<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 quarterly period ended March 31, 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
incorporated or organization) Identification Number)
19100 Von Karman St. Irvine, California 92612
(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:
[12,230,252] 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
<PAGE> 2
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I: FINANCIAL INFORMATION.............................................. 3
ITEM 1. FINANCIAL INFORMATION........................................... 3
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS.............................. 13
Overview............................................................. 13
Results of Operations --- Three Month Period Ended March 31, 2000.... 13
Liquidity and Capital Resources...................................... 15
Year 2000 Compliance................................................. 15
PART II: OTHER INFORMATION................................................. 16
ITEM 1. LEGAL PROCEEDINGS............................................... 16
Actions in Costa Rican Labor Court................................... 16
ITEM 2. CHANGES IN SECURITIES........................................... 16
Securities Issued After March 31, 2000............................... 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
-2-
<PAGE> 3
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).
During the three month period ended March 31, 2000, the Company for the first
time is reporting positive net income. Financial statements follow.
-3-
<PAGE> 4
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Consolidated Balance Sheet
Unaudited
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 61,615 $ 24,869
Account receivable 25,009 4,220
Inventory 12,636 10,040
Prepaid expenses 23,867 2,805
------------ -------------
123,127 41,935
------------ -------------
Buildings and equipment,
Net of depreciation 7,998,038 8,047,905
------------ -------------
Other assets
Other Assets 4,717 4,801
------------ -------------
Total assets $ 8,125,883 $ 8,094,640
============ =============
Liability and Stockholders' Equity
Current liabilities
Accounts payable $ 20,650 $ 44,770
Accrued expenses 139,953 176,873
------------ -------------
160,603 221,643
------------ -------------
Other liabilities
Long term debt 710,000 710,000
Due to officers 1,387,377 1,362,187
------------ -------------
2,097,377 2,072,187
------------ -------------
Stockholders' equity
Common stock - $.001 par value; 20,000,000
Authorized, 12,230,252 issued and outstanding 12,230 12,230
Preferred stock - $.001 par value; 1,000,000
shares authorized, 0 issued and outstanding -- --
Additional paid-in capital 8,897,817 8,897,817
Unrealized gain on foreign exchange 39,948 40,352
Retained deficit (3,082,092) (3,149,589)
------------ -------------
5,867,903 5,800,810
------------ -------------
Total liabilities and stockholders' equity $ 8,125,883 $ 8,094,640
============ =============
</TABLE>
See Notes to Consolidated Financial Statements
-4-
<PAGE> 5
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Consolidated Statement of Operations
Unaudited
For the three month period ended March 31,
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
REVENUES
Sales Revenue
Revenue $ 514,281 $ 451,121
------------ ------------
Total Sales Revenue 514,281 451,121
------------ ------------
EXPENSES
Cost of Sales
Cost of Sales 81,332 211,123
Selling Expense (Commissions) -- 178,435
------------ ------------
Total Cost of Sales 81,332 389,558
------------ ------------
Gross Profit 432,949 61,563
------------ ------------
Operations
General & Administrative 273,522 104,677
Depreciation 55,000 68,152
------------ ------------
Total General & Administrative 328,522 172,829
------------ ------------
Interest Expense 36,930 13,546
------------ ------------
Income taxes 0 0
NET INCOME (Loss) $ 67,497 $ (124,812)
============ ============
Weighted Average share of
Common Stock Outstanding 12,230,252 12,230,252
============ ============
Net Gain (Loss) per Common Share $ .01 $ (.01)
============ ============
Net Gain (Loss) per Fully Diluted Share $ .01 $ (.01)
============ ============
</TABLE>
(See Notes to Consolidated Financial Statements)
-5-
<PAGE> 6
CENTRAL AMERICAN EQUITIES CORP. AND SUBSIDIARIES
Statements of Cash Flow
For the Three Months Ended March 31,
Unaudited
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 67,497 $(124,812)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Unrealized Loss on Foreign Exchange (405) --
Depreciation and amortization 55,000 68,152
Increase (decrease) in:
Accounts receivable (20,789) --
Inventory (2,596) 4,922
Prepaid expense and other 20,978 --
(Increase) decrease in:
Accounts payable (24,120) 20,548
Accrued expenses 36,920 (7,236)
--------- ---------
Net cash used in operating activities: 16,689 (38,426)
--------- ---------
Cash flows from investing activities:
Capital expenditures (5,133) (267,451)
--------- ---------
Net cash used in investing activities -- --
--------- ---------
Cash flows from financing activities:
Proceeds from loans -- 33,288
Proceeds from loans from officers 25,190 --
--------- ---------
Net cash provided by financing activities: -- 33,288
--------- ---------
Net increase (decrease) in cash 36,746 (5,138)
Cash - beginning of period 24,869 8,450
--------- ---------
Cash - end of period $ 61,615 $ 3,312
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
-6-
<PAGE> 7
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.
-7-
<PAGE> 8
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-
<PAGE> 9
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.
-9-
<PAGE> 10
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 March 31, 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 approximately $3
million as of March 31, 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
-10-
<PAGE> 11
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 $699,000 during
the year ended December 31, 1999. However during the three month
period ended March 31, 2000, the Company had positive net income
of approximately $67,497.
The Company is currently in the process of formulating a plan to
effect an additional public offering, 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 March 31, 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 727,602
-----------
$ 7,998,038
===========
</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%. 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, payments are being
renegotiated. 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 prime rate of interest at December 31, 1999 was 8%.
-11-
<PAGE> 12
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 shareholder, which is due when the Company goes public or on
November 1, 2000. The note bears simple interest at 13% per annum
and is secured by property owned by the Company.
Note 5 - Related Party Transactions
At March 31, 2000 the Company had notes payable from various
officers in the amount of $1,387,377, which bear interest at an
annual rate of 7%.
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:
<TABLE>
December 31, Amount
------------ --------
<S> <C>
2000 $ 15,500
2001 7,500
--------
$ 23,000
========
</TABLE>
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 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.
-12-
<PAGE> 13
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 March 31, 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, travel planning and marketing operation that moved its
headquarters from California to Costa Rica in July 1999). The Company has
approximately 75 full and part-time employees.
All Company owned 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 covered by this filing (ended March 31, 2000), the
Company for the first time is reporting positive net income for a period.
During July of 1999, the Company consolidated all of its hotel reservations and
related concierge activities (referred to as Alta Travel Planners or ATP) in
offices within Hotel Alta, in Costa Rica. As a result of this consolidation, the
Company achieved savings in costs for personnel (reservations staff), rental
space, equipment, utilities, and overhead. Certain one-time expenses were
incurred that included moving activities, severance packages, training of new
personnel, installation of utilities (a new 800 line in Costa Rica) and the
purchase of new equipment and stationery. Revenue from commissioned sales
declined as the company diminished certain low-margin travel services.
During the three month period ended March 31, 2000, the Company rented out the
100-seat restaurant at Playa Carmen. Adjacent to the restaurant, CAE plans to
construct a tent camp for surfers and low-budget travelers in the future. This
expansion is partially dependent upon the success of the Company's capital
raising plans.
RESULTS OF OPERATIONS --- THREE MONTH PERIOD ENDED MARCH 31, 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).
-13-
<PAGE> 14
Balance Sheet
Total assets remained at about $8.1 million. Significantly, with the Company
creating positive cash flow for the first time, management did not need to
borrow to meet operational expenses during the three month period ended March
31, 2000. Long-term debt remained at approximately $2,097,000. Note that
$1,254,508 of this debt was cancelled after the close of the period (see next
section for a discussion of debt conversion to equity). For a detailed
description of this debt see Note 4 to the Consolidated Financial Statements.
Post March 31, 2000 Debt Conversion
On June 23, 2000 (after the close of the three-month period reported in this
filing), 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 on the books of the Company. The effects of this conversion
will be reflected in the financial statements for the three-month period ending
June 30, 2000.
Comparison of Statement of Operations for the Periods Ended March 31, 2000 and
1999
During the three month period ended March 31, 2000 total sales revenue increased
to approximately $514,281. This is an increase of approximately 14% from the
same period in 1999. (Note that total sales revenue of approximately $451,000
received during the three-month period ended March 31, 1999 included in excess
of $178,000 of commissions for travel services that were passed through to
non-Company hotels and service providers in Costa Rica).
During the three-month period ended March 31, 2000, total operational expenses
(cost of services and operational costs) were $354,854. This represents a
decline of approximately 28% ($139,981) from the same period in 1999. The
decline can be attributed primarily to the closure of the ATP office in
California and the concomitant large drop in selling expense for commissions,
and decreases in other labor costs (although there have been cost savings across
many expense categories).
As sales revenue grew and expenses declined, the Company reported for the first
time positive net income. During the three-month period ended March 31, 2000,
net income (after depreciation of about $55,000 and interest costs of about
$37,000) was $67,497.
Major improvements in performance occurred at both Hotel Alta and Sunset Reef
hotels. Occupancy at Hotel Alta for the first three months of 2000 increased
approximately 48% over the same period in 1999. Room occupancy grew from 46%
during the first three months of 1999 to 68% during the first three months of
2000.
Occupancy at Sunset Reef for the first three months of 2000 also increased
approximately 48% over the same period in 1999. Room occupancy grew from 30%
during the first three months of 1999 to 44.3% during the first three months of
2000.
-14-
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
The Company had relied on sales of shares of common stock to fund operations and
make capital improvements. Through December 31, 1999, 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. However, during the three month period ended March 31, 2000, the
Company had a positive net income and increasing net worth.
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.
YEAR 2000 COMPLIANCE
During 1999, the Company had identified one computerized system that had to be
modified, upgraded or converted to recognize and process dates after December
31, 1999 (the Year 2000 Issue). CAE's centralized reservations and financial
control system, known as RDP (Resort Data Processing) was determined to be
potentially Y2K non-compliant. CAE elected to replace the system entirely with a
new, Y2K compliant system manufactured and installed by Hovysis Corporation.
Purchase and installation of Hovysis cost approximately $7000. As of March 31,
2000, all systems had proved to be Year 2000 compliant.
-15-
<PAGE> 16
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. Section 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 March 31, 2000.
SECURITIES ISSUED AFTER MARCH 31, 2000.
The following presents information respecting the issuance of common stock of
the Company without registration under the Securities Act of 1933 as amended
(the "Securities Act") during the quarter ending June 30, 2000. 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 on the books of the Company.
These issuances are claimed to have been exempt from registration under the
Securities Act pursuant to Section 4(2) thereof, as more fully described below.
With respect to all sales and issuance of securities as hereinabove described:
a) The Company did not engage in general advertising or general solicitation
and paid no commission or similar remuneration, directly or indirectly,
with respect to such transactions.
b) The persons who acquired these securities are current or former executive
officers and directors of the Company, consultants to the Company, and/or
providers of professional services. Such persons had continuing direct
access to all relevant information concerning the Company and/or have such
knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of such investments and are able
to bear the economic risks thereof.
-16-
<PAGE> 17
c) The persons who acquired these securities advised the Company that the
shares were purchased for investment and without a view to their resale or
distribution and acknowledged that they were aware of the restrictions on
resale of the shares absent subsequent registration and that an appropriate
legend may be placed on the certificates evidencing the Shares reciting the
absence of their registration under the Securities Act and referring to the
restrictions on their transferability.
Accordingly, the Company claims the transactions hereinabove described, to have
been exempt from the registration requirements of Section 5 of the Securities
Act by reason of Section 4(2) thereof in that such transactions did not form
part of a single financing plan and did not involve a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
For the period ended on March 31, 2000 there were no defaults upon senior
securities of any kind by the Company.
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
period ended March 31, 2000.
ITEM 5. OTHER INFORMATION
There is no other information that the Company believes is necessary to include
in this report.
ITEM 6. EXHIBITS AND REPORTS
Exhibits and reports filed herewith: none.
-17-
<PAGE> 18
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
-18-
