SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 1996
Commission File Number 0-18865
LEASING TECHNOLOGY INCORPORATED
(Exact name of registrant as specified in its charter)
UTAH 87-0401400
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
102 WEST 500 SOUTH, SUITE 400, SALT LAKE CITY, UTAH, 84101
(Address of principal executive offices, including zip code)
(801) 363-8961
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
Indicate by check mark whether the registrant has: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and, (2) been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of June 30, 1996, (computed by the average
"bid and ask" prices on such date):
$1,487,725
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding as of June 30, 1996
Common Stock, par value $.001 36,704,644
Documents Incorporated by Reference: NONE
<page 1>
I N D E X
PART I
Item 1. Business.. . . . . . . . . . . . . . . . . . . . . . .2
Item 2. Properties.. . . . . . . . . . . . . . . . . . . . . .7
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . .7
Item 4. Submission of Matters to a Vote of Security Holders. .8
PART II
Item 5. Market for Registrant's Common Equity & Related
Stockholder Matters . . . . . . . . . . . . . . . . . 8
Item 6. Selected Financial Data. . . . . . . . . . . . . . . .9
Item 7. Management's Discussion & Analysis of Financial
Condition & Results of Operations. . . . . . . . . . 10
Item 8. Financial Statements and Supplementary Data. . . . . 12
Item 9. Changes in and Disagreements with Accountants on
Accounting & Financial Disclosure . . . . . . . . . 13
PART III
Item 10. Directors and Executive Officers of the Registrant.. 13
Item 11. Executive Compensation.. . . . . . . . . . . . . . . 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . 14
Item 13. Certain Relationships and Related Transactions.. . . 15
PART IV
Item 14. Exhibits, Financial Statements Schedules,
and Reports . . . . . . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 18
<page 2>
PART I
Item 1. Business.
GENERAL
Leasing Technology Incorporated ("LTI" or "the Company"), a Utah
corporation, is primarily engaged in the venture capital business offering
consulting expertise to selected business opportunities and, through its
subsidiary, Golf Ventures, Inc., a publicly held Utah corporation ("GVIC"),
it is engaged in developing certain residential and recreational real estate
projects.
In 1990, the Company acquired the Palm Lakes real estate development near
St. George, Utah. In 1991, the name of the development was changed to the
Red Hawk(R) Country Club and in 1994, the name was again changed to Red
Hawk(R) International Golf & Country Club ("Red Hawk(R)"). Also in 1991, the
Company purchased two residential developments in St. George consisting of
condominiums, cottages, and single family dwelling lots known as Cotton Manor
and Cotton Acres respectively.
In December 1992, the Company assigned all of its real estate holdings in
Red Hawk(R) , Cotton Manor and Cotton Acres to GVIC, a publicly held Utah
Corporation, in exchange for 3,273,728 shares of GVIC common stock, which
represented approximately 86% of GVIC's total outstanding shares. GVIC further
agreed to assume all obligations related to the acquired real estate. On June
1, 1994, GVIC acquired an additional 54 acres of land adjacent to Red Hawk(R)
for future development. GVIC is developing the real estate projects as
initially anticipated by the Company.
LTI's principal corporate offices are located at 102 West 500 South, Suite
400, Salt Lake City, Utah 84101 and its telephone number is (801) 363-8961.
RED HAWK(R) INTERNATIONAL COUNTRY CLUB
Red Hawk(R) International Golf & Country Club is a master-planned
residential golfing and recreational community situated on 670 acres of land
that, when completed, will include more than 945 building lots, a 27 hole golf
course, tennis courts, swimming pools, and other recreational amenities. Red
Hawk(R) is located in southwest Utah, three (3) miles southeast of St. George
in the City of Washington, approximately 120 miles from Las Vegas, Nevada, and
within a short drive of several national parks including Zion National Park
and Bryce National Park. Red Hawk(R) is situated on rolling farm land
surrounded on three sides by a horseshoe of rolling hills. This land has been
used for several years as a farm known as "Stucki Farms," and the main crops
grown and harvested have been apples, alfalfa and grapes.
Irrigation water for the Red Hawk(R) land is obtained from two sources.
First, from the rights owned in Hurricane Canal Company, La Verkin Bench Canal
Company, and St. George Washington Field Canal Company. Irrigation rights are
serviced by the St. George Washington Field Canal Company. The source of supply
is Navajo Lake and the North Fork of the Virgin River in the Colorado River
drainage. The second source of water is from ten existing wells on the Red
Hawk(R) property. These wells have a proven history of water capability of
4,968.30 acre feet of water per year. Management believe that sufficient water
rights are available to accomplish all of Red Hawk's irrigation water needs.
<PAGE 3>
Washington City recently completed construction of a storage tank for
culinary (drinking) water in close proximity to Red Hawk(R), together with a
water pumping station and delivery lines which run through GVI's property.
As a result, management believes that Red Hawk(R) will have adequate quantities
of culinary water available.
On March 30, 1990, the Company purchased, pursuant to an option agreement
(as amended, the "Stucki Purchase Agreement") with Dr. Karl F. Stucki and Mrs.
Marcia C. Stucki, Trustees of the Karl F. and Marcia C. Stucki Income Trust
(the "Stuckis"), 487 acres of real property (the "Stucki Parcel") to be the
site of the proposed Red Hawk(R) project. The total purchase price of the
property was $3,000,000, payable (i) $25,000 in cash, (ii) $20,000 applied
from LTI's prior purchase option payment, (iii) $90,000 from the assumption by
LTI of the sellers' sales commission obligation, (iv) $1,906,000 by assignment
of certain assets of LTI to the Stuckis (the "Assigned Assets"), and (v)
$959,000 in the form of a trust deed note (the "Trust Deed Note"), payable
$20,000 per month with a balloon payment originally due in January 1994. The
Assigned Assets, comprised of certain notes receivable and other rights of LTI
to receive payments under certain contracts, were transferred with full
recourse to LTI. The combined $2,865,000 amount payable pursuant to the Trust
Deed Note and the Assigned Assets (the "Stucki Payable") bears interest at the
rate of 10% per annum and, under the terms of the Stucki Purchase Agreement,
was payable in full in January 1994.
A deed of trust in favor of the Stuckis securing the Company's obligations
to them under the Stucki Payable (the "Deed of Trust") encumbers the Company's
entire interest in the Stucki Parcel. Under the Stucki Purchase Agreement,
subject to the fulfillment of certain conditions, the Stuckis will agree to
release from the Deed of Trust, 75 lots selected by the Company located within
the first phase of Red Hawk(R). The release of the 75 lots will occur upon the
fulfillment of: (1) the Company securing permanent financing of $1,700,000 for
development of Red Hawk(R); (2) the posting of a performance bond guaranteeing
the Company's completion of improvements to 265 lots, related utilities and
roads, and a golf course; and (3) improvements to the 75 lots are in place.
The Stuckis will retain a security interest in the remaining lots and are
obligated to release one platted lot for each $10,000 of principal paid under
the Stucki Purchase Agreement. The Stucki Purchase Agreement further restricts
the Company from conveying its interest in the property without the written
consent of the Stuckis and until the $1,700,000 in financing has been secured.
As of this date, no permanent financing has been obtained and, therefore, no
lots have been released from the effects of the Deed of Trust.
Because it is necessary for the Company to satisfy the above conditions
in order for the lots to be released from the effects of the related deed of
trust, no lots may be sold to prospective purchasers and title thereto conveyed
until permanent financing for the project is obtained. Thus, if the Company is
unable to obtain such financing, no interest in the project may be sold or
conveyed without the permission of or further concessions from the Stuckis.
In this event, the Company could possibly default on its agreement and the
property would revert back to the Stuckis. It is for this reason that the
Company's financial statements reflect the value of the land on a cash basis,
whereby cost reflects the cash invested in the land and excludes the Trust Deed
Note.
During 1991 and 1992, due to the failure of payments under the Assigned
Assets to materialize and the Company's poor cash flow position, the Company
and the Stucki's entered into various modification agreements pursuant to
which the monthly payments due under the Stucki Purchase Agreement were changed
to $25,000 through August 1992 and $15,000 through December 1993, with a final
balloon payment due in January 1994.
<PAGE 4>
On December 31, 1992, pursuant to the terms of an Acquisition Agreement
with GVI (the "LTI Real Estate Acquisition Agreement"), GVI acquired all of
LTI's right, title and interest in and to the Stucki Purchase Agreement and
assumed LTI's obligations thereunder.
Since May 1994, following its failure to satisfy the Stucki Payable in
full on January 31, 1994 in accordance with its terms, GVI has been
continuing to make monthly payments of $25,000, inclusive of principal and
interest. In consideration of accrued and unpaid interest on the Stucki
Payable through June 1994, aggregating approximately $155,806, GVI issued
10,000 shares of its Common Stock to the Stuckis. Although a verbal
modification agreement between the parties extended the due date of the
Stucki Payable to January 1996, GVI has not satisfied such payment obligation.
Since January 1996, GVI has continued to make $25,000 monthly payment to the
Stuckis, all of which have been accepted. As of April 30, 1996, a balance of
approximately $2,385,000 remains outstanding on the Stucki Payable, inclusive
of principal and accrued interest.
On July 5, 1996, GVI entered into a Further Modification Agreement whereby
GVI, in exchange for the Stucki's extending repayment of the Stucki Payable,
has agreed to pay the Stucki's a lump payment of $75,000 upon the execution of
the Further Modification Agreement and will continue to pay $25,000 per month
for the next two years. After two years the balance of the Stucki Payable
shall be due and payable.
In addition, the terms for the release of property from the Deed of Trust
have been modified. The Stucki's have agreed to release from trust and
transfer title to GVI approximately 200 acres of the Stucki parcel at a cost
of $6,500 per acre. The title will be conveyed in two phases, the first phase,
comprising approximately 45 acres, covers the land for the residential lots of
Red Hawk. The second phase, comprises the balance of the 200 acres, covers
the land required for the golf course. The transfer of title described above
is subject to the reasonable satisfaction of the Stucki's that sufficient
financing has been obtained by the Company to complete Phase I of Red Hawk.
GVI owns two additional parcels of land contiguous with the Red Hawk(R)
site which were not acquired from the Stuckis. One parcel, approximately 129
acres, was acquired by the Company from an unaffiliated third party and
transferred to GVI in December 1992 under the LTI Real Estate Acquisition
Agreement. The purchase price for the parcel was paid in full by delivery of
260,000 shares of the Company's common stock.
On June 1, 1994, GVI directly purchased the second parcel from an
unaffiliated third party, comprised of an additional 54 acres, for a purchase
price of $500,000. The terms of the purchase were a $25,000 cash down payment,
$25,000 payable 90 days from the closing, and annual payments of $100,000, with
interest accruing at a rate of 8% per annum. The 54 acre parcel is intended to
be used for commercial and higher density residential development.
Plan of Red Hawk(R) Operation For Next Twelve Months
During the fiscal year ending March 31, 1997, the Company will continue to
assist GVI in its efforts to acquire permanent financing for developing Phase I
of Red Hawk(R). All projected dates set forth below are dependent upon GVI's
ability to secure the necessary funding, either through outside financing or
from the additional sale of securities.
Engineering, and planning and architecture of Phase I of the golf course
and country club project commenced on October 1990 and is now completed. Phase
I is anticipated to consist of development and sale of 114 estate lots, 7
<PAGE 5>
cottages, 5 corporate villas, and construction of the first 18 holes of the
golf course, a double driving range, irrigation, lakes and infrastructure for
utilities. Actual construction to date has been limited to laying out the
initial 18 holes of the proposed golf course. Preliminary cost estimates for
development of Phase I have been obtained from engineers, architects and
planners. Costs for Phase I are projected at approximately $7,500,000 which
are directly related to construction of an 18 hole golf course, residential
units, the driving range, irrigation, lakes and infrastructure for utilities,
improvements, professional and consulting fees, advertising and promotion, and
overhead.
GVI has received cost estimates for the installation of the off-site
sewer. As Washington City owns and is responsible for sewer lines, the
Company must negotiate with the City with respect to the construction and
payment of the sewer line. Construction costs are estimated to be
approximately $1,000,000 for the off-site sewer. GVI estimates that an
additional $135,000 will be required for construction of a gas line. There
is a possibility that future expenditures for on-site electric power will
be necessary; however, this has not been determined and no estimates of
costs will be obtained until future demands are assessed. In addition, GVI
estimates payments to the City of approximately $130,000 in connection with
the City's recent construction of off-site and on-site water lines and a
pumping station.
In order to complete the subdivision of the real estate, it is required
that GVI file with Washington City, for approval and recordation the master
plan of the project, including a master utility and land plan prepared by
a licensed engineer. Because the subdivision of the land will be in phases,
it is also required that the first phase master plan be filed with the City
for approval and recordation. Approval of the master plan has been given by
the Washington City Planning and Zoning Commission. Permits have been
received for the grading plan and construction on the first 18 holes of the
golf course and Phase I of the real estate. Construction began on July 8, 1996.
The final plat will be recorded upon completion of installation of
improvements and/or bonding of Phase I. No other permits or authorization are
required until after filing of the final plat for Phase I at which time
building permits will be obtained from Washington City.
As funding becomes available, it is anticipated that approval from the
various governmental agencies involved and necessary bonding for all on-site
lot improvements will be received. Construction for all off-site and on-site
improvements should commence as soon as practical thereafter. On site-
improvements are estimated to be $14,000 per lot, or a total of $1,596,000 for
the 114 total lots in Phase I.
Gene Bates, golf course architect, has designed the proposed 27-hole golf
course for a total consulting fee of $250,000, to be paid in installments until
completion of the golf course. Revised plans of the course were completed in
May 1994, and construction of the course is planned to begin following receipt
of development financing for Red Hawk(R). Completion time for the golf course
is estimated at between fifteen to eighteen months from the date construction
commences. Reservations are being taken for residential lots in Red Hawk(R) and
an intensive sales program will commence upon the start of construction. A
final bid has been received estimating that the golf course will cost
approximately $3,750,000 for the initial 18 holes and the driving range.
COTTON MANOR AND COTTON ACRES
In September 1991, the Company purchased for an aggregate purchase price
of $2,592,050, two real estate developments located in St. George, Utah,
consisting of approximately 80 contiguous acres that included an existing
condominium development known as Cotton Manor, and a single residence
development known as Cotton Acres. At the time of the acquisition, the two
developments consisted of both developed and undeveloped lots. One of the
shareholders of Property Alliance, Inc. ("Property Alliance"), the seller of
the developments, was Duane H. Marchant, who in January 1993 became President
and Chief Executive Officer of GVI.
<PAGE 6>
Cotton Manor, a 19 acre development, currently includes 28 completed
condominiums (one two-story building with 16 units and three one-story
four-plexes). All twenty-eight of the completed units have been sold (15 by
the prior owner), except for two units which are used as sales offices by GVI.
Cotton Manor has several existing recreational facilities including swimming
pool, tennis courts, and a putting green.
GVI currently intends to build an additional 102 cottages as marketing of
the project develops. Each cottage is part of a single, detached planned unit
development (PUD). Two cottage models have been completed, one of which has
been purchased by Duane H. Marchant. Approval to construct the first 19
cottages has been obtained from the City of St. George. Water, sewer and
power lines for the 19 units are currently being constructed and are expected
to be completed by June 30, 1996. GVI has recently commenced marketing of the
cottages and believes that the initial 19 cottages can be sold within
approximately two years. All city utilities are available to the property
including sewer and water, electricity and natural gas. Building permits will
be obtained from the City of St. George as needed. Following the sale of the
19 units, known as Phase IV, GVI intends to commence marketing and developing
additional Phases.
Cotton Acres is a 61 acre development consisting of 259 lots. All 200
lots in Phases I-IX have been sold as of April 30, 1996 and dwelling units on
such lots have been completed. Phase X, consisting of 19 lots, is currently
under development. GVI intends to pre-sell these lots prior to actual
construction and believes that the lots can be sold within approximately one
year.
The total purchase price for Cotton Manor and Cotton Acres under the Sales
Agreement between Property Alliance and the Company was $2,592,050, payable as
described below. LTI made an initial payment of $23,601 at the time of the
acquisition and assumed various obligations of Property Alliance related to the
acquired properties including, (i) a promissory note with an outstanding
balance of $277,304, payable $30,000 per year, (ii) a promissory note with an
outstanding balance of $101,145, which has been paid in full and (iii) a
Special Improvement District (SID) obligation estimated at $53,000, of which
$36,000 has been paid through April 30, 1996. The Company also delivered to
Property Alliance a trust deed note in the principal amount of $1,387,000,
bearing interest at the rate of 10% per annum, which note is secured by a
trust deed covering the conveyed properties. A portion of the principal on
the trust deed note was payable in six annual installments of $120,000 through
February 1, 1997 and interest is payable in shares of LTI common stock. In
addition, the Sales Agreement requires mandatory prepayments of 75% of the
gross proceeds from the sale of the acquired assets plus $2,000 from the sale
of each Red Hawk(R) lot. Although the Company did not make payments on the
trust deed note on the foregoing terms, the Company and GVI have made various
oral arrangements with Property Alliance, described below, with respect to
such payments.
On December 31, 1992, pursuant to the LTI Real Estate Acquisition
Agreement, GVI assumed all of LTI's right, title and interest in Cotton Manor
and Cotton Acres and assumed the related liabilities, including the Company's
outstanding obligations to Property Alliance described above. On June 30,
1994, Property Alliance, GVI and the Company entered into a modification of the
original Sales Agreement under which, in consideration of Property Alliance
extending the due date of the first four annual payments on the Note
(aggregating $480,000) until July 31, 1995, GVI is obligated to make a
mandatory prepayment on the Note of $5,000 (rather than $2,000) for each Red
Hawk(R) lot sold by GVI. In addition, GVI is obligated to pay Property
Alliance, as a mandatory prepayment on the Note, $175,000 from the first
$1,000,000 of financing proceeds GVI secures for development of Red Hawk(R).
As of March 31, 1996 the principal balance of the trust deed note was
$721,502 and accrued interest, payable with LTI common stock, was $410,500.
<PAGE 7>
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
No information is presented as to industry segments. The Company,
through its subsidiary GVIC, is presently engaged in the principal business of
developing residential and recreational real estate projects. Reference is
made to the statements of operations included herein in response to Part IV,
Item 14 of this Form 10-K for a statement of the Company's revenues and
operating profit (loss) for the past three fiscal years.
Item 2. Properties.
The Company's principal place of business is an office located at 102 West
500 South, Suite 400, Salt Lake City, Utah 84101. This office facility
consists of approximately 2,150 square feet and is being leased pursuant to a
24-month lease expiring on May 31, 1997 for a monthly lease payment of $2,407.
The Company shares this office space with GVI. The Company and GVI have an oral
agreement pursuant to which GVI pays the rent and certain related overhead
charges for both companies and the Company pays the salary of certain of GVI's
employees who provide part-time services to the Company. Historically, the
value of the rent and overhead charges paid by GVI attributable to the Company
have been approximately equal to the value of the services provided by GVI
employees on behalf of the Company.
The Company's real estate holdings are comprised of one recreational and
residential development consisting of approximately 670 acres near St. George,
Utah named Red Hawk(R) International Golf & Country Club, and two residential
developments in St. George, Utah aggregating approximately 80 acres known as
Cotton Manor and Cotton Acres. See "Item 1. Business."
Item 3. Legal Proceedings.
On July 19, 1993, the Company became the subject of a formal order of
investigation captioned "In the Matter of Leasing Technology, Inc. (NY-6027)"
issued by the Securities and Exchange Commission. The order states that the
Commission deems certain acts and practices to be in possible violation of
Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a) and 15(c)
of the Securities Act of 1934, and various rules thereunder. The Company is
unaware of the circumstances concerning the order entered against LTI;
furthermore, the Company has had no communication with the SEC regarding this
matter since 1994, and therefore, cannot make a judgement as to the possible
effect on the Company of the investigation.
On July 26, 1994, the Company was served with a complaint entitled
"Aksglade, et al. vs. Leasing Technology, Incorporated, et al.," civil number
94C 345S, filed in the United States District Court for the District of Utah,
Central Division. The complaint alleges that the Company and certain other
entities and individuals, including GVIC and the officers and directors of the
Company and GVIC, acted in a manner that caused unregistered shares of the
Company's common stock to be sold in the European marketplace to the plaintiffs
at prices above actual trading prices. The complaint further alleges that
certain affiliates of the Company failed to disclose that certain affiliates
of the Company were selling stock in Europe at prices above actual trading
prices and without disclosing their affiliation with the Company. The
plaintiffs seek damages of $1,386,535 and other exemplary and punitive damages.
The Company believes that this case has been settled. Counsel for the
plaintiff has the signed settlement stipulations and indicates that they will be
delivered to the judge for his signature.
The Company is not a party to any other material, pending legal proceeding
and no such action by, or to the best of its knowledge, against the Company or
any of it's officers or directors, has been contemplated or threatened.
<PAGE 8>
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's Securities Holders
during the fourth quarter of the Company's fiscal year ending March 31, 1996.
PART II
Item 5. Market for Registrant's Common Equity & Related Stockholder Matters.
The Company's common stock is currently traded in the over-the-counter
market on the Electronic Bulletin Board under the symbol LEST. The Company
intends to apply to have its common stock listed for trading on the National
Association of Securities Dealers Automated Quotation System (NASDAQ), although
there is no assurance that such listing will be obtained.
The following table represents the average range of high and low bid
quotations for the calendar quarters indicated since the first quarter of 1994.
Calendar Quarters High Bid Low Bid
1994
1st Quarter 0.34 0.25
2nd Quarter 0.25 0.06
3rd Quarter 0.14 0.05
4th Quarter 0.13 0.06
1995
1st Quarter 0.19 0.13
2nd Quarter 0.50 0.25
3rd Quarter 0.13 0.06
4th Quarter 0.19 0.06
1996
1st Quarter 0.19 0.06
2nd Quarter 0.19 0.06
The foregoing quotations were obtained from broker-dealers and market
makers who provide daily reports of the NASD Electronic Bulletin Board. The
above quotes reflect inter-dealer prices without retail mark-up, mark-down,
or commissions and may not necessarily represent actual transactions.
As of June 30, 1996, the Company has 36,704,644 shares of its common stock
issued and outstanding, and there are 1,425 shareholders, which figures do not
take into consideration those shareholders whose certificates are held in the
name of broker-dealers.
As of the date hereof, the Company has not paid or declared any cash
dividends. The Company can give no assurance that it will generate future
earnings from which cash dividends can be paid. Future payment of dividends
by the Company, if any, is at the discretion of the Board of Directors and will
depend, among other criteria, upon the Company's earnings, capital requirements,
<page 9>
and its financial condition as well as other relative factors. Management has
followed the policy of retaining any and all earnings to finance the
development of its business. Such a policy is likely to be maintained as long
as necessary to provide working capital for the Company's operations.
Item 6. Selected Financial Data.
The following selected financial data for the past five fiscal years is an
integral part of, and should be read in conjunction with, the financial
statements and notes thereto. Information concerning significant trends
in the financial condition and results of operations is contained in Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Income Statement Data
<TABLE>
For Years Ending March 31,
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
Total income $837,571 $657,890 $664,741 $373,183 $731,976
Total cost of sales 512,528 410,193 537,255 289,049 675,456
Gross profit 325,043 247,697 127,486 84,134 56,520
Total general &
administrative
expenses 4,240,465 800,106 809,145 762,075 580,649
Net operating
income (loss) (3,915,422) (552,409) (681,659) (677,941) (524,129)
Total other income
and (expenses) 129,277 22,316 90,986 (250,969) 64,665
Less provision for
(income tax) benefit - - - - 99,901
Income (loss) from
discontinued
operations - (123,421) (555,325) (1,867,947)
Net income or (loss)(3,786,145) (530,093) (714,094) (1,484,235) (2,227,510)
Income (loss) per
share $(0.11) $(0.03) $(0.02) $(0.18) $(0.29)
Weighted number
of shares
outstanding $33,488,244 18,577,936 14,323,015 8,174,778 7,647,609
Balance Sheet Data
As of March 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
Working Capital $370,989 $(878,288) $(64,179) $508,152 $298,372
Total assets 6,984,871 5,723,404 4,526,583 6,151,112 6,093,988
Short term debt 185,775 1,635,928 1,051,385 2,013,340 1,560,527
Long term debt 2,571,058 1,526,278 1,060,264 1,187,815 1,608,279
Minority interest - - - 337,362 61,273
Total stockholder's
equity 3,005,871 2,561,198 2,414,934 2,612,595 2,863,909
- ------------
</TABLE>
<page 10>
Item 7. Management's Discussion & Analysis of Financial Condition & Results
of Operations.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued no new statements
during 1995 and 1996 whose adoption by the Company would have a material
impact on the financial statements.
RESULTS OF OPERATIONS
The following table sets forth, for the three most recent fiscal years,
the percentage relationship to total revenues of principal items in the
Company's Statement of Operations. It should be noted that percentages
discussed throughout this analysis are stated on an approximate basis. During
the fiscal year ended March 31, 1994, the Company reduced ownership in its
subsidiary TKI whereby it became a minority shareholder in TKA, the successor
to TKI, and no longer has control of TKI or TKA. All information below
reflects the Company's investment in TKI under the equity method.
Fiscal Year Ended March 31,
1996 1995 1994
Total income 100% 100% 100%
Cost of sales 61 62 81
Gross Profit 39 38 19
General and Administrative
expenses 506 122 122
Net operating income
(loss) (467) (84) (103)
Other income and (expenses) 15 3 14
Less provisions for
(income tax) benefit - - -
Income (loss) from discounted
operations - - (18)
Net income (loss) (452) (81) (107)
For the Year Ended March 31, 1996, Compared to the Year Ended March 31, 1995.
Total income for the fiscal year ended March 31, 1996 ("fiscal 1996")
increased $179,681, or 27%, to $837,571, compared with $657,890 for the fiscal
year ended March 31, 1995 ("fiscal 1995"). Income is comprised of the sale of
lots from Cotton Acres and condominiums from Cotton Manor and the sale of GVI
stock. During fiscal 1996, 20 lots were sold at an average price of $24,000
and 3 condominiums were sold at an average price of $84,700. During the
comparable prior year period, 33 lots were sold at an average price of
$19,000 and no condominium units were sold. Additionally, the Company sold GVI
stock realizing a gain of $149,463. This stock was received from GVI in
exchange for land transferred to GVI in 1992. The stock was valued at $1.20
per share by the Company.
Cost of sales increased by $102,335, or 25%, to $512,528 for the fiscal
year ended March 31, 1996 from $410,193 for fiscal 1995. As a percentage of
total income, cost of sales decreased to 61% from 62%. Gross profit increased
$77,346, or 31%, to $325,043 during fiscal 1996 from $247,697 during fiscal
1995. Gross profit as a percentage of total income increased to 39% from 38%
in fiscal 1995.
General and administrative expenses increased $3,440,359, or 430%, to
$4,240,465 during fiscal 1996 from $800,106 during fiscal 1995. The increase
was principally attributable to (i) GVI's issuance in exchange for financial
services of 2,835,000 shares of GVI stock valued at $1.00 per share, (ii)
350,000 shares of GVI stock issued by GVI in exchange for promotional services
<page 11>
and valued at $1.00 per share, and (iii) to a lesser extent, the cost of
settling a legal matter. The exchanges of shares for services was recorded as
an expense in the current financial period.
The Company had other income of $129,277 during fiscal 1996 compared with
$22,316 during fiscal 1995. Such income relates principally to the collection
of an account receivable previously written off, interest income from real
estate receivables and home owner association fees collected from Cotton Manor.
The Company experienced a net loss of $3,786,145 in fiscal 1996 compared
with a net loss of $530,093 in fiscal 1995.
For the Year Ended March 31, 1995, Compared to the Year Ended March 31, 1994.
Total income for the fiscal year ended March 31, 1995 ("1995") decreased
$6,851 or 1% to $657,890, compared to $664,741 for the fiscal year ended March
31, 1994 ("1994"). Income is comprised of the sale of lots from Cotton Acres
and condominiums from Cotton Manor. During 1995, 33 lots were sold at an
average price of $19,000. During 1994, 28 lots were sold at an average price
of $17,000, and three condominiums were sold at an average price of $53,000.
Cost of sales decreased 24%, or $127,062, from $537,255 for 1994 to
$410,193 for 1995. As a percentage of total income, cost of sales decreased
from 81% to 62%. This decrease is a result of the lots and condominiums sold
in 1994 being originally acquired in a partially developed state, at a higher
cost than the cost now incurred by the Company to develop lots from raw ground.
The latter being the case for lots sold in 1995. Correspondingly, gross profit
increased from 19% of total income in 1994 to 38% in 1995. The increase is
$120,211, or 94%.
General and administrative expenses decreased 1%, or $9,039, to $800,106
in 1995 from $809,145 in 1994 and as a percentage of total income there was no
material change.
The Company had other income of $22,316 in 1995 compared to $90,986 for
1994. The decrease is due to previously written off deferred income which was
received as a gain in 1994 and higher interest income in 1994 from notes
receivable collected in 1994.
The Company experienced a net loss of $530,093 in 1995, compared to a loss
of $714,094 in 1994. The decreased loss is due to the reduction in cost of
sales and the losses from discontinued operations recorded in 1994 and not
incurred in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had total assets of $6,984,871 and total
stockholders equity of $3,005,871 compared with total assets of $5,723,404 and
total stockholders equity of $2,561,198 at March 31, 1995. The increase in
total assets is due to the capitalization of development related interest and
the increase in current assets described below. Total liabilities at March 31,
1996 increased $816,794, 26%, from $3,162,206 to $3,979,000. The increase is
due to an increase in current liabilities explained below.
As of March 31, 1996, the Company had total current assets of $1,688,931
and total current liabilities of $1,317,942 which results in a current ratio of
1.28:1, compared to a current ratio of 0.46:1 as of March 31, 1995. The current
<page 12>
ratio increase was due to the substantial increase in year end cash of $773,750,
or 4,553%, to $790,744 from $16,994 as of March 31, 1995. The increase in cash
reflected proceeds from the sale of preferred stock to Banque SCS. Real estate
inventory as of March 31, 1996 also increased $151,815, or 25%, to $748,010 due
primarily to the construction of one completed townhome and one partially
completed townhome in the Cotton Manor development. The townhomes will be used
as models until they are sold.
Current liabilities increased $838,028, 51%, over the prior year due to an
increase in interest of $393,186, 248%, related to an adjustment from prior
periods, new construction loans of $185,775 for the two townhome models in the
Cotton Manor development and an increase in accounts payable of $196,023, 34%.
The Company has historically satisfied its cash needs through the sale of
real estate and private placements of preferred stock for cash. During 1996,
the Company's subsidiary GVI raised $968,666 from the sale of preferred stock
and sold $734,675 of real estate in Cotton Manor and Cotton Acres. In June of
1996, GVI completed a 504 offering. Net proceeds to GVI were $889,424. Also
in June, GVI borrowed $2,000,000 from Miltex Industries of Geneva, Switzerland.
With this cash, GVI has refinanced its land debt and escrowed sufficient funds
to allow Granite Construction to break ground on Phase I of the Red Hawk(R)
project in July of 1996.
Completion of Phase I in Red Hawk and the subsequent sale of lots in Phase
I will depend largely on GVI, with assistance from the Company, being able to
raise additional funds, preferably long term financing. GVI will also continue
to develop and sell lots and townhomes in the Cotton Manor/Acres developments.
Item 8. Financial Statements and Supplementary Data.
The Following financial statements and documents are filed herewith on the
pages listed below, as part of Part II, Item 8 of this report.
Document Page
1. Financial Statements and Accounts Report:
Independent Auditor's Report F-1
Consolidated Financial Statements:
Consolidated Balance Sheets F-2
Consolidated Statements of Operations and
Accumulated Deficit for the Years Ended
March 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Cash
Flows for the Years Ended
March 31, 1995, 1994 and 1993 F-5
Notes to Consolidated Financial Statements
Notes 1 through 12 F-7
2. Financial Statement Schedules
Schedule VIII - Valuation and
Qualifying Accounts S-1
Schedule X - Supplementary Income
Statement Information S-1
<page 13>
Schedule XI - Real Estate and
Accumulated Depreciation S-2
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
This item is not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
All directors of the Company serve a term of one (1) year until the next
Annual Shareholders Meeting or until their death, resignation, retirement,
removal, disqualification, or until their successors have been elected and
qualified. Vacancies in the existing board are to be filled by a majority
vote of the remaining directors. Officers of the Company serve at the will
of the Board of Directors.
The following table sets forth the name and office held by each director and
officer of the company, followed by a brief resume of each individual.
NAME AGE POSITION HELD
George H. Badger 65 President, Chief Executive Officer and
Director
Stephen B. Spencer 40 Secretary/Treasurer and Director
GEORGE H. BADGER, President, Chief Executive Officer and a Director of the
Company, is a graduate from Brigham Young University with a BS Degree in
Political Science and a LLD Degree from the University of Utah in 1961. Mr.
Badger has been associated with the Company since its inception in 1983 and
has served as a director since June, 1992, and has been President since 1993.
STEPHEN B. SPENCER, Secretary/Treasurer and a Director of the Company, is a
Certified Public Accountant and has been the Controller of LTI since 1990.
From 1988 to 1990, he worked for Mrs. Fields, Inc. as an Assistant Financial
Controller and then Controller, and from 1985 to 1988, he was the Director of
Operations for the Salt Lake Convention and Visitors Bureau. Mr. Spencer
became a director of the Company in June, 1991. Mr. Spencer is also the
Secretary/Treasurer and director of Golf Ventures, Inc., a subsidiary of
the Company and a publicly traded corporation.
<page 14>
During the past five years, none of the officers and/or directors of the
Company, nor any of the affiliates or promoters of the Company filed any
bankruptcy petition, been convicted in or been the subject of any pending
criminal proceedings, or the subject of any order, judgement or decree
involving the violation of any state or federal securities laws.
Item 11. Executive Compensation.
Executive and Director Compensation
The Company has not had a bonus, profit sharing, or deferred compensation
plan for the benefit of its employees, officers or directors.
The following table sets forth a summary of cash and non-cash compensation
for each of the last three fiscal periods ended March 31, 1996, 1995, and 1994,
with respect to the Company's Chief Executive Officer. No executive officer
of the Company has earned a salary greater than $100,000 annually for any of
the periods depicted.
Summary Compensation Table
Other All
Name and Annual Other
Principal Position Year Salary Bonus Compensation Compensation
George H. Badger, 1996 $ 50,400 $ -0- $ -0- $ -0-
President & CEO 1995 $ 50,400 $ -0- $ -0- $ -0-
1994 $ 50,400 $ -0- $ -0- $ -0-
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information, to the best knowledge of the
Company, as of June 30, 1994, with respect to the beneficial ownership of the
Company's Common Stock by (i) each person known by the Company to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock;
(ii) each director; and (iii) all current directors and executive officers as
a group.
NAME AND ADDRESS OF NUMBER OF PERCENT
BENEFICIAL OWNER SHARES OWNED OF CLASS
Banque SCS Alliance SA 18,966,704 51.67%
P.O. Box 880
12111 Geneva 3
Switzerland
George H. Badger * 2,619,740 7.14%
102 West 500 South
Suite 400
Salt Lake City, UT 84101
<page 15>
Stephen B. Spencer, Trustee* 3,216,400 8.76%
102 West 500 South
Suite 400
Salt Lake City, UT 84101
Don Pickett, agent for 2,517,194 6.86%
Mindon Investment and The Stella Trust
P. O. Box 58548
Salt Lake City, UT 84101
All Officers and Directors as a Group 5,836,140 15.90%
- ---------------
*Denotes Officer and Director of the Company
Item 13. Certain Relationships and Related Transactions.
Since the beginning of the Company's last fiscal year, there have been no
transactions between the Company and any officer, director, nominee for
election as director, or any shareholder owning greater than five percent (5%)
of the Company's outstanding shares, nor any member of the above referenced
individuals' immediate family.
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements:
Independent Auditor's Report. . . . . . . .F-1
Consolidated Balance Sheets for
March 31, 1996 and 1995 F-2
Consolidated Statements of Operations
and Accumulated Deficit for the Years
Ended March 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows for
the Years Ended March 31, 1996, 1995
and 1994 F-5
Notes to Consolidated Financial
Statements F-7
2. Financial Statement Schedules
Included in Part IV of this Report
Schedule VIII - Valuation and Qualifying
Accounts S-1
Schedule X - Supplementary Income
Statement Information S-1
<page 16>
Schedule XI - Real Estate and Accumulated
Depreciation S-2
Other schedules are omitted because of the absence of
conditions under which they are required or because the
required information is given in the consolidated financial
statements or notes thereto.
(a) 3. Exhibits
The following exhibits are filed herewith or are incorporated
by reference to exhibits previously filed with the Securities
and Exchange Commission. The Company shall furnish copies of
exhibits for a reasonable fee (covering the expense of
furnishing copies) upon request.
Exhibit No. Exhibit Name
3.1 (1) Articles of Incorporation
3.2 (2) Amendment to Articles of Incorporation
3.3 (1) By-Laws
10.1 (1) Agreement with TechKNOWLOGY, Inc.
10.2 (1) Financing Agreement
10.3 (1) Exchange of Shares Agreement
10.4 (1) Option Contract
10.5 (1) Extension to Option Contract
10.6 (1) Further Amendment to Option Agreement
10.7 (1) Purchase Agreement
10.8 (1) Amendment to Purchase Agreement
10.9 (1) Addendum to Purchase Agreement
10.10 (1) Purchase Agreement (Stella Trust)
10.11 (2) Agreement of Joint Project
10.12 (2) Amendment to Agreement of Joint Project
10.13 (2) Dynamic American Option
10.14 (2) Land Sale Agreement
10.15 (2) Assignment of Trust Deed and Trust Deed Note
10.16 (2) Promissory Note (Johnson)
10.17 (3) TKI Dealer Agreement
10.18 (4) Modification Agreement
10.19 (4) Land Sales Agreement (Mindon)
<page 17>
10.20 (4) Sales Agreement (Property Alliance)
10.21 (5) Assignment Agreement
10.22 (6) Agreement with The Stella Trust and Mindon
Investments (Pickett Group)
10.23 (6) Acquisition Agreement with Golf Ventures, Inc.
10.24 (6) Settlement Agreement and General Release (TKI)
16.1 (2) Letter Regarding Change in Certifying Public Accountant
21.1 Subsidiaries
99.1 (2) List of Third Party Loans to TechKNOWLOGY, Inc.
(28.1)*
99.2 (2) Lease of LTI Office
(28.2)*
99.3 (2) Financial Statements for years ended March 31, 1989,
1988 and 1987, and (28.3)* quarter ended June 30, 1989,
as prepared by Dale K. Barker Co., P.C.
99.4 (4) Class "A" Preferred Stock
(28.4)*
99.5 (4) Debenture
(28.5)*
(1) Incorporated by reference to the Form 10 Registration
Statement filed with the Commission October 16, 1990, File
No. 0-18865.
(2) Incorporated by reference to Amendment No. 1 to Form 10
Registration Statement filed with the Commission May 23,
1991, File No. 0-18865.
(3) Incorporated by reference to Amendment No. 2 to Form 10
Registration Statement filed with the Commission August 12,
1991, File No. 0-18865.
(4) Incorporated by reference to Amendment No. 3 to Form 10
Registration Statement filed with the Commission November
13, 1991, File No. 0-18865.
(5) Incorporated by reference to Amendment No. 4 to Form 10
Registration Statement filed with the Commission February
13, 1992, File No. 0-18865.
(6) Incorporated by reference to Form 10-K for the year ended
March 31, 1993
(*) Exhibits previously filed as Exhibits 28.1 through 28.5 are
now depicted as 99.1 through 99.5.
(b) The Registrant did not file any reports on Form 8-K during the quarter
ended March 31, 1995.
<page 18>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
LEASING TECHNOLOGY INCORPORATED
(Registrant)
BY: /s/ GEORGE H. BADGER
---------------------------------------
GEORGE H. BADGER, President
Dated: July 10, 1996
- -------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
- ---------------------- --------------------------- --------------
President, Chief Executive
/s/ George H. Badger Officer and Director July 10, 1996
GEORGE H. BADGER (Principal Executive Officer)
Secretary/Treasurer and
/s/ Stephen B. Spencer Director (Chief Financial July 10, 1996
STEPHEN B. SPENCER Officer, Chief Accounting
Officer and Controller)
<page 19>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Leasing Technology Incorporated
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheets of Leasing
Technology Incorporated at March 31, 1996 and 1995 and the related consolidated
statements of operations, accumulated deficit, and cash flows for the years
ended March 31, 1996, 1995, and 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Leasing Technology
Incorporated at March 31, 1996 and 1995 and the results of its operations and
its cash flows for the years ended March 31, 1996, 1995, and 1994 in conformity
with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedules on pages S-1 through
S-2 are presented for purposes of additional analysis and are not a required
part of the basic financial statements. Such information has been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
Jones, Jensen & Company
July 5, 1996
<page 20>
LEASING TECHNOLOGY INCORPORATED
Consolidated Balance Sheets
<TABLE>
ASSETS
March 31,
----------------------
1996 1995
---------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash $ 790,744 $ 16,994
Accounts receivable (Note 1) 92,153 144,451
Inventories (Note 1) 748,010 596,195
Marketable securities 58,024 -
---------- --------
Total Current Assets 1,688,931 757,640
---------- --------
PROPERTY AND EQUIPMENT (Note 1)
Rental property 17,852 17,852
Non-rental property 52,414 43,919
-------- --------
Total depreciable assets 70,266 61,771
Less: accumulated depreciation (63,901) (60,128)
-------- --------
Net Property and Equipment 6,365 1,643
-------- --------
OTHER ASSETS
Land held for development, net of
long-term commitment payable (Notes 1,7) 5,287,605 4,962,151
Deposits 1,970 1,970
--------- ---------
Total Other Assets 5,289,575 4,964,121
--------- ---------
TOTAL ASSETS $6,984,871 $5,723,404
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<page 21>
LEASING TECHNOLOGY INCORPORATED
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
March 31,
-------------------------
1996 1995
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable - trade $ 765,956 $ 569,933
Accrued interest payable 551,986 158,800
Current portion of notes payable (Note 4) 1,156,014 907,195
----------- ----------
Total Current Liabilities 2,473,956 1,635,928
----------- ----------
LONG-TERM DEBT
Commission payable (Note 7) 90,000 90,000
Notes payable (Note 4) 1,415,044 1,436,278
---------- ----------
Total Long-Term Debt 1,505,044 1,526,278
---------- ----------
Total Liabilities 3,979,000 3,162,206
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 9) - -
---------- ----------
MINORITY INTEREST (Note 1) - -
---------- ----------
STOCKHOLDERS' EQUITY (NOTE 5)
Preferred stock, par value $0.001 per share:
10,000,000 shares authorized; issued and
outstanding: 102,220 and 102,220 Class B
shares, 150,000 and 150,000 Class C shares,
-0- and -0- Class A shares at March 31, 1996
and 1995, respectively (in order of liquidation
rights) (See Note 8) 252 252
Common stock, par value $0.001 per share:
125,000,000 shares authorized; issued and
outstanding: 36,704,644 and 36,704,644 shares
issued and 33,488,244 and 33,488,244 shares
outstanding at March 31, 1996 and 1995,
respectively 36,705 36,705
Additional paid-in capital 11,910,212 7,679,394
Accumulated deficit (8,941,298) (5,155,153)
---------- ---------
Total Stockholders' Equity 3,005,871 2,561,198
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,984,871 $ 5,723,404
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<page 22>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Operations and Accumulated Deficit
<TABLE>
For the Years Ended March 31,
-----------------------------------------
1996 1995 1994
------------ ---------- ---------
<S> <C> <C> <C>
INCOME
Sales - real estate $ 734,675 $ 629,750 $ 638,750
Sales - other 102,896 28,140 25,991
----------- ---------- -----------
Total Income 837,571 657,890 664,741
----------- ---------- -----------
COST OF SALES
Cost of Sales - real estate 512,528 410,193 537,255
----------- ---------- -----------
Total Cost of Sales 512,528 410,193 537,255
----------- ---------- -----------
Gross Profit 325,043 247,697 127,486
----------- ---------- -----------
GENERAL AND ADMINISTRATIVE EXPENSE
Depreciation and amortization 3,773 10,658 15,403
General expenses 4,236,692 789,448 793,742
--------- --------- ----------
Total General and Administrative
Expense 4,240,465 800,106 809,145
--------- --------- ---------
Net Operating Income (Loss) (3,915,422) (552,409) (681,659)
--------- --------- ---------
OTHER INCOME AND (EXPENSES)
Interest income 5,683 10,303 42,982
Gain on sale of assets 149,463 40,741 68,588
Interest expense (25,869) (28,728) (20,584)
--------- --------- --------
Total Other Income and (Expenses) 129,277 22,316 90,986
--------- --------- --------
NET INCOME (LOSS) BEFORE INCOME TAX
AND DISCONTINUED OPERATIONS (3,786,145) (530,093) (590,673)
Less provisions for (income tax) benefit - - -
Income (loss) from discontinued operations - - (123,421)
--------- --------- ---------
NET INCOME (LOSS) (3,786,145) (530,093) (714,094)
DISPOSAL OF SUBSIDIARY - - 382,952
BEGINNING ACCUMULATED DEFICIT (5,155,153) (4,625,060) (4,293,918)
ENDING ACCUMULATED DEFICIT $(8,941,298) $(5,155,153) $(4,625,060)
=========== =========== ===========
EARNINGS (LOSS) PER SHARE OF
COMMON STOCK $ (0.11) $ (0.03) $ (0.02)
============ =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 33,488,244 18,577,936 14,323,015
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<page 23>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Cash Flows
<TABLE>
For the Years Ended March 31,
-------------------------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $(3,786,145) $ (530,093) $ (714,094)
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 3,773 10,658 15,403
Common stock issued for services 3,260,000 - -
Increase (decrease) in minority
interest - - (337,362)
Disposal of investments in
subsidiaries - - 574,109
Changes in operating assets and liabilities:
(Increase) Decrease in inventory 416,782 122,223 64,353
(Increase) Decrease in notes and
accounts receivable 52,298 (13,478) 1,401,847
(Increase) Decrease in notes and
accounts receivable -
related party - - 94,676
Increase (Decrease) in accounts
payable and other current
liabilities 402,577 391,518 (660,375)
Increase (Decrease) in other
current assets (58,024) 50,000 13,885
-------- -------- --------
Net Cash Provided (Used) by
Operating Activities 291,261 30,828 452,442
-------- -------- ---------
INVESTING ACTIVITIES
Disposal of property and equipment - - 57,637
Purchases of property and equipment (8,495) - -
Investment in land held for
development (708,276) (962,045) (184,871)
Increase in deposits - - (39,404)
--------- --------- ---------
Net Cash Provided (Used) by
Investing Activities (716,771) (962,045) (166,638)
--------- --------- ---------
FINANCING ACTIVITIES
Payment of long-term debt (126,558) (429,853) (382,390)
Payment of long-term debt -
related parties - - (59,491)
Long-term borrowing 355,000 670,000 12,750
Issuance of common and preferred
stock for cash 970,818 620,249 133,802
--------- --------- --------
Net Cash Provided (Used) by
Financing Activities 1,199,260 860,396 (295,329)
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 773,750 (70,821) (9,525)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 16,994 87,815 97,340
--------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 790,744 $ 16,994 $ 87,815
========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<page 24>
LEASING TECHNOLOGY INCORPORATED
Consolidated Statements of Cash Flows (Continued)
<TABLE>
For the Years Ended March 31,
----------------------------------------
1996 1995 1994
--------- ----------- ----------
<S> <C> <C> <C>
CASH PAID FOR
Interest $ 147,370 $ 38,381 $ 76,524
Income taxes $ - $ - $ -
NON CASH FINANCING ACTIVITIES
Promissory notes issued and assumed
to acquire land held for development $ - $ 475,000 $ -
Common stock issued for services 3,260,000 - -
Expenses paid on the Company's
behalf by a shareholder - 56,108 -
</TABLE>
The accompanying notes are an integral part of these financial statements.
<page 25>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Leasing Technology Incorporated (the Company) was formed as a Utah
corporation on March 31, 1983 for the purpose of leasing equipment. The
Company has significantly increased its investing activities which include
startup companies, real estate development, and/or other projects.
Operations include related and non related party transactions.
b. Property and Equipment
Property and equipment are recorded at cost. When assets are retired or
otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts, and any resulting gain or loss is reflected in
income for the period.
The costs of maintenance and repairs are charged to income as incurred.
Renewals and betterments are capitalized and depreciated over their
estimated useful lives.
c. Depreciation
Depreciation is computed using the declining-balance method over the
estimated useful life of the assets (usually three years).
d. Earnings (Loss) Per Share
Earnings (loss) per common share is computed based on the weighted average
number of common shares outstanding during the period (there are no common
stock equivalents).
e. Income Taxes
Income taxes consist of Federal Income and State Franchise taxes. The
Company has elected a March 31 fiscal year-end.
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No.109 (SFAS No. 109), "Accounting for
Income Taxes," Under the provisions of SFAS No.109, the Company elected
not to restate prior years and has determined that the cumulative effect of
implementation was immaterial.
f. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
g. Estimates
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of commitments and contingencies, and the
reported revenues and expenses.
<page 26>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h. Concentration of Risk
The Company maintains its cash in bank deposit accounts at high credit
quality financial institutions. The balances, at times, may exceed
federally insured limits. At March 31, 1996 and 1995, the Company exceeded
the insured limit by approximately $584,380 and $-0-, respectively.
The Company builds and develops real property in Southern Utah. In the
normal course of business the Company extends secured credit to its
customers.
i. Principles of Consolidation
The accompanying consolidated financial statements include Leasing
Technology Incorporated and its subsidiary, Golf Ventures, Inc. (GVI).
During the year ended March 31, 1994, the Company reduced ownership in its
subsidiary TKI, to the point where it no longer has control, therefore,
its investment is accounted for under the equity method. Due to losses
of TKI, the investment has been reduced to $0.
All significant intercompany transactions have been eliminated in the
consolidated financial statements. The only significant intercompany
transactions are loans made by the Company to GVI. The notes receivable
on the books of the Company and the accrued interest receivable have been
eliminated against the liability on the books of the subsidiaries and the
related accrued interest payable. The interest income accrued by the
Company has been eliminated against the interest expense accrued by the
subsidiary.
j. Inventories
Inventories are stated at the lower of cost or market using the first-in,
first-out method. Inventories consist of the following:
March 31,
----------------------
1996 1995
---------- ----------
Real estate held for resale $748,010 $596,195
---------- ----------
Total inventory $748,010 $596,195
=========== ==========
k. Income Recognition
The Company recognized lease income from automobiles and equipment monthly,
according to the terms of lease contracts.
GVI recognizes gain on real estate sales in accordance with the provisions
of FASB-66.
l. Accounts Receivable
Accounts receivable are shown net of the allowance for bad debts of $5,000
at March 31, 1996 and 1995.
<page 27>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and 1995
NOTE 2 - COMMON STOCK ISSUED BUT NOT OUTSTANDING
The Company has issued 3,216,400 shares of common stock which have been
offered to the holders of the class "B" preferred stock and the debentures.
The shares have note been accepted by the holders of those investments as of
the date of the financial statements.
NOTE 3 - INCOME TAXES
The Company had net operating loss carry-forwards available to offset
future taxable income. The Company has net operating loss carry-forwards of
approximately $8,500,000 to offset future tax liabilities. The loss carry-
forwards will begin to expire in 2007.
Deferred income taxes payable are made up of the estimated federal and
state income taxes on items of income and expense which due to temporary
differences between books and taxes are deferred. The temporary differences
are primarily caused by the use of the equity method for reporting investment
in subsidiaries.
The source and deferred tax effect of these differences are as follows:
March 31,
---------------------
1996 1995
--------- ---------
Net operating loss carryover
equity subsidiary * $(53,373) $(53,373)
---------- ---------
Deferred income taxes payable $ - $ -
========== ==========
* (Note - no deferred tax asset is recorded in accordance with F.A.S.B.
109, because it can not be reasonably determined if the net operating loss
will be useable.)
<page 28>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and 1995
NOTE 4 - NOTES PAYABLE
Notes payable are comprised of the following:
<TABLE>
March 31,
--------------------------
1996 1995
------------ ----------
<S> <C> <C>
Convertible subordinated debentures,
due June 30, 1996 bearing interest at
12% per annum. Interest payable
quarterly, secured by land. $210,500 $210,500
Promissory note payments through August
15, 2016 at $30,524 per year including
interest at 10% per annum. 204,435 216,378
Promissory note secured by land, bearing
interest at 9.75%, payable in full including
accrual interest on June 18, 1997. 355,000 -
Trust deed note secured by land. Interest
accrued at 10% per annum, payable monthly
at $5,000 per month through January 30, 1996
at which time the balance including accrued
interest will be due. 401,366 420,000
Trust deed note payable, secured by land.
Interest accrued at 8% per annum. Payable
$100,000 per year plus the accrued interest
for that year. 459,370 459,370
Brighton Bank, note payable bearing interest
at 13.75%, monthly payments of $806 through
February 1998, secured by personal property
of officers. 7,452 8,309
Trust deed note, secured by land and 50,000
shares of the Company's common stock.
Interest accrued at 15% per annum. Principal
and interest due May 31, 1995. 211,433 250,000
---------- ----------
Page totals $1,849,556 $1,564,557
---------- ----------
</TABLE>
<page 29>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and 1995
NOTE 4 - NOTES PAYABLE (CONTINUED)
<TABLE>
March 31,
------------------------
1996 1995
----------- ----------
<S> <C> <C>
Balance forward $ 1,849,556 $1,564,557
Promissory note secured by land. Interest
accrued at 10% per annum, payable in
shares of the Company's common stock.
$120,000 plus a percentage of the proceeds
of lot sales payable annually beginning on
February 1, 1991 through February 1, 1997
at which time the balance will be due as a
balloon payment. $2,000 from each
Red Hawk lot sale also applies to the note. 721,502 778,916
---------- ---------
Subtotal 2,571,058 2,343,473
Less current portion (1,156,014) (907,195)
---------- ---------
Long-term portion $ 1,415,044 $ 1,436,278
============ ===========
</TABLE>
Maturities of long-term debt are as follows:
March 31, 1996 $1,156,014
1997 588,872
1998 233,219
1999 196,884
2000 145,936
Thereafter 250,133
----------
$2,571,058
==========
<page 30>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and 1995
NOTE 5 - STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
Total
Common Stock Preferred Stock Additional Stock-
Shares Shares Paid-in Accumulated holders'
(in 000s) Amount (in 000s) Amount Capital Deficit Equity
-------- ------ --------- ------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1993 14,124 $14,124 562 $ 562 $6,891,827 $(4,293,918) $2,612,595
Issuance of common stock
for cash 336 336 - - 133,145 - 133,481
Conversion of preferred
stock to common stock 61 61 (11) (11) (50) - -
Disposal of subsidiary - - - - - 382,952 382,952
Net (loss) - - - - - (714,094) (714,094)
------- ------- ----- ----- ---------- ----------- ----------
Balance, March 31, 1994 14,521 14,521 551 551 7,024,922 (4,625,060) 2,414,934
Expenses paid on the
Company's behalf by
a shareholder - - - - 56,108 - 56,108
Capital contributed by
stock issuances of
the subsidiary - - - - 620,249 - 620,249
Common stock issued but
not outstanding 3,217 3,217 - - (3,217) - -
Conversion of preferred
to common stock 18,967 18,967 (299) (299) (18,668) - -
Net (loss) - - - - - (530,093) (530,093)
------- -------- ------- ------- -------- -------- ---------
Balance, March 31, 1995 36,705 36,705 252 252 7,679,394 (5,155,153) 2,561,198
Capital contributed by
stock issuances of
the subsidiary - - - - 4,230,818 - 4,230,818
Net (loss) - - - - - (3,786,145) (3,786,145)
------- -------- ------ ------ --------- ---------- ----------
Balance, March 31, 1996 36,705 $36,705 252 $252 $11,910,212 $ (8,941,298) $3,005,871
======= ======= ===== ===== =========== ============ ==========
</TABLE>
<page 31>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and 1995
NOTE 6 - DISCONTINUED OPERATIONS
In agreements made with TechKNOWLOGY, Inc. (TKI) during 1989, the Company
acquired 49% (490 shares) of TKI's outstanding common stock. The investment
in TKI was shown under the equity method through December 31, 1990.
On September 28, 1990 the Company acquired an additional 35% of the common
stock of TKI. The Company changed from reporting under the equity method to the
consolidation method effective October 1, 1990. The balance sheets at December
31, and March 31, 1993 include the accounts of TKI and the statement of income
and retained earnings includes 100% of the operations of TKI.
On June 30, 1993, the Company entered into a certain Settlement Agreement
and General Release (the "Settlement Agreement") with various parties including
the Company's subsidiary, TechKNOWLOGY, Inc. ("TKI"), and the founders of TKI.
The premise of the Settlement Agreement was to provide the basis for TKI to
transfer all of its assets into TechKNOWLOGY Acquisition, Inc., a newly formed
Texas corporation ("Newco"), in exchange for common stock of Newco and the
assumption by Newco of TKI's trade and bank debt. Upon completion of this
transaction, TKI was to be liquidated and the shareholders of TKI, as
shareholders, would become entitled to a pro rata portion of the assets of
TKI, subject to the costs of winding up the Company and the payment of any and
all claims against TKI. It is anticipated that such assets will consist
almost entirely of shares of Newco common stock. As a result of these
transactions, the Company was entitled to receive, through the liquidation of
TKI, 2,775,000 shares of Newco common stock which initially represented
approximately 66.8% of the total outstanding shares of Newco common stock.
Upon liquidation of TKI, the Company's shares in Newco, together with the
shares of the other parties of the Settlement Agreement, were placed in a
liquidating trust until March 31, 1995, subject to the payment of the costs
of winding up the business and affairs of TKI and payment of any claims that
may be made against TKI. The Company will also have the right to participate,
on a pro rata basis, in any registration rights granted to the holders of
Newco preferred stock.
As a result of this transaction, the Company's ownership percentage fell
below 50%. Previously, TKI was consolidated with the Company for financial
reporting purposes. However, since the ownership percentage fell below 50%,
the investment in TKI is now reported under the equity method of accounting
for investments. All periods presented in these financial statements have
been restated to reflect this change. The investment has been valued at
zero. This is due to the fact that the Company's share of losses incurred by
TKI has exceeded the balance of the investment.
NOTE 7 - LAND HELD FOR DEVELOPMENT
On March 30, 1990 the Company purchased 486 acres from Karl Stucki and the
Stucki Family Trust for $3,004,356, and on July 31, 1990 the Company purchased
130 acres from Dynamic American Corporation for $610,000 which makes up the
Red Hawk real estate development. On December 28, 1992, this real estate
development, together with Cotton Manor/Cotton Acres was transferred to Golf
Ventures, Inc. (GVI) in exchange for 3,273,728 shares of GVI common stock.
The Red Hawk land (616 acres) is undeveloped, and in order for GVI to realize
its investment, adequate financing will need to be obtained.
<page 32>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and 1995
NOTE 7 - LAND HELD FOR DEVELOPMENT (Continued)
The purchase price was comprised as follows:
Cash $ 49,356
Assumption of commission obligation 90,000
Trust deed note:
Stucki Income Trust 2,865,000
------------
Total $ 3,004,356
============
The purchase of the property is recorded on a "cash basis" whereby
the cost in the financial statements reflects only the cash invested in the
land and debts assumed from the seller. The trust deed note is excluded
because of the uncertainty of obtaining adequate development financing.
The principal paid on the trust deed note is added to the cost when it is paid.
For the years ended March 31, 1996, 1995 and 1994, the Company
capitalized $514,687, $432,700 and $419,855 in construction period interest
costs, respectively. The cost of the land is less than the estimated net
realizable value of the land.
NOTE 8 - PREFERRED STOCK
The shareholders of the Company have authorized 10,000,000 shares of
preferred stock with a par value of $0.001. The terms of the preferred stock
are to be determined when issued by the board of directors of the Company.
CLASS A:
The Class A preferred shares could have been redeemed by the Company at
any time on or before March 15, 1994 for $5.00 per share plus 18% per annum
accrued from April 1, 1991 less the dividends that have been paid. Each share
could have been exchanged for 10 shares of free trading common stock any time
on or before March 31, 1994.
CLASS B:
Each share of Class "B" preferred stock was, at the option of the
holder thereof any time on or before March 31, 1995, convertible into shares
of the Company's common stock, none of the shares were converted.
In the event TKI elects to file a registration statement with the
Securities and Exchange Commission for the purpose of making a public
distribution of its shares, shareholders who have not previously converted
their Class "B" preferred stock, will be given the opportunity to convert
preferred stock into TKI common stock at either the ratio listed in the
schedule above, or at the price equal to a percentage discount off the public
offering price up to a maximum of 50%, the exact price to be negotiated
between the Company and the underwriter.
<page 33>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and 1995
NOTE 8 - PREFERRED STOCK (Continued)
CLASS B (Continued)
In the event of a recapitalization, stock split or stock dividend by
either the Company or TKI, all share amounts indicated herein will be
adjusted accordingly.
CLASS C:
In September 1991, the Company purchased the Cotton Manor real estate
project as follows:
Cash $ 23,601
Debt assumed 431,449
Promissory note 1,387,000
Class "C" preferred stock 750,000
-----------
$2,592,050
===========
The Company delivered to the seller, 150,000 shares of authorized but
previously unissued Class "C" preferred stock, which for the purpose of the
agreement were valued at $5.00 per share or a total of $750,000. The shares of
Class "C" preferred stock may be redeemed by the Company at any time prior to
September 3, 1997, by the Company paying to the seller or its assigns, the sum
of $5.50 cash per share if redeemed within 12 months from the date hereof;
$6.00 cash per share if redeemed between 12 and 24 months from the date hereof;
and $6.50 if redeemed between 24 and 36 months from the date hereof; and $7.00
cash per share if redeemed between 36 and 48 months from the date hereof; and
$7.50 cash per share if redeemed within 48 and 60 months from the date hereof.
Prior to the Company redeeming the preferred shares to be issued to the seller
hereunder and prior to the 3rd day of September, 1997, the seller will have the
right to convert any remaining shares of preferred stock into shares of the
Company's common stock at the rate of 5 shares of common stock for each share
of preferred stock converted.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Commitments include trust deed notes not recorded for accounting purposes
(see Note 7) which the Company has committed to pay to acquire the Red Hawk
real estate development. The liability and accompanying asset will be recorded
when the Company resolves the uncertainty described in Note 7.
March 31,
-----------------------
1996 1995
---------- ----------
Stucki Income Trust: $2,865,000 of Trust Deed
notes secured by land. Interest accrued at 10%
partially payable from the proceeds of the sale of
the 140 lots and certain other asset assignments.
Various amounts payable monthly through
May 15, 1998. $ 2,390,725 $2,250,944
Less Current Portion (2,390,725) (2,250,944)
----------- ----------
Long-Term Portion $ - $ -
=========== ===========
<page 34>
LEASING TECHNOLOGY INCORPORATED
Notes to the Consolidated Financial Statements
March 31, 1996 and 1995
NOTE 9 - COMMITMENTS AND OBLIGATIONS (CONTINUED)
Maturities of long-term commitments are as follows:
1996 $2,390,725
1997 -
1998 -
1999 -
2000 -
After 2000 -
-----------
$2,390,725
==========
On July 19, 1993, the Company became the subject of a formal order of
investigation captioned "In the Matter of Leasing Technology, Inc." (NY-6027)
issued by the Securities and Exchange Commission. The order states that the
Commission deems certain acts and practices to be in possible violation of
Section 19(a) of the Securities Act of 1933 and Sections 10(b), 13(a) and 15(c)
of the Securities Act of 1934, and various rules thereunder. As of the date
hereof, the Company is unable to make a determination as to the extent of the
investigation or to any possible material effect that it may have on the
Company.
On July 26, 1994, the Company was served with a complaint entitled Aksglade,
et al. vs. Leasing Technology, Incorporated, et al., civil number 94C345S,
filed in the United States District Court for the District of Utah, Central
Division. The complaint alleges that the Company and other certain entities
and individuals, including the Company's subsidiary Golf Ventures, Inc.
("GVI"), and the officers and directors of the Company and GVI, acted in a
manner that caused unregistered shares of the Company's common stock to be
sold in the European market place to the plaintiffs at prices above actual
trading prices. The Complaint further alleges that certain affiliates of the
Company failed to disclose that certain affiliates of the Company were selling
stock in Europe at prices above actual trading prices and without disclosing
their affiliation with the Company. The plaintiffs seek damages of $1,385,535
and other exemplary and punitive damages. The Company believes that this case
has been settled. Council for the plaintiff has the signed settlement
stipulations and indicates that they will be delivered to the judge for his
signature.
The Company is leasing its principle place of business pursuant to a
24-month lease for a monthly rental of $2,407. The Company shares this office
space with GVI.
NOTE 10 - GOING CONCERN
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. In order to carry out its operating
plans, the Company will need to obtain additional funding from outside sources.
The Company has received funds from a private placement and plans to continue
making private placements of its Subsidiary's preferred and common stock.
There is no assurance that the Company will be able to obtain sufficient funds
from other sources as needed or that such funds, if available, will be
obtainable on terms satisfactory to the Company. Management also intends to
renegotiate the terms of its debt for a longer repayment period.
<page 35>
LEASING TECHNOLOGY INCORPORATED
Supplemental Schedules
March 31, 1996 and 1995
Schedule VIII - Valuation and qualifying accounts
Allowance for returns and bad debts:
Balance at Balance at
Beginning End of
of Year Additions Deductions Year
----------- ------------ ------------- -----------
March 31, 1996 $5,000 $ - $ - $5,000
March 31, 1995 5,000 - - 5,000
Schedule X - Supplementary income statement information
For the Years Ended March 31,
-----------------------------------------
1996 1995 1994
--------- --------- ---------
Maintenance and repair $16,571 $15,039 $2,646
Depreciation and amortization 3,773 10,658 15,403
Taxes, other than payroll and
income taxes 33,120 1,185 864
Royalties - - -
Advertising 1,002 - 29
<page 36>
Schedule XI - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life on
which
Gross depreciation
Cost amount at in latest
capitalized which Accumu- income
Initial subsequent carried lated Date of statements
cost to to at close deprec- construc- Date is
Description Encumbrances Company acquisition of period iation tion acquired computed
- -------------------- ------------ --------- ----------- ---------- ------- ------- --------- ---------
Red Hawk Development
St. George, Utah
Undeveloped Land
Convertible subordinated
Debentures $210,000
Foss Lewis Construction,
Trust Deed Note 211,433
MidValley Ventures,
Trust Deed Note 401,366
Daniel C. Watson
Trust Deed Note 459,370
Stucki income trust,
Trust Deed Note 2,390,725
----------- ----------- ---------- --------- ------ ------ ------- ----
$3,672,894 $1,743,933 $2,216,665 $3,960,598 $ N/A 7-8-96 3-30-90 N/A
=========== =========== ========== ========== ====== ====== ======== =====
Cotton Manor/Cotton
Acres Dev.
St. George, Utah
Improved residential
Blaine Harmon Family
Trust, Promissory Note $204,435
Property Alliance, Inc.
Promissory Note 721,502
--------- ---------- --------- ---------- ----- ------ ------ ----
$925,937 $1,902,130 $(575,123) $1,327,007 $ N/A 9-1-91 9-1-91 N/A
======== ========== ========= ========== ===== ====== ====== ===
<page 37>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 790,744
<SECURITIES> 58,024
<RECEIVABLES> 97,153
<ALLOWANCES> (5,000)
<INVENTORY> 748,010
<CURRENT-ASSETS> 1,688,931
<PP&E> 70,266
<DEPRECIATION> (63,901)
<TOTAL-ASSETS> 6,984,871
<CURRENT-LIABILITIES> 2,473,956
<BONDS> 0
0
252
<COMMON> 36,705
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,984,871
<SALES> 837,571
<TOTAL-REVENUES> 837,571
<CGS> 512,528
<TOTAL-COSTS> 512,528
<OTHER-EXPENSES> 4,240,465
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,869
<INCOME-PRETAX> (3,786,145)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,786,145)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,786,145)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
