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RELATED PARTY TRANSACTIONS
 12 Months Ended
Dec. 31, 2011
RELATED PARTY TRANSACTIONS

NOTE 4.  RELATED PARTY TRANSACTIONS

Due to related parties

The Company’s employees provide administrative/accounting support for (a) a management company, wholly-owned by the Company’s Chairman, named Durpat, LLC, and b) three golf retail stores, one of which is named Saint Andrews Golf Shop ("SAGS") and the others named Las Vegas Golf and Tennis ("District Store") and Las Vegas Golf and Tennis (“Westside, 15 Store”), owned by the Company’s President and his brother.  The SAGS store 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 $90,814 and $84,194 for the years ended December 31, 2011 and 2010, 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 $1,370,830 and $1,231,696 as of December 31, 2011 and 2010, 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 December 31, 2011 and 2010:

 

     2010

2011

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

 

 

693,846

     630,846

 

 

 

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

 

 

 

 

-

2,182

 

 

 

Note payable to BE III, LLC, bearing 10%

Per annum and due on demand

105,500                   

  75,000      

 

 

 

                                          TOTAL                

$4,184,495

$4,093,177

 

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, 2010 was $114,255. The interest payable as of December 31, 2008 is $114,255. The principal of the note was paid off on September 30, 2008 with the proceeds from the Urban Land Settlement.  However, in September of 2011 stock was issued as a means to compensate for the interest due to Investment AKA, LLC, a company involving Andre Agassi, for 952,123 shares.  This share amount was derived by the average stock price for the 30 days prior to the transaction dated September 28, 2011, which was 12 cents a share.

 

All maturities of related party notes payable and the related accrued interest payable as of December 31, 2011 are due and payable upon demand. At December 31, 2011, the Company has no loans or other obligations with restrictive debt or similar covenants.

 

On June 15, 2010, we 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 our outstanding loan due to St. Andrews Golf Shop, Ltd. In March 2010, we 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 December 31, 2011 and 2010, accrued interest payable - related parties related to the notes payable – related parties totaled $4,550,948 and $4,140,745, respectively.

John Boreta has been employed by All-American Golf Center (“AAGC”), a subsidiary, as its general manager for over 12 years.  On June 15, 2010, AAGC entered into an employment agreement with John Boreta.  The employment agreement is for a period through May 31, 2012 and provides for a base annual salary of $75,000.  During 2011, he received compensation of $79,550 for his services in that capacity.  He also receives health insurance that is fully paid for by AGC at a current cost of $1,188 per month.  John Boreta is a principal shareholder of the Company and is also the brother of Ronald Boreta and the son of Vaso Boreta.

Effective August 1, 1994, the Company entered into an employment agreement with Ronald S. Boreta, the Company’s President, and Chief Executive Officer, pursuant to which he receives base salary of $100,000 per year plus annual increases as determined by the Board of Directors.  His salary was increased to $120,000 beginning the year ended December 31, 1996.  The employment agreement is automatically extended for additional one-year periods unless 60 day’s notice of the intention not to extend is given by either party.  Ronald S. Boreta also receives the use of an automobile, for which the Company pays all expenses and full medical and dental coverage.  The Company also pays all dues and expenses for membership at a local country club at which Ronald S. Boreta entertains business contacts for the Company.  Ronald S. Boreta has agreed that for a period of three years from the termination of his employment agreement that he will not engage in a trade or business similar to that of the Company.  As part of the Callaway agreement signed in June of 2010, Mr. Boreta’s employment agreement was extended until 2018 or as long as Callaway Golf Company is involved in the Callaway Golf Center.

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 years ended December 31, 2011 and 2010, the Company recognized rental income totaling $157,248 and $157,248, respectively.