SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
---------- ----------
Commission File No. 33-8964
AM-PAC INTERNATIONAL, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 16-1260971
- -------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
431 East Central Boulevard, Suite 900
Orlando, Florida 32801
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(407) 841-1350
---------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of August 1, 1997, 8,240,547 shares of Common Stock of the issuer were
outstanding.
<PAGE>
AM-PAC INTERNATIONAL, INC.
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996............................................ 3
Consolidated Statements of Operations - For the three
months and six months ended June 30, 1997 and 1996........... 4
Consolidated Statements of Cash Flows - For the six months
ended June 30, 1997 and 1996 ................................ 5
Notes to Consolidated Financial Statements................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 7
PART II - OTHER INFORMATION............................................ 8
SIGNATURES............................................................. 9
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AM-PAC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 24,792 $ 47,651
Accounts receivable 0 0
Inventory 17,387 0
Prepaid expenses 2,358 0
-------- -----------
Total current assets 44,537 47,651
PROPERTY AND EQUIPMENT
Buildings and improvements 109,580 171,614
Land and improvements 0 204,841
Furniture and equipment 33,185 2,000
Less accumulated depreciation ( 3,012 ) ( 103,313 )
--------- --------
Net property and equipment 139,753 275,142
OTHER ASSETS
Escrow deposits 16,562 6,228
Loan receivable - stockholder 237,847 238,398
Related party receivable 46,599 0
Organizational costs, net 1,837 1,837
Note receivable - related party 959,637 0
---------- --------
Total other assets 1,262,482 246,463
--------- --------
Total assets $ 1,446,772 $ 569,256
========= =======
LIABILITY AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 191,744 $ 111,287
Other liabilities 13,510 22,915
Current portion long term debt 0 9,075
------------- ----------
Total current liabilities 205,254 143,277
LONG TERM DEBT
Mortgage payable 0 435,719
Loans payable - related party 1,773 114,459
--------- --------
Total long-term debt 1,773 550,178
--------- --------
Total liabilities 207,027 693,455
STOCKHOLDERS' EQUITY:
Common Stock; $.001 par value;
149,000,000 shares authorized,
8,240,547 and 7,740,547 shares
issued and outstanding respectively, 8,240 7,740
Additional paid in capital 1,472,558 973,058
Accumulated deficit ( 241,053 ) ( 1,104,997 )
--------- ---------
Total stockholders' equity (deficit) 1,239,745 ( 124,199 )
--------- ----------
Total liabilities and stockholder equity $ 1,446,772 $ 569,256
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
AM-PAC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
-------------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Sales $ 58,637 $ 720 $ 138,789 $ 720
Franchise fees 85,488 17,339 96,546 32,904
Commissions 0 7,333 113 7,333
Rental property income 920 21,450 920 42,900
Interest income, net 0 288 0 288
--------- --------- --------- --------
Total revenue 145,045 47,130 236,368 84,145
Costs and expenses:
Cost of sales 24,981 0 47,724 0
Rental property expenses 0 19,741 0 38,396
General and administrative expenses 200,880 14,884 455,276 24,928
--------- --------- -------- --------
Total costs and expenses 225,861 34,625 503,000 63,324
-------- --------- -------- --------
Net income (loss) from operations ( 80,816 ) 12,505 ( 266,632 ) 20,821
Gain on sale of property 1,130,588 0 1,130,588 0
--------- --------- --------- --------
Net income (loss) before taxes 1,049,772 12,505 863,956 20,821
Provision for income taxes 0 0 0 0
--------- --------- --------- --------
Net income $ 1,049,772 $ 12,505 $ 863,956 $ 20,821
========= ========= ========= ========
Net income per share $ .13 $ .00 $ .11 $ .01
========= ========= ========= ========
Average weighted number
of shares outstanding 8,240,547 5,407,214 7,990,547 3,073,880
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
AM-PAC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
----------------------------------------
1997 1996
---------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 863,956 $ 20,821
Adjustments to reconcile net
cash provided (used) by
operating activities
Depreciation 7,165 3,943
Increase in prepaids ( 12,691 ) ( 9,587 )
Increase in inventory ( 17,387 ) ( 0 )
Decrease in receivable 0 7,175
Increase in accounts payable 80,457 2,040
Increase (decrease) in other
current liabilitie ( 9,404 ) 759
Gain on sale of property ( 1,130,588 ) 0
--------- ----------
Net cash provided (used) by operating activities ( 218,492 ) 25,151
Cash flows from investing activities
Purchase of equipment and leasehold improvements ( 140,598 ) 0
--------- ----------
Net cash provided (used) by investing activities ( 140,598 ) 0
Cash flows from financing activities
Expenses of asset sale ( 590 ) 0
Loans to related parties ( 46,048 ) ( 1,977 )
Proceeds from borrowings 387,314 0
Repayment of debt ( 4,445 ) ( 9,375 )
--------- ----------
Net cash provided (used) by financing activities ( 336,231 ) ( 11,352 )
--------- ----------
Net increase (decrease) in cash ( 22,859 ) 13,799
Cash at beginning of period 47,651 33,840
--------- ----------
Cash at end of period $ 24,792 $ 47,639
========= ==========
Supplemental disclosure of cash flow information:
Interest expense $ 28,699 $ 22,017
========= ==========
Income taxes $ 0 $ 0
========= ==========
Supplemental schedule of noncash investing and
financing activities:
Conversion of related party debt to common stock $ 500,000 $ 0
======= ==========
Receipt of note receivable on sale of property $ 959,637 $ 0
======= ==========
Assumption of mortgage on sale of property $ 440,363 $ 0
======= ==========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
AM-PAC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997
1. INTERIM PRESENTATION
The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-QSB. The June 30, 1997 balance sheet data was
derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The
interim financial statements and notes thereto should be read in
conjunction with the financial statements and footnotes thereto included in
the Company's report on Form 10-KSB for the year ended December 31, 1996.
In the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of
the results for the interim periods presented.
2. RELATED PARTY TRANSACTIONS - SALE AND LEASEBACK OF ASSETS
On June 29, 1997, the Company sold the real estate, including all land and
premises, housing the Company's HeadlightZ restaurant to JT Investments
Ltd., an entity controlled by Thomas Tedrow, the President and a
controlling shareholder of the Company, and Jeffrey Martin who may be
deemed a controlling shareholder of the Company. The sale price of the
property was $1.4 million, consisting of assumption of a first mortgage on
the property in the amount of $440,363 and a note payable in the amount of
$959,637 due June 29, 1999 with interest at 8%.
The Company recorded a gain of $1,130,588 on the sale of the property.
Simultaneous with the sale of the property, the Company's subsidiary,
HeadlightZ of Orlando, Inc., and JT Investments entered into a lease
pursuant to which the Company will lease the property through July 1, 2002
for $8,000 per month. The Company is also responsible for all operating
expenses with respect to the property.
3. SHAREHOLDERS' EQUITY
During the six months ended June 30, 1997, the Company issued 500,000
shares of common stock in satisfaction of notes payable to related parties
totaling $500,000.
4. CONTINGENCIES
In connection with the sale of the Company's HeadlightZ property, the
purchaser assumed a first mortgage on such property in the amount of
$440,363. The Company did not obtain a release of liability on the first
mortgage at the time of sale. Accordingly, the Company may be liable for
any deficiency in the event of a default on the mortgage.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-QSB contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward looking statements.
Results of Operations - Six months ended June 30, 1997 compared to the six
months ended June 30, 1996.
Revenues. Revenues for the six months ended June 30, 1997 increased by
$152,223 or 180.9% to $236,368 from $84,145 for the six months ended June 30,
1996. This increase resulted from an increase in sales (from $720 in 1996 to
$138,789 in 1997) attributable to the Company's acquisition of HeadlightZ and an
increase in franchise fees ($32,904 in 1996 to $96,546 in 1997) attributable to
the resumption of royalty payments by the Company's largest franchisee following
resolution of a dispute with the franchisee, which increases were partially
offset by reductions in commissions, rental and interest income.
Cost of Sales. Cost of sales for the six months ended June 30, 1997 were
$47,724. There were no cost of sales for the six months ended June 30, 1996
because the Company's restaurant was not in operation during this period in
1996.
Rental Property Expense. There was no rental property expense for the six
months ended June 30, 1997 while rental property expense totaled $38,396 for the
six months ended June 30, 1996. This decrease in rental property expense
resulted from the Company purchasing the operation of the entity to which it had
previously been paying rent and cancelling the lease.
General and Administrative Expense. General and administrative expenses for
the six months ended June 30, 1997 increased by $430,348 or 1,726.4% to $455,276
from $24,928 for the six months ended June 30, 1996. This increase resulted from
the hiring of additional employees, increased professional fees and pre-opening
expenses associated with the renovation of the Florida restaurant.
Gain on Sale of Assets. During the quarter ended June 30, 1997, the Company
sold the real estate, including all land and premises, housing the Company's
HeadlightZ restaurant to JT Investments Ltd., an entity controlled by Thomas
Tedrow, the President and a controlling shareholder of the Company, and Jeffrey
Martin who may be deemed a controlling shareholder of the Company. The sale
price of the property was $1.4 million, consisting of assumption of a first
mortgage on the property in the amount of $440,363 and a note payable in the
amount of $959,637 due June 29, 1999 with interest at 8%. The Company recorded a
gain of $1,130,588 on the sale of the property.
Simultaneous with the sale of the property, the Company's subsidiary,
HeadlightZ of Orlando, Inc., and JT Investments entered into a lease pursuant to
which the Company will lease the property through July 1, 2002 for $8,000 per
month. The Company is also responsible for all operating expenses with respect
to the property.
Changes in Financial Condition, Liquidity and Capital Resource.
For the past twelve months, the Company has funded its operations and
capital requirements with loans from related parties. As of June 30, 1997, the
Company had cash of $24,792 and a deficiency of working capital of $160,717.
Net cash generated from operating activities decreased to $(218,492) from
$25,151 for the six months ended June 30, 1997 and 1996 respectively. The
decrease resulted from a loss from operations, and an increase in receivables
and inventory, and a decrease in accounts payable which was offset by the sole
of property for a promissory note.
Net cash used in investing activities increased to $140,598 from $0 for the
six months ended June 30, 1997 and 1996, respectively. This increase resulted
from the purchase of equipment and construction of leasehold improvements at the
Company's Florida restaurant.
7
<PAGE>
Net cash provided by financing activities increased to $336,231 from
$(11,352) for the six months ended June 30, 1997 and 1996, respectively. This
increase in cash provided is entirely attributable to borrowing from related
parties. During the six months ended June 30, 1997, the Company converted
$500,000 of loans from related parties into 500,000 shares of common stock.
At June 30, 1997, the Company had long-term debt of $1,773. The mortgage on
the Company's HeadlightZ restaurant property, totaling $440,363, was assumed by
a related party in connection with the sale of the property. The Company did not
obtain a release on such mortgage and remains contingently liable on said
mortgage.
During the quarter ended June 30, 1997, the Company sold the property which
houses the Florida restaurant and leased the facility for 5 years. Under the
terms of the lease, the Company is obligated to make annual payments of $96,000.
The Company has limited financial resources and continues to operate at a
loss. In order to fund continued operations, the Company will require continuing
loans from affiliates or new equity investment or other financing until such
time as the Company can increase its restaurant and franchise revenues to a
level sufficient to support the Company's overhead and other capital needs. The
Company is presently involved in efforts to place $2,000,000 of its common
stock. With these proceeds, the Company believes that it will have sufficient
working capital for the next twelve months.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Agreement to Sell Real Estate
10.2 Real Estate Lease
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AM-PAC INTERNATIONAL, INC.
Date: November 6, 1997 By: /s/ Thomas Tedrow
------------------------------------
Thomas Tedrow
Chief Executive Officer
Date: November 6, 1997 By: /s/ Michael J. Martella
------------------------------------
Michael J. Martella
Chief Financial Officer
9
AGREEMENT TO SELL REAL ESTATE
AMPAC INVESTMENTS, INC, of
- --------------------------------------------------------------------------------
431 E. Central, Suite 900, Orlando, Florida 32817 as Seller, and
- --------------------------------------------------------------------------------
J. T. Investments, Ltd., of
- --------------------------------------------------------------------------------
9025 E. 200 S. Salt Lake City, Utah 84070, as Buyer, hereby agree that
- ---------------------------------------------------
the Seller shall sell and the Buyer shall buy the following described property
UPON THE TERMS AND CONDITIONS HEREINAFTER SET FORTH, which include the STANDARDS
FOR REAL ESTATE TRANSACTIONS set forth withing this contract.
1. LEGAL DESCRIPTION of real estate located in Orange
-----------------------------
County, State of Florida
----------------------------- --------------------------
See Addendum "A"
2. PURCHASE PRICE $1,400,000 Dollars, Method of
---------------------------------------
Payment:
(a) Deposit to be held in trust by_____________________ $ -0-
(b) Approximate principal balance of first mortgage to which
conveyance shall be subject, if any, Mortgage
holder:_______________________________________
Interest:_____% per annum:
Method of payment_____________________________ $ 440,363
(c) Other: 8% interest balloon payment in 2 years $ 959,637
(d) Cash, certified or local cashier's check on closing and
delivery of deed (or such greater or lesser amount as may
be necessary to complete payment of purchase price after
credits, adjustments and prorations). $ -0-
3. PRORATIONS: Taxes, insurance, interest, rents and other expenses and
revenue of said property shall be prorated as of the date of closing.
4. RESTRICTIONS, EASEMENTS, LIMITATIONS: Buyer shall take title subject to:
(a) Zoning, restrictions, prohibitions and requirements imposed by
governmental authority, (b) Restrictions and matters appearing on the plat
or common to the subdivision, (c) Public utility easements of record,
provided said easements are located on the side or rear lines of the
property, (d) Taxes for year of closing, assumed mortgages, and purchase
money mortgages, if any, (e) Other:______________________________________.
Seller warrants that there shall be no violations of building or zoning
codes at the time of closing.
5. DEFAULT BY BUYER: If Buyer fails to perform any of the covenants of this
contract, all money paid pursuant to this contract by Buyer as aforesaid
shall be retained by or for the account of the Seller as consideration for
the execution of this contract and as agreed liquidated damages and in full
settlement of any claims for damages.
6. DEFAULT BY SELLER: If the Seller fails to perform any of the covenants of
this contract, the aforesaid money paid by the Buyer, at the option of the
buyer, shall be returned to the Buyer on demand; or the buyer shall have
only the right of specific performance.
7. TERMITE INSPECTION: At least 15 days before closing, Buyer, at Buyer's
expense, shall have the right to obtain a written report from a licensed
exterminator stating that there is no evidence of live termite or other
woodboring insect infestation on said property nor substantial damage from
prior infestation on said property. If there is such evidence, Seller shall
pay up to three (3%) percent of the purchase price for the treatment
required to remedy such infestation, including repairing and replacing
portions of said improvements which have been damaged; but if the costs for
such treatment or repairs exceed three (3%) percent of the purchase price,
Buyer may elect to pay such excess. If Buyer elects not to pay, Seller may
pay the excess or cancel the contract.
1
<PAGE>
8. ROOF INSPECTION: At least 15 days before closing, Buyer at Buyer's expense,
shall have the right to obtain a written report from a licensed roofer
stating that the roof is in watertight condition. In the event repairs are
required either to correct leaks or to replace damage to fascia or soffit,
Seller shall pay up to three (3%) percent of the purchase price for said
repairs which shall be performed by a licensed roofing contractor; but if
the costs for such repairs exceed three (3%) percent of the purchase price,
Buyer may elect to pay such excess. If buyer elects not to pay, Seller may
pay the excess or cancel the contract.
9. OTHER INSPECTIONS: At least 15 days before closing, Buyer or his agent may
inspect all appliances, air conditioning and heating systems, electrical
systems, plumbing, machinery, sprinklers and pool system included in the
sale. Seller shall pay for repairs necessary to place such items in working
order at the time of closing. Within 48 hours before closing, Buyer shall
be entitled, upon reasonable notice to Seller, to inspect the premises to
determine that said items are in working order. All items of personal
property included in the sale shall be transferred by Bill of Sale with
warranty of title.
10. LEASES: Seller, not less than 15 days before closing, shall furnish to
Buyer copies of all written leases and estoppel letters from each tenant
specifying the nature and duration of the tenant's occupancy, rental rates
and advanced rent and security deposits paid by tenant. If Seller is unable
to obtain such letters from tenants, Seller shall furnish the same
information to Buyer within said time period in the form of a seller's
affidavit, and Buyer may contact tenants thereafter to confirm such
information. At closing, seller shall deliver and assign all original
leases to Buyer.
11. MECHANICS LIENS: Seller shall furnish to Buyer an affidavit that there have
been no improvements to the subject property for 90 days immediately
preceding the date of closing, and no financing statements, claims or lien
or potential lienors known to Seller. If the property has been improved
within that time, Seller shall deliver releases or waivers of all mechanics
liens as executed by general contractors, subcontractors, suppliers and
material men and reciting that all bills for work to the subject property
which could serve as basis for mechanics liens have been paid or will be
paid at closing.
12. PLACE OF CLOSING: Closing shall be held at the office of the Seller's
attorney or as otherwise agreed upon.
13. TIME IS OF THE ESSENCE: Time is of the essence of this Sale and Purchase
Agreement.
14. DOCUMENTS FOR CLOSING: Seller's attorney shall prepare deed, note,
mortgage, Seller's affidavit, any corrective instruments required for
perfecting the title, and closing statement and submit copies of same to
Buyer's attorney, and copy of closing statement to the broker, at least two
days prior to scheduled closing date.
15. EXPENSES: State documentary stamps required on the instrument of conveyance
and the cost of recording any corrective instruments shall be paid by the
Seller. Documentary stamps to be affixed to the note secured by the
purchase money mortgage, intangible tax on the mortgage, and the cost of
recording the deed and purchasing money mortgage shall be paid by the
Buyer.
16. INSURANCE: If insurance is to be prorated, the Seller shall on or before
the closing date, furnish to Buyer all insurance policies or copies
thereof.
17. RISK OF LOSS: If the improvements are damaged by fire or casualty before
delivery of the deed and can be restored to substantially the same
condition as now within the period of 60 days thereafter, Seller shall so
restore the improvements and the closing date and date of delivery of
possession hereinbefore provided shall be extended accordingly. If Seller
fails to do so, the Buyer shall have the option of (1) taking the property
as is, together with insurance proceeds, if any, or (2) canceling the
contract, and all deposits shall be forthwith returned to the Buyer and all
parties shall be released of any and all obligations and liability.
2
<PAGE>
18. MAINTENANCE: Between the date of the contact and the date of closing, the
property, including lawn, shrubbery and pool, if any, shall be maintained
by the Seller in the condition as it existed as of the date of the
contract, ordinary wear and tear excepted.
19. CLOSING DATE: This contract shall be closed and the deed and possession
shall be delivered on or before the _____day of______________, 19_____,
unless extended by other provisions of this contract.
20. TYPEWRITTEN OR HANDWRITTEN PROVISIONS: Typewritten or handwritten
provisions inserted in this form shall control all printed provisions in
conflict therewith.
21. OTHER AGREEMENTS: No agreements or representations, unless incorporated in
this contract, shall be binding upon any of the parties.
22. SPECIAL CLAUSES: Seller will convey with Quit Claim Deed. Property sold "as
is".
COMMISSION TO BROKER: The Seller hereby recognizes N/A as the Broker in this
transaction, and agrees to pay as commission_____% of the gross sale price, the
sum of____________ Dollars ($_____________) or one half of the deposit in case
same is forfeited by the Buyer through failure to perform, as compensation for
services rendered, provided same does not exceed the full amount of the
commission.
WITNESSED BY:
/s/ illegible 6-29-97 Thomas Tedrow 6-29-97
- --------------------------- -------------------------------------
Witness Date Buyer Date
/s/ illegible 6-29-97 Jeff Martin 6-29-97
- --------------------------- -------------------------------------
Witness Date Seller Date
lk: a:\agreement
3
<PAGE>
EXHIBIT "A"
Recorded - Martha O. Haynie
LEGAL DESCRIPTION
Parcel 1
East 52.14 feet of West 312.84 feet of NW 1/4 of NW 1/4 of NW 1/4 of Section 22,
Township 22 South, Range 31 East, lying North of State Road No. 50, and East
52.14 feet of West 260.70 feet of NW 1/4 of NW 1/4 of NW 1/4 of Section 22,
Township 22 South, Range 31 East, lying North of State Road No. 50.
The East 52.14 feet of the West 417.12 feet of the NW 1/4 of the NW 1/4 of NW
1/4 of Section 22, Township 22 South, Range 31 East, lying North of State Road
No. 50, also the East 52.14 feet of the West 364.98 feet of the NW 1/4 of the NW
1/4 of NW 1/4 of Section 22, Township 22 South, Range 31 East lying North of
State Road No. 50.
Section 22, Township 22 South, Range 31 East. East 104.29 feet of the West
208.56 feet of the NW 1/4 of the NW 1/4 of NW 1/4, lying North of State Road No.
50.
All lying and being in Orange County, Florida.
Parcel 2
The West 300.00 feet (as measured along the South line) of the following
described portion of Lot 1, Block "J", Morningside, as recorded in Plat Book
"O", Page 82, Public Records of Orange County, Florida: Begin at the Southeast
corner of said Lot 1, run North 12 degrees West along Crescent Boulevard, 150.30
feet; thence South 89 degrees West 455.52 feet; thence North 27 degrees West
111.6 feet more or less to Emerald Lake; thence Westerly along the lake 77.32
feet more or less to the West line of said Lot 1; thence South 2 degrees East
along the West line of said Lot 1, 230.00 feet more or less to the Southwest
corner of Lot 1; thence East 607.2 feet to the Point of Beginning.
4
REAL ESTATE LEASE
I. This Lease Agreement (this "Lease") is made effective as of July 1, 1997, by
and between JT Investments, LTD., ("Landlord"), and HeadlightZ of Orlando, Inc.,
("Tenant"). The parties agree as follows:
PREMISES. Landlord, in consideration of the lease payments provided in this
Lease, leases to Tenant HeadlightZ of Orlando, (the "Premises") located at See
Addendom "A", 11599 E. Colonial Drive, Orlando, Florida 32817.
TERM. The lease term will begin on July 01, 1997 and will terminate on July 01,
2002.
LEASE PAYMENTS. Tenant shall pay Landlord, monthly payments of $8,000.00 per
month, payable in advance on the first day of each month, for a total annual
lease payment of $96,000.00. Lease payments shall be made to the Landlord at
9025 South 700 West, Sandy, Utah 84070, as may be changed from time to time by
Landlord.
POSSESSION. Tenant shall be entitled to possession on the first day of the term
of this Lease, and shall yield possession to Landlord on the last day of the
term of this Lease, unless otherwise agreed by both parties in writing.
PROPERTY INSURANCE. Landlord and Tenant shall each be responsible to maintain
appropriate insurance for their respective interests in the Premises and
property located on the Premises.
DEFAULTS. Tenant shall be in default of this Lease, if Tenant fails to fulfill
any lease obligation or term by which Tenant is bound. Subject to any governing
provisions of law to the contrary, if Tenant fails to cure any financial
obligation within 5 days (or any other obligation within 15 days) after written
notice of such defaults is provided by Landlord to Tenant, Landlord may take
possession of the Premises without further notice (to the extent permitted by
law), and without prejudicing Landlord's rights to damages. In the alternative,
Landlord may elect to cure any default and the cost of such action shall be
added to Tenant's financial obligations under this Lease. Tenant shall pay all
costs, damages, and expenses (including reasonable attorney fees and expenses)
suffered by Landlord by reason of Tenant's defaults. All sums of money or
charges required to be paid by Tenant under this Lease shall be additional rent,
whether or not such sums or charges are designated as "additional rent".
NOTICE. Notices under this Lease shall not be deemed valid unless given or
served in writing and forwarded by mail, postage prepaid, addressed as follows:
1
<PAGE>
LANDLORD:
Name: JT Investments, LTD.
Address: 9025 South 700 West
Sandy, UT 84070
TENANT:
Name: HeadlightZ of Orlando, Inc.
Address: 11599 E. Colonial Drive
Orlando, FL 32817
Such addresses may be changed from time to time by either party by providing
notice as set forth above.
ENTIRE AGREEMENT / AMENDMENT. This Lease Agreement contains the entire agreement
of the parties and there are no other promises or conditions in any other
agreement whether oral or written. This Lease may be modified or amended in
writing, if the writing is signed by the party obligated under the amendment.
SEVERABILITY. If any portion of this Lease shall be held to be invalid or
unenforceable fgor any reason, the remaining provisions shall continue to be
valid and enforceable. If a court finds that any provision of this Lease is
invalid or unenforceable, but that by limiting such provision, it would become
valid and enforceable, then such provision shall be deemed to be written,
construed and enforced as so limited.
WAIVER. The failure of either party to enforce any provisions of this Lease
shall not be construed as a waiver or limitation of that party's right to
subsequently enforce and compel strict compliance with every provision of this
Lease.
CUMULATIVE RIGHTS. The rights of the parties under this Lease are cumulative,
and shall not be construed as exclusive unless otherise required by law.
GOVERNING LAW. The Lease shall be construed in accordance with the laws of the
State of Florida.
2
<PAGE>
II. THIS IS A TRIPLE NET LEASE. Tenant to pay all repairs, taxes, insurance and
utilities.
LANDLORD:
JT Investments, Ltd.
/s/ illegible
- --------------------------------
Jeffrey D. Martin
TENANT:
HeadlightZ of Orlando, Inc.
/s/ illegible
- --------------------------------
Thomas L. Tedrow
Notary Public Cheryl L. Piper
State of Florida Commission #CC4522632
Expires April 13, 1998
/s/ illegible
------------------
Cheryl L. Piper
3
<PAGE>
EXHIBIT "A"
Recorded - Martha O. Haynie
LEGAL DESCRIPTION
Parcel 1
East 52.14 feet of West 312.84 feet of NW 1/4 of NW 1/4 of NW 1/4 of Section 22,
Township 22 South, Range 31 East, lying North of State Road No. 50, and East
52.14 feet of West 260.70 feet of NW 1/4 of NW 1/4 of NW 1/4 of Section 22,
Township 22 South, Range 31 East, lying North of State Road No. 50.
The East 52.14 feet of the West 417.12 feet of the NW 1/4 of the NW 1/4 of NW
1/4 of Section 22, Township 22 South, Range 31 East, lying North of State Road
No. 50, also the East 52.14 feet of the West 364.98 feet of the NW 1/4 of the NW
1/4 of NW 1/4 of Section 22, Township 22 South, Range 31 East lying North of
State Road No. 50.
Section 22, Township 22 South, Range 31 East. East 104.29 feet of the West
208.56 feet of the NW 1/4 of the NW 1/4 of NW 1/4, lying North of State Road No.
50.
All lying and being in Orange County, Florida.
Parcel 2
The West 300.00 feet (as measured along the South line) of the following
described portion of Lot 1, Block "J", Morningside, as recorded in Plat Book
"O", Page 82, Public Records of Orange County, Florida: Begin at the Southeast
corner of said Lot 1, run North 12 degrees West along Crescent Boulevard, 150.30
feet; thence South 89 degrees West 455.52 feet; thence North 27 degrees West
111.6 feet more or less to Emerald Lake; thence Westerly along the lake 77.32
feet more or less to the West line of said Lot 1; thence South 2 degrees East
along the West line of said Lot 1, 230.00 feet more or less to the Southwest
corner of Lot 1; thence East 607.2 feet to the Point of Beginning.
4
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 24,792
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 17,387
<CURRENT-ASSETS> 44,537
<PP&E> 142,765
<DEPRECIATION> 3,012
<TOTAL-ASSETS> 1,446,772
<CURRENT-LIABILITIES> 205,254
<BONDS> 0
0
0
<COMMON> 8,240
<OTHER-SE> 1,231,505
<TOTAL-LIABILITY-AND-EQUITY> 1,446,772
<SALES> 236,368
<TOTAL-REVENUES> 236,368
<CGS> 47,724
<TOTAL-COSTS> 47,724
<OTHER-EXPENSES> 455,276
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (266,632)
<INCOME-TAX> 0
<INCOME-CONTINUING> (266,632)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,130,588
<CHANGES> 0
<NET-INCOME> 863,956
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
