<PAGE>
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 quarterly period ended September 30, 2000.
( ) 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)
4031 Marcasel Avenue Los Angeles, California 90066
(Address of Principal Executive Offices)
(310) 397-1757
(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 ( ).
The number of shares outstanding of each of the issuer's classes of common
equity:
14,739,268 Shares Class A Common Stock, $.001 par value
(Number of shares outstanding of each of the Registrant's classes of
common stock.)
Transitional Small Business disclosure format (check one)
YES [ X ] NO [ ]
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report on Form 10-KSB of Registrant for the year ended December 31, 1998
and 1999 Quarterly Report on Form 10-QSB of Registrant for the quarter ended
March 31, 2000 Quarterly Report on Form 10-QSB of Registrant for the quarter
ended June 30, 2000
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I: FINANCIAL INFORMATION..............................................3
ITEM 1. FINANCIAL INFORMATION............................................3
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS..............................14
Overview..............................................................14
Public Listing of Stock on OTCBB......................................14
Results of Operations --- Nine Month Period Ended September 30, 2000..15
Comparison of Operations for the Nine Month Periods Ended
September 30, 2000 and September 30, 1999.............................15
Comparison of Operations for the Three Month Periods Ended
September 30, 2000 and September 30, 1999.............................15
Liquidity and Capital Resources.......................................16
PART II: OTHER INFORMATION................................................16
ITEM 1. LEGAL PROCEEDINGS..............................................16
Actions in Costa Rican Labor Court....................................16
ITEM 2. CHANGES IN SECURITIES...........................................16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............17
ITEM 5. OTHER INFORMATION..............................................17
ITEM 6. EXHIBITS AND REPORTS...........................................17
VERIFICATION SIGNATURES.................................................18
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
Central American Equities Corp. (the "Company" or "CAE") is a US hospitality
company, based in Irvine, California and incorporated in the State of Florida.
The Company owns and operates hotels, restaurants, and real property in Costa
Rica. All CAE activities are related to the Company's hotels in Costa Rica, and,
as such, are reported as one operating segment (per FASB Statement No. 131).
The Company Financial statements follow for the three month and nine month
periods ended September 30, 2000.
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CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
------------------------------------------------
Consolidated Balance Sheet
Unaudited
<TABLE>
<CAPTION>
ASSETS
SEPT. 30, 2000 DEC. 31, 1999
-------------- -------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 24,022 $ 24,869
Account receivable 47,293 4,220
Inventory 32,169 10,040
Prepaid expenses 16,381 2,805
----------- ------------
119,865 41,935
----------- ------------
Buildings and equipment,
Net of depreciation 7,899,605 8,047,905
----------- ------------
Other assets
Other Assets 4,801 4,801
----------- ------------
Total assets $ 8,024,271 $ 8,094,640
=========== ============
LIABILITY AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 137,343 $ 44,770
Accrued expenses 349,027 176,873
----------- -----------
486,370 221,643
----------- -----------
Other liabilities
Long term debt 542,300 710,000
Due to officers 445,360 1,362,187
----------- -----------
987,660 2,072,187
----------- -----------
Stockholders' equity
Common stock - $.001 par value; 20,000,000
Authorized, 14,739,268 issued and outstanding 14,739 12,230
Preferred stock - $.001 par value; 1,000,000
shares authorized, 0 issued and outstanding - -
Additional paid-in capital 10,149,816 8,897,817
Unrealized gain on foreign exchange 41,066 40,352
Retained deficit (3,614,315) (3,149,589)
----------- -----------
6,550,240 5,800,810
Total liabilities and stockholders' equity $ 8,024,271 $ 8,094,640
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
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CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE NINE MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------ ------------- -----------------------
<S> <C> <C> <C> <C>
Revenues 1,238,003 $ 969,661 202,196 $ 243,623
Cost of services 208,875 719,042 45,577 179,794
----------- ------------ ----------- -----------
Gross profit 1,029,128 250,619 156,619 63,829
----------- ------------ ----------- -----------
Operations
General and administrative 1,023,547 353,190 359,970 29,914
Depreciation 164,252 197,325 43,433 61,021
----------- ------------ ----------- -----------
1,187,799 550,515 403,403 90,935
----------- ------------ ----------- -----------
(158,671) (299,896) (246,784) (27,106)
----------- ------------ ----------- -----------
Other expense
Interest expense 306,055 47,900 52,443 24,386
Loss on foreign exchange - 19,301 - 19,301
----------- ------------ ----------- -----------
306,055 67,201 52,443 43,687
----------- ------------ ----------- -----------
Total Expenses 1,493,854 617,716 455,846 134,622
----------- ------------ ----------- -----------
Net Income (loss) (464,726) $ (367,097) $ (299,227) $ (70,793)
=========== ============ =========== ===========
Net Loss per Share $ (.035) $ (.03) $ (.02) $ (.01)
=========== ============ =========== ===========
Weighted average share of
common stock outstanding 13,066,591 12,230,252 14,739,268 12,230,252
=========== ============ =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
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CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Statements of Cash Flow
For the Nine Months Ended September 30,
Unaudited
<TABLE>
<CAPTION>
FOR THE NINE RESTATED
MONTHS ENDED FOR THE NINE
SEPTEMBER 30, MONTHS ENDED
2000 SEPTEMBER
30,1999
----------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net Income (Loss) $ (464,726) $ (367,098)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Unrealized Loss on Foreign Exchange 714
Depreciation and amortization 164,252 197,325
Increase (decrease) in:
Accounts receivable (43,073) 27,592
Inventory (22,129) 7,210
Prepaid expense and other (13,576) 8,004
(Increase) decrease in:
Accounts payable 92,573 (555)
Accrued expenses 172,154 76,084
--------------- --------------
Net cash provided by operating activities: (113,811) (51,438)
--------------- --------------
Cash flows from investing activities:
Capital expenditures (15,952) (83,941)
--------------- --------------
Net cash used in investing activities (15,952) (83,941)
--------------- --------------
Cash flows from financing activities:
Proceeds from loans -
Proceeds from loans from officers 128,916 157,440
Payment of loans 1,254,508
Proceeds from issuance of common stock 2,509
Proceeds from additional paid-in capital 1,251,999
--------------- --------------
Net cash provided by financing activities: 128,916 157,440
--------------- --------------
Net increase (decrease) in cash (847) 22,061
Cash - beginning of period 24,869 19,078
--------------- --------------
Cash - end of period $ 24,022 $ 41,139
=============== ==============
</TABLE>
Supplemental Disclosure of Cash Flow Information:
<TABLE>
<S> <C> <C>
Interest paid $ 306,055 $ 43,796
=========== ==========
Income taxes paid $ - $ -
=========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
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CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
------------------------------------------------
Notes to Consolidated Financial Statements
Note 1 - SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS
Central American Equities Corp. and Subsidiaries (the "Company") was
incorporated under the laws of the State of Florida on January 23,
1996. 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.
In December of 1996, the Company entered into an agreement for the
exchange of common stock ("Exchange Agreement") with Cal Tico, L.P.,
Ecolodge Partners, L.P. and Marine Lodge Partners, L.P. (Partnership).
Pursuant to the exchange agreement, the company issued 7,756,885 and
3,099,392 shares of common stock to limited partners and the general
partners, respectively, of the partnerships. In exchange for the
shares, the partnership transferred all of their interests (i.e. 100%
of the outstanding common stock) in the following Costa Rican
corporations: Hoteleria Cal Tico, S.A.; Bandirma, S.A.; Sociedad
Protectora De La Fuana y Flora Marintima De Mal Pais, S.F.; Ecoprojecto
San Luis, S.A. and Confluencia, S.A.
Cal Tico, L.P. was a California limited partnership that was formed in
July 1992 to raise $2 million to purchase the land and construct Hotel
Alta. Cal Tico, L.P. owns 100% of the stock in Hoteleria Cal Tico,
S.A., a Costa Rican corporation. Hoteleria Cal Tico, S.A, owns the land
and buildings at Hotel Alta.
Ecolodge Partners, L.P. was formed in July 1993 to raise a total of
$1.3 million in a private placement offering to purchase the land and
construct the Ecolodge San Luis and Biological Station. Ecolodge
Partners was a California limited partnership that own all of the stock
in Ecoproyecto San Luis, S.A. and Confluencia San Luis, S.A., the two
Costa Rican companies that own the Ecolodge land and buildings.
MarineLodge Partners L.P. was formed in March 1995 to raise $1 million
for the purchase and renovation of the Sunset Reef. MarineLodge
Partners was a California limited partnership. MarineLodge Partners
owned 100% of the stock in Bandirma, S.A. Bandirma owns: a)90% of the
Sociedad Protectora De La Fauna y Flora Maritima de Mal Pais S.A., a
Costa Rican corporation which owns the land and buildings at Sunset
Reef, and b)100% of Muxia, S.A. which owns 100% of the land and
buildings at Playa Carmen.
In 1997 the Company issued 748,975 shares of common stock for an
aggregate purchase price of $1,425,375 pursuant to Rule 506. The
proceeds were used to make capital improvements to the various hotels
acquired pursuant to the Exchange Agreement. The shares were sold to 36
investors.
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CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
------------------------------------------------
Notes to Consolidated Financial Statements
Note 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
In a separate transaction, the Company issued 100,000 shares of common
stock to Steven Aronson on August of 1997. The shares were issued as
compensation for Mr. Aronson's services in conducting due diligence on
the Costa Rican hotels and consulting services.
BASIS OF CONSOLIDATION
The consolidated financial statements include the consolidated accounts
of Central American Equities Corp. and its subsidiaries. Hoteleria Cal
Tico, S.A., Bandirma, S.A., Sociedad Protectora De La Fuana y Flora
Marintima De Mal Pais, S.F., Ecoprojecto San Luis, S.A. and
Confluencia, S.A. are held 100% by the Company. All intercompany
transactions and accounts have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows all certificates of
deposits with maturities of 90 days or less, were deemed to be cash
equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is computed provided using the straight-line
method over the estimated useful lives of five for equipment, seven
years for furniture and fixtures and forty years for buildings and
improvements.
Repairs and maintenance costs are expensed as incurred while additions
and betterments are capitalized. The cost and related accumulated
depreciation of assets sold or retired are eliminated from the accounts
and any gain or losses are reflected in earnings.
ESTIMATES
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
ADOPTION OF STATEMENT OF ACCOUNTING STANDARD NO. 123
In 1997, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 encourages, but does not require companies to record at
fair value compensation cost for stock-based compensation plans. The
Company has chosen to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. Accordingly, compensation cost for stock
-8-
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CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
------------------------------------------------
Notes to Consolidated Financial Statements
Note 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
options is measured as the excess, if any, of the quoted market price
of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock. The difference between the fair
value method of SFAS-123 and APB 25 is immaterial.
ADOPTION OF STATEMENT OF POSITION 98-5
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, Reporting the Costs of Start-Up
Activities, which requires that costs related to start-up activities be
expensed as incurred. Prior to 1998, the Company capitalized its
organization costs. The Company adopted the provisions of the SOP in
its financial statements for the year ended December 31, 1998. The
effect of adoption of SOP 98-5 was to record a charge for the
cumulative effect of an accounting change of $235,605 ($.02 per share),
to expense costs that had been previously capitalized prior to 1998.
ADOPTION OF STATEMENT OF ACCOUNTING STANDARD NO. 128 In February 1997,
the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS
128). SFAS 128 changes the standards for computing and presenting
earnings per share (EPS) and supersedes Accounting Principles Board
Opinion No. 15, "Earnings per Share." SFAS 128 replaces the
presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the diluted EPS
computation. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. This
Statement requires restatement of all prior-period EPS data presented.
As it relates to the Company, the principal differences between the
provisions of SFAS 128 and previous authoritative pronouncements are
the exclusion of common stock equivalents in the determination of Basic
Earnings Per Share and the market price at which common stock
equivalents are calculated in the determination of Diluted Earnings Per
Share.
Basic earnings per common share is computed using the weighted average
number of shares of common stock outstanding for the period. Diluted
earnings per common share is computed using the weighted average number
of shares of common stock and dilutive common equivalent shares related
to stock options and warrants outstanding during the period.
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CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
------------------------------------------------
Notes to Consolidated Financial Statements
Note 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
The adoption of SFAS 128 had no effect on previously reported loss per
share amounts for the year ended December 31, 1997. For the years ended
December 31, 1999 and 1998, primary loss per share was the same as
basic loss per share and fully diluted loss per share was the same as
diluted loss per share. A net loss was reported in 1998 and 1997, and
accordingly, in those years the denominator was equal to the weighted
average outstanding shares with no consideration for outstanding
options and warrants to purchase shares of the Company's common stock,
because to do so would have been anti-dilutive. Stock options for the
purchase of 47,500 shares at December 31, 1998 were not included in
loss per share calculations, because to do so would have been
anti-dilutive. However, these stock options were used in the
calculation of fully diluted loss per share in March 31, 2000.
REVENUE RECOGNITION
The Company records revenue at the point of service and maintains its
corporate records for both financial statement and tax return purposes
on the accrual method of accounting.
FOREIGN EXCHANGE
Assets and liabilities of the Company, which are denominated in foreign
currencies, are translated at exchange rates prevailing at the balance
sheet date. Revenues and expenses are translated at average rates
throughout the year.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments, which
principally include cash, note receivable, accounts payable and accrued
expenses, approximates fair value due to the relatively short maturity
of such instruments.
The fair value of the Company's debt instruments are based on the
amount of future cash flows associated with each instrument discounted
using the Company's borrowing rate. At September 30, 2000, the carrying
value of all financial instruments was not materially different from
fair value.
INCOME TAXES
The Company has net operating loss carryovers of more than $3 million
as of September 30, 2000, expiring in the years 2012 through 2013.
However, based upon present Internal Revenue regulations governing the
utilization of net operating loss carryovers where the corporation has
issued substantial additional stock, most of this loss carryover may
not be available to the Company.
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes, effective July 1993. SFAS No.109
requires the establishment of a deferred tax
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CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
------------------------------------------------
Notes to Consolidated Financial Statements
Note 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
asset for all deductible temporary differences and operating loss
carryforwards. Because of the uncertainties discussed in Note 2,
however, any deferred tax asset established for utilization of the
Company's tax loss carryforwards would correspondingly require a
valuation allowance of the same amount pursuant to SFAS No. 109.
Accordingly, no deferred tax asset is reflected in these financial
statements.
Note 2 - GOING CONCERN
The Company incurred a net loss of approximately $465,000 during the
nine month period ended September 30, 2000.
The Company is currently formulating a plan to increase revenues which
may include an additional offering of stock, the proceeds of which
would be used for working capital and capital expansion. The ability of
the Company to continue as a going concern is dependent on the success
of the plan. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
Note 3 - PROPERTY AND EQUIPMENT
As of September 30, 2000 plant and equipment consisted of the
following:
<TABLE>
<S> <C>
Land $ 1,445,344
Buildings 6,670,904
Machinery and equipment 135,096
Furniture and fixtures 382,180
Computer equipment 92,116
-----------
8,725,640
Less accumulated depreciation 826,035
-----------
$ 7,899,605
===========
</TABLE>
Note 4 - NOTES PAYABLE
The Company has $500,000 outstanding against a $500,000 line of credit
with Commerce Overseas Bank, which bears interest at the prime rate
plus 3%. Principal payments were to begin on January 10, 2000 in
monthly installments of $38,462, however, payments are being
renegotiated. As of September 2000, all interest payments on this loan
were current. The funds advanced under this line of credit were
utilized to supplement cash flow for operating expenses and
construction costs. The note is collateralized by property of the
Company.
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CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
------------------------------------------------
Notes to Consolidated Financial Statements
The Company has a note payable in the amount of $210,000 payable to a
director of the Company, which was due on November 1, 2000. The note
bears simple interest at 13% per annum and is secured by property owned
by the Company. The Company is currently in the process of negotiating
the terms of settlement for this debt.
Note 5 - RELATED PARTY TRANSACTIONS
On June 23, 2000, the Company authorized the issuance of 1,254,508
shares of Common Stock to Richard Talley, the Chairman of the Board of
Directors of the Company and 1,254,508 shares of its Common Stock to
Paul King, a director of the Company. Richard Talley and Paul King
converted the debt owed to them by the Company, in the amount of
$1,254,508 to equity consisting of 2,509,016 shares of the Company's
Stock at a value of $0.50 per share. The issuance of such shares
cancelled the debt of $1,254,508 on the books of the Company.
At September 30, 2000 the Company had a note payable of $149,660 with
Paul King, a director of the Company which is due when the Company goes
public. The note bears simple interest at 13% per annum. The Company is
currently in the process of negotiating the terms of settlement for
this debt.
At September 30, 2000 the Company had a note payable of $79,700 with
Richard Wm. Talley, a director of the Company. The note bears simple
interest at 13% per annum. The Company is currently in the process of
negotiating the terms of settlement for this debt.
The Company has a note payable in the amount of $210,000 payable to a
director of the Company, O.Fred W. Rosenmiller, which was due on
November 1, 2000. The note bears simple interest at 13% per annum and
is secured by property owned by the Company.
Note 6 - COMMITMENTS
The Company leases land under an agreement for a term from June 15,
1998 to June 14, 2001. The Company has an option to buy this property
for $257,400 if purchased on June 15, 2000 or $283,040 if purchased on
June 15, 2001. Minimum rentals in each of the next two years is as
follows:
DECEMBER 31, AMOUNT
------------ ------
2000 $ 15,500
2001 7,500
--------
$ 23,000
Note 7 - BUSINESS COMBINATION
On December 6, 1996 the Company entered into an agreement for the
exchange of common stock ("Exchange Agreement") with Cal Tico, L.P.,
Ecolodge Partners, L.P. and Marine Lodge Partners, L.P.
("Partnership"). Pursuant to the exchange agreement, the Company issued
7,756,885 and 3,099,392 shares of common stock to the limited partners
and the general partners, respectively, of the partnerships. In
exchange for the shares, the partnership transferred all of their
interests (i.e. 100% of the outstanding common stock) in the following
Costa Rican corporations: Hotelera Cal Tico, S.A.; Bandirma, S.A.;
Sociedad Protectora De La Fuana y Flora Marintima De Mal Pais, S.F.;
Ecoprojecto San Luis, S.A. and Confluencia, S.A. The acquisition has
been accounted for as a purchase transaction and, accordingly, the fair
value of the Company's stock that was issued was allocated to assets
and liabilities based on the estimated fair value as of the acquisition
date.
Note 8 - RESTATED FINANCIAL STATEMENTS
The financial statements released by management and dated March 31,
1999 contained various errors which included omission of accounts
receivable, prepaid expenses, property
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<PAGE>
and equipment accrued expenses, notes payable and unrealized gains on
foreign exchange. These errors were corrected by restating the 1998
financial statements. The effects of the errors were to overstate the
1998 loss by $198,794 ($.02 share). Financial data for March 31, 1999
in the consolidated statement of operations have been restated for
comparison purposes. Selling expenses have been displayed to show the
decline in commission expenses related to travel services.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
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 ended September 30, 2000.
OVERVIEW
Central American Equities Corp. (the "Company" or "CAE") is a US hospitality
company, based in Irvine, California and incorporated in the State of Florida on
January 23, 1996. The Company specializes in providing high-quality food and
lodging in unique natural settings in Costa Rica. The company is in the business
of owning and operating hotels and restaurants and real property in Costa Rica.
All CAE activities are related to the Company's hotels in Costa Rica, and, as
such, are reported as one operating segment (per FASB Statement No. 131).
CAE includes among its assets in Costa Rica 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 reservation and travel planning operation located in Hotel Alta ).
The Company has approximately 75 full and part-time employees.
All Company facilities, except for Restaurant Playa Carmen, were opened and
operating by the beginning of 1998 (the first full year of operations). During
the three month period ended September 30, 2000, the Company rented out the
100-seat restaurant at Playa Carmen.
PUBLIC LISTING OF STOCK ON OTCBB
In mid-August 2000 Central American Equities qualified under the new rules of
the National Association of Securities Dealers (NASD) and listed its stock on
the Over the Counter Bulletin Board ("OTCBB") under the symbol "CENE".
RESULTS OF OPERATIONS -- NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000
The following is management's discussion and analysis of significant differences
in the Company's financial position and operations (See Item 1 - Financial
Statements).
BALANCE SHEET
Long-term debt, including debt to officers, was reduced by approximately $1.1
during the period. This was due primarily to the conversion of debt to equity.
On June 23,
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<PAGE>
2000, the Company authorized the issuance of 1,254,508 shares of Common Stock to
Richard Talley, the Chairman of the Board of Directors of the Company and
1,254,508 shares of its Common Stock to Paul King, a director of the Company in
exchange for $1,254,508 in debt.
Current liabilities (accrued expenses and accounts payable) increased by
approximately $265,000 during the first nine months of 2000. This increase
partially reflects additional costs related to the public listing of stock and
for salary due to the President of the Company.
Total assets on September 30, 2000 were approximately $8.0 million.
COMPARISON OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND
SEPTEMBER 30, 1999
During the nine month period ended September 30, 2000 total sales revenue
increased to approximately $1,238,003. This is an increase of approximately 28%
from the same period in 1999.
During the nine-month period ended September 30, 2000, total operational
expenses (cost of services and general and administrative costs) were
$1,232,422. This represents an increase of approximately 15% (approximately
$160,000) from the same period in 1999. The majority of the increase can be
attributed to costs related to the public listing of stock and to increases
related to higher occupancy.
The Company had net positive income BEFORE interest expenses and depreciation.
During the nine-month period ended September 30, 2000, income before interest
expense (of $306,055) and depreciation (of ($164,252) was approximately $5,600 .
Of the $306,055 in interest expense during the period, approximately $207,000
was a one-time expense related to the conversion of debt to equity for Company
officers (see above). The remaining interest expense was related to the $500,000
loan with Commerce Overseas Bank.
Reflecting the one time interest costs related to the conversion of debt to
equity for Company officers and expenses related to the public listing, net
losses increased during the nine month period by approximately by $100,000
relative to the nine month period in 1999.
COMPARISON OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2000
AND SEPTEMBER 30, 1999
Tourism in Costa Rica is cyclical. The months of July, August, and September are
"low season" months for tourism in Costa Rica and, as anticipated, the Company's
monthly revenue has declined relative to the first two quarters of the year.
During the three month period ended September 30, 2000, total revenue was
approximately $202,000, a decrease of approximately $40,000 from the same period
in 1999. The decrease was due primarily to a decline in occupancy at Ecolodge
San Luis and Sunset Reef in August/September. During the three-month period
ended September 30, 2000, total operational expenses (cost of services and
general and administrative costs) increased to approximately $405,000. During
the same period in
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1999, operational expenses were approximately $210,000. The majority of the
increase was related to the public listing of stock in August 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company had relied on sales of shares of common stock and loans to fund
operations and make capital improvements. Through September 30, 2000, operations
had resulted in losses and the Company has limited cash liquidity and capital
resources. During this period, capitalization was not sufficient to fund
necessary expenses and management sought and succeeded in acquiring loans for
working capital from officers.
The Company has had limited, albeit improving, cash liquidity and capital
resources . To the extent that the funds generated by revenues are insufficient
to fund CAE's activities, it will be necessary to raise additional funds. In the
short-term the Company will continue to seek loans from investors and other
sources. The Company is in the process of renegotiating its current bank loan
including attempting to increase the principle and the repayment period.
Short-term plans also include raising additional funds through the sale of
equity or property and acquiring or merging with companies or adding businesses
that that are likely to exhibit positive net income (see Item 5 below).
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ACTIONS IN COSTA RICAN LABOR COURT
At this time there are actions against Central American Equities in the Costa
Rican Labor Court that have been brought by former employees who had been
dismissed by the Company due to poor performance or insubordination. These
employees dispute the reason for their dismissal and, as such, claim they are
entitled to additional monetary compensation. The Company considers these
actions to be routine litigation that is incidental to the business (as defined
under Reg. ss.228.103). It is anticipated that any contingent liability stemming
from these claims would be immaterial to the Company.
ITEM 2. CHANGES IN SECURITIES
The Company did not sell or issue any securities of any kind during the three
month period that ended on September 30, 2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has $500,000 outstanding against a $500,000 line of credit with
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Commerce Overseas Bank, which bears interest at the prime rate plus 3%. Interest
only is payable on the last day of each month. Principal payments were to begin
on January 10, 2000 in monthly installments of $38,462, however, the bank has
permitted an extended grace period and payment schedules are being renegotiated.
As of September 2000, all interest payments on this loan were current. The funds
advanced under this line of credit were utilized to supplement cash flow for
operating expenses and construction costs. The note is collateralized by
property of the Company.
The Company has a note payable in the amount of $210,000 payable to a director
of the Company, which was due on November 1, 2000. The note bears simple
interest at 13% per annum and is secured by property owned by the Company. The
Company is currently in the process of negotiating the terms of settlement for
this debt.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company submitted no matter to a vote of its security holders during the
three month period ended September 30, 2000.
ITEM 5. OTHER INFORMATION
On November 3, 2000 the Company announced that it had begun formal merger
discussions with HealthCare Merger Corp (HMC, formerly known as Centracan,
Inc.). HealthCare Merger is a US medical company incorporated in Nevada. It owns
and operates high technology medical facilities in San Jose, Costa Rica
including a magnetic resonance imaging facility and the first state-of-the-art
cancer treatment center in Central America (with two linear accelerators), and
ultrasound, mammography and stereotactic biopsy diagnostic facilities.
ITEM 6. EXHIBITS AND REPORTS
There are no additional exhibits or reports filed herewith.
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VERIFICATION SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this registration to be signed on its behalf by the
undersigned, thereunto duly authorized.
CENTRAL AMERICAN EQUITIES CORP.
BY: Michael N. Caggiano, President/CEO
MICHAEL N. CAGGIANO, President/CEO
CENTRAL AMERICAN EQUITIES CORP.
BY: Richard Wm. Talley, Director
RICHARD WM, TALLEY, DIRECTOR
CENTRAL AMERICAN EQUITIES CORP.
BY: Paul King, Director
PAUL KING, DIRECTOR
CENTRAL AMERICAN EQUITIES CORP.
BY: F. O. Rosenmiller, Director
F.O. ROSENMILLER, DIRECTOR
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