<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
(For Quarterly Period ended March 31, 1997)
Commission File No. 1-6110
INTERNATIONAL RESORT DEVELOPERS, INC.
-------------------------------------
(Exact name of registrant as specified in its Charter)
(FORMERLY INTERNATIONAL BASIC RESOURCES, INC.)
----------------------------------------------
Idaho 82-0291307
- ---------------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2980 S. Rainbow Blvd., Suite 100, Las Vegas, NV 89102
- ----------------------------------------------- --------
(address of principal executive offices) zip code
Registrant's Telephone Number: (702) 876-9329
Number of outstanding and subscribed shares:
<TABLE>
<CAPTION>
Class Outstanding and Subscribed
------- as of March 31, 1997
----------------------------
<S> <C>
Common Shares, with par 55,888,939 *
value of $0.10 per share
</TABLE>
* Includes 54,213,721 issued shares. Pursuant to amendment to the
Company's articles of incorporation, effective May 19, 1997, these
shares were consolidated on a 1 for 30 basis. The number of issued
shares, after such consolidation, is 1,807,124.
i
<PAGE> 2
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the Registrant was
required to file such reports, and (2) has been subjected to such filing
requirements for the past 90 days.
Yes X No
------- --------
ii
<PAGE> 3
NOTE: THE COMPANY'S NAME HAS BEEN CHANGED, EFFECTIVE MAY 19, 1997, AS THE RESULT
OF AN AMENDMENT TO ITS CERTIFICATE OF INCORPORATION, TO INTERNATIONAL RESORT
DEVELOPERS, INC. ADDITIONALLY, THE ISSUED SHARES OF THE COMPANY HAVE BEEN
CONSOLIDATED ON A ONE FOR THIRTY BASIS, EFFECTIVE MAY 19, 1997. THE NEW TRADING
SYMBOL OF THE COMPANY, ON THE NASDAQ SMALL CAP MARKET, IS IRDP.
PART I
Item 1. Financial Statements.
Following.
1
<PAGE> 4
PART I
FINANCIAL INFORMATION
Item 1: FINANCIAL STATEMENTS
a) Financial Statements of Registrant
INDEX
Accountants' Report
Consolidated Balance Sheet (Unaudited) as of
March 31, 1997 and June 30, 1996
Consolidated Statement of Operations and
retained earnings (Unaudited) for the
three and nine months ended March 31, 1997
and 1996
Consolidated Statement of Cash Flows (Unaudited)
for the nine months ended March 31, 1997
and 1996
Notes to Consolidated Financial Statements
(Unaudited)
The consolidated financial statements of the Registrant included herein have
been prepared, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Although certain information normally
included in financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted, the Registrant believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these consolidated financial statements be read
in conjunction with the financial statements and the notes thereto included in
the Annual Report on Form 10-K of the Registrant for its fiscal year ended June
30, 1996.
The consolidated financial statements included herein reflect all adjustments
(consisting only of normal recurring accruals) which, in the opinion of
management, are necessary to present a fair statement of the results for the
interim periods.
The results for interim periods are not necessarily indicative of trends or of
results to be expected for a full year.
2
<PAGE> 5
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED BALANCE SHEET
March 31, 1997 and June 30, 1996
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
March 31, June 30,
1997 1996
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 876 $ 38,173
Pipeline revenue receivable 7,421
Total current assets ---------- -----------
876 45,594
---------- -----------
PROPERTY AND EQUIPMENT
Mining Property 250,430 250,430
---------- -----------
OTHER ASSETS
Land, purchase rights and
related capitalized costs 5,903,963 5,129,384
Investments in unconsolidated
companies 10,000 10,000
---------- ----------
5,913,963 5,139,384
---------- ---------
$6,165,269 $5,435,408
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
3
<PAGE> 6
INTERNATIONAL RESORT DEVEL0PERS, INC.
CONSOLIDATED BALANCE SHEET March 31,
1997 and June 30, 1996
LIABILITIES AND STOCKH0LDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited)
March 31, June 30,
CURRENT LIABILITIES 1997 1996
----------- -----------
<S> <C> <C>
Current debt $ 2,375,281 $ 1,131,074
Accounts payable 78,230 74,446
Accrued payroll and related taxes 91,450 47,405
Override royalty and interest payable 13,325 13,325
----------- -----------
Total Current Liabilities 2,558,286 1,266,250
----------- -----------
LONG-TERM DEBT -0- 370,500
----------- -----------
MINORITY INTEREST IN SUBSIDIARY 284,183 284,183
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 100,000,000
shares authorized, 55,888,939 issued and
subscribed at March 31, 1997 and
55,169,007 issued and subscribed at
June 30, 1996 5,588,904 5,516,900
Additional paid in capital 2,433,383 2,110,427
Less shares of common stock held in
Treasury-at cost; 8,000 shares for
1997 (2,895) (2,895)
----------- -----------
8,019,392 7,624,432
----------- -----------
Retained earnings;
Accumulated from operations prior to
development stage (3,191,265) (3,191,265)
Accumulated during the development stage (1,505,327) (918,692)
----------- -----------
(4,696,592) (4,109,957)
----------- -----------
Total stockholders' equity 3,322,800 3,514,475
----------- -----------
$ 6,165,269 $ 5,435,408
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
4
<PAGE> 7
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0 $ 0
--------- -------- --------- ---------
EXPENSES
Real estate acquisition
overhead & administrative
expenses 57,437 17,741 208,144 53,222
Legal and accounting 39,665 35,770 169,055 107,309
Office salaries 21,560 133,450 64,680
Office expenses 12,273 1,133 27,905 3,398
Travel 8,491 2,280 35,230 6,840
Rent - Office 1,372 1,830 4,117
Printing 1,095 1,002 3,284
Payroll taxes 482 2,927 1,445
Dues and fees 661
Insurance 5,031
--------- -------- --------- ---------
Development Stage Loss
Pre-operating (117,866) (81,433) (586,035) (244,295)
--------- -------- --------- ---------
OTHER INCOME (EXPENSE)
Minority interest in
subsidiary net loss 1,528 4,405
--------- -------- --------- ---------
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE INCOME TAXES (117,866) (79,905) (586,035) (239,89O)
PROVISION (CREDIT) FOR
INCOME TAXES
--------- -------- --------- ---------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (117,866) (79,905) (586,035) (239,890)
DISCONTINUED OPERATIONS
(NOTE 1)
Lose from discontinued oil
& gas operations (4,793) (600) (11,082)
--------- -------- --------- ---------
NET INCOME (LOSS) $(117,866) $(84,698) $(586,635) $(250,972)
========= ======== ========= =========
INCOME (LOSS) FROM
CONTINUING OPERATIONS
PER SHARE $ NIL $ NIL $ NIL $ NIL
========= ======== ========= =========
NET INCOME (LOSS) PER
SHARE $ NIL $ NIL $ NIL $ NIL
========= ======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
5
<PAGE> 8
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
March 31, March 31,
1997 1996
----- -----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (586,635) $(250,972)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, amortization & depletion 4,624
Minority interest in current operations of
subsidiary (4,405)
Abandoned project costs 45,000
Net changes in assets and liabilities
(Increase) decrease in accounts receivable (579) 7,737
Increase (decrease) in accounts payable
and accrued expenses 177,084 203,541
---------- ---------
Net cash provided (used) by
operating activities (410,130) 5,525
---------- ---------
INVESTING ACTIVITIES:
Pre-development capitalized costs (774,579) (701,261)
---------- ---------
Net cash provided (used) for
investing activities (774,579) (701,261)
---------- ---------
FINANCING ACTIVITIES:
Additions to debt:
Short-term 752,452 245,450
Proceeds from stock subscribed 394,960 510,000
---------- ---------
Net cash provided (used) by
financing activities 1,147,412 755,450
---------- ---------
INCREASE (DECREASE) IN CASH (37,297) 59,714
CASH AT BEGINNING OF PERIOD 38,173 1,616
---------- ---------
CASE At END OF PERIOD $ 876 $ 61,330
========== =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
6
<PAGE> 9
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
March 31, March 31,
1997 1996
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ -0- $ -0-
Income taxes -0- -0-
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In fiscal year ended June 30, 1995 the Company issued 205,373 shares to retire
$200,000 in advance payable to Doggart Trading, Ltd. and to pay $5,373 in
accrued interest at $1.00 per share. In fiscal years ended June 30, 1995 and
1996, the Company also issued 1,350,000 shares to retire $1,350,000 in advances
from 2 shareholders of Doggart Trading, Ltd. related to Mexico real estate
development costs, an obligated itself to issue 935,286 additional shares to
Doggart in conversion of $935,286 of additional advances by Doggart during
those years.
In fiscal year ended 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.
During the quarter ended December 31, 1996, the Company subscribed 789,920
shares to retire $394,960 in advances from Doggart Trading, Ltd., at $.50 per
share.
See accompanying notes to consolidated financial statements (unaudited)
7
<PAGE> 10
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 inception of this
development stage to be April, 1994, when it began its current real estate
and development activities. On May 12, 1997 the Company changed its name
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. Reclassifications of prior-year data have
been made, when appropriate, to conform to the 1997 presentation.
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 dilative 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.
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 acquired and continues to hold for development the Playas
Palmeras Bucaneros Properties discussed in Note 2. The Company also
incurred pre-development 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 pre-development 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
8
<PAGE> 11
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Development Stage Activities Of Real Estate Segment (continued):
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 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.
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.
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 an of the date of the financial statements. Accordingly, upon
settlement, actual results may differ from estimated amounts.
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 June, 1996, the authorized shares were increased
and the additional 4,000,000 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.
9
<PAGE> 12
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 of 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, 1997.
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 an
undetermined amount 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, 1998 plus interest at 8%
(Note 5).
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 three Daddy Lode claims and
ownership of three Mother Lode patented, mining claims situated in the
Summit Mining District, Shoshone County, State of Idaho, together with fee
ownership of fifty-five (55) unpatented mining claims contiguous 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 IBR. IBR started to
develop the vein found by Newmont in June 1990 by contracting General
Mine Services Corp. to work on this property. Work has been suspended on
this property until additional funding for development can be obtained.
10
<PAGE> 13
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. CURRENT AND LONG-TERM DEEBT
Current debt of the Company consist of the following:
March 31, June 30,
1997 1996
--------- --------
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). The balance is due
May 24, 1997. 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 $1,000,000
Note payable to the sellers of 55% of the
shares of Ensenada Nautico Turistica, S.A.
de D.V. (Note 2). This note is payable in
twelve equal principal payments starting
April 1, 1998 plus interest at 8% 494,000 494,000
Advances received from Mr. Hugh Downey 760,026
Advances Received from Doggart Trading
Ltd. 121,255
Other Advances Payable 7,574
---------- ----------
2,375,281 1,501,574
Less Current Portion 2,375,281 1,131,074
---------- ----------
$ -0- $ 370,500
Long-term Debt ---------- ----------
All long-term debt becomes current during the year ended June 30, 1997.
11
<PAGE> 14
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. RELATED PARTY TRANSACTIONS
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, together with
$50,000 of additional advances, plus interest charges of $5,373, into
205,373 shares of the Company's stock (at $1.00 per share). Those
shares were issued to Doggart. During the remainder of the years
ended June 30, 1995 and June 30, 1996, Doggart and certain of its
shareholders advanced an additional $2,285,286 to the Company,
$1,350,000 of which has been converted into stock of the Company at
$1.00 per share. 935,286 shares, in conversion of the rest of those
advances at $1.00 per share, remain to be issued to Doggart. In the
first two quarters of the year ending June 30, 1997, Doggart advanced
an additional $394,966, for which it has been agreed 789,932 shares of
the Company will be issued (at $.50 per share). In the third quarter
of the year ended June 30, 1997, Doggart has advanced and additional
$121,255. The Company has not, as of this time, elected to convert
those advances into shares.
6. 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 and general business credit
carryovers are limited to the separate returns of the respective
corporations.
The components of the provision (benefit) for income taxes are as
follows:
March 31, June 30,
1997 1996
Current
Federal $ -0- $ -0-
State -0- -0-
--------- --------
Total current provision -0- -0-
--------- --------
Deferred
Federal -0- -0-
State -0- -0-
--------- --------
Total deferred provision -0- -0-
Total provision for --------- --------
income taxes $ -0- $ -0-
--------- --------
12
<PAGE> 15
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. INCOME TAX
The items of carryover remaining, for the separate corporations, for which
no tax benefit has been provided are as follows:
International Carson Texas
Basic Industries NGPP,
Resources Corporation Inc.
------------- ------------ ----------
Net operating loss $1,518,000 $1,475,000 $ 7,600
Capital loss -- 142,000 --
General Business credit -- 12,000 16,000
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.
7. MINORITY INTEREST IN SUBSIDIARY
The minority interest in subsidiary represents interests of outsiders
(29.66%) in the stock of Carson Industries Corporation.
8. 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.
9. 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.
10. COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
The Company, has exercised its option to convert advances by Doggart to
the Company during the first six months of the current fiscal year, in the
total amount of $394,960, into common shares at $.50 per share (a total of
789,920 shares).
13
<PAGE> 16
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
Pursuant to its acquisition of concession rights to develop and operate a
cruise ship terminal and marina village at the Port of Ensenada (Note 2),
the Company, through its subsidiary Ensenada Cruiseport Village, S.A. de
C.V. ("Cruiseport"), on December 19, 1995, entered into a concession
agreement with A.P.I. Ensenada S.A. de C.V. (the "Port Authority" of
Ensenada), specifically setting forth the Company's rights and obligations
with respect to the concession. This agreement was modified by
modification agreement between Cruiseport and the Port Authority, on
November 31, 1996. Pursuant to the concession agreement, as modified, the
Company is obligated to pay the Port Authority the following concession
rent.
Amount of Amount of
Concession Concession
Year Rent Year Rent
---- ---------- ----- -----------
1 $ 54,000 11-15 $1,430,000
2 108,000 16-24 1,999,000
3 & 4 280,000 25-32 2,500,000
5 - 10 560,000 33-35 2,999,000
In addition to the foregoing amounts, the Company is obligated to pay to
the Port Authority a variable rent, based upon anchorage and port fees
attributable to gross tonnage of cruise ships that call at the Port of
Ensenada in any year in excess of 18,900,00 tons.
The Company and various of its former officers and directors have been
named in a lawsuit, pending in the United States District Court for the
District of Idaho, alleging violations of various federal and state
laws, including claims under the Securities Act of 1933 and the Exchange
Act of 1934 and state securities laws, and under the consumer protection
laws of the states of Idaho and Washington. Plaintiffs seek actual
damages, as well an punitive and treble damages, court costs and
reasonable attorney's fees. The pleadings in the case do not specify a
dollar amount of damages. However, counsel for the plaintiffs have
indicated that plaintiffs consider their claim to be worth $4,000,000
and that their demand for settlement is $800,000. Management has
indicated its intent to vigorously defend the action.
The Company incurred net losses of $1,080,885 and $2,206,902 for the
years ended June 30, 1996 and 1995, respectively. At June 30, 1996, the
Company's current liabilities exceed its current assets by $1,220,656.
In order to retain its rights to acquire the Bucaneros Property and its
rights to develop and operate the Ensenada Property, the Company will
need to make timely debt payments (Note 4) and timely concession rent
payments discussed above. Failure to do so may require the Company to
write off approximately $4,068,000 of equity in related assets. The
Company is currently dependent oh infusions of cash from Doggart
Trading, Ltd., and Mr. Hugh Downey to fund its operations. Mr Downey,
who has advanced approximately $800,000 to the Company to date, on a
demand
14
<PAGE> 17
INTERNATIONAL RESORT DEVELOPERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS (CONTINUED)
basis, has a secured interest in the Company's shares in its wholly
owned subsidiary, Langer Holdings Ltd. Langer Holdings Ltd. in turn
holds 99% of the shares of Playas Palmeras S.A. and Ensenada Cruiseport
Village S.A. de C.V., which hold most of the Company's assets and
conduct virtually all of the Company's current business. Failure to
meet a demand for payment by Mr. Downey could result, therefore, in the
loss of the Company's business and assets. Doggart Trading Ltd. has
committed to continue to fund, or secure funding for, the base
operations of the Company through June 1997.
Payment of these obligations and any significant development of the
Company's real estate property will require obtaining bank financing or
third party debt or equity funding to the Company. The Company is
currently negotiating with a Mexican banking institution for long-term
financing to pay its obligations timely and allow development of its
real estate projects. The Company also believes that it may be able to
renegotiate the terms of some of its short-term debt in order to reduce
its current working capital demands.
On May 12, 1997 The Company approved a 1 for 30 reverse stock split.
The Company also approved a name change from "International Basic
Resources, Inc.' to "International Resort Developers, Inc." The
financial statements reflect the new name
11. INCENTIVE STOCK OPTION PLAN
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 of its common
stock for use in granting stock options to officers and key employees.
As of March 31, 1997 the following options are outstanding:
Number of Exercise Date Options
Shares under Price Option Exercised
Option Per Share Expires To Date
------------ --------- ------- ---------
Alton E. Jones 3,000,000 $ 0.359 4/18/2006 None
Stephen Barker 750,000 0.359 4/18/2006 None
The option price of $0.359 was determined based upon the NASDAQ trading
share price at the date the options were granted.
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<PAGE> 18
Item 2. Management's Discussion and Analysis or Plan of Operation
a) Results of Operations.
During the quarter ended March 31, 1997, the Company's net loss from
operations was $117,866, and net loss (after other income and loss) also
$117,866; and for the nine month period ended March 31, 1997, the Company's loss
from operations was $586,035, and net loss (after other income and loss) was
$586,635. These figures compare with the following losses reported in the
Company's Form 10-Q for a year earlier: a loss from operations of $59,563 for
the quarter ended March 31, 1996, and net loss (after other income and loss) of
$58,035 for that quarter; and a loss from operations of $210,377 for the
nine-month period ended March 31, 1996, and net loss (after other income and
loss) of $250,972 for that nine-month period.
The reported losses, however, for the three month and nine-- month
periods ended March 31, 1996, included oil and gas operations of the Company. On
May 31, 1996, the Company sold its oil and gas assets. As a result, the audited
financial statements of the Company were restated, as at June 30, 1996, to
exclude revenues and expenses, associated with the current and historical oil
and gas business of the Company, from "income (loss) from continuing
operations." Oil and gas operations, including a loss of $458,227 in 1996 from
the disposal of oil and gas assets, were tabulated separately as "discontinued
operations." Inasmuch as the sole
16
<PAGE> 19
remaining activities of the Company, as of June 30, 1996, were real estate
pre-development activities in Mexico, the financial statements of the Company
categorized the Company as a "development stage enterprise."
The loss from continuing operations of the Company, excluding oil and
gas operations, in fiscal year ended June 30, 1996, was $616,216. The loss
specifically associated with the Company's Mexican operations was $638,419. Of
that amount, $303,514 constituted the write-off, in fiscal 1996, of costs which
had been capitalized as of June 30, 1995, and were associated with projects
which were abandoned in 1996, leaving $334,905 associated with ongoing Mexican
operations, namely the Company's activities in connection with its Ensenada
concession. Of those expenses, the largest components were legal and accounting
fees of $143,078, officer salaries of $86,240, and other overhead and
administrative expenses associated with the Company's Mexican operations of
$70,962. Were the loss of the Company associated with its ongoing Mexican
operations, for fiscal year ended June 30, 1996, pro-rated equally on a
quarterly basis for that year, the amount of that loss for the nine-month period
ended March 31, 1996 would be $244,295.
The loss experienced by the Company, as described in the previous
paragraph, does not include capitalized expenditures incurred in the Company's
pre-development activities in Mexico, amounting to $774,579 in the nine-month
period ended March 31, 1997 (exclusive of the Company's acquisition cost of
$854,000 for its Ensenada concession, payable through a note amortizable
commencing
17
<PAGE> 20
in April, 1998 and the issuance of stock), and $701,261 in the nine-month period
ended March 31, 1996. The policy of the Company, insofar as capitalizing of
costs is concerned, is that costs specifically identified with a project or
property in the development or pre-development stage (e.g. fees/salaries of
consultants, engineers or Company staff directly engaged in the planning of the
Company's Ensenada Project, discussed below, or pre-development site work such
as clearing of debris and moving fill dirt) are capitalized until and unless the
acquisition or future development of the project becomes improbable. Indirect
costs that do not clearly relate to project acquisition or development,
including general and administrative expenses, are charged to expense as
incurred.
The increase in the Company's loss for the nine-month period ended
March 31, 1997, compared with its loss in the nine-month period ended March 31,
1996 other than write-off of abandoned projects, is primarily attributable to
the following: overhead and administrative expenses, together with officer
salaries and office expenses, were $369,499, compared with from $121,316 (on a
prorated basis) for the nine-month period ended March 31, 1996. The increase was
primarily the result of the substantially increased activities of the Company in
connection with its Ensenada project, in the current nine-month period, compared
with the same period of a year earlier (the Company having acquired the
concession in December, 1995, which was more than half-way through the earlier
nine-month period). Such increase in overhead and administrative
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<PAGE> 21
expenses, together with increased travel expenses from $6,840 (on a pro-rated
basis) in the earlier nine-month period to $35,230 in the current nine-month
period, as well as the expensing of a $30,000 fee paid to Heritage Distribution
Corporation, also resulted from the pursuit by the Company of other business and
financing opportunities which did not come to fruition (see discussion in the
following paragraph). Lastly, legal and accounting expenses in the current
nine-month period, compared to the earlier nine-month period (on a pro-rated
basis), increased from $107,308 to $169,855.
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 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
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<PAGE> 22
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.
The Company's net loss for fiscal 1996, including a loss of $464,669
from its discontinued oil and gas operations, including the disposal of its oil
and gas assets, was $1,080,885.
Liquidity and Capital Resources.
The negative working capital position of the Company (current
liabilities in excess of current assets), as of March 31, 1997, was $2,557,410,
compared to $1,220,656 at June 30, 1996 and $2,064,297 at December 31, 1996. The
explanation for the increase since June 30, 1996 is set forth in the following
paragraphs.
Accrued payroll rose from $47,405 at June 30, 1996 to $91,450 at March
31, 1997 (approximately $81,000 of which is accrued to Armada, Inc., a
wholly-owned corporation of Alton Jones, the former chief executive officer of
the Company, who resigned after the close of the second quarter).
Current debt (other than accounts payable) rose from $1,131,074 at June
30, 1996 to $2,375,281 at March 31, 1997. This increase is attributable
primarily to $760,026 advanced during the second and third quarters of the
current fiscal year by a British resident, Hugh Downey, to fund operations of
the Company in Mexico (Mr. Downey is a business acquaintance of Patrick Magee,
the
20
<PAGE> 23
President of the Company); $121,255 advanced by Doggart Trading, Ltd.
("Doggart"), a substantial shareholder in the Company, during the first three
quarters of the current fiscal year, to fund various administrative and
consulting expenses; and the characterization as current debt of $494,000 owing
to the sellers of the shares of two corporations in connection with the
Company's acquisition of its concession in the Port of Ensenada (see discussion
in Item 1, pages 9 - 15 of the Company's restated annual report for fiscal
1996). The $494,000 obligation is to be paid, beginning in April, 1997, in
twelve equal monthly installments with interest at 8% on the unpaid balance. At
June 30, 1996, only $123,500 of that debt was characterized as "current debt."
(The Company has not commenced, as of this time, making payments on the
installments, and intends to negotiate to extend the time of payments).
The above-described advances by Doggart of $121,255, during the fiscal
quarter ended March 31, 1997, have been utilized to fund administrative and
overhead expenditures, including legal and accounting fees, and consulting fees
and salary to David Lawrence, who holds the title of General Director of the
Company's Mexican subsidiary Ensenada Cruiseport Village, S.A. de C.V., and
Armada, Inc., a wholly owned corporation of Alton Jones, former President of the
Company. The advances from Doggart are not secured, do not bear interest, and
are convertible by the Company into common stock of the Company, as described in
more detail below.
The advances by Hugh Downey, in the amount of $472,000 during
21
<PAGE> 24
the second quarter, and in the amount of $288,026 during the third quarter, of
the current fiscal year, as well as approximately $200,000 between March 31 and
May 15, 1997 (see further discussion below), bear interest at the rate of 6% per
annum, are payable immediately upon demand, and are secured by a pledge of 100%
of the stock of Langer Holdings Ltd. ("Langer"), which is wholly owned Cayman
Islands subsidiary of the Company. The stock of Langer is held in trust for Mr.
Downey, as the secured party, by Eurobank Trust Company of the Cayman Islands.
Langer owns 99% of the stock of Playas Palmeras, S.A. ("Playas") and 99% of the
stock of Ensenada Cruiseport Village S.A. de C.V. ("Cruiseport"). The Company is
the owner of the other 1% of the shares of Playas and Cruiseport. Playas, in
turn, is the owner of 8.5 miles of coastal property in Campeche, Mexico, which
(through its ownership of Playas Palmeras S.A. de C.V.) the Company has been
holding for development since 1994, and Cruiseport is the owner of the
concessions rights in Ensenada, Mexico, constituting the primary focus of the
Company's activities over the past two years. Consequently, a default by the
Company in meeting a demand for payment by Mr. Downey would result in the loss
by the Company of its entire business and assets, if Mr. Downey exercised his
rights in the event of such default. The Company lacks the resources, at the
present time, to meet any demand for repayment by Mr. Downey of the advances to
date.
Pursuant to the loan and pledge agreement, Mr. Downey has the option of
realizing or otherwise exploiting the rights over the
22
<PAGE> 25
pledged shares, in the event of default, so as to recover the advances; or
alternatively, Mr. Downey, at his option, has the right to elect to acquire the
pledged shares in satisfaction of the loan, in the event of default. The
agreement pursuant to which Mr. Downey holds his rights further provides that
while there is an outstanding balance on the loan, the Company will not exercise
or attempt to exercise any voting rights in relation to the Langer shares except
on the direction of the Lender. Accordingly, Mr. Downey has the power to
effectively control the business of Playas and Cruiseport.
The advances by Mr. Downey, to date, have been utilized to fund
pre-development expenditures in Mexico; and in particular, to fund the
expenditures of the Company during these quarters, in clearing, dirt moving and
dredging operations on the Ensenada concession, discussed in more detail below.
$1,000,000 of the current debt of the Company, as of March 31, 1997, is
a payable of the Company to Granjas Los Bucaneros, S.A., due May 24, 1997. This
amount is due for the completion of the purchase by the Company of 3.5 miles of
coastal property adjoining Playas' 8.5 miles of coastal property in Campeche,
Mexico. The Company does not have the right to develop or otherwise use the
property being purchased from Granjas Los Bucaneros, S.A. until the $1,000,000
payment has been made; and the Company's contract with Granjas Los Bucaneros,
S.A. provides that the Company will lose its rights in the land if the payment
is not made by that time. The Company does not currently have the resources to
make the payment
23
<PAGE> 26
due on May 24, 1997, and intends to seek an extension of the due date of this
payment; but as of the filing of this report, has not done so.
Accounts payable of the Company were approximately the same at March
31, 1997 ($78,230) as at March 31, 1996 ($74,446), and represented outstanding
legal and accounting fees ($41,000), accrued travel expenses ($21,000) and other
miscellaneous payables.
Doggart, and certain entities which were shareholders of Doggart, have
advanced substantial funds to the Company during the last two fiscal years, and
during the first three quarters of the current fiscal year, for the conduct by
the Company of its pre- development activities in Mexico and to meet
administrative and overhead expenditures. Doggart is the entity which conveyed
to the Company its 8.5 miles of coastal property in Campeche, Mexico, in 1994,
which the Company continues to own through its subsidiary Playas Palmeras, S.A.
(see pages 1 - 9 of Item 1 of the Company's restated annual report for fiscal
1996). The amount of advances by Doggart and its shareholders since July 1, 1994
has been as follows: Doggart - $935,286, Penistone Finance S.A. - $750,000, and
Kestrel Management Corporation - $600,000, during fiscal years 1995 and 1996;
and Doggart - $516,221 during the first three quarters of the current fiscal
year. All of such advances made prior to June 30, 1996 have been converted, or
agreed to be converted, into stock in the Company at the rate of $1.00 per
share. The advances made during the first two quarters of the current fiscal
year by Doggart have been agreed to be converted
24
<PAGE> 27
into common stock in the Company at the rate of $0.50 per share (i.e. 2 shares
for each $1.00 of debt). As of the present time, 1,350,000 shares have been
issued to Penistone Finance S.A. and Kestrel Management Corporation, and 50,000
shares to Doggart, in fulfillment of the above-described conversion of debt, and
1,675,218 shares have yet to be issued to Doggart.
With respect to advances made by Doggart in each quarter ending after
December 31, 1996, the Company and Doggart have agreed as follows: the Company
will have the option to issue stock to Doggart, in conversion of such debt, at
the average bid price for the Company's stock during the last five trading days
of the respective quarter. The Company, as of this time, has not made a decision
with respect to whether to convert the $121,255 of advances by Doggart, during
the quarter ended March 31, 1997, into common stock.
As of this time, Doggart has agreed to continue to fund administrative
and/or pre-development needs of the Company during the current fiscal year (or
to arrange for such funding from other persons, such as Mr. Hugh Downey, as
described above), at a level comparable to the level of Doggart's and its
shareholders' advances in previous years, with an option by the Company to issue
stock in repayment of advances from Doggart as described above. Such advances,
however, would not cover the very substantial capital expenditures which the
Company must make to construct Phase I of the Ensenada Project and therefore to
continue its rights with respect to the Ensenada Project (discussed further
below), and to
25
<PAGE> 28
meet other capital commitments such as the purchase of the 3.5 miles of coastal
property, described above, from Granjas Los Bucaneros, S.A. Furthermore, the
Company cannot warrant the continuing ability of Doggart or others to finance
needs of the Company.
The auditors' report accompanying the financial statements of the
Company as of June 30, 1996 indicate that the financial condition of the Company
raises substantial doubt about the Company's ability to continue as a going
concern. More specifically, the Company's ability to continue as a going concern
is dependent upon securing very substantial financing, in the near future, to
undertake its large planned capital projects in Ensenada, Mexico, as well as its
ability to secure necessary funding to satisfy its working capital deficiency,
to meet ongoing working capital needs, and to meet any demand by Mr. Downey for
payment on his advances.
The Company's subsidiary, in Mexico, Ensenada Cruiseport Village, S.A.
de C.V. ("Cruiseport"), holds a 35-year concession in the Port of Ensenada,
Mexico, with an option on the part of Cruiseport to renew for an additional 12
years. The total focus of the Company's business and activities, at the present
time, is on this concession.
Pursuant to an agreement dated December 19, 1995 between the Company's
subsidiary, Ensenada Cruiseport Village, S.A. de C.V. ("Cruiseport"), and the
Port Authority of Ensenada (the "concession agreement"), Cruiseport has been
granted the right to build and
26
<PAGE> 29
operate a pier and cruiseship terminal and marina and marina village, together
with associated commercial and tourist development in a designated area of
approximately 47 acres in the Port of Ensenada, in consideration of substantial
annual rental payments to the Port Authority. The concession agreement grants to
Cruiseport the sole right to render extensive services within the concession
area, and to charge and receive anchorage fees from cruise ships which arrive in
the concession area.
The concession agreement provides for staged annual rental payments by
Cruiseport to the Port Authority, for its concession rights. Pursuant to a
modification to that agreement, executed in November, 1996, the annual rental
payments by Cruiseport are $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 provides that Cruiseport will 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.
The concession agreement provides for rights of cancellation of the
concession by the Port Authority for non-performance by Cruiseport of its
obligations under the concession, as well as financial penalties for
non-compliance.
Pursuant to the concession agreement, Cruiseport is committed to an
investment program in the range of $25,000,000 over a five-
27
<PAGE> 30
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-1966, 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 a current estimated cost of $12,000,000, encompasses 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, encompass 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
(which modification has been filed with the SEC as an exhibit to the Form 10-QSB
for the Company's quarter ended December 31, 1996). The modification provides
that the Company would provide detailed engineering and technical specifications
to the Port Authority, respecting Phase I, prior to December 31, 1996 (which has
been done) and respecting Phase II, on or before September 30, 1997.
28
<PAGE> 31
The concession agreement, as modified, provides that Cruiseport is
obligated to begin work on Phase I by no later than March 15, 1997, and on Phase
II within two months of such future time as it receives necessary approvals for
that Phase, after submission of the engineering and technical specifications
relating to that Phase. The Company's failure to meet either of those timelines
would constitute a default under the concession agreement, giving the Port
Authority the right to terminate the concession.
On March 10, 1997, the Company commenced dredging work for Phase I,
having received provisional 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. As of that time, a local
construction company in Ensenada, under the Company's supervision, had placed on
site and begun to operate three 110-ton drag lines, operating from the
shoreline, in the conduct of dredging operations. As of the date of the filing
of this report, the dredging operations are still in process.
The Company anticipates that it will complete the necessary dredging
operations and shoreline rock containment work, in order to commence pier
construction, by approximately June 30, 1997. After that time, further dredging
operations will continue offshore, as pier construction is commenced and
progresses, all of which is contingent upon the Company's ability to secure
major financing, as discussed in greater detail below. The Company
29
<PAGE> 32
estimates that the budget for the work estimated to be completed by June 30,
1997 will approximate $1,000,000 to $1,250,000, inclusive of the current
dredging operations, shoreline rock containment work, and work which was
conducted by the Company during the first two quarters of this fiscal year
(described below) in clearing debris and moving dirt from the above-water
portion of its concession area.
Hugh Downey, has, as above-described, advanced funds on a secured basis
to enable the Company to conduct the work described in the previous paragraph,
and as of the date of this report, such advances approximate $960,000. Mr.
Downey has committed to fund up to $1,000,000 (including the $960,000 funded to
date) for this phase, and the Company anticipates requesting Mr. Downey to
advance such additional amounts as may be necessary to fulfill this phase, if,
as the Company anticipates, such costs may total up to $1,250,000. Any such
additional advances would be subject to the same terms, including interest rate
and pledge of Langer shares, as above-described.
Mr. Downey has made no commitments, nor does the Company have any
expectations from him, concerning the major capital requirements of the Company
to complete all of Phase I (estimated, as above described, to require
approximately $12,000,000). Furthermore, management believes that if it is not
able to secure commitments for such capital, and if it is not, accordingly, able
to commence pier construction, within a reasonable time after completing its
current phase of dredging and shoreline containment
30
<PAGE> 33
(scheduled to be completed by June 30), such failure may give the Port Authority
the right to terminate the Company's concession.
The Company is currently diligently pursuing a commercial loan or loans
for $7 million of the projected cost of Phase I, with the assistance of a
Mexican banking institution, as well as private equity capital for the balance.
Alternatively, the Company would seek one or more joint venture partners.
However, it can give no assurances that it will be able to secure financing,
equity capital, or joint venture partners, or that if it is able to do so, that
it will be able to do so in a sufficient timely fashion. Management believes it
to be likely that any lending institution will require that a percentage of the
costs of Phase I (e.g. 30% or greater) be financed with equity.
The Company has not yet entered into a construction contract with a
Mexican general contractor for carrying out the balance of Phase I. (The
contractor which has begun mechanical dredging operations on March 10, 1997 is a
local operator who is not of the size or resources necessary to act as general
contractor for the overall project). However, management does not believe that
entering into a construction contract for the balance of Phase I will be
protracted or difficult, when and if commitments for the capital required for
Phase I are secured.
The Company reported in its restated annual report for fiscal 1996 that
it had been engaged, starting in the first quarter of the current fiscal year,
in clearing debris from the above-water portion of its concession area, and was
also engaged in moving dirt
31
<PAGE> 34
from its above-water concession area to an adjoining portion of the harbor for
use as foundation fill for a federal Navy training center. Pursuant to its
modified concession agreement, the activities of Cruiseport in supplying
foundation fill for the federal Navy training center were formalized into an
obligation to provide and move to the Navy site up to 200,000 cubic meters of
such fill on or before December 31, 1996. Cruiseport met that commitment, and
incurred approximately $450,000 of expenses in regard to its clearing and dirt
moving activities, as of the end of the second quarter of 1996.
In addition to the dependency of the Company on raising capital for its
Ensenada project, the Company's ability to meet its obligation to Granjas Los
Bucaneros, S.A. with regard to the above-described 3.5 miles of coastal property
in Campeche, Mexico, and its ability to develop that 3.5 miles of coastal
property and the adjoining 8.5 miles of coastal properties in Campeche which the
Company acquired in 1994, depends upon the Company's ability to secure capital
financing.
PART II
Item 1. Legal Proceedings
Reference is made to the Company's description, in its Form 10-QSB for
the quarter ended December 31, 1996, of a legal action pending in the United
States District Court for the District of Idaho, against the Company, various of
its present and former officers and directors, and other individuals named Barry
Gill and
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Stephen Bailey and their spouses.
A magistrate's recommendation to the Court that various of the federal
and state claims be remanded to state court has now been confirmed by the Court.
Items 2. Changes in Securities.
There are no reportable events in the quarter, concerning changes in
securities.
However, at a meeting of the shareholders held on May 12, 1997, the
shareholders voted to amend the articles of incorporation of the Company by
adding a provision which would cancel 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
further provided that the number of authorized shares of the Company would
remain at 100,000,000 shares, at par value per share of $0.10.
As of the time of the shareholder's vote, there were 54,213,721 shares
issued and outstanding. The amendment will result in the reduction of that
number of issued and outstanding shares, currently, to 1,807,124 shares. The
authorized, but unissued shares, will accordingly be 98,192,876 shares.
The cancellation of 29/30 of the issued and outstanding shares was
effective at the beginning of business on May 19, 1997.
The Company mailed to shareholders on April 22, 1997, and filed with
the Securities and Exchange on or about April 18, 1997, an Information Statement
describing the above-stated proposed amendment to the articles of incorporation.
In that Information
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<PAGE> 36
Statement, management indicated its belief that the consolidation of shares was
advisable in order to increase the bid price of the Company's stock (currently,
approximately $0.09 per share) and therefore attract investors to the Company,
and in light of the current proposed NASDAQ rule change which requires a $1
minimum bid price per share for continued NASDAQ listing, without an exception
to that requirement (as under the current rule) where the value of the total
market float exceeds $1 million. At the same time, management indicated that it
could not represent that consolidation of the issued shares, as provided by the
amendment, would achieve any particular result in terms of the consequent bid
price for the shares. The Information Statement is incorporated herein by
reference.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securities.
No matter was submitted to a vote of security holders during the
quarter ended March 31, 1997. However, at a shareholders' meeting held on May
12, 1997, the following resolutions were adopted:
1. Amending the articles of incorporation to cancel 29/30 of
the issued and outstanding shares, as described in Item 2 above.
2. Amending the articles of incorporation to change the name
of the Company to "International Resort Developers, Inc."
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<PAGE> 37
3. Electing the following persons as directors of the Company: Patrick
J. Magee, Peter G.K. Oosthuizen, and Patrick Lappin.
4. Appointing La Voie, Clark, Trading & May, P.C., Tucson, Arizona, as
the accountants to audit the financial statements of the Company for its fiscal
year ending June 30, 1997.
The amendments to the Company's articles of incorporation, canceling
29/30 of the outstanding shares, and changing the name of the Company, were
effective May 19, 1997.
The number of votes cast in favor of each resolution, including each
person elected as a director, was 31,630,909 votes (representing the same number
of shares). There were no votes against any resolution, or against any person
nominated as a director, or for any other person as director. The number of
shares which were not represented in person or by proxy at the meeting, and for
which no vote was therefore tabulated on any matter before the meeting, were
22,582,812 shares. Of these shares, 15,491,985 shares were held by brokers.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -- 27 Financial Data Schedule (to be filed by amendment)
(b) No Forms 8-K were filed during the quarter.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on
35
<PAGE> 38
its behalf by the undersigned hereunto duly authorized.
INTERNATIONAL RESORT DEVELOPERS, INC.
May 19, 1997 By: /s/ Patrick Magee
- ------------ -------------------------------
date Patrick Magee, President and
Chief Financial Officer
36
