.

The annual payments for advertising began in 2010 and will continue as long as Callaway, AAGC and SAGS agree to maintain the agreement through the term of the Customer Agreement in December 2018.  Such contributions from Callaway of up to $250,000 annually will be recorded as a reduction of the Company’s costs for the related advertising.  Additionally, the contributions are to be paid to SAGS in the form of golf related products.  SAGS will then reimburse AAGC in the form of monies as the as the related golf products are received.  During the three and nine months ending September 30, 2010, SAGS reimbursed AAGC  $0 and $31,642 respectively.

            Our agreement with Geneva Landscape Management ended January 31, 2010 after 5 years.  Geneva provided all of our landscape needs at approximately $32,000 a month.  We have taken the grounds keeping for the facility in-house starting February 1, 2010 and feel this will provide an overall savings to the company as well as allow us to have more of a personal say in the landscape needs of the facility

 

 

16


 

Results of Operations for the three months ended September 30, 2010 and 2009 compared.

The following tables summarize selected items from the statement of operations for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

 

INCOME:

 

 

For the three months ended

September 30,

 

 

Increase (Decrease)

 

 

2010

 

2009

 

$

 

%

 

 

 

 

 

 

 

 

 

Revenue

$

401,728

$

467,981

 

(66,253)

 

(14.16)%

Revenue – Related Party

 

39,012

 

39,012

 

       -

 

-

Cost of Sales

 

184,638

 

216,229

 

(31,591)

 

(14.61)%

 

 

 

 

 

 

 

 

 

Gross Profit

$

256,102

$

290,764

 

(34,662)

 

(11.92)%

 

 

 

 

 

 

 

 

 

Gross Profit Percentage of Sales

 

58%

 

57%

 

 

 

 

 

Revenue

 

Our revenue for the three months ended September 30, 2010 was $401,728 compared to revenue of $467,981 in the three months ended September 30, 2009, a decrease of $66,253, or (14.61)% from the same three-month period in the previous year. Our overall revenue was down for the three months ending September 30, 2010 by approximately 15% due to the economic downturn facing Las Vegas and the rest of our country.

 

Related party revenue for the three months ended September, 2010 was $39,012 and $39,012 for the same period through September 30, 2009.

 

Cost of sales/Gross profit percentage of sales

 

            Cost of sales currently consists mainly of payroll and benefits expenses of AAGC staff, and operating supplies.  Our cost of sales for the three months ended September 30, 2010 was $184,638, a decrease of $31,591, or 14.61% from $216,229 for the same three month period ending September 30, 2009.  Our costs of goods have improved for the three month period ending September 30, 2010 due to a conscience effort by our staff to curb operational expenses during the economic downturn.

 

            Gross profit as a percentage of sales stayed approximately the same at 58% for the three months ended September 30, 2010 and September 30, 2009.

 

 

17


 

 

EXPENSES:

 

 

 

 

 

 

For the Three Months Ending

September 30,


 

 

 

 

 

 

 

 

 

 

 

2010

 

2009

Increase

$

Decrease

%

 

 

 

 

 

 

Amount

 

Amount

Expenses:

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 402,588

 

 

(342,200)

744,788

217.65%

 

 

Depreciation and amortization

 

26,750

 

 

 24,421

2,329

9.54%

 

 

 

Total expenses

 

429,338

 

 

(317,779)

747,117

235.11%

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

(173,236)

 

 

 608,543

(781,779)

(128.47)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest expense

 

(157,581)

 

 

(96,963)

(60,618)

(62.52)%

 

 

Interest income

 

8  

 

 

    53

 (45)

(84.9)%

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

-

 

 

(30)

30

100%

 

 

 

Total other income (expense)

 

(157,573)

 

 

(96,940)

 (60,633)

62.55%

 

 

 

 

 

 

 

 

 

 

     -

 

 

Net income (loss)

 

(330,809)

 

 

511,603

(842,412)

(164.66)%

 

Net income (loss) attributable to noncontrolling interests

 

(55,552)

 

 

359,591

415,143

(115.45)%

 

 

 

 

 

 

 

 

 

 

   -

 

 

Net income (loss) attributable to All-American

SportPark, Inc.

$

(275,257)

 

$

52,012

          (427,269)

(281.08)%

 

 

General and Administrative Expenses

 

General and administrative expenses for the three months ended September 30, 2010 were $402,588, an increase of $744,788 or 217.65%, from $(342,200) for the three months ended September 30, 2009. The increase is primarily a result of the $750,000 received under the Customer Agreement with Callaway for operating expenses in July 2009 which offset general and administrative expenses for that period

 

Depreciation expense

 

            Depreciation and amortization expenses for the three months ended September 30, 2010 were $26,750, an increase of $2,329, or 9.54%, from $24,421 for the three months ended September 30, 2009.  The slight increase in depreciation is attributed to some fixed assets purchased during 2010 to help the grounds keeping staff perform their duties.

 

Total expenses

 

Our overall operating expenses increased with expenses totaling $429,338 for the three months ended September 30, 2010 compared to ($317,779) for the three months ended September 30, 2009.  The increase is primarily a result of the $750,000 received under the Customer Agreement with Callaway for operating expenses in July 2009 which offset general and administrative expenses for that period. 

 

18


 

 

Income (loss) from operations

 

We had a loss from operations in the amount of $173,236 for the three months ended September 30, 2010 versus a net income of $608,543 for the three months ended September 30, 2009.

 

Interest Expense

 

Our interest expense increased 62.5% from $96,963 for the three months ended September 30, 2009 to $157,581 for the three months ended September 30, 2010. The increase is attributed the continued interest calculated for notes payable on a monthly basis, as well as interest associated with the capital lease.

 

Net Income (Loss)

 

Our net loss for the three months ended September 30, 2010 was $330,809 (before non-controlling interest) as compared with net income of $511,603 for the same period in 2009. The difference is due to the fact that the credit against general and administrative of $750,000 in 2009 made the expenses significantly lower during 2009. 

 

Results of Operations for the nine months ended September 30, 2010 and 2009 compared.

 

The following tables summarize selected items from the statement of operations for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

 

INCOME:

 

 

For the nine months ended

September 30,

 

 

Increase (Decrease)

 

 

2010

 

2009

 

$

 

%

 

 

 

 

 

 

 

 

 

Revenue

$

1,414,303

 

$1,577,490

 

(163,187)

 

(10.34)%

Revenue – Related Party

 

117,936

 

117,936

 

-

 

0%

Cost of Sales

 

537,808

 

670,120

 

(132,312) 

 

(19.75)%

 

 

 

 

 

 

 

 

 

Gross Profit

$

994,431

$

1,025,306

(30,875)

 

(3.01)%

 

 

 

 

 

 

 

 

 

Gross Profit Percentage of Sales

 

65%

 

60%

 

 

 

 

 

Revenue

 

Our revenue for the nine months ended September 30, 2010 was $1,414,303 compared to revenue of $1,577,490 in the nine months ended September 30, 2009, a decrease of $163,187, or     (10.34)% from the same nine-month period in the previous year. Our overall revenue is down through the nine-months ending September 30, 2010 by approximately 15% due to the economic downturn facing Las Vegas and the rest of our country.

 

Revenue Related Party for the three months ended September 30, 2010 was $117,936 and $117,936 for the same period in 2009. 

19


 

 

 

Cost of sales/Gross profit percentage of sales

 

            Cost of sales currently consists mainly of payroll and benefits expenses of AAGC staff, and operating supplies.  Our cost of sales for the nine months ended September 30, 2010 was $537,808, a decrease of $132,312 or (19.75)% or $670,120 for the same nine month period ending September 30, 2009.  Our costs of goods improved for the three month period ending September 30, 2010 due to a conscience effort by our staff to curb operational expenses during the economic downturn.

 

            Gross profit as a percentage of sales increased from 60% for the nine months ended September 30, 2009 to 65% for the nine months ended September 30, 2010 due a conscious effort of our staff to curb spending during these tough economic times in Las Vegas and around the country.

 

EXPENSES:

 

 

 

 

 

 

For the Nine Months Ending

 

 

 

 

 

 

 

 

 

September 30, 2010

 

 

 

 

 

 

 

 

 

2010

 

2009

 

Increase

 

Decrease

 

 

 

 

 

Amount

 

Amount

 

$

 

%

Expenses:

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

$

       1,158,574

 

$

       418,962

 

739,612

 

176.73%

 

Depreciation and amortization

 

73,785

 

 

64,848

 

8,937

 

13.78%

 

 

Total expenses

 

       1,232,449

 

 

483,810

 

748,639

 

154.74%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

(238,018)

 

 

541,496

 

(779,514)

 

(143.96)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(392,625)

 

 

(344,654)

 

(47,971)

 

(13.92)%

 

Interest income

 

25  

 

 

53

 

(28)

 

(52.83)%

 

Other income (expense)

 

-

 

 

2,538

 

(2,538)

 

(100)%

 

 

Total other income (expense)

 

(392,600)

 

 

(342,063)

 

(50,537)

 

(14.77)%

 

 

 

 

 

 

 

 

 

 

 

   -

 

 

Net income (loss)

 

(630,618)

 

 

199,433

 

830,051

 

416.21%

Net income (loss) attributable to noncontrolling interests

 

(15,392)

 

 

362,956

 

       (378,3438)

 

(104.24)%

 

 

 

 

 

 

 

 

 

 

 

  -

 

 

Total net income (loss)

$

(615,226)

 

$

(163,523)

 

(451,703)

 

(276.23)%

 

General and Administrative Expenses

 

General and administrative expenses for the nine months ended September 30, 2010 were $1,158,574, an increase of $739,612 or 176.53%, from $418,962 for the nine months ended September 30, 2009.   The increase in operating expenses in 2010 was due to the fact that the Company received $750,000 under the Customer Agreement with Callaway for operating expenses in July 2009 which offset general and administrative expenses for that period.

20


 

 

 

Depreciation expense

 

            Depreciation and amortization expenses for the nine months ended September 30, 2010 were $73,875, an increase of $8,937, or 13.78%, from $64,848 for the nine months ended September 30, 2009.  The slight increase in depreciation is attributed to some fixed assets purchased during 2010 to help the grounds keeping staff perform their duties.

 

Total expenses

 

Our overall operating expenses increased with expenses totaling $1,234,449 for the nine months ended September 30, 2010 compared to $483,810 for the nine months ended September 30, 2009.  The increase in total expenses in 2010 was due to the fact that the Company received $750,000 under the Customer Agreement with Callaway for operating expenses in July 2009 which offset general and administrative expenses for that period.

 

Loss from operations

 

We had a loss from operations in the amount of $238,018 for the nine months ended September 30, 2010 versus a net income of $541,496 for the nine months ended September 30, 2009.  This is a difference of $779,514.  The decrease in operating expenses in 2010 was due to the fact that the Company received $750,000 under the Customer Agreement with Callaway for operating expenses in July 2009 which offset general and administrative expenses for that period.

 

Interest Expense

 

Our interest expense increased 13.92% from $344,654 for the nine months ended September 30, 2009 to $392,625 for the nine months ended September 30, 2010.  The increase is attributed the continued interest calculated for notes payable on a monthly basis, as well as interest associated with the capital lease.

 

Net Income (Loss)

 

Our net loss for the nine months ended September 30, 2010 was $630,618 (before non-controlling interest) as compared with net income of $199,433 for the same period in 2009.

 

Liquidity and Capital Resources

 

A critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through additional equity and/or debt financing. We do not anticipate generating sufficient positive internal operating cash flow until such time as we can deliver our product to market, complete additional financial service company acquisitions, and generate substantial revenues, which may take the next few years to fully realize. In the event we cannot obtain the necessary financing, we may have to cease or significantly curtail our operations. This would materially impact our ability to continue operations.

 

21


 

 

The following table summarizes our current assets, liabilities, and working capital at September 30, 2010 compared to December 31, 2009.

 

 

 

September 30,

2010

 

December 31, 2009

 

Increase / (Decrease)

$

%

 

 

 

 

 

Current Assets

$         100,213

$         297,735

(197,522)

(66.34)%

Current Liabilities

9,500,930

 9,159,959

340,325

3.72%

Working Capital Deficit

$    (9,400,717)

$   (8,862,224)

(538,493)

(6.08)%

 

 

 

 

 

 

Internal and External Sources of Liquidity

 

Cash Flow. Since inception, we have primarily financed our cash flow requirements through related party debt transactions.  If that source of funding is eliminated it may have a material, adverse affect on our operations. We are currently operating at a loss but with positive cash flow because of deferring related party payables and interest payments.  Though this has allowed us to currently minimize the deferral of our payables, we continue to depend on this source of financing. Should we lose our ability to defer those payables, without a return to profitability, our cash resources will be limited.  On July 1, 2009, we received an initial payment of $750,000 from Callaway Golf Company as part of a $2,750,000 deal to keep Callaway Golf Company involved in our facility through 2018.  This agreement called for remodeling of the present facilities and range landing area, as well as marketing dollars, driving range golf balls and employee uniforms.

 

Satisfaction of our cash obligations for the next 12 months.

 

As of September 30, 2010, our cash balance was $89,699. Our plan for satisfying our cash requirements for the next twelve months is by relying less on-related party financing and using the funds available through our Callaway Golf agreement to help with any cash flow deficiencies.  Because we have not anticipated generating sufficient amounts of positive cash flow to meet our working capital requirements, we have secured a customer agreement with Callaway Golf that will add additional capital to help fund our operations.

 

Given our operating history, predictions of future operating results are difficult to make. Thus, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their various stages of commercial viability. Such risks include, but are not limited to, an evolving business model and the management of growth. To address these risks we, among other things, plan to continue to modify our business plan, implement and execute our marketing strategy, develop and upgrade our facilities in a response to our competitor’s developments.

 

Expected purchase or sale of plant and significant equipment.

 

Pursuant to the agreement entered into on June 19, 2009 with Callaway Golf Company and St. Andrews Golf Shop, we spent approximately $1,200,000 towards the improvements to our existing facility.  The total amount spent on these capital improvements were directly

provided by Callaway Golf Company pursuant to our Customer Agreement with them.   These improvements were finished on November 25, 2009.

22


 

 

  

Going Concern

 

The financial statements included in this filing have been prepared in conformity with generally accepted accounting principles that contemplate the continuance of the Company as a going concern. Management intends to use borrowings and security sales to mitigate the effects of its cash position, however no assurance can be given that debt or equity financing, if and when required will be available. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue existence.

 

Off-Balance Sheet Arrangements

 

            We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Critical Accounting Policies and Estimates

 

Stock-based Compensation:  In accordance with accounting standards concerning Stock-based Compensation, the company accounts for all compensation related to stock, options or warrants using a fair value based method in which compensation cost is measured at the grant date based on the value of the award and is recognized over the service period.  The Company uses the Black-Scholes pricing model to calculate the fair market value of options and warrants issued to both employees and non-employees.  Stock issued for compensation is valued on the date of the related agreement and using the market price of the stock.

 

            Related party transactions:   In accordance with accounting standards concerning related party transactions, there now are established requirements for related party disclosures and the policy provides guidance for the disclosures of transactions between related parties.

 

Subsequent events:  In accordance with accounting standards concerning subsequent events, states that a company is not required to disclose the date through with subsequent events have been evaluated.  The adoption of this ASU did not have a material impact on our consolidated financial statements.

 

Recent Accounting Developments

 

            The FASB Accounting Standards Codification is the single official source of authoritative, nongovernmental, U.S. GAAP, in addition to guidance issued by the Securities and Exchange Commission.  This codification is designed to simplify U.S. GAAP into a single, topically ordered structure.

 

The Consolidation of Variable Interest Entities addresses the effect of the elimination of the qualifying special-purpose entity concept of “Accounting for Transfers of Financial Assets.”  This also amends the accounting and disclosure requirements of FASB to enhance the timeliness and usefulness of information about a company’s involvement in a variable interest entity.

 

23


 

 

 

                In accordance with accounting standards “Accounting for Transfers of Financial Assets”, the objective eliminates the concept of special-purpose entity, requiring the reporting entity to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk to the assets, changes the requirements for the de-recognition of financial assets, and provides for the sellers of the assets to make additional disclosures.

 

In accordance with accounting standards concerning “The Fair Value Option for Financial Assets and Financial Liabilities” relates to providing guidance on when the volume and level of activity for the asset or liability have significantly decreased and identifying transaction s that are not orderly.  The update clarifies the methodology to be used to determine fair value when there is no active market or where the price inputs being used represent distressed sales.  The update also reaffirms the objective of fair value measurement, which is to reflect how much an asset would be sold in and orderly transaction, and the need to use judgment too determine if a formerly active market has become inactive.

 

“Fair Value Measurements and Disclosures” clarifies the fair market value measurement of liabilities.  In circumstances where a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques:  a technique that uses quoted price of the identical or a similar liability or liabilities when traded as an asset or assets, or another valuation technique that is consistent with the principles such as income or market approach.

 

Fair value measurements:  An update to the accounting standards concerning fair value measurements was made in January of 2010 whereby there now exists significant transfers in and out of Levels 1 and 2 and additional disclosures that must be made for activity in Level 3.  We don not anticipate the adoption of this ASU to have a material impact on our consolidated financial statements.

 

Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality:  An improvement to the comparability by elimination of diversity in practice about treatment of modifications of loans accounted for within pools for Receivable – Loans and debt securities acquired with deteriorated credit quality was approved in April 2010.  The amendment clarifies guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration.  We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

24


 

 

Item 4. Controls and Procedures.

 

Our Chief Executive Officer and Principal Financial officer, Ronald Boreta, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our Chief Executive Officer concluded that, as of September 30, 2009, our disclosure controls and procedures are effective in ensuring that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

 

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

25


 

 

PART II--OTHER INFORMATION

 

Item 1.  Legal Proceedings.

 

There are no legal proceedings in which the Company is involved at this time.

 

Item 1A. Risk Factors.

 

Not required.

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

 

            We did not have any unregistered sales of equity securities during the quarter ended September 30, 2010 that have not been reported in a Current Report on Form 8-K.

           

Issuer Purchases of Equity Securities

 

            We did not repurchase any of our equity securities during the quarter ended September 30, 2010.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. (Removed and Reserved)

           

Item 5. Other Information.

 

None.

 

Item 6.  Exhibits.

 

 

 

 

 

 

 

 

Incorporated by reference

Exhibit

number

 

 

Exhibit description

Filed

herewith

 

 

Form

 

Period

ending

 

Exhibit No.

 

Filing

date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1

 

 

Agreement with AKA Investments, LLC dated September 23, 2010

 

 

 

8-K

 

September 23, 2010

 

10.1

 

September 24, 2010

 

31.1

 

 

Certification of Chief  Executive and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.1

 

 

Certification of Chief Executive and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

X

 

 

 

 

 

 

 

 

 

26


 

 

SIGNATURES

           

            In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

ALL-AMERICAN SPORTPARK, INC.

(Registrant)

 

 

 

Date:  December 22, 2010                                                                          By:  /s/ Ronald Boreta                                                  

                                                                                                                    Ronald Boreta, President, Chief Executive Officer,

                                                                                                                    and Treasurer (On behalf of the Registrant and as
                                                                                                                    Principal Financial Officer)

 

 

 

27