U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to _______________
Commission File No. 0-17069
Excal Enterprises, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 59-2855398
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 North Tampa Street, Suite 3575, Tampa, Florida 33602
(Address of principal executive offices)
(813) 224-0228
(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.
_X_ Yes ___ No
As of April 30, 1997, there were 4,025,594 shares of the issuer's common
stock, par value $0.001, outstanding.
Transitional Small Business Disclosure Format (Check One): ___ Yes _X_ No
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
EXCAL ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 829,933
Accounts receivable - trade 266,204
Accounts receivable - related parties 45,149
Income tax receivable 137,310
Prepaid expenses and deposits 249,923
Net assets of discontinued operations 358,052
Deferred tax asset 388,000
---------
Total current assets 2,274,571
---------
Property, plant and equipment
Land 1,740,000
Buildings and improvements 5,896,524
Furniture, fixtures, vehicles and equipment 462,008
---------
8,098,532
Less accumulated depreciation and amortization 605,631
---------
Net property, plant and equipment 7,492,901
---------
Capitalized Clearing Costs, less
accumulated amortization of $99,681 618,347
Commission Costs, less accumulated amortization of $95,850 177,388
----------
Total Assets $ 10,563,207
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 622,197
Reserve for litigation 968,017
Current portion of long-term debt 74,039
---------
Total current liabilities 1,664,253
Long-term debt 19,664
Deferred tax liability 1,790,000
---------
Total Liabilities 3,473,917
---------
Stockholders' equity
Preferred stock, $.01 par value, 7,500,000 shares authorized,
no shares issued and outstanding --
Common stock, $.001 par value, 20,000,000 shares authorized,
4,713,866 shares issued, 4,025,594 shares outstanding 4,713
Additional paid-in capital 5,800,423
Retained earnings 3,606,476
Less 688,272 shares of common stock held in treasury at cost ( 2,322,322)
----------
Total stockholders' equity 7,089,290
----------
Total Liabilities and Stockholders' Equity $10,563,207
==========
The accompanying notes are an integral part of the consolidated financial
statements
<TABLE>
<CAPTION>
EXCAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<S> <C> <C> <C> <C>
Three Months Ended March 31 Nine Months Ended March 31
------------------------- ---------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
Net revenue $ 815,435 $ 805,590 $ 2,408,814 $ 2,199,826
--------- --------- ---------- ----------
Commercial real estate operating costs 196,392 174,408 621,406 536,915
General and administrative costs 377,893 209,834 969,530 697,041
Depreciation and amortization 89,750 90,837 266,176 277,994
--------- --------- --------- ---------
Total operating costs 664,035 475,079 1,857,112 1,511,950
--------- --------- --------- ---------
Net operating profit 151,400 330,511 551,702 687,876
--------- --------- --------- ---------
Other income (expense)
Professional fees related to ( 153,115) ( 83,014) ( 553,619) ( 231,003)
litigation
Settlement - Harvey Moore ( 201,537) -- ( 201,537) --
Dividend and interest income 13,924 24,049 52,265 90,300
Interest expense ( 2,615) ( 3,845) ( 15,360) ( 9,792)
Loss on disposals of assets -- ( 3,141) -- ( 11,205)
Miscellaneous income 16,322 9,721 44,759 44,685
--------- -------- --------- ---------
Net other expense ( 327,021) ( 56,230) ( 673,492) ( 117,015)
--------- -------- --------- ---------
Income (loss) before income taxes
and discontinued operations ( 175,621) 274,281 ( 121,790) 570,861
Income tax provision(benefit) ( 247,000) 108,955 ( 181,000) 229,998
--------- -------- --------- ---------
Income from continuing operations 71,379 165,326 59,210 340,863
Income (loss) from operations
of discontinued division 84,000 ( 59,156) 84,000 ( 196,564)
--------- -------- --------- ---------
Net income $ 155,379 $ 106,170 $ 143,210 $ 144,299
========= ======== ========= =========
Earnings per common share
Continuing operations $ .01 $ .03 $ .01 $ .07
Discontinued operations .02 ( .01) .02 ( .04)
Primary earnings per -------- ------- --------- ---------
common and equivalent share $ .03 $ .02 $ .03 $ .03
======== ======= ========= =========
Weighted average common
and equivalent shares outstanding 4,537,803 5,063,081 4,615,123 4,959,224
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended March 31
--------------------------
1997 1996
--------- ---------
Cash provided (used) by operating activities
Net income $ 143,210 $ 144,299
Adjustments to reconcile net
income to net cash
provided (used) by operating activities:
Depreciation and amortization 364,777 598,225
Other adjustments ( 355,042) ( 65,685)
Increase in net operating assets ( 135,965) ( 936,998)
--------- ---------
Net cash provided (used)
by operating activities 16,980 ( 260,159)
--------- ---------
Cash flows from investing activities
Proceeds from sale of assets 219,609 20,971
Purchase of held-to-maturity securities -- ( 590,181)
Maturity of held-to-maturity securities -- 1,827,576
Property and equipment additions ( 23,895) ( 118,830)
--------- ---------
Net cash provided by investing activities 195,714 1,139,536
--------- ---------
Cash flows from financing activities
Net proceeds from long-term debt 73,184 122,607
Principal repayments of long-term
debt and capital leases ( 90,325) ( 83,615)
Acquisition of treasury stock (2,116,198) --
--------- ---------
Net cash provided (used)
by financing activities (2,133,339) 38,992
--------- ---------
Increase (decrease) in cash and cash equivalents (1,920,645) 918,369
Cash and cash equivalents at beginning of period 2,750,578 1,073,694
--------- ---------
Cash and cash equivalents at end of period $ 829,933 $ 1,992,063
========= =========
The accompanying notes are an integral part of the consolidated financial
statements
EXCAL ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
NOTE 1 - FINANCIAL STATEMENTS
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three-month and nine-month periods ended March 31, 1997 and
1996, (b) the financial position at March 31, 1997, and (c) cash flows for the
nine-month periods ended March 31, 1997 and 1996, have been made.
The unaudited consolidated financial statements and notes are presented
as permitted by Form 10-QSB. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. The
accompanying consolidated financial statements and notes should be read in
conjunction with the audited financial statements and notes of the Company for
the fiscal year ended June 30, 1996. The results of operations for the three-
month and nine-month periods ended March 31, 1997 are not necessarily
indicative of those to be expected for the entire year.
NOTE 2 - DISCONTINUED OPERATIONS
During the fourth quarter of fiscal 1996, the Company decided to terminate the
agency agreements with its automotive services licensed agents effective June
30, 1997. The Company has made the existing Combi-Matcher machines available
for sale to existing licensed agents and others. Michel Tire Company, the
largest licensed agent, purchased the Combi-Matchers it was using from the
Company for an aggregate purchase price of $269,171. Wheel Works, the second
largest licensed agent, purchased the Combi-Matchers it was using, the
Company's remaining uninstalled Combi-Matchers and the rights to build Combi-
Matchers machines, for an aggregate purchase price of $175,000. The following
is a summarized statement of operations for the discontinued division.
Three Months Ended Nine Months Ended
March 31 March 31
------------------- ----------------------
1997 1996 1997 1996
------- ------- --------- -------
Net revenue $ 33,897 $ 209,373 $ 245,220 $ 671,090
Operating expenses 73,140 300,132 408,135 998,550
------- ------- --------- -------
Net operating loss ( 39,243) ( 90,759) ( 162,915) (327,460)
Loss on sale of assets (331,152) ( 9,057) ( 723,634) ( 432)
Other income (expense) ( 353) 705 4,277 ( 670)
Reserve for loss on
discontinued operations 510,748 -- 1,022,272 --
Income tax benefit (expense) ( 56,000) 39,955 ( 56,000) 131,998
------- ------- --------- -------
Net income (loss) $ 84,000 $( 59,156) $ 84,000 $(196,564)
======= ======= ========= =======
The net assets of the discontinued operations, excluding intercompany assets,
at March 31, 1997 were as follows:
Current assets $ 327,145
Property and equipment, net 69,332
-------
Total assets 396,477
-------
Current liabilities 27,536
Non-current liabilities 10,889
-------
Total liabilities 38,425
-------
Net assets $ 358,052
=======
Management originally estimated proceeds of $458,607 from the sale of
Combi-Matchers and inventory resulting in a loss of $1,319,956 and a loss from
operations during the disposal period of $262,687, resulting in a total loss
from disposal of $1,582,643. To date, the Company has recorded $426,269 in
revenue from disposal of assets, resulting in a loss of $723,634 and a loss
from operations of $158,638, including depreciation. Therefore, management
decided to reduce the reserve for discontinued operations by $140,000 ($84,000
after tax). The amounts the Company will ultimately realize could differ
materially in the near term from the amounts estimated as the loss on disposal
of the discontinued operations.
NOTE 3 - STOCKHOLDERS' EQUITY
During the three months ended September 30, 1996, the Company purchased
641,272 shares of its common stock for an aggregate cash purchase price of
$2,116,198, which shares are currently held as treasury stock.
The Company's shareholders approved increasing the authorized common
shares of the Company from 7,500,000 to 20,000,000 in November 1996.
NOTE 4 - EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is based upon the weighted average number of
common shares outstanding and the dilutive effect of common stock equivalents
consisting of stock options and purchase warrants, as shown in the table
below. Fully diluted earnings per share are not presented because they
approximate earnings per common share.
Three Months Ended Nine Months Ended
March 31 March 31
-------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
Weighted average common
shares outstanding 4,025,594 4,666,866 4,176,504 4,666,866
Common stock equivalents 512,209 396,215 438,619 292,430
--------- --------- --------- ---------
4,537,803 5,063,081 4,615,123 4,959,296
========= ========= ========= =========
Item 2. Management's Discussion and Analysis.
The following discussion should be read in conjunction with the
information contained in the financial statements of the Company and the notes
thereto appearing elsewhere herein and in conjunction with Management's
Discussion and Analysis set forth in the Company's Form 10-KSB for the fiscal
year ended June 30, 1996.
The following discussion compares the results of operations for the
three-month period ended March 31, 1997 (Third Quarter 1997) with the three-
month period ended March 31,1996 (Third Quarter 1996) and the nine-month
period ended March 31, 1997 (1997 YTD) with the nine-month period ended March
31, 1996 (1996 YTD).
Results of Continuing Operations
Net revenue of the Company consists of commercial real estate rental
revenue from the lease and management of property located in Jacksonville,
Florida (Imeson Center). Effective April 1, 1997, the Company converted the
warehouse space located on the second floor above the existing office space
into additional office space. Therefore, the property now consists of
approximately 1,392,000 square feet of warehouse space and 276,000 square feet
of office space. The Company's lease agreements are structured to include a
base minimum rental fee, a contingent rental fee to reimburse the Company for
operating expenses, common area maintenance costs, insurance and property
taxes, and a requirement that the tenant pay for its own utilities.
The Company expects to finalize a lease with Prudential Insurance Company to
lease the available 90,026 square feet of mezzanine office space and 48,972
square feet of the converted second floor warehouse space above the mezzanine.
The lease is anticipated to have an initial term of two years with minimum
annual base rent of $6.95 per square foot in the first year and $7.20 per
square foot in the second year. Prudential will have the option to renew for
either a six-month or a four-year term. The base rent per square foot in the
first year of either renewal is expected to be $7.50 per square foot and
increase by $.30 per square foot each year thereafter. The Company has
already cleared the space and turned it over to Prudential for construction of
tenant improvements. Prudential Insurance Company intends to move into the
mezzanine office space the week of May 19, 1997 and into the second floor
office space by the end of June 1997. The Company expects to incur clearing,
renovation, and commission costs of approximately $600,000 related to this
lease
Net revenue increased to $815,435 in Third Quarter 1997 from $805,590 in
Third Quarter 1996. Net revenue for 1997 YTD increased by 10% to $2,408,814
from $2,199,826 in 1996 YTD. These increases were primarily related to the
lease of increased warehouse space by Laney & Duke in the third quarter of
fiscal 1996. In addition, America On-line did not move into phase II of its
space until July 15, 1995.
Commercial real estate operating costs increased by 13% to $196,392 in
Third Quarter 1997 from $174,408 in Third Quarter 1996. Commercial real
estate operating costs for 1997 YTD increased by 16% to $621,406 from $536,915
in 1996 YTD. Sears was responsible for payment of property taxes on the
building through April 15, 1996. As a result, the operating costs of Imeson
Center include an increase in property taxes of $65,008 in Third Quarter 1997
and $181,075 in 1997 YTD. The majority of the increase in property taxes was
offset by reductions in other operating expenses.
General and administrative costs represent general overhead items
(including legal and accounting fees) and the costs of the corporate office,
which provides operational and financial management support to the automotive
and real estate operations and is seeking new business opportunities for the
Company. General and administrative costs increased by $168,059 to $377,893
in Third Quarter 1997 from $209,834 in Third Quarter 1996. General and
administrative costs increased by $272,489 to $969,530 in 1997 YTD from
$697,041 in 1996 YTD. The increases were primarily related to professional
fees, salaries and insurance. Depreciation and amortization expense declined
slightly as a result of some of the corporate assets becoming fully
depreciated or disposed of in fiscal 1996.
Professional fees related to litigation were $153,115 in Third Quarter
1997 compared to $83,014 in Third Quarter 1996. Professional fees related to
litigation increased to $553,619 in 1997 YTD compared to $231,003 in 1996 YTD.
A significant portion of these costs were related to the preparation and trial
of the KFM Venture, Inc. and Harvey Moore lawsuits. In the KFM Venture
lawsuit, the jury found that the contract was unenforceable and awarded KFM
Venture, Inc. no compensation from the Company and the court awarded the
Company reimbursement of a limited amount of its costs, which has not been
received or recorded by the Company. In the Harvey Moore trial, the court
awarded Harvey Moore $294,861 in compensation and $86,676 in pre-judgment
interest. The company previously recorded a $180,000 reserve, resulting in a
current expense of $201,537.
The income tax provision for both Third Quarter 1997 and 1997 YTD
includes a reduction in income tax expense of $178,000 related to a change in
the tax treatment of certain expenses. These savings were partially offset in
1997 YTD by additional state income tax expense of $51,192 recorded in the
second quarter as a result of audits of fiscal 1994 income tax returns.
Results of Discontinued Operations
Until fiscal 1995, the Company derived substantially all of its revenue
from its automotive services operations. The Company's automotive services
revenue significantly declined in each of the last two years. During the
fourth quarter of fiscal 1996, the Company received termination notices from
its largest two licensed agents who together accounted for two-thirds of the
Company's automotive services revenue. As a result, the Company decided to
terminate the agency agreements with the remaining licensed agents effective
June 30, 1997 and report the automotive services division as discontinued
operations. The Company has sold most of the existing Combi-Matchers to the
existing licensed agents.
Revenue of the automotive services division declined by 84% to $33,897 in
Third Quarter 1997 from $209,373 in Third Quarter 1996. Revenue of the
automotive services division declined 63% from $671,090 in 1996 YTD to
$245,220 in 1997 YTD. The decline in revenue is almost entirely related to
the decline in revenue from two licensed agents, Four Day Tires and Michel
Tire Company. Four Day Tires terminated their licensed agent agreement in
July 1996 without the required twelve-month notice. The Company filed suit
against Four Day Tires and received a final judgment in the amount of
$220,000. Four Day Tires filed bankruptcy and the collectibility of the
judgment is questionable. Therefore, the Company has not recorded the
judgment as revenue on its financial statements and has reserved the entire
accounts receivable balance of $34,879 as uncollectible. During the first
quarter of fiscal 1997, Michel Tire Company agreed to purchase the Combi-
Matchers it was using for a purchase price of $269,171. The purchase price
was payable over a nine-month period. The Company is required to supply
Michel Tire Company with parts through June 30, 1997. Wheel Works, the second
largest licensed agent, purchased the Combi-Matchers it was using, the
Company's remaining uninstalled Combi-Matchers and the rights to build Combi-
Matchers, for an aggregate price of $175,000, effective February 1, 1997.
These declines in revenue were offset by a $50,000 settlement reached in
Second Quarter 1997 between the Company and Big Ten Tires regarding early
termination of their licensed agent agreement in June of 1995.
Automotive services operating costs, excluding depreciation, decreased
72% to $53,378 in Third Quarter 1997 from $193,712 in Third Quarter 1996.
Automotive services operating costs, excluding depreciation, decreased by 54%
in 1997 YTD to $309,534 from $678,321 in 1996 YTD. These declines in
operating costs were the result of discontinuing the automotive services
operations and reducing personnel. Depreciation and amortization costs
decreased from $106,420 in Third Quarter 1996 to $19,763 in Third Quarter 1997
and from $320,229 in 1996 YTD to $98,602 in 1997 YTD, primarily as a result of
a decline in the number of Combi-Matchers in operation.
The loss on disposal of the automotive services division was based on
estimated proceeds from disposal and losses from operations during the
disposal period. In determining the loss on disposal, management estimated
proceeds of $458,607 from the sale of Combi-Matchers and inventory resulting
in a loss of $1,319,956 and a loss from operations during the disposal period
of $262,687, excluding depreciation. It was assumed that current assets and
liabilities would be liquidated at face value, resulting in a total loss from
disposal of $1,582,643, before income taxes. To date, the Company has
recorded $426,269 in revenue from disposal of assets resulting in a loss of
$723,634 and a loss from operations of $158,638 including depreciation. The
Company has sold 85 Combi-Matchers previously in operation, and 32 new or
refurbished Combi-Matchers, leaving 16 used Combi-Matchers available for sale,
along with the parts inventory and equipment.
Liquidity and Capital Resources
The cash provided by operating activities was $16,980 in 1997 YTD
compared to cash used of $260,159 in 1996 YTD. The other adjustments are
primarily non-cash operating costs. In 1997 YTD the Company's operations
provided $152,945 in working capital (cash flow excluding changes in operating
assets) compared to the provision of $676,839 in working capital in 1996 YTD.
The Company expended $166,451 in 1997 YTD and $231,692 in 1996 YTD on
operating costs that have been capitalized related to preparing the Imeson
Center facility for rent. These costs will be amortized over a ten-year
period.
The proceeds from sales of assets in 1997 YTD represent proceeds received
from the sale of the discontinued operations. Maturity and purchase of held-
to-maturity securities represent the investment in US backed debt securities
with a maturity date at the time of purchase in excess of three months.
Property and equipment additions in 1996 YTD were primarily for equipment
used at Imeson Center.
Cash of $2,133,339 was used by financing activities in 1997 YTD, as
compared to cash provided by financing activities of $38,992 in 1996 YTD.
Principal repayments of long-term debt and capital leases was $90,325 in 1997
YTD compared to $83,615 in 1996 YTD. During 1997 YTD, the Company purchased
641,272 shares of its common stock from a group of shareholders (the "Smith
Group") for $2,116,198 as part of settlement of litigation. The board of
directors believed this action was in the best interests of the Company and
its shareholders for several reasons, including: (i) media coverage of the
dispute with the Smith Group had caused concern among current and prospective
tenants for the Imeson Center; (ii) estimated litigation costs could have
exceeded $500,000 and business operations would have been further disrupted;
and (iii) by purchasing the Smith Group shares, the percentage ownership and
share of future returns increases proportionally for each remaining
shareholder.
The Company did not have any material commitments for capital
expenditures as of March 31, 1997 other than for ordinary expenses incurred
during the usual course of business and capital costs related to the lease
with Prudential. However, the Company does have an outstanding judgment to
Harvey Moore that needs to be settled. The Company is looking for additional
tenants for Imeson Center. It is expected that any new tenant will require
the Company to incur significant costs related to renovation of the property
to meet the tenant's needs, which could be in excess of the Company's
liquidity position. Additionally, the Company is investigating opportunities
to develop the out-parcels of the Imeson Center. Although the Company has not
identified any specific acquisition opportunities, management anticipates
spending resources to locate potential opportunities to expand the Company's
business operations into other areas. Any new business operation will likely
involve a substantial commitment of Company resources and a significant degree
of risk. The Company also has potential liability related to litigation. Any
of the above mentioned items could require significant capital resources in
excess of the Company's liquidity, requiring it to raise additional capital
through public or private debt or equity financing. The availability of these
capital sources will depend upon prevailing market conditions, interest rates,
and the then existing financial position and results of operations of the
Company. Therefore, no assurances can be made by the Company that such
additional capital will be available. The Company recently received a
commitment letter for a $500,000 revolving line of credit and is in the
process of finalizing this arrangement. However, no assurances can be made by
the Company that such arrangement will be completed.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
No material events have occurred in the Company's ongoing litigation
matters other than those described below. For the history of such litigation,
please refer to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1996.
Securities and Exchange Commission
The Company filed a motion to dismiss the suit, or in the alternative, to
dismiss legal counsel for the SEC on the grounds of ethical misconduct. The
Company also filed a motion to stay discovery until its motion to dismiss
could be heard. The motion to stay discovery was granted. The hearing for
the motion to dismiss was held on January 7, 1997. The magistrate has issued
his report and recommendation denying the Company's motion. The Company has
filed objections to the magistrate's report and requested an oral argument
before the District Court Judge.
ASX Investment Corporation
No trial has been scheduled and the Company's motions to dismiss have
still not been ruled on. In an effort to coerce the Company to pay a
settlement, on December 10, 1996, Steve Rosner filed a complaint in the United
States District Court for the Middle District of Florida, Civil Action No. 96-
2428-CIV-T-25A alleging violations of sections 10(b) and 20(a) of the Exchange
Act by misrepresenting the value of the property acquired from Sears. The
Company believes that this complaint has no merit and is barred by the statute
of limitations. The Company has moved for dismissal and filed a Rule 11
proceeding against Steve Rosner and his attorneys demanding that the Company
be reimbursed its costs of defending this blatantly frivolous suit.
Kerry F. Marler
Upon Mr. Marler's request , the trial scheduled for the week of November
18, 1996 was postponed. The new trial date has been set for August 11, 1997.
The Company has filed motions to amend its complaint to recover fraudulent
transfers from Mr. Marler and KFM Ventures, Inc. Further, the Company is
seeking to add ASX Investment Corporation and its principals to the suit for
conspiracy to violate Mr. Marler's fiduciary duties and tortuous interference
with a business relationship.
Harvey Moore
The trial was rescheduled from August 26, 1996 and began on December 4,
1996. The judge declared a mistrial on December 5, 1996 due to the lack of
time to complete the trial. The trial was then rescheduled for the week of
February 17, 1997. The court awarded Harvey Moore compensation of $294,861
and pre-judgment interest of $86,676. The Company filed a motion for a new
trial which was denied
NationsBank
The final judgment entered in favor of the Company on November 20, 1995
was upheld upon appeal.
John Sanford, et al.
On October 1, 1996, the Company filed a complaint in the United States
District Court for the Middle District of Florida, Case No. 96-1969-CIV-T-
23A, against John Sanford, Walter Carucci, Paul Koether and Nelson Obus
(collectively referred to as the "Sanford Group") for violation of Section 13D
of the Securities Exchange Act of 1934. On December 10, 1996, the Company
amended its complaint to add Channel Partnership II, G.P., as a defendant,
also part of the Sanford Group. Defendants Carucci and Sanford have answered
the complaint, denying all material allegations, and have asserted a
counterclaim, alleging that (i) the Company violated Delaware law by voting
"the Smith Group shares" (as obtained by the Company upon its purchase of the
Smith Group's common stock) in connection with the Company's consent
solicitation, (ii) the Company violated Delaware law by denying Sanford and
Carucci their right to one vote for each share of Excal common stock they
owned; (iii) the Company violated Section 14A of the Securities Exchange Act
of 1934 by distributing a false and misleading proxy statement in connection
with the consent solicitation; and (iv) the Company violated Delaware law by
failing to hold an annual shareholders meeting. As relief, Sanford and
Carucci demand certain declaratory relief by the Court, a directive by the
Court for the Company to rescind any amendments to its Certificate of
Incorporation adopted as a result of the consent solicitation, and costs and
expenses related to the bringing of its counterclaim. The Company believes
that the counterclaim submitted by Carucci and Sanford has no merit and has
filed a motion for dismissal. In addition, the Company intends to amend its
complaint to include violations of Section 16(b) of the Securities Exchange
Act of 1934 and a claim for tortuous interference with a business
relationship.
Channel Partnership II, G.P.
On November 8, 1996, Channel Partnership II, G.P., filed a complaint in
the Delaware Court of Chancery in and for New Castle County, C.A. No. 15311-
NC, against the directors of the Company and the Company as a nominal
defendant. The complaint alleges that the directors of the Company breached
their fiduciary duty by authorizing the purchase of 641,272 shares of its
common stock from the Smith Group (the "Smith Group Transaction") and that the
proxy statement issued in connection with the consent solicitation (See Item
4 below) is false and misleading because it omits material information. The
relief sought includes: (i) a declaration that the proxy the Company received
in connection with the Smith Group Transaction is void and invalid; (ii) a
declaration that the Smith Group Transaction is void and invalid; (iii) an
award to the Company of damages resulting from the Smith Group Transaction and
the consent solicitation; (iv) a declaration voiding and rescinding any
amendments to the Company's Certificate of Incorporation as a result of the
consent solicitation; and, (v) an award to the plaintiff of costs and
expenses. The Company has filed a motion to dismiss the complaint. Channel
filed its response to the Company's motion to dismiss. To date, the court has
not ruled on the motion to dismiss.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual shareholder meeting on February 26, 1997 to
elect one Class I director and ratify the election of Pender Newkirk & Company
as independent auditors for the fiscal year ended June 30, 1997. The voting
results were as follows:
Issue For Against Abstain
- -------------------------------------------- --------- ------- -------
Elect John L. Caskey as Class I director 3,148,697 139,548 293,496
Ratify selection of Pender Newkirk & Company
as auditors for fiscal 1997 3,288,241 267,208 26,292
Item 6. - Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial data schedule
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
EXCAL ENTERPRISES, INC.
Registrant
Dated: May 14, 1997 /s/ W. CAREY WEBB
W. Carey Webb
President and Chief Executive Officer
Dated: May 14, 1997 /s/ TIMOTHY R. BARNES
Timothy R. Barnes
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE COMPNAY'S QUARTERLY
REPORT ON FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 829,933
<SECURITIES> 0
<RECEIVABLES> 448,663
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,274,571
<PP&E> 8,098,532
<DEPRECIATION> 605,631
<TOTAL-ASSETS> 10,563,207
<CURRENT-LIABILITIES> 1,664,253
<BONDS> 19,664
0
0
<COMMON> 4,713
<OTHER-SE> 7,084,577
<TOTAL-LIABILITY-AND-EQUITY> 10,563,207
<SALES> 2,408,814
<TOTAL-REVENUES> 2,408,814
<CGS> 0
<TOTAL-COSTS> 1,857,112
<OTHER-EXPENSES> 658,132
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,360
<INCOME-PRETAX> (121,790)
<INCOME-TAX> (181,000)
<INCOME-CONTINUING> 59,210
<DISCONTINUED> 84,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,210
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
