U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934 For the transition period from . . . . to . . . .
Commission file number 0-21087
Tollycraft Yacht Corporation
Exact name of small business issuer as specified in its charter)
Nevada 86-0849925
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8201 Peters Road, Suite 1000, Plantation, Florida 33324
(Address of principal executive offices) (Zip Code)
(253) 884-5750
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all the reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve 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 number of shares of common stock outstanding as of March 31, 1999 is
8,117,476.
Transitional Small Business Disclosure Format (check one): Yes ... No .X.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Tollycraft Yacht Corporation
First Quarter - 1999
Balance Sheet
December 31, March
31,
1998 1999
Current Assets
Cash 145 145
Accounts receivable -
Raw material inventories 303,508 303,508
Work-in-progress inventories 96,909 96,909
Prepaid expenses -
400,562 400,562
Property and Equipment, net 2,374,292 2,359,292
Other Assets 2,382,000 2,472,000
Total Assets 5,156,854 5,231,854
Current Liabilities -
Net deferred tax liabilities 330,498 330,498
Stockholders Equity (Deficit)
Preferred stock to be issued 11,616,300 11,616,300
Common stock 9,654,206 9,744,206
Retained earnings (deficit) (16,444,150)
(16,459,150)
Total Liabilities and
Stockholders Equity 5,156,854 5,231,854
Statement of Operations
Three Months
Ended March 31,
1998 1999
Net sales 0 0
Cost of sales 0 0
Gross Margin 0 0
Excess plant capacity 0 0
Selling expenses 0 0
General and administrative expenses 205,142 15,000
Income (loss) from operations (205,142) (15,000)
Other income (expenses):
Interest, net (248,658) 0
Total other income (expenses) (248,658) 0
Income (loss) before provision
for income tax (453,800) (15,000)
Net income (loss) (453,800) (15,000)
Statement of cash flows
Three Months
Ended March 31,
1998 1999
Cash, January 1, 2,199 145
Cash flows from operating activities:
Net loss (453,800) (15,000)
Adjustments to reconcile net loss
to net cash used by operations
Depreciation 16,290 15,000
Change in assets and liabilities
Other current assets 231 0
Accounts payable 48,545 0
Accrued payroll & taxes 27,219 0
Other current liabilities 77,724 0
(223,791) 0
Cash flows from financing activities:
Proceeds from notes payable 147,350 0
Proceeds from long-term debt 22,238 0
Issuance of common stock 114,132 0
283,720 0
Net increase (decrease) in cash (71) 0
Cash, March 31 2,128 145
TOLLYCRAFT YACHT CORPORATION
Notes to Financial Statements
1. Basis of Presentation and Summary of significant accounting policies
The unaudited interim condensed financial statements and related notes
have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information
and footnote disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. However, in
the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal
recurring accruals) considered necessary to present fairly the results
for the interim periods presented.
The accompanying condensed financial statements and related notes should
be read in conjunction with the Company's audited financial statements
included in its Annual Report on Form 10-KSB for the year ended December
31, 1998. The results of operations for the three months ended March 31,
1999 are not necessarily indicative of the results to be expected for the
full calendar year.
Nature of business: Tollycraft Yacht Corporation, (the "Company") is
engaged in the manufacture and distribution of luxury motor yachts. The
Company grants credit to its customers. The ability to collect its
accounts receivable is affected by economic fluctuations in the
geographic areas served by the Company.
Inventories: Inventories are valued at the lower of average cost of
market.
Equipment: Equipment is carried at cost. Additions and improvements to
jigs, patterns and molds are capitalized. Depreciation is computed
using the straight-line method over the estimated useful lived of the
assets, which range from three to ten years.
Revenue recognition: Revenue is recognized upon completion, shipment and
title transfer of each yacht. Accordingly, revenue and costs of
individual yachts are included in operations in the year during which
they are completed.
Estimated warranties: The Company records a warranty accrual at the time
of sale for estimated claims, based on actual claims experience. There
is a general one-year parts and labor warranty to the original owner for
defects in all Tollycraft built hulls, desk bridges, stringers and
bulkheads.
Advertising: The Company expenses the cost of advertising as incurred.
Pension and profit sharing plan: Union employees of the Company
participate in a pension plan, which qualifies under Section 401 (k) of
the Internal Revenue Code. The Company is required by the union
contract to make annual contributions of $.05 per labor hour. The
Company contributed $24,132 to the plan in 1998. No contributions were
made to the plan in 1997. The Company is in the process of terminating
the pension and profit sharing plans.
Income taxes: Income taxes are accounted for and reported using an asset
and liability approach. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and
tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to
effect taxable income.
Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change
during the year in deferred tax assets and liabilities.
Deferred tax assets result principally from the Company's differences
for recording warranty reserves for financial statement purposes and
from net operating losses not yet utilized for tax purposes. Valuation
allowances have been provided for those deferred tax assets as their
utilization are uncertain. Deferred tax liabilities result principally
from the use of accelerated depreciation for tax purposes.
Net loss per common share: Net loss per share is computed by dividing
net loss by the weighted average number of common shares outstanding
during the period. Preferred stock to be issued and convertible notes,
debentures, options and warrants are not considered common stock
equivalents, as the affect would be anti-divutive.
Significant risks and uncertainties: The process of preparing financial
statements in conformity with generally accepted accounting principles
requires the use of estimates and assumptions regarding certain types of
assets, liabilities, revenues and expenses. Management of the Company
has made certain estimates and assumptions regarding the reserve for
warranty expenses, costs of work-in-process inventory, contingent
liabilities regarding their inventories and equipment, and federal
penalties on unpaid payroll taxes. Such estimates and assumptions
primarily relate to unsettled transactions and events as of the date of
the financial statements. Accordingly, upon settlement, actual results
may differ from estimated amounts.
2. Operations
The Company has devoted substantial efforts during 1998 and continuing into
1999, in relocating their corporate administrative and sales offices to
Plantation, Florida,its manufacturing facilities to Merida, Yucatan, Mexico
and restructuring debt, rather than in the marketing and manufacturing of
luxury motor yachts. Management believes that the efficiencies expected
to be achieved by relocating to the Eastern United States, which is
closer to the geographic area most served by the Company, and the lower
operating overhead expected by relocating their manufacturing to Mexico
will enable the Company to achieve profitably. The Company expects the
construction of their new manufacturing plant to be completed by the
third quarter of fiscal 1999. At that time the Company will be able to
commence manufacturing again. Marketing efforts will begin in the
spring of 1999.
The accompanying financial statements have been prepared on a basis of
going concern, which basis contemplates the realization of assets and
the satisfaction of liabilities as they become due through continuing
operations. No adjustments have been made to the accompanying financial
statements should the Company be unable to continue in existence, as the
outcome of management's plan is uncertain.
3. Capital stock
In June 1998, the Company board of directors authorized the issuance of
5,000,000 shares of $.001 par value preferred stock and offered each debtor
one share of preferred stock of the Company for each ten dollars of debt they
were owed. Notes payable, accounts payable, accurued liabilities, convertible
promissory notes payable, and other long-term debtors were offered the
conversion. The offering required a majority of the debtors to agree to
the terms of the conversion. In July 1998, a majority of the debtors
agreed to the offering and, accordingly, all of the then outstanding
debt was converted to preferred stock. The Company is in the process
of issuing the preferred stock.
In October 1998, the Company entered into an "Agreement for Payment of
Tax Obligations" with a Mexican corporation known as Grupo Clima S.A
DE C.V. ("Grupo"). Under the agreement, the Company issued 3,000,000
shares of the common stock to Grupo. In exchange, Grupo has agreed to
satisfy all of the claims with the Federal, State of Washington, Cowlitz
County, Washington, and any local taxing authorities against the Company.
Grupo intends to negotiate a settlement with each of the taxing
authorities, sale the common stock and use the proceeds to satisfy the
tax claims, and obtain a full release of liability for the Company and
any of its officers. Under the agreement, no additional shares may be
issued should the amount of the claims exceed the proceeds form the sale
of the common stock, nor is Grupo obligated to return to the Company any
proceeds in excess of the aggregate calims. The Company may be
contingently iliable for some or all of the taxing authorities claims
should Grupo not be able to obtain a full release of liability for the
Company and any of its officers.
In 1997, in a private placement, the Company issued $550,350 of notes
payable net of $104,626 of deferred financing costs. In 1998, the
Company converted the notes payable to preferred stock as part of the
debt conversion.
In January 1999 the Company issued 10,000 shares of common stock for prepaid
legal services and 20,000 shares of common stock for prepaid administrative
expenses.
In March 1999 the Company granted a stock option pursuant to the 1996
Employees
Stock Option Plan in the amount of 100,000 common shares each at an exercise
price of $1.625 per share and an exercise period of five years.
4. Commitment and contingencies
In September 1998, the Company entered into an agreement with a
Mexican corporation known as Yachts of the Americas' S.A. DE C.V.
("Yachts of the Americas"). Under the agreement, Yachts of the
Americas has agreed to build a manufacturing plant and facilities
and to manufacture boats and luxury motor yachts in strict compliance
with the specifications of the Company. The plant and all machinery
it builds or purchaes will remain in the ownership of Yachts of the
Americas. The primary reason for entering into this agreement by the
Company and Yachts of the Americas is to take advantage of the NAFTA
treaty benefits between the two countries. The Company expects to be
more competitive in the United States markets as a results of this
manufacturing agreement.
During 1998, the Company issued to Yachts of the Americas, 2,000,000
shares of its common stock in accorance with the agreement. In
exchange, Yachts of Americas has agreed to provide to the Company
$2,000,000 of future manufacturing services at their cost plus 20%.
In October 1997, the previous landlord of the building in which the
Company leased its office and manufacturing facilities seized
substantially all of the Company's personal property consisting of all
work-in-process inventories, raw material inventories and all
manufacturing equipment, office furniture and fixtures, and molds and
patterns for failure to pay rent under their lease agreement. The
landlord also filed a claim against the Company for approximately
$291,000. In December 1997, the landlord held a lien foreclosure sale
and sold all personal property it had seized.
The company believes it has a substantial claim against the landlord for
unlawfully conducting a landlord's lien foreclosure sale at a time after
the landlord's lien had expired. The Company also believes that certain
equipment; molds and patterns sold had preferential liens against them.
Based on a third party appraisal, the value of the molds and patterns
alone was approximately $5,900,000. The Company is vigorously pursuing
the matter and believes it has a reasonable possibility of a favorable
outcome. No adjustments have been made in the accompanying financial
statements for any gain or loss contingency, as the outcome of the
matter is uncertain.
In February 1997, the Company entered into a retainer agreement relating
to legal services for securities matters with compensation at a rate of
$6,000 per month payable either in common stock of the Company
registered with the Securities and Exchange Commission under Regulation
S-8, if available, and valued at the lowest bid price during the month
payable, or in restricted common stock valued at 50% of the lowest bid
during the month payable.
Item 2. Management's Discussion and Analysis or Plan of Operation
FORWARD LOOKING STATEMENTS
This discussion may contain statements that could be deemed
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934 and the Private Securities Litigation
Reform Act, which statements are inherently subject to risks and
uncertainties. Forward-looking statements are statements that include
projections, predictions, expectations or beliefs about future events
or results or otherwise are not statements of historical fact.
Such statements are often characterized by the use of qualifying words
(and their derivatives) such as "expect," "believe," "estimate," "plan,"
"project," "anticipate," or other statements concerning opinions or
judgment of the Company and its management about future events.
Factors that could influence the accuracy of such forward-looking
statements include, but are not limited to, the financial success or
changing strategies of the Company's customers, actions of government
regulators, the level of market interest rate and general economic
conditions. All forward-looking statements included herein are based
on information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward-looking
statements. It is important to note that the Company's actual results
could differ materially from those in such forward-looking statements
due to the factors cited above. As a result of these factors, there
can be no assurance the Company will not experience material
fluctuations in future operating results on a quarterly or annual
basis, which would materially and adversely affect the Company's
business, financial condition and results of operations.
GENERAL INFORMATION
Since August of 1997 and continuing currently the company has continued
its efforts in relocating their manufacturing facilities to Merida,
Yucatan, Mexico and its corporate administrative and sales offices to
Plantation, Florida. The Company was not involved with manufacturing
activities. For a more complete discussion of the Company's relocation
plans see the Sections entitled "Relocation of Corporate Headquarters"
and "Relocation of Manufacturing and Production".
The Company has also redesigned existing yachts, added complementary models
to the product line and developed manufacturing systems and procedures to
greatly reduce total costs of yacht construction.
Improvements are outlined as follows:
- - Consolidated existing yacht models so the Company produces yachts that
have an acceptable profit margin.
- - Designed and tested new yacht models that enhance the existing product
line and have a projected profit margin of at least 20%
- - Developed production sequencing, staging, tasking, and man loading
systems that management believes will greatly increase production
efficiency and overall quality of the yachts while reducing direct costs
- - Developed a management information system that will track labor and
material costs for each yacht under construction and produce internal
reports for proper control of production costs
- - Identified key personnel positions with necessary experience to
implement and manage improved production methods
- - Identified subcontractors who are capable of supplying major pre-
manufactured components. Component manufacturing and modular
construction techniques will greatly reduce direct labor costs and
overall costs of construction
- - Prepared to implement environmentally safe SCRIMP laminating process for
additional labor and material cost savings
- - Developed plan through Yachts of the Americas, it's joint venture
partner in Mexico, to utilize CNC router equipment to dramatically speed
up design and construction of molds and tooling at significantly lower
costs
- - Redesigned and upgraded interior fit and finish of the yachts and
modernized mechanical and electrical systems in all models.
- - Prior to plant shutdown, generated a backlog of $30,000,000 in orders
for new yachts at prices up to 40% higher than ever before charged in
the history of the Company. These prices have been realized while only
increasing the direct cost of the yachts by a modest 10%
The internal and external costs of developing these improvements to
Tollycraft's product line and manufacturing processes have been expensed when
incurred in prior financial periods.
Relocation of Corporate Headquarters to Florida
In recent years, 80% of the larger yachts produced by the Company have been
sold to clients located on the East Coast. The majority of these yachts were
delivered into Florida. Florida is well known throughout the world as "The
Yacht Capital of the World".
Tollycraft Yacht Corporation has announced that the Company's corporate
headquarters will be relocated from southwest Washington to southern Florida.
This southern Florida location will give Tollycraft a much needed presence
where high demand exists for yachts of Tollycraft quality. An office in this
area will also give the Company access to some of the most talented
marketing, engineering, design, and administrative employees in the industry.
Relocation of Manufacturing and Production to Mexico
In the past, the Company's manufacturing employees have been organized under
a union contract. Even with concessions negotiated in the most recent labor
contract, research has determined that existing contract rates are still
among the highest in the industry. With thousands of man-hours required
to produce each vessel, Tollycraft's yachts would become some of the most
expensive yachts to produce in their class. With retail prices increased
to cover these costs it became evident that Tollycraft must reduce costs
or price itself out of existence.
The most significant costs savings available to Tollycraft Yacht Corporation
will result from the Company's planned relocation of it's manufacturing
facilities from southwest Washington to a marine oriented industrial complex
in Progresso, Mexico. Tollycraft has been exploring several international
locations and has selected Progresso, Mexico over other sites considered for
several reasons.
1. Location on the Gulf of Mexico and proximity to Florida
2. The availability of an adequately trained work force
3. The area work force has a labor rate equivalent of $1.051 to $2.50 US
dollars per hour
4. Governmental and investor support to develop facilities to Tollycraft
specifications.
5. An approximate 50% reduction in the burdened costs of comparable
facilities in the U.S
Joint Venture
Once the decision was made to relocate the Company to Mexico under NAFTA,
Tollycraft then needed to determine whether a Joint Venture with an existing
boat builder was going to be a viable option. Unfortunately after almost 6
months it was determined that either the candidates were to weak financially
or lacked the sophistication to be able to go forward with such a project.
Instead a group of Mexican businessmen put together a company called Yachts
of the Americas, S.A. de C.V. and with Tollycraft's expertise and name have
acquired land and are building a state of the art manufacturing facility to
begin and attract production from not just Tollycraft but other USA yacht
manufacturers.
Tollycraft Yacht Corporation has signed a Joint Venture Agreement with
"Yachts of the Americas" a Mexican Corporation to produce its vessels in
Progreso, Mexico. The vessels will be produced in a new 100,000-sq. ft.
facility presently being designed for Tollycraft. The building will be
situated in a new marine business park that is presently being developed
by the Governor of the State of Yucatan. The property comes with 240 feet of
waterfront that will feature an all-concrete wharf as well as a rail system
for the launching and haul out of vessels up to 150' in length. The joint
venture partners will provide the following:
- Construct manufacturing space in a new marine orientated to Tollycraft
specifications.
- Locate and prescreen the local work force to fill required production
hourly and salaried positions with adequately trained workers
- Fund manufacturing labor costs and provide payroll and other
administrative functions relating to the local work force as well as
obtain all necessary government permits
Tollycraft Yacht Corporation projects a fully burdened labor rate of $4.00 to
$8.00 US per hour. Fully burdened labor rates include hourly and salaried
employees in the Mexico facilities, manufacturing facilities costs,
electricity and utilities, Mexico MRO expenses, communication, and travel
expenses. This compares to Tollycraft's previous fully burdened labor rate
at its closed U.S. facility of approximately $27.00 per labor hour. It is
anticipated that the Mexican joint venture will fund all of the direct labor
and costs of the production buildings in Mexico.
As part of the joint venture agreement, 2,000,000 shares of Tollycraft Yacht
Corporation common stock was issued to Yachts of America. Yachts of America
have credited the company $2,000,000 in prepaid manufacturing costs.
The Company plans to build 39' to 125' yachts in Mexico, with the yachts
being built to the same standards of quality control as the products previously
manufactured by Tollycraft. Materials used in construction would remain the
same quality, with a majority of the materials being shipped from the United
States. Major savings would result from lower direct labor costs as well as
cost reductions in general and administrative expenses. In addition, this
will allow the Company to broaden its product line and again offer smaller
Tollycraft vessels that had previously been discontinued because domestic
manufacturing costs became prohibitive.
While the electronic, auto, appliance and textile industries have been part
of NAFTA and have had plants for years in Mexico this is a first for a premier
yacht builder. Tollycraft vessels have long enjoyed an excellent reputation
for quality this move will more then insure that it will enjoy a reputation
as an excellent value as well.
Results of Operations
Current operating results were as expected and budgeted by management. All
production has been discontinued and all non-essential personnel have been
laid off. A net loss of $(15,000) was incurred for the quarter ended March
31, 1999, due to depreciation of property, plant and equipment. For the
quarter ended March 31, 1998 the net loss had been $453,800.
Management has emphasized the following areas to improve the operations of
the Company:
- - Relocate manufacturing operations to the Yucatan Peninsula area of
Mexico which will result in a projected 80% reduction in labor costs.
- - Relocate administrative offices to southern Florida.
- - Increase basic pricing on each yacht to improve gross margins and
reflect the improved product being manufactured.
- - Redefine manufacturing processes to produce yachts more efficiently
and with greater profit margins.
- - Select new materials to continue upgrading the quality of each yacht
while emphasizing production efficiency.
- - Implement a labor tracking information system to monitor and reduce
direct labor costs.
- - Design a new line of yachts to augment the current models offered.
The new yachts will utilize updated manufacturing techniques and have
greater profit margins.
- - Develop relationships with dealers that are able to provide their own
inventory financing.
- - Increase the dealer network to increase sales volume and reach
economies of scale.
- - Utilize CNC equipment to lower costs and expedite manufacturing of
molds and tooling and production of finished yachts.
- - Implements new SCRIMP laminating process to reduce labor and material
production costs.
Tollycraft Yacht Corporation, in its various business forms, has been
manufacturing high quality watercraft for over 64 years. In that period of
time the Company has produced some of the finest motor yachts available.
However, historically unprofitable operations and the circumstances
surrounding the Company's manufacturing facilities and landlord, require
Tollycraft management to make significant changes to the way it does
business.
Financial Condition
The management of Tollycraft is continuing efforts to raise funds in order to
proceed with this business plan. Alternatives being considered to improve the
Company's financial position include converting current debt to equity
through the issuance of preferred shares and the sale of common shares to raise
working capital.
In June 1998, the Company offered each debtor one share of preferred stock
for each $10 of debt they were owed. Notes payable, accounts payable, accrued
liabilities, and long-term debtors were offered this conversion. The
offering required a majority of the debtors to agree to the terms of the
conversion.
In July 1998, a majority of the debtors agreed to the offering and,
accordingly, all of the then outstanding debt was converted to preferred
stock. The Company is in the process of authorizing and issuing the
preferred stock.
As of March 31, 1999, the Company's current assets equaled $400,562. In
1997, the Company's internally generated cash flow has not been sufficient to
finance its operations. The cumulative losses of the Company continued to be
financed through current liabilities. As stated above, in 1998, the
Company converted substantially all of its liabilities to preferred
stock. As of March 31, 1999, current liabilities total $330,498.
Despite the Company's past difficulties in making timely payments to its
creditors, the Company does not expect any difficulties in obtaining raw
materials once production returns to a regular level.
There were no significant capital expenditures for equipment during the
quarter ended March 31, 1999.
In order to begin production at regular capacity the Company continues to be
in need of additional capital to build production tooling, finance inventory
and provide working capital. The Company is dependent on external sources of
liquidity until projected levels of production and improvements in direct
costs and production efficiencies are achieved which will return the Company
to profitability and a positive cash flow. A material commitment for capital
expenditures and working capital is necessary to meet the projected sales and
production goals. The expected source for a majority of the funds is from
financing provided by joint venture production partners for Mexico
manufacturing activities. There can be no assurance that the Company can
achieve the anticipated aforementioned improvements in operations on
acceptable terms.
In 1997 the Company signed an Investment Banking Agreement with Lloyd Wade
Securities of Dallas, Texas, for a Private Placement of $2,500,000 to provide
the necessary capital for Tollycraft to go forward with its plans.
Marketing efforts will begin again in the spring of 1999. The new
manufacturing facilities are expected to be operational by early summer
1999 when the Company expects to begin manufacturing once again. The
months ahead will set the course for the next decade of Tollycraft Yachts.
It is the goal of management to have a company that is very profitable,
debt free, and for the first time have a surplus of cash in the bank.
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the programming code in
existing computer systems as the Year 2000 approaches. The "Year 2000"
problem is concerned with whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Year 2000 problem is pervasive and complex as the
computer operation of virtually every company will be affected in some way.
The Company, like most owners of computer software, will be required to
modify significant potions of its software so that it will function
properly in the Year 2000. Preliminary estimates of the total costs to
be incurred by the Company to resolve this problem range from $5,000 to
$10,000. Maintenance or modification costs will be expensed as incurred,
while the costs of new software will be capitalized and amortized over
the software's useful life.
Since the Company mainly uses third party "off-the-shelf" software, it does
not anticipate a problem in resolving the Year 2000 problem in a timely
manner. The Company is currently taking steps to ensure that its computer
systems and services will continue to operate on and after January 1, 2000.
However, there can be no assurance that Year 2000 problems will not occur
with respect to the Company's computer systems. Furthermore, the Year
2000 problem may impact other entities with which the Company transacts
business, and the Company cannot predict the effect of the Year 2000
problem on such entities or the resulting effect on the Company. The
cost to be incurred by the Company related to externally maintained
systems is expected to be minimal.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
D & C Lemmons v. Tollycraft
Cowlitz County, Washington
Stipulated Judgement in the amount of $291,048.00
Tollycraft believes it has a substantial offsetting claim against D & C
Lemmons for unlawfully conducting a landlord's lien foreclosure. Based upon
the law regarding landlord liens, the Company has been advised by counsel
that it has a strong chance of success in its claim against D&C Lemmons.
Larry and Vicki Castello v. Searock, Inc., d/b/a The Allied Marine Group,
Tollycraft Yachts, and D.R. Cooley, individually.
17th Judicial Circuit Court, Broward County, Florida
Original File Date: October 11, 1996
Claim for treble damages in excess of $2,700,000 plus attorney fees and costs
for failure to deliver a 57-foot yacht as scheduled. Answers by all
Defendants have been filed and motions to dismiss have been filed and heard.
No decision has been rendered on the Defendants Motion to Dismiss.
Dennis Pursley v. Tollycraft Yacht Corporation and 35 others
San Diego Superior Court, San Diego County, California
Claim for intentional misrepresentation, sale of security not qualified for
sale, and fraudulent transfer. While Mr. Pursley is a shareholder and a note
holder in Tollycraft, he was never contacted by any of the 35 defendants to
invest in the Company. Mr. Pursley's funds all came via the solicitation of
his own registered stockbroker who was with a licensed brokerage firm. It is
interesting to note that neither the broker nor the firm has been named as
defendants in the suit. The Company believes the suit has no merit and will
defend itself vigorously.
Item 2. Changes in Securities
Pursuant to a debt conversion, the Company will issue in a private
transaction pursuant to Section 3(a)(9) of the Securities Act of 1933, up
to 1,500,000 shares of series A preferred shares of its capital stock
proportionately to all debt holders of record as of June 29, 1998. Each
preferred share to carry a series of warrants convertible to one share of
the Corporations common stock as follows:
"A" warrants exercisable at $2.25 after 12 months,
"B" warrants exercisable at $2.00 after 24 months,
"C" warrants exercisable at $1.25 after 36 months,
In the event of liquidation, the preferred shares have preference over the
common shares. The preferred shares have no dividend preference and no
voting rights, except in matters which affect the priority of the shareholders.
In January 1999 the Company, issued, as part of the S-8 registration
statement already filed with the Securities and Exchange Commission,
10,000 shares of common stock for prepaid legal services and 20,000
shares of common stock to an officer of the Company for prepaid
administrative expenses.
In March 1999 the Company granted a stock option pursuant to the 1996
Employees Stock Option Plan in the amount of 100,000 common shares each
at an exercise price of $1.625 per share and an exercise period of five
years.
Item 3. Defaults Upon Senior Securities
Pursuant to action taken June 29, 1998, the Board of Directors of Tollycraft
Yacht Corporation resolved to convert all debt, secured and unsecured, to
equity through the issuance of capital stock. The Company is currently in the
process of achieving this conversion.
The Company will issue up to 1,500,000 shares of series A preferred
shares of its capital stock proportionately to all debt holders of
record as of June 29, 1998. Each preferred share to carry a series
of warrants convertible to one share of the Corporations common stock
as follows:
"A" warrants exercisable at $2.25 after 12 months,
"B" warrants exercisable at $2.00 after 24 months,
"C" warrants exercisable at $1.25 after 36 months,
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Table:
5.1 TERMS OF $10 PREFERRED SHARES, SERIES A
5.2 "A" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
5.3 "B" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
5.4 "C" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter.
[Signatures]
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Tollycraft Yacht Corporation
(Registrant)
Date: May 14, 1999
By:/s/_______________________________
D.R. Cooley, President
Chief Operating Officer
Chief Financial Officer
TOLLYCRAFT YACHT CORPORATION
TERMS OF $10 PREFERRED SHARES, SERIES A
1 Designation and Amount. The shares of such series shall be designated "$10
Preferred Shares, Series A," and shall be issuable from the authorized
Capital
Stock. The number of shares constituting such series shall initially be a
maximum of 1,5000,000. The shares of such series shall have a stated par
value of $.001 per share. Such series is herein sometimes referred to as
the "Series A Preferred Shares."
2 Preferred Dividends. The holders of Series A Preferred Shares shall be
entitled to receive, when, as and if declared by the Board of Directors, out
of funds of the Corporation legally available therefor, cash dividends per
share in the same amount and time as the Common Shares. Dividends shall be
payable to holders of record as they appear on the stock transfer records
of the Corporation on such record dates, which shall be not more than 60
days nor less than 10 days preceding the payment dates, as shall be fixed
by the Board of Directors.
3 Liquidation Rights. In the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the holders of
Series A Preferred Shares are entitled to receive out of the assets of
the Corporation, whether such assets are stated capital or surplus of
any nature, before any payment is made or any assets are distributed to
holders of Common Shares and of any other class of shares of the
Corporation ranking junior to the Series A Preferred Shares, liquidating
distributions in the amount of $10 per Series A Preferred Share plus
accrued and unpaid dividends, whether or not declared, without interest.
If upon any liquidation, dissolution or winding up of the Corporation,
the amounts payable with respect to the Series A Preferred Shares and
any other preferred shares ranking as to any such distribution on
a parity with the Series A Preferred Shares are not paid in full, the holders
of the Series A Preferred Shares and of such other preferred shares shall
share ratably in any such distribution of assets in proportion to the full
respective preferential amounts to which they are entitled. After payment of
the full amount of the liquidating distribution to which they are entitled,
the holders of Series A Preferred Shares shall not be entitled to any further
participation in any distribution of assets by the Corporation. Neither a
consolidation nor merger of the Corporation with another corporation nor a
sale or transfer of all or part of the Corporation's assets for cash,
securities or other property shall be considered a liquidation, dissolution
or winding up of the Corporation for these purposes.
4 Voting Rights. Except as indicated below or otherwise required by law,
holders of Series A Preferred Shares will have no voting rights. Without the
vote or consent of the holders of at least two-thirds of the Series A
Preferred Shares then outstanding, the Corporation may not (a) create or
issue or increase the authorized number of shares of any class or series of
shares ranking prior to the Series A Preferred Shares either as to dividends
or upon liquidation, dissolution or winding up, or any security convertible
into or exercisable or exchangeable for such Shares, (b) purchase or redeem
less than all of the Series A Preferred Shares then outstanding when any
dividends on the Series A Preferred Shares are in arrears, or (c) amend,
alter or repeal any of the provisions of the Articles of Incorporation, or
otherwise, so as to affect any right, preference, privilege or voting power
of the Series A Preferred Shares or the holders thereof; provided, however,
that any increase in the amount of authorized Preferred Shares or the
creation and issuance of any other class of Preferred Shares, or any increase
in the amount of authorized shares of such class or of any other class of
Preferred Shares, in each case ranking on a parity with or junior to the
Series A Preferred Shares with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding up, shall not
be deemed to affect such rights, preferences or voting powers.
TOLLYCRAFT YACHT CORPORATION
No. WA_________ ______________ "A" WARRANTS
"A" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
ADDENDUM TO PREFERRED STOCK CERTIFICATE
CUSIP NUMBER ______________
THIS CERTIFIES THAT, FOR VALUE RECEIVED ___________________________ (the
"Registered Holder") is the owner of the number of Warrants (the "Warrants")
specified above.
Each Warrant initially entitles the Registered Holder to purchase,
subject to the terms and conditions set forth in this Certificate, one fully
paid and nonassessable share of Common Stock, $0.001 par value, of TOLLYCRAFT
YACHT CORPORATION, a Nevada corporation (the "Company"), at any time from
June 29, 1999 (the "Initial Warrant Exercise Date"), and prior to the
Expiration (as hereinafter defined), upon the presentation and surrender of
this Warrant Certificate with the Preferred Stock Certificate to which it is
attached and an Exercise Form duly executed, at the corporate office of
INTERWEST TRANSFER COMPANY, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $2.25, subject to adjustment (the
"Exercise Price"), in lawful money of the United States of America in cash or
by certified or bank check made payable to the Company.
Upon exercise, in addition to the Common Stock, there shall be issued
and delivered to the Registered Holder: a new Preferred Stock Certificate,
with a "B" Warrant Certificate Addendum attached thereto, for the number of
Common Stock shares acquired by exercise. Each "B" Warrant, when attached to
the Preferred Stock Certificate, entitles the Registered Holder to purchase
one share of Common Stock after June 29, 2000 upon payment of $2.00 per share
and also receive a "C" Warrant which, when attached to the Preferred Stock
Certificate, entitles the Registered Holder to purchase one share of Common
Stock after June 29, 2001 upon payment of $1.25 per share.
The Exercise Price and the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment in case the Company shall at any time (a)
subdivide or combine the outstanding shares of Common Stock, the Exercise
price shall forthwith be proportionately decreased in the case of a
subdivision or increased in the case of a combination, (b) pay a dividend in,
or make a distribution of, shares of Common Stock, the Exercise price shall
forthwith be proportionately decreased, (c) cause any reclassification or
change of outstanding shares (including as a result of a combination or
merger) of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value
to par value or as a result of a subdivision or combination) or (d) effect
any sale or conveyance to another corporation of all or substantially all of
the assets or property of the Company that is effected in such a way that
holders of the securities issuable upon exercise of the Warrants shall be
entitled to receive securities or other property with respect to or in
exchange for the securities issuable upon exercise of the Warrants, then, as
a condition of such reclassification, change, consolidation, merger, sale or
conveyance, the Company, or such successor or purchasing corporation, as the
case may be, shall make lawful and adequate provision whereby the Registered
Holder of each Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of securities and
property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance, by a holder of the number of securities issuable
upon exercise of such Warrant immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company
shall cancel this Warrant Certificate and the Preferred Certificate to which
it is attached upon the surrender hereof and shall execute and deliver a new
"A" Warrant Certificate and Preferred Stock Certificate or "A" Warrant
Certificates and Preferred Stock Certificates of like tenor, which the
Warrant Agent shall countersign, for the balance of such "A" Warrants and
shares of Preferred Stock.
Any securities issued pursuant to the exercise of this Warrant shall be
restricted securities subject to Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act") unless registered by the Company.
THIS WARRANT IS TRANSFERABLE AND EXERCISEABLE ONLY WITH THE PREFERRED
STOCK CERTIFICATE WITH WHICH IT WAS ISSUED. IF IT BECOMES DETACHED FROM SUCH
PREFERRED STOCK CERTIFICATE IT AUTOMATICALLY EXPIRES AND BECOMES NULL AND
VOID. ANY TRANSFER OF THE PREFERRED STOCK WITHOUT THE TRANSFER OF THIS
WARRANT WILL EXTINGUISH THIS WARRANT.
The Company and the Warrant Agent may deem and treat the Registered
Holder as the absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary. Upon
the presentment and payment of any tax or other charge imposed in connection
therewith or incident thereto, for registration of transfer of this Warrant
Certificate at such office, a new Warrant Certificate or Warrant Certificates
representing an equal aggregate number of Warrants will be issued to the
transferee in exchange therefor, subject to the presentment of the Preferred
Stock Certificate to which the Warrant Certificate is attached. Prior to the
exercise of any Warrant represented hereby, the Registered Holder, as such,
shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Utah. This Warrant shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful. This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed on _______________, manually or in facsimile, by two of its
officers thereunto duly authorized and a facsimile of its corporate seal to
be imprinted hereon.
TOLLYCRAFT YACHT CORPORATION SEAL
By: __________________________________
Name: Title:
By: __________________________________
Name: Title:
COUNTERSIGNED: INTERWEST TRANSFER COMPANY
as Warrant Agent
By: __________________________________
Authorized Officer
TOLLYCRAFT YACHT CORPORATION
EXERCISE FORM
"A" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
ADDENDUM TO PREFERRED STOCK CERTIFICATE
To Be Executed by the Registered Holder in Order to Exercise "A" Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
___________________ "A" Warrants represented by this Warrant Certificate and
this Preferred Stock Certificate to which it is attached, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
___________________________________________________________________
PLEASE PRINT OR TYPE NAME OF PARTIES
___________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________ ______________________ ______________________
PLEASE PRINT OR TYPE ADDRESS TO BE DELIVERED TO
and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate and Preferred Stock
Certificate for the balance of such Warrants and Preferred Stock be
registered in the name of, and delivered to, the Registered Holder at the
address stated below.
Dated:________________________
X_____________________________ ______________________________
______________________________
Address
______________________________
Social Security or
Taxpayer Identification Number
______________________________
Signature Guaranteed
TOLLYCRAFT YACHT CORPORATION
ASSIGNMENT FORM
"A" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
ADDENDUM TO PREFERRED STOCK CERTIFICATE
To Be Executed by the Registered Holder in Order to Assign Warrants and
Preferred Stock
FOR VALUE RECEIVED, ________________, hereby sells, assigns and transfers
unto
___________________________________________________________________
PLEASE PRINT OR TYPE NAME OF PARTIES
___________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________ ______________________ ______________________
PLEASE PRINT OR TYPE ADDRESS TO BE DELIVERED TO
the "A" Warrants and Preferred Stock represented by this Warrant Certificate
and Preferred Stock Certificate, and hereby irrevocably constitutes and
appoints _____________________________ as its/his/her attorney-in-fact to
transfer this Warrant Certificate and Preferred Stock Certificate on the
books of the Company, with full power of substitution in the premises.
Dated:________________________
X_____________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE EXERCISE FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE AND PREFERRED STOCK
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION ON OR ENLARGEMENT OR ANY
CHANGE WHATSOEVER AND MUST BE GUARANTEED BY A BANK, BROKER, DEALER, CREDIT
UNION, SAVINGS ASSOCIATION OR OTHER ENTITY WHICH IS A MEMBER IN GOOD STANDING
OF THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM.
TOLLYCRAFT YACHT CORPORATION
No. WB_________ ______________ "B" WARRANTS
"B" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
ADDENDUM TO PREFERRED STOCK CERTIFICATE
CUSIP NUMBER ______________
THIS CERTIFIES THAT, FOR VALUE RECEIVED ___________________________ (the
"Registered Holder") is the owner of the number of Warrants (the "Warrants")
specified above.
Each Warrant initially entitles the Registered Holder to purchase,
subject to the terms and conditions set forth in this Certificate, one fully
paid and nonassessable share of Common Stock, $0.001 par value, of TOLLYCRAFT
YACHT CORPORATION, a Nevada corporation (the "Company"), at any time from
June 29, 2000 (the "Initial Warrant Exercise Date"), and prior to the
Expiration (as hereinafter defined), upon the presentation and surrender of
this Warrant Certificate with the Preferred Stock Certificate to which it is
attached and an Exercise Form duly executed, at the corporate office of
INTERWEST TRANSFER COMPANY, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $2.00, subject to adjustment (the
"Exercise Price"), in lawful money of the United States of America in cash or
by certified or bank check made payable to the Company.
Upon exercise, in addition to the Common Stock, there shall be issued
and delivered to the Registered Holder: a new Preferred Stock Certificate,
with a "C" Warrant Certificate Addendum attached thereto, for the number of
Common Stock shares acquired by exercise. Each "C" Warrant, when attached to
the Preferred Stock Certificate, entitles the Registered Holder to purchase
one share of Common Stock after June 29, 2001 upon payment of $1.25 per
share.
The Exercise Price and the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment in case the Company shall at any time (a)
subdivide or combine the outstanding shares of Common Stock, the Exercise
price shall forthwith be proportionately decreased in the case of a
subdivision or increased in the case of a combination, (b) pay a dividend in,
or make a distribution of, shares of Common Stock, the Exercise price shall
forthwith be proportionately decreased, (c) cause any reclassification or
change of outstanding shares (including as a result of a combination or
merger) of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value
to par value or as a result of a subdivision or combination) or (d) effect
any sale or conveyance to another corporation of all or substantially all of
the assets or property of the Company that is effected in such a way that
holders of the securities issuable upon exercise of the Warrants shall be
entitled to receive securities or other property with respect to or in
exchange for the securities issuable upon exercise of the Warrants, then, as
a condition of such reclassification, change, consolidation, merger, sale or
conveyance, the Company, or such successor or purchasing corporation, as the
case may be, shall make lawful and adequate provision whereby the Registered
Holder of each Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of securities and
property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance, by a holder of the number of securities issuable
upon exercise of such Warrant immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company
shall cancel this Warrant Certificate and the Preferred Certificate to which
it is attached upon the surrender hereof and shall execute and deliver a new
"A" Warrant Certificate and Preferred Stock Certificate or "A" Warrant
Certificates and Preferred Stock Certificates of like tenor, which the
Warrant Agent shall countersign, for the balance of such "A" Warrants and
shares of Preferred Stock.
Any securities issued pursuant to the exercise of this Warrant shall be
restricted securities subject to Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act") unless registered by the Company.
THIS WARRANT IS TRANSFERABLE AND EXERCISEABLE ONLY WITH THE PREFERRED
STOCK CERTIFICATE WITH WHICH IT WAS ISSUED. IF IT BECOMES DETACHED FROM SUCH
PREFERRED STOCK CERTIFICATE IT AUTOMATICALLY EXPIRES AND BECOMES NULL AND
VOID. ANY TRANSFER OF THE PREFERRED STOCK WITHOUT THE TRANSFER OF THIS
WARRANT WILL EXTINGUISH THIS WARRANT.
The Company and the Warrant Agent may deem and treat the Registered
Holder as the absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary. Upon
the presentment and payment of any tax or other charge imposed in connection
therewith or incident thereto, for registration of transfer of this Warrant
Certificate at such office, a new Warrant Certificate or Warrant Certificates
representing an equal aggregate number of Warrants will be issued to the
transferee in exchange therefor, subject to the presentment of the Preferred
Stock Certificate to which the Warrant Certificate is attached. Prior to the
exercise of any Warrant represented hereby, the Registered Holder, as such,
shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Utah. This Warrant shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful. This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed on _______________, manually or in facsimile, by two of its
officers thereunto duly authorized and a facsimile of its corporate seal to
be imprinted hereon.
TOLLYCRAFT YACHT CORPORATION SEAL
By: __________________________________
Name: Title:
By: __________________________________
Name: Title:
COUNTERSIGNED: INTERWEST TRANSFER COMPANY
as Warrant Agent
By: __________________________________
Authorized Officer
TOLLYCRAFT YACHT CORPORATION
EXERCISE FORM
"B" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
ADDENDUM TO PREFERRED STOCK CERTIFICATE
To Be Executed by the Registered Holder in Order to Exercise "B" Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
___________________ "B" Warrants represented by this Warrant Certificate and
this Preferred Stock Certificate to which it is attached, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
___________________________________________________________________
PLEASE PRINT OR TYPE NAME OF PARTIES
___________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________ ______________________ ______________________
PLEASE PRINT OR TYPE ADDRESS TO BE DELIVERED TO
and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate and Preferred Stock
Certificate for the balance of such Warrants and Preferred Stock be
registered in the name of, and delivered to, the Registered Holder at the
address stated below.
Dated:________________________
X_____________________________ ______________________________
______________________________
Address
______________________________
Social Security or
Taxpayer Identification Number
______________________________
Signature Guaranteed
TOLLYCRAFT YACHT CORPORATION
ASSIGNMENT FORM
"B" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
ADDENDUM TO PREFERRED STOCK CERTIFICATE
To Be Executed by the Registered Holder in Order to Assign Warrants and
Preferred Stock
FOR VALUE RECEIVED, ________________, hereby sells, assigns and transfers
unto
___________________________________________________________________
PLEASE PRINT OR TYPE NAME OF PARTIES
___________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________ ______________________ ______________________
PLEASE PRINT OR TYPE ADDRESS TO BE DELIVERED TO
the "B"Warrants and Preferred Stock represented by this Warrant Certificate
and Preferred Stock Certificate, and hereby irrevocably constitutes and
appoints _____________________________ as its/his/her attorney-in-fact to
transfer this Warrant Certificate and Preferred Stock Certificate on the
books of the Company, with full power of substitution in the premises.
Dated:________________________
X_____________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE EXERCISE FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE AND PREFERRED STOCK
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION ON OR ENLARGEMENT OR ANY
CHANGE WHATSOEVER AND MUST BE GUARANTEED BY A BANK, BROKER, DEALER, CREDIT
UNION, SAVINGS ASSOCIATION OR OTHER ENTITY WHICH IS A MEMBER IN GOOD STANDING
OF THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM.
TOLLYCRAFT YACHT CORPORATION
No. WC_________ ______________ "C" WARRANTS
"C" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
ADDENDUM TO PREFERRED STOCK CERTIFICATE
CUSIP NUMBER ______________
THIS CERTIFIES THAT, FOR VALUE RECEIVED ___________________________ (the
"Registered Holder") is the owner of the number of Warrants (the "Warrants")
specified above.
Each Warrant initially entitles the Registered Holder to purchase,
subject to the terms and conditions set forth in this Certificate, one fully
paid and nonassessable share of Common Stock, $0.001 par value, of TOLLYCRAFT
YACHT CORPORATION, a Nevada corporation (the "Company"), at any time from
June 29, 2001 (the "Initial Warrant Exercise Date"), and prior to the
Expiration (as hereinafter defined), upon the presentation and surrender of
this Warrant Certificate with the Preferred Stock Certificate to which it is
attached and an Exercise Form duly executed, at the corporate office of
INTERWEST TRANSFER COMPANY, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $1.25, subject to adjustment (the
"Exercise Price"), in lawful money of the United States of America in cash or
by certified or bank check made payable to the Company.
The Exercise Price and the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment in case the Company shall at any time (a)
subdivide or combine the outstanding shares of Common Stock, the Exercise
price shall forthwith be proportionately decreased in the case of a
subdivision or increased in the case of a combination, (b) pay a dividend in,
or make a distribution of, shares of Common Stock, the Exercise price shall
forthwith be proportionately decreased, (c) cause any reclassification or
change of outstanding shares (including as a result of a combination or
merger) of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value
to par value or as a result of a subdivision or combination) or (d) effect
any sale or conveyance to another corporation of all or substantially all of
the assets or property of the Company that is effected in such a way that
holders of the securities issuable upon exercise of the Warrants shall be
entitled to receive securities or other property with respect to or in
exchange for the securities issuable upon exercise of the Warrants, then, as
a condition of such reclassification, change, consolidation, merger, sale or
conveyance, the Company, or such successor or purchasing corporation, as the
case may be, shall make lawful and adequate provision whereby the Registered
Holder of each Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of securities and
property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance, by a holder of the number of securities issuable
upon exercise of such Warrant immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company
shall cancel this Warrant Certificate and the Preferred Certificate to which
it is attached upon the surrender hereof and shall execute and deliver a new
"A" Warrant Certificate and Preferred Stock Certificate or "A" Warrant
Certificates and Preferred Stock Certificates of like tenor, which the
Warrant Agent shall countersign, for the balance of such "A" Warrants and
shares of Preferred Stock.
Any securities issued pursuant to the exercise of this Warrant shall be
restricted securities subject to Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act") unless registered by the Company.
THIS WARRANT IS TRANSFERABLE AND EXERCISEABLE ONLY WITH THE PREFERRED
STOCK CERTIFICATE WITH WHICH IT WAS ISSUED. IF IT BECOMES DETACHED FROM SUCH
PREFERRED STOCK CERTIFICATE IT AUTOMATICALLY EXPIRES AND BECOMES NULL AND
VOID. ANY TRANSFER OF THE PREFERRED STOCK WITHOUT THE TRANSFER OF THIS
WARRANT WILL EXTINGUISH THIS WARRANT.
The Company and the Warrant Agent may deem and treat the Registered
Holder as the absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary. Upon
the presentment and payment of any tax or other charge imposed in connection
therewith or incident thereto, for registration of transfer of this Warrant
Certificate at such office, a new Warrant Certificate or Warrant Certificates
representing an equal aggregate number of Warrants will be issued to the
transferee in exchange therefor, subject to the presentment of the Preferred
Stock Certificate to which the Warrant Certificate is attached. Prior to the
exercise of any Warrant represented hereby, the Registered Holder, as such,
shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Utah. This Warrant shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful. This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed on _______________, manually or in facsimile, by two of its
officers thereunto duly authorized and a facsimile of its corporate seal to
be imprinted hereon.
TOLLYCRAFT YACHT CORPORATION SEAL
By: __________________________________
Name: Title:
By: __________________________________
Name: Title:
COUNTERSIGNED: INTERWEST TRANSFER COMPANY
as Warrant Agent
By: __________________________________
Authorized Officer
TOLLYCRAFT YACHT CORPORATION
EXERCISE FORM
"C" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
ADDENDUM TO PREFERRED STOCK CERTIFICATE
To Be Executed by the Registered Holder in Order to Exercise "C" Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
___________________ "C" Warrants represented by this Warrant Certificate and
this Preferred Stock Certificate to which it is attached, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
___________________________________________________________________
PLEASE PRINT OR TYPE NAME OF PARTIES
___________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________ ______________________ ______________________
PLEASE PRINT OR TYPE ADDRESS TO BE DELIVERED TO
and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate and Preferred Stock
Certificate for the balance of such Warrants and Preferred Stock be
registered in the name of, and delivered to, the Registered Holder at the
address stated below.
Dated:________________________
X_____________________________ ______________________________
______________________________
Address
______________________________
Social Security or
Taxpayer Identification Number
______________________________
Signature Guaranteed
TOLLYCRAFT YACHT CORPORATION
ASSIGNMENT FORM
"C" WARRANT CERTIFICATE TO PURCHASE COMMON STOCK
ADDENDUM TO PREFERRED STOCK CERTIFICATE
To Be Executed by the Registered Holder in Order to Assign Warrants and
Preferred Stock
FOR VALUE RECEIVED, ________________, hereby sells, assigns and transfers
unto
___________________________________________________________________
PLEASE PRINT OR TYPE NAME OF PARTIES
___________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________ ______________________ ______________________
PLEASE PRINT OR TYPE ADDRESS TO BE DELIVERED TO
the "C"Warrants and Preferred Stock represented by this Warrant Certificate
and Preferred Stock Certificate, and hereby irrevocably constitutes and
appoints _____________________________ as its/his/her attorney-in-fact to
transfer this Warrant Certificate and Preferred Stock Certificate on the
books of the Company, with full power of substitution in the premises.
Dated:________________________
X_____________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE EXERCISE FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE AND PREFERRED STOCK
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION ON OR ENLARGEMENT OR ANY
CHANGE WHATSOEVER AND MUST BE GUARANTEED BY A BANK, BROKER, DEALER, CREDIT
UNION, SAVINGS ASSOCIATION OR OTHER ENTITY WHICH IS A MEMBER IN GOOD STANDING
OF THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1999 CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIOD
ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS AND THE FOOTNOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 145
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 400,418
<CURRENT-ASSETS> 400,562
<PP&E> 2,359,292
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,281,854
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
11,616,300
<COMMON> 9,744,206
<OTHER-SE> (16,459,150)
<TOTAL-LIABILITY-AND-EQUITY> 5,281,854
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (15,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,000)
<EPS-PRIMARY> (.0)
<EPS-DILUTED> (.0)
</TABLE>
