UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 333-48312
AMERICAN LEISURE HOLDINGS, INC.
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(Exact name of the small business issuer as specified in its charter)
Nevada 75-2877111
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(State of incorporation) (IRS Employer Identification No.)
Park 80 Plaza East, Saddle Brook, NJ 07663
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(Address of principal executive offices)
(201) 226-2060
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(Issuer's telephone number)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
NONE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
At May 5, 2005, there were outstanding 9,977,974 shares of the Issuer's common
stock, $.001 par value per share.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMERICAN LEISURE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2005 AND DECEMBER 31, 2004
MARCH 31, 2005 DECEMBER 31, 2004
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ASSETS Unaudited Audited
CURRENT ASSETS:
Cash $ 1,767,769 $ 2,266,042
Accounts receivable 1,079,308 3,539,387
Note receivable 70,254 113,000
Prepaid expenses and other 267,843 51,460
Other Current Assets 0 30,476
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Total Current Assets 3,185,174 6,000,365
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PROPERTY AND EQUIPMENT, NET 5,623,959 6,088,500
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LAND HELD FOR DEVELOPMENT 23,531,130 23,448,214
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OTHER ASSETS
Prepaid Sales Commissions 6,553,688 5,966,504
Prepaid Sales Commissions - affiliated entity 3,235,955 2,665,387
Investment-Senior Notes 5,170,000 5,170,000
Goodwill 14,425,437 14,425,437
Trademark 1,008,478 1,000,000
Other 3,874,494 2,637,574
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Total Other Assets 34,268,052 31,864,902
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TOTAL ASSETS $ 66,608,315 $ 67,401,981
================ ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and notes payable $ 9,302,704 $ 9,605,235
Current maturities of notes payable-related parties 262,312 1,910,629
Accounts payable and accrued expenses 2,007,621 5,618,973
Accrued expenses - officers 1,518,110 1,355,000
Customer deposits 40,500 2,752,535
Other 96,616 2,332,886
Shareholder advances 393,559 273,312
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Total Current Liabilities 13,621,422 23,848,570
Long-term debt and notes payable 27,913,777 20,600,062
Deposits on unit pre-sales 19,536,945 16,669,347
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Total liabilities 61,072,144 61,117,979
STOCKHOLDERS' EQUITY:
Preferred stock; 1,000,000 shares authorized; $.001 par value;
1,000,000 Series "A" shares issued and outstanding at
March 31, 2005 and December 31, 2004 10,000 10,000
Preferred stock; 100,000 shares authorized; $.01 par value;
2,825 Series "B" shares issued and outstanding at
March 31, 2005 and December 31, 2004 28 28
Preferred stock, 28,000 shares authorized; $.01 par value
27,189 Series "C" shares issued and outstanding at
March 31, 2005 and December 31, 2004 272 272
Preferred stock; 50,000 shares authorized; $.001 par value;
24,101 and 0 Series "E" shares issued and outstanding at
March 31, 2005 and December 31, 2004 24 24
Preferred stock; 150,000 shares authorized; $.01 par value;
0 and 1,936 Series "F" shares issued and outstanding at
March 31, 2005 and December 31, 2004 - 19
Common stock, $.001 par value; 100,000,000 shares authorized;
9,977,974 shares issued and outstanding at
March 31, 2005 and December 31, 2004 9,978 9,978
Additional paid-in capital 15,442,693 15,636,322
Accumulated deficit (9,926,824) (9,372,641)
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Total Stockholders' Equity 5,536,171 6,284,002
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 66,608,315 $ 67,401,981
================ ===================
AMERICAN LEISURE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2005 MARCH 31, 2004
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UNAUDITED UNAUDITED
Revenue 2,675,674 1,186,665
Operating Expenses:
Depreciation and amortization (431,382) (220,072)
General and administrative expenses (2,405,156) (1,974,466)
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Loss from Operations (160,864) (1,007,873)
Interest Expense (393,319)
Minority Interest - 256,624
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Total Other Income (Expense) (393,319) 256,624
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Loss before Income Taxes (554,183) (751,249)
PROVISIONS FOR INCOME TAXES - (1,135)
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NET LOSS (554,183) (752,384)
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NET INCOME (LOSS) PER SHARE:
BASIC AND DILUTED (0.06) (0.10)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC AND DILUTED 9,977,974 7,630,961
=========== ===========
AMERICAN LEISURE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2005 MARCH 31, 2004
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UNAUDITED UNAUDITED
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (554,183) $ (752,384)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 431,382 220,072
Interest Expense 393,319 -
Changes in assets and liabilities:
Decrease in receivables 2,460,079 1,149,956
Increase in prepaid and other assets (1,388,560) (85,733)
Increase in prepaid commissions (1,157,752) -
Increase in deposits on unit pre-sales 2,867,598 -
(Decrease)/Increase in customer deposits (2,712,035) 145,474
(Decrease)/Increase in accounts payable and
accrued expenses (4,231,662) 78,950
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Net cash provided by (used in) operating activities (3,891,814) 756,335
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CASH FLOWS FROM INVESTING ACTIVITIES:
Security deposits and other - (970,429)
Acquisition of fixed assets - (107,369)
Advances to AWT - (808,487)
Capitalization of real estate carrying costs (49,757) (733,643)
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Net cash used in investing activities (49,757) (2,619,928)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 6,391,615 -
Payment of debt (1,300,000) -
Proceeds from notes payable - 1,289,834
Proceeds from notes payable - related parties - (8,531)
Payments to related parties (1,648,317) -
Proceeds from shareholder advances - 184,977
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Net cash provided by financing activities 3,443,298 1,466,280
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Net decrease in cash (498,273) (397,313)
CASH AT BEGINNING PERIOD 2,266,042 734,852
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CASH AT END OF PERIOD $ 1,767,769 $ 337,539
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 636,065 $ 180,000
============ ============
NON-CASH TRANSACTIONS:
Stock issued for assets, net of liabilities of $7,111,668 $ - $ 5,170,000
============ ============
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
March 31, 2005
NOTE A - PRESENTATION
The condensed balance sheets of the Company as of March 31, 2005 and December
31, 2004, the related condensed consolidated statements of operations for the
three months ended March 31, 2005 and 2004, and the condensed consolidated
statements of cash flows for the three months ended March 31, 2005 and 2004,
(the condensed financial statements) include all adjustments (consisting of
normal, recurring adjustments) necessary to summarize fairly the Company's
financial position and results of operations. The results of operations for the
three months ended March 31, 2005 are not necessarily indicative of the results
of operations for the full year or any other interim period. The information
included in this Form 10-QSB should be read in conjunction with Management's
Discussion and Analysis and Financial Statements and notes thereto included in
the Company's December 31, 2004, Form 10-KSB & 10-KSB/A and the Company's Forms
8-K & 8-K/A filings.
NOTE B - REVENUE RECOGNITION
American Leisure recognizes revenues on the accrual method of accounting. For
the sales of units on the Orlando property, revenues will be recognized upon the
close of escrow for the sales of its real estate. Operating revenues earned
will be recognized upon the completion of the earning process.
Revenues from American Leisure's call center are recognized as generated and on
a periodic basis from the joint venture entity, Caribbean Media Group, Ltd.
Revenues from Hickory Travel Systems, Inc. are recognized as earned, which is
primarily at the time of delivery of the related service, publication or
promotional material. Costs associated with the current period are expensed as
incurred; those costs associated with future periods are deferred.
Revenues from American Leisure Equities Corporation are recognized as the net
operating result of the Business managed by Around The World Travel, Inc. (third
party travel management company). Revenues and expenses are borne by Around The
World Travel and the net operating results recognized as Revenues by American
Leisure Equities Corporation.
One of American Leisure's principal sources of revenue is associated with access
to the travel portal that provides a database of discounted travel services.
Annual renewals occur at various times during the year. Costs related to site
changes are incurred in the months prior to annual billing renewals. Customers
are charged additional fees for hard copies of the site access information.
Occasionally these items are printed and shipped at a later date, at which time
both revenue and expenses are recognized.
NOTE C - PROPERTY AND EQUIPMENT, NET
As of March 31, 2005, property and equipment consisted of the following:
Useful
Lives Amount
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Equipment 3-5 $7,600,083
Furniture & fixtures 5-7 1,538,437
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Subtotal 9,138,520
Less: accumulated depreciation
and amortization 3,514,561
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Property and equipment, net $5,623,959
==========
Depreciation expense for the three-month period ended March 31, 2005 amounts to
$431,382.
NOTE D - LONG-TERM DEBT AND NOTES PAYABLE
Two notes which amount to $7,862,250 ($6 million with Grand Bank and $1,862,250
with Raster Investments) matured on March 31, 2005. These notes are not in
default and the terms have been extended for an additional six months. Total
accrued interest on the notes amount to $256,512.
On March 4, 2005 unimproved property in Davenport, Florida was sold for
$4,020,000 which provided profits of $1,069,920 and debt relief of $1,300,000
(note payable to Emmitt Foster Trustee).
NOTE E - NOTES PAYABLE - RELATED PARTIES
The current portion of notes payable to related parties is as follows:
James Hay Trustee $ 56,000
Malcolm Wright 82,050
Peter Webb 124,262
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Notes payable - related parties $ 262,312
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Included in Long-term debt and notes payable are debts and notes payable to the
following related parties:
Xpress Ltd. $1,041,685
American Leisure Equities Corp 10,432,791
Hickory Travel Services 768,004
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Related party debt and notes $12,242,480
===========
The long-term portion of notes payable owed to Hickory Travel Systems of
$768,004 is owed to the former minority shareholders of Hickory Travel Systems,
Inc., a subsidiary of the Company. $209,004 of such amount is owed to L.
William Chiles, a Director of the Company.
NOTE F - ACQUISITIONS
On December 31, 2004, American Leisure Equities Corporation (the "Purchaser") a
wholly-owned subsidiary of American Leisure, entered into an Asset Purchase
Agreement (hereinafter referred to as "APA") with Around The World Travel, Inc.
(the "Seller"), pursuant to which the Seller agreed to sell substantially all of
its assets to the Purchaser. Under the terms of the APA, the Seller conveyed to
the Purchaser all of the assets necessary to operate the Business, including
substantially all of the Seller's tangible and intangible assets and certain
agreed liabilities.
The purchase price for the assets transferred under the APA is an amount equal
to the fair value of the Business ($16 million, established by an unaffiliated
investment-banking firm, calculated on a going concern basis), plus $1.5
million, for a total purchase price of $17.5 million.
The APA has been amended and it can be further amended through June 30, 2005.
The original APA indicated that the Purchaser will pay the purchase price on or
before June 30, 2005 through a combination of a number of different currencies
including but limited to the application of short term debt owed to the Company,
the assumption of specific liabilities, the payment to certain AWT creditors on
behalf of AWT and potentially certain preferred stock of the Company. Pursuant
to the terms of the APA, the Seller and the Purchaser have entered into a
Management Agreement, under which the Seller manages the Business on behalf of
the Purchaser. The Seller and the Purchaser also entered into a License
Agreement, under which the Purchaser granted the Seller a non-exclusive license
to use certain trade names and related intellectual property in connection with
the performance of its duties under the Management Agreement. The License
Agreement will expire simultaneously with the Management Agreement. The
amendment has changed the consideration for the purchase price to a combination
of 1) issuance to Seller of a note payable in the amount of $8,483,330, 2)
reduction of certain amounts owed by the Seller to Purchaser in the amount of
$4,774,619 and 3) the assumption of certain liabilities of the Seller in the
amount of $4,242,051. The preferred stock issuance in the original APA was
retracted. During the first quarter, certain of the assets, to wit: doubtful
receivables, pre-paids and security deposits were transferred to Seller as
reduction of the note payable. The note was further reduced by a set-off of the
amount of the Accounts Receivable deemed received and retained by AWT. AWT had
sold the Accounts Receivable to the Company on 12/31/04. In lieu of segregating
and remitting the payments received on the Accounts Receivables, AWT was
permitted to apply said amounts as a credit to the Company's note payable. The
final balance due under the note payable will be ascertained on or before June
30, 2005.
The excess purchase price over the fair value of net tangible assets was
$12,585,435, all of which was allocated to goodwill. No impairment of the
goodwill amount occurred during the quarter covered by this report.
The following table summarizes the estimated fair value of the net assets
acquired and liabilities assumed at the acquisition dates.
Total
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Current assets $ 1,850,109
Property and equipment 287,975
Deposits 276,481
Trademark 1,000,000
Goodwill 12,585,435
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Total assets acquired $ 16,000,000
=============
Notes assumed 4,242,051
Debt forgiven 4,774,619
Note issued 8,483,330
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Consideration $ 17,500,000
=============
NOTE G - RELATED PARTY TRANSACTIONS
The Company accrues salaries payable to Malcolm Wright in the amount of $500,000
per year (and $250,000 per year in 2002 and 2003) with interest at 10%. As of
March 31, 2005, the amount of salaries payable accrued to Mr. Wright amounts to
$1,390,110.
The Company accrues director fees to each of its four (4) directors in an amount
of $18,000 per year for their services as directors of the Company. No payments
of director fees were paid during the current quarter and the balance of accrued
director fees as of the end of the quarter covered by this report amounts to
$132,000.
Malcolm Wright is the majority shareholder of American Leisure Real Estate
Group, Inc. (ALRG). On November 3, 2003 TDSR entered into an exclusive
Development Agreement with ALRG to provide development services for the
development of the Tierra Del Sol Resort. Pursuant to the Development Agreement
ALRG is responsible for all development logistics and TDSR is obligated to
reimburse ALRG for all of ALRG's costs and to pay ALRG a development fee in the
amount of 4% of the total costs of the project paid by ALRG. During the period
from inception through March 31, 2005 the total costs plus fees amounted to
$5,639,975.
A trust for the natural heirs of Malcolm Wright is the majority shareholders of
Xpress Ltd. ("Xpress"). On November 3, 2003, TDSR entered into an exclusive
sales and marketing agreement with Xpress to sell the units being developed by
TDSR. This agreement provides for a sales fee in the amount of 1.5% of the total
sales prices received by TDSR plus a marketing fee of 1.5%. During the period
since the contract was entered into and ended March 31, 2005 the total sales
amounted to approximately $215,730,000. As a result of the sales, TDSR is
obligated to pay Xpress a total fee of $6,471,910. As of March 31, 2005,
$4,630,225 has been paid to Xpress and $1,041,685 remains unpaid and is included
in Long-term debt and notes payable (see Note E regarding Notes payable -
Related parties).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements in this discussion and elsewhere in this report that are not
historical are forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. Statements preceded by,
followed by or that otherwise include the words "believes", "expects",
"anticipates", "intends", "projects", "estimates", "plans", "may increase", "may
fluctuate" and similar expressions or future or conditional verbs such as
"should", "would", "may" and "could" are generally forward-looking in nature and
not historical facts. These forward-looking statements were based on various
factors and were derived utilizing numerous important assumptions and other
important factors that could cause actual results to differ materially from
those in the forward-looking statements. Forward-looking statements include the
information concerning our future financial performance, business strategy,
projected plans and objectives. These factors include, among others, the
factors set forth under the heading "Risk Factors." Although we believe that
the expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Most of these factors are difficult to predict accurately and are
generally beyond our control. We are under no obligation to publicly update any
of the forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events. Readers are
cautioned not to place undue reliance on these forward-looking statements.
OVERVIEW
--------
American Leisure Holdings, Inc. ("AMLH") is a Nevada holding company in the
process of developing a large, multi-national travel services, travel management
and travel distribution organization. In addition, we have a Resort Development
Division that develops, constructs and manages luxury vacation home ownership
and travel destination resorts. Our first such resort is THE SONESTA ORLANDO
RESORT AT TIERRA DEL SOL (the "Sonesta Orlando Resort"), a 972 luxury, town home
and condominium unit property to be located in the heart of the Orlando, Florida
theme park area and developed by our subsidiary, Tierra Del Sol Resort, Inc.
("TDSR"). By virtue of a strong marketing program and what we believe to be an
exceptional product, we have pre-sold 100% of the town homes and have accepted
reservations on 51% of the condominiums, resulting in over $215,000,000 in gross
contract value. The Resort Development Division is planning additional
destinations for the Orlando area, South Florida and the Caribbean.
Through our subsidiaries, we manage and distribute travel services, develop
luxury vacation home ownership and travel destination properties, and operate
six (6) affinity-based travel clubs and a call center in Antigua-Barbuda. Our
subsidiary, American Travel & Marketing Group, Inc. ("ATMG") which operates the
affinity-based travel clubs, specializes in using demographic affinities to
promote brand loyalty through the delivery of customized travel to a
constituency that is built around a national retailer or national cause. ATMG
has recently procured agreements with a prominent sports media organization, a
national publisher of household names and an international retail food
service company. Our businesses are intended to complement each other and create
cross-marketing opportunities within our business. We intend to take advantage
of the synergies between the distribution of travel services and the
development, marketing, sale and management of luxury vacation home ownership
and travel destination properties.
We were incorporated in Nevada in June 2000 as Freewillpc.com, Inc, and
until June 2002, operated as a web-based retailer of built-to-order personal
computers and brand name related peripherals, software, accessories and
networking products. In June 2002, we acquired American Leisure Corporation and
its subsidiaries (collectively referred to herein as "American Leisure") in a
reverse merger. We re-designed and structured our business to own, control and
direct a series of companies in the travel and tourism industries so that we can
achieve vertical and horizontal integration in the sourcing and delivery of
corporate and vacation travel services. Except as expressly indicated or unless
the context otherwise requires, the "Company," "we," "our," or "us" means
American Leisure Holdings, Inc., a Nevada corporation, and its subsidiaries.
In October 2003, we acquired a majority interest (51%) in Hickory Travel
Systems, Inc. ("Hickory") as the first building block of our Travel Division.
Hickory is a travel management service organization that primarily serves a
network/consortium of approximately 160 well-established travel agency members,
comprised of over 3,000 travel agents worldwide that focus primarily on
corporate travel. We intend to complement our other businesses through the use
of Hickory's 24-hour reservation services, international rate desk services,
discount hotel programs, preferred supplier discounts, commission enhancement
programs, marketing services, professional services, automation and information
exchange. We view the members of Hickory as a resource for future acquisitions
of viable travel agencies.
In December 2004, American Leisure Equities Corporation ("ALEC"), one of
our wholly-owned subsidiaries, acquired substantially all of the assets of
Around The World Travel, Inc. ("AWT") which included all of the tangible and
intangible assets necessary to operate the business including the business name
"TraveLeaders". We engaged AWT to manage the assets and granted AWT a license to
use the name "TraveLeaders" in doing so. TraveLeaders is a fully integrated
travel services distribution business that provides its clients with a
comprehensive range of business and vacation travel services in both traditional
and e-commerce platforms including corporate travel management, leisure sales,
and meeting, special event and incentive planning. We are in the process of
finalizing the components of the consideration to be paid for the AWT assets
which was deferred in the original asset purchase agreement while an independent
valuation and audited financial statements of AWT were produced. See the
discussion below under "Recent Events."
We are in the process of integrating the administrative and marketing
operations of Hickory and TraveLeaders to distribute, fulfill and manage our
travel services. This is the foundation of our business model. Our business
model is to use the travel distribution, fulfillment and management services of
the combined resources of Hickory and TraveLeaders to provide consumer bookings
at our planned resorts, to rent and sell vacation homes that we plan to manage
at these resorts, and to fulfill the travel service needs of our affinity-based
travel clubs. TraveLeaders currently fulfills travel orders produced by ATMG,
which currently operates six (6) affinity-based travel clubs. As mentioned
above, ATMG has recently obtained contracts through the addition of a
rewards platform that adds brand loyalty to the benefits roster. Hickory and
TraveLeaders are in the process of negotiating joint arrangements with vendors
to provide travel services to their members and clients. The integration process
had been slowed by factors including, but not limited to, identifying those
operations that could be consolidated and the allocation and re-assignment of
the personnel best suited for the consolidated enterprise. In addition, time has
been required to analyze and determine the impact, if any, of certain litigation
commenced by AWT regarding its contracts with Seamless Technologies, Inc. and
others, as discussed in "Part II-Other Information, Item 1. Legal Proceedings",
and, world events such as uncertainties in the Middle East that may continue to
negatively influence corporate and leisure travel. However, we believe that we
have highly qualified travel and business professionals who can complete the
integration process. We plan to complete the integration process to coincide
with the completion of the first units of the Sonesta Orlando Resort, which we
expect to occur in the fall of 2006.
In December 2004, Caribbean Leisure Marketing, Ltd. ("CLM"), a segment of
our company that is focused on telecommunications, entered into a joint venture
with IMA Antigua, Ltd. ("IMA") to own and operate Caribbean Media Group, Ltd.,
an International Business Corporation formed under the laws of Barbados ("CMG").
We own 49% of CMG. CLM owns the telecommunications center in Antigua-Barbuda
(the "Antigua Call Center"). IMA, a wholly owned subsidiary of International
Market Access, Ltd., is currently operating the Antigua Call Center on behalf
of CMG. The services provided by the Antigua Call Center are both in-bound and
out-bound traffic for customer service and accounts receivable management. The
clients of the Antigua Call Center are well known national businesses with well-
established credit and operational systems. We expect this call center to serve
a variety of large and small corporations by contacting customers in the United
States and the United Kingdom. We also own telecommunications equipment such as
switches, dialers and telephone booths that may have application for a
telecommunications program that we are considering in the United States. Part of
this equipment can be used to serve as the switches for a telephone system that
we plan to operate for the Sonesta Orlando Resort. We plan to begin using the
dialers and operator booths during 2005 for the travel fulfillment operations
that TraveLeaders provides to the affinity-based travel clubs operated by ATMG.
We generate revenue from both the Travel Division and the Resort
Development Division. During the first quarter of 2005, we generated a
substantial amount of our revenue from the sale of land that was being held by
our wholly owned subsidiary, Advantage Professional Management Group, Inc.
("APMG"). During the first quarter of 2005, we recognized revenue from the
operations of TraveLeaders net of the management fee of 10% of TraveLeaders'
EBITDA that we incurred to AWT. As mentioned above, AWT manages the business
conducted with assets that ALEC acquired from AWT on December 31, 2004. We also
currently generate modest revenue from the Antigua Call Center. If the rate of
growth continues as forecasted and has been experienced thus far, the revenues
from that call center will increase throughout this year.
RECENT EVENTS
--------------
On January 29, 2005, we entered into an operating agreement with Sonesta
Orlando, Inc., a wholly owned subsidiary of Sonesta International Hotels
Corporation of Boston, Massachusetts ("Sonesta"), a luxury resort hospitality
management company. Pursuant to the operating agreement, we sub-contracted to
Sonesta substantially all of the hospitality responsibilities for the Sonesta
Orlando Resort. Under the terms of the operating agreement, our subsidiary,
American Leisure Hospitality Group, Inc. ("ALHG"), retains primary management
control of the resort. Sonesta brings international awareness to our property
replete with a successful booking and reservation system. In February 2005, we
held the official groundbreaking ceremony for the resort. At that time, we
announced the final plans for the resort amenities and clubhouse that have been
designed by the award-winning firm of Fugelberg Koch.
On February 1, 2005, our Board of Directors (the "Board") nominated Messrs.
David Levine, Thomas Cornish and Carlos Fernandez to serve as members of the
Board. Messrs. Levine, Cornish and Fernandez have not yet commenced their
appointments to the Board of Directors and are considered nominees. We have no
reason to believe that any of them will be unable to serve or decline to serve
as a director. We anticipate that the nominees will commence directorship in the
future, and that Mr. Levine will serve as Chairman of the Board. We also
anticipate that Messrs. Cornish and Levine will serve on the Compensation
Committee to be formed in the near future by the Board, and that Mr. Fernandez
will serve on the Audit Committee also to be formed in the near future by the
Board. L. William Chiles will continue to serve as Chairman of the Board until
Mr. Levine is formally inducted to that position. After Mr. Levine takes over as
Chairman, we anticipate that Mr. Chiles will continue to serve on the Board as a
Director. We filed a Form 8-K with the Commission on February 15, 2005, which
disclosed that the Board had nominated David Levine, Thomas Cornish and Carlos
Fernandez as Directors of the Company to fill vacancies on the Board created by
the resignation of Gillian Wright, which also occurred on February 1, 2005 and
an increase in the number of members on the Board from four (4) to nine (9).
Messrs. Levine, Cornish, and Fernandez currently provide general corporate and
business advice to the Company. As and when the director nominees and we
complete the process of their induction, the nominees are expected to serve as
directors of the Company.
On February 16, 2005, we announced the groundbreaking of the Sonesta
Orlando Resort. As discussed in "Liquidity and Capital Resources," the capital
requirement for the first phase of the resort is approximately $122,600,000. We
are in the final stages of completing the terms of the debt portion
($96,600,000) of capitalization with a prominent national construction lender.
The balance of the development budget, which includes infrastructure, retention,
roads and green space of approximately $26,000,000, will be sourced from the
Westridge Community Development District ("CDD") and equity of the Company. The
Company is confident that it will complete the capitalization process in the
third quarter of 2005. Site development is expected to begin in June of 2005.
On March 7, 2005, we consummated the sale of land in Davenport, Florida
that was the sole asset of our subsidiary, APMG. The property had been held for
commercial development. The land was acquired in 2002 for approximately
$1,975,359 and sold in 2005 for just over $4,000,000. We received approximately
$2,730,000 in net proceeds from the sale.
In May 2005, we extended the maturity dates of two notes in the aggregate
amount to $7,862,250 that matured on March 31, 2005. These notes are not in
default and the terms have been extended for an additional six months. Total
accrued interest on the notes amount to $256,512.
We and AWT entered into an agreement effective March 31, 2005, to change
the manner in which we will pay for substantially all of the assets of AWT.
Pursuant to the terms of the original asset purchase agreement, we were to
assume certain liabilities of AWT in an aggregate amount of $17,306,352 and
issue 1,936 shares of our Series F Preferred Stock valued at $193,648 in
consideration for the assets. Pursuant to the terms of the first amended asset
purchase agreement, we will not assume any of the liabilities or obligations of
AWT except for debt owed to minority shareholders of $4,242,051 (the debt that
we are assuming is referred to herein as the "Minority Shareholder Debt"). We
will not issue any Series F Preferred Stock in connection with our acquisition
of the assets. We are not assuming any portion of the senior secured notes of
AWT in favor of Galileo International, LLC (the "Galileo Debt") or debt owed to
certain former shareholders of AWT. AWT will continue to be liable for the debt
that we will not assume. In addition to the Minority Shareholder Debt, we will
forgive certain working capital loans that AWT owes to us in the amount of
$4,774,619 (the "AMLH Debt") and ALEC will issue a sixty month, 6% per annum,
balloon note in favor of AWT in the principal amount of $8,483,330, or so much
of the remaining balance of the purchase price after taking into account our
forgiveness of the AMLH Debt (the "Balloon Note"). During the first quarter of
2005, we transferred some of the assets back to AWT which will reduce the amount
due under the Balloon Note. The Balloon Note will be further reduced by the
amount of accounts receivable of TraveLeaders that are received and retained
by AWT. We are in the process of finalizing the documentation regarding the
first amended asset purchase agreement and the related transactions. We
generally have until June 30, 2005, to determine the manner in which we will pay
for substantially all of the assets of AWT including the final balance of the
Balloon Note; therefore, the acquisition is subject to further amendment
in this regard.
KNOWN TRENDS, EVENTS, AND UNCERTAINTIES
We expect to experience seasonal fluctuations in our gross revenues and net
earnings. This seasonality may cause significant fluctuations in our quarterly
operating results. In addition, other material fluctuations in operating results
may occur due to the timing of development of certain projects and our use of
the completed contracts method of accounting with respect thereto. Furthermore,
costs associated with the acquisition and development of vacation resorts,
including carrying costs such as interest and taxes, are capitalized as
inventory and will be allocated to cost of real estate sold as the respective
revenues are recognized. We intend to continue to invest in projects that will
require substantial development and significant amounts of capital funding
during 2005 and in the years ahead.
We believe that the hostilities in the Middle East and other world
terrorist events have had a negative impact on the amount of vacation and
corporate air travel by Americans. These events, while having some adverse
impact on our integration of Hickory and TraveLeaders have not required us to
materially change our business plan. Leisure travel within and to the United
States, especially from people from Western Europe, continues to increase, in
part fueled by the relative currency values. There can be no assurances that
anxiety regarding actual or possible future terrorist attacks or other world
events will not have a material adverse effect on our future results of
operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of
operations is based upon our unaudited financial statements, which have been
prepared in accordance with accounting principals generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of any contingent assets and
liabilities. On an on-going basis, we evaluate our estimates. We base our
estimates on various assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements:
Going Concern Considerations
------------------------------
We have incurred substantial losses since inception, and we have negative
working capital. These factors among others indicate that we may not be able to
continue as a going concern, particularly in the event that we cannot obtain
additional debt and/or equity financing to continue our operations or achieve
profitable operations, as discussed below under the headings "Liquidity and
Capital Resources" and "Risk Factors." We intend to raise additional operating
funds through equity and/or debt offerings. In addition to our ability to raise
additional capital, our continuation as a going concern also depends upon our
ability to generate sufficient cash flow to conduct our operations. There can
be no assurance that we will be successful in our endeavors to raise additional
capital or generate sufficient cash flow to conduct our operations. If we are
not successful in our endeavors, it would have a material adverse effect on our
financial statements. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Revenue Recognition
--------------------
We recognize revenues on the accrual method of accounting. Revenues from
Hickory are recognized as earned, which is primarily at the time of delivery of
the related service, publication or promotional material. Costs associated with
the current period are expensed as incurred; those costs associated with future
periods are deferred.
One of our principal sources of revenue is associated with access to the
travel portals that provide a database of discounted travel services. Annual
renewals occur at various times during the year. Costs related to portal usage
charges are incurred in the months prior to annual billing renewals. Customers
are charged additional fees for hard copies of the site access information.
Occasionally these items are printed and shipped at a later date, at which time
both revenue and expenses are recognized.
Revenues from ALEC are recognized as the net operating result of
TraveLeaders as managed by AWT. Revenues and expenses are borne by AWT and 90%
of TraveLeaders' EBITDA is recognized as revenues by ALEC.
Revenues from our Antigua Call Center are recognized as generated and on a
periodic basis from CMG, a joint venture in which we own 49%.
We have entered into pre-sale contracts on the units in the Sonesta Orlando
Resort. For the sales of units on the Sonesta Orlando Resort, revenues will be
recognized upon the closings of the contracts for the sales of its real estate
units. Operating revenues earned will be recognized upon the completion of the
earning process.
Goodwill
--------
We adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets." This statement
requires that goodwill and intangible assets deemed to have indefinite lives not
be amortized, but rather be tested for impairment on an annual basis.
Finite-lived intangible assets are required to be amortized over their useful
lives and are subject to impairment evaluation under the provisions of SFAS No.
144. Our combined goodwill of $14,425,437 has not been impaired as of March 31,
2005, and will be evaluated on a regular basis.
RESULTS OF OPERATIONS
Three Months ended March 31, 2005 Compared to Three Months Ended March 31, 2004
--------------------------------------------------------------------------------
Revenue increased $1,489,009 (or 125%) to $2,675,674 for the three months
ended March 31, 2005, as compared to revenue of $1,186,665 for the three months
ended March 31, 2004. The increase in revenue was primarily attributable to the
sale of the APMG land in Davenport, Florida.
Depreciation and amortization expenses increased $211,310 (or 96%) to
$431,382 for the three months ended March 31, 2005, as compared to depreciation
and amortization expenses of $220,072 for the three months ended March 31, 2004.
The increase in depreciation and amortization expenses was primarily
attributable to the Antigua Call Center and TraveLeaders.
General and administrative expenses increased $430,690 (or 22%) to
$2,405,156 for the three months ended March 31, 2005, as compared to general and
administrative expenses of $1,974,466 for the three months ended March 31, 2004.
The increase in general and administrative expenses was primarily attributable
to an increase in the call center and other telecommunications operations of
CLM.
Loss from operations decreased $847,009 (or 84%) to $160,864 for the three
months ended March 31, 2005, as compared to a loss from operations of $1,007,873
for the three months ended March 31, 2004. The decrease in loss from operations
was largely due to the APMG land sale and the resulting increase in revenue.
We had interest expense of $393,319 for three months ended March 31, 2005.
During the period from December 2003 to December 2004, we received a total of
$11,505,000 of convertible debt financing from Stanford Venture Capital
Holdings, Inc. ("Stanford"). The increase in interest expense is due to the debt
financing that we received from Stanford.
We did not have income or loss attributable to minority interest for the
three months ended March 31, 2005, as compared to income attributable to
minority interest of $256,624 for the three months ended March 31, 2004. Income
attributable to minority interest is related to Hickory, which operated at their
usual seasonal loss for the three months ended March 31, 2005.
Loss before income taxes decreased $197,066 (or 26%) to $554,183 for the
three months ended March 31, 2005, as compared to loss before income taxes of
$751,249 for the three months ended March 31, 2004. The decrease in loss before
income taxes was largely due to a sale of the APMG land and to the increase in
our revenue.
We did not record a provision for income taxes for the three months ended
March 31, 2005. We recorded a provision for income taxes of $1,135 for the three
months ended March 31, 2004. Although we have net operating loss carry-forwards
that may be used to offset future taxable income and generally expire in varying
amounts through 2024, no tax benefit has been reported in the financial
statements because it is more likely than notthat we will not generate enough
taxable income to utilize the accumulated losses by the time they expire in
accordance with the applicable tax regulations. In addition, in June 2002, we
had a change in ownership, as defined by Internal Revenue Code Section 382,
which has resulted in some of our net operating loss carry-forwards being
subject to certain utilization limitations in the future.
Net loss decreased $198,201 (or 26%) to $554,183 (or basic and diluted net
loss per share of $0.06) for the three months ended March 31, 2005, as compared
to net loss of $752,384 (or basic and diluted net loss per share of $0.10) for
the three months ended March 31, 2004. The decrease in net loss (or basic and
diluted net loss per share) was largely due to the sale of the APMG land and to
the increase in our revenue.
We had an accumulated deficit of $9,926,824 as of March 31, 2005.
LIQUIDITY AND CAPITAL RESOURCES
We had total current assets of $3,185,174 as of March 31, 2005, which
consisted of cash of $1,767,769, accounts receivable of $1,079,308, prepaid
expenses and other of $267,843, and note receivable of $70,254.
We had total current liabilities of $13,621,422 as of March 31 2005, which
consisted of current maturities of long-term debt and notes payable of
$9,302,704, accounts payable and accrued expenses of $2,007,621, accrued
expenses to officers of $1,518,110, shareholder advances of $393,559 of which
approximately $209,004 was owed to a director, current maturities of notes
payable to related parties of $262,312 of which approximately $82,050 was owed
to our CEO/director, other current liabilities of $96,616, and customer deposits
of $40,500. We anticipate the closing of a construction and land loan for the
Sonesta Orlando Resort during the third quarter of 2005. In the event that we
close the loan as anticipated, we intend to pay off current maturities of long-
term debt and notes payable of $9,302,704.
We had negative net working capital of $10,436,248 as of March 31, 2005.
The ratio of total current assets to total current liabilities (the "Current
Ratio") was approximately 23% as of March 31, 2005. We anticipate that our net
working capital and Current Ratio will increase during the third quarter of 2005
if we close the construction and land loan for the Sonesta Orlando Resort and
pay off current maturities of long-term debt and notes payable of $9,302,704 as
anticipated.
Net cash used in operating activities was $3,891,814 for the three months
ended March 31, 2005, as compared to net cash provided by operating activities
of $756,335 for the three months ended March 31, 2004. The change from net cash
provided by operating activities to net cash used in operating activities was
attributable to a net loss of $554,183, an decrease in accounts payable and
accrued expenses of $4,231,662, an decrease in customer deposits of $2,712,035,
an increase in prepaid and other assets of $1,388,560, and an increase in
prepaid commissions of $1,157,752 which were primarily offset by an increase in
deposits on unit pre-sales of $2,867,598 and a decrease in receivables of
$2,460,079 for the three months ended March 31, 2005.
Net cash used in investing activities decreased $2,570,171 to $49,757 for
the three months ended March 31, 2005, as compared to net cash used in investing
activities of $2,619,928 for the three months ended March 31, 2004. The decrease
was a result of a decrease in capitalization of real estate carrying costs to
$49,757 for the three months ended March 31, 2005, from $733,643 for the three
months ended March 31, 2004, a decrease in security deposits and other to $0 for
the three months ended March 31, 2005, from $970,429 for the three months ended
March 31, 2004, a decrease in advances to AWT to $0 for the three months ended
March 31, 2005, from $808,487 for the three months ended March 31, 2004, and a
decrease in acquisition of fixed assets to $0 for the three months ended March
31, 2005, from $107,369 for the three months ended March 31, 2004.
Net cash provided by financing activities increased $1,977,018 to
$3,443,298 for the three months ended March 31, 2005, as compared to net cash
provided by financing activities of $1,466,280 for the three months ended March
31, 2004. The increase was due to proceeds from debt of $6,391,615 that was
offset by a payment of debt of $1,300,000 and payments to related parties of
$1,648,317 for the three months ended March 31, 2005.
Our capital requirements during the next 12 months are expected to be
$126,600,000, consisting of approximately $4,000,000 for the working capital
needs of Hickory during the second and third quarters of 2005 to cover their
seasonal losses, TraveLeaders and AMLH, and approximately $122,600,000 for TDSR
to construct the first phase of the Sonesta Orlando Resort to fully implement
our business plan. Based on Hickory's seasonal operating history, we expect them
to have positive cash flow during the fourth quarter of 2005 and first quarter
of 2006. We plan to close commitments for the capital needed for the Sonesta
Orlando Resort prior to commencing construction during the third quarter of
2005. We are currently in final negotiations with a banking institution to
provide a $96,600,000 conventional construction loan for TDSR to begin the first
phase of the Sonesta Orlando Resort. We expect to close the construction loan
during the third quarter of 2005. We have also engaged the same banking
institution to underwrite and place the sale of an estimated $26,000,000 of CDD
Bonds that is contingent on our receiving the commitment for the construction
loan. In accordance with our negotiations in the formation of the conventional
construction loan, we intend to use it in part to repay short-term debt related
to the Sonesta Orlando Resort, which is currently $7,862,250 plus accrued
interest of $256,512. This debt had original maturities of March 31, 2005, but
has recently been extended for an additional six months in order for us to
complete the negotiations and close the construction loan with the banking
institution. Our ability to repay the debt is contingent upon us obtaining
financing for TDSR from the banking institution or from another source. We have
experienced delays in closing the construction loan and CDD Bond financing as a
result of various factors including, but not limited to, the need to have all
costs of development ascertained up front to support a guaranteed maximum price
of construction costs from the general contractor. The general contractor
expects to be able to complete this process during June 2005. Even though we
are optimistic about raising capital, there can be no assurance that we will be
able to obtain financing for our working capital needs, close the construction
loan or the CDD Bond financing, obtain any other type of financing for the
Sonesta Orlando Resort, or repay the current debt related to TDSR. If
additional capital is raised by issuing equity and/or convertible debt, the
ownership interests of our current stockholders may be diluted. Future investors
may be granted rights superior to those of some existing stockholders. At this
time, we do not have any commitments for additional capital from third parties
or from our officers, directors or majority shareholders. Additional capital may
not be available to us from the sources discussed in this paragraph or from any
other source. While our intention is to obtain adequate capital, any additional
capital that may be received may not be sufficient and other arrangements may
not be available when needed or on terms satisfactory to us. If we do not
receive a sufficient amount of additional capital on acceptable terms, we will
have to delay, curtail or scale back some or all of our operations.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results
of operations, liquidity, capital expenditures, or capital resources that
are material to investors.
RISK FACTORS
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
WE NEED AN AGGREGATE OF APPROXIMATELY $126,600,000 OF CAPITAL, WHICH MAY NOT BE
AVAILABLE TO US ON FAVORABLE TERMS, IF AT ALL, TO FULLY IMPLEMENT OUR BUSINESS
PLAN.
We need to raise an aggregate of approximately $126,600,000 during the next
twelve (12) months consisting of approximately $4,000,000 for the working
capital needs of Hickory during the second and third quarters of 2005 to cover
their seasonal losses, TraveLeaders and AMLH, and approximately $122,600,000 for
TDSR to construct the first phase of the Sonesta Orlando Resort to fully
implement our business plan. If we do not receive a sufficient amount of
additional capital on acceptable terms, or at all, we may be unable to fully
implement our business plan which includes, but is not limited to, the on-going
cash requirements for our operations and material commitments, and construction
of the first phase of the Sonesta Orlando Resort. We do not have any commitments
or identified sources of additional capital from third parties or from our
officers, directors or majority shareholders. Additional capital may not be
available to us on favorable terms, if at all. If we cannot obtain a sufficient
amount of additional capital, we will have to delay, curtail or scale back some
or all of our operations, any of which would have a materially adverse effect
upon our business and results of operations.
WE HAVE RECEIVED APPROXIMATELY $11.5 MILLION OF CONVERTIBLE DEBT FINANCING FROM
STANFORD, WHICH IMPOSES SUBSTANTIAL OBLIGATIONS ON US.
We received an aggregate of approximately $11.5 million of credit
facilities from Stanford in three tranches during the period from December 2003
to December 2004. The first tranche of $6 million was received during the period
from December 2003 to April 2004 in the form of a convertible note with a
conversion rate of $15 per share (the "$6 million Credit Facility"). The second
tranche of $4 million was received during the period from April 2004 to August
2004 in the form of a convertible note for $3 million and a convertible note for
$1 million, both of which notes have a conversion price of $10 per share (the
"$4 Million Credit Facility"). The third tranche of approximately $1.5 million
was received during the period September 2004 to December 2004 as an addition to
the $4 Million Credit Facility (the "$1.5 Million Credit Facility"). The
convertible notes and the documents related thereto are collectively referred to
herein as the "Credit Facilities." The Credit Facilities impose certain
obligations on us including, but not limited to, the issuance of warrants, some
of which were modified by the terms of a subsequent facility to provide for a
reduction of the exercise price to $.001 per share to secure the additional $1.5
million, the requirement to file a registration statement with the Commission
under the Securities Act to register the shares of common stock that are
issuable upon conversion of the notes and exercise of the warrants, and the
issuance of a security interest in our assets including the our ownership
interest in certain subsidiaries. If we fail to timely file such registration
statement with the Commission, we must issue to each holder of the original
warrants, additional warrants to purchase an amount of shares equal to 10% of
the shares originally issuable pursuant to the original warrants under the same
terms and conditions of the original warrants for each calendar quarter of the
failure to file ("Liquidated Damages"). In addition, we would be required to
issue to the holders an additional 10% of the shares of common stock into which
the Credit Facilities are convertible for each calendar quarter of the failure
to file. Stanford and we have modified the terms of the Credit Facilities to
provide that we must file the registration statement before June 30, 2005.
The original terms of the registration rights agreement with Stanford, provide
for Liquidated Damages in the event that the registration statement does not
become effective for any reason before December 31, 2004; however, we
have not issued additional warrants to Stanford as Liquidated Damages as of the
filing of this report.
MALCOLM J. WRIGHT, WHO SERVES AS OUR CHIEF EXECUTIVE OFFICER, PRESIDENT AND
CHIEF FINANCIAL OFFICER AND AS A DIRECTOR, IS INVOLVED IN OTHER BUSINESSES AND
PROPERTY DEVELOPMENT PROJECTS THAT MAY BE IN COMPETITION WITH OUR BUSINESS.
Malcolm J. Wright is the President of American Leisure Real Estate Group,
Inc., a real estate development company with which TDSR, our subsidiary, has
contracted for the development of the Sonesta Orlando Resort. Mr. Wright is an
officer of Xpress Ltd., with which TDSR has contracted for exclusive sales and
marketing for the Sonesta Orlando Resort. Mr. Wright is an officer of Innovative
Concepts, Inc., which operates a landscaping business, and M J Wright
Productions, Inc., which owns our Internet domain names. Mr. Wright is also a
principal of Resorts Development Group, LLC, which engages in real estate
development. Mr. Wright is also the President of Osceola Business Managers,
Inc., Florida World, Inc. and SunGate Resort Villas, Inc. although none of these
currently conduct any business operations. From time to time, Mr. Wright pursues
real estate investment and sales ventures that may be in competition with such
ventures that the Company pursues or plans to pursue.
BECAUSE MALCOLM J. WRIGHT, WHO SERVES AS OUR CHIEF EXECUTIVE OFFICER, PRESIDENT
AND CHIEF FINANCIAL OFFICER AND AS A DIRECTOR, IS INVOLVED IN A NUMBER OF OTHER
BUSINESSES, HE MAY NOT BE ABLE OR WILLING TO DEVOTE A SUFFICIENT AMOUNT OF TIME
TO OUR BUSINESS OPERATIONS.
Malcolm J. Wright is the President of American Leisure Real Estate Group,
Inc., Xpress Ltd., Innovative Concepts, Inc., M J Wright Productions, Inc.,
Resorts Development Group, LLC, Osceola Business Managers, Inc., Florida World,
Inc. and SunGate Resort Villas, Inc. Mr. Wright spends a minimum of 50 hours per
week on our business. While it has yet to happen during his entire tenure with
the Company despite the failure of the Company to ever pay Mr. Wright his agreed
salary, it is possible that the demands on Mr. Wright from these other
businesses could increase with the result that he may have to devote less time
as an executive officer and a director of our company. As a result, Mr. Wright
may not possess sufficient time to serve as an executive officer and a director
of our company. If Mr. Wright does not have sufficient time to serve our
company, it could have a material adverse effect on our business and results of
operations.
WE HAVE AGREED TO PROVIDE THE EXECUTIVE OFFICERS OF OUR SUBSIDIARIES AN
AGGREGATE BONUS OF UP TO 19% OF THE PRE-TAX PROFITS OF THE SUBSIDIARY IN WHICH
THEY SERVE AS OUR EXECUTIVE OFFICERS, WHICH WILL REDUCE ANY PROFITS THAT WE MAY
EARN.
The Company has generally agreed to provide the executive officers of each
of its subsidiaries an aggregate bonus of up to 19% of the pre-tax profits,
if any, of the subsidiaries in which they serve as executive officers. Pursuant
to this general agreement, Malcolm J. Wright is entitled to receive 19% of
the pre-tax profits of Leisureshare International Ltd, Leisureshare
International Espanola SA, American Leisure Homes, Inc., Advantage Professional
Management Group, Inc., Tierra Del Sol Resort, Inc., and American Leisure
Hospitality Group, Inc. L. William Chiles is entitled to receive 19% of the
profits of Hickory up to a maximum payment over the life of his contract of
$2,700,000. As Mr. Chiles' bonus is limited, it is not subject to the buy-out by
the Company (discussed below) as it will cease as soon as the $2,700,000 amount
has been paid to him. The executive officers of the Company's other subsidiaries
are entitled to share a bonus of up to 19% of the pre-tax profits of the
subsidiary in which they serve as executive officers. The Company has the right,
but not the obligation to buy-out all of the above agreements after a period of
five years by issuing such number of shares of its common stock equal to the
product of 19% of the average after-tax profits for the five-year period
multiplied by one-third (1/3) of the price-earnings ratio ("P/E Ratio") of the
Company's common stock at the time of the buyout divided by the greater of the
market price of the Company's common stock or $5.00. We are in the process of
finalizing the bonus agreements. We have not paid or accrued any bonus as of
the filing of this report. If we pay bonuses in the future, it will reduce our
profits and the amount, if any, that we may otherwise have available to pay
dividends to our preferred and common stockholders. The Company believes that
this program is an effective tool in attracting and retaining qualified
executives who will be motivated to enhance earnings for the Company. Further,
the Company believes that this program is a viable form of profit sharing
that promotes long-term commitment from its executives.
OUR CONTRACTS WITH SUPPLIERS OF TRAVEL SERVICES GENERALLY RENEW ANNUALLY AND IN
SOME CASES MAY BE CANCELLED AT WILL BY THE SUPPLIER; THEREFORE, ADVERSE CHANGES
OR INTERRUPTIONS IN OUR RELATIONSHIPS WITH THEM COULD REDUCE OUR REVENUE.
We derive a portion of our travel division revenue from commissions and
fees that we receive pursuant to contracts that we have with suppliers of travel
services pursuant to which these suppliers provide their services to our
customers. These contracts generally renew annually and in some cases may be
cancelled at will by the supplier. As such, our ability to maintain or expand
these contracts depends in large part on our ability to maintain and expand good
relationships with these and other suppliers of travel services including
airline, hotel, cruise, tour and car rental suppliers. If we cannot maintain
good relationships, our suppliers could contract with us on terms less favorable
than the current terms of our contracts or the terms of their contracts with our
competitors, exclude us from the products and services that they provide to our
competitors, refuse to renew our contracts, or, in some cases, cancel their
contracts with us at will. In addition, our suppliers may not continue to sell
services and products through global distribution systems on terms satisfactory
to us. If we are unable to maintain or expand good relationships, our ability to
offer and expand travel service or lower-priced travel inventory could be
significantly reduced. Any discontinuance or deterioration in the services
provided by third parties, such as global distribution systems providers, could
prevent our customers from accessing or purchasing particular travel services
through us. If these suppliers cancel or do not renew the contracts, we would
not have the range or volume of services it will require to meet demand and its
future revenue would decline.
OUR SUPPLIERS OF TRAVEL SERVICES COULD REDUCE OR ELIMINATE OUR COMMISSION RATES
ON BOOKINGS MADE THROUGH US OVER THE INTERNET, WHICH WOULD LIKELY REDUCE OUR
REVENUES.
We receive commissions paid to us by our travel suppliers such as hotel
chains and cruise companies for bookings that our customers make through us over
the Internet. Consistent with industry practices, our suppliers are not
obligated by regulation to pay any specified commission rates for bookings made
through us or to pay commissions at all. Over the last several years, travel
suppliers have substantially reduced commission rates. Our travel suppliers have
reduced our commission rates in certain instances. Future reductions, if any, in
our commission rates that are not offset by lower operating costs from our
Internet platforms could have a material adverse effect on our business and
results of operations.
FAILURE TO MAINTAIN RELATIONSHIPS WITH TRADITIONAL TRAVEL AGENTS COULD ADVERSELY
AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS.
Hickory has historically received, and expects to continue to receive, a
significant portion of its revenue through relationships with traditional travel
agents. Maintenance of good relationships with these travel agents depends in
large part on continued offerings of travel services in demand, and good levels
of service and availability. If Hickory does not maintain good relations with
its travel agents, these agents could terminate their memberships and use of
Hickory's products and services, which would have a material adverse effect on
our business and results of operations.
DECLINES OR DISRUPTIONS IN THE TRAVEL INDUSTRY COULD SIGNIFICANTLY REDUCE OUR
REVENUE.
Potential declines or disruptions in the travel industry may result from
any one or more of the following factors:
- price escalation in the airline industry or other travel related
industries;
- airline or other travel related strikes;
- political instability, war and hostilities;
- long term bad weather;
- fuel price escalation;
- increased occurrence of travel-related accidents; and
- economic downturns and recessions.
WE MAY NOT IDENTIFY OR COMPLETE ACQUISITIONS IN A TIMELY, COST-EFFECTIVE MANNER
IF AT ALL.
In the event of any future acquisitions, the Company could issue additional
stock that would further dilute current shareholders' percentage of ownership;
incur debt; assume unknown or contingent liabilities; or experience negative
effects on reported operating results from acquisition-related charges and
amortization of acquired technology, goodwill and other intangibles. In the
event that any of these events occur, it could have a material adverse effect on
shareholder value, or the Company's results of operations or financial
condition.
WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR PLANNED GROWTH.
We plan to grow rapidly and will be subject to related risks, including
capacity constraints and pressure on our management and our internal systems and
controls. Our ability to effectively manage our planned growth will require us
to implement new, and improve our existing, operational and financial systems
and to expand, train and manage our employee base. If we are unable to
effectively manage our planned growth, it would have a material adverse effect
on our business, results of operations and future prospects.
BUSINESS ACQUISITIONS OR JOINT VENTURES MAY DISRUPT OUR BUSINESS, DILUTE
SHAREHOLDER VALUE OR DISTRACT MANAGEMENT ATTENTION.
As part of our business strategy, we may consider the acquisition of, or
investments in, other businesses that offer services and technologies
complementary to ours. If the analysis used to underwrite such acquisitions is
faulty, such acquisitions could materially adversely affect our operating
results and/or the price of our Common Stock. Acquisitions also entail numerous
risks, including: (i) difficulty in assimilating the operations, products and
personnel of the acquired business; (ii) potential disruption of our ongoing
business; (iii) unanticipated costs associated with the acquisition; (iv)
inability of management to manage the financial and strategic position of
acquired or developed services and technologies; (v) the diversion of
management's attention from our core business; (vi) inability to maintain
uniform standards, controls, policies and procedures; (vii) impairment of
relationships with employees and customers, which may occur as a result of
integration of the acquired business; (viii) potential loss of key employees of
acquired organizations; (ix) problems integrating the acquired business,
including its information systems and personnel; (x) unanticipated costs that
may harm operating results; (xi) adverse effects on existing business
relationships with customers; and (xii) risks associated with entering an
industry in which we have no (or limited) prior experience. Any of these risks
would have a material adverse effect on our business, results of operations and
financial condition.
EXCESSIVE CLAIMS FOR DEVELOPMENT-RELATED DEFECTS IN ANY REAL ESTATE PROPERTIES
THAT WE PLAN TO BUILD COULD ADVERSELY AFFECT OUR LIQUIDITY, FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
We will engage third-party contractors to construct our resorts. However,
our customers may assert claims against us for construction defects or other
perceived development defects including, but not limited to, structural
integrity, the presence of mold as a result of leaks or other defects,
electrical issues, plumbing issues, or road construction, water or sewer
defects. In addition, certain state and local laws may impose liability on
property developers with respect to development defects discovered in the
future. To the extent that the contractors do not satisfy any proper claims as
they are primarily responsible, a significant number of claims for
development-related defects could be brought against us, which could adversely
affect our liquidity, financial condition, and results of operations.
WE ARE RELIANT ON KEY MANAGEMENT AND IF WE LOSE ANY OF THEM, IT COULD HAVE A
MATERIAL ADVERSE AFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.
Our success depends, in part, upon the personal efforts and abilities of
Malcolm J. Wright and L. William Chiles. Mr. Wright is a Director of the Company
and the Company's Chief Executive Officer, President and Chief Financial
Officer. Mr. Chiles is a Director of the Company and President of Hickory. Our
ability to operate and implement our business plan is heavily dependent on the
continued service of Messrs. Wright and Chiles. We are in the process of
entering into a written employment agreement with Mr. Wright. Competition in our
industry for executive-level personnel such as Messrs. Wright and Chiles is
fierce and there can be no assurance that we will be able to motivate and retain
them, or that we can do so on economically feasible terms. The loss of Mr.
Wright or Mr. Chiles could have a material adverse effect on our business and
results of operations. The Company is not the beneficiary of any life insurance
policies on any of its executive officers or directors.
Keith St. Clair is the Chief Executive Officer of AWT. We obtained a
$3,000,000 life insurance policy covering Keith St. Clair as a requirement for
$3,000,000 that we received from Stanford. Stanford is the named beneficiary of
this insurance policy. $4,500,000 of our working capital was dedicated to
supporting AWT while we conducted due diligence leading to our acquisition of
its assets on December 31, 2004.
WE HAVE A LIMITED HISTORY OF OPERATIONS AND WE HAVE A HISTORY OF CONTINUING
OPERATING LOSSES.
Since our inception, we have been engaged primarily in planning the
development of the Sonesta Orlando Resort, building travel club membership
databases, the acquisition of Hickory in October 2003, the acquisition of
TraveLeaders in December 2004, and the assembly of our management team. We have
incurred net operating losses since our inception. As of March 31, 2005, we had
an accumulated deficit of $9,926,824.
OUR REVENUES FLUCTUATE FROM QUARTER TO QUARTER DUE TO SEVERAL FACTORS INCLUDING
ONES THAT ARE OUTSIDE OF OUR CONTROL, AND IF OUR REVENUES ARE BELOW OUR
EXPECTATIONS IT WOULD LIKELY HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF
OPERATIONS.
We have experienced and could continue to experience fluctuating revenues
because of a variety of factors, many of which are outside our control. Such
factors may include, but not be limited to, the timing of new contracts;
reductions or other modifications in our clients' marketing and sales
strategies; the timing of new product or service offerings; the expiration or
termination of existing contracts or the reduction in existing programs; the
timing of increased expenses incurred to obtain and support new business;
changes in the revenue mix among our various service offerings; labor strikes
and slowdowns; and the seasonal pattern of certain businesses serviced by us. In
addition, we make decisions regarding staffing levels, investments and other
operating expenditures based on our revenue forecasts. If our revenues are below
expectations in any given quarter, our operating results for that quarter would
likely be materially adversely affected.
WE MAY NOT BE PROFITABLE IN THE FUTURE.
We have incurred losses since our inception and continue to require
additional capital to fund operations. Our fixed commitments, including salaries
and fees for current employees and consultants, equipment rental, and other
contractual commitments, are substantial and will increase if additional
agreements are entered into and additional personnel are retained. We intend to
generate the necessary capital to operate by achieving break-even cash flow from
operations and subsequent profitability, selling equity and/or debt securities
and/or entering into a sale-leaseback of our equipment. There can be no
assurances that we will be successful in its efforts. If we are unsuccessful in
our endeavors to fund our operations, we will have to delay, curtail or scale
back some or all of our operations, in which case your entire investment in the
Company may decline.
A GENERAL ECONOMIC DOWNTURN MAY HINDER OUR ABILITY TO ENTER INTO NEW MULTI-YEAR
GLOBAL DISTRIBUTION SYSTEM ("GDS") CONTRACTS.
Our ability to enter into new multi-year GDS contracts may be dependent
upon the general economic environment in which our clients and their customers
operate. A weak United States or global marketplace could cause us to have
longer sales cycles, delays in closing contracts for new business, and slower
growth under existing contracts. If an economic downturn frustrates our ability
to enter into new multi-year contracts, it would have a material adverse effect
on our business and results of operations.
GDS CONTRACTS THAT WE MAY ENTER INTO GENERALLY PROVIDE FOR FINANCIAL PENALTIES
FOR NOT ACHIEVING PERFORMANCE OBJECTIVES.
We are seeking to enter into multi-year GDS contracts. These contracts
typically cover a five-year period and would require us to meet certain
performance objectives. These contracts may trigger financial penalties if the
performance objectives are not met. In the event that we enter into such
contracts and are unable to meet the performance objectives required thereby, it
would have a material adverse effect on our business, liquidity and results of
operations.
OUR CONTRACTS DO NOT GUARANTEE THAT WE WILL RECEIVE A MINIMUM LEVEL OF REVENUE,
ARE NOT EXCLUSIVE, AND MAY BE TERMINATED ON RELATIVELY SHORT NOTICE.
Our contracts do not ensure that we will generate a minimum level of
revenues, and the profitability of each client campaign may fluctuate, sometimes
significantly, throughout the various stages of our sales campaigns. Although we
will seek to enter into multi-year contracts with our clients, our contracts
generally enable the client to terminate the contract, or terminate or reduce
customer interaction volumes, on relatively short notice. Although some
contracts require the client to pay a contractually agreed amount in the event
of early termination, there can be no assurance that we will be able to collect
such amount or that such amount, if received, will sufficiently compensate us
for our investment in the canceled campaign or for the revenues we may lose as a
result of the early termination. We are usually not designated as our client's
exclusive service provider; however, we believe that meeting our clients'
expectations can have a more significant impact on revenues generated by us than
the specific terms of our client campaign. If we do not generate minimum levels
of revenue from our contracts or our clients terminate our multi-year contracts,
it will have a material adverse effect on our business, results of operation and
financial condition.
WE RECEIVE CONTRACTUALLY SET SERVICE FEES AND HAVE LIMITED ABILITY TO INCREASE
OUR FEES TO MEET INCREASING COSTS.
Most of our contracts have set services fees that we may not increase if,
for instance, certain costs or price indices increase. In the event that a
contract allows us to increase our services based upon increases in cost or
price indices, such increases may not fully compensate us for increases in labor
and other costs incurred in providing services. If our costs increase and we
cannot, in turn, increase our service fees or we have to decrease our service
fees because we do not achieve defined performance objectives, it will have a
material adverse effect on our business, results of operations and financial
condition.
WE MAY NOT BE ABLE TO KEEP UP WITH CURRENT AND CHANGING TECHNOLOGY ON WHICH OUR
BUSINESS IS DEPENDENT.
Our business is dependent on our computer and communications equipment and
software capabilities. The underlying technology is continually changing. Our
continued growth and future profitability will be dependent on a number of
factors affected by current and changing technology, including our ability to
(i) expand our existing service offerings; (ii) achieve cost efficiencies in our
existing call centers; and (iii) introduce new services and products that
leverage and respond to changing technological developments. There can be no
assurance that technologies or services developed by our competitors will not
render our products or services non competitive or obsolete, that we can
successfully develop and market any new services or products, that any such new
services or products will be commercially successful or that our intended
integration of automated customer support capabilities will achieve intended
cost reductions. Our failure to maintain our technological capabilities or
respond effectively to technological changes could have a material adverse
effect on our business, results of operations or financial condition.
A BUSINESS INTERRUPTION, WHETHER OR NOT PROLONGED, COULD HAVE A MATERIAL ADVERSE
EFFECT ON OR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
Our business operations are dependent upon our ability to protect our call
center, computer and telecommunications equipment and software systems against
damage from fire, power loss, telecommunications interruption or failure,
natural disaster and other similar events. While the Company does have some
redundancy, in the event we experience a temporary or permanent interruption at
our call center, through casualty, operating malfunction or otherwise, our
business could be materially adversely affected and we may be required to pay
contractual damages to some clients or allow some clients to terminate or
renegotiate their contracts with us. In the event that we experience such
interruptions, it would have a material adverse effect on our business, results
of operations and financial condition.
OUR INDUSTRY IS LABOR INTENSIVE AND INCREASES IN THE COSTS OF OUR EMPLOYEES
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, LIQUIDITY OR RESULTS OF
OPERATIONS.
Our success will be largely dependent on our ability to recruit, hire,
train and retain qualified personnel. Our industry is labor intensive and has
experienced high personnel turnover. A significant increase in our personnel
turnover rate could increase our recruiting and training costs and decrease
operating effectiveness and productivity. Also, if we obtain several significant
new clients or implement several new, large-scale campaigns, we may need to
recruit, hire and train qualified personnel at an accelerated rate. We may not
be able to continue to hire, train and retain sufficient qualified personnel to
adequately staff new customer management campaigns or our call centers. Because
significant portions of our operating costs relate to labor costs, an increase
in wages, costs of employee benefits, employment taxes or other costs associated
with our employees could have a material adverse effect on our business, results
of operations or financial condition.
OUR INDUSTRY IS SUBJECT TO INTENSE COMPETITION AND COMPETITIVE PRESSURES COULD
ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
We believe that the market in which we operate is fragmented and highly
competitive and that competition is likely to intensify in the future. We
compete with small firms offering specific applications, divisions of large
entities, large independent firms and the in-house operations of clients or
potential clients. A number of competitors have or may develop greater
capabilities and resources than us. Similarly, there can be no assurance that
additional competitors with greater resources than us will not enter our market.
In addition, competitive pressures from current or future competitors also could
cause our services to lose market acceptance or result in significant price
erosion, all of which could have a material adverse effect upon our business,
results of operations or financial condition.
RISKS RELATING TO OUR COMMON STOCK
UNTIL SUCH TIME AS WE COMPLETE THE INTEGRATION OF OUR FINANCIAL ACCOUNTING
FUNCTION, WE MAY NOT BE ABLE TO FILE OUR PERIODIC REPORTS AND REPORTS ON FORM
8-K WITH THE COMMISSION IN A TIMELY MANNER AND COULD RECEIVE AN "E" ON OUR
TRADING SYMBOL OR BE DE-LISTED FROM THE OVER-THE-COUNTER BULLETIN BOARD (THE
"OTCBB").
We are in the process of integrating the business operations of Hickory and
TraveLeaders, which includes the financial accounting function. During 2004, we
received an "e" on our trading symbol, which resulted in our common stock being
de-listed from the OTCBB on May 21, 2004. We were able to have our common stock
cleared for quotation on the OTCBB beginning on January 26, 2005. Our Chief
Executive Officer and Chief Financial Officer evaluated our disclosure controls
and procedures as of March 31, 2005, and determined that as of such date, our
disclosure controls and procedures were effective; however, we face increased
pressure related to recording, processing, summarizing and reporting
consolidated financial information required to be disclosed by us in the reports
that we file or submit under the Exchange Act in a timely manner as well as
accumulating and communicating such information to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure. We believe that until we have
fully integrated our financial accounting function, we will continue to face
such increased pressure which could lead to a future determination that our
disclosure controls and procedures are not effective as of a future evaluation
date. If we are unable to file our periodic reports with the Commission in a
timely manner, we could receive an "e" on our trading symbol, which could result
in our common stock being de-listed from the OTCBB. In the event that our
common stock is de-listed from the OTCBB, it is likely that our common stock
will have less liquidity than it has, and will trade at a lesser value than it
does, on the OTCBB. In addition, investors who hold restricted shares of our
common stock will be precluded from reselling their shares pursuant to Rule 144
of the Securities Act until such time as we were able to establish a history of
current filings with the Commission.
OUR COMMON STOCK COULD AND HAS FLUCTUATED SIGNIFICANTLY, AND SHAREHOLDERS MAY BE
UNABLE TO RESELL THEIR SHARES AT A PROFIT.
The price of our common stock has fluctuated substantially since it began
trading. The trading prices for small capitalization companies like ours often
fluctuate significantly. Market prices and trading volume for stocks of these
types of companies including ours have also been volatile. The market price of
our common stock is likely to continue to be highly volatile. If revenue or
earnings are less than expected for any quarter, the market price of our common
stock could significantly decline, whether or not there is a decline in our
consolidated revenue or earnings that are reflective of long-term problems with
our business. Other factors such as our issued and outstanding common stock
becoming eligible for sale under Rule 144, terms of any equity and/or debt
financing, and market conditions could have a significant impact on the future
price of our common stock and could have a depressive effect on the then market
price of our common stock.
RE-PRICING WARRANTS AND ISSUING ADDITIONAL WARRANTS MAY CAUSE SUBSTANTIAL
DILUTION TO OUR EXISTING STOCKHOLDERS.
In the past, to obtain additional financing, we have modified the terms of
our warrant agreements to lower the exercise price per share to $.001 from $5.00
with respect to warrants to purchase 100,000 shares of our common stock and
$2.96 with respect to warrants to purchase 1,350,000 shares of our common stock.
We are currently in need of additional financing and may be required to lower
the exercise price of other warrants. We may issue additional warrants in
connection with future financing arrangements. Re-pricing of our warrant
agreements and any issuance of additional warrants may cause substantial
dilution to our existing shareholders.
THERE MAY NOT BE AN ACTIVE OR LIQUID TRADING MARKET FOR OUR COMMON STOCK, WHICH
MAY LIMIT INVESTORS' ABILITY TO RESELL THEIR SHARES.
An active and liquid trading market for our common stock may not develop
or, if developed, such a market may not be sustained. In addition, we cannot
predict the price at which our common stock will trade. If there is not an
active or liquid trading market for our common stock, investors in our common
stock may have limited ability of to resell their shares.
WE HAVE AND MAY CONTINUE TO ISSUE PREFERRED STOCK THAT HAS RIGHTS AND
PREFERENCES OVER OUR COMMON STOCK.
Our Articles of Incorporation, as amended, authorize our Board of Directors
to issue "blank check" preferred stock, the relative rights, powers,
preferences, limitations, and restrictions of which may be fixed or altered from
time to time by the Board of Directors or the majority of the preferred
stockholders. Accordingly, the Board of Directors may, without approval from the
shareholders of common stock, issue preferred stock with dividend, liquidation,
conversion, voting, or other rights that could adversely affect the voting power
and other rights of the holders of common stock. The preferred stock can be
utilized, under certain circumstances, as a method of discouraging, delaying, or
preventing a change in ownership and management of the Company that shareholders
might not consider to be in their best interests. We have issued various series
of preferred stock, which have rights and preferences over our common stock
including, but not limited to, cumulative dividends and preferences upon
liquidation or dissolution.
WE DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.
We have not declared or paid dividends on our common stock in the last two
fiscal years. We do not anticipate paying dividends on our common in the
foreseeable future. Our ability to pay dividends is dependent upon, among other
things, our future earnings, if any, as well as our operating and financial
condition, capital requirements, general business conditions and other pertinent
factors. Furthermore, any payment of dividends by us is subject to the
discretion of our board of directors. Accordingly, dividends may not ever be
paid on our common stock. We intend to reinvest in our business operations any
funds that could be used to pay dividends. Our common stock is junior in
priority to our preferred stock with respect to dividends. Cumulative dividends
on our issued and outstanding Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series E Preferred (as the same may be
amended from time to time) accrue at a rate of $1.20, $12.00, $4.00, and $4.00,
respectively, per share per annum, payable in preference and priority to any
payment of any cash dividend on our common stock. We have authorized Series F
Preferred Stock with cumulative dividends that accrue at a rate of $1.00 per
share per annum and are also payable in preference and priority to any payment
of any cash dividend on our common stock. Dividends on our preferred stock
accrue from the date on which we agree to issue such preferred shares and
thereafter from day to day whether or not earned or declared and whether or not
there exists profits, surplus or other funds legally available for the payment
of dividends. We have never paid any cash dividends on our preferred stock.
BECAUSE OF THE SIGNIFICANT NUMBER OF SHARES OWNED BY OUR DIRECTORS, OFFICERS AND
PRINCIPAL SHAREHOLDERS, OTHER SHAREHOLDERS MAY NOT BE ABLE TO SIGNIFICANTLY
INFLUENCE OUR MANAGEMENT.
Our directors, officers, and principal shareholders beneficially own a
substantial portion of our outstanding common and preferred stock. Malcolm J.
Wright, who serves as our President, Chief Executive Officer and Chief Financial
Officer and as a Director, and Roger Maddock, one of our majority shareholders,
have a mutual understanding pursuant to which each of them vote their shares
with the other. As a result, these persons control our affairs and management,
as well as all matters requiring shareholder approval, including the election
and removal of members of the Board of Directors, transactions with directors,
officers or affiliated entities, the sale or merger of the Company or
substantially all of our assets, and changes in dividend policy. This
concentration of ownership and control could have the effect of delaying,
deferring, or preventing a change in our ownership or management, even when a
change would be in the best interest of other shareholders.
ITEM 3. CONTROLS AND PROCEDURES.
Evaluation of disclosure controls and procedures. Our Chief Executive
Officer and Chief Financial Officer, after evaluating the effectiveness of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by
this quarterly report (the "Evaluation Date"), has concluded that as of the
Evaluation Date, our disclosure controls and procedures were effective.
However, because we have not fully integrated our financial accounting function,
we face increased pressure related to recording, processing, summarizing and
reporting consolidated financial information required to be disclosed by us in
the reports that we file or submit under the Exchange Act in a timely manner as
well as accumulating and communicating such information to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure. We are in
the process of integrating the information technology, finance, financial
accounting and account management functions departments of Hickory and
TraveLeaders. We believe that until we have fully integrated the financial
accounting function of Hickory, our other subsidiaries and TraveLeaders, we will
continue to face such increased pressure regarding the timeliness of our filings
as specified in the Commission's rules and forms which could lead to a future
determination that our disclosure controls and procedures are not effective as
of a future evaluation date.
Changes in internal control over financial reporting. There were no significant
changes in our internal control over financial reporting during our most recent
fiscal quarter that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are a defendant in an action that was filed in Orange County, Florida.
In June, 2001, Rock Investment Trust, P.L.C., a British limited liability
company, and RIT, LLC, a related Florida limited liability company, filed suit
against Malcolm J. Wright, American Vacation Resorts, Inc., American Leisure,
Inc., Inversora Tetuan, S.A., Sunstone Golf Resort, Inc., and SunGate Resort
Villas, Inc., seeking either the return of an alleged $500,000 investment or an
ownership interest in one or more of the defendant entities equivalent to the
alleged investment amount. This lawsuit involves allegations of fraud against
Malcolm J. Wright, a director of the Company and the Company's Chief Executive
Officer and Chief Financial Officer. The defendants have denied all claims and
have counterclaimed against Rock Investment Trust and its principal, Roger Smee
seeking damages in excess of $10 million. The litigation is in the discovery
phase and is not currently set for trial. While many depositions and other
discovery of facts remain to be done, based on the status of the record
developed thus far, our counsel believes that Rock Investment Trust's and RIT's
claims are without merit and that the counterclaim will be successful, although
damages are uncertain. This case has been inactive since February 2002, although
opposing counsel did file discovery documents in the past year to keep the case
from being dismissed for lack of prosecution.
In March 2004, Manuel Sanchez and Luis Vanegas as plaintiffs filed a
lawsuit against American Leisure Holdings, Inc. American Access Corporation,
Hickory Travel Systems, Inc. Malcolm J. Wright and L. William Chiles, et al.,
seeking a claim for securities fraud, violation of Florida Securities and
Investor Protection Act, breach of their employment contracts, and claims for
fraudulent inducement. All defendants, including the Company, have denied all
claims and have a counterclaim against Manuel Sanchez and Luis Vanegas for
damages. The litigation commenced in March 2004 and will shortly enter the
discovery phase and is not currently set for trial. The Company believes that
Manuel Sanchez' and Luis Vanegas' claims are without merit and the claims are
not material to the Company. The Company intends to vigorously defend the
lawsuit.
In February 2003, the Company and Malcolm J. Wright were joined in a
lawsuit captioned as Howard C. Warren v. Travelbyus, Inc., William Kerby, David
Doerge, DCM/Funding III, LLC, and Balis, Lewittes and Coleman, Inc. in the
Circuit Court of Cook County, Illinois, Law Division, which purported to state a
claim against us as a "joint venturer" with the primary defendants. The
plaintiff alleged damages in an amount of $5,557,195.70. On November 4, 2004,
the plaintiff moved to voluntarily dismiss its claim against us. Pursuant to an
order granting the voluntary dismissal, the plaintiff has one (1) year from the
date of entry of such order to seek to reinstate its claims.
On March 30, 2004, the Company's President, Malcolm Wright, was
individually named as a third-party defendant in the Circuit Court of Cook
County, Illinois, Chancery Division, under the caption: Cahnman v. Travelbyus,
et al. On July 23, 2004, the primary plaintiffs filed a motion to amend their
complaint to add direct claims against our subsidiary, American Leisure as well
as Mr. Wright. On August 4, 2004, the plaintiffs withdrew that motion and have
not asserted or threatened any direct claims against American Leisure, Mr.
Wright or the Company.
In early May 2004, AWT, from which we purchased substantially all of its
assets, filed a lawsuit with the clerk of the Miami-Dade Circuit Court against
Seamless Technologies, Inc. and e-TraveLeaders, Inc. alleging breach of contract
and seeking relief that includes monetary damages and termination of the
contracts. We were granted leave to intervene as plaintiffs in the original
lawsuits against Seamless and e-TraveLeaders. On June 28, 2004, the above named
defendants brought a retaliatory suit against AWT and the Company in a lawsuit
styled Seamless Technologies, Inc. et al. v. Keith St. Clair et al. This suit
alleges that AWT has breached the contracts and also that we and AWT's Chief
Executive Officer were complicit with certain officers and directors of AWT in
securing ownership of certain assets for us that were alleged to have been a
business opportunity for AWT. This lawsuit involves allegations of fraud against
Malcolm J. Wright, a director of the Company and the Company's Chief Executive
Officer and Chief Financial Officer. The lawsuit filed by Seamless has been
abated and consolidated with the original lawsuit filed by AWT. In a related
matter, the attorneys for Seamless brought another action entitled Peter
Hairston v. Keith St. Clair et al. This suit mimics the misappropriation of
business opportunity claim, but it is framed within a shareholder derivative
action. The relief sought against the Company includes monetary damages and
litigation costs. All three suits have been brought to the Circuit Court of the
11th Judicial Circuit in and for Miami-Dade County, Florida (the "Seamless
Suit"). We have retained legal counsel regarding these matters. We intend to
vigorously support the original litigation filed against Seamless and defend the
counterclaim and allegations against us.
On May 4, 2005, Simon Hassine, along with members of his family, filed a
lawsuit against us and AWT in the Circuit Court Dade County, Florida, Civil
Division, Case Number 05-09137CA. The plaintiffs are the former majority
shareholders of AWT and former owners of the assets of TraveLeaders. The
plaintiffs allege that that they have not been paid for i) a subordinated
promissory note in the principal amount of $3,550,000 plus interest on such note
which they allege was issued to them by AWT in connection with their sale of 88%
of the common stock of AWT; and ii) subordinated undistributed retained earnings
and accrued bonuses in an aggregate amount of $1,108,806 which they allege were
due to them as part of the sale. The plaintiffs allege that the note was issued
to them net of $450,000 of preferred stock of AWT that they further allege they
never received. The plaintiffs also allege that in December 2004 they entered
into a settlement agreement with the Company regarding these matters. The
plaintiffs are pursuing a claim of breach of the alleged settlement agreement
with damages in excess of $1,000,000, interest and costs as well as performance
under the alleged settlement agreement or, in the alternative, a declaratory
judgment that the promissory note, undistributed retained earnings and accrued
bonuses are not subordinated to the Galileo Debt and full payment of the
promissory note, undistributed retained earnings and accrued bonuses plus
prejudgment interest, stated interest on the note, costs and reasonable
attorney's fees. The plaintiffs are also pursuing a claim for breach of contract
regarding the preferred stock of AWT and seeking $450,000 plus interest, costs
and reasonable attorney's fees. The plaintiffs are also pursuing claims of
fraudulent transfer regarding our acquisition of interests in the debt and
equity of AWT and seeking unspecified amounts. The Company intends to vigorously
defend the lawsuit.
In the ordinary course of its business, we may from time to time become
subject to routine litigation or administrative proceedings, which are
incidental to our business.
The Company is not aware of any proceeding to which any of its directors,
officers, affiliates or security holders are a party adverse to the Company or
have a material interest adverse to the Company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
RELATED PARTY TRANSACTIONS
We believe that all prior related party transactions have been entered into
upon terms no less favorable to us than those that could be obtained from
unaffiliated third parties. Our reasonable belief of fair value is based upon
proximate similar transactions with third parties or attempts to obtain the
services from third parties. All ongoing and future transactions with such
persons, including any loans or compensation from such persons, will be approved
by a majority of disinterested members of the Board of Directors.
We accrue $500,000 per year as salary payable to Malcolm J. Wright, our
Chief Executive Officer. Prior to 2004, we accrued $250,000 per year as salary
payable to Mr. Wright. We accrue interest at a rate of 12% compounded
annually on the salary owed to Mr. Wright. As of March 31, 2005, the aggregate
amount of salary payable and accrued interest owed to Mr. Wright was $1,390,110.
We also accrue $100,000 per year as salary payable to L. William Chiles, a
director of the Company and the President of Hickory, for his services, and
interest at a rate of 12% compounded annually beginning in 2005. As of March 31,
2005, the aggregate amount of salary payable and accrued interest owed to
Mr. Chiles was $128,000.
We pay or accrue directors' fees to each of our directors in an amount of
$18,000 per year for their services as directors. During the three months ended
March 31, 2005, we accrued directors' fees for four directors; however, Gillian
Wright resigned as a director on February 1, 2005. As of March 31, 2005, we had
accrued an aggregate amount of directors' fees of $132,000.
We entered into an agreement with Mr. Wright and Mr. Chiles whereby we
agreed to indemnify Mr. Wright and Mr. Chiles against all losses, costs or
expenses relating to the incursion of or the collection of the Company's
indebtedness against Mr. Wright or Mr. Chiles or their collateral. This
indemnity extends to the cost of legal defense or other such reasonably incurred
expenses charged to or assessed against Mr. Wright or Mr. Chiles. In the event
that Mr. Wright or Mr. Chiles make a personal guarantee for the Company's
benefit in conjunction with any third-party financing, and Mr. Wright or Mr.
Chiles elect to provide such guarantee, then Mr. Wright and/or Mr. Chiles shall
earn a fee for such guarantee equal to three per cent (3%) of the total original
indebtedness and two per cent (2%) of any collateral posted as security. This
fee is to be paid by the issuance of warrants to purchase our common stock at a
fixed strike price of $1.02 per share, when the debt is incurred. Mr. Wright
personally guaranteed $6,000,000 that we received from Stanford pursuant to a
convertible promissory note. In addition, Mr. Wright pledged to Stanford 845,733
shares of our common stock held by Mr. Wright. Mr. Chiles had personally
guaranteed $2,000,000 of the $6,000,000 received from Stanford and pledged to
Stanford 850,000 shares of our common stock held by Mr. Chiles. Mr. Wright and
Mr. Chiles have each also given a personal guarantee regarding a loan in the
principal amount of $6,000,000 that was made to TDSR by Grand Bank & Trust of
Florida. In March 2004, we authorized the issuance of warrants to Mr. Wright
and Mr. Chiles to purchase 347,860 shares and 168,672 shares, respectively, of
our common stock at an exercise price of $2.96 per share, which was subsequently
reduced to $1.02 per share of common stock in March 2004 to place them on par
with warrants that we issued to Stanford for additional financing. We are under
a continued obligation to issue warrants at $1.02 to Messrs. Wright and Chiles
for guarantees that they may be required to give on our behalf going forward.
The Company has generally agreed to
provide the executive officers of each of its subsidiaries an aggregate bonus of
up to 19% of the pre-tax profits, if any, of the subsidiaries in which they
serve as executive officers. Pursuant to this general agreement, Malcolm J.
Wright is entitled to receive 19% of the pre-tax profits of Leisureshare
International Ltd, Leisureshare International Espanola SA, American Leisure
Homes, Inc., Advantage Professional Management Group, Inc., Tierra Del Sol
Resort, Inc., and American Leisure Hospitality Group, Inc. L. William Chiles is
entitled to receive 19% of the profits of Hickory up to a maximum payment over
the life of his contract of $2,700,000. As Mr. Chiles' bonus is limited, it is
not subject to the buy-out by the Company (discussed below) as it will cease as
soon as the $2,700,000 amount has been paid to him. The executive officers of
the Company's other subsidiaries are entitled to share a bonus of up to 19% of
the pre-tax profits of the subsidiary in which they serve as executive officers.
The Company has the right, but not the obligation to buy-out all of the above
agreements after a period of five years by issuing such number of shares of its
common stock equal to the product of 19% of the average after-tax profits for
the five-year period multiplied by one-third (1/3) of the P/E Ratio of the
Company's common stock at the time of the buyout divided by the greater of the
market price of the Company's common stock or $5.00. We are in the process of
finalizing the bonus agreements. We have not paid or accrued any bonus as of
the filing of this report.
Malcolm J. Wright is the President and 81% majority shareholder of American
Leisure Real Estate Group, Inc. ("ALRG"). On November 3, 2003 TDSR, entered into
an exclusive development agreement with ALRG to provide development services for
the development of the Sonesta Orlando Resort. Pursuant to this development
agreement, ALRG is responsible for all development logistics and TDSR is
obligated to reimburse ALRG for all of ALRG's costs and to pay ALRG a
development fee in the amount of 4% of the total costs of the project paid by
ALRG. As of March 31, 2005, ALRG had administered operations and paid bills in
the amount of $5,639,975 and received a fee of 4% (or approximately $225,599)
under the development agreement.
Malcolm J. Wright and members of his family are the majority shareholders
of Xpress Ltd. ("Xpress"). On November 3, 2003, TDSR entered into an exclusive
sales and marketing agreement with Xpress to sell the units in the Sonesta
Orlando Resort being developed by TDSR. This agreement provides for a sales fee
in the amount of 3% of the total sales prices received by TDSR plus a marketing
fee of 1.5%. Pursuant to the terms of the agreement, 1.5% of the sales fee is
payable upon entering into a sales contract for a unit in the Sonesta Orlando
Resort and the remaining 1.5% is due upon closing the sale. During the period
since the contract was entered into and ended March 31, 2005, the total sales
made by Xpress amounted to approximately $215,730,333. As a result of the sales,
TDSR is currently obligated to pay Xpress a sales fee of approximately
$3,235,955 and a marketing fee of $3,235,955. TDSR will be obligated to pay
Xpress the remaining sales fee upon closing the sales of the units. As of March
31, 2005, the Company has paid Xpress $3,505,748 of cash, issued Xpress 120,000
shares of Series A Preferred Stock valued at $1,200,000, and transferred to
Xpress a 1913 Benz automobile valued at $500,000. In February 2004, Malcolm J.
Wright, individually and on behalf of Xpress, and Roger Maddock, individually
and on behalf of Arvimex, Inc. ("Arvimex"), entered into contracts with TDSR to
purchase an aggregate of 32 town homes for $8,925,120. Mr. Wright and Mr.
Maddock paid an aggregate deposit of $892,512 and gave a 10% discount in lieu of
brokerage commission. Roger Maddock is directly (and indirectly through
Arvimex) the beneficial owner of more than 5% of our common stock.
We granted warrants to each of Malcolm J. Wright and L. William Chiles for
their services as directors to purchase 150,000 shares (or an aggregate of
300,000 shares) of our common stock at an exercise price of $1.02 per share. The
warrants vested immediately with respect to the purchase of 50,000 shares by
each of them and will vest with respect to the purchase of 100,000 shares by
each of them in equal amounts on the next two anniversary dates of each of their
terms as a director. We are in the process of finalizing the documentation
regarding these warrants.
M J Wright Productions, Inc., of which Mr. Wright is the President, owns our
Internet domain names.
Mr. Wright and we have agreed to terms in principle of an employment
agreement pursuant to which Mr. Wright will serve as our President, Chief
Executive Officer and Chief Financial Officer. Mr. Wright and we have agreed to
terms in principle of an indemnification agreement pursuant to which we will
indemnify Mr. Wright. We will provide the terms of a definitive employment
agreement and an indemnification agreement when such agreements are finalized.
In March 2005, we closed on the sale of 13.5 acres of commercial property
in Davenport, Polk County, Florida at the corner of U.S. Hwy. 27 and Sand Mine
Road. The property was sold for $4,020,000 and the net proceeds were used to
pay $1,648,317 of notes payable to related parties.
Thomas Cornish, a director nominee, is the President of the Seitlin
Insurance Company. The Board has authorized Seitlin to place a competitive bid
to provide insurance for the Sonesta Orlando Resort. During 2004 and 2005, Mr.
Cornish provided consulting services to the Company in consideration for $1,500
and $3,000, respectively. David Levine, a director nominee, provided consulting
services to the Company during 2004 and 2005 in consideration for $3,000 and
$1,500, respectively. Carlos Fernandez is also a director nominee. We authorized
warrants to each of Thomas Cornish, Carlos Fernandez and David Levine to
purchase 150,000 shares (or an aggregate of 450,000 shares) of our common stock
at an exercise price of $1.02 per share in anticipation of them joining the
Board. The warrants vested immediately with respect to the purchase of 50,000
shares by each of them and will vest with respect to the purchase of 100,000
shares by each of them in equal amounts on the next two anniversary dates after
they join our Board.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT NO. DESCRIPTION OF EXHIBIT
------------ ------------------------
2.1 (1) Stock Purchase Agreement
3.1 (2) Articles of Incorporation
3.2 (3) Amended and Restated Bylaws
3.3 (3) Amended and Restated Articles of Incorporation filed July 24,
2002
3.4 (3) Certificate of Amendment of Amended and Restated Articles of
Incorporation filed July 24, 2002
4.1 (3) Certificate of Designation of Series A Convertible Preferred
Stock
4.2 (5) Certificate of Designation of Series B Convertible Preferred
Stock
4.3 (5) Certificate of Designation of Series C Convertible Preferred
Stock
4.4 (10) Amended and Restated Certificate of Designation of Series C
Convertible Preferred Stock
4.5* Corrected Certificate of Designation of Series E Convertible
Preferred Stock, which replaces the Form of Certificate of
Designation of Series E Convertible Preferred Stock, filed as
Exhibit 1 to the Registrant's Form 8-K on April 12, 2004
4.6 (18) Certificate of Designation of Series F Convertible Preferred
Stock, which replaces the Form of Certificate of Designation of
Series F Convertible Preferred Stock, filed as Exhibit 3.1 to the
Registrant's Form 8-K on January 6, 2005
10.1 (3) Stock Option Agreement with L. William Chiles Regarding Hickory
Travel Systems, Inc.
10.2 (5) Securities Purchase Agreement with Stanford Venture Capital
Holdings, Inc. ("Stanford") dated January 29, 2003
10.3 (5) Registration Rights Agreement with Stanford dated January 29,
2003
10.4 (5) Securities Purchase Agreement with Charles Ganz dated January 29,
2003
10.5 (5) Asset Sale Agreement with Charles Ganz dated January 29, 2003
10.6 (5) Registration Rights Agreement with Charles Ganz dated January 29,
2003
10.7 (5) Securities Purchase Agreement with Ted Gershon dated January 29,
2003
10.8 (5) Asset Sale Agreement with Ted Gershon dated January 29, 2003
10.9 (5) Registration Rights Agreement with Ted Gershon dated January 29,
2003
10.10 (6) Confirmation of Effective Date and Closing Date of $6,000,000
Line of Credit
10.11 (6) Credit Agreement with Stanford for $6,000,000 Line of Credit
10.12 (6) First Amendment to Credit Agreement with Stanford for $6,000,000
Line of Credit
10.13 (6) Mortgage Modification and Restatement Agreement between Tierra
Del Sol Resort Inc., formerly Sunstone Golf Resort, Inc. ("TDSR")
and Stanford dated December 18, 2003
10.14 (6) Registration Rights Agreement with Stanford dated December 18,
2003
10.15 (6) Florida Mortgage and Security Agreement securing the $6,000,000
Line of Credit
10.16 (6) Second Florida Mortgage and Security Agreement securing the
$6,000,000 Line of Credit
10.17 (6) Security Agreement by Caribbean Leisure Marketing Limited and
American Leisure Marketing and Technology Inc. dated December 18,
2003, securing the $6,000,000 Line of Credit
10.18 (6) Warrants issued to Daniel T. Bogar to purchase 168,750 shares at
$2.96 per share
10.19 (7) Warrants issued to Arvimex, Inc. ("Arvimex") to purchase 120,000
shares at $0.001 per share
10.20 (7) Warrant Purchase Agreement with Stanford to purchase 600,000
shares at $0.001 per share and 1,350,000 shares at $2.96 per
share
10.21 (7) Warrants issued to Arvimex to purchase 270,000 shares at $2.96
per share
10.22 (10) Credit Agreement with Stanford for $1,000,000 Credit Facility
10.23 (10) Credit Agreement with Stanford for $3,000,000 Credit Facility
10.24 (10) Instrument of Warrant Repricing to purchase 1,350,000 shares at
$0.001 per share
10.25 (10) Warrant Purchase Agreement with Stanford to purchase 500,000
shares at $5.00 per share
10.26 (10) Registration Rights Agreement with Stanford dated June 17, 2004
10.27 (9) Agreement and First Amendment to Agreement to Purchase Galileo
Notes with GCD Acquisition Corp. ("GCD"), dated March 19, 2004
and March 29, 2004, respectively
10.28 (9) Assignment Agreement for Security for Galileo Notes
10.29 (18) Bridge Loan Note for $6,000,000 issued by Around The World
Travel, Inc. ("AWT") in favor of Galileo International, LLC
("Galileo") and acquired by the Registrant
10.30 (18) Third Amended and Restated Acquisition Loan Note for $6,000,000
issued by AWT in favor of Galileo and acquired by the Registrant
10.31 (18) Amended and Restated Initial Loan Note for $7,200,000 issued by
AWT in favor of Galileo and acquired by the Registrant
10.32 (18) Promissory Note for $5,000,000 issued by AWT in favor of CNG
Hotels, Ltd. and assumed by the Registrant
10.33 (18) Promissory Note for $2,515,000 issued by TDSR in favor of Arvimex
and Allonge dated January 31, 2000
10.34 (18) Registration Rights Agreement with Arvimex dated January 23, 2004
10.35 (13) Development Agreement between TDSR and American Leisure Real
Estate Group, Inc.
10.36 (14) Exclusive Sales and Marketing Agreement between TDSR and Xpress
Ltd.
10.37 (15) Asset Purchase Agreement with AWT for TraveLeaders
10.38 (16) Operating Agreement between American Leisure Hospitality Group,
Inc. and Sonesta Orlando, Inc., dated January 29, 2005
10.39 (17) Second Re-Instatement and Second Amendment to Contract of
Advantage Professional Management Group, Inc. ("Advantage") to
sale unimproved land in Davenport, Florida to Thirteen Davenport,
LLC
10.40 (17) Purchase Agreement between Advantage and Paradise Development
Group, Inc. ("Paradise") to sale part of unimproved land in
Davenport, Florida
10.41 (17) First Amendment to Purchase Agreement between Advantage and
Paradise to sale part of unimproved land in Davenport, Florida
10.42 (17) Assignment of Purchase Agreement, as amended, to Thirteen
Davenport, LLC to sale part of unimproved land in Davenport,
Florida
10.43* Note and Mortgage Modification Agreement dated May 12, 2005,
regarding a Promissory Note in the original amount of $985,000
dated January 31, 2000, issued by TDSR in favor of Raster
Investments, Inc. (the "Raster Note") and a Mortgage in favor of
Raster Investments, Inc.
10.44* First Amendment to Asset Purchase Agreement with AWT for
TraveLeaders dated March 31, 2005
16.1 (3) Letter from J.S. Osborn, P.C. dated August 1, 2002
16.2 (4) Letter from J.S. Osborn, P.C. dated May 22, 2003
16.3 (11) Letter from J.S. Osborn, P.C. dated August 17, 2004
16.4 (11) Letter from Charles Smith
16.5 (11) Letter from Marc Lumer & Company
16.6 (11) Letter from Byrd & Gantt, CPA's, P.A.
16.7 (12) Letter from Malone & Bailey, PLLC
16.8 (19) Letter from Bateman & Co., Inc., P.C.
21 (18) Subsidiaries of American Leisure Holdings, Inc.
31* Certification by Chief Executive Officer and Chief Financial
Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32* Certification by Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
99.1 (6) Personal Guarantee by Malcolm J. Wright guaranteeing the
$6,000,000 Line of Credit
99.2 (10) Letter to the Shareholders of Around The World Travel, Inc.
* Filed herein.
(1) Filed as Exhibit 2.1 to the Registrant's Form 8-K on June 28, 2002, and
incorporated herein by reference.
(2) Filed as Exhibit 3.1 to the Registrant's Form SB-1 on October 20, 2000, and
incorporated herein by reference.
(3) Filed as Exhibits 3.4, 3.1, 3.2, 3.3, 10.2, and 16.1, respectively, to the
Registrant's Form 10-QSB on August 19, 2002, and incorporated herein by
reference.
(4) Filed as Exhibit 16.1 to the Registrant's Form 8-K on May 23, 2003, and
incorporated herein by reference.
(5) Filed as Exhibits 99.2, 99.1, 99.3, 99.5, 99.6, 99.7, 99.8, 99.9, 99.10 and
99.11, respectively, to the Registrant's Form 10-KSB on May 23, 2003, and
incorporated herein by reference.
(6) Filed as Exhibits 99.1, 99.2, 99.3, 99.4, 99.7, 99.8, 99.9, 99.10, 99.11
and 99.5, respectively, to the Registrant's Form 8-K on April 1, 2004, and
incorporated herein by reference.
(7) Filed as Exhibits 99.11, 99.12 and 99.13, respectively, to the Registrant's
Form 10-QSB on May 25, 2004, and incorporated herein by reference.
(8) Filed as Exhibit 99.1 to the Registrant's Form 10-KSB on May 21, 2004, and
incorporated herein by reference.
(9) Filed as Exhibits 99.1 and 99.2, respectively, to the Registrant's Form 8-K
on April 6, 2004, and incorporated herein by reference.
(10) Filed as Exhibits 3.1, 10.1, 10.2, 10.3, 10.4, 10.5 and 99.2, respectively,
to the Registrant's Forms 8-K/A filed on August 6, 2004, and incorporated
herein by reference.
(11) Filed as Exhibits 16.2, 16.3, 16.4 and 16.5, respectively, to the
Registrant's Forms 8-K/A filed on August 18, 2004, and incorporated herein
by reference.
(12) Filed as Exhibit 16.1 to the Registrant's Form 8-K on August 18, 2004, and
incorporated herein by reference.
(13) Filed as Exhibit 10.6 to the Registrant's Form 10-QSB on August 20, 2004,
and incorporated herein by reference.
(14) Filed as Exhibit 10.6 to the Registrant's Form 10-QSB/A on December 8,
2004, and incorporated herein by reference.
(15) Filed as Exhibit 10.1 to the Registrant's Form 8-K on January 6, 2005, and
incorporated herein by reference.
(16) Filed as Exhibit 10.1 to the Registrant's Form 8-K on February 2, 2005, and
incorporated herein by reference.
(17) Filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, to the
Registrant's Form 8-K on March 14, 2005, and incorporated herein by
reference.
(18) Filed as Exhibits 4.6, 10.29, 10.30, 10.31, 10.32, 10.33, and 10.34,
respectively, to the Registrant's Form 10-KSB on March 31, 2005, and
incorporated herein by reference.
(19) Filed as Exhibit 16.2 to the Registrant's Form 8-K on March 28, 2005, and
incorporated herein by reference.
REPORTS ON FORM 8-K
We filed the following seven (7) reports on Form 8-K with the Commission
during the quarter for which this report is filed:
(1) Report of Form 8-K filed on January 6, 2005, to report the acquisition of
TraveLeaders and the authorization of 150,000 shares of Series F Preferred
Stock.
(2) Report of Form 8-K filed on January 13, 2005, to report the material terms
of our agreement with Stanford for $1.25 million of additional financing
and the creation of a direct financial obligation therewith.
(3) Report of Form 8-K/A filed on January 13, 2005, to correct the disclosure
under the section entitled "Item 1.01 Entry Into A Material Definitive
Agreement" of the Form 8-K filed with the Commission on January 6, 2005,
and listed in (1), above. We are not assuming any liabilities in connection
with litigation matters of Around The World Travel, Inc., including, but
not limited to lawsuits against Around The World Travel, Inc. filed by
Seamless Technologies, Inc. or Peter Hairston.
(4) Report of Form 8-K filed on February 2, 2005, to report the material terms
of an operating agreement and related agreements with Sonesta which
delegates to Sonesta substantially all of the hospitality responsibilities
within the management of the Sonesta Orlando Resort, which we plan to
construct.
(5) Report of Form 8-K filed on February 15, 2005, to report the resignation of
a Director, and the nomination of new Directors to fill vacancies created
by such resignation and an increase in the number of directors from four
(4) to nine (9).
(6) Report of Form 8-K filed on March 14, 2005, to report the material terms of
a sale of approximately 13.67 acres of unimproved land located in
Davenport, Florida.
(7) Report of Form 8-K filed on March 28, 2005, to report a change in
accountants that was effective August 25, 2004.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN LEISURE HOLDINGS, INC.
By: /s/ Malcolm J. Wright
Name: Malcolm J. Wright
Title: Chief Executive Officer and
Chief Financial Officer
Date: May 23, 2005