<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A No. 1
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
-----------------
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD OF _________ TO
_________.
Commission File Number: 0-29205
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Lighthouse Landings, Inc.
-------------------------
(Name of small business issuer 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)
Issuer's telephone number: (973) 228-2901
Securities registered under Section 12(b) of the Act: None
----
Securities registered under Section 12(g) of the Act:
Common Stock, $.01 Par Value
----------------------------
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [_]
Check here if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year: $3,285,978.
As of April 1, 2000, there were 5,778,295 shares of the Registrant's $.01 par
value Common Stock ("Common Stock"), the only outstanding class of voting
securities, outstanding. Based on the closing price of the Common Stock as
reported on the "Pink Sheets" on April 12, 2000, the aggregate market value of
Common Stock held by non-affiliates of the Registrant was approximately
$11,400,000.
Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
<PAGE>
Lighthouse Landings, Inc.
FORM 10-KSB
PART I
Item 1. Description of Business
History of the Company.
- ----------------------
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.
Through 1997 the Company's principal business was the redevelopment of a
marina facility on a 2 1/2 acre site located on the Shrewsbury River in
Highlands, New Jersey (the "Property"), which it acquired in September 1993.
The Property is a mostly vacant parcel of land with 463 linear feet of
waterfront and has on its premises a 4,000 square foot building on the water's
edge and a small office building. The Property has preliminary zoning approval
for a restaurant facility, retail building, bait and tackle shop, 23 slip
marina, concrete parking area and deep water boat fueling pier.
In September 1993 the Company purchased the Property at a Sheriff's
sale for $1,000,000. Currently, the Property is encumbered by a promissory note
with the remaining principal balance of $60,000, all of which is delinquent.
However, the note holder has afforded the Company additional time to pay the
balance. Relations with the note holder have historically been amenable.
In December 1997, the Company purchased all outstanding shares of a
privately-owned company called The Cigar Box, Inc. ("Cigar Box"), a retail cigar
and accessories store, located in Ramsey, New Jersey. The Cigar Box
stockholders received 75,000 shares of the Company's common stock. The
acquisition was contemplated and consummated at a time when cigars were
increasingly popular and the Cigar Box was to be used to supply retail outlets
at ferry locations in New Jersey. The Company had planned to operate additional
Cigar Box retail outlets, one of which would be included as part of a private
club at the Property's restaurant facility.
In October 1998, the Company acquired 80% of the issued and outstanding
shares of the capital stock of Fast Ferry Holding Corporation, a New York
corporation, and its wholly owned subsidiaries, Fast Ferry I Corporation, Fast
Ferry II Corporation and New York Fast Ferry Services, Inc., all New York
corporations (collectively "NY Fast Ferry"). NY Fast Ferry owns two vessels,
the M/V Finest and the M/V Bravest, and is in the business of operating high-
speed commuter ferry services in the greater New York City harbor area. The
Company issued 454,545 shares of its common stock to the NY Fast Ferry
shareholders. Of the 454,545 shares issued, 70,000 shares are subject to a put
under which two of the three selling shareholders can require the Company to
purchase an aggregate of 70,000 shares at a price of $5.00 per share.
-2-
<PAGE>
As a result of the acquisition of NY Fast Ferry, the Company's primary
business changed from the redevelopment of the Property to the operation of
existing fast ferry service and the development of new routes. Accordingly, the
Company reevaluated all other business strategies and decided to sell all non-
core business assets and operations so it could focus solely on developing its
core business of ferry services. In October 1999 the Company listed both the
Cigar Box and the Property for sale. Efforts to sell the business have been
unsuccessful. The Company intends to close the business on March 31, 2000.
Current Business; Markets.
- -------------------------
The Company is in the business of operating high-speed, passenger ferries.
At present, it owns two high-speed passenger ferries: the M/V Finest and the M/V
Bravest. These ferries are 38-meter aluminum hull, low wake catamarans that
travel at speeds averaging 35 knots. These vessels each have a capacity of 340
passengers and are equipped with TV monitors and a public announcement and
stereo system. Both vessels also have a refreshment concession area onboard.
The Company's primary passenger is the executive commuter. The Company's
fast ferry service offers the executive commuter a fast, convenient, reliable,
clean and comfortable alternative to the crowded public transportation available
via train or bus, not to mention the congestion and stress faced by those
choosing to commute via automobile. The market being served by NY Fast Ferry
includes the Rumson-Red Bank peninsula immediately south of Highlands, New
Jersey in Monmouth County and has an excellent market potential to support
present and expanded ferry service. According to the New Jersey Department of
Transportation, there are approximately 22,000 Manhattan bound daily commuters
from Monmouth County, New Jersey alone.
The M/V Bravest travels 17 nautical miles across New York Harbor from
Highlands, New Jersey to Pier 11 in downtown Manhattan, New York. Pier 11 is
located about two blocks from Wall Street. This ferry also makes a stop at the
East 34th Street Pier on the eastside of midtown Manhattan. The trip to Pier 11
is approximately 40 minutes long and an additional 10 minutes to the East 34th
Street dock. Daily, the ferry makes two peak trips in the morning and two peak
return trips at the end of the business day and one off-peak morning trip and
one off-peak return trip in the evening four days a week. Passengers on these
trips are primarily commuters, the majority of whom purchase 40-trip tickets at
the current cost of $420.
The M/V Finest was under a bareboat charter arrangement until October 31,
1999 to the Massachusetts Steamship Authority, which operates a fast ferry
service in Massachusetts. The M/V Finest recently underwent a scheduled engine
overhaul and is now available for NY Fast Ferry operation. The M/V Finest will
be used to add additional peak runs to and from Manhattan from the Clam Hut site
in the Highlands area which is currently being prepared for operation. This
vessel will make one trip during morning peak hours to Manhattan and two trips
from Manhattan during peak evening hours.
NY Fast Ferry also runs excursions during non-commuter times and on
holidays and weekends when the vessel is not operating scheduled trips. These
excursions include whale watching trips off the coast in the winter, summer
sunset cruises in New York Harbor, and fall
3
<PAGE>
foliage tours up the Hudson River Valley. The ferries also make trips to
sporting events including baseball games at Shea Stadium and football games at
West Point and for special events such as 4th of July fireworks. The Company
also rents its vessels for charters and private parties.
The Property is not in operational condition for fast ferry service because
of the condition of the bulkhead, the surface of the parking area, and the
site's limited parking capacity. Accordingly, NY Fast Ferry operates from a
leased facility known as the Aragon Marina ("Aragon") located on Willow Street,
Highlands, New Jersey. The site is leased by NY Fast Ferry on a passenger trip
basis, with a remaining term of approximately four years, renewable at the same
rates and basis for an additional five years. Under this lease the property
owner provides and maintains all land side facilities, including providing
parking attendants in the morning, snow plowing, lighting, docks, shuttle bus to
offsite lot, etc. It is Aragon's obligation to provide 300 parking spaces, but
only 250 are available, and there are payment reductions for the lost parking
spaces. The monthly lease payment to Aragon has averaged $24,900 over the last
12 months.
The Company believes the Aragon site is better suited to providing first-
class, convenient commuter fast ferry service than the Property it owns.
Accordingly, the Company is in negotiations with the owner of Aragon to purchase
that site and has placed its Property on the market for sale. However, the
Aragon property needs improvements and the parking space needs to be expanded.
The Company is also actively seeking other sites in the New York and New
Jersey areas suitable for providing fast ferry service to commuters to
Manhattan, in order to maximize ferry capacity. If the Company is unsuccessful
in negotiating acceptable terms for the Aragon property, there is sufficient
time remaining on the Aragon lease to permit the Company to explore other
options. The Company recently entered into a 60-day short term agreement to
utilize a dock and parking facility at the Clam Hut located approximately one-
half mile south of the Aragon property. The Clam Hut has parking capacity for
150 vehicles. At the end of the short term agreement, the Company and the
owners of the Clam Hut property have the option of extending the agreement
subject to the approval of the local zoning board.
The Company entered into a five-year lease agreement, renewable for a
further five-year team, with The Connecticut Light and Power Authority (the
"Landlord") for approximately 3.6 acres together with the dock located at
Atlantic Street and Washington Boulevard in Stamford, Connecticut (the "Stamford
Property") for the purpose of operating a high-speed ferry service. The lease
commenced on November 1, 1999 with rent payments commencing on March 1, 2000.
Rent for the first six months (March through August) is based on annual rate of
$100,000, or $8,333.33 per month, and for the seventh through the twenty-fourth
month rent is based on an annual rate of $150,000, or $12,500 per month.
The Company plans to operate high-speed ferry service from the Stamford
Property to LaGuardia airport and to Manhattan, stopping at the pier at East
34th Street and at Pier 11 downtown utilizing two newly-designed aluminum hull
catamarans with a capacity of 275 passengers and a 38 knot service speed.
Operations will be initiated with one temporary vessel that conforms to
operational requirements for this ferry run, until the new vessels are built and
delivered. The design work for both new boats was completed in January 2000.
The Company has signed a Letter of Intent
4
<PAGE>
with Derecktor Shipyards for the construction of three vessels. The Company is
currently negotiating a lease for a temporary vessel until the first new boat is
completed. The Company expects that the first vessel will be completed by
November 2000. The U.S. Coast Guard must issue a certificate off inspection for
any new vessel it uses. The Company does not anticipate problems in obtaining
the necessary certificate for the temporary vessel.
Before ferry service can begin, certain site improvements must be completed
on the Stamford Property. The Company expects the refurbishment to be completed
within approximately 120 days from the time construction begins. The Stamford
site has been zoned for parking and the Company has received oral assurances
from the local authorities that it can operate fast ferry service from this
site. The Company will commence operation of fast ferry service as soon as
possible upon completion of the site refurbishment, upon obtaining the necessary
Connecticut state permits and delivery of the temporary vessel. The Company
retained an engineering firm in Stamford to handle all permits and site plans.
The Company plans to begin operations at the Stamford site in the fourth quarter
of Fall 2000 and will have approximately 600 parking spaces.
The operation of ferry vessels requires U.S. Coast Guard (USCG)
certificates of inspection (See Government Regulations) and permits to dock.
New York City has recently expanded its facilities at Pier 11 located at the
South Street Seaport in the Wall Street area of lower Manhattan. This provides
more times for ferries to dock and disembark passengers. In order to dock the
ferry vessels at any pier under the City's control, the Company must obtain a
permit and will then be given specific docking times around which it can
schedule its trips to and from Manhattan. The Company plans to apply for the
docking permit immediately upon obtaining a vessel to operate from Stamford. The
Company believes it will not take more than 30 days to obtain the permit once
the vessel is acquired.
Currently, the Company is diligently working with the appropriate
officials, consultants and contractors during the initial phases of site
planning and permit approvals. The Landlord is responsible for compliance with
all laws, statutes, ordinances, regulations and other requirements of any
governmental authority related to the environmental condition of this site. As
soon as the necessary site plan approvals and permits have been obtained, the
Company will aggressively schedule the contractors so as to complete the site
refurbishment as soon as possible.
After the requisite site improvements are completed and operations have
commenced, the Company plans to construct a small terminal, consisting of a
totally enclosed waiting room, a ticket office and necessary facilities,
including rest rooms.
Competition.
- -----------
The Company currently operates in the Monmouth County, New Jersey area. In
that market its main competitor is Seastreak, a well-capitalized, wholly-owned
subsidiary of Sea Container Corporation, a United Kingdom based corporation.
This ferry service operates from a nearby site on the Shrewsbury River, the
former Connors Hotel property, and from Atlantic Highlands Yacht Harbor
approximately a mile west. Seastreak has undertaken an improvement and
expansion program whereby it will increase parking capacity at its Highlands
facility, expand its off-peak and
5
<PAGE>
weekend schedules and construct a new Highlands terminal. At this time, the
Company's vessels are faster and more comfortable than Seastreak's vessel. The
Company's vessels can reach a speed of 35 knots, whereas Seastreak's vessels can
only reach a speed of about 22 knots. The Company's vessels can make the trip
from the Highlands to Manhattan about ten minutes faster than Seastreak's
vessels. The Company's vessels have more interior room and provide a smoother
ride than Seastreak's vessels. However, Seastreak has substantially greater
financial resources through its parent corporation, Sea Container, that could
adversely impact the Company.
Monmouth County has indicated it is contemplating an additional high speed
ferry terminal and operation in a town about seven miles northwest of the
Company's site in the Highlands. The Company believes the ferry operator that
will be servicing that facility is New York Waterways. New York Waterways also
provides conventional ferry service for short hauls at various locations in the
New York metropolitan area and has been in business for many years. New York
Waterways has substantially greater financial resources that, if they choose to
compete, could adversely impact the Company.
The Company's competitors, both existing and potential, have longer and
profitable operating histories and substantially greater financial resources
than the Company. The Company's inability to fund the necessary site and
facilities improvements, to purchase additional ferries or to take advantage of
opportunities as they might arise could have significant adverse impact on its
results of operations.
Dependence on Suppliers.
- -----------------------
Parking at docking sites is the Company's biggest issue. The Company
currently is dependent on the lease with Aragon (on which four years remain).
Management is confident it could find other temporary dock space with available
parking on a short term basis until permanent arrangements could be made if
Aragon should breach its lease arrangement with the Company.
Government Regulation.
- ---------------------
The operations of the ferry vessels is under the jurisdiction of the USCG.
The vessels are required to pass an inspection and must have valid certificates
of inspection from the USCG. The USCG conducts an in-water inspection of the
vessel annually and an out-of-water inspection about every 18 months. Should a
violation or other problem be found, the Company is given a period within which
it can correct the problem, during which time the vessels are free to operate.
If the USCG deems it to be a safety hazard, the certificate of inspection is
suspended immediately and the ferry cannot be operated until the necessary
repairs/corrections are made. The vessels' captain and mates must also have
required USCG licenses. To date the Company has an excellent safety record and
maintains the only boats in the Greater New York harbor that are American Bureau
of Shipping (ABS) classified.
The Company also obtains permits from New York - New Jersey Port authority
for docking at city-owned ferry terminals. Obtaining these permits has not been
a problem.
6
<PAGE>
Employees.
- ---------
As of March 31, 2000 the Company had 19 full time employees and no part
time employees. Fast Ferry Holding Corporation employs 17 of the 19 full time
employees. The number of employees will increase as additional ferries become
operational and the Stamford Property service becomes operational.
Fast Ferry Holding Corporation has a collective bargaining agreement with
Local 333, United Marine Division of the International Longshoreman Association,
AFL-CIO, dated September 9, 1997. The contract runs through September 15, 2001.
The contract contains a no-strike clause, specified pay rates, medical benefit
guarantee and union shop provision. Pay increases of 3% are specified in the
year following any year in which a profit is made.
Management believes its relationship with its union and non-union employees
is good.
Item 2. Description of Property
The Property, located on the Shrewsbury River in Highlands, New Jersey,
which the Company acquired in September 1993, is a mostly vacant parcel of land
with 463 linear feet of waterfront and has on its premises, a 4,000 square foot
vacant building on the water's edge and a small office building. The Company
has preliminary zoning approval for a restaurant facility, retail building, bait
and tackle shop, a 23 slip marina, a concrete parking area and deep water boat
fueling pier.
The Property is subject to a first mortgage and note with an outstanding
balance of $58,262. The Property is also subject to a second mortgage lien
related to a note payable to Ashley North Fairfield, Inc. ("ANF Note"). The
current outstanding balance of the ANF Note is $205,195 with an annual interest
rate of 18%. The Company makes monthly principal and interest payments in the
amount of $10,000 through December 1999 and $15,000 through May 10, 2000. On
June 10, 2000 any outstanding balance will be due in full provided that if the
Company makes a principal payment equal to one half of the outstanding principal
balance, the due date for the remaining one half will be extended 90 days. The
Company is currently negotiating with ANF to reduce the amount of the monthly
payment and extend the date when the balance of the note will due in full. The
Property is also subject to real estate tax liens due to the non-payment of
property taxes arising from a dispute over property tax valuations. The Company
is currently attempting to resolve the dispute.
The total sum due and outstanding on all tax liens as of December 31, 1999
is approximately $340,000. This amount includes principal and interest. The
lien holder cannot proceed with foreclosure for a period of two years after the
purchase of the liens. After the two year period, a foreclosure complaint can
be filed which would afford the Company an approximate three to six month period
to satisfy the liens. As of this date, foreclosure papers have not been filed,
nor has there been a threat of foreclosure.
Since the Company has been operating its high-speed ferry service in the
Highlands from a another site (Aragon) in close proximity to the Property that
offers more parking, it has determined
7
<PAGE>
that it is economically more feasible to buy rather than lease the other site.
Accordingly, the Company plans to sell the Property and has listed it with a
real estate broker at a value of $1.2 million.
The Cigar Box in Ramsey, New Jersey is located in a strip mall complex. The
Cigar Box, Inc. has 1 1/2 years remaining on the lease for approximately 1,500
square feet at $2,000 per month. The Cigar Box, Inc. is actively seeking to
sublet the space for the remaining term of the lease. The Company is not liable
on the lease.
Corporate Offices.
- -----------------
The Company's corporate offices are located at 195 Fairfield Avenue, Suite
3C, West Caldwell, New Jersey 07006, phone number 973-228-2901 at a cost of
$2,750 per month commencing January 31, 2000 under an oral sublease agreement
with Anthony Colasanti, a director of the Company. For the previous six months
the Company leased office space at a cost of $1,700 per month in Summit, New
Jersey.
Item 3. Legal Proceedings
On November 25, 1997 New York Fast Ferry Services, Inc. ("NYFF") filed
suit, in the Supreme Court of the State and County of New York, against the City
of New York (the "City") alleging, among other things, breach of agreement by
the City for a lease of a ferry franchise agreement (the "Agreement").
In September 1993, based on NYFF's response to the City's Request for
Proposal ("RFP"), NYFF was awarded the ferry route contemplated in the RFP. As
part of the RFP process, the City solicited NYFF to spend approximately
$12,000,000 to build two ferries to serve the route. The City provided data to
NYFF related to the economic viability of the service. Continuation of the
fundamental premises in the data was necessary for the service to be economical
for NYFF. The Agreement between NYFF and the City stated that the City intended
to construct landing and terminal facilities at one end of the route, and to
make improvements to the terminals at the other end of the route. The City also
agreed to use its "best efforts" to provide connecting transit links to one of
the terminals on the route.
NYFF claims that the City, for the most part, has not made the improvements
on the terminals. NYFF also claims that the City has breached its duty under
the Agreement to act in good faith, and instead, has acted in a manner to
undermine or destroy NYFF's business. NYFF is seeking $4,000,000 in
compensatory damages or, alternatively, recission of the Agreement. The
proceeds, if any, of the suit are pledged 50% to the original shareholders of
NYFF and 50% to debis Financial Services, Inc. as a pledge of collateral against
amounts owing to them pursuant to a note payable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
8
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Market Information.
- ------------------
The Company's Common Stock has been traded on the NASD Over-the-Counter
Bulletin Board under the symbol LGHT, but it currently trades on the "Pink
Sheets." The Company's stock was de-listed from the Bulletin Board pursuant to
new NASD Rules, permitting only those companies who file periodic reports with
the SEC to be listed. The Company intends to re-apply for listing on the
Bulletin Board as soon as the Company completes the registration process. The
following table sets forth the high and low bid prices of the Company's common
stock during the periods indicated.
OTC Market
<TABLE>
<CAPTION>
Calendar High Bid Price Low Bid Price
-------- -------------- -------------
<S> <C> <C> <C>
1999 4th Quarter $ 3.50 $ 1.50
3rd Quarter 5.3125 1.625
2nd Quarter 4.00 1.50
1st Quarter 4.75 2.00
1998 4th Quarter $ 2.875 $ 1.25
3rd Quarter 4.50 2.00
2nd Quarter 5.375 2.25
1st Quarter 5.25 3.50
1997 4th Quarter $ 6.625 $ 2.75
3rd Quarter 6.50 3.125
2nd Quarter 6.00 2.00
1st Quarter * *
</TABLE>
* Trading did not commence until 2nd Quarter.
The closing bid price of the Common Stock on the OTC Bulletin Board on
April 12, 2000, was $2.00 per share.
Holders.
- -------
As of March 31, 2000, there were approximately 70 holders of the Company's
Common Stock, who collectively held 5,778,295 issued and outstanding shares.
9
<PAGE>
Dividends.
- ---------
The Company did not declare or pay cash or other dividends on its Common
Stock during the last two fiscal years. The Company has no plans to pay any
dividends, although it may do so if its financial position changes.
Recent Sales of Unregistered Securities.
- ---------------------------------------
In September 1997 the Company granted options to acquire 56,250 shares
exercisable at $4.00 per share to a consultant. In October 1997 the consultant
exercised options to acquire 8,750 shares of common stock at $4.00 per share.
Both the grant and the exercise were exempt under Section 4(2) of the Securities
Act of 1933 (the "Act"). The options to purchase the remaining 47,500 shares
expired in 1998. No commissions or finder's fees were paid on the transaction.
In October 1997 the Company issued 2,500 shares of its common stock to a
consultant (at a value of $1.00 per share) in lieu of interest owed to the
consultant. The transaction was exempt under Section 4(2) of the Act. No
commissions or finder's fees were paid on the transaction.
In October 1997 the Company issued 25,000 shares of its common stock to an
accredited investor for $3.75 per share in a transaction exempt under Section
4(2) of the Act. No commissions or finder's fees were paid on the transaction.
In December 1997 the Company issued 75,000 shares of its common stock to
one person in exchange for all of the outstanding shares of the Cigar Box, Inc.
in a transaction exempt under Section 4(2) of the Act. No commissions or
finder's fees were paid on the transaction.
In April 1998 the Company issued 30,000 shares of its common stock to an
investor for $3.25 per share in a transaction exempt under section 4(2) of the
act. No commissions or finder's fees were paid on the transaction.
In October 1998 the Company issued an aggregate of 454,545 shares of its
common stock to the three shareholders of Fast Ferry Holding Corp. in exchange
for 80% of the outstanding shares of Fast Ferry Holding Corp. in a transaction
exempt under Section 4(2) of the Act. No commissions or finder's fees were paid
on the transaction.
In October 1998 the Company granted one of its noteholders, as part of
refinancing negotiations, warrants to purchase 200,000 shares of its common
stock exercisable at $2.60 per share until March 16, 2004. The transaction was
exempt under Section 4(2) of the Act. No commissions or finder's fees were paid
on the transaction.
In October 1998 the Company granted an option to purchase 10,000 shares of
common stock to John Koenig, a shareholder of the Company, as part of his
employment agreement. The option is exercisable at $1.50 per share until
October 6, 2001. The transaction was exempt under Section 4(2) of the Act. No
commissions or finder's fees were paid on the transaction.
10
<PAGE>
In June 1999, the Company entered into a loan agreement with Ashley North,
Inc., and in connection with that loan, issued a promissory note and 25,000
shares of its common stock in June 1999 and an additional 25,000 shares in
December 1999. The transaction was exempt under Section 4(2) of the Act. No
commissions or finder's fees were paid on the transaction.
In June 1999, the Company issued 100,000 shares of its common stock to an
accredited investor for $50,000. The transaction was eempt under Section 4(2) of
the Act.
In July 1999, the Company issued a $200,000 promissory note, and warrants
to purchase 200,000 shares of common stock at $1.00 per share exercisable for
three years, for a $200,000 investment by an accredited investor. The note is
convertible to common stock at the option of the holder. The transaction was
exempt under Section 4(2) of the Act. No commissions or finder's fees were paid
on the transaction.
In September 1999, a consultant purchased 50,000 shares of common stock at
a price of $0.10 per share in a transaction exempt under Section 4(2) of the
Act. No commissions or finder's fees were paid on the transaction.
In October 1999, the Company issued, as a bonus to an employee, warrants
to purchase 5,000 shares of common stock at $1.00 per share, exercisable for one
year.
In October 1999, the Company issued an aggregate of 1,250,000 shares to
three companies controlled by Lancer Offshore, Inc., all accredited investors,
for gross proceeds of $1,250,000 or $1.00 per share. The purchasers also
received warrants to purchase an aggregate of 750,000 shares of common stock
exercisable at $1.25 per share until October 31, 2002. A finder's fee was paid
to a third company on this portion of the offering in the amount of $125,000 and
warrants to acquire 75,000 shares of common stock exercisable at $1.25 per share
for five years.
The Company also issued 150,000 shares of common stock for gross proceeds
of $150,000. The investors, all accredited, also received warrants to purchase
an aggregate of 150,000 shares of common stock, exercisable at $1.25 per share
for one year. Aggregate commissions of $15,000 were paid on this portion of the
offering. The offering was conducted in reliance on Section 4(2) of the Act and
Rule 506 promulgated thereunder. The month of the issuance, the investors'
names, and the shares issued are as follows:
Stock issued in October 1999:
<TABLE>
<CAPTION>
Number of Shares
Name and Warrants
---- ----------------
<S> <C>
Joseph Roselle 50,000
Anthony R. Mautone 15,000
Christopher Colasanti 15,000
Michael Hunt 15,000
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Name and Warrants
---- ----------------
<S> <C>
Vincent Bonomo 7,500
Catherine Bonomo 7,500
</TABLE>
Stock issued in November 1999:
<TABLE>
<CAPTION>
Number of Shares
Name and Warrants
---- ----------------
<S> <C>
Dennis Mautone 15,000
Joseph Capozza 12,500
Daniel Coiro 12,500
</TABLE>
In January 2000, the Company sold 97,500 shares of common stock at $1.00
per share, less a finder's fee of $5,000, and an equal number of warrants good
for purchasing shares of common stock for $1.25 per share, exercisable for one
year, to the following accredited investors:
<TABLE>
<CAPTION>
Number of Shares
Name and Warrants
---- ----------------
<S> <C>
Joseph Pontoriero 25,000
Anthony R. Mautone 15,000
Joseph Capozza 25,000
Daniel Coiro 25,000
Andrew Scott 25,000
</TABLE>
The offering was conducted in reliance on Section 4(2) of the Act. No
commissions or finder's fees were paid on the transactions.
In February 2000, the Company sold 50,000 shares of common stock at $1.00
per share, and an equal number of warrants good for purchasing shares of common
stock at $1.25 per share, exercisable for one year, to the following accredited
investors:
<TABLE>
<CAPTION>
Number of Shares
Name and Warrants
---- ----------------
<S> <C>
Arthur Anastasia and David Del Monaco 10,000
Trebor Trading & Investment Limited 25,000
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Name and Warrants
---- ----------------
<S> <C>
Andrew Scott 5,000
John Gluszak 10,000
</TABLE>
The offering was conducted in reliance on Section 4(2) of the Act.
In March 2000, the Company sold 450,000 shares of common stock at $0.50 per
share, and an equal number of warrants good for purchasing shares of common
stock at $1.00 per share, exercisable for two years, to the following accredited
investors:
<TABLE>
<CAPTION>
Number of Shares
Name and Warrants
---- ----------------
<S> <C>
Joseph Roselle 150,000
Joseph Giamanco 150,000
Gary Herman 150,000
</TABLE>
In March 2000, the Company sold 25,000 shares of common stock at $0.50 per
share, and an equal number of warrants good for purchasing common stock at $1.25
per share, exercisable for one year, to Trebor Trading & Investment Limited, an
accredited investor. The offering was conducted in reliance on Section 4(2) of
the Act.
In March 2000, the Company issued 10,000 shares of its common stock to Fred
Ferguson and 2,000 shares to William Mills, both accredited investors, at $1.00
per share, with an equal number of warrants at $1.00 per share, exercisable for
one year. The offering was conducted in reliance on Section 4(2) of the Act.
In March 2000, the Company issued 125,000 shares of its common stock to The
Orbiter Fund and 125,000 shares to The Viator Fund, both accredited investors,
in consideration of a $1,000,000 bridge loan to the Company. Capital Research,
which acted as the broker in the transaction, received 27,500 shares. The
offering was conducted in reliance on Section 4(2) of the Act.
In all transactions above, the stock was issued for an amount that the
Board of Directors of the Company believed was a fair market value for
restricted securities of the Company.
13
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto, along with the other
information contained elsewhere in this Form 10-KSB.
Comparison of the Year Ended December 31, 1999 vs. December 31, 1998
Consolidated revenues for the twelve month period ended December 31, 1999
totaled $3,285,978 and were comprised of $2,214,884, or 67%, from passenger
tickets from the NY Fast Ferry service operating from Highlands(NJ), $789,859,
or 24%, from the charter of the M/V Finest to the Massachusetts Steamship
Authority, which terminated in October 1999, and about $281,000, or 9%, from
excursion trips and galley sales. During the twelve months ended December 31,
1999, the Company ran a total of 1,198 revenue trips from its Highlands (NJ)
site at a 47% load factor. The ferry service ran over 98% of its scheduled
trips, missing only a single trip due to weather conditions or the condition of
the vessels. As the Company acquired the NY Fast Ferry operation in October
1998, the consolidated revenues generated in the period of the prior year under
review reflect only three months of operations of the ferry service, which
totaled $681,167. Of the revenues, about $438,000, or 64%, was attributable to
passenger tickets sales, $217,500, or 32%, was attributable to the charter of
the M/V Finest, and $25,675, or 4%, was generated from excursion trips and
galley sales.
Consolidated operating costs for the twelve month period under review of
$2,493,582 are directly attributable to the ferry operations as compared to
$509,742 for the twelve months ended December 31, 1998. Of the $2,493,582 about
64%, or $1,597,574, are direct operating costs and $896,008, or 36%, represent
depreciation of the ferry vessels and other boat equipment. By comparison, in
1998 direct operating costs totaled $287,116, or 56%, and depreciation of the
ferry vessels and other boat equipment totaled $222,626, or 44%.
Payroll and related costs for the ferry vessel crew represented 29% of the
total direct operating costs for the period or approximately $461,600 for the
twelve months ended December 31, 1999 as compared to $93,594, or 33%, in the
comparable period in 1998. Fuel and oil costs accounted for 19% of the category
or about $306,700 in 1999 as compared to $68,075, or 24%, of the category, in
for the comparable period in 1998. The decline in fuel as a percentage of the
category was a result of improved buying procedures. Docking fees and fees to
the owner of the parking facility totaled $347,500, or 22%, of the direct
operating costs in 1999 as compared to $65,939, or 23%, of the category in the
prior year. Boat maintenance and supplies, which included a scheduled engine
overhaul, accounted for almost $246,300, or 15%, and insurance costs totaled
$99,659, or 6%, of the total direct operating costs. For the same period in
1998, boat maintenance and supplies accounted for almost $27,000, or 10%, and
insurance totaled $ 22,552, or 8%, of the total direct operating costs.
Direct excursion expenses represented 2%, or about $30,300, of the
operating costs and costs of sales related to galley sales totaled $92,939 or
6%. Other direct operating costs amounted to $35,189, or 2%, of the category.
By comparison, for the prior year ended December 31, 1998, direct
14
<PAGE>
excursion expenses and costs of sales related to galley sales represented less
than 1%, or about $1,390, of the operating costs and other direct operating
costs amounted to $8,570, or 3%, of the category.
Marketing and administrative expenses totaled $1,304,319 and $534,330, for
the years ended December 31, 1999 and 1998, respectively. Of the total
marketing and administrative expenses in 1999, $486,624, or 37%, is attributable
to administration of the ferry service and $710,920, or 55%, is attributable to
corporate administration. For the comparable period in the prior year, 17%, or
$91,120, of the total marketing and administrative expenses was attributable to
the administration of the ferry service and $287,056, or 54%, was attributable
to corporate administration. Salaries and related benefits for ferry
administration totaled $285,150, or 22%, and $64,028, or 12%, of the marketing
and administrative expenses for the years ended December 31, 1999 and 1998,
respectively. The increase was attributable to the addition of headcount as the
operation expanded. Corporate management compensation represented $374,229, or
29%, and $183,334, or 34%, of the total category for the period ended 1999 and
1998, respectively. The Company incurred occupancy expense, including utilities
and maintenance for the 1999 period under review totaling $41,013 as compared to
$8,068 for the prior period in 1998 when it utilized available space in the
offices of certain officers and directors, as well as at the Cigar Box.
Marketing and promotional expenses accounted for 2% of the category, or
$27,337, as compared to $147, less than 1%, in 1998.
Other marketing and administrative expenses amount to approximately
$239,163 and $143,893 for the twelve-month periods ended December 31, 1999 and
1998, respectively, and include legal and auditing services, in part due to the
audit of the Company's financial statements, as well as other professional
services related to the development of business plans, market strategies and
funding of the Company. Of the remaining $195,400, approximately $60,400 is
attributable to travel expenditures and certain other expenses, such as
stationary and supplies, and telephone, related to the increased headcount and
corporate activity, totaled $135,000. By comparison, of the remaining $110,640
approximately $43,500 is attributable to travel expenditures and certain other
expenses, such as stationary and supplies, and telephone, related to the
increased headcount and corporate activity, totaled $67,140.
Depreciation expense, related to office equipment, totaled $9,439 for the
twelve months ended December 31, 1999 as compared to $2,460 in the prior period.
Amortization of goodwill related to the acquisition of New York Fast Ferry
amounted to $70,000 and 16,741, for the years ended December 31, 1999 and 1998
respectively.
Interest expense for the twelve months ended December 31, 1999 totaled
$1,473,735, which was primarily attributable to the current obligations of the
NY Fast Ferry, including the mortgages on the boats, and debt financing of the
Company's current operations and business development. Of the total interest
expense, interest paid in connection with the vessel mortgages and line of
credit totaled $969,982. For the comparable period ended December 31, 1998,
interest expense totaled $348,249, of which about $ 290,000 was primarily
attributable to the current obligations of the NY Fast Ferry and the mortgages
on the boats.
15
<PAGE>
Discontinued operations consist of revenues and costs from the Cigar Box
operation as well as certain costs related to the Property, both of which have
been reclassified as discontinued operations. In accordance with management's
decision to cease operations at the Cigar Box and place the related assets and
the Property for sale, the appropriate impairment of assets has been recorded.
For the twelve month period under review, the discontinued operations resulted
in a loss of $155,347 and an impairment of $391,654 for 1999 and $113,392 and
$331,161, respectively, for 1998.
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 New York Fast Ferry and commenced operating fast ferry service from the
Highlands in Monmouth County (NJ). As part of the transaction, the Company
guaranteed payment and satisfaction of NY Fast Ferry's outstanding liabilities.
The NY Fast Ferry operation generates sufficient cash-flow to cover its direct
operating costs. However, the NY Fast Ferry operation does not yet generate
enough cash to carry its debt service, other than the boat mortgages, 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 December 31, 1999, the Company had outstanding two notes payable and
preferred ship mortgages with a financial institution, one on the ferry vessel
M/V Finest and one on the ferry vessel M/V Bravest, of $5,156,274 and
$5,127,461, respectively, which bear interest at 9.25% per annum. Both ship
mortgages each require monthly payments of principle 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 Company also has a line of credit with an outstanding balance at
December 31, 1999 of $1,254,913 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, requires monthly payments of $15,000 through April 10, 2000,
plus principle payments of $45,000 paid in January 1999 and $343,333 paid on May
1, 1999 and October 1, 1999, and remaining payments of $343,333 on March 1,
2000, and a final payment of $934,319 on December 10, 2000. 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. As of this date the Company
is in final stages of negotiations with respect to the December 2000 payment in
excess of $900,000 and expects to restructure that payment in a more favorable
manner for the Company. All payments are current.
In May 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 located on the Shrewsbury River, Highlands, NJ, subject to a real
estate tax lien, and by a personal guarantee of a major shareholder. The
16
<PAGE>
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 an inducement to enter into the loan, the Company issued the lender
25,000 shares of restricted common stock, and if the loan was not prepaid by
December 11, 1999, the lender was entitled to an additional 25,000 restricted
shares. The loan was not prepaid by December 11, 1999, so the lender received
the additional shares. All payments are current.
In the twelve months ended December 31, 1999, the Company had raised
proceeds of $1,615,000 through the private subscription of the Company's common
stock and the exercise of certain warrants.
The Company, as of December 31, 1999, had a working capital deficiency of
$3,259,245. 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 operations and commences ferry service
at other sites and until each of such 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 operations. Additionally, capital expenditures to
improve and expand its landside ferry facilities and acquire fast ferry vessels
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 principle 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 products or otherwise
respond to unanticipated competitive pressures. Such inability could have a
material adverse effect on the Company's business, and financial condition and
results of operations.
Subsequent Events.
- -----------------
In the first quarter of 2000, the Company successfully raised a net of
approximately $390,000 in equity funding through private placements with
accredited investors of 634,500 shares with warrants for the purchase of an
additional 634,500 shares of common stock at $1.00 to $1.25 per share
exercisable for one year from date of issuance. The Company also issued 250,000
shares of common stock to two investment funds in consideration of a $1,000,000
bridge loan to the Company. The
17
<PAGE>
Company issued 27,500 shares of common stock to a broker on that transaction.
Forward-Looking Statements.
- --------------------------
The following cautionary statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 in order for the Company to avail
itself of the "safe harbor" provisions of that Act. Discussions and information
in this document which are not historical facts should be considered forward-
looking statements. With regard to forward-looking statements, including those
regarding the potential revenues from the additional ferry operations from the
Stamford Property, 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. In addition to the risks cited above specific to the
ferry business, differences may be caused by a variety of factors, including but
not limited to, 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.
Item 7. Financial Statements and Supplementary Data
See Financial Statements and Supplementary Data following the signature
---
page of this Form 10-KSB.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
18
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The names, ages, municipalities of residence, positions with the
Registrant, and principal occupations of the directors and executive officers of
the Registrant as of March 24, 2000 are as follows:
<TABLE>
<CAPTION>
Name, Age and
Municipality Residence Office Other Business Experience
---------------------- ------ -------------------------
<S> <C> <C>
Anthony Cappaze Chairman, Chief Executive Officer of President of Trinity Group since
Short Hills, NJ the Company and Director since its 1998; Regional Manager for Northern
Age: 55 inception. Telecom 1983 - 1998.
Anthony Colasanti Vice President, General Counsel and Partner in the law firm of Colasanti
West Orange, NJ Director of the Company since 1996. and Scott since July 1998; partner in
Age: 57 Secretary of the Company since the law firm Colasanti, Ermel &
January 1999. Cosale 1994 - 1998.
Francis Matusek Director of the Company since its Partner in the accounting and tax
Matawan, NJ inception; Officer of the Company consulting firm of Matusek & Company
Age: 48 from its inception until January 1999. since 1974.
</TABLE>
Anthony Colasanti is currently the only member of the Company's Audit
Committee.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
- --------------------------------------------------------------------
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's directors and certain of its officers to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission and NASDAQ. Executive officers and directors are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that all reports on Forms 3, 4 or 5 required to
be filed were filed on a timely basis for the fiscal year ended December 31,
1999.
19
<PAGE>
Item 10. Executive Compensation
Compensation and other Benefits of Executive Officers.
- -----------------------------------------------------
The following table sets out the compensation received for the fiscal years
ended April 30, 1997 and 1998, and December 31, 1999 in respect to each of the
individuals who were the Company's chief executive officer at any time during
the last fiscal year and the Company's four most highly compensated executive
officers whose total salary and bonus exceeded $100,000 (the "Named Executive
Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
FISCAL YEAR COMPENSATION LONG TERM COMPENSATION
Awards Payouts
------ -------
Restricted
Shares
or
Name and Securities under Restricted LTIP All other
Salary(1) Bonus Other Annual Option/SARs Share Payouts Compensation
Principal Position Year (S) ($) Compensation Granted Units ($) ($)
- ------------------ ---- --------- ----- ------------ ---------------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anthony Cappaze/ 1999 100,000 0 0 0 0 0 5,700
Chairman 1998 75,000 0 0 0 0 0 0
and CEO 1997 75,000 0 0 0 0 0 0
</TABLE>
- ----------------
(1) The base compensation is recorded and accrued, but payment is deferred in
the interest of optimizing the Company's cash flow.
Agreements with Management.
- --------------------------
The Company had employment agreements with Messrs. Cappaze and Matusek that
provide for annual salaries of $75,000 each through April 30, 1998 and $100,000
each, thereafter. Mr. Cappaze and Mr. Colasanti signed new employment
agreements in January 2000, and Mr. Matusek's agreement ended March 31, 1999.
Mr. Colasanti and Mr. Cappaze have deferred a significant portion of their
compensation under these agreements. This deferred compensation carries an
interest rate of 4% per annum. As of December 31, 1999, the total deferred
compensation, including interest due, was $449,541.
20
<PAGE>
Option/Stock Appreciation Rights ("SAR") Grants during the most recently
- ------------------------------------------------------------------------
completed Fiscal Year.
- ---------------------
The following table sets out the stock options granted by the Company
during the previous fiscal year to the Named Executive Officers of the Company.
The following amounts include options that were granted prior to the previous
fiscal year but were repriced during that year.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN PREVIOUS YEAR
INDIVIDUAL GAINS
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Market Price on
Name Granted (#) Fiscal Year Price ($/Sh) Date of Grant Expiration Date
- ---- -------------- ------------ ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Anthony Cappaze 200,000 3.3% $0.50 $1.75 06/11/02
Anthony Cappaze 100,000 16.5% $1.00 $1.00 10/30/01
</TABLE>
Aggregated Option/SAR Exercised in Last Financial Year and Fiscal Year-End
- --------------------------------------------------------------------------
Option/SAR Values
- -----------------
None.
Compensation of Directors.
- -------------------------
Directors of the Company are paid $500 per meeting for their services as
such. Furthermore, the directors are reimbursed for all expenses incurred by
them in attending board meetings.
21
<PAGE>
Benefit Plans.
- -------------
The Company currently has no retirement, pension, profit-sharing or
insurance or medical reimbursement plans covering its officers and directors,
but does contemplate implementing group health, term life insurance and 401(k)
plans once additional full-time management employees are hired. The NY Fast
Ferry group has a group medical health plan and a 401(k) plan for its employees.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of March 31, 2000, the number of shares
of the Company's outstanding $0.01 par value common stock beneficially owned by
each of the Company's current directors and the Company's executive officers,
the number of shares beneficially owned by all of the Company's current
directors and named executive officers as a group, and the number of shares
owned by each person who owned of record, or was known to own beneficially, more
than 5% of the Company's outstanding shares of common stock:
<TABLE>
<CAPTION>
Amount and Percent of
Name and Address Nature of Beneficial Common
Of Beneficial Owner Ownership Stock
------------------- -------------------- -----------
<S> <C> <C>
Anthony Cappaze 1,509,850(1) 24.4%
195 Fairfield Avenue, Suite 3C
West Caldwell, NJ 07006
Anthony Colasanti 290,000(2) 4.8%
195 Fairfield Avenue, Suite 3C
West Caldwell, NJ 07006
Francis P. Matusek 1,050,400(3) 18.2%
186 Highway 34
Matawan, New Jersey 07747
All directors and executive 2,850,250(4) 44.3%
Officers as a group
(four persons)
</TABLE>
- -------------------------
*Less than one percent.
(1) Includes 718,700 shares owned by Cappaze Associates, L.P., of which Mr.
Cappaze is the General Partner; 78,000 shares owned by Elchanan Dulitz FBO
Ashley North Ave. Inc., to which Mr. Cappaze pledged stock to secure a loan to
the Company; 15,000 shares owned by Mr. Cappaze's spouse; options to acquire
200,000 shares at $1.75 per share until 6/11/2002; warrants to purchase 100,000
shares at $1.00 per share until 10/27/2001; and warrants to purchase 100,000
shares at $1.00 per share until January 2003.
(2) Includes options to acquire 100,000 shares at $1.00 per share until
10/01/2001; warrants to purchase 100,000 shares at $1.00 per share until
10/27/2001; and warrants to purchase 50,000 shares at $1.00 per share until
January 2003.
(3) Includes 710,000 shares owned by Sun-Rize Ferry Service, L.P., of which Mr.
Matusek is the General Partner; and 2,250 shares owned by Mr. Matusek's spouse.
22
<PAGE>
(4) Includes footnotes 1 through 3.
Other Owners.
- ------------
To the knowledge of the Directors and Senior Officers of the Company, as of
March 24, 2000, there are no persons and/or companies who or which beneficially
own, directly or indirectly, shares carrying more than 5% of the voting rights
attached to all outstanding shares of the Company, other than the following:
<TABLE>
<CAPTION>
Amount and Percent of
Name and Address Nature of Beneficial Common
of Beneficial Owner Ownership Stock
------------------- -------------------- ----------
<S> <C> <C>
Lancer Offshore, Inc. 1,250,000(1) 19.1%
c/o Kaya Flamboyan 9
Curacao Netherlands Antilles
The Viator Fund Ltd. 625,000 10.8%
c/o Kaya Flamboyan 9
Curacao Netherlands Antilles
</TABLE>
(1) Includes warrants to purchase 750,000 shares at $1.25 per share until
12/31/2002.
There are no current arrangements or agreements pledging securities which
could in the future result in a change of control of the Company.
Item 12. Certain Relationships and Related Transactions
In June 1999 Anthony Cappaze, an officer and director of the Company, was
granted options to purchase 300,000 shares of common stock exercisable at $1.75
per share for three years. On September 9, 1999 he exercised options to acquire
100,000 shares. In October 1999, Mr. Cappaze was granted warrants to purchase
common stock at $1.00 per share for two years. Mr. Cappaze signed a new
Employment Agreement as of January 2000, which provides that he receives
warrants for the purchase of 100,000 shares of common stock at $1.00 per share
for three years. In January 2000, the Board of Directors voted to issue 120,000
shares to Mr. Cappaze in lieu of outstanding salary for 1996 and 1997. On March
9, 2000, Mr. Cappaze tendered 300,000 shares of common stock to the Company as
part of the Company's rescission of options exercised using accrued salary as
payment.
On March 9, 2000, Mr. Colasanti and Mr. Matusek each tendered 300,000
shares of common stock to the Company as part of the Company's rescission of
options exercised, using salary as payment.
23
<PAGE>
Anthony Colasanti, an officer and director of the Company, also serves as
general legal counsel for the Company. Mr. Colasanti's law firm, Colasanti &
Scott, LLP, was paid approximately $5,000 in 1997, approximately $10,000 in 1998
and approximately $30,000 in 1999 by the Company for legal services rendered by
his firm to the Company.
Mr. Colasanti also received as an annual retainer for consulting services,
10,000 shares of common stock in May 1997 and 10,000 shares in May 1998. He
received 25,000 shares in May 1999 for legal services in negotiating and closing
a loan for the Company. In September 1999, Mr. Colasanti was granted 100,000
options to purchase common stock at $1.00 per share for two years in lieu of
compensation. In October 1999, Mr. Colasanti was granted 100,000 warrants to
purchase common stock at $1.00 per share for two years for services rendered in
raising capital for the Company. Mr. Colasanti signed a new employment
agreement as of January 2000, which provides that he receives warrants for the
purchase of 50,000 shares of common stock at $1.00 for three years.
In January 2000, the Board of Directors voted to issue 12,500 shares to Mr.
Colasanti in lieu of outstanding salary. Mr. Colasanti directed the Company to
issue the 12,500 shares to several individuals as gifts from Mr. Colasanti. As
none of these individuals are related to Mr. Colasanti or live in his household,
Mr. Colasanti does not beneficially own the 12,500 shares.
On March 12, 2000, Mr. Colasanti transferred 12,500 shares to his adult
sons.
In January 2000, the Board of Directors voted to issue 120,000 shares to
Francis Matusek, a director and officer of the Company, in lieu of outstanding
compensation.
In October 1999, the Company issued an aggregate of 1,250,000 shares to
three companies controlled by Lancer Offshore, Inc., all accredited investors,
for gross proceeds of $1,250,000 or $1.00 per share. Lancer Offshore, Inc. also
received warrants to purchase an aggregate of 750,000 shares of common stock
exercisable at $1.25 per share until December 31, 2002. A finder's fee was paid
to a third company on this portion of the offering in the amount of $125,000 and
warrants to acquire 75,000 shares of common stock exercisable at $1.25 per share
for five years.
In March 2000, the Company issued 125,000 shares to the Viator Fund and
125,000 shares to another entity in consideration of a $100,000 bridge loan to
the Company.
Other than the transactions stated herein, none of the directors or
executive officers of the Company, nor any 5% owner of the Company, has been
involved in any transaction with the Company exceeding $60,000 that has occurred
in the last two years.
24
<PAGE>
PART IV
-------
Item 13. Financial Statements, Schedules and Exhibits and Reports on Form 8-K
(a) Financial Statements, Schedules and Exhibits:
---------------------------------------------
(1) Financial Statements - Fiscal years ended December 31, 1999 and 1998
--------------------------------------------------------------------
(2) Schedules
---------
(3) Exhibits
--------
(b) Reports on Form 8-K No reports on Form 8-K were filed during the last
-------------------
quarter of the fiscal year covered by this report.
(c) Exhibits
--------
3.1 Certificate of Incorporation, as amended.*
3.2 Bylaws.*
10.1 Stock Purchase Agreement dated 9/9/98 for acquisition of Fast Ferry
Holding Corp.*
10.2 Lease Agreement dated 3/30/98 for Aragon Marina.*
10.3 Lease Agreement dated October 1999 for Stamford Property Marina.*
10.4 Letter of Intent for vessel construction. Filed herewith.
21.1 Subsidiaries of the Registrant.*
27.1 Financial Data Schedule. Filed herewith.
__________
* Incorporated by reference from the Company's Registration Statement on Form
10-SB, File No. 0-29205.
(d) Schedules. Schedules are omitted as the information is not required or not
applicable, or the required information is shown in the financial statements or
notes thereto.
-25-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-KSB/A No. 1 to
be signed on its behalf by the undersigned, thereunto duly authorized.
LIGHTHOUSE LANDINGS, INC.
Date: April 17, 1999 By: /s/ Anthony Cappaze
------------------------------------------
Anthony Cappaze, President, Chief
Executive Officer and Director
Date: April 17, 1999 By: /s/ Anthony Colasanti
-----------------------------------------
Anthony Colasanti, Secretary and Director
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
LIGHTHOUSING LANDINGS, INC. AND SUBSIDIARIES
DECEMBER 31, 1999
I N D E X
---------
Page No.
--------
FINANCIAL STATEMENTS:
Independent Accountants' Report............................. F-1
Consolidated Balance Sheets
As at December 31, 1999 and 1998.......................... F-2
Consolidated Statements of Operations
For the Years Ended December 31, 1999 and 1998............ F-3
Consolidated Statements of Changes in
Redeemable Common Stock and Stockholders' Equity
For the Years Ended December 31, 1999 and 1998............ F-4
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998............ F-5 - F-6
Notes to Consolidated Financial Statements.................. F-7 - F 21
<PAGE>
[LETTERHEAD OF WEINICK SANDERS LEVENTHAL & CO., LLP]
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
To the Board of Directors and Stockholders
Lighthouse Landings, Inc.
We have audited the accompanying consolidated balance sheets of Lighthouse
Landings, Inc. and Subsidiaries as at December 31, 1999 and 1998, and the
related consolidated statements of operations, cash flows and changes in
redeemable common stock and stockholder's equity for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lighthouse Landings,
Inc. and Subsidiaries as at December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has sustained substantial losses
for the years ended December 31, 1999 and 1998. In addition at December 31, 1999
the Company has negative working capital of $3,259,245. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
WEINICK SANDERS LEVENTHAL & CO., LLP
New York, N. Y.
February 23, 2000
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
A S S E T S
December 31,
-------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 97,957 $ 62,606
Inventories 6,715 1,057
Net assets held for resale 32,582 -
Prepaid expenses and other current assets 165,214 68,757
----------- -----------
Total current assets 302,468 132,420
Net assets of discontinued operations - 723,765
Property and equipment - at cost,
less accumulated depreciation 12,288,880 13,103,525
Goodwill net of accumulated amortization 1,127,433 1,201,174
Other assets 34,279 19,091
----------- -----------
$13,753,060 $15,179,975
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,981,100 $ 1,282,822
Notes payable - 49,779
Notes payable - stockholders 125,000 -
Accounts payable and accrued expenses 1,006,273 730,520
Due to officers/stockholders 449,540 484,142
----------- -----------
Total current liabilities 3,561,913 2,547,263
Long-term debt - net of current maturities 9,973,872 11,301,455
----------- -----------
Total liabilities 13,535,785 13,848,718
Minority interest - 11,071
----------- -----------
Redeemable common stock - 350,000
----------- -----------
Stockholders' equity:
Common stock - $.01 par value
Authorized - 10,000,000 shares
Issued and outstanding - 4,905,795 shares
in 1999 and 3,250,795 in 1998 49,058 32,508
Additional paid-in capital 5,312,588 3,809,138
Accumulated deficit (5,144,371) (2,621,460)
----------- -----------
217,275 1,220,186
Less: Stock subscription receivable - (250,000)
----------- -----------
Total stockholders' equity 217,275 970,186
----------- -----------
$13,753,060 $15,179,975
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues $3,285,978 $ 681,167
---------- ----------
Operating costs:
Ferry operations 1,597,574 287,116
Depreciation 896,008 222,626
---------- ----------
Total operating costs 2,493,582 509,742
---------- ----------
792,396 171,425
---------- ----------
Marketing and administrative expenses 1,234,319 517,589
Amortization of goodwill 70,000 16,741
---------- ----------
1,304,319 534,330
---------- ----------
Net loss from operations (511,923) (362,905)
---------- ----------
Other expenses:
Interest (net) 1,473,735 348,249
Provision for state income taxes 1,323 1,014
Total other expenses 1,475,058 349,263
---------- ----------
Loss from continuing operations before
minority share in loss of subsidiary (1,986,981) (712,168)
Minority share in loss of subsidiary 11,071 42,534
---------- ----------
Loss from continuing operations (1,975,910) (669,634)
---------- ----------
Discontinued operations:
Loss from discontinued operations (155,347) (113,392)
Estimated loss on disposal (391,654) -
Impairment loss - (331,161)
---------- ----------
Loss from discontinued operations (547,001) (444,553)
---------- ----------
Net loss ($2,522,911) ($1,114,187)
========== ==========
Per share data:
Basic and diluted:
Loss from continuing operations ($0.55) ($0.23)
Loss from discontinued operations (0.15) (0.16)
---------- ----------
Net loss ($0.70) ($0.39)
========== ==========
Weighted average number of shares outstanding:
Basic and diluted 3,591,138 2,850,100
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE COMMON STOCK
AND STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Redeemable Common Stock Common Stock Additional
----------------------- -------------------- Paid-In
Number Amount Number Amount Capital
-------- -------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 - $ - 2,567,500 $25,675 $1,814,021
Issuance of shares in lieu of services - - 60,000 600 232,200
Issuance of shares upon the exercise of
8,750 stock options of $4.00 pre share - - 8,750 88 34,912
Issuance of shares upon the acquisition of
The Cigar Box, Inc. - - 75,000 750 299,250
Sale of shares for cash - - 25,000 250 93,500
Net loss for 1997 - - - - -
------ -------- --------- ------- ----------
Balance at December 31, 1997 - - 2,736,250 27,363 2,473,883
Issuance of shares upon the acquisition of
Fast Ferries Holding Co. 70,000 350,000 384,545 3,845 969,055
Sales of shares for cash - - 30,000 300 97,200
Stock subscription - - 100,000 1,000 249,000
Value of 200,000 warrants issued pursuant to the
acquisition of Fast Ferries Holding Co. - - - - 20,000
Net loss for 1998 - - - - -
------ -------- --------- ------- ----------
Balance at December 31, 1998 70,000 350,000 3,250,795 32,508 3,809,138
Exercise of put option (70,000) (350,000) - - -
Payments for shares subscribed for - - - - (700)
Sale of shares for cash - - 1,550,000 15,500 1,350,200
Shares issued to noteholder in lieu of interest - - 50,000 500 99,500
Shares issued to Director for services rendered - - 55,000 550 54,450
Net loss for 1999 - - - - -
------ -------- --------- ------- ----------
Balance at December 31, 1999 - $ - 4,905,795 $49,058 $5,312,588
====== ======== ========= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Retained
Earnings Stock
(Accumulated Subscriptions
Deficit) Receivable Total
------------ ------------- ----------
<S> <C> <C> <C>
Balance at December 31, 1996 ($ 914,525) $ - $ 925,171
Issuance of shares in lieu of services - - 232,800
Issuance of shares upon the exercise of
8,750 stock options of $4.00 pre share - - 35,000
Issuance of shares upon the acquisition of
The Cigar Box, Inc. - - 300,000
Sale of shares for cash - - 93,750
Net loss for 1997 (592,748) - (592,748)
----------- ----------- ----------
Balance at December 31, 1997 (1,507,273) - 993,973
Issuance of shares upon the acquisition of
Fast Ferries Holding Co. - - 972,900
Sales of shares for cash - - 97,500
Stock subscription - (250,000) -
Value of 200,000 warrants issued pursuant to the
acquisition of Fast Ferries Holding Co. - - 20,000
Net loss for 1998 (1,114,187) - (1,114,187)
----------- ----------- ----------
Balance at December 31, 1998 (2,621,460) (250,000) 970,186
Exercise of put option - - -
Payments for shares subscribed for - 250,000 250,000
Sale of shares for cash - - 1,365,000
Shares issued to noteholder in lieu of interest - - 100,000
Shares issued to Director for services rendered - - 55,000
Net loss for 1999 (2,522,911) - (2,522,911)
----------- ----------- ----------
Balance at December 31, 1999 ($5,144,371) $ - $ 217,275
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss continuing operations ($1,975,910) ($ 669,634)
----------- -----------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Minority interests ( 11,071) -
Depreciation 905,447 222,626
Amortization of goodwill 70,000 16,741
Deferred compensation ( 34,601) 909
Amortization of imputed interest 160,909 42,440
Stock issued for service rendered 200,000 288,721
Deferred compensation - 137,236
Increase (decrease) in cash flows as a result of
changes in assets and liabilities acquired
in a combination:
Accounts receivable ( 19,299) 9,826
Inventories ( 9,915) (1,057)
Prepaid expenses and other current assets ( 71,649) (68,657)
Accounts payable 293,430 369,469
----------- -----------
Total adjustments 1,483,251 1,018,254
----------- -----------
Net cash provide by (used in) operating activities
of continuing operations (492,659) 348,620
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (116,359) -
Cash paid for acquisition - (6,288)
----------- -----------
Net cash used in investing activities (116,359) (6,288)
----------- -----------
Cash flows from financing activities:
Payments on mortgages (293,200) -
Proceeds from notes 615,000 -
Payments on puts (225,000) -
Proceeds from stock subscription 250,000 -
Repayments of long-term debt (896,666) (197,448)
Proceeds from issuance of common stock 1,320,000 97,500
----------- -----------
Net cash provided by financing activities
of continuing operations 770,134 (99,948)
----------- -----------
Net cash used in discontinued operations (125,764) 317,523
----------- -----------
Net increase (decrease) in cash 35,352 559,907
Cash at beginning of year 62,605 479
Cash acquired from acquisition - 137,266
----------- -----------
Cash at end of year $ 97,957 $ 697,652
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year:
Interest $1,072,251 $ 166,591
========== ==========
Income taxes $ 1,323 $ 1,014
========== ==========
Supplemental Schedules of Noncash Activities:
Stock issued for business acquisition:
Common stock $ - $ 972,900
========== ==========
Redeemable common stock $ - $ 300,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
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 1998. In addition,
the accompanying consolidated balance sheet as at December 31, 1999
reflects negative working capital of $3,306,983 and tangible net
capital deficiency of $761,122.
Future viability of the Company is dependent upon the Company's
obtaining additional Capital Funding. During 1999, the Company
arranged private placements of 1,550,000 shares for net proceeds
$1,530,000 and short term loans in the amount of $700,000 to provide
funds for certain obligations and ongoing operations. The Company is
in negotiations for further equity and debt funding.
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 will be provided by a vessel on a short-term charter; the
Company is proceeding with plans for construction and financing of two
vessels specifically to meet the needs of the Stamford service.
During the latter half of 1998 and during 1999, the Company
assessed its strategic direction and concluded that focusing on the
commuter ferry business would provide the greatest return on assets.
Accordingly, the Company is pursuing the divestiture of non-core
assets- i.e. the marina/restaurant property and the retail cigar
business. The carrying value of the related net assets have therefore
been reclassified as "Assets held for sale" on the consolidated
balance sheet.
It is management's opinion that the funds to be raised by the
stock sales and borrowings plus the funds anticipated to be raised
through the sale of the real estate 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.
F-7
<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) Principles of Consolidation:
The consolidated 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 Cigar Box, Inc. subsidiary is presented as a
discontinued operation.
(c) 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 December 31, 1999 and 1998 and the
results of operations cash flows and stockholders equity for the years
then ended.
(d) Inventories:
Inventories which consist entirely of finished goods, are stated
at the lower of cost or market on the first-in, first-out method.
(e) Property and Equipment:
Property and equipment is recorded at cost. The cost of the
ferries obtained through the Fast Ferries 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 fifteen years.
Expenditures which 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 the operations statement.
F-8
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(f) 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 Fast Ferry Holding Corp. and its wholly owned
subsidiaries aggregating $1,344,415 is being amortized over 15 years.
Amortization of goodwill charged to operations was $70,000 in 1999 and
$16,741 in 1998.
(g) 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 $68,765 and
$46,566 at December 31, 1999 and 1998, respectively.
(h) Income Taxes:
The Company has incurred losses for income taxes purposes
aggregating approximately $9,600,000 through December 31, 1999 and,
accordingly, has not recorded any income tax expense. As there is not
sufficient certainty of future taxable income, the deferred tax asset
arising from the potential carry forward of tax losses has been offset
by a reserve in a like amount and consequently no deferred tax asset
is reflected in the accompanying financial statements.
The net operating loss carryforwards at December 31, 1999 expire
as follows:
2009 $ 62,000
2010 107,000
2011 93,000
2012 3,650,000
2013 2,448,000
2018 786,000
2019 2,454,000
----------
$9,600,000
==========
F-9
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(h) Income Taxes: (Continued)
The Tax Reform Act of 1986 enacted a complex set of rules
limiting the utilization of net operating loss carryforwards to offset
future taxable income following a corporate ownership change. The NY
Fast Ferry Group's ability to utilize its operating loss carryforwards
is limited following a change in ownership in excess of fifty
percentage points in any three year period. The effects, if any, of
the change in ownership are not reflected in the foregoing table.
A reconciliation of the statutory income tax effect rate is as
follows:
<TABLE>
<CAPTION>
For the Years Ended December
-----------------------------------------------------
1999 1998
--------------------- ---------------------
<S> <C> <C> <C> <C>
Federal statutory rate ($ 857,000) (34.0%) ($369,000) (34.0%)
Non-deductible portion of:
Goodwill ( 200,000) ( 8.0 ) 92,000 8.4
Minority share in loss
of subsidiary 11,000 - 42,000 ( 3.8 )
Reserve for net operating loss
carryforward tax asset 1,046,000 42.0 235,000 29.4
----------- ----- --------- -----
$ - - $ - -
=========== ===== ========= =====
</TABLE>
(i) 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" which was issued in March 1995.
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
which as at December 31, 1999 were comprised of two (2) ferries with a
book value of 12,288,880 and goodwill on the acquisition of the Fast
Ferry Holding Corp. with a book value of $1,127,433. 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.
(j) 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.
F-10
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(k) 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.
(l) Per Share Data:
Net loss per common share for 1999 and 1988 has been computed
based upon the weighted average number of common shares outstanding.
The assumed exercise of options and warrants were not considered in
the computation in either year due to their anti-dilutive effect.
Fully dilutive per share data is not included because the assumed
exercise of the common stock equivalents in both years is anti-
dilutive.
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 for both 1999 and 1998. The net
assets to be disposed of as of December 31, 1999 aggregating $32,582
consists principally of real estate and are recorded as current assets
in the accompanying consolidated balance sheet under the caption
"Assets held for resale". Management expects the real estate to be
sold in late 2000.
The estimated loss on disposal of the discontinued operations in
1999 of $593,815 represents: a write-off of the goodwill on The Cigar
Box, Inc. of $198,654; and a provision of $193,000 for expected losses
during the phase out period. Net sales of the retail segment for 1999
and 1998 were $75,994 and $184,840, respectively. There were no
revenues from the real estate segment during 1999 and 1998.
F-11
<PAGE>
NOTE 3 - DISCONTINUED OPERATIONS. (Continued)
The net assets of discontinued operations, which have been
segregated in the accompanying balance sheets are summarized as
follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Assets:
Cash $ 3,129 $ 1,189
Inventory 27,401 42,187
Prepaid expenses 100 100
Property and equipment, net of
accumulated depreciation 974,359 968,108
Goodwill - 194,913
---------- ----------
1,004,989 1,206,497
---------- ----------
Liabilities:
Accounts payable 179,108 52,684
Secured mortgage payable 450,711 157,288
Accrued real estate taxes 342,588 272,760
---------- ----------
972,407 482,732
---------- ----------
Net assets of discontinued operations $ 32,582 $ 723,765
========== ==========
NOTE 4 - PROPERTY AND EQUIPMENT.
Property and equipment is summarized as follows:
December 31,
---------------------------
1999 1998
----------- -----------
Continuing:
Ferries $13,300,000 $13,300,000
Computers and office equipment 38,887 29,502
Furniture and fixtures 106,244 25,437
----------- -----------
13,445,131 13,354,939
Less: Accumulated depreciation 1,156,251 251,414
=========== ===========
$12,288,880 $13,103,525
=========== ===========
Discontinued operations:
Land and buildings $ 931,181 $ 918,680
Furniture and fixtures 62,260 62,260
----------- -----------
993,441 980,940
Less: Accumulated depreciation 19,082 12,832
----------- -----------
$ 974,359 $ 968,108
=========== ===========
</TABLE>
F-12
<PAGE>
NOTE 5 - ACQUISITIONS.
(a) The Cigar Box, Inc.:
On December 2, 1997, the Company acquired all of the outstanding
stock of The Cigar Box, Inc., a cigar and accessories store. The
Company purchased The Cigar Box, Inc. by the issuance of 75,000 shares
of Company stock at a value of $4.00 per share. Upon acquisition, the
Company commenced a plan to curtail its wholesale activity and
concentrate on retail activities. As the segment incurred significant
losses, management discontinued the segment.
Reference is made to Note 3 regarding discontinuance of this
subsidiary.
(b) Fast Ferry Holdings Corp.:
On October 6, 1998, the Company acquired 80% of the outstanding
stock of Fast Ferry Holding Corp. and its wholly owned subsidiaries,
New York Fast Ferry Services, Inc. Fast Ferry I, Inc. and Fast Ferry
II, Inc. (the NYFF Group). The NYFF Group owns two vessels the M/V
"Finest", and the M/V "Bravest" and is in the business of operating
high speed commuter ferry services in the greater New York City harbor
area. The NYFF Group was acquired by the issuance of 454,545 shares of
the Company's stock at a value of $3.00 per share. Of the 454,545
shares issued, 70,000 shares were subject to a put option. Such
agreement allowed 2 of the 3 selling shareholders to sell back to the
Company an aggregate of 70,000 shares at a price of $5.00 per share.
As at December 31, 1999, the 70,000 shares subject to the put
option were not treated as equity, but rather as a liability under the
caption "Redeemable Common Stock" in the amount of $350,000 (70,000 @
$5.00). During March 1999 the puts were exercised and the Company
redeemed and retired the 70,000 shares. At December 31, 1999, the
Company is still indebted to the selling stockholders in the amount of
$125,000. Such amount is due in 2000 and bears interest at 12% per
annum. The selling shareholders are holding the remaining 25,000
unpaid shares as security for the obligation.
The acquisition has been accounted for as a purchase.
F-13
<PAGE>
NOTE 5 - ACQUISITIONS. (Continued)
(b) Fast Ferry Holdings Corp.:
The assets acquired and the liabilities assumed in connection
with the aforementioned acquisition of the NY Fast Ferry group is as
follows:
<TABLE>
<S> <C> <C>
Fair value of identifiable assets acquired $13,475,700
Fair value of liabilities assumed 13,261,280
-----------
Net fair value of net assets acquired 214,420
Purchase cost:
454,545 shares issued at $2.53 $1,150,000
Legal and accounting fees 105,696
Excess of exercise price over market
value of puts at time of issuance
(70,000 @ $2.47) 172,900
----------
Total purchase cost 1,428,596
-----------
Excess over net identifiable assets (goodwill) $ 1,214,176
===========
</TABLE>
The unaudited consolidated results of operations for 1998, on a
pro forma basis, as if the NY Fast Ferry Group had been acquired on
January 1, 1998 are as follows:
<TABLE>
<S> <C>
Net sales $1,488,750
Costs and expenses - net 3,143,385
----------
Loss from continuing operations ( 1,654,635)
Loss from discontinued operations ( 416,553)
----------
Net loss ($2,071,188)
==========
</TABLE>
NOTE 6 - REAL ESTATE TAXES PAYABLE.
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. Such real estate tax liability is
presented as reduction of the related real estate and aggregated
$342,588 and $272,760 at December 31, 1999 and 1998, respectively. In
addition $50,000 has been accrued through the estimated disposal date.
F-14
<PAGE>
NOTE 7 - MORTGAGE NOTES PAYABLE.
At December 31, 1999, the following mortgage notes payable is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Mortgage on property, secured by a first mortgage
subject to the tax lien referred to in Note 7,
payable on demand, including interest at 20%. $ 58,267 $157,288
Mortgage on property, secured by a second
mortgage (subject to the tax lien referred to
in Note 7 and the first mortgage referred to
in Note 8(a)), and a personal guarantee of
the Company's President; 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%; as added inducement to enter into the
loan, the lender received 50,000 shares of
common stock. 180,023 -
Mortgage on property, secured by a second
mortgage (subject to the tax lien referred to
in Note 7(d) and the first mortgage referred to
in Note 8(c). The loan carries interest at 6%. 205,195 -
Insurance finance agreement due in monthly
installments of $8,274 including interest. - 49,779
-------- --------
443,485 207,067
Less: Amount applied as reduction of the real
estate held for resale (see Note 3) 443,485 157,288
-------- --------
$ - $ 49,779
======== ========
</TABLE>
F-15
<PAGE>
NOTE 8 - LONG-TERM DEBT.
Long-term debt is as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
(a) Secured obligations:
Preferred ship 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 $ 5,156,274 $ 5,308,158
Preferred ship mortgage note payable, secured
by the vessel "Bravest" due in monthly install-
ments 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. 5,127,461 5,276,094
Note payable, secured by the vessel "Finest"
and "Bravest", payable in fifteen monthly
installments of $15,000 commencing in
February 1999, plus a $45,000 payment in
January, 1999, payments of $343,333 on each
of May 1, 1999, October 1, 1999 and March 1,
2000 and a final payment of $934,319 on
December 10, 2000. The note carries no
interest. The payments have been discounted
to net present value at December 31, 1999
using a discount rate of 9.25%. 1,254,913 1,994,670
Other - 5,355
----------- -----------
11,538,648 12,584,277
(b) Unsecured obligation:
Note payable in the amount of $400,000 including
accrued interest of $16,324. The note is due in
two installments of $100,000 each on March 15,
2000 and July 15, 2000. The final payment of
$200,000 is due on January 15, 2001. The notes
bear interest at 10% per annum. 416,324 -
----------- -----------
11,954,972 12,584,277
Portion due within one year 1,981,100 1,282,822
----------- -----------
Long-term debt - less current maturities $ 9,973,872 $11,301,455
=========== ===========
</TABLE>
F-16
<PAGE>
NOTE 8 - LONG-TERM DEBT. (Continued)
(c) 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) a Company guarantee.
Reference is made to Note 9(c)(ii) regarding warrants issued to
the noteholder.
The secured debt obligations mature as follows:
<TABLE>
<S> <C>
2000 $ 1,981,100
2001 668,352
2002 513,559
2003 563,130
2004 617,485
Thereafter 7,624,019
-----------
$11,967,645
===========
</TABLE>
NOTE 9 - CAPITAL STOCK.
(a) Stock Issued for Consideration Other Than Cash:
On October 5, 1998, the Company issued 454,545 common shares
valued at $2.53 per share (the market value at time of sale) for 80%
of the outstanding stock of Fast Ferry Holding Corp (see Note 5 ii).
Pursuant to the provisions of a note payable obligation entered
into in June 1999, the Company issued 50,000 shares of its common
stock in lieu of interest (see Note 7).
During 1999, the Company issued 55,000 shares to a Director for
legal services valued at $55,000.
(b) Stock Issued for Cash:
During 1998, the Company sold 30,000 shares of its common stock
for $97,500. During 1999, the Company sold 1,480,000 shares of its
common stock for $1,365,000.
F-17
<PAGE>
NOTE 9 - CAPITAL STOCK. (Continued)
(c) Stock Subscriptions Receivable:
During 1998, 100,000 common shares were subscribed for at a
price of $2.50 per share. The aggregate amount of the subscription of
$250,000 is treated as a reduction of stockholders' equity in the
accompanying 1998 consolidated balance sheet. The subscription was
paid in full in October 1999.
NOTE 10 - STOCK OPTIONS AND WARRANTS.
A Summary of activity related to non-qualifying stock options
and warrants granted by the Company is as follows:
<TABLE>
<CAPTION>
Exercise Price
Options Warrants Per Share
-------- --------- --------------
<S> <C> <C> <C>
Outstanding at December 31, 1997 47,500 - $4.00
Granted during 1998 10,000 200,000 $1.88 to $2.60
Expired in 1997 ( 47,500) - $4.00
-------- ---------
Outstanding at December 31, 1998 10,000 200,000 $1.88 to $2.60
Granted during 1999 410,000 1,380,000 $1.00 to $1.50
-------- ---------
Outstanding at December 31, 1999 420,000 1,580,000 $1.88 to $2.60
======== =========
</TABLE>
(a) Stock Options Granted in 1998:
Pursuant to a consulting agreement entered into on September 1,
1997, the Company agreed to issue options to purchase up to an
aggregate of 56,250 shares of its common stock at $4.00 per share. In
1997, 8,750 options were exercised at $4.00 and the remaining 47,500
expired in 1998 (see Note 9(a)).
The Company granted an option to a employee/stockholder to
purchase 10,000 shares at a price of $1.88 per share. Such option is
exercisable through October 6, 2000.
(b) Stock Options Granted in 1999:
The Company granted an option to an employee/stockholder to
purchase 10,000 shares at a price of $1.50 per share. Such option is
exercisable through October 6, 2001.
In June 1999, the Company's President was granted options to
purchase $200,000 shares exercisable at $1.00 per share through
October 6, 2001. Such options were granted for his guaranteeing and
securitising an obligation of the Company.
F-18
<PAGE>
NOTE 10 - STOCK OPTIONS AND WARRANTS. (Continued)
(b) Stock Options Granted in 1999: (Continued)
Also in October two Directors received options to purchase an
aggregate of 200,000 common shares exercisable at $1.00 per share. Of
the options, 100,000 expires on October 6, 2000 and the other 100,000
expires on March 1, 2004.
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 2 years the expected volatility at 200%,
expected dividends are none, and the risk-free interest rate of 10%,
the Company would have recorded compensation expense of $8,052 and
$2,013 for the years ended December 31, 1999 and 1998, 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
December 31,
---------------------------
1999 1998
---------- ----------
Net loss as reported ($2,522,911) ($1,114,187)
Additional compensation 8,052 -
---------- ----------
Adjusted net loss ( 2,530,963) ( 1,114,187)
========== ==========
Loss per share as reported ($.70) ($.39)
===== =====
Adjusted loss per share ($.70) ($.39)
===== =====
(c) Warrants:
(i) Warrants Granted in 1998:
In connection with the Company's refinancing (Note 6), on
October 5, 1998, the Company granted the noteholder warrants to
purchase 200,000 shares of its common stock at $2.60 per share,
the market value at time of grant. Such warrants were granted
pursuant to the refinancing of the two ferries owned by the NYFF
Group. The warrants are exercisable through March 16, 2004.
Management has put a $.10 value on the warrants. Accordingly,
deferred interest expense of $20,000 has been recorded at
December 31, 1998 and amortization of $4,000 and $909 has been
amortized to interest expense during 1999 and 1998,
respectively.
(ii) Warrants Granted in 1999:
As an inducement to purchase shares of the Company's
common stock, warrants to purchase 1,180,000 shares were granted
to individuals who purchased stock in 1999. The warrants are
exercisable at various times through December 31, 2002 at prices
ranging from $1.00 to $1.25. On October 27, 1999 warrants to
purchase 100,000 common shares were granted to both of the
Company's President and a Director. The warrants are exercisable
at $1.00 through October 27, 2001.
F-19
<PAGE>
NOTE 11 - COMMITMENTS AND CONTINGENCIES.
(a) Leases:
(i) The Company and its subsidiaries have a number of operating
lease agreements involving office and retail store space, and
office equipment. These leases are non-cancelable and expire
on various dates through December 2, 2001. Annual payments
under these lease agreements amount to approximately $25,000.
(ii) The NYFF Group operates from leased property in Highlands, NJ
(the Aragon site). The lease is for five years, and commenced
May 1998. Lease payments are dependent on daily passenger
volume using the leased property, and averaged approximately
$24,250 per month during 1999. At the passenger volume using
the Aragon site increases, the lease payments will increase
proportionately. In addition, the NYFF Group rents other
facilities on short-term leases. Rents under the short-term
leases aggregate approximately $2,500 per month.
(iii) In November 1999, the Company completed negotiations to lease
a property in Stamford, CT as a base for ferry service to and
from Manhattan and LaGuardia Airport. Subject to the approval
process outlined in Note 1, the lease will have an initial
term of five years, with payments commencing in March 2000 at
$8,333 per month.
(b) Employment Contracts:
The Company has entered into an employment agreement with its
executive officer Anthony Cappaze. The agreement provide for a salary
of $75,000 each year, through April 30, 1998 and $100,000 each year
thereafter.
The NYFF Group has entered into an employment contract with
its President which provides for a salary of $90,000 each year
through October 4, 2003. Pursuant to the contract, the President was
also granted an option to purchase 10,000 shares of the Company's
common stock.
(c) Litigation:
The NY Fast Ferry Group had initiated a suit alleging breach
of contract against the City of New York. Fifty percent (50%) of the
proceeds, if any, is pledged to the original stockholders of The NY
Fast Ferry Group and the remaining (50%) to the first mortgage holder
as a pledge of collateral against amounts owing to them pursuant to
notes payable referred to in Note 7.
F-20
<PAGE>
NOTE 12 - SUBSEQUENT EVENTS.
(a) Stock Sales and Warrants Granted:
During the period from January 17, 2000 through March 1, 2000,
the Company sold 147,500 shares of its common stock to the public at
a price of $1.00 per share. For each share of stock purchased the
Company granted to the purchasers a warrant exercisable for one year
at $1.25 per share.
During the period from March 10, 2000 through March 17, 2000,
the Company sold 475,000 shares of its common stock to the public at
a price of $.50 per share. For each share of stock purchased the
Company granted to the purchasers warrants exercisable up to 2 years
at $1.00 per share.
(b) Bridge Loan:
On March 11, 2000, the Company received proceeds of a bridge
loan in the amount of $1,000,0000. The loan bears interest at 10% per
annum payable quarterly and is payable nine months from issuance. To
obtain the loan, the Company paid a finders fee consisting of 250,000
shares of unregistered commons stock with on-demand registration and
unlimited piggyback rights.
The loan may be repaid anytime within nine months of issuance,
however, the loan must be repaid out of the proceeds of a financing
greater than $2,000,000. Initially the loan is convertible into
common stock at $1.50 per share. In the event the loan is not
redeemed in full within nine months from issuance, the loan is in
default, and becomes convertible at $1.00 per share for the first 90
days of the default period and is further reduced to $.50 thereafter.
In addition, in the event of default, the Company must issue 50,000
warrants exercisable at $.25 per share for each 30 days period until
repaid.
In January 2000 the Company granted warrants to its President
and a Director to purchase 100,000 and 50,000 common shares,
respectively. The warrants are exercisable through January 2003 and
expire in January 2000.
F-21
<PAGE>
EXHIBIT INDEX
3.1 Certificate of Incorporation, as amended.*
3.2 Bylaws.*
10.1 Stock Purchase Agreement dated 9/9/98 for acquisition of Fast Ferry
Holding Corp.*
10.2 Lease Agreement dated 3/30/98 for Aragon Marina.*
10.3 Lease Agreement dated October 1999 for Stamford Property Marina.*
10.4 Letter of Intent for vessel construction. Filed herewith.
21.1 Subsidiaries of the Registrant.*
27.1 Financial Data Schedule. Filed herewith.
_________
* Incorporated by reference from the Company's Registration Statement on Form
10-SB, File No. 0-29205.
<PAGE>
Exhibit 10.4
LETTER OF INTENT FOR A 35M HIGH SPEED PASSENGER
CATAMARAN FERRY - PREPARED FOR LIGHTHOUSE
HOLDINGS/NEW YORK FAST FERRY BY R.E. DERECKTOR, INC.
3/15/00
Lighthouse Holdings/New York Fast Ferry
Dear John Koenig:
The undersigned, Robert E. Derecktor, Inc., is pleased to propose to you the
sale of one 35m passenger ferry to be constructed by the undersigned, subject to
the general terms and conditions set forth in the "Summary of Terms" transmitted
herewith (the "Summary of Terms") the terms of which are incorporated herein by
reference. Defined terms used herein are used with the meaning assigned to such
terms in the Summary of Terms.
To initiate the construction of the vessel Robert E. Derecktor we will prepare a
builders specification and general arrangement plans to a non-refundable deposit
of twenty-five thousand dollars ($25,000). If you decide to proceed with the
construction of the ferry once the plans and specifications are completed, then
the initial deposit above will be applied to the down payment on the ferry.
If you find this proposal acceptable, please (i) execute the enclosed copy of
this proposal letter in the same space provided and initial each page of the
Summary of Terms, (ii) return the same by facsimile and courier to the above
address and (iii) cause the Initial Deposit to be wired to the Payment Account.
If we do not receive an executed copy of this proposal and the Initial Deposit
prior to March 31st, 2000, or such later date as the undersigned shall agree in
writing (the "proposed Expiry Date"), this proposal shall terminate.
If we receive a copy of this proposal executed by Buyer and the Initial Deposit
as above provided prior to the Proposed Expiry Date, the Shipbuilder shall
reserve building slots for construction of the Vessel, subject to prior
commitments and each of us agree to negotiate in good faith with a view to
executing the Shipbuilding Agreement on or prior to March 15th, 2000, or such
later date as the parties shall agree in writing (the "Documentation Deadline").
If the Shipbuilding Agreements have not been entered into by the parties prior
to the Documentation Deadline, the obligations of the parties hereunder and
under the Summary of Terms (except those which by their terms survive such
termination) shall terminate and the Shipbuilder shall retain the Initial
Deposit theretofore received by the Shipbuilder.
Agreed:
Light House Holdings/New York Fast Ferry
By: /s/Anthony T. Colasanti Title: Vice President
------------------------ ---------------
Anthony T. Colasanti
R.E. DERECKTOR, INC.
By: Title:
------------------------ ---------------
<PAGE>
Summary of Terms
----------------
Shipbuilder: Robert E. Derecktor, Inc.
Purchaser: Lighthouse Landing/New York Fast Ferry
Naval Architects: Nigel Gee and Associates Ltd.
Vessels: One vessel to be constructed by the
Shipbuilder in accordance with the
Preliminary Specifications attached hereto
as Exhibit A and the Shipbuilding Agreements.
With option for two additional vessels.
Purchase Price: Between Four Million seven hundred fifty
thousand and Five Million United States
Dollars ($4,75,000-$5,000,000) depending
upon the final specification.
Deposits: Buyer shall pay the Shipbuilder an initial
deposit (the "Initial Deposit") of twenty-
five thousand ($25,000) on the date of
signing of this proposal letter. Deposits
shall be non-refundable and go towards the
preparation of a Builder's Specification and
General Arrangement plans. The Specification
and General Arrangement plans are the
property of Robert E. Derecktor, Inc. and
Nigel Gee and Associates, Ltd. If the buyer
decides to proceed with the vessel, the
twenty five thousand dollars ($25,000) will
be applied towards the construction deposit
payment.
Payment Account: Bank of New York/County Region
535 East Boston Post Rd.
Mamaroneck, New York 10543
ABA# 021-0000-18
Credit to
Robert E. Derecktor, Inc.
A/C# 0080-200-250
<PAGE>
Shipbuilding Agreements: The definitive shipbuilding agreements
relating to each Vessel consistent with the
terms of this proposal letter and containing
such other terms and conditions as are
customary in transactions of the type
contemplated hereby and mutually
satisfactory to the parties, the initial
draft of which shall be prepared by the
Shipbuilder's counsel. Each party shall be
responsible for the fees and expenses of its
own counsel.
Governing Law, Jurisdiction: New York
Estimated Delivery Date: Nine (9) months after the execution of the
Shipbuilding Agreements after the execution
of the Shipbuilding Agreements. Later dates
as may be permitted under the relevant
Shipbuilding Agreement.
Inspection: Buyer shall have the right to inspect the
Vessels during normal business hours,
provided that such inspection does not
interfere with the Shipbuilder's work.
Insurance: Prior to delivery of a Vessel, the
Shipbuilder shall maintain customary
builder's insurance over such Vessel in an
amount equal to the aggregate amount of the
Purchase Price previously paid by the Buyer
to the Shipbuilder for such Vessel.
Taxes: Buyer will be responsible for all taxes,
fees, customs duties and other governmental
charges arising out of the transactions
contemplated hereby, except income taxes
imposed on the Shipbuilder.
Exclusivity: Buyer agrees that from the date this
proposal letter is entered into and until
the termination of this proposal letter, it
will
2
<PAGE>
exclusively negotiate with the Shipbuilder
for construction of vessels similar to the
Vessels. The Shipbuilder agrees that from
the date this proposal letter is entered
into and until the termination of this
proposal letter, it will reserve building
slots necessary for the timely completion of
the Vessels.
Confidentiality: Each of Buyer and the Shipbuilder agree that
this proposal letter, the exhibits hereto
the Shipbuilding Agreements, the terms
hereof and thereof shall be kept
confidential; provided however, that nothing
in this proposal letter or in the
Shipbuilding Agreements is intended or may
be construed to obligate either party hereto
to refuse to provide information in respect
to a lawful demand or order of any
governmental agency or any court of
competent jurisdiction. The requirement of
confidentiality shall survive the
termination of this proposal letter and/or
the Shipbuilding Agreements.
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 97,957 62,606
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 6,715 1,057
<CURRENT-ASSETS> 302,468 132,420
<PP&E> 13,445,131 13,354,939
<DEPRECIATION> 1,156,251 251,414
<TOTAL-ASSETS> 13,753,060 15,179,975
<CURRENT-LIABILITIES> 3,561,913 2,547,263
<BONDS> 0 0
0 0
0 0
<COMMON> 49,058 32,508
<OTHER-SE> 168,217 937,678
<TOTAL-LIABILITY-AND-EQUITY> 13,753,060 15,179,975
<SALES> 0 0
<TOTAL-REVENUES> 3,285,978 681,167
<CGS> 0 0
<TOTAL-COSTS> 2,493,582 509,742
<OTHER-EXPENSES> 1,304,319 534,330
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,473,735 348,249
<INCOME-PRETAX> (1,985,658) (711,154)
<INCOME-TAX> (1,323) (1,014)
<INCOME-CONTINUING> (1,975,910) (669,634)
<DISCONTINUED> (547,001) (444,553)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,522,911) (1,114,187)
<EPS-BASIC> (.70) (.39)
<EPS-DILUTED> (.70) (.39)
</TABLE>
