UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 1-K

ANNUAL REPORT

 

ANNUAL REPORT PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933

For the fiscal year ended December 31, 2022

 

GolfSuites 1, Inc.

(Exact name of issuer as specified in its charter)

 

Delaware   83-2379196
     
(State or other jurisdiction of incorporation or
organization)
  (I.R.S. Employer Identification No.)

 

650 East Bloomingdale Avenue, Brandon, FL

 

 

33511

     
(Address of principal executive offices)   (Zip Code)

 

  (813) 621-5000  
     
  (Phone)  

 

Preferred Stock
 
(Title of each class of securities issued pursuant to Regulation A)

 

 

 

 

 

 

TABLE OF CONTENTS

 

BUSINESS - 3 -
   
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - 12 -
   
DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES - 18 -
   
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS - 20 -
   
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS - 21 -
   
FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDING DECEMBER 31, 2022 AND DECEMBER 31, 2021 F-1

 

In this annual report, (the “Annual Report”) the terms “GolfSuites,” “GS1,” “we,” “us,” “our,” or “the company” refer to GolfSuites 1, Inc. a Delaware corporation and its subsidiaries on a consolidated basis. The terms “GolfSuites Lubbock” or “Lubbock” refer to GolfSuites Lubbock, LLC, the terms “GolfSuites Tulsa” or “Tulsa” refer to GolfSuites Tulsa, LLC. the terms “GolfSuites Baton Rouge” or “Baton Rouge” refer to GolfSuites Baton Rouge, LLC and the terms “GolfSuites Madison” or “Madison” refers to GolfSuites Madison, LLC. GolfSuites Lubbock and GolfSuites Tulsa and GolfSuites Lubbock are wholly owned subsidiaries of the company and GolfSuites Baton Rouge and GolfSuites Madison are majority owned subsidiaries of the company.

 

THIS ANNUAL REPORT MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE ANNUAL REPORT, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

 

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Item 1. Business

 

Overview

 

GolfSuites 1, Inc. owns, leases and operates golf driving range entertainment centers in the United States. The entertainment centers aim to provide next generation hospitality and dining venues, high tech gamified golf in climate-controlled suites, live entertainment, and spaces for both social and corporate functions.

 

As of December 31, 2023, the company operates three facilities. The company owns 100% of GolfSuites Tulsa, LLC and GolfSuites Lubbock, LLC. The company manages GolfSuites Baton Rouge, LLC, and owns a 50% interest in Baton Rouge. A private investor owns the remaining 50% interest in Baton Rouge. Similarly, the company owns a 50% interest in GolfSuites Madison, LLC. A private investor owns the remaining 50% interest in Madison. As of December 31, 2022, development of the Madison site has been discontinued, and the company is seeking a buyer for the site.

 

Tulsa is located in Jenks, Oklahoma a suburb of Tulsa and was formerly operated under the FlyingTee brand. Currently, Tulsa operates under the GolfSuites brand. Tulsa and the land on which it is located is leased by the company.

 

Lubbock is located in Lubbock Texas. It formerly operated under the 4ORE! Golf brand. Currently, it operates under the brand, 4ORE! Golf-Powered by GolfSuites. During 2023, it will operate under the GolfSuites brand. The Lubbock Facility is owned by the company and the land on which it is located is leased by the company.

 

On March 16, 2021, GS 1 formed Baton Rouge for the purpose of leasing an approximate 18-acre existing driving range in Baton Rouge, Louisiana. Previously, Baton Rouge had been closed for operations. On June 1, 2022, Baton Rouge began operations of the 40-bay facility offering similar services as Tulsa and Lubbock. Minority interest in the loss of Baton Rouge has been reflected in the attached statements to show the allocation of loss to a private equity investor. As of December 31, 2022, the private equity investor had invested $1,000,000 of his total commitment of $1,000,000.

 

On May 5, 2022, Madison purchased approximately 9 acres of land which the company had intended to develop into a 40-bay golf driving range and entertainment facility. The land was purchased on May 5, 2022 with funding provided by the company’s Regulation A share sales, private equity investment, advances from GolfSuites, Inc., positive operating cash flows from existing operations, and $1,125,000 of mortgage financing. Minority interest in the loss of Madison have been reflected in the attached statements to show the allocation of loss to a private equity investor. As of December 31, 2022, the development of the Madison site has been discontinued, and the company is seeking a buyer for the site.

 

Timeline

 

Below is a timeline of the company’s operating history.

 

  On October 25, 2018, the company was incorporated.
     
  In September 2019, GolfSuites 3, Inc., an affiliate of the company, began operating an facility in Jenks, Oklahoma (the “Tulsa Facility”) pursuant to a lease agreement governing the Tulsa Facility and an additional agreement governing the land on which it is located. Both lease agreements were entered into by GolfSuite 3’s wholly owned subsidiary, GolfSuites Tulsa.
     
  On August 6, 2020, GolfSuites Lubbock was formed. It is a wholly owned subsidiary of the company.
     
  On August 19, 2020, pursuant to the Membership Interest Purchase Agreement (“MIP Agreement”), GolfSuites Lubbock acquired 4ORE Golf, LLC, a Texas Limited Liability Company, (the “Lubbock Facility”). The Membership Interest Purchase Agreement is included as an Exhibit to this Form 1-K.
     
  On August 19, 2020, GolfSuites Lubbock, pursuant to the MIP Agreement, assumed the lease agreement governing the land on which the Lubbock Facility is located. The related lease agreement is included as an Exhibit to this Form 1-K.
     
  On December 30, 2020, the company acquired GolfSuites Tulsa from GolfSuites 3. 
     
  On February 9, 2021, the company entered into a lease agreement for an approximate 18-acre existing driving range located at 8181 Siegen Lane, Baton Rouge, Louisiana (the “Baton Rouge Facility”) and has a term of five years. The lease commenced on March 1, 2021.
     
  On January 15, 2022 the company formed GolfSuites Madison, LLC (“Madison”) a Mississippi limited liability company for the purpose of purchasing approximately 9 acres of land which was to be developed into a 40-bay golf driving range and entertainment facility. The land was purchased on May 5, 2022. As of December 31, 2022, the development of the Madison site has been discontinued, and the company is seeking a buyer for the site.

 

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The Facilities

 

Below are statistics related to each operational facility.

 

    TULSA
FACILITY
  LUBBOCK
FACILITY
  BATON ROUGE
FACILITY
ENTERTAINMENT AMENITIES   60 golf suites.   56 golf suites.   40 golf suites.
    These suites open up to the golf target field and incorporate comfortable seating, ball dispensers, club storage, gaming and media displays.   These suites open up to the golf target field and incorporate comfortable seating, ball dispensers, club storage, gaming and media displays.   These suites open up to the golf target field and incorporate comfortable seating, ball dispensers, club storage, gaming and media displays.
    Private lessons available, pinball, pool and corn hole.   Private lessons available, pinball, pool and corn hole.   Private lessons available, pinball, pool and corn hole.
HOSPITALITY AMENITIES   2 restaurants and 2 bars.   2 restaurants and 2 bars.   1 restaurant and 1 bar.
OPERATIONAL STATISTICS   Multi-floor facility.   Multi-floor facility.   Single floor facility.
    Average weekly guests: Approximately 2,500 since September 2019 to present.   Average weekly guests: Approximately 2,500 since August 2020 to present.   Average weekly guests: Approximately 300 since June 2022 to present.

 

To date, revenues have come from the following activities:

 

  · Driving range suite rentals.
  · Special events sales.
  · Food and beverage sales.
  · Coaching and instruction services.
  · Retail sales.

 

The company collects revenue upon sale of an item (including: membership sales, food and beverage sales, apparel etc.) and recognize the revenue when the sale is made.

 

Cost of revenues for the company includes the cost of food, beverages, liquor, wine and beer sold to customers.

 

Operating expenses currently consist of advertising and marketing expenses and general administrative expenses.

 

Current Facilities

 

Currently, the company operates three facilities. The Tulsa Facility, the Lubbock Facility and the Baton Rouge Facility.

 

The Tulsa Facility: Overview

 

The Tulsa Facility is located at 600 Riverwalk Terrace in the City of Jenks, County of Tulsa, Oklahoma. The company believes the following to be the most appealing characteristics of the Tulsa Facility:

 

  It is a mid-size venue consisting of approximately 53,102 rentable square feet and a driving range.
     
  It is an entertainment facility, show casing live entertainment, gamified golf and various games such as pinball, pool and corn hole. It is also prides itself on its local chef inspired menus, craft cocktails and full-service restaurants.

 

  It is located in a metropolitan area with a mid-size population.

 

  Multiple university communities are a short distance away (less than ten miles).

 

  There is an established millennial population within the area which fosters a trade market.

 

  It is less than one mile to major highways, interstate access other large entertainment facilities, restaurant, and recreational attractions.

 

During 2019, the company began re-branding and upgrading the facility. To date, the company has invested approximately $1,339,000 into the Tulsa Facility. The company believes that an additional $1,200,000 may be needed to complete the rebranding and necessary upgrades of the facility, certain sums of which may be paid by the landlord.

 

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The Tulsa Facility: Lease Agreement

 

  The term of the Tulsa Facility lease agreement is 25 years.

 

  Annual base lease payments are $360,000, adjustable throughout the terms of the lease.

 

  GolfSuites Tulsa is entitled to 50% of the net cash flow. The remaining 50% of the net cash flow is due and payable to Onefire Holding Company.

 

 

 

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The Lubbock Facility: Overview

 

The Lubbock Facility is located at 6909 Marsha Sharp Fwy, Lubbock, Texas 79407. The company believes the most appealing characteristics of the Lubbock Facility to be:

 

  It is a mid-size venue with a driving range.

 

  It is an entertainment facility, show casing live entertainment, gamified golf and various games such as pinball, pool and corn hole.  It is also prides itself on its local chef inspired menus, craft cocktails and full-service restaurants.

 

  It is located in a metropolitan area with a mid-size population.

 

  Multiple university communities are a short distance away (less than ten miles).

 

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  There is an established millennial population within the area which fosters a trade market.

 

  It is less than one mile to major highways, interstate access other large entertainment facilities, restaurant and recreational attractions.

 

The Lubbock Facility currently operates under the 4ORE! Golf brand, however, it is owned and operated by GolfSuites. The company plans to begin re-branding in 2023. The company believes the re-branding and necessary upgrades will cost approximately $600,000.

 

The Lubbock Facility: Lease Agreement

 

  The lease agreement related to the land on which the facility is on is for a term of 20 years, terminating October 31, 2038. The beginning monthly rent is $13,000 annually and increases by 2% every year thereafter. The lease includes twenty 5-year options for renewal.

 

  In addition, the company maintains a nuisance (ingress/egress) lease. This lease was agreed to with the owner of the adjacent property because golf balls were going over the net surrounding the driving range and landing on the adjacent property.  The lease expires on August 29, 2023. The company does not have plans to renew this lease.  

 

The Baton Rouge Facility: Overview

 

The Baton Rouge Facility, located at 8181 Siegen Lane, Baton Rouge, Louisiana. The company believes the most appealing characteristics of the Baton Rouge Facility to be:

 

  It is a mid-size venue consisting of approximately 40 bays and a driving range.
     
  It is an entertainment facility, show casing live entertainment, gamified golf and various games such as pinball, pool and corn hole. It is also prides itself on its local chef inspired menus, craft cocktails and full-service restaurants.

 

  It is located in a metropolitan area with a mid-size population.

 

  Multiple university communities are a short distance away (less than ten miles).

 

  There is an established millennial population within the area which fosters a trade market.

 

  It is less than one mile to major highways, interstate access other large entertainment facilities, restaurant and recreational attractions.

 

The re-branding and upgrading of the facility was completed during 2022.

 

The Baton Rouge Facility: Lease Agreement

 

  The term of the Baton Rouge Facility lease agreement is 5 years, however the company has the option to extend the lease for 2 periods of 5 years.

 

  Annual base lease payments range from $15,000, for the first year, $39,600 for the second year and $60,000 for years 3-5.  The company is currently paying $30,000 a year.

 

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Future Facilities

 

Over the next year the company intends to: (i) continue to source existing facilities, and (ii) purchase land for future facilities where such opportunities exist. On April 25, 2023 the company entered into a letter of intent to purchase 10 acres in Opelika, Alabama, near Auburn University.  The company expects to close this transaction in August 2023.

 

has a contract for approximately 10 acres in Opelika, Alabama, near Auburn University.

 

The company is currently sourcing future facilities that will likely have the following characteristics:

 

  Mid-size venue consisting of approximately 40 bays and a driving range.
     
  It is an entertainment facility, show casing live entertainment, gamified golf and various games such as pinball, pool and corn hole. It is also prides itself on its local chef inspired menus, craft cocktails and full-service restaurants.

 

  It is located in a metropolitan area with a mid-size population.

 

  Multiple university communities are a short distance away (less than ten miles).

 

  There is an established millennial population within the area which fosters a trade market.

 

  It is less than one mile to major highways, interstate access other large entertainment facilities, restaurant and recreational attractions.

 

Sourcing Facilities

 

When contemplating leasing already existing facilities, purchasing existing facilities, or building a facility from the ground up the company looks as the following factors to determine whether the project is suited for the company:

 

  Location and size of each future facility.

 

  Large and mid-size populations within metropolitan areas.

 

  University communities with populations of at least 100,000.
     
  Local millennial populations.
     
  The proximity to major highway, interstate access other large entertainment facilities, restaurant, and recreational attractions.
     
  Ongoing growth trends in the selected area.   
     
  Proximity of select population bases including: university students, types of housing developments and employment rates.
     
  Whether a local government is cooperative and favors the development of leisure facilities.
     
  Cost of land.
     
  Availability and potential threat of competitor facilities within the vicinity.
     
  Favorable mortgage/lender terms and relationships.

 

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Financing Facilities

 

The company intends to lease and/or purchase already existing facilities with a combination of the following:

 

  The proceeds of the Regulation A offering.
     
  Funds advanced to GolfSuites by GolfSuites, Inc. (the “Parent Company”).
     
  Mortgage financing provided by banks, private equity funds, lending-REITs and/or other financial institutions.

 

The company intends to purchase land to begin the construction of facilities with a combination of the following:

 

  The proceeds of the Regulation A offering.
     
  Funds advanced to GolfSuites by the Parent Company.
     
  Mortgage financing provided by banks, private equity funds, lending-REITs and/or other financial institutions.

 

Management of the Facilities

 

The Parent Company oversees the management of all of the company’s locations and will oversee the management of all future locations. We intend that all the facilities will operate similar to the Tulsa and Lubbock facilities, where the company and/or its subsidiaries employ management teams and staff to operate each facility whether it is leased facility, owned facility, or built from the ground up.

 

Market Sector

 

The company participates in the recreational sporting and entertainment facilities market. The company believes this market to be young, fast-growing and under-served. This market overlaps three growing, highly profitable markets: the golf market, the recreation/sporting entertainment sector and the food and beverage portion of the hospitality industry. The company competes for revenues from customer spending in each of these three sectors.

 

Target Audience

 

The company has five primary target audiences:

 

  Families looking for a fun experience for their kids and friends.

 

  Experience Seekers, Millennials, Gen-Xers, Boomers seeking unique, fun night/weekend entertainment.

 

  Recreational and avid golfers.

 

  Businesses wanting team building, business gatherings, incentive rewards and corporate event venues with food and entertainment.

 

  Get together/Fundraiser planners looking for unique locations for parties, celebrations and fund-raising events.

 

Management Services from GolfSuites

 

GolfSuites entered into a management services agreement with the Parent Company effective as of August 12, 2019 (the “Management Services Agreement”). Under that agreement, The Parent Company will manage the company and allow the company to use certain intellectual property and business concepts. The company will incur direct capitalized costs and overhead expenses.

 

Some direct capitalized costs and overhead expenses will be paid by the company directly (e.g., salaries, board of director and board of advisor fees, employee benefits, and general administrative costs) while other capitalized costs and overhead expenses will be paid by the Parent Company and then reimbursed by the company (e.g., architectural costs, engineering, land, zoning and permitting and other costs directly related to assets belonging to the company).

 

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In addition, the company will pay the Parent Company monthly management fees as follows:

 

  Operating facilities:  4% of gross operating revenues once facilities are opened.

 

  o Parent Company shall calculate 4% of gross revenue amount of the immediate past month, and the Parent Company shall invoice the company for the specific management fee amount on a monthly basis.

 

  Facilities that are not operational:  3% of all-in development costs.

 

  o The “in-development costs” shall be calculated as the total amount of the hard and soft development costs, which include, but are not limited to, the total costs of land, development and entitlement costs, all construction costs, engineering and design costs, and contractor fees (the “In-Development Costs”) paid by the company in the immediate past month.  The Parent Company shall invoice the company for the specific management fee amount on a monthly basis.

 

The Tulsa Facility, the Lubbock Facility and the Baton Rouge Facility are considered operating facilities.

 

The initial term of the Management Services Agreement is for ten years. Upon expiration of the agreement, it will automatically renew for another two years. Either party can terminate the agreement provided 120 days written notice has been given to the other party. The Management Services Agreement may also be terminated upon certain events of default, including but not limited to, material breaches of the agreement and also if one party files for bankruptcy or otherwise liquidates.

 

In the event the Parent Company were to file for bankruptcy or otherwise liquidate, the company would have to seek another provider of management services or make arrangements for such services to be provided in-house, including the hiring of additional personnel.

 

For additional information please see the Management Services Agreement, which is an Exhibit to this report.

 

Competition

 

Direct competitors

 

The company’s largest competitor in this emerging market is TopGolf. As of December 2022, there are approximately 70 TopGolf locations in the United States. Its first facilities were developed less than 20 years ago, and according to public reporting TopGolf intends to add new venues annually. Other competitors include local and regional facilities as well as other national chains, including DriveShack, 1Up Golf, Big Shots, and Driv.

 

Indirect competitors

 

Indirect competitors include sports-themed entertainment facilities with food and beverage offerings that revolve around other sports including, but not limited to bowling, ping pong, baseball, NASCAR, etc. These include PINS Mechanical, Main Event (40+ locations), Lucky Strike, Bowl More, iDrive NASCAR, iFly, and Dave & Buster’s (139 locations as of December 2020), to name a few.

 

In addition, new entertainment themed centers are being developed within the US that merge retail, food and beverage, entertainment and hospitality into single, tightly packed mixed-use destinations of 1-3 million square feet. These new developments include American Dream (Miami) and American Dream (NYC), as well as numerous other smaller developments throughout the US. Facilities like these typically include entertainment amenities such as water parks, skydiving, surfing, ice-rinks, drive-in movie theatres, hybrid golf facilities, miniature golf, theme parks, observation wheels, climbing walls, X4D movie theatres, and aquariums.

 

Employees

 

The company does not have any full-time or part-time employees. The Tulsa Facility, the Lubbock Facility, and Baton Rogue Facility currently employ approximately 300 employees in the following roles: restaurant service, marketing, management, facilities management, event sales, golf instruction and retail.

 

In addition, the Parent Company employs eight individuals, all of whom spend up to half of their time working on matters related to the company and various related entities. The amount of time that an employee of the Parent Company will dedicate to GolfSuites will vary from week to week depending on the current needs of the company.

 

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Regulation

 

Currently, the company has obtained a state liquor license in Oklahoma for the Tulsa Facility and a state liquor license in Texas for the Lubbock Facility. The company has not yet obtained a liquor license for the Baton Rogue Facility. In addition to the liquor licenses, certain other licenses that may be required for the company’s planned operations include:

 

  State liquor license.
     
  State reuse/resale tax for products including but not limited to golf clubs, and apparel.
     
  County resale tax certificate. 
     
  “Doing Business As” certificates for applicable states.
     
  Health department and food service license for each facility.
     
  Elevator and Fire department certifications, required annually. 

 

Intellectual Property

 

The Parent Company has filed the following name trademarks and GolfSuites intends to enter into a license agreement with the Parent Company for use of the following trademarks:

 

  GolfSuites
     
  Off The Deck
     
  FirstCut

 

Litigation

 

As of December 31, 2022, the company has one lawsuit filed against it for a total of $78,517 plus accrued interest, by a shareholder of the company. This amount is guaranteed to the shareholder by Gerald Ellenburg, the company’s chairman and another shareholder of the company.

 

On December 31, 2022 the chairman and the other shareholder, entered into an agreement granting indemnification to the company for full payment of this $78,517 obligation. The $78,517 balance is included in Advances from Shareholders of GolfSuites, Inc. The total Advances from Sharesholders of GolfSuites, Inc. was $260,517 as of December 31, 2022.

 

Property

 

Tulsa Facility:

 

oThe company has entered into two lease agreements at the Tulsa Facility located at 600 Riverwalk Terrace Jenks, Oklahoma. One lease agreement relates to the facility. The second lease agreement relates to the land that the facility is on.

 

Baton Rouge Facility:

 

oThe company has entered into one lease agreement for the property located at 8181 Siegen Lane, Baton Rouge, Louisiana.

 

Lubbock Facility:

 

oThe company owns the facility located at 6909 Marsha Sharp Fwy, Lubbock, Texas. The company leases the property at 6909 Marsha Sharp Fwy, Lubbock, Texas.

 

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Conflicts of Interest

 

The company is subject to various conflicts of interest arising out of its relationship with the Parent Company. The company discusses these conflicts below.

 

General

 

The Parent Company currently holds all of the issued Common Stock of GolfSuites. The Parent Company is also affiliated with ERC Communities, Inc, f/k/a ERC HomeBuilders, Inc, and its related entities (collectively, the “ERC Entities”). The ERC Entities focus on the development and sale of a built-for rent properties in the United States. Gerald Ellenburg is the CEO for The Parent Company, the company and the ERC Entities (the “Affiliated Executives”).

 

These Affiliated Executives have legal obligations with respect to the Parent Company and the ERC Entities that are similar to their obligations to the company. In the future, these persons and other affiliates of the Parent Company and the ERC Entities may organize and or acquire for their own account, entertainment and hospitality facilities that may have been suitable for GolfSuites.

 

Allocation of GolfSuites Affiliates’ Time

 

Currently, The Tulsa Facility and the Lubbock Facility rely on Scott McCurry, to run the day-to day operations of the facilities. However, the company continues to rely on the Parent Company’s executive officers and other professionals who act on behalf of the Parent Company, for the day-to-day operation of its business, including sourcing locations, developing and/or sourcing future facilities, and capital raising. As the business matures, the company’s intent is to develop its own management team to take over the day-to-day operations of business. Until that occurs and as a result of the Affiliated Executives competing responsibilities, their obligations to other investors and the fact that they will continue to engage in other business activities on behalf of themselves and others, they will face conflicts of interest in allocating their time to GolfSuites and other entities and other business activities in which they are involved.

 

Receipt of Fees and Other Compensation by the Parent Company and its Affiliates

 

The Parent Company and its affiliates will receive substantial fees from the company, which fees will not be negotiated at arm’s length. These fees could influence the Parent Company’s advice to the company as well as the judgment of the Affiliated Executives of the Parent Company. For additional information see “The Company’s Business – Management Services from the Parent Company” for conflicts relating to the payments between the Parent Company and GolfSuites.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

You should read the following discussion and analysis of our financial condition and results of our operations together with our consolidated financial statements and related notes appearing at the end of this Annual Report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed elsewhere in this Annual Report.

 

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Overview

 

GolfSuites 1, Inc. owns, leases and operates golf driving range entertainment centers in the United States. The entertainment centers aim to provide next generation hospitality and dining venues, high tech gamified golf in climate-controlled suites, live entertainment, and spaces for both social and corporate functions.

 

As of December 31, 2022, the company owns 100% of GolfSuites Tulsa, LLC and 100% of GolfSuites Lubbock, LLC. The Tulsa Facility was formerly operated under the FlyingTee brand, but now operates under the GolfSuites brand. The Lubbock Facility was formerly operated under the 4ORE! Golf brand, but now operates under 4ORE! Golf-Powered By GolfSuites brand, and will change to usage of the GolfSuites brand later in 2023.

 

On March 16, 2021, GS 1 formed GolfSuites Baton Rouge, LLC a Louisiana limited liability company for the purpose of leasing an approximate 18-acre existing driving range that had been closed for operations. On June 1, 2022, Baton Rouge began operations of the 40-bay facility offering the same services as Tulsa and Lubbock. Through December 31, 2022, the total site development cost totals approximately $2,560,000. Funding for this site has been provided by the company’s Regulation A share sales, private equity investment, advances from the Parent Company, positive operating cash flows from existing operations, and a land lease. Minority interest in the loss of Baton Rouge has been reflected in the attached statements to show the allocation of loss to a private equity investor. As of December 31, 2022, the private equity investor has invested $1,000,000.

 

On January 15, 2022, GS 1 formed GolfSuites Madison, LLC, a Mississippi limited liability company for the purpose of purchasing approximately 9 acres of land which was to be developed into a 40-bay golf driving range and entertainment facility. The land was purchased on May 5, 2022. Through December 31, 2022, the total site development cost for Madison totals approximately $2,028,000. Funding for this site has been provided by the company’s Regulation A share sales, private equity investment, advances from the Parent Company positive operating cash flows from existing operations, and $1,125,000 of mortgage financing. Minority interest in the loss of Madison has been reflected in the attached statements to show the allocation of loss to a private equity investor. As of December 31, 2022, the private equity investor has invested $712,000. As of December 31, 2022, development of the Madison site has been discontinued, and the company is seeking a buyer for the site.

 

To date, revenues have come from the following activities:

 

  · Driving range suite rentals.
  · Special events sales.
  · Food and beverage sales.
  · Coaching and instruction services.
  · Retail sales.

 

The company collects revenue upon sale of an item (including: membership sales, food and beverage sales, apparel etc.) and recognize the revenue when the sale is made. Cost of revenues for the company includes the cost of food, beverages, liquor, wine and beer sold to customers.

 

Operating expenses currently consist of advertising and marketing expenses and general administrative expenses.

 

Results of Operations

 

For the year ended December 31, 2022, the company had $9,071,791 in revenue compared to the year ended December 31, 2021 the company had $8,853,965 in revenues, a $217,826 (or 2%) increase. The increase in revenues is attributable to:

 

  · the change in restrictions related to capacity constraints and public large-crowd-gatherings which were largely in place and did not expire until March 2021. Expiration of the restrictions led to an increase in group and corporate sales the company;
  · expanded its offerings in food and beverage;
  · the opening of Baton Rouge in June 2022; and
  · improved sales performance incentives for employees.

 

 13 

 

 

The company’s cost of revenues increased by $223,267 (or 17.9%) to $1,469,968 during the year ended December 31, 2022 from $1,246,701 for the year ended December 31, 2021. The increase in costs of revenues was primarily related to the increase in revenues as well as higher costs of materials.

 

Total operating expenses for the period ended December 31, 2022 increased to $7,490,346 from $6,427,854 for the year ended December 31, 2021 a $1,062,492 (or 16.5%) increase. The primary drivers of the increase were:

 

·An increase of $120,695 in advertising and marketing due to the new Baton Rouge site.

 

·An increase of $225,746 in equipment and repairs due to primarily to net repairs at Tulsa and Lubbock of $21,045 plus first-time repairs at Baton Rouge of $33,180.

 

·An increase of $225,886 in operational salaries related to payroll related to the opening of Baton Rouge, offset by efficiencies at Tulsa and Lubbock.

 

·An increase of $192,699 in utilities and telephone primarily due to a very cold winter, followed by a very hot early summer in 2022.

 

·An increase in professional fees of $61,844 primarily due to fees incurred by GS 1 related to legal, accounting, audit and other fees associated with the capital raise and reporting requirements.

 

The company records other income (expense) for depreciation and amortization (related to its facilities and equipment), interest expenses (related to its loans and mortgages), certain costs related to its capital raises under Regulation A and Regulation D and loan forgiveness. The company had net other expense of $3,120,465 for the period ended December 31, 2022 compared with net other expense for the period ended December 31, 2021 of $3,398,583.

 

Minority interest in the loss of Baton Rouge has been reflected to show the allocation of $867,550 in loss as of December 31, 2022 to a private equity investor.

 

As a result of the foregoing, the company generated net loss for the years ended December 31, 2022 in the amount of $2,141,438 compared to a net loss for the period ended December 31, 2021 in the amount of $697,690.

 

Liquidity and Capital Resources

 

The following table summarizes, for the periods indicated, selected items in our condensed Statements of Cash Flows:

 

   Year ended December 31,     
   2022   2021   $ Change 
Net cash provided by operating activities  $62,516   $382,166   $(319,650)
Net cash used in investing activities  $(4,110,391)  $(2,215,996)  $(1,894,395)
Net cash provided by financing activities  $3,601,173   $1,969,455   $1,631,718 

 

Cash provided by operating activities for the year ended December 31,2022 was $62,516 as compared to cash provided by $382,166 for the period ended December 31, 2021. The decrease was primarily comprised of increased net loss from startup of Baton Rouge, one-time income from PPP forgiveness in 2021, and the impact of changes in various working capital components.

 

Cash used in investing activities for the year ended December 31,2022 was $4,110,391, as compared to cash used in investing activities of $2,215,996 for the period ended December 31, 2021. In 2022, the company used $3,991,636 for the purchase of property and equipment; $1,905,957 related to Baton Rouge construction and additions, $2,028,363 related to the acquisition of Madison land; and $57,316 was for additions at Tulsa and Lubbock. Capitalized development fees incurred totaled $118,755; $57,179 from Baton Rouge, and $61,576 from Madison.

 

Cash provided by financing activities was $3,601,173 for the year ended December 31, 2022, compared to cash provided of $1,969,455 for the year ended December 31, 2021. During 2022, we received $3,518,042 from the sale of Preferred Stock, $1,287,000 from proceeds of minority interest in Baton Rouge and Madison and $1,125,000 in proceeds from the note payable for the mortgage on the acquisition of Madison land. Our shareholder and related party advances, net used $2,815,858 for the period ended December 31, 2022, including the conversion to additional paid-in capital of $2,696,442, compared with providing $271,619 for the period ended December 31, 2021. For principal payments on mortgages, equipment loans and leases, the company used $1,209,176 in 2022, which included the leases for Tulsa, Lubbock, and Baton Rouge, compared with using $254,796 in 2021. Dividend payments in 2022 totaled $361,662 compared to $133,968 in 2021.

 

 14 

 

 

As of December 31,2022 , the company has cash and cash equivalents of $227,442. Since inception, our activities have been funded from our revenues, cash advances from its current parent entity and management as well as funds raised in the company’s offerings under Regulation A. Since taking over the operations for the Lubbock Facility, the Tulsa Facility, and the Baton Rouge Facility the company has also been relying on revenues from those facilities. The company plans to continue to try to raise additional capital through: (i) additional offerings (ii) mortgage financing and (iii) revenues from the Tulsa Facility, the Lubbock Facility and the Baton Rouge Facility. Absent additional capital, the company may be forced to significantly reduce expenses and could become insolvent.

 

For the years ended December 31, 2022 and December 31, 2021 , GolfSuites Tulsa and GolfSuites Lubbock advanced funds to the company totaling $690,982 and $967,480, respectively.

 

The company launched its second Regulation A offering in February 2021 which terminated in March 2022. The total amount raised in the offering was approximately, $3,391,706. The company launched its third Regulation A offering in May 2022. For the year ended December 31, 2022, the amount raised pursuant to the Regulation A offering totaled $3,518,042.

 

Indebtedness

 

Advances from the Parent Entity and its Shareholders

 

  · The company has received working capital from its parent entity to cover expenses and costs while preparing for the securities offering under Regulation A. The balance of these advances at December 31, 2022 and December 31, 2021 totaled $260,517 and $933,317, respectively. These advances are recorded as liabilities of the company. The company has formalized some of these borrowings but expects to repay all of these amounts whether a formal promissory note exists or not. The agreements are between related parties. Therefore, there is no guarantee that rates or terms are commensurate with arm’s-length arrangements.

 

  ·

In addition, the company received advances from shareholders of the parent entity. The total of these advances, $2,696,442, was converted to Additional Paid- in Capital in 2022.

 

The balance of these parent entity shareholder advances totaled $2,143,058 as of December 31, 2021. These advances are recorded as liabilities of the company. The company has formalized some of these borrowings but expects to repay all of these amounts whether a formal promissory note exists or not. The agreements are between related parties. Therefore, there is no guarantee that rates or terms are commensurate with arm’s-length arrangements.

 

Notes Payable and Lease Obligations

 

Notes payable consists of the following debt instruments as of December 31, 2022, and 2021.

 

 15 

 

 

      2022   2021 
Equipment financing             
Tulsa  Current  $23,467   $38,450 
Tulsa  Long-term   68,612    109,130 
   Total   92,079    147,580 
Insurance Financing             
Tulsa  Current   121,115    - 
Lubbock  Current   69,712    - 
Baton Rouge  Current   25,807    - 
   Total   216,634    - 
Mortgage financing             
Lubbock  Current   156,727    813,580 
Lubbock  Long-term   5,768,790    5,935,332 
   Subtotal   5,925,517    6,748,912 
Madison  Long-term   1,125,000    - 
   Total   7,050,517    6,748,912 
Totals by entity             
Tulsa  Current   144,582    38,450 
Lubbock  Current   226,439    813,580 
Baton Rouge  Current   25,807    - 
   Current total   396,828    852,030 
Tulsa  Long-term   68,612    109,130 
Lubbock  Long-term   5,768,790    5,935,332 
Madison  Long-term   1,125,000    - 
   Long-term total   6,962,402    6,044,462 
Tulsa  Total   213,194    147,580 
Lubbock  Total   5,995,229    6,748,912 
Baton Rouge  Total   25,807    - 
Madison  Total   1,125,000    - 
   Notes payable total  $7,359,230   $6,896,492 

 

  · Lubbock Facility

 

  o The company took over a construction loan with First United Bank, with an interest rate of 4%.  As of December 31, 2022, the company recorded $5,925,517 in liabilities for this mortgage; the mortgage was secured by a third-party guarantor.

 

  o The company took over the Amended and Restated Ground Lease, executed on October 30, 2018, for a 5-year term. The beginning monthly rent is $13,000 annually and increases by 2% every year thereafter. The lease includes three 5-year options for renewal, which extends the lease termination date to 2038.

 

  o The company took over a lease with Hub City Main Street Investments, LLC. The lease provides for a 5-year term with monthly payments of $2,500. This lease is often referred to as a nuisance lease as it is with the owner of the adjacent property owner because golf balls were going over the net surrounding the driving range and landing on the adjacent property. The lease expires on August 29, 2023.

 

 16 

 

 

  · Tulsa Facility

 

  o GolfSuites Tulsa is a party to a 25-year lease agreement, dated September 13, 2019, and entered into between GolfSuites Tulsa and Onefire Holding Company, LLC (“Onefire”) (the “Tulsa Lease Agreement”). Onefire is entitled to annual payments of $360,000 and 50% of net cash flow.

 

  o On March 5, 2020 GolfSuites Tulsa entered into a Lease Amendment Agreement with Onefire. This agreement provides for the deferment of base rent and additional rent for the period from January 1, 2020, through March 31, 2020.

 

  o On July 6, 2020, the company took out a loan for equipment financing with First Oklahoma Bank in the amount of $198,580. The loan bears an interest rate of 5.25% and expires on July 6, 2025. As of December 31, 2022, the outstanding loan principal was $92,079.

 

  · Baton Rouge Facility

 

  o On February 9, 2021, the company entered into a lease agreement for an approximate 18-acre existing driving range located at 8181 Siegen Lane, Baton Rouge, Louisiana (the “Baton Rouge Facility”) and has a term of five years. The lease commenced on March 1, 2021.  As of December 31, 2022, the company recorded $675,058 in liabilities for this lease.

 

  · Madison Facility

 

  o The mortgage related to the acquisition of Madison land totaled $1,125,000, and that balance is outstanding at December 31, 2022.  The interest rate is the Prime Rate plus five percent, with the balance due May 5, 2023.

 

Trends

 

GolfSuites participates in the recreational sporting and entertainment facilities market. It believes this market to be young, fast-growing and under-served. This market overlaps three growing, highly profitable markets: the golf market, the recreation/sporting entertainment sector and the food and beverage portion of the hospitality industry. GolfSuites competes for revenues from customer spending in each of these three sectors. Since money spent in those sectors is discretionary income, the company believes it is reliant on economic trends in the United States.

 

To date, there have been limited restrictions on construction. The company has continued to move forward with its business plans and has done or intends to do the following:

 

  · Rebranding of the Tulsa Facility
  · Plan for the rebranding of the Lubbock Facility.
  · Opened the Baton Rouge Facility - Q2 2022.
  · Plan for the acquisition or lease of 3 additional facilities.
  · Complete the rebranding of the Lubbock Facility during 2023
  · Sell the Madison Facility during 2023

 

 17 

 

 

Item 3. Directors and Officers

 

Directors, Executive Officers and Significant Employees

 

The table below sets forth the officers and directors of the company as of April 27, 2023.

 

Name   Position   Employer   Age  

Term of Office (If
indefinite give date
of appointment)

Gerald Ellenburg   CEO, Director, Secretary, Treasurer   GolfSuites 1, Inc.   74   March 14, 2019
Ryan Ellenburg   Director   GolfSuites 1, Inc.   41   January 6, 2023

 

The table below sets forth the officers and directors of GolfSuites, Inc. (“Parent Company”).

 

Name   Position   Employer   Age  

Term of Office (If
indefinite give date
of appointment)

Gerald Ellenburg   Director
Chairman
Chief Executive Officer and Secretary
  GolfSuites, Inc.   74   November 8, 2018
Gerald Ellenburg   President   GolfSuites, Inc.   74   February 10, 2023
Scott McCurry   Chief Operating Officer    GolfSuites, Inc.   54   March 2023
David A. Morris III   Consulting CFO   GolfSuites, Inc.   63   November 8, 2018
Ann England   VP, Human Resources   GolfSuites, Inc.   51   October 15, 2021

 

Gerald Ellenburg

 

Gerald Ellenburg (“Jerry”) is the President and Chief Operating Officer since February 10, 2023. In addition, he has served as the Chairman and Chief Executive Officer of the Parent Company since November 2018 and GolfSuites since March 2019. Jerry also serves as the Chairman and Chief Executive Officer of ERC Communities, Inc., since March 2011. Jerry has a total of 35 years of experience in real estate ownership, management and financing of multi-family properties, management of over $750 million in debt and equity financing. Jerry graduated from the University of California, Berkeley in 1971, and is a California-licensed CPA (inactive).

 

Ryan Ellenburg

 

Ryan Ellenburg is a Director of the company since February 10, 2023. Ryan Ellenburg has been consulting with the capital markets team for ERC Communities, Inc., ERC Communities 1, Inc., GolfSuites, Inc., and GolfSuites 1, Inc. since June 2019. In January 2023, Ryan joined the board of directors for ERC Communities, Inc., and ERC Communities 1, Inc. Previously, from September 2017 until June 2019, Ryan was employed by Allied Universal as a security contractor. During that time frame his primary clients were PG&E and ServiceNow. Ryan is no stranger to technology and finance and has been improving systems since value engineering construction projects in college and then overseeing standard upgrades for worldwide Silicon Valley accounts. Mr. Ellenburg is a graduate of the Georgia Institute of Technology in 2004.

 

Scott McCurry

 

Scott McCurry was appointed Chief Operating Officer of the Parent Company in March 2023. Previously, he served as Vice President of Operations for the Parent Company from September 1, 2019 until March 2023. Scott is an operations executive with over 25 years of experience in the Hospitality and Entertainment Industry. Previously, Scott was the National Director of Operations for K1 Speed from September 2017 to September 2019, helping it grow in domestic and international size while adding food beverage to the brand while improving the guest experience.  Prior to K1Speed, Scott was the National Director of Operations of Topgolf from February 2014 to September 2017.  Prior to that Scott was their Director of Operations, a position he held since July 2012.  At Topgolf, Scott helped build the brand from six venues to over 40 venues each averaging $20 million in revenue a year.

 

 18 

 

 

Ann England

 

Ann England is Vice-President of Human Resources, Organizational Development, and Employee Training since October 2021. Ann joins the Parent Company with over 30 years in the foodservice industry, including nearly 20 years in Human Resources, Organizational Development and Employee Training. From 1992 to October 2021, she served at Cracker Barrell in various roles, including Manager of Internal Communications and Guest Relations for 6 years and Director of Operational Strategy for the last 3 years there. In addition to her HR experience, Ann has led internal corporate communications, guest relations, strategic projects, and operational strategy. She is a graduate of Middle Tennessee State University.

 

David A. Morris III

 

David Morris is the Consulting Chief Financial Officer of the Parent Company since November 2018. David is also the Consulting Chief Financial Officer at ERC Communities, Inc., since March 2011 until present. David has over 30 years of experience in finance and financial forensics. During his tenure at GolfSuites, David oversees the following:

 

  tax planning,
     
  compliance,
     
  accounting,
     
  audit,
     
  forecasts and
     
  investment analysis. 

 

David’s’ career has included the Vice-Presidency of Finance at Belz Enterprises, a large real estate development and management company.  David graduated from the University of Wisconsin, La Crosse, in 1980 and is a Tennessee-licensed CPA.

 

 19 

 

 

Item 4. Security Ownership of Management and Certain Securityholders

 

The following table sets out, as of March 31, 2023, GolfSuites voting securities that are owned by its executive officers, directors and other persons holding more than 10% of the company’s voting securities.

 

Title of class  Name and
address of
beneficial
owner
  Amount and
nature
of beneficial
ownership
  Amount and
nature
of beneficial
ownership
acquirable
  Percent of
class
 
Class B Common Stock  GolfSuites, Inc.
650 E. Bloomingdale Ave., Brandon, FL 33511
  18,000,000  N/A  100%

 

There are currently no outstanding shares of the company’s Class A Common Stock and 687,489 shares outstanding of the company’s Preferred Stock.

 

The following table sets out, as of March 31, 2023 the Parent Company’s voting securities that are owned by the company’s executive officers, directors and other persons holding more than 10% of the company’s voting securities.

 

Title of class  Name and
address of
beneficial
owner
  Amount and
nature
of beneficial
ownership
  Amount and
nature
of beneficial
ownership
acquirable
  Percent of
class
 
Common Stock  Gerald Ellenburg  215,000,000  N/A  22.43%
   Nicholas Flanagan  191,000,000  N/A  19.93%
   Michael & Gina Zylstra  119,375,000  N/A  12.46%

 

(1) The address for all the executive officers, directors, and beneficial owners is c/o GolfSuites, Inc. 650 E. Bloomingdale Ave., Brandon, FL 33511.

  

 20 

 

 

Item 5. Interest of Management and Others in Certain Transactions

 

Relationship with the Parent Company

 

The company has received working capital from its parent entity to cover expenses and costs while preparing for the Regulation A securities offering. The total of these advances, $2,696,442 was converted to Additional Paid- in Capital in 2022. The balance of the advances at December 31, 2021 totaled $2,143,058.

 

In addition, the Company received advances from shareholders of the parent entity. The balance of these parent entity shareholder advances totaled $260,517 and $933,317 respectively, as of December 31, 2022 and 2021. These advances are recorded as liabilities of the company. The company has formalized some of these borrowings but expects to repay all of these amounts whether a formal promissory note exists or not. The agreements are between related parties. Therefore, there is no guarantee that rates or terms are commensurate with arm’s-length arrangements.

 

The company has issued 18,000,000 shares of Class B Common Stock to the Parent Company, at par, in exchange for $180.

 

Management Services Agreement

 

The company has entered into a Management Services Agreement with the Parent Company. Pursuant to this agreement, the Parent Company will license all intellectual property and business concepts and design necessary for GolfSuites to conduct its business and under the direction of our Board of Directors, the Parent Company is to provide services to GolfSuites including: Supervision the operations of GolfSuites, and Management all necessary negotiations relating to the business, personnel, etc. In return for the aforementioned services GolfSuites agrees to pay the Parent Company a monthly management fee:

 

  Operational facilities: 4% of gross operating revenues
     
  Facilities that are not operational: 3% of all In-Development Costs

 

The initial term of the agreement is for ten years. Upon expiration of the agreement it shall automatically renew for another two years. Either party can terminate the agreement provided 120 days written notice has been given to the other party. see “Item 1. Business – Management Services from GolfSuites.”

 

Relationship with ERC Communities, Inc.

 

Some of the parties involved with the operation and management of the company, including Gerald Ellenburg, Ryan Ellenburg and David Morris, have other relationships that may create disincentives to act in the best interest of the company and its investors. These parties are also involved with ERC Communities, Inc. and its subsidiaries in similar capacities. These conflicts may inhibit or interfere with the sound and profitable operation of the company.

 

Item 6. Other Information

 

None.

 

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Item 7. Financial Statements

 

FINANCIAL STATEMENTS

 

GolfSuites 1, Inc.

and Subsidiaries

 

Consolidated Financial Statements

 

As of, and for the Years Ended December 31, 2022 and 2021

 

 

 

F-1

 

 

 

 

INDEPENDENT AUDITOR’S REPORT

 

April 25, 2023

 

To: Board of Directors, Golfsuites 1, Inc.
   
Re: 2022 Consolidated Financial Statement audit

 

We have audited the accompanying consolidated financial statements of Golfsuites 1, Inc. and subsidiaries (the “Company”), which comprise the balance sheet as of December 31, 2022 and 2021, and the related statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for the calendar year periods ended 2021 and 2020, and the related notes to such consolidated financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of the Company’s financial statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.

 

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations, shareholder equity and its cash flows for the calendar years ended 2022 and 2021 and in accordance with accounting principles generally accepted in the United States of America.

 

F-2

 

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the financial statements, the Company has stated that substantial doubt exists about the Company's ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are also described in the Notes to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

 

Sincerely,

 

Icon

Description automatically generated

 

IndigoSpire CPA Group

 

IndigoSpire CPA Group, LLC

Aurora, Colorado

 

April 25, 2023

 

F-3

 

 

GolfSuites 1, Inc.

and Subsidiaries

 

Consolidated Financial Statements

As of, and for the Years Ended December 31, 2022 and 2021

Table of Contents

 

Consolidated Balance Sheet  F-5
    
Consolidated Statement of Operations  F-6
    
Consolidated Statement of Changes in Stockholders' Equity  F-7
    
Consolidated Statement of Changes in Cash Flows  F-8
    
Notes and Additional Dislosures to the Consolidated Financial Statements  F-9
    
Consolidating Statements for GolfSuites 1, Inc.  F-18

 

F-4

 

 

GolfSuites 1, Inc. and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2022 and 2021

 

   2022   2021 
ASSETS          
Current assets          
Cash and cash equivalents  $227,442   $674,144 
Accounts receivable   54,467    386,581 
Inventory   308,953    105,856 
Prepaid expenses   239,677    24,223 
Total current assets   830,539    1,190,804 
Property, plant and equipment, net          
Land and building improvements   10,735,403    6,867,239 
Furniture, fixtures and equipment   4,536,829    3,742,864 
Construction in progress   -    650,241 
Accumulated depreciation   (3,408,871)   (2,630,573)
Property, plant and equipment, net   11,863,361    8,629,771 
Right of use assets, net of accumulated amortization   8,485,641    8,896,265 
Other assets          
Capitalized development costs   784,969    666,214 
Other assets   41,134    44,865 
Goodwill   1,749,255    1,749,255 
Total other assets   2,575,358    2,460,334 
TOTAL ASSETS  $23,754,899   $21,177,174 
           
LIABILITIES AND EQUITY          
Liabilities          
Current liabilities          
Notes payable, current portion  $396,828   $852,030 
Lease liabilities, current portion   230,216    201,506 
Accounts payable and accrued expenses   1,756,622    754,375 
EIDL loans payable   298,169    298,900 
Total current liabilities   2,681,835    2,106,811 
Non-current liabilities          
Notes payable, long-term portion   6,962,402    6,044,462 
Lease liabilities, long-term portion   8,723,926    8,954,141 
Advances from shareholders of Golfsuites, Inc. (parent company)   260,517    933,317 
Advances from GolfSuites, Inc. (parent company)   -    2,143,058 
Total non-current liabilities   15,946,845    18,074,978 
TOTAL LIABILITIES   18,628,680    20,181,789 
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES   702,824    283,374 
Stockholders' equity          
Common stock, Class A: 132,000,000 shares authorized, $0.00001 par, no shares issued and outstanding   -    - 
Common stock, Class B: 18,000,000 shares authorized, $0.00001 par, 18,000,000 shares issued and outstanding   180    180 
Additional Paid-In Capital   2,696,442    - 
Preferred stock, Class A: 10,000,000 shares authorized, 867,728 and 540,503 shares issued and outstanding, respectively   6,948,660    3,430,618 
Preferred stock, Other: 40,000,000 shares authorized, no shares issued and outstanding   -    - 
Retained earnings   (5,221,887)   (2,718,787)
TOTAL EQUITY   4,423,395    712,011 
TOTAL LIABILITIES AND EQUITY  $23,754,899   $21,177,174 

 

The accompanying notes are an integral part of these financial statements.

 

F-5

 

 

GolfSuites 1, Inc. and Subsidiaries

Consolidated Statement of Operations

For the Years Ended December 31, 2022 and 2021

 

   2022   2021 
Revenues  $9,071,791   $8,853,965 
Cost of revenues   1,469,968    1,246,701 
Gross profit   7,601,823    7,607,264 
Operating expenses          
Advertising and marketing   162,773    42,078 
Salaries - operational   3,309,450    3,083,564 
Employee benefits and taxes   617,387    576,154 
Property lease and affiliated costs   89,106    90,550 
Equipment and repairs   403,639    177,893 
Gaming, software and license fees   335,229    315,060 
Utilities and telephone   562,083    369,384 
Credit card fees   214,679    240,301 
Insurance   311,292    310,950 
Professional fees   294,241    232,397 
Property and local taxes   405,816    387,946 
Other selling, general and administrative   784,651    601,577 
Total operating expenses   7,490,346    6,427,854 
Net operating profit (loss)   111,477    1,179,410 
Income from Covid 19 relief programs          
PPP loan forgiveness   -    1,073,100 
Employee retention credit   -    331,756 
Total Covid 19 relief programs   -    1,404,856 
Net income before other income (expense)   111,477    2,584,266 
Other income (expense)          
Depreciation and amortization   (1,168,670)   (1,104,196)
Interest expense   (633,886)   (644,222)
Management fees   (344,533)   (667,036)
Reg A share sale costs   (983,293)   (985,742)
Other income   9,917    2,613 
Net other expense   (3,120,465)   (3,398,583)
Net loss before minority interest   (3,008,988)   (814,317)
Minority interest share of subsidiary loss   867,550    116,627 
Net income (loss)  $(2,141,438)  $(697,690)
           
Basic loss per common share  $(0.11897)  $(0.03876)
Diluted loss per common share  $(0.11446)  $(0.03798)

 

The accompanying notes are an integral part of these financial statements.

 

F-6

 

 

GolfSuites 1, Inc. and Subsidiaries

Consolidated Statement of Stockholders' Equity (Deficit)

For the Years Ended December 31, 2022 and 2021

 

   Class A  Class B   Additional  Class A  Other  Retained   Total 
   Common Stock  Common Stock   Paid-In  Preferred Stock  Preferred Stock  Earnings, Net   Stockholders' 
   Shares   Value  Shares  Value   Capital  Shares   Value  Shares  Value  of Dividends   Equity 
Balance as of December 31, 2020  -   $-  18,000,000  $180   $-  274,742   $1,304,534  -  $-  $(1,887,129)  $(582,415)
Share issuance and contributed capital  -    -  -   -    -  265,761    2,126,084  -   -   -    2,126,084 
Net income  -    -  -   -    -  -    -  -   -   (697,690)   (697,690)
Dividends  -    -  -   -    -  -    -  -   -   (133,968)   (133,968)
Balance as of December 31, 2021  -    -  18,000,000   180    -  540,503    3,430,618  -   -   (2,718,787)   712,011 
Share issuance and contributed capital  -    -  -   -    2,696,442  327,225    3,518,042  -   -   -    6,214,484 
Net loss  -    -  -   -    -  -    -  -   -   (2,141,438)   (2,141,438)
Dividends  -    -  -   -    -  -    -  -   -   (361,662)   (361,662)
Balance as of December 31, 2022  -   $-  18,000,000  $180   $2,696,442  867,728   $6,948,660  -  $-  $(5,221,887)  $4,423,395 

 

The accompanying notes are an integral part of these financial statements.

 

F-7

 

 

GolfSuites 1, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

For the Years Ended December 31, 2022 and 2021

 

   2022   2021 
Cash Flows from Operating Activities          
Net loss  $(2,141,438)  $(697,690)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:          
Minority interest share of income (loss)   (867,550)   (116,627)
Depreciation and amortization   1,168,670    1,104,196 
Changes in operating assets and liabilities          
Accounts receivable   332,114    (322,147)
Inventory   (203,097)   (17,570)
Prepaid expenses   (215,454)   (22,510)
Accounts payable and accrued expenses   1,002,247    (529,450)
Other assets   3,731    (1,778)
Reg A and Reg D share sale costs   983,293    985,742 
Net cash provided by operating activities   62,516    382,166 
           
Cash Flows from Investing Activities          
Acquisition of operating golf entities   -    - 
Purchase of property and equipment   (3,991,636)   (1,549,782)
Capitalized development costs   (118,755)   (666,214)
Net cash used in investing activities   (4,110,391)   (2,215,996)
           
Cash Flows from Financing Activities          
Proceeds from issuance of common stock   -    - 
Capital contribution   2,696,442    - 
Proceeds from issuance of perferred stock   3,518,042    2,126,084 
Proceeds from minority interest investor in subsidiary   1,287,000    400,000 
Proceeds from (payments on) PPP and EIDL loans, net of forgiveness   (731)   149,000 
Proceeds net of principal payments on mortgages, equipment loans and leases   261,233    142,462 
Shareholder and related party advances, net   (2,815,858)   271,619 
Dividend payments   (361,662)   (133,968)
Reg A and Reg D share sale costs   (983,293)   (985,742)
Net cash provided by financing activities   3,601,173    1,969,455 
Net Change In Cash and Cash Equivalents   (446,702)   135,625 
Cash and Cash Equivalents, Beginning of Period   674,144    538,519 
Cash and Cash Equivalents, End of Period  $227,442   $674,144 

 

The accompanying notes are an integral part of these financial statements.

 

F-8

 

 

GolfSuites 1, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of December 31, 2022

 

NOTE 1 - NATURE OF OPERATIONS

 

GolfSuites 1, Inc. (which may be referred to as “GS 1”, the “Company”, “we”, “us”, or “our”) is an early-stage company devoted to the development and operation of golf driving range and entertainment centers in the United States. The Company operates under the brand GOLFSUITES. The Company oversees the acquisition of land, zoning, entitlement, design, construction and operation of the existing and planned future facilities.

 

The Company owns 100% of GolfSuites Tulsa, LLC ("Tulsa") and GolfSuites Lubbock, LLC (“Lubbock”). Tulsa was formerly operated under the FlyingTee brand, but now operates under the GolfSuites brand. Lubbock was formerly operated under the 4ORE! Golf brand, but now operates under 4ORE! Golf-Powered by GolfSuites brand, and will change to the GolfSuites brand in 2023.

 

On March 16, 2021 GS 1 formed GolfSuites Baton Rouge, LLC (“Baton Rouge”), a Louisiana limited liability company for the purpose of leasing an approximate 18-acre existing driving range that had been closed for operations. On June 1, 2022 Baton Rouge began operations of the 40-bay facility offering the same services as Tulsa and Lubbock. Through December 31, 2022, the total site development cost totals approximately $2,560,000. Funding for this site has been provided by GS 1’s Reg A share sales, private equity investment, advances from GolfSuites, Inc. (“GolfSuites”) (parent company), positive operating cash flows from existing operations, and a land lease. Minority interest in the loss of Baton Rouge has been reflected in the attached statements to show the allocation of loss to a private equity investor. As of December 31, 2022, the private equity investor has invested $1,000,000.

 

On January 15, 2022 GS 1 formed GolfSuites Madison, LLC (“Madison”) a Mississippi limited liability company for the purpose of purchasing approximately 9 acres of land which was to be developed into a 40-bay golf driving range and entertainment facility. The land was purchased on May 5, 2022. Through December 31, 2022, the total site development cost for Madison totals approximately $2,028,000. Funding for this site has been provided by GS 1’s Reg A share sales, private equity investment, advances from GolfSuites, Inc., positive operating cash flows from existing operations, and $1,125,000 of mortgage financing. Minority interest in the loss of Madison has been reflected in the attached statements to show the allocation of loss to a private equity investor. As of December 31, 2022, the private equity investor has invested $712,000. As of December 31, 2022, development of the Madison site has been discontinued, and GS 1 is seeking a buyer for the site.

 

The attached consolidated statement of operations includes the operations of GS 1, Tulsa, and Lubbock for 2022 and 2021. Activity of Baton Rouge, from the start of operations on June 1, 2022, is also included. In that Madison did not conduct operations, no revenues or expenses are reflected in the statement of operations.

 

F-9

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America ("GAAP"). The Company has adopted December 31 as the year end for reporting purposes.

 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the footnotes thereto. Actual results could differ from those estimates. It is reasonably possible that changes in estimates will occur in the near term.

 

Risks and Uncertainties

The Company has a limited operating history. The Company's business and operations are sensitive to general business and economic conditions in the United States. A host of factors beyond the Company's control could cause fluctuations in these conditions. Adverse conditions may include: recession, economic downturn, local competition or changes in consumer taste. These adverse conditions could affect the Company's financial condition and the results of its operations. As of December 31, 2022, the Company is operating as a going concern.

 

Cash and Cash Equivalents

The Company considers short-term, highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash consists of currency held in the Company’s checking accounts. As of December 31, 2022 and 2021, GS 1’s consolidated cash balances totaled $227,442 and $674,144, respectively.

 

Receivables and Credit Policy

Trade receivables from customers are uncollateralized customer obligations due under normal trade terms, primarily requiring payment before services are rendered. Trade receivables are stated at the amount billed to the customer. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoice. The Company, by policy, routinely assesses the financial strength of its customer. As a result, the Company believes that its accounts receivable credit risk exposure is limited and it has not experienced significant write-downs in its accounts receivable balances. Balances due from credit card companies are included in accounts receivable. As of December 31, 2021 accounts receivable included $331,756 related to Employee Retention Credits – see Note 9 for additional details. The Employee Retention Credits were collected in the second quarter of 2022.

 

Property and Equipment

Property and equipment are recorded at cost. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are expensed as incurred. When equipment is retired or sold, the cost and related accumulated depreciation are eliminated from the balance sheet accounts and the resultant gain or loss is reflected in income.

 

Depreciation is provided using the straight-line method, based on useful lives of the assets. Depreciation for the years ended December 31, 2022 and 2021 totaled $778,298 and $713,571, respectively.

 

F-10

 

 

The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. As of December 31, 2022 and 2021 net property, plant and equipment consisted of the following:

 

   2022   2021 
By Asset Category:  $10,735,403   $6,867,239 
Land and building improvements          
Furniture, fixtures and equipment   4,536,829    3,742,864 
Construction in progress   -    650,241 
Acumulated depreciation   (3,408,871)   (2,630,573)
Total  $11,863,361   $8,629,771 
Net Book Value By Entity:          
Tulsa  $547,362   $624,764 
Lubbock   6,844,109    7,354,766 
Baton Rouge   2,443,527    650,241 
Madison   2,028,363    - 
Total  $11,863,361   $8,629,771 

 

Capitalized Development Costs

The Company has capitalized development fees under contractual agreements with its parent company, GolfSuites. These costs totaled $784,969 as of December 31, 2022 and are not amortized for GAAP purposes.

 

Goodwill

The Company recorded Goodwill related to the acquisition of its Tulsa and Lubbock golf operating entities in 2019 and 2020 respectively. Management has reviewed the amounts recorded as Goodwill in accordance with ASC 350-20-35-3C and has determined that the fair values of Tulsa and Lubbock are greater than carrying values, including Goodwill. Therefore, no impairment losses were recorded for the years ended December 31, 2022 or 2021. Following is a summary of the Goodwill values for Tulsa and Lubbock.

 

Tulsa   $859,760 
Lubbock    889,495 
Total   $1,749,255 

 

Income Taxes

Income taxes are provided for the tax effects of transactions reporting in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of receivables, inventory, property and equipment, intangible assets, cryptocurrency valuation and accrued expenses for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized.

 

F-11

 

 

The Company is taxed as a C Corporation for federal and state income tax purposes. As the Company has recently been formed, no material tax provision exists as of the balance sheet date.

 

The Company evaluates its tax positions that have been taken or are expected to be taken on income tax returns to determine if an accrual is necessary for uncertain tax positions. As of December 31, 2022 and 2021 the Company had no uncertain tax positions requiring accruals.

 

The Company is current with its foreign, US federal and state income tax filing obligations and is not currently under examination from any taxing authority.

 

Revenue Recognition

In 2019, the Company adopted ASC 606, Revenue from Contracts with Customers, as of inception. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

 

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

 

Advertising Expenses

The Company expenses advertising costs as they are incurred.

 

Organizational Costs

In accordance with GAAP, organizational costs, including accounting fees, legal fees, and costs of incorporation, are expensed as incurred.

 

Development & Management Fees

Pursuant to a Management Services Agreement (“MSA”) that exists between GolfSuites and GS 1, fees for development and management of assets are due and paid from GS 1 to GolfSuites. GS 1 pays 3% of the total cost of new assets acquired or developed as development fees on its facilities to GolfSuites, and it pays 4% of gross operating revenue as management fees to GolfSuites. Management fees are reflected on the GS 1 Statement of Operations – Other income (expense). Development fees are reflected on the Consolidated Balance Sheet of GS 1.

 

Earnings per Share

Earnings per share amounts are calculated based on the weighted-average number of shares of common stock outstanding in each year. The basic loss per share is based only on the weighted- average of common shares outstanding. The diluted loss per share is based on the weighted- average of common shares outstanding plus Class A preferred shares, which are convertible to one share of common stock.

 

Common and Preferred Share Sales and Affiliated Costs

GS 1 collected preferred share sales totaling $3,518,042 and $2,126,084 for the years ended December 31, 2022 and 2021, respectively. The Company paid $983,293 and $985,742 related to those periods, in costs including direct compensation, platform facilitating, marketing, share issuance / administration, and advertising for the sale of such shares. The cost ratio for each of those periods is 27.9% and 46.4%, respectively. Costs of approximately $150,000 incurred in 2021, related to prior year sales; after adjusting for these costs, the 2021 adjusted cost ratio approximates 39.3%.

 

F-12

 

 

Concentration of Credit Risk

The Company maintains its cash with major financial institutions located in the United States of America, which it believes to be credit worthy. The Federal Deposit Insurance Corporation insures balances up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits. Management believes the risk of loss is minimal.

 

Recent Accounting Pronouncements

In February 2016, FASB issued ASU No. 2016-02, Leases, that require organizations that lease assets, referred to as "lessees", to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms of more than 12 months. ASU 2016- 02 will also require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases and will include qualitative and quantitative requirements. The new standard for nonpublic entities became effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, and early application is permitted. The Company implemented ASU No. 2016-02 for lease accounting for 2020.

 

The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our balance sheet.

 

NOTE 3 – INCOME TAX PROVISION

 

As described above, the Company was recently formed and has incurred costs of its start-up operations, capital raising, and seeking to bring operations to positions of profitability. As such, no material tax provision yet exists.

 

NOTE 4 – NOTES PAYABLE

 

Notes payable consists of the following debt instruments as of December 31, 2022 and 2021.

 

F-13

 

 

      2022   2021 
Equipment financing             
Tulsa  Current  $23,467   $38,450 
Tulsa  Long-term   68,612    109,130 
   Total   92,079    147,580 
Insurance Financing
Tulsa  Current   121,115    - 
Lubbock  Current   69,712    - 
Baton Rouge  Current   25,807    - 
   Total   216,634    - 
Mortgage financing
Lubbock  Current   156,727    813,580 
Lubbock  Long-term   5,768,790    5,935,332 
   Subtotal   5,925,517    6,748,912 
Madison  Long-term   1,125,000    - 
   Total   7,050,517    6,748,912 
Totals by entity             
Tulsa 

Current

   144,582    38,450 
Lubbock  Current   226,439    813,580 
Baton Rouge  Current   25,807    - 
   Current total   396,828    852,030 
Tulsa  Long-term   68,612    109,130 
Lubbock  Long-term   5,768,790    5,935,332 
Madison  Long-term   1,125,000    - 
   Long-term total   6,962,402    6,044,462 
Tulsa  Total   213,194    147,580 
Lubbock  Total   5,995,229    6,748,912 
Baton Rouge  Total   25,807    - 
Madison  Total   1,125,000    - 
   Notes payable total  $7,359,230   $6,896,492 

 

NOTE 5 – RIGHT OF USE ASSETS & CAPITALIZED LEASE OBLIGATIONS

 

Tulsa, Lubbock and Baton Rouge lease land and/or buildings for each of those operations. In accordance with GAAP, the right of use assets are reflected in the attached balance sheet at the present value of future lease payments, as are the related lease liabilities, over the term of the respective leases.

 

Lubbock assumed the lease of land, that began prior to acquisition, on August 19, 2020; the present value of future lease payments was recorded at the acquisition date. Baton Rouge entered into a lease for land beginning March 1, 2021. The lease is for five years and Baton Rouge has the option to extend the lease for two additional five year terms. The present value of future lease payments, based on a 15 year lease, was recorded as of the lease inception.

 

The discount rate used in each of the present value calculations above is 4.000%, the incremental borrowing rate for Tulsa, Lubbock and Baton Rouge. The right of use assets are amortized straight-line over the life of each lease.

 

F-14

 

 

The table below provides a summary of the capitalized leases as of December 31, 2022.

 

   Tulsa   Lubbock   Baton Rouge   Total 
Lease end date  07/31/2050   10/31/2038   02/29/2036     
Monthly payment  $30,000   $13,525   $2,500   $46,025 
Scheduled monthly payment increase   n/a    2% / year on    Increase to      
         November 1    $3,300 at      
              3/1/2022 and      
              to $5,000 at      
              3/1/2023; then      
              10% for each      
              Renewal      
Asset value at inception or acquisition  $6,304,783   $2,437,633   $649,086   $9,391,502 
Accumulated amortization   (507,884)   (318,645)   (79,332)   (905,861)
Right of use asset, net at                    
December 31, 2022  $5,796,899   $2,118,988   $569,754   $8,485,641 

 

Principal portion lease obligation payments for the years ending December 31:

 

2023  $121,871   $80,052   $28,293   $230,216 
2024   126,838    86,765    34,836    248,439 
2025   132,006    93,820    36,254    262,080 
2026   137,383    101,233    42,807    281,423 
2027   142,980    109,020    45,587    297,587 
Thereafter   5,347,570    1,799,546    487,281    7,634,397 
Total  $6,008,648   $2,270,436   $675,058   $8,954,142 

 

Total land and building minimum lease payments for the years ending December 31:

 

2023  $360,000   $169,422   $56,600   $586,022 
2024   360,000    172,811    60,000    592,811 
2025   360,000    176,267    60,000    596,267 
2026   360,000    179,792    65,000    604,792 
2027   360,000    183,388    66,000    609,388 
Five year total  $1,800,000   $881,680   $307,600   $2,989,280 

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

The Company has one lawsuit filed against it for a total of $78,517 plus accrued interest, by a shareholder of GolfSuites. This amount is guaranteed to the shareholder by the Company’s chairman and another major shareholder of GolfSuites. The chairman and the other shareholder have issued an indemnification to the Company for full payment of this obligation. The balance is included in Advances from Shareholders of GolfSuites, Inc., reflected on the balance sheet.

 

F-15

 

 

NOTE 7 – EQUITY

 

The Company has authorized 132,000,000 shares of Class A common stock and 18,000,000 of Class B common stock, each with a par value of $0.00001 per share. As of December 31, 2022 there are no issued or outstanding shares of Class A common stock, and all Class B common stock is issued, outstanding, and held by GolfSuites, the Company’s parent company. In 2022 GolfSuites also contributed $2,696,442 to GS 1 that is shown in the balance sheet as Additional Paid-in Capital. In addition, the Company has authorized 10,000,000 shares of Class A preferred stock and 40,000,000 of other preferred stock. As of December 31, 2022, 867,728 shares of Class A preferred stock have been issued, are outstanding, and no other preferred stock is issued or outstanding. Class A preferred stock is convertible into Class A common stock. See the Consolidated Statement of Stockholders’ Equity (Deficit) for details of activity for each equity component.

 

Class A common stockholders are entitled to a single vote per share and have equal dividend and liquidation preferences as Class B common stockholders. Class B common stockholders have five votes per share and shares of Class B common stock can be converted into shares of Class A common stock at the option of the holder. Class A preferred stockholders are entitled to a single vote per share and to an 8 percent annual dividend, which will accrue if funds are not legally available to distribute, in addition to a liquidation preference. Shares of Class A preferred stock can be converted into shares of Class A common stock at the option of the holder and shares will be automatically converted in the event of a qualified public offering, as defined in the certificate of incorporation, as amended.

 

NOTE 8 – RELATED PARY TRANSACTIONS

 

The Company has received working capital from its parent entity to cover expenses and costs while preparing for the securities offering. The total of these advances was converted to Additional Paid- in Capital in 2022 (see Note 7 – Equity, above); the balance of the advances at December 31, 2021 totaled $2,143,058. In addition, the Company received advances from shareholders of the parent entity. The balance of these parent entity shareholder advances totaled $260,517 and $933,317 respectively, as of December 31, 2022 and 2021. These advances are recorded as liabilities of the Company. The Company has formalized some of these borrowings but expects to repay all of these amounts whether a formal promissory note exists or not. The agreements are between related parties. Therefore, there is no guarantee that rates or terms are commensurate with arm’s-length arrangements.

 

NOTE 9 – PPP LOAN FORGIVENESS & EMPLOYEE RETENTION CREDITS

 

PPP Loan Forgiveness

Tulsa and Lubbock obtained PPP loans under each of the two rounds of government loan funding. The first PPP loans were funded in 2020 and forgiven in the first quarter of 2021. Forgiveness of these loans was reflected in the consolidated financial statements for 2020. The second round of PPP loans were funded in the first quarter of 2021. The Company received official notice of the forgiveness of these loans in the summer of 2021. Following is a summary of the PPP loan forgiveness recognized by Tulsa and Lubbock.

 

   Tulsa   Lubbock   Total 
PPP Loan 1 - Recorded in 2020  $475,000   $418,400   $893,400 
PPP Loan 2 - Recorded in 2021   665,000    408,100    1,073,100 
Total  $1,140,000   $826,500   $1,966,500 

 

F-16

 

 

Employee Retention Credits

In addition to PPP loans, Tulsa and Lubbock qualified for employee retention credits related to employee payroll taxes for the first quarter of 2021. Claims for refund were filed with the IRS for Tulsa and Lubbock and those refunds were received in the second quarter of 2022. Following is a summary of the income recognized for employee retention credits which were also included in accounts receivable at December 31, 2021.

 

Tulsa   $190,927 
Lubbock    140,829 
Total   $331,756 

 

NOTE 10 – GOING CONCERN

 

These financial statements are prepared on a going concern basis.

 

NOTE 11 – SUBSEQUENT EVENTS

 

Management’s Evaluation

 

Management has evaluated subsequent events through April 25, 2023, the date these financial statements were issued. Based on this evaluation, no other material subsequent events were identified which would require adjustment or disclosure in the financial statements as of December 31, 2022.

 

F-17

 

 

GolfSuites 1, Inc. and Subsidiaries

Consolidating Balance Sheets

As of December 31, 2022 and 2021

 

               GolfSuites                     
   GolfSuites 1,   GolfSuites   GolfSuites   Baton Rouge,   GolfSuites           Consolidated 
   Inc.   Tulsa, LLC   Lubbock, LLC   LLC   Madison, LLC   Combined   Eliminations   2022   2021 
ASSETS                                             
Current assets                                             
Cash and cash equivalents  $37,408   $25,765   $161,158   $3,111   $-   $227,442   $-   $227,442   $674,144 
Accounts receivable   1,700    22,830    23,713    6,224    -    54,467    -    54,467    386,581 
Inventory   -    97,812    120,906    90,235    -    308,953    -    308,953    105,856 
Prepaid expenses   -    126,276    79,586    33,815    -    239,677    -    239,677    24,223 
Total current assets   39,108    272,683    385,363    133,385    -    830,539    -    830,539    1,190,804 
Property, plant and equipment, net                                             
Land and building improvements   -    175,700    6,691,539    1,839,801    2,028,363    10,735,403    -    10,735,403    6,867,239 
Furniture, fixtures and equipment   -    679,205    3,141,227    716,397    -    4,536,829    -    4,536,829    3,742,864 
Construction in progress   -    -    -    -    -    -    -    -    650,241 
Accumulated depreciation   -    (307,543)   (2,988,657)   (112,671)   -    (3,408,871)   -    (3,408,871)   (2,630,573)
Property, plant and equipment, net   -    547,362    6,844,109    2,443,527    2,028,363    11,863,361    -    11,863,361    8,629,771 
Right of use assets, net of accumulated amortization   -    5,796,899    2,118,988    569,754    -    8,485,641    -    8,485,641    8,896,265 
Other assets                                             
Investment in subsidiaries   5,527,114    -    -    -    -    5,527,114    (5,527,114)   -    - 
Capitalized development costs   784,969    -    -    -    -    784,969    -    784,969    666,214 
Other assets   -    25,000    16,134    -    -    41,134    -    41,134    44,865 
Intercompany advances   (1,658,462)   1,419,199    239,263    -    -    -    -    -    - 
Goodwill   -    859,760    889,495    -    -    1,749,255    -    1,749,255    1,749,255 
Total other assets   4,653,621    2,303,959    1,144,892    -    -    8,102,472    (5,527,114)   2,575,358    2,460,334 
TOTAL ASSETS  $4,692,729   $8,920,903   $10,493,352   $3,146,666   $2,028,363   $29,282,013   $(5,527,114)  $23,754,899   $21,177,174 
                                              
LIABILITIES AND EQUITY                                             
Liabilities                                             
Current liabilities                                             
Notes payable, current portion  $-   $144,582   $226,439   $25,807   $-   $396,828   $-   $396,828   $852,030 
Lease liabilities, current portion   -    121,871    80,052    28,293    -    230,216    -    230,216    201,506 
Accounts payable and accrued expenses   8,817    1,210,778    340,318    196,709    -    1,756,622    -    1,756,622    754,375 
EIDL loans payable   -    149,000    149,169    -    -    298,169    -    298,169    298,900 
Total current liabilities   8,817    1,626,231    795,978    250,809    -    2,681,835    -    2,681,835    2,106,811 
Non-current liabilities                                             
Notes payable, long-term portion   -    68,612    5,768,790    -    1,125,000    6,962,402    -    6,962,402    6,044,462 
Lease liabilities, long-term portion   -    5,886,777    2,190,384    646,765    -    8,723,926    -    8,723,926    8,954,141 
Advances from shareholders of Golfsuites, Inc. (parent company)   260,517    -    -    -    -    260,517    -    260,517    933,317 
Advances from GolfSuites, Inc. (parent company)   -    -    -    -    -    -    -    -    2,143,058 
Total non-current liabilities   260,517    5,955,389    7,959,174    646,765    1,125,000    15,946,845    -    15,946,845    18,074,978 
TOTAL LIABILITIES   269,334    7,581,620    8,755,152    897,574    1,125,000    18,628,680    -    18,628,680    20,181,789 
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES   -    -    -    -    -    -    702,824    702,824    283,374 
Equity                                             
Member equity   -    1,339,283    1,738,200    2,249,092    903,363    6,229,938    (6,229,938)   -    - 
Common stock, Class A   -    -    -    -    -    -    -    -    - 
Common stock, Class B   180    -    -    -    -    180    -    180    180 
Additional paid-in capital   2,696,442    -    -    -    -    2,696,442    -    2,696,442    - 
Preferred stock, Class A   6,948,660    -    -    -    -    6,948,660    -    6,948,660    3,430,618 
Preferred stock, other   -    -    -    -    -    -    -    -    - 
Retained earnings   (5,221,887)   -    -    -    -    (5,221,887)   -    (5,221,887)   (2,718,787)
TOTAL EQUITY   4,423,395    1,339,283    1,738,200    2,249,092    903,363    10,653,333    (6,229,938)   4,423,395    712,011 
TOTAL LIABILITIES AND EQUITY  $4,692,729   $8,920,903   $10,493,352   $3,146,666   $2,028,363   $29,282,013   $(5,527,114)  $23,754,899   $21,177,174 

 

The accompanying notes are an integral part of these financial statements.

 

F-18

 

 

GolfSuites 1, Inc.

Consolidating Statement of Operations

For the Years Ended December 31, 2022 and 2021

 

               GolfSuites                     
   GolfSuites 1,   GolfSuites   GolfSuites   Baton Rouge,   GolfSuites           Consolidated 
   Inc.   Tulsa, LLC   Lubbock, LLC   LLC   Madison, LLC   Combined   Eliminations   2022   2021 
Revenues  $-   $4,372,846   $4,240,520   $458,425   $-   $9,071,791   $-   $9,071,791   $8,853,965 
Cost of revenues   -    714,510    643,880    111,578    -    1,469,968    -    1,469,968    1,246,701 
Gross profit   -    3,658,336    3,596,640    346,847    -    7,601,823    -    7,601,823    7,607,264 
Operating expenses                                             
Advertising and marketing   -    35,189    64,153    63,431    -    162,773    -    162,773    42,078 
Salaries - Operational   -    1,513,967    1,294,360    501,123    -    3,309,450    -    3,309,450    3,083,564 
Employee benefits and taxes   -    259,769    299,280    58,338    -    617,387    -    617,387    576,154 
Property lease and affiliated costs   -    22,899    48,369    17,838    -    89,106    -    89,106    90,550 
Equipment and repairs   -    205,624    126,102    71,913    -    403,639    -    403,639    177,893 
Gaming, software and license fees   -    136,916    191,537    6,776    -    335,229    -    335,229    315,060 
Utilities and telephone   -    273,224    233,143    55,716    -    562,083    -    562,083    369,384 
Credit card fees   -    105,426    97,851    11,402    -    214,679    -    214,679    240,301 
Insurance   -    180,160    83,152    47,980    -    311,292    -    311,292    310,950 
Professional fees   250,161    12,506    29,003    2,571    -    294,241    -    294,241    232,397 
Property and local taxes   900    205,116    193,200    6,600    -    405,816    -    405,816    387,946 
Other selling, general and administrative   1,992    307,599    286,777    188,283    -    784,651    -    784,651    601,577 
Total operating expenses   253,053    3,258,395    2,946,927    1,031,971    -    7,490,346    -    7,490,346    6,427,854 
Net operating profit (loss)   (253,053)   399,941    649,713    (685,124)   -    111,477    -    111,477    1,179,410 
Income from Covid 19 relief programs                                             
PPP loan forgiveness   -    -    -    -    -    -    -    -    1,073,100 
Employee retention credit   -    -    -    -    -    -    -    -    331,756 
Total Covid 19 relief programs   -    -    -    -    -    -    -    -    1,404,856 
Net income (loss) before other income (expense)   (253,053)   399,941    649,713    (685,124)   -    111,477    -    111,477    2,584,266 
Other income (expense)                                             
Depreciation and amortization   -    (316,389)   (697,671)   (154,610)   -    (1,168,670)   -    (1,168,670)   (1,104,196)
Interest expense   -    (252,586)   (353,484)   (27,816)   -    (633,886)   -    (633,886)   (644,222)
Management fees   (344,533)   -    -    -    -    (344,533)   -    (344,533)   (667,036)
Reg A share sale costs   (983,293)   -    -    -    -    (983,293)   -    (983,293)   (985,742)
Other income   -    9,917    -    -    -    9,917    -    9,917    2,613 
Net other expense   (1,327,826)   (559,058)   (1,051,155)   (182,426)   -    (3,120,465)   -    (3,120,465)   (3,398,583)
Net income (loss) before income from subsidiaries and minority interest   (1,580,879)   (159,117)   (401,442)   (867,550)   -    (3,008,988)   -    (3,008,988)   (814,317)
Income (loss) from subsidiaries   (560,559)   -    -    -    -    (560,559)   560,559    -    - 
Minority interest share of subsidiary loss   -    -    -    -    -    -    867,550    867,550    116,627 
Net income (loss)  $(2,141,438)  $(159,117)  $(401,442)  $(867,550)  $-   $(3,569,547)  $1,428,109   $(2,141,438)  $(697,690)

 

The accompanying notes are an integral part of these financial statements.

 

F-19

 

 

Item 8.

 

INDEX TO EXHIBITS

 

The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each case as indicated below.

 

2.1 Second Certificate of Amendment to the Amended and Restated Certificate of Incorporation (1)
   
2.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation (4)
   
2.3 Amended and Restated Certificate of Incorporation (3)
   
2.4 Bylaws (3)
   
6.1 Management Services Agreement between GolfSuites 1, Inc. and KGEM Golf, Inc. dated January 17, 2019 (4)
   
6.2 MIP Agreement dated August 2020 (1)
   
6.3 MIP Agreement dated August 2021 between the company, GolfSuites Baton Rouge and the Purchaser (5)
   
6.4 4ORE Golf Lease Agreement dated November 2018 (1)
   
6.5 Assignment of LLC interest and Amendment to LLC Agreement of GolfSuites Tulsa, LLC dated December 31, 2020 (1)
   
6.6 Lease Agreement between Onefire Holding Company, LLC, and GolfSuites Tulsa, LLC, dated September 13, 2019 (1)
   
6.7 Lease Amendment Agreement between Onefire Holding Company, LLC and GolfSuites Tulsa, LLC dated March 5, 2020 (1)
   
6.8 GolfSuites Baton Rouge Lease Agreement dated February 9, 2021 (5)
   
6.9 GolfSuites Madison Operating Agreement dated May 5, 2022 (6)

 

  (1) Filed as an exhibit to the GolfSuites 1, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11408).

 

  (2) Filed as an exhibit to the GolfSuites 1, Inc. Form 1-K, dated April 30, 2021 (Commission File No. 24R-00224).

 

  (3) Filed as an exhibit to the GolfSuites 1, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10939).

 

  (4) Filed as an exhibit to the GolfSuites 1, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10938).

 

  (5) Filed as an exhibit to the GolfSuites 1, Form 1-SA, dated September 16, 2021 (Commission File No.  24R-00224).
     
  (6) Filed as an exhibit to this GolfSuites 1, Form 1-SA, dated September 27, 2022.

 

 22 

 

 

SIGNATURE

 

Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Riverview, State of Florida, on May 1, 2023.

 

GolfSuites 1, Inc.  
   
/s/ Gerald Ellenburg  
   
By Gerald Ellenburg  
CEO of GolfSuites 1, Inc.  

 

Pursuant to the requirements of Regulation A, this report has been signed below by the following persons on behalf of the issuer and in the capacities and on the dates indicated.

 

/s/ Gerald Ellenburg  

 

Gerald Ellenburg, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Director

Date: May 1, 2023

 

/s/ Ryan Ellenburg  

 

Ryan Ellenburg, Director

Date: May 1, 2023

 

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