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UNITED STATES
SECURITIES AND EXCHANGE COMMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-18303
GOLF ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-2990598
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9925 Haynes Bridge Road, Suite 200
PMB# 226
Alpharetta, Georgia 30004
(Address of principal executive offices)
(Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports 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 [ ]
There were 5,293,044 shares of Common Stock ($0.01 par value) outstanding as of
July 17, 2001.
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GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
For the Quarter ended June 30, 2001
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountant's Report - Goldstein
Golub Kessler LLP 3
Consolidated Balance Sheets at June 30, 2001 (Unaudited)
And December 31, 2000 4-5
Consolidated Statements of Operations for the three months
and six months ended June 30, 2001 and 2000 (Unaudited) 6
Consolidated Statements of Cash Flows for the six
months ended June 30, 2001 and 2000 (Unaudited) 7
Notes to Consolidated Financial Statements (Unaudited) 8-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Submission of Matters to a Vote of Securities Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountants' Report
The Board of Directors and Stockholders
Golf Entertainment, Inc.
We have reviewed the accompanying consolidated balance sheet of Golf
Entertainment, Inc. (formerly LEC Technologies, Inc.) and Subsidiaries as of
June 30, 2001, and the related consolidated statements of operations, for each
of the three month and six-month periods then ended and the statement of cash
flows for the sixth month period then ended. These financial statements are the
responsibility of the company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial statements consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses from operations, has a
working capital deficiency and a stockholders' deficiency that raise substantial
doubt about its ability to continue as a going concern. Management's plan in
regard to these matters is also described in Note 1. The financial statements do
not include any adjustments that may result from this uncertainty.
/s/ Goldstein Golub Kessler LLP
New York, New York
July 17, 2001
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GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2001 2000
-------- ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 1,135 $ 1,914
Prepaid expenses 6,801 25,352
-------- --------
Total Current Assets 7,936 27,266
-------- --------
OTHER ASSETS
Assets related to discontinued operations 73,671 173,990
-------- --------
TOTAL ASSETS $ 81,607 $201,256
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2001 2000
------------ ------------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 147,191 $ 149,768
Accrued expenses 3,619 29,196
Notes payable 192,695 105,000
Current maturaties of long-term debt 9,311 22,252
------------ ------------
Total Current Liabilities 352,816 306,216
------------ ------------
LONG-TERM DEBT 8,448 10,017
------------ ------------
OTHER LIABILITIES
Liabilities related to discontinued operations -- 39,750
Other liabilities -- 57,254
------------ ------------
Total Other Liabilities -- 97,004
------------ ------------
TOTAL LIABILITIES 361,264 413,237
------------ ------------
STOCKHOLDERS' DEFICIT
Preferred Stock - 10,000,000 shares authorized,
460,000 shares designated as Series A,
$0.01 par value, 380,000 shares issued, 228,516
shares outstanding 2,285 2,285
Common stock, $0.01 par value, 25,000,000 shares
authorized, 5,293,044 shares issued and
outstanding 52,930 52,930
Additional paid-in capital 11,535,349 11,535,349
Accumulated deficit (11,870,221) (11,802,545)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIT (279,657) (211,981)
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 81,607 $ 201,256
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
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GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Selling, general and administrative 35,734 200,994 127,107 529,135
Settlement of legal proceedings -- 17,500 -- 292,433
Depreciation and amortization -- 14,812 -- 30,151
Interest expense/(income), net 4,179 4,283 8,128 2,424
------------ ------------ ------------ ------------
39,913 237,589 135,235 854,143
------------ ------------ ------------ ------------
Loss from continuing operations (39,913) (237,589) (135,235) (854,143)
Income/(loss) from discontinued
operations (1,967) 14,596 (34,445) (85,476)
Gain on discontinued operations -- 15,837 -- 15,837
------------ ------------ ------------ ------------
Net loss before extraordinary item (41,880) (207,156) (169,680) (923,782)
Extraordinary income-gain on
forgiveness of debt 44,750 -- 44,750 --
------------ ------------ ------------ ------------
Net income/(loss) $ 2,870 $ (207,156) $ (124,930) $ (923,782)
============ ============ ============ ============
Loss per share from continuing
operations $ (0.01) $ (0.05) $ (0.03) $ (0.20)
Income/(loss) from discontinued
Operations $ -- $ 0.01 $ -- $ (0.01)
Extraordinary gain per share $ 0.01 $ -- $ 0.01 $ --
Loss per common share -
basic and diluted $ -- $ (0.04) $ (0.02) $ (0.21)
Weighted average shares outstanding 5,293,044 4,924,147 5,293,044 4,339,699
The accompanying notes are an integral part of these consolidated financial
statements.
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GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
-------------------------------
June 30, June 30,
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (124,930) $ (923,782)
Adjustments to reconcile net loss to cash provided by
(used in) operating activities:
Depreciation and amortization -- 59,109
Stock compensation expense -- 200,000
Issuances of stock for services and settlements -- 135,380
Gain on disposals -- (4,305)
Gain on discontinued operations -- (15,337)
Forgiveness of debt (44,750) --
Change in assets and liabilities due to operating activities:
Decrease in accounts receivable -- 5,891
Decrease in inventory -- 19,721
Decrease/(increase) in prepaid expenses 18,551 (14,205)
Decrease in accounts payable (2,577) (111,812)
Decrease in accrued liabilities (20,577) (153,265)
Decrease in other operating activities -- 17,624
Increase in deferred compensation -- (200,000)
Total adjustments (49,353) (61,699)
---------- ----------
Net cash used in operating activities (174,283) (861,783)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales and disposals of off-lease inventory -- 6,605
Sales and disposals of furniture and equipment -- 405,685
Purchases of furniture and equipment -- (725)
Payments received on notes receivable -- 68,583
Decrease in notes receivable -- 199,833
Sales-type and direct financing lease rentals received 100,319 167,962
---------- ----------
Net cash provided by investing activities 100,319 847,943
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on nonrecourse and recourse discounted
lease rentals -- (115,941)
Proceeds from notes payable 87,695 3,555
Principal payments on long-term debt (14,510) (177,887)
Proceeds from sale of stock -- 405,000
---------- ----------
Net cash provided by financing activities 73,185 114,727
---------- ----------
Net decrease in cash (779) (23,111)
Cash at beginning of period 1,914 23,945
---------- ----------
Cash at end of period $ 1,135 $ 834
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 945 $ 2,307
Income taxes $ -- $ --
The accompanying notes are an integral part of these consolidated financial
statements.
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GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements are condensed and
do not include all information required by generally accepted accounting
principles to be included in a full set of financial statements. The unaudited
condensed consolidated financial statements include the accounts of Golf
Entertainment, Inc. and its wholly owned subsidiaries, collectively referred to
as the "Company".
All material intercompany accounts and transactions have been eliminated.
Certain reclassifications have been made to prior periods' amounts to conform to
current period presentation. The information furnished reflects all adjustments,
which are, in the opinion of the Company, necessary to present fairly its
financial position, the results of its operations and its cash flows for the
three months and six months ended June 30, 2001 and 2000. It is suggested that
this report be read in conjunction with the Company's audited financial
statements included in the Annual Report on Form 10-K for the fiscal year ended
December 31, 2000. The operating results and cash flows for the three month and
six-month periods presented are not necessarily indicative of the results that
will be achieved for the full fiscal year or for future periods.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial reporting period and the reported amount of revenue and expenses.
Actual results could differ from those estimates.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As shown in the accompanying
consolidated financial statements, the Company has incurred a net loss for the
six months ended June 20, 2001 of $124,930. In addition, the Company has a
stockholders' deficiency of $279,657 at June 30, 2001. The Company's ability to
continue as a going concern is dependent upon its ability to obtain additional
financing and the attainment of an adequate level of profitable operations.
Management believes that the action it is taking will provide the opportunity
for the company to Continue as a going concern.
Note 2. Earnings per Common Share
Earnings per common share are based on the weighted average number of common
shares outstanding during each period presented. Weighted average basic and
diluted common shares outstanding for the six months ended June 30, 2001 and
2000 were 5,293,044 and 4,339,699, respectively. Weighted average basic and
diluted common shares outstanding for the three months ended June 30, 2001 and
2000 were 5,293,044 and 4,924,147 respectively. Vested and unvested options,
warrants and convertible
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preferred stock were not included in the computation of dilutive EPS because the
effect of doing so would be antidilutive.
Note 3. Notes Payable and Long-term Debt
Notes payable and long-term debt consist of the following at:
June 30, December 31,
2001 2000
-------- ------------
Term note payable to Northwinds
Center, LP, payments of $340 including
interest at 10%, due October 31, 2004 11,509 12,929
Term note payable to Imperial Premium
Finance Company, payments of $1,842
Including interest at 17.8%, due June 25,
2001 -- 10,590
Term note payable to Scott Printing
Corporation, due in monthly installments
Beginning December 1, 2000 of $1,250
For 4 months, $2,500 for 2 months with
Interest at 0.0% 6,250 8,750
Demand convertible note payable to
Ronald G. Farrell, interest accruing at
Prime plus 2.0%, due upon demand 192,695 105,000
-------- --------
$210,454 $137,269
======== ========
Note 4. Assets and Liabilities Related to Discontinued Operations
Excluded from the sale of the leasing portfolio on December 31, 1999, the
Company retained certain assets and liabilities related to its former line of
business. The assets and liabilities related to discontinued operations are as
follows:
June 30, December 31,
2001 2000
-------- ------------
Investment in leased assets, sales-type $ 73,671 $173,990
======== ========
Notes payable $ -- $ 39,750
======== ========
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
In April 2001, Golf Entertainment, Inc. ceased doing business. Golf
Entertainment, Inc. and its subsidiaries (GolfBZ.com, Inc. or "GolfBZ";
Traditions Acquisition Corporation or "TAC"; LEC Leasing, Inc. or "LEC";
Superior Computer Systems, Inc. or "SCS"; Pacific Mountain Computer Products,
Inc. or "PMCPI"; Atlantic Digital International, Inc. or "ADI"; LEC
Distribution, Inc; TJ Computer Services, Inc) (collectively, the "Company" or
"Golf") most currently was in the business of brokering businesses within the
golf industry via the Internet. Due to certain economic factors, the Company
ceased all active operations on April 6, 2001 and is currently seeking to
acquire or merge with a company that desires to establish a public trading
market for its securities while avoiding what it may deem to be adverse
consequences of undertakings a public offering itself, such as time delays,
significant expense, loss of control and other burdens related to compliance
with various federal and state securities laws. This business combination may be
with a financially stable mature company or with a financially unstable company
or with a company in its early stages of development of growth.
Results of Operations
For the six months ended June 30, 2001, the Company had no significant revenues
(other than interest and financing income) because of the discontinuance of the
Traditions Golf Club operation in May 2000. The Company will not achieve any
significant revenues until, at the earliest, the completion of a business
combination.
For the six months and three months ended June 30, 2001, the selling, general
and administrative costs of the corporate headquarters were $127,107 and
$35,734, respectively. Interest expense, net of interest income of $275 and
$177, related to corporate operations was $8,128 and $4,179, respectively.
Management has put a cost control plan into place which will reduce even further
overhead expenses.
For the six months and three months ended June 30, 2001, the Company received
financing income from payments made by the lessor of its remaining sales-type
leases. The Company reported income of $5,183 and $3,352 from the results of
these transactions.
On April 30, 2001, the Company sold its interest in GolfBZ.com, Inc. to Ronald
G. Farrell, the Company's Chairman and Chief Executive Officer. The overhead
expenses of GolfBZ.com, Inc. were $40,045 for the four months ended April 30,
2001. These amounts are included in Discontinued Operations. The Company did not
record a gain or loss on the transaction.
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As a result of the foregoing, the Company recorded a net loss of $124,930 and
net income of $2,870 for the six months and three months ended June 30, 2001,
respectively. This is compared to a net loss of $923,782 and $207,156 for the
six months and three months ended June 30, 2000.
Liquidity and Capital Resources
The Company has very little cash and has had no substantial access to cash
except for borrowings from insiders since the fourth quarter of 2000. The lack
of liquidity has caused the Company to cease operations.
The Company's cash requirements for operations and capital expenditures during
the six months ended June 30, 2001 were financed through the proceeds from the
sale of demand convertible debentures and lease rental payments.
On November 30, 2000, the Company agreed to sell up to $500,000 of Convertible
Notes to the Company's Chairman/CEO, Ronald G. Farrell. The balance of the
Convertible Notes was $105,000 as of December 31, 2000. Through June 30, 2001,
the Company has been able to sell additional Convertible Notes of $87,695. The
Company has been unable to sell any of its Convertible Notes since June 30, 2001
and it will not be able to continue operations.
Future Plans
On April 6, 2000, the Board of Directors decided to cease operations of the
Company. The Company's primary remaining objective is to respond to any inquires
regarding a business combination with a potential purchaser or locate a target
business that the Company believes will have significant growth potential and
effect a business combination with that target. A business combination may
involve the acquisition of, or merger with, a financially stable, mature company
that desires to establish a public trading market for its securities while
avoiding what it may deem to be adverse consequences of undertaking a public
offering itself, such as time delays, significant expense, loss of voting
control and other burdens (including significant professional fees) related to
compliance with various federal and state securities laws. In the alternative, a
business combination may involve a company that may be financially unstable or
in its early stages of development or growth.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Certain statements herein and in the future filings by the Company with the
Securities and Exchange Commission and in the Company's written and oral
statements made by or with the approval of an authorized executive officer
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
and the Company intends that such forward-looking statements be subject to the
safe-harbors created thereby. The words and phrases "looking ahead", "we are
confident", "should be", "will be", "predicted", "believe",
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"expect" and "anticipate" and similar expressions identify forward-looking
statements. These and other similar forward-looking statements reflect the
Company's current views with respect to future events and financial performance,
but are subject to many uncertainties and factors relating to the Company's
operations and business environment which may cause the actual results of the
Company to be materially different from any future results expressed or implied
by such forward-looking statements. Examples of such uncertainties include, but
are not limited to, changes in customer demand and requirements, the
availability and timing of external capital, interest rate fluctuations, changes
in federal income tax laws and regulations, competition, unanticipated expenses
and delays in the integration of newly-acquired businesses, industry specific
factors and worldwide economic and business conditions. With respect to economic
conditions, a recession can cause customers to put off leisure time activities
and adversely affect the Company's revenue. The Company undertakes no obligation
to publicly update or revise any forward-looking statements whether as a result
of new information, future events or otherwise.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company has been involved in legal proceedings from time to time arising out
of the ordinary course of its prior business. There are no such currently
pending proceedings, which are expected to have a material adverse effect on the
Company.
Item 2. Submission of Matters to a Vote of Securities Holders
None.
Item 5. Other Information
On August 17, 1999, the Company was notified by the Nasdaq SmallCap Market that
the Company did not comply with the bid price requirement, as set forth in
Nasdaq Marketplace Rule 4310 ( c) (04). On January 28, 2000, the Company's
common stock was delisted and became immediately eligible to trade on the OTC
Bulletin Board.
On April 23, 2001, the Company's ticker symbol was modified by having an `E'
appended to the end, indicting non-compliance with required SEC filings. The
Company expects that this was removed upon acceptance of the filing of the
Company's Forms 10-K and 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
None.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLF ENTERTAINMENT, INC.
(Registrant)
Date: July 17, 2001 /s/ Ronald G. Farrell
--------------------------------------------
Ronald G. Farrell
Chief Executive Officer
(Principal Executive Officer)
Date: July 17, 2001 /s/ Scott A. Lane
--------------------------------------------
Scott A. Lane
Chief Financial Officer
(Principal Financial and Accounting Officer)
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