SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10QSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the period ended October 31, 1998
Commission File No. 0-29164
TRI-NATIONAL DEVELOPMENT CORP.
(Name of Small Business Issuer in its charter)
Wyoming 33-0741573
(State of Incorporation) (I.R.S. ID)
480 Camino Del Rio S., Suite 140
San Diego, California 92108
(Address of principal executive officers)
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value Per Share
(Title of Class)
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and 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 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. /X/
As of December 14, 1998, 22,406,342 shares of the registrant's common stock
were outstanding.
<PAGE>
TRI-NATIONAL DEVELOPMENT CORP.
FORM 10QSB
FOR THE PERIOD ENDED OCTOBER 31, 1998
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
a) Consolidated Statements of Operations
For the Six Months Ended
October 31, 1997 and 1998 . . . . . . . . . . . . . . . .3
b) Consolidated Balance Sheets
As of October 31, 1997 and 1998 . . . . . . . . . . . . .4
c) Consolidated Statements of Cash Flows
For the Six Months Ended
October 31, 1997 and 1998 . . . . . . . . . . . . . . . .5
d) Consolidated Statements of Stockholders' Equity . . . . .6
e) Notes to Financial Statements . . . . . . . . . . . . . .7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 17
PART II OTHER INFORMATION
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . 23
Item 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 23
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED
OCT 31, 1998 OCT 31, 1997
------------ ------------
REVENUES:
- ---------
Revenues $ 369,192 $ 245,881
Minority Interest - -
Gain on Sale of Assets - -
----------- -----------
Total Revenues 369,192 245,881
EXPENSES:
- ---------
General and Administrative Expenses 1,444,985 515,781
----------- -----------
Income Before Unusual Items (1,075,793) (269,900)
----------- -----------
UNUSUAL ITEMS:
- --------------
Gain (Loss) on Debt Settlement - -
Gain on Sale of MRI Medical Diagnostics
Inc. shares - -
Write-Down of Investments - -
----------- -----------
Total Unusual Items - -
----------- -----------
Minority Interest - (9,570)
Income Before Income Taxes (1,075,793) (279,470)
Income Taxes - -
----------- -----------
Net Income $(1,075,793) $ (279,470)
=========== ===========
Earnings per share-Fully Diluted $ (0.050) $ (0.015)
=========== ===========
See accompanying notes to financial statements.
3
<PAGE>
TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS: OCT 31, 1998 OCT 31, 1997
- ------- ------------ ------------
Current Assets:
- ----------------
Cash & Cash Equivalents $ 333,748 $ 403,240
Accounts Receivable 532,403 299,196
Notes Receivable - 237,633
Chino Bank Judgement Receivable (Note 2) 5,366,926 -
Advances to Subsidiaries 100,500 -
----------- -----------
Total Current Assets 6,333,578 940,069
Investments:
- ------------
NetRom, Inc. Convertible Preferred Stock
(Note 3) 3,000,000 -
NetRom, Inc. Common Stock (Note 4) 4,200,000 4,200,000
MRI Medical Diagnostics, Inc. (Note 5) 20,050 496,994
Hills of Bajamar (Note 6) 4,052,158 3,843,661
Plaza Resort Timeshares (Note 7) 13,079,055 13,279,055
Activity Link, Inc. ( Note 8) 183,411 -
Assisted Living-Youngtown (Note 9) 3,992,300 -
Plaza Rosarito (Note 10) 100,000 -
----------- -----------
Total Investments 28,626,974 21,819,710
Property, Furniture, and Equipment (Note 11) 637,062 649,190
----------- -----------
Total Assets $35,597,613 $23,408,969
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
Current Liabilities:
- --------------------
Accounts Payable $ 367,449 $ 268,565
Chino Bank Judgement Legal Expenses
Payable (Note 2) 1,878,424 -
Loans Payable-Short Term-1 Year or less
(Note 12) 2,575,321 -
Notes Payable-Current Portion 39,821 7,186
Interest Payable 661,906 747,323
----------- -----------
Total Current Liabilities 5,522,921 1,023,074
Notes Payable-Net of Current Portion
(Note 13) 9,547,294 8,738,458
Deferred Income - Chino Bank Judgement
(Note 2) 3,488,502 -
----------- -----------
Total Liabilities 13,035,796 8,738,458
----------- -----------
STOCKHOLDERS' EQUITY:
- ---------------------
Common Stock 9,069,927 9,128,963
Preferred Stock 9,458,000 6,000,000
Minority Interest - (328,538)
Retained Earnings ( Deficit ) (1,489,031) (1,152,988)
----------- -----------
Total Stockholders' Equity 17,038,896 13,647,437
----------- -----------
Total Liabilities and Stockholders' Equity $35,597,613 $23,408,969
=========== ===========
See accompanying notes to financial statements.
4
<PAGE>
TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
OCT 31, 1998 OCT 31, 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net Income from Operations $(1,075,793) $ (279,471)
Depreciation and Amortization - 54,301
Accumulated Deficit & Minority Interest 1,068,288 22,182
Net Changes in Operating Assets and
Liabilities:
Notes and Accounts Receivable (96,074) (134,213)
Prepaid Expenses - -
Accounts Payable 98,884 41,252
----------- -----------
Net Cash Flow From Operating
Activities (4,695) (295,949)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Equipment, Furniture & Fixtures 12,128 (28,935)
NetRom, Inc. Preferred Stock (3,000,000) -
Activity Link, Inc.-Investment (183,411) -
Purchase U.S. Treasury Securities & CD'S - (285,956)
Hills of Bajamar (208,497) (2,000)
Youngtown Assisted Living-Investment (3,992,300) -
Plaza Rosarito (100,000) -
Plaza Timeshares-Investment 200,000 -
----------- -----------
Net Cash Flow from Investing
Activities (7,272,080) (316,891)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Notes Payable 3,331,375 (711,414)
Proceeds from Common Shares (59,036) 1,407,981
Proceeds from Preferred Shares 3,458,000 -
Treasury Stock - -
Proceeds from Common Shares-
MRI Diagnostics 476,944 -
----------- -----------
Net Cash Flow From Financing
Activities 7,207,283 696,567
----------- -----------
Net Increase in Cash (69,492) 83,727
Cash-Beginning of Period 403,240 33,557
----------- -----------
Cash-End of Period $ 333,748 $ 117,284
=========== ===========
See accompanying notes to financial statements.
5
<PAGE>
TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
PREFERRED COMMON TREASURY MINORITY EARNINGS TOTAL
STOCK STOCK STOCK INTEREST (DEFICIT) EQUITY
----- ----- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 31, 1997 $6,000,000 $9,128,963 $ - $(328,538) $(1,152,988) $13,647,437
ISSUANCE OF PREFERRED STOCK 3,458,000 3,458,000
ISSUANCE OF COMMON STOCK 175,964 175,964
PURCHASE OF TREASURY STOCK (235,000) - (235,000)
SALE OF TREASURY STOCK
MINORITY INTEREST 328,538 328,538
RETAINED EARNINGS NET CHANGE (336,043) (336,043)
---------- ---------- --------- --------- ----------- -----------
BALANCE AT OCTOBER 31, 1998 $9,458,000 $9,069,927 $ - $ - $(1,489,031) $17,038,896
========== ========== ========= ========= =========== ===========
</TABLE>
See accompanying notes to financial statements.
6
PAGE>
TRI-NATIONAL DEVELOPMENT CORP.
NOTES TO THE FINANCIAL STATEMENTS
October 31, 1998 (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS ACTIVITY
Tri-National Development Corp. is a publicly traded international real
estate development and management company. The Company was incorporated on
July 31, 1979 as Rocket Energy Resources Ltd. under the laws of the
Province of British Columbia, Canada by registration of its Memorandum and
Articles. The Company changed its name to MRI Medical Technologies, Inc. in
April of 1989. On December 7, 1992, the Company changed its name to Tri-
National Development Corp. and recapitalized on the basis of five (5)
common shares of MRI Medical Technologies, Inc. for one (1) common share of
Tri-National Development Corp. In January of 1997, the Shareholders
approved a special resolution to change the corporate domicile from
Vancouver, B.C. to the state of Wyoming. On February 24, 1997, the
Company's Articles of Continuation were accepted by the state of Wyoming
and it is now incorporated in good standing under the laws of the State of
Wyoming. The Company maintains its executive offices in San Diego,
California at 480 Camino Del Rio S. in Suite 140 and its telephone number
is 619-718-6370.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Greater San
Diego Imaging Center, a 100% owned subsidiary and Activity Link, Inc.,
owned 100% by the Company. All material intercompany accounts and
transactions have been eliminated in the consolidation.
EARNINGS PER SHARE
Primary earnings per share have been computed based on the weighted average
number of shares and equivalent shares outstanding during each period. The
dilutive effect of stock options and warrants has been considered in the
computation of equivalent shares and is included from the respective dates
of issuance.
The fully diluted computation is based on the number of shares for the
three months ended October 31, 1998 and 1997. The computation contemplates
the dilutive effects of common stock equivalent shares as well as
conversion of the convertible preferred stock.
Since the date of issuance of the warrants and options, both primary and
fully diluted earnings per share computations limit the assumption of the
repurchase of treasury shares to a maximum of 20% of the outstanding shares
of the Company.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost and depreciated over the
estimated useful lives of the assets (five to seven years) using the
straight line method.
7
<PAGE>
2. CITIZENS BUSINESS BANK AWARD RECEIVABLE
In March 1992, the Company advanced $383,064 to MRI Medical Diagnostics,
Inc. for a joint venture interest in its subsidiary, MRI Grand Terrace,
Inc., a California corporation, to enable it to acquire a retirement hotel
located in Grand Terrace, California. In addition to the joint venture
interest, the loan was evidenced by a 15% note receivable from MRI Medical
Diagnostics, Inc. and a second trust deed and an assignment of rents from
MRI Grand Terrace, Inc.. On March 22, 1993, MRI Grand Terrace, Inc. filed
a complaint against Chino Valley Bank, now known as Citizens Business Bank
(AMEX:CVB), as a result of the purchase of the residential retirement hotel
in Grand Terrace from the Chino Valley Bank. MRI Grand Terrace, Inc.
claimed that the sellers of the property (Chino Valley Bank) had failed to
disclose that the property's parking lot encroached on the property of the
adjacent parcel of land. Contrary to the bank's representations, the
Conditional Use Permit (CUP) under which the hotel was operating was in
violation, which restricted the ability of TND and MRI Grand Terrace, Inc.
to operate, refinance or sell the facility. MRI Grand Terrace, Inc.
stopped making mortgage payments to the mortgage holder (the same Chino
Valley Bank), which then filed a Notice of Default as an initial step to
foreclosure on the property. MRI Grand Terrace, Inc. then sought
Bankruptcy protection in July of 1993, and was ultimately dismissed from
Bankruptcy in May of 1995. The Chino Valley Bank subsequently sold the
property in foreclosure to itself. TND filed it's own action against the
Chino Valley Bank in early 1995, claiming that it was defrauded and
misrepresented when it advanced the $383,064 for the closing in 1992. The
Company purchased the stock of MRI Grand Terrace, Inc., as described in
Note 4 to these financial statements, in an effort to control both
lawsuits. As a result of the uncertainty of the final results of the
lawsuits, the Company previously wrote off the investment. In May of 1998,
TND and MRI Grand Terrace, Inc. received judgements in their favor for
fraud, intentional misrepresentation and deceit/negligent misrepresentation
in the Superior Court of San Bernardino, California. TND and MRI Grand
Terrace, Inc. received judgements totaling almost $5 million dollars,
including punitive and compensatory damages, plus pre-trial interest.
Beginning May 7th, 1998 the $5 million judgement begins accruing, post
judgement interest of 10% or $1,400 per day until the full award is paid.
A 35% portion of the award is due to the Company's attorney. The
attorneys, however, have filed for recovery of those fees as an additional
award that was heard and approved September 25, 1998. On December 3, 1998,
the court awarded the Company an additional $185,000 in legal fees.
3. NETROM, INC. CONVERTIBLE PREFERRED STOCK
In January of 1998, the Company, on behalf of its wholly owned subsidiary,
Planificacion y Desarrollo Regional Jatay, S.A. de C.V., a Mexican
corporation, sold 50 acres of its Hills of Bajamar property to NetRom,
Inc., a California publicly traded corporation for $60,000 per acre, for a
total purchase price of $3,000,000, plus construction and management
contracts on said 50 acres.
NetRom, Inc. delivered to Tri-National Development Corp. at closing,
1,000,000 shares of its preferred stock at a value of $3.00 per share for
a total value of $3,000,000. The preferred stock will cumulate interest at
a rate of 15% per annum and will be convertible into common stock at $3.00
per share or market price for the 10 day average prior to the date of
conversion, which ever is less, but in no event less than $1.50 per share.
The conversion date is at the option of Tri-National Development Corp.,
however, no sooner than 12 months from the date of closing and in no case
later than 15 days after the common
8
<PAGE>
stock of NetRom, Inc. trades at or above $4.00 per share for a period of
thirty consecutive days.
Additionally, NetRom, Inc. will provide TND warrants to purchase 1,000,000
common shares at a price of $1.25 per share, presuming that NetRom, Inc.
achieves its stated projection of $.31 per share in earnings for the year
ending December 31, 1998. In the event that NetRom, Inc. falls below the
$.31 per share earnings projection, but no lower than $.21 in earnings for
that period, then the warrant price will fall to $1.00 per share. Further,
if the earnings fall to between $.11 and $.21, then the option price will
be reduced to $.75 per share and in the event the earnings fall below $.11
per share, the option price will be reduced to $.50 per share. The price
and terms for the property are based on arms length negotiations between
the parties and was approved by the Board of Directors of TND and the
shareholders of NetRom, Inc. at their Annual Meeting of Shareholders, held
on January 19, 1998.
In June of 1998, NetRom, Inc. exercised an option to acquire an additional
200 acres of the Company's Hills of Bajamar property for $4.2 million. The
$4.2 million was paid with 4.2 million restricted shares of NetRom, Inc.
common stock. By exercising its option to acquire the 200 acres, NetRom,
Inc. increases their total holdings to 250 acres The combined parcel will
be utilized via a joint venture arrangement with Tri-National to develop an
extreme sports destination resort on a 500 acre total parcel. This
investment of 4.2 million common shares of NetRom, Inc. represents
approximately 30% of the total shares outstanding of NetRom, Inc.
4. INVESTMENT IN MRI MEDICAL DIAGNOSTICS INC., A COLORADO CORPORATION
In 1992 the Company sold its wholly owned subsidiary, MRI Medical
Diagnostics Inc., a California corporation to Petro-Global, Inc., a
Colorado publicly traded corporation. In return the Company received
6,000,000 restricted common shares of the purchaser, Petro-Global, Inc.,
plus certain mineral properties and leases. In 1992, the mineral
properties were written down to a nil value in the records and the name was
changed from Petro-Global, Inc. to MRI Medical Diagnostics, Inc.(MRI-Med).
MRI-Med filed for Chapter 11 bankruptcy protection in July 1993 in
conjunction with the Chino Valley Bank action (see Note 2). After
dividends in kind totaling 2,000,000 shares in 1992 and 1993 to TND
shareholders, and due to uncertainty in the underlying value of the
remaining 4,000,000 MRI-Med shares held by the Company, the carrying cost
of these shares was written-off in 1994. Tri-National Development Corp.
filed a reorganization plan on behalf of MRI-Med in August 1995 and, in
settlement of the litigation described in Note (2), the Company received
5,900,000 shares of MRI-Med at a deemed value of $0.50 per share, ordered
by the U.S. Federal Bankruptcy Court, plus 1,400,000 shares for
reimbursement of current expenses. In July of 1997, MRI-Med recapitalized
on a 1 for 5 basis. The investment is recorded in the books at a cost of
$496,994. The Company declared and paid a stock dividend of 750,000 shares
of MRI-Med to TND shareholders of record August 31, 1997 and declared a
second stock dividend of an additional 750,000 to TND shareholders of
record January 27, 1998. After the stock dividends paid to TND shareholders
in 1992, 1993, 1997 and 1998, and shares sold to finance the reorganization
the Company retains approximately 415,000 post-split shares of MRI-Med.
MRI-Med is currently traded on the Over the Counter Bulletin Board under
the symbol "MMDI" and trades in the $.05 to $.10 range.
9
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5. REAL ESTATE DEVELOPMENT PROPERTY: HILLS OF BAJAMAR
The Hills of Bajamar (formerly the Santa Fe Ranch) consists of
approximately 2,470 acres (divided into ten 247 acres parcels) of
undeveloped land located fifty miles south of San Diego, California on the
Pacific Coast side of the State of Baja California, Mexico, in the
Municipality of Ensenada. The Company originally had a right to acquire a
100% interest in the property pursuant to a series of agreements requiring
ongoing payments for each 247 acres parcel released by the vendor.
In an effort to accommodate the Vancouver Stock Exchange, which the Company
was trading on at the time, the Company entered into an agreement with
Pacific Medical International, Inc. (PMI) whereby, subject to TND
shareholder approval, TND divested itself of all of its rights in
consideration for: retention of 86.45 acres of the first parcel of the
Santa Fe Ranch to be released by the original vendor; and the greater of
(1) a one percent royalty on the gross proceeds from the sale of any land
that is part of the said Santa Fe Ranch, or (2) $150,000 for each 247 acres
parcel released by the vendor, beginning with the release of the fourth
parcel and continuing with each release thereafter.
Prior to receiving shareholder approval, the Board renegotiated the
agreement and, on June 23, 1995, the Company held an Extraordinary General
Shareholder Meeting that approved the renegotiated agreement. Under the
renegotiated agreement, the Company was granted 51% of the issued and
outstanding shares of PMI with any dilution of stock to raise further
funding to come from the shareholdings of the minority shareholders of PMI
and not their treasury. PMI also agreed to assume a convertible promissory
note to a Mr. Yates on renegotiated terms and Yates agreed to such
assumption by PMI. The Yates note was originally secured by the Company's
rights to its 86.45 acres of the Santa Fe Ranch. The renegotiated note
with PMI provided for Yates to receive the greater of $2,000 or 50% of the
sale price for each acre of the Santa Fe Ranch sold until all funds due to
him were paid, with Yates also to receive a lien against the first 250
acres of the Santa Fe Ranch as security.
The Company then entered into a new agreement in November of 1996 with PMI
to acquire all right and title to the 237 acres then fully paid and in
escrow, as well as, the balance of the contract for the remaining 2,233
acres for a $700,000 promissory note payable, 500,000 shares of TND Class
B Series B Preferred Stock at a value of $4.00 per share and the return of
its 51% interest in PMI. In January of 1998, the Company converted the
$700,000 promissory note into 1,000,000 common shares of the Company. The
Company's basis in the Hills of Bajamar taking into account cash invested,
stock issued and notes given total, $3,843,661. PMI remains responsible
for its own debts, including Mr. Yates.
In September of 1992, the Company, in accordance with its contract, took
title to an additional 257 acres, for a total of 500, and placed the
balance of 2,000 acres of Hills of Bajamar in trust with Banco Ixe.
10
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6. PLAZAS RESORT TIMESHARES AND COMMERCIAL PROPERTY
In December of 1996, the Company entered into an acquisition agreement with
Valcas International, S.A. de C.V., to acquire 100% of the stock of
Inmobilaria Plaza Baja California, S.A. de C.V., a Mexican corporation,
including its existing assets, which include 16+ developed acres of ocean
front land within the Bajamar resort complex with plans for 328 vacation
ownership (timeshare) units, known as the Players Club at Bajamar, plus a
26,000 square foot adjacent commercial building under construction for
$13,079,055, payable with notes for $9,079,055 and 1,000,000 Class B Series
B Convertible Preferred shares with a value of $4.00 per share. See Note
14 for details on the Notes Payable.
7. ACTIVITY LINK, INC.
In January of 1998, TND, through its wholly owned subsidiary, Tri-National
Resorts Management, Inc., acquired 100% of Activity Link, Inc., a Nevada
corporation, for a combination of $228,000 in cash and 75,000 shares of
restricted Common Stock in TND and a quarterly distribution of profits in
the amount of 15% once Activity Link, Inc. has achieved $300,000 in annual
net profits and equally thereafter. Activity Link, Inc. owns the
proprietary rights to "Activity Link", a reservation system for many
different types of tourist activities that will be accessed directly by the
concierge desks of major hotels and resorts. The hotels and resorts will
be billed for each ticket or reservation paid through Activity Link. The
first three beta sites for Activity Link are being prepared for a vacation
ownership developer in Hawaii, starting in late 1998. Once beta testing is
complete, Activity Link plans to initially target the 500 hotels in Hawaii.
In addition, the Company intends to utilize Activity Link for its own
vacation ownership and resort properties. As of July 31, 1998, no
restricted Common Stock in TND had been issued in connection with this
acquisition. On September 3, 1998, the Board of Directors of TND authorized
the spinoff of Activity Link, Inc. to become its own publicly traded
corporation. The Board further authorized management, at its discretion,
to distribute a percentage of the Activity Link shares to shareholders of
TND, after a registration.
8. ASSISTED LIVING
In January of 1998, TND finalized negotiations and executed agreements to
purchase its first assisted living facility to be built and delivered, for
a combination of $110,000 in cash, 864,500 shares of the Company Class B
Series B Convertible Preferred Stock and a new mortgage for a total of
$8,140,000. Tri-National, through a newly formed subsidiary, Alpine Gardens
East, intends to own this 100 suite assisted living facility in Youngtown,
Arizona. This 100-unit facility is planned to include 40 two-bedroom units
and 60 one-bedroom units. In June of 1998, the Company closed on this
property. Financing is expected to be in place through FHA by September of
1998 at which time the Company intends to break ground on the construction.
As of July 31, 1998, the Company had paid a total of $65,000 in cash and
issued 864,500 shares of Class B Series B Convertible Preferred Stock.
9. PLAZA ROSARITO
On November 20, 1998, Tri-National Holdings, S.A. de C.V., a newly formed
wholly-owned Mexican subsidiary, took possession of Plaza San Fernando from
Banco Bital with a $1 million cash down payment. Plaza Rosarito's value is
in excess of $37 million. Tri-National has renamed this spectacular
property, Plaza Rosarito. It is located in the heart of Rosarito Beach in
Baja
11
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California, Mexico, minutes from the 20th Century fox film studio where
"Titanic" was filmed and down the street from the famous Rosarito Beach
Hotel. Plaza Rosarito includes 15 acres of undeveloped oceanfront land
zoned for a 450-room hotel and convention center and 15 acres of developed
land, including 415,000 square feet of existing steel, concrete and marble
commercial space, 40 developed residential lots and a 90% complete 36-unit
condominium complex.
The Company will start executing multi-year, triple-net leases from the
preliminary commitments for approximately 300,000 square feet of the
existing commercial property at up to $1.80 per square foot from large U.S.
and Mexican retail operations, which upon full lease up should generate in
excess of $6 million annually and become the largest shopping center in
Baja California.
10. FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
Furniture and equipment $713,611
Less accumulated depreciation (76,549)
--------
$637,062
========
11. LOANS PAYABLE-SHORT TERM
During the last twelve months, the Company issued a Private Placement of
nine-month Corporate Notes at 10% interest per annum to institutional and
accredited investors. The investors principal and interest are bonded by
New England Surety Co., for up to $8 million. The primary use of proceeds
generated from the $8 million will be used for the construction of the
first 41-unit phase of the Players Club at Bajamar vacation ownership
(timeshare) complex. The Company has, at its option, the ability to
renegotiate for up to an additional $15 million of bonding from New England
Surety Co., once the $8 million has been placed, using the first completed
41-unit phase as collateral. The Company intends to repay the principal
and interest with cash flow generated from vacation ownership sales. As of
October 31, 1998 the Company placed $2,545,009 in Corporate Notes.
12. LONG-TERM NOTES PAYABLE
Long-term notes payable at October 31, 1998, consisted of the following:
Note payable to Valcas Internacional,
S.A. de C.V. $ 5,688,582
Note payable to Valcas Internacional,
S.A. de C.V. 2,109,473
Note payable and cash payable to
DUBSCA upon closing of vacation
ownership (timeshare) project 1,200,000
Note payable to North County Bank
Guaranteed by a stockholder and
secured by equipment, due in
monthly installments of $864,
including interest at 10.5%,
through October, 2001 23,309
12
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Note payable to Commercial Money
Center secured by GSDIC
Equipment, due in monthly installments
of $17,889 for 63 months 484,751
-----------
9,587,115
Less current portion ( 39,821)
-----------
Long-term debt, net of current portion $ 9,547,294
===========
Maturities at long-term debt are as follows:
Year ending
October XXXX Amount
------------ ------
1999 $ 507,441
2000 1,901,129
2001 1,918,531
2002 5,459,860
-----------
$ 9,786,961
===========
13. INCOME TAXES
The Company began the year with loss carryforwards from prior years
totaling, $413,239. These losses increase the net loss carryforwards in
the current quarter to $299,329. There will be a loss carry forward in the
amount of $413,239 to reduce future federal income taxes.
14. LEASES
The Company leases two office facilities in San Diego, California and one
in Ensenada, Baja California under operating leases which expire in 1999
and the year 2000, respectively. The leases generally require the Company
to pay all maintenance, insurance and property taxes and are subject to
certain minimum escalation provisions. Rent expense for all operating
leases was approximately $42,000 for the six months ended October 31, 1998.
Future minimum operating lease payments as of October 31, 1998 are as
follows:
1999 $158,200
2000 167,800
--------
$326,000
========
15. GREATER SAN DIEGO IMAGING CENTER
This facility has provided magnetic resonance imaging (MRI) services in the
San Diego area since 1990. On June 4, 1996 the Company entered into an
Asset Purchase Agreement with Greater San Diego Imaging Center (GSDIC) with
an effective date of November 1, 1996. GSDIC owns and operates a magnetic
resonance imaging center in San Diego, California. The Company agreed to
purchase the fixed assets, certain trade accounts receivable, certain
assignable contracts, leases and agreements, prepaid expenses and the
goodwill of the business. The purchase price is $599,999 for the fixed
assets and $1.00 for other assets and is payable as follows:
13
<PAGE>
(a) by payment of $325,000, of which $25,000 U.S. was paid upon execution
of the agreement (partially paid from deposit on letter agreement), and
(b) by the issuance of 857,142 common shares of TND based upon a value of
$0.35 U.S. per share for total share consideration having a value of
$300,000 U.S., and
(c) on December 30, 1996, the Company entered into an agreement with First
Colonial Ventures, Ltd., Nevada publicly traded company, to sell it 1/3 of
GSDIC for $350,000 cash, payable over twelve months. As of April 30, 1998,
First Colonial had paid a total of $112,367, with unpaid principal,
interest and penalties of $357,748. The Company has declared First
Colonial in default and has retained the 1/3 interest as liquidated
damages.
This facility, with tenant improvements, was originally financed for $2.5
million. The equipment has a current appraisal of $1.2 million and tenant
improvements valued at $241,000. An $75,000 "open unit" upgrade was
completed for claustrophobic and large patients.
16. RELATED PARTY TRANSACTIONS
The aggregate amounts paid and accrued to related parties during the
quarter follows:
Management Compensation and Consulting Fees $67,400.
17. SHARE CAPITAL
The authorized capital of the Company consists of 110,100,000 shares
divided into,100,000 Class A Preferred shares with a par value of $1.00
each; 5,500,000 Class B Series A Convertible Preferred shares with a par
value of $1.00 each; 4,500,000 Class B Series B Convertible Preferred
shares with a par value of $1.00 each, of which 2,364,500 are issued and
outstanding; and 100,000,000 common shares without par value, of which
22,406,342 were issued and outstanding at October 31, 1998.
PREFERRED STOCK
CLASS A PREFERRED STOCK
100,000 Class A Preferred shares authorized with a par value of $1.00 each.
No Class A Preferred Shares have been issued.
CLASS B PREFERRED STOCK
10,000,000 Class B Convertible Preferred shares authorized with a par value
of $1.00. The 10,000,000 Class B Convertible Preferred shares are
authorized into two different series, 5,500,000 shares of Series A and
4,500,000 Series B.
CLASS B SERIES A PEFERRED STOCK
No Class B Series A Preferred Shares have been issued.
14
<PAGE>
CLASS B SERIES B PREFERRED STOCK
The Class B Series B Preferred Shares are priced at $4.00 per share,
cumulate at 15.00% annually and are convertible into Common Shares at $3.00
per share once the Common Shares have traded at an average of $5.00 or
higher for 30 consecutive trading days. The Class B Series B Convertible
Preferred Shares are used for acquisitions only and have no voting rights
until converted into Common Stock. As of April 30, 1998, a total of
2,364,500 share of Class B Series B Convertible Preferred Shares were
issued for acquisitions as follows:
Shares Issued TO Acquisition
- ------ --------- -----------
500,000 Pacific Medical International,Inc. Planificacion y Desarrolos
Regional Jatay, S.A. de C.V.
For Hills of Bajamar property
1,000,000 Valcas International, S.A. de C.V. Inmobilaria Plaza Baja
California, S.A. de C.V.
For Bajamar Plazas Resort and
Plaza Suite Bugambillas
864,500 Solymar, Inc. Assisted Living Property
In Youngtown, Arizona
COMMON STOCK
The authorized Common Stock of the Company consists of 100,000,000 shares
of Common Stock without par value. At October 31, 1998, there were
22,406,342 shares issued and outstanding.
The Common Stock has full voting rights on all matters for which
shareholder approval is required or permitted.
The Common Stock does not possess any preferential right to dividends and
therefore is entitled to dividends only when and if dividends on such
common stock are declared by the Board of Directors, and only from funds
legally available therefore.
The holders of Common Stock have equal ratable rights to dividends from
funds legally available therefore, when, as and if declared by the Board of
Directors of the Company; are entitled to shares ratably in all of the
assets of the Company available for distribution to holders of Common Stock
upon liquidation, dissolution or winding up of the affairs of the Company;
do not have preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions applicable thereto. Such shares are
entitled to one vote per share on all matters which stockholders may vote
on at all meetings of shareholders. All shares of Common Stock are fully
paid and nonassessable.
The holders of shares of common stock of the Company do not have cumulative
voting rights. Thus, the holders of more than 50% of such outstanding
shares, voting for the election of directors can elect all of the directors
to be elected, and in such event, the holders of the remaining shares will
not be able to elect any of the Company's directors.
15
<PAGE>
STOCK FOR LOTS PROGRAM
During the year end April 30, 1998, the Company carried out a Private
Placement to existing shareholders for 4,000 square foot residential lots
at the Hills of Bajamar. The cash price per lot was $10,000 and the stock
price per lot was 5,000 shares of Common Stock at a value of $2.00 per
share. As of October 31, 1998, 17 shareholders subscribed to the Private
Placement for 47 lots, totaling 235,000 shares of Common Stock.
The Company has recently completed the topography maps for the Hills of
Bajamar and retained FMA International for master planning. Once the
master plan for the Hills of Bajamar is completed, which is expected to be
by January 31, 1999, a plot selection will be sent out to all of the
participants in the Private Placement, on a first-come first-served basis.
Once the participants have made a lot selection, their Common Stock will be
held as treasury stock.
STOCK BUYBACK
On September 16, 1998, Tri-National announced that the Board of Directors
had authorized a Common Stock Repurchase Program for up to approximately $3
million. The $3 million used for the Common Stock Repurchase Program will
come from the $5 million award from Chino Valley Bank. Management has
never seen litigation as a profit center, hence, any cash awarded from the
lawsuit has never been included in the Company's budget for operating
capital or acquisitions and development. Management has been given
discretion over the timing and amounts of the periodic buybacks, including
in advance of receipt of the award. Shares bought back will be held as
treasury stock and may be used for general corporate purposes.
18. OPTIONS AND WARRANTS
STOCK OPTIONS GRANTED AND EXERCISED DURING THE YEAR:
For the year ending December 1996, 975,000 Employee Stock Options were
issued to officers and Directors to purchase Common Stock in the Company at
a price of $.25 per share, expiring December 31, 1999. As of October 31,
1998, a total of 875,000 Employee Stock Options were outstanding.
For the year ending December 1997, a total of 1,000,000 Employee Stock
Options were issued to officers and directors to purchase Common Stock in
the Company at a price of $.50 per share and expiring December 31, 1999.
As of October 31, 1998, no Employee Stock Options had been exercised at
$.50 per share.
For the year ending December 1998, a total of 1,000,000 Employee Stock
Options were issued to officers and directors to purchase Common Stock in
the Company at a price of $.50 per share and expiring December 31, 1999.
As of October 31, 1998, no Employee Stock Options had been exercised at
$.50 per share.
WARRANTS GRANTED AND EXERCISED DURING THE YEAR:
In 1996,the Company carried out a private placement of 1,945,741 units of
the Company at a price of $0.285 per unit for gross proceeds of $521,971.
Each unit consists of one common share in the capital of the Company and a
two year non-transferable share purchase warrant. Each non-transferable
share purchase warrant entitles the holder thereof to purchase one common
share in the capital of the Company at any time during the first six months
of the term of the
16
<PAGE>
warrant at a price of $0.285, at any time during the second six months of
the term of the warrant at a price of $0.40, at any time during the third
six months of the term of the warrant at a price of $0.55 or at any time
during the final six months of the term of the warrant at a price of $0.75.
The term of the warrant commenced on the October 30, 1996. As of October 31,
1998, a total of 1,818,495 warrants had been exercised, leaving 127,246
warrants unexercised and expiring on October 31, 1998.
In 1996,the Company also carried out a private placement of 968,020 units
of the Company at a price of $0.35 per unit for gross proceeds of $338,807.
Each unit consists of one common share in the capital of the Company and a
two year non-transferable share purchase warrant. Each non-transferable
share purchase warrant entitles the holder thereof to purchase one common
share in the capital of the Company at any time during the first year of
the term of the warrant at a price of $0.40 or at any time during the final
year of the term of the warrant at a price of $0.50. The term of the
warrant commenced on the October 30, 1996. As of October 31, 1998, a total
of 943,145 warrants had been exercised, leaving 24,875 unexercised and
expiring on October 31, 1998.
During the year ended April 30, 1998, the Company carried out a private
placement of 1,857,332 units of the Company for gross proceeds of
approximately $669,194. Each unit consists of one common share in the
capital of the Company and a one year non-transferable share purchase
warrant for a term of one year. Each non-transferable share purchase
warrant entitles the holder thereof to purchase one common share in the
capital of the Company at any time during the year of the term of the
warrant at an average price of approximately $.80 per share. As of October
31, 1998, no warrants for this private placement have been exercised;
913,972 warrants were outstanding and 943,360 had expired unercised. The
shares issued pursuant to this private placement are restricted securities
as defined by Rule 144.
RECENT SALE OF SECURITIES
In July of 1998, the Company carried out a single issuer private placement
for 500,000 shares at a price of $.35 per share. No warrants were attached
to the placement. The shares issued pursuant to this private placement are
restricted securities as defined by Rule 144.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
GREATER SAN DIEGO IMAGING CENTER is the magnetic resonance imaging ("MRI")
facility the company acquired in 1997. This center has provided services to
the San Diego medical community since 1990. From 1997 to 1998, the facility
gross increased by over 50% and the has increased from 240 patients in the
first year to over 1,000 in 1998. The increase is based on aggressive new
marketing following on the addition of a $75,000 "open gap" upgrade, which
allowed the facility to cater to overweight and large patients as well as
claustrophobic patients that could not tolerate the very closed other units
in San Diego.
Another public company, First Colonial Ventures, Ltd., had contracted for
a one third ownership position in the center and was to pay the company
$350,000 for that percentage. However, after paying in excess of $100,000
of the contracted amount, First Colonial defaulted on its contract and the
company noticed them of the default and pursuant to the default provision,
terminated their rights
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<PAGE>
and retained the one third position and cash paid to date as liquidated
damages.
Greater San Diego Imaging Center under the direction of its medical
director, Jerry J. Parker, M.D., is looking to expand its operations in
1999 by adding additional diagnostic services.
BAJAMAR OCEAN FRONT RESORT located in Baja California, Mexico on the
Pacific Ocean is the subject of a June 1996 escrow established with Stewart
Title Company of Houston, Texas. The escrow was opened with Desarrollos
Urbanos Baja California, S.A., which is half owned by Grupo Situr, S.A.,
the largest Mexican resort development company in Mexico. Subsequent to the
opening of the escrow, Grupo Siturs financial problems grew into a national
issue and the Mexican government became involved with the banks to attempt
to work out the overall issues. The property at Bajamar, which is the
subject of our contract is only a small fraction of their holdings, however
all sales were on hold until a complete workout plan was effected.
Consequently, we have retained our escrow position and patiently waited for
the resolve, which we believe to be very close to occurring.
Our escrow includes the existing 27 holes of golf, the existing 81 room
hotel, the clubhouse, tennis courts, land and plans for an additional 102
room hotel and conference center, land and plans for an additional 9 holes
of golf and approximately 300 acres of developed land for residential
housing adjacent to the golf courses. The closing of this escrow also is
important to the timeshare/vacation ownership program that is located on
land separate from this escrow, however located in the Bajamar resort. This
328-unit program is dependent on its relationship with the adjacent golf
courses and hotel and we have delayed the start of the timeshares in
anticipation of our escrow closing and thereby guaranteeing the
availability of these amenities.
PLAZAS RESORT AND COMMERCIAL PROPERTY, KNOWN AS THE PLAYERS CLUB AT
BAJAMAR, is a vacation ownership (timeshare) complex will encompass 328
units located on the golf course and facing the ocean and an adjacent
26,000 square foot commercial facility on a 16-acre developed site
purchased by the Company in December of 1996. While we have been waiting
for the above stated escrow to close, work has continued on the plans for
the structures as well as all of the marketing materials. The Company has
also begun accepting preliminary sales of the timeshares, which the Company
anticipates will be in great demand, since there is no real competition in
the region, certainly not on a golf course and on the ocean only 50 miles
from San Diego.
ACTIVITY LINK, INC. On September 3, 1998, the Board of Directors of the
Company approved the immediate spin-off of it's wholly-owned subsidiary
Activity Network, Inc., a Nevada Corporation. Activity Network has been
developing an integrated software-based reservations system linking hotel
and timeshare properties with providers of leisure activities like
helicopter flights, luaus, scuba diving and snorkel cruises in Hawaii. The
system will provide real-time activity reservations through the existing
network of activity desks throughout Hawaii, a state which has over
7,000,000 annual visitors that stay a week or longer, seeking recreation.
The initial system design was based on a customized dial-up computer
network, which analysis showed would have limited the company's growth rate
and potential. After extensive research and meetings with industry
consultants including Microsoft engineers, a decision has been made to
proceed with an
18
<PAGE>
integrated Internet-based architecture, permitting more rapid growth and
eventual expansion into the consumer direct market. Based on that decision
and its requirement for a more comprehensive system design and
architecture, and the concomitant need for additional funding, Tri-National's
Board of Directors has decided to pursue a strategy of bringing
Activity Network public now, an approach believed to be in the best
interests of both the project and shareholders of Tri-National.
Tri-National will be assisting in the compilation and filing of Form 15c2-11
for Activity Network, the filing necessary to become publicly traded
corporation. In addition, Activity Network is in the process of raising $1
million for working capital and research and development through a private
placement at $2.50 per share.
Tri-National will retain a significant stock position in the new public
entity. In an effort to enhance shareholder value, the Board of Directors
has authorized management, at its discretion, to distribute a percentage of
the Activity Network shares to Tri-National shareholders after
registration.
ALPINE GARDENS EAST is a Nevada corporation created in January 1998 to
focus on assisted living for senior citizens. The Company's first project
is in Youngtown, Arizona just north of Phoenix and adjacent to Sun City.
This facility will be a 190-unit assisted living and Alzheimer's care
facility. The Company closed on the land in June of 1998 and has just
recently completed the soil studies begin construction in early 1999.
On October 21, 1998, Tri-National, through its majority-owned subsidiary,
Alpine Gardens East, entered into a purchase agreement to acquire a 50%
interest in Premier Care, Inc., an Arizona healthcare corporation for a
combination of cash and stock. In addition to a pharmaceutical subsidiary,
Premier Care, Inc. has assisted living and skilled nursing operations in
independent facilities generating gross revenues in excess of $12 million
annually.
On November 3, 1998, the Company signed an agreement to acquire 3.66 acres
of undeveloped property overlooking the Pacific Ocean in Carlsbad,
California for $2.9 million. The Company plans to develop a 180-bed
assisted living facility with an Alzheimer's care component. The addition
of the Carlsbad project to the Company's assisted living operations could
add in excess of $30 million in assets and over $1 million in net revenues
to the Company annually.
On November 19, the Company entered into a purchase agreement to secure
land and improvements to develop a $22 million mid-rise independent and
assisted living complex to be constructed on Cortez Hill at the corner of
8th and Ash Street. The facility, to be known as the Cortez House, will be
operated by its subsidiaries Alpine Gardens East, Inc. and Premier Care.
Construction is expected to commence mid-1999. The acquisition and
development of the Cortez House is an exciting opportunity to participate
in the $3.5 billion San Diego downtown redevelopment, right in our own
backyard.
Further, the Company is completing the final phase of its due diligence
study for the acquisition of 7 additional sites in Washington and Oregon,
yielding $119 million in additional assets, which is expected to generate
annual net revenues in excess of $14 million. The Company has been
negotiating with three large U.S. investment banks for financing the
acquisitions and development of assisted living facilities.
19
<PAGE>
NEW ENGLAND SURETY is a bonding company that is providing nine-month surety
bonds to cover principal and interest for lenders that are providing the
Company with funds necessary to proceed with the development of the
timeshare program, as well as operational requirements. The program gives
a 10% per annum interest rate to the institutional and accredited lenders
in addition to up to 20% in costs for the bonds and cost of securing the
funding. While this would appear to be expensive the Company believes it to
be a good alternative to the usual private placements that would typically
be used to provide these types of funds. If the market price of our stock
was at a much higher level then the decision would probably be different.
However, for the time being this appears to be a viable and less dilutive
approach. The company is required to collateralize the bond with 187 acres
of its Hills of Bajamar property for the first $8,000,000 of loans and has
also been approved for an additional $15,000,000 bond subject to utilizing
the first section of 41 units of vacation ownership units (timeshares) as
collateral for that amount.
No Private Placements have occurred during this period due to the market
price of the Company's shares being well under a $1.00 and consequently
adding significant dilution to raise the same $8,000,000 as is being done
with the bond program.
NETROM, INC., is a California publicly traded company that purchased 50
acres of the Hills of Bajamar property in February of 1998 for $3,000,000
of their stock based on $60,000 per acre. In June of 1998, Netrom then
proceeded to contract directly with the Company to acquire an additional
200 acres for $4,200,000, which was paid in full by deliverance of
4,200,000 shares of their common stock.
Netrom and the Company have since entered into a joint venture agreement to
develop a family sports destination resort on the Hills of Bajamar. Netrom
will contribute the 250 acres recently acquired and the Company will
contribute an additional 250 acres thereby creating a potential 500 acre
resort. Plans and designs are currently under way by the recently appointed
master planner, FMA International, for the facility that should bring major
joint venture partners from the sports world. The facility is envisioned to
include man made snow board hills, lakes for water sports, other board
sports taught by professionals, executive style golf course for teaching
golf to beginners, race tracks for cars and bike racing and its own hotel
and spas for a family environment.
INTERNATIONAL HEALTH NETWORKS/MRI MEDICAL DIAGNOSTICS, INC., is the
combining of the entire medical campus programs for Mexico that the Company
has envisioned for the past several years as the magnet for the retiree
market in Baja California, Mexico. As discussed earlier, Ron Hibbard who
passed away was also purchasing the shell company known as MRI-Medical
Diagnostics, Inc., which the company retains an interest in. When Mr.
Hibbard died his concept of franchising Alpine Herbs utilizing the MRI-
Medical shell died with him. Upon mutual agreement the parties agreed to
dissolve the original transaction and return MRI-Medical to its original
state. At that time International Health Networks, "IHN", came forward and
agreed to merge with MRI-Medical with the intent of utilizing the shell for
the medical programs that makes up their company. IHN is headed up by three
prominent doctors, all of whom are also shareholders of Tri-National,
including Dr. Jerry Parker, who is also a director of the company. They
had to move quickly to begin bringing in funds to clear the liabilities
needed to keep the shell from being removed from trading for lack of
filings with the SEC and accounting requirements as well as fees due the
transfer agent.
20
<PAGE>
The medical campus is to be built on Hills of Bajamar property contracted
for by IHN in 1997. The agreement called for 150 acres at the south end of
the property at a price of $25,000 per acre and an option for an additional
100 acres at $60,000 per acre for 3 years. The company retained the right
to build all required facilities on the combined 250 acres and to maintain
a property management contract as well. The campus is to include an acute
care hospital associated with an recognized U.S. provider, a medical school
complete with dormitories, class rooms and auditorium, medical exhibition
center, R & D facilities for pharmaceutical industry and facilities for
long term care combined with anti-aging and wellness programs. This campus
is important not only to the region, but to the Company's desire to create
a retirement mecca on its properties.
CHINO VALLEY BANK LAWSUIT and subsequent jury award, On August 14, 1998,
Tri-National and its wholly owned subsidiary, MRI Grand Terrace, Inc.,
appeared in the Superior Court of San Bernardino before the Honorable Barry
Plotkin, to hear Chino Valley Bank, now known as Citizens Business Bank
(AMEX:CVB), attempt to attack the judgement of approximately $5,000,000
signed by Judge Plotkin on June 3, 1998. Tri-National successfully defeated
the bank's motion for a new trial, as well as a motion for the Judge to set
aside the jury's verdicts reached on May 7, 1998. In denying Citizens
Business Bank's motions, the court upheld the jury's respective verdicts of
12 to 0 and 11 to 1, wherein they found the bank guilty of fraud and
negligent misrepresentation in connection with the sale of the Grand
Terrace Retirement Hotel to Tri-National and MRI Grand Terrace, Inc. in
1992. On August 17, 1998, the bank posted a $7.5 million bond to start
the appeal process. Post judgement interest against the bank continues at
the rate of approximately $500,000 per year. Citizens Business Bank has a
total net worth of approximately $100 million.
Tri-National's motion for attorney fees and costs was heard and approved on
September 25, 1998. On December 3, 1998, the court awarded the Company an
additional $185,000. These costs are in addition to the existing
$5,000,000 judgement for punitive and compensatory damages, including
pre-trial interest.
If the bank formally begins the appeal process, this would permit Tri-
National to cross appeal, allowing Tri-National to present damages that
were not recognized by the judge in the first trial. Most importantly, we
could present damages of two publicly traded stocks with several million
shares outstanding on each Company, that had stock prices adversely
affected. Additional damages could run as high as $20 million in our
favor.
PLAZA ROSARITO On November 20, 1998, Tri-National Holdings, S.A. de C.V.,
a newly formed wholly-owned Mexican subsidiary, took possession of Plaza
San Fernando from Banco Bital with a $1 million cash down payment. Plaza
Rosarito's value is in excess of $37 million. Tri-National has renamed
this spectacular property, Plaza Rosarito. It is located in the heart of
Rosarito Beach in Baja California, Mexico, minutes from the 20th Century
fox film studio where "Titanic" was filmed and down the street from the
famous Rosarito Beach Hotel. Plaza Rosarito includes 15 acres of
undeveloped oceanfront land zoned for a 450-room hotel and convention
center and 15 acres of developed land, including 415,000 square feet of
existing steel, concrete and marble commercial space, 40 developed
residential lots and a 90% complete 36-unit condominium complex.
The Company will start executing multi-year, triple-net leases from the
preliminary commitments for approximately 300,000 square feet of the
existing
21
<PAGE>
commercial property at up to $1.80 per square foot from large U.S. and
Mexican retail operations, which upon full lease up should generate in
excess of $6 million annually and become the largest shopping center in
Baja California
SUMMARY OF OCTOBER 31, 1998 TO APRIL 30, 1999 targets and plans includes
additional acquisitions and development in the assisted living facility
business, as well as related type facilities to provide current profits.
The company expects to deliver a significant number of timeshare units,
accompanied by the appropriate earnings, in addition to the earnings
associated with the existing golf and hotel properties at Bajamar, which
the Company anticipates closing on prior to the Company's year end, April
30, 1999. We will continue to seek opportunities for growth, which will be
announced from time to time as is required.
Our target for attaining a NASDAQ listing remains high on our list and we
intend to do all necessary to succeed in that effort. The listing brings us
up to an entirely different level in the perception of the Company by
investors, acquisition candidates, employee candidates and the
institutional market at large. This is especially critical when addressing
funding sources relative to our major capital requirements for our joint
ventures, acquisitions and development or just basic equity versus debt
analysis.
The coming year should be the year for the Company's efforts to finally
crystallize and reward us all with a sound and growing investment.
FORWARD LOOKING STATEMENTS
Statements of the Company's or management's intentions, beliefs,
anticipations, expectations and similar expressions concerning future
events contained in this document consistute "forward looking statements"
as defined in the Private Securities Litigation Reform Act of 1995. As
with any future event, there can be no assurance that the events described
in forward looking statements made in this report will occur or that the
results of future events will not vary materially from those described in
the forward looking statements made in this report. Important factors that
could cause the Company's actual performance and operating results to
differ materially from the forward looking statements include, but are not
limited, changes in the general level of economic activity in the markets
served by the Company, competition in the real estate industry and other
industries where the Company markets its products and the introduction of
new products by competitors in those industries, delays in refining the
Company's construction and sales techniques, cost overruns on particular
projects, availability of capital sufficient to support the Company's level
of activity and the ability of the Company to implement its business
strategy.
22
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See notes to financial statements.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
27. Financial Data Schedule
(B) Reports on Form 8-K
Tri-National Development Corp. filed no reports on Form 8-K during the
sixth months ended October 31, 1998.
Items 2,3,4 and 5 are not applicable and have been omitted.
SIGNATURES:
Pursuant to the requirements of the Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Tri-National Development Corp.
a Wyoming Corporation
BY: s/Michael A. Sunstein DATED: December 14, 1998
Michael A. Sunstein
Chief Executive Officer, President
Director
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