1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
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(Mark One)
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended June 30, 1996
/ / Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required)
For the transitional period from _____________ to ____________
Commission File No. 1-13362
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SENIOR TOUR PLAYERS DEVELOPMENT, INC.
-------------------------------------
(Name of Small Business Issuer as specified in its charter)
Nevada 04-3226365
- - ------------------------------ ---------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
incorporation or organization)
266 Beacon Street, Boston, MA 02116
-----------------------------------
(Address of principal executive offices)(Zip Code)
(617) 266-3600
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(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes x No
----- -----
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
2,933,333 Shares of Common Stock, as of August 9, 1996
Transitional Small Business Issuer Format (check one):
Yes No x
----- -----
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
UNAUDITED
- - ----------------------------------------------------------------------------------------
June 30
1996
- - ----------------------------------------------------------------------------------------
ASSETS
CURRENT:
Cash and cash equivalents $ 745,269
Interest and other receivables 87,712
Inventories 124,167
Prepaid expenses and other current assets 71,140
-----------
Total current assets 1,028,288
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PROPERTY AND EQUIPMENT:
Property and equipment, net of accumulated depreciation 10,783,847
Construction in progress 2,008,362
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Property and equipment, net 12,792,209
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OTHER ASSETS:
Restricted cash 14,659
Water rights 1,051,992
Other assets 280,073
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Total other assets 1,346,724
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$15,167,221
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 672,087
Current portion of long term debt 239,598
Current portion of obligation under water-rights agreement 68,558
Deferred revenues 169,938
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Total current liabilities 1,150,181
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LONG TERM LIABILITIES:
Obligation under water rights agreement 909,318
Long term debt 7,376,810
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value; 5,000,000 shares authorized 0
Common stock, $.001 par value; 15,000,000 shares authorized;
2,933,333 shares issued and outstanding 2,933
Additional paid-in capital 7,545,040
Management options 2,916,700
Accumulated deficit (4,733,761)
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Total stockholders' equity 5,730,912
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$15,167,221
===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERLY PERIODS ENDED JUNE 30, 1996 & 1995
UNAUDITED
- - -----------------------------------------------------------------------------------------------
Three Month Three Month
Period Ended Period Ended
June 30, 1996 June 30, 1995
- - -----------------------------------------------------------------------------------------------
NET REVENUES $1,544,842 $ 286,352
COSTS AND EXPENSES:
Operating, general and administrative 1,459,640 472,985
Noncash compensation charge 138,700 0
---------- ----------
Operating loss (53,498) (186,633)
INTEREST INCOME 6,792 34,646
INTEREST EXPENSE (240,556) (89,714)
---------- ----------
Net loss $ (287,262) $ (241,701)
========== ==========
NET LOSS PER SHARE OF COMMON STOCK $ (0.10) $ (0.08)
========== ==========
WEIGHTED AVG NUMBER OF COMMON SHARES OUTSTANDING 2,933,333 2,933,333
---------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
4
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERLY PERIODS ENDED JUNE 30, 1996 & 1995
UNAUDITED
- - -------------------------------------------------------------------------------------------------------
Three Month Three Month
Period Ended Period Ended
June 30, 1996 June 30, 1995
- - -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (287,262) $ (241,701)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 186,269 83,248
Noncash compensation charge 138,700 0
Changes in assets and liabilities:
Interest and other receivables (4,762) (27,263)
Prepaid expenses and other assets (11,090) 37,609
Deposits 0 (43,641)
Inventories (33,252) 0
Deferred revenue 54,040 0
Accounts payable and accrued expenses 269,650 (42,347)
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Cash provided by (used in) operating activities 312,293 (234,095)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (purchases) maturities of short-term investments 0 247,072
Purchases of property and equipment (12,985) (8,215)
Golf course development costs capitalized (889,728) (2,033,438)
Cash (restricted) released from escrow (2,094) 1,804,521
---------- -----------
Net cash provided by (used in) investing activities (904,807) 9,940
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt 380,970 0
Repayment of long term debt (97,331) (14,969)
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Net cash provided by (used in) financing activities 283,639 (14,969)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (308,875) (239,124)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,054,144 760,844
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 745,269 $ 521,720
========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
5
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 & 1995
UNAUDITED
- - ---------------------------------------------------------------------------------------------------------------
Six Month Six Month
Period Ended Period Ended
June 30, 1996 June 30, 1995
- - ---------------------------------------------------------------------------------------------------------------
NET REVENUES $3,125,829 $ 744,069
COSTS AND EXPENSES:
Operating, general and administrative 2,654,463 1,093,874
Noncash compensation charge - management stock options 416,700 0
---------- ----------
Operating income (loss) 54,666 (349,805)
INTEREST INCOME 10,930 94,910
INTEREST EXPENSE (449,086) (178,366)
---------- ----------
Net loss $ (383,490) $ (433,261)
========== ==========
NET LOSS PER SHARE OF COMMON STOCK $ (0.13) $ (0.15)
========== ==========
WEIGHTED AVG NUMBER OF COMMON SHARES OUTSTANDING 2,933,333 2,933,333
---------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
6
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 & 1995
UNAUDITED
- - ------------------------------------------------------------------------------------------------------------------
Six Month Six Month
Period Ended Period Ended
June 30, 1996 June 30, 1995
- - ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (383,490) $ (433,261)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 345,888 190,290
Noncash compensation charge 416,700 0
Changes in assets and liabilities:
Interest and other receivables 9,948 (19,291)
Prepaid expenses and other assets 24,568 (1,066)
Deposits 8,100 (63,641)
Inventories (44,916) 0
Deferred revenue 9,112 0
Accounts payable and accrued expenses (207,513) (554,664)
----------- -----------
Cash provided by (used in) operating activities 178,397 (881,633)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (purchases) maturities of short-term investments 0 751,654
Purchases of property and equipment (33,226) (85,322)
Golf course development costs capitalized (1,334,297) (4,159,523)
Investment in partnership and management contract 0 (269,740)
Increase in other assets (50,000) 0
Cash (restricted) released from escrow (2,094) 4,612,752
----------- -----------
Net cash provided by (used in) investing activities (1,419,617) 849,821
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt 736,298 176,214
Repayment of long term debt (223,193) (26,296)
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Net cash provided by (used in) financing activities 513,105 149,918
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (728,115) 118,106
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,473,384 403,614
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 745,269 $ 521,720
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
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SENIOR TOUR PLAYERS DEVELOPMENT, INC & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Senior Tour Players Development, Inc. ("the Company") was organized as a
Nevada corporation on April 6, 1994 for the purposes of developing,
acquiring, and managing semi-private, private, and public golf courses
and golf practice facilities throughout the United States.
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary, The Badlands Golf Club,
Inc. ("The Badlands"), which was established during 1995, and is located
in Las Vegas, Nevada. The Company also owns a majority (53.5%) interest
in the Forest Lakes Limited Partnership which owns The Forest Lakes Golf
Club in Sarasota, Florida ("Forest Lakes") and accordingly, the
financial information presented herein includes the assets, liabilities,
and revenue and expense of Forest Lakes. All significant intercompany
transactions and balances have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For the purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market, and consist of
food & beverage, golf equipment, clothing, and accessories, and course
maintenance inventories consisting of chemicals, fertilizer, and seed.
PROPERTY, EQUIPMENT, AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets.
REVENUE
Revenue consists primarily of greens fees, membership dues, golf cart
rental fees, golf course management fees, food, beverage, and pro shop
merchandise sales. Deferred revenues consists of prepaid membership dues
which are recognized within one year of receipt as earned.
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SENIOR TOUR PLAYERS DEVELOPMENT, INC & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NET LOSS PER SHARE OF COMMON STOCK
Net loss per share is computed by dividing net loss applicable to common
stockholders by the weighted average number of shares outstanding during
the period.
2. GOLF COURSE DEVELOPMENT COSTS
CONSTRUCTION IN PROGRESS
The Company is in the final construction phase of the clubhouse
facilities at The Badlands At June 30, 1996 construction in progress
consisted of construction, design, and other costs incurred in
connection with the construction of the clubhouse and other structures
at The Badlands as well as preliminary design and planning costs
incurred in connection with the Company's planned golf course
development project in McKinney, Texas. These costs will be depreciated
over the estimated useful lives of the assets once the assets are placed
in service.
LAND LEASE AGREEMENT - THE BADLANDS
The Badlands is situated on approximately 186 acres of leased land in
Las Vegas, Nevada, which land is leased for a term of 49 years expiring
July, 2045. The lease agreement contains four 10-year options to extend
the term of the lease based on certain terms as defined. The lease
requires rental payments of $240,000 per annum, commencing July 1, 1995,
with an increase every three years based on the increase in the Consumer
Price Index. The lease also contains a contingent rental clause
requiring the Company to pay an amount equal to the amount by which 6%
of annual gross receipts at The Badlands exceeds the minimum annual
rental of $240,000. The lease also requires the Company to pay real
estate taxes, assessments, and other charges in connection with the
leased land.
LAND LEASE AGREEMENT - THE BADLANDS - DEVELOPMENT OF ADDITIONAL NINE
HOLES
During June, 1996 the Company executed an agreement to lease an
additional 67 acres abutting The Badlands which land will be used to
develop an additional nine holes. The term of the new lease will be
coterminous with the existing lease, namely 50 years expiring July 2045,
with four (4) ten-year extension options. The annual rental will be the
greater of 6% of annual revenue or $120,000, with rentals commencing on
the earlier of : (i) the opening of the additional nine holes to the
general public; or (ii) November 1, 1998. The lease also requires the
Company to pay real estate taxes, assessments, and other charges in
connection with the leased property.
WATER RIGHTS AGREEMENT - NEVADA
The Company has purchased 399 acre-feet of water rights under a water
rights agreement (the "Agreement") for use at The Badlands. The
Agreement requires the Company to pay $13,300 per month commencing on
July 1, 1995, with no interest, for ten years through July 2005. The
obligation under the water rights agreement has been capitalized in the
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SENIOR TOUR PLAYERS DEVELOPMENT, INC & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WATER RIGHTS AGREEMENT - NEVADA (CONTINUED)
accompanying consolidated balance sheet. The capitalized water rights
will not be amortized since the asset has an indefinite and
indeterminable life span, and is transferable by the Company subject to
certain restrictions in the Agreement.
CONSTRUCTION AND TERM LOAN AGREEMENT - THE BADLANDS
In December, 1995, the Company entered into a $6,700,000 loan agreement.
At the closing, the loan provided the Company with $3,384,000 which was
used to pay off the then outstanding Badlands construction loan, and
return approximately $1,200,000 in cash to the Company. The agreement
allows the Company to borrow up to an additional $1,616,000 to provide
funds to complete construction of the clubhouse and other structures at
The Badlands.
In addition to the $3,384,000 at closing and the $1,616,000 provided for
clubhouse construction, the loan provides for the availability to the
Company of an additional $1,700,000 in "Earnout Advances". The earnout
funds will be made available to the Company over a period of thirty
months following the loan closing so long as certain operating results
are achieved at The Badlands, including minimum debt service coverage
ratios, and other revenue and cash flow criteria, as defined in the loan
agreement.
The loan is subject to a 20-year amortization with the interest rate
fixed at 10.78%. The loan term is five years with a maturity date of
December 26, 2000, however the Company may extend the term for an
additional five years upon payment of an extension fee of .5% and
assuming the Company meets certain terms and conditions as defined in
the agreement. Borrowings are collateralized by a Deed of Trust and a
security interest in substantially all assets of The Badlands. The
agreement also contains certain covenants, including those of a
financial nature, which the Company must meet and maintain.
3. LONG TERM DEBT
Long-term debt consists of the following at June 30, 1996:
Mortgage note payable to NationsCredit, secured by The Badlands $4,104,546
Mortgage note payable to Textron Financial, secured by the golf course
at Forest Lakes, interest is at the prime rate plus 2%, principal and
interest of approximately $21,000 due monthly, maturing 1-31-2002 2,003,442
Mortgage note payable to sellers of the clubhouse at Forest Lakes,
interest only payable monthly at 9.25%, with principal due at maturity
on January 7, 2000 1,000,000
10
SENIOR TOUR PLAYERS DEVELOPMENT, INC & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. LONG TERM DEBT (CONTINUED):
Capital lease obligation for turf maintenance and other equipment,
principal and interest payments of $12,660 due monthly, final maturity
date of September 30, 1999 410,369
Collateralized note payable, due October 15, 1998, with monthly principal
and interest payments of $1,654, interest at the prime rate plus 2.0% 39,141
Note payable to a bank, due February 3, 2000, with monthly principal
payments of $1,000 together with interest at the prime rate plus 2.0% 45,000
Various collateralized notes payable to a bank with monthly principal and
interest payments of $904, with interest rates ranging from 9.0% to 9.25%
and maturity dates from July 1997 to September 1998 13,910
----------
$7,616,408
Less-current portion 239,598
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LONG TERM DEBT $7,376,810
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4. STOCKHOLDERS' EQUITY
COMMON STOCK
In November 1994, the Company sold 1,600,000 shares of common stock and
warrants at a price of $5.00 per common share and $.10 per warrant
through an initial public offering. Each warrant entitles the holder to
purchase one share of the Company's common stock at an exercise price of
$5.50, subject to adjustment, at any time until November 16, 1999, at
which time the warrants expire. The warrants are subject to redemption
by the Company at a price of $5.10 per warrant on 30 days' written
notice, provided the average of the closing bid prices of the common
stock of the Company equals or exceeds $8.00 for 20 consecutive trading
days ending 3 days of the date the notice of redemption is given.
UNDERWRITER'S WARRANTS
In connection with the Company's initial public offering in November
1994, the Company issued 160,000 warrants to the underwriter (the
"Underwriter's Warrants"). Each Underwriter's Warrant entitles the
Underwriter to purchase one share of common stock for $7.25 and one
warrant for $.15.
OVERALLOTMENT OPTION
In addition to the Underwriter's Warrants, the Company granted an
overallotment option (the "Option") to the Underwriter. The Option,
exercisable not later than forty-five days after the date of the
prospectus, November 16, 1994, entitled the Underwriter to purchas
additional shares of common stock and/or additional warrants at the
public offering price less the underwriting discounts and commissions,
as defined. In
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SENIOR TOUR PLAYERS DEVELOPMENT, INC & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OVERALLOTMENT OPTION (CONTINUED)
December 1994, the Underwriter exercised its option and purchased
153,200 warrants for $13,351 net of discounts and commissions.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of preferred stock
with such designations, voting, and other rights and preferences as may
be determined from time to time by the Board of Directors.
STOCK OPTION PLAN
On June 20, 1994, the Company adopted a Stock Option Plan which provides
for the granting of non-qualified and incentive stock options, as
defined by the Internal Revenue Code, to key employees at prices as
determined by the Compensation Committee of the Board of Directors.
Under the plan, options for a maximum of 350,000 shares of common stock
may be granted over a period not to exceed ten years. As of June 30,
1996, 195,000 options have been authorized to be granted under this
plan.
MANAGEMENT STOCK OPTIONS
Effective June 20, 1994, the Company entered into employee stock option
agreements with certain officers and key employees granting them options
to acquire up to 1,111,111 shares of the Company's common stock for an
exercise price of $1.00 per share. Under these agreements, each
employee's options vest and become exercisable based on the Company
achieving certain financial benchmarks, as defined in the agreements.
During the fourth quarter of 1995, in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, the Company recorded a noncash compensation charge for
$2,500,000 based on its estimate of the value related to the probable
future vesting of stock options granted to these individuals. The
noncash compensation charge at December 31, 1995 was calculated based on
the market price of the Company's common stock on December 31, 1995
($3.25), less the exercise price of $1.00 per share, multiplied by the
number of shares subject to the options (1,111,111). This amount is
subject to further adjustment in future periods through the date the
options vest based on changes in the market price of the Company's
stock. Accordingly, during the period from January 1, 1996 thru June 30,
1996 the Company recorded additional noncash compensation charges
totalling $416,700 relating to these options. Thru June 30, 1996 the
Company had accrued $2,916,700 based on the market price of the
Company's Common Stock on June 30, 1996 of $3.625 per share.
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SENIOR TOUR PLAYERS DEVELOPMENT, INC & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INCOME TAXES
At December 31, 1995, the Company had a N.O.L. carryforward available
for federal tax purposes of approximately $1,442,000 with expiration
dates beginning in 2009. The Company has provided a valuation allowance
equal to 100% of the gross deferred tax asset since it is more likely
than not that the deferred tax asset will not be realized.
6. SUBSEQUENT EVENTS
RELATED PARTY TRANSACTION - LOAN GUARANTY
During July 1996, following a vote of the Board of Directors, the
Company entered into an agreement with Golftown, Inc., a Massachusetts
corporation that is developing a driving range facility on Route 1 in
Saugus, Massachusetts (the "Project"). The Company has agreed to
guaranty a loan in an amount not to exceed $295,000 made to Golftown, in
exchange for a 25% equity interest in the Project. Under the terms of
the agreement with Golftown and its lender, the Company has the
opportunity to cure any default under the loan, and in the event of a
default, the Company may assume day-to-day management of the Project and
receive a management fee for such services in addition to its 25%
interest to all Project profits. In addition, the Company has entered
into an agreement for a pledge of voting rights to a majority of the
voting interest of Golftown, which pledge becomes effective in the event
of a default under the loan being guaranteed by the Company. The
President and majority owner of Golftown is Jeffrey Abrams, who is the
son of Stanton V. Abrams, the President and Chairman of the Board of
Directors of Senior Tour Players Development, Inc. The driving range is
scheduled to open to the general public during the month of August,
1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES.
- - -------------------------------
The Company believes that is has sufficient cash, operating revenues,
and committed financing, to meet its current operating needs.
At June 30, 1996, the Company had $745,269 in cash and cash equivalents
and the Company had borrowed $4,104,546 under its $6,700,000 construction and
permanent loan agreement, the terms of which are summarized herein and in the
notes to the consolidated financial statements included in Part I of this
report.
It is the Company's practice to lease golf carts under operating leases,
and to lease maintenance equipment, office, and golf equipment under capital
leases at its owned golf facilities. The Company is leasing substantially all of
its turf maintenance equipment at The Badlands and plans to lease substantially
all of the clubhouse FF&E at The Badlands and has secured a $750,000 leasing
line of credit for this purpose. As of June 30, 1996 the Company had $410,369
outstanding under this leasing line of credit. The Company has leased its golf
cart fleet at The Badlands under an operating lease.
At June 30, 1996 while the Company's consolidated balance sheet
reflected negative working capital of $121,893, current liabilities included
$354,522 representing contract amounts payable relating to the construction of
the Badlands clubhouse that will be funded through the long term construction
loan agreement already in place with NationsCredit as discussed herein.
PLAN OF OPERATION.
- - ------------------
The Company's plan of operation for the next twelve months will involve
the completion of the clubhouse at The Badlands and operation of that golf
course; the planning, design, and commencement of construction of an additional
nine holes at The Badlands; the continuing management of Forest Lakes Golf Club
in Sarasota, Florida in which the Company owns a 53.5% ownership interest;
continuing management of New England Country Club in Bellingham, Massachusetts
which the Company operates under a management contract; completion of due
diligence and the planning and design of construction of the proposed golf
course at Stonebridge Ranch in McKinney, Texas as more fully described herein;
fund raising efforts for debt and equity to finance the proposed new development
project in McKinney, Texas; and the continuing search for opportunities for the
acquisition, lease, and development of golf course and golf practice facilities
and golf course management opportunities throughout the United States.
Depending on its success in identifying and entering into additional
golf course and golf practice facility development, lease, and acquisition
opportunities, the Company will seek additional financing and equity sources to
fund potential transactions or projects. Accordingly, the Company is presently
participating in active discussions concerning additional golf course and
practice facility development and acquisition projects.
Notwithstanding the Company's efforts and plans for new acquisitions and
development, except for the properties described herein, as of the date of this
report, the Company has no binding or definitive commitments, agreements, or
understandings to acquire, lease, or develop
14
any additional golf courses or golf practice facilities; however, additional
acquisitions developments, leases, or management agreements may be negotiated or
entered into at any time.
PROPOSED GOLF COURSE DEVELOPMENT - STONEBRIDGE RANCH - MCKINNEY, TEXAS
During March, 1996 the Company signed a purchase and sale agreement and
related documents with Stonebridge Ranch Development Corporation, a residential
development group of the Mobil Land organization, an affiliate of Mobil
Corporation, for the proposed development of an 18-hole championship golf
facility located within the Stonebridge Ranch Development in McKinney, Texas,
approximately 25 miles north of Dallas.
Under the terms of the proposed agreement, land is to be conveyed by the
Stonebridge Ranch Development Corporation to the Company for total consideration
of ten dollars ($10.00) and the Company, in turn, shall be responsible for 100%
of the costs of the design, development, and operation of an 18-hole
championship golf course, clubhouse, driving range, and maintenance facilities.
The Company has no interest in the residential development which is planned for
the land surrounding the course. During the Company's due diligence period, the
Company, at its sole option, can elect to develop a 27-hole facility, and if
such an election is made, additional land will be conveyed to the Company at no
additional consideration.
In connection with the design and promotion of the golf course, the
Company intends to utilize the design and marketing services of six "Legends" of
golf to design three holes each and participate in the promotion of the
facility. The Company has entered into agreements with senior pros Sam Snead,
Bob Goalby, Chi Chi Rodriguez, Miller Barber, and Orville Moody, and regular PGA
TOUR pro Bruce Lietzke to provide design and promotional services to the
project.
Based on the permitting and design process, it was initially thought
that course construction would commence in the Fall of 1996 with a course
opening targeted for late 1997. However, several issues have arisen which may
delay the start of construction. The primary reasons for the delay include the
announced sale of the Mobil Land Development Corporation by Mobil Corporation to
Westbrook Partners, LLC, a real estate investment company. The Stonebridge Ranch
Community is owned by Mobile Land Development. The pending sale has caused
delays in the Company's due diligence undertakings as well as delays in the
permitting timetable.
Notwithstanding the Company's desire to do so, the Company's ability to
develop a golf course at Stonebridge Ranch in McKinney, Texas is dependent on a
number of factors, including, but not limited to, the ability of the Company to
raise the necessary joint venture equity and debt to finance the project; the
requirement to receive all necessary approvals and permits for the construction
of the golf course and related facilities; and additionally, if the Company
requires a postponement of the construction start, then the Company must be able
to negotiate any postponement with Mobil Land Development.
THE BADLANDS
The construction of the Badlands clubhouse is continuing and the Company
hopes to move into its new facilities by the end of August. The Company has been
operating since October, 1995 with a temporary clubhouse which contains the pro
shop, a food and beverage facility, and a separate temporary cart storage
facility.
15
During June, 1996 the Company executed an agreement to lease an
additional 67 acres abutting The Badlands which land will be used to develop an
additional nine holes. The Company plans to utilize the design services of
Johnny Miller Design for the nine-hole expansion. and is presently negotiating a
design contract in this regard. Following the permitting and design process,
course construction will likely commence in the Fall of 1996, with a course
opening targeted for the Fall of 1997. It is expected that financing for the
project will be provided by NationsCredit under a construction and permanent
loan agreement as discussed herein.
The term of the new land lease will be coterminous with the existing
Badlands land lease, namely 50 years expiring July 2045, with four (4) ten-year
extension options. The annual rental will be the greater of 6% of annual revenue
or $120,000, with rentals commencing on the earlier to occur of (i) the opening
of the additional nine holes to the general public; or (ii) November 1, 1998.
The lease also requires the Company to pay real estate taxes, assessments, and
other charges in connection with the leased property.
GOLFTOWN DRIVING RANGE - SAUGUS, MASSACHUSETTS
During July 1996, following a vote of the Company's Board of Directors,
the Company entered into an agreement with Golftown, Inc., a Massachusetts
corporation that is developing a driving range facility on Route 1 in Saugus,
Massachusetts (the "Project"). The Company has agreed to guaranty a loan in an
amount not to exceed $295,000 made to Golftown, in exchange for a 25% equity
interest in the Project. Under the terms of the agreement with Golftown and its
lender, the Company has the opportunity to cure any default under the loan, and
in the event of a default, the Company may assume day-to-day management of the
Project and receive a management fee for such services, which fee would be in
addition to the Company's right to receive 25% of all Project profits. In
addition, the Company has entered into an agreement for a pledge of voting
rights to a majority of the voting interests of Golftown, which pledge becomes
effective in the event of a default under the loan being guaranteed by the
Company. The President and majority owner of Golftown is Jeffrey Abrams, who is
the son of Stanton V. Abrams, the President and Chairman of the Board of
Directors of Senior Tour Players Development, Inc. The dirving range is
scheduled to open during August..
RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 1996 VS.THREE MONTH PERIOD ENDED JUNE 30, 1995
- - --------------------------------------------------------------------------------
The Company was organized in April, 1994 and generated its initial operating
revenues during the first quarter ended March 31, 1995 when it acquired a 53.5%
interest in the Forest Lakes Golf Club in Sarasota, Florida. The Company was
deemed to be a development stage company as described in FAS-7 "Accounting and
Reporting by Development Stage Enterprises" until the fourth quarter of 1995,
when the Badlands Golf Club, the Company's initial development project, opened
for public play. During the six month period ended June 30, 1995 the Company's
revenues were limited to Forest Lakes operating revenues and management fees
from a management agreement with New England Country Club.
NET REVENUES during the second quarter ended June 30, 1996 totalled $1,544,842
compared to $286,352 during the second quarter of 1995, an increase of
$1,258,490. Substantially all of the
16
increase relates to revenues generated at The Badlands Golf Club during the
second quarter of 1996.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES were $1,459,640 for the three
month period ended June 30, 1996 compared to $472,985 for the corresponding
period in 1995, an increase of $986,655 which is primarily (91%) attributable to
the opening of The Badlands. Operating expenses at The Badlands during the
second quarter of 1996 totalled $894,704 versus $0 in 1995.
NONCASH COMPENSATION CHARGES. During the second quarter of 1996 the Company
recorded a noncash compensation charge of $138,700 representing an adjustment to
the reserve established in 1995 for the probable future vesting of stock options
granted to executive officers and key employees of the Company. During 1994 the
Company entered into employee stock option agreements with certain key employees
under which such employees have been granted options to acquire up to 1,111,111
shares of Common Stock of the Company for an exercise price of $1.00 per share.
Under the agreements, the options vest and become exercisable in the following
amounts when and if the Company achieves the following benchmarks: (i) the
Company has, for the year ending December 31, 1996 earnings before interest,
taxes, depreciation, and amortization ("EBITDA") of at least $1,000,000 (50% of
the shares subject to the options become immediately exercisable); and (ii) the
Company has, for the year ending December 31, 1997, EBITDA of at least
$1,500,000 (50% of the shares subject to the options become immediately
exercisable). The reserve of $2,916,700 at June 30, 1996 assumes that all of the
shares subject to the options vest on the dates indicated herein.
The calculation by the Company of the $2,916,700 reserve established at June
30, 1996 is based on the market price of the Company's Common Stock on June 30,
1996 ($3.625), minus the exercise price of $1.00 per share, multiplied by the
number of shares subject to the options (1,111,111). Under current accounting
guidelines, if the EBITDA benchmarks are achieved as called for under the option
agreements, the charge or cost to recognize the vesting of the options will be
calculated by multiplying the number of shares that become exercisable, by the
market price of the Company's Common Stock on the "Measurement Date" minus the
exercise price of $1.00 per share. The "Measurement Date" in the Company's
instance, are the dates on which the benchmarks are, (or may be) achieved,
namely December 31, 1996 and 1997. The amount accrued as of June 30, 1996 is
subject to further adjustment in future periods through the date the options
vest based on changes in the market price of the Company's stock. .
INTEREST EXPENSE totalled $240,556 for the second quarter ended June 30, 1996
compared to $89,714 during the quarter ended June 30, 1995. Forest Lakes
interest totalled $81,755 during the second quarter of 1996 and represents
interest payments on a first mortgage on the golf course, a separate clubhouse
mortgage, and various maintenance equipment financing agreements. Total debt at
Forest Lakes at June 30, 1996 was $3,101,492. The remaining interest expense of
$158,801 relates to The Badlands Golf Club and includes interest on the
NationsCredit first mortgage on the golf course, a capital lease, and interest
on financed water rights.
INTEREST INCOME totalled $6,792 during the second quarter of 1996 compared to
$34,646 during the corresponding period in 1995. Interest income relates
primarily to interest earned on funds invested in U.S. Government agency
obligations and U.S. Treasury bills.
17
SIX MONTH PERIOD ENDED JUNE 30, 1996 VS. SIX MONTH PERIOD ENDED JUNE 30, 1995
- - -----------------------------------------------------------------------------
NET REVENUES during the six month period ended June 30, 1996 totalled $3,125,829
compared to $744,069 during 1995, an increase of $2,381,760. Substantially all
of the increase relates to revenues generated at The Badlands Golf Club which
opened in October 1995 and which totalled approximately $2,382,000 during the
six month period ended June 30, 1996.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES were $2,654,463 for the six month
period ended June 30, 1996 compared to $1,093,874 for the corresponding period
in 1995, an increase of $1,560,589, due primarily to the opening of The
Badlands. Operating expenses at The Badlands during the six months ended June
30, 1996 totalled $ 1,566,367 versus $0 in 1995.
NONCASH COMPENSATION CHARGES totalled $416,700 during the six month period ended
June 30, 1996 representing an adjustment to the reserve established in 1995 for
the probable future vesting of stock options granted to executive officers and
key employees of the Company in 1994. Refer to the notes to the consolidated
financial statements included herein and to "Results of Operations - Three
Month Period Ended June 30, 1996 vs.Three Month Period Ended June 30, 1995"
elsewhere in this report for a more detailed explanation of noncash charges.
INTEREST EXPENSE totalled $449,086 during the six month period ended June 30,
1996 compared to $178,366 during 1995, an increase of $270,720 which is
primarily due to the opening of The Badlands. Interest expense relating to The
Badlands Golf Club totalled approximately $284,000 during the six month period
ended June 30, 1996 versus $0 during the corresponding period in 1995 and
includes interest on the NationsCredit first mortgage on the golf course, a
capital lease, and interest on financed water rights.
INTEREST INCOME totalled $10,930 during the six month period ended June 30, 1996
compared to $94,910 during the corresponding six month period in 1995. Interest
income relates primarily to interest earned on funds invested in U.S. Government
agency obligations and U.S. Treasury bills.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings which
could have a material effect on the Company's financial condition.
ITEM 2. CHANGES IN SECURITIES None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On June 5, 1996 the Company held its Annual Meeting of Shareholders. The
only matters voted on by shareholders was the election of seven directors, which
comprises the entire Board of Directors of the Company, and the ratification of
management's selection of Arthur Andersen LLP as the independent auditors of the
Company for the fiscal year ending December 31, 1996. These matters were noticed
to shareholders of record, and solicited prior to the Annual Meeting through
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proxies sent to holders of record of the Company's common stock as of the
close of business May 10, 1996. The following directors were nominated and duly
elected at the Annual Meeting:
Stanton V. Abrams President & CEO
Richard B Rogers Senior Vice President
Michael J. Meluskey Treasurer, Secretary
Stanley Bernstein Independent Outside Director
Robert L. Seelert Independent Outside Director
Arnold Mullen Independent Outside Director
Alan L. Stanzler Independent Outside Director
ITEM 5. OTHER INFORMATION None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None.
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
Dated: August 13, 1996 By:
------------------------------------
Lawrence P. Butler
Chief Financial Officer