<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ___________.
COMMISSION FILE NUMBER: 0-29205
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LIGHTHOUSE LANDINGS, INC.
-------------------------------------------------------
(Exact name of small business issuer as in its charter)
New Jersey 22-3241823
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
195 Fairfield Avenue, Suite 3C, West Caldwell, New Jersey 07006
---------------------------------------------------------------
(Address of principal executive offices)
(973) 618-9036
--------------
(Issuer's telephone number)
---------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 number of shares outstanding of the issuer's classes of common equity, as of
July 31, 2000 is 6,519,295 shares of Common Stock.
Transitional Small Business Disclosure Format (check one):
YES NO X
----- -----
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
LIGHTHOUSE LANDINGS, INC.
Interim Consolidated Financial Statements
June 30, 2000
(Unaudited)
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
June 30, 2000
(Unaudited)
INDEX TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED):
-----------------------------------------------------------------
Page No.
--------
Balance Sheets
At June 30, 2000 and December 31, 1999.................. 3
Statements of Operations
For the Three and Six Months Ended
June 30, 2000 and 1999.................................. 4
Statement of Changes in Stockholders'
Equity (Capital Deficiency) for the Six Months Ended
June 30, 2000........................................... 5
Statements of Cash Flows
For the Six Months Ended
June 30, 2000 and 1999.................................. 6-7
Notes to Consolidated Condensed
Financial Statements..................................... 8-17
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
A S S E T S June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Current assets:
Cash $ 207,546 $ 97,957
Inventories 37,841 40,948
Net assets of discontinued operations 65,612 32,582
Prepaid expenses and other current assets 49,016 127,994
------------ ------------
Total current assets 360,015 299,481
Property and equipment - at cost,
less accumulated depreciation 11,856,017 12,288,880
Goodwill net of accumulated amortization 1,072,463 1,112,935
Other assets 201,323 51,764
------------ ------------
$ 13,489,818 $ 13,753,060
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPTIAL DEFICIENCY)
Current liabilities:
Bridge financing payable $ 1,322,326 $ -
Current maturities of long-term debt 1,706,566 1,879,764
Notes payable - stockholders 157,098 125,000
Accounts payable and accrued expenses 974,536 948,606
Deferred revenues 168,838 68,765
Due to officers/stockholders 220,385 449,540
------------ ------------
Total current liabilities 4,549,749 3,471,675
Long-term debt - net of current maturities 9,635,330 10,064,110
------------ ------------
Total liabilities 14,185,079 13,535,785
------------ ------------
Stockholders' equity,(Capital Deficiency):
Common stock - $.01 par value
Authorized - 10,000,000 shares
Issued and outstanding - 6,245,295
shares June 30, 2000 and 4,905,795
in December 31, 1999 62,453 49,058
Additional paid-in capital 6,269,318 5,312,588
Accumulated deficit (7,027,032) (5,144,371)
------------ ------------
Total stockholders' equity (Capital Deficiency) (695,261) 217,275
============ ============
$ 13,489,818 $ 13,753,060
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30 June 30
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 960,646 $ 879,657 $ 1,642,971 $ 1,601,065
Cost of Services:
Ferry operations 697,795 372,596 1,318,408 725,851
Depreciation 229,416 221,750 458,832 444,858
------------ ------------ ------------ ------------
Gross Margin 33,435 285,311 (134,269) 430,356
Selling, General & administrative 444,142 298,438 702,702 540,576
Marketing 17,249 4,671 41,926 10,892
Amortization of goodwill 20,236 20,236 40,472 40,472
------------ ------------ ------------ ------------
Loss from operations (448,192) (38,034) (919,369) (161,584)
Other expenses:
Interest (net) 394,882 410,549 728,008 730,257
Provision for state income taxes - 1,223 - 1,687
------------ ------------ ------------ ------------
Total other expenses 394,882 411,772 728,008 731,944
Loss from continuing operations before
minority share loss in subsidiary (843,074) (449,806) (1,647,377) (893,528)
Minority share in loss of subsidiary - - - 11,071
------------ ------------ ------------ ------------
Loss from continuing operations (843,074) (449,806) (1,647,377) (882,457)
Loss on discontinued operations (235,284) (24,756) (235,284) (47,723)
------------ ------------ ------------ ------------
Net loss (1,078,358) (474,562) (1,882,661) (930,180)
------------ ------------ ------------ ------------
Per share data:
Basic and diluted:
Loss from continuing operations ($ .14) ($ .14) ($ .29) ($ .27)
Loss from discontinuing operations ($ .04) ($ .01) ($ .04) ($ .01)
------------ ------------ ------------ ------------
Net loss ($ .18) ($ .15) ($ .33) ($ .28)
============ ============ ============ ============
Weighted average number of shares
outstanding
Basic and diluted 6,125,745 3,282,795 5,742,092 3,271,679
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Additional Accumulated
Common Stock Paid-In Stockholders'
Number Amount Capital (Deficit) Total
----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 2000 4,905,795 $ 49,058 $ 5,312,588 ($5,144,371) $ 217,275
Increase of shares for cash 688,500 6,885 441,740 - 448,625
Shares issued for
services rendered 298,500 2,985 178,890 - 181,875
Shares issued for
satisfaction of liabilities 352,500 3,525 336,100 - 339,625
Net loss for the period - - - (1,882,661) (1,882,661)
----------- ----------- ----------- ------------- -----------
Balance at June 30, 2000 6,245,295 $ 62,453 $ 6,269,318 ($7,027,032) ($ 695,261)
=========== =========== =========== ============= ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
LIGTHHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the six Months Ended
June 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss continuing operations ($1,647,377) ($883,457)
------------ ------------
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Minority interests - (11,071)
Depreciation 462,059 451,456
Amortization of goodwill 40,472 40,472
Amortization of deferred finance cost 103,013 2,000
Imputed interest 48,926 86,724
Stock issued for service rendered 40,000 100,000
Deferred Revenue 100,073 43,233
Increase (decrease) in cash flows as
a result of changes in assets and
liability account balances:
Inventories 3,107 (4,280)
Prepaid expenses and other current assets 78,978 19,623
Accounts payable and accrued expenses 25,930 18,119
Related party obligations 17,568 17,103
Other assets (697) -
------------ ------------
919,429 763,379
------------ ------------
Net cash used in operating activities
of continuing operations (727,948) (187,518)
------------ ------------
Cash flows used in investing activities:
Acquisition of property and equipment (29,196) (19,254)
------------ ------------
Cash flows from financing activities:
Proceeds from loans 1,200,000 -
Repayments of long-term debt (650,904) 280,928
Proceeds from issuance of common stock 448,625 5,000
------------ ------------
Net cash provided by financing activities
of continuing operations 997,721 285,928
------------ ------------
Net cash provided by continuing operations 240,577 146,596
Net cash used in discontinued operations (130,988) (187,518)
------------ ------------
Net increase in cash 109,589 (40,922)
Cash at beginning of year 97,957 62,606
------------ ------------
Cash at end of year $ 207,546 $ 21,684
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
LIGTHHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year:
Interest $ 842,708 $ -
Income taxes $ - $ -
Supplemental Schedules of Noncash Activities:
Common stock issued as additional interest $ 129,375 $ -
Common stock issued in payment of
Consulting and legal fees $ 52,500 $ -
Common stock issued as payment of liabilities:
Related parties $ 214,625
Others $ 125,000
Note issued as payment of consultant's fee $ 110,000 $ -
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 2000
NOTE 1 - REALIZATION OF ASSETS - GOING CONCERN.
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting principles,
which contemplate continuation of the Company as a going concern.
Lighthouse Landings, Inc. (the "Company") has sustained substantial
losses for the years ended December 31, 1999 and the six months ended
June 30, 2000. In addition, the accompanying consolidated balance sheet
as at June 30, 2000 reflects negative working capital of $4,189,734 and
net tangible capital deficiency of $1,931,677
Future viability of the Company is dependent upon the Company
obtaining additional funding. During 1999, the Company arranged private
placements of its common stock for net cash proceeds of $1,530,000 and
obtained short term loans in the amount of $700,000 for both its
continuing and discontinued segments. The proceeds were used to provide
funds for the payment of certain obligations and ongoing operations.
Commencing in January 2000 through July 31, 2000, the Company received
$448,625 through the sale of its securities and $1,940,000 from bridge
loans.
The Company currently operates a commuter ferry service from
Highlands, NJ to and from Manhattan, and is pursuing the establishment
of other routes in the Greater New York City area. In November 1999,
the Company completed negotiations and executed a lease for a property
in Stamford, CT as a base for fast ferry service to and from Manhattan
and LaGuardia Airport. The site requires improvements and governmental
approvals. The Company is proceeding with preparations for establishing
ferry service, and expects to be able to commence service in the spring
of 2001. Initially, it is expected that service on these new routes
will be provided by a vessel on a short-term charter. The Company is
proceeding with plans for construction and financing of at least three
vessels specifically to meet the needs of the new service.
During 1998 and 1999, the Company assessed its strategic
direction and concluded that focusing on the commuter ferry business
would provide the greatest return on assets and discontinued the marina
restaurant property and the retail cigar operations in 1999.
Accordingly, the Company is pursuing the divestiture of the
discontinued segments assets. The carrying value of the related net
assets have been reclassified as "Net assets of discontinued
operations" in the accompanying consolidated balance sheet.
It is management's opinion that the funds to be raised by the
sales of its securities and borrowings plus the funds anticipated to be
raised through the sale of net assets of the discontinued segments will
be sufficient to meet the Company's obligations as they become due.
The conditions previously mentioned raise substantial doubt
about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) Description of Business:
The Company was incorporated in New Jersey in 1993 and is in the
commuter ferry business. The Company currently operates a commuter
ferry service from Highlands, New Jersey to and from Manhattan, and is
pursuing the establishment of other routes in the Greater New York City
metropolitan area.
(b) Basis of Presentation:
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions for
Form 10-Q and Article 10 of Regulations S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, the statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present
fairly the financial position as of June 30, 2000 and the results of
operations and cash flows for the six month period ended June 30, 2000
and 1999. The results of operations for the six month period ended June
30, 2000 and 1999 are not necessarily indicative of the results to be
expected for the full year.
The December 31, 1999 balance sheet has been derived from the
audited financial statements at the date included in the Company's
annual report contained in Form 10-KSB. These unaudited financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's annual report contained in
Form 10-KSB.
(c) Principles of Consolidation:
The consolidated condensed financial statements include the
accounts of Lighthouse Landings, Inc. and its subsidiaries. Inclusion
of the results of subsidiary companies' operations is on the "Purchase"
method, from the dates of their respective acquisition. All significant
intercompany balances and transactions have been eliminated in
consolidation. Recognition of the interest of minority stockholders `is
provided for in the accounts. As discussed more thoroughly in Note 3,
the retail and marina segments are presented as discontinued
operations.
(d) Change of Accounting Period:
The Company has changed its April 30 fiscal year end to December
31st. Accordingly, the accompanying consolidated financial statements
reflect balance sheets as of June 30, 2000 and December 31, 1999 and
the results of operations cash flows and stockholders equity (Capital
deficiency) for the six month period ended June 30, 2000 and 1999 then
ended.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(e) Inventories:
Inventories which consist of parts inventory and cafeteria
products are stated at the lower of cost or market on the first-in,
first-out method.
(f) Property and Equipment:
Property and equipment is recorded at cost. The cost of the
ferries obtained through the New York Fast Ferry Holding Corp.
acquisition in December 1998 has been determined as an allocation of
the purchase price of the business acquired based upon an appraisal.
Depreciation is computed using the straight-line method. Depreciation
on equipment, including the ferries, is calculated principally over
their estimated useful lives of fifteen years.
Expenditures that substantially increase estimated useful lives
are capitalized. Maintenance, repairs and minor renewals are expensed
as incurred. When assets are sold or otherwise disposed of, their costs
and accumulated depreciation are removed from the accounts and any
resulting gain or loss is recorded in operations.
(g) Goodwill:
Goodwill arising from acquisitions initially represents the
excess of the purchase cost over the fair value of identifiable assets
less identifiable liabilities. Goodwill is reviewed on an ongoing basis
to determine that the value has not been impaired; in 1999 it was
determined that the value of the goodwill arising from the purchase of
The Cigar Box, Inc. has been impaired and accordingly the remaining
unamortized goodwill of $198,654 has been written off to discontinued
operations during 1999. The goodwill arising from the acquisition of
New York Fast Ferry Holding Corp. and its wholly owned subsidiaries
aggregating $1,214,174 is being amortized over 15 years. Amortization
of goodwill charged to operations was $40,472 for the six months ended
June 30, 2000 and 1999.
(h) Revenue Recognition:
Revenue is recognized when earned. The Company's ferry business
sells the majority of commuter tickets in advance of use. Accordingly,
the Company determines the unused portion of ticket sales and defers
that value to future periods. Deferred income aggregated $168,838 and
$68,765 at June 30, 2000 and December 31, 1999, respectively.
(i) Income Taxes:
The Company complies with Statement of Financial Accounting
Standards No. ("SFAS 109"), "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets are computed for
differences between financial statement and tax basis of assets and
liabilities that will result in future taxable or deductible amounts,
based on the enacted tax laws and rates in the periods in which
differences are expected to affect taxable income. The principal asset
and liability differences are deferred revenues, valuation allowances
for long-term assets, the estimated loss on the disposal of
discontinued operations, and utilization of the Company's tax loss
carry forwards. Management has fully reserved the net deferred tax
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
assets as it is more likely than not that the deferred tax asset
will be utilized in the future.
(j) Impairment of Long-lived Asset:
The Company accounts for impairment of long-lived assets
accordance with Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairments of Long-Lived Assets and for Long-
Lived Assets to be Disposed of." SFAS No. 121 requires that long-lived
assets be reviewed for impairment whenever events or changes in
circumstances indicate that the book value of the asset may not be
recoverable. Due to significant loss incurred during 1999, the Company
evaluated its long-term assets of its continuing operations which as at
December 31, 1999 were comprised of property and equipment (principally
two (2) ferries) with an undepreciated cost of $12,288,880 and goodwill
on the acquisition of the Fast Ferry Holding Corp. with a unamortized
cost of $1,112,935. Based upon an estimate of the future undiscounted
net cash flows of the related asset or asset grouping over the
remaining life, it was determined that there was no impairment in
either the net book value of the ferries or the goodwill.
(k) Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
(l) Concentrations of Credit Risk:
Financial instruments which potentially subject the Company
to concentrations of credit risk consist primarily of cash. The Company
places its cash with high credit quality financial institutions which
at times may be in excess of the FDIC insurance limit.
(m) Loss Per Common Share:
Loss per common share is based on the weighted average number of
common shares outstanding. In March 1997, the Financial Accounting
Standards Broad issued Statement No. 128 ("SFAS 128"), "Earnings Per
Share," which requires dual presentation of basic and diluted earnings
per share on the face of the statements of operations, and which the
Company has adopted. Basic loss per share excludes dilution and is
computed by dividing income available to common stockholders by the
weighted-average common shares outstanding for the period. Diluted loss
per share reflects the potential dilution that could occur if
convertible debentures, options and warrants were to be exercised or
converted or otherwise resulted in the issuance of common stock that
then shared in the earnings of the entity.
Since the effect of outstanding options, warrant and
convertible debenture conversions are antidilutive in all periods
presented, it has been excluded from the computation of loss per common
share.
<PAGE>
NOTE 3 - DISCONTINUED OPERATIONS.
On October 28, 1999, the Company adopted a plan to sell its real estate and
retail/wholesale segments. Accordingly both segments have been accounted for as
discontinued operations in the accompanying consolidated financial statements.
The net assets to be disposed of as of June 30, 2000 aggregating $65,612 consist
principally of real estate and its related secured indebtednesses. The net
assets are recorded as current assets in the accompanying consolidated balance
sheet under the caption "Net assets of discontinued operations." Management
expects the real estate to be sold in late 2000 or early 2001.
In the second quarter of 2000 management became aware that its previous
estimate of the time required to dispose of these segments was incorrect and
accordingly the original estimate of the carrying charges of the real property -
real estate taxes and interest- would have to be increased to reflect these
charges through June 2001. The accompanying reflect a charge for $110,000 of
these costs incurred through June 2000 plus an estimate of an additional
$125,000 for interest and taxes through June 2001.
The net assets of discontinued operations, which have been segregated in
the accompanying balance sheets are summarized as follows:
June 30,
2000
--------
Assets:
Inventory $ 2,001
Property assets, net (See Note 4) 931,180
--------
933,181
--------
Liabilities:
Accounts payable 32,434
Secured mortgage payables 337,547
Accrued real estate taxes and interest 497,588
--------
867,569
--------
Net assets of discontinued operations $ 65,612
========
(a) The mortgage notes payable are summarized as follows:
20% demand mortgage on real property
subject to the tax lien referred to below $ 25,000
Second mortgage on real property payable in monthly
installments (applied firstly to interest) of
$15,000 from January 10, 2000 through
May 10, 2000, and three equal monthly
payments equal to one-third of the balance
outstanding on June 10, 2000, commencing
June 10, 2000. The loan carries interest at
18% plus as added inducement to enter into the
loan, the lender received 50,000 shares of
common stock valued at $100,000. 104,547
6% second demand mortgage on real property 208,000
--------
$337,547
========
(b) Real estate taxes liens have been recorded by local governmental
authorities because of non-payment of said property taxes arising from a dispute
over property tax valuations. The Company is currently attempting to resolve the
dispute.
<PAGE>
NOTE 4 - PROPERTY AND EQUIPMENT.
Property and equipment is summarized as follows:
June 30,
------------
2000
------------
Continuing operations:
Ferries $ 13,300,000
Computers and office equipment 61,210
Furniture and fixtures 113,117
------------
13,474,327
Less: Accumulated depreciation 1,618,310
------------
$ 11,856,017
============
Discontinued operations:
Land and buildings $ 931,180
============
NOTE 5 - LONG-TERM DEBT.
June 30,
------------
2000
------------
Mortgage note payable, secured by the
vessel "Finest" due in monthly install-
ments of $61,875 through March 10, 1999,
and $56,719 through September 10, 2005,
including interest at 9.25% per annum, with a
final payment of $3,626,691 due October 10,
2005. (a) $ 5,083,845
Mortgage note payable, secured by the vessel
"Bravest" due in monthly installments of
$59,063 through March 10, 1999 and
$56,719 through September 10, 2005, including
interest at 9.25% per annum, with a final payment
of $3,572,971 due October 10, 2005. (a) 5,050,561
Note payable, secured by the vessel "Finest"
and "Bravest", payable in fifteen monthly
installments of $15,000 commencing in
February 1999, payment of $343,333 on
March 31, 2000 and a final payment of
$934,319 due on December 10, 2000
including imputed interest of 9.25%. (a) 899,929
10% interest bearing obligation payable in two
installments of $100,000 each on March 15,
2000 and July 15, 2000 and as final payment of
$200,000 January 15, 2001. 307,562
------------
11,341,896
Portion due within one year 1,706,566
------------
Long-term debt - less current maturities $ 9,635,330
============
<PAGE>
(a) The two first mortgages on the ships and note payable are secured through
(i) cross collateralization agreements; (ii) assignments of charter agreements
and other personal property, (iii) a pledge of a potential receivable arising
from a lawsuit against the City of New York and (iv) cross corporate guarantees.
Reference is made to Note 9(c)(i) regarding warrants issued to the note holder.
The secured debt obligations mature as follows:
2001 $ 1,706,566
2002 490,434
2003 537,773
2004 589,682
2005 646,600
Thereafter 7,370,841
-----------
$11,341,896
===========
NOTE 6 - BRIDGE FINANCING LOANS
JUNE 2000 - During the month of June 2000, the company received proceeds from
nine convertible promissory notes, (six for $20,000, one for $10,000 and two for
$5,000), totaling $140,000 dollars. Each convertible promissory note carries a
simple interest rate of 10.5%. Interest only is payable quarterly, and the notes
mature one-year from date of issuance. In addition, each convertible promissory
note holder was issued 125 shares of the company's common stock for each $5,000
dollars of indebtedness owed to the convertible promissory note holder at date
of issuance. These shares of stock are restricted securities. The fair value of
the common shares on the dates of issuance aggregated $4,375 that will be
charged to operations as additional interest over the life of the notes.
The lenders have the right, at their sole and exclusive option, to convert
the outstanding indebtedness to common shares (the "Conversion Rights") of the
company at any time prior to borrower making payment. Should such "Conversion
Rights" be exercised, the Company shall issue such shares to the Lender at the
rate of one share of common stock for each two ($2.00) dollars of the
indebtedness then due and owing. The shares issued by the company through the
exercise of the "Conversion Rights" will be restricted securities. The option
and conversion as provided herein shall be exercised by each lender issuing
written notice to the borrower.
The loan balance for the nine convertible promissory notes including
interest accrued as of June 30, 2000 is $140,631.
JUNE 2000 - On June 14, 2000, New York Fast Ferry Services Inc., received
proceeds of two bridge loans aggregating $60,000. The loans bear interest at 14%
per annum. Loans aggregating $45,000 plus accrued interest are payable on July
14, 2000, which were made, and the balance of the loans with accrued interest on
or before September 14, 2000.
The loan balance for the nine convertible promissory notes including
interest accrued as of June 30, 2000 is $60,373.
MARCH 2000 - On March 11, 2000, the Company received proceeds of two bridge
loans aggregating $1,000,000. The loans, which bear interest at 10% per annum
payable quarterly, are payable nine months from issuance. To obtain the loans,
the Company issued to each loan holder 125,000 shares of unregistered common
stock with on-demand registration and unlimited piggyback rights. The fair value
of the shares at issuance aggregating $125,000 will be charged to operations as
additional interest over the life of the loans.
The loans may be repaid anytime within nine months of issuance; however,
the loans must be repaid out of the proceeds of a financing greater than
$2,000,000. Initially the loans are convertible into common stock at $1.50 per
share. In the event the loans are not redeemed in full within nine months from
issuance, the loans are in default, and become convertible at $1.00 per share
for the first 90 days of
<PAGE>
the default period and are further reduced to $.50 thereafter. In addition, in
the event of default, the Company must issue to each of the loan holders 50,000
warrants exercisable at $.25 per share for each 30 days period until repaid.
The loan balance for the two bridge notes including accrued interest as of
June 30, 2000 is $1,008,333
MARCH 2000 - The Company employed the services of a financial consultant to
arrange for the two bridge loans dated March 11, 2000. The consultant received
as payment for this service (i) a 10% interest bearing note payable on December
10, 2000 in the amount of $110,000, (ii) 25,000 shares of the company's common
stock whose fair market value at date of issuance was $12,500, and (iii) the
same default remedies as the bridge loan holders. The note payable balance
including accrued interest as of June 30, 2000 is $113,361. The consultant also
has agreed to perform consulting services for the Company and will receive
payment for his services in the form of warrants to acquire 50,000 common shares
at $2.00 per share for each three month period his services are required.
NOTE 7 - CAPITAL STOCK.
(a) Common stock for consideration other than cash:
During the second quarter of 2000, the Company issued 20,000 of its common
shares having a fair market value on the date of issuance of $40,000 to outside
legal and financial consultants for services rendered.
During the second quarter of 2000, the Company issued 100,000 shares having
a fair market value on the date of issuance of $125,000. This issuance was for
satisfaction of a note and other liabilities related to the discontinued
operations.
During the second quarter of 2000, the Company issued 3,500 shares having a
fair market value on the date of issuance of $4,375. The shares were issued as
additional interest, and this amount is being charged to operations over the
life of the convertible promissory notes issued in June 2000.
During the first quarter of 2000, the Company issued 252,500 shares having
a fair market value on the date of issuance of $214,625 to two officer/directors
and another director for satisfaction for accrued compensation in the amount of
$214,625.
During the first quarter of 2000, a financial consultant was issued 25,000
shares having a fair market value on the date of issuance was $12,500 for
service rendered in arranging the bridge loan. This amount is being charged to
operations over the life of the loan.
During the first quarter of 2000, the Company issued 250,000 of its common
shares having a fair market value on the date of issuance of $125,000 as
additional consideration for the bridge loan.
(b) Common Stock Issued for Cash:
During second quarter of 2000, the Company sold 54,000 shares of its common
stock restricted for one year at prices ranging from $1.00 to $1.25 per share,
for an aggregate of $60,125.
During first quarter of 2000, the Company sold 634,500 shares of its common
stock and warrants to acquire an additional 634,500 common shares at prices
ranging from $1.00 to $1.25 per share for an aggregate of $388,500.
<PAGE>
NOTE 8 - STOCK OPTIONS AND WARRANTS.
A summary of activity related to non-qualifying stock options and warrants
granted by the Company is as follows:
Exercise
Price
Per
Options Warrants Share
--------- ---------- -------------
Outstanding at January 1, 1999 10,000 200,000 $.96 to $2.60
Cancelled (10,000) $2.53
Granted during 1999 420,000 1,330,000 $1.00 to $1.75
--------- ----------
Outstanding at December 31, 1999 420,000 1,530,000 $1.00 to $2.60
Granted during 2000 250,000 689,500 $.50 to $2.00
--------- ----------
Outstanding at June 30, 2000 670,000 2,219,500 $.50 to $2.60
========= ==========
(a) Stock Options:
The Company has entered into new employment agreements with its Chief
Executive Officer and its V.P., Secretary in 2000. These officers received as a
condition of their contract options to purchase 100,000 and 150,000,
respectively, shares of common stock at $1.00 per share, the fair market value
at the date of grant, through January 2007. Half of these options are
exercisable in January 2002 and the officers are first able to exercise the
other 50% in January 2003.
Assuming the fair market value of the stock at the date of grant to be
equal to option exercise price, the life of the options to be from 1.3 years to
7 years the expected volatility at 400%, expected dividends are none, and the
risk-free interest rate of 10%, the Company would have recorded compensation
expense of $135,882 and $6,300 for the six months ended June 30, 2000 and 1999,
respectively, as calculated by the Black-Scholes option pricing model. As such,
proforma net loss and loss per share would be as follows:
For the Years Ended
June 30,
----------------------------
2000 1999
------------ ------------
Net loss as reported ($1,882,661) ($930,180)
Additional compensation 135,882 6,300
------------ ------------
Adjusted net loss ($2,008,543) ($936,480)
============ ============
Loss per share as reported ($.33) ($.29)
============ ============
Adjusted loss per share ($.35) ($.29)
============ ============
<PAGE>
(b) Warrants Granted in 2000:
As an inducement to purchase shares of the Company's common stock, warrants
to purchase 689,500 shares were granted to individuals who purchased stock in
2000. The warrants are exercisable at various times through March 15, 2002 at
prices ranging from $.50 to $2.00.
A financial consultant was issued warrants to acquire 50,000 common shares
at $2.00 per share as part of a consulting agreement. Another Consultant was
granted a warrant to acquire 5,000 common shares at $2.00 per share which was
the fair value of the common stock on the date of issuance.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
OVERVIEW - Lighthouse Landings Inc. (the "Company"), is a New Jersey corporation
--------
formed on May 12, 1993 under the name Drydock Cafe, Inc. On September 21, 1994,
the Company changed its name to Lighthouse Landings, Inc. The Company, through
its subsidiary New York Fast Ferry Holding Corp. ("NYFF"), is an operator of
high speed, commuter passenger ferry boats in the New York City metropolitan
region.
The following discussion should be read in conjunction with the unaudited
Consolidated Financial Statements and the Notes to those statements, which are
prepared in accordance with generally accepted accounting principles ("GAAP") in
the United States for interim financial information, along with other
information included in this Form 10-QSB.
Comparison of three and six month periods ended June 30, 2000 compared with
three and six month periods ended June 30, 1999 are as follows.
REVENUES - NYFF's operations consolidated revenues increased by 9.12% to
--------
$960,646 for the three months ended June 30, 2000 compared to $879,657 for the
three months ended June 30,1999. For the six months ended June 30, 2000,
consolidated revenues increased by 2.62% to $1,642,971 compared to $1,601,065
for the comparable period in 1999. The overall increase net of decreases are
explained as follows:
PASSENGERS TICKET SALES - Passenger ticket sales increased by 48.38% to
$873,654 for the three months ended June 30, 2000 compared to $588,804 for the
three months ended June 30,1999. For the six months ended June 30, 2000, earned
passenger ticket sales increased by 39.21% to $1,513,781 compared to $1,086,979
for the comparable period in 1999.
The increase is the result of adding additional scheduled runs with the
Motor Vessel (M/V) Finest. The M/V Finest was originally chartered to the
Massachusetts Steamship Authority. This charter terminated in October 1999.
GALLEY SALES - Galley sales increased by 20.58% to $58,938 for the three
months ended June 30, 2000 compared to $48,878 for the three months ended June
30,1999. For the six months ended June 30, 2000, galley sales increased by
11.90% to $101,136 compared to $90,384 for the comparable period in 1999.
The increase is primarily the result of adding the M/V Finest as a commuter
passenger ferry.
CHARTER SALES - Charter sales decreased by 88.40% to $28,054 for the three
months ended June 30, 2000 compared to $241,975 for the three months ended June
30,1999. For the six months ended June 30, 2000, charter sales decreased by
93.38% to $28,054 compared to $423,702 for the comparable period in 1999. The
decrease is the result of terminating the charter businees of the M/V Finest and
utilizing this vessel for commuter transportation.
<PAGE>
COST OF SERVICES - NYFF's cost of services increased by 56.01% to $927,211 for
----------------
the three months ended June 30, 2000 compared to $594,346 for the three months
ended June 30,1999. For the six months ended June 30, 2000, cost of services
increased by 51.81% to $1,777,240 compared to $1,170,709 for the comparable
period in 1999. The overall changes are detailed follows:
SALARY and RELATED BENEFITS - Salary and related benefits increased by
46.61% to $163,466 for the three months ended June 30, 2000 compared to $111,494
for the three months ended June 30,1999. For the six months ended June 30, 2000,
salary and related benefits increased by 39.51% to $305,406 compared to $218,913
for the comparable period in 1999.
The increase is the result of adding a crew for additional scheduled runs
with the Motor Vessel (M/V) Finest. The M/V Finest was originally chartered to
the Massachusetts Steamship Authority. This charter terminated in October 1999.
FUEL and OIL RELATED COSTS - Fuel and oil related costs increased by 94.70%
to $151,433 for the three months ended June 30, 2000 compared to $77,777 for the
three months ended June 30,1999. For the six months ended June 30, 2000, fuel
and oil related costs increased by 128.08% to $292,371 compared to $128,221 for
the comparable period in 1999.
The increase is attributable to an increase in the cost of fuel, an
increase in the scheduled runs and the operation of the M/V Finest.
BOAT MAINTENANCE and RELATED SUPPLIES - Boat maintenance and related costs
increased by 394.14% to $96,244 for the three months ended June 30, 2000
compared to $19,477 for the three months ended June 30,1999. For the six months
ended June 30, 2000, Boat maintenance and related costs increased by 169.25% to
$245,288 compared to $91,102 for the comparable period in 1999.
The increase in Boat maintenance and related costs, which included a
scheduled engine overhaul and other unscheduled maintenance are the result of an
increase in the scheduled runs and the operation of the M/V Finest.
DOCKING and PARKING RELATED FEES - Docking and Parking related fees
increased by 32.09% to $139,016 for the three months ended June 30, 2000
compared to $105,240 for the three months ended June 30,1999. For the six months
ended June 30, 2000, docking related fees increased by 33.21% to $239,169
compared to $179,538 for the comparable period in 1999.
The increase in docking and parking related fees, are the result of an
increase in the scheduled runs and the operation of the M/V Finest translating
to more passengers traveled. The number of passengers traveled is a component of
the parking fee calculation charged by the owner of the parking facility in
Highlands, New Jersey.
INSURANCE - Insurance related costs increased by 203.15% to $60,114 for the
three months ended June 30, 2000 compared to $19,830 for the three months ended
June 30, 1999. For the six months ended June 30,
<PAGE>
2000, insurance related costs increased by 129.22% to $96,297 compared to
$42,011 for the comparable period in 1999.
The increase in insurance related costs, is primarily the result of the
operation of the Motor Vessel M/V Finest. As well as a general price increase in
the insurance premiums.
GALLEY COST of GOODS SOLD - The galley cost of goods sold increased by
61.33% to $39,230 for the three months ended June 30, 2000 compared to $24,317
for the three months ended June 30,1999. For the six months ended June 30, 2000,
galley cost of goods increased by 36.37% to $66,597 compared to $42,375 for the
comparable period in 1999.
The increase is attributable to an increase in the number of scheduled runs
and the operation of the M/V Finest translating into more passengers traveled
aboard the boats.
OTHER DIRECT OPERATING COSTS - Other direct operating costs increased by
233.95% to $48,292 for the three months ended June 30, 2000 compared to $14,461
for the three months ended June 30,1999. For the six months ended June 30, 2000,
other direct operating costs increased by 209.32% to $73,280 compared to $23,691
for the comparable period in 1999.
The increase is attributable to an increase in the number of scheduled runs
and the operation of the M/V Finest.
DEPRECIATION - Depreciation increased by 3.60% to $229,416 for the three months
------------
ended June 30, 2000 compared to $221,750 for the three months ended June
30,1999. For the six months ended June 30, 2000, depreciation increased by 3.14%
to $458,832 compared to $444,858 for the comparable period in 1999.
The increase is attributable to an increase in other boat equipment
associated with operation of the M/V Finest and continued upgrades of equipment
on the Bravest.
SELLING, GENERAL and ADMINISTRATIVE EXPENSES - The consolidated company's
--------------------------------------------
selling, general and administrative expenses increased by 48.82% to $444,142 for
the three months ended June 30, 2000 compared to $298,438 for the three months
ended June 30,1999. For the six months ended June 30, 2000, selling, general and
administrative expenses increased by 29.99% to $702,702 compared to $540,576 for
the comparable period in 1999. The overall changes are detailed as follows:
FERRY ADMINISTRATION, SALARY and RELATED BENEFITS - Salary and related
benefits for the Ferry Administration increased by 12.18% to $79,840 for the
three months ended June 30, 2000 compared to $71,170 for the three months ended
June 30,1999. For the six months ended June 30, 2000, Salary and related
benefits for the "Ferry Administration" increased by 9.09% to $154,595 compared
to $141,708 for the comparable period in 1999.
The increase is attributable to the addition of one head count increase,
overall salary increases, and overtime of clerical staff.
<PAGE>
CORPORATE ADMINISTRATION, SALARY and RELATED BENEFITS - Salary and related
benefits for the Corporate Administration increased by 1.97% to $113,651 for the
three months ended June 30, 2000 compared to $111,458 for the three months ended
June 30,1999. For the six months ended June 30, 2000, Salary and related
benefits for the "Corporate Administration" decreased by 5.70% to $182,367
compared to $193,388 for the comparable period in 1999.
The three-month increase is related to salary increases associated with the
addition of the VP Secretary and the new chief financial officer. The overall
six-month decrease was the result of changes in the employment agreements with
certain current and former officers.
PROFESSIONAL SERVICES - Professional services, which include legal,
accounting and consulting services, increased by 150.50% to $157,871 for the
three months ended June 30, 2000 compared to $63,023 for the three months ended
June 30,1999. For the six months ended June 30, 2000, Professional services
increased by 69.72% to $178,152 compared to $104,967 for the comparable period
in 1999.
The increase is related to the 10-KSB audits and 10-QSB reviews of the
company's financial statements, as well as various SEC filings requiring both
legal and accounting services. In addition, there were various engineering and
related expenses associated with the new planned ferry routes ((i.e. Stamford,
CT., Highlands, NJ (new location) and Keyport, N.J.)).
TRAVEL and RELATED AUTOMOBILE EXPENSES - Travel and related automobile
expenses decreased by 36.37% to $15,223 for the three months ended June 30, 2000
compared to $24,115 for the three months ended June 30,1999. For the six months
ended June 30, 2000, travel and related automobile decreased by 43.72% to
$23,044 compared to $40,947 for the comparable period in 1999.
The decrease is related to an overall decrease in travel within the
organization over the comparable period in 1999.
OFFICE FACILITY RELATED EXPENSES- Office facility related expenses includes
rent, utilities, maintenance and general office expenditures for the Company's
corporate office in West Caldwell, New Jersey and the NYFF marina office in
Highlands, New Jersey.
These office facility related expenses increased by 367.24% to $57,994 for
the three months ended June 30, 2000 compared to $12,412 for the three months
ended June 30,1999. For the six months ended June 30, 2000, office facility
related expenses increased by 100% to $80,473 compared to $34,894 for the
comparable period in 1999.
The increase primarily relates to the establishment of a new corporate
headquarters in West Caldwell, New Jersey as well as increased costs associated
with the maintenance of the marina office located in Highlands, New Jersey.
DEPRECIATION EXPENSE - Depreciation expense decreased by 34.14% to $2,674
for the three months ended June 30, 2000 compared to $4,060 for the three months
ended June 30,1999. For the six months ended June 30,
<PAGE>
2000, Depreciation expense increased by 51.08% to $3,227 compared to $6,598 for
the comparable period in 1999.
The decrease is related to assets that have been fully depreciated
CORPORATE EXPENSE - OTHER - Other Corporate related expenses increased by
38.43% to $16,889 for the three months ended June 30, 2000 compared to $12,200
for the three months ended June 30,1999. For the six months ended June 30, 2000,
Depreciation expense increased by 347.29% to $80,844 compared to $18,074 for the
comparable period in 1999.
The increase is related to the expenses associated with filing the 10-KSB and
10-QSB with the company's financials statements, as well as various other SEC
filings.
MARKETING EXPENSES - Marketing expenses increased by 269.28% to $17,249 for the
------------------
three months ended June 30, 2000 compared to $4,671 for the three months ended
June 30,1999. For the six months ended June 30, 2000, marketing expenses
increased by 284.92% to $41,926 compared to $10,892 for the comparable period in
1999.
The increase is related to increased efforts to attract new passengers.
GOODWILL AMORTIZATION - In each of the quarters ended June 30, 2000 and 1999,
---------------------
the Company recorded amortization of goodwill expense of $20,236, which was
related to its acquisition of NYFF.
INTEREST EXPENSE - Interest expense primarily relates to meeting the current
----------------
obligations of the NYFF, including the mortgages on the vessels and debt
financing of the Company's current operations and business development.
Interest expense decreased by 3.82% to $394,882 for the three months ended June
30, 2000 compared to $410,549 for the three months ended June 30,1999. For the
six months ended June 30, 2000, Interest expense decreased by .31% to $728,008
compared to $730,257 for the comparable period in 1999.
The decrease primarily relates to new bridge financing entered into during
2000; resulting in better terms.
Liquidity and Capital Resources.
--------------------------------
Since inception, the Company has funded its operations primarily through
cash generated from private placements of debt and equity securities and
institutional financing. In October 1998, the Company acquired 80% of the stock
of NYFF and commenced operating fast ferry service from Highlands, New Jersey.
As part of the transaction, the
<PAGE>
Company guaranteed payment and satisfaction of NYFF's outstanding liabilities,
which included mortgages on its two ferry vessels and a line of credit. The NYFF
operation generates sufficient cash-flow to cover its direct operating costs.
However, the NYFF operation does not yet generate enough cash to make principal
and interest payments for both boat mortgages, carry its other debt, to fund the
capital improvements and capital expenditures necessary for the Company to
expand its operations and to implement its strategic business objectives.
As of June 30, 2000, two outstanding notes payable and preferred ship
mortgages held by Debis Financial Services, Inc., one on the ferry M/V Finest
and one on the ferry M/V Bravest, were $5,083,845 and 5,050,559, respectively,
which bear interest at 9.25% per annum. Both ship mortgages each require
monthly payments of principal and interest in the amount of $56,719 through
September 10, 2005, with final payments of $3,626,691 and $3,572,971,
respectively, due on October 10, 2005.
The line of credit held by Debis Financial Services Inc. assumed by the
Company had an outstanding balance at June 30, 2000 of $899,929 with the same
financial institution that holds the preferred ship mortgages. The line of
credit, secured by the M/V Finest and the M/V Bravest, required monthly payments
of $15,000 through April 10, 2000, and final principal payment of $934,319 on
December 10, 2000. As of this filing the line of credit is current. The note
carries no interest, but has been discounted to a net present value using a
discount rate of 9.25% per annum. These two preferred ship mortgages and the
line of credit are further secured by cross collateralization agreements,
assignment of personal property, a pledge of a potential receivable arising out
of a lawsuit against the City of New York, and a Company guarantee. Moreover,
the financial institution was granted warrants to purchase 200,000 shares of
Company stock at $2.60 per share exercisable through March 16, 2004.
During the month of June 2000, the company received proceeds from nine
convertible promissory notes, (six for $20,000, one for $10,000 and two for
$5,000), totaling $140,000 dollars. Each convertible promissory note carries a
simple interest rate of 10.5%, interest only is payable quarterly, and matures
one-year from date of issuance. In addition, each convertible promissory note
holder was issued 125 shares of the company's common stock for each $5,000
dollars of indebtedness owed to the convertible promissory note holder at date
of issuance. These shares of stock are restricted securities.
The lender has the right, at its sole and exclusive option, to convert the
outstanding indebtedness to common shares (the "Conversion Rights") of the
company at any time prior to borrower making payment. Should such "Conversion
Rights" be exercised, the Company shall issue such shares to the Lender at the
rate of one share of common stock for each two ($2.00) dollars of the
indebtedness then due and owing. The shares issued by the company through the
exercise of the "Conversion Rights" will be restricted securities. The option
and conversion will be exercised by the lender issuing written notice to the
borrower.
The loan balance for the nine convertible promissory notes including
interest accrued as of June 30, 2000 is $140,631.
<PAGE>
On June 14, 2000, New York Fast Ferry Services Inc., received proceeds of
two bridge loans aggregating $60,000. The loans bear interest at 14% per annum.
Their terms are as follows:
1. On or before July 14, 2000 a principal payment of 45,000, together
with all outstanding accrued interest to date of payment. Payment
was made July 14, 2000.
2. On or before September 14, 2000 a principal payment of 15,000,
together with all outstanding accrued interest to date of payment.
The loan balance for the two promissory notes including interest accrued as
of June 30, 2000 is $60,373.
On March 1, 2000 the company received two $500,000 convertible bridge loans
due December 11, 2000, with interest at 10% per annum and is payable quarterly.
The loan may be prepaid at any time, but must be repaid out of the proceeds of
any financing in excess of $2,000,000. The loan is convertible to common shares
of the company at the rate of one share for each $1.50 of indebtedness. In
addition, to the 10% interest, the company issued 250,000 common shares, which
the company valued at $0.50 per share, as additional consideration. Further
shares are issuable in the event of a default.
In June 1999, the Company obtained financing in the net amount of $300,000
from an unrelated third party that is secured by a second mortgage on the
property of the Shrewsbury River, subject to a real estate tax lien, and by a
personal guarantee of a major shareholder. The note carries an annual interest
rate of 18% and is payable in monthly installments, applied first to interest,
as follows: from July 10, 1999 through December 10, 1999, $10,000 per month;
from January 10, 2000 through May 10, 2000, $15,000 per month; and commencing
June 10, 2000, three monthly installments each equal to one-third of the
outstanding balance on June 10, 2000. As of June 30, 2000 the Company was
current in these obligations. As an inducement to enter into the loan, the
Company issued the lender 25,000 shares of common stock in June 1999 and an
additional 25,000 shares in December 1999.
In the six months ended June 30, 2000, the Company had raised proceeds of
$448,625 through the private placement of 688,500 shares of restricted common
stock to accredited investors. The Company also issued 252,500 shares of
restricted common stock to three directors and officers in satisfaction of
unpaid compensation amounting to $214,625. In addition, the company issued
100,000 shares of restricted common stock on June 13, 2000 and $25,000 on July
11, 2000 to a mortgage holder of the discounted operation in satisfaction of
$150,000 of debt.
The Company, as of June 30, 2000, had a working capital deficiency of
$4,189,734. Furthermore, in the planned development of its commercial
operations, the Company's combined losses are expected to continue as the
Company divests its non-core assets and until it increases its ferry service
when each of its sites become fully operational. The Company's ability to meet
its obligations in the ordinary course of business is dependent upon its ability
to continue to obtain adequate financing and/or to successfully expand its ferry
<PAGE>
operations. Furthermore, capital expenditures to acquire additional fast ferry
vessels and improve and expand its landside ferry facilities will require
significant funding.
The Company has been successful to date in its efforts to raise funds and
believes that proceeds from anticipated interim financing together with
available funds and cash flows expected to be generated by operations will be
sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the next twelve months. Furthermore, the Company has
begun to negotiate more favorable payment terms with certain creditors that
require significant principal payments in the next twelve months. In the event
the Company's plans change, its assumptions change or prove to be inaccurate or
if the proceeds of the interim financing or cash flows prove to be insufficient
to fund operations, the Company may find it necessary or desirable to reallocate
funds within the above described business strategies, seek additional financing
or curtail its activities. There can be no assurance that additional financing
will be available on terms favorable to the Company, or at all, or that the
Company will be able to negotiate more favorable payment terms with its existing
creditors. If adequate funds are not available or are not available on
acceptable terms, the Company may not be able to meet its current obligations,
take advantage of unanticipated opportunities, develop new services or otherwise
respond to unanticipated competitive pressures. Such inability could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Forward-Looking Statements
--------------------------
Discussions and information in this document that are not historical facts
should be considered forward-looking statements. With regard to forward-looking
statements, including those regarding the potential interim financing, the
sufficiency of the cash flow, and the business prospects or any other aspect of
the Company, actual results and business performance may differ materially from
that projected or estimated in such forward-looking statements. The Company has
attempted to identify in this document certain of the factors that it currently
believes may cause actual future experience and results to differ from its
current expectations. Differences may be caused by a variety of factors,
including adverse economic conditions, entry of new and stronger competitors in
the ferry business, insufficient parking space for potential ferry customers,
inadequate capital and the inability to obtain funding from third parties,
unexpected costs, and the inability to obtain or keep qualified personnel.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
On June 30, 2000, D. Weckstein & Co., Inc. ("Weckstein") filed suit against
the Company in the Supreme Court of the State of New York. The Complaint
alleges that the Company owes Weckstein $360,000 for services rendered by
Weckstein in connection with the Company's
<PAGE>
purchase of The Cigar Box, pursuant to a letter agreement between Weckstein and
the Company. In the alternative, if the Court finds that Weckstein is not
entitled to damages for breach of the letter agreement, Weckstein seeks an award
in quantum meruit for services rendered. Weckstein also seeks an award of its
costs and disbursements.
On July 28, 2000, the Company filed an Answer, denying that the Company
owes Weckstein damages for breach of contract or in quantum meruit; raising
several defenses, including that Weckstein failed to perform its obligations
under the letter agreement; and seeking dismissal of the Complaint and an award
of the Company's attorney's fees, costs and further relief that the Court deems
just and equitable.
On July 28, 2000, the Company filed a Notice of Removal, to remove the case
from the Supreme Court of the State of New York to the United States District
Court for the Southern District of New York, based on the diversity jurisdiction
of the Federal Court.
On August 3, 2000, the Company received a notice from its landlord,
Northeast Utilities, terminating its lease for the property that is the proposed
site for the Company's Stamford, Connecticut ferry terminal. The Company
disputes the landlord's right to terminate the lease, and is attempting to
negotiate a resolution of this matter with the landlord. If those efforts are
unsuccessful, the Company intends to pursue legal action to continue its lease.
ITEM 2. CHANGES IN SECURITIES
---------------------
(c) In May 2000, the Company sold 21,000 shares of common stock, at $1.00 and
$1.25 per share, to the following three accredited investors. The offering
was conducted in reliance in Section 4(2) of the Act and Rule 506.
In May 2000, the Company sold 8,000 shares of common stock, at $1.00 and
$1.25 per share, to the following accredited investor. The offering was
conducted in reliance on Section 4(2) of the Act and Rule 506.
May Number of Shares
--- ----------------
. Christopher Karounos 7,000
. Jason Karounos 7,000
. Peter Karounos 7,000
. Dana Schwartz 8,000
-------
29,000
=======
During June of 2000, the Company issued 3,500 shares, having a fair market
value on the date of issuance of $4,375, to
<PAGE>
the following purchasers of the Company's convertible promissory notes.
<TABLE>
<CAPTION>
Principal
Amount of Number
Name Note of Shares
---- --------- ---------
<S> <C> <C>
. Robert Powless $ 20,000 500
. Arthur Klowden $ 5,000 125
. Herman and Danny Vaden $ 20,000 500
. Steve Carcaterra $ 20,000 500
. Edward Holst $ 5,000 125
. Lowell Kupfer $ 10,000 250
. Frederick Keifer $ 20,000 500
. Herbert and Lois Rake $ 20,000 500
. Loren and Judith Hanson $ 20,000 500
---------
3,500
=========
</TABLE>
During June of 2000, the Company issued 20,000 shares of common stock,
having a fair market value on the date of issuance of $40,000, to providers
of professional services. The shares were issued as follows: 10,000 were
issued to Colasanti & Scott, L.L.P. for outside legal services, and 10,000
were issued to Patricia Beene, CPA for financial services rendered.
In June 2000, the Company sold 12,500 shares of common stock at $1.25 per
share, to the following accredited investor. The offering was conducted in
reliance on Section 4(2) of the Act and Rule 506.
In June 2000, the Company sold 12,500 shares of common stock at $1.00 per
share, to the following accredited investor. The offering was conducted in
reliance on Section 4(2) of the Act and Rule 506.
In June 2000, the Company issued 100,000 shares of common stock, in
satisfaction of debt outstanding on the discontinued operation, to the
following accredited investor. The offering was conducted in reliance on
Section 4(2) of the Act and Rule 506.
June Number Of Shares
---- -----------------
. Dana Schwartz 12,500
. Felice Barone 12,500
. Nathan Plafsky 100,000
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125,000
========
<PAGE>
ITEM 5. OTHER INFORMATION
-----------------
Subsequent Events
-----------------
JULY 2000 - The Company entered into a letter agreement, dated July 24, 2000,
with Paul Derecktor, John Koenig, and Jack Davis (collectively, the 20% minority
shareholders of NYFF). Under the agreement, the Company will purchase from the
minority shareholders the remaining 20% of the issued and outstanding shares of
stock of NYFF not already owned by the Company, for the sum of $287,000. The
terms of the agreement are as follows: A 10% cash payment was due and was paid
on July 25, 2000. The balance of $258,750 will by paid by August 31, 2000 with
51,750 shares of the Company's unregistered common stock (valued at $5.00 per
share), and warrants to purchase 51,750 shares of common stock, at $2.00 per
share, exercisable for three years.
JULY 2000 - The Company entered into an Agreement, dated July 19, 2000, with
Robert E. Derecktor, Inc. ("Derecktor"), for the purchase of up to three new 35-
meter aluminum high-speed catamaran passenger ferries to be built by Derecktor.
Paul Derecktor, who was a minority shareholder of NYFF at the time the contract
was executed, is an officer, director, and shareholder of Derecktor. The
initial order is for one vessel. The purchase price will be paid in 10
installments, spread over approximately 10 months, and is as follows: If a
second vessel is ordered within 120 days after the date of the agreement, the
price will be $5,250,000 for the first vessel, and $5,206,000 for the second
vessel. If a third vessel is ordered within 240 days after the date of the
Agreement, the price will be $5,188,000 for the first vessel, and $5,058,000 for
the second and third vessels. If only one vessel is ordered, the purchase
price is $5,400,000. If a second vessel is not ordered within 120 days of the
date of the agreement, then a lump sum of $211,500 will be paid with payment
installment number four on the first vessel. If the second vessel is ordered,
but the third vessel is not ordered after 240 days, then a lump sum of $148,000
will be paid with payment installment number four on the second vessel.
Derecktor has the right to raise the purchase price of the second or third
vessel if it can show that significant material cost increases have taken place
(but the increase can only be in proportion to the material cost increase).
JULY 2000 - The Company employed the services of a financial consultant to
arrange for four bridge loans, one dated July 10, and three dated July 14, 2000.
The consultant received as payment for this service (i) a 10% interest bearing
note payable on January 14, 2001 in the amount of $88,000 (ii) 22,000 shares of
the Company's unregistered common stock, with a fair market value at date of
issuance of $44,000, and (iii) the same default remedies as the bridge loan
holders.
On July 10, 2000, the Company received proceeds of one of those bridge
loans, aggregating $500,000. The loan, which bears interest at 10% per annum
payable quarterly, is payable three months from issuance. To obtain the loan,
the Company issued to the loan holder 125,000 shares of unregistered common
stock of the Company with on-demand registration and unlimited piggyback rights.
The fair value of the
<PAGE>
shares at issuance aggregating $250,000 will be charged to operations as
additional interest over the life of the loans.
On July 14, 2000, the Company received proceeds of three of those bridge
loans, aggregating $300,000. Included with those bridge loans was a
restructuring of an additional $200,000 demand mortgage on the discontinued 52
Shewsbury Avenue Highlands New Jersey property. The loans, which bear interest
at 10% per annum payable quarterly, are payable three months from issuance. To
obtain the loans, the Company issued the three loan holders a total of 125,000
shares of the Company's unregistered common stock with on-demand registration
and unlimited piggyback rights. The fair value of the shares at issuance
aggregating $250,000 will be charged to operations as additional interest over
the life of the loans.
The four bridge loans above may be repaid anytime within three months of
issuance; however, the loans must be repaid out of the proceeds of a financing
greater than $3,000,000. Initially, the loans are convertible into the
Company's common stock at $1.50 per share. In the event the loans are not
redeemed in full within three months from issuance, the loans are in default,
and become convertible at $1.00 per share for the first 90 days of the default
period, and the conversion price is further reduced to $0.50 thereafter. In
addition, in the event of default, the Company must issue to each loan holder
50,000 warrants exercisable at $.25 per share for each 30 days period until
repaid.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibit 3.1 - Certificate of Incorporation, as amended. (1)
Exhibit 3.2 - Bylaws. (1)
Exhibit 10.4 - Letter of Intent for vessel construction. (2)
Exhibit 10.5.1 - Employment Agreement with John Ferreira. (3)
Exhibit 10.5.2 - Employment Agreement with Anthony Cappaze. (3)
Exhibit 10.5.3 - Employment Agreement with Anthony Colasanti. (3)
Exhibit 10.6 - Agreement with Robert E. Derecktor, Inc. for
vessel construction. Filed herewith.
Exhibit 27.1 - Financial Data Schedule. Filed herewith.
---------
(1) Incorporated by reference from the Company's Registration Statement on
Form 10-SB, File No. 0-29205.
(2) Incorporated by reference from the Company's Form 10-KSB/A No. 1, for the
fiscal year ended December 31, 1999.
(3) Incorporated by reference from the Company's Registration Statement on Form
10-SB/A No. 1.
(b) Reports on Form 8-K: During the quarter ended April 30, 2000, the Company
filed no reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10- QSB/A No. 1 to be signed on its behalf
by the undersigned thereunto duly authorized.
LIGHTHOUSE LANDINGS, INC.
Date: August 14, 2000 By: /s/Anthony Cappaze
--------------------------------------------
Anthony Cappaze, President
Chief Executive Officer
Director
Date: August 14, 2000 By: /s/Anthony Colasanti
--------------------------------------------
Anthony Colasanti, Secretary
and Director
Date: August 14, 2000 By: /s/John Ferreira, Jr.
--------------------------------------------
John Ferreira, Jr., Chief
Financial Officer
