<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A No. 2
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ___________.
COMMISSION FILE NUMBER: 0-29205
-------
LIGHTHOUSE FAST FERRY, INC.
-----------------------------------------------------
(Exact name of small business issuer as in its charter)
New Jersey 22-3241823
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
195 Fairfield Avenue, Suite 3C, West Caldwell, New Jersey 07006
----------------------------------------------------------------
(Address of principal executive offices)
(973) 618-9036
----------------
(Issuer's telephone number)
LIGHTHOUSE FAST FERRY, INC.
----------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months(or for such
Shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO ___
---
The number of shares outstanding of the issuer's classes of common equity, as of
December 6, 2000 is 6,645,587 shares of Common Stock.
Transitional Small Business Disclosure Format (check one):
YES ___ NO X
---
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
Consolidated Condensed Balance Sheets
At June 30, 2000 and December 31, 1999 (Unaudited)................... 3
Consolidated Condensed Statements of Operations
For the Three and Six Months Ended
June 30, 2000 and 1999 (Unaudited)................................... 4
Consolidated Condensed Statement of Changes in Stockholders'
Equity For the Six Months Ended June 30, 2000 (Unaudited)............ 5
Consolidated Condensed Statements of Cash Flows
For the Six Months Ended June 30, 2000 and 1999 (Unaudited).......... 6 to 7
Consolidated Notes to Consolidated Condensed
Financial Statements (Unaudited)..................................... 8 to 18
2
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
A S S E T S June 30, December 31,
----------- 2000 1999
----------- -----------
Current assets:
Cash $ 207,546 $ 97,957
Inventories 37,841 40,948
Net assets of discontinued operations 65,612 32,582
Prepaid expenses and other current assets 49,016 127,994
----------- -----------
Total current assets 360,015 299,481
Property and equipment - at cost,
less accumulated depreciation 11,856,017 12,288,880
Goodwill net of accumulated amortization 1,072,463 1,112,935
Other assets 201,323 51,764
----------- -----------
$13,489,818 $13,753,060
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
---------------------------------------------------------
Current liabilities:
Bridge financing payable $ 1,322,326 $ -
Current maturities of long-term debt 1,706,566 1,879,764
Notes payable - stockholders 157,098 125,000
Accounts payable and accrued expenses 974,536 948,606
Deferred revenues 168,838 68,765
Due to officers/stockholders 220,385 449,540
----------- -----------
Total current liabilities 4,549,749 3,471,675
Long-term debt - net of current maturities 9,635,330 10,064,110
----------- -----------
Total liabilities 14,185,079 13,535,785
----------- -----------
Stockholders' equity,(Capital Deficiency):
Common stock - $.01 par value
Authorized - 10,000,000 shares
Issued and outstanding - 6,245,295 shares
June 30, 2000 and 4,905,795 in
December 31, 1999 62,453 49,058
Additional paid-in capital 6,269,318 5,312,588
Accumulated deficit (7,027,032) (5,144,371)
----------- -----------
Total stockholders' equity (Capital Deficiency) (695,261) 217,275
----------- -----------
$13,489,818 $13,753,060
=========== ===========
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30 June 30
------------- ------------
2000 1999 2000 1999
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $ 960,646 $ 879,657 $1,642,971 $1,601,065
Costs of Services:
Ferry operations 697,795 372,596 1,318,408 725,851
Depreciation 229,416 221,750 458,832 444,858
----------- --------- ---------- ----------
Total Costs of Services 927,211 584,346 1,778,240 1,170,709
----------- --------- ---------- ----------
Selling, General & administrative 444,142 298,438 702,702 540,576
Marketing 17,249 4,671 41,926 10,892
Amortization of goodwill 20,236 20,236 40,472 40,472
----------- --------- ---------- ----------
Loss from operations (448,192) (38,034) (919,369) (161,584)
Other expenses:
Interest (net) 394,882 410,549 728,008 730,257
Provision for state income taxes - 1,223 - 1,687
----------- --------- ---------- ----------
Total other expenses 394,882 411,772 728,008 731,944
Loss from continuing operations before
minority share loss in subsidiary (843,074) (449,806) (1,647,377) (893,528)
Minority share in loss of subsidiary - - - 11,071
----------- --------- ---------- ----------
Loss from continuing operations (843,074) (449,806) ( 1,647,377) (882,457)
Loss on discontinued operations (235,284) (24,756) (235,284) (47,723)
----------- --------- ---------- ----------
Net loss (1,078,358) (474,562) (1,882,661) (930,180)
----------- --------- ---------- ----------
Per share data:
Basic and diluted:
Loss from continuing operations ($.14) ($.14) ($.29) ($.27)
Loss from discontinuing operations (.04) ($.01) ($.04) ($.01)
----------- --------- ---------- ----------
Net loss ($.18) ($.15) ($.33) ($.28)
=========== ========= ========== ==========
Weighted average number of shares
outstanding
Basic and diluted 6,125,745 3,282,795 5,742,092 3,271,679
=========== ========= ========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Additional Accumulated
Common Stock Paid-In Stockholders'
Number Amount Capital (Deficit) Total
--------- ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 2000 4,905,795 $49,058 $5,312,588 ($5,144,371) $217,275
Increase of shares for cash 688,500 6,885 441,740 - 448,625
Shares issued for
services rendered 298,500 2,985 178,890 - 181,875
Shares issued for
satisfaction of liabilities 352,500 3,525 336,100 - 339,625
Net loss for the period - - - (1,882,661) (1,882,661)
--------- ------- ---------- ----------- -----------
Balance at June 30, 2000 6,245,295 $62,453 $6,269,318 ($7,027,032) ($695,261)
========= ======= ========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six
Months Ended
June 30,
--------------------------
2000 1999
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss continuing operations ($1,647,377) ($883,457)
----------- ---------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Minority interests - (11,071)
Depreciation 462,059 451,456
Amortization of goodwill 40,472 40,472
Amortization of deferred finance cost 103,013 2,000
Imputed interest 48,926 86,724
Stock issued for service rendered 40,000 100,000
Deferred revenue 100,073 43,233
Increase (decrease) in cash flows as a result of
changes in assets and liability accounts balances:
Inventories 3,107 (4,280)
Prepaid expenses and other current assets 78,979 22,772
Accounts payable and accrued expenses 25,930 (463)
Related party obligations 17,568 16,103
Other (697) -
----------- ---------
Total adjustments 919,430 746,946
----------- ---------
Net cash used in continuing operations (727,947) (136,511)
Net cash used in discontinued operations (253,315) -
----------- ---------
Net cash flow used in operating activities (981,262) (136,511)
----------- ---------
Cash flows used in investing activities:
Acquisition of operating activies (29,196) (19,254)
----------- ---------
Cash flows from financing activities:
Proceeds from loans 1,322,326 -
Repayment of long-term debt (650,904) 109,843
Proceeds from issuance of common stock 448,625 5,000
----------- ---------
Net cash provided by financing activities
of continuing operations 1,120,047 114,843
----------- ---------
Net decrease in cash 109,589 (40,922)
Cash at beginning of year 97,957 62,606
----------- ---------
Cash at end of year $ 207,546 $ 21,684
=========== =========
</TABLE>
See accompanying notes to consolidated condensed financial statements
6
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
For the Six Months Ended
June 30,
-------------------------
2000 1999
-------- --------
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year:
Interest $842,708 $705,000
Income taxes $ - $ -
Supplemental Schedules of Noncash
Activities:
Common stock issued as additional interest $129,375 $ -
Common stock issued in payment of
Consulting and legal fees $ 52,500 $ -
Common stock issued as payment of liabilities:
Related parties $214,625
Others $125,000
Note issued as payment of consultant's fee $110,000 $ -
See accompanying notes to consolidated condensed financial statements.
7
<PAGE>
LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 2000
NOTE 1 - REALIZATION OF ASSETS - GOING CONCERN.
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting principles,
which contemplate continuation of the Company as a going concern.
Lighthouse Landings, Inc. (the "Company") has sustained substantial
losses for the years ended December 31, 1999 and the six months ended
June 30, 2000. In addition, the accompanying consolidated balance sheet
as at June 30, 2000 reflects negative working capital of $4,189,734 and
net tangible capital deficiency of $1,931,677
Future viability of the Company is dependent upon the Company
obtaining additional funding. During 1999, the Company arranged private
placements of its common stock for net cash proceeds of $1,530,000 and
obtained short term loans in the amount of $700,000 for both its
continuing and discontinued segments. The proceeds were used to provide
funds for the payment of certain obligations and ongoing operations.
Commencing in January 2000 through July 31, 2000, the Company received
cash of $448,625 through the sale of its securities and $2,105,000 from
bridge loans.
The Company currently operates a commuter ferry service from
Highlands, NJ to and from Manhattan, and is pursuing the establishment
of other routes in the Greater New York City area. In November 1999,
the Company completed negotiations and executed a lease for a property
in Stamford, CT as a base for fast ferry service to and from Manhattan
and LaGuardia Airport. The site requires improvements and governmental
approvals. The Company is proceeding with preparations for establishing
ferry service, and expects to be able to commence service in the spring
of 2001. Initially, it is expected that service on these new routes
will be provided by a vessel on a short-term charter. The Company is
proceeding with plans for construction and financing of at least three
vessels specifically to meet the needs of the new service.
During 1998 and 1999, the Company assessed its strategic
direction and concluded that focusing on the commuter ferry business
would provide the greatest return on assets and discontinued the marina
restaurant property and the retail cigar operations in 1999.
Accordingly, the Company is pursuing the divestiture of the
discontinued segments assets. The carrying value of the related net
assets have been reclassified as "Net assets of discontinued
operations" in the accompanying consolidated balance sheet.
It is management's opinion that the funds to be raised by the
sales of its securities and borrowings plus the funds anticipated to be
raised through the sale of net assets of the discontinued segments will
be sufficient to meet the Company's obligations as they become due.
The conditions previously mentioned raise substantial doubt about
the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
8
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) Description of Business:
The Company was incorporated in New Jersey in 1993 and is in
the commuter ferry business. The Company currently operates a commuter
ferry service from Highlands, New Jersey to and from Manhattan, and is
pursuing the establishment of other routes in the Greater New York City
metropolitan area.
(b) Basis of Presentation:
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions for Form
10-Q and Article 10 of Regulations S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, the statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present
fairly the financial position as of June 30, 2000 and the results of
operations and cash flows for the six month period ended June 30, 2000
and 1999. The results of operations for the six month period ended June
30, 2000 and 1999 are not necessarily indicative of the results to be
expected for the full year.
The December 31, 1999 balance sheet has been derived from
the audited financial statements at the date included in the Company's
annual report contained in Form 10-KSB. These unaudited financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's annual report contained in
Form 10-KSB.
(c) Principles of Consolidation:
The consolidated condensed financial statements include the
accounts of Lighthouse Landings, Inc. and its subsidiaries. Inclusion
of the results of subsidiary companies' operations is on the "Purchase"
method, from the dates of their respective acquisition. All significant
intercompany balances and transactions have been eliminated in
consolidation. Recognition of the interest of minority stockholders is
provided for in the accounts. As discussed more thoroughly in Note 3,
the retail and marina segments are presented as discontinued
operations.
(d) Change of Accounting Period:
The Company has changed its April 30 fiscal year end to
December 31st. Accordingly, the accompanying consolidated financial
statements reflect balance sheets as of June 30, 2000 and December 31,
1999 and the results of operations cash flows and stockholders equity
(Capital deficiency) for the six month period ended June 30, 2000 and
1999 then ended.
9
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(e) Inventories:
Inventories which consist of parts inventory and cafeteria
products are stated at the lower of cost or market on the first-in,
first-out method.
(f) Property and Equipment:
Property and equipment is recorded at cost. The cost of the
ferries obtained through the New York Fast Ferry Holding Corp.
acquisition in December 1998 has been determined as an allocation of
the purchase price of the business acquired based upon an appraisal.
Depreciation is computed using the straight-line method. Depreciation
on equipment, including the ferries, is calculated principally over
their estimated useful lives of fifteen years.
Expenditures that substantially increase estimated useful
lives are capitalized. Maintenance, repairs and minor renewals are
expensed as incurred. When assets are sold or otherwise disposed of,
their costs and accumulated depreciation are removed from the accounts
and any resulting gain or loss is recorded in operations.
(g) Goodwill:
Goodwill arising from acquisitions initially represents the
excess of the purchase cost over the fair value of identifiable assets
less identifiable liabilities. Goodwill is reviewed on an ongoing basis
to determine that the value has not been impaired; in 1999 it was
determined that the value of the goodwill arising from the purchase of
The Cigar Box, Inc. has been impaired and accordingly the remaining
unamortized goodwill of $198,654 has been written off to discontinued
operations during 1999. The goodwill arising from the acquisition of
New York Fast Ferry Holding Corp. and its wholly owned subsidiaries
aggregating $1,214,174 is being amortized over 15 years. Amortization
of goodwill charged to operations was $40,472 for the six months ended
June 30, 2000 and 1999.
(h) Revenue Recognition:
Revenue is recognized when earned. The Company's ferry
business sells the majority of commuter tickets in advance of use. The
tickets which are dated expire (90) ninety days after issuance and are
nonrefundable and extendable. Accordingly, the Company determines the
unused portion of tickets sales and defers that value to future
periods. Deferred income aggregated $168,838 and $68,765 at June 30,
2000 and December 31, 1999, respectively.
The other revenues generated by the Company, for example the
sale of food through the ferries' concession stands, are recognized
when the services have been rendered. To date, other revenues have not
been significant.
10
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(i) Income Taxes:
The Company complies with Statement of Financial Accounting
Standards No. ("SFAS 109"), "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets are computed for
differences between financial statement and tax basis of assets and
liabilities that will result in future taxable or deductible amounts,
based on the enacted tax laws and rates in the periods in which
differences are expected to affect taxable income. The principal asset
and liability differences are deferred revenues, valuation allowances
for long-term assets, the estimated loss on the disposal of
discontinued operations, and utilization of the Company's tax loss
carry forwards. Management has fully reserved the net deferred tax
assets as it is more likely than not that the deferred tax asset will
be utilized in the future.
(j) Impairment of Long-lived Asset:
The Company accounts for impairment of long-lived assets
accordance with Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairments of Long-Lived Assets and for Long-
Lived Assets to be Disposed of." SFAS No. 121 requires that long-lived
assets be reviewed for impairment whenever events or changes in
circumstances indicate that the book value of the asset may not be
recoverable. Due to significant loss incurred during 1999, the Company
evaluated its long-term assets of its continuing operations which as at
December 31, 1999 were comprised of property and equipment (principally
two (2) ferries) with an undepreciated cost of $12,288,880 and goodwill
on the acquisition of the Fast Ferry Holding Corp. with a unamortized
cost of $1,112,935. Based upon an estimate of the future undiscounted
net cash flows of the related asset or asset grouping over the
remaining life, it was determined that there was no impairment in
either the net book value of the ferries or the goodwill.
(k) Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
(l) Concentrations of Credit Risk:
Financial instruments which potentially subject the Company
to concentrations of credit risk consist primarily of cash. The Company
places its cash with high credit quality financial institutions which
at times may be in excess of the FDIC insurance limit.
11
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(m) Loss Per Common Share:
Loss per common share is based on the weighted average number
of common shares outstanding. In March 1997, the Financial Accounting
Standards Broad issued Statement No. 128 ("SFAS 128"), "Earnings Per Share,"
which requires dual presentation of basic and diluted earnings per share on
the face of the statements of operations, and which the Company has adopted.
Basic loss per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average common shares
outstanding for the period. Diluted loss per share reflects the potential
dilution that could occur if convertible debentures, options and warrants were
to be exercised or converted or otherwise resulted in the issuance of common
stock that then shared in the earnings of the entity. Since the effect of
outstanding options, warrant and convertible debenture conversions are
antidilutive in all periods presented, it has been excluded from the
computation of loss per common share.
NOTE 3 - DISCONTINUED OPERATIONS.
On October 28, 1999, the Company adopted a plan to sell its real
estate and retail/wholesale segments. Accordingly both segments have been
accounted for as discontinued operations in the accompanying consolidated
financial statements. The net assets to be disposed of as of June 30, 2000
aggregating $65,612 consist principally of real estate and its related secured
indebtednesses. The net assets are recorded as current assets in the
accompanying consolidated balance sheet under the caption "Net assets of
discontinued operations." Management expects the real estate to be sold in
late 2000 or early 2001.
In the second quarter of 2000 management became aware that its
previous estimate of the time required to dispose of these segments was
incorrect and accordingly the original estimate of the carrying charges of the
real property- real estate taxes and interest- would have to be increased to
reflect these charges through June 2001. The accompanying reflect a charge for
$110,000 of these costs incurred through June 2000 plus an estimate of an
additional $125,000 for interest and taxes through June 2001.
The net assets of discontinued operations, which have been segregated
---------------------------------------------------------------------
in the accompanying balance sheets are summarized as follows:
-------------------------------------------------------------
June 30,
2000
--------
Assets:
Inventory $ 2,001
Property assets, net (See Note 4) 931,180
--------
933,181
--------
Liabilities:
Accounts payable 32,434
Secured mortgage payables 337,547
Accrued real estate taxes and interest 497,588
--------
867,569
--------
Net assets of discontinued operations $ 65,612
========
12
<PAGE>
NOTE 3 - DISCONTINUED OPERATIONS. (Continued)
(a) The mortgage notes payable are summarized as follows:
20% demand mortgage on real property
subject to the tax lien referred to below $ 25,000
Second mortgage on real property payable in monthly
installments (applied firstly to interest) of
$15,000 from January 10, 2000 through
May 10, 2000, and three equal monthly
payments equal to one-third of the balance
outstanding on June 10, 2000, commencing
June 10, 2000. The loan carries interest at
18% plus as added inducement to enter into the
loan, the lender received 50,000 shares of
common stock valued at $100,000. 104,547
6% second demand mortgage on real property 208,000
--------
$337,547
========
(b) Real estate taxes liens have been recorded by local governmental
authorities because of non-payment of said property taxes arising
from a dispute over property tax valuations. The Company is
currently attempting to resolve the dispute.
NOTE 4 - PROPERTY AND EQUIPMENT.
Property and equipment is summarized as follows at June 30, 2000:
Continuing operations:
Ferries $13,300,000
Computers and office equipment 61,210
Furniture and fixtures 113,117
-----------
13,474,327
Less: Accumulated depreciation 1,618,310
-----------
$11,856,017
===========
Discontinued operations:
Land and buildings $ 931,180
===========
13
<PAGE>
NOTE 5 - LONG-TERM DEBT. June 30, 2000
-------------
Mortgage note payable, secured by the
vessel "Finest" due in monthly install-
ments of $61,875 through March 10, 1999,
and $56,719 through September 10, 2005,
including interest at 9.25% per annum, with a
final payment of $3,626,691 due October 10, 2005. (a) $ 5,083,845
Mortgage note payable, secured by the vessel
"Bravest" due in monthly installments of
$59,063 through March 10, 1999 and
$56,719 through September 10, 2005, including
interest at 9.25% per annum, with a final payment
of $3,572,971 due October 10, 2005. (a) 5,050,561
Note payable, secured by the vessel "Finest"
and "Bravest", payable in fifteen monthly
installments of $15,000 commencing in
February 1999, payment of $343,333 on
March 31, 2000 and a final payment of
$934,319 due on December 10, 2000
including imputed interest of 9.25%. (a) 899,929
10% interest bearing obligation payable in two
installments of $100,000 each on March 15,
2000 and July 15, 2000 and as final payment of
$200,000 January 15, 2001. 307,562
-----------
11,341,896
Portion due within one year 1,706,566
-----------
Long-term debt - less current maturities $ 9,635,330
===========
(a) The two first mortgages on the ships and note payable are secured
through (i) cross collateralization agreements; (ii) assignments of
charter agreements and other personal property, (iii) a pledge of a
potential receivable arising from a lawsuit against the City of New
York and (iv) cross corporate guarantees. Reference is made to Note
9(c)(i) regarding warrants issued to the note holder.
The secured debt obligations mature as follows:
2001 $ 1,706,566
2002 490,434
2003 537,773
2004 589,682
2005 646,600
Thereafter 7,370,841
-----------
$11,341,896
===========
14
<PAGE>
NOTE 6 - BRIDGE FINANCING LOANS
JUNE 2000 - During the month of June 2000, the company received
proceeds from eight convertible promissory notes, (six for $20,000, one
for $10,000 and one for $5,000), totaling $135,000 dollars. Each
convertible promissory note carries a simple interest rate of 10.5%.
Interest only is payable quarterly, and the notes mature one-year from
date of issuance. In addition, each convertible promissory note holder
was issued 125 shares of the company's common stock for each $5,000
dollars of indebtedness owed to the convertible promissory note holder
at date of issuance. These shares of stock are restricted securities.
The fair value of the common shares on the dates of issuance aggregated
$4,375 that will be charged to operations as additional interest over
the life of the notes.
The lenders have the right, at their sole and exclusive option,
to convert the outstanding indebtedness to common shares (the
"Conversion Rights") of the company at any time prior to borrower
making payment. Should such "Conversion Rights" be exercised, the
Company shall issue such shares to the Lender at the rate of one share
of common stock for each two ($2.00) dollars of the indebtedness then
due and owing. The shares issued by the company through the exercise of
the "Conversion Rights" will be restricted securities. The option and
conversion as provided herein shall be exercised by each lender issuing
written notice to the borrower.
The loan balance for the eight convertible promissory notes
including interest accrued as of June 30, 2000 is $140,631.
JUNE 2000 - On June 14, 2000, New York Fast Ferry Services Inc.,
received proceeds of two bridge loans aggregating $60,000. The loans
bear interest at 14% per annum. Loans aggregating $45,000 plus accrued
interest are payable on July 14, 2000, which were made, and the balance
of the loans with accrued interest on or before September 14, 2000.
The loan balance for the nine convertible promissory notes including
interest accrued as of June 30, 2000 is $60,373.
MARCH 2000 - On March 11, 2000, the Company received proceeds of
two bridge loans aggregating $1,000,000 from two private investment
funds, both of which are controlled by an individual stockholder of the
Company. The loans, which bear interest at 10% per annum payable
quarterly, are payable nine months from issuance. To obtain the loans,
the Company issued to each loan holder 125,000 shares of unregistered
common stock with on-demand registration and unlimited piggyback
rights. The fair value of the shares at issuance aggregating $125,000
will be charged to operations as additional interest over the life of
the loans.
The loans may be repaid anytime within nine months of issuance;
however, the loans must be repaid out of the proceeds of a financing
greater than $2,000,000. Initially the loans are convertible into
common stock at $1.50 per share. In the event the loans are not
redeemed in full within nine months from issuance, the loans are in
default, and become convertible at $1.00 per share for the first 90
days of the default period and are further reduced to $.50 thereafter.
In addition, in the event of default, the Company must issue to each of
the loan holders 50,000 warrants exercisable at $.25 per share for each
30 days period until repaid.
The loan balance for the two bridge notes including accrued
interest as of June 30, 2000 is $1,008,333
15
<PAGE>
NOTE 6 - BRIDGE FINANCING LOANS (Continued)
MARCH 2000 - The Company employed the services of a financial
consultant to arrange for the two bridge loans dated March 11, 2000.
The consultant received as payment for this service (i) a 10% interest
bearing note payable on December 10, 2000 in the amount of $110,000,
(ii) 25,000 shares of the company's common stock whose fair market
value at date of issuance was $12,500, and (iii) the same default
remedies as the bridge loan holders. The note payable balance including
accrued interest as of June 30, 2000 is $113,361. The consultant also
has agreed to perform consulting services for the Company and will
receive payment for his services in the form of warrants to acquire
50,000 common shares at $2.00 per share for each three month period his
services are required.
NOTE 7 - CAPITAL STOCK.
(a) Common stock for consideration other than cash:
During the second quarter of 2000, the Company issued 20,000 of
its common shares having a fair market value on the date of issuance of
$40,000 to outside legal and financial consultants for services
rendered.
During the second quarter of 2000, the Company issued 100,000
shares having a fair market value on the date of issuance of $125,000.
This issuance was for satisfaction of a note and other liabilities
related to the discontinued operations.
During the second quarter of 2000, the Company issued 3,500
shares having a fair market value on the date of issuance of $4,375.
The shares were issued as additional interest, and this amount is being
charged to operations over the life of the convertible promissory notes
issued in June 2000.
During the first quarter of 2000, the Company issued 252,500
shares having a fair market value on the date of issuance of $214,625
to two officer/directors and another director for satisfaction for
accrued compensation in the amount of $214,625.
During the first quarter of 2000, a financial consultant was
issued 25,000 shares having a fair market value on the date of issuance
was $12,500 for service rendered in arranging the bridge loan. This
amount is being charged to operations over the life of the loan.
During the first quarter of 2000, the Company issued 250,000 of
its common shares having a fair market value on the date of issuance of
$125,000 as additional consideration for the bridge loan.
(b) Common Stock Issued for Cash:
During second quarter of 2000, the Company sold 54,000 shares of
its common stock restricted for one year at prices ranging from $1.00
to $1.25 per share, for an aggregate of $60,125.
During first quarter of 2000, the Company sold 634,500 shares of
its common stock and warrants to acquire an additional 634,500 common
shares at prices ranging from $1.00 to $1.25 per share for an aggregate
of $388,500.
16
<PAGE>
NOTE 8 - STOCK OPTIONS AND WARRANTS.
A summary of activity related to non-qualifying stock options and
warrants granted by the Company is as follows:
<TABLE>
<CAPTION>
Exercise
Price Per
Options Warrants Share
----------- ------------ --------------
<S> <C> <C> <C>
Outstanding at January 1,
1999 10,000 200,000 $.96 to $2.60
Cancelled (10,000) $2.53
Granted during 1999 420,000 1,330,000 $1.00 to $1.75
------- ---------
Outstanding at December
31, 1999 420,000 1,530,000 $1.00 to $2.60
Granted during 2000 250,000 689,500 $.50 to $2.00
------- ---------
Outstanding at June 30,
2000 670,000 2,219,500 $.50 to $2.60
======= =========
</TABLE>
(a) Stock Options:
The Company has entered into new employment agreements with
its Chief Executive Officer and its V.P., Secretary in 2000. These
officers received as a condition of their contract options to purchase
100,000 and 150,000, respectively, shares of common stock at $1.00 per
share, the fair market value at the date of grant, through January
2007. Half of these options are exercisable in January 2002 and the
officers are first able to exercise the other 50% in January 2003.
Assuming the fair market value of the stock at the date of
grant to be equal to option exercise price, the life of the options to
be from 1.3 years to 7 years the expected volatility at 400%, expected
dividends are none, and the risk-free interest rate of 10%, the
Company would have recorded compensation expense of $135,882 and
$6,300 for the six months ended June 30, 2000 and 1999, respectively,
as calculated by the Black-Scholes option pricing model. As such, pro
forma net loss and loss per share would be as follows:
For the Years Ended
June 30,
-------------------------
2000 1999
----------- ---------
Net loss as reported ($1,882,661) ($930,180)
Additional compensation 135,882 6,300
----------- ---------
Adjusted net loss ($2,008,543) ($936,480)
=========== =========
Loss per share as reported ($.33) ($.29)
=========== =========
Adjusted loss per share ($.35) ($.29)
=========== =========
(b) Warrants Granted in 2000:
As an inducement to purchase shares of the Company's common
stock, warrants to purchase 689,500 shares were granted to individuals
who purchased stock in 2000. The warrants are exercisable at various
times through March 15, 2002 at prices ranging from $.50 to $2.00.
A financial consultant was issued warrants to acquire 50,000
common shares at $2.00 per share as part of a consulting agreement.
Another consultant was granted a warrant to acquire 5,000 common shares
at $2.00 per share which was the fair value of the common stock on the
date of issuance.
17
<PAGE>
NOTE 9 - RESTATEMENT.
The consolidated financial statements have been restated to give
effect to certain comments made by the Securities and Exchange
Commission.
NOTE 10 - LITIGATION.
On June 30, 2000, D. Weckstein & Co., Inc. ("Weckstein") filed
suit against the Company in the Supreme Court of the State of New
York. The Complaint alleges that the Company owes Weckstein $360,000
for services rendered by Weckstein in connection with the Company's
purchase of The Cigar Box, pursuant to a letter agreement between
Weckstein and the Company. In the alternative, if the Court finds that
Weckstein is not entitled to damages for breach of the letter
agreement, Weckstein seeks an award in quantum meruit for services
rendered. Weckstein also seeks an award of its costs and
disbursements.
On July 28, 2000, the Company filed an Answer, denying that the
Company owes Weckstein damages for breach of contract or in quantum
meruit; raising several defenses, including that Weckstein failed to
perform its obligations under the letter agreement; and seeking
dismissal of the Complaint and an award of the Company's attorney's
fees, costs and further relief that the Court deems just and
equitable.
On July 28, 2000, the Company filed a Notice of Removal, and the
case has been removed from the Supreme Court of the State of New York
to the United States District Court for the Southern District of New
York, based on the diversity jurisdiction of the Federal Court.
NOTE 11 - SUBSEQUENT EVENT.
On August 3, 2000, the Company received a notice from a subsidiary
of The Connecticut Light & Power Co. (the "Landlord"), terminating its
lease for the property that is the proposed site for the Company's
Stamford, Connecticut ferry terminal. The Landlord based the
termination of the lease on the failure of the Company to get certain
necessary permits for its use of the site. The Company disputes the
Landlord's right to terminate the lease.
On August 8, 2000, the Company filed a complaint against the
Landlord in Connecticut Superior Court against alleging breach of
lease, promissory estoppel, breach of the duty of good faith and fair
dealing, intentional misrepresentation, negligent misrepresentation,
and violation of the Connecticut Unfair Trade Practices Act by the
Landlord. The Company claims that the Landlord had agreed that the
permits issue would not be used to attempt to terminate the lease. The
Company is seeking specific performance of the lease, compensatory and
punitive damages, attorneys fees, and other relief.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
OVERVIEW - Lighthouse Landings Inc. (the "Company"), is a New Jersey
--------
corporation formed on May 12, 1993 under the name Drydock Cafe, Inc. On
September 21, 1994, the Company changed its name to Lighthouse Landings, Inc. On
September 19, 2000, the Company changed its name to Lighthouse Fast Ferry, Inc.
The Company, through its subsidiary New York Fast Ferry Holding Corp. ("NYFF"),
is an operator of high speed, commuter passenger ferry boats in the New York
City metropolitan region.
The following discussion should be read in conjunction with the unaudited
Consolidated Financial Statements and the Notes to those statements, which are
prepared in accordance with generally accepted accounting principles ("GAAP") in
the United States for interim financial information, along with other
information included in this Form 10-QSB.
Comparison of three and six month periods ended June 30, 2000 compared with
three and six month periods ended June 30, 1999 are as follows.
REVENUES - NYFF's operations consolidated revenues increased by 9.12% to
--------
$960,646 for the three months ended June 30, 2000 compared to $879,657 for the
three months ended June 30,1999. For the six months ended June 30, 2000,
consolidated revenues increased by 2.62% to $1,642,971 compared to $1,601,065
for the comparable period in 1999. The overall increase net of decreases are
explained as follows:
PASSENGERS TICKET SALES - Passenger ticket sales increased by 48.38% to
$873,654 for the three months ended June 30, 2000 compared to $588,804 for the
three months ended June 30,1999. For the six months ended June 30, 2000, earned
passenger ticket sales increased by 39.21% to $1,513,781 compared to $1,086,979
for the comparable period in 1999.
The increase is the result of adding additional scheduled runs with the
Motor Vessel (M/V) Finest. The M/V Finest was originally chartered to the
Massachusetts Steamship Authority. This charter terminated in October 1999.
GALLEY SALES - Galley sales increased by 20.58% to $58,938 for the three
months ended June 30, 2000 compared to $48,878 for the three months ended June
30,1999. For the six months ended June 30, 2000, galley sales increased by
11.90% to $101,136 compared to $90,384 for the comparable period in 1999.
The increase is primarily the result of adding the M/V Finest as a commuter
passenger ferry.
CHARTER SALES - Charter sales decreased by 88.40% to $28,054 for the three
months ended June 30, 2000 compared to $241,975 for the three months ended June
30,1999. For the six months ended June 30, 2000, charter sales decreased by
93.38% to $28,054 compared to $423,702 for the comparable period in 1999. The
decrease is the result of terminating the charter business of the M/V Finest and
utilizing this vessel for commuter transportation.
19
<PAGE>
COST OF SERVICES - NYFF's cost of services increased by 56.01% to $927,211 for
the three months ended June 30, 2000 compared to $594,346 for the three months
ended June 30,1999. For the six months ended June 30, 2000, cost of services
increased by 51.81% to $1,777,240 compared to $1,170,709 for the comparable
period in 1999. The overall changes are detailed follows:
SALARY and RELATED BENEFITS - Salary and related benefits increased by
46.61% to $163,466 for the three months ended June 30, 2000 compared to $111,494
for the three months ended June 30,1999. For the six months ended June 30, 2000,
salary and related benefits increased by 39.51% to $305,406 compared to $218,913
for the comparable period in 1999.
The increase is the result of adding a crew for additional scheduled runs
with the Motor Vessel (M/V) Finest. The M/V Finest was originally chartered to
the Massachusetts Steamship Authority. This charter terminated in October 1999.
FUEL and OIL RELATED COSTS - Fuel and oil related costs increased by 94.70%
to $151,433 for the three months ended June 30, 2000 compared to $77,777 for the
three months ended June 30,1999. For the six months ended June 30, 2000, fuel
and oil related costs increased by 128.08% to $292,371 compared to $128,221 for
the comparable period in 1999.
The increase is attributable to an increase in the cost of fuel, an
increase in the scheduled runs and the operation of the M/V Finest.
BOAT MAINTENANCE and RELATED SUPPLIES - Boat maintenance and related costs
increased by 394.14% to $96,244 for the three months ended June 30, 2000
compared to $19,477 for the three months ended June 30,1999. For the six months
ended June 30, 2000, Boat maintenance and related costs increased by 169.25% to
$245,288 compared to $91,102 for the comparable period in 1999.
The increase in Boat maintenance and related costs, which included a
scheduled engine overhaul and other unscheduled maintenance are the result of an
increase in the scheduled runs and the operation of the M/V Finest.
DOCKING and PARKING RELATED FEES - Docking and Parking related fees
increased by 32.09% to $139,016 for the three months ended June 30, 2000
compared to $105,240 for the three months ended June 30,1999. For the six months
ended June 30, 2000, docking related fees increased by 33.21% to $239,169
compared to $179,538 for the comparable period in 1999.
The increase in docking and parking related fees, are the result of an
increase in the scheduled runs and the operation of the M/V Finest translating
to more passengers traveled. The number of passengers traveled is a component of
the parking fee calculation charged by the owner of the parking facility in
Highlands, New Jersey.
INSURANCE - Insurance related costs increased by 203.15% to $60,114 for the
three months ended June 30, 2000 compared to $19,830 for the three months ended
June 30,1999. For the six months ended June 30,
20
<PAGE>
2000, insurance related costs increased by 129.22% to $96,297 compared to
$42,011 for the comparable period in 1999.
The increase in insurance related costs, is primarily the result of the
operation of the Motor Vessel M/V Finest, as well as a general price increase in
the insurance premiums.
GALLEY COST of GOODS SOLD - The galley cost of goods sold increased by
61.33% to $39,230 for the three months ended June 30, 2000 compared to $24,317
for the three months ended June 30,1999. For the six months ended June 30, 2000,
galley cost of goods increased by 36.37% to $66,597 compared to $42,375 for the
comparable period in 1999.
The increase is attributable to an increase in the number of scheduled runs
and the operation of the M/V Finest translating into more passengers traveled
aboard the boats.
OTHER DIRECT OPERATING COSTS - Other direct operating costs increased by
233.95% to $48,292 for the three months ended June 30, 2000 compared to $14,461
for the three months ended June 30,1999. For the six months ended June 30, 2000,
other direct operating costs increased by 209.32% to $73,280 compared to $23,691
for the comparable period in 1999.
The increase is attributable to an increase in the number of scheduled runs
and the operation of the M/V Finest.
DEPRECIATION - Depreciation increased by 3.60% to $229,416 for the three months
------------
ended June 30, 2000 compared to $221,750 for the three months ended June
30,1999. For the six months ended June 30, 2000, depreciation increased by 3.14%
to $458,832 compared to $444,858 for the comparable period in 1999.
The increase is attributable to an increase in other boat equipment
associated with operation of the M/V Finest and continued upgrades of equipment
on the Bravest.
SELLING, GENERAL and ADMINISTRATIVE EXPENSES - The consolidated company's
--------------------------------------------
selling, general and administrative expenses increased by 48.82% to $444,142 for
the three months ended June 30, 2000 compared to $298,438 for the three months
ended June 30,1999. For the six months ended June 30, 2000, selling, general and
administrative expenses increased by 29.99% to $702,702 compared to $540,576 for
the comparable period in 1999. The overall changes are detailed as follows:
FERRY ADMINISTRATION, SALARY and RELATED BENEFITS - Salary and related
benefits for the Ferry Administration increased by 12.18% to $79,840 for the
three months ended June 30, 2000 compared to $71,170 for the three months ended
June 30,1999. For the six months ended June 30, 2000, Salary and related
benefits for the "Ferry Administration" increased by 9.09% to $154,595 compared
to $141,708 for the comparable period in 1999.
The increase is attributable to the addition of one head count increase,
overall salary increases, and overtime of clerical staff.
CORPORATE ADMINISTRATION, SALARY and RELATED BENEFITS - Salary and related
benefits for the Corporate Administration increased by 1.97% to $113,651 for the
three months ended June 30, 2000 compared to $111,458
21
<PAGE>
for the three months ended June 30,1999. For the six months ended June 30, 2000,
Salary and related benefits for the "Corporate Administration" decreased by
5.70% to $182,367 compared to $193,388 for the comparable period in 1999.
The three-month increase is related to salary increases associated with the
addition of the VP Secretary and the new chief financial officer. The overall
six-month increase was the result of changes in the employment agreements with
certain current and former officers.
PROFESSIONAL SERVICES - Professional services, which include legal,
accounting and consulting services, increased by 150.50% to $157,871 for the
three months ended June 30, 2000 compared to $63,023 for the three months ended
June 30,1999. For the six months ended June 30, 2000, Professional services
increased by 69.72% to $178,152 compared to $104,967 for the comparable period
in 1999.
The increase is related to the 10-KSB audits and 10-QSB reviews of the
company's financial statements, as well as various SEC filings requiring both
legal and accounting services. In addition, there were various engineering and
related expenses associated with the new planned ferry routes ((i.e. Stamford,
CT., Highlands, NJ (new location) and Keyport, N.J.)).
TRAVEL and RELATED AUTOMOBILE EXPENSES - Travel and related automobile
expenses decreased by 36.37% to $15,223 for the three months ended June 30, 2000
compared to $24,115 for the three months ended June 30,1999. For the six months
ended June 30, 2000, travel and related automobile decreased by 43.72% to
$23,044 compared to $40,947 for the comparable period in 1999.
The decrease is related to an overall decrease in travel within the
organization over the comparable period in 1999.
OFFICE FACILITY RELATED EXPENSES - Office facility related expenses includes
rent, utilities, maintenance and general office expenditures for the Company's
corporate office in West Caldwell, New Jersey and the NYFF marina office in
Highlands, New Jersey.
These office facility related expenses increased by 367.24% to $57,994 for
the three months ended June 30, 2000 compared to $12,412 for the three months
ended June 30,1999. For the six months ended June 30, 2000, office facility
related expenses increased by 100% to $80,473 compared to $34,894 for the
comparable period in 1999.
The increase primarily relates to the establishment of a new corporate
headquarters in West Caldwell, New Jersey as well as increased costs associated
with the maintenance of the marina office located in Highlands, New Jersey.
DEPRECIATION EXPENSE - Depreciation expense decreased by 34.14% to $2,674
for the three months ended June 30, 2000 compared to $4,060 for the three months
ended June 30,1999. For the six months ended June 30, 2000, Depreciation expense
increased by 51.08% to $3,227 compared to $6,598 for the comparable period in
1999.
The decrease is related to assets that have been fully depreciated
22
<PAGE>
CORPORATE EXPENSE - OTHER - Other Corporate related expenses increased by
38.43% to $16,889 for the three months ended June 30, 2000 compared to $12,200
for the three months ended June 30,1999. For the six months ended June 30, 2000,
Depreciation expense increased by 347.29% to $80,844 compared to $18,074 for the
comparable period in 1999.
The increase is related to the expenses associated with filing the 10-KSB and
10-QSB with the company's financials statements, as well as various other SEC
filings.
MARKETING EXPENSES - Marketing expenses increased by 269.28% to $17,249 for the
------------------
three months ended June 30, 2000 compared to $4,671 for the three months ended
June 30,1999. For the six months ended June 30, 2000, marketing expenses
increased by 284.92% to $41,926 compared to $10,892 for the comparable period in
1999.
The increase is related to increased efforts to attract new passengers.
GOODWILL AMORTIZATION - In each of the quarters ended June 30, 2000 and 1999,
---------------------
the Company recorded amortization of goodwill expense of $20,236, which was
related to its acquisition of NYFF.
INTEREST EXPENSE - Interest expense primarily relates to meeting the current
----------------
obligations of the NYFF, including the mortgages on the vessels and debt
financing of the Company's current operations and business development.
Interest expense decreased by 3.82% to $394,882 for the three months ended June
30, 2000 compared to $410,549 for the three months ended June 30,1999. For the
six months ended June 30, 2000, Interest expense decreased by .31% to $728,008
compared to $730,257 for the comparable period in 1999.
The decrease primarily relates to new bridge financing entered into during
2000; resulting in better terms.
Liquidity and Capital Resources.
--------------------------------
Since inception, the Company has funded its operations primarily through
cash generated from private placements of debt and equity securities and
institutional financing. In October 1998, the Company acquired 80% of the stock
of NY Fast Ferry and commenced operating fast ferry service from Highlands, New
Jersey. As part of the transaction, the Company guaranteed payment and
satisfaction of NY Fast Ferry's outstanding liabilities, which included
mortgages on its two ferry vessels and a line of credit. In July 2000, the
Company entered into an oral agreement with the holders of the remaining 20% of
issued and outstanding shares of NY Fast Ferry to purchase those shares by the
now extended deadline of January 31, 2001. The Company and the holders of the
NY Fast Ferry shares are currently negotiating a written stock purchase
agreement for the purchase by the Company of the remaining NY Fast Ferry shares
for a combination of cash and restricted common shares of the Company. The
purchase price in the agreement under negotiation is $28,753 in cash and 102,271
common shares of the Company. Management expects that this written agreement
will be finalized and executed in January 2001. The NY Fast Ferry operation
23
<PAGE>
generates sufficient cash-flow to cover its direct operating costs. However,
the NY Fast Ferry operation does not yet generate enough cash to make principal
and interest payments for both boat mortgages, carry its other debt, to fund the
capital improvements and capital expenditures necessary for the Company to
expand its operations and to implement its strategic business objectives.
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.
On March 1, 2000 the Company received a total of $1,000,000 in proceeds
from senior convertible promissory notes from two investment funds, originally
due December 11, 2000 with interest at 10% per annum, and is payable quarterly.
The Company issued a $110,000 senior convertible promissory note to a third
investment fund as a finder's fee. In addition to the 10% interest, the Company
issued 275,000 common shares, which the Company valued at $0.50 per share, as
additional consideration. Further shares are issuable in the event of a
default. In December 2000 the Company, the investment funds and the finder
agreed to extend the maturity date of the notes to June 30, 2001 and in
consideration therefor, the Company agreed to issue to the investment funds
shares of the Company's Common Stock at a rate of one share for each $2.00 of
the outstanding indebtedness then due and owing. Further, the Company agreed to
reduce the conversion price from $1.50 per share to $1.00 per share and upon a
ninety day default, the conversion price is reduced from $1.00 per share to
$0.75 per share. Each lender has the right at its sole and exclusive option to
convert the outstanding indebtedness under the notes to common stock of the
Company at any time prior to the Company making payment and should such
conversion rights be exercised, the Company shall issue common stock to the
lender at the rate of one share for each $1.00 of indebtedness then due and
owing. The loans may be prepaid at any time, but must be repaid out of the
proceeds of any financing in excess of $2,000,000.
As of September 30, 2000, two outstanding notes payable and preferred ship
mortgages held by Debis Financial Services, Inc. ("Debis"), one on the ferry M/V
Finest and one on the ferry M/V Bravest, were $5,029,965 and $4,995,903,
respectively, which bear interest at 9.25% per annum. Both ship mortgages each
require monthly payments of principal and interest in the amount of $56,719
through September 10, 2005, with final payments of $3,626,691 and $3,572,971,
respectively, due on October 10, 2005. The Company is current in these
payments.
The line of credit held by Debis assumed by the Company had an outstanding
balance at September 30, 2000 of $920,410 with the same financial institution
that holds the preferred ship mortgages. The line of credit, secured by the M/V
Finest and the M/V Bravest, required monthly payments of $15,000 through April
10, 2000, plus principal payments of $45,000 in January 1999, $920,410 on May 1,
1999 and October 1, 1999, a payment of $343,333 on March 1, 2000, and originally
required a final payment of $934,319 on December 10, 2000. The Company and
Debis have agreed to restructure the payment of the debt. The remaining
principal balance on the line of credit shall be paid through eight quarterly
principal payments, plus accrued interest. The first payment was due December
31, 2000 with seven subsequent payments due at each
24
<PAGE>
calendar quarter. In consideration for the restructuring of the debt payment,
Debis will receive a restructure fee of $50,000, $25,000 of which was payable on
December 31, 2000 and $25,000 of which is payable on March 31, 2001. The Company
expects to make the first of such payments in the first quarter of 2001.
Quarterly principal and interest payments will be equal, except that the first
payment on December 31, 2000 will be divided in half, and the second half of
such payment will be due January 31, 2001 with accrued interest. The note
carries no interest, but has been discounted to a net present value using a
discount rate of 9.25% per annum. These two preferred ship mortgages and the
line of credit are further secured by cross collateralization agreements,
assignment of personal property, a pledge of a potential receivable arising out
of a lawsuit against the City of New York, and a Company guarantee. Moreover,
the financial institution was granted warrants to purchase 200,000 shares of
Company stock at $2.60 per share exercisable through March 16, 2004.
During June 2000 the Company received proceeds from eight 10.5% convertible
promissory notes, (six for $20,000, one for $10,000 and one for $5,000),
totaling $135,000. During July 2000 the Company received proceeds from two
10.5% convertible promissory notes (two for $40,000) totaling $80,000. During
August 2000 the Company received proceeds from four 10.5% convertible promissory
notes (one for $40,000, one for $10,000, one for $15,000 and one for $5,100)
totaling $70,100. During September 2000 the Company received proceeds from five
10.5% convertible promissory notes (three for $20,000 and two for $10,000)
totaling $80,000. Each convertible promissory note carries a simple interest
rate of 10.5%, interest only is payable quarterly, and matures one-year from
date of issuance.
The lender has the right, at its sole and exclusive option, to convert the
outstanding indebtedness to common shares (the "Conversion Rights") of the
company at any time prior to borrower making payment. Should such Conversion
Rights be exercised, the Company shall issue such shares to the Lender at the
rate of one share of common stock for each $2.00 of the indebtedness then due
and owing. The shares issued by the company through the exercise of the
Conversion Rights will be restricted securities. The option and conversion will
be exercised by the lender issuing written notice to the borrower.
On June 14, 2000, New York Fast Ferry Services Inc. received proceeds of
two bridge loans aggregating $60,000. New York Fast Ferry Services Inc. has
since paid off the balance on the loans. The loans were paid with funds from
ferry operations.
In July 2000, the Company received a total of $1,000,000 in proceeds from
senior convertible promissory notes from four lenders, and paid a finder by
issuance of an $88,000 note, originally due January 14, 2001 with interest at
10% per annum, payable quarterly. One of these four lenders exchanged a $200,000
Note for its $200,000 mortgage note receivable. In December 2000 the Company
and the lenders agreed to extend the maturity date of the notes to June 30, 2001
and in consideration therefor, the Company agreed to issue to the lenders shares
of the Company's common stock at a rate of one share for each $2.00 of
outstanding indebtedness then due and owing. Further, the Company agreed to
reduce the conversion price from $1.50 per share to $1.00 per share and upon a
ninety day default, the conversion price is reduced from $1.00 per share to
$0.75 per share. Each lender has the right at its sole and exclusive option to
convert the outstanding
25
<PAGE>
indebtedness under the notes to common stock of the Company at any time prior to
the Company making payment and should such conversion rights be exercised, the
Company shall issue common stock to the lender at the rate of one share for each
$1.00 of indebtedness then due and owing. The loans may be prepaid at any time,
but must be repaid out of the proceeds of any financing in excess of $2,000,000.
In June 1999, the Company obtained financing in the net amount of $300,000
from a then unrelated third party that is secured by a second mortgage on the
property of the Shrewsbury River, subject to a real estate tax lien, and by a
personal guarantee of a major shareholder. The note carries an annual interest
rate of 18% and was 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. The Company made a principal payment in
July 2000, reducing the balance to $58,694. The Company is currently
renegotiating the terms of the note, such that the Company will make interest
only payments on the balance until a final payment is made before March 1, 2001.
To date, the Company is current in its obligation. As an inducement to enter
into the loan, the Company issued the lender 25,000 shares of common stock in
June 1999 and an additional 25,000 shares in December 1999.
In the nine months ended September 30, 2000, the Company had raised
proceeds of $482,600 through the private placement of 712,667 shares of
restricted common stock to accredited investors. The Company also issued 252,500
shares of restricted common stock to three directors and officers in
satisfaction of unpaid compensation amounting to $214,625. In addition, the
company issued 100,000 shares of restricted common stock on June 13, 2000 and
$25,000 on July 11, 2000 to a mortgage holder of the discounted operation in
satisfaction of $150,000 of debt.
The Company, as of September 30, 2000, had a working capital deficiency of
$4,900,471. Furthermore, in the planned development of its commercial
operations, the Company's combined losses are expected to continue as the
Company divests its non-core assets and until it increases its ferry service
when each of its sites become fully operational. The Company's ability to meet
its obligations in the ordinary course of business is dependent upon its ability
to continue to obtain adequate financing and/or to successfully expand its ferry
operations. Furthermore, capital expenditures to acquire additional fast ferry
vessels and improve and expand its landside ferry facilities will require
significant funding.
The Company has been successful to date in its efforts to raise funds and
believes that proceeds from interim financing from convertible promissory notes
sold during the second, third and fourth quarters, 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. As of September 30, 2000, $2,165,000 was raised
from the sale of convertible promissory notes. Furthermore, the Company has
negotiated more favorable terms with certain creditors, and is negotiating more
favorable payment terms with other creditors, that require significant principal
payments in the next twelve months. In the event the Company's plans change,
its assumptions change or prove
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to be inaccurate or if the proceeds of the interim financing or cash flows prove
to be insufficient to fund operations, the Company may find it necessary or
desirable to reallocate funds within the above described business strategies,
seek additional financing or curtail its activities. There can be no assurance
that additional financing will be available on terms favorable to the Company,
or at all, or that the Company will be able to negotiate more favorable payment
terms with its existing creditors. If adequate funds are not available or are
not available on acceptable terms, the Company may not be able to meet its
current obligations, take advantage of unanticipated opportunities, develop new
services or otherwise respond to unanticipated competitive pressures. Such
inability could have a material adverse effect on the Company's business,
financial condition and results of operations.
Subsequent Events
-----------------
In October, the Company received a total of $500,000 in proceeds from
senior convertible promissory notes from two lenders, and issued a $55,000 note
as a finder's fee, originally due January 30, 2001 with interest at 10% per
annum, payable quarterly. In December 2000 the Company and the lenders agreed
to extend the maturity date of the loans to June 30, 2001 and in consideration
therefor, the Company agreed to issue to the lenders shares of the Company's
common stock at a rate of one share for each $2.00 of outstanding indebtedness
then due and owing. Further, the Company agreed to reduce the conversion price
from $1.50 per share to $1.00 per share and upon a ninety day default, the
conversion price is reduced from $1.00 per share to $0.75 per share. Each
lender has the right at its sole and exclusive option to convert the outstanding
indebtedness under the notes to common stock of the Company at any time prior to
the Company making payment and should such conversion rights to exercised, the
Company shall issue common stock to the lender at the rate of one share for each
$1.00 of indebtedness then due and owing. The loans may be prepaid at any time,
but must be repaid out of the proceeds of any financing in excess of $2,000,000.
In addition, during the month of October, the Company received proceeds
from four 10.5% convertible promissory notes (one for $5,000, two for $40,000
and one for $10,000) totaling $95,000. During the month of November, the
Company received proceeds from three 10.5% convertible promissory notes (two for
$60,000 and one for $20,000) totaling $140,000. Each convertible promissory
note carries a simple interest rate of 10.5%, interest only is payable
quarterly, and matures one-year from date of issuance.
The lender has the right, at its sole and exclusive option, to convert the
outstanding indebtedness to common shares (the "Conversion Rights") of the
company at any time prior to borrower making payment. Should such Conversion
Rights be exercised, the Company shall issue such shares to the Lender at the
rate of one share of common stock for each $2.00 of the indebtedness then due
and owing. The shares issued by the company through the exercise of the
Conversion Rights will be restricted securities. The option and conversion will
be exercised by the lender issuing written notice to the borrower.
The loan balance for the twenty-six 10.5% convertible promissory notes including
interest accrued as of November 30, 2000 was approximately $511,000.
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Forward-Looking Statements
--------------------------
Discussions and information in this document that are not historical facts
should be considered forward-looking statements. With regard to forward-looking
statements, including those regarding the potential interim financing, the
sufficiency of the cash flow, and the business prospects or any other aspect of
the Company, actual results and business performance may differ materially from
that projected or estimated in such forward-looking statements. The Company has
attempted to identify in this document certain of the factors that it currently
believes may cause actual future experience and results to differ from its
current expectations. Differences may be caused by a variety of factors,
including adverse economic conditions, entry of new and stronger competitors in
the ferry business, insufficient parking space for potential ferry customers,
inadequate capital and the inability to obtain funding from third parties,
unexpected costs, and the inability to obtain or keep qualified personnel.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
On June 30, 2000, D. Weckstein & Co., Inc. ("Weckstein") filed suit against
the Company in the Supreme Court of the State of New York. The Complaint
alleges that the Company owes Weckstein $360,000 for services rendered by
Weckstein in connection with the Company's purchase of The Cigar Box, pursuant
to a letter agreement between Weckstein and the Company. In the alternative, if
the Court finds that Weckstein is not entitled to damages for breach of the
letter agreement, Weckstein seeks an award in quantum meruit for services
rendered. Weckstein also seeks an award of its costs and disbursements.
On July 28, 2000, the Company filed an Answer, denying that the Company
owes Weckstein damages for breach of contract or in quantum meruit; raising
several defenses, including that Weckstein failed to perform its obligations
under the letter agreement; and seeking dismissal of the Complaint and an award
of the Company's attorney's fees, costs and further relief that the Court deems
just and equitable.
On July 28, 2000, the Company filed a Notice of Removal, and the case has
been removed from the Supreme Court of the State of New York to the United
States District Court for the Southern District of New York, based on the
diversity jurisdiction of the Federal Court.
On August 3, 2000, the Company received a notice from a subsidiary of The
Connecticut Light & Power Co. (the "Landlord"), terminating its lease for the
property that is the proposed site for the Company's Stamford, Connecticut ferry
terminal. The Landlord based the termination of the lease on the failure of the
Company to get certain necessary permits for its use of the site. The Company
disputes the Landlord's right to terminate the lease.
On August 8, 2000, the Company filed a complaint against the Landlord in
Connecticut Superior Court against alleging breach of lease, promissory
estoppel, breach of the duty of good faith and fair
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dealing, intentional misrepresentation, negligent misrepresentation, and
violation of the Connecticut Unfair Trade Practices Act by the Landlord. The
Company claims that the Landlord had agreed that the permits issue would not be
used to attempt to terminate the lease. The Company is seeking specific
performance of the lease, compensatory and punitive damages, attorneys fees, and
other relief.
ITEM 2. CHANGES IN SECURITIES
---------------------
In May 2000, the Company sold 29,000 shares of common stock, at $1.00 and
$1.25 per share, to the following accredited investors. The offering was
conducted in reliance on Section 4(2) of the Act and Rule 506.
May Number of Shares
--- ----------------
. Christopher Karounos 7,000
. Jason Karounos 7,000
. Peter Karounos 7,000
. Dana Schwartz 8,000
------
29,000
======
During June of 2000, the Company issued 3,500 shares, having a fair market
value on the date of issuance of $4,375, to the following purchasers as part of
the Company's convertible promissory note offering.
Principal Amount
June of Note Number of Shares
---- ------- ----------------
. Robert Powless $20,000 500
. Arthur Klowden $ 5,000 125
. Herman and Danny Vaden $20,000 500
. Steve Carcaterra $20,000 500
. Edward Holst $ 5,000 125
. Lowell Kupfer $10,000 250
. Frederick Keifer $20,000 500
. Herbert and Lois Rake $20,000 500
. Loren and Judith Hanson $20,000 500
------
3,500
======
During June of 2000, the Company issued 20,000 shares of common stock, having
a fair market value on the date of issuance of $40,000, to providers of
professional services. The shares were issued as follows: 10,000 were issued to
Colasanti & Scott, L.L.P. for outside legal services, and 10,000 were issued to
Patricia Beene, CPA for financial services rendered.
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In June 2000, the Company sold 12,500 shares of common stock at $1.25 per
share to Dana Schwartz, an accredited investor. The offering was conducted in
reliance on Section 4(2) of the Act and Rule 506.
In June 2000, the Company sold 12,500 shares of common stock at $1.00 per
share to Felice Barone, an accredited investor. The offering was conducted in
reliance on Section 4(2) of the Act and Rule 506.
In June 2000, the Company issued 100,000 shares of common stock, in
satisfaction of debt outstanding on the discontinued operation, to Nathan
Plafsky, an accredited investor. The offering was conducted in reliance on
Section 4(2) of the Act and Rule 506.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibit 3.1 - Certificate of Incorporation, as amended. (1)
Exhibit 3.2 - Bylaws. (1)
Exhibit 10.5.1 - Employment Agreement with John Ferreira. (1)
Exhibit 27.1 - Financial Data Schedule. Filed herewith.
---------
(1) Incorporated by reference from the Company's Registration Statement on
Form 10-SB, as amended.
(b) Reports on Form 8-K: During the quarter ended June 30, 2000 the Company
filed no reports on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-QSB/A No. 2 to be signed on its behalf
by the undersigned thereunto duly authorized.
LIGHTHOUSE LANDINGS, INC.
Date: January 12, 2001 By: /s/ Anthony Cappaze
--------------------------------
Anthony Cappaze, President,
Chief Executive Officer
Director
Date: January 12, 2001 By: /s/ Anthony Colasanti
--------------------------------
Anthony Colasanti, Secretary and
Director
Date: January 12, 2001 By: /s/ John Ferreira, Jr.
--------------------------------
John Ferreira, Jr., Chief
Financial Officer
31
