GLOBAL ACQUISITIONS Corp - Quarter Report: 2010 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

 

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

 

(Exact name of registrant as specified in its charter)

 

 

(Address of principal executive offices)

 

(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.

 

All-American Sportpark, inc.

Form 10-Q

Index

 

PART 1 – FINANCIAL INFORMATION

Item 1 Financial Statements

All-American SportPark, Inc.

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

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

 

 

 

 

 

 

ALL-AMERICAN SPORTPARK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

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

 

 

ALL-AMERICAN SPORTPARK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

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

 

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.

 

 

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

 

 

 

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 $17,571 interest in the net asset value of our subsidiary AAGC and an $226,363 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.

 

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                                           639,237                 640,821

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

Note payable to SAGS for phone system,
payable in monthly payments of $457 through
2011                                                                                   10,241                   16,269

Total                                                                              4,025,970              4,553,717

Less current portion                                                                       -                  10,782

                                                                                   $4,025,970            $4,542,935                                                                                       

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.

 

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:

 

 

Total rent expense for all operating leases was $694,271 and $690,636 for September 30, 2010 and 2009, respectively.

 

 

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 March 31, 2010 and December 31, 2014 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.

·      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.

 

As a result of the forgoing changes, the loss attributable to noncontrolling interest for the three and nine months ended September 30, 2010 and 2009, totaling $207,237 and $208,872 will be changed to reflect an income attributable to noncontrolling interest totaling $153,457 and $156,822, respectively.

 

 

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                            -                              

 

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

 

Cost of Revenue                                                          382,120                 382,120                             

 

Gross Profit                                                              1,313,306              1,327,195                 (13,889)

 

Expenses:

      General & administrative                                        706,962              1,456,962               (750,000)

      Depreciation and amortization                                  64,848                   64,848                             -

            Total expenses                                                 771,810              1,521,810              (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                                                  156,822               (203,872)                 360,694

 

Total net income (loss)                                      $           42,611      $       (322,806)      $         375,417

 

Net income (loss) per share – basic

and fully diluted                                                 $               0.01      $             (0.09)      $               0.10

 

 

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                                                          120,229                 120,229                             -

 

Gross Profit                                                                 386,764                 400,653                 (13,889)

 

Expenses:

      General & administrative                                     (246,200)                 503,800               (750,000)

      Depreciation and amortization                                  24,421                   24,421                             -

            Total expenses                                              (221,779)                 528,221              (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                                                  153,457               (207,237)                360,694)

 

Total net income (loss)                                      $         358,146      $      (17,271)_      $         375,417

 

Net income (loss) per share – basic

and fully diluted                                                 $               0.10      $             (0.00)      $               0.10

 

 

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.

 

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

 

 

 

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.

 

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

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:

 

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 $66,653, or (14.16)% 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.

 

Revenue Related Party 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 the same at 58% for the three months ended September 30, 2010 and September 30, 2009.

 

 

EXPENSES:

 

 

General and Administrative Expenses

 

General and administrative expenses for the three months ended September 30, 2010 were $402,588, an increase of $60,388 or 17.65%, 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 ($221,779) 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.  We also had a decrease in contract services due to the ending of the landscape contract with Geneva Maintenance.  This provided a savings of approximately $164,000 annually.

 

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 $221,779 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 due to additional borrowings from related parties as well as interest associated with a 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 (loss) 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, making 2010 numbers appear very high. 

 

 

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:

 

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 10% 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. 

 

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% from $382,120 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 64% 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:

 

 

General and Administrative Expenses

 

General and administrative expenses for the nine months ended September 30, 2010 were $1,158,573, an increase of $460,638 or 63.88%, 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.

 

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 $1,234,448 for the nine months ended September 30, 2010 compared to $771,810 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 $238,017for 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 $779,513.  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 13.9% from $47,971 for the nine months ended September 30, 2009 to $382,625 for the nine months ended September 30, 2010.  The increase is is due to additional borrowings from related parties as well as interest associated with a capital lease.

 

Net Income (Loss)

 

Our net loss for the nine months ended September 30, 2010 was $630,617 (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.

 

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