<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
(For Quarterly Period ended December 31, 1997)
Commission File No. 1-6110
AMERISTAR INTERNATIONAL HOLDINGS CORPORATION
(FORMERLY INTERNATIONAL RESORT DEVELOPERS, INC.)
Tennessee 82-0291307
- -------------------------------- -------------------------
State of incorporation I.R.S. Employer No.
1801 West End Avenue, Suite 1110
Nashville, Tennessee 37203
- --------------------------------- ------------------
Address of Principal Office zip code
Registrant's Telephone Number: 615-329-3300
Number of outstanding shares:
<TABLE>
<CAPTION>
Outstanding
Class as of December 31, 1997
- ----- ------------------------
<S> <C>
Common Shares, with
par value $0.10 per share 1,807,124
</TABLE>
<PAGE> 2
PART I
Item 1. Financial Statements.
See following pages.
<PAGE> 3
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997
(UNAUDITED)
3
<PAGE> 4
INTERNATIONAL RESORT DEVELOPERS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CONSOLIDATED BALANCE SHEETS ..................................................... 5-6
CONSOLIDATED STATEMENTS OF OPERATIONS ........................................... 7-8
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY .................................................. 9
CONSOLIDATED STATEMENTS OF CASH FLOWS ........................................... 10-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...................................... 12-23
</TABLE>
4
<PAGE> 5
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
December 31, June 30,
1997 1997
------------ ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 23,270 $ 876
Accounts receivable - trade 18,577
Accounts receivable - related party 30,746
Inventory 65,769
Prepaid expenses 7,881
Accrued interest and other receivables 39,357 300
----------- ----------
Total current assets 185,600 1,176
----------- ----------
PROPERTY AND EQUIPMENT
Mining property 250,430 250,430
Furniture and equipment 206,988
Accumulated depreciation (3,149)
----------- ----------
Net property and equipment 454,269 250,430
----------- ----------
OTHER ASSETS
Land, purchase rights concessions and related
capitalized costs and improvements 3,342,062 6,180,764
Long-term notes and advances receivable (Note14) 1,200,000
Goodwill, net of accumulated amortization 814,092
Investment in unconsolidated companies 10,000 10,000
----------- ----------
5,366,154 6,190,764
----------- ----------
$ 6,006,023 $6,442,370
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited)
December 31, June 30,
1997 1997
------------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Current debt $ 1,012,527 $1,861,799
Accounts payable 76,575 53,914
Accrued payroll and related taxes 34,182 121,575
Override royalty and interest payable 13,325 138,463
Loans payable - Doggart Trading, Ltd. and Hugh Downey 82,105 1,138,685
----------- ----------
Total Current Liabilities 1,218,714 3,314,436
----------- ----------
LONG-TERM DEBT
DEFERRED INCOME TAXES PAYABLE - (NOTE 7)
MINORITY INTEREST IN SUBSIDIARY 284,183 284,183
----------- ----------
COMMITMENTS AND CONTINGENCIES (NOTE 12)
STOCKHOLDERS' EQUITY - after giving retroactive
1.30 reverse stock split (See NOTE 1):
Common Stock, $.10 par value, 100,000,000 shares
authorized, 2,241,298 issued for December
1997 and 1,841,298 issued for June 1997 224,129 184,129
Additional paid in capital 7,638,158 7,478,158
Less shares of common stock held in Treasury-at cost;
267 share for 1997, 1996 and 1995 (2,895) (2,895)
----------- ----------
7,859,392 7,659,392
Retained Deficit (3,356,266) (4,815,641)
----------- ----------
Total Stockholders' Equity 4,503,126 2,843,751
----------- ----------
$ 6,006,023 $6,442,370
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For The Six Months Ended December 31,
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
REVENUES
Sale of Real Estate Development-Ensenada (Note 13) $ 5,150,000 $
Sales - Ameristar 88,024
-----------
Total revenues 5,238,024
COST OF REVENUES
Cost of developing Real Estate - Ensenada 3,451,964
Cost of sales - Ameristar 27,533
-----------
GROSS PROFIT 1,758,527
OPERATING EXPENSES
Real estate acquisition overhead and administrative expenses 150,707
Selling - Ameristar 96,132
General and administrative 244,439 317,462
----------- ----------
Total Operating Expenses 340,571 468,169
----------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 1,417,956 (468,169)
----------- ----------
OTHER INCOME (EXPENSE)
Interest income 41,419
----------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 1,459,375 (468,169)
PROVISION (CREDIT) FOR INCOME TAXES - (NOTE 7)
----------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 1,459,375 (468,169)
DISCONTINUED OPERATIONS - (NOTE 1)
Loss from discontinued oil & gas operations - less
applicable income tax credits (600)
----------- ----------
NET INCOME (LOSS) $ 1,459,375 $ (468,769)
=========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,889,124 1,840,131
=========== ==========
INCOME (LOSS) FROM CONTINUING OPERATIONS
PER SHARE $ .773 $ (.255)
=========== ==========
NET INCOME (LOSS) PER SHARE $ .773 $ (.255)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For The Three Months Ended December 31,
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
REVENUES
Sale - Ameristar $ 88,024 $
COST OF REVENUES
Cost of sales - Ameristar 27,533
----------- ----------
GROSS PROFIT FROM REAL ESTATE DEVELOPMENT 60,491
OPERATING EXPENSES
Real estate acquisition overhead and administrative expenses 124,568
Selling - Ameristar 96,132
General and administrative 187,584 138,308
----------- ----------
Total Operating Expenses 283,716 262,876
----------- ----------
LOSS FROM CONTINUING OPERATIONS (223,225) (262,876)
----------- ----------
OTHER INCOME (EXPENSE)
Interest income 22,184
-----------
LOSS BEFORE INCOME TAXES (201,041) (262,876)
PROVISION (CREDIT) FOR INCOME TAXES - (NOTE 7)
NET LOSS $ (201,041) $ (262,876)
=========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,936,951 1,840,131
=========== ==========
NET LOSS PER SHARE $ (.104) $ (.143)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY From July 1, 1995
through December 31, 1997
<TABLE>
<CAPTION>
Common Stock
------------------------------------- Retained
Paid in Earnings
Per Share Shares Amount Capital (Deficit)
--------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1995 49,439,021 $ 4,943,902 $ 1,313,439 $(3,029,072)
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) (4,000,000)
Net loss for the year ended June 30, 1996 (1,080,885)
------------ ----------- ----------- -----------
BALANCE, JUNE 30, 1996 55,169,007 5,516,901 2,110,426 (4,109,957)
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
Net loss for the year ended June 30, 1997 (705,684)
------------ ----------- ----------- -----------
BALANCE, JUNE 30, 1997 1,841,298 184,129 7,478,158 (4,815,641)
Shares issued in Ameristar acquisition .50 400,000 40,000 160,000
Net income for the six months ended
December 31, 1997- Unaudited 1,459,375
------------ ----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 $ 2,241,298 $ 224,129 $ 7,638,158 $(3,356,266)
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For The Six Months Ended December 31,
<TABLE>
<CAPTION>
1997 1996
--------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 1,459,375 $ (468,769)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, amortization
& valuation allowance 16,947
Change in assets and liabilities:
Increase in accounts receivable (18,577) (579)
Decrease in inventory 8,857
Increase in accrued interest, prepaid and other (35,905)
Increase (decrease) in accounts payable and
accrued expenses (123,188) 94,655
Decrease in interest payable (125,138)
---------------
Net cash provided by (used for) operating activities 1,182,371 (374,693)
--------------- -----------
INVESTING ACTIVITIES:
Proceeds from sale of real estate, net 3,451,964
Increase in long-term notes (1,200,000)
Capitalized real estate predevelopment costs (613,262) (522,832)
Net assets of Ameristar acquired for cash (882,552)
Purchase of property and equipment (2,395)
---------------
Net cash (used) provided by investing activities 753,755 (522,832)
--------------- -----------
FINANCING ACTIVITIES:
Additions to debt:
Short-term 465,268
Payments on debt:
Short-term (1,913,732)
Proceeds from stock subscribed 394,960
--------------- -----------
Net cash provided by (used for) financing activities (1,913,732) 860,228
--------------- -----------
NET INCREASE (DECREASE) IN CASH 22,394 (37,297)
CASH AT BEGINNING OF PERIOD 876 38,173
--------------- --------------
CASH AT END OF PERIOD $ 23,270 $ 876
=============== ==============
Taxes paid during the period $ 0 $ 0
=============== ==============
Interest paid during the period $ 155,900 $ 0
=============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
INTERNATIONAL RESORT DEVELOPERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the periods ended December 31, 1997 and 1996
SUPPLEMENTAL SCHEDULES OF NONCASH ACTIVITIES:
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.
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.
On December 9, 1997 the shareholders approved an acquisition of the assets of
Growth Strategies, Inc. (GSI) dba Ameristar Worldwide Entertainment for 400,000
shares of IRD common stock (valued at $.50 per share) and $882,552 in cash,
including advances. The asset allocation of $1,082,552 disclosed in Note 1 is
inclusive of both the cash and value of the shares issued.
11
<PAGE> 12
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
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. During
1997 the Company changed its name from International Basic Resources, Inc. to
International Resort Developers, Inc. During July, 1997 the Company closed the
sale of its Ensenada project with a third party for a gross sales price of
$5,150,000. During December 1997 the Company completed its acquisition of Growth
Strategies, Inc. (GSI) as discussed further in this note.
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.
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 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.
12
<PAGE> 13
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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.
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.
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 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 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.
13
<PAGE> 14
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. 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 December 31, 1997, June 30, 1997 or June 30 1996.
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.
Acquisition of the net assets of Growth Strategies, Inc. - On December 9, 1997
the shareholders approved the purchase of the net assets of Growth Strategies,
Inc. dba Ameristar Worldwide Entertainment for 400,000 shares of IRD common
stock at $.50 per share and $882,552 cash, including advances. The cost was
allocated to the purchased assets as follows:
<TABLE>
<S> <C>
Current Assets, including $23,484 cash $ 139,889
Property and Equipment 204,593
Goodwill 827,890
----------
Total assets $1,172,372
==========
</TABLE>
14
<PAGE> 15
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Acquisition of the net assets of Growth Strategies, Inc.
<TABLE>
<S> <C>
Current Liabilities $ 66,337
Cash investment and advances from IRD 906,035
Common stock issued 200,000
----------
Total liabilities assumed and stock issued $1,172,372
==========
</TABLE>
Had the acquisition occurred as of July 1, 1997, the following proforma results
of year to date operations as of December 31, 1997 may have resulted:
Revenues
Net loss
Net loss per share
Additionally, the following proforma results of operations for the quarter
ended December 31, 1997 may have resulted:
Revenues
Net loss
Net loss per share
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 June 1997 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.
15
<PAGE> 16
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
NOTE 2--LAND HELD FOR DEVELOPMENT AND RESALE (Continued)
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.
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.
16
<PAGE> 17
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 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 December 31, 1997 consist of the following:
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
Other advances payable 12,527
----------
Total Current Debt $1,012,527
==========
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.
17
<PAGE> 18
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
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 totaling 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 $82,105 have not been
retired as of December 31, 1997.
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.
18
<PAGE> 19
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
NOTE 7--PROVISION (CREDIT) FOR INCOME TAX (Continued)
The components of the provision (credit) for income taxes at December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Current
Federal $ - $ -
State - -
------- ----------
Total current provision - -
Deferred
Federal - -
State - -
-------- ----------
Total deferred provision - -
Total provision (credit)
for income taxes $ - $ -
======== ==========
</TABLE>
The reconciliation of the income tax (provision) expense at the statutory rate
to the effective rate at December 31, is as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
Amount % Amount %
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Federal taxes (credit)
At the statutory rate $ 496,000 34.0 % $(160,000) (34.0)%
Additional deferred tax
assets providing no
tax benefit 160,000 34.0
NOL of subsidiaries
providing no tax
benefit - - - -
NOL carryover utilized
in the current year (496,000) (34.0)
Other - - - -
---------- ------- -------- -------
$ -% $ - -%
========== ======= ======== =======
</TABLE>
19
<PAGE> 20
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
NOTE 7--PROVISION (CREDIT) FOR INCOME TAX (Continued)
For financial reporting purposes, a valuation allowance of $290,000 has been
deducted for the full amount of the deferred tax asset resulting from the
Company's net operating loss carry forwards 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 $ - $ 580,000 $ 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.
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.
20
<PAGE> 21
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
NOTE 11--EXECUTIVE COMPENSATION AND INCENTIVE STOCK OPTION PLAN
<TABLE>
<CAPTION>
12/31/97 6/30/97 6/30/96
-------- -------- -------
Principal Salary- Salary- Salary-
Position Fees Fees Fees
- --------- -------- -------- -------
<S> <C> <C> <C>
M.K.Miller - Past Chairman $ - $ - $ 16,000
Alton E. Jones - Past President/Chairman - 147,400 186,000
Nigel Spinks - Consultant - - -
David P. Lawrence - Director 33,574 48,000 13,500
Steven Barker - Vice President- - 60,000 47,000
Ensenada Cruiseport Village
Francis Cobb - Past Secretary - 39,050 106,000
Chris Millar - Director - - -
Sam Watson - Secretary 18,500 - -
Donald Spears - Director - - -
Pieter G.K. Oosthuizen 25,335 - -
</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.
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.
21
<PAGE> 22
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
NOTE 12--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
above with Advanced Capital Services. 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 plaintiffs 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.
The Company has been named in a civil action regarding claimed fraudulent
inducements offered to the plaintiffs by the Company, and its officers, to
acquire shares of the Company. The plaintiffs claim damages of $1.5 million. The
plaintiffs 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 December 31, 1997 the
Company's current liabilities exceed its current assets by $1,033,000. 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.
22
<PAGE> 23
INTERNATIONAL RESORT DEVELOPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the period ended December 31, 1997
NOTE 12--COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS (Continued)
The Company has completed an acquisition of business assets from Growth
Strategies, Inc. (GSI) . These assets are primarily related to the sales,
installation and distribution of satellite dishes, Internet access equipment and
software and various programming to residential customers. The Company
anticipates generating cash flow and operating income from this new venture. In
connection with the acquisition of GSI on December 9, 1997 the Company recorded
$827,890 of goodwill based upon its future expectations of profitability. The
Company has minimal current revenues or consistent sources of cash flow. The
Company anticipates generating cash flow from development of productive
operations of its GSI 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. The
Company did produce net cash flow of approximately $3,450,000 during August 1997
from the sale of its Ensenada project. Approximately $1,870,000 of these
proceeds was used to pay short-term liabilities. At December 31, 1997 the
Company's current liabilities exceed its current assets by approximately
$1,033,000. The Company believes it may be able to extend the maturity of the
$1,000,000 due May 28, 1998 secured by the Bucaneros Property (Note 5).
NOTE 13--LONG-TERM NOTES AND ADVANCES RECEIVABLE
In connection with the sale of the Ensenada Project the Company has received a
note receivable in the amount of $1,200,000. This note bears interest at 7.2%
and is payable as $800,000 on January 19, 1998 and $400,000 on July 19, 1998.
23
<PAGE> 24
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Certain statements contained in this Quarterly Report, including,
without limitation, statements containing the words "anticipates," "it is
anticipated," "believes," "estimates," "hopeful," and "goal," and words of
similar import, constitute forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Actual results could differ
from those contained in forward looking statements, and readers are referred to
the Company's Form 10-KSB for fiscal year ended June 30, 1997, to the Company's
Form 10-QSB for its fiscal quarter ended September 30, 1997, and to this Report,
for discussions of various factors which could cause such results to differ.
Factors which could cause such results to differ include, without limitation,
lack of delivery of product by AmeriStar Worldwide Entertainment Corp.'s
(AWEC's) suppliers for resale by AWEC, through its distributorship network;
unwillingness of a supplier to enter into a distributorship arrangement with
AWEC or termination by a supplier of AmeriStar's distributorship arrangement
with said supplier; failure of AWEC's distributorship network to effectively
market products; insufficiency of customer orders for products and/or
24
<PAGE> 25
services distributed by AWEC through its distributor network; or insufficient
working working capital to undertake contemplated operations, inclusive of the
operations of AWEC or the development and resale of the Company's Mexican
property interests.
As reported in Part II, Item 4, following, at the annual meeting of
shareholders of the Company, on December 9, 1997, the acquisition by the
Company of the stock of AmeriStar Worldwide Entertainment Corp. ("AWEC"), a
Nevada corporation, was approved, and became effective on that date. At the
same meeting, the merger of the Company into its wholly owned subsidiary,
AmeriStar International Holdings Corporation, a Tennessee corporation, was also
approved. The merger was finalized, through filings with the appropriate state
authorities, on January 22, 1998. From that date forward, the name of the
Company is AmeriStar International Holdings Corporation (hereafter referred to
as "AmeriStar"), the Company's state of incorporation is Tennessee, and each
person who was a shareholder of International Resort Developers, Inc. ("IRD"),
holds, instead of his or her shares in IRD, the same number and par value of
shares in AmeriStar. The stock symbol of AmeriStar on NASDAQ is "AIHC".
Hereafter in this Report, the term "Company" will be used to refer
interchangeably, and collectively, to AmeriStar, IRD, and its consolidated
subsidiaries, including AWEC.
AWEC, which was acquired by the Company, effective December 9, 1997,
had in turn acquired, on August 22, 1997, the rights to its
25
<PAGE> 26
name, and other tangible and intangible assets and relationships, including a
nationwide distributor network comprised of approximately 8,500 home-based
distributors, from a company named AmeriStar Worldwide Entertainment, Inc.
("AWEI"). Based upon unaudited figures supplied to the Company, AWEC, as of
September 30, 1997, had a stated book value of tangible and current assets,
comprised of the assets it had acquired from AWEI, in the amount of $313,137
(including computer equipment and furniture with an approximate book value of
$200,000, and inventory, receivables and other current assets with an
approximate book value of $100,000), offset by current liabilities in the
approximate amount of $50,000.
The business which was conducted by AWEI, to which AWEC succeeded,
was the resale, to the residential market throughout the United States, of
satellite dishes for capturing television signals, and the earning of
commissions on related video and audio programming subscribed to by the
purchasers of said satellite dishes. AWEC conducts such business pursuant to a
non-exclusive distributorship arrangement, with EchoStar Communications
Corporation ("EchoStar"), a manufacturer and distributor of satellite dishes
and related programming. EchoStar currently offers 170 channels to subscribers
to its program network. It is anticipated that after March of 1998, when an
additional satellite is active, EchoStar will have the capability of
broadcasting 500 channels; and the Company believes that EchoStar will be the
only direct broadcast service provider to offer local programming to the
largest 40 U.S. cities.
26
<PAGE> 27
AWEC has distributed the EchoStar products through its own network of
"Independent Distributors." These distributors are home-based persons who have
signed an "Independent Distributor" agreement with AWEC or its predecessor
AWEI, and have paid to AWEC or its predecessor $89.95 for an Independent
Distributor kit or $195 to enroll in AWEC's "Sales Director Leadership Training
Bonus Program," including the kit. These distributors earn commissions from
AWEC for the products they distribute on behalf of AWEC. AWEC continues to
add, and at the present time has over 9,000, Independent Distributors. Up
until mid-January, 1998, AWEC, as did AWEI before it, communicated weekly with
its distributors through a weekly closed-circuit one-hour satellite slot
purchased from EchoStar (at a cost to AWEC of $1,650 per week); and utilized
this broadcast to apprise its distributors of current products available for
distribution, benefits of the products and selling strategies. AWEC is
currently evaluating whether there are more cost-effective ways of
communicating with its distributors in the foregoing regards.
Pursuant to AWEC's distributorship agreement with EchoStar, AWEC
purchases and resells satellite dishes; and, in addition, receives from
EchoStar an initial commission of between $50 and $100, and residual monthly
commissions of between $0.50 and $1.50 per month, for a subscriber to
EchoStar's programming who has purchased a satellite dish through AWEC.
The Company believes that it is currently able to realize a margin in
the average range of $150 (net of commissions to the
27
<PAGE> 28
Company's own distributors), from each installation of a satellite dish
distributed by AWEC.
Since November of 1997, EchoStar has not been able to deliver product
to the Company, because of a reported shortage of components. EchoStar has
told the Company that product will be available, again, in March, 1998, though
the Company can give no assurances in said regard. Management estimates that
it can place four to five hundred dishes per month, through its distributor
network, depending upon availability of product.
In August of 1997, AWEC, prior to its acquisition by IRD, became an
authorized agent of UniDial Incorporated ("UniDial") of Louisville, Kentucky, a
nationwide provider of long-distance telephone services, internet access,
multimedia conference services and data networking, for the marketing, on a
non-exclusive commission basis, of Unidial's services to small and medium size
businesses and residential customers in the United States. The agent's
agreement is for a term of two years, terminable at an earlier time by UniDial
for any material breach of the contract by AWEC, the failure of AWEC's accounts
to aggregate $5,000 in monthly revenue after the sixth month of the
distributorship agreement, or the failure of AWEC's accounts to aggregate
$10,000 in monthly revenue after the twelfth month of the distributorship
agreement.
In December, the Company earned $1,260 in commissions (net of
commissions to the Company's distributors) from its distributorship arrangement
with Unidial, and is hopeful that its monthly revenues will increase to the
$5,000 range.
28
<PAGE> 29
In January, 1998, AWEC entered into a non-exclusive remarketer
agreement with WebSurfer, Inc. ("WebSurfer), a Canadian company located in
Markham, Canada, and a subsidiary of Batria Corp., a multi-national
manufacturer of computer hardware equipment, for the purchase and resale by
AWEC of the following Websurfer product. WebSurfer has developed a product
which, it reports, will enable the user to browse the internet through one's
television set, utilizing a proprietary set-top box, to which can be connected
a printer, and also utilizing a hand-held wireless monitor and wireless
keyboard. It is also reported that the system will enable a customer to
utilize the internet to place telephone calls to a user who employs the same
system. The Company intends to utilize its distributor network to market this
system, and anticipates being able to realize a gross margin of approximately
$150 per system placed, net of commissions to its distributors. The Company
anticipates taking delivery of approximately 100 of the systems in the near
future, but has been informed that it will be at least 60 days before a steady
supply of systems from WebSurfer is available. The arrangement is for a term
of one year, renewable by either party, and terminable at an earlier time by
WebSurfer for failure of the Company to meet its obligations under the
agreement, inclusive of minimum purchase obligations, which are 500 units per
month during the first quarter of 1998 and increasing substantially thereafter.
AWEC, in January of 1998, also entered into an agreement with SkyMall,
Inc. whereby for a test period of 90 days, SkyMall, Inc.
29
<PAGE> 30
has agreed to a link from AWEC's home page to SkyMall's shopping lobby on the
World Wide Web, and to pay to AWEC a 5% commission for customer purchases from
SkyMall referred from AWEC's home page. SkyMall is the marketer of products to
airline passengers through publications present on airlines and through the
internet.
AWEC is also currently negotiating with, and anticipates entering into
a distributor agreement with, ADT Corporation, the world's largest manufacturer
and supplier of home and business security systems, for the distribution by
AWEC of ADT's security systems. Management anticipates that a distributor
agreement will be finalized in the near future, and that the Company's gross
margin from the purchase and resale of such systems (net of commissions to the
Company's distributors) will be in the range of $300 per system, plus
residuals. Management's goal is to reach a volume of 500 systems per month to
residential and/or business customers, by 1998 year-end.
It must be emphasized that the success of the Company in meeting its
goals, in distributing products pursuant to the above-stated distributorship
arrangements, and therefore its ability to operate profitably, is not only
dependent upon customer orders, but also the availability of product to the
Company for distribution, and in the case of ADT, the finalization of the
agreement. Consequently, no representations can be made as to whether the
Company will be able to meet its goals. Customer acceptance also depends upon
the viability of the product being distributed, and its competitive position to
other products on the market or which
30
<PAGE> 31
may come to market. Whereas management believes that WebSurfer, discussed
above, is an exciting product, its workability, potential, and customer
acceptance has yet to be proven.
The reported revenues of AWEI, during the eighteen months it was in
business, prior to the time of the sale of its assets to AWEC, from the sale of
EchoStar products and the sign-up of its "Independent Distributors," were
approximately $3,000,000; and AWEI's reported net loss from operations over the
previous 12 months approximately $1,000,000. Management believes that a
principal contributor to a poor bottom line was that the Company did not have
in place an appropriate credit card clearing arrangement to process high
volumes of customer transactions. As of October, 1997, management believes
that such an arrangement is in place.
As of September 30, 1997, the Company had advanced to AWEC $655,525,
$400,000 of which was utilized by AWEC to satisfy a $400,000 note issued by
AWEC in connection with its acquisition of AWEI's business, and the remainder
of which was utilized to fund deficit operations of AWEC between the date of
that acquisition and September 30, 1997. Between October 1, 1997 and December
31, 1997), the Company advanced to AWEC an additional approximate $300,000 to
cover deficit operations.
The deficit in operations of AWEC in January, 1998 was approximately
$50,000. Management is hopeful that it will be able to become profitable in
the next several months. The attainment of such profitability, in management's
judgment, depends upon the
31
<PAGE> 32
resumption of delivery by EchoStar of shipments to the Company, and/or the
ability of the Company to be successful in promoting and selling products
pursuant to its other distributorship arrangements above discussed. It is
excited about the potential of these distributorships, although it can make no
assurances with respect to their success.
The Company continues to own, without mortgage encumbrances, and
intends to exploit the potential of, substantial property interests in the State
of Campeche, Mexico, namely coastal properties, approximately 8.5 miles in
length, constituting the "Palmeras" and "Irvine" parcels, in the State of
Campeche, Mexico. These properties, acquired by the Company in 1994, have been
extensively discussed in previous Reports of the Company. It is the intention
of the Company, dependent upon securing necessary capital to complete
infrastructure (e.g., provision of water and electricity), to utilize the
business of AWEC, including AWEC's home page on the world-wide web, to market
residential lots into which the Palmeras and Irvine parcels of the Company, in
the State of Campeche, Mexico, are being subdivided.
32
<PAGE> 33
Results of Operation.
During the quarter ended December 31, 1997, the Company incurred a
loss from continuing operations of $223,225 (and a net loss, after income from
interest, of $201,041). Of this amount, approximately $145,000 is attributable
to overhead administrative expenses not directly connected with the business of
AWEC, namely legal and accounting, consulting, and officer and director fees
and expenses of the Company. The balance of the loss, namely $78,626, reflects
the business of AWEC for the month of December. Inasmuch as the acquisition of
AWEC was not consummated until December 9, 1998, the operations of AWEC have
been consolidated into the financial statements of the Company only for the
month of December, 1997.
The loss of AWEC for the period October 1, 1997 through December 31,
1997 was $306,012 (and, between the date of the purchase of the business of
AWEI by AWEC on August 22, 1997, and December 31, 1997, was $449,705). As
indicated in the previous paragraph, most of this loss has not been reflected
in the
33
<PAGE> 34
financial statements of the Company which are included in this Report, since
the acquisition of AWEC was not consummated until December, 1997.
The accrued revenues of AWEC (from orders booked, though not
necessarily shipped, and before costs of goods sold, including commissions to
AWEC's distributors) declined from $176,000 in September, 1997, and $120,000 in
October, 1997, to approximately $88,000 in each of the months of November and
December, 1997, primarily reflective of the suspension of delivery of product
from EchoStar. Of the bookings in October through December, approximately
$16,000 in December, $13,000 in November, and $35,000 in October, pertained to
sign-up of distributors by AWEC, reflected by sales of distributor kits and
other sales aids to such distributors, and most of the balance to orders for
EchoStar systems. Orders booked by AWEC in January, 1998, appear to be
approximately $70,000; and its deficit in operations in the range of $50,000 -
$70,000 for that month.
Management is optimistic that AWEC will be able to operate on a
break-even, and then profitable basis, in the coming several months, dependent
upon a resumption of deliveries from EchoStar and/or its ability to be
successful in exploiting the business opportunities and prospects from its
relationships with WebSurfer, SkyMall and ADT, discussed above.
For the six-month period ended December 31, 1997, the Company's income
from continuing operations was $1,459,375, compared with a loss of $468,169 for
the comparable period of a
34
<PAGE> 35
year earlier. This income was the result (reported in the last quarterly
Report) of the recognition of revenues, in the quarter ended September 30,
1997, of $5,150,000 from the sale of Ensenada Cruiseport Village, S.A. de C.V.,
offset by costs of such revenues of $3,451,964, inclusive of the capitalized
cost of the Ensenada project at June 30, 1997, and net of administrative
expenses in that quarter of $58,835. (The $5,150,000 of revenues was received
$3,950,000 in cash, $800,000 in a note payable in January, 1999, and $400,000
in a note payable in June, 1999). The net income of the Company for the quarter
ended September 30, 1997 was therefore $1,660,436.
Capital Resources.
As of September 30, 1997, as reported in the previous quarterly
report, the total current assets of the Company were $518,997. These assets
reflected the receipt by the Company of $3,950,000 in cash proceeds from the
sale of its Ensenada concession, less the satisfaction of liabilities from that
amount, less the advance to AWEC of $655,525 as of September 30, 1997. The
current liabilities as of that date were $1,188,644. These liabilities
included the following: 1) $1,007,799, which the Company is obligated to pay on
or before May 24, 1998, with further interest, pursuant to its contractual
right to acquire the Los Bucaneros property (comprising 3.5 miles of beachfront
land located in the State of Campeche, Mexico), if the Company is to perfect
and maintain title to this property; 2) $121,155 owing to Doggart Trading,
Ltd., a substantial shareholder in the Company, for
35
<PAGE> 36
advances which it has made to the Company for working capital; and 3) other
current liabilities of approximately $60,000 for accounts payable, accrued
payroll, and royalties and interest payable.
The deficit working capital position of the Company, as of September
30, 1997, namely $669,647, increased to a deficit working capital position, as
of December 31, 1997, of $1,033,054. This increase, in the amount of $363,407,
is accounted for by: 1) the loss in operations, reflected in the financial
statements of the Company for the three months ended December 31, 1997, of
$201,041, plus 2) approximately $300,000 of losses of AWEC, for periods prior
to December 1, 1997, which have not been reflected in the financial statements
for the quarter ended December 31, 1997, but which were covered by advances
from the Company, less 3) inventory, receivables and other current assets with
a book value of approximately $147,430 acquired by the Company as the result of
its purchase of AWEC.
During the month of January, 1998, the Company borrowed $50,000 from
EuroBank, a financial institution in the Cayman Islands, to cover deficit cash
needs during that month. At the present time, the Company does not have in
place a line of credit or other commitments from financial institutions, or from
other sources of capital, to cover continued deficit operations, to satisfy
current liabilities, or for other purposes. The ability of the Company to
continue operations, including the operations of AWEC, the ability of the
Company to complete its acquisition of the Los Bucaneros property, and the
ability of the Company to fulfill its intentions
36
<PAGE> 37
with respect to the subdivision and marketing of parcels from its Palmeras and
Irvine parcels in Mexico, is therefore dependent upon the near-term ability of
AWEC to undertake operations on a break-even or profitable basis, and the
Company's ability to secure financing to cover any further deficits, to meet its
current liabilities, to proceed with the acquisition of title to the Los
Bucaneros property, and to complete infrastructure and therefore successfully
market its Palmeras and Irvine parcels, and the Company's ability to secure
necessary financing to meet its current liabilities. In the past, the Company
has relied on advances from certain large shareholders to meet deficits.
However, it has no commitments from shareholders as to such advances in the
future.
The current liabilities of the Company as of December 31, 1997 are as
follows: $1,012,527, reflecting the above-described obligation of the Company,
payable on before May 24, 1998, if the Company is to perfect title to the Los
Bucaneros property (comprising 3.5 miles of beachfront land in the State of
Campeche, adjacent to the Company's Playas and Palmeras properties); $76,575 in
accounts payable, comprising $66,230 of payables of AWEC and the remainder legal
and accounting fees; $34,182 of accrued payroll of AWEC; $13,325 of accrued
royalties from previous oil and gas operations conducted by the Company; and
$82,105 payable to Doggart Trading, Ltd. During the quarter, the Company
reduced its payable to Doggart, which was $122,155 as of September 30, 1997,
through a payment to Doggart. This payable represents advances from Doggart,
during the fiscal year ended June 30, 1997, covering cash needs of the Company.
In consideration of the Company's sale of Ensenada Cruiseport Village
S.A. de C.V. in fiscal year ended June 30, 1997, the
37
<PAGE> 38
Company received, in addition to $3,950,000 in cash proceeds, two notes, one
for $800,000 payable in January, 1999, and another note (subject to certain
contingencies) for $400,000 payable in June, 1999. The Company reported in its
last Report that it is attempting to discount the $800,000 note with a banking
institution. To date, it has not been successful in such regard.
The Company's capitalized resources at September 30, 1997,
attributable to its real property interests, included $3,050,000 as the
Company's acquisition price for its Los Bucaneros Property in Campeche, Mexico,
$80,321 as its acquisition cost of the 8.5 miles of adjoining coastal property
represented by the Company's Palmeras and Irvine parcels, and $161,739 in
additional capitalized costs associated with the Irvine and Palmeras parcels.
(See complete discussion of these real property interests in the Company's Form
10-KSB for fiscal 1997). The acquisition cost of the Palmeras and Irvine
parcels does not, in management's view, reflect a substantially higher actual
value (See discussion in Form 10-KSB for fiscal 1997). Conversely, 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.
If the Company is unable to meet its above-described
38
<PAGE> 39
obligation to acquire title to the Los Bucaneros property, such failure 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.
PART II
ITEM 1. LEGAL PROCEEDINGS.
There have been no further material developments, in the quarter, in
items of litigation previously reported.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.
The annual meeting of shareholders of International Resort Developers,
Inc. was held on December 9, 1997, in Nashville, Tennessee. The following
transpired:
1. Election of Directors. Pieter G. K. Oosthuizen, David Lawrence,
Chris Millar, Donald M. Spears, and Samuel B. Watson were elected as the
directors of the Company. to serve until the next annual meeting of the Company
or until their successors are elected and qualify. There are no other
directors whose terms continued after the meeting. These directors were
elected with the following votes cast in their favor and no votes cast for
other persons, in opposition to their election, or withheld: Pieter
Oosthuizen: 1,386,008 votes; David Lawrence: 1,386,008 votes; Chris Millar:
1,386,008 votes; Donald M. Spears: 1,386,008 votes; and Samuel B.
39
<PAGE> 40
Watson: 1,386,008 votes. There were 197,232 broker non-votes. Since the time
of the election, Chris Millar has resigned his directorship position, due to
conflicting business responsibilities, and Nigel Spinks, a British solicitor
(i.e. lawyer), has been appointed to fill that vacancy.
2.) Change of Name and Domicile of the Company. The shareholders
approved the merger of IRD into its wholly owned Tennessee subsidiary,
AmeriStar International Holdings Corporation ("AmeriStar"). 1,006,317 votes
were cast in favor of the merger, 134 votes were cast against, and there were
584 votes abstaining. There were 654,811 broker non- votes. The merger became
effective, through filings with appropriate state authorities, on January 22,
1998. AmeriStar, until the effective date of the merger, was a subsidiary
without substantial assets or liabilities. As the result of the merger, the
assets and liabilities of IRD became the assets and liabilities of AmeriStar,
and the shareholders of IRD, as of the effective date of the merger, have
become, instead, shareholders of AmeriStar, a Tennessee corporation, with each
such shareholder holding the same number and par value of shares in AmeriStar
as previously held in IRD.
The Charter and By-laws of AmeriStar are not materially different from
the Charter and By-Laws of IRD, except in the following respects:
(a) Directors have previously been elected by cumulative voting, in
which each shareholder is entitled to cast a number of votes equal to the
number of his shares, multiplied by the number
40
<PAGE> 41
of directors being elected, with the right to distribute such number of votes
among or between nominees in such proportion as the shareholder chooses. The
Charter of AmeriStar provides for the more traditional method of electing
directors, pursuant to which each shareholder is entitled to cast a number of
votes, equal to the number of his shares, for such slate of directors as the
shareholder chooses. This method of voting for directors will be utilized at
the next annual meeting of shareholders, currently planned for January of 1999,
and in all other elections of directors by shareholders held hereafter.
(b) The by-laws of IRD provided for the indemnification of a
director or officer against reasonable expenses incurred in connection with the
defense of any litigation to which he was a party because of his status as a
present or past director or officer, provided that he had no right to
reimbursement in relation to matters as to which he had been adjudged liable to
the Company for negligence or misconduct in the performance of his duties. The
Charter of AmeriStar provides that a director or officer shall not be
personally liable to the corporation or its shareholders for monetary damage,
or related litigation expenses, for breach of fiduciary duty, except for any
breach of the director's or officer's duty of loyalty to the corporation or its
shareholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, or under Section
48-18-304 of the Tennessee Business Corporation Act, pertaining to unlawful
distribution of corporate funds.
41
<PAGE> 42
3.) Acquisition of "AmeriStar Worldwide Entertainment Corporation."
The shareholders approved the acquisition of AmeriStar Worldwide
Entertainment Corp. ("AWEC"), formerly known as Growth Strategies, Inc., a
Nevada corporation, pursuant to an agreement dated September 29, 1997 between
IRD and Park Investments Limited ("Park"), the sole shareholder of AWEC.
1,015,725 votes were cast in favor of the acquisition, 34 votes were cast
against, and there were 584 votes abstaining. There were 654,811 broker
non-votes. As the result of the shareholders' approval, the acquisition became
effective December 9, 1997. AWEC had in turn acquired the rights to its name,
and other tangible and intangible assets and relationships, including a
distributor network comprised of approximately 8,500 distributors, nationwide,
from a company named AmeriStar Worldwide Entertainment, Inc. ("AWEI") in
August, 1997.
The terms of the acquisition by IRD (now AmeriStar) of AWEC, which was
approved by the shareholders, provided for the issuance by IRD of 340,000
shares of its stock to Park and 60,000 shares to one Samuel B. Watson, who was
the chief executive officer of AWEI prior to its acquisition by AWEC, and
thereafter of AWEC. Additionally, AmeriStar is obligated to issue 2,550 shares
to Park and 450 shares to Samuel B. Watson for each $1,000 of after-tax profit
earned by AWEC in excess of $1,000,000 during each of the calendar years 1998
and 1999. AmeriStar is also obligated to pay to Park a royalty of 2 1/2% of
net sales revenue of AWEC on and after September 1, 1997.
42
<PAGE> 43
Samuel B. Watson continues, at the present time, as President and
Chief Executive Officer of AWEC, and is also Secretary and a director of
AmeriStar.
4. Appointment of La Voie, Clark, Charvoz & May, P.C.
The shareholders appointed La Voie, Clark, Charvoz & May, P.C. as the
accountants to audit the financial statements of AmeriStar for the fiscal year
next ending after June 30, 1997. There were 1,381,109 votes in favor, 34 votes
against, and 3,484 votes abstaining. There were 196,764 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are attached:
EX-3.1. Articles of Incorporation of AmeriStar International Holdings
Corporation.
Ex-3.2. By-Laws of AmeriStar International Holdings Corporation.
EX-27. Financial Data Schedule (for SEC use only).
No Forms 8-K were filed during the quarter.
43
<PAGE> 44
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERISTAR INTERNATIONAL HOLDINGS CORPORATION
By s/ Samuel B. Watson
----------------------------------------
Samuel B. Watson, Secretary and a Director
By s/ Barry Miller
-------------------------------------------
Barry Miller, Chief Financial Officer
Date: February 23, 1998
44
<PAGE> 1
EXHIBIT 3.1
CHARTER
OF
AMERISTAR INTERNATIONAL HOLDINGS CORPORATION
The undersigned, having capacity to contract and acting as the
Incorporator for the above listed corporation under the Tennessee Business
Corporation Act, adopts the following charter for such corporation:
1. The name of the corporation is AMERISTAR INTERNATIONAL HOLDINGS
CORPORATION.
2. (a) The complete address of the corporation initial registered
office in Tennessee is
1801 West End Avenue
Nashville, Davidson County, Tennessee, 37203
(b) The name of the initial registered agent to be located at
the address listed in 2(a) is:
Samuel B. Watson
3. The name and complete address of the incorporator is
Sam J. McAllester, III, Esq.
1500 Nashville City Center
511 Union Street
Nashville, Tennessee 37219.
4. The complete address of the corporation's principal office is:
1801 West End Avenue
Nashville, Davidson County, Tennessee 37203
5. The corporation is for profit.
<PAGE> 2
6. The total number of shares that the corporation is authorized to
issue is One Hundred Million (100,000,000) shares of $0.10 par value common
stock which shall have unlimited voting rights and the right to receive the net
assets of the corporation upon dissolution of the corporation. Dividends are
payable on the common stock when and as declared by the Board of Director. Each
holder of the common stock shall be entitled to one vote per share of stock.
The common stock shall not have cumulative voting. No holder of any shares of
the common stock shall have preemptive rights.
7. The business and affairs of the corporation shall be managed by a
Board of Directors. The number of directors and their team shall be specified in
the by-laws of the corporation.
8. The purposes for which this corporation is organized are to carry
on lawful businesses which the Board of Directors shall select and determine
from time to time, including carrying on such businesses through subsidiary
corporations, through partnership, joint venture and trust agreements entered
into by either the corporation of its subsidiaries, or through any other type of
agreement or form of business enterprise as the Board of Directors may approve.
9. A director or officer of the corporation shall not be personally
liable to the corporation or its shareholders for monetary damages or expenses
for breach of fiduciary duty as a director, except: (i) for any breach of the
director's
<PAGE> 3
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, or (iii) under Section 48-18-304 of the Tennessee Business
Corporation Act. If the Tennessee Business Corporation Act is amended or
superseded after the filing of this charter to authorize corporate action
further eliminating or limiting the personal liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Tennessee Business Corporation Act as so amended
from time to time or by such act as may supersede it. The affirmative vote of
at least two-thirds (2/3) of the total votes eligible to be cast at a legal
meeting duly called and held, shall be required to amend, repeal or adopt any
provision inconsistent with this provision. Any repeal or modification of this
provision by the shareholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at the time of
such repeal or modification.
Dated this 12th day of November, 1997.
/s/ Sam J. McAllester, III
-------------------------------------
Sam J. McAllester, III, Incorporator
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
AMERISTAR INTERNATIONAL HOLDINGS CORPORATION
Prepared by:
WYATT, TARRANT & COMBS
511 Union Street, Suite 1500
Nashville, Tennessee 37219
November 12, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I
Offices ............................................................. 1
Article II
Meetings of Shareholders ............................................ 1
2.1 Annual Meeting ............................................. 1
2.2 Special Meetings ........................................... 1
2.3 Notice of Shareholder Meetings ............................. 2
2.4 Waiver of Notice ........................................... 3
2.5 Place of Meetings .......................................... 3
2.6 Record Date ................................................ 3
2.7 Shareholders List For Meeting .............................. 4
2.8 Quorum Requirements ........................................ 4
2.9 Voting and Proxies ......................................... 5
2.10 Action Without Meeting ..................................... 5
2.11 Presiding Officer; Order of Business ....................... 6
Article III
Board of Directors .................................................. 7
3.1 Management of the Corporation .............................. 7
3.2 Qualifications and Elections ............................... 7
3.3 Number ..................................................... 7
3.4 Regular Meetings ........................................... 8
3.5 Special Meetings ........................................... 8
3.6 Place of Meetings .......................................... 8
3.7 Notice of Directors' Meetings .............................. 8
3.8 Waiver of Notice ........................................... 9
3.9 Quorum and Vote ............................................ 10
3.10 Vacancies .................................................. 10
3.11 Action Without Meeting ..................................... 11
3.12 Execution of Instruments ................................... 11
3.13 No Compensation ............................................ 11
3.14 Resignation and Removal .................................... 12
3.15 Committees ................................................. 12
Article IV
Officers ............................................................ 13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
4.1 Number ..................................................... 13
4.2 Election and Term .......................................... 13
4.3 Resignation and Removal .................................... 13
4.4 Compensation ............................................... 14
4.5 President .................................................. 14
4.6 Chief Financial Officer .................................... 14
4.7 Vice Presidents ............................................ 15
4.8 Secretary .................................................. 15
4.9 Treasurer .................................................. 15
Article V
Capital Stock ....................................................... 16
5.1 Stock Certificates ......................................... 16
5.2 Transfer of Shares ......................................... 17
5.3 Loss of Certificates ....................................... 18
5.4 Registered Shareholders .................................... 18
5.5 Transfer Agent and Registration ............................ 18
Article VI
Indemnification of Directors and Officers ........................... 19
6.1 Standard for Indemnification ............................... 19
6.2 Non-Exclusive .............................................. 20
Article VII
Corporate Records ................................................... 20
Article VIII
Amendment of By-Laws ................................................ 21
Article IX
Fiscal Year ......................................................... 22
Article X
Seal ................................................................ 22
</TABLE>
ii
<PAGE> 4
ARTICLE I
OFFICES
In addition to its registered and principal offices, the corporation may
have such other offices and/or facilities at such other places as the Board of
Directors may from time to time determine and as the business of the corporation
may require. The address of the principal office may be changed by the Board of
Directors by amendment to the corporation's charter.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 Annual Meeting. (a) The annual meeting of shareholders shall be
held within One Hundred Twenty (120) days of the fiscal year end of the
corporation, but no later than as selected by the Board of Directors, or on such
other date as may be set by the Board of Directors.
(b) In the event the annual meeting is not held at the time
prescribed in this Section 2.1, and if the Board of Directors shall not call a
special meeting prescribed in Section 2.2 within three (3) months after the date
prescribed for the annual meeting, then any shareholder may call such meeting,
and at such meeting the shareholders may elect the directors and transact other
business with the same force and effect as at an annual meeting duly called and
held.
2.2. Special Meetings. Special meetings of the shareholders may be
called by the President, the Board of Directors, or by written request of the
<PAGE> 5
holders of at least Fifteen percent (15%) of all the votes entitled to be cast
on any issue proposed to be considered at the proposed special meeting. The
business transacted at special meetings of the shareholders shall be confined to
the business stated in the notice given to the shareholders. It shall be the
duty of the Secretary to mail out notice of such meetings.
2.3 Notice of Shareholder Meetings. Written or printed notice stating
the place, day, and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called and the person or
persons calling the meeting, shall be delivered, either personally or by mail,
by or at the direction of the Secretary. Such notice shall be mailed or
delivered not less than Ten (10) days nor more than Sixty (60) days before the
date of the meeting. Any notice required to be sent or given to any shareholder
under the provisions of the charter, these by-laws, or the laws of Tennessee, is
effective when mailed, if mailed postage prepaid and correctly addressed to the
shareholder's address shown in the corporation's current record of shareholders.
If delivered personally, any notice required to be sent or given to any
shareholder under the provisions of the charter, these by-laws, or the laws of
Tennessee, is effective when received by the shareholder. The person giving
such notice shall certify that the notice required by this paragraph has been
given.
2
<PAGE> 6
2.4 Waiver of Notice. A shareholder may waive any notice that is
required either before or after the date and time stated in the notice. The
waiver must be in writing, signed by the shareholder entitled to the notice, and
delivered to the corporation for inclusion in the minutes or filing with the
corporate records. Notwithstanding the foregoing, a shareholder's attendance at
a meeting (a) waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting or promptly upon
the shareholder's arrival objects to holding the meeting or transacting business
at the meeting, and (b) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice unless the shareholder objects to considering the matter when it
is presented.
2.5 Place of Meetings. Meetings of the shareholders may be held at
such place within or without the State of Tennessee as may be designated by the
Board of Directors. If not otherwise specified by the Board of Directors, said
meeting shall be held at the corporation's principal office.
2.6 Record Date. For the purpose of determining the shareholders
entitled to notice of, or to vote at, any meeting of the shareholders, or any
adjournment thereof, or in order to make a determination of the shareholders for
any other proper purpose, the Board of Directors may fix in advance a date as
the record date for any such determination of shareholders. Unless otherwise
3
<PAGE> 7
determined by the Board of Directors, the record date for determining
shareholders entitled to take action without a meeting is the date the first
shareholder signs the consent.
2.7 Shareholders List for Meeting. After fixing a record date for a
meeting, the corporation shall prepare an alphabetical list of the names of all
its shareholders who are entitled to notice of a shareholder. The list must
show the address and number of shares held by each shareholder. The shareholder
list must be available for inspection by any shareholder beginning Two (2)
business days after notice of the meeting is given for which the list was
prepared and must remain on file for a minimum period of Thirty (30) days prior
to the meeting, at the corporation's principal office or at a place identified
in the meeting notice in the city where the meeting will be held. The
shareholder list must also be available at the meeting. Failure to comply with
the requirements of this Section 2.7 shall not affect the validity of any action
taken at such meeting of the shareholders.
2.8 Quorum Requirements. A majority of the common stock issued and
outstanding, present is person or represented by proxy, shall constitute a
quorum for the transaction of business. Once a share is represented for any
purpose at a meeting, it is deemed present for quorum purposes for the remainder
of the meeting and for any adjournment of that meeting unless a new record date
is or must be set for that adjourned meeting. A meeting may be
4
<PAGE> 8
adjourned despite the absence of a quorum, and notice of any adjournment need
not be given if the time and place to which the meting is adjourned are
announced at the meeting at which the adjournment is taken. When a quorum
exists at any meeting, action on a matter is approved if the vote cast favoring
the action exceed the votes cast opposing the action, unless the question is one
upon which, by express provision of the charter, these by-laws, or the laws of
Tennessee, a greater number of affirmative votes is required, in which case such
express provisions shall govern the decision of such question.
2.9 Voting and Proxies. Each shareholder shall have One (1) vote for
each share of common stock registered in his or her name on the books of the
corporation on and as of the record date for such meeting filed and determined
by the Board of Directors or as otherwise determined by statute. Every
shareholder entitled to vote at any meeting may do so either in person or by
written proxy, which proxy shall be filed with the Secretary of the meeting
before being voted. Such proxy shall entitle the holders thereof to vote at any
adjournment of such meeting, but shall not be valid after the final adjournment
thereof. No proxy shall be valid after the expiration of Eleven (11) months
from the date of its execution unless otherwise provided in the proxy.
2.10 Action Without Meeting. Whenever the shareholders are required or
permitted to take any action at a meeting, such action may be taken without a
meeting. If all shareholders entitled to vote on the action consent to
5
<PAGE> 9
taking such action without a meeting, the affirmative vote of the number of
shares that would be necessary to authorize or take such action at a meting is
the act of the shareholders. The action must be evidenced by One (1) or more
written consents describing the action taken, signed by each shareholder
entitled to vote on the action in One (1) or more counterparts, indicating each
signing shareholder's vote or abstention on the action and delivered to the
corporation for inclusion in the minutes of filing with the corporate records.
2.11 Presiding Officer; Order of Business. (a) Meetings of the
shareholders shall be presided over by the Chairman of the Board of Directors,
or, if the Chairman of the Board of Directors is not present, by the President,
or, if the President is not present, by a Vice-President, if any. If none of
the above-referenced officers are present, such meeting of the shareholders
shall be presided over by a chairman to be chosen by a majority of the
shareholders entitled to vote at the meeting who are present in person or
represented by proxy. The Secretary or an Assistant Secretary, if any, shall
act as secretary of every meeting. If neither the Secretary or Assistant
Secretary is present at the meeting, the shareholders present at the meeting or
represented by proxy shall choose any person to act as secretary of the meeting.
(b) The order of business shall be as follows:
1. Call of meeting to order;
2. Proof of notice of meeting;
3. Reading of minutes of previous annual meeting;
6
<PAGE> 10
4. Reports of Officers;
5. Reports of committees;
6. Election of directors; and
7. Miscellaneous business.
ARTICLE III
BOARD OF DIRECTORS
3.1 Management of the Corporation. The business and affairs of the
corporation shall be managed by a Board of Directors. The Board of Directors
may implement and exercise all corporate powers and do all such lawful acts and
things as are not prohibited by the charter of the corporation, by these
by-laws, or by the laws of Tennessee.
3.2 Qualifications and Election. Directors need not be shareholders
or residents of Tennessee, but must be of legal age. Directors shall be
elected by a plurality of the votes cast by the shares entitled to vote in the
election at the annual meeting of the shareholders. Each director shall serve
until the next annual meeting of the shareholders or until a successor has been
elected and qualified.
3.3 Number. The initial number of directors that shall constitute
the entire Board of Directors shall be five (5). The number of directors may
be increased or decreased by resolution of the Board of Directors from time to
time. Any change in the number of directors shall be set forth in the notice
of any.
7
<PAGE> 11
meeting of shareholders held for the purpose of electing directors, subject to
the approval of the shareholders.
3.4 Regular Meetings. An annual meeting of the Board of Directors
shall be held immediately after the adjournment of the annual meeting of
shareholders, at which time the officers of the corporation shall be elected.
The board may also designate more frequent intervals for regular meetings.
3.5 Special Meetings. Special meetings of the Board of Directors
may be called at any time by the President, any Two (2) directors, or the sole
Director if only One (1) director.
3.6 Place of Meetings. Meetings of the Board of Directors, whether
annual, regular, or special, shall be held at such time or times and at such
place or places within or without the State of Tennessee as the Board of
Directors may, from time to time, determine or as may be specified in the
notice of such meeting. The Board of Directors may permit any and all
directors to participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A
director participating in a meeting by this means is deemed to be present in
person at the meeting.
3.7 Notice of Directors' Meeting. The annual and regular meetings
of the Board of Directors may be held without notice of the date, time, place,
or purpose of the meeting. In the case of special meetings, written or
8
<PAGE> 12
printed notice stating the date, time, and place of the meeting, shall be
delivered either personally, by mail, overnight courier, telegraph, telephone
facsimile transmission, telex, or other form of wire or wireless communication.
Such notice shall be delivered not less than Two (2) days before the date of the
meeting. If notice is given by personal delivery, the notice is effective when
received. If notice is given by overnight courier service, correctly addressed,
and with delivery charges prepaid or charged to the sender's or the
corporation's account, the notice is effective on the date of promised delivery
by such courier service. If notice is given by mail, correctly addressed, and
with first class postage affixed thereon, the notice is effective Five (5) days
after its deposit in the United States mail. If notice is given by registered
or certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee, the notice is effective on the earlier of the date
shown on the return receipt or Five (5) days after deposit in the United States
mail. If notice is given by telegraph, the notice is effective on the date the
telegraphic agency shall confirm delivery thereof to the addressee. If notice
is given by facsimile transmission, telex, or other form of wire or wireless
communication and transmitted to the proper address or number, the notice is
effective when receipt is confirmed electronically or otherwise.
3.8 Waiver of Notice. A director may waive any notice that is
required either before or after the date and time stated in the notice. The
waiver
9
<PAGE> 13
must be in writing, signed by the director entitled to the notice, and filed
with the minutes or corporate records. Notwithstanding the foregoing, a
director's attendance at or participation in a meeting waives any required
notice to that director of the meeting unless the director at the beginning of
the meeting (or promptly upon arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
3.9 Quorum and Vote. At all meetings of the Board of Directors, the
presence of a majority of the directors then in office shall constitute a quorum
for the transaction of business. A meeting may be adjourned despite the absence
of a quorum; and notice of an adjourned meeting need not to be given if the time
and place to which the meeting is adjourned are fixed at the meeting at which
adjournment is taken, and if the period of adjournment does not exceed One (1)
month in any One (1) adjournment. The affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be an act of
the board, unless the vote of a greater number is required by the charter, these
by-laws, or the laws of Tennessee.
3.10 Vacancies. Newly created directorships resulting from an increase
in the number of directors, and vacancies occurring in any directorship for any
reason, including the removal of a director with or without cause, may be filled
by the Board of Directors or if the directors remaining in office
10
<PAGE> 14
constitute fewer than a quorum of the board, by the affirmative vote of a
majority of all directors remaining in office. Any director so elected shall
serve until the next meeting of the shareholders at which directors are elected.
3.11 Action Without Meeting. Whenever the directors are required or
permitted to take any action at a Board of Directors' meeting, such action may
be taken without a meeting. If all directors consent to taking such action
without a meeting, the affirmative vote of the number of directors that would
be necessary to authorize or to take such action at a meeting is the act of the
board. The action must be evidenced by One (1) or more written consents
describing the action taken, signed by each director in One (1) or more
counterparts, indicating each signing director's vote or abstention on the
action, and such consent(s) shall be included in the minutes or filed with the
corporate records reflecting the action taken. The action is effective when
the last director signs the consent, unless the consent specifies a later
effective date.
3.12 Execution of Instruments. The Board of Directors may authorize
any officer or officers, agent or agents, to enter into any contract or to
execute and deliver any instrument in the name of, and on behalf of, the
corporation, and such authority may be general or confined to specific
instances.
3.13 Compensation. Directors shall be entitled to such reasonable
compensation for their services as a director as shall be fixed by resolution of
the
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<PAGE> 15
Board of Directors, and also shall be entitled to reimbursement for any
reasonable expenses incurred in attending such regular or special meetings of
the board. The compensation of directors may be on such basis as is determined
in the resolution of the Board of Directors. Any director receiving
compensation under these provisions shall not be barred from serving the
corporation in any other capacity and receiving reasonable compensation for such
other services.
3.14 Resignation and Removal. A director may resign at any time by
delivering written notice to the Board of Directors, its chairman or President,
or to the corporation. A resignation is effective when the notice is delivered
unless the notice specifies a later effective date. The shareholders may remove
One (1) or more directors with or without cause.
3.15 Committees. The Board of Directors may create One (1) or more
committees, including an audit committee, a compensation committee, and a
nominating committee. A committee may consist of a single member. All
committees so created shall have and may exercise such powers and authority as
the Board of Directors may delegate to such committee or committees by
resolution. All members of a committee that is authorized to exercise powers of
the Board of Directors must be members of the Board of Directors and shall serve
on such committee at the pleasure of the Board of Directors. No committee can
act on matters reserved to the entire Board of Directors by the charter, these
by-laws, or the laws of Tennessee. All committees created by the Board of
12
<PAGE> 16
Directors shall keep regular minutes of their meetings and proceedings and
shall report to the Board of Directors upon request. Unless the board otherwise
elects, the President shall be a member ex-officio of all committees of the
Board of Directors.
ARTICLE IV
OFFICERS
4.1 Number. The corporation shall have a President, Chief
Financial Officer, and a Secretary. The corporation may also have One (1) or
more Vice-Presidents, a Treasurer, and such other officers as the Board of
Directors shall from time to time deem necessary. Any Two (2) or more offices
may be held by the same person, except the offices of President and Secretary.
4.2 Election and Term. The officers shall be elected annually by
the Board of Directors or, if the Board of Directors specifically authorizes an
officer to appoint One (1) or more other officers or assistant officers, by
appointment by such duly authorized officer. Each officer shall serve at the
pleasure of the Board of Directors, or if appointed by another officer, at such
other officer's pleasure, or until a successor has been elected and qualified.
Any vacancy in an office may be filled for the unexpired portion of the term by
the Board of Directors.
4.3 Resignation and Removal. An officer may resign at any time by
delivering notice to the corporation. A resignation is effective when the
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<PAGE> 17
notice is delivered unless the notice specifies a later effective date. The
Board of Directors may remove any officer at any time with or without cause and
any officer, if appointed by another officer, may likewise be removed by such
officer.
4.4 Compensation. The compensation, including salaries, of all
officers and those agents appointed by the board shall be as fixed by the Board
of Directors. No officer shall be ineligible to receive such salary by reason
of the fact that such officer is also a director of the corporation and
receiving compensation therefor.
4.5 President. The President shall be the chief executive officer
of the corporation. The President shall see that all orders and resolutions of
the Board of Directors are carried into effect. The President shall effect such
division of duties between the officers of the corporation as the President
shall deem proper, except as the board otherwise directs. Further, the
President shall execute all bonds, mortgages, contracts, conveyances or other
instruments of the corporation except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the corporation.
4.6 Chief Financial Officer. The Chief Financial Officer, subject
to the Board of Directors and the President, shall supervise and manage the
financial planning and direction of the corporation. The Chief Financial
Officer shall be responsible for the daily financial operations of the
corporation and shall
14
<PAGE> 18
supervise the Treasurer, if any. If no Treasurer is elected by the Board of
Directors, the Chief Financial Officer shall assume the duties of the Treasurer.
4.7 Vice Presidents. The Vice Presidents, in the order of their
seniority if more than One (1), shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President until
the Board of Directors elects a successor, and shall perform such other duties
as the Board of Directors or the President may prescribe.
4.8 Secretary. The Secretary shall attend all meetings of the
shareholders and the Board of Directors and record all votes and the minutes of
all proceedings in a book to be kept for that purpose and shall perform like
duties for committees of the Board of Directors upon the request of the
President. The Secretary shall give, or cause to be given, notice of all
meetings of the shareholders and all meetings of the Board of Directors and
shall perform such other duties as may be prescribed by the Board of Directors
or the President, under whose supervision the Secretary shall be. The
Secretary shall attest the execution of any document or instrument requiring
such attestation and authenticate records of the corporation.
4.9 Treasurer. The Treasurer, if elected by the Board of Directors,
shall have custody of the funds and securities of the corporation shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the corporation, and shall deposit all money and other valuable effects in the
name
15
<PAGE> 19
and to the credit of the corporation in such depository or depositories as may
be designated by the Board of Directors. The Treasurer shall render to the
President or to the Board of Directors, whenever either may require it, an
amount of all transactions of the corporation. If required by the Board of
Directors, the Treasurer shall give the corporation a bond, with such surety or
sureties as shall be satisfactory to the Board of Directors, for the faithful
performance of the duties of the office and for the restoration to the
corporation of all books, papers, vouchers, money, and other property in the
case of the Treasurer's death, resignation, retirement, or removal from
office. If no Treasurer shall be elected by the Board of Directors, all duties
and responsibilities of the Treasurer hereunder shall be assumed and discharged
by the President or such officer as the President shall designate.
ARTICLE V
CAPITAL STOCK
5.1 Stock Certificates. Every shareholder shall be entitled to a
certificate or certificates of capital stock of the corporation in such form as
may be prescribed by the Board of Directors. At a minimum each share
certificate must state on its face the name of the corporation, that the
corporation is organized under the laws of Tennessee, the name of the person to
whom the certificate is issued, the number and class of shares and the
designation of the series, if any, and be signed manually or by facsimile by
the President and the
16
<PAGE> 20
Treasurer or the Secretary of the corporation and sealed with the seal of the
corporation. Certificates representing shares of the capital stock of the
corporation shall be numbered, issued in numerical sequence, and entered in the
books of the corporation as they are issued. If the corporation is authorized
to issue different classes of shares or different series within a class, the
designations, relative rights, preferences, and limitations applicable to each
class and the variations in rights, preferences and limitations determined for
each series, and the authority of the Board of Directors to determine
variations for future series, must be summarized on the front or back of each
certificate.
5.2 Transfer of Shares. Shares of Stock Shall be transferred on the
books of the corporation only by the holder of record thereof, either in person
or by power of attorney attested to by at least One (1) witness, by delivery and
surrender of the properly assigned certificate. When shares are transferred by
an attorney-in-fact, the power of attorney shall be filed with the Secretary.
All certificates exchanged or returned shall be canceled by the Secretary, and
such canceled certificates shall be affixed in their original places in the
certificate book. No new certificate or certificates shall be issued until the
old certificate or certificates have thus been canceled and returned to their
original place in the stock certificate book. The corporation shall not be
required to transfer shares of stock until furnished with adequate assurance by
the transferring shareholder of compliance with applicable securities laws.
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<PAGE> 21
5.3 Loss of Certificates. In the case of the loss, mutilation, or
destruction of a certificate of stock, a duplicate certificate may be issued
upon the execution of a lost certificate affidavit and upon such terms,
including provisions for indemnification or bond, as the Board of Directors may
prescribe.
5.4 Registered Shareholders. The corporation shall be entitled to
treat the holder of record of any share or shares of stock of the corporation
as the holder in fact, and, accordingly, shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Tennessee.
5.5 Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents or transfer clerks and one or more
registrars, and may require all certificates for shares to bear the signature
or signatures of any of them.
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<PAGE> 22
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
6.1 Standard for Indemnification. The corporation shall indemnify
and advance expenses to each present and future director or officer, or any
present or future director or officer of any other corporation serving as such
at the request of the corporation because of the corporation's interest in such
other corporation, or the executor, administrator, or other legal
representative of any such director or officer, to the fullest extent allowed
by the laws of the State of Tennessee, as now in effect and as hereafter
adopted. The corporation may indemnify and advance expenses to any employee or
agent of the corporation who is not a director or officer, or the executor,
administrator or other legal representative of any such employee or agent, to
the same extent as to a director or officer if the Board of Directors
determined that it is in the best interest of the corporation. The corporation
shall also have the power to contract with any individual director, officer,
employee, or agent for whatever additional indemnification the Board of
Directors shall deem appropriate, as long as it is consistent with public
policy.
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<PAGE> 23
6.2 Non-Exclusive. The foregoing right of indemnification and
advancement of expenses shall not be exclusive of any other rights to which the
director or officer may be entitled as a matter of law, or which may be
lawfully granted to the director or officer. The indemnification and
advancement of expenses hereby granted by the corporation shall be in addition
to, and no in restriction or limitation of, any other privilege or powers the
corporation may lawfully exercise with respect to indemnification, advancements
or reimbursement of directors, trustees, officers, or employees.
ARTICLE VII
CORPORATE RECORDS
The corporation shall keep a copy of the following records at its
principal office:
a. Its charter or restated charter an all amendments thereto
currently in effect;
b. Its by-laws or restated by-laws and all amendments to them
currently in effect;
c. Resolutions adopted by the Board of Directors creating One
of more classes or series of shares, and fixing their relative rights,
preferences, and limitations, if shares issued pursuant to those resolutions
are outstanding.
20
<PAGE> 24
d. The minutes of all shareholders' meetings, and records
of all action taken by shareholders without a meeting, for the past Three (3)
years;
e. All written communications to shareholders generally
within the past Three (3) years, including any financial statements prepared for
the past Three (3) years under Tennessee Code Annotated Section 48-26-201;
f. A list of the names and business addresses of its
current directors and officers; and
g. Its most recent annual report delivered to the
Tennessee Secretary of State under Tennessee Code Annotated Section 48-26-203.
ARTICLE VIII
AMENDMENT OF BY-LAWS
These by-laws may be amended, added to, or repealed either by: (1) a
majority vote of the shares present at any duly constituted shareholder's
meeting, or (2) a majority vote of the Board of Directors at a duly constituted
meeting of the Board. Any notice of the proposal to make, alter, amend or repeal
the by-laws shall be included in the notice of the director's meeting at which
such action takes place. Any change in these by-laws made by the Board of
Directors, however, may be amended or repealed by the shareholders at the
21
<PAGE> 25
next shareholders' meeting following the any such action by the Board of
Directors. The notice of such shareholders' meeting shall include notice that
the shareholders will be called on to ratify the action taken by the Board of
Directors with regard to the by-laws.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall commence on the first day of
January of each calender year and shall end on the last day of December of the
same calendar year, and the books of the corporation shall be kept and its
income computed in accordance therewith.
ARTICLE X
SEAL
The corporate seal of the corporation shall consist of two concentric
circles, between which shall be the name of the corporation, and in the center
of which shall be inscribed the year of its incorporation and the words
"Corporate Seal, State of Tennessee."
22
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<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 23,270
<SECURITIES> 0
<RECEIVABLES> 49,323
<ALLOWANCES> 0
<INVENTORY> 65,769
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<PP&E> 454,269<F1>
<DEPRECIATION> 3,149
<TOTAL-ASSETS> 6,006,023
<CURRENT-LIABILITIES> 1,218,714
<BONDS> 0
0
0
<COMMON> 4,503,126<F2>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,006,023
<SALES> 88,024
<TOTAL-REVENUES> 88,024
<CGS> 27,533
<TOTAL-COSTS> 166,373
<OTHER-EXPENSES> 144,876
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,459,375<F3>
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 1,459,375<F3>
<EPS-PRIMARY> (0.773)
<EPS-DILUTED> (0.773)
<FN>
<F1>EXCLUSIVE OF LAND, PURCHASE RIGHTS, CONCESSIONS AND RELATED CAPITALIZED COSTS
IN THE AMOUNT OF $3,342,062.
<F2>STATED AND PAID-IN CAPITAL OF $7,859,392 LESS RETAINED DEFICIT OF $3,356,261.
<F3>FOR THREE MONTH PERIOD ENDED DECEMBER 31, 1997, THERE WAS A LOSS FROM
CONTINUING OPERATIONS OF $223,225 AND A NET LOSS OF $201,041, CONSTITUTING A LOSS
PER SHARE OF 0.104.
</FN>
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