UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 event reported): February 14, 2006
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AZUR HOLDINGS, INC.
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(Exact name of Registrant as specified in charter)
Delaware 000-25824 13-3337553
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(State of Incorporation) (Commission File No.) (IRS Employer
Identification Number)
101 NE 3rd Avenue, Suite 1220, Fort Lauderdale, Florida 33301
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 954-763-1515
New Harvest Capital Corporation
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities
Act(17CFR230.425)
|_| Soliciting material pursuant to Rule14a-12 under the Exchange Act
(17CFR240.14a-2)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17CFR240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17CFR240.13e-4(c))
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TABLE OF CONTENTS
Item No. Description of Item Page No.
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Item 1.01 Entry Into a Material Definitive Agreement................ 4
Item 2.01 Completion of Acquisition or Disposition of Assets........ 5
Item 3.02 Unregistered Sale of Securities........................... 21
Item 5.06 Change in Shell Company Status............................ 21
Item 9.01 Financial Statements and Exhibits......................... 21
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this Current Report on Form 8-K contains
some forward-looking statements. For example, statements included in this report
regarding our financial position, business strategy and other plans and
objectives for future operations, and assumptions and predictions about future
product demand, supply, manufacturing, costs, marketing and pricing factors are
all forward-looking statements.
Statements that are predictive in nature, that depend upon or refer to
future events or conditions or that include words such as "expects,"
"anticipates," "intends," "plans," "believes," "estimates" and similar
expressions are forward-looking statements. Although we believe that these
statements are based upon reasonable assumptions, including projections of
orders, sales, operating margins, earnings, cash flow, research and development
costs, working capital, capital expenditures and other projections, they are
subject to several risks and uncertainties, and therefore, we can give no
assurance that these statements will be achieved.
Investors are cautioned that our forward-looking statements are not
guarantees of future performance and the actual results or developments may
differ materially from the expectations expressed in the forward-looking
statements.
As for the forward-looking statements that relate to future financial
results and other projections, actual results will be different due to the
inherent uncertainty of estimates, forecasts and projections may be better or
worse than projected. Given these uncertainties, you should not place any
reliance on these forward-looking statements. These forward-looking statements
also represent our estimates and assumptions only as of the date that they were
made. We expressly disclaim a duty to provide updates to these forward-looking
statements, and the estimates and assumptions associated with them, after the
date of this filing to reflect events or changes in circumstances or changes in
expectations or the occurrence of anticipated events.
We undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any additional disclosures we make in our
reports on Form 10-KSB, Form 10-QSB, Form 8-K, or their successors. We also note
that we have provided a cautionary discussion of risks and uncertainties under
the caption "Risk Factors" in this Current Report. These are factors that we
think could cause our actual results to differ materially from expected results.
Other factors besides those listed here could also adversely affect us.
Information regarding market and industry statistics contained in this
Current Report is included based on information available to us which we believe
is accurate. We have not reviewed or included data from all sources, and cannot
assure stockholders of the accuracy or completeness of the data included in this
Current Report. Forecasts and other forward-looking information obtained from
these sources are subject to the same qualifications and the additional
uncertainties accompanying any estimates of future market size, revenue and
market acceptance of products and services. This discussion is provided as
permitted by the Private Securities Litigation Reform Act of 1995.
3
Explanatory Note
This Current Report on Form 8-K is being filed by Azur Holdings, Inc. (the
"Company") in connection with a transaction in which the Company acquired 100%
of the issued and outstanding capital stock of The Grand Shell Landing, Inc., a
Mississippi corporation ("GSLI"), and 75% of the issued and outstanding capital
stock of Azur Shell Landing Resort, Inc., a Mississippi corporation ("ASLR"),
and assumed certain liabilities of Azur International, Inc. ("AII") on February
14, 2006. See "Business" and "Properties" in Item 2.01 of this Current Report
for information on the businesses and properties of GSLI and ASLR. The Company
accomplished the acquisition through its entry into and consummation of an
Exchange Agreement dated February 14, 2006 (the "Exchange Agreement") with AII,
a Nevada corporation which prior to the consummation of the Exchange Agreement
owned approximately 50.4% of the issued and outstanding shares of capital stock
of the Company and immediately after the consummation of the Exchange Agreement
owned approximately 99.8% of the issued and outstanding shares of capital stock
of the Company.
As a result of the above transaction, the Company ceased being a shell
company as such term is defined in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). See Item 5.06 of this Current Report.
Throughout this Current Report, and unless the context otherwise requires,
"we," "our" and "us" refers collectively to the Company and its subsidiaries,
GSLI and ASLR.
Item 1.01. Entry into a Material Definitive Agreement.
On February 14, 2006, the Company entered into and consummated the
Exchange Agreement with AII.
Under the Exchange Agreement, we issued an aggregate of 25,236,773 shares
of our Common Stock, par value $.0001 per share in exchange for 2,000 shares of
common stock of GSLI and 7,500 shares of common stock of ASLR held by AII. We
also assumed certain liabilities of AII aggregating approximately $1,650,000.
After the consummation of the Exchange Agreement, AII owns an aggregate of
25,287,109 shares of our Common Stock, constituting approximately 99.8% of the
issued and outstanding shares of our Common Stock.
In connection with the closing of the Exchange Agreement, we entered into
a series of agreements with Omicron Master Trust and certain other investors
(collectively, the "Investors") who had loaned to GSLI and ASLR an aggregate of
$1 million and $6 million in May 2005 and November 2005, respectively, including
a guarantee of all of such obligations. We also agreed to issue to the Investors
in exchange for warrants to purchase an aggregate of 10 million shares of common
stock of AII at a price of $.50 per share, new five-year warrants to purchase an
aggregate of 10 million shares of our common stock at a price of $.50 per share
and we and the Investors agreed that the $1 million principal amount of
convertible promissory notes issued in May 2005 will also be convertible into
shares of our common stock (based on a conversion rate, subject to adjustment)
of the lesser of $3.00 per share or an amount per share calculated by dividing
$45 million by the number of shares of common stock on a fully diluted basis).
Finally, we entered into a new registration rights agreement with the Investors
covering the registration of our shares of common stock, including shares of
common stock issuable upon conversion of warrants and on conversion of the
outstanding convertible notes held by the Investors.
4
Item 2.01 Completion of Acquisition or Disposition of Assets.
As a result of the Company's acquisition of all of the outstanding capital
stock of GSLI and 75% of the issued and outstanding capital stock of ASLR, which
corporations operate the business and own the properties discussed herein, the
Company ceased being a shell company as such term is defined in Rule 12b-2 under
the Exchange Act. See Item 5.06.
BUSINESS
Our History
Azur Holdings, Inc. (most recently known as "New Harvest Capital
Corporation") was organized under the laws of the State of Delaware on August
29, 1985. In February 1986, we completed a public offering of 50,000,000 shares
of our Common Stock par value $.0001 per share. In October 1988, we formed a
wholly-owned subsidiary, Exclusives for the Bride, Inc. ("Exclusives"). During
the fiscal year ended April 30, 1991 ("Fiscal 1991"), we sold substantially all
of the assets of Exclusives and since then we have had no substantial revenues.
From October 31, 1990 until February 2002, our assets consisted primarily
of Common Stock of JLM Couture, Inc. ("JLM"), a company registered under the
Securities Exchange Act of 1934 (the "Exchange Act") which is engaged in the
business of marketing bridal gowns and bridesmaids' gowns.
On February 1, 2002, JLM acquired these shares from us for $161,883. On
March 7, 2002, we conducted a private offering of 25,000,000 shares of our
common stock for an aggregate considerate of $62,500, from six purchasers. We
also issued 13,860,000 shares to Mr. Joseph L. Murphy in payment of $69,300 owed
to him for services rendered to us. These steps were taken to enable us to
implement its plan to acquire an operating entity.
On January 14, 2005, eight shareholders completed the sale of their
restricted shares of our common stock to two purchasers, Ruth Shepley
("Shepley") and HVST Acquisition Corporation, a Nevada corporation, owned and
controlled by James A. Ditanna ("HVST Acquisition"). Under the terms of the
purchase agreement with the selling shareholders, Shepley acquired 8,200,000
restricted common shares (approximately 6.0% of the then issued and outstanding
shares) and HVST Acquisition acquired 68,960,000 restricted common shares
(approximately 50.4% of the then issued and outstanding shares). In connection
with the acquisition, the then officers and director of the Company resigned and
James Ditanna and two other persons were appointed as the directors and officers
of the Company.
5
On June 1, 2005, pursuant to a Stock Purchase Agreement dated as of June
1, 2005 between HVST Acquisition and AII, HVST Acquisition sold to AII
68,960,000 shares of our common stock, constituting approximately 50.4% of our
outstanding common stock.
By virtue of its acquisition of a majority of our voting securities of on
such date, AII acquired from HVST Acquisition control of the Company on June 1,
2005.
In August 2005 we effected a one for 1,370 share reverse stock split
pursuant to which the outstanding shares of our common stock were reduced from
136,959,999 shares to 100,129 shares.
Immediately prior to the consummation of the Exchange Agreement, we had no
assets.
Organizational History of GSLI and ASLR
GSLI was incorporated in Mississippi on June 4, 2004 as a wholly owned
subsidiary of AII. In November 2004 GSLI purchased the Shell Landing Golf Club,
located in Gautier, Mississippi, for $8,000,000. The purchase was financed with
a $6,400,000 first mortgage loan from an institution and a $1,600,000 second
mortgage from the seller. On November 3, 2005 GSLI, AII and Azur-Shell Landing
Development II, LLC ("ASLD II"), entered into a loan agreement and certain
additional agreements and instruments, including promissory notes and a deed of
trust, with or in favor of Omicron Master Trust and certain other investors
(collectively, the "Investors") pursuant to which the Investors loaned to the
borrowers an aggregate of $6,000,000. A portion of such borrowings was used to
pay off the entire outstanding indebtedness secured by the second mortgage on
the Shell Landing Golf Club. As of January 31, 2006 the outstanding principal
and accrued interest secured by a first mortgage on the Shell Landing Golf Club
was $6,282,826 and the outstanding indebtedness on the loan from the Investors
(which indebtedness is secured by a second mortgage on property of GSLI) was
$6,000,000. The Shell Landing Golf Club is the only asset of GSLI.
ASLR was incorporated in Mississippi on April 29, 2005. All of the
outstanding capital stock of ASLR was transferred to AII in October 2005 for no
consideration. As of the date of such transfer ASLR had no assets or
liabilities.
ASLD II, a Mississippi limited liability company owned 50% by Crawford
Family Limited Partnership, a Florida limited partnership ("Crawford"), and
Naranjo Family Limited Partnership, a Florida limited partnership ("Naranjo"),
owns five (5) parcels of land in Gautier, Mississippi (the "Property") with an
as is undeveloped appraised value of $19,170,000. The land is contiguous to the
Shell Landing Golf Club. On October 31, 2005 AII, ASLR and ASLD II entered into
a Co-Ownership Agreement (the "Co-Ownership Agreement") pursuant to which ASLD
II conveyed to ASLR a 95% undivided tenants-in-common interest in the Property
for the following consideration:
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At the closing on November 3, 2005 ASLR paid to Naranjo $1,000,000 in
cash, issued to Naranjo a promissory note in the principal amount of $250,000
and agreed that until Naranjo shall have received payments in an aggregate
amount of $16,000,000 as a result of ASLD II's 5% undivided tenants-in-common
interest the Property, Naranjo shall receive directly and within 5 business days
of each closing, 5% of the revenue derived from the sale of developed Property,
sale of land, lease or rental of any or all of the Property or any interest
therein before closing costs, commissions or other expenses paid in connection
therewith and certain minimum cumulative payments whether or not sales or
rentals of the Property have been made. In addition, AII issued to Naranjo an
aggregate of 5,000,000 shares of Azur common stock.
At the closing ASLR also paid to Crawford $250,000 in cash, issued to
Crawford a promissory note in the principal amount of $1,460,000 (which amount
includes unpaid salary to Carl Crawford from February 1, 2005 to September 30,
2005 of $210,000) and agreed that Crawford shall receive in perpetuity 5% of all
gross proceeds received by ASLR or any of its subsidiaries from of sales of land
from the Property. In addition, pursuant to the Co-Ownership Agreement, ASLR
paid off the entire indebtedness to the seller of the Shell Landing Golf Club
which was secured by a second mortgage on such property. In addition, AII issued
to Crawford an aggregate of 5,000,000 shares of AII common stock and ASLR issued
to Carl Crawford as further consideration a number of shares of ASLR common
stock such that after the issuance, Carl Crawford owned 25% of the outstanding
shares of common stock of ASLR and AII owned the remaining 75%. Also, Carl
Crawford entered into an employment agreement under which he agreed to serve as
a director and President of each of ASLR and Grand Shell for a three year term
(subject to extension for additional one year periods if not terminated by
either party) at a salary of $360,000 per annum plus additional benefits.
On February 14, 2006 we acquired all of the outstanding capital stock of
GSLI and 75% of the outstanding capital stock of ASLR pursuant to the terms of
the Exchange Agreement. See Item 1.01 herein.
Overview of Our Business and Properties After the Acquisition of GSLI and ASLR
Through our wholly owned subsidiary, GSLI, we own Shell Landing Golf Club.
The 225 acre course designed by Davis Love III is located in Gautier,
Mississippi approximately 13 miles east of Biloxi, which has become a world
class entertainment and gambling center with 12 casinos. The region was affected
by Hurricane Katrina in 2004. There are currently approximately 6,800 hotel
rooms in operation in the Gautier and Biloxi area. We believe that the number of
rooms should increase to approximately 14,000 in the next six months and
approximately 30,000 in the next three years. The Mississippi legislature has
changed the laws regarding gaming whereby casinos will be permitted to build
their casinos on land. This action by the legislature was intended to assist
revitalizing the gaming community and the local economy. We believe that the
gaming community is set to invest significantly in the rebuilding of the
region's gaming industry.
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Golf Digest named Shell Landing among America's Best New Courses in 2002.
The January 2002 issue ranked the course #5 in America in the Best New Upscale
Public category, the only course in the top five located in the South. Shell
Landing includes a clubhouse with locker rooms, a restaurant and catering
facilities and a golf shop; a driving range and practice area; a deck and a
maintenance building.
There were 30,442 rounds of golf played on the course in 2005 and 1,785
rounds played from January 1 to January 31, 2006.
We own 75% of the capital stock of ASLR which in turn has a 95% undivided
tenants-in-common interest in five (5) parcels of land aggregating approximately
1,100 acres in Gautier, Mississippi (the "Property") with an as is undeveloped
appraised value of $19,170,000. The land is contiguous to the Shell Landing Golf
Club. ASLR's ownership rights are subject to the terms of a Co-Ownership
Agreement among ASLR, AII and ASLD II. ASLD II is a Mississippi limited
liability company owned 50% by Crawford Family Limited Partnership, a Florida
limited partnership ("Crawford"), and Naranjo Family Limited Partnership, a
Florida limited partnership ("Naranjo"). ASLD II owns the record title to the
Property.
ASLD II acquired the Property on May 4, 2005 for a purchase price of
$8,000,000. The purchase price was partially financed with a $7,413,000 mortgage
loan obtained from an institution. The outstanding principal balance of the loan
accrues interest at the rate of 14% per annum. Monthly interest payments
commenced on June 1, 2005 and shall be paid while principal on the loan remains
outstanding. Assuming no principal is prepaid, the monthly interest payments
shall be $86,485. The entire principal amount of the loan is due on June 1,
2007. The land includes approximately 455 acres plus 48 completed, but unsold
residential lots ranging in size from .6 to 1.25 acres, 230 platted but
undeveloped lots, 129 of which will be premier lots (larger acreage, better
views) and 101 of which will be estate lots a proposed 12.75 acre condominium
site, a proposed 18.9 acre condominium site, a proposed 20.0 acre apartment
site, approximately 330 acres planned for a resort village, various residential
lots, town homes and cluster homes and approximately 61 acres of commercial land
(95% of which is wetlands).
The property is also held subject to a second mortgage securing
indebtedness in the principal amount of $6,000,000 held by the Investors. For
further information about the transaction in which such indebtedness was
incurred, see the first paragraph of the section entitled "Organizational
History of GSLI and ASLR in this Item 2.01.
Under the Co-Ownership Agreement, ASLR has agreed, among other things,
that until Naranjo shall have received payments in an aggregate amount of
$16,000,000 as a result of ASLD II's 5% undivided tenants-in-common interest the
Property, Naranjo shall receive directly and within 5 business days of each
closing, 5% of the revenue derived from the sale of developed property, sale of
land, lease or rental of any or all of the Property or any interest therein
before closing costs, commissions or other expenses paid in connection therewith
and certain minimum cumulative payments whether or not sales or rentals of the
Property have been made. In addition, ASLR agreed that Crawford shall receive in
perpetuity 5% of all gross proceeds received by ASLR or any of its subsidiaries
from of sales of land from the Property.
8
We intend to construct on the 12.75 acre site located between the 9th and
18th fairways of the Shell Landing Golf Course, a 126 unit luxury condominium
project consisting of 21 buildings surrounding a pool, spa and eight tennis
courts and overlooking the Shell Landing Golf Course. The units average 1,500
square feet and are being offered at prices averaging $315,000. The project is
scheduled to commence in the second quarter of 2006 and be completed by the
first quarter of 2007. We intend to obtain traditional bank financing for the
construction of this project. The contractor for this project has not been
chosen. The selling price for each unit has been reduced due to changes in the
design of the units which will reduce construction costs and enable us to
maintain substantially all of our profit margin.
A second phase of development on the 18.9 acre site located between the
3rd, 4th and 5th fairways of the golf course contemplates construction of 210
condominium units in 30 buildings. We anticipate that construction will commence
in the first quarter of 2007 and be completed by the first quarter of 2008. We
anticipate that the marketing and sales of these units shall commence in the
third quarter of 2006. JME Coldwell Banker shall continue marketing this
property to prospective purchasers in the local market as well as in Georgia,
Alabama, Tennessee, Texas and states in the Northeast. In addition, we
anticipate that the marketing and sale of a portion of the property to a third
party, where we intend to construct 400 apartment units. Construction is
expected to commence in 2006.
LEGAL PROCEEDINGS
We know of no material, active, pending or threatened proceeding against
us, GSLI or ASLR nor are we involved as a plaintiff in any material proceeding
or pending litigation.
RISK FACTORS
An investment in our Common Stock involves a high degree of risk. You
should carefully consider the risks described below and the other information
contained herein before deciding to invest in our Common Stock. The financial
information contained in this Risk Factors" section is given on a pro forma
basis assuming the transactions contemplated by the Exchange Agreement had
occurred don or prior to the date of such information.
Our cash flows and capital resources may be insufficient to service our
substantial indebtedness and future indebtedness and such cash flows, and our
ability to refinance all or a portion of our indebtedness or obtain additional
financing, depend on many factors beyond our control.
As of February 14, 2006, on a consolidated basis we had approximately
$35,620,428 of outstanding long-term debt. We plan to incur substantial
additional indebtedness in the future in order to make acquisitions and fund the
planned development of our existing properties.
Because we have substantial debt, we will require significant amounts of
cash from our operations and from borrowings and the sale of our equity and debt
securities in order to fund our debt service obligations. Our ability to
generate cash to meet scheduled payments or to refinance our obligations with
respect to our debt depends on our financial and operating performance which, in
turn, is subject to prevailing economic and competitive conditions and to the
following financial and business factors, some of which may be beyond our
control.
9
If our cash flow and capital resources are insufficient to fund our debt
service obligations, we could face substantial liquidity problems and might be
forced to reduce or delay capital expenditures, dispose of material assets or
operations, seek to obtain additional equity capital, or restructure or
refinance our indebtedness. Such alternative measures may not be successful and
may not permit us to meet our scheduled debt service obligations. In particular,
in the event that we are required to dispose of material assets or operations to
meet our debt service obligations, we cannot be sure as to the timing of such
dispositions or the proceeds that we would realize therefrom. The value realized
from such dispositions will depend on market conditions and the availability of
buyers, and, consequently, any such disposition may not, among other things,
result in sufficient cash proceeds to repay our indebtedness. Also, the credit
facilities which govern or will govern our credit facilities may contain
covenants that may limit our ability to dispose of material assets or operations
or to restructure or refinance our indebtedness. Further, we cannot assure you
that we will be able to restructure or refinance any of our indebtedness or
obtain additional financing, given the uncertainty of prevailing market
conditions from time to time, our high levels of indebtedness and the various
debt incurrence restrictions that may imposed by our credit facilities. If we
are able to restructure or refinance our indebtedness or obtain additional
financing, the economic terms on which such indebtedness is restructured,
refinanced or obtained may not be favorable to us.
Required repayments of debt and related interest can adversely affect our
operating performance. As of February 14, 2006, approximately $6,172,882 of our
debt bears interest at a variable rate. Interest rates are currently at historic
lows and may increase significantly. Failure to hedge effectively against
interest rate changes may adversely affect our results of operations. If our
interest expense increased significantly, it would adversely affect our results
of operations.
We also intend to incur additional debt in connection with future
developments and acquisitions of properties. We may borrow new funds to develop
or acquire properties. In addition, we may incur or increase our mortgage debt
by obtaining loans secured by some or all of the real estate properties we
develop or acquire. Our substantial debt may harm our business and operating
results by:
o requiring us to use a substantial portion of our funds from operations to
pay interest, which reduces the amount available for distributions or
other purposes;
o making us more vulnerable to economic and industry downturns and reducing
our flexibility in responding to changing business and economic
conditions; and
o limiting our ability to borrow more money for operating or capital needs
or to finance acquisitions in the future.
In addition to the risks discussed above and those normally associated
with debt financing, including the risk that our cash flow will be insufficient
to meet required payments of principal and interest, we also are subject to the
risk that we will not be able to refinance the existing indebtedness on our
properties (which, in most cases, will not have been fully amortized at
maturity) or obtain permanent financing on development projects we financed with
construction loans or mezzanine debt, and that the terms of any refinancing we
could obtain would not be as favorable as the terms of our existing
indebtedness. If we are not successful in refinancing this debt when it becomes
due, we may be forced to dispose of properties on disadvantageous terms, which
would adversely affect our ability to service other debt and meet our other
obligations.
We expect to experience rapid growth and may not be able to adapt our
management and operational systems to respond to the integration of additional
properties without significant disruption or expense.
10
We expect to continue to pursue additional acquisition and development
opportunities.
As a result of the anticipated rapid growth of our portfolio, we cannot
assure you that we will be able to adapt our management, administrative,
accounting and operational systems or hire and retain sufficient operational
staff to integrate these properties into our portfolio and manage any future
acquisitions of additional properties without operating disruptions or
unanticipated costs. As we develop or acquire additional properties, we will be
subject to risks associated with managing new properties, including tenant
retention and mortgage defaults. In addition, acquisitions or developments may
cause disruptions in our operations and divert management's attention away from
day-to-day operations. In addition, our profitability may suffer because of
acquisition- related costs or amortization costs for acquired goodwill and other
intangible assets. Our failure to successfully integrate any future properties
into our portfolio could have a material adverse effect on our results of
operations and financial condition and our ability to make cash distributions to
our shareholders, although it is not our present intention to make cash
distributions to shareholders in the immediately foreseeable future.
Our future developments, acquisitions and investment opportunities may
not yield the returns we expect or may result in shareholder dilution.
We expect to develop and/or acquire a number of real estate properties in
the future. New developments are subject to a number of risks, including, but
not limited to, construction delays or cost overruns that may increase project
costs, financing risks, the failure to meet anticipated occupancy or rent
levels, failure to receive required zoning, occupancy, land use and other
governmental permits and authorizations and changes in applicable zoning and
land use laws. If any of these problems occur, development costs for a project
will increase, and there may be significant costs incurred for projects that are
not completed. In deciding whether to acquire or develop a particular property,
we made certain assumptions regarding the expected future performance of that
property. If a number of these new properties do not perform as expected, our
financial performance will be adversely affected. In addition, if we issue
equity securities for any such acquisitions, such issuances could be
substantially dilutive to our shareholders.
Our results of operations will be significantly influenced by the
economies of the markets in which we operate, and the market for luxury
residential and resort space generally.
We are susceptible to adverse developments in the markets in which we
operate, such as business layoffs or downsizing, industry slowdowns, relocations
of businesses, changing demographics, infrastructure quality, state budgetary
constraints and priorities, increases in real estate and other taxes, costs of
complying with government regulations or increased regulation and other factors.
In addition, all of our real property is currently located in Gautier,
Mississippi, which exposes us to greater economic risks than if we owned
properties in numerous geographic regions. Any adverse economic or real estate
developments in Gautier, Mississippi and the surrounding region or any of the
markets in which we may operate, or any decrease in demand for luxury
residential housing and hotel space resulting from the local regulatory
environment, business climate or fiscal problems, could adversely affect our
financial condition, results of operations, cash flow, the trading price of our
common shares and our ability to satisfy our debt service obligations.
We may not be successful in identifying suitable development projects or
acquisitions that meet our criteria, which may impede our growth.
A central part of our business strategy is expansion through development
projects and acquisitions, which requires us to identify suitable development or
acquisition candidates or investment opportunities that meet our criteria and
are compatible with our growth strategy. We may not be successful in identifying
suitable real estate properties or other assets that meet our development or
acquisition criteria or in completing developments, acquisitions or investments
on satisfactory terms. Failure to identify or complete developments or
acquisitions could slow our growth, which could in turn adversely affect our
financial condition and results of operations.
11
Our performance and value are subject to risks associated with real estate
assets and with the real estate industry.
Our ability to make distributions to our shareholders depends on our
ability to generate substantial revenues from our properties. Events and
conditions generally applicable to owners and operators of real property that
are beyond our control may decrease cash available for distribution and the
value of our properties. These events include:
o local oversupply, increased competition or reduction in demand for space;
o inability to collect rent from tenants;
o vacancies or our inability to rent space on favorable terms;
o inability to finance property development, tenant improvements and
acquisitions on favorable terms;
o increased operating costs, including insurance premiums, utilities and
real estate taxes;
o costs of complying with changes in governmental regulations;
o the relative illiquidity of real estate investments;
o changing demographics; and
o changing traffic patterns.
In addition, periods of economic slowdown or recession, rising interest
rates or declining demand for real estate, or the public perception that any of
these events may occur, could result in a general decline in sales prices or
rents, which would adversely affect our financial condition, results of
operations, cash flow, per share trading price of our common shares and ability
to satisfy our debt service obligations and to make distributions to our
shareholders.
We could incur significant costs related to government regulation and
environmental matters.
Under various federal, state and local laws, ordinances and regulations,
an owner or operator of real estate may be required to investigate and clean up
hazardous or toxic substances or petroleum product releases at a property and
may be held liable to a governmental entity or to third parties for property
damage and for investigation and clean up costs incurred by such parties in
connection with contamination. The cost of investigation, remediation or removal
of such substances may be substantial, and the presence of such substances, or
the failure to properly remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral. In connection with the ownership, operation and management of
real properties, we are potentially liable for removal or remediation costs, as
well as certain other related costs, including governmental fines and injuries
to persons and property.
The occurrence of natural disasters in the Gulf Coast could adversely
affect our business.
All of our real estate properties are currently located in Gautier,
Mississippi on the Mississippi Gulf Coast. The occurrence there of natural
disasters such as hurricanes, floods, fires, unusually heavy or prolonged rain
and droughts, could have a material adverse effect on our ability to develop and
sell properties or realize income from our projects. The occurrence of natural
disasters could also cause increases in property insurance rates and deductibles
which could reduce demand for our properties. On August 29 - 30 of 2005, the
state of Mississippi was affected by Hurricane Katrina. Shell Landing Golf Club
which is located in Gautier, Mississippi was impacted by this hurricane. No
significant structural damage occurred, mostly due to the high elevation of the
land pertaining to the golf Club. There was loss of power to the area, which
resumed on September 2, 2005. Although the golf Club resumed operations on
September 23, 2005 we experienced a reduction in revenues from the golf Club in
the short term as a result of the hurricane. The insurance company has been
contacted and the claims have been submitted with respect to economic loss and
any damage that may have occurred to the golf Club and any related property. The
insurance companies have paid approximately $264,500 in advances on the claims
for repairs and replacement of equipment. Insurance premiums for the golf course
have increased in the aggregate approximately $5,500 per annum. The golf course
has lost $419,000 in revenues through December 31, 2005 due to the hurricane
based on revenues earned in 2004 and the projections for 2006.
12
Joint venture investments could be adversely affected by our lack of sole
decision-making authority, our reliance on a co-venturer's financial condition
and disputes between us and our co-venturers.
We may co-invest with third parties through partnerships, joint ventures
or other entities, acquiring non-controlling interests in or sharing
responsibility for managing the affairs of a property, partnership, joint
venture or other entity. In these situations, we will not be in a position to
exercise sole decision-making authority regarding the property, partnership,
joint venture or other entity. Investments in partnerships, joint ventures or
other entities may, under certain circumstances, involve risks not present were
a third party not involved, including the possibility that partners or
co-venturers might become bankrupt or fail to fund their share of required
capital contributions. Partners or co-venturers may have economic or other
business interests or goals that are inconsistent with our business interests or
goals, and may be in a position to take actions contrary to our policies or
objectives. Such investments may also have the potential risk of impasses on
decisions, such as a sale, because neither we nor the partner or co-venturer
would have full control over the partnership or joint venture. Disputes between
us and partners or co-venturers may result in litigation or arbitration that
would increase our expenses. Consequently, actions by or disputes with partners
or co-venturers might result in subjecting properties owned by the partnership
or joint venture to additional risk. In addition, we may, in certain
circumstances, be liable for the actions of our third-party partners or
co-venturers.
We do not anticipate paying any cash dividends in the foreseeable future.
We presently anticipate that we will retain all available funds for use in
the operation and expansion of our business and do not anticipate paying any
dividends in the foreseeable future. Any future payment of dividends to our
stockholders will depend on decisions that will be made by our board of
directors and will depend on then existing conditions, including our financial
condition, contractual restrictions, capital requirements and business
prospects.
We may be unable to raise additional funding to pursue our strategies
which may harm our business.
We anticipate the need for additional capital as we pursue our business
strategy. Based on our development plans for our current properties, we will
need approximately $135 million over the next 12-24 months and a total of $620
million over the next five years. We expect to raise additional capital through
a combination of new debt issuances and equity sales, from private as well as
public sources, and traditional acquisition and development loans potentially
utilizing any largely unencumbered properties as collateral for such loans.
Issuance of any convertible debt and/or the sale of equity will likely have a
dilutive effect on us and our shareholders. Implementation of our strategy and
business plans is contingent upon the availability of such funding sources. No
assurance can be given that we will be able to raise capital, at terms that are
acceptable to us, or at all, in order to fund our operations as set forth above.
13
Our business plan may never be implemented.
Our business plan includes the acquiring, owning, developing, managing and
selling of parcels of undeveloped property and existing hotel and resort
properties. There is no assurance that any of the transactions will ever be
completed.
Our business plan includes the acquisition of real property and/or
businesses.
Our business plan includes future acquisitions or investments in real
property, other companies and facilities. We may not realize the anticipated
benefits of any acquisition or investment. If we make any acquisitions, we will
be required to assimilate the operations, products and personnel of the acquired
businesses and train, retain and motivate key personnel from the acquired
businesses. Similarly, acquisitions may cause disruptions in our operations and
divert our management's attention from day-to-day operations, which could impair
our relationships with our employees, customers and strategic partners. In
addition, our profitability may suffer because of acquisition-related costs,
amortization costs for certain intangible assets, and impairment losses related
to goodwill.
Our real estate investments are relatively illiquid.
Because real estate investments are relatively illiquid, our ability to
vary our portfolio promptly in response to economic or other conditions will be
limited. The foregoing may impede our ability to respond to adverse changes in
the performance of our investments and could have an adverse effect on our
financial condition and results of operations.
Various conflicts of interest existed during the negotiation of the
Exchange Agreement.
AII acquired a controlling interest in the Company on June 1, 2005 when
AII purchased approximately 50.4% of our outstanding common stock. In connection
with such purchase, officers and directors of AII were appointed as our
directors and officers and all persons not affiliated with AII resigned as
officers and directors of Harvest.
On the date that the Board of Directors of each company approved the
Exchange Agreement, our board consisted of the same individuals - Donald Goree,
Donald Winfrey, Tony Sharp and Frederick Trowman-Rose.
Accordingly, on the day on which the Exchange Agreement was executed, we
and AII were under common control.
The directors of each of the Company and AII had an independent obligation
to ensure that the participation in the share exchange of each individual
company is fair and equitable, considering all factors unique to each company
and without regard to whether the share exchange is fair and equitable to the
other company. While the directors sought to discharge faithfully this
obligation to each of the companies, you should bear in mind that all four of
our directors were members of both boards during the negotiation of the Exchange
Agreement. As a result, these directors may not have had a totally independent
perspective during the negotiations of the Exchange Agreement, which may have
led them to advocate positions during such negotiations different from what they
may have advocated had they not had the same perspective and the share exchange
should not be viewed as being agreed upon at "arms-length."
14
Our common stock is traded on the Over- the- Counter Bulletin Board and,
as a result, there may be limited trading volume in the stock, as well as a
greater spread between "bid" and "asked" prices.
Our common stock is traded on the Over-the-Counter Bulletin Board (the
"OTC Bulletin Board"). While a public market currently exists for our common
stock, trading of relatively small blocks of stock can have a significant impact
on the price at which the stock is traded. In addition, the over the counter
market has experienced, and is likely to experience in the future, significant
price and volume fluctuations which could adversely affect the market price of
our common stock without regard to our operating performance.
Issuers whose securities are traded on the OTC Bulletin Board may
experience a greater spread between the "bid" and "asked" prices of their
securities compared with securities traded on a national securities exchange or
Nasdaq, and a limited liquidity in their securities. In addition, many investors
have policies against the purchase or holding of securities traded in the
over-the-counter markets. Trading in an over-the-counter market such as OTC
Bulletin Board has, and will continue to, affect both the trading volume and the
market value of our common stock for the foreseeable future.
We will be subject to the penny stock rules which may adversely affect
trading in our stock.
Because our common stock is not listed on any securities exchange or the
Nasdaq Stock Market and does not have a trading price of at least $5.00 per
share, our common stock is subject to penny stock regulations. As a result, the
market liquidity for our shares could be adversely affected because these
regulations require broker-dealers to make a special suitability determination
for the purchase and to have received the purchaser's written consent to the
transaction prior to the sale. This makes it more difficult administratively for
broker-dealers to buy and sell stock subject to the penny stock regulations on
behalf of their customers. As a result, it may be more difficult for a
broker-dealer to sell our shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
As of February 14, 2006, we had outstanding 25,336,893 shares of common
stock, 25,287,109 shares of which were owned by AII, including 25,236,773 shares
which were issued pursuant to the Exchange Agreement.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
Our Directors and Executive Officers
The following sets forth information regarding our current executive officers
and directors.
Donald H. Goree, Director, Chairman and Chief Executive Officer, Age 47
15
Mr. Goree was elected Chief Executive Officer of Harvest on June 1, 2005.
He has been Chairman and CEO of Azur since January 2004. Mr. Goree has over 25
years of experience in commercial real estate investment, finance and
development.
Donald C. Winfrey, Director and President, Age 38
Mr. Winfrey was elected President of the Company on June 1, 2005. He has
been President and a director of AII since January 1, 2005. From 1997 to
December 31, 2004 he held various positions with Xentel, Inc., including Vice
President of its U.S. operations; from 1992 to 1997 he held various positions
with CD3 Storage Systems, including President. He has also served as Chairman to
various strategic planning and client development committees.
Tony Sharp, Director, Age 52
Mr. Sharp was elected as a director of the Company effective January 1,
2006. Mr. Sharp was most recently a Project Director at Longcross Management, a
London-based commercial property development firm, and he has over 20 years
experience in real estate development, urban renewal, finance, and consulting.
Mr. Sharp has also been serving as a director of AII since December 1, 2005.
Mr. Sharp previously served AII in an advisory capacity. His experience in
the property sector began in 1985, when, as an advisor for Coopers & Lybrand's
consulting arm, he supported many large U.K. development companies with regard
to their corporate structure and on the social and economic impact of proposed
urban renewal schemes. This led to his appointment as assistant to the CEO of
the National Phoenix Initiative (NPI), an urban renewal partnership sponsored by
the construction and development industry associations along with the UK's
Department of Environment. NPI promoted projects involving private investment in
public sector bodies including the health sector, universities, prison service,
local authorities and urban development corporations. Following this, Mr. Sharp
was involved with numerous joint ventures, acquiring distressed property
portfolios while serving as project director at Longcross Management. Mr. Sharp
is a graduate of Balliol College at Oxford University.
Frederick Trowman-Rose, Age 52
Professor Trowman-Rose was elected as a director of the Company effective
January 1, 2006. He currently serves as Company Secretary of Light & Boston
Limited (a ceremonial regalia manufacturer) since 2001, and Managing Director of
Libomet Limited (a stamper and finisher of non-ferrous and precious metals).
Previously, he was Company Secretary and Director of his family engineering firm
ABC Maintenance Services Limited and a technical editor of publications
including Professional Printer and British Editor. He is a professor of
Environmental Science and President of the Association of Teachers of Printing &
Allied Subjects and Provost of the London College of Management and IT.
Professor Trowman-Rose is a graduate of the University of Cambridge and holds
doctorate degrees in organic chemistry. A former diplomat, he served Belize, the
country of his birth, as her first Consul in the United Kingdom. Professor
Trowman-Rose has held a number of senior honorary positions on professional and
environmental bodies, including Honorary Vice-President of the Chartered
Institute of Journalists, the world's senior professional association for
journalism and the media.
16
Carl Crawford, Vice President of Golf Operations and President of GSLI and ASLR,
Age 61
Mr. Crawford has been Vice President of Golf Operations and the President
of our subsidiary, The Grand Shell Landing, Inc., since AII acquired the Shell
Landing Golf Course in November 2004. Mr. Crawford was a part owner of the
entity which sold the course to AII and has actively involved in operations of
the golf course since 2002. Prior thereto he was a partner in HAM Marine, Inc.,
which was merged into Freide Goldman, Inc., a naval architect and marine
engineering company. Since July 2000 he has been the sole proprietor of GME, a
firm which operates a manufacturing facility for medical devices.
Albert Lazo, Secretary, Age 32
Mr. Lazo was elected as Secretary of the Company on June 1, 2005. He has
been General Counsel and Secretary of AII since April 2004 and a director of AII
since January 2005. From February 2000 to April 2004, Mr. Lazo was an associate
attorney with the law firm of Richards and Polansky, P.C. in Miami, Florida.
From June 1999 to February 2000, he was an associate attorney at the law firm of
John G. Shieley, P.A., based in Miami, Florida.
There are no family relationships among any of the Company's directors and
officers, except that Donald H. Goree and Donald Winfrey are first cousins.
Executive Compensation
We did not pay any compensation to any of our officers and directors
during the three fiscal years ended April 30, 2005 and have not paid any
compensation to such persons during the period from May 1, 2005 to February 14,
2006.
The following table provides information relating to compensation paid by
AII for the fiscal year ended December 31, 2004 for its Chief Executive Officer
and compensation payable to other highly compensated executive officers of AII
whose total salary and bonus (as determined pursuant to SEC rules) exceeded
$100,000.
17
Long Term Compensation Awards Payouts
--------------------------------------- ------------------------- -------------------------
Restricted Securities
Other Annual Stock Underlying LTIP All
Salary Bonus Compensation Award(s) Options/ Payouts other
Name and Principal Position ($) ($) ($) ($) SARs (#) ($) Comp.
----------- ----------- ----------- ----------- ----------- ----------- -----------
Donald Goree, Chairman
and CEO 0 0 2,581(1) 1,400,900 0 0 0
Donald Winfrey, President 0 0 0 381,710 0 0 0
Jeffrey Grene, Vice President
of Development 40,000 0 0 345,900 0 0 0
Albert Lazo, General Counsel
and Secretary 80,000 0 738 202,950 0 0 0
(1) Commencing December 15, 2004 and pending the sale of such property, which
AII is currently marketing, AII has provided to Mr. Goree the rent-free use of a
2 bedroom house located on North Rio Vista Boulevard, Fort Lauderdale, Florida.
The property is owned by a general partnership in which AII has a 53% interest.
AII is carrying all costs for the property, including debt service, taxes and
utilities. The value of the benefit to Mr. Goree of living in such property on a
rent-free basis for two weeks in 2004 is not included in the table.
Director Compensation
Otto Reich, who served as a director of AII from December 1, 2004 to
December 1, 2005, was issued 50,000 shares of AII common stock upon his election
as a director of AII. Eduardo Naranjo, who served as a director of AII from
February 11, 2004 to December 31, 2004 was awarded 3,000,000 shares of common
stock of AII on February 11, 2004 and 500,000 shares of common stock of AII on
October 27, 2004 for services to AII.
Indemnification of Our Directors and Officers
Reference is made to Section 145 of the Delaware General Corporation Law,
which provides that a corporation may indemnify directors and officers as well
as other employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation (a
"derivative action")), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interest of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such action, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, bylaws, disinterested director vote, stockholder vote, agreement or
otherwise.
18
The Company's Certificate of Incorporation eliminates the personal
liability of directors to the fullest extent permitted by Section 102(b) (7) of
the Delaware Corporation Law.
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against such persons
in their official capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION
IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
DESCRIPTION OF SECURITIES
The authorized capital of the Company consists of 300,000,000 shares of
Common Stock, par value $.0001 per share, of which 25,336,893 shares were
outstanding as of February 14, 2006 and 5,000,000 shares of Preferred Stock, par
value $.0001 per share, no shares of which were issued or outstanding as of
February 14, 2006.
Common Stock
Holders of shares of Common Stock are entitled to share, on a ratable
basis, such dividends as may be declared by the Board of Directors out of funds
legally available therefor. Upon liquidation, dissolution or winding up of the
Company, after payment to creditors, if any, the assets of the Company will be
divided pro rata on a per share basis among the holders of the Common Stock.
Each share of Common Stock entitles the holders thereof to one vote.
Holders of Common Stock do not have cumulative voting rights which means that
the holders of more than 50% of the shares voting for the election of Directors
can elect all of the Directors if they choose to do so, and, in such event, the
holders of the remaining shares will not be able to elect any directors. The
By-Laws of the Company require that only a majority of the issued and
outstanding shares of Common Stock need be represented to constitute a quorum
and to transact business at a shareholders' meeting. The Common Stock has no
preemptive, subscription or conversion rights and is not redeemable by the
Company.
19
Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or more
series having some designations, rights and preferences as may be determined by
the Board of Directors. As of February 14, 2006 no shares of Preferred Stock
were issued or outstanding.
MARKET FOR OUR COMMON STOCK
Our common stock is traded in the over-the-counter market and has been
quoted on the OTC Bulletin Board since March 22, 1986. There is a very limited
public market for our common stock. As of February 14, 2006, 25,336,893 shares
of common stock were outstanding.
The following table sets forth, for the respective periods indicated, the
high and low bid quotations for our common stock. The information has been
retroactively restated to give effect to a one for 1,370 share reverse stock
split which was effectuated in August 2005, by multiplying the price per share
as originally reported ($.01) by 1,370. The market quotations represent prices
between dealers, do not include retail markup, markdown, or commissions and do
not represent actual transactions.
Quarter Ended High Bid Low Bid
- ------------- -------- -------
2004
----
July 31, 2003 $13.70 $13.70
October 31, 2003 13.70 13.70
January 31, 2004 13.70 13.70
April 30, 2004 13.70 13.70
2005
----
July 31, 2004 13.70 13.70
October 31, 2004 13.70 13.70
January 31, 2005 13.70 13.70
April 30, 2005
2006
----
July 31, 2005 no quotation available
October 31, 2005 no quotation available
January 31, 2006 no quotation available
20
No dividends have been paid on our common stock and we do not anticipate
paying dividends in the foreseeable future.
At February 14, 2006, there were approximately 245 holders of record of
our common stock. We believe that we have more shareholders since many of our
shares are held in "street" name.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the U.S. Securities and Exchange Commission (the
"SEC"), reports, statements and other information as required under the
Securities Exchange Act of 1934. These reports, statements and other information
may be read and copied at the SEC's Public Reference Room at 100 F Street NE,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room at 1-800-SEC-0330.
The SEC maintains a web site (HTTP://WWW.SEC.GOV.) that contains the
registration statements, reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC such as
us. You may access our SEC filings electronically at this SEC website. These SEC
filings are also available to the public from commercial document retrieval
services.
Item 3.02 Unregistered Sales of Equity Securities.
On February 14, 2006, we issued 25,236,773 shares of our common stock to
AII pursuant to the terms of the Exchange Agreement. The issuance of shares of
our common stock in the share exchange was exempt from registration in reliance
upon Rule 506 of Regulation D under Section 4(2) of the Securities Act.
Item. 5.06 Change in Shell Company Status.
As a result of our acquisition of all of the outstanding capital stock of
GSLI and 75% of the outstanding capital stock of ASLR, as described in Item
2.01, which description is in its entirety incorporated by reference in this
Item 5.06 of this Current Report, we ceased being a shell company as such term
is defined in Rule 12b-2 under the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
(a) The financial statements of GSLI are appended to this Current Report
beginning on page F-1. The pro forma financial information giving effect
to the consummation of the Exchange Agreement as of October 31, 2005 is
appended to this report beginning at page P-1.
21
(b) The following exhibits are filed with this Current Report:
Exhibit No. Description of Exhibit
- ----------- ----------------------
10.1 Exchange Agreement, dated as of February 14, 2006 between the
Company and AII.*
10.2 Waiver Agreement and Amendment dated February 14, 2006 among the
Company, AII and certain other persons.*
10.3 Waiver Agreement and Amendment dated February 14, 2006 among the
Company, AII and certain other persons.*
10.4 Form of Guarantee by the Company in favor of certain other
persons.*
10.5 Form of Amended and Restated Debentures due September 30, 2006
dated February 14, 2006 by the Company and AII in favor certain
other persons.*
10.6 Registration Rights Agreement dated February 14, 2006 between the
Company and certain other persons.*
10.7 Co-Ownership Agreement dated October 21, 2005 among, the Company,
ASLD II and AII. Incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K filed by AII on November 4, 2005.
10.8 Promissory Note, dated November 3, 2005 in the principal amount of
$1,460,000 from ASLR to Crawford. Incorporated by reference to
Exhibit 2.2 to the Current Report on Form 8-K filed by AII on
November 4, 2005.
10.9 Loan Agreement, dated as of November 3, 2005 among, AII, ASLR,
GSLI, ASLD II, Omicron Master Trust and certain other investors.
Incorporated by reference to Exhibit 2.4 to the Current Report on
Form 8-K filed by AII on November 4, 2005.
10.10 Form of Promissory Note, dated November 3, 2005 from ASLR, Azur,
GSLI and ASLD II to Investors. Incorporated by reference to
Exhibit 2.5 to the Current Report on Form 8-K filed by AII on
November 4, 2005
10.11 Deed of Trust and Security Agreement dated November 3, 2005 from
ASLR, AII, GSLI and ASLD II in favor of the Investors.
Incorporated by reference to Exhibit 2.6 to the Current Report on
Form 8-K filed by AII on November 4, 2005.
- ----------------------
* Filed herewith.
22
10.12 Indemnity Agreement dated November 17, 2004 among GSLI, Carl
Crawford ("Crawford") and AII. Incorporated by reference to
Exhibit 10.13 to the Registration Statement on Form S-4 (No.
333-126713) filed by the Company on July 20, 2005 (the "S-4").
10.13 Warranty Deed from Shell Landing Golf, LLC to GSLI. Incorporated
by reference to Exhibit 10.4 to the S-4.
10.14 Promissory Note in the principal amount of $6,400,000 dated
November 17, 2004 from GSLI to the order of Textron Financial
Corporation ("Textron"). Incorporated by reference to Exhibit
10.17 to the S-4.
10.15 Assignment of Leases, Rents and Contracts from GSLI to Textron.
Incorporated by reference to Exhibit 10.18 to the S-4.
10.16 Deed of Trust, Security Agreement and Fixture Filing dated as of
November 17, 2004 from GSLI to Textron. Incorporated by reference
to Exhibit 10.19 to the S-4.
10.17 Design Contract dated July 20, 1999 among Shell Landing
Development, Inc. and McIntyre Golf Development and Love
Enterprises and Associates, Inc. and Davis Love III. Incorporated
by reference to Exhibit 10.23 to the S-4.
10.18 Letter, dated November 10, 2004 from Love Enterprises and
Associates, Inc. to GSLI. Incorporated by reference to Exhibit
10.24 to the S-4.
23
INDEX TO FINANCIAL STATEMENTS
Page No.
The Grand Shell Landing, Inc. Financial Statements as of
September 30, 2005 and for the Nine Months then Ended
(unaudited)
Balance Sheet F-2
Income Statement F-3
Statement of Cash Flows F-4
Notes to Financial Statements F-5-8
The Grand Shelling Landing, Inc. Financial Statements as of
December 31, 2004 and for the 45 days ended December 31, 2004
Report of Independent Registered Public Accounting Firm F-9
Balance Sheet F-10
Income Statement F-11
Statement of Cash Flows F-12
Statement of Stockholders' Equity F-13
Notes to Financial Statements F-14-19
Shell Landing Golf, LLC Financial Statements as of December 31, 2003
and for the year ended December 31, 2003
Report of Independent Registered Public Accounting Firm F-20
Balance Sheet F-21
Income Statement F-22
Statement of Members' Equity F-23
Statement of Cash Flows F-24
Notes to Financial Statements F-25-28
F-1
THE GRAND SHELL LANDING, INC.
BALANCE SHEET
September 30, 2005
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 141,442
Accounts receivable 50,074
Inventory 82,479
Prepaid expenses 129,868
------------
Total current assets 403,863
Property and equipment, net of accumulated
depreciation of $379,324 7,775,646
Other assets 147,032
------------
TOTAL ASSETS $ 8,326,541
============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable 60,637
Payroll Liabilities 4,034
Other current liabilities 113,983
Current portion of notes payable 1,251,064
Current portion of capital lease obligations 45,016
------------
Total current liabilities 1,474,734
LONG-TERM LIABILITIES
Notes payable 6,121,506
Capital lease obligation 48,445
------------
Total long-term liabilities 6,169,951
------------
EQUITY
Common stock:
$0.01 par value, 2,000 shares authorized,
issued and outstanding 20
Additional paid-in capital 837,586
Retained earnings (deficit) (35,304)
Net Income (Loss) (120,447)
------------
TOTAL LIABILITIES AND EQUITY $ 8,326,541
============
The accompanying notes are an integral part of the financial statements.
F-2
THE GRAND SHELL LANDING, INC.
INCOME STATEMENT
For the Nine Months Ended September 30, 2005
(unaudited)
Revenues
Golf course revenue $ 1,610,930
Merchandise sales 236,444
Restaurant sales 292,276
------------
Total Revenue 2,139,649
Cost of Sales 255,680
------------
Gross Profit 1,883,969
Operating Expenses
General and administrative expenses 1,285,507
Depreciation 348,892
Amortization 27,006
------------
Total Operating Expenses 1,661,405
------------
Net Income (Loss) Before
Other Income and (Expense) 222,564
Other Income and (Expense)
Other Income 831
Interest Expense (343,842)
------------
Total Other Income and (Expense) (343,011)
------------
Net Income (Loss) (120,447)
============
The accompanying notes are an integral part of the financial statements.
F-3
THE GRAND SHELL LANDING, INC.
STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2005
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (120,447)
Adjustments to Reconcile Income (Loss) to Net Cash
Provided (Used) for Operating Activities:
Depreciation and amortization 375,897
(Increase) decrease in operating assets:
Accounts Receivable (12,668)
Inventory (17,038)
Prepaid Expenses (22,503)
Increase (Decrease) in opearting liabilities:
Accounts Payable 23,588
Accrued Expenses 5,097
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 231,926
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in equipment (5,726)
------------
NET CASH USED FOR INVESTING ACTIVITIES (5,726)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes and loans payable (128,036)
Capital lease obligations (31,744)
------------
NET CASH USED BY FINANCING ACTIVITIES (159,780)
------------
Net Increase in Cash 66,420
Beginning Cash 75,022
------------
Ending Cash $ 141,442
============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 343,842
============
The accompanying notes are an integral part of the financial statements.
F-4
THE GRAND SHELL LANDING, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
(unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations. The Grand Shell Landing, Inc. (a MS Corporation) operates
an 18-hole golf course, pro-shop and restaurant located in Gautier, MS. In 2004,
the course was named the Number 5 Upscale Course by Golf Digest in its annual
"America's Top 10 Best New Courses." The course is located near the third
largest gaming market in the United States of America. Out-of-state players
account for approximately eighty-two percent of the Company's revenue.
Use of Estimates. Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Cash. For amounts categorized as "cash" on the balance sheet and statement of
cash flows, the Company considers all short-term debt securities purchased with
a maturity of three months or less to be cash equivalents.
Property and Equipment. Property and equipment are carried at cost and are being
depreciated over their useful lives using the straight-line method. The
estimated useful lives of significant assets are as follows: equipment, 5 years;
land improvements, 20 years; and buildings, 40 years. The parent company
determines the depreciation method to be used for income tax purposes.
Substantially all of the Company's assets are encumbered.
Leases. Leases that transfer substantially all of the risks and benefits of
ownership are capital leases. Other leases are operating leases. Capital leases
are included in property and equipment and are amortized using the same methods
as used for depreciation of property and equipment. Operating leases are
expensed over the terms of the leases using the straight-line method.
Allowance for Doubtful Accounts. An allowance for doubtful accounts is estimated
and recorded based on the Company's historical bad debt experience. Management
believes that all accounts receivable will be collected within one year;
therefore, an allowance for doubtful accounts is not considered necessary.
Inventory. Inventory is stated at the lower of cost or market value with cost
determined using the first-in, first-out method.
Income Taxes. The Company (a MS Corporation) is a wholly-owned subsidiary of
Azur International, Inc. The company and its parent file a consolidated federal
income tax return. A provision for income taxes has been included in the
company's income statement; allocated on the separate return basis.
NOTE 2. ACCOUNTS RECEIVABLE
Accounts receivable consist of $50,074 as of September 30, 2005.
F-5
THE GRAND SHELL LANDING, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
(unaudited)
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of September 30, 2005:
Land $ 861,949
Land improvements 4,603,620
Buildings 2,295,616
Equipment and fixtures 393,785
------------
8,154,970
Less: Accumulated depreciation (379,324)
------------
$ 7,775,646
============
Depreciation expense for the nine months ended September 30, 2005 was $348,892.
NOTE 4. CAPITAL LEASES
Property held under capital leases, included with property and equipment at
September 30, 2005, consists of the following as of September 30, 2005:
Equipment $ 256,027
Less: Accumulated depreciation (4,267)
------------
Equipment under capital lease-net $ 251,760
============
Capital lease obligations consist of the following at September 30, 2005:
Non-cancellable equipment leases, through 2008, secured
by equipment $ 93,461
Less: Current portion of capital lease obligations (45,016)
------------
Long-term capital lease obligations $ 48,445
============
F-6
THE GRAND SHELL LANDING, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
(unaudited)
NOTE 4. CAPITAL LEASES (Continued)
The following is a schedule of future lease payments under capital leases for
the nine months ended September 30, 2005:
2005 $ 45,016
Thereafter 48,445
------------
Total mininum lease payments 93,461
NOTE 5. OTHER ASSETS
Other assets consists of the following at September 30, 2005:
Loan costs, net of
accumulated amortization of $33,007 $ 147,032
------------
$ 147,032
============
Loan costs are being amortized under the straight-line method over the life of
the loan.
NOTE 6. NOTES PAYABLE
Notes payable consists of the following as of Setpember 30, 2005:
Note payable to a finance company, monthly payments are variable, including
interest of 6.75%, collateralized by real property, due November 2009 $ 6,283,264
Note payable to former owner of Grand Shell Landing, bearing interest of 6%
due on November 16, 2005 1,070,811
Note payable to a finance company, monthly payments of $278, including
imputed interest of 7.00%, collateralized by equipment, due October 2006 4,102
Note payable to a finance company, monthly payments of $277, including
imputed interest of 6.49%, collateralized by equipment, due May 2007 5,142
Note payable to a finance company, monthly payments of $814, including
imputed interest of 6.75%, collateralized by equipment, due October 2006 9,251
Non-cancellable equipment leases, through 2008, secured 93,461
------------
7,466,031
Less current maturities (1,296,080)
------------
$ 6,169,951
============
F-7
THE GRAND SHELL LANDING, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
(unaudited)
NOTE 6. NOTES PAYABLE (Continued)
Maturities of notes payable are as follows:
2005 1,296,080
Thereafter 6,169,951
------------
$ 7,466,031
============
NOTE 7. COST OF SALES
Cost of sales consists of the following at September 30, 2005:
2005
------------
Merchandise $ 139,883
Food 73,288
Beer and liquor 42,509
------------
$ 255,680
============
NOTE 8. INCOME TAXES
The Company files a consolidated federal tax return with its parent and records
its share of the consolidated federal tax expense on a separate return basis.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Operating Leases:
The Company leases equipment under operating leases expiring in various years
through 2007. In the normal course of business, the Company generally renews or
replaces its operating leases.
Claims and Litigation
Management is unaware of any pending litigation matters as of September 30,
2005.
F-8
BAUM & COMPANY, P.A.
Certified Public Accountants
1515 University Drive, Suite 209
Coral Springs, Florida 33071
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
The Grand Shell Landing, Inc.
Fort Lauderdale, Florida
We have audited the accompanying balance sheet of The Grand Shell Landing, Inc.
as of December 31, 2004 and the related statements of operations, stockholders'
equity (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 audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 consolidated
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 The Grand Shell Landing, Inc.
as of December 31, 2004 and the results of their operations and their cash flows
for the year then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Baum & Company, P.A.
Baum & Company, P.A.
Coral Springs, Florida
April 22, 2005
F-9
THE GRAND SHELL LANDING, INC.
BALANCE SHEET
December 31, 2004
ASSETS
CURRENT ASSETS
Cash $ 75,022
Accounts receivable 37,406
Inventory 65,441
Prepaid expenses 107,365
------------
Total current assets 285,234
Property and equipment, net of accumulated depreciation 8,118,812
of $30,432
Other assets 174,037
------------
TOTAL ASSETS $ 8,578,083
============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable 37,049
Accrued property taxes 65,965
Accrued interest 23,777
Other current liabilities 10,099
Deferred revenue 13,080
Current portion of notes payable 1,231,123
Current portion of capital lease obligations 49,422
------------
Total current liabilities 1,430,515
LONG-TERM LIABILITIES
Notes payable 6,269,483
Capital lease obligation 75,783
------------
Total long-term liabilities 6,345,266
------------
EQUITY
Common stock:
$0.01 par value, 2,000 shares authorized,
issued and outstanding 20
Additional paid-in capital 837,586
Retained earnings (deficit) (35,304)
------------
TOTAL LIABILITIES AND EQUITY $ 8,578,083
============
The accompanying notes are an integral part of the financial statements.
F-10
THE GRAND SHELL LANDING, INC.
INCOME STATEMENT
For the 45 days ended December 31, 2004
Revenues
Golf course income $ 167,820
Merchandise sales 25,489
Restaurant sales 36,187
------------
Total Revenue 229,496
Cost of Sales 33,379
------------
Gross Profit 196,117
Operating Expenses
General & Administrative Expenses 137,681
Depreciation 30,432
Amortization 6,001
------------
Total Operating Expenses 174,114
------------
Net Income (Loss) Before
Other Income and Expense 22,003
Other Income and (Expense)
Interest Expense (57,307)
------------
Total Other Income and (Expense) (57,307)
------------
Net Income (Loss) $ (35,304)
============
The accompanying notes are an integral part of the financial statements.
F-11
THE GRAND SHELL LANDING, INC.
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (35,304)
Adjustments to Reconcile Income (Loss) to Net Cash
Provided (Used) for Operating Activities:
Depreciation 30,432
Amortization 6,001
(Increase) decrease in operating assets:
Accounts Receivable (37,406)
Inventory 11,102
Prepaid Expenses 23,710
Increase (Decrease) in opearting liabilities:
Accounts Payable 37,049
Accrued Expenses 30,835
Deferred Revenue (11,877)
Other Liabilitites 10,099
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 64,641
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 14,000
Principal payments on long-term debt (4,319)
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,681
------------
Net Increase in Cash 74,322
Beginning Cash, November 17, 2004 700
------------
Ending Cash $ 75,022
============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 57,307
============
SUMMARY OF SIGNIFICAT NONCASH TRANSACTIONS:
In 2004, the Company acquired property and equipment valued at $8,329,282
through the issuance of debt and assumption of capital leases and notes payable
totalling $8,329,282.
In 2004, the Company incurred loan costs of $180,038, which were capitalized as
intangible assets.
In 2004, the Company's parent paid $294,416 at the time of acquisition in which
they received coomon stock and additional paid-in capital.
The accompanying notes are an integral part of the financial statements.
F-12
THE GRAND SHELL LANDING, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
As of December 31, 2004
Additional
Common Common Paid-In Accumulated
Shares Stock Capital Deficit
------------ ------------ ------------ ------------
Balance at 12/31/03
Net Loss for the Year Ended 12/31/04 (35,304)
Issuance of Common Stock for Acquisitions 2,000 20 837,586
------------ ------------ ------------ ------------
Balance 12/31/04 2,000 $ 20 $ 837,586 $ (35,304)
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
F-13
THE GRAND SHELL LANDING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations. The Grand Shell Landing, Inc. (a MS Corporation) operates
an 18-hole golf course, pro-shop and restaurant located in Gautier, MS. In 2004,
the course was named the Number 5 Upscale Course by Golf Digest in its annual
"America's Top 10 Best New Courses." The course is located near the third
largest gaming market in the United States of America. Out-of-state players
account for approximately eighty-two percent of the Company's revenue.
Use of Estimates. Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Cash. For amounts categorized as "cash" on the balance sheet and statement of
cash flows, the Company considers all short-term debt securities purchased with
a maturity of three months or less to be cash equivalents.
Property and Equipment. Property and equipment are carried at cost and are being
depreciated over their useful lives using the straight-line method. The
estimated useful lives of significant assets are as follows: equipment, 5 years;
land improvements, 20 years; and buildings, 40 years. The parent company
determines the depreciation method to be used for income tax purposes.
Substantially all of the Company's assets are encumbered.
Leases. Leases that transfer substantially all of the risks and benefits of
ownership are capital leases. Other leases are operating leases. Capital leases
are included in property and equipment and are amortized using the same methods
as used for depreciation of property and equipment. Operating leases are
expensed over the terms of the leases using the straight-line method.
Allowance for Doubtful Accounts. An allowance for doubtful accounts is estimated
and recorded based on the Company's historical bad debt experience. Management
believes that all accounts receivable will be collected within one year;
therefore, an allowance for doubtful accounts is not considered necessary.
Inventory. Inventory is stated at the lower of cost or market value with cost
determined using the first-in, first-out method.
Income Taxes. The Company (a MS Corporation) is a wholly-owned subsidiary of
Azur International, Inc. The company and its parent file a consolidated federal
income tax return. A provision for income taxes has been included in the
company's income statement; allocated on the separate return basis.
NOTE 2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following amounts as of December 31:
Membership 16,106
Special events 21,300
------------
$ 37,406
============
F-14
THE GRAND SHELL LANDING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
(continued)
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31, 2004:
Land $ 861,949
Land improvements 4,603,620
Buildings 2,295,616
Equipment and fixtures 388,059
------------
8,149,244
Less: Accumulated depreciation 30,432
------------
$ 8,118,812
============
Depreciation expense for the forty-five days ended December 31, 2004 was
$30,432.
NOTE 4. CAPITAL LEASES
Property held under capital leases, included with property and equipment at
December 31, 2004, consists of the following as of December 31, 2004:
Equipment $ 256,027
Less: Accumulated depreciation (4,267)
------------
Equipment under capital lease-net $ 251,760
============
Capital lease obligations consist of the following at December 31, 2004:
Non-cancellable equipment leases, through 2008, secured
by equipment $ 125,205
Less: Current portion of capital lease obligations (49,422)
------------
Long-term capital lease obligations $ 75,783
============
F-15
THE GRAND SHELL LANDING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
(continued)
NOTE 4. CAPITAL LEASES (Continued)
The following is a schedule of future lease payments under capital leases for
year ending December 31:
2005 $ 49,422
2006 43,757
2007 42,813
2008 1,830
Thereafter --
------------
Total mininum lease payments 137,822
Less: Interest imputed at various rates 12,617
------------
Present value of minimum lease payments $ 125,205
============
NOTE 5. OTHER ASSETS
Other assets consists of the following at December 31, 2004:
Loan costs, net of accumulated amortization of $6,001 $ 174,037
Due from parent - Income tax benefit 12,000
------------
$ 186,037
============
Loan costs are being amortized under the straight-line method over the life of
the loan.
NOTE 6. NOTES PAYABLE
Notes payable consists of the following as of December 31:
Note payable to a finance company, monthly payments are variable, including
interest of 6.75%, collateralized by real property, due November 2009 $ 6,400,000
Note payable to former owner of Grand Shell Landing, bearing interest of 6%
due on November 16, 2005 1,070,811
Note payable to a finance company, monthly payments of $278, including
imputed interest of 7.00%, collateralized by equipment, due October 2006 6,377
Note payable to a finance company, monthly payments of $277, including
imputed interest of 6.49%, collateralized by equipment, due May 2007 7,389
Note payable to a finance company, monthly payments of $814, including
imputed interest of 6.75%, collateralized by equipment, due October 2006 16,029
------------
7,500,606
Less current maturities (1,231,123)
------------
$ 6,269,483
============
F-16
THE GRAND SHELL LANDING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
(continued)
NOTE 6. NOTES PAYABLE (Continued)
Maturities of notes payable are as follows:
2005 1,231,123
2006 183,482
2007 182,628
2008 193,881
2009 171,563
Subsequent to 2009 5,537,929
------------
$ 7,500,606
============
NOTE 7. COST OF SALES
Cost of sales consists of the following at December 31:
2004
------------
Merchandise $ 16,525
Food 9,792
Beer and liquor 5,429
Member discounts 1,633
------------
$ 33,379
============
F-17
NOTE 8. INCOME TAXES
The Company files a consolidated federal tax return with its parent and records
its share of the consolidated federal tax expense on a separate return basis.
The Company's current tax benefit of $12,000 is included in other assets on the
Company's balance sheet. This asset represents the approximate amount due from
the Company's parent for the benefit the parent will receive on the 2004
consolidated federal tax return as a result of the loss generated by the
Company.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Operating Leases:
The Company leases equipment under operating leases expiring in various years
through 2007. In the normal course of business, the Company generally renews or
replaces its operating leases. Minimum future lease payments required under
operating leases are as follows:
Year ending December 31, 2005 $ 82,829
2006 82,829
2007 18,092
------------
$ 183,750
============
F-18
THE GRAND SHELL LANDING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
(continued)
NOTE 9. COMMITMENTS AND CONTINGENCIES (Continued)
During the forty-five days ended December 31, 2004, the Company incurred $14,304
in rent expense under these operating leases.
Claims and Litigation
Management is unaware of any pending litigation matters as of December 31, 2004.
F-19
BAUM & COMPANY, P.A.
Certified Public Accountants
1515 University Drive, Suite 209
Coral Springs, Florida 33071
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Members
Shell Landing Golf, LLC.
Fort Lauderdale, Florida
We have audited the accompanying balance sheet of Shell Landing Golf, LLC as of
December 31, 2003 and the related statements of operations, members' equity
(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 audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 consolidated
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 Shell Landing Golf, LLC. as of
December 31, 2003 and the results of their operations and their cash flows for
the year then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Baum & Company, P.A.
Baum & Company, P.A.
Coral Springs, Florida
October 31, 2005
F-20
SHELL LANDING GOLF, LLC
BALANCE SHEET
December 31, 2003
ASSETS
CURRENT ASSETS
Cash $ 175,135
Accounts receivable 39,087
Inventory 64,770
Prepaid expenses 13,359
------------
Total Current Assets 292,351
Property and Equipment, net of accumulated depreciation 5,410,215
of $30,432
Other assets 3,675
------------
TOTAL ASSETS $ 5,706,241
============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable 101,645
Accrued liabilities 12,226
Accrued interest 10,541
Accrued property taxes 61,188
Deferred revenue 6,037
Current portion of notes payable 571,068
Current portion of capital lease obligations 43,841
------------
Total current liabilities 806,546
LONG-TERM LIABILITIES
Notes and loans payable 5,325,142
Capital lease obligations 92,498
------------
Total long-term liabilities 5,417,640
------------
TOTAL LIABILITIES 6,224,186
MEMBER'S EQUITY (517,945)
TOTAL LIABILITIES AND EQUITY $ 5,706,241
============
The accompanying notes are an integral part of the financial statements.
F-21
SHELL LANDING GOLF, LLC
INCOME STATEMENT
For the Year Ended December 31, 2003
Revenues
Golf course income $ 2,083,637
Merchandise sales 245,310
Restaurant sales 361,754
------------
Total Revenue 2,690,701
Cost of Sales 283,871
------------
Gross Profit 2,406,830
Operating Expenses
General & Administrative Expenses 1,563,027
Depreciation 389,795
Amortization 4,835
------------
Total Operating Expenses 1,957,657
------------
Net Income (Loss) Before
Other Income and Expense 449,173
Other Income and (Expense)
Interest Income 5
Interest Expense (313,222)
Gain/(Loss) on sale of asset (1,339)
------------
Total Other Income and (Expense) (314,556)
------------
Net Income (Loss) 134,617
============
The accompanying notes are an integral part of the financial statements.
F-22
SHELL LANDING GOLF, LLC
STATEMENT OF MEMBERS' EQUITY
As of December 31, 2003
Additional
Paid-In Accumulated
Capital Deficit
------------ ------------
Balance at 12/31/02 $ (652,562)
Net Loss for
the Year Ended 12/31/03 134,617
------------ ------------
Balance 12/31/03 $ -- $ (517,945)
============ ============
The accompanying notes are an integral part of the financial statements.
F-23
SHELL LANDING GOLF, LLC
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 134,617
Adjustments to Reconcile Income (Loss) to Net Cash
Provided (Used) for Operating Activities:
Depreciation 389,795
Amortization 4,835
(Gain)/Loss on sale of equipment 1,339
(Increase) decrease in operating assets:
Accounts Receivable 4,536
Inventory (3,940)
Due from Related Parties 1,509
Prepaid Expenses (13,359)
Increase (Decrease) in opearting liabilities:
Accounts Payable (19,242)
Accrued Expenses (32,021)
Deferred Revenue 3
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 468,072
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 10,073
NET CASH (USED) FOR INVESTING ACTIVITIES 10,073
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 125,000
Principal payments on long-term debt (453,754)
------------
NET CASH (USED) FOR FINANCING ACTIVITIES (328,754)
------------
Net Increase in Cash 149,391
Beginning Cash 25,744
------------
Ending Cash $ 175,135
============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 313,222
============
SUMMARY OF SIGNIFICAT NONCASH TRANSACTIONS:
In 2003, the Company acquired property and equipment valued at $126,045 through
the issuance of debt and assumption of capital leases and notes payable
totalling $126,045.
The accompanying notes are an integral part of the financial statements.
F-24
SHELL LANDING GOLF, LLC
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations. Shell Landing Golf, LLC (the Company) operates an 18-hole
golf course, pro-shop and restaurant located in Gautier, MS. The course is
located near the third largest gaming market in the United States of America.
Out-of-state players account for approximately eighty-two percent of the
Company's revenue.
Use of Estimates. Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could differ
from those estimates.
Cash. For amounts categorized as "cash" on the balance sheet and statement of
cash flows, the Company considers all short-term debt securities purchased with
a maturity of three months or less to be cash equivalents.
Property and Equipment. Property and equipment is stated at cost. The costs of
additions and betterments are capitalized and expenditures for repairs and
maintenance are expensed in the period incurred. When items of property and
equipment are sold or retired, the related costs and accumulated depreciation
are removed from the accounts and any gain or loss is included in income.
Depreciation of property and equipment is provided utilizing both the
straight-line and accelerated methods over the estimated useful lives of the
respective assets as follows: equipment, 5 to 7 years; land improvements, 15 to
20 years; and buildings, 39 to 40 years.
Intangible Assets. Intangible assets subject to amortization include loan fees
and goodwill. Loan fees related to financing with Hancock Bank have been
capitalized and amortized over the term of the loan. The excess of the
acquisition cost over the net book value of assets acquired from McIntyre Golf,
has been recorded as goodwill. Goodwill does not require amortizations, but is
subject to a periodic impairment test. The Company has determined goodwill has
not been impaired; therefore, no impairment loss has been recognized.
Amortization of loan costs was $4,835 for 2003.
Leases. Leases that transfer substantially all of the risks and benefits of
ownership are capital leases. Capital leases are included in property and
equipment and are amortized using the same methods as used for depreciation of
property and equipment.
Allowance for Doubtful Accounts. An allowance for doubtful accounts is estimated
and recorded based on the Company's historical bad debt experience. Management
has determined that all accounts receivable will be collectible within a year.
Inventory. Inventory is stated at the lower of cost or market value, with cost
determined using the first-in, first-out method.
Income Taxes. The Company is taxed as a partnership under the Internal Revenue
Code and a similar state statute. In lieu of income taxes, the members of the
LLC are taxed on their proportionate share of the LLC's taxable income.
Therefore, no provision or liability for Federal or state income taxes related
to the LLC is included in these financial statements.
F-25
SHELL LANDING GOLF, LLC
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
(continued)
NOTE 2. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following amounts as of December 31:
Membership 19,975
Special events 19,112
------------
$ 39,087
============
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31:
Land $ 667,978
Land improvements 3,497,689
Buildings 1,779,013
Equipment and fixtures 563,962
------------
6,508,642
Less: Accumulated depreciation 1,098,427
------------
$ 5,410,215
============
Depreciation expense for the year ended December 31, 2003 was $496,787.
NOTE 4. CAPITAL LEASES
Property held under capital leases, included with property and equipment at
December 31, consists of the following:
Equipment $ 409,073
Less: Accumulated depreciation 199,479
------------
Equipment under capital lease - net $ 209,594
============
Capital lease obligations consist of the following at December 31:
Non-cancellable equipment leases, through 2005,
secured by equipment $ 136,339
Less: Current porition of capital lease obligations 43,841
------------
Long-term capital lease obligations $ 92,498
============
F-26
SHELL LANDING GOLF, LLC
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
(continued)
NOTE 4. CAPITAL LEASES (Continued)
The following is a schedule of future lease payments under capital leases for
year ending December 31:
2004 $ 43,841
2005 40,696
2006 36,293
2007 36,293
------------
Total mininum lease payments 157,123
Less: Interest imputed at various rates 20,784
------------
Present value of minimum lease payments $ 136,339
============
NOTE 5. OTHER ASSETS
Other assets consists of the following at December 31:
Goodwill $ --
Loan costs, net of accumulated amortization of $22,903 2,417
Security deposit 1,258
------------
$ 3,675
============
NOTE 6. NOTES PAYABLE
Notes payable consists of the following as of December 31:
Note payable to a bank, monthly payments of $36,657, including interest at
variable rates, collateralized by real property, due March 2018 $ 4,093,772
Note payable to a finance company, monthly payments of $278, including
interest of 7.00%, collateralized by equipment, due October 2006 8,549
Note payable to a finance company, monthly payments of $277, including
interest of 6.49%, collateralized by equipment, due June 2007 10,415
Note payable to a finance company, monthly payments of $814, including
interest of 6.75%, collateralized by equipment, due December 2006 26,063
Note payable to a former member, due on demand, non-interest bearing,
secured by real estate 225,000
Notes payable to members, monthly payements of $12,763, including imputed
interest of 7.00%, due September 2017, unsecured 1,349,985
Notes payable to members, monthly payments of $1,451, including imputed
interest of 7.00%, due January 2013, unsecured 117,126
Notes payable to members, due on demand, non-interest bearing, unsecured 65,300
------------
5,896,210
Less current maturities 571,068
------------
$ 5,325,142
============
F-27
SHELL LANDING GOLF, LLC
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
(continued)
NOTE 6. NOTES PAYABLE (Continued)
Maturities of notes payable are as follows:
2004 571,068
2005 364,141
2006 382,145
2007 388,015
2008 406,406
Subsequent to 2008 3,784,435
------------
$ 5,896,210
============
NOTE 7. COST OF SALES
Cost of sales consists of the following at December 31:
Merchandise $ 135,175
Food 88,822
Beer and liquor 59,874
------------
$ 283,871
============
NOTE 8. RELATED PARTY TRANSACTIONS
The Company has several demand notes due to members which bear interest at
7.00%. The balance at December 31, 2003 was $1,532,411. Interest expense on
these loans totaled $95,325 in 2003.
F-28
AZUR HOLDINGS, INC. |
Proforma Consolidated Financial Statements |
| | | | | | | | | | | | | | | |
| (I) Financial Information |
| | | | | | | | | | | | | | | |
| On February 14, 2006, Azur Holdings Inc. ("Holdings") a Deleware corporation, formerly, New Harverst Capital |
| Corporation, acquired from Azur International Inc., a Nevada corporation ("Azur"), all of the common stock of The Grand |
| Shell Landing, Inc., a Mississippi corporation ("GSLI"), and 75% of the common stock of Azur Shell Landing Resort, Inc., |
| a Mississipi corporation ("ASLR"), effected by the issuance by Holdings of 25,236,773 shares of its $.0001 par value |
| common stock, and the assumption by Holdings of $ 700,000 of 18% debt and $ 829,561 of operating liabilities. Azur |
| owns approximately 50.4% of Holdings, which it acquired on June 1, 2005. |
| | | | | | | | | | | | | | | |
| The accompanying unaudited pro forma financial statements include Holdings, GSLI, ASLR and proforma adjustments. |
| The balance sheets have been presented as of October 31, 2005 for Holdings, Sept 30, 2005 for GSLI and November 3, |
| 2005 for ASLR (the date ASLR entered into a co-ownership agreement whereby Azur Shell Landing Development II |
| conveyed to ASLR a 95% undivided tenants-in-common interest in the property owned by Azur Shell Landing |
| Development II). The pro forma annual statement of operations is for the year ended April 30, 2005 for Holdings, and |
| GSLI. ASLR is a real estate holding company formed on May 13, 2005 and had no predecessor income. The pro forma six |
| month statement of operations is for the six months ending October 31, 2005 for Holdings and GSLI. |
| | | | | | | | | | | | | | | |
| The condensed pro forma financial statements should be read in conjunction with the audited financial statements of |
| Holdings (formerly, New Harvest Capital Corporation) and Azur, which can be found in the Form 10-KSB filings for each |
| company. |
| | | | | | | | | | | | | | | |
| (II) Pro Forma Consolidated Financial Data |
| | | | | | | | | | | | | | | |
| The unaudited consolidated pro forma balance sheet of Holdings as of October 31, 2005 and the unaudited GSLI balance |
| sheet as of September 30, 3005 and the compiled balance sheet of ASLR as of November 3, 2005 are based on |
| historical balance sheets. The adjustments presented are provided to reflect, on a pro forma basis, the issuance of |
| common stock by Holdings and assumption of debt and liabilities by Holdings for the acquistion of the subsidiaries and the |
| elimination of subsidiary equity, and the recognition of minority non-controlling interest in a subsidiary. |
| | | | | | | | | | | | | | | |
| The unaudited pro forma statements of operations are the historical financial statements of Holdings, GSLI and ASLR and |
| and pro forma adjustments reflective of this acquisition. The pro forma information is not necessarily indicative of the |
| results of operations that would have been reported had such events occurred on the dates indicated, nor is it indicative of |
| the results of Holdings' future operations. |
| Azur Holdings Inc. | |
| Proforma Consolidated Balance Sheet | |
| October 31, 2005 | |
(unaudited) | |
| | | | | The Grand | | Azur Shell | | | | | | | | | | | |
| | | Azur | | Shell | | | | | | | | | | | | | |
| | | Holdings, Inc. | | | | | | | | | | | | | | | |
| | October 31, | | September 30, | | November 3, | | | | | | | | | | | |
ASSETS | | 2005 | | 2005 | | 2005 | | | | | | | | | | Consolidated | |
| | | | | | | | | | | | | | | | | | |
| CURRENT ASSETS | | | | | | | | | | | | | | | | | |
| Cash and Cash Equivalents | | $ | - | | $ | 141,442 | | $ | 1,200,000 | | | | | $ | - | | | | | $ | - | | $ | 1,341,442 | |
| Restricted Cash | | | - | | | - | | | 1,440,970 | | | | | | | | | | | | | | | 1,440,970 | |
| Accounts Receivable | | | - | | | 50,074 | | | - | | | | | | | | | | | | | | | 50,074 | |
| Inventory | | | - | | | 82,479 | | | - | | | | | | | | | | | | | | | 82,479 | |
| Prepaid Expenses | | | - | | | 129,868 | | | - | | | | | | - | | | | | | - | | | 129,868 | |
| . | | | | | | . | | | | | | | | | | | | | | | | | | | |
| Total current assets | | | - | | | 403,863 | | | 2,640,970 | | | | | | - | | | | | | - | | | 3,044,833 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| PROPERTY AND EQUIPMENT | | | | | | | | | | | | | | | | | | | | | | | | | |
| Land | | | - | | | 861,949 | | | 12,550,786 | | | | | | - | | | | | | - | | | 13,412,735 | |
| Land Acquisition Costs | | | - | | | - | | | 5,660,714 | | | | | | - | | | | | | - | | | 5,660,714 | |
| Buildings, property improvements & equipment | | | - | | | 7,293,021 | | | - | | | | | | - | | | | | | - | | | 7,293,021 | |
| Accumulated depreciation | | | - | | | (379,324 | ) | | - | | | | | | | | | | | | | | | -379,324 | |
| Net Property & Equipment | | | - | | | 7,775,646 | | | 18,211,500 | | | | | | - | | | | | | - | | | 25,987,146 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| OTHER NON-CURRENT ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loan Acquisition Costs-net | | | - | | | - | | | 435,987 | | | | | | - | | | | | | - | | | 435,987 | |
| Deferred Land Acquisition Costs | | | - | | | - | | | 10,339,287 | | | | | | | | | | | | | | | 10,339,287 | |
| Due from Related Parties-Azur International | | | - | | | - | | | 2,274,013 | | | | | | - | | | | | | - | | | 2,274,013 | |
| Other Assets | | | - | | | 147,032 | | | - | | | | | | | | | | | | | | | 147,032 | |
| Total non-current assets | | | - | | | 147,032 | | | 13,049,287 | | | | | | - | | | | | | - | | | 13,196,319 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | - | | $ | 8,326,541 | | $ | 33,901,757 | | | | | $ | - | | | | | $ | - | | $ | 42,228,298 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | | | | | | | | | | | | | | | | | | |
| Notes & Mortgages Payable-Current Portion | | $ | - | | $ | 180,253 | | $ | - | | | | | $ | - | | | | | $ | - | | $ | 180,253 | |
| Notes & Mortgages Payable-Related party | | | - | | | 1,070,811 | | | 1,210,000 | | | | | | | | | | | | | | | 2,280,811 | |
| Capital Lease Obligation-Current Portion | | | - | | | 45,016 | | | - | | | | | | | | | | | | | | | 45,016 | |
| Accounts Payable and Accruals | | | 32,613 | | | 64,671 | | | 600,970 | | | | | | - | | | a | | | 829,561 | | | 1,527,815 | |
| Other Current Liabilities | | | - | | | 113,983 | | | 1,550,310 | | | | | | | | | | | | | | | 1,664,293 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total current liabilities | | | 32,613 | | | 1,474,734 | | | 3,361,280 | | | | | | - | | | | | | 829,561 | | | 5,698,188 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| LONG TERM LIABILITIES | | | | | | | | | | | | | | | | | | | | | | | | | |
| Notes & Mortgages Payable-Net of Current Portion | | | - | | | 6,121,506 | | | 12,750,477 | | | | | | - | | | a | | | 700,000 | | | 19,571,983 | |
| Guaranteed Payments-Related party (h) | | | | | | | | | 16,000,000 | | | | | | | | | | | | | | | 16,000,000 | |
| Capital Lease Obligation-Net of Current Portion | | | - | | | 48,445 | | | - | | | | | | - | | | | | | - | | | 48,445 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total long term liabilities | | | - | | | 6,169,951 | | | 28,750,477 | | | | | | - | | | a | | | 700,000 | | | 35,620,428 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities | | | 32,613 | | | 7,644,685 | | | 32,111,757 | | | | | | - | | | | | | 1,529,561 | | | 41,318,616 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non Controlling Interest In Subsidiaries | | | - | | | - | | | - | | | b | | | 1,022,500 | | | | | | - | | | 1,022,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock-$.0001 par value, 5,000,000 shares | | | - | | | - | | | - | | | | | | | | | | | | - | | | - | |
| authorized, | | | | | | | | | | | | | | | | | | | | | | | | - | |
| Common stock, $0.0001 par value, 300,000,000 | | | 10 | | | | | | | | | | | | | | | a | | | 2,524 | | | 2,534 | |
| shares authorized | | | - | | | - | | | - | | | | | | - | | | | | | - | | | - | |
| Common Stock-Subsidiaries | | | | | | 20 | | | 20,000 | | | b | | | (5,000 | ) | | a | | | (15,020 | ) | | - | |
| Additional Paid In Capital | | | 606,670 | | | 837,587 | | | 4,070,000 | | | b | | | (1,017,500 | ) | | a | | | (1,672,816 | ) | | 2,823,941 | |
| (Accumulated Deficit) | | | (639,293 | ) | | (155,751 | ) | | - | | | | | | - | | | a | | | 155,751 | | | (639,293 | ) |
| Deferrred Interest on Capitalized Land Acq. | | | - | | | - | | | (2,300,000 | ) | | | | | - | | | | | | - | | | (2,300,000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Stockholders' Equity (Deficit) | | | (32,613 | ) | | 681,856 | | | 1,790,000 | | | | | | (1,022,500 | ) | | | | | (1,529,561 | ) | | (112,818 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Liabilities and Stockholders' Equity (Deficit) | | $ | - | | $ | 8,326,541 | | $ | 33,901,757 | | | | | $ | - | | | | | $ | - | | $ | 42,228,298 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Azur Holdings Inc. | |
Pro Forma Consolidated Statement of Operations | |
For the year ended April 30, 2005 | |
(unaudited) | |
| | | | | The Grand | | Azur | | | | | | | | | | | |
| | | Azur | | Shell | | | | | | | | | | | | | |
| | | Holdings, | | Landing, | | Landing | | | | Proforma | | | | Proforma | | Proforma | |
| | Inc. | | Inc. | | Resort, Inc. | | | | Adjustments | | | | Adjustments | | Consolidated | |
| | | | | | | | | | | | | | | | | | |
| SALES AND REVENUES | | $ | - | | $ | 3,365,911 | | $ | - | | | | | $ | - | | | | | $ | - | | $ | 3,365,911 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| COST OF SALES | | | - | | | 382,798 | | | - | | | | | | - | | | | | | - | | | 382,798 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross Profit | | | - | | | 2,983,113 | | | - | | | | | | - | | | | | | - | | | 2,983,113 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | 9,470 | | | 1,939,579 | | | - | | | | | | - | | | | | | - | | | 1,949,049 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) before other income (expenses) and | | | | | | | | | | | | | | | | | | | | | | | | | |
| provision for income taxes | | | (9,470 | ) | | 1,043,534 | | | - | | | | | | - | | | | | | - | | | 1,034,064 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| OTHER INCOME (EXPENSE) | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other Income | | | | | | 110,080 | | | - | | | | | | | | | | | | | | | 110,080 | |
| Other Expense | | | | | | (232,859 | ) | | - | | | | | | | | | | | | | | | (232,859 | ) |
| Interest income | | | - | | | - | | | - | | | | | | | | | | | | | | | - | |
| Interest (expense) | | | (798 | ) | | (348,342 | ) | | - | | | c | | | (4,468,677 | ) | | e | | | 126,000 | | | (4,691,817 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total other income (expense) | | | (798 | ) | | (471,121 | ) | | - | | | | | | (4,468,677 | ) | | | | | 126,000 | | | (4,814,596 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) before provision for income taxes | | | (10,268 | ) | | 572,413 | | | - | | | | | | (4,468,677 | ) | | | | | 126,000 | | | (3,780,532 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | - | | | | | | - | | | | | | - | | | | | | - | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) before minority share | | | (10,268 | ) | | 572,413 | | | - | | | | | | (4,468,677 | ) | | | | | 126,000 | | | (3,780,532 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Minority share of Income (Loss) | | | - | | | - | | | - | | | d | | | (1,117,169 | ) | | | | | | | | (1,117,169 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) | | $ | (10,268 | ) | $ | 572,413 | | $ | - | | | | | $ | (3,351,508 | ) | | | | $ | 126,000 | | $ | (2,663,363 | ) |
| Net income (loss) per weighted average share | | | ($0.11 | ) | | | | | | | | | | | | | | | | | | | | ($0.11 | ) |
| Weighted average number of shares (f) | | | 95,372 | | | | | | | | | | | | | | | | | | 25,236,773 | | | 25,332,145 | |
| | | | | | | | | | | | | | | |
| | | | | Azur Holdings Inc. |
| | | | | Pro Forma Adjustments -Balance Sheet and Annual Income Statement |
| | | | | | | | | | | | | | | |
| | a) | Issuance of 25,236,773 shares of common stock and assumption of $ 700,000 of 18% debt and $ 829,561 of |
| | | payables for 100% equity in GSLI and 75% of ASLR. |
| | b) | Recognition of 25% Minority share in ASLR. |
| | c) | Annual interest expenses of $ 4,468,677 on ASLR debt and loan fees |
| | d) | Minority share ( 25%) of ASLR loss. |
| | e) | Annual interest expenses of $ 126,000 on Azur debt assumed. |
| | f) | Reflects effect of August 9, 2005 1:1,370 reverse stock split |
| | g) | Debt comprises the following: |
| | | | | Name | Amount | Interest Rate | Maturity | | | | | | | |
| | | ASLR | | Crawford | 1,210,000 | 4.0% | Nov 2006 | | | | | | | |
| | | | | Olympic | 6,750,477 | 14.0% | June 2007 | | | | | | | |
| | | | | Omicron | 6,000,000 | 14.0% | June 2007 | | | | | | | |
| | | GSLI | | Textron | 6,301,759 | Prime + 1.5% | Nov 2009 | | | | | | | |
| | | | | Crawford* | 1,070,811 | 4.0% | Nov 2005 | *(Paid in Nov. 2005). | | | |
| | | AZUR Transfer | | | | | | | | | | | |
| | | | | Arron Baer | 700,000 | 18.0% | Jan. 2007 | | | | | | | |
| | | | This $700,000 note is guaranteed by Azur by the proceeds of Victoria Green LLC, a development project |
| | | | that Azur has a 25% interest in. The project consists of 24 townhomes in the Ft. Lauderdale area, with |
| | | | construction estimated from June 2006 to completion date by March 2007. |
| | h) | Guaranteed Payments-Related party of $16,000,000 to be paid from 5% of the gross revenues derived from the |
| | | sale of land, developed property, or the lease or rental of any property of ASLR, until the year 2011, incurred |
| | | via land purchase of $5,660,714 and deferred land acquisition costs of $ 10,339,287. |
| | | | | | | | | | | | | | | | | | |
Pro Forma Consolidated Statement of Operations | |
For the Six Months Ended October 31, 2005 | |
Unaudited | |
| | | | | The Grand | | Azur | | | | | | | | | | | |
| | | Azur | | Shell | | Shell | | | | | | | | | | | |
| | Holdings, | | Landing, | | Landing | | | | | | | | | | | |
| | | Inc. | | Inc. | | Resort, Inc. | | | | Adjustments | | | | Adjustments | | | |
| | | | | | | | | | | | | | | | | | |
| SALES AND REVENUES | | $ | - | | $ | 981,292 | | $ | - | | | | | $ | - | | | | | $ | - | | $ | 981,292 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| COST OF SALES | | | - | | | 141,338 | | | - | | | | | | - | | | | | | - | | | 141,338 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross Profit | | | - | | | 839,954 | | | - | | | | | | - | | | | | | - | | | 839,954 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | 170,368 | | | 841,207 | | | - | | | | | | - | | | | | | - | | | 1,011,575 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) before other income (expenses) and | | | | | | | | | | | | | | | | | | | | | | | | | |
| provision for income taxes | | | (170,368 | ) | | (1,253 | ) | | - | | | | | | - | | | | | | - | | | (171,621 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| OTHER INCOME (EXPENSE) | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other Income | | | | | | | | | - | | | | | | | | | | | | | | | - | |
| Other Expense | | | | | | (181,635 | ) | | - | | | | | | | | | | | | | | | (181,635 | ) |
| Interest income | �� | | - | | | - | | | - | | | | | | | | | | | | | | | - | |
| Interest (expense) | | | - | | | (251,996 | ) | | - | | | a | | | (2,234,339 | ) | | c | | | (63,000 | ) | | (2,549,335 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total other income (expense) | | | - | | | (433,631 | ) | | - | | | | | | (2,234,339 | ) | | | | | (63,000 | ) | | (2,730,970 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) before provision for income taxes | | | (170,368 | ) | | (434,884 | ) | | - | | | | | | (2,234,339 | ) | | | | | (63,000 | ) | | (2,902,591 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | - | | | - | | | - | | | | | | - | | | | | | - | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) before minority share | | | (170,368 | ) | | (434,884 | ) | | - | | | | | | (2,234,339 | ) | | | | | (63,000 | ) | | (2,902,591 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Minority share of Income (Loss) | | | | | | | | | - | | | b | | | (558,585 | ) | | | | | | | | (558,585 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) | | $ | (170,368 | ) | $ | (434,884 | ) | $ | - | | | | | $ | (1,675,754 | ) | | | | $ | (63,000 | ) | $ | (2,344,006 | ) |
| Net income (loss) per weighted average share | | | ($1.70 | ) | | | | | | | | | | | | | | | | | | | | ($0.09 | ) |
| Weighted average number of shares (d) | | | 100,120 | | | | | | | | | | | | | | | | | | 25,236,773 | | | 25,336,893 | |
| Azur Holdings Inc. |
| Pro Forma Adjustments Six Months Income Statement |
| | | | | | | | | | | | | | | |
| | a) | Six month interest expenses of $ 2,234,339 on ASLR debt and loan fees |
| | b) | Minority share of ASLR loss. |
| | c) | Six month interest expenses of $ 63,000 on Azur debt assumed. |
| | d) | Reflects effect of August 9, 2005 1:1,370 reverse stock split |
| Azur Holdings Inc. | |
| Proforma Consolidated Balance Sheet - INTEREST EXP CALC | |
| October 30, 2005 | |
| | | | | | | | |
| | | Azur Shell | | INT RATE | | ANNUAL INT | |
| | Landing | | | | | |
ASSETS | | Nov 3 | | | | | |
| | | | | | | | |
| CURRENT ASSETS | | | | | | | |
| Cash and Cash Equivalents | | $ | 1,200,000 | | | | | | | |
| Restricted Cash | | | 1,440,970 | | | | | | | |
| Prepaid Expenses | | | - | | | | | | | |
| | | | | | | | | | | |
| Total current assets | | | 2,640,970 | | | | | | | |
| | | | | | | | | | | |
| PROPERTY AND EQUIPMENT | | | | | | | | | | |
| Land | | | 12,550,786 | | | | | | | |
| Land Acquisition Costs | | | 5,660,714 | | | | | | | |
| Net Property & Equipment | | | 18,211,500 | | | | | | | |
| | | | | | | | | | | |
| OTHER NON-CURRENT ASSETS | | | | | | | | | | |
| Loan Acquisition Costs-net | | | 435,987 | | | 36 MO | | | 145,329 | |
| Deferred Land Acquisition Costs | | | 10,339,287 | | | 6 YRS | | | 1,723,215 | |
| Due from Related Parties-Azur International | | | 2,274,013 | | | | | | | |
| Other Assets | | | - | | | | | | | |
| Total non-current assets | | | 13,049,287 | | | | | | | |
| | | | | | | | | | | |
| Total assets | | $ | 33,901,757 | | | | | | | |
| | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | |
| | | | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | | | |
| Notes & Mortgages Payable-Current-Crawford | | $ | 1,210,000 | | | 4 | % | $ | 48,400 | |
| Accounts Payable and Accruals | | | 600,970 | | | | | | | |
| Other Current Liabilities | | | 1,550,310 | | | | | | | |
| | | | | | | | | | | |
| Total current liabilities | | | 3,361,280 | | | | | | | |
| | | | | | | | | | | |
| LONG TERM LIABILITIES | | | | | | | | | | |
| Notes & Mortgages Pay. Olympic | | | 6,750,477 | | | 14 | % | | 945,067 | |
| Omicron | | | 6,000,000 | | | 14 | % | | 840,000 | |
| Naranjo | | | 16,000,000 | | | see amort of land costs 10MM | |
| | | | | | | | | | | |
| Capital Lease Obligation-Net of Current Portion | | | - | | | | | | | |
| | | | | | | | | | | |
| Total long term liabilities | | | 28,750,477 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total liabilities | | | 32,111,757 | | | | | | | |
| | | | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | | | |
| Preferred Stock-$.0001 par value, 5,000,000 shares | | | - | | | | | | | |
| authorized, | | | | | | | | | | |
| Common stock, $0.0001 par value, 300,000,000 | | | | | | | | | | |
| shares authorized | | | - | | | | | | | |
| Common Stock | | | 20,000 | | | | | | | |
| Additional Paid In Capital | | | 4,070,000 | | | | | | | |
| (Accumulated Deficit) | | | - | | | | | | | |
| Non Controlling Interest In Subsidiaries | | | - | | | | | | | |
| Deferrred Interest on Capitalized Land Acq. | | | (2,300,000 | ) | | 3 yrs | | | 766,667 | |
| | | | | | | | | | | |
| Total Stockholders' Equity (Deficit) | | | 1,790,000 | | | | | | | |
| | | | | | | | | | | |
| Total Liabilities and Stockholders' Equity (Deficit) | | $ | 33,901,757 | | | | | | | |
| TOTAL EXP | | | - | | | | | | 4,468,677 | |
| INTEREST | | | | | | | | | | |
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 hereunto duly authorized.
AZUR HOLDINGS, INC.
February 14, 2006 By: /s/ Donald Winfrey
------------------
Donald Winfrey
President
