SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) APRIL 26, 1996
FIRST AMERICAN RAILWAYS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 33-14751-D 87-0443800
(STATE OF (COMMISSION FILE (IRS EMPLOYER
INCORPORATION) NUMBER) IDENTIFICATION
NUMBER)
1360 SOUTH OCEAN BLVD., SUITE 1905, POMPANO BEACH, FLORIDA 33062
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES OF THE REGISTRANT)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 941-1155
ASIA-AMERICA CORPORATION
73-251 AMBER STREET, PALM DESERT, CA 92260
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
ITEM 1. CHANGES IN CONTROL OF THE REGISTRANT.
On April 26, 1996, the Registrant merged (the "Merger") with First
American Railways, Inc., a private Florida corporation (the "Acquiree"); the
Registrant was the survivor of the Merger. As part of the Merger, the Registrant
exchanged one share of its common stock, $.001 par value, for each outstanding
share of the common stock of the Acquiree. Five individuals were also appointed
to serve as members of the Registrant's Board of Directors in place of the sole
director, Denny W. Nestripke, who resigned. Mr. Nestripke was also the principal
shareholder of the Registrant before the Merger. As a part of the Merger, Mr.
Nestripke as the sole officer of the Registrant resigned and the officers of the
Acquiree were appointed in his place, as described below. Current management of
the Registrant is now comprised of:
NAME POSITION
---- --------
ALLEN C. HARPER CHAIRMAN OF THE BOARD OF
DIRECTORS
EUGENE K. GARFIELD PRESIDENT, ASSISTANT
SECRETARY AND DIRECTOR
THOMAS G. RADER DIRECTOR
DAVID H. RUSH DIRECTOR
LUIGI SALVANESCHI DIRECTOR
MARY ACIETUNO SECRETARY AND TREASURER
A "change in control" resulted from the Merger. The shares of
restricted common stock issued to the shareholders of the Acquiree at the time
of the Merger represented approximately 96% of the 8,318,773 shares of common
stock then outstanding. Immediately prior to and in anticipation of the Merger,
the Registrant effectuated a 1-for-108 share reverse stock split of its
outstanding common stock thereby reducing the outstanding number of its common
stock to 350,000 shares (following a contribution to capital of 1,965 post-split
shares by the pre-Merger majority shareholder).
2
Those persons who currently own five percent or more of the outstanding
shares of the Registrant are as follows:
% OF
NAME NO. OF SHARES POSITION OUTSTANDING SHARES(1)
- ---- ------------- -------- ---------------------
THOMAS G. RADER 1,614,581 DIRECTOR 18%
ALLEN C. HARPER 1,379,032(2) CHAIRMAN OF THE
BOARD OF DIRECTORS 15%
EUGENE K. GARFIELD 732,343 PRESIDENT, ASSISTANT
SECRETARY, DIRECTOR 8%
CAPITAL GROWTH
INTERNATIONAL, LLC 562,500(3) NONE 6%
(1) Based on a total of 9,050,278 shares outstanding following
the transaction described in Item 5, below.
(2) Includes 1,379,032 shares which are owned jointly of record
with his spouse, Carol E. Harper. Excludes 1,285 shares
owned by the Harper Family Trust, Ltd., a Florida limited
partnership for which Carol E. Harper serves as general
partner, and with respect to which Allen C. Harper
disclaims any beneficial ownership.
(3) Excludes warrants to purchase 650,000 shares of common stock of the
Registrant which were issued to Capital Growth International, LLC, as
the placement agent (the "Placement Agent") in connection with the
transaction described in Item 5, below.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As described in Item 1, above, the Registrant acquired all of the
assets of the Acquiree (consisting mainly of cash and contracts) by virtue of
the Merger.
The consideration for the acquisition paid by the Registrant was in the
form of one share of its common stock for each share of common stock of the
Acquiree. The exchange ratio, along with the condition precedent of the
1-for-108 reverse stock split by the Registrant, was determined in arm's-length
negotiations between the Registrant's management and representatives of the
Acquiree. The consideration received by the Registrant for its issuance of its
shares was all of the assets of the Acquiree.
None of the Acquiree's shareholders was affiliated with the Registrant
in any manner. The principal basis used in the negotiations to determine the
number of shares to be issued by the Registrant was the percentage of stock
which would be owned by the new "control group" after the issuance thereof
rather than any traditional valuation formula.
3
ITEM 5. OTHER EVENTS.
Pursuant to the Plan and Articles of Merger with the Acquiree (a copy
of which is attached hereto as an exhibit), the Registrant amended its Articles
of Incorporation to (i) change its corporate name to First American Railways,
Inc., (ii) authorize 500,000 shares of preferred stock, $.001 par value, to be
issued in such series and with such rights, preferences and designations as
determined by the Registrant's Board of Directors, and (iii) provide that
officers and directors of the Registrant shall have no liability for breach of
fiduciary duty except as provided under Nevada law.
In connection with the Merger transaction there was a private offering
consisting of a minimum of $10,000,000 of Units (333-1/3 Units) and a maximum of
$15,000,000 of Units (500 Units), with an over-allotment option of $1,500,000,
or 50 Units (the "Offering"). Each Unit consists of (a) a convertible secured
note in the principal amount of $15,000, which bears interest at the rate of 10%
per annum, (b) 6,000 shares of common stock, and (c) 6,000 redeemable common
stock purchase warrants, each such warrant entitling the holder thereof to
purchase one share of common stock at an exercise price of $3.50 per share
(subject to adjustment under certain circumstances) at any time prior to
redemption from the date of issuance until two years thereafter. As a result of
the Merger, the Registrant succeeded to all rights, duties and obligations of
the Acquiree including those with respect to the subject securities.
The private offering yielded gross proceeds of $16,501,365 and the
Registrant issued securities consisting of 4,050,271 shares of common stock
(including shares issued to the Placement Agent and its designee), $8,250,682 in
principal amount of convertible secured notes (which are convertible into
2,357,338 shares of common stock assuming no interest thereon is converted into
shares), and 3,950,271 redeemable common stock purchase warrants (including
warrants issued to the Placement Agent) which are exercisable for an equivalent
amount of shares of common stock.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
(a) Financial statements for First American Railways, Inc., a
Florida corporation, covering the year ended April 30, 1995
and the six month periods ended January 31, 1996 and 1995
(unaudited) are attached hereto.
(b) Pro forma financial information.
Unaudited pro forma combined financial statements of the
Registrant giving effect to the acquisition of the Acquiree by
merger are attached hereto.
4
(c) EXHIBITS.
2.1 Agreement and Plan of Merger dated April 15, 1996 with
exhibits is incorporated herein by reference to Exhibit
A to the Registrant's Form 10-QSB for the quarter ended
March 30, 1996.
2.2 Plan and Articles of Merger of First American Railways,
Inc., a Florida corporation, with and into the
Registrant (f/k/a Asia-America Corporation) as filed
with the Secretaries of State of the State of Nevada and
the State of Florida.
20 Information Statement of the Registrant dated April 12,
1996, which includes business description of First
American Railways, Inc., a Florida corporation, along
with biographies of its management is incorporated
herein by reference to Exhibit B to the Registrant's
Form 10-QSB for the quarter ended March 30, 1996.
5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST AMERICAN RAILWAYS, INC.
(F/K/A ASIA-AMERICA CORPORATION)
DATE: MAY 9, 1996 BY: /S/ ALLEN C. HARPER
---------------------
ALLEN C. HARPER, CHAIRMAN OF THE
BOARD OF DIRECTORS
6
FIRST AMERICAN RAILWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F - 2
FINANCIAL STATEMENTS
BALANCE SHEET F - 3
STATEMENT OF OPERATIONS F - 4
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) F - 5
STATEMENT OF CASH FLOWS F - 6
NOTES TO FINANCIAL STATEMENTS F - 7
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
First American Railways, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of First American Railways, Inc.
(a development stage company) as of April 30, 1995 and the related statements of
operations, stockholders' equity (deficit) and cash flows for the year then
ended and for the period February 14, 1994 (incorporation) to April 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First American Railways, Inc.,
(a development stage company) as of April 30, 1995 and the results of its
operations and its cash flows for the year then ended and for the period
February 14, 1994 (incorporation) to April 30, 1995 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company is a development stage enterprise.
As discussed in note 2 to the financial statements, the Company's dependence on
outside financing to complete its development activities, lack of existing
commitments from lenders to provide necessary financing, lack of sufficient
working capital, and losses since inception raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans concerning
these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Miami, Florida
May 10, 1995, except for note 7 /s/ BDO SEIDMAN, LLP
which is as of August 24, 1995 -------------------------------
BDO Seidman, LLP
F-2
FIRST AMERICAN RAILWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JANUARY 31, APRIL 30,
1996 1995
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ - $ 134,401
Prepaids and other 1,000 1,680
- -------------------------------------------------------------------------------------------------------------------
Total current assets 1,000 136,081
EQUIPMENT (NOTE 3) 5,854 7,080
DEPOSIT TO RELATED PARTY (NOTE 6) 350,000 350,000
DEFERRED OFFERING COSTS 10,000 25,000
- -------------------------------------------------------------------------------------------------------------------
$ 366,854 $ 518,161
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable $ 183,949 $ 22,122
Accrued liabilities 140,685 -
Notes payable to related parties and others (Note 8) 312,888 -
- -------------------------------------------------------------------------------------------------------------------
637,522 22,122
- -------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
STOCKHOLDERS' EQUITY (DEFICIT) (NOTE 5)
Common stock, no par, 10,000,000 shares
authorized and 4,275,000 shares issued
and outstanding 979,035 979,035
Additional paid-in capital 136,000 136,000
Deficit accumulated during the development stage (1,385,703) (618,996)
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) (270,668) 496,039
- -------------------------------------------------------------------------------------------------------------------
$ 366,854 $ 518,161
- -------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-3
FIRST AMERICAN RAILWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
CUMULATIVE FROM FOR THE YEAR ENDED
FEBRUARY 14, 1994 APRIL 30, 1995
(INCORPORATION) FOR THE NINE MONTHS AND THE PERIOD FROM
THROUGH ENDED JANUARY 31, FEBRUARY 14, 1994
JANUARY 31, 1996 1996 1995 (INCORPORATION)
(UNAUDITED) (UNAUDITED) TO APRIL 30, 1995
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Salaries and payroll taxes $ 633,486 $ 270,694 282,517 $ 362,792
Professional fees 270,867 127,932 77,105 142,935
General and administrative 228,984 153,377 48,945 75,607
Consulting fees (Note 6) 99,533 62,963 26,200 36,570
Depreciation 2,318 1,226 703 1,092
Expenses from offerings
not completed 150,515 150,515 - -
- ---------------------------------------------------------------------------------------------------------------------------
Net loss, representing deficit
accumulated during the
development stage $ (1,385,703) $ (766,707) $ (435,470) $ (618,996)
- ---------------------------------------------------------------------------------------------------------------------------
Weighted average number of
common shares outstanding 4,275,000 4,275,000 4,275,000 4,275,000
- ---------------------------------------------------------------------------------------------------------------------------
Net loss per common share $ (.32) $ (.18) $ (.10) $ (.14)
- ---------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-4
FIRST AMERICAN RAILWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
- -------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL DEFICIT ACCUMULATED
COMMON STOCK PAID-IN DURING THE
SHARES AMOUNT CAPITAL DEVELOPMENT STAGE
- -------------------------------------------------------------------------------------------------------------------------------
Balance at February 14, 1994 and
April 30, 1994 - $ - $ - $ -
Initial capitalization for cash at $0.0046
per share (Note 5) 3,854,430 18,000 - -
Issuance of common stock for cash
at $2.29 per share, net of offering
costs of $20,965 (Note 5) 420,570 961,035 - -
Capital contribution - forgiven
salaries (Note 6) - - 136,000 -
Net loss - - - (618,996)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at April 30, 1995 4,275,000 $ 979,035 $ 136,000 (618,996)
Net loss (unaudited) - - - (766,707)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 1996 (unaudited) 4,275,000 $ 979,035 $ 136,000 $ (1,385,703)
- -------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-5
FIRST AMERICAN RAILWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(NOTE 7)
CUMULATIVE FROM FOR THE YEAR ENDED
FEBRUARY 14, 1994 FOR THE NINE APRIL 30, 1995
(INCORPORATION) MONTHS ENDED AND THE PERIOD FROM
THROUGH JANUARY 31, FEBRUARY 14, 1994
JANUARY 31, 1996 1996 1995 (INCORPORATION)
(UNAUDITED) (UNAUDITED) TO APRIL 30, 1995
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net loss $ (1,385,703) $ (766,707) $ (435,470) $ (618,996)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Salaries forgiven 136,000 - 136,000 136,000
Depreciation 2,318 1,226 703 1,092
(Increase) decrease in prepaids and other (1,000) 680 (680) (1,680)
Increase in accounts payable 183,949 161,827 21,588 22,122
Increase in accrued liabilities 140,685 140,685 (157,611) -
- -------------------------------------------------------------------------------------------------------------------------------
Total adjustments 461,952 304,418 (157,611) 157,534
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used by operating activities (923,751) (462,289) (277,859) (461,462)
- -------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Deposit for purchase of railcar from
related party (350,000) - (350,000) (350,000)
Capital expenditures (8,172) - 7,035 (8,172)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (358,172) - (357,035) (358,172)
- -------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 979,035 - 979,035 979,035
Payment of offering costs (10,000) 15,000 (25,000) (25,000)
Notes payable to related parties and others 312,888 312,888 954,035 -
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,281,923 327,888 319,141 954,035
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in cash - 134,401 319,141 134,401
Cash at beginning of period - 134,401 - -
- -------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ - $ - $ - $ 134,401
- -------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-6
FIRST AMERICAN RAILWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED
JANUARY 31, 1996 AND 1995
1. SUMMARY OF ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
FIRST AMERICAN RAILWAYS, INC. ("THE COMPANY") WAS INCORPORATED ON FEBRUARY
14, 1994, IN THE STATE OF FLORIDA. THE COMPANY IS A DEVELOPMENT STAGE
ENTITY, ORGANIZED FOR THE PURPOSE OF CONSTRUCTING AND MARKETING AN
ENTERTAINMENT BASED PASSENGER TRAIN INITIALLY BETWEEN FT. LAUDERDALE AND
ORLANDO AND SUBSEQUENTLY TO OTHER PARTS OF THE UNITED STATES AND
INTERNATIONALLY. THE COMPANY HAD NO FINANCIAL ACTIVITIES FROM FEBRUARY 14,
1994 TO APRIL 30, 1994.
PREPARATION OF FINANCIAL STATEMENTS
THE PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES REQUIRES MANAGEMENT TO MAKE ESTIMATES AND
ASSUMPTIONS THAT AFFECT THE REPORTED AMOUNTS OF ASSETS AND LIABILITIES AND
DISCLOSURE OF CONTINGENT ASSETS AND LIABILITIES AT THE DATE OF THE
FINANCIAL STATEMENTS AND THE REPORTED AMOUNTS OF REVENUES AND EXPENSES
DURING THE REPORTING PERIOD. ACTUAL RESULTS COULD DIFFER FROM THOSE
ESTIMATES.
EQUIPMENT AND DEPRECIATION
EQUIPMENT IS STATED AT COST LESS ACCUMULATED DEPRECIATION. EQUIPMENT IS
DEPRECIATED OVER 5 YEARS.
OFFERING COSTS
COSTS INCURRED IN CONNECTION WITH THE COMPANY'S EFFORTS TO OBTAIN
ADDITIONAL FINANCING THROUGH A PUBLIC OFFERING OR PRIVATE PLACEMENT OF
SECURITIES ARE DEFERRED AND OFFSET AGAINST THE PROCEEDS IN STOCKHOLDERS'
EQUITY (DEFICIT) OR CHARGED TO OPERATIONS IF AN OFFERING OR PLACEMENT IS
UNSUCCESSFUL.
INCOME TAXES
THE COMPANY HAS NO INCOME SINCE INCEPTION AND ACCORDINGLY HAS NOT PROVIDED
FOR INCOME TAXES.
F-7
NET LOSS PER COMMON SHARE
NET LOSS PER COMMON SHARE IS BASED ON THE WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK OUTSTANDING, AS ADJUSTED FOR THE EFFECTS OF THE
APPLICATION OF SECURITIES AND EXCHANGE COMMISSION STAFF ACCOUNTING
BULLETIN (SAB) NO. 83. PURSUANT TO SAB NO. 83, COMMON STOCK ISSUED BY THE
COMPANY AT A PRICE LESS THAN THE CONTEMPLATED PUBLIC OFFERING PRICE IS
TREATED AS OUTSTANDING FOR ALL PERIODS PRESENTED.
UNAUDITED FINANCIAL STATEMENTS
THE INTERIM FINANCIAL STATEMENTS AS OF JANUARY 31, 1996 AND FOR THE NINE
MONTHS ENDED JANUARY 31, 1996 AND 1995 ARE UNAUDITED. IN THE OPINION OF
MANAGEMENT, SUCH STATEMENTS REFLECT ALL ADJUSTMENTS (CONSISTING ONLY OF
NORMAL RECURRING ADJUSTMENTS) NECESSARY FOR A FAIR PRESENTATION OF THE
FINANCIAL POSITION, RESULTS OF OPERATIONS AND CHANGES IN CASH FLOWS. THE
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JANUARY 31, 1996 ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS FOR THE ENTIRE YEAR.
2. LIQUIDITY
THE ACCOMPANYING FINANCIAL STATEMENTS HAVE BEEN PREPARED ASSUMING THE
COMPANY WILL CONTINUE AS A GOING CONCERN. THIS BASIS OF ACCOUNTING
CONTEMPLATES THE RECOVERY OF THE COMPANY'S ASSETS AND THE SATISFACTION OF
ITS LIABILITIES IN THE NORMAL COURSE OF OPERATIONS. SINCE INCEPTION, THE
COMPANY HAS BEEN INVOLVED IN THE RESEARCH AND DESIGN OF ITS PRODUCT, THE
DEVELOPMENT OF AN ORGANIZATIONAL INFRASTRUCTURE, AND THE PERFORMANCE OF
PRELIMINARY MARKETING AND PROMOTIONAL ACTIVITIES. AS OF JANUARY 31, 1996,
THE COMPANY HAS NOT COMMENCED ITS PLANNED OPERATIONS AND HAS INCURRED
LOSSES AGGREGATING $1,385,703 AND HAS A DEFICIT IN STOCKHOLDERS EQUITY OF
$270,668. THE COMPANY'S ULTIMATE ABILITY TO ATTAIN PROFITABLE OPERATIONS
IS DEPENDENT UPON OBTAINING ADDITIONAL FINANCING ADEQUATE TO COMPLETE ITS
DEVELOPMENT ACTIVITIES, INCLUDING THE ACQUISITION OF THE RAILCARS,
ACQUISITION/CONSTRUCTION OF TERMINALS AND THE MAINTENANCE FACILITY, AND TO
COMMENCE AND ACHIEVE A LEVEL OF SALES ADEQUATE TO SUPPORT ITS COST
STRUCTURE.
F-8
THE COMPANY IS ATTEMPTING TO RAISE FUNDS THROUGH SEVERAL STAGES OF PRIVATE
PLACEMENT FINANCING. IF THE COMPANY IS NOT SUCCESSFUL IN THESE EFFORTS, IT
INTENDS TO FUND FUTURE DEVELOPMENT ACTIVITIES BY OBTAINING ADDITIONAL
FUNDS FROM OTHER SOURCES OR EXISTING INVESTORS. HOWEVER, THERE CAN BE NO
ASSURANCE THAT THE COMPANY WILL BE SUCCESSFUL IN CONSUMMATING ITS PLANS,
OR THAT SUCH PLANS, IF CONSUMMATED WILL ENABLE THE COMPANY TO ATTAIN
PROFITABLE OPERATIONS OR CONTINUE AS A GOING CONCERN.
3. EQUIPMENT
THE COMPANY'S EQUIPMENT IS SUMMARIZED AS FOLLOWS:
APRIL 30, 1995
-------------------------------------------------------------------------
Office and computer equipment $ 8,172
Less accumulated depreciation 1,092
-------------------------------------------------------------------------
$ 7,080
-------------------------------------------------------------------------
4. INCOME TAXES
At April 30, 1995, the Company had a net loss of approximately $619,000
for financial reporting purposes. In general, expenses incurred during the
development stage are capitalized for tax purposes as pre-operating
expenses and may be amortizable over a 60 month period commencing with the
month in which active business begins.
Realization of any portion of the approximate $165,000 deferred tax asset
at April 30, 1995, resulting from the future amortization of capitalized
pre- operating expenses, is not considered more likely than not and,
accordingly, a valuation allowance has been established for the full
amount of such asset.
5. STOCKHOLDERS' EQUITY (DEFICIT)
a) In May 1995, the Company executed a stock split and exchanged the
1,996,400 then outstanding shares of its common stock for 2,495,500
shares of common stock and changed the par value of its common stock
from $.01 to no par. In February 1996, the Company executed a second
stock split and exchanged the 2,495,500 shares of its common stock for
4,275,000 shares of common stock with no par value, 10,000,000 shares
authorized to be issued. The components of
F-9
stockholders' equity and all per share amounts in the accompanying
financial statements have been adjusted retroactively to reflect the
stock splits and changes in par value.
b) In 1994, the Company issued 3,854,430 shares of common stock to its
initial shareholders for cash of $18,000.
c) In connection with a private placement, the Company issued 420,570
shares of common stock for cash of $961,035 net of offering costs of
$20,965.
6. COMMITMENTS AND CONTINGENCIES
a) The Company entered into employment agreements, which expire by 1997,
with three of its officers providing for aggregate annual salaries of
approximately $300,000 and for certain payments in the event of
termination. During the period from February 14, 1994 (incorporation)
to April 30, 1995, such officers waived approximately $136,000 of
salaries due them under the terms of their respective employment
agreements. The amounts waived were recorded as salary expense and a
capital contribution. The officers do not plan to waive future salaries
due them under the agreements.
b) The Company has entered into an agreement with Rader Railcar, Inc.
("Rader") a company owned by a director and shareholder to construct a
railcar to be acquired by the Company at a total cost of $850,000.
During the year ended April 30, 1995, the Company advanced $350,000 to
Rader which is included in deposit in the accompanying balance sheet at
April 30, 1995. The Company took delivery of the railcar on April 28,
1995, and at that time assumed the full risk of loss of such car;
however, the railcar is not presently being used in operations, and
title will not pass until the balance is paid.
c) In February 1995, the Company entered into an agreement with the
Florida East Coast Railway Company ("FEC") for the use of FEC track in
connection with the Company's proposed rail operations. Under the
agreement, the Company will pay a fee to the FEC upon commencement
F-10
of operations of no less than either $500,000 per train consist per
year, or $1.20 per car mile (as defined). Effective January 1 of the
year in which the third anniversary of the commencement service occurs,
and January 1 in every third year thereafter, the car mile rate and the
minimum amount payable shall, upon the request of either party, be
adjusted based on the "Consumer Price Index For Urban Wage Earners and
Clerical Workers" unadjusted, as published by the Bureau of Labor
Statistics, U.S. Department of Labor. The agreement will expire ten
years from the date of commencement of service. At the conclusion of
the initial ten year term, the company will have the right to extend
the agreement for an additional ten year period upon twelve months
advance notice to the FEC.
d) In January 1995, the Company entered into a consulting agreement to
receive governmental consultation services from an outside party for
the period from January 1, 1995 through December 31, 1995. The
agreement provides for consultation to be paid at the rate of $2,000
per month during the term of the agreement.
7. OTHER EVENTS
On August 24, 1995 the Company entered into a memorandum of understanding
with CSX Transportation, Inc. ("CSXT") for the use of its tracks between
West Palm Beach and the Orlando International Airport tradeport site in
connection with the operation of the Florida Fun-Train. The Memorandum
which contains the essential terms of the agreement between the Company and
CSXT, provides, in part, that the Company will pay CSXT the greater of $20
per train mile, or 16% of the Company's revenue from the Florida Fun-Train
operations. In addition, the Company is required to maintain at least $300
million in comprehensive general liability insurance with a minimal
deductible (or self insured). The Memorandum also provides for a certain
degree of exclusivity for the Company's proposed rail operations.
Specifically CSXT has agreed not to grant similar access rights to the
subject rail corridor (between West Palm Beach and Orlando) to any other
private rail passenger operator or contractor which would provide
comparable conventional rail passenger service (primarily servicing the
cruise ship market). This exclusivity clause is voidable by CSXT upon the
occurrence of certain conditions. The term
F-11
of the agreement is five years. In addition to the foregoing, the Company
has agreed to sell up to 400,000 warrants to CSXT the terms of such
warrants are to be negotiated. Also, the Company has agreed to appoint a
CSXT representative, selected by the Company, to its Board of Directors.
8. BORROWINGS FROM RELATED PARTIES AND OTHERS (UNAUDITED)
On June 9, 1995 the Company entered into a loan agreement with a
shareholder and director for up to $125,000, with simple interest of 18%.
As of January 31, 1996, the Company had borrowed $125,000. The loan is to
be repaid upon the earlier of the closing of a second contemplated
financing or May 31, 1996. The obligation is personally guaranteed by the
Company's Chairman of the Board. In addition, the Company entered into loan
agreements with three other shareholders for a total of $175,000 with
simple interest of 18%. One loan ($40,000) is repayable no later than
August 25, 1996 and the second loan ($100,000) personally guaranteed by the
Company's Chairman of the Board, is to be repaid upon the earlier of the
closing of a second contemplated financing or June 30, 1996. The third loan
($35,000) is to be repaid upon the earlier of the second contemplated
financing or January 22, 1997.
Two other loans bear interest at 18%, $4,000 from an officer and $13,000
(some of which was repaid in January) from an employee. These loans will be
repaid from the proceeds of this offering.
F-12
ASIA - AMERICA CORPORATION
FIRST AMERICAN RAILWAYS, INC.
PROFORMA COMBINED BALANCE SHEET
(UNAUDITED)
The following unaudited proforma combined balance sheet aggregates the unaudited
balance sheet of Asia-America Corporation (Asia) as of March 31, 1996, and the
unaudited balance sheet of First American Railways, Inc. (First American) as of
January 31, 1996, and gives effect to the Stage I and Stage II financings and
the merger of First American into Asia which occurred on April 26, 1996. The
Stage I financing was completed on March 28, 1996, whereby First American sold
20 units comprised of $25,000 face amount of notes payable bearing interest at
10% per annum and 18,750 shares of common stock, each unit sold for $25,000,
aggregating $500,000. The initial closing of the Stage II financing was
completed on April 26, 1996, whereby First American sold approximately 428.129
units comprised of $15,000 face amount of notes payable bearing interest at 10%
per annum, and 6,000 shares of common stock, and 6,000 redeemable common stock
warrants, each unit sold for $30,000, aggregating $12,843,865 (including the
conversion into Stage II units of $412,500 principal amount of Stage I notes and
accrued interest thereon). The final closing of the Stage II financing was
completed on May 9, 1996 whereby an additional, approximate 121.917 units were
sold aggregating $3,657,500. The business combination is treated as a
recapitalization of First American, since Asia is not an operating company, with
the issuance of shares for the net assets of Asia. Asia issued common stock in
exchange for all of the issued and outstanding shares of First American and
succeeded to all rights, duties and obligations under the securities issued in
the financings described above. The following proforma balance sheet uses the
assumptions described in the notes following this proforma and the historical
financial information available at March 31, 1996 and January 31, 1996 for Asia
and First American, respectively. The balance sheets of Asia at March 31, 1996
and First American at January 31, 1996 are unaudited but include all adjustments
necessary to present fairly the financial information set forth therein.
Due to the fact that the transaction between the two companies has been treated
as a recapitalization of First American and that the current revenues and
operations of Asia are immaterial to the revenues and operations of First
American, no Proforma Statements of Operations have been presented. If presented
they would be materially the same as the January 31, 1996 and the April 30,
1995, Statements of Operations for First American.
The proforma combined balance sheet should be read in conjunction with the
separate financial statements and related notes thereto of Asia and First
American included elsewhere in this document. This proforma combined balance
sheet is not necessarily indicative of the combined financial position which
might have existed for the period indicated or as it may be in the future.
P-1
ASIA-AMERICA CORPORATION
FIRST AMERICAN RAILWAYS, INC.
PROFORMA COMBINED BALANCE SHEET
- -------------------------------------------------------------------------------------------------------------------------------
STAGE I AND II MERGER AND
FIRST AMERICAN FINANCINGS ASIA-AMERICA RECAPITALIZATION
RAILWAYS, INC. PROFORMA CORPORATION PROFORMA
JANUARY 31, ADJUSTMENTS FIRST AMERICAN MARCH 31, ADJUSTMENTS PROFORMA
1996 INCREASE RAILWAYS, INC. 1996 INCREASE COMBINED
(UNAUDITED) (DECREASE) AS ADJUSTED (UNAUDITED) (DECREASE)
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ 500,000 (1) $ 14,459,476 $ 382 $ - $ 14,459,858
(75,000)(1)
(12,888)(2)
12,427,500 (3)
(1,284,386)(3)
(387,500)(4)
3,657,500 (3)
(365,750)(3)
Prepaids and other 1,000 75,650 (1) 1,000 1,000
(75,650)(4)
- -------------------------------------------------------------------------------------------------------------------------------
Total current assets 1,000 14,459,476 14,460,476 382 14,460,858
Equipment, net 5,854 5,854 5,854
Deposit to related party 350,000 350,000 350,000
Deferred loan costs 642,193 (3) 825,068 825,068
182,875 (3)
Deferred offering costs 10,000 (10,000)(1) - -
- -------------------------------------------------------------------------------------------------------------------------------
$ 366,854 $15,274,544 $ 15,641,398 $ 382 $ - $ 15,641,780
- -------------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
PROFORMA COMBINED BALANCE SHEET.
P-2
ASIA-AMERICA CORPORATION
FIRST AMERICAN RAILWAYS, INC.
PROFORMA COMBINED BALANCE SHEET
- -------------------------------------------------------------------------------------------------------------------------------
STAGE I AND II MERGER AND
FIRST AMERICAN FINANCINGS ASIA-AMERICA RECAPITALIZATION
RAILWAYS, INC. PROFORMA CORPORATION PROFORMA
JANUARY 31, ADJUSTMENTS FIRST AMERICAN MARCH 31, ADJUSTMENTS
1996 INCREASE RAILWAYS, INC. 1996 INCREASE PROFORMA
(UNAUDITED) (DECREASE) AS ADJUSTED (UNAUDITED) (DECREASE) COMBINED
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT
Accounts payable $ 183,949 $ 183,949 $ 108 $ 184,057
Accrued liabilities 140,685 140,685 140,685
Notes payable to related parties
and others 312,888 $ (12,888)(2) - -
(300,000)(4)
Notes payable (55,000)(1) 8,250,682 8,250,682
500,000 (1)
6,421,932 (3)
(412,500)(3)
(87,500)(4)
55,000 (4)
1,828,750 (3)
- -------------------------------------------------------------------------------------------------------------------------------
637,522 7,937,794 8,575,316 108 - 8,575,424
- -------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity (Deficit)
Common stock, $.001 par value,
100,000,000 shares authorized,
9,050,278 shares issued and
outstanding 979,035 55,000 (1) 8,450,300 38,000 $(8,479,250)(5) 9,050
(9,350)(1)
6,421,933 (3)
(642,193)(3)
(182,875)(3)
1,828,750 (3)
Discount on common stock - (10,180) 10,180 (5) -
Additional paid-in capital 136,000 136,000 8,469,070 (5) 8,577,524
(27,546)(5)
Deficit accumulated during the
development stage (1,385,703) (55,000)(4) (1,520,218) (27,546) 27,546 (5) (1,520,218)
(75,650)(4)
(3,865)(3)
- -------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) (270,668) 7,336,750 7,066,082 274 - 7,066,356
- -------------------------------------------------------------------------------------------------------------------------------
$ 366,854 $15,274,544 $ 15,641,398 $ 382 $ - $ 15,641,780
- -------------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
PROFORMA COMBINED BALANCE SHEET.
P-3
ASIA - AMERICA CORPORATION
FIRST AMERICAN RAILWAYS, INC.
PROFORMA COMBINED BALANCE SHEET
(UNAUDITED)
GENERAL
Asia was incorporated under the laws of the state of Nevada in 1987, with a
fiscal year end of June 30. During the year ended December 31, 1993, for
financial statement purposes, the Company changed its year end to December 31.
On March 29, 1991 Asia divested itself of its wholly-owned subsidiary by selling
all of the subsidiary's capital stock to the subsidiary's former shareholders.
After its divestiture, Asia had no assets, retained certain liabilities and, for
financial reporting purposes was considered to be a shell.
Since the March 29, 1991 divestiture, Asia has been considered a development
stage entity. The operating activities of Asia have been confined to seeking the
acquisition of a business, acquiring the assets of a business or engaging in
some other form of business opportunity.
First American was incorporated on February 14, 1994, in the state of Florida.
First American is a development stage entity, organized for the purpose of
constructing and marketing an entertainment based passenger train initially
between Ft. Lauderdale and Orlando and subsequently to other parts of the United
States. First American had no financial activities from February 14, 1994 to
April 30, 1994.
PROFORMA INFORMATION
The accompanying proforma balance sheet combines the balance sheets of Asia as
of March 31, 1996 and First American as of January 31, 1996 and includes
adjustments to reflect the proceeds from First American's Stage I and Stage II
financings and the merger of the companies.
Proforma Adjustments - (1) In March 1996, First American completed its Stage I
financing. First American received gross proceeds of $500,000. Costs associated
with the offering were $85,000 of which $10,000 was prepaid (allocated $75,650
to notes issued and $9,350 to stock issued) in exchange for $500,000 in notes
payable bearing interest at 10% per annum, with a $55,000 original issue
discount, and 375,000 shares of common stock valued at $55,000. (2) First
American used $12,888 of the net proceeds of the Stage I financing to paydown
notes payable to related parties and others. (3) On April 26, 1996, First
American completed the initial closing of its Stage II financing. Total
consideration of $12,843,865 was received consisting of $12,427,500 in cash and
the conversion of $412,500 in notes
P-4
payable and $3,865 in accrued interest from the Stage I financing. In connection
with this transaction $6,421,932 in notes payable were issued bearing interest
at 10% per annum, 2,568,771 redeemable common stock purchase warrants, and
2,568,771 shares of common stock were issued, valued at $6,421,933. Costs
associated with the offering of $1,284,386 were allocated $642,193 to notes
issued and $642,193 to stock issued. On May 9, 1996, the final closing of the
Stage II financing was completed. Total consideration of $3,657,500 was received
and $1,828,750 in notes payable bearing interest at 10% per annum, 731,500
redeemable common stock purchase warrants and 731,500 shares of common stock
valued at $1,828,750 were issued. Costs associated with the offering of $365,750
were allocated $182,875 to notes issued and $182,875 to stock issued. (4) From
the net proceeds of the Stage II financing $387,500 was used to paydown $300,000
in notes payable to related parties and others and $87,500 in notes payable from
the Stage I financing. The $55,000 original issue discount and the $75,650 in
deferred loan costs were amortized at this time. (5) Combines the equity
accounts and recapitalizes the company with 9,050,278 shares of $.001 par value
stock.
Included in the proforma information provided above, Capital Growth
International, LLC ("CGI") and its designee received an aggregate of 750,000
shares of common stock and, in addition, CGI received 650,000 redeemable common
stock purchase warrants, all as partial compensation for its role as Placement
Agent in the Stage II financing.
P-5
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
2.2 PLAN AND ARTICLES OF MERGER OF FIRST
AMERICAN RAILWAYS, INC., A FLORIDA
CORPORATION, WITH AND INTO THE
REGISTRANT (F/K/A ASIA-AMERICA CORP-
ORATION) AS FILED WITH THE SECRETAR-
IES OF STATE OF THE STATE OF NEVADA
AND THE STATE OF FLORIDA.
24