SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
Commission File No. 0-26760
NORTH AMERICAN RESORTS, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-126065
(State or other jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
301 East Hillcrest Street, Orlando, Florida 32801
(Address of principal executive office) (Zip Code)
Registrant's telephone number: (407) 841-1917
Securities registered pursuant to Section 12(b) of the Act:
771,465 Shares of Preferred Stock
60,657,446 Shares Of Common Stock
Securities registered pursuant to Section 12(g) of the Act:
None
Preferred Stock, (no par value)
Common Stock, (no par value)
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes_X_ NO___
The aggregate market value of the voting stock held by non-affiliates of the
Registrant on December 31, 1996, based on the average bid and asked prices of
Common Stock in the over-the-counter market on that date was $606,574.
771,465 shares of Registrant's Preferred Stock and 60,657,446 shares of
Registrant's Common Stock, no par value were outstanding on December 31, 1996,
prior to the effectiveness of the latest practicable date.
DOCUMENTS INCORPORATED BY REFERENCE
None.
CONTENTS
Page
PART I
Item 1. BUSINESS 5
Item 2. PROPERTY 6
Item 3. LEGAL PROCEEDINGS 8
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 8
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS 8
Item 6. SELECTED FINANCIAL DATA 9
Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 10
Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA 10
Item 9. DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 10
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT 11
Item 11. EXECUTIVE COMPENSATION 11
Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 11
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 12
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K 12
PART I
Item 1. BUSINESS
North American Resorts, Inc. was formed in Colorado in 1985 as Gemini
Ventures, Inc. The name was changed in 1989 to Solomon Trading Company, Ltd.,
and was changed again in 1994 to The Voyageur First, Inc. The name was changed
to its present name on March 30, 1995 after an asset purchase of North American
Resorts, Inc. At the time of the purchase the only asset of North American
Resorts, Inc. was its business plan, and the Company issued 166,667 shares of
its preferred stock for North American Resorts, Inc.
The Company became the owner of USA Tourist Service Centers, Inc. as a
result of the asset purchase of North American Resorts, Inc. USA Tourist Service
Centers, Inc., which began business in 1993, was wholly owned by North American
Resorts, Inc. USA Tourist Service Centers, Inc. holds a license as a travel
agent, and operates out of its office in Orlando, Florida. North American
Resorts, Inc. also held an option to purchase 5 time share units at Ocean
Landings in Coco Beach, Florida, which it has now purchased.
North American Resorts, Inc. was also activated in mid 1995 and sells
memberships. A member is entitled to an annual pass to Cypress Island animal
preserve and to a vacation at Ocean Landings Resort in Coco Beach, Florida or to
trade in the week vacation to Interval International and select from other
resorts. Interval International is a clearing house for time shares. The Company
does not receive anything from Interval International, and pays nothing to
Interval international. Each member desiring to trade must pay a charge of
$89.00 to Interval International for the service. There is no peak or prime time
because Ocean Landings is well booked, approximately 85% year round.
The Company will not sell time shares, but will sell memberships for
five years. The main difference between the two is that the member will not be
the owner of any part of the real estate. However, because the membership is for
longer than three years, the Company has filed its plan with the State of
Florida under the laws that regulate time shares. At this time the application
to the State of Florida has been filed, but has neither been approved or
disapproved, the filing of the application entitles the Company to sell its
memberships. Ocean Landings is an approved timeshare property in Florida, and
the Company has made the appropriate filings with the State of Florida to market
the Ocean Landings timeshare weeks.
The five year membership sells for $5,000 and entitles the member to a
one week vacation each of the five years at Ocean Landings Resort, or may be
traded into Interval International, a worldwide trade organization. At this time
there are 82 five year memberships, and 30 three year memberships, for a total
of 112 memberships that have been sold. The average is 20% down and the rest
financed over 5 years. The current memberships have no relation to any golf
memberships, or the memberships to ITEX. The Company intends to sell a different
golf membership
North American Resorts, Inc. ran short of cash in the summer of 1996
and ceased sales. There was an Agreement and Plan of Reorganization entered into
with American Clinical Labs, Inc. on September 3, 1996 in an attempt to cure the
shortage of cash to operate. This did not work and the parties entered into a
Recision and Release on December 1, 1996, the result of which is that the
Company returned the assets to American Clinical Labs, Inc. and American
Clinical Labs, Inc. returned its shares to the Company with the exception of
12,500,000 shares of restricted common stock of the Company in exchange for
funds advanced by American Clinical Labs.
There are 12 employees of the Company at this time two of which are
executive officers.
Competition in the Orlando area for tourists is intense, there are
numerous competitors for the tourists and most of the competitors are much more
fully established and have far greater resources than the Company. The Company's
plan to meet the competition is in the lower economic end of the market.
Item 2. - PROPERTY
The only property owned by the Company at this time is 255 weeks of
time share owned at Ocean Landings, a resort located in Coco Beach, Florida. The
Company paid to Anthony Arrigoni 166,667 shares of preferred stock to acquire
North American Resorts, Inc., in March, 1995. The property was acquired by the
exercise of an option to purchase from 900 North Atlantic Corporation, which has
no affiliation, of the Ocean Landing units, and the Company paid 2,000 preferred
shares and $55,000 for the five time share units in May of 1995. The shares have
not yet been issued to 900 North Atlantic Corporation, but there is a
contractural obligation to issue them. Management of the Company had been
familiar with Ocean Landings for more then 10 years, but there is no affiliation
of any member of the Company with Ocean Landings. The Company received a
Warranty Deed when the units were purchased. The property consists of 5 units
that are rented to members. Each member may rent a unit for up to 3 weeks per
year, subject to availability, but is entitled to one week. Historically people
only rent for one week per year. In the event that the Company needs more units
it will rent them at a discount from Ocean Landings. A member who rents for more
than one week from Ocean Landings per year pays 50% of the rack rate, which
varies from $75 and $45, or $37.50 and $22.50 per day, depending on the unit.
The rental fee is paid to the Company, which in turn pays Ocean Landings with no
mark up of the price. Any owner at Ocean Landings may rent unused units at 50%
of the rack rate. Each unit is rented for 51 weeks per year, and one week per
year it is not rented while maintenance is performed on the unit. The time
shares were acquired by the Company as a part of the merger with North American
Resorts, Inc. in May, 1995. The time shares were owned by 900 North Atlantic
Corporation, and have now been deeded to North American Resorts, Inc. The
Company has an option to purchase another 204 weeks from Ocean Landings until
June, 1996, that it will exercise if it needs additional weeks to sell. The
option is from 900 North Atlantic Corporation, which has no affiliation, and the
204 weeks will be paid for by the issuance of 204,000 shares of common stock of
the Company.
Ocean Landings is a 220 unit time share resort on the beach in Coco
Beach, Florida. It is 15 years old, and has 220 units. There are 4 two story
buildings, and two five story buildings with elevators. It has a health club and
swimming pool, but there are no golf facilities in connection with Ocean
Landings. The time share weeks are not for resale. The units owned by the
Company are all studio units, which mean that there is one bedroom in addition
to the main room of the unit, each unit sleeps four people, and has facilities
for cooking. None of the units have an ocean view. As a result of the Warranty
deed the Company owns the units. At this time the maintenance costs of the units
is $140 per year, per unit week of ownership, which covers all expenses, a total
of $36,975 was paid last year to Ocean Landings, which is responsible for
maintenance of all units and the common areas.
The Company has entered into a lease of an island in the Orlando area,
Cypress Island. The Company first considered purchasing Cypress Island, and
later decided to lease the island. The agreement is for a 99 year lease, rental
payments are to be $25,000 per month for the first quarter of 1996, $50,000 per
month for the second quarter of 1996, $75,000 per month for the third quarter of
1996, and $100,000 per month for the remainder of the lease. There is also a
provision for a purchase and first refusal, however no price has been agreed
upon. The Letter of Intent had a closing date of January 3, 1996, which has been
changed to March 1, 1996. There are no conditions to the closing of the lease,
and no further negotiations are contemplated.
The Company rents approximately 2,000 square feet of space in a strip
center for its USA Tourist Service Centers, Inc. in Orlando, and has
approximately 3,000 square feet of office space in an office building in Orlando
for its North American Resorts, Inc. facility.
Item 3. - LEGAL PROCEEDINGS
None
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
PART II
Item 5. - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock has been traded since October 1, 1994,
before that time there was little or no activity. As of December 31, 1996, the
following brokerage firms were making a market in the Company's common stock: M.
H. Myerson, Paragon Securities, Comprehensive Securities and Patterson and
Turners.
The following table sets forth for the periods indicated the range of
high and low closing bid quotations per share as reported by the local
over-the-counter market. These quotations represent inter-dealer prices, without
retail markups, markdowns or commissions and may not necessarily represent
actual transactions.
Price Per Share
---------------
High Low
---- ---
Fiscal year 1996
First Quarter (January 1, 1996
through March 31, 1996) $1.11/16 $5/8
Second Quarter (April 1, 1996
through June 30, 1996) $.75 $1/8
Third Quarter (July 1, 1996 $.11 $1/16
through September 30, 1996)
Fourth Quarter (October 1, 1996 $1/16 $ .01
through December 31, 1996)
The common shares that were issued as a result of the sales under
Section 504 have been traded. The initial issue was to 22 people. There has been
no trading of the preferred shares.
There are 103 holders of the common shares of the Company, and 68
holders of the preferred shares of the Company. There are 74 record holders of
the common shares, and the Company has polled the holders of the street name
shares to reach 103 holders of the common shares. There have never been any
dividends, cash or otherwise, paid on the common or preferred shares of the
Company.
The preferred shares are convertible into common shares at the rate of
10 common shares for each share of preferred. There are 771,465 preferred shares
outstanding that could be converted to 7,714,650 common shares that would be
subject to be sold pursuant to Rule 144. There are no outstanding options or
warrants.
The common shares of the Company are subject to the "Penny Stock Rules"
of Rule 15(g) of the Securities Exchange Act of 1934. These rules impose
additional sales requirements on broker dealers selling securities to persons
other than established customers and accredited investors as defined in the
Securities Act of 1933. Brokerage transactions falling within these rules
require brokers to make a special suitability determination for the purchaser
and to obtain the purchaser's written consent to make the trade before making
the sale. Accordingly these Penny Stock Rules may adversely affect the ability
of purchasers to resell these securities.
Item 6. - SELECTED FINANCIAL DATA
Fiscal Years Ended December 31,
-------------------------------
1996 1995 1994
---- ---- ----
Income Statement Data
- ---------------------
Net Sales $ 606,937 $ 296,968 $ --
Income (loss) $(3,608,955) $ (948,171) $ --
Net Income (loss) $(3,608,955) $ (948,171) $ --
Per Share Data
- --------------
Income (loss) $ (0.10) $ (1.67) $ --
Cash dividends -- -- --
As of December 31,
------------------
1996 1995 1994
---- ---- ----
Balance Sheet Data
- ------------------
Total Assets $ 1,121,354 $ 1,861,195 $ --
Long-term debt, net
of current portion $ 8,773 $ 11,689 $ --
Item 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net sales for 1996 were $606,937, up from $296,968 in 1995, the Form
10-K for the year ended December 31, 1995 showed sales of $1,635,641, which has
been adjusted to reflect discontinued operations. Net loss was $3,608,955,
compared to $948,171 in 1995. Per share loss was $(.10) per share, as opposed to
$(1.67) in 1995. All income was from operations.
Cost and Expenses for 1996 were $3,147,014, compared to $498,785 in
1995. Other Expenses were $931,541, compared to $790,000 in 1995. Assets
decreased from $1,861,915 in 1995 to $1,121,354 in 1996. Long term debt
decreased from $11,689 in 1995 to $8,773 in 1996.,
The independent auditor for the Company has issued a report that states
that the financial statements have been prepared assuming that the Company will
continue as a going concern and that there is no assurance that the Company can
realize sufficient revenues from its services to attain profitable operations.
Management plans to operate the Company profitably in two areas: (1) selling
mini vacations to Florida, and (2) selling vacation club memberships. Management
believes, based on experience in these two areas, that anticipated revenues,
coupled with low debt, will generate sufficient revenue to be a profitable
operation.
Inflation has not had a significant effect on the company, and the
company has budgeted 1996 based on moderate economic growth.
Item 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are attached following Item 14.
Item 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Gary A. LaPalme has been the auditor for the Company for the past two
years. Mr. LaPalme is not licensed in the State of Florida, all operations of
the Company take place in the State of Florida, and, as a result, he is now
associated with M. A. Cabrera & Company, P.A. of Plantation, Florida. This audit
was prepared by both auditors working together.
PART III
Item 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers and directors of the company, with a brief
description are as follows:
Name Age Position
- ---- --- --------
Max P. Cawal 40 Chief Executive Officer/Director
Anthony Arrigoni 32 Chief Financial Officer/Director
Max P. Cawal, 40 years of age, the Chief Executive Officer and a
Director. Mr. Cawal was President of Peak Development Company and Executive Vice
President of Peak Resorts International from 1990 to 1995. He has been a
financial consultant and a director of EVRO Corporation a publicly held company
since 1996.
Anthony Arrigoni, 32 years of age, a Director. Mr. Arrigoni was an
Account Executive for Cardservice International from 1990 to 1993, President of
Dream Away Travel from March, 1993 to December, 1994 and President of U.S.A.
Tourist Services, Inc. from December, 1994 to the present time. A Director since
May, 1995.
The directors of the Company are elected annually by the shareholders
for a term of one year or until their successors are elected and qualified. The
officers serve at the pleasure of the Board of Directors.
Item 11. - EXECUTIVE COMPENSATION.
There is no employee that was paid as much as $60,000 per year as
salary. There is no contract for the payment of a salary to any employee. The
only paid executive officer is Anthony Arrigoni who is paid $500 per week, he
receives no other compensation.
Item 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
There are presently 60,657,446 shares of the company's common shares,
and 771,465 preferred shares outstanding. The following table sets forth the
information as to the ownership of each person who, as of the date of this
report, owns of record, or is known by the company to own beneficially, more
than five percent of the company's common stock, and the officers and directors
of the company.
Common Stock
Name Shares Per cent
---- ------ --------
Anthony Arrigoni 29,100 5%
All officers and directors as a group 29,100 5%
Preferred Stock
Name Shares Per cent
---- ------ --------
Anthony Arrigoni 166,666 22%
T & B, Inc. 150,000 19%
Princeton Manufacturing 58,000 7%
Princeton Riverview Property 58,000 7%
Consortium Group 87,000 11%
V. H. S., Inc. 96,000 12%
ITEX Corporation 165,000 21%
Richard Dickerman 50,000 6%
All officers and Directors as a group 166,666 22%
Item 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The purchase of all of the outstanding stock of North American Resorts,
Inc. in April, 1995 resulted in Anthony Arrigoni becoming a shareholder of the
Company, and he is now Directors of the Company.
PART IV
Item 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) Attached are the Financial Statements and Independent
Auditor's Report on Examination of Financial Statements for
the year ended December 31, 1996.
(b) Attached are the following Financial Statement Schedules
and Auditors Report on Schedules,
Independent Auditors Report on Schedules
All other schedules are omitted because they are not required
or not applicable or the information is shown in the
consolidated financial statements or notes thereto.
(c) No report was filed on Form 8-K.
(d) There are no exhibits.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated July 23,1996
NORTH AMERICAN RESORTS, INC.
by______/s/______________________
Max P. Cawal
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
NORTH AMERICAN RESORTS, INC.
December 31, 1996, 1995 and 1994
[LOGO]
M.A. CABRERA & COMPANY P.A.
Certified Publis Accountants & Consultants
2 S. University Drive, Suite 330
Plantation, Florida 33324-3307
954/476-2008 800/226-1660
Fax 954/475-0809
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Director
North American Resorts, Inc.
We have audited the accompanying balance sheet of North American Resorts, Inc.
as of December 31, 1996 and 1995 and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of North American Resorts for the year ended
December 31, 1994 were audited by other auditors whose report dated August 28,
1995, on those statements included explanatory paragraphs describing the
conditions that raised substantial doubt about the Company's ability to continue
as a going concern.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all
material respects, the financial position of North American Resorts, Inc. as of
December 31, 1996 and 1995 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has suffered losses from operations that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note A. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/S/ M.A. Cabrera & Company, P.A.
Plantation, Florida
May 2, 1997
North American Resorts, Inc.
BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash $ 869 $ 1,080
Accounts receivable 146,877 250,661
Accounts receivable - other 114,993 58,005
----------- ---------
Total current assets 262,739 309,746
PROPERTY, LEASEHOLD IMPROVEMENTS
AND EQUIPMENT - Net 25,905 130,588
OTHER ASSETS 832,710 1,421,581
----------- ---------
$ 1,121,354 $1,861,915
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 190,512 89,192
Advance customer deposits -- 211,138
Current portion of long-term debt 10,402 50,801
Loans from stockholders 163,563 119,566
Accrued expenses 103,517 11,028
Reserve for discontinued operations 49,493
----------- ---------
Total current liabilities 517,487 481,725
DEFERRED REVENUES 481,606 598,674
LONG-TERM DEBT, less current portion 8,773 11,689
STOCKHOLDERS' EQUITY
Preferred stock; 50,000,000 shares authorized; no par
value; issued and outstanding - 771,465 shares in 1996
and 946,534 shares in 1995 1,575,373 710,938
Common stock; 100,000,000 shares authorized; no par value;
60,657,446 shares issued and outstanding in 1996 and
1,296,946 shares issued and outstanding in 1995 3,442,141 1,062,060
Rescinded stock (291,900) --
Accumulated deficit (4,612,126) (1,003,171)
----------- ---------
113,488 769,827
----------- ---------
$ 1,121,354 $1,861,915
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
North American Resorts, Inc.
STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ----------
REVENUES
<S> <C> <C> <C>
Memberships $ 577,017 $ 266,391 $ --
Commissions 8,300 -- --
Other 21,620 30,577 --
------------ ------------ ----------
606,937 296,968 --
COSTS AND EXPENSES
Direct costs - memberships 122,825 36,015 --
General and administrative 2,636,162 180,773 --
Salaries and related expenses 361,867 95,395 --
Selling and marketing 14,731 162,175 --
Depreciation and amortization 11,429 24,427 --
------------ ------------ ----------
3,147,014 498,785 --
------------ ------------ ----------
Loss from operations (2,540,077) (201,817) --
OTHER EXPENSES
Loss on stock devaluation 880,000 -- --
Loss on disposal of fixed assets 51,541 -- --
Development costs -- 290,000 --
Advertising expenses -- 500,000 --
------------ ------------ ----------
931,541 790,000 --
------------ ------------ ----------
Loss from continuing operations before
income taxes (3,471,618) (991,817) --
Income taxes -- -- --
------------ ------------ ----------
Loss from continuing operations (3,471,618) (991,817) --
Discontinued operations
Profit (Loss) from operations of tourist services division (228,860) 43,646 --
Gain on disposal of tourist services division 91,523 -- --
------------ ------------ ----------
(137,337) 43,646 --
------------ ------------ ----------
NET LOSS $ (3,608,955) $ (948,171) $ --
============ ============ ==========
Net loss per share $ (0.10) $ (1.67) --
============ ============ ==========
Weighted average shares outstanding 35,251,192 568,115 35,389
============ ============ ==========
</TABLE>
The accompanying notes are an integral part of these statements.
North American Resorts, Inc.
STATEMENTS OF CAH FLOWS
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS FROM CONTINUING OPERATIONS $(3,471,618) $ (991,817) $ --
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 11,429 27,546 --
Reserve for discontinued operations 49,493 -- --
Loss on stock devaluation 880,000 -- --
Loss on disposal of fixed assets 51,541 -- --
Deferred revenues earned (117,068) -- --
Consulting and other expenses incurred by
issuance of common and preferred stock 1,957,178 -- --
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable 46,796 (180,357) --
Increase in accounts payable 101,320 79,471 --
Increase (decrease) in advance customer deposits (211,138) 120,740 --
Increase in accrued expenses 92,489 11,028 --
Increase in deferred revenues -- 598,674 --
Other -- 6,484 --
----------- ----------- --------
Subtotal (609,578) (328,231) --
Earnings (Loss) from discontinued operations (137,337) 43,646 --
----------- ----------- --------
Net cash (used) by operating activities (746,915) (284,585) --
----------- ----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of prepaid advertising/promotional items -- (1,000,000) --
Purchases of property, leasehold improvements
and equipment -- (109,696) --
Time share weeks purchased -- (55,000) --
Organizational expenses paid -- (11,330) --
----------- ----------- --------
Net cash (used) by investing activities -- (1,176,026) --
----------- ----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 353,022 1,000,000 --
Proceeds from sale of preferred stock 393,000 279,635 --
Loans from stockholders - net 43,997 119,566 --
Long-term debt financing -- 84,864 --
Repayment of long-term debt (43,315) (22,374) --
----------- ----------- --------
Net cash provided by financing activities 746,704 1,461,691 --
----------- ----------- --------
NET INCREASE IN CASH (211) 1,080 --
Cash, beginning of period 1,080 -- --
----------- ----------- --------
Cash, end of period $ 869 $ 1,080 $ --
=========== =========== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $ -- $ 273 $ --
=========== =========== ========
Acquisition of other assets through issuance of preferred
stock:
Prepaid consulting $ 529,174
Prepaid promotional items 121,171
Investment in stock 120,000
-----------
$ 770,345
===========
Items arising through merger not requiring cash:
Property , leasehold improvements and equipment $ 28,219
Receivables 128,539
Advance customer deposits (90,398)
Other 10,309
Liabilities assumed (8,721)
Goodwill upon purchase 370,405
-----------
$ 438,353
===========
Issuance of preferred stock - utilized in merger $ 438,353
===========
</TABLE>
The accompanying notes are an integral part of these statements.
North American Resorts, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------------ ------------------------ Rescinded Accumulated
Shares Amount Shares Amount Stock Deficit Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances January 1, 1994 -- $ -- 637,000 $ 55,000 $ -- $ (55,000) $ --
Consolidation of stock 18/1 -- -- (601,611) -- -- --
Net loss for the year -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances - December 31, 1994 -- -- 35,389 55,000 -- (55,000) --
Issuance of stock - first phase -- -- 222,223 400,000 -- -- 400,000
Issuance of stock - second phase -- -- 333,334 600,000 -- -- 600,000
Issuance of preferred stock for
the purchase of promotional items and
certain consulting and other fees 261,300 11,130 -- -- -- -- 11,130
Issuance of preferred stock for
the acquisition of the Company 166,667 416,668 -- -- -- -- 416,668
Issuance of preferred stock for
advertising, promotional items,
consulting fees, development
costs and time share units 589,167 290,200 -- -- -- -- 290,200
Conversion of preferred stock
to common stock (70,600) (7,060) 706,000 7,060 -- --
Net loss for the year -- -- -- -- -- (948,171) (948,171)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances - December 31, 1995 946,534 710,938 1,296,946 1,062,060 -- (1,003,171) 769,827
Issuance of preferred stock for
barter credits and consulting fees 367,381 812,321 -- -- -- -- 812,321
Sale of preferred stock 397,400 393,000 -- -- -- -- 393,000
Sale of common stock -- -- 17,002,000 353,022 -- -- 353,022
Issuance of common stock for
consulting fees -- -- 25,960,000 1,394,273 -- -- 1,394,273
Preferred and common stock issued
in exchange for joint venture (rescinded
in 1997) 200,000 83,400 5,000,000 208,500 (291,900) -- --
Conversion of preferred stock
to common stock (1,139,850) (424,286) 11,398,500 424,286 -- -- --
Net loss for the year -- -- -- -- -- (3,608,955) (3,608,955)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances - December 31, 1996 771,465 $ 1,575,373 60,657,446 $ 3,442,141 $ (291,900) $(4,612,126) $ 113,488
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
North American Resorts, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated on November 1, 1985 in the State of Colorado. The
Company's primary business is the selling of vacations in Florida and the sales
of time share memberships to the Ocean Landings and Cypress Island Preserve,
controlled by the Company, as well as the operation of the Cypress Island
Preserve as a tourist destination.
The financial statements are presented assuming the Company will continue as a
going concern which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has incurred
significant losses and there is no guarantee that it will generate sufficient
revenues from its planned activities to generate a profit. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash and/or cash equivalents.
Reorganization and Restructuring of the Company
On November 7, 1994 the Company's board voted on various issues that
were approved by the Company's shareholders on November 17, 1994. The
following items were addressed:
Consolidation of shares - The Company approved to consolidate
its common shares with a reverse stock split of 18:1.
Private placement - The Company approved a private placement
totaling $1,000,000 qualifying under Section 504 of the
Securities and Exchange Commission.
Preferred stock - The Company approved a non-trading preferred
class of stock. The stock is convertible to common stock on a
ratio of ten common shares for every one preferred share.
Name change - The Company originally was incorporated under
the name of Gemini Ventures, Inc.. Since then the Company has
had several name changes:
November, 1985 Gemini Ventures, Inc.
July, 1989 Solomon Trading Company, Limited
November, 1994 The Voyageur, Inc.
December, 1994 The Voyageur First, Inc.
March, 1995 North American Resorts, Inc.
Property, Leasehold Improvements and Equipment
Property, leasehold improvements and equipment are recorded at cost for
financial reporting purposes and are depreciated utilizing the
straight-line method over their estimated service lives. Significant
additions and betterments are capitalized. Expenditures for
maintenance, repairs and minor renewals are charged to operations as
incurred. The lives used for depreciation are summarized as follows:
Years
-----
Leasehold improvements 31.5
Equipment and furniture 5
Sales model and sales trailers 10
Organization Costs
Organization costs are being amortized over sixty months on a
straight-line basis.
Goodwill
Goodwill, arising from the acquisition of North American Resorts, Inc.
(Tourist Services Division) was being amortized over 15 years utilizing
the straight-line basis. If a determination is made that the goodwill
will not be recovered from future operations, it will be charged to
operations as expense to the extent of impairment of the underlying
value. The impairment will be measured by the deficiency in the
estimated discounted future cash flow and the analysis will be made on
a quarterly basis.
Such a determination was made upon the disposal of the Tourist Services
Division, resulting in the unamortized goodwill totaling $351,885 being
written off. Such item is included in Gain on Disposal of the Tourist
Services Division in the accompanying statement of operations.
Prepaid Promotional Items
Prepaid promotional items consist of appraised art work initially
obtained by the purchase of Rochkes, Inc. for $1,000,000 cash and
150,000 shares of preferred stock. The art work is to be used as
incentives in the sales of time shares memberships. The art work prints
will be expensed as they are used. If artwork prints are not used in a
timely manner, the items will be charged to income as expense to the
extent of the impairment. The Company anticipates obtaining certified
appraisals on an annual basis to verify the continued viability of the
asset.
Deferred Revenues
Deferred revenues arising from the sale of time-share memberships are
recognized ratably over the contract period. Additional deferred
revenues arising from the sale of memberships to ITEX Corporation will
be recognized as they are used by ITEX (see Note D).
Revenue Recognition - Time Share Memberships
Revenue is recognized ratably over the term of the time share
memberships. Time share memberships that are sold outright and deeded
to the buyer and where no significant future performance is required on
the Company's part are recognized at the time of closing.
Time Share Weeks
Time share weeks are accounted for at cost: five units at fifty weeks.
The rights for use of these weeks are sold to members.
Earnings (Loss) Per Share
Earnings (loss) per share are based on the weighted average shares
outstanding during the year. The conversion of the preferred stock is
not assumed in the computation of earnings (loss) per share because the
effect is anti-dilutive.
NOTE B - ACQUISITION
On March 30, 1995 the Company completed the acquisition of North American
Resorts, Inc., a Florida Corporation, with the issuance of 166,667 shares of
preferred stock. The Company changed its name to North American Resorts, Inc.
and adopted the acquired Company's business plan, as described in Note A. The
acquisition was accounted for utilizing the purchase method of accounting. The
operations of the acquired Company are included from the date of acquisition.
The acquisition was completed by the issuance of 166,667 shares of preferred
stock. The value of the transaction was $438,353 and the purchase price was
allocated as follows:
Property, leasehold improvements and equipment $ 28,219
Receivables 128,539
Other 10,309
Advance customer deposits (90,328)
Liabilities assumed (8,721)
Goodwill 370,405
---------
$ 438,353
=========
Pro forma financial statements are not presented since the acquired company does
not have a significant operating history and pro-forma results are not
meaningful.
NOTE C - PROPERTY, LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Property, leasehold improvements and equipment are summarized as follows:
1996 1995
----------- -----------
Leasehold improvements $ -- $ 37,883
Equipment and furniture 35,922 73,189
Sales model and trailer -- 26,843
----------- -----------
35,922 137,915
Less accumulated depreciation (10,017) (7,327)
----------- -----------
$ 25,905 $ 130,588
=========== ===========
NOTE D - OTHER ASSETS
Other assets consist of the following:
1996 1995
----------- -----------
Prepaid consulting $ 529,174 $ --
Prepaid promotional items 121,171 1,000,000
Time share weeks 55,000 55,000
Organization expense - net 7,365 9,630
Goodwill - net -- 351,885
Investment in stock 120,000 --
Other -- 5,066
----------- -----------
$ 832,710 $ 1,421,581
=========== ===========
NOTE E - LONG-TERM DEBT
Long-term debt consists of the following:
1996 1995
------- -------
Mortgage payable, secured by time share weeks;
payable January 15, 1996; interest at 10%
per annum $ -- $30,000
Note payable in monthly installment of $1,150
including interest at 13.8%; secured by
equipment 14,175 23,126
Other 5,000 9,364
------- -------
19,175 62,490
Due within one year 10,402 50,801
------- -------
Long-term portion $ 8,773 $11,689
======= =======
Maturities of long-term debt:
Year ended
December 31, Amount
- ------------ ------
1996 $ -- $50,801
1997 10,402 11,689
1998 8,773 --
------- -------
$19,175 $62,490
======= =======
NOTE F - DEFERRED REVENUES - MEMBERSHIPS/ADVERTISING
The Company purchased advertising by the issuance of 165,000 shares of preferred
stock and $500,000 of membership sales. The entire transaction was recorded at
the value of the deferred memberships. No value was assignable to the preferred
stock portion of the transaction due to the uncertainty of the value of the
preferred stock. The advertising was expensed as a period cost since
capitalization is proper only when there is a history to help ascertain that the
advertising is expected to benefit future periods.
See Note A for accounting for deferred revenues.
NOTE G - RELATED PARTY TRANSACTIONS.
The Company has received advances from certain stockholders totaling $163,563
and $119,566 as of December 31, 1996 and 1995, respectively. There are no
specified repayment terms or conditions.
NOTE H - LEASE COMMITMENTS
The Company has entered into a lease of the Cypress Island Preserve through May
31, 2093. The Company agrees to operate the preserve as a tourist attraction and
resort facility. The consideration for the lease is that the Company will
provide funding for the negative cash flow resulting from the operations of the
Preserve. During 1996 and 1995 the Company's expensed relating to Cypress Island
totaled $779,703 and $38,126 respectively.
NOTE I - PREFERRED STOCK
During 1995 preferred stock was issued for the following:
Purchase of Rochkes, Inc. (prepaid promotional) (Note A) 150,000
Directors fees 5,000
Finders fees 6,300
Purchase options 2,000
Consulting fees 98,000
---------
Subtotal 261,300
---------
Purchase of Company (Note B) 166,667
---------
Purchase of advertising (Note F) 165,000
Promotional items costs 87,000
Consulting fees 170,667
Development costs (see below) 114,000
Guarantee on Cypress Island Preserve 50,500
Purchase of time share units 2,000
---------
Subtotal 589,167
---------
Grand total shares issued 1,017,134
=========
The development costs, consisting of consulting fees, engineering fees, utility
hook up fees and other miscellaneous fees totaled $290,000 and have been
expensed.
Preferred stock is convertible to common stock on a ratio of ten common shares
for every preferred share. The stock is convertible for a period of two years
from the date of issue.
NOTE J - RESCINDED MERGER
During 1996, the Company entered into a merger agreement with American Clinical
Labs, Inc.. The merger was never completed and the transaction was rescinded on
December 1, 1996. There was no effect on the financial statements of the
Company.
<TABLE> <S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 869
<SECURITIES> 0
<RECEIVABLES> 261,870
<ALLOWANCES> 0
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<CURRENT-ASSETS> 262,739
<PP&E> 25,905
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0
1,575,373
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<SALES> 577,017
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<CGS> 3,147,014
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