UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of Earliest Date Reported) October 31, 1996
Sonoma International
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(Exact name of registrant as specified in its charter)
Nevada 0-6683 94-0880052
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporatin or organization) File Number) Identification No.)
3930 S. Eastern Avenue, Suite 218, Las Vegas Nevada 89109
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(702) 361-3033
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(Registrant's telephone number, including area code)
901 Tahquitz, Ste B 201, Palm Springs, CA 92261
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(Former name or former address, if changed since last report.)
<PAGE>
Item 1. Changes in Control of Registrant
See Item 2. Acquisition or Disposition of Assets.
Item 2. Acquisition or Disposition of Assets
As of October 31, 1996, the Company entered into an agreement (the
"Agreement") with Key West Conch Harbor, Inc., a Florida corporation ("KWCHI")
to acquire all of the issued and outstanding shares of KWCHI.
The stockholders of KWCHI will be issued 300,000 shares of the
Company's Common Stock, such shares to be determined following a reverse split
previously contemplated by the Company. KWCHI owns a Marina located on the
Northwest corner of Caroline and Grinnell Streets in the developing "Old Town"
area of Key West, Florida. The approximately 2-acre or 82,000 square foot site
has an estimated 251 feeet of frontage on Caroline Street and 221 feet of
shoreline along a waterway known as the Key West Bight. KWCHI began development
of the Marina in May, 1995 when construction of the dock and fueling facility
began. The Marina currently has a new 450 foot dock with two 100-foot finger
piers, a Texaco Star Port fueling dock and an on-shore fuel containment area.
The facility derives its current revenue from fueling operations and slip
rentals. Fueling operations began in February of 1995, and slip rentals began in
July, 1995.
Closing of the agreement is contingent upon the closing of the
Company's previous agreement to acquire Jamestown Resort & Marina, Ltd.
Item 7. Financial statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of businesses acquired
The Key West Conch Harbor Balance Sheets as of December 31, 1995, and
December 31, 1994, and the related Statements of Operations, Changes in
Partners' Deficit, and Statements of Cash Flows for the years ended December 31,
1995 and December 31, 1994, and the report of King, Burns & Company, P.C.,
independent certified public accountants, thereon, together with the notes
thereto, are located immediately following this Item 7.
(b) Proforma financial information
The unaudited pro forma consolidated balance sheet as of June 30, 1996,
and the unaudited pro forma statements of operations for the years ended June
30, 1996, and June 30, 1995, immediately follow the financial statements
included as part of Item 7(a) herein. These proforma financial statments include
both the Jamestown Resort & Marina, Ltd. financial statments and the KWCHI
financial statements.
<PAGE>
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>
FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
JAMESTOWN RESORT & MARINA, LTD
(a Kentucky Limited Partnership)
DECEMBER 31, 1995 AND 1994
<PAGE>
JAMESTOWN RESORT & MARINA, LTD
(a Kentucky Limited Partnership)
Index to Financial Statements
Page
Report of Independent Certified Public Accountants 1
Financial Statements
Balance Sheets 2
Statements of Operations 4
Statements of Changes in Partners' Deficit 5
Statements of Cash Flows 6
Notes to Financial Statements 7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Partners
Jamestown Resort & Marina, Ltd.
We have audited the accompanying balance sheets of Jamestown Resort & Marina,
Ltd. (a Kentucky Limited Partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' deficit, and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jamestown Resort & Marina, Ltd.
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
The financial statements have been prepared assuming that the Partnership will
continue as a going concern. As discussed in Note C to the financial statements,
the Partnership has incurred losses since its inception and at December 31,
1995, its current liabilities exceeded current assets by approximately
$6,733,000. 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 6, 1996
<PAGE>
JAMESTOWN RESORT & MARINA, LTD.
(a Kentucky Limited Partnership)
Balance Sheets
December 31, 1995 and 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 9,628 $ 3,584
Escrow funds 26,673 43,262
Receivables:
Trade (net of allowance for doubtful accounts of $3,876 in 1996 and 1995) 47,653 46,799
Other 34,199 23,111
Inventory 75,400 82,311
Prepaid expenses 46,456 71,919
---------------- ----------------
Total current assets 240,009 270,986
---------------- ----------------
PROPERTY AND EQUIPMENT
Buildings and improvements 2,352,561 2,249,862
Land improvements 79,737 73,623
Docks and floating buildings 7,180,728 6,957,013
Boats and improvements 782,105 717,688
Furnishings, fixtures and equipment 1,640,722 1,521,580
Houseboats and pontoons under capital lease 1,373,649 1,373,649
Computers under capital lease 161,734 161,734
Vehicles 22,482 20,642
Construction in progress 240,931 148,931
---------------- ----------------
13,834,649 13,224,722
Less accumulated depreciation and amortization 3,987,745 3,403,036
---------------- ----------------
Net property and equipment 9,846,904 9,821,686
---------------- ----------------
OTHER ASSETS
Deferred loan fees, net of accumulated amortization of
$11,827 106,438 -
Goodwill, net of accumulated amortization of
$165,825 and $147,400 571,175 589,600
---------------- ----------------
Total other assets 677,613 589,600
---------------- ----------------
TOTAL ASSETS $ 10,764,526 $ 10,682,272
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
JAMESTOWN RESORT & MARINA, LTD.
(a Kentucky Limited Partnership)
Balance Sheets - Continued
December 31, 1995 and 1994
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
CURRENT LIABILITIES
Current portion of long-term debt (including $3,410,277
<S> <C> <C>
and $2,206,239 to related parties) $ 3,819,067 $ 10,622,738
Current portion of obligations under capital leases 198,391 203,793
Accounts payable 188,555 274,790
Accrued interest (including $272,272 and $53,662 to related parties) 1,246,452 795,946
Accrued liabilities 141,387 249,313
Security deposits 29,074 34,458
Deferred revenue 633,190 531,411
Accrued management fees - related party 581,301 458,006
Accrued guarantee fees - related party 60,000 40,000
Deferred gain on sale leaseback 75,800 81,905
---------------- ----------------
Total current liabilities 6,973,217 13,292,360
---------------- ----------------
LONG-TERM LIABILITIES
Long-term debt 7,421,234 211,577
Long-term portion of obligations under capital leases 417,638 614,838
---------------- ----------------
Total long-term liabilities 7,838,872 826,415
---------------- ----------------
COMMITMENTS AND CONTINGENCIES (Notes C, D, E, F, G, H, K and L)
PARTNERS' DEFICIT (4,047,563) (3,436,503)
---------------- ----------------
TOTAL LIABILITIES AND PARTNERS' DEFICIT $ 10,764,526 $ 10,682,272
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
JAMESTOWN RESORT & MARINA, LTD.
(a Kentucky Limited Partnership)
Statements of Operations
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
REVENUES
<S> <C> <C>
Annual slip fees $ 1,168,041 $ 997,195
Boat rental 748,941 753,835
Lodge 683,251 677,905
Fuel 531,120 488,485
Convenience store and merchandise 381,123 340,724
Restaurant 372,473 349,001
Other 135,073 76,662
---------------- ----------------
Total revenues 4,020,022 3,683,807
---------------- ----------------
COST OF REVENUES
Annual slip 165,634 129,395
Boat rental 396,916 439,154
Lodge 235,082 209,793
Fuel 351,029 310,084
Convenience store and merchandise 288,498 269,061
Restaurant 329,982 276,638
Other 109,350 79,986
---------------- ----------------
Total cost of revenues 1,876,491 1,714,111
---------------- ----------------
GROSS PROFIT 2,143,531 1,969,696
SELLING, GENERAL AND ADMINISTRATIVE (including related party
amounts for management and guarantee fees of $220,540 and $205,229) 1,278,390 1,089,981
AMORTIZATION OF GOODWILL 30,252 18,426
DEPRECIATION AND AMORTIZATION 578,603 617,499
---------------- ----------------
INCOME FROM OPERATIONS 256,286 243,790
INTEREST EXPENSE (including interest to related parties
of $260,716 and $214,724) 867,346 749,823
---------------- ----------------
NET LOSS $ (611,060) $ (506,033)
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
JAMESTOWN RESORT & MARINA, LTD.
(a Kentucky Limited Partnership)
Statement of Changes in Partners' Deficit
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Special
General Limited Limited
Partner Partners Partners Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Deficit at January 1, 1994 $ (2,913,099) $ (17,371) $ - $ (2,930,470)
Net loss for the year
ended December 31, 1994 (506,033) - - (506,033)
---------------- ---------------- ---------------- ----------------
Deficit at December 31, 1994 (3,419,132) (17,371) - (3,436,503)
Net loss for the year
ended December 31, 1995 (611,060) - - (611,060)
---------------- ---------------- ---------------- ----------------
Deficit at December 31, 1995 $ (4,030,192) $ (17,371) $ - $ (4,047,563)
================ ================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
JAMESTOWN RESORT & MARINA, LTD.
(a Kentucky Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (611,060) $ (506,033)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation and amortization of fixed assets 578,603 617,499
Amortization of goodwill 30,252 18,426
Amortization of deferred gain on sale leaseback (6,105) (6,105)
Changes in assets and liabilities:
Decrease (increase) in escrow funds 16,589 41,409
Decrease (increase) in trade receivables (854) (3,478)
Decrease (increase) in other receivables (11,088) 57,620
Decrease (increase) in inventory 6,911 (7,279)
Decrease (increase) in prepaid expenses 25,463 6,950
Increase (decrease) in accounts payable (86,235) 152,403
Increase (decrease) in accrued interest 450,506 357,236
Increase (decrease) in accrued liabilities (107,927) 94,807
Increase (decrease) in security deposits (5,384) (8,447)
Increase (decrease) in deferred revenue 101,779 46,890
Increase (decrease) in accrued guarantee fees 20,000 20,000
Increase (decrease) in accrued management fees 123,295 84,943
---------------- ----------------
Net cash provided by operating activities 524,745 966,841
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (603,820) (711,802)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank and related party loans 1,250,700 -
Repayments of borrowings (844,715) (152,884)
Repayments of obligation under capital lease (202,601) (189,195)
Organization and loan costs (118,265) -
---------------- ----------------
Net cash provided by financing activities 85,119 (342,079)
---------------- ----------------
NET INCREASE (DECREASE) IN CASH 6,044 (87,040)
Cash at beginning of the year 3,584 90,624
---------------- ----------------
Cash at end of the year $ 9,628 $ 3,584
================ ================
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for interest $ 430,908 $ 411,592
================ ================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCIANG ACTIVITIES
Assumption of debt in connection with the
purchase of property and equipment $ - $ 520,019
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
JAMESTOWN RESORT & MARINA, LTD
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE A - ORGANIZATION
General
Jamestown Resort & Marina, Ltd. (the "Partnership") is a limited partnership
organized under the laws of the State of Kentucky by Jamestown Resort & Marina,
Inc. ("JRMI"), the general partner, on November 1, 1987. The Partnership owns a
resort and marina facility near Jamestown, Kentucky on Lake Cumberland.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Cash Flows
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposits, and all highly liquid debt instruments with
original maturities of 3 months or less when purchased.
Inventory
Inventory is stated at the lower of cost or market and consists of food,
beverages, clothing, fuel and boat parts. Cost is determined on the first-in,
first-out ("FIFO") method of accounting.
Property and Equipment
Property and equipment are stated at cost. The Partnership provides for
depreciation on the straight-line method over the estimated useful lives of the
related assets. Assets held under capital leases are amortized using the
straight-line method over the estimated useful lives of the related assets.
Major classes of property and equipment and their related lives are as follows:
Life in
Major Class Years
Docks, floating buildings and buildings on land 31.5
Houseboats and pontoons 20.0
Land improvements 15.0
Signage 10.0
Furnishings 7.0
Computers under capital lease 5.0
Maintenance and repairs are expensed as incurred. Replacements and betterments
are capitalized.
Goodwill
Goodwill relates to the original purchase of the marina and the U.S. Army Corps
of Engineers lease and represents the excess of cost over fair value of net
assets acquired which is being amortized using the straight-line method over 40
years. On an on-going basis, management reviews recoverability, the valuation
and amortization of goodwill. As part of this review, management considers the
undiscounted value of the projected future net earnings in evaluating the value
of goodwill. If the undiscounted value of the projected future net earnings is
less than the stated value, the goodwill would be written down to its fair
value. Management also considers the appraised value of the marina facility in
evaluating the value of goodwill.
7
<PAGE>
JAMESTOWN RESORT & MARINA, LTD
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Continued
Deferred Loan Fees
Loan fees are capitalized and amortized over the life of the loan using the
straight-line method.
Revenue Recognition
Annual or seasonal slip rentals received are recognized as deferred revenue and
amortized into income over the life of the rental contract using the
straight-line method. All other revenues are recognized at the time the rental
occurs or the delivery of the product or service takes place.
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.
Income Taxes
Taxable income or loss of the Partnership is allocated to the partners in
accordance with the provisions of the Partnership agreement. The Partnership
qualifies as a limited partnership and as such, Federal income taxes accrue to
the partners rather than to the Partnership. Accordingly, the accompanying
statements of operations of the Partnership include no provision for income
taxes.
Other
Advertising costs are expensed as incurred and amounted to $58,000 and $43,000
in 1995 and 1994, respectively.
NOTE C - GOING CONCERN UNCERTAINTY
As reflected in the statements of operations, the Partnership incurred net
losses of approximately $611,000 and $506,000 in 1995 and 1994, respectively. At
December 31, 1995, current liabilities exceed current assets by approximately
$6,733,000. These factors, among others, raise substantial doubt as to the
Partnership's ability to continue as a going concern.
Management has been successful in the past in negotiating delays in the payment
of the Company's loans and was successful in refinancing the mortgage debt
(Notes F and L) and paid off the obligations under the capital leases subsequent
to December 31, 1995 (Note L). Management is also in the process of merging with
a public shell (Note L), and has plans to raise sufficient additional capital in
the public market after the merger to pay off certain of the short and long term
debt and to provide additional liquidity to fund operations and growth.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
or classification of liabilities which may result from the possible inability of
the Partnership to continue as a going concern.
8
<PAGE>
JAMESTOWN RESORT & MARINA, LTD
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE D - DEVELOPMENT AGREEMENT WITH THE TRANSPORTATION CABINET OF THE
COMMONWEALTH OF KENTUCKY
The Partnership and the Transportation Cabinet of the Commonwealth of Kentucky
("Transportation Cabinet") are parties to an agreement for development of the
marina facilities. The Partnership agreed to construct a new resort and marina
and the Transportation Cabinet agreed to construct an extension of Kentucky
Highway 92 to the island upon which the Partnership constructed its lodge.
The Partnership agreed to pay the Transportation Cabinet one percent of the
gross revenues received by the Partnership from the resort and marina facilities
in perpetuity. The fees under the agreement totaled $40,000 in 1995 and $37,000
in 1994.
NOTE E - LEASE RIGHTS
The Partnership leases approximately 290 acres of land and water from the U.S.
Army Corps of Engineers. The lease has a 25-year term beginning January 1, 1988
with an option for a 25-year extension which has been exercised. Rental amounts
due under the lease are contingent upon a variety of factors, primarily gross
revenues. Rent expense was $70,000 in 1995 and $64,000 in 1994.
NOTE F - NOTES PAYABLE AND LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31,
------------------------------
1995 1994
---------- ------
<S> <C> <C>
Mortgage $ 7,194,005 $ 7,944,005
Demand Note (related party) 1,852,777 1,846,239
General Partner note 1,197,500 -
Limited Partner notes 360,000 360,000
Paddleboat notes 209,736 270,066
Yacht Club note 223,624 227,041
Executive Boats note 159,671 186,963
Generators note 42,988 -
------------- --------------
11,240,301 10,834,314
Less current maturities (3,819,067) (10,622,738)
------------- --------------
Long-term portion $ 7,421,234 $ 211,577
=========== =============
</TABLE>
Mortgage. On December 31, 1988 the Partnership entered into two notes with banks
to finance the resort and marina project. The first note was for $5,625,000
maturing on January 1, 1995. The note required monthly payments of principal in
the amount of $53,568 and interest at a rate of 11%, adjusted to 3% above the
weekly auction average rate of T-Securities, with a 3 year maturity on November
1. The second note was for $2,375,000 maturing on January 1, 1995. The note
required monthly payments of principal in the amount of $6,000 and interest at a
rate of 1% over the Base Lending rate as defined. Both notes were secured by
Partnership property. Thereafter, the Partnership defaulted on the notes, and
the bank became insolvent. The loan was subsequently assumed by the Resolution
Trust Corporation ("RTC"). The note was consolidated with several other notes
and sold to a second bank in March, 1993.
9
<PAGE>
JAMESTOWN RESORT & MARINA, LTD
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE F - NOTES PAYABLE AND LONG-TERM DEBT - Continued
Accrued interest was $748,240 and $708,240 at December 31, 1995 and 1994,
respectfully.
On August 11, 1995, The Partnership entered into a written agreement with the
second bank whereby the notes held could be paid off by the Partnership for
$6,100,000, plus accrued interest of $240,000. The amount was refinanced on
January 29, 1996 (Note L). The classification of the note payable (long-term and
short-term portions) is based on the refinanced terms. This agreement was
conditional on the ability of the Partnership to make an initial payment of
$1,000,000 at the closing of the loan modification and being able to repay the
remaining $5,100,000 by May 1, 1996. The Partnership made a payment of $750,000
on September 1995. These funds were obtained from related parties and bear
interest at 10%. The remaining $250,000 was rolled over into the final
settlement. See Note L.
Demand Note. The Partnership originally entered into a note agreement with a
bank for $2,000,000 on November 16, 1989, at 1 1/2% over the prime lending rate
which was collateralized by a second mortgage on the assets of the Partnership
and by certain items of the Webb Family Trust, an entity related to the general
partner. A 1 % guarantee amount based on the outstanding balance is payable to
the Webb Family Trust as compensation for pledging its collateral (See Note H).
The Partnership defaulted on the note several times and on January 15, 1993 the
note was converted to a demand note. In March 1994, the Partnership again
defaulted under the terms of the note and the Webb Family Trust collateral was
liquidated by the bank to satisfy the note. The Partnership subsequently became
obligated to the Webb Family Trust under the same terms as the demand note.
General Partner Loans. The Webb Family Trust loaned the Partnership $477,500 at
various dates in 1995 and $750,000 in September 1995 at 10% under a promissory
note entered into on August 10, 1995. The note matured on May 1, 1996 and is due
on demand.
Limited Partner Loans. On March 6, 1992, loans totaling $360,000 were made by
limited partners at 1% plus prime for operating shortfalls and capital
improvements. The notes are payable on demand. The notes may be extended each
year for a fee of 1% of the note balance.
Paddleboat. Webb Cruise Lines, Inc. (WCL) an entity controlled by the general
partner originally purchased the Jamestown Queen, a paddleboat, by obtaining
financing from two banks. On April 21, 1989 WCL entered into the first note with
a bank for $325,000. On October 30, 1994 the note was renewed for $251,303 at 2%
plus prime maturing on April 30, 2000. The note requires monthly payments of
$5,309 of principal and interest. The loan is collateralized by five shares
(5.6%) of the limited Partnership units, the Paddleboat and guaranteed by the
Webb Family Trust. On May 8, 1989, WCL entered into a 13.5% variable note with a
second bank amounting to $75,000 with interest and principal due on June 22,
1995. The Partnership paid a monthly rent of $7,260 to WCL for the use of the
boat. The Partnership assumed both notes and title of the boat from WCL in May
1994 for the balance of both notes of $282,346 which approximated the fair value
of the Paddleboat.
Yacht Club. Webb Lexington Ventures, Inc., an entity controlled by the general
partner, entered into a 11% mortgage note with a bank for $278,000 to purchase
the Yacht Club. The note matures on July 1, 1996 and interest is payable
quarterly in October, January, April and July. Principal payments consist of two
installments, $23,757 on January 1, 1996 and $200,000 on July 1, 1996. The note
is collateralized by the property of the general partner. The Yacht Club was
acquired by the Partnership by assuming the note, which approximated the fair
market value of the Yacht Club.
10
<PAGE>
JAMESTOWN RESORT & MARINA, LTD
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE F - NOTES PAYABLE AND LONG-TERM DEBT - Continued
Executive Boats. On February 8, 1990, the Partnership entered into a note with a
bank finance its executive boats and is collateralized by the two houseboats.
The note was renewed on October 30, 1995 and provides for monthly principal
payments of $4,000 and interest at 11% and matures on October 28, 1999.
Generators. On May 26, 1995, the Partnership entered into a note with a bank for
$53,200 at a fixed rate of 10.5% maturing on October 1, 1997. The note is
collateralized by 12 boat generators. Interest and principal of $3,000 are paid
monthly beginning on July 1, 1995 through October 1, 1995. Payments will resume
each year on March 1 through October 1.
Aggregate maturities of long-term debt at December 31, 1995 are as follows:
1996 $ 3,819,067
1997 217,870
1998 217,425
1999 234,021
2000 173,393
Thereafter 6,578,525
------------
Total $ 11,240,301
===========
NOTE G - OBLIGATIONS UNDER CAPITAL LEASES
The Partnership leases certain boats and computer equipment under capital
leases. In 1991, the Partnership sold 25 houseboats and 20 pontoon boats for
$1,374,000 to a bank and subsequently leased back the boats under a capital
lease. In connection with this sale and lease-back transaction, the Partnership
recorded a deferred gain of $104,000. This gain is being amortized as a offset
to amortization expense over the term of the lease. The lease term is for six
years and monthly payments of $30,000 are required from March through October of
each year. The lease also has a purchase option of $202,000 at the end of the
lease. The Partnership entered into a sale and leaseback transaction for
computer equipment in 1990 for $161,000. The computer lease matured in 1994. The
Partnership is required to pay future minimum payments related to these leases
as follows:
Amount
-----------
1996 $ 239,710
1997 443,938
-----------
683,648
Amount representing interest (67,619)
Present value of net minimum
lease payments 616,029
Current portion 198,391
----------
Total $ 417,638
==========
The weighted average interest rate on the capital leases approximates 10% at
December 31, 1995.
Accumulated amortization for leased boats and computer equipment at December 31,
1995 and 1994 was $456,000 and $384,000 , respectively. Amortization expense,
net of the deferred gain amortization of $6,000 each year, for the leased boats
and computer equipment was approximately $65,000 and $95,000 during 1995 and
1994, respectively.
11
<PAGE>
JAMESTOWN RESORT & MARINA, LTD
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE G - OBLIGATIONS UNDER CAPITAL LEASES - Continued
In connection with the boat lease, the bank requires a monthly deposit of $3,761
into an escrow account for repairs and maintenance of the boats. This account
has a balance of approximately $26,000 and $43,000, at December 31, 1995 and
1994, respectively, which is included in escrow funds in the accompanying
balance sheets.
NOTE H - RELATED PARTY TRANSACTIONS
The general partner has a management agreement with the Partnership to provide
management services to the Partnership for a fee equal to 5% of the annual gross
revenues. Such fee is payable to the general partner at a rate $4,000 per month,
plus direct costs and expenses associated with its management of the
Partnership. The remainder of the fee is accrued. Accrued management fees at
1995 and 1994 were $581,000 and $458,000, respectively. Management fees paid in
1995 and 1994 were $48,000 and management fee expense was $201,000 and $185,000,
respectively.
The general partner guaranteed the Demand Note (Note F) and receives as
compensation a fee of 1% of the outstanding note balance annually. Such fee
amounted to $20,000 during 1995 and 1994, respectively. The accrued guarantee
fee was $60,000 and $40,000 at December 31, 1995 and 1994, respectively.
Accrued interest due to the partners was $272,000 and $54,000 at December 31,
1995 and 1994, respectively. Interest expense payable to related parties was
$261,000 and $215,000 during 1995 and 1994, respectively.
Accounts receivable (other) of $25,000 at December 31, 1995 and 1994, from
related parties, are recorded as a reduction of accrued management fees and are
primarily for reimbursable expenses.
The Partnership rents a portion of land to the general partner for $441 per
year.
Also see Note F.
NOTE I - PARTNERSHIP AGREEMENT
The general partner is required to manage the affairs of the Partnership but is
not required to make a capital contribution for its interest in the Partnership.
For Federal income tax purposes, the special limited partners received an
assigned value of $200,000 (equivalent to eight units) for contributing their
interest in the Sale and Purchase Agreement with Jamestown Dock, Inc. Eighty
units had been sold to limited partners.
The special limited and limited partners are entitled to an annual Preference
Payment of 10% of their capital contributions to the extent that cash flow
exceeds operating expenses, debt service and funds set aside in a working
capital reserve. All unpaid Preference Payments accumulate and may be paid in
future years out of available cash flow. Remaining cash flow, after the
Preference Payment, is distributable to the limited partners and to the general
partner in proportion to their interests in partnership profits. No cash
distributions have been made to the partners. Accumulated but unpaid Preference
Payments totaled $1,372,917 at December 31, 1995 and $1,152,917 at December 31,
1994 (Note L).
The net loss for the years ended December 31, 1995 and 1994 was allocated in
accordance with the Partnership Agreement. No loss is allocated to the special
limited partners because of their nil capital account balances. In accordance
with the Partnership agreement, limited partners are allocated 80% of net losses
to the extent that they have positive capital account balances, and the general
partner is allocated the remaining loss.
12
<PAGE>
JAMESTOWN RESORT & MARINA, LTD
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments", requires disclosure about the fair value of all
financial assets and liabilities for which it is practicable to estimate. Cash
and escrow funds, accounts receivable, accounts payable and other liabilities
are carried at amounts that reasonably approximate their fair values.
The carrying amount and fair value of notes payable and long-term debt
(excluding capital leases) are as follows:
December 31, 1995
------------------------------
Carrying Fair
amount value
---------- ----------
Mortgage debt $7,194,000 $5,350,000
Demand note 1,853,000 1,853,000
Variable rate debt 570,000 570,000
Other current debt 1,677,000 1,677,000
NOTE K - CONTINGENT LIABILITIES
In the normal course of its business, the Partnership is subject to litigation.
Management of the Partnership, based on discussions with its outside legal
counsel, does not believe any claims, individually or in the aggregate, will
have a material adverse impact on the Partnership's financial position.
NOTE L - SUBSEQUENT EVENTS
On January 29, 1996, the Partnership entered into a loan agreement for
$6,300,000 maturing on February 1, 2001. The agreement requires monthly payments
of principal and interest at a variable rate equal to the commercial paper rate
plus 4.25%. Proceeds of $5,800,000 was used to settle the $5,631,000 mortgage
note described in Note F, and $678,000 was used to settle the boat lease
obligation (Note F) and related loan origination fees. Other short term
borrowings were obtained to finance the difference between amounts paid and the
$5,800,000 proceeds used from the $6,300,000 loan agreement.. On March 28, 1996
the remaining $500,000 was drawn on the note. The balance due on the note at
June 30, 1996 was $6,261,000.
As of September 12, 1996, the Partnership, by consent of the JRMI and the
limited partners, entered into an agreement (the "Agreement") with Sonoma
International ("Sonoma"), a public company with no operations. The Agreement
requires the transfer and assignment to Sonoma of all of the common stock of
JRMI and all limited partnership interests in exchange for 1,700,000 shares of
common stock of Sonoma. There are several conditions to closing including the
delivery to Sonoma of an appraisal which states that the assets of the
Partnership, as of the date of the appraisal, have a fair market value of not
less than $10,000,000. That appraisal has been delivered to Sonoma. The
agreement incorporates the payment of the preference payments due (Note I)
through the issuance of shares of Sonoma.
13
<PAGE>
FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KEYWEST CONCH HARBOR, INC.
DECEMBER 31, 1995 AND 1994
<PAGE>
KEY WEST CONCH HARBOR, INC.
Index to Financial Statements
Page
Report of Independent Certified Public Accountants 1
Financial Statements
Balance Sheets 2
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 Stockholders
Key West Conch Harbor, Inc.
We have audited the accompanying balance sheets of Key West Conch Harbor, Inc.
as of December 31, 1995 and 1994, and the related statements of operations,
stockholders' deficit, and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Key West Conch Harbor, Inc. as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years 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 incurred losses since its inception and at December 31, 1995,
its current liabilities exceeded current assets by approximately $2,107,802.
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
October 18, 1996
<PAGE>
KEY WEST CONCH HARBOR, INC.
Balance Sheets
December 31, 1995 and 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 20,899 $ 3,657
Receivables 6,452 8,859
Inventory 8,716 -
Prepaid expenses and other 13,859 500
---------------- ----------------
Total current assets 49,926 13,016
---------------- ----------------
PROPERTY AND EQUIPMENT
Land 1,810,818 1,786,640
Land improvements 121,805 101,265
Docks 788,016 443,711
Fuel Tanks 72,609 -
Furniture, fixtures and equipment 20,178 550
Construction in progress 171,233 -
---------------- ----------------
2,984,659 2,332,166
Less accumulated depreciation and amortization 70,717 29,719
---------------- ----------------
Net property and equipment 2,913,942 2,302,447
---------------- ----------------
OTHER ASSETS
Deferred loan fees, net of accumulated amortization of $5,761 and $1,002, respectively 16,712 13,545
---------------- ----------------
Total other assets 16,712 13,545
---------------- ----------------
TOTAL ASSETS $ 2,980,580 $ 2,329,008
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
KEY WEST CONCH HARBOR, INC.
Balance Sheets - Continued
December 31, 1995 and 1994
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
CURRENT LIABILITIES
<S> <C> <C>
Current portion of long-term debt (including $378,584
and $148,700 to related parties) $ 1,928,584 $ 1,248,700
Accounts payable 23,897 71,792
Accrued interest (including $110,405 and $71,798 to related parties) 137,354 71,798
Accrued liabilities 48,633 55,293
Security deposits - 10,000
Deferred revenue 19,260 -
---------------- ----------------
Total current liabilities 2,157,728 1,457,583
---------------- ----------------
LONG-TERM LIABILITIES
Long-term debt, net of current maturities (including $908,711 and
$990,800 to related parties) 1,108,711 990,800
---------------- ----------------
Total long-term liabilities 1,108,711 990,800
---------------- ----------------
COMMITMENTS AND CONTINGENCIES (Notes C, D, G and H)
STOCKHOLDERS' DEFICIT
Common stock; $10 par value; 100 shares authorized,
issued and outstanding 1,000 1,000
Accumulated deficit (286,859) (120,375)
---------------- ----------------
Total stockholders' deficit (285,859) (119,375)
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,980,580 $ 2,329,008
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
KEY WEST CONCH HARBOR, INC.
Statements of Operations
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
REVENUES
<S> <C> <C>
Annual slip fees $ 143,442 $ 73,715
Lease income from related party - 92,675
Fuel 507,914 -
Other 2,557 -
---------------- ----------------
Total revenues 653,913 166,390
---------------- ----------------
COST OF REVENUES
Annual slip 10,981 11,091
Fuel 372,660 -
---------------- ----------------
Total cost of revenues 383,641 11,091
---------------- ----------------
GROSS PROFIT 270,272 155,299
SELLING, GENERAL AND ADMINISTRATIVE 152,007 60,478
DEPRECIATION AND AMORTIZATION 45,757 30,721
---------------- ----------------
INCOME FROM OPERATIONS 72,508 64,100
INTEREST EXPENSE (including interest to related parties
of $94,350 and $91,800) 238,992 184,475
---------------- ----------------
NET LOSS $ (166,484) $ (120,375)
================ ================
Net loss per common share $ (1,665) $ (1,204)
================ ================
Weighted average shares outstanding 100 100
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
KEY WEST CONCH HARBOR, INC.
Statements of Changes in Stockholders' Equity (Deficit)
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Common Stock
----------------------------------- Accumulated
Shares Amount Deficit Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 100 $ 1,000 $ - $ 1,000
Net loss for the year
ended December 31, 1994 - (120,375) (120,375)
---------------- ---------------- ---------------- ----------------
Balance at December 31, 1994 100 1,000 (120,375) (119,375)
Net loss for the year
ended December 31, 1995 - (166,484) (166,484)
---------------- ---------------- ---------------- ----------------
Balance at December 31, 1995 100 $ 1,000 $ (286,859) $ (285,859)
================ ================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
KEY WEST CONCH HARBOR, INC.
Statements of Cash Flows
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (166,484) $ (120,375)
Adjustments to reconcile net loss to net cash provided (used)
by operating activities
Depreciation and amortization 40,998 29,719
Amortization of deferred loan fees 4,759 1,002
Changes in assets and liabilities:
Receivables 2,407 (8,859)
Inventory (8,716) -
Prepaid expenses and other (13,359) (500)
Accounts payable (47,895) 71,792
Accrued interest 65,556 71,798
Accrued liabilities (6,660) 55,293
Security deposits (10,000) 10,000
Deferred revenue 19,260 -
---------------- ----------------
Net cash provided (used) by operating activities (120,134) 109,870
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (652,493) (2,332,166)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank and related party loans 797,795 2,239,500
Organization and loan costs (7,926) (14,547)
Proceeds from issuance of common stock - 1,000
---------------- ----------------
Net cash provided by financing activities 789,869 2,225,953
---------------- ----------------
NET INCREASE IN CASH 17,242 3,657
Cash at beginning of the year 3,657 -
---------------- ----------------
Cash at end of the year $ 20,899 $ 3,657
================ ================
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for interest $ 248,141 $ 112,674
================ ================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCIANG ACTIVITIES
Assumption of debt in connection with the
purchase of property and equipment $ 652,493 $ 2,332,166
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
KEY WEST CONCH HARBOR, INC.
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE A - ORGANIZATION
General
Key West Conch Harbor, Inc. (the "Company") is a S-Corporation, incorporated in
the State of Florida on December 23, 1993 for the purposes of acquiring,
developing, and operating a marina facility in Key West, Florida.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Cash Flows
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposits, and all highly liquid debt instruments with
original maturities of 3 months or less when purchased.
Inventory
Inventory is stated at the lower of cost or market and consists of fuel. Cost is
determined on the first-in, first-out ("FIFO") method of accounting.
Property and Equipment
Property and equipment are stated at cost. The Company provides for depreciation
on the straight-line method over the estimated useful lives of the related
assets. Major classes of property and equipment and their related useful lives
are as follows:
Life in
Major Class Years
Land improvements 20
Docks 20
Furniture, fixtures and equipment 7
Computer equipment 5
Maintenance and repairs are expensed as incurred. Replacements and betterments
are capitalized.
Deferred Loan Fees
Loan fees are capitalized and amortized over the life of the loan using the
straight-line method.
Revenue Recognition
Annual or seasonal slip rentals received are recognized as deferred revenue and
amortized into income over the life of the rental contract using the
straight-line method. All other revenues are recognized at the time the rental
occurs or the delivery of the product or service takes place.
Lease income
During 1994 all fuel operations where leased to a related party who made lease
payments of all interest on the first mortgage. Income recorded in 1994 from
these payments was $92,675.
7
<PAGE>
KEY WEST CONCH HARBOR, INC.
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Continued
Loss per share
Loss per share of common stock is based upon the weighted average number of
common shares outstanding. There is no effect on loss per share after giving
effect to proforma income taxes as if the Company was taxed as a C-Corporation.
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.
Income Taxes
Taxable income or loss of the S-Corporation is allocated to the shareholders in
accordance with the provisions of the Stockholders agreement. The Company
qualifies as a S-Corporation and as such, Federal income taxes accrue to the
shareholders rather than to the Company. Accordingly, the accompanying
statements of operations of the Company include no provision for Federal income
taxes.
NOTE C - GOING CONCERN UNCERTAINTY
As reflected in the statements of operations, the Company incurred net losses of
$166,484 and $120,375 in 1995 and 1994, respectively. At December 31, 1995,
current liabilities exceed current assets by $2,107,802. These factors, among
others, raise substantial doubt as to the Company's ability to continue as a
going concern.
Management has been successful in the past in negotiating delays in the payment
of the Company's loans and was successful in refinancing the mortgage debt
(Notes D and H) subsequent to December 31, 1995. Management is also negotiating
to transfer ownership and control of the Company to a public company (Note H).
The public company has plans to raise additional capital in the public market
after the acquisition.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
or classification of liabilities which may result from the possible inability of
the Company to continue as a going concern.
NOTE D - NOTES PAYABLE AND LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31,
------------------------------
1995 1994
---------- ------
<S> <C> <C>
First mortgage $1,550,000 $1,100,000
Second mortgage - stockholder 500,000 500,000
Third mortgage - related party 200,000 200,000
First note - stockholder 245,000 245,000
Second note - stockholder 125,000 125,000
Working capital note - stockholder 57,295 69,500
First note payable 200,000 -
Second note payable - stockholders 160,000 -
---------- ---------
3,037,295 2,239,500
Less current maturities 1,928,584 1,248,700
--------- ---------
Long-term portion $1,108,711 $ 990,800
============ ==========
</TABLE>
8
<PAGE>
KEY WEST CONCH HARBOR, INC.
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE D - NOTES PAYABLE AND LONG-TERM DEBT - Continued
First Mortgage. On December 29, 1993 the Company entered into a note payable for
$1,100,000 with a financial institution to purchase the marina. The note is
collateralized by the property. The mortgage is at a variable rate of 1 1/2%
above the banks prime rate and matures on June 29, 2010. Payments of interest
were required from January 29, 1994 through July 29, 1995, thereafter monthly
payment of principal and interest were required to fully amortize the note
through the maturity date.
On March 27, 1995 the Company renegotiated the variable rate note with the
financial institution for $1,550,000 (which included unpaid interest). This note
matures with all the principal due on October 1, 1996 and requires monthly
interest payments beginning on May 1, 1995, at a rate of 1% over the banks
index. (See Note H).
Prepaid interest on this note was $13,359 at December 31, 1995.
Second Mortgage. On December 28, 1993 the Company entered into a $500,000
promissory note with a stockholder, at a fixed rate of 8%, collateralized by a
second mortgage on the property. Annual payments are required for principal and
interest totaling $50,000 commencing on January 5, 1995 and continuing until the
maturity date of January 5, 2004. Principal and interest payments due on January
5, 1995, were deferred. Accrued interest was $44,257 and $40,000 at December 31,
1995 and 1994, respectfully.
Third Mortgage. As part of the original purchase the Company entered into a
$200,000 promissory note with a related party. This note had a fixed rate of 10%
and matures on March 15, 1997. (See Note H).
On January 13, 1995 the Company renewed the $200,000 promissory note,
subordinate to the first and second mortgage, with a stockholder, at a fixed
rate of 10%. The note matures on January 13, 1997 and requires monthly interest
payments.
First Note to Stockholder. On December 28, 1993 the Company entered into a
$245,000 promissory note with a stockholder, at a fixed rate of 8%. Annual
payments are required of $50,000 (principal and interest) commencing January 5,
1995 and continuing until the maturity date of January 5, 2004.Principal and
interest payments due on January 5, 1995, were deferred. At December 31, 1995
and 1994 accrued interest was $39,200 and $19,600, respectively. (See Note H).
Second Note to Stockholder. On December 28, 1993 the Company entered into a
$125,000 promissory note with a stockholder, at a fixed rate of 8% with a
maturity date in July 2001. Annual interest payments are required commencing on
January 5, 1995 and continuing until the maturity date in July 2001. Interest
due on January 5, 1995 was deferred. At December 31, 1995 and 1994 accrued
interest was $20,000 and $10,000, respectively. (See Note H).
Working Capital Note to Stockholder. During 1994, working capital of $69,500 was
provide to the Company by a stockholder at a fixed rate of 8%. The timing of the
repayment of the note payable is at the discretion of the Company and is
classified as current maturities in the accompanying balance sheets. The balance
outstanding at December 31, 1995 and 1994 was $57,295 and $69,500, respectively.
At December 31, 1995 and 1994 accrued interest was $6,948 and $2,198,
respectively.
First Note payable. On August 3, 1995 the Company entered into a $200,000
promissory note with a financial institution maturing on February 3, 1999, at a
variable rate of 1 3/4% above the financial institutions base rate. Monthly
interest payments are required.
9
<PAGE>
KEY WEST CONCH HARBOR, INC.
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE D - NOTES PAYABLE AND LONG-TERM DEBT - Continued
Second Note Payable. The following two notes were entered into by stockholders
of the Company to provide operating funds.
On October 2, 1995 the stockholders entered into a note payable for $100,000
with the principal maturing on October 2, 1996, at a variable rate of 1% over
prime. Monthly interest payments commencing on November 2, 1995 are required.
On December 27,1995 the stockholders entered into a second note payable for
$100,000 with the principal maturing on November 27, 1996, at a variable rate of
2% over prime. Monthly interest payments commencing on January 27, 1995 are
required. At December 31, 1995 $60,000 had been drawn and is outstanding under
this note payable.
Aggregate maturities of long-term debt at December 31, 1995 are as follows:
1996 $ 1,928,584
1997 284,752
1998 87,636
1999 290,760
2000 94,143
Thereafter 351,420
-----------
Total $ 3,037,295
==========
NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments", requires disclosure about the fair value of all
financial assets and liabilities for which it is practicable to estimate. Cash,
accounts receivable, accounts payable and other liabilities are carried at
amounts that reasonably approximate their fair values.
The carrying amount and fair value of notes payable and long-term debt are as
follows:
December 31, 1995
--------------------------
Carrying Fair
amount value
---------- ---------
Variable rate debt $1,910,000 $1,910,000
Fixed rate debt 1,070,000 1,151,250
Demand note 57,296 57,296
The fair value of the Company's fixed rate debt have been estimated based upon
relative changes in the Company's variable borrowing rates since origination of
the fixed rate debt. Fair values of variable rate debt and demand notes are
deemed to approximate carrying amount.
10
<PAGE>
KEY WEST CONCH HARBOR, INC.
Notes to Financial Statements
Years ended December 31, 1995 and 1994
NOTE F - RELATED PARTY TRANSACTIONS
The Company has a $9,381 payable to a stockholder related to commissions earned
in conjunction with the purchase of the marina on December 28, 1993. In
addition, the Company has a $30,000 payable to a stockholder for a finders fee
in conjunction with the purchase of the marina.
During 1995 and 1994, the Company entered into various notes payable with
stockholders of the Company. See Note D.
Accrued interest due to the stockholders was $110,405 and $71,798 at December
31, 1995 and 1994, respectively. Interest expense in connection with notes due
to stockholders was $94,350 and $91,800 during 1995 and 1994, respectively.
Upon formation of the S Corporation, the Company purchased the Key West facility
for approximately $2,300,000 from a stockholder. This purchase price
approximated the fair market value of the property.
NOTE G - CONTINGENT LIABILITIES
In the normal course of its business, the Company is subject to litigation.
Management of the Company, based on discussions with its outside legal counsel,
does not believe any claims, individually or in the aggregate, will have a
material adverse impact on the Company's financial position.
NOTE H - SUBSEQUENT EVENTS
On July 25, 1996 the majority stockholder sold 73.625 shares to a third party
which resulted in a change in control of the Company in exchange for $1,700,000.
On April 8 , 1996, the Company entered into a loan agreement for $2,724,185
maturing on April 1, 2016. This agreement renewed and consolidated the first
mortgage of $1,550,000 with an additional amount of $1,174,185 which was used to
pay off the third mortgage, the second note payable, to provide operating funds
and to fund expansion of the fuel system. The agreement requires twenty-four
monthly interest payments beginning May 1, 1996 at a rate of 9% and two hundred
and sixteen monthly principal and interest payments of $25,510 beginning May 1,
1998 at a rate of 9% during the first 36 payments and 1% over prime thereafter.
Effective of October 31, 1996, the Company, by consent of the stockholders,
entered into an agreement (the "Agreement") with Sonoma International
("Sonoma"), a public company. The Agreement requires the transfer and assignment
to Sonoma of all of the common stock of the Company in exchange for 300,000
shares of common stock of Sonoma.
11
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Sonoma International (a public company which has had no operations since 1988)
("Sonoma") was incorporated under the laws of the State of Nevada on June 10,
1940. Since February of 1988, Sonoma has focused on finding assets and or
operations that could be acquired by Sonoma so that Sonoma could become an
operating entity.
Jamestown Resort & Marina, Ltd. ("JRML") is a limited partnership, organized by
Jamestown Resort & Marina, Inc., the general partner, under the laws of the
State of Kentucky on November 1, 1987. JRML owns a resort and marina facility on
Lake Cumberland near Jamestown, Kentucky.
On September 12, 1996, Sonoma entered into a stock exchange agreement ("First
Agreement") with JRML whereby Sonoma would be reorganized in consideration of
acquiring all of the partnership units of JRML. Sonoma is to acquire 100% of
JRML in exchange for an aggregate of 1,500,000 shares of its common stock.
Key West Conch Harbor, Inc. ("KWCHI") is a S-Corporation which was incorporated
in the State of Florida on December 23, 1993 for the purposes of acquiring,
developing, and operating a marina facility in Key West, Florida.
Effective October 31, 1996, Sonoma entered into a stock exchange agreement (the
"Second Agreement") with KWCHI. The Second Agreement requires the transfer and
assignment to Sonoma of all of the common stock of KWCHI in exchange for 300,000
shares of common stock of Sonoma.
The unaudited pro forma balance sheet of Sonoma reflects the reorganization with
JRML and KWCHI as if it had occurred on June 30, 1996. Such pro forma
information is based on the historical balance sheet data of Sonoma, JRML and
KWCHI as of June 30, 1996. For accounting purposes, the merger between Sonoma
and JRML is regarded as an acquisition by JRML of substantially all of the
outstanding stock of Sonoma and is accounted for as a recapitalization of JRML
with JRML as the acquirer (a reverse acquisition). The subsequent merger with
KWCHI is accounted for using the pooling method of accounting. The unaudited pro
forma statements of operations for the years ended June 30, 1996 and 1995
reflect the transactions as if they had occurred on July 1, 1994.
The unaudited pro forma financial information is not necessarily indicative of
the results of operations that would have been reported had such events occurred
on the dates specified, nor is it necessarily indicative of the future results
of the combined entities. The unaudited pro forma financial statements should be
read in conjunction with the historical financial statements of Sonoma, JRML and
KWCHI.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Pro Forma Consolidated Balance Sheet (unaudited)
June 30, 1996
<TABLE>
<CAPTION>
Historical - Note 1 Note 2
------------------------------------------ Pro Forma Pro Forma
Sonoma JRML KWCHI Adjustments Balance
---------- ------------ ------------- ----------- -----------
CURRENT ASSETS
<S> <C> <C> <C> <C> <C>
Cash $ - $ 16,167 $ 508,155 $ - $ 524,322
Escrow funds - 19,097 - - 19,097
Receivables:
Trade, net - 131,319 8,483 - 139,802
Other - 59,055 - - 59,055
Inventory - 155,004 22,406 - 177,410
Prepaid expenses and other - 40,901 31,242 - 72,143
---------- ------------- ------------ ----------- -----------
Total current assets - 421,543 570,286 - 991,829
PROPERTY AND EQUIPMENT
Buildings and improvements - 2,197,655 - - 2,197,655
Land - - 1,816,298 - 1,816,298
Land improvements - 79,962 182,535 - 262,497
Docks and floating buildings - 7,174,566 1,094,057 - 8,268,623
Boats and improvements - 2,169,004 - - 2,169,004
Fuel tanks and containment building - - 155,993 - 155,993
Furniture, fixtures and equipment - 1,920,713 45,538 - 1,966,251
Vehicles - 22,482 - - 22,482
Construction in progress - 374,963 - - 374,963
---------- ------------- ------------ ----------- -----------
- 13,939,345 3,294,421 - 17,233,766
Less accumulated depreciation and amortization - 4,254,953 99,063 - 4,354,016
---------- ------------- ------------ ----------- -----------
Net property and equipment - 9,684,392 3,195,358 - 12,879,750
OTHER ASSETS
Deferred loan fees, net - 348,593 50,275 - 398,868
Goodwill, net - 561,963 - - 561,963
---------- ------------- ------------ ----------- -----------
Total other assets - 910,556 50,275 - 960,831
---------- ------------- ------------ ----------- -----------
TOTAL ASSETS $ - $ 11,016,491 $ 3,815,919 $ - $14,832,410
========== ============= ============ =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Pro Forma Consolidated Balance Sheet - Continued (unaudited)
June 30, 1996
<TABLE>
<CAPTION>
Historical - Note 1 Note 2
------------------------------------------ Pro Forma Pro Forma
Sonoma JRML KWCHI Adjustments Balance
---------- ------------ ------------- ------------ -----------
CURRENT LIABILITIES
<S> <C> <C> <C> <C> <C>
Current portion of long-term debt $ 262,391 $ 3,457,920 $ 299,041 $ - $ 4,019,352
Accounts payable - 394,769 16,594 - 411,363
Accrued interest 252,435 469,681 135,728 (417,291) 440,553
Accrued liabilities 275 204,254 24,568 100,000 329,097
Security deposits - 251,334 17,600 - 268,934
Deferred revenue - 599,879 30,526 - 630,405
Accrued management fees - related party - 652,679 - (652,679) -
Accrued guarantee fees - related party - 70,000 - (70,000) -
--------------- ------------ ------------- ----------- ----------
Total current liabilities 515,101 6,100,516 524,057 (1,039,970) 6,099,704
LONG-TERM DEBT - 6,964,623 3,581,648 - 10,546,271
OWNERS' DEFICIT
Partners' deficit - (2,048,648) - 2,048,648 -
Stockholders' deficit
Common stock, $10 par value, authorized, issued
and outstanding shares, 100 - - 1,000 (1,000) -
Common stock, $0.001 par value, authorized, issued
and outstanding shares, 2,300,000 60,000 - - (57,700) 2,300
Additional paid-in capital 4,274,616 - (3,551,047) 723,569
Accumulated deficit (4,849,717) - (290,786) 2,601,069 (2,539,434)
------------ ------------ ------------ ---------- -----------
Total owners' deficit (515,101) (2,048,648) (289,786) 1,039,970 (1,813,565)
------------ ------------ ------------ ---------- -----------
TOTAL LIABILITIES AND OWNERS' DEFICIT $ - $ 11,016,491 $ 3,815,919 $ - $ 14,832,410
============ ============ ============ ========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Pro Forma Consolidated Statement of Operations (unaudited)
Year ended June 30, 1996
<TABLE>
<CAPTION>
Historical - Note 1 Note 2
-------------------------------------- Pro Forma Pro Forma
Sonoma JRML KWCHI Adjustments Balance
---------- --------- ----------- ----------- -----------
REVENUES
<S> <C> <C> <C> <C> <C>
Annual slip fees $ - $ 1,197,062 $ 241,650 $ - $ 1,438,712
Boat rental - 743,442 - - 743,442
Lease - - (24,591) - (24,591)
Lodge - 687,539 - - 687,539
Fuel - 545,320 825,544 - 1,370,864
Convenience store and merchandise - 366,458 - - 366,458
Restaurant - 369,530 - - 369,530
Other - 113,175 19,368 - 132,543
---------- ----------- ---------- ---------- ---------
Total revenues - 4,022,526 1,061,971 - 5,084,497
COST OF REVENUES
Annual slip - 136,821 3,267 - 140,088
Boat rental - 387,696 - - 387,696
Lodge - 229,667 - - 229,667
Fuel - 351,552 649,490 - 1,001,042
Convenience store and merchandise - 285,137 - - 285,137
Restaurant - 316,826 - - 316,826
Other - 103,498 - - 103,498
---------- ----------- ---------- ---------- ---------
Total cost of revenues - 1,811,197 652,757 - 2,463,954
---------- ----------- ---------- ---------- ---------
GROSS PROFIT - 2,211,329 409,214 - 2,620,543
SELLING, GENERAL AND ADMINISTRATIVE 9,147 1,295,462 186,418 100,000 1,591,027
GAIN ON REDUCTION OF OBLIGATIONS 28,363 - - 28,363
AMORTIZATION OF GOODWILL - (68,834) (3,382) - (72,216)
DEPRECIATION AND AMORTIZATION - (491,229) (72,531) - (563,760)
---------- ----------- ---------- ---------- ---------
INCOME (LOSS) FROM OPERATIONS 19,216 355,804 146,883 (100,000) 421,903
INTEREST EXPENSE 11,284 914,562 229,637 - 1,155,483
---------- ----------- ---------- ---------- ---------
NET INCOME (LOSS) $ 7,932 $ (558,758) $ (82,754) $ (100,000) $ (733,580)
========== =========== ========== ========== =========
Net income (loss) per common share $ 0.00 $ (828) $ (0.32)
========== ========== =========
Weighted average shares outstanding 47,774,591 100 2,300,000
========== ========== =========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Pro Forma Consolidated Statement of Operations (unaudited)
Year ended June 30, 1995
<TABLE>
<CAPTION>
Historical - Note 1 Note 3
------------------------------------------ Pro Forma Pro Forma
Sonoma JRML KWCHI Adjustments Balance
---------- ------------ ------------- ----------- -----------
REVENUES
<S> <C> <C> <C> <C> <C>
Annual slip fees $ - $ 1,091,420 $ 119,095 $ - $ 1,210,515
Boat rental - 758,764 - - 758,764
Lodge - 694,079 - - 694,079
Fuel - 494,998 244,961 - 739,959
Convenience store and merchandise - 352,601 - - 352,601
Restaurant - 368,594 - - 368,594
Lease revenue - - 101,110 - 101,110
Other - 94,093 67 - 94,160
---------- ------------ ------------ ----------- ---------
-
Total revenues - 3,854,549 465,233 - 4,319,782
COST OF REVENUES
Annual slip - 162,466 16,111 - 178,577
Boat rental - 349,613 - - 349,613
Lodge - 234,583 - - 234,583
Fuel - 325,714 190,951 - 516,665
Convenience store and merchandise - 276,268 - - 276,268
Restaurant - 314,009 - - 314,009
Other - 86,183 - - 86,183
---------- ------------ ------------ ----------- ---------
Total cost of revenues - 1,748,836 207,062 - 1,955,898
---------- ------------ ------------ ----------- ---------
GROSS PROFIT - 2,105,713 258,171 - 2,363,884
SELLING, GENERAL AND ADMINISTRATIVE 75,800 1,201,898 68,628 100,000 1,446,326
AMORTIZATION OF GOODWILL - 18,426 - 18,426
DEPRECIATION AND AMORTIZATION - 604,854 39,673 - 644,527
---------- ------------ ------------ ----------- ---------
INCOME (LOSS) FROM OPERATIONS (75,800) 280,535 149,870 (100,000) 254,605
INTEREST EXPENSE 34,240 761,645 221,031 - 1,016,916
---------- ------------ ------------ ----------- ---------
NET INCOME (LOSS) $ (110,040) $ (481,110) $ (71,161) $ (100,000) $ (762,311)
========== ============ ============ =========== =========
Net Income (loss) per common share $ 0.00 $ (712) $ (0.33)
========== ============ =========
Weighted average shares outstanding 25,579,850 100 2,300,000
========== ============ =========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Notes to Pro Forma Consolidated Financial Statements (unaudited)
NOTE 1 - HISTORICAL FINANCIAL STATEMENTS
Reflects the historical balance sheet and statements of operations of Somona,
JRML and KWCHI.
NOTE 2 - PRO FORMA ADJUSTMENTS FOR JUNE 30, 1996 (See Pro Forma Adjustment
Summary further)
(a) The Agreement to acquire JRML and KWCHI requires that Sonoma effect a one
for two hundred reverse split, leaving 300,000 shares issued and outstanding,
and issue 2,000,000 shares (with a par value of $0.001 after the reverse split)
for the acquisition of the JRML and KWCHI. The partners of JRML will receive
1,500,000 shares. The shareholders of KWCHI will receive 300,000 shares. Clear
Creek Investments, LLC which owns all of the outstanding shares of Jamestown
Resort and Marina, Inc., the general partner for JRML will receive an additional
200,000 shares. The following shares were issued to purchase all ownership
interests in JRML and KWCHI.
(1) Reflects the issuance of 907,296 shares to acquire the JRML
partners interest.
(2) Reflects the issuance of 300,000 shares to acquire KWCHI.
(3) Reflects the issuance of 200,000 shares to Clear Creek
Investments, LLC which owns all of the outstanding shares of
Jamestown Resort and Marina, Inc., the general partner for
JRML, for origination services.
(4) Reflects the effect of a 1 for 200 reverse split.
(b) Reflects the issuance of 111,289 shares to a related party to relieve
$417,291 in interest payable.
(c) Reflects the issuance of 18,683 shares to a related party to relieve
$70,000 in guarantee fees payable.
(d) Reflects the issuance of 174,200 shares to a related party to relieve
$652,679 in management fees payable.
(e) Reflects the issuance of 261,563 shares to a related party for
commission and incentive fees in connection with the sale of JRML.
(f) Reflects the issuance of 26,969 shares to an incentive stock plan for
JRML employees and creditors.
(g) Reflects the increase in professional fees to meet the filing and
related requirements of an active public company.
(h) Reflects the elimination of the accumulated deficit in the public
company resulting from the reverse acquisition.
NOTE 3 - PRO FORMA ADJUSTMENTS FOR JUNE 30, 1995
(a) Reflects the increase in professional fees to meet the filing and
related requirements of an active public company.
(b) Reflects the issuance of 26,690 shares to an incentive stock plan for
JRML employees and creditors.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Notes to Pro Forma Consolidated Financial Statements (unaudited)
NOTE 4 - EXTRAORDINARY ITEMS NOT INCLUDED IN THE UNAUDITED PRO FORMA FINANCIAL
STATEMENTS
During fiscal year 1996, Sonoma generated an extraordinary gain from conversion
of debt to equity of $418,699. JRML also had an extraordinary gain on debt
extinguishment of $2,518,487 during this period. These items are not reflected
in the accompanying pro forma consolidated financial statements.
NOTE 5 - INCOME TAXES
On a consolidated basis, Sonoma, the KWCHI (S-Corporation), and JRML (the
Partnership) incurred losses for 1996 and 1995, and the more likely than not
criterion as to whether income will be generated in the future has not been met.
Therefore, a 100% valuation allowance has been recorded against the tax benefit
generated from any proforma net operating losses. Accordingly, the accompanying
pro forma statements of operations do not reflect any income tax expense
(benefit).
<PAGE>
SONOMA INTERNATIONAL
(A NEVADA CORPORATION)
Pro Forma Adjustment Summary
Balance Sheet
June 30, 1996
<TABLE>
<CAPTION>
Accumulated
Accrued Accrued Common Common Additional deficit
Accrued Accrued management guarantee Partners' Stock Stock paid-in and net
interest liabilities fees fees deficit $10 par $0.001 par capital loss
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Note 2(a)(1) $ $ $ $ $2,048,648 $ $ 907 $ (907) $ (2,048,648)
Note 2(a)(2) (1,000) 300 700
Note 2(a)(3) 200 (200)
Note 2(a)(4) (59,700) 59,700
Note 2(b) (417,291) 111 417,180
Note 2(c) (70,000) 19 69,981
Note 2(d) (652,679) 174 652,505
Note 2(e) 262 (262)
Note 2(f), 3(b) 27 99,973 (100,000)
Note 2(g), 3(a) 100,000 (100,000)
Note 2(h) (4,849,717) 4,849,717
$(417,291) $100,000 $(652,679) $(70,000) $2,048,648 $(1,000) $(57,700) $(3,551,047) $ 2,601,069
</TABLE>
Statement of Operations Statement of Operations
Year ended June 30, 1996 Year ended June 30, 1995
Selling General Selling General
and and
Administrative Administrative
Note 2(g) $50,000 Note 3(a) $ 50,000
Note 2(f) 50,000 Note 3(b) 50,000
$100,000 $ 100,000
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Sonoma International
November 11, 1996
Date Harry W. Hendersen,
President and Chief
Accounting Officer