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RELATED PARTY TRANSACTIONS
 12 Months Ended
Dec. 31, 2012
RELATED PARTY TRANSACTIONS

NOTE 4.  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 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 $80,806 and $90,814 for the years ended December 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 $1,416,843 and $1,370,830 as of December 31, 2012 and 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.

Notes and Interest Payable to Related Parties:

The Company has various notes and interest payable to the following entities as of December 31, 2012 and 2011:

 

2012

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

 

 

743,846

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, LLC, bearing 10%

Per annum and due on demand

200,500

105,500

 

                                          TOTAL                

 

 

$4,329,495

$4,184,495

 

 

 

 

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

 

On June 15, 2011, we entered into a “Stock Transfer Agreement” with Saint Andrews Golf Shop, 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 Saint Andrews Golf Shop, Ltd. In March 2011, 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.

 

Interest expense on related party notes totaled $427,486 and $410,100 for the years ended December 31, 2012 and 2011, respectively.

As of December 31, 2012 and 2011, accrued interest payable - related parties related to the notes payable - related parties totaled $4,978,335 and $4,550,848, respectively.

John Boreta, who became a Director of the Company in 2012, has been employed by All-American Golf Center (“AAGC”), a subsidiary, as its general manager for over 12 years.  On June 15, 2009, AAGC entered into an employment agreement with John Boreta.  The employment agreement was for a period through June 15, 2012 and provided for a base annual salary of $75,000. Although the term of the employment agreement ended in June 2012, he continues to be employed on the same basis.  During 2012, John Boreta received compensation of $81,000 for his services in that capacity, which includes an auto allowance.  He also receives health insurance that is fully paid for by AGC at a current cost of $666 per month.

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 term of the employment agreement ended in May 2012, but he continues to be employed by the Company on the same basis.  Ronald S. Boreta receives the use of an automobile, for which the Company pays all expenses and full medical and dental coverage which totals $666 a month.  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.

Lease to SAGS

The CGC has two tenant operations. The first is the Saint Andrews Golf Shop that occupies approximately 4,300 square feet for golf retail sales and pays a fixed monthly rent that includes a prorated portion of maintenance and property tax expenses of $13,104 for its retail and office space.  The lease is for fifteen years through July 2012.  The tenant has two options to extend for five years in July 2012 and July 2017 with a 5% rent increase for each extension.  The tenant extended their first option starting August 2012. For the years ended December 31, 2012 and 2011, the Company recognized rental income totaling $160,020 and $157,248 respectively.