<PAGE> 1
US SECURITIES & EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) Quarterly report under section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarter period ended March 31, 1999.
( ) Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from to .
Commission File Number 0-24185
CENTRAL AMERICAN EQUITIES CORP.
Florida 65-0636168
(State or other jurisdiction of (IRS Employer Identification Number)
incorporated or organization)
19200 Van Karmen Ste. 850
Irvine, California 92612
(Address of Principal Executive Offices) (Zip Code)
(949)757-0222
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock, $.001 Par Value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding twelve (12) months
(or for such shorter period that registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past ninety (90)
days. YES (X) NO ( ).
Applicable only to Corporate Issuers
State the number of shares outstanding of each of the issuers' classes
of common equity:
12,205,252 Shares of Class A Common Stock, $.001 Par Value
Transitional Small Business Disclosure Format
YES ( ) NO (X)
<PAGE> 2
CENTRAL AMERICAN EQUITIES CORP.
TABLE OF CONTENTS
Part I
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Page
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Item 1-Financial Information
Central American Equities Corp.'s Balance sheet as of 03/31/99 and
12/31/98 1
Statement of Operations for the three month period ended 03/31/99,
the three month period ended 3/31/99, and cumulative period
from 01/23/96 (date of inception) to 03/31/99 2
Statements of Stockholders' Equity 3
Statements of Cash Flows for the three month period ended 03/31/99,
the twelve month period ended 12/31/98, and cumulative period from
01/23/96 (date of inception) to 03/31/99 4
Notes to Financial Statements 5-7
Item 2-Management's Discussion and Analysis of Financial Condition and
Results of Operations 7-12
Part II
Item 1-Legal Proceedings 12-13
Item 2-Changes in Securities 13
Item 3-Defaults upon Senior Securities 13
Item 4-Submission of Matter to a Vote of Security Holders 13
Item 5-Other Information 13
Item 6-Exhibits and Reports on Form S-K 14
</TABLE>
<PAGE> 3
Item 1-Financial Statements
The Financial Statements of the Company are set forth below:
CENTRAL AMERICAN EQUITIES CORP.
BALANCE SHEET
ASSETS
(UNAUDITED)
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<CAPTION>
For the Three Month
Period Ended For the Year Ended
March 31, 1999 December 31, 1998
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Current Assets
Cash $ 3,312 $ 8,450
Inventory 23,979 28,901
----------- -----------
Total Current Assets $ 27,291 $ 37,351
Property and Equipment
Buildings and other depreciable assets,
at cost, net of depreciation of $476,402 7,784,691 7,836,653
----------- -----------
Other Assets
Organization costs, net of accumulated
amortization of $129,522 1,018,874 1,035,064
----------- -----------
Total Assets $ 8,830,856 $ 8,909,068
=========== ===========
Liability and Stockholders' Equity
Current Liabilities
Accounts Payable $ 58,638 $ 59,034
Line of credit-Banco del Comercio 500,000 500,000
Notes payable - other 50,601 50,601
Accrued Expenses 59,658 66,894
Accrued interest expense 7,491 7,491
----------- -----------
Total Current Liabilities 676,388 684,020
----------- -----------
Long Term Debt -- --
----------- -----------
Due to Stockholders 978,223 923,991
----------- -----------
Stockholders' Equity
Common Stock $ 12,230 $ 12,230
Additional Paid-In Capital 8,797,817 8,797,817
Retained earnings (Deficit) (1,633,802) (1,508,990)
----------- -----------
Total Stockholders' Equity 7,176,245 7,301,057
----------- -----------
Total Liabilities and Stockholders' Equity $ 8,830,856 $ 8,909,068
=========== ===========
</TABLE>
(See Notes to Financial Statements)
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<PAGE> 4
CENTRAL AMERICAN EQUITIES CORP.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
Period from
Three Months January 23, 1996
Ended Ended (Date of Inception)
March 31, 1999 March 31, 1998 to March 31, 1999
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Revenues $ 451,121 $ 285,181 $ 1,961,128
------------ ------------ ------------
Cost of Sales
Salaries & Wages 127,374 147,196 823,570
Payroll Taxes 37,917 23,842 153,554
Repairs & Maintenance 7,369 8,236 40,312
Utilities 30,117 36,504 176,132
Insurance 8,346 7,996 40,329
Other 178,435 123,737 673,383
------------ ------------ ------------
Total Cost of Sales $ 389,558 $ 347,511 $ 1,907,010
------------ ------------ ------------
Gross Profit $ 61,563 $ (62,330) $ 54,118
------------ ------------ ------------
General & Administrative
Salaries & Wages $ 7,999 $ 6,908 $ 35,359
Consulting Fees 20,350 10,015 180,328
Management Fees -- -- 100,100
Legal & Professional Fees 3,350 24,427 217,422
Advertising 2,081 7,219 107,464
Commission Expense 10,397 1,709 24,592
Postage & Delivery 2,822 1,126 18,487
Travel 39,256 24,368 274,218
Office Expense 5,669 711 12,381
Utilities 12,407 840 18,377
Dues & Subscriptions 166 132 2,533
Depreciation & Amortization 68,152 79,152 605,924
Other Expenses 180 4,225 21,642
------------ ------------ ------------
Total General & Administrative $ 172,829 $ 160,832 $ 1,619,097
------------ ------------ ------------
Operating Loss $ (111,266) $ (223,162) $ (1,564,979)
Interest Expense (13,546) (10,842) (68,823)
------------ ------------ ------------
Loss before provision for
income taxes $ (124,812) $ (234,004) $ (1,633,802)
Provision for income taxes -- -- --
============ ============ ============
Net Loss $ (124,812) $ (234,004) $ (1,633,802)
============ ============ ============
Net Loss per Common Share $ (.01) $ (.02) $ (.01)
============ ============ ============
Weighted Average share of
Common Stock Outstanding 12,230,252 12,205,252 12,187,852
============ ============ ============
</TABLE>
(See Notes to Financial Statements)
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<PAGE> 5
CENTRAL AMERICAN EQUITIES CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
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Common Paid In Retained
Stock Capital Earnings Total
----- ------- -------- -----
<S> <C> <C> <C> <C>
Balance
01/23/96 -- -- -- --
Capital Contribution 11,356 7,248,316 -- 7,259,672
------ --------- ---------- ----------
Balance
12/31/96 11,356 7,248,316 -- 7,259,672
Capital Contribution 749 1,424,626 -- 1,425,375
Common Stock Issued for
Consulting Services Rendered 100 99,900 -- 100,000
Net Loss -- -- (572,988) (572,988)
------ --------- ---------- ----------
Balance
12/31/97 12,205 8,772,842 (575,988) 8,212,059
Net Loss -- -- (702,351) (702,351)
------ --------- ---------- ----------
Balance
12/31/98 12,230 8,797,817 (1,508,990) 7,301,057
Net Loss for the
Quarter Ended
March 31, 1999 -- -- (124,812) (124,812)
Balance
03/31/99 12,230 8,797,817 (1,633,802) 7,176,245
====== ========= ========== ==========
</TABLE>
(See Notes to Financial Statements)
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<PAGE> 6
CENTRAL AMERICAN EQUITIES CORP.
STATEMENTS OF CASH FLOW
(UNAUDITED)
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<CAPTION>
Cumulative
Period From
For the For the Jan. 23, 1996
Quarter Ended Year Ended (Date of Inception)
March 31, 1999 Dec. 31, 1998 March 31, 1999
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Cash Flows from Operating Activities
Net Loss $(124,812) $(936,002) $ (1,633,802)
Adjustment to Reconcile Net
Loss to Net Cash Provided by
Operating Activities:
Depreciation and Amortization 68,152 316,610 605,924
Change in Assets and Liabilities:
Inventory 4,922 (12,089) (23,979)
Accrued Expenses (7,236) 16,894 59,262
Accounts Payable 20,548 38,534 59,082
Accrued Interest -- -- --
Expense -- (4,302) 7,491
--------- --------- ------------
Net Cash Used in Operating Activities: $ (38,426) $(580,355) $ (926,022)
--------- --------- ------------
Cash Flows from Investing Activities:
Organization & Start-Up Costs -- -- (1,148,396)
Capital Expenditure -- (267,451) (8,261,093)
--------- --------- ------------
Net Cash Used in Investing Activities: $ -- $(267,451) $ (9,409,489)
--------- --------- ------------
Cash Flows from Financing Activities:
Proceeds from Loans Payable 33,288 819,278 1,528,380
Proceeds from Issuance of
Common Stock -- -- 12,501
Proceeds from Additional
Paid-In Capital -- -- 8,672,942
Common Stock Issued for
Consulting Services -- 25,000 125,000
--------- --------- ------------
Net Cash Provided by Financing
Activities: 33,288 844,278 10,338,823
--------- --------- ------------
Net Increase/Decrease in Cash (5,138) (3,528) 3,312
Cash - Beginning of Period 8,450 11,978 --
Cash - End of Period 3,312 8,450 3,312
========= ========= ============
Supplemental Schedule of Cash
Flow Information
Interest Paid 13,546 43,369 43,369
========= ========= ============
Income Taxes Paid -- -- --
========= ========= ============
</TABLE>
(See Notes to Financial Statements)
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<PAGE> 7
CENTRAL AMERICAN EQUITIES CORP.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1-Summary of Accounting Policies
Nature of Business
Central American Equities Corp. (the "Company" or "CAE") was
incorporated under the laws of the State of Florida on January 23, 1996. The
Company acquired Cal Tico, L.P. ("Cal Tico"). Ecolodge Partners L.P.
("Ecolodge") and Marine Lodge Partners, L.P. ("Marine Lodge" and together with
Cal Tico and Ecolodge, the "Partnerships"). The Company provides an integrated
eco-vacation experience in Costa Rica, and is in the business of owning and
operating hotels and real property in Costa Rica.
Use of Estimates
Management uses estimates and assumptions in preparing the financial
statements in accordance with generally accepted principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses.
Organization Costs
Organization costs are amortized on a straight-line basis over five (5)
years. Amortization expense for the three months ended March 31, 1999 was
$16,190.
Equipment
Equipment is recorded at cost less accumulated depreciation.
Depreciation is provided over the estimated useful lives of the assets by using
the straight line method of depreciation. Depreciation expense for the three
months ended March 31, 1999 was $51,962.
Repairs and maintenance costs are expensed as incurred while additions
and betterments are capitalized. The costs and related accumulated depreciation
of assets sold or retired are eliminated from the accounts and any gain and
losses are reflected in earnings.
Per Share Data
The primary income (loss) per share was computed on the weighted
numbers of shares of common stock outstanding during the period. Common share
equivalents were not included as their inclusion would have been anti-dilutive.
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<PAGE> 8
Income Taxes
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes. SFAS No. 109 requires the establishment of
a deferred tax asset for all deductible temporary differences and operating loss
carry forwards.
The Company has a net operating loss carry-over of approximately
$1,634,000 as of March 31, 1999, expiring through 2014.
Note 2-Long Term Debt
Line of credit with Banco del Comercio advanced on June 30, 1998 with a
one (1) year term. Principal is due and payable on June 30, 1999. Interest only
at the rate of prime plus 2 1/2% is due and payable on the last day of each
month. As of March 31, 1999, a total of $12,482 of interest has been paid and is
reflected as Interest Expense in the Financial Statements. Subject to review and
acceptance by the lending institution, this line of credit can be renewed for an
additional one (1) year period. The funds advanced under this Line of Credit
were utilized to supplement cash flow for operating expenses and construction
costs. As of March 31, 1999, the amount due on this indebtedness is $500,000.
Note payable with principal and interest due to an individual at the
rate of 8.00% due and payable on February 1, 2000. This note is for the purchase
of the beach land at the Marinelodge Resort. Accordingly, $1,064 is reflected in
the Financial Statements as Interest Expense. The Inception Date of the note is
August 1, 1995. As of March 31, 1999, the amount due on this indebtedness is
$50,601.
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TOTAL DEBT $550,601
LESS: CURRENT MATURITIES $550,601
--------
LONG TERM DEBT $ 0
--------
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The aggregate amount of debt maturing during the next five (5) years is
as follows:
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1999 $542,168
2000 8,433
========
$550,601
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Note 3-Related Party Transactions
During the period January 23, 1996 (date of inception) to March 31,
1999, two (2) shareholders each advanced to the Company approximately $489,111
for a total of $978,223. There are no stated terms for repayment. The two (2)
stockholders each hold 6.0% of the issued and outstanding Class A Common Stock
and are the Company's two (2) largest shareholders. In addition, these two (2)
shareholders are also members of the Board of Directors of the Company.
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<PAGE> 9
During the twelve (12) month period ended December 31, 1997, the
Company paid $100,100 in management fees to Talley King & Company. Talley King &
Company is jointly owned by Messers Richard William Talley and Paul King, each
of whom are 6.0% shareholders of the Company's Class A Common Stock and are also
directors. The fees paid were for management and supervision of the Company's
operations. The management contract agreement was not renewed for 1998 and
accordingly, no management fees have been paid during 1998.
Note 4-Capital Stock
The following is a summary of the classes of Capital Stock at March 31,
1999:
Common Stock
Class A-Par Value $.001 Per Share:
Authorized 20,000,000 Shares;
12,230,252 issued and outstanding $12,230
The holders of Class A Common Stock possess the voting power of one (1)
vote of each share of stock held. The holder of Class A Common Stock do not
possess cumulative voting rights. Class A Common stockholders having a majority
of the outstanding shares of common stock voting for the election of directors
can elect all members of the directors of the corporation.
The Class A Common Stock has no preemptive rights or subscriptions,
redemption or commission privileges. All of the outstanding shares of common
stock are fully paid and non-assessable.
Item 2. Management's Discussion and Analysis of Financial Condition and Result
of Operations
The following is management's discussion and analysis of significant
factors, which have affected the Company's financial position and operations
during the three month period that ended March 31, 1999.
OVERVIEW
CAE is a US hospitality company, based in Irvine, California and
incorporated in the state of Florida. The Company specializes in providing
high-quality food and lodging in unique natural settings in Costa Rica.
CAE includes among its assets three hotels: Hotel Alta in Santa Ana (a
suburb of the capital city of San Jose), Ecolodge San Luis and Biological
Station (in the San Luis Valley near the world famous Monteverde Cloud Forest),
and Sunset Reef (on the Pacific Ocean in Mal Pais adjacent to the protected Cabo
Blanco Reserve). CAE also owns and operates La Luz Restaurant (located in Hotel
Alta), Restaurant Playa Carmen (on the beach near Sunset Reef), and Alta Travel
Planners (a full service travel agency and marketing operation with headquarters
in California).
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<PAGE> 10
With the opening of Hotel Alta in December of 1997, 1998 marked the
beginning of the first year of full operation of the Company's hotels. All
Company owned facilities, except for Restaurant Playa Carmen (see below), were
open and operating during the first quarter of 1999.
OVERALL COMPANY PERFORMANCE
CAE's performance improved significantly during the first three months
of 1999. Although initial occupancy levels for 1998 were low (but reasonable for
the start-up of a new hotel group), with the upswing in occupancy and revenues
during the first quarter of 1999, management remains steadfast in its belief
that the fundamentals for superior performance continue to be in place. Costa
Rica is a highly desirable tourist destination, which continues to increase in
popularity. Soft adventure and eco-travel remain among the most rapidly growing
segments in the travel market. And, CAE operates three uniquely attractive
properties, which have been repeatedly praised by the writers and tour
wholesalers who have visited them.
HOTEL ALTA
Revenue at the three hotels are primarily dependent upon the occupancy
rates and per room charges (although other services are sold). Significant
improvements in occupancy and average room rates were registered during the
first quarter of 1999. At Hotel Alta the occupancy for the first three months of
1999 was about 46%. This is a 40% increase in occupancy over aggregate 1998 and
a 22% increase over the first quarter of 1998.
Significantly, the average room rate during the first quarter of 1999
increased to more than $131. This represents a 47% increase over the average
rate in 1998 (about $88) and a 32% increase over the average rate during the
first quarter of 1998 (about $99).
Several marketing advances have been made over the last year. American
Airlines Vacations, which provides Costa Rican accommodations for about 4000
guests annually, has listed Hotel Alta as one of only eight San Jose area hotels
available from its select vacation program.
British Airways has named Hotel Alta as the only San Jose hotel option
in their Costa Rican vacation program. British Airways Worldwide Vacations
anticipates booking accommodations for more than 1000 guests in Costa Rica
during 1999.
Hayes and Jarvis, a large British wholesaler, has included Hotel Alta
among its four San Jose options. Hayes and Jarvis has booked 40 seats per week
on British Airways' direct flight to San Jose from London.
Several large US wholesalers have decided to highlight Hotel Alta in
their brochures. For example, Sunnyland Tours is currently promoting Hotel Alta
as a honeymoon destination.
-8-
<PAGE> 11
Starting in August of 1999, Friendly Holiday Tours will be highlighting
Hotel Alta in its annual Costa Rica brochure. Friendly Holiday Tours has just
been purchased by Global Vacations, a large NYSE-listed travel company which has
acquired several other travel wholesalers including Hayden Holidays, Allied
Tours, Friendly Holidays, Island resort Tours, and MTI. Because Global Vacations
is combining all of its Latin America operations, Hotel Alta will be offered to
all of Global Vacations' subsidiaries.
Hotel Alta continues to receive significant complimentary press in
dozens of magazines and newspapers in the United States and Costa Rica.
LA LUZ RESTAURANT
During the first quarter of 1999, La Luz's Executive Chef, Sherman
Johnson decided that after two years in Costa Rica, it was time to return to the
United States. Stefano Delgrano, La Luz's Executive Sous Chef, who has trained
under Sherman Johnson for the past two years, has taken over as the Executive
Chef. He has kept the critically-acclaimed dishes that made La Luz famous and
added several new Italian creations.
La Luz has received substantial positive press since its opening. For
example, Conde Nast Traveler has named La Luz one of the best restaurants in
Central America and Costa Rica's major newspaper, La Nacion, has rated La Luz
one of the top three restaurants in the country, giving it the newspaper's
coveted Five-Fork Rating.
Because of the attention it has received, management plans in the fall
of 1999 to add to La Luz a sophisticated club and bar in space currently
available above the restaurant.
ECOLODGE SAN LUIS
Ecolodge San Luis and Biological Station is an integrated ecotourism,
research, education project directed on-site by two renowned tropical
biologists. The 162-acre Ecolodge San Luis property borders on the famous
Monteverde Cloud Forest Reserve (acclaimed as "one of the most outstanding
wildlife sanctuaries in the New World Tropics and named as one of the top ten
ecotourism destinations in the world).
The occupancy at Ecolodge San Luis for 1998 was about 16%. During the
first quarter of 1999, occupancy climbed above 20%. Indicating significant
expenditure tightening (and future opportunity), the break-even occupancy (at
the current mix of average room rates) at Ecolodge San Luis is about 17%.
The more than forty writers who have visited Ecolodge San Luis have
been effusive in their praise. For example, the Adventure Guide to Costa Rica
has said, "this beautiful designed lodge-research complex is in a gorgeous
location. Whereas there are a number of avowedly ecological lodges in Costa
Rica, there is only one Ecolodge San Luis, a place created with the avowed
intention of bringing together researchers to mingle and share their work with
visitors.
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<PAGE> 12
SUNSET REEF AND PLAYA CARMEN
Hotel Sunset Reef is located in the small Pacific beach-front town of
Mal Pais on the southern tip of the Nicoya Peninsula. The hotel lies on the
northern border of the renowned Absolute Natural Reserve of Cabo Blanco - the
jewel of nature at the very tip of the Nicoya Peninsula (The Costa Rica
Handbook).
The occupancy at Sunset Reef for the first three months of 1999 was
about 26.3%. This is a 150% increase in occupancy over aggregate 1998 (when
occupancy was about 11%) and a 92% increase over the first quarter of 1998 (when
occupancy was 13.7%).
Significantly, the average room rate during the first quarter of 1999
increased to about $84. This represents a 24% increase over the average rate in
1998 (about $63) and a 23% increase over the average rate during the first
quarter of 1998 (about $68).
The Playa Carmen restaurant and bar is located about four miles away
from the Sunset Reef on a broad, white, sandy beach at Playa Carmen, known as
one of the best surfing beaches in Costa Rica. Management is preparing to open
the 100-seat reataurant before the beginning of the 1999 high season. Adjacent
to the restaurant, CAE plans to construct a tent camp for surfers and low budget
travelers.
NEW MANAGEMENT AND NEW MARKETING PLAN
Management has resolved several problems, which it believes, prevented
the Company from reaching its goal during 1998.
New Management
Management experienced considerable turmoil during late 1997 and early
1998 with the unanticipated resignation of Warren Francis, the CEO of CAE and
General Manager for Hotel Alta. Mr. Francis resigned because of personal
reasons. Management is currently pursuing legal action against Mr. Francis for
breach of contract and failure to perform (see Item 1-Legal Proceedings).
Mr. Francis' departure and related hotel construction difficulties
delayed the opening of Hotel Alta, originally scheduled for June 1997. Operating
cash was limited as the hotel had hired and trained staff in preparation for a
June opening that was delayed until December. Mr. Francis' departure was also
related to the closure of Ecolodge San Luis and Sunset Reef just prior to the
beginning of the all-important 1997-98 high season.
During the Summer of 1998, the Board of Directors hired Michael N.
Caggiano, Ph.D., as an operational liaison to the board. Caggiano had been
Executive Vice President in Charge of Consulting Operations at a large
independent, US hospitality and real estate consulting firm. Caggiano holds a
Ph.D. from the RAND Corporation and a B.A. from Pomona College.
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<PAGE> 13
Caggiano's role has been to increase revenues and profits through
expanded occupancy at each CAE hotel. He is also expected to reduce costs and
guide the company through the completion of several property enhancement
projects. Pending the success of the public offering, the Company is actively
examining several other Costa Rican vacation properties as future investment
opportunities.
MARKETING
Mr. Francis' departure, led to delays in the creation and
implementation of the marketing strategy necessary for the 1997-98 high season
and contributed to the resulting lack of market exposure for the three (3)
hotels. Management has responded to this problem by creating a strong management
team, which has successfully implemented a marketing plan that has already begun
to build a client base among tour wholesalers and tour operators.
There are several other significant marketing decisions that will
positively impact the coming 1998-99 high season. First, marketing functions,
which had previously been directed by an outside consultant, were brought
in-house. Second, the Company's public relations firm was placed under the
direct control of management.
In addition to the successes discussed above, more than forty (40)
travel writers have visited CAE hotels. Scores of magazine articles have been
published or are anticipated over the next few months. Management anticipates
these articles will boost occupancy at each of CAE's hotels.
APPOINTMENT OF NEW CEO AND PRESIDENT
In late August of 1998, Michael N. Caggiano, Ph.D. was appointed
consulting CEO and President of CAE.
Caggiano has worked with CAE for the past several years: first as a
financial consultant in the construction stage of the company and more recently
as an operational liaison to the Board of Directors. Currently he is President
of a small, Los Angeles-based financial and management consulting firm that has
provided advice to corporations investing in Costa Rica. He specializes in
analyzing economic performance, corporate strategy, acquisitions, and
organizational change. His clients have included hospitality, real estate,
health care, international exporting, electronics, and manufacturing companies.
In his new post, Caggiano will oversee all US and Costa Rican
operations for the company. Brian Frazee, Managing Director for the AltA Group,
will continue to manage Hotel Alta and will report to Caggiano.
Prior to establishing his own consulting firm, Dr. Caggiano was
Executive Vice President in Charge of Consulting Operations at Robert Charles
Lesser & Co. (RCLCo) a 50-person, 5-office, national hospitality and real estate
consulting firm based in Los Angeles. While at RCLCo, he oversaw the management
of several hundred consulting engagements annually concerning real estate and
hospitality development, economic development, public policy issues,
feasibility, and corporate strategy.
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<PAGE> 14
In 1990, Dr. Caggiano was elected to the first City Council of Malibu
and later served as its Mayor Pro Tem. Before serving as an elected official,
Dr. Caggiano was a Fellow and Policy Analyst with The RAND Corporation. While at
RAND, he specialized in solving state and local government finance problems. He
devised methodologies to forecast revenues and costs, designed administrative
and accounting structures necessary to allow a public entities to operate as
private enterprises, and created action plans for the operation and marketing of
governmental services. During his nine years at RAND, Dr. Caggiano authored
nearly 20 publications.
During the past five years, Dr. Caggiano served as the President of Heal the
Bay, one of Southern California's most successful environmental groups. This
15,000-member volunteer organization is dedicated to improving ocean water
quality and cleaning up beaches in Southern California.
Dr. Caggiano holds a Ph.D. in Public Policy Analysis from the RAND
Graduate School of The RAND Corporation, an M.P.A. from the University of
Southern California, and a B.A. in Government from Pomona College.
LIQUIDITY AND CAPITAL RESOURCES
The Company had relied on sales of shares of common stock to fund
operations and make capital improvements. To date, operations have resulted in
losses and the Company has limited cash liquidity and capital resources. During
the second and third quarters of 1998, capitalization was not sufficient to fund
necessary expenses and management sought and succeeded in acquiring about $1.25
million in bridge loans.
However, the Company has a positive net worth of over $7.1 million and
a current asset ratio of over 11 to 1 through the three month period ended March
31, 1999.
RESULTS OF OPERATIONS
The Company's revenues from its date of inception until March 31, 1999
is $1,961,128. The Company's revenues for the three month period that ended
March 31, 1999 were $451,121.
The Company has incurred a net loss of $1,633,802 since its date of
inception and has also incurred a net loss of $124,812 for the three month
period that ended March 31, 1999.
Part II
Item 1-Legal Proceedings
CAE has brought claims against its former CEO, Warren Francis, for
breach of contract and breach of the covenant of good faith and fair dealing
under California law. The action is entitled Central American Equities, a
Florida Corporation vs. Warren Francis. These claims are pending in the United
States District Court for the Central District of California, case number
98-0485WJR (Mcx) and have been assigned to the Honorable William J. Rae for all
purposes, including trial.
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<PAGE> 15
CAE's claim against Mr. Francis arise in part out of his alleged
failure to perform his contractual duties from approximately April through
August 1997 and his abrupt departure without notice on or about September 2,
1997. It is alleged that Mr. Francis breached his employment contract by, among
other things, allowing a personal relationship to interfere significantly with
his job performance in Cost Rica, failing to market and promote the business of
CAE, failing to create and develop tour operator and travel agent relationships
in order to maximize occupancy levels in the hotels by the 1997-98 high season,
failing responsibly to manage physical improvements and construction of the
Hotel Alta, thus causing delays in its opening to the public, failing
responsibly to hire and train appropriate staff, and failing to direct and
supervise CAE employees and staff in the performance of their duties. It is
alleged that an improper and inappropriate relationship between Mr. Francis and
a member of the staff of the Hotel Alta resulted in a breach of the covenant of
good faith and fair dealing.
CAE is seeking special and general damages from Mr. Francis in excess
of $400,000. It is alleged, among other things, that Mr. Francis' breach of
contract and breach of the covenant of good faith and fair dealing caused
significant delays in opening Hotel Alta and, once it finally opened, that
occupancy levels were substantially depressed due to his failure to adequately
market and promote the hotels during the Spring and Summer of 1997.
The action will be tried before a jury, with trial presently set to commence in
June 1999. A mandatory settlement conference has been set for May 1999 and if an
appropriate settlement occurs as a result of this conference, all litigation
will be cancelled.
Item 2-Changes in Securities
The Company did not sell or issue any securities of any kind during the
period that ended on March 31, 1999.
Item 3-Defaults Upon Senior Securities
For the period that ended on March 31, 1999, there was no defaults upon
senior securities of any kind by the Company.
Item 4-Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders by the
Company for the period ended March 31, 1999.
Item 5-Other Information
There is no other information that the Company believes is necessary to
be included in this report.
-13-
<PAGE> 16
Item 6-Exhibits and Reports on Form S-K
Exhibits filed herewith:
None
Current reports on Form 10KSB, dated April 9, 1999, filed with the Securities
and Exchange Commission.
-14-
<PAGE> 17
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CENTRAL AMERICAN EQUITIES CORP.
By:/s/MICHAEL N. CAGGIANO
---------------------------------
MICHAEL N. CAGGIANO
President and CEO
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-QSB--CENTRAL AMERICAN EQUITIES CORPROATION.
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<FISCAL-YEAR-END> DEC-31-1999
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