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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Quarterly Period Ended December 31, 1998 Commission File Number #0-27480
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</TABLE>
LAHAINA ACQUISITIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
COLORADO 84-1325695
- ------------------------------- ---------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
</TABLE>
5895 Windward Parkway, Suite 220
Alpharetta, Georgia 30005
--------------------------------
(Address, including zip code, of
Principal Executive Offices)
Registrant's Telephone Number, Including Area Code (770) 754-6140
------------------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former Name, Former Address, and Former Fiscal Year If Changed since Last
Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act or 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practical date.
<TABLE>
<CAPTION>
Class of Common Stock Outstanding at February 19, 1999
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<S> <C>
no par value 2,246,500 shares
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LAHAINA ACQUISITIONS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
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<CAPTION>
PART I -- FINANCIAL INFORMATION PAGE
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ITEM 1 Financial Statements
Consolidated Balance Sheets for the Quarter Ended 3
December 31, 1998 and at December 7, 1998
Consolidated Statements of Operations for the 4
Period from Inception to December 31, 1998
Consolidated Statements of Cash Flows for 5
the Period from Inception to December 31, 1998
Consolidated Statements of Changes in Shareholders' 6
Equity
Notes to Consolidated Financial Statements for 7
the Period from Inception to December 31, 1998
ITEM 2 Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
PART II -- OTHER INFORMATION
ITEM 1 Legal Proceedings 14
ITEM 2 Changes in Securities and the Use of Proceeds 14
ITEM 6 Exhibits and Reports on Form 8-K 16
SIGNATURES
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LAHAINA ACQUISITIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1998
(Unaudited) December 7, 1998
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<S> <C> <C>
ASSETS
Current Assets
Cash ............................................... $ -- $ --
Accounts Receivable ................................ 16,555 --
Prepaid Expenses ................................... 31,378 17,281
Note Receivable .................................... 21,800 --
Escrow Funds ....................................... 30,000 30,000
---------- ----------
Total Current Assets ................................. 99,733 47,281
Fixed Assets
Land ............................................... 400,000 400,000
Buildings .......................................... 2,406,965 2,403,623
Equipment .......................................... 149,127 143,738
Accumulated Depreciation ........................... (40,760) (24,389)
---------- ----------
Total Fixed Assets ................................... 2,915,332 2,922,972
TOTAL ASSETS ........................................... $3,015,065 $2,970,253
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable ................................... 59,313 4,250
Notes Payable - Shareholder ........................ 74,151 --
Notes Payable - Others ............................. 155,000 180,000
Accrued Interest Payable ........................... 22,706 --
Security Deposits Payable .......................... 9,000 9,000
---------- ----------
Total Current Liabilities ............................ 320,170 193,250
Long-Term Debt
Note Payable - Mortgage .............................. 1,550,000 1,550,000
Note Payable - Convertible Debenture ................. 775,000 --
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Total Long-Term Debt ................................... 2,325,000 1,550,000
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TOTAL LIABILITIES ...................................... 2,645,170 1,743,250
SHAREHOLDERS' EQUITY
Preferred Series A Convertible Stock, 10,000,000 Shares
Authorized, 1,910,000 shares Issued and Outstanding
at December 31, 1998 (Unaudited) and December 7, 1998 -- --
Common Stock, $1.00 Par Value, 500 Shares Authorized,
500 Shares Issued and Outstanding at December 7, 1998 -- 500
Common Stock, No Par Value, 800,000,000 Shares
Authorized, 2,246,500 Shares Issued and Outstanding
at December 31, 1998 (Unaudited) ..................... -- --
Additional Paid-In Capital - Common Stock .............. 573,004 1,247,069
Retained Deficit ....................................... (203,109) (20,566)
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TOTAL SHAREHOLDERS' EQUITY ............................. 369,895 1,227,003
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............. $3,015,065 $2,970,253
========== ==========
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The accompanying notes are an integral part of these financial statements.
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LAHAINA ACQUISITIONS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From Inception
(September 25, 1998)
Through
December 31, 1998
(Unaudited)
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<S> <C>
Revenue ................................................... $ 16,555
Operating Expense ......................................... 196,958
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Operating Loss ............................................ (180,403)
Interest Expense .......................................... (22,706)
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Net Loss .................................................. $ (203,109)
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INCOME (LOSS) PER SHARE:
Basic ..................................................... $ (0.09)
Shares for Basic .......................................... 2,246,500
Diluted ................................................... $ (0.09)
Shares for Diluted ........................................ 5,342,424
</TABLE>
The accompanying notes are an integral part of the financial statements.
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LAHAINA ACQUISITIONS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
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<CAPTION>
From Inception
(September 25,
1998) through
December 31,
1998
(Unaudited)
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<S> <C>
Net loss $ (203,109)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 16,271
Expenses paid on behalf of the company by the majority shareholder 11,538
(Increase) decrease in:
Accounts receivable (16,555)
Prepaid expenses (12,543)
Escrow funds --
Notes payable (21,800)
Offering costs --
Increase in accounts payable 74,926
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Net cash used in operating activities (151,272)
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CASH FLOWS USED IN INVESTING ACTIVITIES-capital expenditures (5,379)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of notes payable 824,151
Proceeds from the issuance of common stock --
Cash distribution (667,500)
Repurchase and retirement of common stock --
----------
Net cash provided by financing activities 156,651
----------
Net increase in cash --
Cash at beginning of period --
----------
Cash at end of period $ --
==========
Supplemental disclosure of non-cash items
Non-cash capital contributions by majority stockholder 1,247,569
==========
Purchase of Lahaina Acquisitions, Inc. $ (7,065)
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LAHAINA ACQUISITIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
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<CAPTION>
Series A Preferred Stock - Common Stock -
No Par Value No Par Value Additional Total
-------------------------- ------------------- Paid-In Stockholders'
Shares Amount Shares Amount Capital Retained Deficit Equity
----------- ----------- --------- --------- ---------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 24,
1998 (date of inception) - $ - - $ - $ - $ - $ -
Issuance of common stock - - 500 500 - - 500
Non-cash capital contributions - - - - 1,247,069 - 1,247,069
Net Loss - - - - - (20,566) (20,566)
----------- ----------- --------- --------- ---------- ---------------- -----------
Balance at December 7, 1998 - - 500 500 1,247,069 (20,566) 1,227,003
Adjustment for Merger - - - (500) 500 - -
----------- ----------- --------- --------- ---------- ---------------- -----------
Balance at December 7, 1998,
as adjusted - - 500 - 1,247,569 (20,566) 1,227,003
Cash Distribution - - - - (667,500) - (667,500)
Issuance of common/preferred
stock for acquired company 1,910,000 - 2,246,000 - (7,065) - (7,065)
Net Loss - - - - 0 (182,543) (182,543)
----------- ----------- --------- --------- ---------- ---------------- -----------
Balance at December 31, 1995
(Unaudited) 1,910,000 $ - 2,246,500 $ - $ 573,004 $ (203,109) $ 369,895
=========== =========== ========= ========= ========== ================ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LAHAINA ACQUISITIONS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
For the Period from Inception (September 25, 1998) through December 31, 1998
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in
understanding the Registrant's financial statements. The financial statements
and notes are representations of the Registrant's management who are responsible
for their integrity and objectivity. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates. These
accounting policies conform to generally accepted accounting principles and have
been applied in the preparation of the financial statements.
REGISTRANT'S ACTIVITIES AND OPERATING CYCLE
Lahaina Acquisitions, Inc. (the "Registrant") is engaged in real estate
development and property management. The Registrant's fiscal year ends
September 30.
On December 14, 1998, the Company acquired Beachside Commons I, Inc.
(Beachside) from Mongoose Investments, LLC ("Mongoose") in a transaction
accounted for as a reverse acquisition (see Note K, "SIGNIFICANT EVENTS").
The Registrant's financial statements have been prepared in conformity with
principles of accounting applicable to a going concern. These principles
contemplate the realization of assets and liquidation of liabilities in the
normal course of business.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Lahaina
Acquisitions, Inc. and its wholly owned subsidiary, Beachside. All significant
intercompany accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Registrant considers all highly liquid investments with maturity of three
months or less to be cash equivalents for the purpose of determining cash flows.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is provided by
straight-line methods for financial reporting and accelerated methods for
income tax purposes over estimated useful lives, which range from 5 to 39.5
years.
NOTE B - NOTE RECEIVABLE
Note receivable represents an operating loan
to a customer, secured by security
interest and outstanding stock, due
through December 31, 1999, bearing
interest at a rate of prime plus three
(3) percentage points (10.75% at
December 31, 1998). $21,800
NOTE C - NOTES PAYABLE
The carrying amount of notes payable approximates fair value and is based on the
current rates available to the Registrant for debt of the same remaining
maturities with similar collateral requirements. Notes payable at December 31,
1998, consisted of the following:
Note payable, stockholder, consists of a
revolving line of credit, due on demand
to a related party, with a maximum
borrowing facility of $300,000.00,
bearing interest at 10%, unsecured,
revolving line of credit,
due on demand. $74,151
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Notes payable, others, consists of three
notes, at an interest rate of 18%
payable on demand, from
individuals in the amounts of
$80,000, $50,000, and $25,000. $ 155,000
NOTE D - LONG-TERM DEBT
Long-term debt at December 31, 1998, consisted of the following:
Note payable to Pacific Coast Investment
Company (secured by a first
mortgage on the Beachside Commons
property), at an interest rate of 15%
payable in monthly installments
of interest only. The entire principal
is due and payable November 11, 2003. $1,550,000
Note payable to GCA Strategies Investment
Fund Limited(1), dated December 6,
1998 (secured by a second mortgage
on the Beachside Commons property), at an
interest rate of 9%, maturing
January 31, 2001 with interest payable
quarterly in arrears on the last day of
March, June, September and December
of each year until the maturity date.
(Note K - Significant Events)
(Note M - Subsequent Events) $ 775,000
Note payable to Global Capital Advisors, Ltd.(1)
dated November 4, 1998, at an interest
rate of 12% maturing on May 3, 1999.
(Note M - Subsequent Events) $2,325,000
==========
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(1) These notes include certain provisions, including issuance
of warrants and conversion to common stock (see Form 8-K dated 12/28/98
for details). Such shares have been included in the computation of the
fully diluted share amounts.
Maturities of long-term debt are as follows:
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<CAPTION>
Year Ending
December 31 Amount
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1999 -0-
2000 -0-
2001 750,000
2002 -0-
2003 1,550,000
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NOTE E - SHAREHOLDER'S EQUITY
The components of shareholder's equity are as follows:
Preferred stock consists of 9.5% cumulative preferred stock of no par value
with a liquidation value at $1.00 per share for each outstanding share of
Series A Preferred Stock. There are 10,000,000 shares of Series A Preferred
Stock authorized with 1,910,000 shares issued and outstanding at December
31, 1998. This stock may be converted into Common Stock of the Registrant
at $1.00 per share, or 1,910,000 shares, at the option of the holder.
Common stock is voting stock with no par value. There are 800,000,000
shares authorized with 2,246,500 shares issued and outstanding at December
31, 1998.
NOTE F - RELATED PARTY TRANSACTIONS
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Included in current debt are loans to the Registrant from the majority
shareholder, Mongoose Investments, LLC, (Mongoose) and parties related to
Mongoose, in the following amounts:
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Mongoose $74,151.00
Other related parties 70,000.00
</TABLE>
Mongoose owns 2,000,000 of the 2,246,500 shares of the Registrant's Common Stock
currently outstanding or approximately 89% of such shares. Mongoose has rights
to own an additional 1,910,000 additional shares of Common Stock upon conversion
of its Series A Preferred Stock.
NOTE G - INCOME TAXES
The Registrant has net operating loss carryforwards of approximately $107,000
which are available to offset future taxable income. The loss carryforwards
expire $8,000 in 2016, $46,000 in 2017, and $53,000 in 2018. A valuation has
been established in the full amount of the deferred tax benefit resulting from
the net operating loss carryforwards for each of the periods ending December
31, 1998.
NOTE H - EARNINGS PER SHARE
Basic earnings per share was calculated using the 2,246,500 shares
outstanding at December 31, 1998. Fully diluted shares would have been
computed as follows:
<TABLE>
<S> <C>
Shares outstanding at December 31, 1998 2,246,500
Shares assumes conversion of the outstanding 1,910,000
shares Series A Convertible Preferred Stock 1,910,000
Assumes conversion of the $750,000 Convertible Debenture 882,353
Assumes conversion of the $25,000 Note 28,571
Assumes conversion of the Warrant attached to the
Line of Credit 200,000
Assumes exercise of the 60,000 Share Warrant 60,000
Assumes conversion of the Warrant attached to the
Convertible Note 15,000
---------
Fully diluted shares 5,342,424
=========
</TABLE>
NOTE I - LEGAL PROCEEDINGS
The Company is party from time to time to various legal proceedings. The
Company currently has a claim arising out of the construction phase of the
Beachside project in the total amount of $30,000. While it expects to prevail
favorable in this proceeding it has placed sufficient funds in escrow to
accommodate any liabilities in this matter. In the opinion of management, these
proceedings are expected to have no material impact on the Company's financial
position or results of operations.
NOTE J - RESERVE FOR DOUBTFUL ACCOUNTS
The Company has not taken any reserves for its accounts receivable or notes
receivable at this time, though it may change this policy in the future based
on its experiences with respect to collections.
NOTE K - SIGNIFICANT EVENTS
On December 14, 1998, the Registrant purchased all of the outstanding shares of
Beachside in a transaction accounted for as a reverse acquisition. In
accordance with the provisions of Staff Accounting Bulletin No. 97, Beachside
was deemed to be the accounting acquirer of Lahaina as its stockholders
received the largest portion of the voting rights in the combined corporation.
The acquired company, Lahaina, was recorded at its historical cost basis, as it
was a shell company prior to its acquisition of Beachside. A summary of the
transaction follows.
Acquisition Transaction
On December 14, 1998, the Registrant purchased all of the outstanding stock
of Beachside from Mongoose. The purchase was deemed effective as of December
7, 1998. Beachside is the owner of a commercial real estate development
located on Fernandina Beach, Florida in the resort area of Amelia Island,
Northeast Florida.
The Registrant paid the following for the Beachside stock: 1,250,000 newly
issued shares of Common Stock of the Registrant; 1,910,000 newly issued
shares of Series A of Preferred Stock, of the Registrant which shares are
convertible into 1,910,000 shares of Common Stock; and $667,500 in cash,
which was a portion of the $750,000 borrowed in connection with this
transaction by the Registrant under the Note, before amendment.
At the same time, Mongoose purchased 750,000 shares of Common Stock from
Paxford Investments, Ltd., ("Paxford") an existing shareholder of the
Registrant, for $300,000. The Stock Purchase Agreement, the Note and the
related Securities
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<PAGE> 10
Purchase Agreement, Registration Rights Agreement, Stock Pledge Agreement and
Warrant are attached as Exhibits or incorporated by reference to this Form 10-Q.
As a result of the above transactions, a change in the control of the Registrant
has occurred in that Mongoose owns 2,000,000 shares of the 2,246,500 shares of
Common Stock currently outstanding or approximately 89% of such shares. Mongoose
could own an additional 1,910,000 shares of Common Stock upon conversion of its
Series A Preferred Stock. It is currently estimated that the conversion of the
Note and the exercise of a related will result in an additional 825,000 to
1,030,000 shares of Common Stock being issued. According to current estimates,
the Note as amended will convert into 910,924 shares of Common Stock. The
Warrant is exercisable for 60,000 shares of Common Stock. Thus, after conversion
of all convertible securities, it is likely that the Registrant will remain in
the control of Mongoose for the foreseeable future. The Managing Member of
Mongoose is Richard P. Smyth.
The assets of Beachside consist of two buildings and unimproved real estate,
leases to tenants in the buildings and minimal operating capital. The property
is subject to (1) a first mortgage securing a loan in the amount of $1,550,000
bearing interest at 15% per annum, principal and interest payable and due
December 1, 2001, and (2) a second mortgage in favor of GCA securing repayment
of the Note. Once the Note is converted to Common Stock the second mortgage will
be released. The Registrant intends to continue operating the developed portion
of the Beachside property and intends to initiate and complete the development
of the currently undeveloped portion of the Beachside property when appropriate
financing can be obtained.
Change in Board of Directors
In connection with the change in control of the Registrant, the previous
Directors of the Registrant resigned, but, before resigning, elected Richard P.
Smyth, Gerald F. Sullivan, Sidney E. Brown, and D. Nelson Lester as Directors of
the Registrant. The Directors will be paid $500 per meeting held telephonically
and $1,000 per meeting held in person. Further, each Director has been allowed
to purchase $10,000 of the Company's Common Stock, restricted and priced as of
the day of the initial transaction, at $.40 per share, the price paid by
Mongoose for the Common Stock purchased from Paxford.
The Registrant is interviewing other persons for membership on the Board of
Directors.
The Registrant indemnifies the past and present Directors to the maximum extent
permitted by Colorado law.
Change in Financial and Business Position
As a result of the recent change in control, there has been a change in the
financial position of the Registrant. Prior to December 14, 1998, the Registrant
had virtually no assets and no operations. The Registrant now has assets,
primarily in the form of the commercial real estate holdings of Beachside, and
operates those holdings.
Bridge Funding
In order to raise the cash portion of the purchase price for the Beachside
stock, the Registrant borrowed $750,000 from GCA. The costs associated with the
transaction were the payment of an $82,500 consulting fee to affiliates of the
Fund and the issuance of a Warrant to purchase 60,000 shares of Common Stock to
LKB Financial, LLC in satisfaction of amounts owed to it for broker/finder
services in connection with the transaction.
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NOTE L - Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income,
effective for fiscal years beginning after December 15, 1997. This statement,
which must be adopted by the Registrant by fiscal year ended September 30, 1999,
establishes standards for the reporting and display of comprehensive income and
its components in financial statements. Comprehensive income generally
represents all changes in shareholders' equity except those resulting from
investments by and distributions to owners. The Registrant believes it is in
compliance and this did not have any material impact on the Registrant.
Currently, no differences exist between the Company's net income or loss and
comprehensive net income or loss.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, Disclosures About Segments of an Enterprise and Related Information ("SFAS
No. 131"), effective for fiscal years beginning after December 15, 1997. This
statement, which must be adopted by the Registrant by fiscal year ended
September 30, 1999, established standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report information about
operating segments in interim financial reports. SFAS No. 131 also establishes
standards for related disclosures about products and services, geographic areas
and major customers. The Registrant believes it is in compliance and this did
not have any material impact on the Registrant.
In March 1998, the American Institute of Certified Public Accounts ("AICPA")
issued Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed For or Obtained For Internal Use ("SOP" No. 98-1"). SOP No. 98-1 is
effective for fiscal years beginning after December 15, 1998. SOP No. 98-1 will
require the capitalization of certain costs incurred after the date of adoption
in connection with developing or obtaining software for internal-use. The
Registrant believes it is in compliance and this did not have any material
impact on the Registrant.
NOTE M - SUBSEQUENT EVENTS
In January 1999, the Registrant reached an agreement with the holder of its
$25,000 note to convert it to the same terms as the $750,000 convertible
debenture with a maturity date of January 31, 2001. Therefore, the note was
included in long-term debt. In order to provide additional interim funding for
the Registrant in its development stage, the Registrant has entered into a
lending agreement with GCA Strategic Investment Fund, Ltd. This line provides
for funding of up to a maximum of $300,000 in accordance with certain terms and
conditions. The Fund is entitled to receive certain compensation for this line
including the issuance of up to 200,000 warrants, based on the amounts drawn on
the line, with a strike price of $2.60 per share of common stock. These shares
have been included in the fully diluted share computation. As of the date of
this filing, the Registrant has utilized $150,000 of this line. A copy of this
agreement in attached as an exhibit to this Form 10-Q.
-11-
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the results of operations and financial condition of
the Registrant should be read in conjunction with the Registrant's Consolidated
Financial Statements and Notes thereto immediately preceding this section. This
discussion contains forward-looking statements based on current expectations
which involve risks and uncertainties. Actual results and the timing of certain
events may differ significantly from those projected in such forward-looking
statements due to a number of factors, including, but not limited to, the
possibilities that the demand for the Registrant's services may decline as a
result of possible changes in general and industry specific economic conditions
and the effects of competitive services and pricing, required financing may not
be available upon terms acceptable to the Registrant, in which case the
Registrant will not grow as expected, and such other risks and uncertainties as
are described in reports and other documents filed by the Registrant from time
to time with the Securities and Exchange Commission.
OVERVIEW
The Registrant was formed with the intent to actively seek, locate, evaluate,
structure and complete mergers with or acquisitions of private companies,
partnerships or sole proprietorships. The Registrant intends to implement a
business strategy that will allow it to facilitate opportunistic acquisitions
or investment in real estate, related operations and businesses with an
emphasis on asset oriented opportunities, such as real estate equipment or
other physical assets.
On December 14, 1998, the Registrant purchased all of the outstanding shares of
Beachside Commons I, Inc. ("Beachside") in a transaction accounted for as a
reverse acquisition. In accordance with the provisions of Staff Accounting
Bulletin No. 97, Beachside was deemed to be the accounting acquirer of Lahaina
as its stockholders received the largest portion of the voting rights in the
combined corporation. The acquired company, Lahaina, was recorded at its
historical cost basis, as it was a shell company prior to its acquisition of
Beachside.
The acquisition on of Beachside, whose main activity is real estate development
and redevelopment and investment in businesses within resort market places, is
consistent with that business strategy. Since inception, the Registrant
generated no revenues until its acquisition of Beachside.
RESULTS OF OPERATIONS
Prior to December 14, 1998, the Registrant was a shell company and did not
conduct an active business, and its historical results of operations were not
meaningful. As a result of the Company's acquisition of Beachside on December
14, 1998, which was accounted for as a reverse acquisition, the Company has now
become an operating entity.
For the period from inception (September 25, 1998) through December 31, 1998,
the Registrant recorded revenues totaling $16,555, primarily attributable to
rental revenue from its Beachside property. Operating expenses for the period
from inception (September 25, 1998) through December 31, 1998 totaled
$196,958, and are primarily expenses associated with operating Beachside, as
well as expenses associated with consummation of the acquisition of Beachside.
Net interest expense for the period from inception (September 25, 1998) through
December 31, 1998 totaled $22,706, principally relating to indebtedness
associated with the Beachside property. The Registrant reported a net operating
loss of $203,109 for the period from inception (September 25, 1998) through
December 31, 1998.
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POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS AND SEASONALITY
As a result of the Registrant's limited operating history in resort
development and the emerging nature of the markets in which the Registrant
competes, the Registrant is unable to accurately forecast its revenues. The
Registrant's current and future expense levels are based predominantly on its
operating plans and estimates of future revenues and, while relevant to
management for planning purposes, should not be relied upon by potential
investors. The Registrant may be unable to adjust spending in a timely manner
to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in revenues would likely have an immediate material
adverse effect on the Registrant's business, operating results and financial
condition. Further, the Registrant currently intends to substantially increase
its operating expenses to increase advertising, develop and offer new and
expanded services, to fund increased sales and marketing and customer service
operations and to develop its technology and systems. To the extent such
expenses precede or are not subsequently followed by increased revenues, the
Registrant's operating results will fluctuate and anticipated net losses in a
given quarter may be greater than expected.
The Registrant expects to experience significant fluctuations in its
future quarterly operating results due to a variety of other factors, many of
which are outside the Registrant's control. Factors that may adversely affect
the Registrant's quarterly operating results include, but are not limited to (i)
general economic conditions and economic conditions specific to the real estate
industry, (ii) the level of use of resort facilities as well as seasonal
fluctuation in vacationers' demands, (iii) the Registrant's ability to upgrade
and develop its systems and infrastructure and to attract new personnel in a
timely and effective manner, (iv) the amount and timing of operating costs and
capital expenditures relating to expansion of the Registrant's business,
operations and infrastructure, (v) governmental regulation, (vi) unforeseen
events affecting the industry, and (vii) the timing associated with the start,
completion and closing associated with the land development or construction
activities of the Registrant.
Due to the foregoing factors, quarterly revenues and operating results are
difficult to forecast, and the Registrant believes that period-to-period
comparisons of its operating results will not necessarily be meaningful and
should not be relied upon as an indication of future performance. It is likely
that the Registrant's future quarterly operating results from time to time will
not meet the expectations of security analysts or investors. In such event, the
price of the Registrant's Common Stock would likely be materially and adversely
affected.
LIQUIDITY AND CAPITAL RESOURCES
Prior to December 14, 1998, the Registrant was a shell company and did not
conduct an active business, and its historical results of operations were not
meaningful. As a result of the Company's acquisition of Beachside on December
14, 1998, which was accounted for as a reverse acquisition, the Company has now
become an operating entity.
At December 31, 1998, the Registrant did not have a cash balance. For the
period from inception (September 25, 1998) through December 31, 1998, the
Registrant used $151,272 of cash in operations, principally relating to its net
loss. Cash flows used in investing activities totaled $5,379, attributable to
capital expenditures. Cash flows provided by financing activities totaled
$156,651, of which $824,151 was provided by an increase in notes payable and
$667,500 was used for a cash distribution relating to the acquisition of
Beachside. The increase in notes payable is primarily attributable to the
issuance of $775,000 in convertible debentures.
The Registrant is not presently generating positive cash flow, and its
operations are presently consuming cash at a rate in excess of its present
ability to generate cash. The Registrant's operations will continue to consume
cash in excess of cash generated from operations for the foreseeable future.
The Registrant believes that its current cash, and cash equivalents and its
debt arrangements will be sufficient to meet its anticipated cash needs for
working capital and capital expenditures for at least the next several months.
However, the Registrant's capital requirements depend on several factors,
including the level of acquisition activity and other factors. The timing and
amount of such capital requirements cannot accurately be predicted. If capital
requirements vary materially from those currently planned, the Registrant may
require additional financing sooner than anticipated. The Registrant has no
commitments for any additional financing, and there can be no assurance that any
such commitments can be obtained on favorable terms, if at all. Any additional
equity financing may be dilutive to the Registrant's shareholders and debt
financing, if available, may involve restrictive covenants with respect to
dividends, raising capital and other financial and operational matters which
could restrict its operations or finances. If the Registrant is unable to obtain
additional financing as needed, the Registrant may be required to reduce the
scope of its operations or its intended expansion, which could have a material
adverse effect on the Registrant's business, results of operations and financial
condition.
RECENT DEVELOPMENTS
In order to enhance the Registrant's ability to acquire, develop, renovate,
manage and sell its properties and other businesses and operations, the
Registrant has recently formed a subsidiary, Klein Real Estate Services, and has
entered into an agreement to acquire a mortgage brokerage operation based in
Gainesville, Georgia. The Registrant has entered into an agreement to acquire JP
Concepts, Inc., a provider of resort related hospitality services. These
additional acquisitions are all contingent on the successful transfer of the
associated licenses to the Registrant by the issuing governmental agencies.
-13-
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party from time to time to various legal proceedings. The
Company currently has a claim arising out the construction phase of the
Beachside project in the total amount of $30,000. While it expects to prevail
favorably in this proceeding it has placed sufficient funds in escrow to
accommodate any liabilities in this matter. In the opinion of management, these
proceedings are not expected to have a material impact on the Company's
financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
PREFERRED STOCK
Pursuant to the Registrant's Amended and Restated Articles of
Incorporation, the Board of Directors has the authority, without further action
by the shareholders, to issue up to 10,000,000 shares of Preferred Stock in one
or more series and to fix the designations, powers, preferences, privileges,
and relative participating, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of the Common Stock. The Board of
Directors, without shareholder approval, can issue Preferred Stock with voting,
conversion or other rights that could adversely affect the voting power and
other rights of the holders of Common Stock. Preferred Stock could thus
be issued quickly with terms calculated to delay or prevent a change in control
of the Registrant or make removal of management more difficult. Additionally,
the issuance of Preferred Stock may have the effect of decreasing the market
price of the Common Stock, and may adversely affect the voting and other rights
of the holders of Common Stock. 1,910,000 shares of Series A Preferred Stock
are currently outstanding. Although the Registrant has no current plans to
issue any additional shares of the Preferred Stock, such shares may be issued
in connection with subsequent acquisitions or financings.
TERMS OF SERIES A PREFERRED STOCK
In connection with its acquisition of Beachside, the Registrant authorized
and issued shares of Series A Preferred Stock. These securities have
preferential rights over the rights of outstanding Common Stock. The rights,
preferences, and restrictions granted to and imposed on the Series A Preferred
Stock are set forth below.
DIVIDEND PROVISIONS
Subject to the rights of any series of Preferred Stock that may from time
to time come into existence, the holders of shares of Series A Preferred Stock
are entitled to receive dividends out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of the Registrant) on the Common Stock of this
Corporation, at the rate of $0.095 per share, per annum (as adjusted for any
stock splits, stock dividends, recapitalizations or the like), payable when,
as, and if declared by the Board of Directors. Such dividends will be
cumulative. The holders of the outstanding Series A Preferred Stock can waive
any dividend preference that such holders shall be entitled to receive upon the
affirmative vote or written consent of the holders of a majority of the Series
A Preferred Stock.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the
Registrant, either voluntary or involuntary, subject to the rights of any
series of Preferred Stock that may from time to time come into existence, the
holders of Series A Preferred Stock are entitled to receive, prior and in
preference to any distribution of any of the assets of the Registrant to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of $1.00 for each outstanding share of Series A
Preferred Stock (the "Series A Liquidation Price"), plus declared but unpaid
dividends on such share (subject to adjust of such fixed dollar amounts for any
stock splits, stock dividends, combinations, recapitalizations or the like).
Upon completion of this distribution all of the remaining assets of the
Registrant available for distribution to shareholders shall be distributed
among the holders of Series A Preferred Stock and Common Stock pro rata based
on the number of shares of Common Stock held by each holder (assuming full
conversion of all shares of Series A Preferred Stock).
Liquidation, dissolution or winding up of the Registrant shall be deemed
to be occasioned by, or to include (unless the holders of a majority of the
Series A Preferred Stock then outstanding shall determine otherwise), (i) the
acquisition of the Registrant by another entity by means of any transaction or
series of related transactions (including, without limitation, any
reorganization, merger or consolidation) that results in the transfer of fifty
percent or more of the outstanding voting power of the Registrant; or (ii) a
sale of all or substantially all of the assets of the Registrant. In any of
such events, if the consideration received by the Registrant is other than
cash, its value will be deemed its fair market value determined as set forth in
Amended and Restated Articles of Incorporation of the Registrant.
REDEMPTION
-14-
<PAGE> 15
The Series A Preferred Stock is redeemable only at the election of the
Board of Directors of the Registrant upon 20 days notice to the holders of
Series A Preferred Stock at a price per share equal to the Series A Liquidation
Price plus accrued (whether or not declared) but unpaid dividends on each such
share.
CONVERSION
Each share of Series A Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share, and
until 5:00 p.m. Eastern Time of the day fixed for its redemption (the
"Conversion Rights"), at the office of the Registrant or any transfer agent for
such stock, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing the Series A Liquidation Price by the
Conversion Price applicable to such share in effect on the date the certificate
is surrendered for conversion. The initial Conversion Price per share for shares
of Series A Preferred Stock shall be $1.00, subject to adjustment as set forth
in the Registrant's Amended and Restated Articles of Incorporation.
AUTOMATIC CONVERSION
Each share of Series A Preferred Stock shall automatically be converted
into shares of Common Stock at the Conversion Price at the time in effect for
such Series A Preferred Stock immediately upon the earlier of (i) the
Registrant's sale of its Common Stock in a firm commitment underwritten public
offering pursuant to a registration statement on Form S-1 or Form SB-2 under the
Securities Act of 1933, as amended, the public offering price of which was not
less than $10.00 per share (as adjusted for any stock splits, stock dividends,
recapitalizations or the like) and $10,000,000 in the aggregate or (ii) the date
specified by written consent or agreement of the holders of a majority of the
then outstanding shares of Series A Preferred Stock.
VOTING RIGHTS
The holder of each share of Series A Preferred Stock shall have the right
to one vote for each share of Common Stock into which such Series A Preferred
Stock could then be converted, and with respect to such vote, except as set
forth in the following paragraph, such holder (i) shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock,
(ii) shall be entitled to notice of any shareholders' meeting in accordance with
the bylaws of the Registrant, and (iii) shall be entitled to vote, together with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote. Fractional votes shall not, however, be
permitted and any fractional voting rights available on an as-converted basis
shall be rounded to the nearest whole number (with one-half being rounded
upward).
The holders of shares of Series A Preferred Stock shall be entitled to
elect one director of the Registrant at each annual election of Directors. The
holders of Series A Preferred Stock and Common Stock (voting together as a
single class and not as separate series, and on an as-converted basis) shall be
entitled to elect any remaining Directors of the Registrant.
Subject to the rights of any series of Preferred Stock that may from time
to time come into existence, so long as any shares of Series A Preferred Stock
are outstanding, the Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of a majority of
the Series A Preferred Stock then outstanding voting together as a single class:
(i) sell, convey, or otherwise dispose of all or substantially all
of its property or business or merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary corporation) or effect
any transaction or series of related transactions in which more than fifty
percent of the voting power of the Registrant is disposed of;
(ii) redeem purchase or otherwise acquire (or pay into or set aside
for a sinking fund for such purpose) any share or shares of Preferred Stock
or Common Stock; provided, however, that this restriction shall not apply
to the repurchase of shares of Common Stock from employees, officers,
Directors, consultants or other persons performing services for this
Corporation or any subsidiary pursuant to agreements under which this
Corporation has the option to repurchase such shares at cost or at cost
upon the occurrence of certain events, such as the termination of
employment;
(iii) amend the Registrant's Articles of Incorporation or bylaws;
(iv) declare or pay any dividends on any shares of capital stock;
(v) do any act or thing which would result in taxation of the
holders of shares of the Series A Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended (or any comparable provision of
the Internal Revenue Code as hereafter from time to time amended); or
(vi) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on a
parity with, the Series A Preferred Stock with respect to dividends,
liquidation or voting.
-15-
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
Number Description Page
<S> <C> <C>
2.1 Stock Purchase Agreement dated December 3, 1998, by and between Lahaina Acquisitions, Inc. and
Mongoose Investments, LLC (1)
2.2 Common Stock Purchase Warrant in the amount of 60,000 shares to be issued by Lahaina Acquisitions,
Inc. and purchased by LKB Financial, LLC, expiring on December 20, 2003 (1)
3.1 Amended and Restated Articles of Incorporation (2)
3.2 Bylaws of the Registrant (2)
4.1 Securities Purchase Agreement dated December 7, 1998, by and between Lahaina Acquisitions, Inc. and
GCA Strategic Investment Fund Limited (1)
4.2 9% Convertible Note of Lahaina Acquisitions, Inc. payable to GCA Strategic Investment Fund Limited,
in the principal amount of $750,000 (1)
4.3 Letter Agreement dated January 19, 1999 by and between Lahaina Acquisitions, Inc. and GCA Strategic E-1
Investment Fund, Ltd. amending 9% Convertible Note
4.4 Registration Rights Agreement dated December 7, 1998, by and between Lahaina Acquisitions, Inc. and
GCA Strategic Investment Fund Limited (1)
4.5 Letter Agreement dated January 19, 1999 by and between Lahaina Acquisitions, Inc. and GCA Strategic E-2
Investment Fund, Ltd. confirming conversion of $25,000 Beachside Commons Note
4.6 Working Capital Line dated January 19, 1999, by and between Lahaina Acquisitions, Inc. and GCA E-3
Strategic Investment Fund, Ltd.
4.7 Note Guaranty by Richard P. Smyth with respect to $300,000 of indebtedness of Lahaina Acquisitions, E-5
Inc.
4.8 Line of Credit for up to $250,000 between Lahaina Acquisitions, Inc. and Mongoose Investments, LLC E-7
4.9 Form of Stock Certificate (2)
4.10 18% Note of Mongoose Investments, LLC payable to Elaine Oppenheimer, in the principal amount of E-9
$85,000. This note was transferred to Lahaina Acquisitions, Inc. on December 7, 1998.
4.11 18% Note of Mongoose Investments, LLC payable to Nancy Estroff Smyth, in the principal amount of E-11
$50,000. This note was transferred to Lahaina Acquisitions, Inc. on December 7, 1998.
4.12 18% Note of Mongoose Investments, LLC payable to Nancy Estroff Smyth, in the principal amount of E-13
$20,000. This note was transferred to Lahaina Acquisitions, Inc. on December 7, 1998.
10 Contract of Engagement dated January 19, 1999 by and between Lahaina Acquisitions, Inc. and LKB E-15
Financial LLC
27 Financial Data Schedule (for SEC use only) E-19
</TABLE>
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K,
filed December 28, 1998.
(2) Incorporated by reference to the Registration Statement on Form 10, filed
December 29, 1995.
(B) REPORTS ON FORM 8-K
A report on Form 8-K was filed on December 28, 1998 reporting (i) a
change in control of the Registrant, (ii) the acquisition of all of the
stock of Beachside Commons I, Inc. from Mongoose Investments, LLC,
(iii) a change in the location of company headquarters and (iv) the
intention to file a Form S-1 Registration Statement.
A report on Form 8-K was filed on February 10, 1999 reporting (i) a
change in the Registrant's certifying accountant and (ii) that the
company had formed, acquired or was in discussions to acquire a
number of small businesses in order to complement its current
operations and increase its overall size.
-16-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LAHAINA ACQUISITIONS, INC.
--------------------------
(Registrant)
By: /s/ L. Scott Demerau
-----------------------------------------
Name: L. Scott Demerau
Title: President
October 29, 1999
<PAGE> 1
EXHIBIT 4.3
January 19, 1999
Rick Smyth
Lahaina Acquisitions, Inc.
2900 Atlantic Avenue
Fernandina Beach, FL 32034
Dear Rick:
This letter agreement will confirm the amendments in the 9% Convertible Note as
follows:
2. Amend the conversion price on the second $375,000 from 85% of
the 5 day Weighted Average Sale Price to a conversion price of
$875.
These amendments do not change any other terms of the agreement, rights of GCA
Strategic Investment Funds, Ltd., or obligations of Lahaina Acquisitions, Inc.,
under the agreement.
- -----------------------------------
GCA Strategic Investment Fund, Ltd.
- -----------------------------------
Rick Smyth
Lahaina Acquisitions, Inc.
E-1
<PAGE> 1
EXHIBIT 4.5
January 19, 1999
Rick Smyth
Lahaina Acquisitions, Inc.
2900 Atlantic Avenue
Fernandina Beach, FL 32034
Dear Rick:
This letter agreement will confirm that the $25,000 Beachside Commons Note due
May 3, 1999 will be converted from its present form to the $750,000 Convertible
Debenture dated December 14, 1998, with all rights, remedies and obligations
herein. The Conversion Shares and the 25,000 Shares issued under the Note will
be included in the Registrant's S-1 Registration Statement.
- -----------------------------------
GCA Strategic Investment Fund, Ltd.
- -----------------------------------
Rick Smyth
Lahaina Acquisitions, Inc.
E-2
<PAGE> 1
EXHIBIT 4.6
WORKING CAPITAL LINE
$300,000 PAR VALUE
SECTION ONE
TERMS OF CREDIT LINE AND NOTES
FOR VALUE RECEIVED, LAHAINA ACQUISITION, INC. ("the Debtor") of 2900 Atlantic
Avenue, Suite 900, Fernandina Beach, Florida 32034 promises to pay to the order
of GCA STRATEGIC INVESTMENT FUND LTD. (hereinafter "GCA") c/o Prime Management
Limited Mechanics Building, 12 Church Street, Hamilton HM 11, Bermuda, the par
value amount of One Hundred Eighty Thousand ($180,000) Dollars payable April 22,
1999. The purchase price of the note will be $850 principal amount for each
$1000 par value amount purchased. Beginning on the latter of (i) the full
repayment of the note and (ii) 95 days following the closing date, the Fund will
grant to the Company an option for an additional $120,000 of Notes, with the
same conditions as set forth herein (The "Option notes"), provided there is no
material adverse change in financial condition of the Company or the Company's
stock price. The additional notes will be funded in $60,000 increments, up to a
total of $300,000. The Company will provide the Funds with three weeks notice
prior to any take down of the additional notes. Prepayment of the full Par Value
Amount is permitted at any time. All Option Notes shall have a term of Ninety
(90) days from the date any Option Note is closed upon by Lahaina Acquisitions,
Inc.
SECTION TWO
WARRANTS
The Fund will receive 100,000 warrants with a strike price of $2.60. The term of
the Warrants will begin at the closing date hereof and continue through five
years from the closing date (the "Funding Warrants"). The Option Notes will
entitle the Funds to receive an additional 50,000 Warrants per $60,000 par value
amount thereof, with the same expiration as the Funding Warrants (the "Option
Warrants"), up to an additional 100,000 Bonus Warrants. The stock price of the
Option Warrants is the average of the following: (i) the 30 day Weighted Average
Sales Price and (ii) the 30 day Closing Bid Price of Companies Common Shares
listed on the OTC Bulletin Board as reported by Bloomberg, L.P., on the date of
the takedown.
SECTION THREE
EFFECT OF WAIVER OF RIGHTS BY GCA
GCA is not under any obligation to exercise any of its rights under this note,
and failure to exercise its right under this note or to delay in exercising any
of its rights shall not be deemed a waiver of or in any manner impair any of the
rights of GCA.
SECTION FOUR
REGISTRATION RIGHTS
The rights and remedies of GCA specified in this note are cumulative and do not
exclude any other rights or remedies it may otherwise have. The Warrants will be
registered for resale under a resale registration statement as provided for in
the Registration Rights Agreement, attached hereto as Exhibit A.
SECTION FIVE
ACCELERATION OF INSOLVENCY OF DEBTOR
If Debtor shall be adjudged bankrupt, or file a petition in bankruptcy, or have
a petition in bankruptcy filed against it, this note shall become due and
payable immediately without demand or notice.
SECTION SIX
WAIVER OF PRESENTMENT, PROTEST, AND NOTICE OF DISHONOR
Debtor hereby waives all acts on the part of GCA required in fixing the
liability of the party, including among other things presentment, demand, notice
of dishonor, protest, notice of protest, notice of nonpayment, and any other
notice.
E-3
<PAGE> 2
SECTION SEVEN
CHOICE OF LAWS
This note shall be governed by and construed in accordance with the internal
laws (as opposed to conflict of laws) of Georgia in all respects, including
matters of construction, validity and performance.
SECTION EIGHT
COSTS OF COLLECTION
Debtor shall pay on demand all costs of collection, including legal expenses and
attorney fees, incurred by GCA in enforcing this note on default.
Dated: January 19, 1999
LAHAINA ACQUISITIONS, INC.
By:
-----------------------------------------
Richard Smyth
E-4
<PAGE> 1
EXHIBIT 4.7
NOTE GUARANTY
($300,000)
Guaranty made this 19th day of January, 1999, by Richard Smyth, of 7276
Sanctuary Lane, Fernandina Beach, Florida 32034 referred to as Guarantor, to GCA
Strategic Investment Fund Ltd. c/o Prime Management Limited, Mechanics Building,
12 Church Street, Hamilton HM 11, Bermuda, referred to as Creditor with respect
to the indebtedness of Lahaina Acquisitions, Inc. referred to as Debtor and
having as its principle place of business and offices located at 2900 Atlantic
Avenue, Fernandina Beach, Florida 32034.
3. STATEMENT OF GUARANTY
In consideration of the sum of Ten Dollars ($10), paid by GCA Strategic
Investment Fund Ltd. to the undersigned Guarantor, and other valuable
consideration moving to the Guarantor, the receipt of which is acknowledged, as
well as for the purpose of inducing GCA Strategic Investment Fund Ltd. to lend
to Lahaina Acquisitions, Inc. the sum of Three Hundred Thousand Dollars
($300,000), Guarantor unconditionally guarantees to GCA Strategic Investment Fun
Ltd. its endorsees, transferees, successors, or assigns of either this guaranty
or of the obligation whose payment is guaranteed, the due and punctual payment
of the par value and interest on, that certain promissory note dated hereof, in
the par value amount of $300,000, made by the Debtor in favor of the Creditor
and all other indebtedness due GCA Strategic Investment Fund Ltd. by the Debtor
according to the terms of the instruments evidencing such indebtedness, payment
to be made at such time or times as such indebtedness becomes due, either in
course or by virtue of the provisions for the acceleration of the maturity of
the indebtedness as contained in any instrument evidencing such indebtedness.
4. INDEBTEDNESS GUARANTEED
The indebtedness, payment of which is guaranteed, includes any rewards
or extensions of the indebtedness, in whole or in part, including both principal
and interest, together with such attorneys' fees as may be collectable by law as
shall be provided for by any note or instrument in writing evidencing such
obligation and all damages, losses, costs, charges, expenses, and liabilities of
every king, nature and description suffered or incurred by GCA Strategic
Investment Fund Ltd. arising in any manner out of, or in any way connected with
or growing out of such obligation of Debtor to GCA Strategic Investment Fund
Ltd.
5. WAIVER OF NOTICE
Guarantor waives any notice which may be required relative to the
acceptance of this guaranty, the creation, extension, or renewal of the
indebtedness of the Debtor and the acceleration of maturity of such
indebtedness, also presentment, demand, protest, notice of dishonor or
nonpayment or other default by the Debtor with respect to any liabilities or
obligations of the Debtor under the terms of any note or instrument in writing
evidencing such indebtedness or the laws applicable to that indebtedness.
6. AUTHORITY OF CREDITOR
Guarantor authorized Creditor to deal in any manner with any obligation
or indebtedness the discharge and payment of which are guaranteed and the
collateral and the security of every kind and character given to secure the
payment of such obligation and indebtedness, and without limiting the generality
of this guaranty, Creditor is authorized to waive any rights which it may have
relative to requiring additional collateral or to surrendering or to releasing
collateral held by it, or to substituting any collateral held by it for other
collateral of like kind, or any kind, nor shall the obligation of Guarantor
under this guaranty, nor the rights of Creditor protected by it be diminished or
in any manner affected by the failure of Creditor to exercise its rights with
reference to such collateral, or failure to accelerate the maturity of the
indebtedness upon default on that indebtedness, or in extending the maturity of
the indebtedness, or in renewing the notes evidencing the same, or in failing to
attempt collection of the indebtedness by legal proceedings or otherwise, or it
any other manner proceeding against Debtor or the collateral or security pledged
or conveyed as security for such obligations or indebtedness.
7. DEFAULT BY DEBTOR
In the event the Debtor shall be in default in the payment of any of
the indebtedness guaranteed by this instrument, Guarantor shall immediately,
upon demand by the Creditor, pay to the Creditor, the full amount of the
indebtedness in the payment of which default has occurred, and such obligation
shall become the direct and primary obligation of the Guarantor.
8. JOINT AND SEVERAL LIABILITY
The obligation and liability of the Guarantor and Debtor shall be joint
and several.
9. SUIT AGAINST GUARANTOR
E-5
<PAGE> 2
There shall be no duty or obligation of Creditor to institute
proceedings against Debtor or to exhaust any remedy in law or in equity against
the Debtor before brining suit or instituting proceedings of any kind against
the Guarantor.
10. INDEBTEDNESS AS PART OF GUARANTY
Guarantor agrees that the terms, conditions, agreements, and
stipulations in the note and other evidences of indebtedness whose payment or
discharge is guaranteed, whether executed before or after this guaranty, shall
become a part of this agreement, and Guarantor ratifies, adopts and confirms all
such terms, conditions, agreements, and stipulations.
11. WAIVER OF CERTAIN RIGHTS
Without in any way limiting the generality of Section 8, Guarantor
hereby waives and renounces, for himself or his family, any and all exemption
rights which any of them may have under or by virtue of the Constitution or Laws
of the State of Florida, or of any other state or of the United States as
against the liability obligation created by this instrument. The Guarantor
transfers, conveys, and assigns to the Creditor or holder of this guaranty, a
sufficient amount of any such exemption that may be allowed to the Guarantor
including any such exemption as any be set apart in bankruptcy, to pay this
obligation in full, with all costs of collection. The Guarantor directs that any
nominated trustee having possession of such exemption to deliver to the Creditor
a sufficient amount of property or money set apart as exempt to pay this
obligation.
12. BINDING EFFECT
This agreement shall bind the heirs and legal representatives of the
Guarantor.
13. CHOICE OF LAWS
This guaranty shall be governed by and construed in accordance with the
internal laws (as opposed to conflict of laws) of Georgia in all respects,
including matters of construction, validity and performance.
Dated: January 19, 1999
IN WITNESS WHEREOF, the Guaranty has been duly executed by the
Guarantor on the date above written.
-------------------------------------------
Richard Smyth
- -----------------------------
Witness
E-6
<PAGE> 1
EXHIBIT 4.8
LINE OF CREDIT PROMISSORY NOTE
$250,000 Fernandina Beach, Florida
, 1999
----------------
FOR VALUE RECEIVED, LAHAINA ACQUISITIONS, INC., a Colorado Corporation
(hereinafter referred to as "Payor"), promises to pay to the order of MONGOOSE
INVESTMENTS, LLC, a Georgia limited liability company (hereinafter referred to
as "Holder"), the principal sum of up to two hundred fifty thousand dollars
($250,000), the actual amount owed based on the real and actual amounts advanced
to the Payor, less any reimbursements made by the Payor. All advances under this
line shall be evidenced by documented transfers, canceled checks or other
documentation acceptable to all parties and shall be reviewed by a qualified
third party on a monthly basis with the accounting of the amounts owed reviewed
by a qualified third party on a monthly basis with the accounting of the amounts
owed reviewed by the Board of Directors upon completion of such monthly review.
Said principal shall bear interest at the rate of ten percent per annum.
Interest shall be due and payable monthly on so much of the principal as has
been disbursed from time to time and remains unpaid and shall be calculated on
the basis of a three hundred sixty -- (360) day year. As further consideration
the Payor agrees to issue to the Holder at the end of each month the line is in
place a warrant to purchase common stock in the Payor. This warrant shall allow
the purchase, at 105% of the closing price of the stock on the final trading day
of each month, a number of shares equal to the weighted average outstanding
balance due from the Payor during the prior month divided by the closing price
of the stock on the final day of the month that sum divided by twelve. The
prices used in this calculation shall be as published by Bloomberg Financial,
LLP, or as generally available from public sources. Principal and interest shall
be payable at 7276 Sanctuary Lane, Amelia Island, Florida 32034, or at such
other place as Holder may designate and shall mature and be payable on demand.
Payor acknowledges and agrees that any amounts that have been disbursed prior to
the execution hereof are covered by and included in the principal amount
hereunder.
Payments shall be made in currency of the United States of America,
which at the time of payment shall be legal tender for the payment of public and
private debts. This Note is secured by a security interest in all of the assets
of the Company not otherwise encumbered by any other obligations.
Payor shall have the right to prepay the principal amount outstanding
in whole or in part at any time without penalty, and the Payor has the
obligation to pay the outstanding amounts upon receipt of any additional funding
provided to the Payor from any source, including but not limited to operating
income, sale of equity or placement of debt, except to the extent that such
payment would endanger the ongoing operations of the Company. Payor hereby
waives all presentment, demand, notice of dishonor, and protest. Payor hereby
renounces and waives all exemption rights allowed by the Constitution and laws
of Florida or any other State of the United States, as against this Note or any
renewal thereof.
If Payor fails to pay any amount payable hereunder within five (5) days
of demand, Payor shall be in default hereunder. In addition, a default shall
exist hereunder upon the occurrence of any of the following events: (i) Payor
becomes insolvent as defined in the Uniform Commercial Code as in effect at that
time in Florida; (ii) Payor makes an assignment for the benefit of creditors or
files a petition in bankruptcy.
Payor acknowledges that its obligation to pay all sums due under this
Note is absolute and unconditional and that such obligation is not subject to
any defense, counterclaim, and right of setoff or recoupment.
Payor shall pay all costs of collection, including, but not limited to,
reasonable attorneys' fees if collected by or through an attorney at law.
This instrument shall be governed by and interpreted in accordance with
the laws of the State of Florida. Payor acknowledges that this Note has been
entered into and monies advanced in the State of Florida, and Payor acknowledges
and agrees that Payor is subject to the jurisdiction of the State of Florida.
Words herein importing the masculine shall include females, and words
importing persons shall include bodies corporate, and the singular shall include
the plural, and vice-versa. The rights of Holder hereunder shall inure to the
benefit of its legal representatives, successors and assigns.
E-7
<PAGE> 2
Except for any notice required under applicable law to be given in
another manner, any notice provided for in this Note shall be given in writing,
by hand delivery or by mailing such notice by certified mail, postage prepaid to
the address shown below or to such other address as either party may designate
by notice to the other as provided herein. Any notice provided for in this Note
shall be deemed to have been given to Payor or Holder when given in the manner
designated herein. Notice given as hereinabove provided shall be deemed received
by the party to whom it is addressed on the third calendar day following the
date on which said notice is deposited in the mail.
(a) TO HOLDER: Mongoose Investments, LLC
7276 Sanctuary Lane
Amelia Island, Florida 32034
(b) TO PAYOR: Lahaina Acquisitions, Inc.
102 South Tenth Street
Fernandina Beach, Florida 32034
The waiver of a breach of any provision, term or condition of this Note
shall not operate or be construed as a waiver of any subsequent breach, and the
acceptance of a past due payment shall not be construed as a waiver of Holder's
rights to require strict compliance with all terms and conditions herein.
Time is of the essence of this Note.
IN WITNESS WHEREOF, the undersigned have caused this Note to be
executed this day of _________, 1998.
Lahaina Acquisitions, Inc.
By:
-----------------------------------------
Gerald Sullivan, Vice Chairman
E-8
<PAGE> 1
EXHIBIT 4.10
PROMISSORY NOTE
$85,000 FERNANDINA BEACH, FLORIDA
AS OF JULY 1, 1998
FOR VALUE RECEIVED, MONGOOSE INVESTMENTS, LLC., a Georgia Limited
Liability Company (hereinafter referred to as "Payor"), promises to pay to the
order of ELAINE OPPENHEIMER, an individual (hereinafter referred to as
"Holder"), the principal sum of Eighty Five Thousand Dollars ($85,000). Said
principal shall bear interest at the rate of eighteen percent (18%). Interest
shall due and payable on so much of the principal as has been disbursed from
time to time and shall be calculated on the basis of a three hundred sixty (360)
day year. Principal and interest shall be at such place as Holder may designate
and shall mature and be payable on demand. Payor acknowledges and agrees that
any amounts which have been disbursed prior to the execution hereof are covered
by and included in the principal amount hereunder.
Payments shall be made in currency of the United States of America,
which at the time of payment shall be legal tender for the payment of public and
private debts.
Payor shall have the right to prepay the principal amount outstanding
in whole or in part at any time without penalty. Payor hereby waives all
presentment, demand, notice of dishonor, and protest. Payor hereby renounces and
waives all exemption rights allowed by the Constitution and laws of Florida or
any other State of the United States, as against this Note or any renewal
thereof.
If Payor fails to pay any amount payable hereunder within five (5) days
of demand. Payor shall be in default hereunder. In addition, a default shall
exist hereunder upon the occurrence of any of the following events: (i) Payor
becomes insolvent as defined in the Uniform Commercial Code as in effect at that
time in Florida; (ii) Payor makes an assignment for the benefit of creditors or
riles a petition in bankruptcy; or (iii) a default shall exist under the terms
of the Stock Pledge Agreement executed by the Payor on this date;
Payor acknowledges that its obligation to pay all sums due under this
Note is absolute and unconditional and that such obligation is not subject to
any defense, counterclaim, right of setoff or recoupment.
Payor shall pay all costs of collection, including, but not limited to,
reasonable attorneys' fees if collected by or through an attorney at law. The
instrument shall be governed by and interpreted in accordance with the laws of
the State of Florida. Payor acknowledges that this Note has been entered into
and monies advanced in the State of Florida, and Payor acknowledges and agrees
that Payor is personally subject to the jurisdiction of the State of Florida.
Payor, as used herein, shall include the undersigned and all endorsers,
guarantors, and sureties of this Note, and shall also include the legal
representatives, successors and assigns of the Payor, all of whom shall be
jointly and severally liable hereunder. Words herein importing the masculine
shall include females, and words importing persons shall include bodies
corporate, and the singular shall include the plural, and vice-versa. The rights
of Holder hereunder shall inure to the benefit of its legal representatives,
successors and assigns.
Except for any notice required under applicable law to be given in
another manner, any notice provided for in this Note shall be given in writing,
by hand delivery or by mailing such notice by certified mail, postage prepaid to
the address shown below or to such other address as either party may designate
by notice to the other as provided herein. Any notice provided for in this Note
shall be deemed to have been given to Payor or Holder when given in the manner
designated herein. Notice given as hereinabove provided shall be deemed received
by the party to whom it is addressed on the third calendar day following the
date on which said notice is deposited in the mail.
(a) TO HOLDER: Elaine Oppenheimer
c/o March Oppenheimer
25 Rockwood Place
Englewood, New Jersey 07631
E-9
<PAGE> 2
(b) TO PAYOR: Mongoose Investments, LLC
7276 Sanctuary Lane
Fernandina Beach, Florida 32034
The waiver of a breach of any provision, term or condition of this Note
shall not operate or be construed as a waiver of any subsequent breach, and the
acceptance of a past due payment shall not be construed as a waiver of Holder's
rights to require strict compliance with all terms and conditions herein.
Time is of the essence of this Note.
IN WITNESS WHEREOF, the undersigned have caused this Note to be
executed this 1st day of July, 1998.
Mongoose Investments, LLC
By:
---------------------------------
Richard Smyth
THIS NOTE SHALL BE TRANSFERRED AND ASSIGNED TO LAHAINA ACQUISITIONS, INC., AS OF
DECEMBER 7, 1998 AS A PART OF THE ACQUISITION OF THE STOCK OF BEACHSIDE COMMONS
I, INC.
By:
---------------------------------
Richard Smyth, Chairman,
Lahaina Acquisitions, Inc.
By:
---------------------------------
Gerald Sullivan, Vice Chairman,
Lahaina Acquisitions, Inc.
E-10
<PAGE> 1
EXHIBIT 4.11
PROMISSORY NOTE
$50,000 FERNANDINA BEACH, FLORIDA
AS OF JULY 30, 1998
FOR VALUE RECEIVED, MONGOOSE INVESTMENTS, LLC., a Georgia Limited
Liability Company (hereinafter referred to as "Payor"), promises to pay to the
order of NANCY ESTROFF SMYTH, an individual (hereinafter referred to as
"Holder"), the principal sum of Fifty Thousand Dollars ($50,000). Said principal
shall bear interest at the rate of eighteen percent (18%). Interest shall due
and payable on so much of the principal as has been disbursed from time to time
and shall be calculated on the basis of a three hundred sixty (360) day year.
Principal and interest shall be at such place as Holder may designate and shall
mature and be payable on demand. Payor acknowledges and agrees that any amounts
which have been disbursed prior to the execution hereof are covered by and
included in the principal amount hereunder.
Payments shall be made in currency of the United States of America,
which at the time of payment shall be legal tender for the payment of public and
private debts.
Payor shall have the right to prepay the principal amount outstanding
in whole or in part at any time without penalty. Payor hereby waives all
presentment, demand, notice of dishonor, and protest. Payor hereby renounces and
waives all exemption rights allowed by the Constitution and laws of Florida or
any other State of the United States, as against this Note or any renewal
thereof.
If Payor fails to pay any amount payable hereunder within five (5) days
of demand. Payor shall be in default hereunder. In addition, a default shall
exist hereunder upon the occurrence of any of the following events: (i) Payor
becomes insolvent as defined in the Uniform Commercial Code as in effect at that
time in Florida; (ii) Payor makes an assignment for the benefit of creditors or
riles a petition in bankruptcy; or (iii) a default shall exist under the terms
of the Stock Pledge Agreement executed by the Payor on this date;
Payor acknowledges that its obligation to pay all sums due under this
Note is absolute and unconditional and that such obligation is not subject to
any defense, counterclaim, right of setoff or recoupment.
Payor shall pay all costs of collection, including, but not limited to,
reasonable attorneys' fees if collected by or through an attorney at law. The
instrument shall be governed by and interpreted in accordance with the laws of
the State of Florida. Payor acknowledges that this Note has been entered into
and monies advanced in the State of Florida, and Payor acknowledges and agrees
that Payor is personally subject to the jurisdiction of the State of Florida.
Payor, as used herein, shall include the undersigned and all endorsers,
guarantors, and sureties of this Note, and shall also include the legal
representatives, successors and assigns of the Payor, all of whom shall be
jointly and severally liable hereunder. Words herein importing the masculine
shall include females, and words importing persons shall include bodies
corporate, and the singular shall include the plural, and vice-versa. The rights
of Holder hereunder shall inure to the benefit of its legal representatives,
successors and assigns.
Except for any notice required under applicable law to be given in
another manner, any notice provided for in this Note shall be given in writing,
by hand delivery or by mailing such notice by certified mail, postage prepaid to
the address shown below or to such other address as either party may designate
by notice to the other as provided herein. Any notice provided for in this Note
shall be deemed to have been given to Payor or Holder when given in the manner
designated herein. Notice given as hereinabove provided shall be deemed received
by the party to whom it is addressed on the third calendar day following the
date on which said notice is deposited in the mail.
(a) TO HOLDER: Nancy Estroff Smyth
7276 Sanctuary Lane
Fernandina Beach, Florida 32034
(b) TO PAYOR: Mongoose Investments, LLC
7276 Sanctuary Lane
E-11
<PAGE> 2
Fernandina Beach, Florida 32034
The waiver of a breach of any provision, term or condition of this Note
shall not operate or be construed as a waiver of any subsequent breach, and the
acceptance of a past due payment shall not be construed as a waiver of Holder's
rights to require strict compliance with all terms and conditions herein.
Time is of the essence of this Note.
IN WITNESS WHEREOF, the undersigned have caused this Note to be
executed this 30th day of July, 1998.
Mongoose Investments, LLC
By:
---------------------------------
Richard Smyth
THIS NOTE SHALL BE TRANSFERRED AND ASSIGNED TO LAHAINA ACQUISITIONS, INC., AS OF
DECEMBER 7, 1998 AS A PART OF THE ACQUISITION OF THE STOCK OF BEACHSIDE COMMONS
I, INC.
By:
---------------------------------
Richard Smyth, Chairman,
Lahaina Acquisitions, Inc.
By:
---------------------------------
Gerald Sullivan, Vice Chairman,
Lahaina Acquisitions, Inc.
E-12
<PAGE> 1
EXHIBIT 4.12
PROMISSORY NOTE
$20,000 FERNANDINA BEACH, FLORIDA
AS OF SEPTEMBER 30, 1998
FOR VALUE RECEIVED, MONGOOSE INVESTMENTS, LLC., a Georgia Limited
Liability Company (hereinafter referred to as "Payor"), promises to pay to the
order of NANCY ESTROFF SMYTH, an individual (hereinafter referred to as
"Holder"), the principal sum of Eighty Five Thousand Dollars ($85,000). Said
principal shall bear interest at the rate of eighteen percent (18%). Interest
shall due and payable on so much of the principal as has been disbursed from
time to time and shall be calculated on the basis of a three hundred sixty (360)
day year. Principal and interest shall be at such place as Holder may designate
and shall mature and be payable on demand. Payor acknowledges and agrees that
any amounts which have been disbursed prior to the execution hereof are covered
by and included in the principal amount hereunder.
Payments shall be made in currency of the United States of America,
which at the time of payment shall be legal tender for the payment of public and
private debts.
Payor shall have the right to prepay the principal amount outstanding
in whole or in part at any time without penalty. Payor hereby waives all
presentment, demand, notice of dishonor, and protest. Payor hereby renounces and
waives all exemption rights allowed by the Constitution and laws of Florida or
any other State of the United States, as against this Note or any renewal
thereof.
If Payor fails to pay any amount payable hereunder within five (5) days
of demand. Payor shall be in default hereunder. In addition, a default shall
exist hereunder upon the occurrence of any of the following events: (i) Payor
becomes insolvent as defined in the Uniform Commercial Code as in effect at that
time in Florida; (ii) Payor makes an assignment for the benefit of creditors or
riles a petition in bankruptcy; or (iii) a default shall exist under the terms
of the Stock Pledge Agreement executed by the Payor on this date;
Payor acknowledges that its obligation to pay all sums due under this
Note is absolute and unconditional and that such obligation is not subject to
any defense, counterclaim, right of setoff or recoupment.
Payor shall pay all costs of collection, including, but not limited to,
reasonable attorneys' fees if collected by or through an attorney at law. The
instrument shall be governed by and interpreted in accordance with the laws of
the State of Florida. Payor acknowledges that this Note has been entered into
and monies advanced in the State of Florida, and Payor acknowledges and agrees
that Payor is personally subject to the jurisdiction of the State of Florida.
Payor, as used herein, shall include the undersigned and all endorsers,
guarantors, and sureties of this Note, and shall also include the legal
representatives, successors and assigns of the Payor, all of whom shall be
jointly and severally liable hereunder. Words herein importing the masculine
shall include females, and words importing persons shall include bodies
corporate, and the singular shall include the plural, and vice-versa. The rights
of Holder hereunder shall inure to the benefit of its legal representatives,
successors and assigns.
Except for any notice required under applicable law to be given in
another manner, any notice provided for in this Note shall be given in writing,
by hand delivery or by mailing such notice by certified mail, postage prepaid to
the address shown below or to such other address as either party may designate
by notice to the other as provided herein. Any notice provided for in this Note
shall be deemed to have been given to Payor or Holder when given in the manner
designated herein. Notice given as hereinabove provided shall be deemed received
by the party to whom it is addressed on the third calendar day following the
date on which said notice is deposited in the mail.
(a) TO HOLDER: Nancy Estroff Smyth
7276 Sanctuary Lane
Fernandina Beach, Florida 32034
(b) TO PAYOR: Mongoose Investments, LLC
E-13
<PAGE> 2
7276 Sanctuary Lane
Fernandina Beach, Florida 32034
The waiver of a breach of any provision, term or condition of this Note
shall not operate or be construed as a waiver of any subsequent breach, and the
acceptance of a past due payment shall not be construed as a waiver of Holder's
rights to require strict compliance with all terms and conditions herein.
Time is of the essence of this Note.
IN WITNESS WHEREOF, the undersigned have caused this Note to be
executed this 30th day of September, 1998.
Mongoose Investments, LLC
By:
---------------------------------
Richard Smyth
THIS NOTE SHALL BE TRANSFERRED AND ASSIGNED TO LAHAINA ACQUISITIONS, INC., AS OF
DECEMBER 7, 1998 AS A PART OF THE ACQUISITION OF THE STOCK OF BEACHSIDE COMMONS
I, INC.
By:
---------------------------------
Richard Smyth, Chairman,
Lahaina Acquisitions, Inc.
By:
---------------------------------
Gerald Sullivan, Vice Chairman,
Lahaina Acquisitions, Inc.
E-14
<PAGE> 1
EXHIBIT 10
LKB FINANCIAL LLC./LAHAINA ACQUISITION, INC.
CONTRACT OF ENGAGEMENT
THIS IS AN ENGAGEMENT AGREEMENT (this "Agreement") by and between LKB
FINANCIAL, LLC., a Georgia corporation ("LKB") and Lahaina Acquisitions, Inc.
(the "Company"), and by which LKB and the Company, in consideration of the
mutual agreements set forth below (the mutuality, adequacy, and sufficiency of
which are hereby acknowledged), hereby agree as follows:
1. RETENTION OF LKB AS INVESTMENT BANKER. The Company hereby
engages LKB, and LKB hereby agrees to provide specific financial advisory
services to the Company for the purpose of securing financing for the Company.
Neither LKB nor the Company shall make any commitment, representation, or
warranty of any kind whatsoever on behalf of the other, nor shall either party
have any right or authority to sign for, bind, or commit the other to any
obligation or undertaking in connection with any transaction contemplated
herein, or otherwise, without the written consent of the other.
2. NON-CONTRAVENTION.
2.1 The Company agrees not to engage in, or enter into a
contract to engage in, any Financing with any party, or related or affiliated
party, to whom it is introduced by LKB for the purposes of this financing for a
period of Two (2) years from the Closing Date of this financing. In the event of
circumvention of this prohibition by the Company, the Company shall be required
to pay to LKB the same compensation with respect to such other Financing as is
set forth in Section 4 of this Agreement. The terms of this paragraph shall
remain in effect regardless of whether this contract is terminated under Section
2(c) or 7 below, and regardless of the term of this Agreement.
2.2 The Company agrees that LKB or its representative
shall participate in any and all communications concerning this transaction
between the Company and the Investor(s), affiliates, associates or
representatives of the Investor introduced by LKB other than such communications
that are made to shareholders generally. In the event of such circumvention,
without prior approval from LKB, LKB may, at its sole option, cause the
immediate termination of this Agreement.
3. SERVICES. During the term of this Agreement, LKB will provide
the services set forth on Attachment A hereto (the "Services").
4. COMPENSATION. For all Services to be provided under this
Agreement, the Company shall pay LKB the fees set forth on Attachment B hereto.
5. ACKNOWLEDGMENT OF THE COMPANY. The Company acknowledges and
agrees that LKB may be called upon by other parties or entities from time to
time to provide services similar to the Services to such other parties or
entities and in such an event the Company hereby consents to LKB providing any
such services to such other party of entity.
6. TRADE SECRETS; CONFIDENTIAL INFORMATION. The parties agree
that:
6.1 all of the trade secrets of each party (which
include, but are not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or services, whether currently existing or otherwise
developed during the term of this Agreement, that derives economic value, actual
or potential, from not being generally known to and not being readily
ascertainable by proper means by other persons who can obtain economic value
from its disclosure or use and is the subject of efforts which are reasonable
under the circumstances to maintain its secrecy and any other information or
materials that is a trade secret within the meaning of Official Code of Georgia
Annotated ss. 10-1-760), and
6.2 all of the confidential information of each party
(which includes any data or information of either party other than trade
secrets, whether currently existing or otherwise developed or acquired by either
party during the term of this Agreement, which is competitively sensitive and
not generally known to the public);
6.3 all of the information contained herein, the Terms of
the transaction, and the structure of the transaction, except as required by the
Securities and Exchange Commission;
E-15
<PAGE> 2
that either has been provided, or will be provided, to the other or that has
been obtained, or will be obtained, by either party in connection with this
Agreement (such trade secrets and confidential information being referred to
collectively as the "Information") is proprietary Information of the disclosing
party and is the sole, exclusive and valuable property of the disclosing party
(and the recipient party acknowledges and agrees that he has, and will acquire,
no right, title or interest in such property).
Thus, the recipient party agrees:
6.3.1 that he will not use the Information to the detriment
of the disclosing party and
6.3.2 that he will hold the Information in strict
confidence, use the Information only in connection with the matters
covered by this Agreement, and not disclose the Information to any
person or entity (other than an employee of the recipient party) unless
the disclosing party directs otherwise
indefinitely in the case of trade secrets (so long as they remain trade secrets)
and until Sixty (60) months after the termination of this Agreement in the case
of confidential information; provided, however, that the agreements in clause
(ii) shall not apply to the Information to the extent the recipient party
demonstrates that:
(a) it was in the public domain at the time of
its communication to the recipient party; or
(b) it entered the public domain through no
action of the recipient party subsequent to the time of communication
to the recipient party; or
(c) it was rightfully received by the recipient
party from a third party without a similar restriction and without
breach of this Agreement or any other agreement with the disclosing
party; or
(d) it was independently developed by the
recipient party without breach of this Agreement; or
(e) it was approved for release by written
authorization of the disclosing party.
Immediately after termination of this Agreement, the recipient party shall
deliver to the disclosing party all materials in its possession involving the
disclosing party's Information. Any trade secrets shall also be entitled to all
of the protection and benefits under O.C.G.A. ss. 10-1-760, O.C.G.A. ss. 16-8-13
and any other applicable law. If any information which the parties deem to be a
trade secret is found by a court of competent jurisdiction not to be a trade
secret for purposes of this section 6, then the Information shall be considered
confidential information for purposes of this section 6.
7. TERM. The term of this Agreement shall be for a period of
Three Hundred Sixty-Five (365) days from the execution of this Agreement, unless
sooner terminated in accordance with this Agreement.
8. LIMITATION ON LIABILITY. Notwithstanding anything to the
contrary in this Agreement, LKB's liability to the Company for any loss or
damage arising out of LKB's performance or nonperformance of the Services shall
be limited to loss or damage directly resulting from willful misconduct or gross
negligence of LKB or its agents. It is expressly agreed that in no event shall
LKB's liability to the Company ever exceed the fees paid to LKB by the Company
for the Services set forth on Attachment B hereto. NEITHER LKB NOR ITS OFFICERS,
DIRECTORS, SHAREHOLDERS OR AGENTS SHALL BE LIABLE FOR INCIDENTAL, INDIRECT,
SPECIAL, OR CONSEQUENTIAL DAMAGES OR LOSS OF REVENUES SUFFERED BY THE COMPANY OR
FOR ANY CLAIM, DEMAND OR ACTION AGAINST THE COMPANY OR ANY OF ITS
REPRESENTATIVES BY ANY THIRD PARTY ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT.
9. INDEMNIFICATION. The Company shall be solely responsible for,
and hold harmless and indemnify LKB (including its successors, officers,
directors, shareholders, employees, agents and representatives) from and
against, all losses, claims, damages, liabilities, and expenses (including any
and all reasonable expenses and attorneys fees incurred in investigating,
preparing or defending against any litigation or proceeding, commenced or
threatened, or any claim whatsoever whether or not resulting in any liability)
in connection with LKB's provision of the Services to the Company, unless such
loss, claim, damage, liability or expense results from the willful misconduct or
gross negligence of LKB or its employees or agents.
10. MISCELLANEOUS.
E-16
<PAGE> 3
10.1 NOTICES. Each notice under this Agreement shall be in
writing and given either in person or by facsimile, overnight delivery
service or first class mail, postage and any other costs prepaid, to
the address of the party being given notice set forth below his or its
signature or to such other address as a party may furnish to the other
as provided in this sentence; and if notice is given pursuant to the
foregoing of a permitted successor or assign, then notice shall
thereafter be given pursuant to the foregoing also to such permitted
successor or assign.
10.2 ASSIGNMENT; SUCCESSORS IN INTEREST. No assignment,
transfer or delegation of any rights or obligations under this
Agreement by a party shall be made without the prior written consent of
the other party. This Agreement is binding upon the parties and their
respective successors and assigns, and inures to the benefit of the
parties and their respective permitted successors and assigns.
References to a party are also references to any successor or assign of
such party.
10.3 NUMBER; GENDER; CAPTIONS; CERTAIN DEFINITIONS.
Whenever the context requires, the singular includes the plural, the
plural includes the singular, and the gender of any pronoun includes
the other genders. Titles and captions of or in this Agreement are
inserted only as a matter of convenience and for reference and in no
way affect the scope of this Agreement or the intent of its provisions.
The parties agree: (i) that "this Agreement" includes any amendments or
other modifications and supplements, and all exhibits, schedules and
other attachments, to it; (ii) that "parties to this Agreement" and
variations of that phrase includes all persons who have executed and
delivered this Agreement and, in the event of a successor or assign to
a person who has executed and delivered this Agreement, such successor
or assign; and (iii) that "including" and other words or phrases of
inclusion, if any, shall not be construed as terms of limitation, so
that references to "included" matters shall be regarded as
non-exclusive, non-characterizing illustrations.
10.4 SEVERABILITY. Any determination by any court of
competent jurisdiction that any provision of this Agreement is invalid
shall not affect the validity of any other provision of this Agreement,
which shall remain in full force and effect and which shall be
construed as to be valid under applicable law.
INTEGRATION; AMENDMENT, WAIVER. This Agreement (i) constitutes
the entire agreement of the parties with respect to its subject matter, (ii)
supersedes all prior agreements, if any, of the parties with respect to its
subject matter, and (iii) may not be amended except in writing signed by the
party against whom the change is being asserted. The failure of any party at any
time or times to require the performance of any provision of this Agreement
shall in no manner affect the right to enforce the same; and no waiver by any
party of any provision (or of a breach of any provision) of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
or construed either as a further or continuing waiver of any such provision or
breach or as a waiver of any other provision (or of a breach of any other
provision) of this Agreement.
10.5 ATTACHMENTS. All schedules, attachments and exhibits
to this Agreement are hereby incorporated into this Agreement and are
hereby made a part of this Agreement as if set out in full in the first
place that reference is made thereto.
10.6 CONTROLLING LAW. This Agreement is governed by, and
shall be construed and enforced in accordance with the laws of the
State of Georgia.
10.7 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, and all such counterparts taken together shall be
deemed to constitute one and the same agreement.
DULY EXECUTED and delivered by the parties hereto on January 19, 1999,
and effective as of January 19, 1999.
LKB FINANCIAL LLC. LAHAINA ACQUISITIONS, INC.
By: By:
------------------------------------ --------------------------------
Lewis N. Lester, Chairman Richard P. Smyth, President
Address: 106 Colony Park Dr. Address: 2900 Atlantic Avenue
Suite 900 Fernandina Beach,
Cumming, GA 30040 Florida 32037
E-17
<PAGE> 4
ATTACHMENT A - SERVICES
The Services to be provided by LKB shall include the following:
1. The introduction of an Investor or Investors;
2. Facilitating financing of a Working Credit Line and Notes in the amount
of $300,000.00, on a Best Efforts Basis;
3. Negotiations of terms between the Investor(s) and the Company;
4. Introduction of Escrow Agent, and providing the Escrow Agreement.
5. Provide specific financial advisory services during the term of this
Engagement Contract.
ATTACHMENT B - COMPENSATION
Total Compensation to be paid by the Company shall be as follows:
1. $15,000.00 to be paid in cash via wire transfer at the time of closing
the initial funding.
2. 15,000 Warrants with a strike price equal to the average of the five
closing bid prices of the Company's Common Shares, listed on the O.T.C.
Bulletin Board as reported by Bloomberg, L.P. prior to the initial
closing date. The term of the Warrants will begin at the closing date
hereof and continue through five years from the closing date.
E-18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR DECEMBER 31, 1998 (UNAUDITED) AND THE
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 38,355
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 99,733
<PP&E> 2,956,092
<DEPRECIATION> (40,760)
<TOTAL-ASSETS> 3,015,065
<CURRENT-LIABILITIES> 320,170
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 369,895
<TOTAL-LIABILITY-AND-EQUITY> 3,015,065
<SALES> 0
<TOTAL-REVENUES> 16,555
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 196,958
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,706
<INCOME-PRETAX> (203,109)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (203,109)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
