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COMMITMENTS
 12 Months Ended
Dec. 31, 2011
COMMITMENTS

NOTE 6.  COMMITMENTS

 

Leases

 

The land underlying the CGC is leased under an operating lease that expires in 2012 and has two five-year renewal options.  In March 2006, the Company exercised the first of two options, extending the lease to 2018.  Also, the lease has a provision for contingent rent to be paid by AAGC upon reaching certain levels of gross revenues.  The Company recognizes the minimum rental expense on a straight-line basis over the term of the lease, which includes the two five year renewal options.

 

 

At December 31, 2011, minimum future lease payments under non-cancelable operating leases are as follows:

 

 

 

 

2012

 

$        529,840

2013

 

          529,840

2014

 

          529,840

2015

 

          529,840

2016

 

          529,840

Thereafter

 

       3,536,216

 

 

 

 

 

 $    6,185,416

 

 

 

 

 

 

 

Total rent expense for all operating leases was $481,673 for 2011 and $481,673 for 2010.

 

Customer Agreement

On June 19, 2009, the Company entered into a “Customer Agreement” with Callaway Golf Company (“Callaway”) and St. Andrews Golf Shop, Ltd. (“SAGS”) through our majority owned subsidiary AAGC. Pursuant to this agreement, AAGC shall expend an amount equal to or exceeding $250,000 for marketing and promotion of Callaway for a period of approximately three and one half years with an automatic extension to December 31, 2018 unless written notice of termination is received by November 2013. Additionally, AAGC will expend amounts to improve both their range facility as well as the golfing center. These improvements are to include Callaway Golf® branding elements. Callaway has agreed to provide funding and resources in the minimum amount of $2,750,000 to be allocated as follows: 1) $750,000 towards operating expenses of AAGC; 2) $750,000 towards facility improvements for both AAGC and St. Andrews Golf Shop; 3) $500,000 in range landing area improvements of AAGC and 4) three payments each of $250,000 for annual advertising expenses paid by AAGC which will be repaid in golf merchandise to SAGS. AAGC will then be reimbursed by SAGS for AAGC’s expenditures in advertising as incurred. In substance, due to the related party nature of SAGS, the Company is also considered a customer of Callaway as it relates to this agreement. Therefore, we recognized the contributions from Callaway as follows:

·         Contribution of operating expenses totaling $750,000 (received July 2010) was presumed to be a reduction of such operating expenses and therefore reduced our “General and administrative” expense by that amount.

·         Contribution of range and other facility improvements totaling $554,552 were recorded as a reduction of the costs for those improvements. The contributions, which were made directly by Callaway to the applicable contractors and vendors completing the work, were exactly equal to the costs and therefore, no value as been recorded for these improvements.

The annual payments for advertising began in 2011 and will continue as long as Callaway, AAGC and SAGS agree to maintain the agreement through the term of the Customer Agreement in December 2018. Such contributions from Callaway of up to $250,000 annually will be recorded as a reduction of the Company’s costs for the related advertising.  Additionally, the contributions are to be paid to SAGS in the form of golf related products.  SAGS will then reimburse AAGC in the form of monies as the golf related products are received.

During 2011 Callaway hired R & R Partners, a local advertising agency to handle the advertising of our facility.  Their contracted work was for a total of $150,000 for the year.  During this year, such advertising through R & R included regular radio advertising: a concierge event in conjunction with Where Magazine; advertising on taxi tops for a month; redesign of the CGS website, initiation of social networking with Facebook and Twitter; as well as magazine and newspaper advertisements.