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- Related party transactions
 3 Months Ended
Mar. 31, 2012
- Related party transactions

Note 5 – Related party transactions

 

Due to related parties

 

The Company’s employees provide administrative/accounting support for (a) three golf retail stores, one of which is named Saint Andrews Golf Shop ("SAGS") and the other two Las Vegas Golf and Tennis ("District Store") and Las Vegas Golf and Tennis Superstore (“Westside”), 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 $22,892 and $20,648 for the three months ended March 31, 2012 and 2011, 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 $1,423,409 and $1,370,830 as of March 31, 2012 and December 31, 2011, 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.

Both the Company’s President and his brother have continued to defer half of their monthly salaries until the Company is in a more positive financial state.  The amounts deferred for first quarter 2012 are $15,000 and $9,375, respectively.

Notes and Interest Payable to Related Parties:

The Company has various notes and interest payable to the following entities as of March 31, 2012, and December 31, 2010, respectively:

 

 

2011

 

2010

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

 

693,846

 

 

 

 

 

Various notes payable to the District Store, bearing 10% per annum and due on demand

 

85,000

 

85,000

 

 

 

 

 

Note payable to BE, III bearing 10% per annum and due on demand

 

200,500

 

105,500

 

 

 

 

 

 

 

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Total

$

4,279,495

$

4,184,495

 

 

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All maturities of related party notes payable and the related accrued interest payable as of March 31, 2012 are due and payable upon demand. At March 31, 2012, the Company has no loans or other obligations with restrictive debt or similar covenants.

 

On June 15, 2009, the Company 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 the Company’s outstanding loan due to St. Andrews Golf Shop, Ltd. In March 2009, the Company 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 March 31, 2012 and December 31, 2011, accrued interest payable - related parties related to the notes payable – related parties totaled $4,657,373and $4,550,848, respectively.

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 three month ending March 31, 2012 and 2011, the Company recognized rental income totaling $39,312 and $39,312, respectively.