U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT (NO FEE
REQUIRED)
For the transition period from __________________ to ______________
Commission file number 0-6683
Sonoma International
(Exact name of registrant as specified in its charter)
Nevada 94-0880052
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3930 S. Eastern Avenue, Suite 218, Las Vegas, NV 89109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 361-3033
Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
- ------------------------------------------ ---------------------------------
- ------------------------------------------ ---------------------------------
Securities registered Under 12(g) of the Exchange Act:
Common Stock, par value $0.001
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X ] No [ ]
<PAGE>
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and asked
prices of such stock, as of a specified date within the past 60 days. As of
September 15, 1996 - $0
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 60,000,000
2
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PART I
Item 1. Description of Business
Sonoma International (the "Company") is a Nevada corporation formed in
1940 which principally engaged in the quicksilver mining business until the
mid-1970's when its operations ceased. Thereafter, the Company undertook several
other operations that did not materialize as expected, including a real estate
development that was struggling. In 1985, the Company's Directors restructured
the Company with the purpose of finding an acquisition through the issuance of
Common Stock that would provide the Company additional assets and operations. As
part of this restructuring, the number of authorized shares of Common Stock was
increased to 60,000,000 from 12,500,000 and the par value reduced from $0.40 to
$0.001. Essentially, the equity capital structure of the Company was determined
at that time. Since February of 1988, Sonoma International has focused on
finding assets that could be acquired by the Company so that the Company could
again become an operating entity.
During the 1988 fiscal year, Mr. Gary V. Sutley and others were issued
shares of Common Stock in consideration of transferring assets to the Company of
an entity affiliated with Mr. Sutley. Several million shares of Common Stock
were issued to various people in connection with these transactions. In February
1988, Mr. Sutley and others became directors of the Company. At that time the
Company focused on identifying assets and liabilities of the Company, settling
liabilities, and seeking new business opportunities for the Company.
Until May, 1995, the Company's efforts to find operating assets and
settle outstanding liabilities were not successful. In May, 1995, the Company
entered into an agreement with Atrium Place Hotel, Inc. ("ATHI") whereby the
Company agreed to be reorganized in consideration of acquiring all of the issued
and outstanding capital stock of ATHI (the "ATHI Agreement"). The ATHI Agreement
required that the Company be reorganized such that 20% of the issued and
outstanding shares of Common Stock be owned by the Company's existing
shareholders and 80% of the issued and outstanding shares of Common Stock be
owned by the shareholders of ATHI. The ATHI Agreement required that ATHI
transfer assets to the Company whose net worth exceeds $4,000,000. As part of
the ATHI Agreement, Harry W. Hendersen, Barbara Hendersen, and Angie L.
Hochanadel agreed to become Directors and Officers of the Company, and Gary V.
Sutley, the Company's sole remaining director and officer, agreed to resign all
offices.
In connection with the ATHI Agreement, the Company agreed to obtain
releases from all of its present liabilities. The Company obtained agreements
with three judgment creditors of the Company and another creditor, as part of an
overall settlement between several parties and the Company, that all obligations
between the Company and said creditors would be discharged. The effect of these
settlements would be to relieve the Company of all obligations. As of October
10, 1995, these agreements had all been entered into. Four agreements are
subject to trading commencing in the Company's capital stock. See Footnote D to
the accompanying financial statements.
In connection with the reorganization, the Company agreed to obtain
releases from all of its present liabilities. In consideration of the services
rendered to the Company by Mr. Gary V. Sutley and Linda Starner and/or nominees
of each, the Company agreed to issue to Mr. Sutley and Ms. Starner and/or
nominees of each an aggregate of 33,347,553 shares of Common Stock. Furthermore,
the Company obtained agreements with three judgment creditors of the Company and
another creditor, as part of an overall settlement between several parties and
the Company, that all obligations between the Company and said creditors would
be discharged. The effect of these settlements was to relieve the Company of all
obligations assuming that the transaction was completed as contemplated. As of
October 10, 1995, these agreements had all been entered into.
During the 1996 fiscal year, those activities did not materialize. The
assets were not transferred to the Company as required, and the ATHI Agreement
was formally terminated on September 12, 1996. Accordingly, in the summer of
1996, the Company sought new arrangements for operating assets and entered into
a new agreement described below with Clear Creek Investments, L.L.C., among
others, whereby at least $10,000,000 in assets would be transferred to the
Company.
3
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Agreement to Acquire Jamestown Resort & Marina, Ltd.
As of September 12, 1996, the Company entered into an agreement (the
"Agreement") with Clear Creek Investments, L.L.C., a Kentucky limited liability
company ("Clear Creek"), and all the holders of the limited partnership
interests in Jamestown Resort & Marina, Ltd., a Kentucky limited partnership
("JRML"). Clear Creek is the sole stockholder of Jamestown Resort & Marina,
Inc., a Kentucky corporation ("JRMI")which is the general partner of JRML. JRML
owns a Resort and Marina located on Lake Cumberland in South Central Kentucky.
The Agreement requires the transfer and assignment to Sonoma of all the
capital stock of JRMI and all limited partnership interests of JRML
(collectively, the "Transferred Securities"). There are several conditions to
closing, including without limitation: (i) the delivery to the Company of an
appraisal which states that the assets of JRML, as of the date of the appraisal,
have a fair market value of not less than $10,000,000, which appraisal has been
delivered to the Company; and (ii) that the Company effect a one for 20 reverse
split. The Company has subsequently determined to effect a one for 200 reverse
split, leaving 300,000 shares issued and outstanding. In consideration for the
transfer of the Transferred Securities, the Company will issue 1,700,000 shares
of Common Stock to Clear Creek, and affiliated, related and non-related entities
or individuals for the acquisition of JRML.
Description of JRML
JRML is a Resort and Marina located on the North shore of Lake
Cumberland in Kentucky. Lake Cumberland is a 53,000 acre, 101 mile long, lake in
South Central Kentucky which was impounded by Wolf Creek Dam, a project
developed by the U.S. Army Corps of Engineers on the Cumberland River. The lake
has an average depth of 120 feet and is navigable by small boats and large
crafts. The Resort and Marina is located on approximately 291 acres on land and
water three miles east of Jamestown, Kentucky on land leased from the U.S. Army
Corps of Engineers. Jamestown, Kentucky is approximately 16 miles north of the
Tennessee border and is within a two hour drive from Lexington and Louisville,
Kentucky and Nashville, Tennessee. Kentucky Highway 92 terminates at the Resort
and Marina.
Background
JRML was formed in 1987 and was assigned an option to acquire an
existing entity that operated cottages and a small boat dock on a portion of the
land now leased by JRML. After the option to acquire the existing facility was
exercised in August 1987, JRML formally entered into a lease agreement with the
U.S. Army Corp of Engineers (the "Corp") for a term of 25 years. The term of the
lease was subsequently extended for another 25 years so that the term of the
lease now expires in the year 2037. JRML assumed day-to-day operation of the
Resort and Marina in November, 1987.
Upon acquisition of such entity, JRML immediately embarked on a plan to
construct an extremely attractive, world class Resort and Marina. While
initially keeping the existing 17 cabins, the rest of the facilities were
removed. Expansion began in 1987 and included a 7,200 square foot head boat
facility which contains the Ship Store and restaurant, five sixty foot fuel
piers, 571 slips and a 1,600 square foot floating maintenance building with
repair slip and hoist. These facilities were completed in 1988. In 1989, JRML
completed construction of a 40 unit all suite Lodge. The Lodge is located on an
island around which the marina is constructed. The island is connected to the
mainland by a causeway built by the Commonwealth of Kentucky after the
acquisition of the leasehold by JRML. JRML entered into a development agreement
with the Commonwealth of Kentucky whereby the Commonwealth paid almost
$2,000,000 for the island/causeway improvements, and JRML agreed to pay an
annual 1% of revenue fee to the Commonwealth. Since 1989, JRML has continued to
expand and improve the Resort and Marina.
4
<PAGE>
Present Facility
JRML derives revenues principally from marina slip rentals ,boat
rentals, lodging, fuel sales, restaurant sales, and sales from the ship's store.
The following table sets forth the percentage of revenues derived from these
categories for the eight calendar months ended August 31, 1996:
Category Percentage
-------- ----------
Marina Slip Rentals 26.9%
Boat Rentals 19.0
Lodging 17.6
Fuel Sales 15.0
Restaurant Sales 9.7
Ship Store Sales 9.6
Other 2.2
--------
TOTAL 100.0%
Marina
JRML has 805 total wet slips, 645 of which are annual rental, many of
which are covered, and range in size from 22 feet by 70 feet to 10 feet by 20
feet. Most of these slips have metered electricity, cable television and
telephone connections. In addition, there are 160 slips used for overnight slip
rentals and JRML's rental fleet.
To maximize available water acreage, the marina is of U shaped design
and is built around the island which is located in the midst of the Resort and
Marina. The marina is constructed on a floating dock system and is designed to
operate at all levels of the lake which fluctuates as much as 80 feet during the
year.
Ship Store, Restaurant and Fuel
The Ship Store is part of the head boat facility, the main building on
the floating dock, and is centered immediately off the island. The Ship Store
has approximately 8,000 square feet. The Ship Store derives its revenue
principally from sale of marine supplies, clothing, groceries, full service
restaurant, gifts and tobacco. The full service restaurant has a 120 seat
capacity. Five fueling slips are located adjacent to the Ship Store and are 20
feet by 60 feet with eight fuel pump stations. There are three fully code
compliant fiberglass fuel tanks, two 12,000 gallon tanks and one 6,000 gallon
tank, installed in the ground on the island.
Yacht Club and Snack Bar
JRML's Yacht Club facility, which is located near the Ship Store, has
2,500 square feet plus 900 square feet of covered patio for outdoor dining and
special events. The snack bar and ice cream store, located nearby and close to
the fueling slips, has 720 square feet and contains open patio type seating.
Room Rentals
JRML rents 18 cabins, a two story (model) Condominium, and 40 suites in
the Lodge. Of the 18 rental cabins, six are one bedroom, eight are two bedrooms
and four are three bedrooms, all having a fully equipped kitchen. All of the
Lodge suites have at least two rooms, a bedroom and a living room. Two of the
forty suites have been adapted for handicapped individuals and four have a
fireplace and fully equipped kitchen and counter wet bar. The Corps of Engineers
has approved a development plan for 52 privately owned Condominiums whereby JRML
will manage and receive a net 40% of the revenues from those rentals. The Lodge
is located on the island and the cabins, and the model Condominium and future
development lots are located on the shore.
The Lodge includes a meeting room that can accommodate 100 people and
be partitioned into two rooms. All cabins and suites in the Lodge and the
Condominium have cable television and most have VCRs.
5
<PAGE>
Boat Rentals
The rental fleet consists of 19 pontoon boats and 30 houseboats, and 27
of the houseboats are considered luxurious, having amenities such as air
conditioning, full service kitchens and full service bathrooms. The 19 pontoon
boats are 24 feet in length and are equipped with deck chairs. Three houseboats
are 56 feet by 16 feet and sleep twelve. Twenty five of the house boats are 60
feet by 14 feet and sleep eight while two of the houseboats are 70 feet by 16
feet and sleep twelve. The houseboats are marketed as an extension of JRML's
lodging and are rented as "boatel rooms" when they are not out on the lake as
rental boats.
The Jamestown Queen is a 140 passenger paddle boat that is used for
sight seeing, dinner and party cruises. The paddle boat is equipped for dining,
dancing and is marketed toward catered social events for groups. The revenue
figures for boat rentals summarized above exclude revenues derived from The
Jamestown Queen. JRML has discontinued rental of ski boats, fishing boats and
wave runners because of liability concerns.
Other revenue Sources, Facilities and Expansion
JRML also derives revenues from the maintenance and repair of boats,
boat brokering, telephone service, and miniature golf, among other sources of
revenues. There are a variety of administrative and maintenance facilities
located throughout the Resort and Marina that support the facility's operation.
Environmental Matters
JRML's operations are subject to various federal, state and local laws
and regulations relating to the environment. Violation of any of these statutes
and regulations or orders issued thereunder could result in civil or criminal
enforcement actions. In addition to other applicable law, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
provides for cleanup of sites from which there has been a release or threatened
release of hazardous substances and authorizes the Environmental Protection
Agency to take any necessary response actions at such sites, including requiring
potentially responsible parties to take or pay for such actions. JRML is not
aware of any potentially material environmental liability relating to any
property in which JRML has an interest; however, there can be no assurance that
no such liability exists, or that future developments will not result in
material costs and liabilities being imposed on JRML.
Employees
JRML employs 20 full time people throughout the year. These employees
are principally responsible for the management of the Resort and Marina, its
maintenance as well as services provided throughout the year. With the exception
of the Ship Store and Restaurant the Resort and Marina remains open in the
winter and fully operational during the other seasons.
The number of JRML's employees increases to 50 in the spring and fall
and 150 in the summer, essentially Memorial Day through Labor Day.
Competition
There are a total of nine other marinas on Lake Cumberland. These
marina's are generally smaller than that of JRML. JRML is the newest and highest
quality facility on Lake Cumberland and in the entire region. Almost all of the
slip rental rates are higher than those of other marinas on Lake Cumberland and
in the entire area which management believes reflects the higher quality slips
and many additional amenities at JRML.
JRML does, however, compete with a variety of other recreational and
entertainment activities in the Kentucky and Tennessee area. JRML's customers
are principally from Kentucky and Ohio. There are a large number of
recreational, entertainment and vacation activities, many of which have
significantly greater resources than those of JRML, that are located in
Kentucky, Ohio and Tennessee.
6
<PAGE>
Item 2. Description of Property
JRML leases approximately 291 acres, including water and land on which
the Resort and Marina are located, from the Corp. The original term of the lease
ends December 31, 2012, but the term has been extended to December 31, 2037.
JRML may terminate the lease at any lease year upon six months notice, and the
Corp may terminate the lease if JRML violates the lease and continues to do so
for 60 days after notice of the violation in writing.
Rent on the lease is calculated based on an assumed break even point.
JRML must pay 0.75% of all sales and 2.25% of all rents and services below the
break even point. Gross income between the break even point and twice the break
even point requires the payment of 2.25% of sales and 6.75% of rents and
services. Gross revenue in excess of twice the break even point requires the
payment of 3.00% of sales and 7.00% of rents and services. For the calendar
years ended December 31, 1995 and 1994, JRML paid $67,788 and $64,461 in rent,
respectively. The lease prohibits gambling on the premises. The one percent
development rent paid to the Commonwealth of Kentucky was $40,108 in 1995 and
$37,046 in 1994.
Item 3. Legal Proceedings
JRML has no legal proceedings pending other than two law suits
involving former employees and one liability claim. Management of JRML does not
consider these lawsuits material.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company has prepared an Information Statement to notify the
Company's stockholders of an action planned to be effected by the holders of the
majority of the Company's issued and outstanding shares of Common Stock. These
actions consist of : (i) a one for 200 reverse stock split; (ii) after such
stock split, an increase of the authorized Common Stock from 300,000 to
7,500,000 shares; and (iii) ratification of the Agreement.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Common Stock has not been traded for the last several years because
of the Company's inactivity and there has been no market for the Common Stock
for more than two years prior to June 30, 1996. The Company anticipates that
trading will commence following the filing of this Form 10-KSB on the NASDAQ
Bulletin Board, although there can be no assurance that such market will
develop.
As of September 15, 1996 there were approximately 2,950 holders of
record of the Common Stock, according to the records provided by the transfer
agent.
No cash dividends on the Common Stock have been declared or paid during
the two years ending June 30, 1996, and there are currently no plans to pay a
cash dividend.
Item 6. Management's Discussion and Analysis or Plan of Operation
The Company has been inactive for a number of years. Administrative
costs and interest expenses were incurred during the fiscal years ended June 30,
1996 and 1995, amounting to $25,259 and $109,240, respectively.
In 1996, the Company recognized a gain of $28,363 on the settlement of
obligations, along with an extraordinary gain of $418,699 on the reduction of
notes payable through the issuance of the Company's common stock. Settlements
have been reached to extinguish the remaining notes payable and related accrued
interest contingent on Sonoma's stock obtaining a market value. This event is
expected to occur in fiscal year 1997.
7
<PAGE>
As described previously the Company has entered into an agreement
whereby the Company will acquire the partnership of JRML. The Company's ability
to continue in existence is dependent on the success of this acquisition and
resulting operations, or its ability to complete a similar transaction with
another entity.
Item 7. Financial Statements
The Consolidated Financial Statements identified in the Index to
Financial Statements appearing under "Item 13. Exhibits and Reports on Form 8-K"
are incorporated by reference.
Item 8. Changes and Disagreements With Accountants on Accounting and Financial
Disclosure
On September 16, 1996, the Company filed a Current Report on Form 8-K
reflecting the engagement by the Company of King Burns & Co. as the Company's
independent accountants.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
compliance With Section 16(a) of the Exchange Act.
The directors and executive officers of the Company, and their
respective ages and positions held with the Company, are as follows:
Name Age Position
Harry W. Hendersen 71 President and Director
Barbara Hendersen 70 Secretary and Director
Angie L. Hochanadel 48 Director
Harry W. Hendersen has been in the development and construction
business since 1951. Since that time he has built and developed homes, housing
developments, apartments buildings, office structures, schools, churches, motels
and hotels, including five Ramada Inns and three Sheraton Hotels. In 1993, CWS,
Inc., in which Mr. Hendersen is an executive and owns a hotel in Phoenix,
Arizona, filed a petition under Chapter 11 of the United States Bankruptcy Code
in connection with a dispute with the State of Arizona and others. In addition
to such bankruptcy proceeding, that entity is engaged in litigation relating to
such bankruptcy petition. Mr. Hendersen was educated at Stanford, Duke and
Columbia Universities.
Barbara Hendersen has been active in the government, charitable, and
civic life of Palm Springs, California, since moving to Palm Springs in 1942.
During that period she has been an officer or an advisor to the Palm Springs
Unified School District, the Jack Warner Guidance Center for emotionally
disturbed children, a task force on tourism for Palm Springs, and the Palm
Springs Social Service Commission. In 1981, Ms. Hendersen formed the
Cultural/Convention Center, Inc. which led directly to the building of the
present Palm Springs Cultural/Convention Center and leads an effort in Palm
Springs, California to build a performing arts and sports center. Following the
loss of her husband in 1992, Barbara Hendersen married Harry W. Hendersen.
Angie L. Hochanadel has been active in several charitable organizations
as well as several community and civic boards in the Palm Springs area for the
last several years. She is on the Palm Springs Unified School District Board and
the Palm Springs Historical Society Board of Directors. Ms. Hochanadel is the
daughter of Barbara Hendersen.
Each director will hold office until the next Annual Meeting of
Stockholders and until such time as its successor is elected and qualified,
subject to prior removal by the stockholders of the Company in accordance with
the Bylaws of the Company. The officers of the Company serve at the discretion
of the Board of Directors of the Company.
8
<PAGE>
Following the closing of the Agreement, the Company will install
directors who are nominees of new and existing shareholders.
In May of 1995, Harry W. Hendersen, Barbara Hendersen, and Angie L.
Hochanadel became directors of the Company but did not file Form 3's. Mr. Sutley
has not filed a Form 3.
Item 10. Executive Compensation.
As part of the Company's planned reorganization, the Company issued to
affiliates of Mr. Gary V. Sutley an aggregate of 18,347,553 shares of Common
Stock, and Mr. Sutley directed the issuance of 15,000,000 to unaffiliated
individuals or entities. This stock is in lieu of an accrual of approximately
$310,000 consulting fees. This settlement includes fees in the amount of $50,000
per annum for each of the fiscal years ended June 30, 1993, 1994, 1995. These
shares are included in the one for 5200 reverse stock split and thus are a part
of the 300,000 being retained by the prior stockholders.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of September 15, 1996, the number of
shares of Common Stock and percentage of the outstanding Common Stock
beneficially owned by each person known by the Company to own more than 5% of
the outstanding Common Stock:
Beneficial Ownership(1)
Number of Shares Percent
---------------- -------
B.D.C. International 4,000,000 6.7%
4419 Marcum Lane
Eugene, OR 97402
Timespell, Inc. 5,000,000 8.3
2510 N. Grande Ave #104
Santa Ana, CA 92701
Amber Unlimited(2) 9,652,553 16.1
3690 S. Eastern #218
Las Vegas, NV 89109
Leonel Breault 3,331,500 5.6
125 Barkentine Street
Foster City, CA 94404
Sutley Family Trust 4,820,000 8.0
3640 West 15th Street
Eugene, OR 97402
Linda Bergeron 5,000,000 8.3
824 West 15th Street #56
Newport Beach, CA 92663
(1) The officers and directors of the Company, three people, do not own
capital stock in the Company.
(2) Amber Unlimited is affiliated with Gary V. Sutley.
9
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Item 12. Certain Relationships and Related Transactions
Affiliates of Mr. Sutley, the Company's sole director prior to May of
1995, were issued an aggregate of 18,347,553 shares of Common Stock and Mr.
Sutley directed the issuance of 15,000,000 to unaffiliated individuals or
entities., in connection with approximately $310,000 in consulting services
rendered to the Company. These shares are included in the one for 200 reverse
split and thus are a part of the 300,000 being retained by the prior
stockholders.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 - Financial Data Schedule
Financial Statements:
Reports of Independent Certified Public Accountants
Financial Statements:
Balance Sheet
Statements of Operations
Statements of Changes in Stockholders' Deficit
Statements of Cash Flows
Notes to Financial Statements
(b) Form 8-K
On September 16, 1996, the Company filed a Current Report on Form 8-K
reflecting the engagement by the Company of King Burns & Co. as the Company's
independent accountants.
On September 27, 1996, the Company filed a Current Report on Form 8-K
reflecting the Agreement.
10
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FINANCIAL STATEMENTS AND
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
SONOMA INTERNATIONAL
(A NEVADA CORPORATION)
JUNE 30, 1996 AND 1995
<PAGE>
SONOMA INTERNATIONAL
(A NEVADA CORPORATION)
Index to Financial Statements
Page
Reports of Independent Certified Public Accountants 1
Financial Statements
Balance Sheet 3
Statements of Operations 4
Statements of Changes in Stockholders' Deficit 5
Statements of Cash Flows 6
Notes to Financial Statements 7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Sonoma International
Palm Springs, California
We have audited the accompanying balance sheet of Sonoma International as of
June 30, 1996, and the related statements of operations, stockholders' deficit,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements, referred to above present fairly, in
all material respects, the financial position of Sonoma International as of June
30, 1996, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note C to the financial statements,
the Company has no assets to pay its obligations and has been inactive for a
number of years. These factors raise substantial doubt as to the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note C. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
King, Burns & Company, P.C.
Dallas, Texas
September 13, 1996
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Sonoma International
Palm Springs, California
We have audited the accompanying statements of operations, stockholders'
deficit, and cash flows of Sonoma International for the year ended June 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statements of operations, stockholders' deficit and cash
flows referred to above present fairly, in all material respects, the results of
its operations and its cash flows of Sonoma International for the year ended
June 30, 1995, in conformity with generally accepted accounting principles.
SKEEHAN & COMPANY
November 1, 1995
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Balance Sheet
June 30, 1996
<TABLE>
<CAPTION>
1996
--------------
<S> <C>
TOTAL ASSETS $ -
==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accrued liabilities 275
Accrued interest 252,435
Notes payable 262,391
--------------
Total current liabilities 515,101
--------------
Total liabilities 515,101
--------------
Commitments and contingencies (Notes C, D, E and H)
Stockholders' deficit
Common stock, $.001 par value, authorized, issued
and outstanding shares, 60,000,000 60,000
Additional paid-in capital 4,274,616
Accumulated deficit (4,849,717)
--------------
Total Stockholders' Deficit (515,101)
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ -
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Statements of Operations
For the years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenue $ - $ -
------------ ------------
Expenses
Professional fees 13,975 -
Consulting fees - 75,000
Interest 11,284 34,240
State taxes (4,828) 800
------------ ------------
Total expenses 20,431 110,041
Gain on the reduction of obligations 28,363 -
------------ ------------
Net income (loss) before extraordinary item 7,932 (110,041)
Extraordinary item
Gain from conversion of debt to equity net of income taxes of $-0- 418,699 -
------------ ------------
Net income (loss) $ 426,631 $ (110,041)
============ ============
Net income (loss) per common share before extraordinary item $ 0.00 $ 0.00
============ ============
Net income (loss) per common share for extraordinary item $ 0.01 $ -
============ ============
Net income (loss) per common share $ 0.01 $ (0.00)
============ ============
Weighted average shares outstanding 47,774,591 25,579,850
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Statement of Changes in Stockholders' Deficit
Years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Additional
Number of Common Paid-In Accumulated
Shares Stock Capital Deficit Total
------------- ---------- --------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1994 25,579,850 $ 25,580 $ 4,252,116 $ (5,166,308) $ (888,612)
Net loss - - - (110,040) (110,040)
------------- ---------- --------------- --------------- ---------
Balance at June 30, 1995 25,579,850 25,580 4,252,116 (5,276,348) (998,652)
Stock issued for debt and other obligations 34,420,150 34,420 - - 34,420
Capital contributions resulting from
obligations settled by shareholders
on behalf of the Company - - 22,500 - 22,500
Net income - - - 426,631 426,631
------------- ---------- --------------- --------------- ---------
Balance at June 30, 1996 60,000,000 $ 60,000 $ 4,274,616 $ (4,849,717) $ (515,101)
============= ========== =============== =============== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Statements of Cash Flows
Years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 426,631 $ (110,040)
Gain on conversion of debt to equity (418,699) -
Gain on reduction of obligations (28,363) -
Increase (decrease) in accounts payable and taxes (4,828) 800
Increase (decrease) in accrued interest 11,284 -
Increase (decrease) in accrued liabilities 13,975 34,240
Increase in stockholder advances - 75,000
------------ ------------
Net cash provided by operations - -
Cash at beginning of year - -
------------ ------------
Cash at end of year $ - $ -
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Notes to the Financial Statements
June 30 1996 and 1995
NOTE A - ORGANIZATION
Sonoma Quicksilver Mines, Inc. was incorporated under the laws of the State of
Nevada on June 10, 1940. The name was subsequently changed to Sonoma
International (the "Company" or "Sonoma"). The Company had several failed
business operations and since 1988 its only activity has been to search for a
company or assets to acquire.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Taxes
The Company accounts for income taxes in accordance with the asset and liability
approach. Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
Income (Loss) per share
Income (Lose) per share of common stock is based upon the weighted average
number of common shares outstanding.
Use of Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could vary from the estimates that were
used.
Accounting Standards Not Yet Adopted
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation" ("SFAS 123"), was issued. This
statement requires the fair value of stock options and other stock-based
compensation issued to employees to either be included as compensation expense
in the income statement, or the pro forma effect on net income and earnings per
share of such compensation expense to be disclosed in the footnotes to the
Company's financial statements commencing with the Company's 1996 fiscal year.
The Company expects to adopt SFAS 123 on a disclosure basis only. As such,
implementation of SFAS 123 is not expected to impact the Company's balance sheet
or statement of operations.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
7
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Notes to the Financial Statements
June 30 1996 and 1995
NOTE C - GOING CONCERN UNCERTAINTY
Sonoma has been inactive for a number of years and its continued existence is in
doubt. The Company has no assets to pay its current obligations or additional
obligations arising from incidental administrative expenses and interest
expenses.
The Company plans to reduce its liabilities and acquire income producing assets
through the issuance of additional stock and a merger with an operating
partnership (Note H). The ability of the Company to continue in existence is
dependent on the success of these plans.
NOTE D - NOTES PAYABLE
Notes payable consists of the following at June 30, 1996:
<TABLE>
<S> <C>
Notepayable dated June 12, 1991, due on demand to an individual bearing
interest at 15% per annum; unsecured. Interest of $44,316 has been
accrued through the settlement date. On September 27, 1996 a conditional
settlement agreement was reached relieving Sonoma of the principal and
accrued interest in exchange for 800,000 common shares of Sonoma. This
settlement agreement is contingent upon Sonoma stock obtaining a market
value and that the stock can be liquidated. $ 60,974
Notepayable to two individuals, due on demand and unsecured. Interest of
$15,861 has been accrued through the settlement date. On July 25, 1995,
a conditional settlement agreement was reached releasing Sonoma of
principal and accrued interest in exchange for 200,000 shares of the
Company. This settlement agreement is contingent upon Sonoma stock
obtaining a market value and that the stock can be liquidated. 45,861
Notepayable to Sunwest Bank, due on demand with interest accruing at 10.5%;
unsecured. Interest of $42,557 has been accrued through the settlement
date. On September 7, 1995, a conditional settlement agreement was
reached relieving Sonoma of the outstanding principal and accrued
interest in exchange for a nominal cash amount and the issuance of
200,000 shares of Sonoma common stock. This settlement is conditioned
upon Sonoma common stock being listed on the National Bulletin Board and
having a market value and that the stock can be liquidated. 43,556
Notepayable to Garfield Bank, due on demand with interest accruing at 16%;
unsecured. Interest of $164,997 has been accrued through the settlement
date. On September 8, 1995, a conditional settlement agreement had been
reached relieving Sonoma of the principal amount owed and all accrued
interest thereon conditioned on 850,000 shares of Sonoma common stock
being transferred into the name of Garfield Bank (from other
shareholders) and Sonoma common stock having a market value that can be
liquidated. 112,000
-------
Total notes payable $262,391
</TABLE>
8
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Notes to the Financial Statements
June 30 1996 and 1995
NOTE E -STOCKHOLDERS' DEFICIT
In 1995, the Company entered into numerous conditional settlement agreements
with various creditors in an attempt to settle all long term debt of Sonoma.
Many of the settlement agreements are in the form of debt relief in exchange for
common stock of the Company and conditioned upon the Company's common stock
being listed on the National Bulletin Board and having a market value so that
the stock can be liquidated.
On July 18, 1995, a settlement agreement was reached related to the unsecured 6%
note payable that was in default with a former officer relieving Sonoma of the
principal amount owed of $5,000 with $2,700 accrued interest, accounts payable
of $22,000 with $7,335 of accrued interest by issuing 272,597 shares of Sonoma
common stock.
During the year ended June 30, 1996 Sonoma reached agreements with two
shareholders whom were prior officers of the Company to settle amounts due to
them approximating $444,445 through the issuance of 33,347,553 of the Company's
common stock.
During the year ended June 30, 1996, Sonoma reached agreements with two
individuals to settle amounts due to them approximating $8,800 through the
transfer of 40,000 of the Company's common stock (transferred from other
shareholders).
Professional fees of 13,700 were paid on behalf of Sonoma by certain
shareholders. These expenses paid on behalf of the Company were accounted for as
contributions to additional paid-in capital.
NOTE F - RELATED PARTY TRANSACTIONS
From 1989 through June 30, 1995, officers of the Company paid expenses and/or
liabilities of Sonoma. Additionally, officers of Sonoma were owed consulting
fees from the Company for current and past services rendered. During the year
ended June 30, 1996, Sonoma and the officers have agreed to settle the
outstanding amounts owed to them of $444,445 through the issuance of common
stock. See Note E.
NOTE G - INCOME TAXES
The Company generated negligible taxable income and/or net operating losses
during the years ended June 30, 1996 and 1995. Any existing available net
operating losses at June 30, 1996 would be lost upon consummation of the
acquisition transaction described in Note H. At June 30, 1996, the Company has a
deferred tax asset of approximately $85,000 relating to amounts deducted for
financial reporting losses not deducted for income tax reporting purposes. This
asset has a valuation allowance recorded against it due to the uncertainty of
generating future taxable income.
There was no significant change in the valuation allowance from 1995.
NOTE H - SUBSEQUENT EVENT
As of September 12, 1996, the Company entered into an agreement (the
"Agreement") with Clear Creek Investments, LLC, a Kentucky Limited Liability
Company ("Clear Creek"), and holders of the limited partnership interests in
Jamestown Resort & Marina, Ltd, a Kentucky limited partnership ("JRML"). JRML
owns a resort and marina located on the Cumberland Lake in south central
Kentucky.
The Agreement requires the transfer and assignment to Sonoma of JRML's general
partner and all limited partnership interests. There are several conditions to
closing including the delivery to the Company of an appraisal which states that
the assets of JRML as of the date of the appraisal have a fair market value of
not less than $10,000,000. That
9
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Notes to the Financial Statements
June 30 1996 and 1995
appraisal has been delivered to the Company. In addition, the Agreement requires
that the Company effect a one for two hundred reverse split, leaving 300,000
shares issued and outstanding, and issue 1,700,000 shares to Clear Creek and
affiliated and related entities or individuals for the acquisition of JRML.
10
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
(Registrant) Sonoma International .
By (Signature and Title)/s/ Harry W. Hendersen
Harry W. Hendersen, President
Date September 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By (Signature and Title) /s/ Harry W. Hendersen
Harry W. Hendersen, Director
Date September 27, 1996
By (Signature and Title) /s/ Barbara Hendersen
Barbara Hendersen, Director
Date September 27, 1996
By (Signature and Title) _________________________________
Angela L. Hochanadel
Date
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 515,101
<BONDS> 0
60,000
0
<COMMON> 0
<OTHER-SE> (575,101)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,147
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,284
<INCOME-PRETAX> 7,932
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,932
<DISCONTINUED> 0
<EXTRAORDINARY> 418,699
<CHANGES> 0
<NET-INCOME> 426,631
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.00
</TABLE>
