SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15d of the Securities Exchange Act of
1934 for the quarterly period ended: June 30, 2000
[ ] Transition report pursuant to Section 13 or 15d of the Securities Exchange
Act of 1934
For the Transition period from ________ to ________.
Commission file number: 333-45210
Supreme Hospitality
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(Exact name of registrant as specified in its charter)
Formerly Richwood, Inc.
Formerly Grubstake, Inc.
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(Former name if changed since last report)
Nevada 88-0460457
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(State of incorporation) (IRS employer identification number)
41919 Skywood Drive
Temecula, CA 92591-1877
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(Address of principal executive offices)
Issuer's telephone number, including area code: 909-506-3435
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
TITLE OF EACH CLASS OUTSTANDING JUNE 30, 2000
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Common Stock, par value $.0001 10,000,000 shares of common stock
Preferred Stock, par value $.0001
Transitional Small Business Disclosure Format (check one)
Yes No X
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<PAGE>
SUPREME HOSPITALITY
INDEX
PAGE
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 2000 4
Consolidated Statements of Operations for the Six Months 6
Ended June 30, 2000
Consolidated Statement of Cash Flows for the Six Months 7
Ended June 30, 2000
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of Operation 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Change in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature 13
Page 2 of 13
<PAGE>
WEBB & RITCHEY
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CERTIFIED PUBLIC ACCOUNTANTS
A Professional Corporation
December 2, 2000
The Board of Directors
Supreme Hospitality
Temecula, California
We have prepared the accompanying unaudited consolidated balance sheet of
Supreme Hospitality as of June 30, 2000 and the related unaudited statements of
income, shareholder's equity (deficit), and cash flows for the six months then
ended.
Unaudited financial statements are limited to presenting in the form of
financial statements information that is the representation of management. We
have not audited or reviewed the accompanying financial statements and,
accordingly, do not express an opinion or any other form of assurance on them.
/s/ Webb & Ritchey
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Webb & Ritchey, CPA'S - A Professional Corporation
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41661 Enterprise Circle No. #211 o Temecula, CA 92590 o (909) 296-9755
Page 3 of 13
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Supreme Hospitality
Unaudited Consolidated Balance Sheet
June 30, 2000
ASSETS
Current Assets
Cash $ 61,303
Receivables 29,169
Other Current Assets 17,404
----------------
Total Current Assets 107,876
Property and Equipment
Building 3,002,961
Furniture & Equipment 1,009,722
Land 1,362,048
Land Improvements 344,714
Vehicles 24,199
Accumulated Depreciation (382,713)
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Total Property and Equipment 5,360,931
Other Assets
Deposits 7,200
Franchise Costs -
Loan Fees, Net of Amortization 46,525
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Total Other Assets 53,725
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TOTAL ASSETS $ 5,522,532
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SEE ACCOUNTANT'S REPORT
Page 4 of 13
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Supreme Hospitality
Unaudited Consolidated Balance Sheet
June 30, 2000
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable $ 178,170
Accrued Interest 38,602
Accrued Other Liabilities 26,434
Guest Advance Deposits 12,573
Current Maturities-LT Debt 299,686
----------------
Total Current Liabilities 555,465
Total Long Term Liabilities 5,091,207
----------------
Total Liabilities 5,646,672
Shareholder Equity
Common Stock 1,000
Additional Paid In Capital 21,950
Retained Earnings (147,090)
----------------
Shareholders' (Deficit) (124,140)
TOTAL LIABILITIES & SHAREHOLDERS' DEFICIT $ 5,522,532
================
SEE ACCOUNTANT'S REPORT
Page 5 of 13
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Supreme Hospitality
Unaudited Consolidated Statement of Net Loss
For the Six Months Ended June 30, 2000
REVENUES $ 684,711
OPERATING EXPENSES
Salaries 147,922
Depreciation and amortization 115,902
Professional Fees 67,719
Other Operating Expenses 91,921
Utilities 27,466
Payroll tax and personnel costs 14,799
Repairs and Maintenance 22,315
TOTAL OPERATING EXPENSES 488,044
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INCOME FROM OPERATIONS 196,667
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OTHER EXPENSE
Interest Expense 287,257
NET LOSS BEFORE EXTRAORDINARY ITEMS $ (90,590)
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EXTRAORDINARY ITEM-Fee Paid to Underwriter (56,500)
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NET LOSS $ (147,090)
===============
EARNINGS (LOSS) PER COMMON SHARE
Before Extraordinary Items $ (0.009)
===============
On Net Loss $ (0.015)
===============
SEE ACCOUNTANT'S REPORT
Page 6 of 13
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<TABLE>
<CAPTION>
Supreme Hospitality
Unaudited Statement of Cash Flows
For the Six Months Ended June 30, 2000
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss (147,900)
Adjustments to reconcile net (loss) to net cash
provided by operating activities
Depreciation 133,886
(Increase) decrease in:
Receivables 135,248
Other Current Assets (6,081)
(Increase) decrease in:
Current Liabilities 69,426
---------------
Net cash provided by operating activities 184,579
CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid on long-term debt (98,456)
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Net cash (used) by financing activities (98,456)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of franchise -
Purchase of furniture and equipment 12,597
Cash received on note receivable-Shareholder (73,388)
Cash received from reqacquired common stock 21,950
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Net cash provided by investing activities (38,841)
NET INCREASE (DECREASE) IN CASH 47,282
BEGINNING CASH 14,021
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ENDING CASH $ 61,303
===============
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Supplemental Disclosures - Cash paid for interest $ 287,257
===============
</TABLE>
SEE ACCOUNTANT'S REPORT
Page 7 of 13
<PAGE>
SUPREME HOSPITALITY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - History And Organization Of The Company
------------------------------------------------
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments (all of which were normal recurring
adjustments) necessary to present fairly the financial position of Supreme
Hospitality (the "Company") at June 30, 2000, and the results of its operations
and its cash flows for the three months ended June 30, 2000. The results of
operations for the interim periods ended June 30, 2000 are not necessarily
indicative of the results to be expected for the full year.
The Company was organized November 10, 1997, under the laws of the State of
Nevada as GRUBSTAKE, INC. The Company currently has no operations and in
accordance with SFAS #7, is considered a development company. On December 1,
1998, the Company changed its name to RICHWOOD, INC. On April 17, 2000, the
Company changed its name to SUPREME HOSPITALITY.
Note 2 - Unaudited Interim Financial Information
------------------------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for financial statements. For further
information, refer to the audited financial statements and notes thereto for the
two months ending February 29, 2000 for Temecula Valley Inn, Inc., and for the
one month ending April 30, 2000 for Supreme Hospitality, included in the
Company's Form 10SB12G/A filed with the Securities and Exchange Commission on
June 29, 2000.
Note 3 - Summary Of Significant Accounting Policies
---------------------------------------------------
Accounting Method
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The Company records income and expenses on the accrual method.
Estimates
---------
The 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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from estimates.
Cash and Equivalents
--------------------
The Company maintains a cash balance in a non-interest-bearing bank that
currently does not exceed federally insured limits. For the purpose of the
statements of cash flows, all highly liquid investments with the maturity of
three months or less are considered to be cash equivalents. There are no cash
equivalents as of June 30, 2000.
Income Taxes
------------
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS #109)
" Accounting for Income Taxes". A deferred tax asset or liability is recorded
for all temporary difference between financial and tax reporting. Deferred tax
expense (benefit) results from the net change during the year of deferred tax
assets and liabilities.
Page 8 of 13
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Reporting on Costs of Start-Up Activities, Loss Per Share, Year End
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Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up
Activities" which provides guidance on the financial reporting of start-up costs
and organization costs. It requires most costs of start-up activities and
organization costs to be expensed as incurred. SOP 98-5 is effective for fiscal
years beginning after December 15, 1998. With the adoption of SOP 98-5, there
has been little or no effect on the company's financial statements.
Net loss per share is provided in accordance with Statement of Financial
Accounting Standards No. 128 (SFAS #128) "Earnings Per Share". Basic loss per
share is computed by dividing losses available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
loss per share reflects per share amounts that would have resulted if dilative
common stock equivalents had been converted to common stock. As of April 29,
2000, the Company had no dilative common stock equivalents such as stock
options.
The Company has selected December 31, as its fiscal year-end.
Note 4 - Income Taxes
---------------------
There is no provision for income taxes for the period ended June 30, 2000, due
to the net loss and no state income tax in Nevada, the state of the Company's
domicile and operations. The Company's total deferred tax asset as of December
31, 1999 is as follows:
Net operation loss carry forward $2,755
Valuation allowance $2,755
Net deferred tax asset $ 0
The federal net operating loss carry forward will expire between 2018 and 2019.
This carry forward may be limited upon the consummation of a business
combination under IRC Section 381.
Note 5 - Stockholders' Equity
-----------------------------
Common Stock, .0001 par value, 50,000,000 shares authorized, issued and
outstanding 10,000,000
10% Preferred Stock, .0001 par value, dividends cumulative, convertible after
three years into common stock at a ratio of three shares of common stock for one
share of preferred stock authorized 1,000,000,000 shares, none issued
Note 6 - Warrants And Options
-----------------------------
There are no warrants or options outstanding to acquire any additional shares of
common or preferred stock.
Note 7 - Related Party Transactions
-----------------------------------
The Company neither owns nor leases any real or personal property. An officer of
the corporation provides office services without charge. Such costs are
immaterial to the financial statements and accordingly, have not been reflected
therein. The officers and directors of the Company are involved in other
business activities and may in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the resolution
of such conflicts.
Page 9 of 13
<PAGE>
Note 8 - Prior Interim Quarterly Statements
-------------------------------------------
The SEC requires if the interim period is more than one quarter, income
statements must also be provided for the most recent interim quarter and the
comparable quarter of the preceding fiscal year. The Company did not have any
activity prior to the reverse merger on April 17, 2000.
Note 9 - Material Subsequent Events
-----------------------------------
The Company on July 1, 2000 entered into a franchise agreement with Days Inn of
America. The franchise fee is 8 1/2% of gross room revenues payable monthly. The
first two months were charged at a reduced rate of 2%. The Company expects
increased room revenues due to Days Inn of America national and international
marketing programs.
Page 10 of 13
<PAGE>
Item 2 - Management's Discussion And Analysis Or Plan Of Operations
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The Company was organized for the purpose of creating a corporate vehicle to
seek, investigate and, if such investigation warrants, acquire an interest in
one or more business opportunities presented to it by persons or firms who or
which desire to seek perceived advantages of a publicity held corporation. On
April 30, 2000 the Company (SUPREME HOSPITALITY) acquired TEMECULA VALLEY INN,
INC., (a Nevada corporation) as a wholly owned subsidiary of Supreme Hospitality
in exchange of Common Stock, Sub Curia. The primary activity of the Company is
the hospitality business for both the business and leisure traveler, and a
90-room hotel was built and opened in1998. The executive offices of the company
are located at 41919 Skywood Drive, Temecula, California 92591. Its telephone
number is (909) 506-3435. Of the 50,000,000 shares of the SUPREME HOSPITALITY'S
Common Stock, 1,000,000 are currently freely tradable under the Rule 144k
exemption promulgated under the Securities Act of 1933. See Item 8 "Description
of Securities."
The Company may obtain funds for additional hotel construction or acquisition by
private placements, equity or debt issues. Persons purchasing securities in
these placements and other shareholders will likely not have the opportunity to
participate in the decision relating to any acquisition. Investors will entrust
their investment monies to the Company's management before they have a chance to
analyze any ultimate use to which their money may be put. Consequently, the
Company's potential success is heavily dependent on the Company's management,
which will have virtually unlimited discretion in new construction or
acquisition.
The Company plans to develop and construct additional properties in the future
and has an option to purchase for $1,300,000, approximately 2.61 acres of
approved hotel property, including a complete package which consists of a
business plan, construction costs, drawings, etc. This property is located
adjacent to Interstate 5 and Hilltop Drive in Redding, California. This parcel
is the last available hotel property in this immediate area. The current plan is
to exercise the purchase option and develop and build a 99-room hotel on this
property. This development is anticipated to be the next development the Company
will undertake. The cost is estimated to be $5,850,000 for land, building and
improvements. This property is included in the financial projections and is
scheduled to commence operations in the fourth quarter of 2001.
The Company has identified other properties in the Temecula Valley of Southern
California to acquire, develop and build hotels. This will be done through the
raising of additional equity funds. An additional property in the Temecula
Valley is included on the financial projections commencing operations in the
third quarter of 2002. Development cost for a 120-room hotel is estimated at
$7,800,000 for land development, building and improvements.
The management of the Company believes that the Temecula Valley area will
continue to see unprecedented growth not seen since the mid 1980's. The Company
is poised to take advantage of that growth, given it can meet its financial
requirements.
The Company believes that through the acquisition of the land and subsequent
development of these properties, shareholder value will be increased. The
management team has the expertise to identify prime properties and negotiate a
fair price for the land and develop it and build a quality facility, which will
increase in value.
As is customary in the industry, the Company may pay a finder's fee for locating
an acquisition prospect. If any such fee is paid, it will be approved by the
Company's Board of Directors and will be in accordance with the industry
standards. Such fees are customarily between 1% and 5% of the size of the
transaction, based upon a sliding scale of the amount involved. Such fees are
typically in the range of 5% on a $1,000,000 transaction ratably down to 1% in a
$4,000,000 transaction. Management has adopted a policy that such a finder's fee
or real estate brokerage fee could, in certain circumstances, be paid to any
employee, officer, director or 5% shareholder of the Company, if such person
plays a material role in bringing in a transaction to the Company.
Page 11 of 13
<PAGE>
Item 3 - Description Of Property
--------------------------------
A 90-room 3-story hotel, Temecula Valley Inn (TVI) in Temecula, California, was
constructed and opened for business on December 5, 1998. It is one of the
premier hotel properties in the Temecula Valley. Though cyclical in nature, the
TVI's occupancy rates have continued to grow. TVI has chosen to remain
independent of any national or regional franchise in order to keep costs down
and allow for autonomous management TVI has developed its own website to take
advantage of the growing Internet market. The property's web address is
Www.temeculavalley.com.
The Company currently serves the business traveler who requires perceived value
for the nightly rate he/she pays. Through active marketing to various
corporations the Company has been successful during its first year of operations
of attracting a reasonable volume of corporate business. On weekends, the
Company attracts customers who are typically in town to attend various community
functions including but not limited to the "Balloon and Wine Festival" and the
"Rod Run". During the summer months there are activities in the area almost
every weekend. Occupancy rates during these weekends approached 100% on average
during the first year of operations.
There are 11 hotels and motels, with 810 rooms, in the community area including
Temecula Valley Inn. The property has excellent visibility and easy access from
Interstate 15. There are numerous restaurants within walking distance of the
Hotel.
The Company is beyond the break-even point and can satisfy its cash requirements
in the foreseeable future. The Company expects occupancy rates to steadily
increase every year due to its marketing efforts and the growth of Temecula
Valley.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT:
With the exception of historical information, the matters discussed in this
Report are "forward looking statements" as the term is defined in Section 27A of
The Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
The Securities Exchange Act of 1934, as amended (the "Exchange Act"). While we
Believe that our strategic plan is on target, several important factors, many of
Which are beyond our control, have been identified which could cause the
Successful implementation of our business plan to differ materially from
planned, implied or predicted results. We are a development stage company; our
profitability will depend upon the successful implementation of our business
plan or a merger or acquisition by a more established company in the industry.
Although management believes that the expectations reflected in these
forward-looking statements are reasonable, it can give no assurances that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the expectations are discussed in this
Report, including, without limitation, in conjunction with those forward-looking
statements contained in this Report.
Page 12 of 13
<PAGE>
PART II - OTHER INFORMATION
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Item 1 - Legal Proceedings
--------------------------
To the best of the Company's knowledge, there are no material legal proceedings
pending against the Company or any of its property, nor was any such proceeding
terminated during the quarter ended June 30, 2000.
Item 2 - Change In Securities
-----------------------------
This item is not applicable.
Item 3 - Defaults Upon Senior Securities
----------------------------------------
This item is not applicable.
Item 4 - Submission Of Matters To A Vote Of Security Holders
------------------------------------------------------------
This item is not applicable.
Item 5 - Other Information
--------------------------
This item is not applicable.
Item 6 - Exhibits And Reports On Form 8-K
-----------------------------------------
This item is not applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: Temecula, CA
December 7, 2000 Supreme Hospitality
By: /s/ Larry W. Lang
--------------------------------
Larry W. Lang
Chief Executive Officer
Page 13 of 13
