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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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American Leis | LSE:ALGL | London | Ordinary Share | VGG0294N1078 | ORD NPV (DI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 29.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number : 8495K American Leisure Group Limited 29 December 2008 29 December 2008 American Leisure Group Limited ("ALG" or "the Company") Interim statement for the six months to 30 June 2008 I American Leisure Group, Ltd. and its Subsidiaries ("ALG" or "the Company"), the AIM listed vacation property developer and hospitality company, announces its interim results for the 6 months to 30 June 2008. CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT AND BUSINESS REVIEW "Please refer to the Chairman's and Chief Executive's Statements in the December 2007 Annual Report that were issued simultaneously with this June 2008 Interim Report and in particular the urgent need for the Company to obtain financing for it to continue as a going concern." For further information please contact: American Leisure Group Limited Malcolm Wright, Chief Executive Officer Tel: +1 (407) 251 2240 David Mace, Chairman www.americanleisuregroupltd.com Collins Stewart Europe Limited Hugh Field Tel: +44 (0) 20 7523 8350 Media enquiries: Abchurch Communications Henry Harrison-Topham / Stephanie Cuthbert Tel: +44 (0) 20 7398 7718 stephanie.cuthbert@abchurch-group.com www.abchurch-group.com CONSOLIDATED BALANCE SHEETS Assets Six months to Year to 30 June 2008 31 December 2007 Unaudited US$ US$ Cash 633,695 1,259,083 Cash - restricted 4,742,303 10,214,794 Accounts receivable, net 499,501 2,803,119 Prepaid expenses and other 2,978,063 3,169,752 Property and equipment, net 11,219,198 11,575,570 Land and construction inventory 328,475,758 303,371,800 Prepaid sales commissions, net 13,721,809 16,557,079 Deferred financing costs, net 910,702 580,343 Total Assets 363,181,029 349,531,540 Liabilities and Stockholders' Equity Liabilities Accounts payable 2,982,909 2,599,633 Accrued expenses 19,333,875 17,470,218 Notes payable 109,860,243 99,643,565 Due to related parties 64,236,536 47,913,136 Deposits 35,008,826 44,124,455 Total Liabilities 231,422,389 211,751,007 Stockholders' Equity Ordinary shares of no par value; 600,000,000 shares authorised; 171,159,108 and 169,973,228 shares issued and outstanding as at 30 June 2008 and 31 December 2007, respectively Additional paid-in capital, net 146,884,821 146,312,817 Accumulated deficit 15,126,181 8,532,284 Total Stockholders' Equity 131,758,640 137,780,533 Total Liabilities and Stockholders' 363,181,029 349,531,540 Equity The accompanying notes are an integral part of these consolidated financial statements. CONSOLIDATED STATEMENT OF OPERATIONS For the Six Months Ended 30 June 2008 (Unaudited) Six months to 30 June 2008 US$ Travel service revenues 2,446,598 Hotel revenues 749,570 Other revenues 10,500 Total Revenues 3,206,668 Cost of travel services 2,445,305 Hotel operating expenses 587,593 Real estate sales and marketing expenses 3,731,194 General and administrative expenses 8,371,744 Depreciation 147,710 Total Operating Expenses 15,283,546 Loss from continuing operations (12,076,878) Interest income 70,701 Other income 10,037 Loss before discontinued operations and gain on (11,996,140) sale of assets Loss from discontinued operations (227,900) Gain on sale of TraveLeaders 5,630,144 Net Loss (6,593,896) Per Share Data: Basic from continuing operations (0.07) Basic from discontinued operations 0.03 Basic net loss (0.04) Basic weighted average shares outstanding 170,737,462 The accompanying notes are an integral part of these consolidated financial statements. CONSOLIDATED STATEMENT OF CASH FLOWS For the Six Months Ended 30 June 2008 Six months to 30 June 2008 CASH FLOWS FROM OPERATING ACTIVITIES: US$ Net loss (6,593,896) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 147,710 Gain on sale of TraveLeaders (5,630,144) Changes in assets and liabilities: Changes in accounts receivable (205,801) Change in prepaid expenses and other (5,562) Change in prepaid sales commissions 2,835,270 Change in accounts payable 1,215,051 Change in accrued expenses 5,017,375 Change in due to related parties 3,609,977 Change in deposits (9,115,629) Net cash provided by operating activities (8,725,649) CASH FLOWS FROM INVESTING ACTIVITIES: Additions to land and construction inventory (25,103,958) Change in restricted cash 5,472,491 Acquisition of fixed assets (415,264) Disposal of fixed assets 111,118 Proceeds from sale of TraveLeaders 4,584,709 Net cash used in investing activities (15,350,904) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 11,190,582 Proceeds from notes payable-related parties 13,305,000 Payments of notes payable (694,484) Payments of notes payable-related parties (19,574) Payments of deferred financing costs (330,359) Net cash from financing activities 23,451,165 Net decrease in cash (625,388) CASH AT BEGINNING OF PERIOD 1,259,083 CASH AT END OF PERIOD 633,695 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for 846,024 Taxes Interest 3,374,694 The accompanying notes are an integral part of these consolidated financial statements AMERICAN LEISURE GROUP LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - PRESENTATION The consolidated balance sheets of American Leisure Group Limited ("ALG" or the "Company") as at 30 June 2008 and 31 December 2007, the related consolidated statement of operations for the six months ended 30 June 2008 and the consolidated statement of cash flows for the six months ended 30 June 2008, (the financial statements), include all adjustments (consisting of normal, recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations. Since ALG was incorporated on 16 May 2007 ("Date of Inception") and had no operating results through 30 June 2007, comparative statements of operations and statements of cash flow for the period ending 30 June 2007 have not been presented. The results of operations for the six months ended 30 June 2008 are not necessarily indicative of the results of operations for the full year or any other interim period. The information included in these consolidated financial statements should be read in conjunction with the Company's 31 December 2007 consolidated financial statements. NOTE B - THE COMPANY ALG was incorporated in the British Virgin Islands ("BVI"). On 13 August 2007, ("Date of Commencement of Trading"), ALG began trading (the "Admission") on the Alternative Investment Market operated by the London Stock Exchange PLC in London, England (the "AIM Exchange"). The consolidated financial statements consist of ALG and its subsidiaries, American Leisure Holdings, Inc, ("AMLH"), Azure Property Investments, Inc, ("Azure") and Arvimex Inc ("Arvimex"). The consolidated entity is ALG which also refers to ALG and its subsidiaries according to context. Entities acquired by ALG as existing subsidiaries of American Leisure Holdings, Inc. and Azure Property Investments, Inc. AMLH AAH Kissimmee, LLC Comtech Fibernet, Inc. Advantage Professional Management Group, Inc. Costa Blanca Real Estate, Inc. Affinity Travel Club, Inc. Florida Golf Group, Inc. Affinity Travel, Inc. Hickory Travel Systems, Inc. American Access I-Drive Limos, Inc. Telecommunications Corporation American Leisure Corporation, Leisureshare Inc. International Espanola S.A. American Leisure Equities Leisureshare Corporation (ALEC) International, Ltd. American Leisure Homes, Inc. Luxshare, Inc. American Leisure Marketing and Orlando Holidays, Technology, Inc. Inc. American Leisure Travel Group, Pool Homes Managers, Inc. Inc. American Leisure, Inc. Pool Homes, Inc. American Sterling Corp. Reedy Creek Acquisition Corp. American Sterling South Beach Resorts, Motorcoaches, Inc. LLC American Switching TDS Amenities, Inc. Technologies, Inc. American Travel & Marketing TDS Clubhouse, Inc. Group, Inc. American Travel Club, Inc. Tierra Del Sol Resort, Inc. Ameritel, Inc. Vista Title & Escrow, Inc. Caribbean Leisure Marketing, Welcome to Orlando, Ltd. Inc. Castlechart, Ltd. Wright Resorts Villas & Hotels Club Turistico Latinoamericano, Inc. Azure Bezar Finance, Inc. Sherberth Development Partners, LLC Four Corners Development Sherberth Group, LLC Investments Associates, LLC Maingate Towers, Inc. Speedo Property, SA Oleander International, Inc. Tortuga Cay Resort, LLC Orlando Tennis Village, Inc. Tri County Road Ventures, LLC Pharaoh Developments, Inc. West Villas, Inc. Ripley International, Inc. Weston International Enterprises, Inc. ALG operates in three business segments: 1) real estate - developing vacation real estate in Orlando, Florida; 2) travel - providing travel related services and products (ticketing, reservations, travel packages, corporate meetings and events) and 3) hospitality - hotel management. The Company determines its operating segments based on several criteria including: assets, revenues, and managerial focus. Real Estate - ALG, through its subsidiaries AMLH and Azure, is involved in the development of vacation real estate in Orlando, Florida. Travel - ALG, through its subsidiary Hickory Travel Systems ("HTS"), provides clients with a comprehensive range of business and vacation travel services (see NOTE N - SUBSEQUENT EVENTS). Hospitality - The hospitality division consists primarily of the operations of the Boulevard Hotel located in Miami Beach in Florida. NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition ALG recognises revenues on the accrual method of accounting. These consolidated financial statements have been prepared and consistently applied in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). Revenues from HTS are recognised as earned, which is primarily at the time of delivery of the related service, publication or promotional material. Fees associated with access to travel portals and advertisements included on the web service operated by HTS are deferred and recognised ratably over the contracted service period. ALG sold its 50.83% interest in HTS on 31 October 2008 to an unrelated third party (see NOTE N - SUBSEQUENT EVENTS). Revenues from TraveLeaders are recognised as earned, which is primarily at the time of delivery of the related service. Specifically, commission revenues for cruises, hotel and car rentals are recognised upon completion of travel, hotel stay or car rental. Commission fees for airline ticketing are recognised at the time of reservation. Transactions that are not determined to be earned are deferred. ALG sold substantially all of the assets of TraveLeaders on 21 March 2008 to an unrelated third party (see NOTE I - DISCONTINUED OPERATIONS). Revenues from real estate transactions are recognized upon the close of escrow and title is transferred to the buyer. ALG follows the provisions in SFAS No. 66, Accounting for Sales of Real Estate ("SFAS 66") whereby the specific timing of a sale is measured against various criteria related to the terms of the transaction and any continuing involvement in the form of management or financial assistance associated with the property. If sales occur and the infrastructure of the development is not complete, ALG will follow SFAS 66 and SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects ("SFAS 67"). If the sales criteria are not met, ALG defers recognition and will account for the continued operations of the property by applying the deposit, finance, instalment, or cost recovery methods, as appropriate. In calculating cost of sales, ALG uses estimates and forecasts to determine total costs at completion of the development project. Resort Unit Pre-sales and Prepaid Sales Commissions, net Subsidiaries of ALG have entered into pre-construction sales contracts for units at certain Orlando developments. At 30 June 2008 and 31 December 2007, the total of the pre-construction contracts are approximately $238,516,000 and $280,741,000 respectively. Revenue on these contracts will be recognised when title is transferred to the buyer and the ALG subsidiaries have no further continuing involvement. Subsidiaries of ALG pre-sell units and receive deposits of between 5% and 20% of the sales price. A liability is recorded for the pre-sale deposit until the construction process is completed and the sales contract is finalised. Certain amounts of deposits received are restricted and recorded in restricted cash. As at 30 June 2008, approximately $8 million was reclassified from deposits to accrued expenses for those deposits related to sales contracts that had been cancelled. Additionally, broker commissions of up to 8.5% are prepaid on the pre-sold units. ALG recognises the advance commission payments as a deferred expense until the revenue related to the sales contract is recognised or the sales contract is cancelled. ALG records a valuation allowance against prepaid commissions for estimated cancellation of contracts. At 30 June 2008 and 31 December 2007, the prepaid commission valuation allowance was $3,026,870 and $0 respectively. Deferred Financing Costs, net Deferred financing costs consist of loan origination and related costs, which are being amortised on a straight-line basis over the term of the related debt principal that approximates the effective interest method. Any remaining balance of deferred financing costs at the time of an early debt retirement is written off at the time of the retirement. All amortized deferred financing costs were capitalised to land and construction inventory as part of the interest capitalisation. Recent Accounting Pronouncements In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with US GAAP and expands disclosures about fair value measurements. SFAS 157 explains the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritises the information used to develop those assumptions. SFAS 157 became effective on 1 January 2008. ALG believes the adoption of SFAS 157 does not have a material impact on its consolidated financial statements. Additionally, the FASB Staff issued FASB Staff Position ("FSP") No. 157-2 which delayed the effective date of SFAS 157 as it relates to certain nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008. This delay should not have a material impact on ALG's consolidated financial statements. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments at fair value that are not currently required to be measured at fair value. It also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 became effective on 1 January 2008. ALG believes the adoption of SFAS 159 does not have a material impact on its consolidated financial statements. In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles ("SFAS 162"). SFAS 162 identifies the sources of accounting principles and framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP. ALG adheres to the standards set forth in SFAS 162. There will not be an impact on ALG's consolidated financial statements. In December 2007, the Financial Accounting Standards Board ("FASB") issued FAS No. 141R, Business Combinations ("FAS 141R"). FAS 141R replaces FASB Statement No. 141, Business Combinations ("FAS 141"). FAS 141R retains the fundamental requirements of FAS 141 that the purchase method of accounting be used for all business combinations, that an acquirer be identified for each business combination and for goodwill to be recognized and measured as a residual. FAS 141R expands the definition of transactions and events that qualify as business combinations to all transactions and other events in which one entity obtains control over one or more other businesses. FAS 141R broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. FAS 141R also increases the disclosure requirements for business combinations in the financial statements. FAS 141R is effective for fiscal periods beginning after 15 December 2008. Therefore, the Company is required to adopt FAS 141R on 1 January 2009. The Company is currently evaluating the requirements of FAS 141R and the potential impact on the Company's financial position and results of operations. ALG believes the adoption of FAS 141R will not have a material impact on its consolidated financial statements. In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" ("FAS 160"). FAS 160 modifies the reporting for noncontrolling interests in the balance sheet and minority interest income (expense) in the income statement. The pronouncement also requires that increases and decreases in the noncontrolling ownership interest amount be accounted for as equity transactions. FAS 160 is required to be adopted prospectively, with limited exceptions, effective for the Company in 2009. The Company is currently evaluating the effect the adoption of FAS 160 will have on its financial position, results of operations and related disclosures. ALG believes the adoption of FAS 160 will not have a material impact on its consolidated financial statements. NOTE D - LAND AND CONSTRUCTION INVENTORY ALG and its subsidiaries adhere to SFAS 67, as well as guidance provided by the American Institute of Certified Public Accountants Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts in its application of capitalising costs related to land acquisition, development, and construction. Land and construction inventory includes the initial cost of acquisition of the land and all subsequent capitalised construction and development costs. Construction and development costs include all expenditures incurred in readying certain construction and development related assets of ALG for their intended use. These expenditures consist of direct costs such as land, financing costs, interest, legal fees, consulting fees, surveying, engineering, architects, contractors, real estate taxes, permits, licenses and fees. Interest costs are capitalised during the construction period, which commences when i) expenditures for the asset have been made; ii) activities that are necessary to get the asset ready for its intended use are in progress; and iii) interest cost is being incurred, and continues as long as these three conditions are present. The amount capitalised in an accounting period shall be determined by applying an interest rate(s) (the "capitalisation rate(s)") to the average amount of accumulated expenditures for the asset during the period. The capitalisation rate(s) are based on the rates applicable to borrowings, both directly and indirectly associated with the subject asset, outstanding during the period. For the six months ended 30 June 2008 interest capitalised to land and construction inventory totalled $4,287,918. As at 30 June 2008 and 31 December 2007, $295,939 and $398,964 of interest was accrued and unpaid and included in accrued expenses. All capitalised construction costs are subject to write-down in as much as ALG's construction and development assets are carried at the lower of cost or net realisable value. As at 30 June 2008 and 31 December 2007, ALG's management determined that no impairment was deemed necessary. Land and construction inventory included the following as at: 30 June 2008 31 December 2007 US$ US$ Land held for development 190,956,441 176,362,480 Land and site development 92,034,149 85,000,383 Construction in progress 45,485,168 42,008,937 Total 328,475,758 303,371,800 NOTE E - LOSS PER SHARE The basic net loss per Ordinary share is computed by dividing the net loss applicable to Ordinary stockholders by the weighted average number of Ordinary shares outstanding. Net loss per Ordinary share is computed by dividing the net loss applicable to Ordinary stockholders, adjusted on an "as if converted" basis, by the weighted average number of Ordinary shares outstanding plus potential dilutive securities. Six months ended Description 30 June 2008 Net loss (as reported) $ (6,593,896) Net loss per share (0.04) Weighted average shares outstanding: Basic 170,737,462 NOTE F - SHARES FOR SERVICES On 6 February 2008, ALG entered into a secured promissory note with Stanford International Bank, Limited ("Stanford"), a related party and significant shareholder in ALG for up to $10,945,000 (see NOTE L - RELATED PARTY TRANSACTIONS). The terms of the note require ALG to issue Stanford and certain related parties warrants to purchase 750,000 Ordinary shares of stock at £1.20 per share. The warrants expire on 6 February 2013. The fair value of each warrant grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk free rate of 1.5%; volatility of 45% for 2008 and 2007 with no assumed dividend yield; and expected lives of three to five years. As at 30 June 2008, these warrants were valued at $574,002 and are recorded as a discount to the promissory note with an offset to additional paid in capital on the accompanying consolidated balance sheet. During the six months ended 30 June 2008 ALG did not issue warrants to executives as shares for services. However, the schedules below identifies the warrants that have been issued through 30 June 2008 which indicates that as of 30 June 2008, the outstanding warrants amount to 2,625,000 of which 1,075,000 warrants are outstanding to related parties and 1,550,000 warrants are outstanding to third parties. The following warrants were outstanding: Warrants Granted Ordinary Share For Exercise Price in Expiration Warrant Holders Ordinary Shares £'s Date Warrants outstanding at 30 June 2008: Dawnay Day 625,000 1.20 13 August 2010 Collins Stewart 625,000 1.20 13 August 2010 Stanford Group and related parties (A) 625,000 1.20 13 August 2010 Stanford (A) 450,000 1.20 6 February 2013 Others 300,000 1.20 6 February 2013 Total warrants outstanding at 30 June 2008 2,625,000 Stanford Group and related parties (A) warrants issued 1,750,000 0.01 9 July 2013 subsequent to 30 June 2008 Total warrants outstanding 4,375,000 (A) Stanford Group Company is a significant shareholder in ALG NOTE G - INCOME TAXES Under SFAS No. 109, deferred tax assets and liabilities are recognised for the estimated future tax effects, based on enacted tax laws, of temporary differences between the values of assets and liabilities recorded for financial reporting and for tax purposes and of net operating loss and other carry-forwards. The Company's deferred tax assets principally relate to net operating loss carry-forwards, allowance for doubtful accounts, accrued expenses, and reserves. The deferred tax liabilities relate to tax versus book basis differentials in fixed assets and land. A full valuation allowance has been established for the net deferred tax assets that management believes is less than more likely than not to be realized in the future. As at 30 June 2008, the Company has a non-current deferred tax liability of approximately $1,720,000. In June 2002 and August 2007, AMLH had a change in ownership, as defined by Internal Revenue Code Section 382, which has resulted in AMLH's net operating loss carry-forward being subject to certain utilisation limitations in the future. NOTE H - OPERATING SEGMENTS The Company has adopted the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". As of 30 June 2008, ALG's three business units have separate management teams and infrastructures that offer different products and services. The business units have been aggregated into three reportable segments. ALG's inception was 16 May 2007 and there were no operations from 16 May 2007 to 30 June 2007; therefore, comparable information to 2007 is not presented. Tierra Del Sol, Inc. represents ALG's Real Estate segment, and is planning to construct a 1,812-unit resort in Orlando, Florida on 122 acres of land. Vertical development on the townhomes and amenities commenced in the first quarter of 2007. Presales commenced in February 2004. South Beach Resorts, LLC represents ALG's Hospitality segment and operates a hotel (The Boulevard) in South Beach, Florida. Hickory Travel Services, Inc represents ALG's Travel segment and provides travel related services (see NOTE N - SUBSEQUENT EVENTS). The assets of American Leisure Equities Corporation (TraveLeaders) were sold to an unrelated third party in March 2008 and the results of those operations are reported as Discontinued Operations (see NOTE I - DISCONTINUED OPERATIONS). For the six months ending 30 June 2008: In (000's) Real Estate Travel Hospitality Elim Consol Segment Revenues 10 2,447 750 - 3,207 Segment Income (loss) (12,051) (35) 90 - (11,996) Total Assets 358,680 618 3,883 - 363,181 Capital Expenditures (8) 28 63 - 83 Depreciation 40 30 78 - 148 NOTE I - DISCONTINUED OPERATIONS On 21 March 2008, AMLH entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with TL Acquisition Group ("TAG") in which AMLH agreed to sell substantially all of the assets and operations and certain of the liabilities of TraveLeaders. AMLH received cash payments totaling $4,584,708 from the sale. Concurrent with the TraveLeaders' sale, AMLH and a subsidiary of TAG entered into a Strategic Alliance Agreement, pursuant to which TAG agreed to offer its products to AMLH for resale to AMLH's customers and AMLH agreed to offer rooms in its resorts to TAG. AMLH and TAG also agreed to work together to identify and develop co-marketing and joint marketing programs in the future. The Strategic Alliance Agreement has an initial term of five years, and can be extended for three additional periods of five years each. In addition, AMLH entered into a Non-Compete Agreement in connection with the transaction. The Non-Compete requires that for a period of five years, AMLH would not directly or indirectly permit their name to be used by or participate in any business or enterprise that engages or proposes to engage in the business of operating travel agents in the US, except as in connection with ALG's pre-existing operations of Hickory Travel Systems, Inc and as otherwise provided in the Non-Compete Agreement. The operating results for the period of 1 January 2008 through 21 March 2008 are reported as discontinued operations on the consolidated statement of operations and amounted to a loss of $227,900. The gain on the sale of assets amounted to $5,630,144. The assets and liabilities of TraveLeaders as of the date of sale included: Description Amount Cash $ 1,362,285 Accounts receivable 1,147,134 Prepaid and other 197,250 Property and equipment, net 512,807 Accounts payable 831,775 Accrued expenses 3,153,717 Notes payable 279,420 NOTE J - COMMITMENTS AND CONTINGENCIES Construction Liens During the normal course of business, ALG receives notices that liens may be filed on its properties to ensure that vendors and contractors will be paid for products delivered and work performed on its developments. In the due course of payment, these liens are either never filed or are released. As at 30 June 2008 and 31 December 2007, due to cash constraints, ALG had a number of liens filed on certain developments by other vendors and contractors securing their interests. Some of these liens were subsequently released, and some were negotiated to be released at the time of closing of units and are still in place. The amounts relative to liens are recorded in either accounts payable, accrued expenses, or due to related parties in the accompanying consolidated balance sheet. Pre-construction Sales Contracts Included in the purchase of AMLH and Azure, ALG acquired pre-construction contracts for the sale of townhome and condominium units. As at 30 June 2008 and 31 December 2007, the pre-construction contracts totalled approximately $238,516,374 and $280,741,000 respectively. Deposits received on these sales contracts totalled $35,008,826 at 30 June 2008 and $44,124,455 at 31 December 2007. As at 30 June 2008 and 31 December 2007, ALG had the obligation to refund approximately $7,609,239 and $3,405,222, respectively, for deposits from cancelled contracts. The liability related to the refund obligation is included in accrued expenses in the accompanying consolidated balance sheets. Certain of these pre-construction sales contracts contain addendums that will require continued involvement by ALG after construction is complete and the sales contract is finalised. This continued involvement may include guaranteed rental revenues to the customer, the repurchase of the unit by ALG, or to lease the customer's unit for a certain period of time. Litigation In the ordinary course of its business, ALG and its subsidiaries may from time to time become subject to claims or proceedings relating to the purchase, subdivision, sale and/or financing of its real estate or its operations. ALG believes these claims will not have a material impact on its operations. We are not aware of any proceeding to which any of our directors, officers, affiliates or security holders are a party adverse to us or have a material interest adverse to us. NOTE K - RELATED PARTY TRANSACTIONS American Leisure Real Estate Group and Resorts Development Group Mr. Wright is the President and significant shareholder of American Leisure Real Estate Group, Inc. ("ALRG") and Resorts Development Group LLC ("RDG"). In November 2003, AMLH entered into an exclusive development agreement with ALRG and Azure entered into an exclusive development agreement with RDG to provide development services for the development of their resorts. Pursuant to this development agreement, ALRG and RDG were responsible for all development logistics, including processing construction billings received from Resorts Construction LLC, a related party. In exchange, AMLH and Azure were obligated to reimburse ALRG and RDG for all costs incurred including overhead, and to pay a development fee in the amount of 4.0% of the total costs. At the time of Admission, the development agreements were amended so that AMLH and Azure were not obligated to use ALRG and RDG for these services. During the period from 13 August 2007 through 31 December 2007, ALG's subsidiaries transitioned to performing these services in-house. At the time of ALG's acquisition of AMLH and Azure, the Company assumed liabilities in the amount of $3,527,213 and $7,792,911 to ALRG and RDG, respectively. From the period 13 August 2007 (Date of Placement) through 31 December 2007, ALRG billed AMLH $10,905,022 for the reimbursement of costs incurred (including $9,596,367 in construction billings from Resorts) and $436,200 for its 4.0% development fee. Additionally, from the period 13 August 2007 (Date of Placement) through 31 December 2007, RDG billed Azure $1,853,493 for the reimbursement of costs incurred (including $1,489,394 in construction billings from Resorts) and $74,139 for its 4.0% development fee. At 31 December 2007, ALG's subsidiaries owed ALRG $13,000 and RDG $5,456,957, respectively, for past services rendered, and these amounts are included in due to related parties in the accompanying consolidated balance sheet. There were no additional amounts billed by ALRG or RDG for the period from 1 January 2008 through 30 June 2008; therefore at 30 June 2008 ALG's subsidiaries owed ALRG $13,000 and RDG $5,456,957, respectively. Xpress Limited Mr. Wright and members of his family are the majority shareholders of Xpress Limited ("Xpress"). In November 2003, AMLH and Azure entered into exclusive sales and marketing agreements with Xpress to sell the units being developed. This agreement provides for a sales fee in the amount of 3.0% of the total sales prices received by AMLH and Azure plus a marketing fee of 1.5% payable when the relevant units close; 66.7% of which has been paid and 33.3% of which is due at closing. At the time of Admission, the agreements were amended so that AMLH and Azure were not obligated to pay Xpress for these services except to existing brokers introduced by Xpress. During the period from 13 August 2007 through 31 December 2007, the Company's subsidiaries transitioned to performing these services in-house except for brokers already established by Xpress. In connection with the acquisitions of AMLH and Azure by ALG, $9,572,635 in total commissions paid to Xpress are included in the prepaid sales commissions in the accompanying consolidated balance sheet. There were no payments made to Xpress during the period of transition. There are no additional amounts incurred with Xpress through 30 June 2008; however, included in the balance of prepaid commissions are amounts paid to Xpress of $8,500,153 and $9,572,635 as at 30 June 2008 and 31 December 2007 respectively. The decrease of $1,072,482 is attributable to sales cancellations. Resorts Construction Resorts Construction, LLC has been contracted to furnish construction administration and management services. Resorts Development Group, LLC, of which Mr. Wright, CEO and Director of ALG and members of his family are the majority shareholders of Auk Limited which owns Resorts Development Group, LLC which owns a 50% membership interest in Resorts Construction, LLC. These contracts include: * a site work contract to provide all labor, materials, equipment and services necessary to prepare the Tierra del Sol property for development, * a contract to provide professional planning and engineering consulting services for the development of Tierra del Sol, * a construction contract to provide all labor, materials, equipment and services necessary to construct 496 townhomes at Tierra del Sol, * a construction contract to provide all labor, materials, equipment and services necessary to construct the amenities, water park, sports bar, and five condo buildings at Tierra del Sol, * a site work contract to provide all labor, materials, equipment and services necessary to prepare the Bella Citta property for development, * a contract to provide professional planning and engineering consulting services for the development of Bella Citta, * a site work contract to provide all labor, materials, equipment and services necessary to prepare the Los Jardines del Sol property for development, * a contract to provide professional planning and engineering consulting services for the development of Los Jardines del Sol, * a site work contract to provide all labor, materials, equipment and services necessary to prepare the Preserve property for development, * a contract to provide professional planning and engineering consulting services for the development of the Preserve property, * a contract to provide professional planning and engineering consulting services for the development of the Reedy Creek property, * a contract to provide professional planning and engineering consulting services for the development of the Tortuga Cay property. At 30 June 2008 these contracts had remaining balances of work to be performed of $331,272,239. At 30 June 2008 and 31 December 2007 the payables balances (including retainage) to Resorts Construction totalled $10,687,353 and $8,225,015, respectively, which are included in due to related parties in the accompanying consolidated balance sheets. On 6 January 2008 the Company entered into a $10,000,000 promissory note with Resorts Construction, LLC, a related party used to secure all current and future accounts payable to Resorts. The note is collateralised by a mortgage and security agreement encumbering all of the Bella Citta real property, improvements thereto, and any personal property assigned. The interest on the note is 10.0%, and there is no stated term. The principal and interest are payable upon maturity. The amounts outstanding at 30 June 2008 and 31 December 2007 are $3,000,000 and $0 respectively. These amounts are included in due to related parties in the accompanying consolidated balance sheet. As of May 2008, ALG was in violation of the liquidity commitment in its construction loan facility agreement with Regions Bank. As a consequence of this violation, ALG is to pay a guaranty fee of $840,000 to Messrs. Wright, Meyer, and Pratt for their personal guarantees on the Regions Bank loan facility and the amount is included in due to related parties in the accompanying consolidated balance sheets. Randolph Partners, LLC In 2006, Azure entered into a $15.5 million promissory note with Randolph Partners, LLC, a related party that owns 20% of, and is the operating manager of, Sherberth Development Partners, LLC to purchase the Sherberth Road property. The note bears interest at 13.0%, and expired in February 2008. On 2 February 2008, a $1 million payment was made to extend the note due date until 31 July 2008. Beginning on 5 August 2008, $100,000 monthly payments of interest are made to extend the note until such time as ALG refinances the note. The note is secured by a first priority lien on the land. The amounts outstanding on the note at 30 June 2008 and 31 December 2007 are $15,535,000 and the accrued interest payables are $4,922,616 and $3,911,424 respectively. The principal and interest are payable upon maturity. This loan is personally guaranteed by Mr. Wright. These amounts are included in due to related parties in the accompanying consolidated balance sheet. Stanford In 2003, AMLH entered into a $6,000,000 promissory note with Stanford, a related party and significant shareholder in ALG. This note has a maturity date of 31 December 2008. The note bears an annual interest rate of 6.0%. The principal and interest are payable upon maturity. The total amount outstanding at 30 June 2008 and 31 December 2007 was $6,000,000. Accrued interest payable on this note was $639,000 at 30 June 2008 and $457,000 at 31 December 2007. This loan is personally guaranteed by Mr. Wright. These amounts are included in due to related parties in the accompanying consolidated balance sheet. On 6 February 2008 the Company entered into a $10,945,000 promissory note with Stanford, a related party and significant shareholder in ALG. The note is collateralised by second priority mortgages on the Phase 2 TDS and Bella Citta properties. The interest on the note is 8.0% and it matures on 31 December 2008. The principal and interest are payable upon maturity. The note will be funded into tranches. The first tranche was for $7,105,000 with $3,300,000 funding within three days of the closing date and the remaining balance was funded in six semi-monthly increments of approximately $635,000 through 14 April 2008. The second tranche was for $3,840,000 and was funded in six $640,000 semi-monthly increments through 14 July 2008. The terms of the note require ALG to issue Stanford to purchase 150,000 Ordinary shares in ALG at £1.20 per Ordinary share (see NOTE F - SHARES FOR SERVICES). The terms of the note also require ALG to issue Stanford and certain third parties warrants to purchase 300,000 Ordinary shares in ALG at £1.20 per Ordinary share (see NOTE F - SHARES FOR SERVICES). The warrants expire on 6 February 2013. In addition, since ALG has received funding from the second tranche, it is required to issue additional warrants to purchase 300,000 Ordinary shares in ALG at £1.20 per Ordinary share (see NOTE F- SHARES FOR SERVICES). These warrants also expire on 6 February 2013. The note allows for a six month extension of the maturity date if ALG issues to Stanford a fee equal to 500,000 Ordinary shares. The amounts outstanding at 30 June 2008 and 31 December 2007 are $10,309,000 and $0 respectively. These amounts are included in due to related parties in the accompanying consolidated balance sheet. Guarantees In return for an ALG guarantee to be held harmless, upon the conclusion of the Admission, Mr. Wright agreed to extend his personal guarantees on various loans to 31 March 2008 and ALG had agreed to extinguish them by this date. At 30 June 2008, based on liability balances outstanding, these guarantees amounted to approximately $125,524,789. In October 2008, Mr. Wright agreed to extend his personal guarantees beyond 31 March 2008 based upon the condition that Mr. Wright can call the guarantees with 24 hours advance notice to ALG. NOTE L - SUSPENSION OF TRADING ON AIM ALG was unable to meet the annual financial statement reporting requirements as outlined in Rule 19 of the AIM Rules requiring its accounts to be filed within six months of the accounting date. Consequently, trading in the Company's shares on AIM was temporarily suspended on 30 June 2008. NOTE M - FINANCIAL CONDITION AND GOING CONCERN ALG's financial statements have been presented on the basis that it is a going concern, which contemplates the realisation of assets and the satisfaction of liabilities in the normal course of business. ALG has sustained recurring negative cash flows from operations and has not yet reached the point where it is closing on presold townhome units to generate cash from its real estate operations. Over the past year, ALG's operations have been funded through a combination of funds raised on the AIM market and bank debt. As at 30 June 2008, ALG had approximately $633,695 of unrestricted cash. On 6 February 2008, the Company executed an agreement with Stanford International Bank Limited. ("Stanford") whereby ALG was granted a facility of $10,945,000. Additionally, on 30 June 2008, the Company executed an agreement with Stanford whereby ALG was granted a facility of $17,500,000. On 7 August 2008, ALG received a conditional commitment from Kennedy Funding, Inc. ("Kennedy") for a new credit facility for an aggregate amount of up to $40 million. Unfortunately, the receipt of the required valuations was delayed due to difficulties from the lack of comparable transactions in the current market conditions and as a result, Kennedy has extended its August commitment letter to 15 January 2009. However, ALG believes that the final Kennedy facility available for draw down to the Group will be reduced from $40 million to a loan secured only on Bella Citta. As a result of this reduction in the facility, ALG believes that if the facility is granted, the net amount of new working capital available for the Company (after the deduction of closing costs, an interest reserve for 12 months and the repayment of the existing mortgage on Bella Citta of $10 million) may only be approximately $4 million. These funds are required to finance the immediate working capital of the Group and to help facilitate the completion of the first phase at Tierra Del Sol. ALG believes that, as a result of the Stanford loans and if the prospective Kennedy loan is drawn down, closings on pre-sales of the first 96 townhome units, and the closing of new vertical construction lines that it is currently negotiating, and the renewal of all existing loan facilities that will expire during 2009, it will have sufficient cash and financing commitments to reach the point where it will be able to build the remaining pre-sold townhome units and consequently to generate cash from their closings and therefore meet its funding requirements over the next year. However, ALG has experienced and continues to experience negative cash flows from operations, as well as an ongoing requirement for substantial additional capital investment. ALG will need to raise substantial additional capital funding quickly and also over the next several years to accomplish its business plan. In addition, ALG may wish to pursue selectively possible acquisitions of businesses, technologies, content, or products complementary to those of ALG in the future in order to expand its presence in the marketplace and achieve operating efficiencies. ALG expects such acquisitions would require additional funding. There can be no assurance as to the availability of, or the terms upon which such financing and capital might be available. The financial statements do not reflect any adjustments that would be required should the Company be unable to obtain the required additional funding and be unable to continue as a going concern. NOTE N - SUBSEQUENT EVENTS New Financings On 9 July 2008, ALG entered into promissory notes with Stanford, a related party and significant shareholder in ALG, for an aggregate amount of $17,500,000. The loan has two parts, "Note A" in the principal amount of $7,500,000 and "Note B" in the principal amount of $10,000,000. The notes are collateralised by mortgages on the Phases 1 and 2 of TDS. The interest on the note(s) is 10.0% with a maturity of 31 December 2008. The principal and interest are payable upon maturity. The first tranche of Note A was drawn for $750,000 on 4 August 2008 and is followed with nine bi-weekly tranches immediately thereafter in equal amounts of $750,000 each, totaling $7,500,000. The first tranche of Note B was for $1,300,000 on 1 July 2008 and was followed by four additional weekly tranches of equal amounts of $1,300,000 immediately followed by five additional weekly tranches of $700,000 each, totaling $10,000,000. The total of the combined notes is $17,500,000. On 6 July 2008 the promissory note was amended and required ALG to issue to Stanford, and others, warrants to purchase up to 1,750,000 Ordinary shares in ALG at a price of £0.01 per Ordinary share; and, upon Stanford's exercise of warrants, would entitle Stanford to receive added fees on prepayment, maturity or extension of the loan. The warrants expire on 9 July 2013. On 7 August 2008, ALG received a commitment from Kennedy Funding, Inc ("Kennedy") for a new credit facility for an aggregate amount of up to $40 million subject to no more than 50% of the market value of the real estate collateral (the 80 acres forming Bella Citta and Los Jardines del Sol). The loan term is for three years at varying increasing rates that begin with 12.0% prepaid at loan closing for the first year. Thereafter, the interest is paid monthly with rate increases to the greater of 16.0% or Prime + 11.0% for the second year, and the greater of 18.0% or Prime + 13.0% for the third year. A loan origination fee of 4% of the loan amount will be paid out of loan closing proceeds. An additional loan commitment fee of $1.2 million was charged subject to adjustment to 3% of the final loan amount, and all but $50,000 of it will be paid out of loan closing proceeds. The terms of the note allow for ALG to obtain release of portions of the real estate collateral, provided that any principal and interest payments are current, by paying to Kennedy a release price of the greater of 80% of the net sales price or 75% of the gross sales price of the parcel. Management believes that this loan will be executed within the first quarter of 2009. Executive Resignations On 22 July 2008, ALG entered into Memorandums of Understanding (the "Memorandums") with three of its executives (including Mr. Pauzar and Mr. Ron Leventhal). The Memorandums clarify that the Company will be required to pay the executives severance pay and provide health benefits for one year. The estimated cost of these requirements is approximately $1.3 million over the subsequent 12 months. In addition, the Memorandums state that if any of the executives subsequently procure a merger and acquisition project to ALG, the executive that introduced the project will be paid 1% of the value of the transaction. Hickory Travel Services, Inc Stock Transfer Agreement On 31 October 2008, a Stock Transfer Agreement was executed between American Leisure Holdings, Inc. ("AMLH") and Hickory Travel Systems, Inc. ("HTS") and L. William Chiles (CEO of HTS and former director of AMLH) whereby AMLH transferred its 50.83% interest in HTS to L. William Chiles ("Chiles") for consideration of approximately $784,000. -ENDS- This information is provided by RNS The company news service from the London Stock Exchange END IR QKLFLVLBFFBK
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