UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of Earliest Date Reported: September 12, 1996
Sonoma International
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(Exact name of registrant as specified in its charter)
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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
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(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 7. Financial statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of businesses acquired
The Jamestown Resort & Marina, Ltd. 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.
<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.
2
<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 ------------ ------------
<S> <C> <C>
Current portion of long-term debt (including $3,410,277
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.
3
<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.
4
<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.
5
<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.
6
<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
December 31,
1995 1994
----------- ----------
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
=========== ===========
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>
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. (the "Partnership") is a limited partnership
organized under the laws of the State of Kentucky by Jamestown Resort & Marina,
Inc., the general partner, on November 1, 1987. The Partnership owns a resort
and marina facility near Jamestown, Kentucky on Lake Cumberland.
On September 12, 1996, Sonoma entered into a stock exchange agreement
("agreement") with the Partnership whereby Sonoma would be reorganized in
consideration of acquiring all of the partnership units of the Partnership.
Sonoma is to acquire 100% of the Partnership in exchange for an aggregate of
approximately 85% of its common stock.
The unaudited pro forma balance sheet of Sonoma reflects the reorganization with
the Partnership as if it had occurred on June 30, 1996. Such pro forma
information is based on the historical balance sheet data of Sonoma and the
Partnership as of June 30, 1996, giving effect to the proposed acquisition of
all partnership interests of the Partnership using the pooling method of
accounting. The unaudited pro forma statements of operations for the years ended
June 30, 1996 and 1995 reflects the reorganization as if it had occurred on July
1, 1994, giving effect to the acquisition using the pooling method of
accounting.
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 and the
Partnership.
<PAGE>
SONOMA INTERNATIONAL
(A Nevada Corporation)
Pro Forma Consolidated Balance Sheet (unaudited)
June 30, 1996
<TABLE>
<CAPTION>
Historical Pro Forma Pro Forma
Sonoma Jamestown Adjustments Balance
CURRENT ASSETS ---------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Cash $ - $ 16,167 $ - $ 16,167
Escrow funds - 19,097 - 19,097
Receivables: - -
Trade, net - 131,319 - 131,319
Other - 34,063 - 34,063
Inventory - 155,004 - 155,004
Prepaid expenses - 40,901 - 40,901
---------- ------------- ------------- ------------
Total current assets - 396,551 - 396,551
PROPERTY AND EQUIPMENT
Buildings and improvements - 2,197,655 - 2,197,655
Land improvements - 79,962 - 79,962
Docks and floating buildings - 7,174,566 - 7,174,566
Boats and improvements - 2,169,004 - 2,169,004
Furnishings, fixtures and equipment - 1,920,713 - 1,920,713
Vehicles - 22,482 - 22,482
Constuction in Progress - 374,963 - 374,963
---------- ------------- ------------- ------------
- 13,939,345 - 13,939,345
Less accumulated depreciation and amortization - 4,254,953 - 4,254,953
---------- ------------- ------------- ------------
Net property and equipment - 9,684,392 - 9,684,392
OTHER ASSETS
Deferred loan fees, net - 348,593 - 348,593
Goodwill, net - 561,963 - 561,963
---------- ------------- ------------- ------------
Total other assets - 910,556 - 910,556
TOTAL ASSETS $ - $ 10,991,499 $ - $ 10,991,499
========== ============= ============= ============
</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 Pro Forma Pro Forma
Sonoma Jamestown Adjustments Balance
CURRENT LIABILITIES ---------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Current portion of long-term debt $ 262,391 $ 3,457,920 $ - $ 3,720,311
Accounts payable 394,769 - 394,769
Accrued interest 252,435 469,681 - 722,116
Accrued liabilities 275 204,254 - 204,529
Security deposits - 251,334 - 251,334
Deferred revenue - 599,879 - 599,879
Accrued management fees - related party - 627,687 - 627,687
Accrued guarantee fees - related party - 70,000 - 70,000
---------- ------------- ------------- ------------
Total current liabilities 515,101 6,075,524 - 6,590,625
LONG-TERM LIABILITIES - 6,964,623 6,964,623
OWNERS' DEFICIT
Partners' deficit - (2,048,648) 2,048,648 (A) -
Stockholders' deficit
Common stock, $0.20 par value, authorized, issued
and outstanding shares, 2,000,000 60,000 - 340,000 (A) 400,000
Additional paid-in capital 4,274,616 - (2,388,648)(A) 1,885,968
Accumulated deficit (4,849,717) - (4,849,717)
---------- ------------- ------------- ------------
Total owners' deficit (515,101) (2,048,648) - (2,563,749)
TOTAL LIABILITIES AND OWNERS' DEFICIT $ - $ 10,991,499 $ - $ 10,991,499
========== ============= ============= ============
</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 Pro Forma Pro Forma
Sonoma Jamestown Adjustments Balance
REVENUES ---------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Annual slip fees $ - $ 1,197,062 $ - $ 1,197,062
Boat rental - 743,442 - 743,442
Lodge - 687,539 - 687,539
Fuel - 545,320 - 545,320
Convenience store and merchandise - 366,458 - 366,458
Restaurant - 369,530 - 369,530
Other - 113,175 - 113,175
---------- ------------- ------------- ------------
-
Total revenues - 4,022,526 - 4,022,526
COST OF REVENUES
Annual slip - 136,821 - 136,821
Boat rental - 387,696 - 387,696
Lodge - 229,667 - 229,667
Fuel - 351,552 - 351,552
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 - 1,811,197
---------- ------------- ------------- ------------
GROSS PROFIT - 2,211,329 - 2,211,329
SELLING, GENERAL AND ADMINISTRATIVE 9,147 1,295,462 - 1,304,609
GAIN ON REDUCTION OF OBLIGATIONS 28,363 - - 28,363
AMORTIZATION OF GOODWILL - 68,834 - 68,834
DEPRECIATION AND AMORTIZATION - 491,229 - 491,229
---------- ------------- ------------- ------------
INCOME (LOSS) FROM OPERATIONS 19,216 355,804 - 375,020
INTEREST EXPENSE 11,284 914,562 - 925,846
---------- ------------- ------------- ------------
NET INCOME (LOSS) $ 36,295 $ (558,758) $ - $ (522,463)
========== ============= ============= ============
Net income (loss) per common share $ 0.00 $ (0.26)
========== ============
Weighted average shares outstanding 47,774,591 $ 2,000,000
========== ============
</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 Pro Forma Pro Forma
Sonoma Jamestown Adjustments Balance
REVENUES ---------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Annual slip fees $ - $ 1,091,420 $ - $ 1,091,420
Boat rental - 758,764 - 758,764
Lodge - 694,079 - 694,079
Fuel - 494,998 - 494,998
Convenience store and merchandise - 352,601 - 352,601
Restaurant - 368,594 - 368,594
Other - 94,093 - 94,093
---------- ------------- ------------- ------------
-
Total revenues - 3,854,549 - 3,854,549
COST OF REVENUES
Annual slip - 162,466 - 162,466
Boat rental - 349,613 - 349,613
Lodge - 234,583 - 234,583
Fuel - 325,714 - 325,714
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 - 1,748,836
GROSS PROFIT - 2,105,713 - 2,105,713
---------- ------------- ------------- ------------
SELLING, GENERAL AND ADMINISTRATIVE 75,800 1,201,898 - 1,277,698
AMORTIZATION OF GOODWILL - 18,426 - 18,426
DEPRECIATION AND AMORTIZATION - 604,854 - 604,854
---------- ------------- ------------- ------------
INCOME (LOSS) FROM OPERATIONS (75,800) 280,535 - 204,735
INTEREST EXPENSE 34,240 761,645 - 795,885
---------- ------------- ------------- ------------
NET LOSS $ (110,040) $ (481,110) $ - $ (591,150)
========== ============= ============= ============
Net loss per common share $ 0.00 $ (0.30)
========== ============
Weighted average shares outstanding 25,579,850 $ 2,000,000
========== ============
</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 A - RECLASSIFICATION OF PARTNERS' DEFICIT TO ADDITIONAL PAID-IN CAPITAL
Reflects the recording of the Partners' deficit to additional paid-in capital.
NOTE B - EXTRAORDINARY ITEMS NOT INCLUDED IN THE UNAUDITED PRO FORMA FINANCIAL
STATEMENTS
During fiscal year 1996, Sonoma had an extraordinary gain from conversion of
debt to equity of $418,699. Jamestown also had an extraordinary gain on debt
extinguishment of $2,518,487. These items are not reflected in the accompanying
pro forma consolidated financial statements.
NOTE C - INCOME TAXES
As Sonoma and the Partnership on a consolidated basis incurred losses for both
1996 and 1995, and it is unclear as to whether income will be generated going
forward, any income tax benefit has a 100% valuation allowance recorded against
it. Accordingly, the accompanying pro forma statements of operations do not
reflect any income taxes.
<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
October 15, 1996
Date Harry W. Henderson, President and
Chief Accounting Officer
<PAGE>
