As filed with the Securities and Exchange Commission on October 23, 2000
Registration No. _________________
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
AMENDMENT NO. 2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SUPREME HOSPITALITY
(Name of small business issuer in its charter)
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<S> <C> <C>
Nevada 0000 91-2019034
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or Organization) Classification Code Number) Identification Number)
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41919 Skywood Drive, Temecula, California 92591 (909) 506-3435
(Address of principal executive offices) Telephone Number
Nevada Legal Forms & Books, Inc.
3020 W. Charleston Blvd., Las Vegas, NV 89102
(Name, address and phone number for agent for service)
Copies to:
Orsini & Rose Law Firm, P.A.
3800 Central Avenue
St. Petersburg, FL 33731
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [x]
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CALCULATION OF REGISTRATION FEE
------------------------ ----------------- ------------------ ------------------- ------------------
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Title of each class of Amount to be Proposed maximum Proposed maximum Registration Fee
securities to be registered offering price aggregate offering
registered per share(1) price(1)
PREFERRED STOCK 1,000,000 shares $6.30 $6,300,000 $1,663.20
------------------------ ----------------- ------------------ ------------------- ------------------
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Note (1) Estimated solely for calculating the registration fee.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
Supreme Hospitality ("Company") may offer from time to time shares in its common
stock, $0.0001 par value in amounts, at prices and on terms to be determined at
the time of each offering in one or more supplements to this prospectus.
SUPREME HOSPITALITY
1,000,000 shares of 10% Convertible Preferred Stock
$6.30 per share
<S> <C> <C>
Supreme Hospitality We are in the hotel business
41919 Skywood Drive servicing both the leisure
Temecula, California 92591 and business traveler with one
hotel already operating and
another in development.
The Offering
Per Share Total Each share is convertible
--------- ----- into three shares
of common and
Public price...... $6.30 $6,300,000 yields a 10% per annum
Selling stock dividend for three
Discounts...... $0.80 $ 800,000 years.
Supreme Hospitality... $5.50 $5,500,000 The offering price may not
reflect the market price of our shares
after the offering.
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This investment involves Risk, and you should read the "Risk Factors" to
consider beginning on page 7.
Neither the Securities and Exchange Commission nor any State Regulatory Body has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
August 28, 2000
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AVAILABLE INFORMATION
The company has filed with the Securities and Exchange Commission (
"SEC" ) a Registration Statement on Form 10-SB ( " Registration Statement " )
under the Securities Act of 1933, as amended ( "Securities Act" ), with respect
to the Securities. This Prospectus, which constitutes part of the Registration
Statement, omits certain of the information contained in the Registration
Statement and the exhibits thereto on file with the SEC pursuant to the
Securities Act and the rules and regulations of the SEC hereunder. The
Registration Statement, including exhibits thereto, may be inspected and copied
at the public reference facilities maintained by the SEC at 450 Fifth Street,
NW., Room 1024, Washington, DC. 20549. Copies may be obtained at the prescribed
rates from the public reference Section of the SEC at its principal office in
Washington, DC. Statements contained in this Prospectus as to the contents of
any contract or any document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ( "Exchange Act" ), and in
accordance therewith will file reports and other information with the SEC. Such
reports and other information can be inspected and copied at the location
described above. Copies of such materials can be obtained by mail from the
Public Reference Section of the SEC at 450 Fifth Street, NW., Room 1024,
Washington, DC. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been previously filed by the
Company with the SEC under the Exchange Act ( File No. 000-30803) are
incorporated herein by reference:
(i) Registration on Form 10-SB12G Filed June 14, 2000.
All documents filed by the Company pursuant to Sections 13 (a), 13 (c), 14 or 15
(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained herein, or in any document incorporated or
deemed to be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person, including any
beneficial owner to whom a copy of this Prospectus is delivered, on the written
request of any such person, a copy of any or all of the documents incorporated
herein by reference, except the exhibits to such documents ( unless such
exhibits are specifically incorporated by reference in such documents). Requests
for such copies should be directed to the Company, at 41919 Skywood Drive,
Temecula, CA. 92591.
2
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TABLE OF CONTENTS
Page
Prospectus Summary ........................................................ 4
The Offering .............................................................. 4
Determination of Offering Price ........................................... 5
Description of Convertible Preferred Stock ................................ 5
The Company ............................................................... 6
Risk Factors .............................................................. 7
Disclosure Regarding Forward Looking Statements ........................... 9
Use of Proceeds ........................................................... 13
Plan of distribution ...................................................... 13
Capitalization ............................................................ 15
Price Range of Stock ...................................................... 16
Dividend Policy ........................................................... 16
Management ................................................................ 17
Management's discussion and Analysis and Plan of Operations ............... 18
Description of Property ................................................... 19
Demographics .............................................................. 20
Selected Financial Information ............................................ 24
Additional Financial Information......................................F-1, F-10
Security Ownership of Beneficial Owners and Management .................... 34
Legal Matters ............................................................. 35
Experts ................................................................... 35
3
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PROSPECTUS SUMMARY
You should read this prospectus summary together with the entire
prospectus, including the more detailed information in our financial statements
and accompanying notes appearing elsewhere in this prospectus. Unless otherwise
indicated, all information contained in this prospectus relating to our shares
of common and preferred stock is based upon information as of April 17, 2000.
This is an offer to sell 1,000,000 shares of the 10% convertible
preferred stock of Supreme Hospitality ( A Nevada Corporation). Each share is
convertible into a total of three shares of common. The preferred stock offering
price is $ 6.30 per share and yields a 10% per annum dividend paid in common
stock at the market upon conversion.
THE OFFERING
Preferred stock offered________________________________ 1,000,000 shares
Preferred stock outstanding after the offering_______________1,000,000 shares
Proposed NASDAQ Symbol____________________________ SUPRpr
Ranking____________ The preferred stock will rank senior to the common stock
with respect to payments upon the liquidation, dissolution
or winding up of the company.
Use of proceeds____ The net proceeds from this offering will be used to pay down
the debt and to provide working capital for the Company.
(See Use of Proceeds page).
4
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Determination of Offering Price
On June 14, 2000, the registration statement for 10,000,000 shares of
common stock and 1,000,000 shares of preferred stock was filed with the U.S.
Securities and Exchange Commission on Form 10-SB of the 1934 Securities Act.
(File #: 000-30803). Prior to June 14, 2000, none of the securities have been
publicly traded as no public market has existed. The Board of Directors and the
key management personnel determined the public offering price of the preferred
by adding the debt to be retired plus the offering fees and operating capital
and dividing by the shares offered.
Debt $ 5,000,000
Offering Fees $ 800,000
Operating capital $ 500,000
-----------
Total $ 6,300,000
-----------
Shares offered 1,000,000 = $6.30 per share
Description of Convertible Preferred Stock
General
This is a three year convertible preferred stock offering. One
preferred share is convertible into three shares of the Company's common stock
at any time during the three year period at the option of the shareholder. The
conversion is automatic on the third year record date if not converted earlier
by the shareholder.
The preferred shares yield a 10% per annum dividend, which is paid in
common shares at the market upon conversion. The 10% annual common stock
dividend is determined by multiplying the preferred share offering price ($6.30)
by a factor of ten ($63.00) and dividing it by the market price per share. This
will determine the number of common shares to the shareholder upon conversion.
The Charter authorizes the issuance of 1,000,000 shares of Preferred
Stock, par value $0.0001per share ("Preferred Stock"). No other series of
Preferred Stock has been authorized or issued. The Preferred Stock will rank
senior to the Common stock with respect to the payment of dividends and amounts
upon liquidation, dissolution or winding up of the Company without the consent
of any holder of Preferred Stock.
While any shares of Preferred stock are outstanding, the Company may
not authorize, create or increase the authorized amount of any class or series
of stock that ranks senior to the Preferred Stock with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding up of the Company.
However, the Company may increase the authorized number of shares of Preferred
Stock or issue a series of Preferred Stock ranking junior to or on a parity with
the Preferred stock with respect, in each case, to the payment of dividends and
amounts upon liquidation, dissolution and winding up of the Company without the
consent of any holder of Preferred Stock.
5
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THE COMPANY
Supreme Hospitality ("The Company") is in the hospitality (hotel)
business catering to the business, leisure and vacation traveler. On April 30,
2000, the Company acquired Temecula Valley Inn (" TVI ") as a wholly owned
subsidiary. TVI is a 90-room hotel built in 1998 located in the Temecula Valley
in Southern California between Los Angeles and San Diego. It is one of the
premier hotel properties in the valley. Though cyclical in nature, TVI's
occupancy rates have continued to grow. TVI has developed its own website to
take advantage of the growing Internet market. The hotel's web address is
www.temeculavalley.com.
-----------------------
The Company currently serves the 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 approximately the two years of operation.
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 utilizes the services of Rezsolutions to
assist in the booking of rooms. This firm charges 12% for reservations they
make. The website generates approximately 15% of business, whereas walk-ins
average 20%, corporate business averages 40%, AARP & AAA combined provide 25%.
The Company's acquisition growth strategy is to increase cash flow and
enhance shareholder value by building or acquiring additional hotels that meet
the Company's investment criteria. It 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. The parcel is the last available hotel property in this immediate
area. The current plan is to exercise the purchase option, develop and build a
90-room hotel on this property. This development is anticipated to be the next
development the Company will undertake. Development cost is estimated to
be $5,850,000 for land development, building and improvements. The property is
included in the financial projections and is scheduled to commence operations in
the third 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 funds. An additional property in the Temecula
Valley is included in 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 the 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 financing requirements.
The Company believes that through the acquisition of land and
subsequent development of these properties that 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.
6
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RISK FACTORS
THE UNITS BEING OFFERED HEREIN ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. BEFORE MAKING AN INVESTMENT IN THE COMPANY, PROSPECTIVE INVESTORS
SHOULD GIVE CAREFUL ATTENTION TO THE FOLLOWING RISK FACTORS INHERENT IN AND
AFFECTING THE BUSINESS OF THE COMPANY.
Limited Operating History
The Company was formed on October 30, 1997 and acquired Temecula Valley
Inn as its first operating hotel on April 30,2000. Prior to its acquisition by
the company, Temecula Valley Inn was constructed and opened for business in
1998.
Operating Losses
The Company has incurred net losses and experienced negative cash flow
during its two year operating history. ( See financial information).
Hotel Industry Risks
Operating Risks
The Company's hotels are subject to all operating risks common to the
hotel industry. These risks include, among other things, intense competition
from other hotels; over-building in the hotel industry which has adversely
affected occupancy, average daily rate ( "ADR" ) and revenue per available room
( "REVPAR" ) in the past; increases in operating costs due to inflation and
other factors, which increases have not always been, and may not necessarily in
the future be, offset by increased room rates; dependence an business and
commercial travelers and tourism; increases in energy costs and other expenses
of travel; and adverse effects of general and local economic conditions. Such
factors could adversely affect the Company's ability to make any required
payments of principal and interest on indebtedness and to make future dividends
to shareholders. Further, annual adjustments to the base rent and the thresholds
for computation of percentage rent, based on a formula taking into account
changes in the U.S. Consumer Price Index ( "CPI" ), would ( in the absence of
offsetting increases in room revenue and in the event of any decrease in room
revenues) result in decreased revenues to the Company available for required
payments of principal and interest on indebtedness and to make future dividends
to shareholders.
Competition
Competition for Guests; Operations. The hotel industry is highly
competitive and hotels experience competition primarily from other upscale
hotels in its immediate vicinity, but also competes with other hotel properties
in its geographic market. Some of the competitors of the Company's hotel may
have substantially greater marketing and financial resources than the Company. A
new hotel is in development, and additional Hotels room may be developed in the
future. Such additional hotel rooms could have an adverse effect on the revenues
of the Company's hotels in such markets.
7
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Competitions of Acquisitions. The Company may be competing for
investment opportunities with entities which have substantially greater
financial resources than the Company. These entities may be able to accept more
risk than the Company prudently can manage. Competition may generally reduce the
number of suitable investment opportunities offered to the Company and increase
the bargaining power of property owners seeking to sell.
Seasonality of Hotel business
The hotel industry is seasonal in nature. Generally, hotel revenues are
greater in the second and third quarters than in the first and fourth quarters.
Through diversity in the geographic location and in the primary customer base of
the company's hotels, the Company may be able to lessen, but now eliminate, the
effects of seasonality. Accordingly, seasonality can be expected to cause
significant quarterly fluctuations in the Company's revenues.
Investment Concentration in Single Industry
The Company's current strategy is to acquire interests in hotel
properties. The Company will not seek to invest in assets selected to reduce the
risks associated with investments in the hotel industry, and will be subject to
risks inherent in concentrating investments in a single industry. Therefore, the
adverse effect on the Company's revenue and amounts available for required
payments of principal and interest on indebtedness. Future dividends to
shareholders resulting from a downtown in the hotel industry will be more
pronounced than if the Company had diversified its investments outside of the
hotel industry.
Constraint on Acquisitions and Improvements
The Company intends to continue to pursue its current growth strategy,
which includes building or acquiring and improving hotel properties. There is a
risk that the Company will not have access to sufficient equity of debt capital
to pursue its acquisition Strategies indefinitely. The Company's ability to
continue to make hotel acquisitions will depend primarily on its ability to
obtain additional private or public equity or debt financing. There can be no
assurance that such financing will be available to make future investments.
Effect of Market Interests Rates On Price of Capital Stock
One of the factors that may influence the Company's Common Stock and
any Preferred Stock in public trading markets is the annual yield as compared to
yields on other financial instruments. Thus, an increase in market interest
rates will result in higher yields on other financial instruments, which could
adversely affect the market price of the shares of Common Stock and any
Preferred Stock.
Reliance on Key Personnel and Board of Directors
Shareholders have no right or power to take part in the management of
the Company except through the exercise of voting rights on certain specified
matters. The Board of Directors is responsible for managing the Company. The
Company's future success, including particularly the implementation of the
Company's acquisition growth strategy, is substantially dependent on the active
participation of Mr. Lang. The loss of services for this individual could have a
material adverse effect on the Company.
8
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Real Estate Investment Risks
The Company's investments are subject to varying degrees of risk
generally incident to the ownership of real property, including, in addition to
the risks discussed below, adverse changes in general or local economic
conditions, zoning laws, traffic patterns and neighbor characteristics, tax
rates, governmental rules and fiscal policies, and by civil unrest, acts of war,
and other adverse factors which are beyond the control of the Company.
Illiquidity of Real Estate
Real estate investments are relatively illiquid. The ability of the
Company to vary its portfolio in response to changes in economic and other
conditions will be limited. Also, no assurances can be given that the market
value of any of the Hotels will not decrease in the future. There can be no
assurance that the Company will be able to dispose of an investment when it
finds disposition advantageous or necessary or that the sale price realized in
any disposition will recoup or exceed the amount of the Company's investment
therein.
Uninsured and Underinsured Losses
The Company's hotel is covered by comprehensive policies of insurance,
including liability, fire and extended coverage. Management believes such
specified coverage is of the type and amount customarily obtained by owners of
real property assets. However, there are certain types of losses, generally of a
catastrophic nature, such as earthquakes, hurricanes and floods, that may be
uninsurable or not economically insurable. Although the hotel was constructed
under the more recent and stringent oost-1984 building codes that were intended
to reduce the likelihood or extent of damage from seismic activity, no assurance
can be given that an earthquake would not cause substantial damage and losses.
The Company presently maintains and intends to continue to maintain earthquake
insurance on the current Hotel located in California to the extent practicable.
The Company's Board of Directors may exercise discretion in determining amounts,
coverage limits and the deductibility provisions of insurance, with a view to
maintaining appropriate on the company's investments as a reasonable cost and on
suitable terms. This may result in insurance coverage that, in the event of a
substantial loss, would not be sufficient to pay the full current market value
or current replacement cost of the Company's lost investment. Inflation, changes
in building codes and ordinances, environmental considerations, and other
factors also might make it impractical to use insurance proceeds to replace the
property after such property has been damaged or destroyed. Under such
circumstances the insurance proceeds received by the Company might not be
adequate to restore its economic position with respect to such property.
9
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Disclosure Regarding Forward Looking Statements
This Prospectus includes forward looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 12E of the
Securities Exchange Act of 1934, as amended. Although the company believes that
the expectations reflected in such forward looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
achieved.
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Temecula Valley Inn
Three Year Projection - Statement of Operations 2000-2002
Year 1 Total Total Total Total
-------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1 Year 2 Year 3 3 Years
------- ------- ------- ------- ------ ------ ------ -------
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Occupancy Statistics
--------------------
Available rooms Per day 90 90 90 90 90 180 300
Available rooms per period 8,190 8,190 8,280 8,280 32,940 49,410 87,780 170,130
Occupied rooms per period 3,686 5,324 5,796 5,382 20,176 30,456 57,320 107,952
Percent of occupancy 45.00% 65.00% 70.00% 65.00% 61.25% 61.60% 65.30% 63.45%
Average daily rate 85 90 90 85 87.5 87.07 89.25 88.36
Revenue
-------
Rooms 313,310 479,160 521,640 457,470 1,771,580 2,651,724 5,115,701 9,539,005
Other income 15,666 23,958 26,082 22,874 88,580 132,586 255,785 476,951
------ ------ ------ ------ ------ ------- ------- -------
Total revenue 328,976 503,118 547,722 480,344 1,860,160 2,784,310 5,371,486 10,015,956
------- ------- ------- ------- --------- --------- --------- ----------
Operating expenses
------------------
General and administrative 131,273 147,916 152,713 148,507 580,409 881,082 1,364,456 2,825,947
Marketing 9,869 15,094 16,432 14,410 55,805 83,529 161,145 300,479
Repairs & Maintenance 13,805 18,900 20,576 19,106 71,667 108,119 203,486 383,272
Utilities 13,823 199,965 21,735 20,183 75,706 114,210 214,950 404,866
Property taxes 47,234 47,234 94,468 124,663 248,910 468,041
Other 7,372 10,684 11,592 10,764 40,376 60,912 114,640 175,552
----- ------ ------ ------ ------ ------ ------- -------
Total operating expenses 175,422 259,757 223,048 260,204 918,431 1,372,515 2,307,587 4,558,157
------- ------- ------- ------- ------- --------- --------- ---------
Income from Operations 153,554 243,361 324,674 220,140 941,729 1,411,795 3,063,899 5,417,423
-------
Other Income (expenses)
----------------------
Interest Income 500 500 500 500 2000 2000 2000 6000
Interest Expense -135,715 -133907 -105913 -103484 -479019 -436742 -1065604 -1981365
Depreciation & Amortization -65,693 -65693 -65693 -65693 262772 -394158 -656930 -1313860
------- ------ ------ ------ ------ ------- ------- --------
Total other ( expenses) -200,908 -199100 -171106 -168677 -739791 -828900 -1720534 -3289225
-------- ------- ------- ------- ------- ------- -------- --------
Net income (loss) before
income taxes -47,354 44261 153568 51463 201938 582895 1343365 2128198
Tax Benefit (expense) 21,309 -19917 -69106 -23158 -90872 -262303 -604514 -957689
------ ------ ------ ------ ------ ------- ------- -------
Net Income (loss) -26,045 24344 84462 28305 111066 320592 738851 1170509
------- ----- ----- ----- ------ ------ ------ -------
</TABLE>
10
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<CAPTION>
Temecula Valley Inn
Three Year Projection-Occupancy Revenue-2000-2002
Year 1 Total Total Total Total
------
1st Qtr 2nd Qtr 3rd qtr 4th Qtr Year 1 Year2 Year3 3 Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Occupancy Statistics
--------------------
by property
Temecula Valley Inn
------------------
Available rooms per day 90 90 90 90 90 90 90
Available rooms per period 8,190 8,190 8,280 8,280 82,940 32,850 32,850 98,640
Occupied rooms per period 3,686 5,324 5,796 5,382 20,188 22,176 23,819 66,183
Percent of Occupancy 45% 65% 70% 65% 61.30% 67.50% 72.50% 67.10%
Average Daily Rate 85.00 90.00 90.00 85.00 87.50 90.08 92.56 90.26
Redding Property
----------------
Available rooms per day 90 90
Available rooms per period 16,560 32,850 49,410
Occupied room per period 8,280 21,357 29,637
Percent of Occupancy 50% 65% 60%
Average Daily Rate 79.00 80.01 79.73
Temecula Valley Property III
----------------------------
Available rooms per day 120
Available room per period 22,080 22,080
Occupied rooms per period 12144 12144
Percent of occupancy 55% 55%
Average daily rate 99.00 99.00
Totals
------
Available rooms per day 90 90 90 90 90 180 300
Available rooms per period 8,190 8,190 8,280 32,940 49,410 87,780 170,130
Occupied rooms per period 3,686 5,324 5,796 5,382 20,188 30,456 57,320 107,964
Percent of Occupancy 45% 65% 70% 65% 61.30% 62% 65.30% 63.50%
Average daily rate 85.00 90.00 90.00 85.00 87.75 87.07 89.25 88.35
Revenue
-------
Temecula Valley Inn 313,310 479,160 521,640 457,470 1,771,580 1,997,604 2,204,714 5,973,898
Redding Property 654,120 1,708,731 2,362,851
Temecula Valley II 1,202,256 1,202,256
Total Room Revenue 313,310 479,160 521,460 457470 1,77,580 2,651,724 5,115,701 9,535,005
</TABLE>
11
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<TABLE>
<CAPTION>
Temecula Valley Inn
Three Year Projection-General and Administrative Expenses 2000-20002
Year 1 Total Total Total Total
--------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1 Year 2 Year 3 3 Years
-------- ------- -------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries 43,500 43,000 43,500 43,000 174,000 269,700 278,835 722,535
Legal Profession 1,500 1,500 1,500 1,500 6,000 9,000 15,000 30,000
Workers' compensation 7,500 7,500 7,500 7,500 30,000 45,000 75,000 150,000
insurance
Complimentary breakfast 7,372 10,648 11,592 10,764 40,376 60,912 114,640 215,982
Telephone 14,375 20,764 22,604 20,990 78,733 118,778 223,548 421,059
Accounting 1,500 1,500 1,500 1,500 6,000 9,000 15,000 30,000
Management fees
Contract representation 30,000 30,000 30,000 30,000 120,000 180,000 300,000 600,000
Insurance 3,750 3,750 3,750 3,750 15,000 22,500 37,500 75,000
Uniforms 600 600 600 600 2,400 3,600 6,000 12,000
Guest supplies 2,285 3,301 3,594 3,337 12,517 1,883 35,538 66,938
Operating supplies 2,212 3,194 3,478 3,229 12,113 18,274 34,392 64,779
Equipment rental 1,990 3,194 3,130 2,906 10,901 16,446 30,953 58,300
Commissions 1,917 2,875 3,014 2,799 10,498 15,837 10,498 56,141
Cleaning supplies 1,548 2,236 2,434 262,260 8,478 12,792 24,074 45,344
Cable television 1,325 1,325 1,325 1,325 5,300 7,950 13,250 26,500
Credit card fees 1,253 1,810 1,971 1,830 6,864 10,355 19,489 36,708
Printing and stationary 1,216 1,757 1,913 1,776 6,662 10,050 18,916 35,268
Employee benefits 975 975 975 975 3,900 5,850 9,750 19,500
Promotion 848 1,225 1,333 1,238 4,644 7,005 13,184 24,833
Travel and meals 900 900 900 900 3,600 5,400 9,000 18,000
Laundry supplies 811 1,171 1,275 1,184 4,441 6,700 12,610 23,751
Linen replacements 663 958 1,043 969 3,633 5,482 10,318 19,433
Licenses dues and fees 775 775 775 775 3,100 4,650 7,750 15,500
Security 1,200 1,200 1,200 1,200 4,800 7,200 12,000 2,400
Payroll processing
Miscellaneous 479 692 753 700 2,624 3,959 7,452 14,035
Postage and delivery 221 319 348 323 1,211 1,827 3,439 6,477
Decorations and flowers 258 373 406 377 1,414 2,134 4,012 7,558
Temporary services 300 300 300 300 1,200 1,800 3,000 6,000
Total general &
Administrative 131,273 147,916 152,713 148,507 580,409 881,082 1,364,456 2,825,947
</TABLE>
12
<PAGE>
Use of Proceeds
The net proceeds to be received by the Company from the sale of
1,000,000 preferred shares offered by the Company is approximately $5,500,000
after deducting $800,000 in offering expenses payable by the Company.
Approximately $5,000,000 will be applied to debt retirement.
The company believes the net proceeds of this offering will be
sufficient to fund its plan of operation. From time to time in the ordinary
course of business, the company evaluates the acquisition of products,
businesses, and technologies that complement the Company's business, for which a
portion of the net proceeds may be used. Currently, the Company is involved in
discussions with respect to developing another hotel. Pending the use of the net
proceeds for the above purpose, the Company intends to invest such funds in
short-term interest-bearing securities or other instruments, as the Company
deems appropriate.
Plan of Distribution
The Company may sell Securities through underwriters or dealers,
directly to one or more purchasers, through agents or through a combination of
any such methods of sale. The Prospectus Supplement with respect to the
Securities will set forth the terms of the offering of the Securities, including
the name or names of any underwriters, dealers or agents, the initial public
offering price, any underwriting discounts and other items constituting
underwriters compensation, any discounts or concessions allowed or reallowed or
paid to dealers, and any securities exchanges on which the Securities may be
listed.
Securities may be sold directly by the Company through agents
designated by the Company from time to time at fixed prices, which may be
changed, or at varying prices determined at the time of sale. Any agent involved
in the offer or sale of the securities will be named, and any commissions
payable by the Company to such agent will be set forth, in the Prospectus
Supplement relating thereto. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities, for whom
they act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters under the Securities Act, and any
discounts or commissions they receive from the Company and any profit on the
resale of Securities they realize may be deemed to be underwiting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company will be
described, in the applicable Prospectus Supplement. Unless otherwise set forth
in the Prospectus Supplement relating thereto, the obligations of the
underwriters or agents to purchase the Securities will be subject to conditions
precedent and the underwriters will be obligated to purchase all the Securities
if any are purchased. The initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
13
<PAGE>
Unless otherwise specified in the related Prospectus each series of
Securities will be a new issue with no established trading market, other than
the preferred stock which is to be on the NASDAQ Bulletin Board. Any shares of
Common Stock sold pursuant to a Prospectus Supplement will be approved for
trading, upon notice of issuance, on the NASDAQ. The Company may elect to list
any series of Debt Securities or Preferred Stock on an exchange, but is not
obligated to do so. It is possible that one or more underwriters may make a
market in a series of Securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. Therefore, no
assurance can be given as to the liquidity of, or the trading market for, the
Securities.
Under agreements into which the Company may enter, underwriters,
dealers and agents who participate in the distribution of securities may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, the Company in the ordinary course of business.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states Securities may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and complied with.
14
<PAGE>
<TABLE>
<CAPTION>
CAPITALIZATION
The following table sets forth the short-term debt and the capitalization of the
Company at July 31, 2000 and the pro forma short4em debt and capitalization of
the Company which is presented as if the issuance of 1,000,000 shares of the 10%
Convertible Preferred Stock and application of the net proceeds therefrom, as
described under "Use Of Proceeds" had occurred as July 31, 2000. Proforma
conversion of preferred stock on July 31, 2003.
Preferred
10% Preferred Pro Forma Stock Pro Forma
Pro Forma Historical Stock Offering Adjusted Conversion Adjusted
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short Term Debt
(in Thousands) 518.0 $518.0 $518.0
Long- term debt 5,139.0 (5,000.0) 139.0 139.0
Shareholders' Equity: 10%
Preferred Stock 0.0001 par value 0.1 0.1 (0.1)
1,000,000 shares authorized,
dividends cumulative,
convertible after three years
into common stock at a ratio
of three shares of common
stock for one share of
preferred stock no shares
issued or outstanding; 1,000,000
shares issued and outstanding,
as adjusted. Common Stock,
0.0001 par value, 50,000,000 0.1 0.1 0.1 0.2
shares authorized, issued and
outstanding 10,000,000
shares; at conversion an additional
3,756,000 share will be issued for
conversion of 1,000,000 shares
of preferred stock which
include 756,000 shares in
payment of accumulated
dividends.
Additional Paid-In-Capital 2.4 6,300.0 6,302.4 (1,840.0)
1,840.0 6,302.4
Deficit (109.0) (109.2) (109.2)
---------------------------------------------------------------------------------
Total Shareholders' Equity (106.7) 6,300.0 6,193.0- 6,193.0
---------------------------------------------------------------------------------
Total Capitalization $5,550.3 $1,300.1 6,850.4- 6,850.4
---------------------------------------------------------------------------------
</TABLE>
(1) Historical figures reflect a merger of Temecula Valley Inn, Inc. as of
April 21,2000.
(2) Additional Paid-in Capital reflects a reduction of $1,840.0 from
payment of accumulated dividends with 756,000 shares of common and an
increase arising out of the conversion of the Preferred stock in the
amount of $1840.0.
(3) The Preferred stock is convertible at any time but is mandatory after
three years. Dividends accrue annually but the Pro Forma reflects a one
time conversion and dividend payment for illustrative purposes only.
15
<PAGE>
Price Range of Class of Stock
Our common or preferred stock is not presently quoted on any NASDAQ
market.
Dividend Policy
To date, we have not paid any cash dividends on our common stock. We currently
intend to retain all of our future earnings for use in our business and,
therefore, do not expect to pay dividends in the near future.
16
<PAGE>
Management
Board of Directors currently consists of two members. The company has four key
officers and two members. The Company has four Key officers and two other
management employees. Set forth below is certain information regarding the
officers.
Name Position
---- --------
Larry W. Lang President/CEO
M. Diana Lang VicePres/Sec/Treasurer
Floyd D. Janeway Operations Manager
Robert P. Howell Financial Manager
The Company's executive management team consists of Larry Lang, Chief
Executive Officer and President, Floyd Janeway, Operations Manager and Robert
Howell, Financial Manager.
Mr. Larry Lang, age 53, is a registered Professional engineer in 17
states. Mr. Lang through his company Mexam, Inc., provided structural
engineering consulting to a number of companies. He has over 30 years
experience. He was responsible for the joist design for the Ontario Mill Mall in
Ontario California as well as the casino, New York, New York, in Las Vegas,
Nevada. Mr Lang obtained his general Contractor's License in California in April
1998 and through his construction company Lang Construction & Dev., Inc. was the
general contractor responsible for the building of Temecula Valley Inn. Mr. Lang
has been involved in the hospitality industry for the last four years, with the
assistance of Mr. Janeway. Mr. Lang acquired the land designed and constructed
Temecula Valley Inn.
Mr. Floyd Janeway, age 68, comes to the company with over 45 years
experience as a successful independent businessman. Mr. Janeway was on site
daily assisting with the oversight of the construction of Temecula Valley as
Construction Manager. Mr. Janeway has been responsible for overseeing the daily
operations of Temecula Valley Inn since it opened. as Operations Manager. Mr.
Janeway negotiated the purchase option for the Temecula Valley Inn and the
Redding property. A majority of Mr. Janeway's experience has been in the real
estate development business. He has developed both residential and commercial
properties for himself and others. Mr. Janeway not only continues to manage the
current hotel property but he is involved in forward planning for additional
site locations.
Mr. Robert Howell, age 44, comes to the Company with over 18 years
experience in finance, accounting and computer network systems as both a
consultant and employee for various real estate development companies in
Arizona, California and Nevada. Mr. Howell is currently acting Chief Financial
Officer on a consulting basis for National Land Corporation and its subsidiaries
including St. James Village Inc., owner developer of a 537 lot master planned
community in the foothills of the Sierra Nevada Mountains, south of Reno,
Nevada. Mr. Howell also spent a number of years consulting for Woodbridge
Development, Silveroak Development and Alper Development in southern California.
A graduate of Arizona State University, with a Bachelor of Science in
Accounting. Mr. Howell became a Certified Public Account in 1983. He gained his
experience working for KMPG Peat Marwick, in Phoenix, Arizona.
17
<PAGE>
Management's Discussion and Analysis and Plan of Operations
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, (a Nevada Corporation) as a wholly owned subsidiary of
Supreme Hospitality in an 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 in 1998. The
executive offices of the company are located at 41919 Skywood Drive, Temecula,
California 92591. Its telephone number is (909) 506-3435.
The Company may obtain funds for addition hotel construction or
acquisition by private placement, 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 success which 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 as option to purchase for $1,300,000 approximately 2.61 acres of
approved hotel property, including a complete package which consists of 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 the immediate area. The current plan is to exercise
the purchase option and develop and build a 90-room hotel on this property. This
development is anticipated to be the next development the Company will
undertake. The cost is estimated to be $5,8000,000 for land, building and
improvements. This property is included in the financial projections and is
scheduled to commence operations in the third 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 funding. 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 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 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% of 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.
18
<PAGE>
Description of Property
A 90-room 3-story hotel, Temecula Valley Inn 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 cynical in nature, TVI's
occupancy rates have continued to grow. 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 weekend 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 Interstate15. There are numerous restaurants within walking distance
of the hotel.
19
<PAGE>
Demographics
Temecula's demographic profile shows it to be a very rapidly growing,
ethnically diverse place, where relatively young, well educated families are
raising children, and succeeding economically.
Since 1990-1997, the city has grown from 27,099 to 43,100 people. The
59.0% growth rate is the fastest of any inland Empire community with over 40,000
residents.
Temecula's expanding economy has given it the wherewithal to devote an
increasing amount of community resources to education, parks and law
enforcement. The city has 23 parks covering 199 acres, one of the premier
varietal wine growing areas of California including twelve wineries that a wide
range of grapes and is one of the safest cities in California having a crime
rate 50% below that of the next safest Inland Empire city as represented by 1996
studies.
Location:
Temecula is located 85 miles southeast of Los Angeles, 487 miles south of San
Francisco, and 55 miles north of San Diego.
Economic Growth & Trends:
1970 1980 1990 1998
--------------------------------------------------------------------------------
Population-County 459,074 663,116 1,170,413 1,441,036
Taxable sales-County $828,578 $3,274,017 $9,522,631 $11,972,371
Population-City 2,773 8,234 27,099 46,558
Taxable Sales-City N/A N/A $119,900 $831,094
Housing Units-City N/A N/A 9,130 13,947
Median Household
Income-City N/A N/A $44,270 $63,248
School Enrollment (K-12) N/A N/A 7,595 14,614
Ethnic Distribution:
White 80.8%
Hispanics 14.2%
Black 1.5%
Asian/pacific Islander 2.4%
American Indian 0.5%
Other Race 0.5%
TOTAL 100.0%
20
<PAGE>
Climate:
AVERAGE TEMPERATURE RAIN HUMIDITY
Period Min. Mean Max Inches 4a.m. Noon 4p.m.
--------------------------------------------------------------------------------
January 46.0 61.0 69.9 1.35 55 40 55
April 51.7 62.0 72.2 0.75 60 30 50
July 62.5 73.4 84.2 0.05 45 40 35
October 52.4 64.3 76.2 0.46 50 30 45
--------------------------------------------------------------------------------
Year 57.2 64.7 73.4 10.44 52 40 45
Transportation:
Rail: None
Truck: Two(2) carriers are located in Temecula
Over night delivery To: Los Angeles, San Francisco, San Diego and Phoenix.
Air: French Valley Airport, owned by Riverside County, is
a general aviation facility. Approximately one hour
drive to San Diego, Ontario, John Wayne and Palm
Springs Airports.
Bus: Greyhound to Riverside, San Diego, Los Angeles,
Riverside Transit Agency local and intercity bus
service.
Ports: Nearest ports at Los Angeles-Long Beach, 85 miles
northeast, and San Diego, 55 miles south.
Highways: I-215 north to Riverside
I-15 north to Corona, Orange County and Los Angeles
I-15 south to San Diego County
State Route 79 east to Palm Springs
Community Facilities:
Health: 72 physicians/surgeons
46 dentists
10 optometrists
20 chiropractors
2 major hospitals are found just north of the city
-Inland Valley Regional Medical Center
-Rancho Springs Medical Center
Education: 10 elementary schools
3 middle schools
2 high schools
1 continuation high school
1 independent study high school
9 private schools
Cultural: 36 churches 10 banks
1 library 2 savings and loans
7 newspapers 1 museum
1 cable network (TCI) 3 theaters with 9 screens
Recreation: 15 wineries
3 public golf courses
1 private golf course
Vail Lake (12 miles east)
Skinner Lake (12 miles northeast)
150 miles of equestrian trails
Hotels/motels: 11 hotels and motels, with 810 room, in the community area
21
<PAGE>
Community History
Through the mid-1960's the economy of the Temecula Valley centered
around the Vail Ranch, and so the cattle business and related agricultural
enterprises were the stimulus for most of the business ventures. During this
period the clientele of Old Town seemed to be confined to ranchers, cowboys, and
Indians. The Old West lifestyle continued here until the sale of the Vail Ranch
to Kaiser Development Company which inaugurated the transformation of the
Temecula Valley.
The Kaiser Land Development marketed the Valley's attractions actively
and within a short time the Valley became as the site of Rancho California. New
owners quickly focused on development as the next step in furthering the
economic growth of the area.
The completion of the I15 freeway provided a high volume traffic
corridor and easy links for the Valley with San Diego, Riverside and Los
Angeles. Indeed, the central location of the Valley between these urban centers
makes it ideal for manufacturing and distributing industrial and consumer
products throughout Southern California.
Rancho California was then changed to Temecula and was incorporated on
December 1, 1989.
22
<PAGE>
Area Description
Temecula is located in the southwest corner of Riverside County, 85
miles south of Los Angeles and 60 miles north of San Diego. The communities of
Lake Elsinore, Fallbrook Hemet, Moreno Valley and Riverside are within close
proximity. The Temecula Valley is bordered on the West by Camp Pendleton Marine
Corps Base and the Cleveland National Forest. Elevations range from 1,980 feet
near the eastern boundaries to 2,600 feet on the west. The weather is comparable
to the Napa Valley, evidenced by a growing wine industry, with warm dry days and
ocean breeze cooled evenings.
The quality of air in the Temecula Valley is consistently better than
that in surrounding communities and other parts of Western Riverside County.
Ocean breezes flow though the rainbow Gap almost every day, sweeping away smog
and moderating temperatures. In the summer the cool Pacific winds bring
temperatures that are as many as ten degrees lower than communities not more
than 12 to 15 miles away.
The city of Temecula is rapidly emerging as potentially one of the most
prosperous new communities in the region. Geography is playing a role as the
city is receiving growth impulses both down the I-15 from Orange County and up
from San Diego County. The infrastructure has lured firms in higher paying
sectors than the average for the Inland Empire. The Environmental and
residential factors also play a big role, in that the community rests in a
beautiful setting that is luring relatively young, well educated families, to
homes that are inexpensive by Southern California standards.
23
<PAGE>
SUPREME HOSPITALITY
COMPILED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
<PAGE>
WEBB & RITCHEY
CERTIFIED PUBLIC ACCOUNTANTS
A Professional Corporation
October 13, 2000
TO WHOM IT MAY CONCERN:
The firm of Webb & Ritchey, Certified Public Accountants-A Professional
Corporation consents to the inclusion of their report dated October 13, 2000 on
the compiled financial statements of Supreme Hospitality as of September 30,
2000, in any filings that are necessary now or later with the U.S. Securities
and Exchange Commission.
Yours Very Truly,
/s/ Allen D. Ritchey, CPA
----------------------------
Webb & Ritchey CPA'S- PC,
By: Allen D. Ritchey, CPA
41661 Enterprise Circle No. #211 o:o Temecula, CA 92590 (909) 296-9755
(800) 507-3391 o:o Fax (909) 296-9756
<PAGE>
WEBB & RITCHEY
CERTIFIED PUBLIC ACCOUNTANTS
A Professional Corporation
October 13, 2000
The Board of Directors
Supreme Hospitality
Temecula, California
We have compiled the accompanying consolidated balance sheet of Supreme
Hospitality as of September 30, 2000 and the related statements of income,
shareholders' equity (deficit), and cash flows for the six months then ended.
Certain historical footnotes are omitted from these financial statements as
these statements are designed to update audited and compiled statements that
were issued earlier covering the first three months of 2000.
A compilation is 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/ Allen D. Ritchey, CPA
----------------------------
Webb & Ritchey, CPA's
A Professional Corporation
41661 Enterprise Circle No. #211 o:o Temecula, CA 92590 o:o (909) 296-9755
(800) 507-3391 o:o Fax (909) 296-9756
<PAGE>
SUPREME HOSPITALITY
FOOTNOTES TO COMPILED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
HISTORY OF THE CONSOLIDATED COMPANIES AND BASIS OF STATEMENTS
Temecula Valley Inn, Inc. was effectively incorporated as of January 1, 2000 by
acquiring the net assets of a sole proprietorship which owned and operated a
hotel in Temecula California.
On April 30, 2000 Supreme Hospitality acquired Temecula Valley Inn, Inc. by way
of an exchange of 9,000,000 shares of Supreme Hospitality's common stock for all
of the outstanding stock of Temecula Valley Inn, Inc. Immediately before the
exchange on April 30, 2000, Supreme Hospitality had nominal assets and was
dormant for all practical purposes. Thus, these statements are essentially those
of Temecula Valley Inn, Inc. which owned and operated substantially all of the
assets of the consolidated group before and after the exchange.
Management feels that the proper accounting treatment of the above-described
acquisition is that of a reverse acquisition, or purchase, of Supreme
Hospitality by Temecula Valley Inn, Inc. The net asset carrying value and fair
market value of Supreme Hospitality before the exchange were approximately the
same and these statements do not reflect any revision in the value of Supreme
Hospitality.
These compiled financial statements are presented as a consolidation of Supreme
Hospitality and its wholly owned subsidiary, Temecula Valley Inn, Inc.
ADDITIONAL PAID IN CAPITAL
The Company reacquired some 95,300 shares of outstanding common stock and resold
it. The sale, net of acquisition cost, yielded $51,886.
UNDERWRITING AND FRANCHISE COSTS
On July 12, 2000, the Company became affiliated with a national hotel chain,
Day's Inn World, by purchasing a franchise from that entity for $22,000.
The Company is presently in the process of making an initial public offering of
it's 10% Preferred stock and has advanced the underwriters $81,000 for the
initial costs.
<PAGE>
SUPREME HOSPITALITY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
ASSETS
CURRENT ASSETS
CASH $ 17,017
RECEIVABLES 29,234
NOTE RECEIVABLE, SHAREHOLDER 21,559
OTHER CURRENT ASSETS 17,404
TOTAL CURRENT ASSETS $ 85,214
PROPERTY AND EQUIPMENT
LAND 1,362,048
LAND IMPROVEMENTS 344,714
BUILDINGS AND IMPROVEMENTS 3,002,961
FURNITURE AND EQUIPMENT 1,017,776
VEHICLES 24,199
LESS ACCUMULATED DEPRECIATION (438,036)
TOTAL FIXED ASSETS 5,313,662
OTHER ASSETS
DEPOSITS 7,200
UNDERWRITING AND FRANCHISE COSTS 103,000
LOAN FEES, NET OF AMORTIZATION 45,280
TOTAL OTHER ASSETS 155,480
TOTAL ASSETS $ 5,554,356
SEE ACCOUNTANTS' COMPILATION REPORT
<PAGE>
<TABLE>
<CAPTION>
SUPREME HOSPITALITY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
LIABILITIES & EQUITY
<S> <C> <C>
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 170,055
ACCRUED INTEREST 38,602
ACCRUED OTHER LIABILITIES 35,192
GUEST ADVANCE DEPOSITS 12,260
CURRENT PORTION-LONG-TERM DEBT 284,686
TOTAL CURRENT LIABILITIES $ 540,795
LONG TERM LIABILTIES
NOTES PAYABLE-NET OF CURRENT PORTION 5,066,071
TOTAL LONG TERM LIABILITIES 5,066,071
TOTAL LIABILITIES 5,606,866
SHAREHOLDER EQUITY
COMMON STOCK 1,000
0.0001 PAR VALUE, 50,000,000 SHARES AUTHORIZED
ISSUED AND OUTSTANDING 10,000,000
10% PREFERRED STOCK, 0.0001 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
ADDITIONAL PAID IN CAPITAL 53,886
RETAINED EARNINGS-DEFICIT (107,396)
TOTAL SHAREHOLDERS' EQUITY (52,510)
TOTAL LIABILITIES & EQUITY $ 5,554,356
</TABLE>
SEE ACCOUNTANTS' COMPILATION REPORT
<PAGE>
SUPREME HOSPITALITY
STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30,2000
REVENUE $ 772,607
OPERATING EXPENSES
SALARIES DEPRECIATION AND AMORTIZATION 157,049
PROFESSIONAL FEES OTHER OPERATING EXPENSES 111,753
UTILTIES PAYROLL TAXES AND OTHER PERSONNEL 34,378
PERSONNEL COST REPAIRS AND MAINTENANCE 131,080
29,066
6,309
28,465
TOTAL OPERATING EXPENSES 498,100
INCOME FROM OPERATIONS 274,507
OTHER EXPENSE: INTEREST EXPENSE 275,578
NET (LOSS) $ (1,071)
RETAINED EARNINGS JANUARY 1, 2000 0
RETAINED EARNINGS DEFIC SEPTEMBER 30, 2000 $ (1,071)
SEE ACCOUNTANTS' COMPILATION REPORT
<PAGE>
SUPREME HOSPITALITY
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
COMMON ADDITIONAL RETAINED
STOCK PAID IN CAPITAL (DEFICIT)
BALANCES, APRIL 1, 2000 3,000 (106,325)
RECAPITALIZATION
of outstanding common stock
to 10,000,000 shares of
0.0001 par value outstanding (2,000)
SALE OF REACQUIRED 53,886
common shares net of acquisition costs
Net (Loss) (1,071)
BALANCES SEPTEMBER 30, 2000 1,000 53,886 (107,396)
SEE ACCOUNTANT'S COMPILATION REPORT
<PAGE>
<TABLE>
<CAPTION>
SUPREME HOSPITALITY
STATEMENT OF CASH FLOW
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (1,071)
Adjustments to reconcile net (loss) to net cash
provided by operating activities
Depreciation and Amortization 111,753
(Increase) decrease in:
Receivables (15,722)
(Increase) decrease in:
Current Liabilities 22,960
Net cash provided by operating activities 117,920
CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid on long-term debt (73,183)
Net cash (used) by financing activities (73,183)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of franchise and advance to underwriters (103,000)
Purchase of furniture and equipment (9,344)
Cash received on note receivable-Shareholder 28,425
Cash received from reacquired common stock 51,886
Net cash provided by investing activities (32,033)
NET INCREASE (DECREASE) IN CASH 12,704
CASH APRIL 1, 2000 4,313
CASH SEPTEMBER 30, 2000 $ 17,017
Supplemental Disclosures - Cash paid for interest $ 293,704
</TABLE>
SEE ACCOUNTANTS' COMPILATION REPORT
<PAGE>
BARRY L. FRIEDMAN, P.C.
Certified Public Accountant
1582TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors May 22, 2000
SUPREME HOSPITALITY
Temecula, California
I have audited the accompanying Balance Sheets of SUPREME HOSPITALITY, (Formerly
RICHWOOD, INC.), Formerly GRUBSTAKE, INC.), (a Development Stage Company) as of
April 29, 2000, December 31, 1999, and December 31, 1998, and the related
statements of operations, stockholders' equity and cash flows for the period
January 1, 2000 to April 29, 2000, and the two years ended December 31, 1999,
and December 31, 1998. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of SUPREME HOSPITALITY, (Formerly
RICHWOOD, INC.), Formerly GRUBSTAKE, INC.), (a Development Stage Company) as of
April 29, 2000, December 31, 1999, and December 31, 1998, and the related
statements of operations, stockholders' equity and cash flows for the period
January 1, 2000 to April 29, 2000, and the two years ended December 31, 1999,
and December 31, 1998, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note #5 to the financial
statements, the Company has suffered recurring losses from operations and has no
established source of revenue. This raises substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters is
described in Note #5. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Barry L. Friedman
Certified Public Accountant
F-1
<PAGE>
SUPREME HOSPITALITY
(Formerly RICHWOOD, INC.)
(Formerly GRUBSTAKE, INC.)
(A Development State Company)
BALANCE SHEET
-------------
ASSETS
------
April December December
29, 2000 31, 1999 31, 1998
-------- -------- --------
CURRENT ASSETS $ 0 $ 0 $ 0
TOTAL CURRENT ASSETS $ 0 $ 0 $ 0
OTHER ASSETS $ 0 $ 0 $ 0
TOTAL OTHER ASSETS $ 0 $ 0 $ 0
TOTAL ASSETS $ 0 $ 0 $ 0
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
SUPREME HOSPITALITY
(Formerly RICHWOOD, INC.)
(Formerly GRUBSTAKE, INC.)
(A Development State Company)
BALANCE SHEET
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
April December December
29, 2000 31, 1999 31, 1998
CURRENT LIABILITIES
Officers' advances (Note #8) $ 425 $ 225 $ 170
--------- -------- --------
TOTAL CURRENT LIABILITIES
STOCKHOLDERS' EQUITY (Note #4)
Preferred stock
Par value $0.0001
Authorized 1,000,000
Issued and outstanding
April 29, 2000-None $ 0
Common stock
No par value
Authorized 25,000 shares
Issued and outstanding at
December 31, 1998-
25,000 shares $ 2,500
December 31, 1999-
25,000 shares $ 2,500
Common stock
Par value $0.0001
Authorized 50,000 shares
Issued and outstanding at
April 29, 2000-
1,000,000 shares 100
Additional Paid-In Capital 2,400 0 0
Deficit accumulated during
the development stage -2,925 -2,755 -2,670
--------- -------- --------
TOTAL STOCKHOLDERS' EQUITY $ -425 $ -255 $ -170
--------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 0 $ 0 $ 0
--------- -------- --------
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SUPREME HOSPITALITY
(Formerly RICHWOOD, INC.)
(Formerly GRUBSTAKE, INC.)
(A Development State Company)
STATEMENT OF OPERATIONS
-----------------------
Jan. 1, Year Year Nov. 10, 1997
2000 to, Ended Ended (Inception)
Apr. 29, Dec. 31, Dec. 31, to Apr. 29,
2000 1999 1998 2000
---- ---- ---- ----
INCOME $ 0 $ 0 $ 0 $ 0
---------- ---------- --------- ---------
Revenue
EXPENSES
General, Selling and
Administrative $ 170 $ 85 $ 2,670 $ 2,925
--------------------------------------------
TOTAL EXPENSES $ 170 $ 85 $ 2,670 $ 2,925
NET PROFIT/LOSS(-) $ -170 $ -85 $ -2,670 $ -2,925
Net Loss per share-
Basic and diluted
(Note #2) $ -0002 $ -.0001 $ -.0027 $ -.0029
Weighted average
Number of common
shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000
--------- --------- --------- ---------
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
SUPREME HOSPITALITY
(Formerly RICHWOOD, INC.)
(Formerly GRUBSTAKE, INC.)
(A Development State Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------
Additional Accumu-
Common Stock paid-in lated
Shares Amount Capital Deficit
------ ------ ---------- -------
December 1, 1998
Issued for Cash 25,000 $ 2,500 $ 0
Net loss year ended
December 31, 1998 $ -2,670
------- -------- --------- --------
Balance
December 31, 1998 25,000 $ 2,500 $ 0 $ -2,670
Net loss year ended
December 31, 1999 -85
------- -------- --------- --------
Balance
December 31, 1999 25,000 $ 2,500 $ 0 $ -2,755
------- -------- --------- --------
April 17, 2000
Changed Par Value -2,498 +2,498
April 17, 2000
Forward Stock Split
40 for 1 975,000 +98 -98
Net Loss
January 1, 2000 to
April 29, 2000
------- -------- --------- --------
Balance,
April 29, 2000 1,000,000 $ 100 $ 2,400 $ -2,925
--------- -------- --------- --------
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SUPREME HOSPITALITY
(Formerly RICHWOOD, INC.)
(Formerly GRUBSTAKE, INC.)
(A Development State Company)
Jan. 1, Year Year Nov. 10, 1997
2000 to, Ended Ended (Inception)
Apr. 29, Dec. 31, Dec. 31, to Apr. 29,
2000 1999 1998 2000
---- ---- ---- ----
Cash Flows from
Operating Activities
Net Loss $ -170 $ -85 $ -2,670 $ -2,925
Adjustment to
Reconcile net loss
To net cash provided
by operating
Activities
Changes in assets and
Liabilities
Officers' Advances 170 +85 +170 +425
--------- --------- --------- ---------
Net cash used in
Operating activities $ 0 $ 0 $ -2,500 $ -2,500
Cash Flows from
Investing Activities 0 0 0 0
Cash Flows from
Financing Activities
Issuance of Common
Stock for Cash 0 0 +2,500 +2,500
Net Increase (decrease) $ 0 $ 0 $ 0 $ 0
Cash,
Beginning of period 0 0 0 0
--------- --------- --------- ---------
Cash, End of Period $ 0 $ 0 $ 0 $ 0
--------- --------- --------- ---------
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
SUPREME HOSPITALITY
(Formerly RICHWOOD, INC.)
(Formerly GRUBSTAKE, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
April 29, 2000, December 31, 1999, and December 31, 1998
NOTE 1-HISTORY AND ORGANIZATION OF THE COMPANY
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-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
-----------------
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 April 29, 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.
F-7
<PAGE>
SUPREME HOSPITALITY
(Formerly RICHWOOD, INC.)
(Formerly GRUBSTAKE, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
April 29, 2000, December 31, 1999, and December 31, 1998
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reporting on Costs of Start-Up Activities
-----------------------------------------
Loss Per Share
--------------
Year End
--------
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 3- INCOME TAXES
--------------------
There is no provision for income taxes for the period ended April 29, 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.
F-8
<PAGE>
SUPREME HOSPITALITY
(Formerly RICHWOOD, INC.)
(Formerly GRUBSTAKE, INC.)
(A Development State Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
April 29, 2000, December 31, 1999, and December 31, 1998
NOTE 4-STOCKHOLDERS' EQUITY
Common Stock
------------
The authorized common stock of the corporation consists of 50,000,000
shares with a par value $0.0001 per share.
Preferred Stock
---------------
SUPREME HOSPITALITY has 1,000,000 shares of preferred stock, with a par
value of $.0001.
On December 1, 1998, the Company issued 25,000 shares of its no par
value common stock for cash of $2,500.00.
On October 25, 1999, the State of Nevada approved the Company's
restated Articles of Incorporation, which increased its capitalization
from 25,000 common shares tp 50,000,000 common shares, and changed the
par value from no par value to $0.0001.
On April 17, 2000, the Company approved a forward stock split on the
basis of 40 for 1, thus increasing the common stock from 25,000 shares
1,000,000 shares.
NOTE 5-GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company does not have
significant cash or other material assets, nor does it have an
established source of revenues sufficient to cover its operating costs
and to allow it to continue as a going concern.
NOTE 6-WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common or preferred stock.
F-9
<PAGE>
SUPREME HOSPITALITY
(Formerly RICHWOOD, INC.)
(Formerly GRUBSTAKE, INC.)
(A Development State Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
April 29, 2000, December 31, 1999, and December 31, 1998
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.
NOTE 8-OFFICERS ADVANCES
While the Company is seeking additional capital through a merger with
an existing company, an officer of the Company has advanced funds on
behalf of the Company to pay for any costs incurred by it. These funds
are interest free.
NOTE 9-SUBSEQUENT EVENTS (UNAUDITED)
On April 30, 2000, the Company bought 100% of the issued and
outstanding shares of Temecula Valley Inn, Inc., a Nevada corporation,
such that Temecula Valley Inn, Inc., a Nevada corporation shall become
a wholly owned subsidiary of SUPREME HOSPITALITY, a Nevada corporation,
for 9,000,000 common shares of SUPREME HOSPITALITY. Temecula Valley
Inn, Inc. owns a ninety-room hotel in Temecula, California. This
transaction is valued a $5,592,823, which represents the net total
assets of Temecula Valley Inn, Inc., as of February 29, 2000 and
F-10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information relating to the beneficial ownership
of Company common stock by those persons beneficially holding more than 5% of
the Company capital stock, by the Company's directors and executive officers,
and by all of the Company's directors as a group, as of June 9th, 2000.
(a) Security ownership of certain beneficial owners:
Class Name & Address No. of Shares Percent
--------------------------------------------------------------------------------
Common Stock Louise Davis 3,000,000 30
40596 Via Jalapa
Murrieta, CA. 92562
(b) Security ownership of Management
Class Name & Address No. of Shares Percent
--------------------------------------------------------------------------------
Common Stock Larry W. & Diana Lang 3,000,000 30
41919 Skywood Drive
Temecula, CA. 92591
Common Stock Floyd & Glenda Janeway 3,000,000 30
25060 Hancock Avenue
Suite- #179
Murrieta, CA. 92562
34
<PAGE>
Legal Matters
The validity of the securities will be passed upon for the Company by
Orsini & Rose Law Firm, P.A. St. Petersburg, Florida. Orsini & Rose Law Firm
will rely upon other counsel in all matters involving California law.
Experts
All financial statements included in this prospectus or incorporated by
reference in the registration statement filed June 14, 2000 have been audited by
Barry L. Freidman, CPA, and Nystrom & Company, LLP in regards to the
acquisitions of the Temecula Valley Inn on April 30, 2000. The Company has
relied on the reports and audits of both of these independent accountants, given
on their authority as experts in accounting and auditing, and being in
accordance with generally accepted accounting principles.
35
