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FORM 10-KSB
ANNUAL REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO
THE 1934 ACT REPORTING REQUIREMENTS
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Annual Report for the fiscal year ended June 30, 1997
Commission File No. 1-6110
INTERNATIONAL RESORT DEVELOPERS, INC.
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(Exact name of registrant as specified in its charter)
FORMERLY KNOWN AS
International Basic Resources, Inc.
IDAHO 82-0291307
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1801 West End Avenue,Suite 1110, Nashville, TN 37203
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(address of principal executive offices) (zip code)
Issuer's telephone number (615) 329-3300
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Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common shares, par value $0.10 per share
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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 issuer's revenues for its most recent fiscal year, as reported on its
financial statements: $0.
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State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: $1,384,071 on October 9, 1997, calculated using 1,384,071 shares at $1.00
per share, which was the closing price on the NASDAQ small-cap market on October
9, 1997. (Doggart Trading, Ltd. and Inland Mortgage & Guaranty Co., Inc. are
considered affiliates of the Company. See Item 11 respecting their
shareholdings).
State the number of shares outstanding of each of the issuer's classes of common
equity: As of June 30, 1997: 1,807,124
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PART 1
ITEM 1. DESCRIPTION OF BUSINESS.
The business of International Resort Developers, Inc. (the "Company")
is that of real estate development and planning. Additionally, the Company has
recently contracted to acquire a business by the name of Ameristar Worldwide
Entertainment Corporation ("Ameristar") which is in the business of distributing
residential broadcast satellite dishes, long-distance telephone services,
internet access, and direct marketing services through television and the
internet.
a. Business Development.
The Company was incorporated in 1968 in Idaho with the intention of
operating as a mining company. In 1983 due to a change in control of the
Company, the business focus was redirected to oil and gas interests in Eastland
County, Texas and real estate development and management in the State of Ohio.
Real estate activities in Ohio were discontinued in 1994. Oil and gas well
drilling and operations were conducted in Texas from 1983 until May 31, 1996.
These operations generated operating losses for many years, leading to the
Company's decision to sell its oil and gas business on May 31, 1996.
In June, 1994, the Company acquired ownership of real estate in the
State of Campeche, Mexico, located on the western coast of the Yucatan
Peninsula. This real estate is owned by the Company's wholly-owned subsidiary,
Playas Palmeras, S.A., a Mexican corporation. Since June 1994, the Company has
pursued plans for the development of this real estate, and has acquired other
real estate interests in Mexico. During the past three years, the primary focus
of the Company's activities have been in Mexico; and since the late part of
1995, its primary focus has been on developing a concession which it acquired in
the Port of Esenada, Mexico, for the construction of port facilities, inclusive
of piers, as well as commercial and residential construction. This concession
was sold by the Company in July of 1997.
In May, 1997, the Company changed its name to International Resort
Developers, Inc., in recognition of its focus on its
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resort development. At the same time, the share capital of the Company was
consolidated on a 1 for 30 basis. Before the consolidation of shares, there were
54,213,721 shares outstanding. After consolidation, the number of outstanding
shares was 1,807,124.
Hereafter, in this report, all references to shares will be to
post-consolidation figures. For example, even though 37,000,000 shares of the
Company were contracted to be issued to Doggart Trading, Ltd. and its
shareholders in connection with the acquisition by the Company, in June, 1994,
of various properties in Campeche, Mexico, the figure will be stated in this
report as 1/30 of that amount.
1. June 1994 Transaction with Doggart Trading, Ltd.
Pursuant to various closing agreements concluded in June, 1994, the
Company acquired 100% of the stock of Playas Palmeras S.A., a Mexican
corporation, from Doggart Trading, Ltd. ("Doggart"), a Cayman Islands
corporation. The Company acquired 1% of the stock directly from Doggart, and the
other 99% through the acquisition from Doggart of 100% of the stock of Langer
Holdings Ltd.("Langer"), a subsidiary of Doggart holding that 99% interest. The
acquisition by the Company was in consideration of the Company's issuance of
1,233,333 shares of its common stock, 1,100,000 of which were then issued to
seven Doggart shareholders and two other persons. The remaining 133,333 shares
were to be issued to Doggart, without further consideration from Doggart, upon
increase in the authorized capital of the Company. In April, 1996, the Company's
authorized capital was increased, and the additional 133,333 shares were issued
to Doggart in June, 1996.
Playas Palmeras, S.A. ("Playas") owns fee title to two adjoining
parcels of unimproved property in the State of Campeche, Mexico (the "Palmeras"
parcel and the "Irvine" parcel). These parcels are contiguous beach-front
properties which run approximately 8.5 miles in length along the coast of the
Gulf of Mexico.
The acquisition of the Palmeras and Irvine parcels in Campeche has been
treated as a reverse asset acquisition, and, accordingly, is reflected on the
balance sheet of the Company at the original cost to Doggart of acquiring its
interest in the parcels in late 1993 and early 1994, namely $80,321.
Management does not believe that the fair market value of the Palmeras
and Irvine parcels is reflected by Doggart's acquisition cost. Rather,
management believes that the prior
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owners were unable to pay liens and taxes encumbering the parcels, and were
therefore forced to sell at a distress price.
The basic agreements between the Company and Doggart, transferring a
100% interest in the parccels to the Company, were an agreement dated March 4,
1994, and an Addendum thereto dated June 7, 1994. These agreements conditioned
the obligation of the Company to issue its shares for the above-described
parcels on the parcels having an appraised value of not less than $10,000,000.
Pursuant to its obligation under the agreements between the Company and
Doggart, as set forth above, Doggart delivered to the Company an appraisal
report prepared by Appraisal Group, Inc., 111 Northwest 183rd Street, Suite 350,
Miami, Florida 33169. The date of the formal report is July 15, 1994, and was
prepared by Thomas G. Spears, Senior Vice President of Appraisal Group, Inc. The
report indicated that the fair market value of the 8.5 miles of coastal property
was Thirteen Million Dollars, as of July 1, 1994. Market value, as defined in
the report, was "the most probable price in terms of money which a property
should bring in a competitive and open market under all conditions requisite to
a fair sale, the buyer and seller each acting prudently, knowledgeably and
assuming the price is not affected by undue stimulus." The appraisal report was
prepared on the assumption that the parcels would be placed to their highest and
best use, namely a "world class destination resort." The appraisers assumed that
the Palmeras parcel could be subdivided into 407 lots, including one large
commercial lot; and that the Irvine parcel could be developed to include a
250-room resort hotel, retail space, restaurants, and 622 residential lots.
Although management believes that the property has substantial
potential for development, and the potential for realization of substantial
proceeds in connection with the sale of undeveloped lots and/or the development
of the property for hotels, condominiums, vacation homes and resort facilities,
it makes no representations that the property could be sold in bulk (e.g. in one
or more sales of substantial unimproved acreage) for the appraised figure, or as
to whether in fact there would be a buyer in the current market for the property
in bulk at any substantial price.
The principles which guided the negotiations of the transaction between
Doggart and the Company were as follows. The book net worth of the Company, as
of June 30, 1994, without the Mexican property, was $1,921,282. Management did
not consider the actual fair market net worth of the Company, without the
Mexican property, to be in excess of its book net worth. The Company was
acquiring property with an appraised value in excess of $10,000,000.
Consequently, management considered it
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appropriate to issue 1,233,333 shares of stock in consideration for the
acquisition of the Mexican property, since such number of shares, after
issuance, would constitute 74% of the total number of outstanding shares,
whereas the Mexican property, valued at $10,000,000, would constitute 83.8% of
the combined value of that property plus the pre-existing book net worth of the
Company.
During the past three years, the Company has expended substantial
effort in interesting developers in financing development of the Irvine and
Palmeras parcels, and in exploring various forms of potential financing for such
development, including financing from Mexican banks and from the Export-Import
Bank of the United States. Such efforts have not been fruitful. Accordingly,
management is now evaluating other avenues for exploiting the properties. In
particular, management is developing plans and proposals for marketing
individual lots through broad direct marketing efforts in the United States,
utilizing satellite television and internet facilities. In that regard,
management believes that its prospective acquisition of Ameristar Worldwide
Entertainment Corporation may provide the means and structure for undertaking
such marketing efforts (see discussion below).
It is likely that substantial sums would be required to ready lots for
sale; and that although small in comparison with the level of funds previously
contemplated for full scale development of the infrastructure for commercial and
touristic uses, requirements in the range of $1,000,000 over the coming year may
be realistic. At the present time, the Company does not have financing or
capital commitments for such funds.
The following is a more detailed description of the Palmeras and Irvine
parcels. (1) the Palmeras parcel runs approximately 6,000 meters along the coast
of the Gulf of Mexico, on the western edge of the Yucatan Peninsula of Mexico,
in the municipality of Champton, State of Campeche, and has an area of
approximately 290,000 square meters. (2) the Irvine parcel, adjacent to the
Palmeras parcel, runs approximately 8,144 meters along the coast of the Gulf of
Mexico, and has an area of approximately 450,000 square meters. The parcels are
bordered on their western side by the Gulf of Mexico, and on their eastern side
by Mexican Federal Highway 180. Management estimates that a width of no less
than 150 feet from the mean high water mark to the middle of the federal highway
is required for development purposes, or for creation of lots for sale, and that
the Company's parcels, along approximately 70% of their coastal length, exceed
that width.
The parcels experienced two hurricanes during the fall of 1995, but
since they were (and are) completely unimproved, no significant damage occurred.
The majority of the palm trees were
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blown over, substantial amounts of sand were deposited, and portions of Federal
Highway 180 were damaged and closed for repairs. The repairs to the highway have
been completed and the road is open, and portions of the road have been
relocated from seven to seventy meters inland from the prior right of way. None
of the effects of the hurricanes or the resulting relocation of Highway 180 have
negatively affected the sales potential of the Company's property, in
management's estimation.
The parcels are in an undeveloped area, approximately twenty-five miles
from the city of Champoton to the northeast, with a population of approximately
70,000 persons; approximately 60 miles from the city of Campeche (1990
population 150,518) to the northeast; approximately six miles from the fishing
village of Sabancuy to the southwest, with a population of approximately 5,000;
and approximately 50 miles from the city of Ciudad del Carmen (1990 population
83,806) to the southwest. Utilities, including electricity and water, are
available from Sabancuy, electricity is available from high wires two to three
miles east of the parcels, and water is available from aquifer approximately
eight miles to the east of the parcels. Wires and pipes will be necessary to
transport these utilities to the parcels; and any substantial development will
require the construction of additional power substations by CFE, the federal
entity which operates the electrical utility. Sewage treatment will require the
construction of facilities on site. The Company does not currently intend to
undertake the foregoing infrastructure development, and accordingly, such lack
of infrastructure will lower the price at which lots can be sold, or potentially
create an impediment to the sale of lots.
There is no other real estate development in the areas of the State of
Campeche immediately adjacent to the Company's parcels, although in the cities
of Ciudad del Carmen and Campeche substantial real estate development has
occurred. The property adjacent to the Irvine and Palmearas parcels is capable
of development, and if it were developed as resort property, could be in direct
competition with the Company. At the same time, however, additional development
in the area would likely enhance the visitor base, promote tourism in general,
and improve the area's attractiveness.
2. The Ensenada Acquisition and Disposition.
In December, 1995, the Company acquired concession rights to build and
operate a cruise ship terminal and marina village at the Port of Ensenada, Baja
California, Mexico. The principal activities of the Company in fiscal years 1996
and 1997 have been involved in planning for, and commencing, the development of
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facilities there.
On July 19, 1997, the Company sold its concession rights to a major
Philippine corporation, International Container Terminal Services, Inc.
("ICTSI"). The consideration for the transaction was $5,150,000. Of this amount,
$3,950,000 has been received, $800,000 is to be paid in January, 1999, and
$400,000 is to be paid in July, 1999. The latter payment of $400,000 is subject
to reduction in the event that the purchaser suffers any loss as the result of
certain specified contingent liabilities.
The Company held its concession rights at the Port of Ensenada through
a wholly owned subsidiary, Ensenada Cruiseport Village, S.A. de C.V.
("Cruiseport"). The form of sale to ICTSI was the sale by the Company of all of
its stock in Cruiseport.
The following constitutes a discussion of the business of the Company
with respect to the Ensenada concession, since its acquisition of the concession
rights.
On December 14, 1995 the Company purchased the shares of two Mexican
corporations, Ensenada Nautico Turistica, S. A. de C.V. ("ENT") and Terminales
Maritimas Nacionales, S.A. de C.V. ("TMN"), which had been granted the rights,
by the Department of Transport and Communication of the Mexican federal
government, to build and operate a cruise ship terminal and marina village at
the Port of Ensenada, Baja California, Mexico. The Company, through its
subsidiary, Ensenada Cruiseport Village, S.A. de C.V. ("Cruiseport"), agreed to
purchase the shares of ENT and TMN for $854,000. The purchase price was payable
$54,000 in cash, $360,000 in shares of stock of the Company to 45% in interest
of the selling shareholders (the "45% selling group"), and $440,000 in shares of
stock of the Company or in cash, at their option, to the other 55% in interest
of the selling shareholders (the "55% selling group").
The 55% selling group elected to take cash; and the agreement between
the Company and the 45% selling group was later modified to be a cash payment as
well. The Company and the selling groups agreed, in July, 1997, that the total
amount due and owing to these two groups, including accrued interest, was
$955,000; and that amount was paid to the selling groups out of the proceeds
received by the Company from its sale of Cruiseport to ICTSI.
After the closing of the agreement for the acquisition of the shares of
ENT and TMN by the Company, the Department of Transport and Communications of
the Mexican federal government and the Port Authority of Ensenada, in
substitution for the concession rights previously held by ENT and TMN, granted
concession rights directly to Cruiseport, pursuant to an
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agreement dated December 19, 1995, executed by ENT, TMN, Cruiseport and the Port
Authority of Ensenada, entitled "Agreement on Partial Assignment of Rights."
This agreement, as later further amended, is hereafter referred to as the
"concession agreement," and the rights granted to Cruiseport thereunder,
including the right to construct terminal, marina and associated facilities
within a 47-acre assigned area of the Port, are hereafter referred to as the
"concession."
The Company treated the acquisition of the concession by Cruiseport
from the Port Authority of Ensenada as an asset acquisition, capitalized at the
purchase price of the stock of TMN and ENT, namely $854,000.
The concession agreement granted to Cruiseport the right to exclusively
profit from and exploit the "assigned area;" to render services in the assigned
area, including maneuvers, anchoring, docking, embarkation and disembarkation,
boating, tugging, tying, supplying of water, fuel, communication, electricity,
collection of garbage, laundry, passenger luggage handling, and tourist
services; and to carry out works and installations of tourist and commercial
development in the assigned area, including condominiums, offices, restaurants,
club house, commercial locales, etc.; to receive collections from the services
provided by Cruiseport, at levels of rates established by the federal
government; to determine priorities on docking of ships in the assigned area; to
perform as agent for tourist cruises in order to hire all services, including
pilotage and tugging; and to receive income on the anchorage rates of cruise
ships anchored in the assigned area.
The concession was for 35 years, beginning January 1, 1996. The
concession agreement provided that this term could be extended for up to twelve
additional years, pursuant to request presented by Cruiseport to the Port
Authority during the last part of the original term of the agreement.
The concession agreement provided for staged annual rental payments by
Cruiseport to the Port Authority, for its concession rights. Pursuant to a
modification to the agreement, executed in November, 1996, the annual rental
payments by Cruiseport were established at $54,000, $108,000, $280,000 and
$560,000, in years one through four, respectively, and rising steadily
thereafter to a level of $2,500,000 per year in years 25 through 32 and
$2,999,000 per year in years 33 through 35. In addition to the fixed rental
payments, the modified concession agreement provided that Cruiseport would pay
an additional variable rental fee of 20% of the anchorage and port fees received
by Cruiseport with respect to the total weight of cruise ships in excess of
18,900,000 gross tons in any year.
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Pursuant to the concession agreement, Cruiseport was committed to an
investment program in the range of $25,000,000 over a five-year period, in
fulfillment of a conceptual plan embodying three phases of construction.
The Company delivered a "design of the works" to the Port Authority, in
mid-1996, constituting a conceptual plan describing the three phases of
construction; and the Company received approval of this plan, as well as
necessary environmental approvals from the Mexican federal government.
Phase I, at an estimated cost of $12,000,000, encompassed the
construction of two (2) piers (approximately 780' and 623' in length,
respectively) suitable for use by large cruise ships, with related dredging and
construction of a sea (retaining) wall, together with a smaller pier along the
sea wall for medium size cruise ships. Phases II and III, at estimated costs of
$4,800,000 and $8,900,000 respectively, encompassed the construction of various
facilities, including terminal building, commercial, specialty, retail and
office space, marina slips, condominiums, apartments, and specialty docks.
The original concession agreement of December 19, 1995 was modified by
formal agreement between Cruiseport and the Port Authority in November, 1996.
The concession agreement, as modified, provided that Cruiseport was obligated to
begin work on Phase I by no later than March 15, 1997. On March 10, 1997, the
Company commenced dredging work for Phase I, having received pro- visional
authorization to do so. On March 14, 1997, the Board of Directors of the Port
Authority of Ensenada met and ratified and confirmed the final authorization for
work to begin on Phase I.
During fiscal 1997, the Company vigorously engaged in an effort to
secure financing for Phase I -- namely $12,000,000. The Company was in regular
communication with a major Mexican banking institution, which in turn assisted
the Company in locating potential financing; and the Company, additionally,
negotiated with various potential investor groups. None of the efforts were
successful. The Company has reported in its recent filings that its continuing
failure to secure such financing would likely result in the loss of its
concession rights.
As of June 30, 1996, the Company had capitalized $933,322 in
expenditures associated with the planning and development of its Ensenada
concession, inclusive of fees and expenses of consultants, planners, engineers,
staff, and associated overhead, in connection with the development of plans,
pursuit of financing, and negotiations with private and public parties to
develop and finance the Ensenada concession. During its fiscal year ended June
30, 1997, the Company capitalized an additional $1,051,380 in expenditures, and
an additional $300,000 subseqent
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to fiscal year end and prior to sale of the Project. Approximately $1,000,000 of
these expenditures were for clearing of debris and dirt moving activities as
well as the conduct of dredging operations preliminary to the commencement of
pier construction.
Cruiseport's objective, in acquiring and exploiting its concession at
the Port of Ensenada, has been to profit over the years from cruise ship traffic
to and from the Port, which the Company has anticipated would increase year to
year, both as the result of the attractiveness of tourism to Mexico and
specifically as the result of the Company's development activities at the Port
and the Company's efforts to attract cruiseship traffic.
However, the Company has been unable to obtain financing for the
substantial capital costs involved in the project, notwithstanding its vigorous
efforts during fiscal 1997 to obtain financing for Phase I. Although it
commenced dredging operations in March of 1997, the Company was operating on the
basis of advances from Hugh Downey, and without the required capital to continue
to the next step in Phase I, namely pier construction. The Company's decision,
therefore, to sell its concession, derived from its continuing inability to
secure financing for the fulfillment of Phase I. Management was able to
negotiate a sales price ($5,150,000, inclusive of a note for $1,200,000) which
exceeded its capitalized investment in the project of $3,138,702 (inclusive of
the approximate $300,000 capitalized after the end of fiscal year 1997, prior to
sale). The capitalized costs, together with the the entire pre-operating
expenses of the Company during fiscal years 1996 and 1997, were $4,479,624, or
approximately $650,000 less than the sales price which the Company negotiated.
3. Dardell Real Property Acquisition.
In April, 1995 the Company entered into an agreement with Dardell
International Limited ("Dardell"), a company unrelated to the Company prior to
said agreement, for the purchase of a land contract between Dardell and a
Mexican corporation named Granjas Los Bucaneros, S.A. Under the land contract,
Granjas Los Bucaneros had the obligation to sell and Dardell had the obligation
to purchase approximately 3.5 miles of unimproved beach-front property,
constituting a total of 580 acres, in the State of Campeche, Mexico, adjacent to
the Company's 8.5 miles of coastal property there.
The agreement between the Company and Dardell provided that Dardell
would sell and the Company would buy the above-described land contract for a
price of $2,000,000, and that upon closing of
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the contract, that purchase price would be paid through the issuance of 100,000
shares of the Company's stock (as adjusted for the May 12, 1997 consolidation of
shares) to Dardell.
The Company determined that the issuance of 100,000 shares to Dardell
in payment of the $2,000,000 purchase price for the land contract (i.e. valuing
the shares at $20.10 per share on a post-May 12, 1997 consolidation basis) was
appropriate based upon the trading range of the Company's stock during the
previous month (March 1995) and up to the date the agreement was verbally
consummated between the Company and Dardell, namely the first week of April,
1995.
The contractual right acquired by the Company was subject to the
requirement to make payment to the seller of the land, Granjas Los Bucaneros,
S.A., in an amount of $1,050,000, with $50,000 due on or before May 29, 1995 and
$1,000,000 due on or before May 24, 1997 (subsequently extended to May 24,
1998). The $50,000 due on or before May 29, 1995 was paid by the Company. Upon
payment of the final installment of $1,000,000, Granjas Los Bucaneros, S.A. is
obligated to execute a new deed transferring all its rights in the property to
the Company. If that payment is not made by the Company on or before May 24,
1998, it will lose its rights in the property.
Prior to making payment of the final installment, the Company does not
have the right to develop or otherwise use the property.
The Company has be unable, as of this time, to secure capital or other
financing to make the $1,000,000 payment to Granjas Los Bucaneros.
The Los Bucaneros contract right has been carried on the books of the
Company at $3,097,002, representing the $2,000,000 in consideration paid to
Dardell, the $1,000,000 encumbrance in the form of the further amount payable by
the Company to Granjos Los Bucaneros, and $47,002 of capitalized costs incurred
by the Company in connection with the acquisition of the contract right.
4. Pending Acquisition of Ameristar Worldwide Entertainment Corporation
("Ameristar").
On September 29, 1997, the Company entered into an agreement with Park
Investments Limited ("Park"), a Liberian corporation with headquarters at 15
Hector Street, Herne Bay, Auckland, New Zealand, to acquire all of Park's stock
in a Nevada corporation by the name of Growth Strategies, Inc. ("GSI"), whose
address is 5300 West Sahara Avenue, Suite 101, Las Vegas, Nevada 89126. The sole
shareholder, President and director of Park and
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GSI is David Mackarness, a British citizen resident in Belgium, whose address is
Avenue Walckiers 45, Brussels, Belgium 1160. The Secretary of GSI is Nigel
Spinks, a British solicitor who, prior to June, 1995, was a director of
International Resort Developers, Inc., is currently a director of Langer
Holdings Ltd., a subsidiary of the Company, and has continued to be active in
the negotiation of potential contracts for the Company, inclusive of the
contract between the Company and Park.
GSI had, in turn, in August of 1997, acquired certain of the assets
utilized in a business conducted by a Tennessee corporation named Brightstar,
Inc. ("Brightstar"). Based upon unaudited figures supplied to the Company,
Brightstar had a stated book value of tangible and current assets, as of
September 30, 1997, in the amount of $313,137,26 (including computer equipment
and furniture with an approximate book value of $200,000, and other current
assets with an approximate book value of $100,000), offset by current
liabilities in the approximately amount of $50,000. The business of Brightstar
had been conducted under the name "Ameristar Worldwide Entertainment
Corporation", and GSI acquired from Brightstar, as well as the above-stated
tangible assets, the right to utilize this name and various contractual
relationships, as described below.
The business conducted by Brightstar was the distribution of satellite
dishes for capturing television signals, and related video and audio
programming, as well as installation services, to the residential market
throughout the United States, pursuant to a contractual relationship with
Echostar Satellite Corporation ("EchoStar"), a manufactuerer and distributor of
satellite dishes and related programming. EchoStar offers, through its network,
approximately 500 channels to subscribers to its network.
The business of Brightstar also included the sign-up of sub-agents to
distribute the satellite dishes and related services, and the earning of sign-up
fees from, and over-ride fees on sales by, such sub-agents. As of the date of
acquisition by the Company of the assets of GSI, there were approximately 8,500
such sub-agents.
GSI acquired from Brighstar, in addition to the name "Ameristar",
Brightstar's contractual relationship with EchoStar and with the sub-agents
above-described.
The President, director and owner of Brightstar, prior to the
acquisition of its assets by GSI, was one Samuel B. Watson of 9412 Highwood Hill
Road, Brentwood, Tennessee. Mr. Watson has agreed to serve as the chief
executive officer of Ameristar, as a subsidiary of the Company, pursuant to an
employment contract cancelable by either party upon twelve months written
notice, and has also agreed to serve as a director of the Company.
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The reported revenues of Brightstar, during the eighteen months it was
in business, prior to the time of the sale of its assets to GSI, was
approximately $3,000,000, and its net loss from operations over the previous 12
months approximately $1,000,000. However, management believes, based on
discussions with Mr. Watson, that one of the principal contributors to a poor
bottom line was the fact that Ameristar was not set up to process orders on a
high volume basis. Management hopes to remedy that situation.
The agreement between the Company and Park, to acquire all of the stock
of GSI, is subject to approval by the shareholders of the Company, which meeting
is anticipated to be held in November, 1997. In the interim period, the Company
has advanced to GSI $650,000, $400,000 of which was utilized by GSI to repay a
$400,000 note issued by GSI to Brightstar in connection with the acquisition by
GSI of the assets and relationships of Brightstar. The remaining $250,000 has
been used as operating capital by GSI. It is anticipated by the Company that it
will be necessary to utilize approximately $400,000 of its additional capital to
support deficit operations during the balance of calendar 1997, at which point
management is hopeful that GSI will be operating on a break-even and then
profitable basis.
The agreement between Park and the Company, for the acquisition of the
stock of GSI, is in consideration of the issuance by the Company of 340,000
shares of the Company's common stock to Park, which after issuance will amount
to 15.2% of the enlarged capital of the Company, and 60,000 shares to Samuel B.
Watson, which after issuance will amount to 2.7% of the enlarged capital of the
Company.
In addition to the foregoing payments, the contract between the Company
and Park provides for the further issuance of 2,550 shares to Park and 450
shares to Samuel B. Watson for each $1,000 of after-tax profit earned by GSI in
excess of $1,000,000 during each of the calendar years 1998 and 1999, as shown
in GSI's audited accounts.
GSI had conducted no business prior to its acquisition of the assets of
Brightstar above discussed.
GSI is in the process of changing its name to Ameristar Worldwide
Entertainment Corporation, and will hereafter be referred to interchangeably as
"Ameristar."
In addition to continuing and intending to expand the business of
Ameristar, as previously conducted by Brightstar, Inc., it is the intention of
the Company to immediately target new areas of business, as well as utilize the
business of
14
<PAGE> 15
Ameristar to leverage the Company's Mexican property interests by utilizing the
communications facilities of Echostar, as well as the internet, to market
residential lots into which the Palmeras and Irvine parcels are and will be
subdivided.
EchoStar has indicated to the Company that it will permit the Company
to have preferential rates to advertise on the EchoStar satellite network, and
the Company intends to take advantage of this offer to promote its Mexican
property interests as well as undertake other business ventures (discussed
below) through the use of satellite television.
Ameristar has also entered into a contract with UniDial Communications,
Inc. ("UniDial") of Louisville, Kentucky, which is a nationwide provider of
long-distance telephone services, internet access, multimedia conference
services and data networking. Pursuant to the contract, it is intended that
Ameristar, as an agent of UniDial, and on a commission basis, will place these
services with small to medium size businesses and residential customers
throughout the United States. Ameristar intends, in this regard, to utilize its
nationwide distributor network.
Through its relationship with UniDial, the Company plans to advertise
its Mexican properties on the World Wide Web. Additionally, through its
relationship with both UniDial and EchoStar, the Company intends to create a
"Shopping Mall" on the internet and satellite television, through which it
intends to market a variety of products and services on behalf of other
companies, as well as promote its Mexican real estate.
Ameristar has also entered a contract with Enhanced Personal
Communications, Inc. of Atlanta, Georgia, pursuant to which Ameristar intends to
market "virtual office services," including services to enable small businesses
and residences to install and operate sophisticated computer and digital
systems.
It must be emphasized that except for the marketing of satellite dishes
and related services on behalf of EchoStar, as above described, Ameristar has
not been actively involved in the above described ventures. Consequently, no
representations can be made, at this point, as to the profitability of the
various businesses to be conducted by Ameristar.
Prior to entering into its contract to acquire GSI the Company had, on
August 25, 1997, entered into a contract to purchase all of the share capital of
World Lynx Communications Corporation ("World Lynx") of 111 Center Street,
Little Rock, Arkansas. World Lynx had previously acquired from GSI the assets
which GSI had in turn acquired from Brightstar, including the Ameristar name,
for a price which included a stock consideration,
15
<PAGE> 16
making GSI the largest shareholder in World Lynx. In further consideration for
the assets which it had acquired from GSI, World Lynx had concurrently obligated
itself to pay to GSI a royalty of 2 1/2% of net sales to be derived from the
assets acquired from GSI.
After announcing the prospective acquisition of World Lynx through a
press release and the filing of a Form 8-K with respect to the prospective
acquisition, the Company determined, on the basis of its due diligence
investigation, to terminate the transaction, because the assets of World Lynx
were subject to certain liabilities and encumbrances which were not acceptable
to the Company. Accordingly, the parties to the Company's Agreement to acquire
World Lynx entered into a Rescission Agreement on September 29, 1997 as a result
of which the assets which GSI had transferred to World Lynx reverted to GSI.
Park, as GSI's parent company, agreed to sell it's GSI shares to the Company on
the terms and for the stock considerations mentioned above, but on the further
basis that GSI would assume, in favor of Park, the royalty obligation of 2 1/2%
of net sales that was previously to have been born by World Lynx in favor of
GSI.
In consideration of Park, as the parent company of GSI, consenting to
GSI's releasing of the Company from its contract with World-Lynx and consenting
to the revised contract, the Company has agreed to pay Park a royalty of 2 1/2%
of net sales revenue of Ameristar on and after September 1, 1997. This
obligation is in addition to the issuance of 400,000 shares by the Company to
Park and Samuel Watson, as above described, and is in addition to the Company's
advance of $400,000 to GSI which has in turn been paid by GSI to Brightstar for
the Brightstar assets, as above-described.
5. Abandoned Transactions.
In the Company's restated annual report for fiscal 1996, it reported
three proposed transactions, one with Heritage Distribution Group ("Heritage")
for a prospective $30 million financing of the Company's development activities,
and proposed acquisitions of RBC Enterprises, Inc. ("RBC") and Prime Interests,
Inc. ("Prime"), two companies which have been engaged in real estate development
activities in the United States. These proposed transactions did not
materialize, and negotiations were terminated with respect to all three in
December, 1996 (see discussion in Form 10-QSB for quarter ended December 31,
1996).
The Company has not included as expenses in the Statement of Operations
(or otherwise reflected as a liability) $172,000 which New York counsel, which
represented the Company in connection with the prospective transactions, has
indicated to Company it
16
<PAGE> 17
accrued as legal fees for such representation. New York counsel has indicated
that it intends to seek payment of that amount. Neither has the Company
included, as expenses in the Statement of Operations (or otherwise reflected as
a liability) a $70,000 additional fee for "services and expenses" billed by
Heritage Distribution Group in connection with the proposed financing.
Management does not believe that either of these bills represent amounts
properly due and owing. As of this time, these matters have not been resolved.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's properties are described in Item 1 above, with the
exception of the following.
The Company holds interests in five unpatented and three patented
potential gold-bearing claims in Murray, Idaho, comprising approximately 100
acres. These claims are underlain with substantial underground tunneling from
mining which ceased several decades ago. Historical reports of drilling and
mining activity which took place in the late nineteenth century lead the Company
to believe that there may be potential for underground mining of sulfate gold on
a vein known as the Goldback vein, which is in part located on land covered by
the Company's interests and which has never been mined. However, management
believes that a substantial exploration program would be necessary in order to
ascertain the existence of gold reserves and the viability of mining activities.
The Company has devoted no time, attention or resources to its gold
mining claims or evaluation of mining potential and prospects in the past
several years, and has no present intention to do so.
ITEM 3. LEGAL PROCEEDINGS
1) The Company, various of its present and former officers and
directors (M. K. Miller, now deceased, Irwin A. Katz and Bryan Miller), together
with one Barry Gill, and the respective wives of all of the foregoing, have been
named as defendants in a lawsuit which was originally filed in May, 1994 by
certain shareholders of the Company, in Idaho State District Court and then
removed to the United States District Court for the District of Idaho. The suit
alleged violations of the federal securities laws, state securities laws of
Washington and Idaho, fraud, negligent misrepresentation, breach of contract,
breach of fiduciary duty, and violations of the Washington and Idaho State
17
<PAGE> 18
Consumer Protection Acts. The plaintiff shareholders contend that the Company,
and its officers and directors, wrongfully assisted certain third parties,
including Advance Capital Corporation and its agents, in the private sale of
approximately 10,000 common shares of the Company (adjusted for the May 12, 1997
consolidation of shares) to the plaintiffs.
In April, 1997, the federal court remanded all claims, except for a
Rule 10(b)(5) claim under the federal Securities Exchange Act of 1934, back to
state court. Motions for summary judgment by the defendants are pending in the
state court; and the claim remaining in federal court is presently scheduled for
trial in December, 1997.
The Plaintiffs have not set forth in their pleadings a specific dollar
amount of damages, though they seek actual damages, punitive damages, treble
damanges, court costs and attorney fees. In a letter of Decebmer 5, 1996,
counsel for the plaintiffs indicated that plaintiffs considered their claim to
be worth $4,000,000, and that plaintiffs' demand for settlement, at that time,
was $800,000.
The Company and its officers and directors deny any involvement in the
transactions between Advance Capital Corporation and the plaintiffs, or any
other wrongdoing. The Company, and its trial counsel, believe plaintiffs' claims
to be without merit, and the Company correspondingly believes plaintiffs'
demands for settlement to be untenable. The Company intends to vigorously defend
against the claims of the plaintiffs.
2. The Company, together with former officers and directors of the
Company, namely Allan Ferguson, Alton Jones and Nigel Spinks, have been named in
a civil action commenced in the Circuit Court of the Fifteenth Judicial Circuit
in Palm Beach County, Florida, in July, 1997. The complaint has allegedly been
served upon the the Company, but the Company considers the service to have been
improper, and has filed a motion to dismiss for lack of personal jurisdiction.
The action alleges that the defendants fraudulently induced plaintiff
Andaurex International Inc., a Bermuda corporation, to purchase 66,666 shares of
the Company (as adjusted for the May 12, 1997 consolidation of shares on a 1 for
30 basis) from shareholders of the Company; and in particular, that the
defendants intended that said shares not be transferred into the name of
Andaurex, or in street name, as and when promised, and that during the period in
which the shares were not transferred on the books of the Company, their value
allegedly declined from a high of $26.10 cents per share (as asjusted for the
May 12, 1997 consolidation of shares) to $3.60 per share (as adjusted for
18
<PAGE> 19
said consolidation). The action claims for compensatory damages, together with
costs and interest.
The Company does not believe that the allegations against it have
merit, and intends to answer and defend against the claim when and if properly
served.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
The Company held an annual shareholders meeting on May 12, 1997, in Los
Angeles, California. The following matters were presented to and approved by the
shareholders:
1. Cancellation of shares. Amending the Articles of Incorporation of
the Company by adding a provision thereto which canceled 29/30 of the
outstanding and issued shares, resulting in each shareholder of the Company
owning, thereafter, one share for each 30 shares previously owned by that
shareholder. The amendment effectively provided that to the extent a shareholder
owned less than 30 shares, he would thereafter own a fraction of a share equal
to the number of shares he previously owned, divided by 30; and that to the
extent a shareholder owned a number of shares greater than 30, but not exactly
divisible by 30, he would thereafter own such exact number of shares, including
a fraction of a share, resulting from the division of the number of shares which
he previously owned by 30.
The amendment to the Articles provided that the number of authorized
shares of the Company would remain at 100,000,000 shares, at a par value per
share of $0.10. Prior to the amendment, there were 54,213,721 shares issued and
outstanding. The amendment reduced the number of issued and outstanding shares
to 1,807,124 shares. After the amendment, the Company's authorized, unissued
shares, were 98,192,876 shares.
The amendment added a Section 7 to Article VI ("Capital Stock") of the
Articles, which reads as follows:
"29/30 of the issued and outstanding shares of the Corporation shall be
canceled, effective at the beginning of business on the first business day
following the filing of this resolution of shareholders, amending the articles
of incorporation, with the State of Idaho. The cancellation shall result in each
shareholder, as of the effective time of the cancellation, owning thereafter 1
share (including a fractional share where the number of shares owned as of such
time is not exactly divisible by thirty) for each thirty shares or portion
thereof owned as of the effective time of the cancellation. This cancellation of
issued and outstanding shares shall not result in any cancellation of the
authorized shares of the Corporation,
19
<PAGE> 20
which shall remain at 100,000,000 shares of common stock of ten cents ($.10) par
value per share. The issued and outstanding shares of the Corporation which are
canceled shall thereafter constitute authorized but unissued shares."
2. Change of Name. Amending the Articles of Incorporation to change the
name of the Company to "International Resort Developers, Inc."
3. Election of directors. Electing the following three persons,
nominated by management, as directors of the Company, to serve until the next
annual meeting of shareholders or until their successors are otherwise duly
elected: Patrick Joseph Magee, Pieter Gerhard Keyfer Oosthuizen, and Patrick
Lappin.
4. Appointing La Voie, Clark, Charvoz & May, P.C., Tucson, Arizona, as
the accountants to audit the financial statements of the Company for its fiscal
year ending June 30, 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is listed on the NASDAQ small cap market.
Effective for trading on May 19, 1997, the Company's stock was consolidated on a
1 for 30 basis. The following figures are not adjusted for such consolidation,
and represent the actual high and low trading figures, both before and after
consolidation. The high and low closing trading prices of such stock, for each
quarter in the fiscal years ending June 30, 1996 and June 30, 1997 were as
follows:
<TABLE>
<CAPTION>
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
<S> <C> <C> <C> <C>
1996 $0.563 - 0.313 $ 0.531 - 0.344 $ 0.594 - 0.313 $0.844 - 0.313
1997 $0.625 - 0.21875 $0.46875 - 0.09375 $0.1875 - 0.0625 $.0625 - .03125
(pre-5/19/97)
$ 2.00 - .875
(post-5/18/97)
</TABLE>
20
<PAGE> 21
On October 8, 1997, the Company's closing share price, on the NASDAQ
small cap market, was $1.25.
As of August 15, 1997, there were 409 stockholders of the Company, of
record.
There were no cash dividends declared on the Company's common stock in
the fiscal years ended June 30, 1996 or June 30, 1997.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Liquidity and Capital Resources.
At June 30, 1997, the current assets of the Company (namely cash and
receivables) were $1,176, and its current liabilities $3,314,436, for a net
working capital deficit of $3,313,260. As a result of this deficit, and the fact
that the Company has no current revenues or consistent sources of cash flow or
operations other than its intention to develop productive operations as the
result of the prospective acquisition of Ameristar Worldwide Entertainment
Corporation, the Company's auditors have stated that the financial status of the
Company raises substantial doubt about the Company's ability to continue as a
going concern.
Due to the total focus of the Company, through the end of the 1997
fiscal year, on developing its real estate interests in Mexico, the financial
statements through June 30, 1997 have been prepared on the basis of the Company
being a "development stage company." Management is optimistic that the
acquisition of Ameristar Worldwide Entertainment Corporation will enable the
Company to develop into a profitable operating Company. However, it must be
emphasized that Ameristar has no history of profitable operations, and therefore
no representations can be made in such regard.
The working capital deficit of the Company increased by $2,092,604 from
June 30, 1996. This increase was attributable to the following. The $854,000
purchase price incurred by the Company in the purchase, in 1995, of the Mexican
companies which had previously owned the concession rights in the Port of
Ensenada (referred to herein as "ENT" and "TMN"), was first recorded, in its
entirety, in fiscal 1997, as a current liability. Previously, $370,500 had been
recorded as long-term debt, and $360,000 of the purchase price had been recorded
as subscriptions to stock, inasmuch as the Company was obligated to issue stock
in payment of this portion of the purchase price.
21
<PAGE> 22
The agreements were modified in fiscal 1997 to provide for payment of the entire
purchase price in cash. (The entire purchase price was satisfied after
year-end). Additionally, during fiscal 1997, Doggart Trading, Ltd. advanced to
the Company, $516,215, and Hugh Downey $1,017,430, for the conduct by the
Company of its operations, including capitalized and expensed costs for the
Ensenada Project. Of the amounts advanced by these two parties, all of the
advances by Hugh Downey and $121,155 of the advances by Doggart were recorded as
current liabilities at June 30, 1997.
The balance of the amount advanced by Doggart during fiscal 1997 was
recorded as subscription to stock, pursuant to the agreement of the Company and
Doggart to satisfy that balance (namely $394,600) for the issuance of 26,300
shares (a deemed value of $15 per share).
The remainder of increase in current liabilities between fiscal 1996
and fiscal 1997 were an increase in accrued payroll from $47,405 to $121,575,
and an increase in interest and royalties payable from $13,325 to $138,463. The
accrued payroll at June 30, 1997 constituted amounts owing to two former
officers of the Company, Alton Jones and Frank Cobb, which were satisfied after
year end. The interest and royalties payable at fiscal year-end 1997 were the
accrued interest on the aforesaid debt to Hugh Downey ($34,045) and on the
payable to ENT and TMN ($91,093). These amounts were also satisfied after
year-end.
The "current portion of long-term debt", other than the above-described
$854,000 owing to TMN and ENT, constitutes the amount payable, on May 24, 1998,
to Granjas Los Bucaneros, D.A., to complete the purchase obligation of the
Company with respect to the 3.5 miles of coastal property adjoining the
Company's other 8.5 miles of coastal property in Campeche, Mexico.
On July 19, 1997, the Company sold its Ensenada concession, as
discussed in the earlier portion of this report. The sales price was $5,150,000,
of which $3,950,000 was received in cash, and the balance in the form of
promissory notes. The cash received by the Company was utilized to satisfy
substantially all of the current liabilities of the Company as of June 30, 1997,
with the exception of the amount owing on May 24, 1998 for the Los Bucaneros
property, and the amount of $121,255 owing to Doggart Trading, Ltd. The proceeds
of the sale of the Ensenada concession have also been utilized, since year end,
to advance funds in the amount of $650,000 to Ameristar, in satisfaction of
various of its debts and for working capital, in anticipation of the completion
of the purchase of Ameristar by the Company (See discussion above).
Additionally, $200,000 was paid as a fee to Mr. Downey for making his advances
to the Company and forebearing in not demanding earlier repayment.
22
<PAGE> 23
As of October 1, 1997, the remaining cash in the Company's accounts,
from the sale of its Ensenada concession, was $470,241 (exclusive of the notes
receivable from the sale). Respecting the prospective acquisiton of
GSI/Ameristar discussed above, management believes that the balance of the
Company's liquid capital will be required to satisfy operating deficits of
GSI/Ameristar incurred and to be incurred prior to calendar year-end 1997.
Management is hopeful that the operations of GSI/Ameristar will have
become self-sustaining by the beginning of 1998, and that GSI/Ameristar will
operate profitably in 1998. However, no representations can be made to that
effect. Furthermore, the Company's intentions with respect to the preparation of
the Campeche property for sale of individual lots may require in the range of
$1,000,000 of capital; and the payment by the Company of its obligation of
$1,000,0000, to complete the purchase of the Los Bucaneros property, is due May
24, 1998.
In order to partially fulfill its plans and obligations as set forth in
the previous paragraph, the Company is attempting to discount $800,000 of the
$1,200,000 in promissory notes which it has received in connection with the sale
of the Ensenada concession, and has initiated discussions with a banking
institution in said regard. However, no commitments have been received, as of
this date, in said regard, and the Company has not otherwise determined at this
time how it will raise the necessary capital to finance the plans and
obligations discussed in the previous paragraph. The inability of the Company to
meet its obligation with respect to the Los Bucaneros property would result in
the forfeiture of the Company's interest in that land, and the consequent
write-down of the $3,050,000 at which that property has been capitalized on the
books of the Company. The inability of the Company to finance the necessary
development of its Campeche property to permit the sale of individual lots would
result in a delay or abandonment of such plans.
GSI/Ameristar, to date of the contract between the Company and Park
Investments Limited for the acquisition of the said company, operated at a
substantial net loss. Although management is hopeful that it will be able to
operate GSI/Ameristar profitably, no representations can be made in that regard.
Furthermore, the Company does not have further commitments for financing or
equity sources of capital which would fund continuing deficits. Although during
the three fiscal years ended June 30, 1997, and during the first quarter of the
current fiscal year, substantial advances were made to the Company by Doggart
Trading, Ltd., various of its shareholders, and Hugh Downey, to fund operations
and capital expenditures of the Company, there is no intention or probability
that such advances
23
<PAGE> 24
will continue in the future.
The Company's capitalized resources, as of June 30, 1997, included
$2,838,702 of expenditures capitalized in connection with the Company's Ensenada
Project (see discussion below), $3,050,000 as the Company's acquisition price
for the Los Bucaneros Property in Campeche, Mexico, and $80,321 as the book
value of the 8.5 miles of adjoining coastal property represented by the
Company's Palmeras and Irvine parcels. The book value of the Palmeras and Irvine
parcels are figures representing acquisition costs, and do not reflect
appraisals which have been secured by the Company. (See item 1 above). Likewise,
the book value of the Los Bucaneros Property is related to the value of stock
issued by the Company for the right to acquire the property, and encumbrances
burdening the property; and management does not represent that the current
market value of the Los Bucaneros property equals the stated book value. The
capitalized costs of the Company described above represent assets which are
illiquid, and do not represent currently realizable value. However, the Ensenada
Project was sold by the Company, after fiscal year end, for cash and notes
exceeding the capitalized book value of the Project on the Company's balance
sheet as of June 30, 1997.
Results of Operations
During its 1997 fscal year, the Company incurred a net loss of
$705,684, compared with a net loss from continuing operations of $616,215 in
fiscal 1996 and a net loss from continuing operations of $302,476 in fiscal
1995. (After deduction of losses from discontinued oil and gas operations, the
net losses of the Company in fiscal 1996 and 1995 were $1,080,885 and
$2,206,902, respectively).
The losses of the Company in fiscal 1997 were almost entirely
attributable to the pursuit by the Company of its real-estate development
activities, and in particular its Ensenada Project. Additionally, the Company
pursued potential real estate transactions in the United States, reported in its
annual report filing for fiscal 1996; but these transactions were abandoned in
December, 1996, as reported in the Company's quarterly report for the second
quarter of the current fiscal year (ending December 31, 1996). The expenses of
the Company include officer compensation, office expenses, travel, rent and
legal and accounting fees. They do not include the substantial portion of
expenditures for planning and associated pre-development efforts which were
capitalized on the books. The reason for the increased amount of expenditures in
fiscal 1997, compared with earlier years, is a function of the increased amount
of activity and effort expended by the Company.
24
<PAGE> 25
During fiscal 1997, the Company capitalized $1,051,380 of expenditures
incurred during that year in connection with its Ensenada Project. Such
capitalized costs included fees and expenses of staff and consultants, and
associated overhead, in connection with the development of plans and pursuit of
financing for the Ensenada Project. Additionally, such costs included
substantial amounts expended by the Company in fiscal 1997 in actual development
work conducted on the Ensenada concession. As of June 30, 1997, the capitalized
costs of the Company associated with its Ensenada Project were $2,838,702. As
the result of the sale by the Company, in July, 1997, of the Ensenada Project,
those capitalized costs will be removed from future financial statements of the
Company.
Item 7. Financial Statements
(following)
25
<PAGE> 26
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 AND 1995
26
<PAGE> 27
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITORS REPORT ON THE CONSOLIDATED
FINANCIAL STATEMENTS................................................... 28-29
CONSOLIDATED BALANCE SHEETS.................................................. 30-31
CONSOLIDATED STATEMENTS OF OPERATIONS ....................................... 32
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY.................................................. 33
CONSOLIDATED STATEMENTS OF CASH FLOWS........................................ 34-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................................... 36-48
INDEPENDENT AUDITORS REPORT ON FINANCIAL SCHEDULE............................ 49
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION...................... 50
</TABLE>
27
<PAGE> 28
REPORT OF INDEPENDENT AUDITORS
Board of Directors
International Resort Developers, Inc.
Nashville, Tennessee
We have audited the accompanying consolidated balance sheets of International
Resort Developers, Inc. (A Development Stage Enterprise) as of June 30, 1997,
1996 and 1995 and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended June 30, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of International Resort
Developers, Inc. as of June 30, 1997, 1996 and 1995 and the results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1997 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the accompanying consolidated
financial statements the Company incurred significant net losses for the years
ended June 30, 1997, 1996 and 1995. At June 30, 1997 the Company's current
liabilities exceed its current assets by $3,313,260. Subsequent to June 30, 1997
the Company sold its Ensenada project and reduced its current liabilities to
approximately $1,000,000 owed on its Playas Palmeras property, which is due May
24, 1998. If the Company is unable to pay this liability timely it may lose its
investment in this real estate which would result in a decrease in shareholders'
equity of approximately $2,000,000. The Company is in the process of completing
an acquisition of business assets it believes will generate cash flow and
operating income. The Company has no current revenues, consistent sources of
cash flow or operations other than its intention to develop productive
operations of its proposed asset acquisition and development and resale of its
land located in Campeche, Mexico. Both of these ventures are expected to require
obtaining sources of working capital and long-term development capital. These
conditions, as well as the uncertainties related to pending
28
<PAGE> 29
Board of Directors
International Resort Developers, Inc.
litigation discussed in Note 13, raise substantial doubt about the Company's
ability to continue as a going concern. Management's plan to pay its short-term
debt and generate revenues, cash flow and business operations are also discussed
in Note 13. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
Subsequent to year end the Company has entered into an agreement, subject to
shareholder approval, to acquire all of the outstanding stock of an entity which
had recently acquired the operating assets of another entity. In anticipation of
such approval, $650,000 has been advanced to the entity to date with another
$400,000 likely to be needed to meet its cash flow needs through the end of
1997. Additionally, 400,000 shares of the Company's stock and a 2.5% roayalty on
future net revenues of the entity, are to be exchanged for all of the
outstanding stock of the entity. Furthermore, additional shares of the Company
stock are to be paid in the event the entity meets certain operational targets.
We have not been provided with sufficient audited financial information about
the acquired operation to comply with the disclosure requirements, if any, that
may be imposed.
LaVoie, Clark, Charvoz & May, P.C.
Tucson, Arizona
October 10, 1997
29
<PAGE> 30
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 876 $ 38,173 $ 1,616
Pipeline revenue receivable 300 7,421 16,386
---------- ---------- ----------
Total current assets 1,176 45,594 18,002
---------- ---------- ----------
PROPERTY AND EQUIPMENT
Oil property 21,000
Gas property 2,356,023
Mining property 250,430 250,430 250,430
Pipeline & pipeline equipment 405,838
---------- ---------- ----------
250,430 250,430 3,033,291
Less accumulated depreciation, depletion &
valuation allowance 2,305,164
---------- ---------- ----------
250,430 250,430 728,127
---------- ---------- ----------
OTHER ASSETS
Land, purchase rights concessions and related
capitalized costs and improvements 6,180,764 5,129,384 3,831,898
Investment in unconsolidated companies 10,000 10,000 10,000
---------- ---------- ----------
6,190,764 5,139,384 3,841,898
---------- ---------- ----------
$6,442,370 $5,435,408 $4,588,027
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 31
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT LIABILITIES
Current debt $ 1,861,799 $ 1,131,074 $ 9,853
Accounts payable 53,914 74,446 21,735
Accrued payroll and related taxes 121,575 47,405
Override royalty and interest payable 138,463 13,325 14,745
Loans payable - Doggart Trading, Ltd. and Hugh Downey 1,138,685 15,000
----------- ----------- -----------
Total Current Liabilities 3,314,436 1,266,250 61,333
----------- ----------- -----------
LONG-TERM DEBT 370,500 1,000,000
----------- ----------- -----------
DEFERRED INCOME TAXES PAYABLE - (NOTE 7)
----------- ----------- -----------
MINORITY INTEREST IN SUBSIDIARY 284,183 284,183 301,320
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 13)
----------- ----------- -----------
STOCKHOLDERS' EQUITY - after giving retroactive
1.30 reverse stock split (See NOTE 1):
Common Stock, $.10 par value, 100,000,000 shares
authorized, 1,841,298 issued for 1997, 1,838,967
issued for 1996 and 1,647,967 issued for 1995 184,129 183,897 164,797
Additional paid in capital 7,478,158 7,443,430 6,092,544
Less shares of common stock held in Treasury-at cost;
267 share for 1997, 1996 and 1995 (2,895) (2,895) (2,895)
----------- ----------- -----------
7,659,392 7,624,432 6,254,446
----------- ----------- -----------
Retained Deficit:
Accumulated from operations prior to the
development state (3,191,265) (3,191,265) (2,726,596)
Accumulated during the development stage (1,624,376) (918,692) (302,476)
----------- ----------- -----------
(4,815,641) (4,109,957) (3,029,072)
----------- ----------- -----------
Total Stockholders' Equity 2,843,751 3,514,475 3,225,374
----------- ----------- -----------
$ 6,442,370 $ 5,435,408 $ 4,588,027
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 32
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
Operations From
Inception of the
For The Years Ended June 30, Development Stage
----------------------------------------- April 1, 1994 to
1997 1996 1995 June 30, 1997
----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0 $ 0
EXPENSES
Predevelopment costs expensed on abandoned projects 303,514 303,514
Real estate acquisition overhead and administrative expenses 205,644 70,962 289,446 566,052
Legal and accounting 220,514 143,078 363,592
Officer salaries 186,450 86,240 272,690
Office expenses, rent and other 33,596 19,199 52,795
Travel 35,530 9,120 44,650
Printing 1,020 4,379 5,399
Payroll taxes 19,749 1,927 21,676
----------- ----------- ----------- -----------
Development Stage Loss - Preoperating (702,503) (638,419) (289,446) (1,630,368)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Miscellaneous income (expense) (3,181) 5,067 3,678 497
Interest income
Bad debts (31,796) (9,593)
Minority interest in subsidiary's net income 17,136 6,088 6,088
Gain on sale of real estate (prior to development stage)
----------- ----------- ----------- -----------
(3,181) 22,203 (22,030) (3,008)
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (705,684) (616,216) (311,476) (1,633,376)
PROVISION (CREDIT) FOR INCOME TAXES - (NOTE 7) (9,000) (9,000)
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (705,684) (616,216) (302,476) $(1,624,376)
===========
DISCONTINUED OPERATIONS - (NOTE 1)
Loss from discontinued oil & gas operations - less
applicable income tax
credits of $0 in 1997, $0 in
1996 and $53,000 in 1995 (6,442) (1,904,426)
Loss on disposal of oil & gas assets (458,227)
----------- ----------- -----------
NET INCOME (LOSS) $ (705,684) $(1,080,885) $(2,206,902)
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,835,975 1,683,152 1,534,168
=========== =========== ===========
INCOME (LOSS) FROM CONTINUING OPERATIONS
PER SHARE $ (0.384) $ (0.366) $ (0.197)
=========== =========== ===========
NET INCOME (LOSS) PER SHARE $ (0.384) $ (0.642) $ (1.439)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 33
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY From July
1, 1994 through June 30, 1997
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------
Paid in
Per Share Shares Amount Capital Shares
--------- ---------- ------------ ------------ ------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1994 46,008,348 $ 4,500,835 $ (1,674,167) 8,000
Shares canceled related to rescinded transaction (Note 14) (1,000,000)
Shares issued for payment of notes payable
plus accrued interest to Daggart Trading, Inc. 1.00 205,373 20,537 184,836
Shares subscribed but unissued at June 30, 1995
related to advances from Doggart Trading, Ltd.
for use in real estate development and operations 1.00 1,225,300 122,530 1,102,770
Shares issued to Dardell International Ltd. to acquire
real estate (Note 2) .67 3,000,000 300,000 1,700,000
Net loss for the year ended June 30, 1995
---------- ------------ ------------ ------
BALANCE, JUNE 30, 1995 49,439,021 4,943,902 1,313,439 8,000
Shares subscribed but unissued at June 30, 1996
related to advances from Doggart Trading, Ltd.
for use in real estate development and operations 1.00 235,286 23,529 211,757
Shares issued for payment of advances payable
to Doggart Trading, Ltd. 1.00 774,700 77,470 697,230
Shares subscribed for acquisition of 45% of Ensenada
concession rights .50 720,000 72,000 288,000
Shares issued for acquisition of Langer Holdings, Ltd. (Note 2) 4,000,000 400,000 3,600,000
Adjustment to reflect excess of contract purchase
price over Transferor's cost (Note 2) (4,000,000)
Net loss for the year ended June 30, 1996
---------- ------------ ------------ ------
BALANCE, JUNE 30, 1996 55,169,007 5,516,901 2,110,426 8,000
Shares subscribed but unissued at June 30, 1997
related to $394,960 of advances from Doggart
Trading, Ltd. for use in development of the
Ensenada project .50 789,920 78,992 315,968
Recision of shares subscribed for acquisition
of 45% of Ensenada concession rights
due to renegotiations (Note 2) (720,000) (72,000) (288,000)
One for thirty reverse stock split approved
May 12, 1997 (Note 1) (53,397,629) (5,339,764) 5,339,764 (7,733)
Net loss for the year ended June 30, 1997
---------- ------------ ------------ ------
BALANCE, JUNE 30, 1997 1,841,298 $ 184,129 $ 7,478,158 267
========== ============ ============ ======
<CAPTION>
Cumulative
Treasury Stock Changes from
---------------------------------------- Inception of the
Retained Total Development Stage
Earnings Stockholders' April 1, 1994 to
Amount (Deficit) Equity June 30, 1997
-------- ------------ ------------ -----------------
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1994 $(2,895) $ (822,170) $ 2,001,603 $ 349,212
Shares canceled related to rescinded transaction
Shares issued for payment of notes payable
plus accrued interest to Daggart Trading, Inc. 205,373 205,373
Shares subscribed but unissued at June 30, 1995
related to advances from Doggart Trading, Ltd.
for use in real estate development and operations 1,225,300 1,225,300
Shares issued to Dardell International Ltd. to acquire
real estate (Note 2) 2,000,000 2,000,000
Net loss for the year ended June 30, 1995 (2,206,902) (2,206,902) (302,476)
------- ------------ ------------ ------------
BALANCE, JUNE 30, 1995 (2,895) (3,029,072) 3,225,374
Shares subscribed but unissued at June 30, 1996
related to advances from Doggart Trading, Ltd.
for use in real estate development and operations 235,286 235,286
Shares issued for payment of advances payable
to Doggart Trading, Ltd. 774,700 774,700
Shares subscribed for acquisition of 45% of Ensenada
concession rights 360,000 360,000
Shares issued for acquisition of Langer Holdings, Ltd. 4,000,000 4,000,000
Adjustment to reflect excess of contract purchase
price over Transferor's cost (4,000,000) (4,000,000)
Net loss for the year ended June 30, 1996 (1,080,885) (1,080,885) (616,216)
------- ------------ ------------ ------------
BALANCE, JUNE 30, 1996 (2,895) (4,109,957) 3,514,475
Shares subscribed but unissued at June 30, 1997
related to $394,960 of advances from Doggart
Trading, Ltd. for use in development of the
Ensenada project 394,960 394,960
Recision of shares subscribed for acquisition
of 45% of Ensenada concession rights
due to renegotiations (360,000) (360,000)
One for thirty reverse stock split approved
May 12, 1997
Net loss for the year ended June 30, 1997 (705,684) (705,684) (705,684)
------- ------------ ------------ ------------
BALANCE, JUNE 30, 1997 $(2,895) $ (4,815,641) $ 2,843,751 $ 3,560,455
======= ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 34
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
Operations From
Inception of the
Development Stage
For The
Years Ended June 30, April 1, 1994 to
1997 1996 1995 June 30, 1997
-------------- ----------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(705,684) $(1,080,885) $(2,206,902) $(4,184,298)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, amortization
& valuation allowance 19,470 1,685,638 1,736,814
Gain on sale of real estate and easement 26,112
Issue of stock for services 33,325
Issue of stock in payment of interest 5,373 5,373
Loss on disposal of oil & gas assets 458,227 458,227
Write-down of predevelopment costs for abanded projects 303,514 303,514
Minority interest in current operations of subsidiary (17,137) (6,088) (712)
Change in assets and liabilities:
Decrease (increase) in accounts receivable 7,121 8,965 46,418 48,305
Decrease in interest receivable 42,750
Decrease in prepaid expenses 5,725
Increase (decrease) in accounts payable and
accrued expenses 178,776 98,696 (39,234) 258,444
Decrease in current income taxes payable (16,000) (16,000)
Decrease in interest payable (575) (10,214)
Decrease in deferred income taxes payable (54,000) (60,000)
(Decrease) increase in other loans payable 224 (2,279) 3,921 1,866
----------------- ---------------- --------------- ----------------
Net cash used by operating activities (519,563) (211,429) (581,449) (1,350,769)
------------- ------------ ------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of real estate 8,303
Acquisition of Bucaneros purchase rights (1,050,000) (1,050,000)
Capitalized real estate predevelopment costs (1,051,380) (747,000) (701,577) (2,499,957)
Capitalized oil & gas development costs, net of dry hole costs (23,495)
Payment for property and equipment 60,346
Acquisition of Ensenada concession rights (494,000) (494,000)
--------------------- ------------- ----------------------------------
Net cash (used) provided by investing activities (1,051,380) (1,241,000) (1,751,577) (3,998,803)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES:
Additions to debt:
Short-term 1,533,645 1,118,486 1,340,300 3,993,311
Long-term 370,500 1,000,000 1,370,500
Payments on debt:
Short-term (50,000) (30,875)
Decrease in short-term loans from officer (10,338)
--------------------- ----------------------------------------------------
Net cash provided from financing activities 1, 533,645 1,488,986 2,290,300 5,322,598
---------------- ----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH (37,298) 36,557 (42,726) (26,974)
CASH AT BEGINNING OF YEAR 38,173 1,6116 44,342 27,849
---------------- ------------------------------ ---------------
CASH AT END OF YEAR $875 $38,173 $1,616 $875
=============== ============= ============= ===============
Taxes paid during the year $0 $0 $3,981 $7,962
================================================== ==============
Interest paid during the year $0 $0 $5,373 $69,352
================================================== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE> 35
29
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30, 1997, 1996 and 1995
SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In fiscal year ended June 30, 1994 the Company issued a total of 66,648 shares
of its stock at $.50 per share for various legal and consulting services.
In fiscal year ended June 30, 1994 the Company sold 5 acres of land for $500,000
which consisted of $100,000 down payment applied directly to company debt and
the balance in the form of a real estate contract in the amount of $400,000. On
May 31, 1995 the Company used the above real estate contract, plus accrued
interest, and approximately 18 acres of land located in Centerville, Ohio to
retire all the outstanding debt of the Company to its affiliates which totaled
$847,160.
On August 10, 1994 a note receivable held by the Company in the amount of $112,
941 was exchanged for the assumption, by International Mortgage and Guaranty Co.
(IMG), of various of the Company's obligations to IMG and other creditors.
In fiscal year ended June 30, 1994 the Company exchanged and forgave the debt of
B.M. Woods in the amount of $49,974. B.M. Woods assumed Company liabilities for
overriding royalty fees payable in the amount of the debt.
In fiscal year ended June 30, 1995 the Company issued 205,373 shares to retire
$200,000 in advances payable to Doggart Trading, Ltd. and to pay $5,373 in
accrued interest at $1.00 per share. The Company also subscribed 1,225,300
shares to retire $1,225,300 in advances from Doggart Trading, Ltd., related to
Mexico real estate development costs.
In fiscal year June 30, 1995 the Company issued 3,000,000 shares of its stock at
$.67 per share in settlement of the acquisition price of $2,000,000 for the
purchase rights to the Los Bucaneros property.
In fiscal year ended June 30, 1996 the Company issued 2,000,000 shares, at $1.00
per share, to retire $1,225,300 of subscriptions from the prior year and to
retire $774,700 in advances payable to Doggart Trading, Ltd. for 1996. The
Company also subscribed 235,286 shares to retire $235,286 in advances from
Doggart Trading, Ltd., related to Mexico real estate development costs.
In fiscal year ended June 30, 1996 the Company issued 720,000 shares, at $.50
per share, as part of an acquisition agreement to acquire concession rights in
Ensenada (Note 2).
In June 1996 the Company issued 4,000,000 shares as part of the original
acquisition agreement for the Playas Palmeras property (Note 2). Since the
original transaction was treated as a reverse acquisition the value of these
shares issued is limited to the transferor's cost which was recorded in 1994.
Accordingly, these shares were issued at no additional book value to the
Company.
35
<PAGE> 36
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
(Continued)
On May 12, 1997 the shareholders approved a one for thirty reverse stock split
resulting in a decrease in common stock and increase in paid in capital of
$5,339,763.
During June 1997 the Company subscribed for issuance 789,920 shares, at $.50 per
share, to retire advances of $394,960 payable to Doggart Trading, Ltd. for 1997.
During June 1997 the company completed a renegotiation with sellers of 45% of
the Ensenada project to pay the acquisition price of $360,000 in cash rather
than with the Company's stock, as previously agreed. This resulted in an
increase in current liabilities and a reduction of shareholder equity of
$360,000.
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Organization - The Company was incorporated in the State of Idaho on
August 12, 1968 as Fourth of July Silver, Inc. and changed its name on August 8,
1983 to International Basic Resources, Inc. At this time the Company was engaged
in mining and development of basic metals and other natural resources. From
August 1983 to May 1996 the Company acquired land holdings, oil and gas leases
and a pipeline gathering facility. In April 1994 the Company decided to pursue
real estate acquisition and development in addition to its oil and gas and
mining operations. In May, 1996 the Company sold all of its oil and gas leases
and related pipeline gathering facilities. Subsequent to the sale the Company
had no operations and was focusing solely on real estate development. The
Company considers itself to be a development stage enterprise and considers the
inception of this development stage to be April, 1994, when it began its current
real estate and development activities. During 1997 the Company changed its name
from International Basic Resources, Inc. to International Resort Developers,
Inc.
Principles of Consolidation - The consolidated statements include the accounts
of International Basic Resources, Inc. and subsidiaries (Carson Industries
Corporation, Texas NGPP, Inc., Langer Holdings, Ltd. and Playas Palmeras, S.A.).
All significant intercompany accounts and transactions are eliminated.
Receivables - The Company expects to collect the full amount of its receivables.
There is no allowance for uncollectible accounts as of June 30, 1997.
36
<PAGE> 37
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment - Property and equipment are carried at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Major additions and betterments are capitalized.
Costs of maintenance and repairs which do not improve or extend the life of the
associated assets are expensed currently. When there is a disposition of
property and equipment, the cost and related accumulated depreciation are
removed from the accounts and any gain or loss is reflected in net income.
Depletion is computed using the unit-of-production method.
Exploration Costs - The Company uses the successful efforts method of accounting
whereby development costs, whether productive or nonproductive, are capitalized
and amortized using the unit-of-production method. All geological and
geophysical costs are expensed as incurred and all exploratory drilling costs
are initially capitalized and the cost of an unsuccessful well is charged to
expense when it is determined to be nonproductive.
Evaluation of Impairment of Oil and Gas and Mining Properties -
Proved oil and gas:
The Company periodically assesses the potential impairment of its proved oil and
gas properties by comparing the net capitalized cost to projected undiscounted
future net cash flows. The excess of net capitalized cost over projected
undiscounted future net cash flows is adjusted as a charge to current operations
through a valuation allowance offset to the respective assets.
Unproved oil and gas:
The Company periodically assesses the potential impairment of its unproved oil
and gas properties. Among the factors considered are drilling of a dry hole with
no firm plans to continue drilling or the approaching expiration of a lease
without commencement of drilling on the property or adjoining properties. If
impairment is determined to have occurred, a charge is made to operations
through a valuation allowance offset to the respective assets.
Mining property:
Exploration, acquisition and development costs of mining properties are
capitalized for properties with potential viable mineral reserves sufficient to
economically recover the capitalized costs. Exploration costs incurred which do
not lead to the discovery of potential viable general reserves are expensed.
When production is commenced, capitalized costs are depleted using the units of
production method. Net undepleted capitalized costs are compared to future
undiscounted net cash flows in evaluating impairment. If impairment has
occurred, a charge is made to operations through a valuation allowance offset to
the respective assets. There are currently no mining assets under development or
production.
37
<PAGE> 38
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Capitalized Real Estate Acquisition and Development Costs - Payments made by the
Company to obtain an option to acquire real estate are capitalized as incurred.
All other costs that are specifically identified with a project or property are
capitalized unless the acquisition or future development of the project is, or
becomes, improbable. Indirect project costs that relate to several projects are
capitalized and allocated to the projects to which the costs relate. Indirect
costs that do not clearly relate to project acquisition or development,
including general and administrative expenses, are charged to expense as
incurred.
Net Income Per Share - Earnings per share is computed using the weighted average
number of common shares outstanding during each period. Outstanding common stock
equivalents, consisting of shares under option and outstanding warrants, do not
have a significant dilutive effect on earnings per share. Any shares subscribed
but unissued at year end are included in the weighted average number of shares
outstanding for purposes of computing earnings per share. On May 12, 1997 the
shareholders approved a one for thirty reverse stock split. Earnings per share
computations have been retroactively computed giving effect for this event.
Development Stage Activities of Real Estate Segment - As discussed in Note 2,
the Company's stock ownership changed significantly during March, 1994. Since
April 1994 the Company has been in the development stage related to its real
estate acquisition and development activities through its wholly owned
subsidiary Langer holdings, Ltd. Operations related to real estate activities in
the development stage are as follows:
The Company has undertaken acquisition and development of the Playas Palmeras
and Bucaneros Properties discussed in Note 2. The Company also incurred
predevelopment costs associated with certain properties in the Yucatan and
Campeche area of Mexico it intended to jointly develop with DSC, S.A. de C.V.
(DSC) during 1995. During 1996 these projects were abandoned and the related
capitalized predevelopment costs of $303,514 were expensed.
On December 14, 1995 the Company entered into an agreement to effectively
acquire the concession rights to build and operate a cruise ship terminal and
marina village at the harbor in Ensenada, Baja California, Mexico.
In May 1996 the Company sold all of its oil and gas leases and related pipeline
gathering facilities. Subsequent to this sale the Company had no operations and
focused solely on the real estate development. The Company considers itself to
be a development stage enterprise and considers the inception of this
development stage to be April 1994, when it began its current real estate and
development activities.
38
<PAGE> 39
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
During August 1997 the company sold all of its rights to develop and operate its
Ensenada project to an unrelated third party for $5,150,000 (Note 2).
Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid instruments with an initial maturity of
three months or less to be cash equivalents. The Company had no cash equivalents
at June 30, 1997, 1996 and 1995.
Use of Estimates in the preparation of Financial Statement Amounts - The process
of preparing financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions regarding
certain types of assets, liabilities, revenues and expenses. Such estimates
primarily relate to unsettled transactions and events as of the date of the
financial statements. Accordingly, upon settlement, actual results may differ
from estimated amounts.
Reverse Stock Split -On May 12, 1997 the Company's shareholders approved a one
for thirty stock split. The notes to the financial statements related to periods
prior to this action have not been retroactively restated to reflect the effect
of this change.
NOTE 2--LAND HELD FOR DEVELOPMENT AND RESALE
During March 1994, the Company entered into an acquisition agreement with
Doggart Trading, LTD, a Grand Cayman, B.W.I. Corporation (Doggart) to acquire
its 100% interest in Langer Holdings, LTD. (Langer) and Langer's 99% owned
subsidiary Playas Palmeras, S.A. (Playas) in exchange for 33,000,000 common
shares of the Company being issued to the shareholders of Doggart. The agreement
also includes a commitment to issue an additional 4,000,000 shares of the
Company when the board of directors approves an increase in the authorized
shares of the Company in an equal or greater amount. In April 1996 the
authorized shares were increased and the additional 4,000,000 shares were
issued.
Playas is a Mexican corporation which owns fee simple title to two parcels of
land situated within the Municipality of Champoton, State of Campeche, Yucatan
Peninsula, Mexico. The Company acquired directly the additional 1% interest in
Playas at the date of closing. The property held by Playas is described as
approximately 8.5 miles of unimproved beach property located along the Gulf of
Mexico.
The Company's obligation, under its acquisition agreement with Doggart, to issue
33,000,000 shares, as above referenced, was conditioned upon the obligation of
Doggart to obtain and furnish to the Company an appraisal of the property
indicating appraised value of no less than $10,000,000 U.S. Since the
transaction resulted in the shareholders of the transferor (Doggart) receiving
approximately 71% of the shares of the Company as consideration, the transaction
is considered to be a reverse acquisition. Accordingly, the Playas land is
valued at the transferor's cost, which at June 30, 1994 was $80,321.
39
<PAGE> 40
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 2--LAND HELD FOR DEVELOPMENT AND RESALE (Continued)
During May 1995 the Company purchased the acquisition right to approximately 3.5
miles of contiguous unimproved beach property known as Los Bucaneros. The
Company assumed the seller's underlying debt of $1,050,000 and issued 3,000,000
shares of stock at $.67 per share for a total acquisition price of $3,050,000.
During May, 1995, $50,000 was paid by the Company for the matured portion of the
note payable assumed. The balance of $1,000,000 is payable on May 24, 1998 (Note
5).
On December 14, 1995 the Company entered into an agreement to effectively
acquire the concession rights to develop and operate a cruise ship terminal and
marina village at the harbor in Ensenada, Baja California, Mexico. The
acquisition price was $854,000 which the Company agreed to pay with subscribed
shares of stock for $360,000 at $.50 per share and an obligation to pay the
balance of $494,000 in cash or with shares at the option of the sellers. The
sellers exercised their right to receive cash and have agreed to be paid in
twelve equal principal installments starting April 1, 1997 plus interest at 8%
(Note 5). These payment terms were renegotiated with the sellers and the Company
during June 1997. The new terms called for all $854,000, plus accrued interest
from the date of sale, to be paid in cash. During August 1997, subsequent to the
sale of the Ensenada project by the Company, this obligation was paid by the
Company including accrued interest of $91,093.
NOTE 3--MINING PROPERTY
The mining property consists of:
a) A contiguous group of twenty-one (21) unpatented mining claims situated
in the St. Joe Mining District, Shoshone County, Idaho;
b) A multi-year leasehold interest on the Daddy Lode mining claims, and
ownership of the Mother Lode patented mining claims situated in the
Summit Mining District, Shoshone County, State of Idaho, together with
fee ownership of certain unpatented mining claims contiguous to the
Mother Lode property, all of which are of interest to the Company for
purported gold potential. In May 1989, the Company executed a
lease/joint venture contract with Newmont Exploration Company for the
entire Mother Lode and Daddy Lode group of patented and unpatented
mining claims in Shoshone County, Idaho. Newmont subsequently
reassigned all the Mother Lode and Daddy Lode group properties to the
Company. The Company started to develop the vein found by Newmont in
June 1990 by contracting General Mine Services Corp. to work on this
property. Work has since been suspended on this property until
additional funding for development can be obtained.
40
<PAGE> 41
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 4--PIPELINE AND PIPELINE EQUIPMENT
On April 22, 1985, the company purchased a six (6) mile pipeline gathering
facility. The facility serves the oil and gas properties acquired by the
company. These assets were sold during May 1996 as part of the Company's
disposal of its oil and gas operations.
NOTE 5--CURRENT DEBT
Current debt of the Company at June 30, 1997 consist of the following:
<TABLE>
<S> <C>
Deed of Trust payable to Granjas Los Bucaneros to
complete the acquisition of 3.5 miles of beach-front
property which is adjacent to the Company's property
known as Playas Palmeras (Note 2). During 1997 the
Company obtained a one year extension of its due date
for this debt. The balance is due May 24, 1998. If
the Company does not make this payment it may lose
its rights to acquire and develop this property and
would realize a reduction of shareholder equity of
approximately $2,000.000. $1,000,000
Note payable to the sellers of the Ensenada
Project (Note 2). This note is payable in twelve
equal principal payments starting April 1, 1997
plus interest at 8%. This note was renegotiated
during June 1997 and paid, plus accrued interest
of $91,093, during August 1997 (Note 2). 854,000
Advances payable to Hugh Downey, interest at 6%
payable on demand, secured by all assets of the
Company. These advances, plus accrued interest
of $34,200 and a loan fee of $200,000, were paid
during August 1997 by the Company. 1,017,430
Advances payable to Doggart Trading, Ltd.,
interest at 6% payable on demand, unsecured. 121,255
Other advances payable 7,799
----------
Total Current Debt $3,000,484
==========
</TABLE>
41
<PAGE> 42
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 5--CURRENT AND LONG-TERM DEBT (Continued)
In settlement of a long-term debt in May 1994, to an affiliated company, the
Company agreed to a 6 1/4% overriding revenue interest from all future income
from oil and gas properties developed or purchased with the proceeds of the
debt. The overriding revenue interest continues through the life of the
production of these properties. Royalties paid to the affiliate were $0, $4,203
and $4,084 for the years ended June 30, 1997, 1996 and 1995, respectively. As
part of the sale of its oil and gas operations during May 1996 (Note 1) all
royalty obligations of the Company were assumed by the buyer.
NOTE 6--RELATED PARTY TRANSACTIONS
Mr. M.K. Miller, past President of International Basic Resources, Inc., was a
member of the immediate family of the principal shareholders of B.M. Woods, Inc.
which owns 100% of Inland Mortgage Guaranty Company, Inc. (Inland). Inland made
loans to the Company for the development of its oil and gas interests, receiving
an overriding revenue interest in future production from properties developed
with the debt. The debt, in addition to additional accrued obligations of
$104,515, was retired in May 1994 through the transfer to Inland of a $400,000
note receivable, together with accrued interest of $7,216, and certain
undeveloped residential real estate with a cost of $428,108 (Note 5).
As discussed in Note 2, the Company purchased certain undeveloped real estate in
Mexico from Doggart with approximately 71% of its common stock in June, 1994.
Doggart had advanced the Company $150,000 by June 30, 1994, with interest at 7%,
payable December, 1994. During September 1994, Doggart agreed to convert this
debt of the Company into common shares at $1 per share. During the year ended
June 30, 1995 Doggart advanced an additional $1,290,300 and received shares
totaling 205,373 shares to retire $200,000 of advances plus accrued interest of
$5,373. During the year ended June 30, 1996 additional shares totalling
1,225,300 and 774,700 have been issued at $1.00 per share to retire $2,000,000
in advances. At June 30, 1996 shares totalling 235,286 have been subscribed at
$1 per share to retire an additional $235,286 in advances. During 1997 an
additional 789,920 shares were subscribed at $.50 per share to retire $394,960
in advances during 1997. Additional 1997 advances of $121,255 have not been
retired as of June 30, 1997 (Note 5).
NOTE 7--PROVISION (CREDIT) FOR INCOME TAX
The Company does not file a consolidated income tax return. Each corporation in
the group files a separate return. Thus the tax benefits from net operating loss
deductions and general business credit carryovers are limited to the separate
returns of the respective corporations.
42
<PAGE> 43
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 7--PROVISION (CREDIT) FOR INCOME TAX (Continued)
The components of the provision (credit) for income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- --------
<S> <C> <C> <C>
Current
Federal $-- $-- $ (8,000)
State -- -- --
--- --- --------
Total current provision -- -- (8,000)
Deferred
Federal -- -- (54,000)
State -- -- --
--- --- --------
Total deferred provision -- -- (54,000)
Total provision (credit)
for income taxes $-- $-- $(62,000)
=== === ========
</TABLE>
The reconciliation of the income tax (provision) expense at the statutory rate
to the effective rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ----------------------- ---------------
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Federal taxes (credit)
at the statutory rate $(240,000) (34.0)% $(367,500) (34.0)% $(771,000) (34.0)%
Additional deferred tax
assets providing no
tax benefit 240,000 34.0% 367,500 34.0 535,000 23.6
NOL of subsidiaries
providing no tax
benefit - - - - 231,000 10.2
NOL carryover of
subsidiary utilized
in the current year - - - - (57,000) (2.5)
Other - - - - - -
--------------- ------------------------- -------- ----------------- -----
$ - - % $ - - % $(62,000) (2.7)%
============== ========= =============== ======== ========= ======
</TABLE>
43
<PAGE> 44
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 7--PROVISION (CREDIT) FOR INCOME TAX (Continued)
The approximate tax effect of each type of temporary difference comprising the
deferred taxes payable balance is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Notes receivable reported on installment
method for tax purposes $ - $ - $ -
Net operating loss carry forward subject
to separate company limitations - - -
Other - - -
----------- ----------- ----------
$ - $ - $ -
========== ========== ==========
</TABLE>
For financial reporting purposes, a valuation allowance of $1,142,500 has been
deducted for the full amount of the deferred tax asset resulting from the
Company's net operating loss carryforwards noted below as it was determined that
there is limited probability for the deferred tax asset to be realized at this
time.
The items of carryover remaining, for the separate corporations, for which no
tax benefit has been provided are as follows:
<TABLE>
<CAPTION>
International Carson Texas
Basic Industries NGPP,
Resources Corporation Inc.
--------- ----------- ----
<S> <C> <C> <C>
Net operating loss $2,224,000 $1,475,000 $7,600
Capital loss - 142,000 -
General business credit - 12,000 16,000
</TABLE>
The net operating losses above expire beginning in 1999. The capital loss carry
forward of Carson Industries Corporation expires in 1997. The general business
credit of Carson Industries Corporation expires in 1998 and of Texas NGPP, Inc.
in 2000.
NOTE 8--MINORITY INTEREST IN SUBSIDIARY
The minority interest in subsidiary represents interests of outsiders (29.66%)
in the stock of Carson Industries Corporation.
44
<PAGE> 45
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 9--INVESTMENT IN UNCONSOLIDATED COMPANIES
The Company owns 100 shares of Investmark stock. The investment in this
unconsolidated company is presented by the Company at a cost of $10,000.
NOTE 10--ARTICLES OF INCORPORATION AMENDED
On March 22, 1993 the Company's articles of incorporation were amended to
increase the authorized capital of the Company from 20,000,000 to 50,000,000
common shares, par value $0.10 per share, with rights and privileges of the
common shares remaining the same. On January 8, 1996 the Company again amended
its articles of incorporation to increase the authorized capital of the Company
from 50,000,000 to 100,000,000 common shares.
NOTE 11--GAIN ON SALE OF ASSETS
The gain on sale of assets for fiscal year June 30, 1994 consists of the gain on
sale of 5 acres of Centerville, Ohio real property. The total sales price was
$500,000 consisting of a $100,000 down payment applied directly to Company debt
and the balance in the form of a real estate contract receivable.
NOTE 12--EXECUTIVE COMPENSATION AND INCENTIVE STOCK OPTION PLAN
<TABLE>
<CAPTION>
6/30/97 6/30/96 6/30/95 6/30/94
Principal Salary- Salary- Salary- Salary-
Position Fees Fees Fees Fees
- -------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
M.K.Miller - Past Chairman $ - $16,000 $48,000 $48,000
Alton E. Jones - Past President/Chairman 147,400 186,000 117,000
Nigel Spinks - Consultant - - 72,000
David P. Lawrence - Consultant 48,000 13,500 70,000
Steven Barker - Vice President- 60,000 47,000
Ensenada Cruiseport Village
Francis Cobb - Past Secretary 39,050 106,000
</TABLE>
In addition to the compensation presented above, on April 19, 1996 the Company
adopted the International Basic Resources, Inc. 1996 Incentive Stock Option Plan
whereby the Company reserved 10,000,000 shares of its common stock for use in
granting stock options to officers and key employees.
45
<PAGE> 46
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 12--EXECUTIVE COMPENSATION AND INCENTIVE STOCK OPTION PLAN (Continued)
At that same date options to acquire stock were granted as follows:
<TABLE>
<CAPTION>
Number of Exercise Date Options
Shares Under Price Option Exercised
Recipient Option Per Share Expires To Date
- --------- ------ --------- ------- -------
<S> <C> <C> <C> <C>
Alton E. Jones 3,000,000 $0.359 4/18/2006 None
Francis H. Cobb 1,500,000 0.359 4/18/2006 None
Stephen Barker 750,000 0.359 4/18/2006 None
</TABLE>
The option price of $0.359 was determined based upon the NASDAQ trading share
price at the date the options were granted. As part of their employment
termination agreements with the Company all of the above employees agreed to
relinquish their options to acquire stock. Accordingly, at June 30, 1997 there
were no outstanding granted options to acquire the Company's stock.
NOTE 13--COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
The Company concluded its litigation related to the 1,000,000 shares issued to
Advanced Capital Services Corporation on August 21, 1995. The Company received a
default judgement against Advanced Capital which rescinded the issuance of the
shares and authorized the Company to seek further monetary damages at its
discretion.
During the year ended June 30, 1996, Doggart agreed to convert the current debt
of the Company to Doggart into common shares at $1 per share and at $.50 per
share for 1997. As of June 30, 1996, 235,286 shares of the Company's stock are
subscribed for this purpose and as of June 30, 1997 an additional 789,920 of its
stock is subscribed to retire $394,960 of advances from Doggart during 1997.
The Company and its Officers have been named in a lawsuit which alleges
violations of federal securities laws related to the transactions discussed in
Note 14. The plaintiffs consider their claim to be worth $4,000,000 and have
made demands for settlement at $800,000. The Company, and its trial counsel,
believe the plantiffs claim to be without merit and its current demands for
settlement unacceptable. The Company and its Officers deny involvement in the
identified transactions. Management has indicated its willingness to entertain a
settlement through the issuance of shares to the plaintiffs, in order to resolve
the matter without further expenses of litigation.
46
<PAGE> 47
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 13--COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS (Continued)
The Company has been named in a civil action regarding claimed fraudulent
inducements offered to the plantiffs by the Company, and its officers, to
acquire shares of the Company. The plantiffs claim damages of $1.5 million. The
plantiffs have filed suit but no other significant discovery or legal evaluation
has been performed. The Company's counsel is unable to indicate the likelihood
of an outcome at this time.
The Company is in dispute with two firms claiming to have provided services to
the Company totaling $242,000. These are unasserted claims that the Company has
not included in expenses or as a liability on its financial statements.
Management does not believe that these amounts are properly due and owing and
intends to vigorously defend its position if lawsuits are filed.
The Company incurred net losses of $705,684, $1,080,885 and $2,206,902 for the
years ended June 30, 1997, 1996 and 1995, respectively. At June 30, 1997 the
Company's current liabilities exceed its current assets by $3,313,260. In order
to retain its right to acquire the Bucaneros property the Company will need to
make timely debt payments (Note 5). Failure to do so may require the Company to
write off approximately $2,000,000 of equity in this asset. The Company is in
the process of completing an acquisition of business assets from Growth
Strategies, Inc. (GSI) . These assets are primarily related to the sales,
installation and distribution of satellite dishes and various programming to
residential customers. The Company believes it will generate cash flow and
operating income from this new venture. The Company has no current revenues,
consistent sources of cash flow or operations. The Company anticipates
generating cash flow from development of productive operations of its proposed
asset acquisition and development for resale of its land located in Campeche,
Mexico. Both of these ventures are expected to require obtaining sources of
working capital and long-term development capital. Completion of the acquisition
of the GSI assets is contingent upon shareholder approval at the next annual
meeting.
47
<PAGE> 48
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
NOTE 14--SHARES REMOVED FROM TRUST
An executive committee meeting held October 15, 1992 resolved that M.K. Miller
(then President of IBR) be issued stock of the Company to place into trust, for
the benefit of the corporation, the amount of stock he feels necessary to
complete one or more purchases in the future, and to use said stock for any and
all corporate purposes and hold said stock in his name as trustee. As a result
of the above resolution 6,830,000 shares of IBR stock were placed in trust by
M.K. Miller.
On February 8, 1993 the Company entered into an agreement with Advance Capital
Services Corporation whereby the Company issued 1,000,000 shares of the above
referenced stock held in trust to Advance for certain oil and gas interests.
Advance failed to perform and/or deliver any consideration. On April 15, 1993
the agreement was rescinded. Advance was ordered to return the 1,000,000 shares.
The uniss ued 5,830,000 shares held in trust were returned to the Company by
M.K. Miller during 1994.
48
<PAGE> 49
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULES
The Board of Directors
International Resort Developers, Inc.
Nashville, Tennessee
Our report dated October 10, 1997 on the financial statements of International
Resort Developers, Inc. is included in the Form 10-KSB and covers the financial
statements for June 30, 1997, 1996 and 1995, listed under Item 7 of this Form
10-KSB.
In our opinion, the financial statement schedule for the year ended June 30,
1997, 1996 and 1995, referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly the information required
to be included therein.
LaVoie, Clark, Charvoz & May, P.C.
Tucson, Arizona
October 10, 1997
49
<PAGE> 50
INTERNATIONAL RESORT DEVELOPERS, INC.
FOR THE YEAR ENDED JUNE 30, 1997
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Projects
Subsequent Capitalized Costs Abandoned Carrying
Encumb- Initial FYE FYE FYE FYE Amount @ Accumulated
Description rances Cost 6/30/95 6/30/96 6/30/97 6/30/96 June 30, 1997 Depreciation
- ----------- ---------- ---------- -------- -------- ---------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
8.5 miles of land
in Campeche,
Mexico - Playas
Plameras $ 0 $ 80,321 $164,739 $ 0 $ 0 $ 0 $ 245,060 $ 0
3.5 miles of land
in Campeche,
Mexico - Los Bucaneros 1,000,000 3,050,000 47,0002 3,097,002
Ensenada project 854,000 854,000 186,322 747,000 1,051,380 2,838,702
Isla Del Carmen projects (3) 183,312 (183,312) 0
Other Yucatan projects (3) 90,150 (90,150) 0
Acapulco project 30,052 (30,052) 0
---------- ---------- -------- -------- ---------- --------- ---------- ----
Balances at June 30, 1997 $1,854,000 $3,984,321 $701,577 $747,000 $1,051,380 $(303,514) $6,180,764 $ 0
========== ========== ======== ======== ========== ========= ========== ====
<CAPTION>
Depreciation
Date of Date Life/
Description Construction Acquired Method
- ----------- ------------ ---------- ------------
<S> <C> <C> <C>
8.5 miles of land
in Campeche,
Mexico - Playas
Plameras n/a June 24, 1994 n/a
3.5 miles of land
in Campeche,
Mexico - Los Bucanero n/a May 24, 1995 n/a
Ensenada project n/a December 14, 1995 n/a
Isla Del Carmen projects (3) n/a Abandoned n/a
Other Yucatan projects (3) n/a Abandoned n/a
Acapulco project n/a Abandoned
Balances at June 30, 1997
</TABLE>
50
<PAGE> 51
PART III
MEMBERS OF BOARD OF DIRECTORS
Directors
<TABLE>
<CAPTION>
NAME AND AGE TERM PERIOD SERVED OTHER POSITIONS HELD
AS MEMBER OF BOARD WITH BUSINESS
OF DIRECTORS OF COMPANY EXPERIENCE
COMPANY
<S> <C> <C> <C> <C>
Patrick J. Magee Until next meeting 02/08/97 to present President, CEO and **
Age: 52 of shareholders Chief Financial
Officer of Company,
02/08/97 to present;
President and member
of Board of
Directors of Playas
Palmeras, S.A.,
4/01/97 to present.
Pieter G.K. Oosthuizen Until next meeting 03/29/97 to present Chairman of the **
Age: 65 of shareholders Board of Directors
of Company, 3/29/97
to present.
Patrick Lappin Until next meeting 5/12/97 to present N.A. **
Age: 46 of shareholders
</TABLE>
**See description of business experience during the past five years on pages
following.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME POSITIONS HELD PERIOD SERVED BUSINESS
AND WITH COMPANY AS SUCH EXPERIENCE
AGE
<S> <C> <C> <C>
Patrick J. Magee President, CEO, Chief 02/08/97 to present
Age: 52 Financial Officer, and member
of Board of Directors of
Company;
President and member of Board 04/01/97 to present
of Directors of Playas
Palmeras,
S.A.
Pieter G.K. Oosthuizen Chairman of the Board of 3/29/97 to present
Age: 65 Directors of Company and
Secretary of
Company.
</TABLE>
**See description of business experience during the past five years in pages
following.
Officers of the Company serve at the pleasure of the directors.
51
<PAGE> 52
Business Experience.
Patrick J. Magee is an entrepreneur whose particular experience is in
construction and development, project finance, and mortgage banking and
placements. His principal activities during the past five years have been the
development and funding of two shopping centers in Ireland, as well as mortgage
banking and placements. Mr. Magee is a resident of Ireland. He is also the
President and sole shareholder of Doggart Trading, Ltd., a substantial
shareholder of the Company.
Pieter G.K. Oosthuizen is currently Vice Chairman of WEBCO Europe S.A.,
a private European investment company headquartered in Luxembourg, Europe.
During the previous five years, he has also served as the Managing Director of
Euro-Hexagon S.A., a private European investment company located in Luxembourg,
as Managing Director of Infe Ltd., a private investment and financial
engineering consulting group located in London, England, and as a financial
advisor to a number of international companies. Over the past thirty-five years,
Mr. Oosthuizen has held numerous executive positions with major banking
institutions, including Citibank, where between 1967 and 1974 his positions
included Vice President in charge of International Operations and
Administration, International Banking Group, New York, and Vice-President,
Product Management Division, Corporate Banking Group, New York.
Patrick Lappin holds a Bachelor of Science degree in Civil
Engineering in Great Britain, and has been a resident of the United States since
1986, during which time he has worked as part of managing agent/contractor teams
in the construction of several major commercial buildings, including the New
Paul Getty Museum and Disney Concert Hall.
Involvement in Legal Proceedings. During the past five years, none of
the following events occurred which are material to an evaluation of the ability
or integrity of any director, person nominated to become a director or executive
officer of the Company:
(1) Any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
(2) Any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Being subject to any order, judgment, or decree, not
52
<PAGE> 53
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; and
(4) Being found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment has
not been reversed, suspended, or vacated.
Section 16(a) Beneficial Ownership Reporting Compliance
The following persons, as beneficial owners of more than ten percent of
the common stock of the Company, or as officers or directors of the Company,
have failed to file Forms 3, specifying their beneficial ownership, or Forms 4
or 5, respecting changes in beneficial ownership: Patrick Magee, Pieter
Oosthuizen, Patrick Lappin, and Doggart Trading, Ltd.
ITEM 10. EXECUTIVE COMPENSATION.
Compensation of Chief Executive Officer and all other individuals whose
compensation exceeded $100,000 during the Company's fiscal year ended June 30,
1997:
SUMMARY COMPENSATION TABLE
A. Annual Compensation
<TABLE>
<CAPTION>
Name and Fiscal Salary Bonus Other Annual
Principal Year Compensation
Position End
<S> <C> <C> <C> <C>
Patrick Magee 6/97 0 0 0
Chief Executive
Officer, 2/8/97
to present
Alton E. Jones 6/97 $147,400(1) 0 0
President and
Chief Executive
Officer, 1/08/96
to 1/31/97 6/96 $186,000(1) 0 0
6/95 $117,000(1) 0 0
</TABLE>
53
<PAGE> 54
(1) Mr. Jones' compensation was paid to Armada, Inc., a real estate
management and consulting firm wholly owned by Mr. Jones and of which Mr. Jones
was President.
In addition to the compensation set forth above, the Company paid for
suitable lodging and transportation for the above-named individuals while in
Mexico.
B. Options
There are no outstanding options granted by the Company, nor were any
options to acquire shares exercised during fiscal 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Management has been advised that the following are the beneficial
owners of more than 5% of the Company's common stock (which is the only
outstanding class of stock), as of September 30, 1997. In certain regards, these
holdings differ from the amounts indicated on records of the transfer agent of
the Company, as described in more detail in footnotes 1 and 3 below, and to that
extent cannot be verified by the Company.
<TABLE>
<CAPTION>
Title of Class Name and Address Amount and Percentage
of Beneficial Nature of of Class
Owner Beneficial
Ownership
(shares)
<S> <C> <C> <C>
Common Inland Mortgage 227,033 12.6
& Guaranty
Company, Inc.(1)
1929 Westgate Road
Springfield, OH 45504
Common Gerald Carden 143,333 7.9
417 Lynnwood Drive
Nashville, TN 37205
Common Doggart Trading,Ltd.(2)(3) 196,017 10.6
5th Floor
Anderson Square Building
Georgetown, Grand Cayman
Cayman Islands, B.W.I.
Common Patrick J. Magee (4) 196,017 10.6
49 Botanic Avenue
Belfast, Ireland BT7-1JL
</TABLE>
54
<PAGE> 55
(1) The records of the transfer agent indicate that Inland Mortgage &
Guaranty Company, Inc. is the owner of 127,033 shares. However, the Company has
been informed by Inland Mortgage & Guaranty Company, Inc. that its beneficial
ownership is as shown in the table. The Company has also been informed that
Inland Mortgage & Guaranty Company, Inc. is a wholly owned subsidiary of B.M.
Woods, Inc., a company owned (one-third each) by Bryan D. Miller (a former
member of the Board of Directors of International Resort Developers, Inc.),
Michael Miller and Stephen Miller, who are the children of M.K. Miller, former
Chairman of the Board of Directors of International Resort Developers, Inc.
(2) It is reported to the Company by Patrick J. Magee, President and
CEO of the Company, that at present he is the sole beneficial owner of Doggart
Trading, Ltd.
(3) Doggart Trading, Ltd. is the owner of record of 140,179 shares, but
is the beneficial owner of 21,667 additional shares held in street name.
Furthermore, the Company has the obligation to issue 34,171 additional shares to
Doggart Trading, Ltd. in satisfaction of advances made by Doggart Trading, Ltd.
during fiscal years ended June 30, 1995 and June 30, 1996, as well as the first
two quarters of fiscal year ended June 30, 1997. The shares have not yet been
issued, but are included in the total of shares shown for Doggart.
(4) These are the same shares shown in the table as owned by Doggart
Trading, Ltd. Patrick J. Magee, President and CEO of International Resort
Developers, Inc., has informed the Company that he is the sole shareholder of
Doggart Trading, Ltd.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Doggart Trading, Ltd., ("Doggart"), a substantial shareholder, has
advanced funds to the Company. since February of 1994, in the total amount of
$1,601,501, $516,215 of which was advanced during the fiscal year ended June 30,
1997. Of these advances, $1,480,246 has been converted into and/or agreed to be
converted into 62,685 shares of the Company, in satisfaction of said advances.
28,512 of those shares have been issued to date. The advances have not borne
interest, except for interest of $5,373 which was accrued on $200,000 of said
advances. Outstanding advances of Doggart, in the amount of $121,255, which have
not been agreed to be converted into stock, do not bear interest.
55
<PAGE> 56
Allan Ferguson, President and a director of the Company between June 1,
1995 and December 31, 1995, and Chairman and a director of Playas Palmeras, S.A.
between March 1, 1994 and December 31, 1995, was the President and a director of
Doggart Trading, Ltd. between March 1, 1994 and December 31, 1995. Nigel Spinks,
a director of the Company between July 15, 1994 and May 31, 1995, a director of
Playas Palmeras, S.A. between March 1, 1994 and December 31, 1995, and a current
director of Langer Holdings Ltd., was a director of Doggart between March 1,
1994 and December 31, 1995.
In May, 1995 the Company entered into a contract with Dardell
International Limited ("Dardell") to purchase approximately 3.5 miles of
unimproved beach-front property in the State of Campeche, Mexico, adjacent to
the northeast to the Company's 8.5 miles of coastal property acquired in June,
1994 from Doggart Trading, Ltd. The Company acquired Dardell's contract right to
purchase the said property for $2,000,000 payable to Dardell, which was
satisfied by the issuance of 3,000,000 shares of the Company's stock to Dardell.
Dardell was the owner of 100% of the real estate purchase contract. The said
shares were issued and delivered to Dardell, causing Dardell to become the owner
of more than a 5% interest in the Company. The Company has been informed that
Dardell subsequently disposed of its shares of stock in the Company. The
contract acquired by the Company required a payment to the owners of the
property in the amount of $1,050,000, with $50,000 due on or before May 29, 1995
and $1,000,000 due on or before May 24, 1997 (subsequently extended to May 24,
1998).
David Lawrence, a Vice President of Playas Palmeras, S.A. until June,
1996, and currently a retained consultant to the Company, owned a 5% interest in
each of the Mexican corporations (ENT and TMN) acquired by the Company in
December, 1995, in connection with the Company's acquisition of its concession
rights in Ensenada, Mexico. (See Item 1). Accordingly, he is one of the
shareholders of said corporations to whom the Company is was obligated and made
payments in connection with the acquisition of the shares of those corporations
by the Company.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
The following are filed as a part of this report.
1. Audited consolidated balance sheets of Registrant, as of June 30, 1997, June
30, 1996 and June 30, 1995; consolidated statements of operations for fiscal
years ending June 30, 1997, June 30, 1996, June 30, 1995 and June 30, 1994;
consolidated statements of cash flows for fiscal years ending June 30, 1997,
56
<PAGE> 57
June 30, 1996, June 30, 1995 and June 30, 1994; and cumulative cash flows from
inception of the development stage (April 1, 1994 to June 30, 1997);
consolidated statement of changes in stockholders' equity from July 1, 1993
through June 30, 1997; notes to financial statements; and audit report of La
Voie,
Clark, Charvoz & May, P.C. for the fiscal years ended June 30, 1995, June 30,
1996 and June 30, 1997. (See Item 7)
2. Schedules to Financial Statements (Schedule III, Real Estate and Accumulated
Depreciation) (See Item 7).
There were no Forms 8-K filed during the last quarter of the fiscal year
ending June 30, 1997.
4. The following exhibits: See Exhibit Index
57
<PAGE> 58
EXHIBIT INDEX
10.1. Stock Purchase Agreement, dated July 19, 1997, between International
Resort Developers, Inc. and ICTSI International Holdings Corp. (Incorporated by
reference from Form 8-K, filed July 30, 1997) (Reg. S-B, Section 601(b)(10)).
10.2. Agreement dated 29 September, 1997, between International Resort
Developers, Inc., "The WLC Shareholders", Growth Strategies, Inc., Samuel B.
Watson, Park Investments Limited, and Ameristar Worldwide Entertainment
Corporation (Reg. S-B, Section 601(b)(10)).
10.3. Agreement dated 29 September, 1997, between Park Investments Limited
and International Resort Developers, Inc. (Reg. S-B, Section 601(b)(10)).
21. Subsidiaries. (Reg. S-B, Section 601(b)(21)).
27. Financial Data Schedule. (Reg. S-B, Section 601(b)(27)).
58
<PAGE> 59
SIGNATURES
In accordance with Section 13 of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL RESORT DEVELOPERS, INC.
By: s/Patrick Magee
------------------------------------
Patrick Magee, President, Chief
Financial Officer and Director
Date: October 12, 1997
59
<PAGE> 60
SIGNATURES
In accordance with the Exchange Act, this report has been signed below
by the following person on behalf of the registrant and in the capacity and on
the date indicated.
Date: October 12, 1997 S/Patrick Magee
---------------------------------------
Patrick Magee, President, Chief
Financial Officer and Director
60
<PAGE> 61
SIGNATURES
In accordance with Section 13 of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL RESORT DEVELOPERS, INC.
By: S/Pieter Oosthuizen
---------------------------------
Pieter Oosthuizen, Chairman of
the Board and Secretary
Date: October 12, 1997
61
<PAGE> 1
EXHIBIT 10.2
Agreement dated 29 September, 1997, between International Resort Developers,
Inc., "The WLC Shareholders", Growth Strategies, Inc., Samuel B. Watson, Park
Investments Limited, and Ameristar Worldwide Entertainment Corporation.
<PAGE> 2
AGREEMENT
DATED: 29 SEPTEMBER 1997
PARTIES
1. INTERNATIONAL RESORT DEVELOPERS INC (incorporated in Idaho) of 2900, South
Rainbow Boulevard, Las Vegas, Nevada 89102 ("IRD")
2. THE PERSONS SPECIFIED IN THE SCHEDULE HERETO ("The WLC Shareholders")
3. GROWTH STRATEGIES INC ("incorporated in Nevada") of P.O. Box 27740, 5300 West
Sahara Ave, Suite 101, Las Vegas, Nevada 89126 ("GSI")
4. SAMUEL B WATSON OF 9412, Highwood Hill Road, Brentwood, Tennessee 37027,
contracting as a Trustee ("SW")
5. PARK INVESTMENTS LIMITED of 15, Hector Street, Herne Bay, Auckland, New
Zealand ("Park")
6. AMERISTAR WORLDWIDE ENTERTAINMENT CORPORATION ("incorporated in Arkansas) of
111, Center Street, Suite 1308, Little Rock, Arkansas (formerly called World
Lynx Communications Corp) ("WLC")
WHEREAS:
(1) By a contract dated August 25 1997 ("the Principal Contract") the WLC
shareholders agreed to sell to IRD and IRD agreed to buy all of the 1,000 issued
and outstanding shares in the capital of WLC in consideration of the issue to
the WLC Shareholders on closing of 1,685,539 shares in IRD credited as fully
paid ("the Basic Consideration Shares") and a further number of shares in IRD,
also to be credited as fully paid, on the basis of three thousand shares for
each thousand dollars of after tax profit earned by WLC during the years 1998
and 1999 ("the Earn-out Shares"). Final closing of the Principal Contract was to
be conditional upon approval by a general meeting of the shareholders of IRD.
(2) The Principal Contract contained provisions whereby the WLC Shareholders
warranted, inter alia, that all the accounting and financial information
relating to WLC disclosed to IRD was correct and comprehensive in all material
respects and IRD's obligation to close the Principal Contract was conditional
upon further due diligence by IRD.
(3) Previously to entry into the Principal Contract WLC had acquired from GSI
certain assets formerly forming part of a network marketing business operating
under the name Ameristar Worldwide Entertainment ("the Name") from premises at
1801, West End Avenue, Nashville, Tennessee, the assets acquired including all
rights to operate under and use the Name in verbal and logo form, all the trade
connections of GSI and arrangements with GSI's sales and
<PAGE> 3
distribution agents and sub-agents, the lease relating to the said premises
("the Lease"), the benefit of a purchase and distribution contract with
Echo-Star Communications Corp ("the Dish Contract"), all or any concepts, plans,
proposals, copyrights, designs, video tapes, computer programs of a proprietary
nature and intellectual property of any kind used in connection with said
business, and all of the assets scheduled to the acquisition contract ("the GSI
Contract") but not including inventory, cash and receivables (all of which
assets and rights are together referred to as "the Ameristar Assets") in
consideration of WLC:
(a) issuing to GSI 450 shares in its capital ("the WLC Consideration
Shares")
(b) giving to GSI a promissory note ("the Note") in the sum of $400,000
interest free but payable on demand
(c) paying to GSI a royalty of 21/2% of its net sales revenue (as
defined in the GSI Contract) in each year
In the GSI Contract WLC gave to GSI in connection with the issue of its shares
to GSI the like warranty to that given by WLC to IRD and referred to in Recital
(2) above.
(4) The GSI Contract closed on 22 August 1997 whereupon SW became the President
and CEO of WLC and WLC Consideration Shares were issued but on the direction of
GSI 150 of such shares were issued to SW as Trustee
(5) Park is the owner of all the issued capital of GSI
(6) Since the making of the Principal Contract IRD has advanced to WLC a total
amount of $650,000, of which $400,000 was utilized to pay the amount due on the
Note. The sum of $200,000 approximately now stands to the credit of an account
of WLC at Bank, West End Avenue, Nashville ("the Account"). No payments on
account of the above recited royalty have been made by WLC.
(7) It is accepted by all the parties hereto that discrepancies have arisen in
respect of the accounting and financial information concerning the affairs of
WLC disclosed by WLC to IRD and GSI and that while such discrepancies do not in
any way relate to the Ameristar Assets the conditionality of the Principal
Contract would not therefore be satisfied. Furthermore, given the circumstances
the directors of IRD would no longer be in a position to recommend to its
shareholders that they vote to approve the implementation of the Principal
Contract.
(8) In full settlement the parties have therefore agreed that their respective
rights and claims under the Principal Contract and the GSI Contract shall be
settled by the rescission thereof and the sale by Park of the issued share
capital of GSI to IRD on the terms set out herein and on the basis that GSI as
the owner (following such rescission) of the Ameristar Assets enters into a
covenant to pay to Park the like royalty which WLC agreed in the GSI Contract to
pay to GSI
<PAGE> 4
NOW IT IS HEREBY AGREED as follows:
1. The Principal Contract and the GSI Contract shall be and are hereby forthwith
rescinded for all purposes and shall be of no further effect and no party
thereto shall make any claim against any other party relating to or derived from
the terms thereof. As a result of the rescission of the GSI Contract the
Ameristar Assets shall revert to the ownership GSI with the benefit of all
inventory, unfulfilled or outstanding orders and monies due but unpaid relating
to that part of the business carried on by WLC since 22 August 1997 utilizing
the Ameristar Assets.
2. Immediately following execution hereof the following parties shall take the
actions specified below:
(a) IRD and Park shall enter into and thereafter perform a contract for
the sale to and purchase by IRD of the share capital of GSI in the terms of the
form on contract annexed hereto ("the New Contract")
(b) IRD shall with effect from the closing of the New Contract waive
the repayment by WLC of $400,000 advanced by it to WLC and utilized for the
repayment of the Note and such further part of the monies advanced by it to WLC
as have been credited to the Account and are not being repaid pursuant to
sub-clause (c) below
(c) WLC shall repay to IRD firstly all monies standing to the credit of
the Account and secondly such further amount as shall be equal to the difference
(if any) between the total of the amounts waived pursuant to (b) above and
repaid as provided firstly above and $650,000 and shall then close the Account.
(d) SW shall resign as President and CEO and he shall procure that
Barry Miller shall also resign as CFO and Secretary of WLC.
(e) IRD shall give to GSI an inter company loan facility of $650,000 of
which $400,000 plus such amount as shall have been lent by IRD to WLC and
credited to the Account but not repaid as provided by sub-clause (c) above shall
be deemed to have been drawn down. An amount equal to the credit balance on the
Account repaid by WLC shall be drawn down by GSI immediately following the
execution hereof and repayment by WLC.
(f) WLC shall
(i) cancel the WLC Consideration Shares and SW and GSI shall
execute such consents or other documents WLC shall reasonably require for the
purpose of accomplishing such cancellation
(ii) assign or otherwise transfer the Lease and the Dish
Contract to GSI and to take all necessary steps and do all necessary things to
re-vest in GSI the full benefit of the Ameristar Assets, including, but without
limitation merchant accounts arising from credit card transactions and
associated credit card facilities and arrangements.
<PAGE> 5
(iii) change its name to World Lynx Communications Inc.
(iv) transfer to GSI all the employees of WLC engaged in
that part of its business utilizing the Ameristar Assets
(g) GSI shall:
(i) change its name to Ameristar Worldwide Entertainment
Corporation
(ii) appoint SW as President and CEO and Barry Miller as CFO
and Secretary
(iii) employ all those persons transferred to it as provided
in (f) (iv) above on the same terms as apply to their employment by
WLC
(iv) assume and fulfill all outstanding orders and other
commitments relating to the Ameristar Assets as are transferred to it
pursuant to this Agreement
3. In consideration of Park as the parent company of GSI consenting to GSI
releasing IRD from the Principal Contract and WLC from the GSI contract and the
obligation to pay the royalty therein provided for and, further, agreeing to
enter into the New Contract for the sale to IRD of its shares in GSI, GSI with
the consent and approval of IRD agrees and covenants that it shall henceforth
pay to Park a royalty of 2 1/2% of its Net Sales Revenue in each year from the 1
September 1997 ("the Royalty"). In this sub-clause "Net Sales Revenue" shall
mean payments actually received by or for the credit of GSI from sales made by
it, or by any subsidiary of it, in each year, less commissions actually paid in
the normal course of business as a cost of sale, as shown in an audited
statement of the Net Sales Revenue of GSI in each such year consolidated with
its subsidiaries (if any), provide that during the first seven days of each
month of each year during which the Royalty shall be payable GSI shall advance
to Park on account of its liability such amount as GSI's management shall in
good faith estimate from its management accounts to be 2 1/2% of the Net Sales
Revenue arising during the previous month. Within fourteen days of the
certification of each audited statement of GSI it shall pay to Park any balance
due after taking into account all payments received during the year in question
or Park shall similarly repay any balance due to GSI. IRD agrees that upon GSI
becoming it's subsidiary it will procure that GSI shall, for such time as the
Royalty shall be payable, retain the ownership and remain the operator of the
Ameristar Assets (including for the avoidance of doubt the business carried on
under the Name in such form as it shall exist from time to time) and that it
will in good faith use its best efforts to ensure the maximization by GSI of the
sales upon which the Royalty is to be computed.
4. This agreement shall enure to the benefit of and shall be binding upon the
parties and their subsidiaries (as they may exist from time to time) successors
and assignees. The provision of this agreement shall survive the full or partial
performance of clause 2 hereof.
<PAGE> 6
5. WLC warrants that it is the unencumbered beneficial owner of the Ameristar
Assets and that no claims exist which affect or may affect the Ameristar Assets
and that it is not aware of any circumstances which may give rise to any such
claims.
6. This agreement may be executed in separate counterparts and when so executed
by all the parties will be valid as if all the signatories had executed the same
document.
IN WITNESS WHEREOF this agreement is executed by the parties as specified
THE SCHEDULE
The WLC Shareholders
Samuel B Watson 9412, Highwood Hill Road
Brentwood
TN 37027
Growth Strategies Inc. P.O. Box 22740
5300 W. Sahara Avenue
Suite 101
Las Vegas, NV 89126
Lewis Pollack C/O Spears Law Office
P.O. Box 622
Marvern, AR 72104
Daniel Dixon as above
Donald Spears as above
Romford Enterprises SA Dorpstraat
Landsmeer
Amsterdam, Netherlands
Waterlink Limited Calle san Miguel, 13
Beniarres
Alicante 03850, Spain
Hawk Continental Ltd Calle de Gerro, 18
Los Monteros
29600, Marbella, Spain
Kisaran Enterprises Ltd 5, Park Farm Close
London N22, UK
<PAGE> 7
Salfolia Trading Ltd 273, Upper Lisburn Road
Belfast, UK
Leander Limited 2, Heath Close
London W5, UK
Rathluire Ltd 505, Lisburn Road
Belfast UK
INTERNATIONAL RESORT DEVELOPERS INC
By: s/Pieter Oosthuizen
s/Samuel B. Watson as Trustee GROWTH STRATEGIES INC
By: s/David Mackarness
s/Lewis Pollock
s/Daniel Dixon
s/Donald Spears
ROMFORD ENTERPRISES LTD
By: s/J.A. De Groot
WATERLINK LIMITED LEANDER LIMITED
By: s/J.W. Godfrey & Co. By: s/ J.W. Godfrey & Co.
KISARAN ENTERPRISES SALFOLIA TRADING LTD
By: s/ J.W. Godfrey & Co. By: s/ J.W. Godfrey & Co.
HAWK CONTINENTAL LTD RATHLUIRC LIMITED
By: s/ J.W. Godfrey & Co. By: s/ J.W. Godfrey & Co.
PARK INVESTMENTS LTD
By: s/David Mackarness
AMERISTAR WORLDWIDE ENTERTAINMENT CORPORATION
By: s/Samuel B. Watson
<PAGE> 1
EXHIBIT 10.3
Agreement dated 29 September, 1997, between Park Investments Limited and
International Resort Developers, Inc.
<PAGE> 2
AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
Date: 29 September, 1997
PARTIES
1. PARK INVESTMENTS LIMITED ( "the Seller")
2. INTERNATIONAL RESORT DEVELOPERS, INC. (incorporated in Idaho) of ("the
Buyer")
RECITALS
1. Growth Strategies Inc. ("the Company") is incorporated in Arkansas with an
authorized capital of 1,000 shares of $1.00 each all of which are issued ("the
Shares") and are held by the Seller. The Company has agreed to change its name
to Ameristar Worldwide Entertainment Corporation.
2. The Company carries on from premises at 1801 West End Avenue, Suite 1110,
Nashville, Tennessee ("the Premises") the businesses of network access and
long-distance services, network marketing, direct broadcast service, and home
theater equipment ("the Business") and is the owner of the trade name "Ameristar
Worldwide Entertainment"
3. The Buyer is a Reporting Company whose shares are registered with the SEC and
quoted on NASDAQ. The authorized capital of the Buyer is 100,000,000 shares of
$0.10 each of which approximately 1,807,124 are, or will be at closing, in
issue.
4. The Sellers are willing to sell and the Buyers to buy the Shares on the terms
of this Agreement.
IT IS HEREBY AGREED AS FOLLOWS
Sale and Purchase
1. Subject to the conditions herein contained the Sellers agree to sell and the
Buyer agrees to buy all the Shares. The consideration for the sale shall be:
(a) The issue by the Buyer to the Seller of 400,000 newly issued common
shares of the Buyer ("the Basic Consideration Shares")
(b) The further issue of shares in the capital of the Buyer ("the
Additional Consideration Shares") on the basis of 3,000 such shares for
each $1,000 of after-tax net profit earned by the Company in excess of
$1,000,000 during each of the calendar years 1998 and 1999, as shown in
the Company's audited accounts. Such number of Additional Consideration
Shares as are to be issued pursuant to this clause shall be issued to
the Sellers, or as the Sellers may direct, within ten working days of
the auditors of the
<PAGE> 3
Company certifying the accounts of the Company for the year in
question, as fully paid and ranking equally in all respects with
existing issued share capital of the Buyer. Provided that
notwithstanding the foregoing, the above-said number of shares to be
issued for each $1,000 of after-tax net profit shall be adjusted
pro-rata to reflect any stock split or consolidation (reverse stock
split) of shares of the Buyer hereafter effected.
(c) It is acknowledged by the Sellers that the Basic Consideration
Shares and the Additional Consideration Shares may not be
re-transferred by Sellers, in a public offering or sale, inclusive of
sales on NASDAQ, without an effective registration statement, covering
such offer and/or sale, under the Securities Act of 1933, and any
applicable provision of state law, unless an exemption from such
registration is available; and that the Basic Consideration Shares and
Additional Consideration Shares will be suitably legended to reflect
said restricted status. The Buyer undertakes that as soon as practical
after the issuance of the Basic Consideration shares, and after the
issuance of Additional Consideration Shares, it shall file such
registration statement or statements with the SEC as may be necessary
to qualify said shares for resale in the public markets, under federal
law, and will utilize its best efforts to secure the effectiveness of
such registration statement or statements, and as expeditiously as
possible.
Conditionality
2. Each of the parties' respective obligations to close the transaction hereby
agreed to shall be conditional upon:
(a) The approval of the transaction by the shareholders of the Buyer at
a duly called meeting of its shareholders. Buyer agrees that it will
utilize it best efforts to hold such a meeting in October, 1997,
pursuant to compliance with the rules of the Securities and Exchange
Commission regarding necessary filings with the commission and mailings
to shareholders in connection with such meeting.
(b) There having been no breaches by the other party of any of the
provisions hereof prior to the closing date and all warranties and
representations made by either party remain correct as at closing.
(c) There having been no material adverse change in the financial
position or prospects of the other party prior to the closing date
since the date on which the affairs of such other party were duly and
diligently investigated prior to the execution hereof.
<PAGE> 4
Closing
3. Closing shall take place at Nashville, Tennessee within ten days of the
approval of the transaction by the shareholders of the Buyer, or at such other
time and place as the parties may agree, at which time:
(a) The Sellers shall deliver to the Buyer:
(i) Certificates representing all of the Shares endorsed for
transfer to the Buyer by the owner of record thereof.
(ii) A corporate resolution of any corporate holders of the
Shares authorizing the transfer thereof in such form as the
Buyer shall require.
(iii) A resolution of the directors of the Company resolving
to register the transfer of the Shares to the Buyer.
(iv) The corporate books and records of the Company.
(v) A resolution of the directors of the company appointing as
directors and officers of the Company such persons as the
Buyer shall have nominated.
(vi) The resignations of the directors of the Company which
the Buyer shall have the option to decline.
(vii) Certificates of all banks at which the Company has
accounts (including merchant accounts) of the balances at the
close of business the previous day with copies of all bank
mandates and signature authorities.
(viii) An opinion of the company's counsel, satisfactory to
the Buyer, as to the following:
(1) That the Company is validly incorporated and is
in good standing in the state of Arkansas.
(2) That the Shares in the Company which have been
assigned to the Buyer are validly issued and
non-assessable, and constitute all of the issued and
outstanding shares of the Company.
(3) That the assignments of the Shares to the buyer
have been validly executed by the Sellers; that said
assignments are effective to convey, and have
conveyed, all of the rights and interest of the
Sellers in said shares to the Buyer; and that the
Buyer, as a result of said assignments, is vested
<PAGE> 5
with all rights, respecting the Shares or which
derive from ownership of the Shares, as were
previously possessed by the Sellers.
(4) That there are no agreements, corporate governing
instruments, or provisions of law, which prevent or
otherwise condition the transfer of the Shares by the
Sellers to the Buyer, or which prevent or condition
the vesting of all voting and other rights attendant
to ownership of the Shares in the Buyer.
(5) That the resignations of the Directors of the
company are effective; that the resolution of such
Directors, prior to their resignation, appointing as
directors and officers of the company those persons
nominated by the buyer, has been duly adopted; and
that said resolution is effective pursuant to the
corporate governing documents of the Company, and all
applicable laws, to effectuate the appointment of the
persons nominated by the Buyer as directors and
officers of the company without further necessity of
shareholder approval or other corporate action.
(6) That counsel for the Company is unaware of any
pending litigation in which claims have been made
against the Company, or of other claims which have
been made or threatened against the Company, or of
circumstances which could give rise to any such
claims; nor is counsel aware of any failure of
compliance by the Company with applicable laws and
regulations relating to its affairs and activities.
(ix) A written agreement between the Company and Sam Watson,
in form satisfactory to Buyer, providing for the services of
Mr. Watson as President and CEO of the Company, terminable by
either party on not less than 12 months written notice.
(b) The Buyer shall:
(i) Either deliver the Basic Consideration Shares to the
Sellers or as they shall direct, or shall, having passed the
necessary directors' resolution to issue the Basic
Consideration Shares, give an irrevocable direction to the
Buyer's Transfer Agents to issue the Basic Consideration
Shares to the Sellers or as they may direct. The Seller hereby
directs that 60,000 of the Basic Consideration Shares shall be
issued to Samuel B. Watson, who shall have, as well, pro-rata
entitlement to such Additional Consideration Shares as may be
issued.
(ii) Nominate Samuel B. Watson and Donald Spears as two of the
five directors proposed by management for election by the
shareholders at the meeting of shareholders of the Buyer to be
held in October, 1997.
<PAGE> 6
If closing shall not have occurred within two months of the date hereof, as the
result of failure of warranties or otherwise, either party may by written notice
to the other terminate this contract, and neither party shall have a claim
against the other in respect of such termination except for willful failure to
close or to meet the conditions for closing.
Warranties and representations
4. The Sellers warrant and represent to the Buyer in relation to the Company,
except where stated otherwise, effective as at the date thereof and as at the
date of closing.
(a) That the accounting and financial information disclosed to the
Buyer in writing is correct and comprehensive in all material respects
in its account of the financial affairs, assets and liabilities of the
Company and the Business.
(b) That there has been no material deterioration in the financial
position or prospects of the Company or the business since the making
of the disclosures referred to in (a) above.
(c) That all contracts, licenses and permits on which the Company
relies in the course of the Business or any part thereof are in full
force and effect and that there is no breach of any such contract
license or permit. No facilities of the type used in the Business have
been revoked or denied to the Company or granted on onerous terms.
(d) That the certificate of incorporation and by-laws of the Company,
as provided to the Buyer, are those currently in effect, and constitute
the totality of corporate documents governing the operation of the
Company; and without limitation, that there are no other agreements,
including agreements among shareholders or between shareholders and the
Company, which affect the governance of the company, relations among
shareholders, or relations between shareholders and the Company.
(e) That the Company is the owner of such rights as may exist in the
tradename "Ameristar Worldwide Entertainment", has not licensed the
right to use of this name or any part thereof to any other persons, and
that the Sellers are not aware of any infringing uses of said name.
(f) That the Company possess a proprietary database of approximately
9,000 current and/or former customers, and has not licensed or
otherwise agreed to the use of this database by any other person.
(g) That the Company maintains in force effective insurance cover
against all risks that are normally insured against in the fields of
the Business.
(h) That save as disclosed in writing the Company is not a party to any
litigation and that there are no claims made or threatened against the
Company and that the Company is not aware of any circumstances which
could give rise to any such claim.
<PAGE> 7
(i) That the opinion of counsel to the Company given pursuant to
clause 3(a) is correct in all respects.
(j) That the Company is in compliance with all applicable laws and
regulations relating to its affairs and activities and has made all
required returns in full accurate timely and compliant manner. No
penalties are payable in respect of any such return including tax
returns.
(k) That pending closing it will not:
(i) hold any meeting of shareholders or permit to be passed
any shareholders' resolution.
(ii) undertake any transaction not in the normal course of
business.
(iii) borrow or lend or give any guarantee or security.
(iv) hire or dismiss any employee without the consent of the
Buyer.
(v) make any distribution.
(vi) issue any shares.
but will operate its business as a going concern in all respects as
hitherto, except insofar as may have been consented to by the Buyer.
5. The Buyer warrants and represents to the Sellers
(a) It is in good standing in the State of Idaho and is current in its
filings with the Securities and Exchange Commission.
(b) The since the filing of its 10-QSB for its quarter ending March 31,
1997, there have been no material changes in the business assets or
affairs of the Buyer, except as disclosed in Form 8-K filed by the
Buyer on or about August 4, 1997 pertaining to the sale of its
concession in the Port of Ensenada, Mexico, and except as otherwise
disclosed in or pursuant to this agreement. Further, that Form 10-KSB
filed by the Buyer for its fiscal year ended June 30, 1996 and
subsequent Form 10-QSB's filed by the Buyer are accurate and complete
in all material respects.
(c) That other than as disclosed in the above filings, the Buyer is not
a party to litigation, is not aware of any claim, and is not aware of
circumstances which may give rise to any claim, which the directors of
the Buyer deem material to Buyer's financial position, save that the
Buyer is aware of a complaint filed in Florida by Andaurex
International Inc., but
<PAGE> 8
which has not been served on the Company, full details of which have
been disclosed to the Sellers.
(d) That the Buyer is in compliance with all applicable laws and
regulations insofar as they affect it assets and activities.
(e) That pending closing it will not make any distribution.
6. The Sellers agree that during a period of three (3) years from the date of
closing, they will not engage in the business of network marketing or the custom
provision of internet services within the United States, or to customers in the
United States, or otherwise compete with the Buyer or any of its subsidiaries in
regard to any business heretofore conducted by any of the Sellers.
7. This agreement shall inure to the benefit of, and shall be binding upon, the
parties and their subsidiaries, successors and assignees. The provisions of this
agreement, including without limitation the provisions of Section 6, above,
shall survive the Closing.
8. This agreement may be executed in separate counterparts, and when so executed
by all of the parties, will be valid as if all signatories had executed the same
document.
<PAGE> 9
IN WITNESS WHEREOF, this Agreement is executed by the parties as
specified
"BUYER"
International Resort
Developers, Inc.
By: s/Pieter G.K. Oosthuizen
Date: October 13, 1997
"SELLER"
Park Investments Limited
By: s/David Mackarness
Date: October 13, 1997
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
PLAYAS PALMARES S.A.
LANGER HOLDINGS LTD.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 876
<SECURITIES> 0
<RECEIVABLES> 300
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,176
<PP&E> 250,430<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,442,370
<CURRENT-LIABILITIES> 3,314,436
<BONDS> 0
0
0
<COMMON> 2,843,751<F2>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,442,370
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 705,684
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (705,684)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (705,684)
<EPS-PRIMARY> (0.384)
<EPS-DILUTED> (0.384)
<FN>
<F1>EXCLUSIVE OF LAND PURCHASE RIGHTS, CONCESSIONS AND RELATED CAPITALIZED
COSTS IN THE AMOUNT OF $6,180,764
<F2>STATED AND PAID-IN CAPITAL OF $7,659,392, LESS RETAINED DEFICIT OF
$4,815,641
</FN>
</TABLE>
