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 January 31, 1999
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 March 23, 1999, 22,693,705 shares of the registrant's common stock
were outstanding.
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TRI-NATIONAL DEVELOPMENT CORP.
FORM 10QSB
FOR THE PERIOD ENDED JANUARY 31, 1998
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
a) Consolidated Statements of Operations
For the Nine Months Ended
January 31, 1998 and 1999 . . . . . . . . . . . . . . . 3
b) Consolidated Balance Sheets
As of January 31, 1998 and 1999 . . . . . . . . . . . . 4
c) Consolidated Statements of Cash Flows
For the Nine Months Ended
January 31, 1998 and 1999 . . . . . . . . . . . . . . . 5
d) Notes to the Financial Statements . . . . . . . . . . . 6
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
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED
JAN 31, 1999 JAN 31, 1998
------------ ------------
REVENUES:
- ---------
Revenues $ 492,074 $ 349,118
Gain on Sale of Assets - 2,880,000
----------- -----------
Total Revenues 492,074 3,229,118
EXPENSES:
- ---------
General and Administrative
Expenses (Note 22) 4,422,330 1,006,538
----------- -----------
Income Before Unusual Items (3,930,256) 2,222,580
----------- -----------
UNUSUAL ITEMS:
- --------------
Gain (Loss) on Debt Settlement - -
Gain on Sale of Assets 27,797 -
Write-Down of Investments - -
----------- -----------
Total Unusual Items 27,797 -
----------- -----------
Minority Interest - (12,435)
Income Before Income Taxes (3,902,459) 2,210,145
Income Tax Provision - 339,496
----------- -----------
Net Income $(3,902,459) $ 1,870,650
----------- -----------
Earnings per share-Primary $ (0.153) $ 0.110
Earnings per share-Fully Diluted $ (0.153) $ 0.110
See accompanying notes to financial statements
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TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED UNAUDITED BALANCE SHEETS
ASSETS: JAN 31, 1999 JAN 31, 1998
- ------- ------------ ------------
CURRENT ASSETS:
- ---------------
Cash & Cash Equivalents $ (71,789) $ 373,016
Accounts Receivable 438,633 734,796
Citizens Business Bank Judgment
Receivable (Note 2) 5,566,328 -
----------- -----------
TOTAL CURRENT ASSETS 5,933,172 1,107,812
----------- -----------
INVESTMENTS:
NetRom, Inc. Convertible Preferred
Stock (Note 3) 3,000,000 3,000,000
NetRom, Inc. Common Stock (Note 4) 4,200,000 4,200,000
MRI Medical Diagnostics, Inc. (Note 5) 20,308 496,994
Hills of Bajamar (Note 6) 4,159,159 3,723,661
Plaza Resort Timeshares (Note 7) 13,341,192 13,279,055
Bajamar Las Perlas Condominiums (Note 8) 6,000,000 -
Activity Link, Inc. ( Note 9) 216,064 -
Assisted Living-Youngtown (Note 10) 4,002,300 -
Assisted Living-Carlsbad (Note 11) 40,000 -
Alpine Gardens East (Note 12) 300,500 -
Plaza Rosarito (Note 13) 1,008,108 -
Portal Del Mar Condominiums (Note 14) 100,000 -
Banco Atlantico Commercial
Building (Note 15) 25,000 -
International Health Network (Note 16) 10,000 -
----------- -----------
TOTAL INVESTMENTS 36,422,631 24,699,710
Capitalized Equipment lease (Note 19) 471,391 -
Property, Furniture, and Equipment
(Note 18) 175,810 637,060
Capitalized Equipment lease-Last
Lease Payment 17,889 -
----------- -----------
TOTAL ASSETS $43,020,892 $26,444,582
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
CURRENT LIABILITIES:
- --------------------
Accounts Payable $ 419,590 $ 360,513
Citizens Business Bank Judgment
Legal Exp Payable (Note 2) 1,948,215 -
Notes Payable (Note 19) 1,044,880 394,378
Notes Payable-Current Portion 8,234 7,441
Interest Payable 717,511 -
----------- -----------
TOTAL CURRENT LIABILITIES 4,138,430 762,332
Notes Payable-Net of Current
Portion (Note 20) 18,274,796 9,302,828
Long-Term Lease Obligation 983,894 -
Unamortized Discount on Lease (512,503) -
Deferred Income - Citizens Business
Bank Judgment (Note 2) 3,618,113 -
Accrued Taxes on Income - 339,496
----------- -----------
TOTAL LIABILITIES 26,502,730 10,404,656
----------- -----------
STOCKHOLDERS' EQUITY:
- ---------------------
Common Stock (Note 21) 11,715,110 9,098,508
Treasury Stock (Note 21) (339,251) -
Preferred Stock (Note 21) 9,458,000 6,000,000
Retained Earnings ( Deficit ) (4,315,697) 941,418
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 16,518,162 16,039,926
=========== ===========
Total Liabilities and Stockholders'
Equity $43,020,892 $26,444,582
=========== ===========
See accompanying notes to financial statements
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TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
CASH FLOW ACTIVITIES: NINE MONTHS ENDED
- --------------------- ---------------------------
JAN 31, 1999 JAN 31, 1998
------------ ------------
CASH FROM OPERATING ACTIVITIES: INFLOW (OUTFLOW):
- -------------------------------------------------
Net Income (Loss) (3,902,459) $ 1,870,650
Add: Depreciation & Amortization - 49,722
Changes in Operating Assets and
Liabilities:
Accounts Receivable (149,701) (332,180)
Accounts Payable 47,038 133,200
Accrued Taxes on Income - 339,497
Interest Payable 717,511 -
----------- -----------
Net Cash from Operating Activities (3,287,611) 2,060,889
----------- -----------
CASH FROM INVESTING ACTIVITIES: INFLOW (OUTFLOW)
- ------------------------------------------------
Furniture and Equipment (10,141) (12,229)
Land Sale to NetRom, Inc. for
Preferred Stock - (3,000,000)
Alpine Gardens East (268,000) -
MRI Medical Diagnostics Investment - -
Activity Link, Inc. (105,800) -
Assisted Living-Youngtown (434,300) -
Assisted Living-Carlsbad (40,000) -
U.S. Treasury Bills - (258,855)
Certificates of Deposit - (29,110)
Las Perlas Condominiums (1,000,000) -
Hills of Bajamar (435,498) 118,000
Plaza Rosarito (1,008,108) -
Portal Del Mar (100,000) -
Hall of Fame Fitness Center Building (25,000) -
International Health Network (10,000) -
Plaza Resort Timeshares (262,137) -
----------- -----------
Net Cash From Investing Activities (3,698,984) (3,182,194)
----------- -----------
CASH FROM FINANCING ACTIVITIES: INFLOW (OUTFLOW)
- --------------------------------------------------
Notes and Loans Payable 4,390,188 (499,736)
Common Stock Private Placements
& Warrants 2,644,388 1,660,100
Purchases of Treasury Stock (1,539,251) -
Treasury Stock Issued for Real Estate 1,200,000 -
Minority Interest - 12,435
----------- -----------
Net Cash From Financing Activities 6,695,325 1,172,799
----------- -----------
Net Cash Inflow (Outflow) 9 months
ended 1-31-99 & 1-31-98 (291,270) 51,494
Cash-Beginning Balance as of
May 1, 1998 & 1997 219,481 33,557
----------- -----------
Cash- Ending Balance as of
January 31, 1999 & 1998 $ (71,789) $ 85,051
=========== ===========
See accompanying notes to financial statement
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TRI-NATIONAL DEVELOPMENT CORP.
NOTES TO THE FINANCIAL STATEMENTS
January 31, 1999 (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 nine
months ended January 31, 1999 and 1998. 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.
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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 began 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, 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 accumulates 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
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stock of NetRom, Inc. trades at or above $4.00 per share for a period of
thirty consecutive days.
Additionally, NetRom, Inc. provided 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.
4. NETROM, INC. COMMON STOCK
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.
5. 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.
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6. 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, totals $4,159,159. PMI remains responsible
for its own debts, including Mr. Yates.
In September of 1998, the Company, in accordance with its contract, took
title to an additional 257 acres, for a total of 494 acres, and placed the
balance of 2,000 acres of Hills of Bajamar in trust with Banco Ixe.
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7. PLAZAS RESORT TIMESHARES AND COMMERCIAL PROPERTY
In December of 1996, the Company entered into an acquisition agreement with
Valcas Internacional, S.A., to acquire 100% of the stock of Inmobilaria
Plaza Baja California, S.A., a Mexican corporation, including its existing
assets, which include 16+ developed acres of ocean front land within the
Bajamar resort with plans for 328 vacation ownership (timeshare) units,
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
details for Notes Payable. During the third quarter, the Company paid
$200,000 additional as it modified the original contract.
8. LA PERLA CONDOMINIUMS
In January of 1999, the Company into an acquisition agreement with Valcas
Internacional, S.A. to acquire 2+ developed acres of ocean front land
within the Bajamar resort, with plans for a 32-unit condominium complex for
$6,000,000. The Company paid $1,000,000 in accordance with the new
contract for the 32-unit La Perla condominiums to be built and signed notes
for an additional $5,000,000, pursuant to a construction contract executed
simultaneously.
9. 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 PLUS 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 January 31, 1999, no
restricted Common Stock in TND had been issued in connection with this
acquisition. On September 3, 1998, the Board of Directors of TND voted to
allow Activity Link, Inc. to assume its own identity with its own
management, while TND retained an approximately 40% interest. The Board
further authorized management, at its discretion, to distribute a
percentage of the retained shares in Activity Link to shareholders of TND,
after a registration if Activity Link went public.
10. ASSISTED LIVING - YOUNGTOWN
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 its majority owned subsidiary, Alpine
Gardens East, intends to own and operate this 126-bed assisted living
facility in Youngtown, Arizona. This facility is planned to include 40
two-bedroom units, 50 one-bedroom units
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and 36 units reserved for Alzheimer and Dementia residents. In June of
1998, the Company closed on this property.
11. ASSISTED LIVING - CARLSBAD
In October of 1998, the Company entered into a purchase agreement to
acquire 3.66 acres of undeveloped property overlooking the Pacific Ocean in
Carlsbad, California for $2,900,000, with a $40,000 down payment at
signing. The Company, through its majority owned subsidiary, Alpine
Gardens East, intends to develop and operate this 180-bed assisted living
facility, with an Alzheimer's care component.
12. ALPINE GARDENS EAST
Alpine Gardens East is a Nevada corporate formed to own and operate
assisted living facilities in the southwest United States. As of January
31, 1999, the Company has paid $300,500 for its 75% interest.
13. 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. Tri-National has renamed
this property, Plaza Rosarito. It is located in the heart of Rosarito
Beach in Baja California, Mexico. 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 187,500 square feet of
existing steel, concrete and marble commercial space, 40 developed
residential lots and a 90% complete 36-unit condominium complex.
14. PORTAL DEL MAR CONDOMINIUMS
In February of 1999, Tri-National Holdings, S.A. de C.V., a newly formed,
wholly-owned Mexican subsidiary, signed purchase agreements and provided
the $100,000 down payment to acquire Portal Del Mar for $1,250,000. Portal
Del Mar is a 120-unit, 2 and 3-bedroom condominium development on 6 acres
overlooking the Pacific Ocean in Baja California, Mexico, just south of
Rosarito Beach. The 120 ocean view condominiums are in various stages of
completion, with approximately 46 completed.
15. BANCO ATLANTICO COMMERCIAL BUILDING
In February of 1999, Tri-National Holdings, S.A. de C.V., a newly formed,
wholly-owned Mexican subsidiary, signed purchase agreements and provided
the $25,000 down payment to acquire Banco Atlantico for $950,000. Banco
Atlantico is a 20,000 square foot, 2-story commercial building in the heart
of the banking district in Tijuana, Mexico.
16. INTERNATIONAL HEALTH NETWORKS, INC.
International Health Networks, (IHN) is Nevada corporation and a majority-
owned subsidiary of the Company. IHN is headed up by three prominent
physicians, all of whom are also shareholders of Tri-National, including
Dr. Jerry Parker, who is a director of the Company. IHN is a multitude of
U.S. medical services designed for Mexico that the Company has envisioned
for the past several years as the magnet for the retiree market in Baja
California, Mexico.
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The primary focus for IHN is a planned medical campus, to be built on Hills
of Bajamar property. The medical campus was originally contracted for by
IHN in 1997 in an agreement that called for 150 acres at the south end of
the property at a price of $25,000 per acre with an option for an
additional 100 acres at $60,000 per acre for 3 years. The Company retained
the construction rights to build all required facilities on the combined
250 acres and maintain a property management contract. The campus is to
include an acute care hospital associated with an recognized U.S. medical
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. With
IHN now a majority-owned subsidiary of TND, the original contract is being
revised.
18. FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
Furniture and equipment $672,679
Less accumulated depreciation (25,478)
--------
$647,201
========
19. 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 residential lot, condominium and
vacation ownership sales. As of January 31, 1999 the Company placed
$5,224,881 in Corporate Notes, of which $1.044,880 will be retired in the
next 12 months.
20. LONG-TERM NOTES PAYABLE
Long-term notes payable at January 31, 1999, consisted of the following:
Note payable to Inmobiliaria Plaza
Baja California, S.A. de C.V. $ 5,688,582
Note payable to Inmobiliaria Plaza
Baja California, S.A. de C.V. 2,190,473
Notes payable to Valcas Internacional,
S.A. de C.V., pursuant to La Perla 5,000,000
Construction contract
Corporate Notes payable to accredited
Investors - 10% per annum 4,180,000
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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 $860,
including interest at 10.5%,
through October, 2001 23,975
-----------
18,283,030
Less current portion ( 8,234)
-----------
Long-term debt, net of current portion $18,274,796
===========
Maturities at long-term debt are as follows:
Period ending
January 31 Amount
---------- ------
2000 7,608,234
2001 1,409,121
2002 9,265,675
-----------
$18,283,030
-----------
21. 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
22,625,133 were issued and outstanding at January 31, 1999.
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.
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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 January 31, 1999, 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 January 31, 1999, there were
22,625,133 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.
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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 January 31,
1999, 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 January 31, 1999, a total of 1,000 Employee Stock Options had been
exercised at $.50 per share, leaving 999,000 outstanding.
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 January 31, 1999, 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 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 January
31, 1999, a total of 28,572 warrants had been exercised; 528,158 warrants
were outstanding at an average exercise price of $.74 and
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<PAGE>
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 common shares for gross proceeds of $175,000. No warrants were
attached to the placement. The shares issued pursuant to this private
placement are restricted securities as defined by Rule 144.
In November of 1998, the Company carried out a single issuer private
placement for 1,500,000 common shares for gross proceeds of $615,000. No
warrants were attached to the placement. The shares issued pursuant to
this private placement are restricted securities as defined by Rule 144.
TREASURY STOCK
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 January 31, 1999, 17 shareholders subscribed to the Private
Placement for 47 lots, totaling 235,000 shares of Common Stock.
Last year the Company retained FMA International and has just recently
completed the master planning for the Hills of Bajamar. Once the
engineering for the Hills of Bajamar is completed, which is expected to be
by April 30, 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
canceled and held as treasury stock by the Company.
COMMON STOCK REPURCHASE PROGRAM:
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. As of the
date of this filing, March 23, 1999, the Company has bought back a total of
approximately 3.5 million common shares.
22. INCOME TAXES
The Company began the year with loss carry forwards from prior years
totaling, $413,239. The losses for the last 3 quarters increase the net
loss carry forwards to $4,315,698.
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23. 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. The Company also leases autos,
equipment and computers.
Future minimum operating lease payments as of January 31, 1999 are as
follows:
1999 $210,700
2000 252,840
--------
$463,540
========
24. 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:
(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.
25. RELATED PARTY TRANSACTIONS
There were no related party transaction other than the compensation and
expense allowance incurred in the ordinary course of business.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
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 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 allowing
Activity Network to proceed independently, an approach believed to be in
the best interests of both the project and shareholders of Tri-National.
Tri-National will be available to assist in the compilation and filing of
Form 15c2-11 for Activity Network, the filing necessary to become publicly
traded corporation, if the Company so elects. In addition, Activity
Network is in the process of attempting to raise $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, if it does become publicly traded.
ASSISTED LIVING
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-bed 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 to 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.
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<PAGE>
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, would
be operated by its subsidiaries Alpine Gardens East, Inc. and Premier Care.
Due diligence is continuing. 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.
BAJAMAR OCEAN FRONT RESORT
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 1/2 owned by Grupo Situr, S.A.,
once the largest Mexican resort development-company in Mexico. Subsequent
to the opening of the escrow, Grupo Situr's financial problems grew into a
national issue and the Mexican government became involved with several
banks involved with Grupo Situr in an 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 the Grupo Situr holdings. However, all
contracts and sales were put on hold until a complete workout plan was
effected with the banks. 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 with 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 is also
important to the timeshare/vacation ownership program that is located on
land separate from this escrow, however, located within the Bajamar resort.
This 328-unit program requires a relationship with the adjacent golf
courses and hotel. We have delayed the start of the timeshares in
anticipation of our escrow closing and thereby guaranteeing the
availability of these amenities.
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<PAGE>
CITIZENS BUSINESS BANK
Citizens Business Bank 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 that had stock prices adversely affected. Additional
damages could be several million dollars in our favor.
GREATER SAN DIEGO IMAGING CENTER
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 has increased from 240 patients in the
first year to over 1,000 in 1998. The increase is based on aggressive new
marketing following 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 other closed units in
San Diego.
Another public company, First Colonial Ventures, Ltd., had contracted to
acquire a 1/3 ownership position in the center for $350,000. However, after
paying in excess of $100,000 of the contracted amount, First Colonial
defaulted on its contract. The Company noticed them of the default and
pursuant to the default provision, terminated their rights and retained the
1/3 ownership position and cash paid to date as liquidated damages.
Greater San Diego Imaging Center is under the direction of its medical
director, Jerry J. Parker, M.D..
INTERNATIONAL HEALTH NETWORKS, INC./MRI MEDICAL DIAGNOSTICS,INC.
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
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<PAGE>
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 subsequently decided that the time and
energy their management would spend resurrecting MRI Medical could be
better spent developing their business plan and executing same.
Consequently, they have relinquished their position in MRI Medical and
elected to become a subsidiary of TND.
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. The medical campus, intended to be built on Hills
of Bajamar property, was originally 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 with an option for an additional 100 acres at $60,000
per acre for 3 years. The Company retained the construction rights to build
all required facilities on the combined 250 acres and maintain a property
management contract. The campus is to include an acute care hospital
associated with an recognized U.S. medical 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. With IHN now a subsidiary of TND,
the original contract is being revised.
NETROM, INC.
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,
which was paid by deliverance of 1,000,000 shares of their convertible
preferred stock. In June of 1998, Netrom acquired an additional 200 acres
of the Hills of Bajamar property for $4,200,000, which was paid 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 water sports, board sports, an executive style golf course, race
tracks for cars and bikes and its own hotel and spa for a family
environment.
PLAZAS RESORT AND COMMERCIAL PROPERTY AT BAJAMAR
Plazas Resort and Commercial Property, is a 328-unit vacation ownership
(timeshare) complex and 26,000 square feet of commercial space that will
encompass 16+ acres located on the golf course and facing the Pacific
Ocean, within the Bajamar resort. 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
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<PAGE>
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.
ACQUISITIONS
BANCO ATLANTICO COMMERCIAL BUILDING
In February of 1999, Tri-National Holdings, S.A. de C.V., a newly formed,
wholly-owned Mexican subsidiary, signed purchase agreements and provided
the $25,000 down payment to acquire Banco Atlantico for $950,000. Banco
Atlantico is a 20,000 square foot, 2-story commercial building in the heart
of the banking district in Tijuana, Mexico.
LA PERLA CONDOMINIUMS
In January of 1999, the Company into an acquisition agreement with Valcas
Internacional, S.A. to acquire 2+ developed acres of ocean front land
within the Bajamar resort, with plans for a 32-unit condominium complex for
$6,000,000. The Company paid $1,000,000 in accordance with the new
contract for the 32-unit La Perla condominiums to be built and signed notes
for an additional $5,000,000, pursuant to a construction contract executed
simultaneously.
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
appraised value is in excess of $33 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 187,000 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 100,000 square feet of the
existing commercial property at up to $2.50 per square foot from large U.S.
and Mexican retail operations, which upon full lease up should generate in
excess OF $4 million annually and become one of the largest shopping center
in Baja California.
PORTAL DEL MAR CONDOMINIUMS
In February of 1999, Tri-National Holdings, S.A. de C.V., a newly formed,
wholly-owned Mexican subsidiary, signed purchase agreements and provided
the $100,000 down payment to acquire Portal Del Mar for $1,250,000. Portal
Del Mar is a 120-unit, 2 and 3-bedroom condominium development on 6 acres
overlooking the Pacific Ocean in Baja California, Mexico, just south of
Rosarito Beach. The 120 ocean view condominiums are in various stages of
completion, with approximately 46 completed. The Company plans to add a
clubhouse, 3 tennis courts, 2 pools and a spa. Comparable condominiums
located across the road are selling in the $250,000 range, while the
Company intends to begin sales under $120,000.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
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
provides 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 has collateralized the first
$8 million bond with 187 acres of its Hills of Bajamar property and has
also been approved for an additional $15,000,000 bond, subject to
collaterilization of the first 41 vacation ownership units (timeshares).
OUTLOOK
Targets and plans include additional acquisitions and development of
assisted living facilities in the U.S.; development and sales of a
significant number of timeshare units, condominiums, single family homes
and residential lots, as well as, lease income from commercial properties
in Mexico. This would be in addition to the earnings associated with the
existing golf and hotel properties at the Bajamar Resort, which the Company
anticipates closing prior to June 30, 1999. We will continue to seek
opportunities for growth, which will be announced as consummated.
Our target for attaining a NASDAQ listing continues to be 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.
SAFE HARBOR 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
22
<PAGE>
Company's level of activity and the ability of the Company to implement its
business strategy.
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 2 reports on Form 8-K during
the nine months ended January 31, 1999 and are incorporated by
reference.
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: March 22, 1999
Michael A. Sunstein
Chief Executive Officer, President
Director
23
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