UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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 September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT 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)
100 North Point Center East
Suite 320
Alpharetta, Georgia 30022
(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
October 15, 2001.
GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
For the Quarter ended September 30, 2001
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountants' Report -- Goldstein
Golub Kessler LLP 3
Consolidated Balance Sheets at September 30, 2001
(Unaudited) and December 31, 2000 4-5
Consolidated Statements of Operations for the three
months and nine months ended September 30, 2001
and 2000 (Unaudited) 6
Consolidated Statements of Cash Flows for the nine
months ended September 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
2
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
September 30, 2001, and the related consolidated statements of operations for
the three-month and nine-month periods ended September 30, 2001 and 2000 and the
consolidated statements of cash flows for the nine-months ended September 30,
2001 and 2000. 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
November 13, 2001
3
GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 1,291 $ 1,914
Prepaid expenses -- 25,352
-------- ---------
Total Current Assets 1,291 27,266
-------- ---------
OTHER ASSETS
Assets related to discontinued operations 52,222 173,990
-------- ---------
Total Other Assets 52,222 173,990
-------- ---------
TOTAL ASSETS $ 53,513 $ 201,256
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
4
GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2001 2000
------------- -------------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 133,109 $ 149,768
Accrued expenses 4,981 29,196
Notes payable 180,863 105,000
Current maturities of long-term debt 6,250 22,252
------------- -------------
Total Current Liabilities 325,203 306,216
------------- -------------
LONG-TERM DEBT -- 10,017
------------- -------------
OTHER LIABILITIES
Liabilities related to discontinued operations -- 39,750
Other liabilities -- 57,254
------------- -------------
Total Other Liabilities -- 97,004
------------- -------------
TOTAL LIABILITIES 325,203 413,237
------------- -------------
STOCKHOLDERS' DEFICIT
Series A preferred stock, $0.01 par value, 1,000,000
shares authorized, 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 at September 30, 2001 and December 31,
2000, respectively 52,930 52,930
Additional paid-in capital 11,535,349 11,535,349
Accumulated deficit (11,862,254) (11,802,545)
------------- -------------
TOTAL STOCKHOLDERS' DEFICIT (271,690) (211,981)
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 53,513 $ 201,256
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
5
GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2001 2000 2001 2000
----------- ----------- ----------- -----------
Selling, general and administrative 1,139 232,083 128,246 761,218
Settlement of legal proceedings -- -- -- 292,433
Depreciation and amortization -- 12,776 -- 42,927
Interest expense/(income), net 3,891 156 12,019 2,580
----------- ----------- ----------- -----------
5,030 245,015 140,265 1,099,158
----------- ----------- ----------- -----------
Loss from continuing operations (5,030) (245,015) (140,265) (1,099,158)
Income/(loss) from discontinued
operations 1,245 (128,924) (33,200) (214,400)
Gain/(loss) on discontinued operations -- (107) -- 15,730
----------- ----------- ----------- -----------
Net loss before extraordinary item (3,785) (374,046) (173,465) (1,297,828)
Extraordinary income -- gain on
forgiveness of debt 11,751 -- 56,501 --
----------- ----------- ----------- -----------
Net income/(loss) $ 7,966 $ (374,046) $ (116,964) $(1,297,828)
=========== =========== =========== ===========
Loss per share from continuing
operations $ -- $ (0.04) $ (0.03) $ (0.22)
Income/(loss) from discontinued
Operations $ -- $ (0.02) $ -- $ (0.04)
Extraordinary gain per share $ -- $ -- $ 0.01 $ --
Loss per common share --
basic and diluted $ -- $ (0.06) $ (0.02) $ (0.26)
Weighted average shares outstanding 5,293,044 5,991,457 5,293,044 4,894,303
The accompanying notes are an integral part of these consolidated financial
statements.
6
GOLF ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
-----------------------------------
September 30, September 30,
2001 2000
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (116,964) $ (1,297,828)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization -- 71,885
Increase in deferred compensation -- 100,000
Issuances of stock for services and settlements -- 135,580
Inventory obsolescence reserve -- 50,000
Write-off notes receivable -- 261,250
Change in assets and liabilities due to operating activities:
Decrease/(increase) in prepaid expenses 25,352 (34,549)
Increase/(decrease) in accounts payable (16,659) 111,118
Decrease in accrued liabilities (19,215) (128,708)
Decrease in assets disposed of -- 387,373
Decrease in liabilities disposed of -- (376,734)
Forgiveness of debt (56,501) --
---------- ------------
Total adjustments (67,023) 576,715
---------- ------------
Net cash used in operating activities (183,987) (721,113)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of furniture and equipment -- 47,700
Purchases of furniture and equipment -- (1,176)
Decrease in notes receivable -- 68,583
Sales-type and direct financing lease rentals received 121,768 229,199
---------- ------------
Net cash provided by investing activities 121,768 344,306
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 91,739 19,500
Principal payments on long-term debt (30,143) (146,044)
Proceeds from sale of stock -- 480,000
---------- ------------
Net cash provided by financing activities 61,596 353,456
---------- ------------
Net decrease in cash (623) (23,351)
Cash at beginning of period 1,914 23,945
---------- ------------
Cash at end of period $ 1,291 $ 594
========== ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ 14,781
Income taxes $ -- $ --
The accompanying notes are an integral part of these consolidated financial
statements.
7
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
nine months ended September 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 nine-month period 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
nine months ended September 30, 2001 of $116,979. In addition, the Company has a
stockholders' deficiency of $271,690 at September 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 three months ended September 30, 2001
and 2000 were 5,293,044 and 5,991,457, respectively. Vested and unvested
options, warrants and
8
convertible 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:
September 30, December 31,
2001 2000
------------- ------------
Term note payable to Northwinds
Center, LP, payments of $340 including
interest at 10%, due October 31, 2004 -- 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 180,863 105,000
--------- ---------
$ 187,113 $ 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:
September 30, December 31,
2001 2000
------------- ------------
Investment in leased assets, sales-type $ 52,222 $ 173,990
========== ==========
Notes payable $ -- $ 39,750
========== ==========
Note 5. Supplemental Disclosures of Noncash Investing and Financing Activities
Not applicable
9
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 nine months ended September 30, 2001, the Company had no significant
revenues (other than interest and financing income) since 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 nine months and three months ended September 30, 2001, the selling,
general and administrative costs of the corporate headquarters were $128,246 and
$1,139, respectively. Interest expense, net of interest income of $316 and $41,
related to corporate operations was $12,016 and $2,580, respectively. Management
has put a cost control plan into place which will reduce even further overhead
expenses.
For the nine months and three months ended September 30, 2001, the Company
received financing income from payments made by the lessor of its remaining
sales-type leases. The Company reported income of $6,429 and $1,246 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 $40,405 for the four months ended April 30,
2001. These
10
amounts are included in Discontinued Operations. The Company did not record a
gain or loss on the transaction.
As a result of the foregoing, the Company recorded a net loss of $116,964 and
net income of $7,966 for the nine months and three months ended September 30,
2001, respectively. This is compared to a net loss of $1,297,828 and $374,046
for the nine months and three months ended September 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 nine months ended September 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 September 30,
2001, the Company has been able to sell additional Convertible Notes of $91,739.
The Company has been unable to sell any of its Convertible Notes since September
30, 2001 and it will not be able to continue operations.
Future Plans
On April 6, 2001, 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
11
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", "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.
12
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 May 17, 2001, the Company filed its Form 10-K for the fiscal year ended
December 31, 2001. On May 23, 2001, the Company filed its Form 10-K for the
quarterly period ended March 31, 2001. The 'E', indicating non-compliance with
required SEC filings, appended to the Company's ticker symbol on April 23, 2001,
was removed upon acceptance of the filings.
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
None.
13
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: October 31, 2001 /s/ Ronald G. Farrell
------------------------------------
Ronald G. Farrell
Chief Executive Officer
(Principal Executive Officer)
Date: October 31, 2001 /s/ Scott A. Lane
------------------------------------
Scott A. Lane
Chief Financial Officer
(Principal Financial and Accounting Officer)
14