-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EJ5HAAx8ereoUq7VbmuTC26wnLuTFQdr0DjAXEsHc7ImyY1kQbNSeG/mIGTE8joG monfLxGav1q1TBBZykTA2A== 0000950144-99-012228.txt : 19991101 0000950144-99-012228.hdr.sgml : 19991101 ACCESSION NUMBER: 0000950144-99-012228 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAHAINA ACQUISITIONS INC CENTRAL INDEX KEY: 0000855684 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 841325695 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-27480 FILM NUMBER: 99737463 BUSINESS ADDRESS: STREET 1: 5895 WINDWARD PARKWAY STREET 2: SUITE 200 CITY: ALPHARETTA STATE: GA ZIP: 30005 BUSINESS PHONE: 7707546140 MAIL ADDRESS: STREET 1: 5895 WINDWARD PARKWAY STREET 2: SUITE 200 CITY: ALPHARETTA STATE: GA ZIP: 30005 10-Q/A 1 LAHAINA ACQUISITIONS, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended Commission File Number June 30, 1999 #0-27480 LAHAINA ACQUISITIONS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) COLORADO 84-1325695 (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 5895 Windward Parkway, Suite 220 Alpharetta, Georgia 30005 ------------------------------------------------ (Address, Including Zip Code, of Principal Executive Offices) Registrant's Telephone Number, Including Area Code (770) 754-6140 NOT APPLICABLE -------------- (Former Name, Former Address, and Former Fiscal Year If Changed since Last Report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act or 1934 during the preceding 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 --- --- Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practical date. Class of Common Stock Outstanding at August 18, 1999 no par value 2,906,343 shares issued & outstanding 4,756,500 shares fully diluted 2 LAHAINA ACQUISITIONS, INC. AND SUBSIDIARY INDEX TO FORM 10-Q
PART I -- FINANCIAL INFORMATION PAGE ITEM 1 Financial Statements Consolidated Balance Sheets for June 30, 1999 3 and for December 7, 1998 Consolidated Statements of Operations for the 4 Three Months Ended June 30, 1999 and for the Period from Inception to June 30, 1999 Consolidated Statements of Changes in Shareholders' 5 Equity for the Period from Inception to June 30, 1999 Consolidated Statements of Cash Flows for the 6 Period from Inception to June 30, 1999 Notes to Consolidated Financial Statements for the 7 Period from Inception to June 30, 1999 ITEM 2 Management's Discussion and Analysis of Financial 14 Condition and Results of Operations PART II -- OTHER INFORMATION ITEM 6 Exhibits and Reports on Form 8-K 17 SIGNATURES
-2- 3 LAHAINA ACQUISITIONS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 (UNAUDITED) DECEMBER 7, 1998 --------------------------------- ASSETS Current Assets Cash ............................................... $ 60,261 $ -- Accounts Receivable ................................ 10,000 -- Prepaid Expenses ................................... -- 17,281 Note Receivable .................................... -- -- Escrow Funds ....................................... 31,000 30,000 ---------- ---------- Total Current Assets .................................. 101,261 47,281 Fixed Assets Land ............................................... 400,000 400,000 Buildings .......................................... 2,434,289 2,403,623 Equipment .......................................... 150,279 143,738 Accumulated Depreciation ........................... (82,769) (24,389) ---------- ---------- Total Fixed Assets .................................... 2,901,799 2,922,972 Other Assets Offering Costs & Reserve ........................... 139,251 -- Notes Receivable ................................... 62,000 -- Other .............................................. -- -- ---------- ---------- 201,251 -- TOTAL ASSETS ............................................ $3,204,311 $2,970,253 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Current Liabilities Accounts Payable ................................... 540,294 4,250 Notes Payable - Shareholder ........................ -- -- Notes Payable - Others ............................. -- 180,000 Accrued Interest Payable ........................... -- -- Other Current Liabilities .......................... -- -- Security Deposits Payable .......................... 9,000 9,000 ---------- ---------- Total Current Liabilities ............................. 549,294 193,250 Long-term Debt Note Payable - Mortgage ............................... 1,550,000 1,550,000 Note Payable - Convertible Debenture .................. 775,000 -- ---------- ---------- Total Long-term Debt .................................... 2,325,000 1,550,000 ---------- ---------- TOTAL LIABILITIES ....................................... 2,874,294 1,743,250 SHAREHOLDERS' EQUITY Preferred Series A Convertible Stock, 10,000,000 Shares Authorized, 1,910,000 Shares Issued and Outstanding at June 30, 1999 (Unaudited) and December 7, 1998 .................................... -- -- Common Stock, $1.00 Par Value, 500 Shares Authorized, 500 Shares Issued and Outstanding at December 7, 1998 ................................. -- 500 Common Stock, No Par Value, 800,000 Shares Authorized, 2,493,833 Shares Issued and Outstanding at June 30, 1999 (Unaudited) ........................... 1,093,171 -- Additional Paid-in Capital - Common Stock ............. -- 1,247,069 Retained Deficit ...................................... (763,154) (20,566) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY .............................. 330,017 1,227,003 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .............. $3,204,311 $2,970,253 ========== ==========
The accompanying notes are an integral part of these financial statements. -3- 4 LAHAINA ACQUISITIONS, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS
FROM INCEPTION FOR THE THREE (SEPTEMBER 25, MONTHS ENDED 1998) THROUGH JUNE 30, 1999 JUNE 30, 1999 (UNAUDITED) (UNAUDITED) ---------------------------------------- REVENUE: .................. $ 62,158 $ 143,713 Operating Expenses ...... 347,119 702,221 ---------- ---------- Operating Loss .......... (284,961) (558,508) Interest Expense ........ (78,406) (204,646) ---------- ---------- Net Loss................. $ (363,367) $ (763,154) ---------- ---------- INCOME (LOSS) PER SHARE: Basic ................... $ (0.15) $ (0.31) Shares for Basic......... 2,433,833 2,433,833 Diluted.................. $ (0.15) $ (0.31) Shares for Diluted....... 6,251,500 6,251,500
See accompanying Notes to the Consolidated Financial Statements. -4- 5 LAHAINA ACQUISITIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SERIES A PREFERRED STOCK -- COMMON STOCK -- NO PAR VALUE NO PAR VALUE ADDITIONAL TOTAL -------------------- -------------------- PAID-IN RETAINED STOCKHOLDERS' SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY --------- -------- --------- -------- ---------- --------- ------------- Balance at September 24, 1998 (date of inception)............................ -- $ -- -- $ -- $ -- $ -- $ -- Issuance of common stock................ -- -- 500 500 -- -- 500 Non-cash capital contributions.......... -- -- -- -- 1,247,069 -- 1,247,069 Net Loss................................ -- -- -- -- -- (20,566) (20,566) --------- -------- --------- -------- ---------- --------- ---------- Balance at December 7, 1998............. -- -- 500 500 1,247,069 (20,566) 1,227,003 Adjustment for Merger................... -- -- -- (500) 500 -- -- --------- -------- --------- -------- ---------- --------- ---------- Balance at December 7, 1998, as adjusted.............................. -- -- 500 -- 1,247,569 (20,566) 1,227,003 Cash Distribution....................... -- -- -- -- (667,500) -- (667,500) Issuance of common preferred stock for acquired company...................... 1,910,000 -- 2,246,000 -- (7,065) -- (7,065) Net Loss................................ -- -- -- -- -- (182,543) (182,543) --------- -------- --------- -------- ---------- --------- ---------- Balance at December 31, 1998 (Unaudited)........................... 1,910,000 -- 2,246,500 -- 573,004 (203,109) 369,895 Issuance of common stock................ -- -- 75,000 -- 30,000 -- 30,000 Net Loss................................ -- -- -- -- -- (196,678) (196,678) --------- -------- --------- -------- ---------- --------- ---------- Balance at March 31, 1999 (Unaudited)... 1,910,000 -- 2,321,500 -- 603,004 (399,787) 203,217 Issuance of common stock................ -- -- 232,333 -- 577,867 -- 577,867 Repurchase and retirement of treasury stock................................. -- -- (60,000) -- (87,700) -- (87,700) Net Loss................................ -- -- -- -- -- (363,367) (363,367) --------- -------- --------- -------- ---------- --------- ---------- Balance at June 30, 1999 (Unaudited).... 1,910,000 $ -- 2,493,833 $ -- $1,093,171 $(763,154) $ 330,017 ========= ======== ========= ======== ========== ========= ==========
The accompanying notes are an integral part of these financial statements -5- 6 LAHAINA ACQUISITIONS INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
From Inception (September 25, 1998) through June 30, 1999 (Unaudited) -------------- Net loss $ (763,154) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 58,380 Expenses paid on behalf of the company by the majority shareholder 11,538 (Increase) decrease in: Accounts receivable (10,000) Prepaid expenses 18,835 Escrow funds (1,000) Notes payable (62,000) Offering costs (139,251) Increase in accounts payable 533,201 -------------- Net cash used in operating activities (353,451) -------------- CASH FLOWS USED IN OPERATING ACTIVITIES - capital expenditures (33,955) -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of notes payable 1,172,867 Proceeds from the issuance of common stock 30,000 Cash distribution (667,500) Repurchase and retirement of common stock (87,700) -------------- Net cash provided by financing activities 447,667 -------------- Net increase in cash 60,261 Cash at beginning of period -- -------------- Cash at end of period $ 60,261 ============== Supplemental disclosure of non-cash items Non-cash capital contributions by majority stockholder 1,247,569 ============== Purchase of Lahaina Acquisitions, Inc. $ (7.065) ============== Conversion of line of credit into common stock $ 277,500 ============== Conversion of loan to majority stockholder into additional paid-in capital $ 135,367 ============== Assumption of debt by majority stockholder $ 165,000 ==============
The accompanying notes are an integral part of these financial statements. -6- 7 Lahaina Acquisitions, Inc. and Subsidiary Notes to Consolidated Financial Statements For the Period from Inception (September 25, 1998) through June 30, 1999 (Unaudited) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES As discussed further in Note M, Lahaina Acquisitions, Inc. ("Lahaina") acquired Beachside Commons I, Inc. ("Beachside") (collectively, the "Company") on December 7, 1998. The purchase was accounted for as a reverse acquisition, whereby Beachside was determined to be the accounting acquiror in accordance with Staff Accounting Bulletin No. 97 (SAB 97). The assets and liabilities of Lahaina were recorded at the historical cost basis as it was a shell company at December 7, 1998. This summary of significant accounting policies is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, who are responsible for their integrity and objectivity. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. All adjustments have been made that, in the opinion of management, are necessary for a fair statement of the results of the interim period. Other than the acquisition of Beachside Commons I, Inc. ("Beachside") described in Note O, all adjustments made have been of a normal and recurring nature. These accounting policies conform to generally accepted accounting principles and have been applied in the preparation of the financial statements. REGISTRANT'S ACTIVITIES AND OPERATING CYCLE Lahaina Acquisitions, Inc. (the "Company") is engaged in real estate development and property management. The Company's fiscal year ends September 30. The Registrant's financial statements have been prepared in conformity with principles of accounting applicable to a going concern. These principles contemplate the realization of assets and liquidation of liabilities in the normal course of business. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Registrant and its wholly owned subsidiary, Beachside. All significant intercompany accounts and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with maturity of three months or less to be cash equivalents for the purpose of determining cash flows. PROPERTY, EQUIPMENT AND DEPRECIATION Property and equipment are stated at cost. Depreciation is provided by straight-line methods for financial reporting and accelerated methods for income tax purposes over estimated useful lives, which range from 5 to 39.5 years. NOTE B - ACCOUNTS RECEIVABLE Accounts receivable includes a $10,000 advance against accrued salary to a director. NOTE C - NOTES RECEIVABLE Notes receivable were reduced from the prior period as a result of the purchase of a note due from a customer, whose balance was $87,700 at March 31, 1999 and approximately $200,000 at June 30, 1999 which was purchased from the Company through the Redemption of 60,000 shares of the Registrant's Common Stock. The purchaser was Mongoose Investments, LLC. ("Mongoose"), the largest shareholder of the Company. The managing member of Mongoose is Richard P. Smyth, who is also the Company's Chairman and CEO. The purchase of the notes was part of the sale of the assets of JP Concepts, Inc. ("JP Concepts") a restaurant operation located at Beachside Commons, which was purchased by the Registrant on April 1, 1999, through the issuance of 20,000 shares of Common Stock and a note payable from the Registrant of $10,000. The operation was not deemed to be important to the Registrant based on the Registrant's pending merger with The Accent Group, Inc. ("Accent"), was not profitable, and was not expected to achieve profitability in the near term. Included in the amounts owed to the Company by JP Concepts were amounts due for rent at Beachside Commons through September 1999. Mongoose has agreed to assume all responsibilities of the existing lease between JP Concepts and Beachside. The Board of Directors of the Company has deemed this transaction to be more favorable to the Company than any other third party transaction which it may have considered with regard to the disposition of the JP Concepts assets. -7- 8 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES As discussed further in Note M, Lahaina Acquisitions, Inc. ("Lahaina") acquired Beachside Commons I, Inc. ("Beachside") (collectively, the "Company") on December 7, 1998. The purchase was accounted for as a reverse acquisition, whereby Beachside was determined to be the accounting acquiror in accordance with Staff Accounting Bulletin No. 97 (SAB 97). The assets and liabilities of Lahaina were recorded at the historical cost basis as it was a shell company at December 7, 1998. This summary of significant accounting policies is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, who are responsible for their integrity and objectivity. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. All adjustments have been made that, in the opinion of management, are necessary for a fair statement of the results of the interim period. Other than the acquisition of Beachside Commons I, Inc. ("Beachside") described in Note O, all adjustments made have been of a normal and recurring nature. These accounting policies conform to generally accepted accounting principles and have been applied in the preparation of the financial statements. REGISTRANT'S ACTIVITIES AND OPERATING CYCLE Lahaina Acquisitions, Inc. (the "Company") is engaged in real estate development and property management. The Company's fiscal year ends September 30. The Registrant's financial statements have been prepared in conformity with principles of accounting applicable to a going concern. These principles contemplate the realization of assets and liquidation of liabilities in the normal course of business. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Registrant and its wholly owned subsidiary, Beachside. All significant intercompany accounts and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with maturity of three months or less to be cash equivalents for the purpose of determining cash flows. PROPERTY, EQUIPMENT AND DEPRECIATION Property and equipment are stated at cost. Depreciation is provided by straight-line methods for financial reporting and accelerated methods for income tax purposes over estimated useful lives, which range from 5 to 39.5 years. NOTE B - ACCOUNTS RECEIVABLE Accounts receivable includes a $10,000 advance against accrued salary to a director. NOTE C - NOTES RECEIVABLE Notes receivable were reduced from the prior period as a result of the purchase of a note due from a customer, whose balance was $87,700 at March 31, 1999 and approximately $200,000 at June 30, 1999 which was purchased from the Company through the Redemption of 60,000 shares of the Registrant's Common Stock. The purchaser was Mongoose Investments, LLC. ("Mongoose"), the largest shareholder of the Company. The managing member of Mongoose is Richard P. Smyth, who is also the Company's Chairman and CEO. The purchase of the notes was part of the sale of the assets of JP Concepts, Inc. ("JP Concepts") a restaurant operation located at Beachside Commons, which was purchased by the Registrant on April 1, 1999, through the issuance of 20,000 shares of Common Stock and a note payable from the Registrant of $10,000. The operation was not deemed to be important to the Registrant based on the Registrant's pending merger with The Accent Group, Inc. ("Accent"), was not profitable, and was not expected to achieve profitability in the near term. Included in the amounts owed to the Company by JP Concepts were amounts due for rent at Beachside Commons through September 1999. Mongoose has agreed to assume all responsibilities of the existing lease between JP Concepts and Beachside. The Board of Directors of the Company has deemed this transaction to be more favorable to the Company than any other third party transaction which it may have considered with regard to the disposition of the JP Concepts assets. -8- 9 An operating loan to 1st Southern Mortgage ("1st Southern"), secured by security interest in outstanding stock, due through December 31, 1999, bearing interest at 10% per annum. $62,000
NOTE D - OFFERING COSTS - RESERVE Offering costs reserve consists of costs incurred in preparation of the S-1 Registration Statement filing in the amount of $139,251. Upon completion of the S-1 Registration Statement, these costs will be charged against the equity accounts. If the S-1 Registration Statement is abandoned, these costs will be expensed as administrative costs. Management expects the shares involved in the S-1 Registration Statement to be issued during the Company's fiscal fourth quarter, at which time this reserve would be eliminated. NOTE E - MERGER COSTS Expenses charged against earnings during this quarter include costs associated with the planned merger with Accent, include legal, travel and consulting costs related to the transaction in the amount of approximately $150,000. NOTE F - NOTES PAYABLE - CONVERSION OF LINE OF CREDIT During the period the Company converted its working capital loan from GCA Strategic Investment Fund Limited into shares of the Company's Common Stock. The Company issued 146,667 shares in consideration of an outstanding balance of approximately $300,000 or $2.05 per share, including accrued interest and fees. NOTE G - NOTES PAYABLE - REDUCTION BY SHAREHOLDER As of June 30, 1999, for no additional consideration, the Company's largest shareholder has agreed to assume three notes payable, whose balance at June 30, 1999 was approximately $165,000, including principal and accrued interest. Further, the Company's largest shareholder has waived the obligations of the Company to repay its line of credit with the Company whose balance at June 30, 1999 was approximately $135,000. These transactions resulted in a reduction of liabilities of approximately $300,000. NOTE H - LONG-TERM DEBT Long-term debt at June 30, 1999, consisted of the following: Note payable to Pacific Coast Investment Company (secured by a first mortgage on the Beachside Commons property), at an interest rate of 15% payable in monthly installments of interest only. The entire principal is due and payable November 11, 2003. $1,550,000
-9- 10 Note payable to GCA Strategic Investment Fund, Ltd.(1), dated December 4, 1998 (secured by a second mortgage on the Beachside Commons property), and a $25,000 note payable to GCA Strategic Investment Fund, Ltd. dated November 4, 1998, both at an interest rate of 9%, maturing January 31, 2001 with interest payable quarterly in arrears on the last day of March, June, $ 775,000 September and December of each year until the maturity date. See Note M - Significant Events ---------- $2,325,000 ==========
(1) These notes include certain provisions, including issuance of warrants and conversion to common stock. Maturities of long-term debt are as follows:
Year Ending June 30 Amount ----------- ------ 1999 -0- 2000 -0- 2001 775,000 2002 -0- 2003 1,550,000
NOTE H - STOCKHOLDERS' EQUITY The components of stockholders' equity are as follows: -10- 11 Preferred stock consists of 9.5% cumulative preferred stock of no par value with a liquidation value at $1.00 per share for each outstanding share of Series A Preferred Stock. There are 10,000,000 shares of Series A Preferred Stock authorized with 1,910,000 shares issued and outstanding at June 30, 1999. This stock may be converted into Common Stock of the Company at $1.00 per share, or 1,910,000 shares, at the option of the holder. Common stock is voting stock with no par value. There are 800,000,000 shares authorized with 2,493,833 shares issued and outstanding at June 30, 1999. NOTE I - RELATED PARTY TRANSACTIONS Included in current debt is a loan from the Company to 1st Southern for $62,000. The Company has an option to acquire. 1st Southern, which is currently owned by the son of the Company's Vice Chairman. The Vice Chairman of 1st Southern is a director of the Company. Should the acquisition be completed, the total consideration given would be the outstanding amount of this loan. During the quarter the Company acquired, then disposed of, the assets of JP Concepts, a restaurant operation and tenant in the Company's Beachside Commons project. The assets were sold to the Company's largest shareholder, Mongoose. See Note "C". JP Concepts was responsible for approximately 50% of the Company's revenues during this quarter. NOTE J - INCOME TAXES The Company has net operating loss carry-forwards of approximately $316,000 which are available to offset future taxable income. The loss carry-forwards expire $8,000 in 2016, $46,000 in 2017, $53,000 in 2018 and $209,000 in 2019. A valuation has been established in the full amount of the deferred tax benefit resulting from the net operating loss carry-forwards for each of the periods ending June 30, 1999. -11- 12 NOTE K - LEGAL PROCEEDINGS The Company is party from time to time to various legal proceedings. In the opinion of management, there are no matters which might have a material impact on the Company's financial position or results of operations. NOTE L - RESERVE FOR DOUBTFUL ACCOUNTS The Company has not taken any reserves for its accounts receivable or notes receivable at this time, though it may change this policy in the future based on its experiences with respect to collections. NOTE M - SIGNIFICANT EVENTS As a result of the Company's merger on December 14, 1998 the Company became a holding company with an operating subsidiary. Acquisition Transaction On December 14, 1998, the Company purchased all of the outstanding stock of Beachside from Mongoose. The purchase was deemed effective as of December 7, 1998. Beachside is the owner of a commercial real estate development located on Fernandina Beach, Florida in the resort area of Amelia Island, Northeast Florida. The Company paid the following for the Beachside stock: 1,250,000 newly issued shares of Common Stock of the Registrant; 1,910,000 newly issued shares of Series A of Preferred Stock, of the Registrant which shares are convertible into 1,910,000 shares of Common Stock; and $667,500 in cash, which was a portion of the $750,000 borrowed in connection with this transaction by the Registrant under the Original Note, before amendment. At the same time, Mongoose purchased 750,000 shares of Common Stock from Paxford Investments, Ltd., ("Paxford") an existing shareholder of the Company, for $300,000. As a result of the above transactions, a change in the control of the Company occurred in that Mongoose owns 1,715,000 shares of the 2,493,833 shares of Common Stock outstanding on June 30, 1999 or approximately 70% of such shares. Mongoose could own an additional 1,910,000 shares of Common Stock upon conversion of its Series A Preferred Stock. It is currently estimated that the conversion of the convertible debenture and the exercise of the warrants will result in an additional 1,200,000 to 2,100,000 shares of Common Stock being issued. According to current estimates, the convertible debenture as amended will convert into 885,714 shares of Common Stock. The warrant attached to the line of credit is exercisable for 200,000 shares of Common Stock, the warrant issued December 4, 1998 is exercisable for 60,000 shares of Common Stock, the warrant attached to the convertible debenture is exercisable for 15,000 shares of Common Stock and the Right is exercisable for 25,000 shares of Common Stock. Thus, after conversion of all convertible securities, it is likely that Mongoose will remain in the control of the Company for the foreseeable future. The Managing Member of Mongoose is Richard P. Smyth. The assets of Beachside consist of two buildings and unimproved real estate, leases to tenants in the buildings and minimal operating capital. The -12- 13 property is subject to (1) a first mortgage securing a loan in the amount of $1,550,000 bearing interest at 15% per annum, principal and interest payable and due December 1, 2001, and (2) a second mortgage in favor of GCA securing repayment of the Note. Once the Note is converted to Common Stock the second mortgage will be released. The Company intends to continue operating the developed portion of the Beachside property and intends to initiate and complete the development of the currently undeveloped portion of the Beachside property when appropriate financing can be obtained. Bridge Funding In order to raise the cash portion of the purchase price for the Beachside stock, the Registrant borrowed $750,000 from GCA. The costs associated with the transaction were the payment of an $82,500 consulting fee to affiliates of the Fund and the issuance of a Warrant to purchase 60,000 shares of Common Stock to LKB Financial, LLC in satisfaction of amounts owed to it for broker/finder services in connection with the transaction. The Company has received additional operating loans from GCA Strategic Investment Fund, Ltd. in the form of three ninety-day convertible notes that total $300,000. The notes include up-front charges totaling $48,000. The charges expensed during the nine months ended June 30, 1999 totaled $52,500, including discounted amounts. On June 1, 1999 the Company converted this Note into 146,667 shares of Common Stock. (See Note F.) Acquisitions and Dispositions During the Period As of March 31, 1999, the Registrant had agreements for the acquisition of three companies: Klein Real Estate Services ("KRES"), JP Concepts and 1st Southern. On June 30, 1999, and in other subsequent press releases the Company has announced its plans to merge with Accent, an Atlanta, GA based Real Estate and Mortgage Financing concern. On July 21, 1999, the Company announced it had entered into a definitive Merger Agreement, subject to final board approval. The merger became final on August 23, 1999. The assets of JP Concepts were acquired on April 1, 1999 for the consideration of 20,000 shares of the Registrant's Common Stock and a note payable to JP Concept's shareholder in the amount of $10,000. On June 30, 1999, the same assets, including accrued rent due to the Registrant, were sold to Mongoose for the contribution of 60,000 shares of the Company's Common Stock. The assets of KRES were acquired on April 1, 1999 for the consideration of 20,000 shares of the Registrant's Common Stock and a note payable to the manager of KRES in the amount of $10,000. On June 30, 1999, based on a change of direction in the Registrant the Registrant's entered into an agreement with the former owner of KRES to terminate the transaction. The consideration given included the payment of $30,000, and reimbursement of normal expenses of approximately $5,000 and salaries due as of June 30, 1999. -13- 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the results of operations and financial condition of the Registrant should be read in conjunction with the Registrant's Consolidated Financial Statements and Notes thereto immediately preceding this section. This discussion contains forward-looking statements based on current expectations which involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements due to a number of factors, including, but not limited to, the possibilities that the demand for the Registrant's services may decline as a result of possible changes in general and industry specific economic conditions and the effects of competitive services and pricing, required financing may not be available upon terms acceptable to the Registrant, in which case the Registrant will not grow as expected, and such other risks and uncertainties as are described in reports and other documents filed by the Registrant from time to time with the Securities and Exchange Commission. OVERVIEW The Registrant was formed with the intent to actively seek, locate, evaluate, structure and complete mergers with or acquisitions of private companies, partnerships or sole proprietorships. The Registrant intends to implement a business strategy that will allow it to facilitate opportunistic acquisitions or investment in real estate, related operations and businesses with an emphasis on asset oriented opportunities, such as real estate equipment or other physical assets. On December 14, 1998, the Registrant purchased all of the outstanding shares of Beachside Commons I, Inc. ("Beachside") in a transaction accounted for as a reverse acquisition. In accordance with the provisions of Staff Accounting Bulletin No. 97, Beachside was deemed to be the accounting acquirer of Lahaina as its stockholders received the largest portion of the voting rights in the combined corporation. The acquired company, Lahaina, was recorded at its historical cost basis, as it was a shell company prior to its acquisition of Beachside. The acquisition on of Beachside, whose main activity is real estate development and redevelopment and investment in business within resort market places, is consistent with that business strategy. Since inception, the Registrant generated no revenues until its acquisition of Beachside. RESULTS OF OPERATIONS Prior to December 14, 1998, the Registrant was a shell company and did not conduct an active business, and its historical results of operations were not meaningful. As a result of the Company's acquisition of Beachside on December 14, 1998, which was accounted for as a reverse acquisition, the Company has now become an operating entity. Three Months Ended June 30, 1999 For the three months ended June 30, 1999, the Registrant recorded revenues totaling $62,158, primarily attributable to rental revenue from its Beachside property. Operating expenses for the three months ended June 30, 1999 totaled $347,119, and are primarily expenses associated with operating Beachside, as well as expenses associated with administrative costs. Net interest expense for the three months ended June 30, 1999 totaled $78,406, principally relating to indebtedness associated with the Beachside property as well as to other borrowings. The Registrant recorded a net operating loss of $363,367 for the three months ended June 30, 1999. From Inception (September 25, 1998) through June 30, 1999 For the period from inception (September 25, 1998) through June 30, 1999, the Registrant recorded revenues totaling $143,713, primarily attributable to rental revenue from its Beachside property. Operating expenses for the period from inception (September 25, 1998) through June 30, 1999 totaled $702,221, and are primarily expenses associated with operating Beachside, as well as expenses associated with consummation of the acquisition of Beachside and administrative costs. Net interest expense for the period from inception (September 25, 1998) through June 30, 1999 totaled $204,646, principally relating to indebtedness associated with the Beachside property as well as to new borrowings. The Registrant recorded a net operating loss of $763,154 for the period from inception (September 25, 1998) through June 30, 1999. -14- 15 POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS AND SEASONALITY As a result of the Registrant's limited operating history in resort development and the emerging nature of the markets in which the Registrant competes, the Registrant is unable to accurately forecast its revenues. The Registrant's current and future expense levels are based predominantly on its operating plans and estimates of future revenues and, while relevant to management for planning purposes, should not be relied upon by potential investors. The Registrant may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues would likely have an immediate material adverse effect on the Registrant's business, operating results and financial condition. Further, the Registrant currently intends to substantially increase its operating expenses to increase advertising, develop and offer new and expanded services, to fund increased sales and marketing and customer service operations and to develop its technology and systems. To the extent such expenses precede or are not subsequently followed by increased revenues, the Registrant's operating results will fluctuate and anticipated net losses in a given quarter may be greater than expected. The Registrant expects to experience significant fluctuations in its future quarterly operating results due to a variety of other factors, many of which are outside the Registrant's control. Factors that may adversely affect the Registrant's quarterly operating results include, but are not limited to (i) general economic conditions and economic conditions specific to the real estate industry, (ii) the level of use of resort facilities as well as seasonal fluctuation in vacationers' demands, (iii) the Registrant's ability to upgrade and develop its systems and infrastructure and to attract new personnel in a timely and effective manner, (iv) the amount and timing of operating costs and capital expenditures relating to expansion of the Registrant's business, operations and infrastructure, (v) governmental regulation, (vi) unforeseen events affecting the industry, and (vii) the timing associated with the start, completion and closing associated with the land development or construction activities of the Registrant. Due to the foregoing factors, quarterly revenues and operating results are difficult to forecast, and the Registrant believes that period-to-period comparisons of its operating results will not necessarily be meaningful and should not be relied upon as an indication of future performance. It is likely that the Registrant's future quarterly operating results from time to time will not meet the expectations of security analysts or investors. In such event, the price of the Registrant's Common Stock would likely be materially and adversely affected. LIQUIDITY AND CAPITAL RESOURCES Prior to December 14, 1998, the Registrant was a shell company and did not conduct an active business, and its historical results of operations were not meaningful. As a result of the Company's acquisition of Beachside on December 14, 1998, which was accounted for as a reverse acquisition, the Company became an operating entity. At June 30, 1999, the Registrant had cash and cash equivalents totaling $60,261. For the period from inception (September 25, 1998) through June 30, 1999, the Registrant used $353,451 of cash in operations, principally relating to its net loss offset somewhat by an increase in accounts payable of $533,201. An increase in offering costs of $139,251 also contributed to cash flows used in operations. Cash flows used in investing activities during the period from inception (September 25, 1998) through June 30, 1999 totaled $33,955, attributable to capital expenditures. Cash flows provided by financing activities during the period from inception (September 25, 1998) through June 30, 1999 totaled $447,667, of which $1,172,867 was provided by an increase in notes payable and $667,500 was used for a cash distribution relating to the acquisition of Beachside. The increase in notes payable is primarily attributable to the issuance of $775,000 in convertible debentures. The Registrant is not presently generating positive cash flow, and its operations are presently consuming cash at a rate in excess of its present ability to generate cash. The Registrant's operations will continue to consume cash in excess of cash generated from operations for the foreseeable future. The Registrant believes that its current cash, cash equivalents and its debt arrangements will be sufficient to meet its anticipated cash needs for working capital and capital expenditures for at least the next several months. However, the Registrant's capital requirements depend on several factors, including the level of acquisition activity and other factors. The timing and amount of such capital requirements cannot accurately be predicted. If capital requirements vary materially from those currently planned, the Registrant may require additional financing sooner than anticipated. The Registrant has no commitments for any additional financing, and there can be no assurance that any such commitments can be obtained on favorable terms, if at all. Any additional equity financing may be dilutive to the Registrant's shareholders and debt financing, if available, may involve restrictive covenants with respect to dividends, raising capital and other financial and operational matters which could restrict its operations or finances. If the Registrant is unable to obtain additional financing as needed, the Registrant may be required to reduce the scope of its operations or its intended expansion, which could have a material adverse effect on the Registrant's business, results of operations and financial condition. -15- 16 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Registrant is involved in no legal proceedings at this time. There have been no material developments since the previous report. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS
Number Description Page 2.1 Stock Purchase Agreement dated December 3, 1998, by and between Lahaina Acquisitions, Inc. and Mongoose Investments, LLC (1) 3.1 Articles of Incorporation (2) 3.2 Amendment to Certificate of Incorporation (4) 3.3 Bylaws of the Registrant (2) 4.1 Securities Purchase Agreement dated December 7, 1998, by and between Lahaina Acquisitions, Inc. and GCA Strategic Investment Fund, Ltd. (1) 4.2 9% Convertible Note of Lahaina Acquisitions, Inc. payable to GCA Strategic Investment Fund, Ltd., in the principal amount of $750,000 (1) 4.3 Letter Agreement dated January 19, 1999 by and between Lahaina Acquisitions, Inc. and GCA Strategic Investment Fund, Ltd. amending 9% Convertible Note (3) 4.4 Registration Rights Agreement dated December 7, 1998, by and between Lahaina Acquisitions, Inc. and GCA Strategic Investment Fund, Ltd. (1) 4.5 Letter Agreement dated January 19, 1999 by and between Lahaina Acquisitions, Inc. and GCA Strategic Investment Fund, Ltd. confirming conversion of $25,000 Beachside Commons Note (3) 4.6 Working Capital Line dated January 1, 1999, by and between Lahaina Acquisitions, Inc. and GCA Strategic Investment, Ltd. (3) 4.7 Note Guaranty by Richard P. Smyth with respect to $300,000 of indebtedness of Lahaina Acquisitions, Inc. (3) 4.8 Line of Credit for up to $250,000 between Lahaina Acquisitions, Inc. and Mongoose Investments, LLC (3) 4.9 Form of Stock Certificate (2) 4.10 18% Note of Mongoose Investments, LLC payable to Elaine Oppenheimer, in the principal amount of $85,000. This note was transferred to Lahaina Acquisitions, Inc. on December 7, 1998 (3) 4.11 18% Note of Mongoose Investments, LLC payable to Nancy Estroff Smyth, in the principal amount of $50,000. This note was transferred to Lahaina Acquisitions, Inc. on December 7, 1998 (3) 4.12 18% Note of Mongoose Investments, LLC payable to Nancy Estroff Smyth, in the principal amount of $20,000. This note was transferred to Lahaina Acquisitions, Inc. on December 7, 1998 (3) 4.13 Common Stock Purchase Warrant in the amount of 60,000 shares to be issued by Lahaina Acquisitions, Inc. and purchased by LKB Financial, LLC, expiring on December 20, 2003 (1) 4.14 Common Stock Purchase Warrant in the amount of 100,000 shares to be issued by Lahaina Acquisitions, Inc. and purchased by GCA Strategic Investment Fund, Ltd., expiring on January 19, 2004 (4) 4.15 Common Stock Purchase Warrant in the amount of 15,000 shares to be issued by Lahaina Acquisitions, Inc. and purchased by LKB Financial, LLC, expiring on January 19, 2004 (4) 10.1 Contract of Engagement dated January 19, 1999 by and between Lahaina Acquisitions, Inc. and LKB Financial LLC (3) 10.2 Purchase and Sale Agreement, dated June 30, 1999 by and between Lahaina Acquisitions, Inc. and Mongoose Investments, LLC. 10.3 Settlement and Release Agreement dated June 30, 1999 by and between Lahaina Acquisitions, Inc. and Sherry Klein. 10.4 Consulting Agreement dated as of June 1, 1999 by and between Lahaina Acquisitions, Inc. and Gator Glory, LLC. 10.5 Consulting Agreement dated as of June 1, 1999 by and between Lahaina Acquisitions, Inc. and Gerald F. Sullivan.
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Number Description Page 27 Financial Data Schedule (for SEC use only)
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K, filed December 28, 1998. (2) Incorporated by reference to the Registration Statement on Form 10, filed December 29, 1995. (3) Incorporated by reference to the Quarterly Statement on Form 10-Q, filed February 24, 1999. (4) Incorporated by reference to the Quarterly Statement on Form 10-Q, filed May 24, 1999. (B) REPORTS ON FORM 8-K No reports on Form 8-K have been filed this quarter. -17- 18 SIGNATURES Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LAHAINA ACQUISITIONS, INC. (Registrant) By: /s/ L. Scott Demerau -------------------------------------- Name: L. Scott Demerau Title: President October 29, 1999 -18- EX-10.2 2 PURCHASE AND SALE AGREEMENT 1 Exhibit 10.2 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT is made as of the 30th day of June, 1999, by and between LAHAINA ACQUISITIONS, INC., a Colorado corporation ("Lahaina"), and MONGOOSE INVESTMENTS, LLC, a Georgia limited liability company ("Mongoose"). Capitalized terms not defined herein shall have the meaning set forth in that certain Purchase and Sale Agreement by and among Lahaina, Brian Moon and JP Concepts, Inc. ("JP Concepts") dated March 1, 1999. W I T N E S S E T H: WHEREAS, Mongoose desires to purchase, and Lahaina desires to sell, all of the Assets and all capital stock of JP Concepts which is held by Lahaina and all of the capital stock of JP Concepts held by Lahaina as of the date of this agreement; NOW, THEREFORE, for and in consideration of the mutual promises and covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. PURCHASE AND SALE. Lahaina shall sell, convey, transfer, assign and deliver to Mongoose and Mongoose shall purchase and accept from Lahaina, upon the terms and conditions set forth herein, the Assets and all of the issued and outstanding capital stock of JP Concepts held by Lahaina as of the date of this agreement (the "JP Stock"). The transfer of the Assets and the JP Stock shall be made free and clear of all claims, liens and encumbrances. 2. PURCHASE PRICE. The total purchase price of the Assets and the JP Stock shall be 60,000 shares of common stock of Lahaina. 3. MISCELLANEOUS. This Agreement shall be governed by the laws of the State of Georgia. This Agreement may be executed in one or more counterparts, each of which may be considered an original and all of which together shall constitute one and the same instrument. [SIGNATURE PAGE FOLLOWS] 2 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first written above. LAHAINA ACQUISITIONS, INC. By: /s/ Gerald F. Sullivan ------------------------------------- Gerald F. Sullivan Secretary MONGOOSE INVESTMENTS, LLC By: /s/ Richard P. Smyth ------------------------------------- Richard P. Smyth Managing Member -2- EX-10.3 3 SETTLEMENT & RELEASE AGREEMENT 1 Exhibit 10.3 SETTLEMENT AND RELEASE AGREEMENT THIS SETTLEMENT AND RELEASE AGREEMENT is made as of the 30th day of June, 1999, by and between LAHAINA ACQUISITIONS, INC., a Colorado corporation ("Lahaina"), and SHERRY KLEIN, a resident of the State of Florida and the owner and operator of the real estate brokerage doing business under the trade name "Klein Real Estate Services" ("Klein"). Capitalized terms not defined herein have the meanings set forth in that certain Purchase and Sale Agreement dated March 1, 1999 by and between Lahaina, Klein and Klein Real Estate Services (the "Purchase and Sale Agreement"). W I T N E S S E T H: WHEREAS, Lahaina is a party to that certain Agreement and Plan of Merger dated June __, 1999 (the "Agreement") between Lahaina, LAHA 1, Inc. ("LAHA 1"), Accent Real Estate Group, Inc. ("Accent"), Mongoose Investments, LLC ("Mongoose"), the Beneficial Owners and the Shareholders (as defined in the Agreement) pursuant to which LAHA 1, a wholly-owned subsidiary of Lahaina, shall merge with and into Accent; WHEREAS, Lahaina has agreed to enter into this Settlement and Release Agreement as a condition to closing of the Agreement; WHEREAS, Lahaina is willing to terminate its interest in the Assets pursuant to the Purchase and Sale Agreement, on all terms and conditions set forth herein, so as to induce Accent to merge with Lahaina pursuant to the Agreement and Plan of Merger; NOW, THEREFORE, for and in consideration of the premises and covenants and mutual agreements contained herein, the parties hereto agree as follows: 1. Klein hereby agrees to terminate the Purchase and Sale Agreement and any and all agreements related thereto, contemplated thereof, or in connection therewith, which hereby is of no further force and effect, and release and discharge any claims or demands she (or any entity with which she is in any way affiliated), now has or ever may have against Lahaina arising in connection with the Purchase and Sale Agreement or related transactions, including, but not limited to, any and all employment or consulting agreements or understandings entered into with Lahaina in connection with or contemplated by the Purchase and Sale Agreement. 2. In consideration of Klein's agreements in Section 1 above, Lahaina agrees (a) to pay Klein $30,000 in full settlement of any and all obligations, except 2 that Lahaina shall pay any unpaid but owed prior incidental expenses incurred by Klein through the operation of Klein Real Estate Services from April 1, 1999 to the date of this Agreement and (b) to allow Klein to retain the 20,000 shares of Lahaina no par value per share Common Stock issued to Klein in payment of the Purchase Price. 3. This Agreement shall be governed by the laws of the State of Georgia This Agreement may be executed in one or more counterparts, each of which may be considered an original and all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first written above. LAHAINA ACQUISITIONS, INC. By: /s/ Richard P. Smyth -------------------------------------- Richard P. Smyth Chief Executive Officer Sworn to and subscribed /s/ Sherry Klein (Seal) before me this ____ day of ------------------------------ - ------, -----. Sherry Klein /s/ Barbara S. Johns - ------------------------------------ Notary Public My Commission Expires: June 30, 1999 - ------------------------------------ CONSENTED AND AGREED TO BY: - ------------------------------------ L. Scott Demerau -2- EX-10.4 4 CONSULTING AGREEMENT WITH GATOR GLORY, LLC 1 Exhibit 10.4 CONSULTING AGREEMENT THIS CONSULTING AGREEMENT is made and entered into as of the 1st day of June, 1999 by and between Lahaina Acquisitions, Inc., a Colorado corporation, and its successors (hereinafter referred to as the "Company"), and Gator Glory, LLC, hereinafter referred to as "Consultant"). WITNESSETH: WHEREAS, Consultant possesses significant knowledge and experience in the management of private and public corporations and has been engaged by the Company to provide certain consulting services to it; and WHEREAS, the Company desires to enter into this Agreement with Consultant to set forth in detail the consulting services to be provided to the Company, and to provide for the payment for such services by the Company, and Consultant wishes to provide such consulting services, all upon the terms and subject to the conditions contained herein; NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Engagement and Term. Subject to the terms and conditions of this Agreement, the Company hereby retains Consultant to provide the consulting services described in Section 2 below, and Consultant hereby accepts such engagement. The term of this Agreement shall commence on the date hereof and shall continue for a period of two years (the "Term"), provided that this agreement may be terminated prior to the expiration of the Term upon 90 days written notice by Consultant to the Company, except that the payment of fees under this Agreement shall continue for a period equal to that of the engagement of the Company by Client. If no term is indicated in any agreement, other than this Agreement, between the Client and the Company, the term of such agreement shall be two years from the date of the initial activity for each consulting situation. The initial date and the term for each assignment shall be listed on a separate form, Addendum "A", each signed copy of which shall become a part of this Agreement. 2. Description of Services. During the term of this Agreement, as requested from time to time by the Company, Consultant shall provide to the Company, or other affiliates, or entities related to the Company, advice regarding matters for either the Company or other affiliates, or entities related to the Company, as set forth more fully below. The consulting activities which the Consultant may provide to the Company may include advice relating to mergers, acquisitions, strategic planning, marketing 2 Page 2 of 9 Consulting Agreement between Lahaina Acquisitions, Inc. and Gator Glory, LLC June 1, 1999 communications and public relations ("Communication Services"), technology implementation and, at the request of the Company, the Consultant shall also provide (i) advice regarding the management of the Company, (ii) financial advice regarding the Company's operations, (iii) advice relating to corporate governance issues and (iv) strategic planning advice (the "Management Consulting Services", only together with Communication Services, the "Services"). The activities for which such advice is provided shall be listed on a separate sheet whose form and content shall be as shown in Addendum "A" of this Agreement. Upon signature by the Company and the Consultant, each Addendum "A" shall become a part of this Agreement. 3. Non-Exclusivity of Services. The Company acknowledges that Consultant shall not be engaged by the Company on a full-time basis and shall provide Services to other companies from time to time. The Company further acknowledges that Consultant may not be available at all times to respond promptly to requests for the provision of Services due to other business commitments; however, Consultant shall use reasonable efforts to respond within a reasonable time to requests for Services by the Company. 4. Place of Engagement. The Services to be performed by Consultant pursuant to this Agreement shall be rendered primarily from the offices of the Consultant or at one or more suitable locations designated by the Company, with the mutual agreement of the Consultant. 5. Compensation. In consideration of Consultant's Services hereunder, for and during the Term of this Agreement, the Company shall pay Consultant a consulting fee equal to $10,000 per month, payable one month in advance, in addition to a one-time payment of $30,000 for services rendered prior to June 1, 1999 and supplemental compensation which shall be paid as a fee equal to two percent of the value of any transaction set forth on Addendum "A" of this Agreement. The value used in computing the fee shall be equal to the gross funding amount in the case of debt or equity transactions, or asset value in the case of an asset sale or purchase, or in the case of a purchase or sale of a business or operation. Fees involved shall be provided from the companies listed on any and all forms titled Addendum "A", a copy of which form is attached to this Agreement, and subsequently added to this Agreement during its Term. Such fees shall include all compensation, including but not limited to cash compensation, equity, warrants, options, consulting fees or long term incentive options. The Company shall pay to the Consultant its portion of the fees within 48 hours of completion of the 3 Page 3 of 9 Consulting Agreement between Lahaina Acquisitions, Inc. and Gator Glory, LLC June 1, 1999 transaction by the Company. The Company shall provide the consultant with medical benefits comparable to and of equal value with the medical benefits the Company provides its senior executives. For the equity, options, warrants and other equity-related items referenced in this Section 5, such items shall be listed in the name, either personal or company, provided by the Consultant and shall be registered, transferred and available for sale under terms not less favorable than those provided to any other individual or entity. 6. Expenses & Office Support. The Company shall reimburse the Consultant for all expenses incurred as a result of the performance of its duties under this Agreement within 10 days of a request by the Consultant to be reimbursed for such expenses. The Consultant shall provide receipts and other expense documentation in a form not different to that required by employees of the Company. The Company shall also provide office space and administrative/secretarial support to the Consultant, either directly or through reimbursement to the Consultant. All travel, telephone or other related expenses shall be reimbursed as well as other related expenses. 7. Entire Agreement. This Agreement supercedes all prior agreements between the parties concerning its subject matter, including any prior subject matter or dealings between the parties, and constitutes the entire agreement between the parties with respect to matter contained herein. 8. Taxes. Any and all sales, service, income and other taxes applicable to any payments made by the Company to Consultant under this Agreement shall be the sole responsibility and liability of Consultant. Consultant shall indemnify and hold harmless the Company for any liability or damages imposed upon the Company for taxes payable by or with respect to Consultant. 9. Confidential Information. Except as permitted pursuant to this Section 9, during Consultant's engagement with the Company and for a period of two years thereafter, Consultant will hold in strict confidence and not disclose to any person or entity without the express written authorization of the Company, any confidential or secret information, financial, marketing data, including, without limitation financial statements of the Company, technique, process, formula, developmental or experimental work, work in progress, business methods, trade secrets including, without limitation any 4 Page 4 of 9 Consulting Agreement between Lahaina Acquisitions, Inc. and Gator Glory, LLC June 1, 1999 customer lists, marketing techniques or plans, or any other secret or confidential information relating to the Company (collectively referred to herein as "Confidential Information"), including, without any limitation any information relating to inquiries made by the Company or negotiations with respect to any acquisition of or by the Company; provided, however, that Confidential Information shall not include any of the foregoing which (i) is available to the public generally, or (ii) has been developed by Consultant without use of any Confidential Information, or in connection with Consultant's engagement with the Company and not in violation of any other terms of this Agreement, or (iii) is or has been learned by Consultant through an independent third party who is not, and has not been, affiliated with or employed by the Company or bound by an agreement of confidentiality or fiduciary duty to the Company. Consultant agrees that it will not make any use, outside the scope of Consultant's engagement of any Confidential information, and will not make any use of any Confidential Information at any time for two years after termination of such engagement. Notwithstanding the foregoing, this Agreement shall not prevent Consultant from disclosing any Confidential Information to the extent that disclosure is required by law or any order of a court or government authority with jurisdiction over Consultant. 10. Independent Contractor. Consultant's relationship to the Company hereunder shall be that of an independent contractor, Consultant shall not be the agent of the Company and shall have no authority to act on behalf of the Company in any manner except in the manner and to the extent that the Company may expressly agree in writing. 11. Indemnification (a) Liability. Neither Consultant nor its employees shall be liable or accountable to the Company, in damages or otherwise, for any error of judgment, any mistake of fact of law, or any other act or thing which it or its employees may do or refrain from doing in connection with its duties and obligations hereunder, except in the case of its or its employees' gross negligence or intentional misconduct. (b) Indemnification. The Company shall indemnify and hold harmless Consultant with respect to any demands, judgments, settlements, damages, payments or claims of any nature whatsoever arising from or out of the Consultant's performance of its duties hereunder, at law or in equity, in connection with the Consultant's or the Company's activities, actions, operations, 5 Page 5 of 9 Consulting Agreement between Lahaina Acquisitions, Inc. and Gator Glory, LLC June 1, 1999 or decisions, including, but not limited to, any errors, omissions, incidents or accidents occurring in connection with such activities, actions, operations or decisions, or otherwise in the course or conduct of its business, which indemnity shall continue notwithstanding the termination at this Agreement. 12. Waiver. No failure on the part of either party hereto to exercise and no delay by either party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or remedy by either party hereto preclude any other or further exercise thereof or the exercise by such party of any other right, power or remedy. No express waiver or assent by either party hereto of any breach of or default in any term or condition of this Agreement by the other party shall constitute a waiver of or an assent to any succeeding breach of or default in the same or any other term or condition hereof. 13. Severability. All rights and restrictions contained in this Agreement may be exercised and shall be applicable and binding only to the extent that they do not violate any applicable laws and are intended to be limited to the extent necessary so that they will not render this Agreement illegal, invalid or unenforceable. If any term of this Agreement, or part not essential to the commercial purpose of this Agreement shall be held illegal, invalid or unenforceable by a court of competent jurisdiction, it is the intention of the parties that the remaining terms hereof, or part thereof shall constitute their agreement with respect to the subject manner hereof and all such remaining terms, or parts thereof, shall remain in full force and effect. To the extent legally permissible, any illegal, invalid or unenforceable provision of this Agreement shall be replaced by a valid provision which will implement the commercial purpose of the illegal, invalid or unenforceable provision. 14. Notices. All notices, requests, demands and other communications hereunder must be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class, registered mail, to the applicable party and addressed as follows: COMPANY: Lahaina Acquisitions, Inc. 5895 Windward Parkway, Suite 220 Alpharetta, Georgia 30005 6 Page 6 of 9 Consulting Agreement between Lahaina Acquisitions, Inc. and Gator Glory, LLC June 1, 1999 CONSULTANT: Gator Glory, LLC 7276 Sanctuary Lane Fernandina Beach, Florida 32034 Any party may change the address or facsimile number to which notices, requests, demands or other communications to such party shall be delivered or mailed by giving notice thereof to the other parties hereto in the manner provided herein. 15. Governing Law. Regardless of the place of execution, place of performance or otherwise; this Agreement and all amendments, modifications or supplements thereto, and the rights of the parties hereunder, shall be governed by and constituted and enforced in accordance with the laws of the State of Georgia. 16. Agreement Non-assignable. The parties acknowledge that this Agreement has been entered into as a result of, among other things, the special skills of Consultant, and agree that this Agreement may not be assigned or transferred by Consultant, in whole or in part, without the prior written consent of the Company. Further, the parties agree that this Agreement may not be assigned or transferred by the Company, or Consultant, without the prior written consent of the other party. Notwithstanding the foregoing paragraph, the parties agree that this Agreement has been entered into based on the assumption that Consultant would transfer and assign all rights and obligations hereunder to RS & Associates, LLC, a limited liability company to be formed under the laws of the State of Georgia ("RS") or to such other entity as may be formed for the purpose of assuming the rights and obligations hereunder. The Company hereby gives its prior written consent to such assignment. 17. Headings. The headings as to the contents of particular sections are inserted only for convenience and shall not be construed as a part of this Agreement or as a limitation on or enlargement of the scope of any of the terms or provisions of this Agreement. 7 Page 7 of 9 Consulting Agreement between Lahaina Acquisitions, Inc. and Gator Glory, LLC June 1, 1999 18. Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject manor hereof and contains the sole and entire agreement between the parties with respect to the matters covered hereby This Agreement shall not be modified or amended except by an instrument in writing signed by or on behalf of the parties hereto. [SIGNATURE PAGE FOLLOWS] 8 Page 8 of 9 Consulting Agreement between Lahaina Acquisitions, Inc. and Gator Glory, LLC June 1, 1999 IN WITNESS WHEREOF the Company and Consultant have caused this Agreement to be executed as of the date first written above. THE COMPANY: CONSULTANT: LAHAINA ACQUISITIONS, INC. GATOR GLORY, LLC By: /s/ Scott Demerau By: /s/ Richard P. Smyth ------------------------------- --------------------------------- Name: Scott Demerau Name: Richard P. Smyth ----------------------------- ------------------------------- Title: President Title: Managing Member ---------------------------- ------------------------------ 9 Page 9 of 9 Consulting Agreement between Lahaina Acquisitions, Inc. and Gator Glory, LLC June 1, 1999 ADDENDUM A-___ This form shall become a part of the agreement between Lahaina Acquisitions, Inc., a Georgia corporation (hereinafter referred to as the "Company"), its principals, affiliates and successors and Gator Glory, LLC, a Georgia limited liability company, its principals, affiliates and assigns (hereinafter referred to as "Consultant"). The purpose of this Addendum is to list the activities for which services shall be provided by the Consultant to the Company, and for which the Consultant shall be entitled to receive supplemental compensation, in addition to the monthly consulting fee, as listed in Section 5 of the Consulting Agreement dated as of June 1, 1999 between the Company and the Consultant. Date of this Addendum A- ____:_______________ Description of Activity: ___________________________________ Name of Company/Entity/Asset (if applicable): ________________________________________________________________________________ Date of Initial Activity: ______________________ Term of Activity: ___________ (______) Years from the date of initial activity. IN WITNESS WHEREOF the Company and Consultant have caused this Agreement to be executed as of the date first written above. THE COMPANY: CONSULTANT: LAHAINA ACQUISITIONS, INC. GATOR GLORY, LLC By: /s/ Scott Demerau By: /s/ Richard P. Smyth ------------------------------- --------------------------------- Name: Scott Demerau Name: Richard P. Smyth ----------------------------- ------------------------------- Title: President Title: Managing Member ---------------------------- ------------------------------ EX-10.5 5 CONSULTING AGREEMENT WITH GERALD F. SULLIVAN 1 Exhibit 10.5 CONSULTING AGREEMENT THIS CONSULTING AGREEMENT is made and entered into as of the 1st day of June, 1999 by and between Lahaina Acquisitions, Inc., a Colorado corporation, and its successors (hereinafter referred to as the "Company"), and Gerald F. Sullivan (hereinafter referred to as "Consultant"). WITNESSETH: WHEREAS, Consultant possesses significant knowledge and experience in the management of private and public corporations and has been engaged by the Company to provide certain consulting services to it; and WHEREAS, the Company desires to enter into this Agreement with Consultant to set forth in detail the consulting services to be provided to the Company, and to provide for the payment for such services by the Company, and Consultant wishes to provide such consulting services, all upon the terms and subject to the conditions contained herein; NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Engagement and Term. Subject to the terms and conditions of this Agreement, the Company hereby retains Consultant to provide the consulting services described in Section 2 below, and Consultant hereby accepts such engagement. The term of this Agreement shall commence on the date hereof and shall continue for a period of two years (the "Term"), provided that this agreement may be terminated at any time after twelve months and prior to the expiration of the Term upon 90 days written notice of either party. If no term is indicated in any agreement, other than this Agreement, between the Client and the Company, the term of such agreement shall be two years from the date of the initial activity for each consulting situation. The initial date and the term for each assignment shall be listed on a separate form, Addendum "A", each signed copy of which shall become a part of this Agreement. 2. Description of Services. During the term of this Agreement, as requested from time to time by the Company, Consultant shall provide to the Company, or other affiliates, or entities related to the Company, advice regarding matters for either the Company or other affiliates, or entities related to the Company, as set forth more fully below. The consulting activities which the Consultant may provide to the Company may include advice relating to mergers, acquisitions, strategic planning, marketing communications and public relations ("Communication Services"), technology 2 Page 2 of 8 Consulting Agreement between Lahaina Acquisitions, Inc. and Gerald F. Sullivan June 1, 1999 implementation and, at the request of the Company, the Consultant shall also provide (i) advice regarding the management of the Company, (ii) financial advice regarding the Company's operations, (iii) advice relating to corporate governance issues and (iv) strategic planning advice (the "Management Consulting Services", only together with Communication Services, the "Services"). The activities for which such advice is provided shall be listed on a separate sheet whose form and content shall be as shown in Addendum "A" of this Agreement. Upon signature by the Company and the Consultant, each Addendum "A" shall become a part of this Agreement. 3. Non-Exclusivity of Services. The Company acknowledges that Consultant shall be engaged by the Company on a full-time basis. The Company further acknowledges that Consultant may not be available at all times to respond promptly to requests for the provision of Services due to other business commitments; however, Consultant shall use reasonable efforts to respond within a reasonable time to requests for Services by the Company. 4. Place of Engagement. The Services to be performed by Consultant pursuant to this Agreement shall be rendered primarily from the offices of the Consultant or at one or more suitable locations designated by the Company, with the mutual agreement of the Consultant. 5. Compensation. In consideration of Consultant's Services hereunder, for and during the Term of this Agreement, the Company shall pay Consultant a consulting fee equal to $10,000 per month, payable one month in advance, in addition to a one-time payment of $30,000 for services rendered prior to June 1, 1999 and supplemental compensation which shall be paid as a fee equal to two percent of the value of any transaction set forth on Addendum "A" of this Agreement. The value used in computing the fee shall be equal to the gross funding amount in the case of debt or equity transactions, or asset value in the case of an asset sale or purchase, or in the case of a purchase or sale of a business or operation. Fees involved shall be provided from the companies listed on any and all forms titled Addendum "A", a copy of which form is attached to this Agreement, and subsequently added to this Agreement during its Term. Such fees shall include all compensation, including but not limited to cash compensation, equity, warrants, options, consulting fees or long term incentive options. The Company shall pay to the Consultant its portion of the fees within 48 hours of completion of the transaction by the Company. The Company shall provide the consultant with medical 3 Page 3 of 8 Consulting Agreement between Lahaina Acquisitions, Inc. and Gerald F. Sullivan June 1, 1999 benefits comparable to and of equal value with the medical benefits the Company provides its senior executives. The 2% fee shall be offset by annual salary. For the equity, options, warrants and other equity-related items referenced in this Section 5, such items shall be listed in the name, either personal or company, provided by the Consultant and shall be registered, transferred and available for sale under terms not less favorable than those provided to any other individual or entity. 6. Expenses & Office Support. The Company shall reimburse the Consultant for all expenses incurred as a result of the performance of its duties under this Agreement within 10 days of a request by the Consultant to be reimbursed for such expenses. The Consultant shall provide receipts and other expense documentation in a form not different to that required by employees of the Company. The Company shall also provide office space and administrative/secretarial support to the Consultant, either directly or through reimbursement to the Consultant. All travel, telephone or other related expenses shall be reimbursed as well as other related expenses. 7. Entire Agreement. This Agreement supercedes all prior agreements between the parties concerning its subject matter, including any prior subject matter or dealings between the parties, and constitutes the entire agreement between the parties with respect to matter contained herein. 8. Taxes. Any and all sales, service, income and other taxes applicable to any payments made by the Company to Consultant under this Agreement shall be the sole responsibility and liability of Consultant. Consultant shall indemnify and hold harmless the Company for any liability or damages imposed upon the Company for taxes payable by or with respect to Consultant. 9. Confidential Information. Except as permitted pursuant to this Section 9, during Consultant's engagement with the Company and for a period of two years thereafter, Consultant will hold in strict confidence and not disclose to any person or entity without the express written authorization of the Company, any confidential or secret information, financial, marketing data, including, without limitation financial statements of the Company, technique, process, formula, developmental or experimental work, work in progress, business methods, trade secrets including, without limitation any customer lists, marketing techniques or plans, or any other secret or confidential 4 Page 4 of 8 Consulting Agreement between Lahaina Acquisitions, Inc. and Gerald F. Sullivan June 1, 1999 information relating to the Company (collectively referred to herein as "Confidential Information"), including, without any limitation any information relating to inquiries made by the Company or negotiations with respect to any acquisition of or by the Company; provided, however, that Confidential Information shall not include any of the foregoing which (i) is available to the public generally, or (ii) has been developed by Consultant without use of any Confidential Information, or in connection with Consultant's engagement with the Company and not in violation of any other terms of this Agreement, or (iii) is or has been learned by Consultant through an independent third party who is not, and has not been, affiliated with or employed by the Company or bound by an agreement of confidentiality or fiduciary duty to the Company. Consultant agrees that it will not make any use, outside the scope of Consultant's engagement of any Confidential information, and will not make any use of any Confidential Information at any time for two years after termination of such engagement. Notwithstanding the foregoing, this Agreement shall not prevent Consultant from disclosing any Confidential Information to the extent that disclosure is required by law or any order of a court or government authority with jurisdiction over Consultant. 10. Independent Contractor. Consultant's relationship to the Company hereunder shall be that of an independent contractor, Consultant shall not be the agent of the Company and shall have no authority to act on behalf of the Company in any manner except in the manner and to the extent that the Company may expressly agree in writing. 11. Indemnification (a) Liability. Neither Consultant nor its employees shall be liable or accountable to the Company, in damages or otherwise, for any error of judgment, any mistake of fact of law, or any other act or thing which it or its employees may do or refrain from doing in connection with its duties and obligations hereunder, except in the case of its or its employees' gross negligence or intentional misconduct. (b) Indemnification. The Company shall indemnify and hold harmless Consultant with respect to any demands, judgments, settlements, damages, payments or claims of any nature whatsoever arising from or out of the Consultant's performance of its duties hereunder, at law or in equity, in connection with the Consultant's or the Company's activities, actions, operations, or decisions, including, but not limited to, any errors, omissions, incidents or 5 Page 5 of 8 Consulting Agreement between Lahaina Acquisitions, Inc. and Gerald F. Sullivan June 1, 1999 accidents occurring in connection with such activities, actions, operations or decisions, or otherwise in the course or conduct of its business, which indemnity shall continue notwithstanding the termination at this Agreement. 12. Waiver. No failure on the part of either party hereto to exercise and no delay by either party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or remedy by either party hereto preclude any other or further exercise thereof or the exercise by such party of any other right, power or remedy. No express waiver or assent by either party hereto of any breach of or default in any term or condition of this Agreement by the other party shall constitute a waiver of or an assent to any succeeding breach of or default in the same or any other term or condition hereof. 13. Severability. All rights and restrictions contained in this Agreement may be exercised and shall be applicable and binding only to the extent that they do not violate any applicable laws and are intended to be limited to the extent necessary so that they will not render this Agreement illegal, invalid or unenforceable. If any term of this Agreement, or part not essential to the commercial purpose of this Agreement shall be held illegal, invalid or unenforceable by a court of competent jurisdiction, it is the intention of the parties that the remaining terms hereof, or part thereof shall constitute their agreement with respect to the subject manner hereof and all such remaining terms, or parts thereof, shall remain in full force and effect. To the extent legally permissible, any illegal, invalid or unenforceable provision of this Agreement shall be replaced by a valid provision which will implement the commercial purpose of the illegal, invalid or unenforceable provision. 14. Notices. All notices, requests, demands and other communications hereunder must be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class, registered mail, to the applicable party and addressed as follows: COMPANY: Lahaina Acquisitions, Inc. 5895 Windward Parkway, Suite 220 Alpharetta, Georgia 30005 6 Page 6 of 8 Consulting Agreement between Lahaina Acquisitions, Inc. and Gerald F. Sullivan June 1, 1999 CONSULTANT: Gerald F. Sullivan 5255 Porter Lane Gainesville, GA 30506 Any party may change the address or facsimile number to which notices, requests, demands or other communications to such party shall be delivered or mailed by giving notice thereof to the other parties hereto in the manner provided herein. 15. Governing Law. Regardless of the place of execution, place of performance or otherwise; this Agreement and all amendments, modifications or supplements thereto, and the rights of the parties hereunder, shall be governed by and constituted and enforced in accordance with the laws of the State of Georgia. 16. Agreement Non-assignable. The parties acknowledge that this Agreement has been entered into as a result of, among other things, the special skills of Consultant, and agree that this Agreement may not be assigned or transferred by Consultant, in whole or in part, without the pnor written consent of the Company. Further, the parties agree that this Agreement may not be assigned or transferred by the Company, or Consultant, without the prior written consent of the other party. 17. Headings. The headings as to the contents of particular sections are inserted only for convenience and shall not be construed as a part of this Agreement or as a limitation on or enlargement of the scope of any of the terms or provisions of this Agreement. 18. Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject manor hereof and contains the sole and entire agreement between the parties with respect to the matters covered hereby This Agreement shall not be modified or amended except by an instrument in writing signed by or on behalf of the parties hereto. [SIGNATURE PAGE FOLLOWS] 7 Page 7 of 8 Consulting Agreement between Lahaina Acquisitions, Inc. and Gerald F. Sullivan June 1, 1999 IN WITNESS WHEREOF the Company and Consultant have caused this Agreement to be executed as of the date first written above. THE COMPANY: CONSULTANT: LAHAINA ACQUISITIONS, INC. /s/ Gerald F. Sullivan ------------------------------------ Gerald F. Sullivan By: /s/ Scott Demerau ------------------------------------ Name: Scott Demerau ---------------------------------- Title: President --------------------------------- 8 Page 8 of 8 Consulting Agreement between Lahaina Acquisitions, Inc. and Gerald F. Sullivan June 1, 1999 ADDENDUM A-___ This form shall become a part of the agreement between Lahaina Acquisitions, Inc., a Georgia corporation (hereinafter referred to as the "Company"), its principals and affiliates and Gerald F. Sullivan (hereinafter referred to as "Consultant"). The purpose of this Addendum is to list the activities for which services shall be provided by the Consultant to the Company, and for which the Consultant shall be entitled to receive supplemental compensation, in addition to the monthly consulting fee, as listed in Section 5 of the Consulting Agreement dated June 1, 1999 between the Company and the Consultant. Date of this Addendum A- ____:_______________ Description of Activity: ___________________________________ Name of Company/Entity/Asset (if applicable): ________________________________________________________________________________ Date of Initial Activity: ______________________ Term of Activity: ___________ (______) Years from the date of initial activity. IN WITNESS WHEREOF the Company and Consultant have caused this Agreement to be executed as of the date first written above. THE COMPANY: CONSULTANT: LAHAINA ACQUISITIONS, INC. By: --------------------------------- Name: Gerald F. Sullivan By: /s/ Scott Demerau ------------------------------------ Name: Scott Demerau ---------------------------------- Title: President --------------------------------- EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FILED AUGUST 23, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH. 9-MOS SEP-30-1999 OCT-01-1998 JUN-30-1999 60,261 0 10,000 0 0 101,261 2,984,568 (82,769) 3,204,311 549,294 0 0 0 0 330,017 3,204,311 0 143,713 0 0 702,221 0 204,646 (763,154) 0 0 0 0 0 (763,154) (0.31) (0.31)
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