Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
|X| ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the fiscal year ended December 31, 2009
or
|_| TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
the transition period from __________________ to
_____________________
Commission
file number 000-53452
ISLAND
BREEZE INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
27-1742696
|
|
State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
|
incorporation
or organization
|
|
211 Benigno Blvd,
Suite 201, Bellmawr, New Jersey
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08031
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code (856) 931-1505
Securities
registered pursuant to Section 12(b) of the Act:
|
Title of each
class
|
Name of each exchange
on which registered
|
|
None
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N/A
|
Securities
registered pursuant to section 12(g) of the Act:
Class A
Common Stock, $0.001 par value
(Title of
class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes | | No | X |
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes | | No |X|
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 of 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
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K | X |
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
|
Large
accelerated filer |_|
|
Accelerated
filer |_|
|
|
Non-accelerated
filer |_|
|
Smaller
reporting company |X|
|
| (Do not check if a smaller reporting company) |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes | | No |X|
State
the aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant's most recently completed second fiscal
quarter. As of April 9, 2010, the aggregate market value of the common stock of
the registrant held by non-affiliates (excluding shares held by directors,
officers and others holding more than 5% of the outstanding shares of the class)
was $5,475,992, based upon a closing sale price of $0.99.
Indicate
the number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date. As of April 9, 2010, the registrant
had outstanding 25,049,850 shares of Class A Common Stock and16,110,500 shares
of Class B Common Stock.
DOCUMENTS
INCORPORATED BY REFERENCE
None
2
Table of
Contents
ISLAND
BREEZE INTERNATIONAL, INC.
FORM 10-K
ANNUAL REPORT
Table of
Contents
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PART
I
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Item
1.
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Business
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6
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Item
1A.
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Risk
Factors
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12
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Item
1B.
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Unresolved
Staff Comments
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21
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Item
2.
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Properties
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21
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Item
3.
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Legal
Proceedings
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22
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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22
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PART
II
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||
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Item
5.
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Market
for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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22
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Item
6.
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Selected Financial
Data
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25
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Item
7.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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26
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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32
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Item
8.
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Financial
Statements and Supplementary Data
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33
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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33
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Item
9A
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Controls
and Procedures
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34
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Item
9A (T).
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Controls
and Procedures
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34
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Item
9B.
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Other
Information
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35
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PART
III
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||
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Item
10.
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Directors,
Executive Officers, Promoters and Control Persons and Corporate
Governance, Compliance with Section 16(a) of the Exchange
Act
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35
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Item
11.
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Executive
Compensation
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39
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters
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41
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Item
13.
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Certain
Relationship and Related Transactions, and Director
Independence
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42
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Item
14.
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Principal
Accountant Fees and Services
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43
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PART
IV
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||
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Item
15.
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Exhibits,
Financial Statement Schedules
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44
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SIGNATURES
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46
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3
Safe Harbor Statement under
the Private Securities Litigation Reform Act of 1995
Information
included in this Form 10-K may contain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). This information may
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of Island Breeze International,
Inc. (“We”, “Our” or the “Company”) to be materially different from the future
results, performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
future plans, strategies and expectations, are generally identifiable by use of
words "may," "should," "expect," "anticipate," "estimate," "believe," "intend"
or "project" or the negative of these words or other variations on these words
or comparable terminology. Forward-looking statements are based on assumptions
that, although we believe are reasonable, may be incorrect, and there can be no
assurance that any projections or other expectations included in any
forward-looking statements will come to pass. Our actual results could differ
materially from those expressed or implied by the forward-looking statements as
a result of various factors. Except as required by applicable laws, we undertake
no obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the
future.
Explanatory
Note.
As
used in this report, unless the context otherwise requires, the words “we”,
“our” and “us” and words of similar import refers to Island Breeze
International, Inc. and its solely owned Cayman Island subsidiary Island Breeze
International (“IBI”). Since virtually all of our assets and
operations are conducted through IBI, the discussions of our business and the
risks we face and our historic economic performance, which are subsequently
presented in this Form 10-K, relate primarily to IBI. Specific
discussions or comments relating to Island Breeze International will reference
“IBI,” and those relating to Goldpoint Resources, Inc. our predecessor company,
will reference “Goldpoint”.
Prelude
We were
formerly an exploration stage company named Goldpoint Resources, Inc.
(“Goldpoint”), which owned an option to acquire a mineral claim in Clark County,
Nevada.
GoldPoint
was incorporated on June 29, 2007, under the laws of the State of
Nevada. Prior to June 12, 2009, GoldPoint did not make any
significant purchases or sale of assets, nor was it involved in any mergers,
acquisitions or consolidations. Prior to such date, Goldpoint was an exploration
stage corporation. It intended to be in the business of mineral
property exploration and had the right to conduct exploration activities on one
property. Immediately prior to June 12, 2009, GoldPoint had one
Officer and two Directors and no employees.
As of
June 12, 2009, Olympian Cruises, LLC (“Olympian”), a Delaware limited liability
company, acquired control of Goldpoint in a transaction we refer to herein as
the “Share Exchange” or the “Reverse Acquisition”. As of such date,
Goldpoint issued 30,000,000 shares of its common stock (or approximately 77.8 %
of Goldpoint’s common stock outstanding on that date) to
Olympian. In return for such issuances of shares, Goldpoint received
all of the outstanding shares of capital stock of IBI, a privately held exempt
Cayman Islands company. Thus, IBI became Goldpoint’s wholly-owned
subsidiary and the business of the subsidiary became its only
operations.
4
Under the
agreement relating to the Share Exchange (the “Exchange Agreement”), Goldpoint
was required to merge into a newly formed Delaware corporation, thereby becoming
a Delaware corporation, change its name to Island Breeze International, Inc. and
change its authorized capital stock to 100,000,000 shares of Class A Common
Stock, par value $0.001 per share, 16,110,500 shares of Class B Common Stock,
par value $0.001 per share and 1,000,000 shares of preferred stock, par value
$0.001 per share.
It was
originally contemplated that the Merger would occur prior to the consummation of
the Share Exchange and that 13,889,500 shares of Class A Common Stock and
16,110,500 shares of Class B Common Stock would be issued to Olympian on
consummation of the Share Exchange. However, in order to facilitate
the closing of the Share Exchange, Goldpoint and Olympian agreed to effect the
Merger after the consummation of the Share Exchange rather than
beforehand. The Merger occurred on September 15, 2009 and after
consummation of the Merger, Olympian exchanged 16,110,500 shares of Class A
Common Stock for an identical number of shares of Class B Common
Stock.
The Class
A and Class B Common Stock are substantially identical except that holders of
Class A Common Stock have the right to cast one vote for each share held of
record and holders of Class B Common Stock have the right to cast ten votes for
each share held of record on all matters submitted to a vote of holders of
common stock. The Class A Common Stock and Class B Common Stock vote together as
a single class on all matters on which stockholders may vote, including the
election of directors, except when class voting is required by applicable
law. As a result of the Merger, Goldpoint’s outstanding common stock
automatically became Class A Common Stock on a 1 for 1 basis.
The
company’s activities since the closing of the Share Exchange have been focused
on developing entertainment (including gaming) cruises to nowhere, the
development of which is the historic business of IBI. The company owns two
vessels, one of which it expects to substantially renovate and equip with
gaming, restaurant and entertainment related equipment. The company
is currently evaluating port locations in East Asia for the establishment
of its initial cruise operations.
(Since
only our Class A Common Stock is registered under the securities laws or is
publicly traded, all references in this Report to our common stock refers to our
Class A Common Stock unless specifically noted otherwise.)
5
Item
1. Business.
Overview
IBI was
incorporated under the laws of the Cayman Islands as an exempt company on
September 27, 2006. We have had no revenue and have no
operations. Our efforts since our incorporation have been focused on
developing and operating entertainment cruises which incorporate gaming, dinning
and other forms of shipboard entertainment. We own two vessels, one
of which we expect to substantially renovate and equip with gaming, restaurant
and entertainment related equipment. The ports that we were
previously primarily considering for the Company’s initial operations included
ports in Florida and Texas. Increasingly, we have focused on
international locations and we are currently evaluating port locations primarily
in East Asia for the establishment of our initial cruise operations, with a
particular focus on home port locations in Taiwan and the Hong Kong Special
Administrative Region of China (“Hong Kong”). This change in location is based
on our belief that the East Asian market presents greater opportunities for the
initial launch of our cruise business. In this effort, we have
established a registered branch office in Taipei, Taiwan.
We do not
have the cash reserves required to complete the renovations of our vessels or to
commence operations. We believe that we will need at least
$15,000,000 of outside funding for us to launch our first vessel and initiate
our business. Further funds, which we estimate to be not less than an
additional $15,000,000, will be required for us to launch our second vessel and
to expand our operations. We may also decide to acquire another
vessel from which we may establish our initial operations, which will require an
undermined amount of outside funding to acquire and initiate our entertainment
cruise operations.
We
currently expect to commence our initial cruise operations upon completion of
the renovation of the m/v Island Breeze (the “Island Breeze”), a 410 foot vessel
currently located in Greece which we acquired on September 12,
2007. After renovations are complete, we expect the Island Breeze to
have a passenger capacity of approximately 1,200 passengers. Further,
we expect that after the completion of renovations, the Island Breeze will
feature a contiguous gaming area measuring approximately 15,000 square feet with
15 to 16 foot high ceilings. Based on our existing plans, the Island Breeze will
also offer a 300 seat buffet restaurant, a fine dining restaurant, a full
service spa/salon, a VIP lounge and a 400 seat showroom, although the final
configuration may vary. Upon completion of renovations of the Island
Breeze, we intend to place the Island Breeze in service and establish our
planned entertainment cruise operation from a yet to be determined port
location. We believe that after it is renovated the Island Breeze
will be better suited for our East Asian operations than our second vessel, the
m/v Casino Royal (the “Casino Royale”), since the Island Breeze has an enclosed
entertainment area and the gaming area is concentrated on one
level. We also believe that based on our current renovation plans,
the Island Breeze will require less capital investment and take less time to
renovate versus the Casino Royale. Alternatively, we may decide to
acquire another vessel from which we can commence our initial
operations. If we initiate that alternative, that a vessel will
likely have a sufficient amount of cabins to accommodate passengers on overnight
or multi-day cruises versus the shorter duration cruises suitable for either the
Island Breeze or the Casino Royale.
Our
second vessel is the Casino Royale, a 430 foot vessel currently located in the
Bahamas, which the Company acquired on May 23, 2008. We have
developed renovation designs for the Casino Royale
which would result in a passenger capacity of approximately 1,200 passengers; a
main gaming deck area measuring approximately 11,000 feet with 12 to 14 foot
high ceilings; and two upper level gaming salons. Our existing
renovation plans also provide for dining and entertainment facilities including
a 300 seat buffet restaurant, a 100 seat fine dining restaurant, a VIP lounge
and a covered outdoor entertainment area. We believe the Island
Breeze, is better suited to likely ports we are considering in east
Asia. In part, this is because we believe that the Island Breeze is
better suited to the open sea travel typical to east Asia markets than the
Casino Royal which is better suited to the short day trip pattern more typical
to the U.S. market. Further, given our current renovation plans for
each vessel, excluding equipment costs, we believe that the Casino Royale will
cost substantially more to renovate versus the Island
Breeze. Therefore, we are reexamining our plans and may sell the
Casino Royale rather than renovate it.
6
Acquisitions
On
September 12, 2007, we acquired an existing day cruise vessel, the m/v Atlantis,
from Fortune Ship Investments, Ltd., and subsequently renamed the vessel the m/v
Island Breeze. The Island Breeze is approximately 410 feet in length and will
have a capacity of 1,200 passengers upon the completion of renovations. After we
secure the financing necessary to renovate the Island Breeze, we intend to
commence renovations and to purchase and install the related equipment and
systems. We expect that after the completion of renovations, the
Island Breeze will feature a contiguous gaming area measuring approximately
15,000 square feet with 15 to 16 foot high ceilings. The Island Breeze will also
offer a 300 seat buffet restaurant, a fine dining restaurant, a full service
spa/salon, a VIP lounge and a 400 seat showroom, although the final
configuration may vary. The Island Breeze was originally built as an overnight
passenger/vehicle ferry with car decks on the main and mezzanine levels where
the gaming and buffet/showroom levels are located. The Island Breeze is fitted
with an active retractable fin stabilization system which provides additional
passenger comfort in the event of adverse sea conditions. The Island Breeze is
currently moored in Elefsina Bay, near Piraeus, Greece (six miles southeast of
Athens). Since September, 2007 we have incurred
approximately $1,750,000 of renovation and carrying costs for the
Island Breeze, including, but not limited to, costs related
to planning; purchase of materials, parts, and equipment;
material removals; and additional carrying costs related to such as labor
(crew), fuel, insurance, and dockage. We estimate that the full scale renovation
of the Island Breeze will cost an additional $6,400,000 and will take
approximately three months from the commencement of full scale renovations,
which will occur after the required financing is
secured. Additionally, we anticipate that we will incur an additional
$2,800,000 of costs related to the purchase and installation of gaming
equipment, IT equipment, and other furniture, fixtures &
equipment. However, we believe that such costs can be reduced if we
were to utilize, in part of in whole, the gaming equipment, IT equipment, and
other furniture and fixtures currently onboard the Casino
Royale. This would have the effect of increasing subsequent costs
related to the Casino Royal if we go forward with the rehabilitation of that
vessel. Further, we will continue to incur additional carrying costs
related to the Island Breeze while we seek to secure the financing necessary to
renovate and refit the vessel. We may modify the scope of the
renovations if we are unable to secure the financing we require to complete the
contemplated renovations.
On May
23, 2008, we acquired the m/v Casino Royale from Catino, SA. The
Casino Royale is approximately 430 feet in length and will have a capacity of
approximately 1,200 passengers if we complete
the renovations as currently designed. The renovation plans we
developed for this vessel contemplate a main gaming deck area measuring
approximately 11,000 feet with 12 to 14 foot high ceilings and two upper level
gaming salons. Trenovation he plans also include dining and
entertainment experiences with a 300 seat buffet restaurant, a 100 seat fine
dining restaurant, a VIP lounge and a covered outdoor entertainment
area. The Casino Royale was originally built as an overnight
passenger/vehicle ferry with a car/truck deck on what is now the main gaming
deck. This vessel is fitted with an active retractable fin
stabilization system which provides additional passenger comfort in the event of
adverse sea conditions. The Casino Royale is currently moored in
Freeport, Bahamas. Since May, 2008 we have incurred approximately
$2,215,000 in renovation and carrying costs for the Casino Royale, including,
but not limited to, costs related to planning; purchase of materials, parts, and
equipment; material removals; and additional carrying costs related to labor
(crew), fuel, insurance, and dockage. We estimate that the full scale
renovation of the Casino Royale would cost an additional $8,400,000 and would
take approximately five months from the commencement of such
renovations. Additionally, we anticipate that we would incur an
additional $1,200,000 in costs related to the purchase and installation of
additional gaming equipment, IT equipment, and other furniture, fixtures &
equipment. We are re-evaluating our plans for the vessel and may sell
the vessel rather than renovate it. Should we decide to sell the
Casino Royale, it is possible that we may decide to retain the equipment and
furniture presently onboard the vessel for use on the Island Breeze, thereby
reducing the anticipated equipment costs that will be associated with the launch
of the m/v Island Breeze. Alternatively, if we decide to sell the
Casino Royale we may decide to sell or store such equipment and furniture
presently onboard the Casino Royale.
7
Business
Strategy
We expect
to offer round trip entertainment cruises, including cruises-to-nowhere, with
anticipated cruise durations between six to ten hours per
cruise. Following renovation of the Island Breeze, we expect to offer
our customers a full entertainment experience complete with a full service
restaurant, 300 seat buffet restaurant, a casino separate VIP gaming salons, a
full service spa and salon, a VIP lounge and a 400 seat showroom, although the
final configuration may vary. We may modify the scope of the
renovation if we are unable to secure the financing we require to complete the
contemplated renovations.
Marketing
We expect
to initiate a comprehensive marketing program aimed at establishing the
Company’s cruise ships as a premier entertainment destination for residents,
business travelers, tour groups, and leisure travelers. We will attempt to
create and encourage new and repeat visitation from our target
market. We expect our marketing program to include: the
implementation of a customer profiling system, a premium member club, a busing
program, direct mail, print media, television, radio, and outdoor media
advertising, event marketing, and a corporate website.
Depending
on availability, we intend to allocate a significant amount of our future
resources to marketing. We believe that the marketing of our business
will be important to our success. We intend to focus our marketing
efforts on adults, ages twenty-one years or older, located within a one hundred
mile radius of our ports of operation. In addition to our marketing
programs, we expect to benefit from the advertising and promotion of our dining
and entertainment venues. Our ability to initiate our marketing program, or for
that matter any marketing initiative, will depend on
our having sufficient working capital available to do so, of which there can be
no assurance. We believe that marketing is essential to successful
operations, and if we lack sufficient working capital to implement a significant
marketing campaign, our likelihood of success will be dramatically
reduced. Additionally, there can be no assurance that any of these
strategies will result in significant market acceptance of the Company’s
entertainment and gaming cruise operations.
8
East
Asian Market
We
originally contemplated initiating operations in the United States and were
exploring the Texas and Florida markets. However, we have been
revaluating this strategy and believe that the East Asian market may provide
greater opportunities for the initiation and expansion of our business. In
particular, we are focusing on home port opportunities in Taiwan and in Hong
Kong. In this regard we have established a registered branch office
in Taipei, Taiwan. We believe that the East Asian market offers
opportunities for maximizing return on investment of our existing facilities and
of generating profits. We note however that we are continuously
reevaluating our business strategy due to the changes in market conditions and
other factors and may focus on markets in Florida, Texas or other locations in
the future.
The
Company is currently evaluating international entertainment cruise opportunities
primarily in East Asia. Growth in the Eastern Asian gaming market has been
dramatic. For example, although land based, the large scale and varied
casino development in Macau highlights the potential for our business in the
East Asian market. Revenue per head in Macau already surpasses that
achieved in Las Vegas.
The East
Asian market is quite diverse and the economic, competitive and regulatory
environment changes from country to country. Depending on the locations we
select, we will likely complete with numerous cruises, structured and non
structured gaming operations, and other entertainment options which have
established market positions. Because the Company’s business will
require the negotiation of port availability and potentially regulatory
clearances, the Company will retain the assistance of consultants in initially
evaluating and potentially facilitating entry into the East Asian
market.
There is
no assurance that we will be able to successfully compete with existing or
expanded entertainment cruises, land based or vessel based gaming operations
within the East Asian market, or the State of Florida, Texas, or other
states. Some of the companies that own or run competing entertainment
and/or gaming operations enjoy superior capitalization, name recognition,
licensing and existing market share. In additional to gaming based
competition, we will also compete with non-gaming entertainment activities,
including, but not limited to, short term cruises, resort attractions, various
sports activities, and numerous other recreational activities. There
is no assurance that we will be able to successfully compete with such other
activities.
9
Weather
and Seasonal Fluctuations
The
success of our intended entertainment cruise business will depend, to a
significant extent, on weather conditions. In particular, inclement
weather, or the threat of such weather, is expected to have a direct effect on
passenger counts, potentially adversely affecting our revenues. Bad
weather or sea conditions may result in the cancellation of cruises. Our
intended business may also be subject to seasonal fluctuations.
Regulations
The
cruise and gaming industry is highly regulated, and the laws and regulations to
which we will be subject will depend to a great extent on the locations from
which we operate and the laws and regulations in effect in such
jurisdictions. The discussion below is not intended to be complete
and is presented to provide an overview of certain of the regulations which may
affect our business.
The
Island Breeze and the Casino Royale, and any other vessels which we may operate
in the future must comply with various international and country coast guard and
port authority requirements as to ship design, on-board facilities, fire safety,
equipment, personnel and general safety. In addition, we are subject
to certain federal, state and local safety and health laws, regulations and
ordinances that apply to non-gaming businesses, such as the Clean Air Act, the
Clean Water Act, and other environmental rules and regulations. The
coverage and compliance costs associated with these laws, regulations and
ordinances will result in additional costs to our operations in the
future.
The
vessels we own are subject to the provisions of SOLAS 74, which was adopted in
1974 by the International Maritime Organization, a specialized agency of the
United Nations that is responsible for measures to improve the safety and
security of international shipping, and to prevent marine pollution from ships.
SOLAS 74 is the current basic safety standard for all ships engaged in
international service. The Convention was substantially amended in
1992 and 2000 in order to upgrade and improve shipboard fire safety
standards. The amendments are applicable to all passenger ships
engaged in international service, including retroactively to those ships that
were built prior to 1980. Under the amendments, full compliance with SOLAS 74
standards is to be phased in and implemented over time and completed no later
than October 1, 2010. By that date, passenger ships must comply with
the final phase of the implementation of the SOLAS 74 amendments, most notably,
requirements that no combustible material is used in ships’ structures and that
certain other interior structure and space standards are met. The precise nature
and scope of necessary work maybe determined in conjunction with the ship’s
classification society. Upon completion of the planned renovations,
our vessels will be in compliance with the current SOLAS 74 requirements
including those required to be completed by October 1, 2010.
Although
the Company is currently focusing on establishing its initial cruise operations
in East Asia, the Company may in the future decide to pursue opportunities in
the United States, including the states of Florida and Texas, where we were
initially focused. The rules and regulations in the United States
vary from state to state. The effect
of amendments in 1994 to the Federal Gambling
Ship Act and in 1992 to the Federal Johnson Act, was to repeal the
prior prohibition
under Federal law of gambling aboard ships making coastal voyages beyond the
jurisdiction of state territorial waters (three miles on eastern coast of the
United States and nine miles within the Gulf of Mexico), and to permit
individual states to enact laws regulating or prohibiting gambling aboard ships
making coastal voyages from ports located in such
states.
10
Many
states in the United States have introduced legislation which would prohibit or
restrict gaming aboard ships making costal voyages from ports located in their
states. For example, from time to time in prior years, bills have
been introduced in the Florida legislature which if enacted, would prohibit
coastal gaming cruises from Florida ports. No such bills have been
enacted and no such bill is currently pending. There is a risk that
the State of Florida, the State of Texas and municipalities in Eastern Asia or
other jurisdictions may at some future date regulate or prohibit the coastal
cruise gaming business. In addition, the United States government or
Asian nations could enact regulations or prohibit coastal gaming
cruises.
As
another example, from time to time, bills have been introduced seeking to place
passenger surcharges on cruises originating from ports within the State of
Florida. Originally, this surcharge was intended to fund a trust fund to be used
for statewide beach restoration and management. Such bills were
subsequently amended so that the gaming cruise industry would not be
taxed. However, there can be no assurance that similar bills designed
to tax passengers on cruises such as those we expect to offer will not be
introduced in the future. In addition, while current law and
regulations do not now prohibit casino advertising, from time to time, bills
have been introduced which, in part, prohibit advertising of any form of
gambling. There can be no assurance that such bills will not be
reintroduced or enacted in the future. There has also been litigation
instituted in the State of Florida against gaming cruise operators for allegedly
causing a public nuisance. There can be no assurance that further
litigation will not be instituted in the future which, if successful, could
adversely affect the industry in which we operate.
Due to
our recent focus on the east Asia market, we are examining the laws and
regulations that may apply in that market. The requirements for
operating in that market differ to some extent from those that apply in the
United States. For example, Hong Kong requires annual safety
inspection of vessels whose home ports are located in its
jurisdiction. We expect to retain local consultants to advise us on
local legal requirements once we have selected our home ports.
Renovations,
Materials, Research and Development, Environmental Laws, Intellectual Property
and Independent Contractors
We have
acquired two vessels and currently expect to renovate one of them. We
believe the materials necessary for the renovations, the subcontractors who will
complete the renovations, and the materials for the operation of the business
thereafter are readily available. We expect to utilize the services
of a shipyard and subcontractors with respect to the renovation of the
vessels. We have not incurred research and development expenses to
date, but we have expended approximately $100,000 since September, 2006 in
demographical studies and analysis to evaluate potential markets and ports from
which to initiate operations. We have no patents, trademarks, labor
contracts and similar items. We may engage independent contractors
with regard to the certain services and amenities contained on our
vessels. We do not expect to incur any material expenses, other than
routine maintenance, in order to comply with applicable environmental
laws. However, we are subject to various international, federal,
state and local laws and regulations that may or will govern our operations and
our ships, including emissions and discharges into the environment, and the
handling and disposal of hazardous and non-hazardous substances and wastes. If
an accident resulting in a discharge of fuel or other hazardous material were to
occur, we would be liable for costs related to corrective action or
environmental cleanup, penalties and/or the imposition of other liabilities or
restrictions.
11
Employees
As of
March 31, 2009, we had nine full-time employees and an additional two
individuals who were independent contractors working for us either in their
individual capacities or through professional service companies controlled by
them. No employee is represented by a labor union. We anticipates
employing additional personnel as needed for the casino gaming floor, food and
beverage outlets, terminal services, and the operations of the vessel and the
Company.
Item
1A. Risk Factors
Investing
in us involves a high degree of risk. You should carefully consider the
risks described below before making a decision to buy our common stock. If
any of the following risks actually occur, our business could be harmed.
In that case, the trading price of our common stock could decline, and you may
lose all or part of your investment. You should also refer to the other
information in this report, including our financial statements and the related
notes. Except for historical information, the
information in this report contains "forward-looking"
statements about our expected future business and performance.
Our actual operating results and financial performance may prove to be very
different from what we have predicted as of the date of this report. The
risks described below address some of the factors that may affect our future
operating results and financial performance.
RISKS
RELATED TO OUR FINANCIAL CONDITION
WE NEED
SIGNIFICANT INFUSIONS OF ADDITIONAL CAPITAL, WHICH MAY RESULT IN DILUTION TO OUR
SHAREHOLDERS’ OWNERSHIP AND VOTING RIGHTS IN OUR COMPANY.
Based
upon our current cash reserves and forecasted operations, we believe that we
will need to obtain at least $15,000,000 of outside funding to provide the
working capital necessary to complete the renovation of the Island Breeze,
purchase the necessary equipment for the vessel and commence operations, and at
least another $15,000,000 of funding in order to complete the renovation, and
purchase the equipment necessary to launch our second vessel, the Casino Royale,
if we choose to go forward with its renovation. Our need for additional
capital to finance our business strategy, operations, and growth or if we
acquire a vessel in place of the Casino Royale will be greater should, among
other things, revenue or expense estimates prove to be incorrect. If we fail to
secure sufficient capital in the future, we will not be able to initiate
operations until we can obtain adequate financing. We may not be able to
obtain additional financing in sufficient amounts or on acceptable terms when
needed, which will adversely affect our prospects. Debt financing must be repaid
regardless of whether or not we generate profits or cash
flows from our business activities. Equity financing will result in dilution to
existing shareholders and may involve securities that have rights, preferences,
or privileges that are senior to our common stock. Furthermore, we
may be required to sell interests in one or both of our vessels to secure the
financing we require. We may also attempt to sell one of our vessels
in order to move forward with the renovation of the second. There can
be no assurance we will be able to find a purchaser who will make an acceptable
offer. Furthermore, even if we sell one vessel, financing, in
addition to the amount we realize from the sale of the vessel, will be required
to complete the remaining vessel and there can be no assurance that the required
financing will be available to us.
12
RISKS
RELATED TO OUR BUSINESS
WE ARE A
DEVELOPMENT STAGE COMPANY AND HAVE NO OPERATING HISTORY UPON WHICH AN EVALUATION
OF OUR COMPANY CAN BE MADE. FOR THAT REASON, IT WOULD BE DIFFICULT FOR A
POTENTIAL INVESTOR TO JUDGE OUR PROSPECTS FOR SUCCESS.
We were
organized in September, 2006 and have had no operations since our inception from
which to evaluate our business and prospects. Most of our activities have been
centered on the acquisition and renovation of our two vessels, the Island Breeze
and the Casino Royale and related financing and other start-up activities.
We have had no revenue to date. There can be no assurance that our future
proposed operations will be implemented successfully or that we will ever have
profits. If we are unable to commence and sustain our operations, our
shareholders may lose their entire investments. We face all the risks inherent
in a new business, including the expenses, difficulties, complications and
delays frequently encountered in connection with initiating operations,
including capital requirements and managements’ potential underestimation of
initial and ongoing costs. As a new business, we may encounter delays and other
problems. We also face the risk that we will not be able to effectively
implement our business plan. In evaluating our business and prospects, these
issues should be considered. If we are not effective in addressing these risks,
we will not operate profitably or perhaps at all and we may not have adequate
working capital to meet our obligations as they become due.
Our
ability to operate as a going concern and to achieve profitable operations will
be dependent on such factors as the success of our business model and marketing
strategy, market penetration, competition and the availability of
financing. No assurance can be given that we will be able
successfully to develop our business under the foregoing conditions and given
the inherent risks.
WE WILL
INITALLY DEPEND ON ONLY ONE VESSEL TO CONDUCT OUR OPERATIONS.
Assuming
we are able to secure the funding required to complete renovations of the Island
Breeze (which we expect to launch first), to purchase the necessary equipment,
and to commence initial operations, our initial operations will be entirely
reliant upon the success of the gaming day cruise to nowhere operations of the
Island Breeze. Any disruption of the operations of that vessel would
have a substantial negative impact on our business. While we will
maintain casualty insurance to protect us against damage and loss of this vessel
and the related equipment, any material damage to, or loss of, the vessel due to
fire, extreme weather, flooding or other causes, would have a material adverse
effect on our financial condition, business, and prospects.
13
WE HAVE
NOT SELECTED AND FINALIZED NEGOTIATIONS WITH RESPECT TO THE INITIAL PORT FROM
WHICH OUR ENTERTAINMENT CRUISES WILL OPERATE AND THE FAILURE TO SELECT OUR
INITIAL PORT AND SUCCESSFULLY NEGOTIATE THE TERMS OF OCCUPANCY COULD HAVE AN
ADVERSE AFFECT ON OUR BUSINESS.
We have
tentatively selected East Asia as the initial location from which we will
initiate our entertainment cruise operations. This selection is
subject to change. While we have had preliminary negotiations, we
have not yet negotiated the final terms of occupancy for any vessel at any
port. In the event we are unable to secure an appropriate port from
which to commence our initial operations or we are unable to successfully
negotiate favorable agreements with respect to the occupancy at the port we
ultimately select, our business will be adversely affected.
PROBLEMS
WE INCUR WITH RESPECT TO THE RENOVATION OF OUR VESSELS WILL ADVERSELY AFFECT OUR
PROSPECTS AND RESULTS OF OPERATIONS.
Our
business plan is now founded on the renovations of the Island
Breeze. We cannot commence operations until the renovation of the
Island Breeze is complete and our future prospects will depend on the renovation
of the Island Breeze. We are subject to the risks inherent in
substantial construction projects including, contract issues and negotiations
with others who will renovate the vessels, the quality of the work performed,
delays caused by unavailability of contractors, cost overruns, poor workmanship,
and may other risks. Our prospects will be negatively affected should
any of these problems occur.
WE NEED
TO EFFECTIVELY MANAGE OUR GROWTH AND THE EXECUTION OF OUR BUSINESS
PLAN. ANY FAILURE TO DO SO WOULD NEGATIVELY IMPACT OUR
RESULTS.
To manage
our operations effectively, we will need to create operational, financial and
other management processes and systems. We have a small staff and our
success also depends on our ability to maintain high levels of employee
efficiency, to manage our costs in general and administrative expenses in
particular and otherwise to efficiently execute our business
plan. There are no assurances that we will be able to effectively and
efficiently manage our growth. Any inability to do so could increase
our expenses and negatively impact the result of our operations.
THE LOSS
OF KEY PERSONNEL WOULD DIRECTLY AFFECT OUR EFFICIENCY AND ECONOMIC
RESULTS.
We are
dependent upon the creative skills and leadership of our management team,
including Bradley T. Prader (our President and Chief Executive Officer), Sean F.
McManimon (our Chief Operating Officer), Michael C. Hovdestad (our Chief Legal
Officer), Steven G, Weismann (our Chief Financial Officer), and Thomas L.
Schneider (our Executive Vice President of Maritime Operations). The
loss of the services of any of them could have a material adverse affect on our
business and operations, including our ability to execute our business
plan.
14
OUR
STRATEGY REQUIRES US TO DEVELOP AND MAINTAIN RELATIONSHIPS WITH OTHER
FIRMS.
Our
strategy depends on various relationships with other firms such as independent
contractors and vendors. Of particular importance to us is our
relationship with independent contractors and vendors who will sell us materials
and perform various shipboard maintenance services on our vessels. We will need
to maintain and develop relationships with these independent contractors and
vendors. It is vital to our success that we continue to maintain
existing and develop new relationships with key independent contractors and
vendors. There can be no assurance, however, that we will be able to
develop and maintain relationships which provide us the services and facilities
we require. If we fail to develop and maintain such relationships, we
may be forced to change our strategy, which could have a material adverse effect
on our ability to initiate operations and/or the results of our
operations. Further, if our relationship with a key independent
contractor or vendor is terminated, it is likely our business will be disrupted
until a replacement is identified and the relevant services are
procured.
WE MAY
NOT BE ABLE TO SUCCESSFULLY INTEGRATE ADDITIONAL ENTERTAINMENT CRUISE OPERATIONS
IN THE FUTURE.
If we
have the working capital necessary to do so, in addition to the Island Breeze or
any other vessel we may purchase and launch first, we expect to launch
additional entertainment cruise operations in the future. There can be no
assurance that we will be able to do so. We may acquire additional
vessels, which acquisitions may be accompanied by risks such as potential
exposure to unknown liabilities. We may enter into joint ventures, which may
carry risks of liability to third parties.
CERTAIN
FACTORS RELATING TO OUR INDUSTRY
WE EXPECT
TO FACE COMPETITION TO OUR ENTERTAINMENT CRUISE OPERATIONS FROM LAND BASED AND
NON-GAMING ENTERTAINMENT ACTIVITIES IN EAST ASIA AND OTHER JURSIDICTIONS AS WELL
AS TRADITIONAL LAND-BASED CASINOS, OTHER ENTERTAINMENT CRUISE OPERATIONS AND
OTHER GAMING ACTIVITIES.
We expect
to compete with a variety of vacation activities in East Asia or potentially in
the United States, including in some locations other entertainment cruise
operations, short-term cruises, resort attractions, sporting and other
recreational activities. In the future, we expect significant
competition as:
|
|
o
|
new
entertainment cruise operators enter our intended
markets,
|
|
|
o
|
new
gaming operators enter our intended
markets,
|
|
|
o
|
existing competitors expand their operations. |
|
|
o
|
gaming
activities expand in jurisdictions in which we will operate,
and
|
|
|
o
|
gaming
is legalized in new
jurisdictions.
|
15
In
general, we will compete with gaming activities including:
|
|
o
|
other
entertainment cruise operations,
|
|
|
o
|
traditional
land-based casinos,
|
|
|
o
|
riverboat
casinos,
|
|
|
o
|
casino
gaming on Indian land in the United
States,
|
|
|
o
|
state-sponsored
lotteries and
|
|
|
o
|
pari-mutuel
betting on horse racing and
jai-alai.
|
Our
operations will compete with all of these and other forms of gaming and will
compete with any new forms of gaming and entertainment that may be legalized in
the future, as well as with other types of entertainment. Most of our
competitors will have significantly more resources, an established market
presence and significant revenue. We are subject to competition in
East Asian jurisdictions from numerous diverse structured and non structured
gaming and entertainment operations (cruise and land based) that are well
established, including those existing in Macau, Hong Kong, and
Taiwan. In the United States we would be subject to competition from
gaming establishments in other jurisdictions, including Atlantic City, New
Jersey, Las Vegas, Nevada, the Bahamas, riverboat gambling on the Mississippi
and Ohio rivers, gambling in Louisiana and the Mississippi Gulf Coast and
international gaming destinations such as Macau. Such competition
could adversely affect our ability to commerce operations and to compete for new
gaming opportunities.
THE
COMPETITION WE EXPECT TO FACE WILL INCREASE IN THE FUTURE IF JURISIDICTIONS,
LEGALIZE ADDITIONAL GAMING ACTIVITIES.
Over the
past few years, there has been an attempt to expand legalized gaming in various
locations in the United States as well as foreign jurisdictions. It
is likely that the gaming industry will continue to pursue legalization of
gaming throughout the world, and we believe that the increased legalization of
gaming would have a material adverse impact on our future
operations.
WE WILL
BE SUBJECT TO EXISTING AND NEW GAMING LAWS, REGULATIONS AND TAXES.
Domestic
and foreign regulations are quite diverse and change from country to country and
jurisdiction to jurisdiction. Domestic and foreign regulations, taxes
and other factors may limit or prohibit our ability to commence operations in
certain locations, adversely affect our profitability, and may restrict or
prohibit our operations in domestic or foreign jurisdictions in which we plan to
operate.
16
From time
to time, legislation has been introduced which, if enacted, would prohibit the
coastal gaming business in various jurisdictions. Restrictive
regulations may be promulgated after we have initiated operations and may
adversely affect our business.
In
addition, the U.S. government has previously considered a Federal tax on casino
revenues and the U.S. government, or state governments may consider such tax or
other regulations that would affect our gaming business. From time to
time, legislators and special interest groups have proposed legislation that
would expand, restrict or prevent gaming operations in Florida , Texas, and in
other jurisdictions throughout the
country. Any such taxes, expansion of gaming or restriction on or
prohibition of our gaming operations could have a material adverse effect on our
operating results.
WE ARE
SUBJECT TO A VARIETY OF NON-GAMING REGULATIONS WHICH COULD RESULT IN INCREASED
EXPENSES AND ADVERSELY AFFECT OUR BUSINESS.
Any
vessel which we operate in the future must comply with various domestic and
foreign coast guard and port authority requirements as to ship design, on-board
facilities, fire safety, equipment, personnel and general safety. An
inability to maintain compliance with such regulations could force us to incur
additional costs in the renovation of our vessels, to maintain compliance or
require us to buy new vessels. In addition, we may
be subject to certain state and local safety and health laws,
regulations and ordinances that apply to non-gaming businesses, such as the
Clean Air Act, the Clean Water Act, and other environmental rules and
regulations. The coverage and compliance costs associated with these
laws, regulations and ordinances will result in future additional costs to our
operations.
WEATHER
CONDITIONS COULD SERIOUSLY DISRUPT OUR OPERATIONS.
Our
gaming operations will be subject to unique risks, including loss of service
because of flood, hurricane or other severe weather conditions. Our
vessels will face additional risks from their movement and the movement of other
vessels on waterways. Most international waters are subject to severe
storms, hurricanes and occasional flooding. As a result of such
severe weather conditions, as well as the ordinary or extraordinary maintenance
requirements of our vessels, if we are unable to operate our vessels, our
results of operations will be harmed. Our business is seasonal and we
experience significant quarterly fluctuations in operating results.
WE ARE
SUBJECT TO ENVIRONMENTAL LAWS AND POTENTIAL EXPOSURE TO ENVIRONMENTAL
LIABILITIES.
We are or
expect to be subject to various foreign, federal, state and local environmental
laws and regulations that will govern our operations and our ships, including
emissions and discharges into the environment, and the handling and disposal of
hazardous and non-hazardous substances and
wastes. Failure to comply with such laws and regulations could result in costs
for corrective action or environmental cleanup, penalties, or the imposition of
other liabilities or restrictions.
17
ENERGY
AND FUEL PRICE INCREASES MAY ADVERSELY AFFECT OUR COST OF OPERATIONS AND OUR
REVENUES.
Our
vessels will use significant amounts of fuel and other forms of
energy. While no shortages of energy have been experienced recently,
the recent increases in the cost of fuel may negatively affect our results of
operations. In addition, energy and fuel price increases could result
in a decline in disposable income of potential customers and a corresponding
decrease in visitation to our vessels, which would negatively impact our
revenues. The extent of the impact is subject to the magnitude and
duration of the energy and fuel price increases, and this impact could be
material.
ECONOMIC
DOWNTURNS, AS WELL AS OTHER FACTORS AFFECTING DISCRETIONARY CONSUMER SPENDING,
COULD REDUCE THE NUMBER OF VISITORS OR THE AMOUNT OF MONEY VISITORS MAY SPEND ON
OUR VESSELS.
The
strength and profitability of our business depends on consumer demand for cruise
trips and gaming in general and for the type of amenities we
offer. Changes in consumer preferences or discretionary consumer
spending could harm our business.
During
periods of economic contraction such as exist today, our revenues may decrease
while some of our costs will remain fixed, resulting in decreased
earnings. This is because the gaming and other leisure activities we
expect to offer on our vessels are discretionary expenditures. Participation in
these activities may decline during economic downturns because consumers have
less disposable income. Even an uncertain economic outlook may
adversely affect consumer spending in our gaming operations and related
facilities, as consumers spend less in anticipation of a potential economic
downturn.
THE
TERRORIST ATTACKS WHICH OCCURRED ON SEPTEMBER 11, 2001, AND THE POTENTIAL FOR
FUTURE TERRORIST ATTACKS MAY HAVE A NEGATIVE IMPACT ON TRAVEL AND LEISURE
EXPENDITURES.
Leisure
travel remains particularly susceptible to global geopolitical events. It is
likely that many of the customers of our vessels will travel by air, and the
cost and availability of air service can affect our business. We
cannot predict the extent to which war, future security alerts or additional
terrorist attacks may negatively impact our business.
CURRENCY
FLUCTUATIONS CAN AFFECT FINANCIAL RESULTS
Currency
and exchange rate fluctuations may negatively impact our financial
results. We expect to pay for the renovations of one of our vessels
(the Island Breeze) in Euros and will therefore be adversely effected if the
value of the U.S. dollar declines against the Euro. Furthermore,
currency fluctuations will directly affect our operational results if we operate
in foreign countries.
18
CERTAIN
FACTORS RELATED TO OUR COMMON STOCK
(Since
only our Class A Common Stock is registered under the securities laws or
publicly trades, all references in this Report to our common stock refers to our
Class A Common Stock unless specifically noted otherwise.)
BECAUSE
OUR COMMON STOCK IS CONSIDERED A "PENNY STOCK," A SHAREHOLDER MAY HAVE
DIFFICULTY SELLING SHARES IN THE SECONDARY TRADING MARKET.
Our
common stock is subject to certain rules and regulations relating to "penny
stock" (generally defined as any equity security that has a price less than
$5.00 per share, subject to certain exemptions). Broker-dealers who sell penny
stocks are subject to certain "sales practice requirements" for sales in certain
nonexempt transactions (i.e., sales to persons other than established customers
and institutional "accredited investors"), including requiring delivery of a
risk disclosure document relating to the penny stock market and monthly
statements disclosing recent price information for the penny stocks held in the
account, and certain other restrictions. For as long as our common stock is
subject to the rules on penny stocks, the market liquidity for such securities
could be significantly limited. This lack of liquidity may also make it more
difficult for us to raise capital in the future through sales of equity in the
public or private markets.
THE PRICE
OF OUR COMMON STOCK MAY BE VOLATILE, AND A SHAREHOLDER'S INVESTMENT IN OUR
COMMON STOCK COULD SUFFER A DECLINE IN VALUE.
There
could be significant volatility in the volume and market price of our common
stock, and this volatility may continue in the future. Our common stock is
listed on the over-the-counter Bulletin Board and there is a greater chance for
market volatility for securities that trade on the OTC Bulletin Board as opposed
to a national exchange or quotation system. This volatility may be caused by a
variety of factors, including the lack of readily available quotations, the
absence of consistent administrative supervision of "bid" and "ask" quotations
and generally lower trading volume. In addition, factors such as quarterly
variations in our operating results, changes in financial estimates by
securities analysts or our failure to meet our or their projected financial and
operating results, litigation involving us, general trends relating to the
gaming and cruise industries, actions by governmental agencies, national
economic and stock market considerations as well as other events and
circumstances beyond our control could have a significant impact on the future
market price of our common stock and the relative volatility of such market
price.
A LARGE
NUMBER OF SHARES OF COMMON STOCK WILL BE ELIGIBLE FOR FUTURE SALE AND MAY
DEPRESS OUR STOCK PRICE.
Our
shares that are eligible for future sale may have an adverse effect on the price
of our stock. As of April 9, 2010, there were 25,049,850 shares of our Class A
Common Stock outstanding. A significant percent of these shares are eligible to
be traded (a significant portion of which will be subject to certain volume
limitations). Trading of our common stock on the OTC Bulletin Board
began in March, 2009 and the average daily trading volume has been very
low. Sales of substantial amounts of common stock, or a perception
that such sales could occur, and the existence of options or warrants to
purchase shares of common stock at prices that may be below the then
current market price of the common stock, could adversely affect the market
price of our common stock and could impair our ability to raise capital through
the sale of our equity securities.
19
YOUR OWNERSHIP INTEREST, VOTING POWER
AND THE MARKET PRICE OF OUR COMMON STOCK MAY DECREASE BECAUSE WE HAVE ISSUED,
AND MAY CONTINUE TO ISSUE, A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK OR
SECURITIES CONVERTIBLE OR EXERCISABLE INTO OUR COMMON STOCK.
We have
issued common stock and warrants to satisfy our obligations and fund our
requirements. In the future we may issue additional shares of common stock,
options, warrants, preferred stock or other securities exercisable for or
convertible into our common stock to raise money to pay our expenses and
initiate and expand our business. We continue to seek additional investors. If
additional sales of our equity occurs, your ownership interest and voting power
in us will be diluted and the market price of our common stock may
decrease.
In
September, 2009, we consummated a transitory merger and converted into a
Delaware Company (the “Merger”). After the Merger, our Series B
Common Stock which is held by Olympian has super voting rights in that each
share of such stock has 10 times the voting power of a share of Class A Common
Stock. Our charter documents also provide authorization to our Board
of Directors to issue "blank check" preferred stock, with designations, rights
and preferences as they may determine. Accordingly, our Board of
Directors may, without stockholder approval, issue shares of preferred stock
with dividend, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of our common
stock. These types of provisions may discourage, delay or prevent a
change in our control and are traditional anti-takeover
measures. These provisions make it difficult for a majority
stockholder to gain control of the Board of Directors and of our company. These
provisions may be beneficial to our management and our Board of Directors in a
hostile tender offer and may have an adverse impact on shareholders who may want
to participate in such a tender offer, or who may want to replace some or all of
the members of our Board of Directors.
PROVISIONS
IN OUR CERTIFICATE OF INCORPORATION PROVIDE FOR INDEMNIFICATION OF OFFICERS AND
DIRECTORS, WHICH COULD REQUIRE US TO DIRECT FUNDS AWAY FROM OUR
BUSINESS.
Our
Certificate of Incorporation provides for the indemnification of our officers
and directors. We may be required to advance costs incurred by an
officer or director and to pay judgments, fines and expenses incurred by an
officer or director, including
reasonable attorneys’ fees, as a result of actions or
proceedings in which our officers and directors are involved by reason of being
or having been an officer or director of our company. Funds paid in
satisfaction of judgments, fines and expenses may be funds we need for the
initiation or continued operation of our business, thereby affecting our ability
to attain or maintain profitability.
20
THE REQUIREMENTS OF BEING A PUBLIC COMPANY MAY STRAIN OUR RESOURCES AND
DISTRACT OUR MANAGEMENT.
As a
public company, we are subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”). These requirements place a strain on our
systems and resources. The Exchange Act requires that we file annual,
quarterly and current reports with respect to our business and financial
condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure
controls and procedures and internal controls for financial
reporting. We are required to document and test our internal control
procedures in order to satisfy the requirements of Section 404 of the
Sarbanes-Oxley Act, which requires annual management assessments of the
effectiveness of our internal controls over financial reporting and in the
future will require a report by our independent registered public accountants
addressing these assessments. During the course of our testing, we may identify
deficiencies which we may not be able to remediate in time to meet the deadlines
imposed by the Sarbanes-Oxley Act. If we fail to achieve and maintain
the adequacy of our internal controls, as such standards are
modified, supplemented or amended from time to time, we may not be
able to ensure that we can conclude on an ongoing basis that we have effective
internal controls over financial reporting in accordance with the Sarbanes-Oxley
Act.
In order
to maintain and improve the effectiveness of our disclosure controls and
procedures and internal control over financial reporting, significant resources
and management oversight will be required. This may divert management’s
attention from other business concerns, which could have a material adverse
effect on our business, financial condition, results of operations and cash
flows. In addition, we may need to hire additional accounting and financial
staff with appropriate public company experience and technical accounting
knowledge, and we cannot assure you that we will be able to do so in a timely
fashion.
WE HAVE
NO INTENTION OF PAYING DIVIDENDS.
We have
never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, as working capital and,
therefore, do not expect to pay any dividends in the foreseeable
future.
Item
1B. Unresolved Staff Comments
Not
Applicable
Item
2. Properties
We
presently operate out of offices we lease at 211 Benigno Blvd., Suite 201,
Bellmawr, New Jersey 08031. Our telephone number is (856)
931-1505. On December 1, 2009 the Company opened an administrative
office at 4F, #59, Heping East Road, Sec 1, Taipei 106, Taiwan. These offices
are sufficient for our current needs. We intend to establish
additional corporate and operational facilities at or near our ports of call and
other locations.
21
Item
3. Legal Proceedings
We are
not involved in any material legal proceedings outside the ordinary course of
business.
Item
4. Submission of Matters to a Vote of Security Holders
We did
not submit any matter to a vote of our stockholders during the fourth quarter of
2009.
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer
Purchases of Equity Securities.
MARKET
FOR OUR COMMON STOCK
AND
RELATED
STOCKHOLDER
MATTERS
Our
common stock was authorized to trade on March 20, 2009 on the over-the-counter
market with quotations available on the OTC Electronic Bulletin Board under the
symbol "GPNT" on the Over-the-Counter Bulletin Board Electronic Quotation System
maintained by the Financial Industry Regulatory Authority (“FINRA”). Trading
commenced on March 23, 2009. Prior to March 23, 2009, there was no public
trading market for our Common Stock.
The
following table sets forth the range of high and low bid quotations of our
common stock for the periods indicated. The information contained in the table
was obtained from Bloomberg Financial Services. The prices represent
inter-dealer quotations, which do not include retail markups, markdowns or
commissions, and may not represent actual transactions. The ticker
symbol has been changed to “IBII”.
|
2009
Quarter Ended
|
High
|
Low
|
|
|
December
31, 2009
|
$
0.70
|
$
0.15
|
|
|
September
30, 2009
|
0.78
|
0.25
|
|
|
June
30, 2009
|
1.25
|
0.00
|
|
|
March
31, 2009
|
0.00
|
0.00
|
|
|
2010
Quarter Ended
|
High
|
Low
|
|
|
March
31, 2010
|
$
0.99
|
$
0.60
|
Security
Holders
On the
close of business on April 9, 2010, there were 25,049,850 shares of our Class A
Common Stock outstanding, which were held of record by approximately 88
stockholders, not including persons or entities that hold the stock in nominee
or "street" name through various brokerage firms. As of such date there were
16,110,500 shares of our Class B Common Stock outstanding which were held of
record by one stockholder.
22
Dividends
We have
paid no cash dividends and have no present plan to pay cash dividends, intending
instead to reinvest our earnings, if any. Payment of future cash dividends will
be determined from time to time by our Board of Directors, based upon our future
earnings (if any), financial condition, capital requirements and other factors.
We are not presently subject to any contractual or similar restriction on our
present or future ability to pay such dividends.
Securities
Authorized for Issuance Under Equity Compensation Plans
In July,
2009, the Company’s shareholders approved the 2009 Stock Incentive Plan (the
“Plan”) which provides for awards including non-qualified stock options, common
stock, restricted stock, divided equivalent rights and stock appreciation rights
for its officers, employees, consultants and directors in order to attract and
retain such individuals and to enable them to participate in the long-term
success and growth of the Company. There are 5,000,000 shares of
Class A Common Stock reserved for distribution under the Plan, all of which were
available on December 31, 2009. Stock options that may be granted under the Plan
will generally be granted with an exercise price at or above the fair market
value of the underlying common stock at the date of grant, and will vest and
expire at such time as the administrator, currently the Company’s
Board of Directors, may determine.
Subject
to the terms of the Plan, the plan administrator, currently the Company’s Board
of Directors, shall determine the provisions, terms, and conditions of each
award including, but not limited to, the vesting schedules, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, shares, or other consideration) upon settlement, payment contingencies,
performance criteria for vesting and other matters. There were no
awards under the Plan as of December 31, 2009.
Sales
of Unregistered Securities
We sold
the securities listed below during the fourth quarter of 2009 without
registering the securities under the Securities Act of 1933.
During
October, 2009, we sold to an investor 20,000 Class A Common shares for $0.50 per
share and realized total proceeds of $10,000.
During
October, 2009, a holder of our promissory note converted $20,000 of the
principal due on this note into 80,000 Class A Common shares.
During
November, 2009, we issued an aggregate of 142,500 Class A Common shares valued
at $0.50 per share in connection with the purchase by two investors of our
promissory notes in the aggregate amount of $372,000.
During
December, 2009, we issued an aggregate of 10,000 Class A Common shares valued at
$0.50 per share in connection with the purchase by three investors of our
promissory notes in the aggregate amount of $225,788.
23
During
the period from October 1, 2009 to December 31, 2009, we issued an aggregate of
500,000 Class A common shares valued at $0.50 per share to three separate
consultants as payment
to implement and maintain digital advertising as well as future promotional and
marketing services.
On
November 6, 2009, we borrowed $300,000 and issued a convertible promissory note
payable twelve months from the date of issue. On or before the maturity date,
upon written notice to the Company, the Lender may elect to convert the
principal amount of this Note into Class A Common shares at a conversion price
of $0.50 per share.
On
November 17, 2009, we borrowed $72,000 and issued a convertible promissory note
payable twelve months from the date of issue. On or before the
maturity date, upon written notice to the Company, the Lender may elect to
convert the principal amount of this Note into Class A Common shares at a
conversion price of $0.50 per share.
On
December 18, 2009, we borrowed $10,000 and issued a convertible promissory note
payable twelve months from the date of issue. On or before the
maturity date, upon written notice to the Company, the Lender may elect to
convert the principal amount of this Note into Class A Common shares
at a conversion price of $0.50 per share.
On
December 31, 2009, we borrowed an aggregate of $25,000 and issued two
convertible promissory notes payable twelve months from the date of
issue. On or before the maturity date, upon written notice to the
Company, the Lenders may elect to convert the principal amount of the Notes
into Class A Common shares at a conversion price of $0.50 per
share.
There
were no brokerage commissions, underwriter’s discounts or similar items paid
with respect to any of the aforementioned issuances of securities.
The
Company believes all of the issuances of securities referred to in this Note
were exempt from registration under the Securities Act of 1933 pursuant to
Section 4(2) thereof and other available exemptions.
We sold
the securities listed below during the first quarter of 2010 without registering
the securities under the Securities Act of 1933.
During
January, 2010, we issued an aggregate of 150,000 Class A Common shares valued at
$0.50 per share to two potential lenders as payment for due diligence in
connection with prospective funding.
During
the period from January 1, 2010 to March 31, 2010, we sold to seventeen
investors an aggregate of 326,000 Class A Common shares valued at $0.50 per
share and realized total proceeds of $163,000.
During
the period from January 1, 2010 to March 31, 2010, we issued an aggregate of
15,000 Class A Common shares valued at $0.50 per share in connection with the
purchase by seven investors of our promissory notes in the aggregate amount of
$100,000.
24
During
the period from January 1, 2010 to March 31, 2010, we issued an aggregate of
235,000 Class A common shares valued at $0.50 per share to four separate
consultants as payment for promotional and marketing services.
Except as
set forth above, there were no brokerage commissions, underwriter’s discounts or
similar items paid with respect to any of the aforementioned issuances of
securities.
Purchase
of Equity Securities by the Issuer and Affiliated Purchasers.
During
the fourth quarter of our fiscal year ended December 31, 2009, the following
officers of the Company or “affiliate purchasers” (as defined in Rule 10b-18(a)
(3) under the Exchange Act) purchased shares of our Class A Common Stock, the
only class of our equity securities registered pursuant to section 12 of the
Exchange Act.
Bradley
T. Prader, CEO, purchased 9,250 shares via the publicly traded markets at an
average price of $0.60 per share.
Michael
C. Hovdestad, CLO, purchased 1,500 shares via the publicly traded markets at an
average price of $0.61 per share.
Steven G.
Weismann, CFO, purchased 4,000 shares via the publicly traded markets at an
average price of $0.50 per share.
These
purchases were made by the above mentioned individual persons and were not
purchased as part of a publicly announced plan or program.
Item
6. Selected Financial Data
As a
smaller reporting Company, we are not required to provide the information
required by the item.
25
Item
7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
General
The
following discussion of our results of operation constitutes management’s review
of the factors that affected our financial and operating performance for the
years ended December 31, 2009 and 2008. This discussion should be
read in conjunction with the financial statements and notes thereto contained
elsewhere in this report.
On June
12, 2009 we acquired all of the outstanding capital stock of Island Breeze
International (“IBI”), by issuing 30,000,000 shares (80.3% of our outstanding
shares as of that date) of our outstanding common shares to IBI’s
shareholder. We subsequently issued 5,866,844 shares (15.7% of our
outstanding shares as of that date) of our common stock in satisfaction of IBI
promissory notes.
This
reverse acquisition is being accounted for as a recapitalization of IBI with IBI
as the acquirer, and accordingly all comparative historical financial statements
will be those of IBI, which has a fiscal year ending on December
31.
The
discussion and analysis of our financial condition and results of operations is
based upon the financial statements of IBI through June 12, 2009, the date we
closed the Share Exchange, which have been prepared in accordance with
accounting principles generally accepted in the United States, and on a
consolidated basis, including the Company and IBI after June 12, 2009. The
preparation of these financial statements requires the Company to make estimates
and judgments that affect the reported amounts of assets and liabilities. On an
on-going basis, the Company estimates on historical experience and on various
other assumptions that, we believe to be reasonable under the circumstances, the
results of which form the Company’s basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
IBI was
incorporated under the laws of the Cayman Islands on September 27, 2006.
IBI was in the development stage since inception to facilitate the purchase and
renovation of our proposed cruise gaming vessels.
We cannot
predict what future laws and regulations might be passed that could have a
material effect on its results of operations. We assess the impact of
significant changes in laws and regulations on a regular basis and update the
assumptions and estimates used to prepare our financial statements when we deem
it necessary.
Our
primary sources of funding to date have been capital contributions by our
majority shareholder and others and cash provided by short-term
borrowings. Our primary uses of funds have been for capital expenditures
as well as general and administrative expenses.
We may
decide to acquire another vessel from which we can commence our initial
operations. It would be anticipated that such a vessel will have a
sufficient amount of cabins to accommodate passengers on overnight or multi-day
cruises versus the shorter duration cruises that can be operated by either the
Island Breeze or the Casino Royale.
We also believe that the Casino Royale is particularly well suited to the
day trip pattern more typical to the U.S. market than the more open sea travel
typical to East Asia markets. Therefore, we are examining our plans
for this vessel and may sell the vessel rather than renovate it.
26
Results
of Operations
We are a
development stage company. Since inception, our efforts have been
principally devoted to the acquisition and renovation of two vessels to be used
in its entertainment cruise business. From inception, September 27, 2006, to
December 31, 2009, we have sustained accumulated losses of $3,031,255.
Included in the loss were general and administrative expenses as well as
professional fees not associated with the purchase and renovation of our
vessels.
Balance
Sheet Discussion
As
of December 31, 2009 and 2008
As of
December 31, 2009, our total assets were $17,135,620, total liabilities
were $1,546,145 and shareholders’ equity was $15,589,475 compared to
$15,366,084, $5,766,014 and $9,600,070, respectively, as of December 31,
2008. Current assets at December 31, 2009 were $430,823 consisting of cash
and cash equivalents of $77,333 and prepaid expenses of $353,490 compared to
$64,016, $59,016 and $5,000, respectively, for the period ending December 31,
2008. Included in total assets as of December 31, 2009
are property, and equipment, net of depreciation, of $8,860 and other
assets of $16,695,937 consisting of the cost of vessels we have acquired
and costs related to renovations of the vessels compared to $10,771 and
$15,291,297, respectively, for the period ending December 31, 2008 with respect
to these items.
As of
December 31, 2009, our total liabilities and our current liabilities were
$1,546,145 consisting of officer loans and notes payables in the amount
$358,700, accounts payable of $529,140, convertible notes payable of $412,452
and accrued expenses of $245,853 compared to total liabilities of $5,766,014,
current liabilities of $5,266,014, officer loan and notes payables of
$90,371, accounts payable of $285,255, convertible notes payable of $4,849,643,
and accrued expenses of $40,745, for the period ending December 31, 2008.
The significant decrease in our liabilities in 2009 compared to 2008 resulted
from our conversion of $5,566,795 (inclusive of accrued interest) in Convertible
Promissory Notes converted into 5,566,795 Class A common shares at $1.00 per
share.
The net
cash used in our operating activities in the twelve-month period ended December
31, 2009 was $664,203, an increase of $302,898 from that used in the
twelve-month period ended December 31, 2008, which net increase was affected by
increases in our net loss year over year, prepaid expenses and accrued
expenses.
Cash and
cash equivalents as of December 31, 2009 increased by $18,317, as compared to
December 31, 2008. Net cash used in investment activities in the
twelve-month period ended December 31, 2009 was $1,188,237, consisting of
acquisition and renovation of property and equipment, a decrease of $5,079,987
compared to the cash used in investment activities during the twelve-month
period ended December 31, 2008. Net cash from financing activities in the twelve-month
period ended December 31, 2009 was $1,870,757, compared to $6,472,690 from the
period ended December 31, 2008, consisting of proceeds from issuance of
convertible notes, loans, and capital
contributions.
27
Our
capital expenditure plan for 2010 is estimated to approximate $30,000,000 to
facilitate our renovation plan, purchase of gaming equipment, hiring of
additional personnel, terminal improvements, marketing, working capital
reserves, and general corporate purposes. We require additional
financing to continue. The Company expects financing will be supplied
by additional capital contributions from the Company’s shareholders, long-term
debt, the sale of securities or a combination thereof. There can be no
assurance that financing from such sources or from any sources will be
available to us.
Liquidity
and Capital Resources
We have
funded our activities to date through capital contributions from our
shareholders, short term loans, convertible notes and issuance of our common
stock. Since our inception, September 27, 2006, thru December 31,
2009, we received $18,580,295 in capital contributions from our
shareholders. As of December 31, 2009, we had shareholders’ equity of
$15,589,475, but little cash on hand.
We have
three short term loans outstanding totaling an aggregate of $90,000 which we owe
to the officers of the Company. The loans bear interest at the rate
of 5% annum with initial due dates of December 1 and December 5, 2008. On the
respective due dates the loans (including accrued interest) were extended for a
period of one-year at the stated interest rate.
In May
2008 and September 2008, we borrowed an aggregate of $5,000,000 and issued
convertible notes due on different dates commencing in November, 2009 and ending
in March, 2010, eighteen months from the date of each loan, together with
interest at the rate of 12% per annum. The principal amount and
accrued interest due on the notes automatically converted into shares of our
common stock, at $1.00 per share, after the consummation of the reverse
acquisition on June 12, 2009, on which date we issued 5,566,795 shares of our
common stock in satisfaction of the notes.
On June
4, 2009, we borrowed $50,000 and issued a promissory note to a lender affiliated
with one of our directors. The promissory note provides for interest
at the rate of 5% per annum and is payable along with principal, sixty days from
date of issue. On August 5, 2009 we reissued the promissory note
under the original terms, for $50,411, which included the original principal
plus accrued interest. We also issued 10,000 shares of Class A common
stock in connection with this loan. The promissory note was payable
60 days from date of issue. On October 13, 2009, we made a principal
payment of $17,000 and reissued the promissory note under the original terms for
$33,797, which included the remaining principal plus accrued
interest. The promissory note is payable 60 days from date of
issue. On November 10, 2009 and December 4, 2009, respectively, we
made principal payments on this note of $17,000 and $8,000,
respectively. On December 31, 2009 the balance due on this note was
$9,072, which includes outstanding principal and accrued
interest.
28
On June
8, 2009, we borrowed $50,000 and issued a promissory note evidencing the
loan. This loan, plus interest at the rate of 5% annum was payable
August 8, 2009. We also issued 10,000 shares of Class A common stock
in connection with this loan. On August 9, 2009 we reissued the promissory note
under the original terms, for $50,411, which included the original principle
plus accrued interest. The promissory note was payable 60 days from
date of issue. We also issued 10,000 shares of Class A common stock
in connection with the extension of this loan. On October 8, 2009,
the lender converted $20,000 of principal into 80,000 shares of Class A Common
Stock and reissued the promissory note under the original terms for $30,832,
which included the remaining principal plus accrued interest. On
November 10, 2009, we paid the lender $31,005, which included all outstanding
principal and accrued interest.
On June
18, 2009, we borrowed $250,000 and issued a promissory note evidencing the
loan. This loan, plus interest at the rate of 12% per annum was
payable 90 days from the date of issue. We also issued 25,000 shares
of Class A common stock in connection with this loan. On September
17, 2009 we reissued the promissory note under the original terms, for $227,479,
which included the original principal amount less a $30,000 principal repayment,
plus accrued interest. The promissory note is payable 90 days from
date of issue. We also issued 25,000 shares of Class A common stock
in connection with the extension of this loan. On December 17, 2009,
we reissued the promissory note under the original terms, for $200,788, which
included the original principle amount less a $30,000 principal repayment, plus
accrued interest. The promissory note is payable 104 days from date
of issue. We also issued 5,000 shares of Class A common stock in
connection with the extension of this loan. On December 31, 2009, the
balance due on this note was $205,200, which includes outstanding principal and
accrued interest.
On
October 9, 2009, we borrowed $49,000 and issued a promissory note to Olympian
Cruises, LLC. The promissory note provides for interest at the rate of 5% per
annum and is payable along with principal, one year from the date of
issue. On December 31, 2009, the balance due on this note was $49,557,
which includes outstanding principal and accrued interest.
On
November 6, 2009, we borrowed $300,000 and issued a convertible promissory note
evidencing the loan. This loan, plus interest at the rate of 10% per
annum, is payable twelve months from the date of issue. Pursuant to
the terms of this note, on or before the maturity date, upon written notice, the
lender may elect to convert the principal amount of this note into shares of
Class A common stock at a conversion price of $0.50 per share. We
also issued 120,000 shares of Class A common stock in connection with this loan.
On December 31, 2009, the balance due on this note was $304,521, which includes
outstanding principal and accrued interest.
On
November 17, 2009, we borrowed $72,000 and issued a convertible promissory note
evidencing the loan. This loan, plus interest at the rate of 10% per
annum, is payable twelve months from the date of issue. Pursuant to
the terms of this note, on or before the maturity date, upon written notice, the
lender may elect to convert the principal amount of this note into shares of
Class A common stock at a conversion price of $0.50 per share. We
also issued 22,500 shares of Class A common stock in connection with this
loan. On December 31, 2009, the balance due on this note was $72,868,
which includes outstanding principal and accrued interest.
29
On
December 18, 2009, we borrowed $10,000 and issued a convertible promissory note
evidencing the loan. This loan, plus interest at the rate of 10% per
annum, is payable twelve months from the date of issue. Pursuant to
the terms of the note, on or before the maturity date, upon written notice, the
lender may elect to convert the principal amount of this note into shares of
Class A common stock at a conversion price of $0.50 per share. On December 31,
2009, the balance due on this note was $10,063, which includes outstanding
principal and accrued interest.
On
December 31, 2009, we borrowed $10,000 and issued a convertible promissory note
evidencing the loan. This loan, plus interest at the rate of 10% per
annum, is payable twelve months from the date of issue. Pursuant to
the terms of the note, on or before the maturity date, upon written notice, the
lender may elect to convert the principal amount of this note into shares of
Class A common stock at a conversion price of $0.50 per share. We
also issued 2,000 shares of Class A common stock in connection with this loan.
December 31, 2009, the balance due on this note was $10,000, which includes
outstanding principal and accrued interest.
On
December 31, 2009, we borrowed $15,000 and issued a convertible promissory note
evidencing the loan. This loan, plus interest at the rate of 10% per
annum, is payable twelve months from the date of issue. Pursuant to
the terms of the note, on or before the maturity date, upon written notice, the
lender may elect to convert the principal amount of this note into shares of
Class A common stock at a conversion price of $0.50 per share. We
also issued 3,000 shares of Class A common stock in connection with this
loan. December 31, 2009, the balance due on this note was $15,000,
which includes outstanding principal and accrued interest.
During
October, 2009, we sold to an investor 20,000 Class A Common shares for $0.50 per
share and realized total proceeds of $10,000.
During
October, 2009, a holder of our promissory note converted $20,000 of principal of
this Note into 80,000 Class A Common shares.
During
November, 2009, we issued an aggregate of 142,500 Class A Common shares valued
at $0.50 per share in connection with the purchase by two investors of our
promissory notes in the aggregate amount of $372,000.
During
December, 2009, we issued an aggregate of 10,000 Class A Common shares valued at
$0.50 per share in connection with the purchase by three investors of our
promissory notes in the aggregate amount of $225,788.
During
the period from October 1, 2009 to December 31, 2009, we issued an aggregate of
500,000 Class A common shares valued at $0.50 per share to three separate
consultants as payment to implement and maintain digital advertising as well as
future promotional and marketing services.
Impact
of Inflation
Since we
have had no operations to date, inflation has not affected the results of our
operations, but may affect the costs we will incur to complete the renovation of
our vessels. Do not expect such consequences to be significant given
the current economic client.
30
Liquidity
- Activity Subsequent to December 31, 2009
On
January 6, 2010, we entered into a drawdown equity financing agreement and
registration rights agreement with Auctus Private Equity Fund, LLC
(“Auctus”). Under the terms of the agreement (the “Financing
Agreement”), Auctus has committed, subject to certain conditions, to purchase up
to $10,000,000 of our Class A Common stock over a term of three
years. Although we are not obligated to sell shares
under the equity financing facility, the Financing Agreement gives us
the option to sell Auctus Class A Common Shares at a per share purchase price
of equal to 95% of the lowest closing bid price during the five
trading days following our delivery of notice to Auctus (the
“Notice”). At our option, we may set a floor price under which Auctus
may not sell the shares which were the subject of the
Notice. The maximum number of shares of Class A
Common Stock that we can include in any Notice is the greater of: (i) shares
with a purchase price of $150,000 or (ii) 200% of the average daily trading
volume of our Class A Common Stock for ten days preceding the drawdown notice
date.
Auctus is
not required to purchase the shares, unless the shares which are subject to the
Notice have been registered for resale under the Securities Act of
1933. The Company is obligated to file a registration statement
within 90 days and to use all commercially reasonable efforts to have such
registration statement declared effective within 120 days of
filing. The Company issued and delivered 50,000 shares of its Class A
Common Stock to Auctus as an origination fee with respect to the subject
transaction.
In
February 2010, we borrowed an aggregate of $100,000 from six individuals and
issued convertible notes due commencing twelve months from the date of each loan
together with interest at the rate of 10% per annum.
In
February 2010, we sold to twelve investors an aggregate of 202,000 Class A
common shares for total proceeds of $101,000.
In March
2010, we sold to four investors an aggregate of 124,000 Class A common shares
for total proceeds of $62,000.
31
Liquidity
– General Requirements
Based
upon our current cash reserves and forecasted operations, we believe that we
will need to obtain at least $15,000,000 of outside funding to provide the
working capital necessary to complete the renovation of the Island Breeze,
purchase the necessary equipment for the vessel and commence operations, and at
least another $15,000,000 of funding in order to complete the renovation and
purchase the equipment necessary to launch our second vessel, the Casino Royal,
if we decide to rehabilitate and launch this vessel. Our need for
additional capital to finance our business strategy, operations, and growth will
be greater should, among other things, revenue or expense estimates prove to be
incorrect. If we fail to arrange for sufficient capital in the future, we will
not be able to initiate operations until we can obtain adequate financing.
Furthermore, we may be required to sell interests in one or both of our vessels
to secure the financing we require. If we are unable to secure the
required financing we may also attempt to sell one of our vessels in order to
move forward with the renovation of the second.
Off
Balance Sheet Arrangements
Not
applicable.
Critical
Accounting Policies
Our
significant accounting policies are more fully described in Note 2 to the
audited financial statements. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and the related
disclosures of contingent assets and liabilities. Actual results could differ
from those estimates under different assumptions or conditions. We believe the
following critical accounting policies are subject to estimates and judgments
used in the preparation of these reports.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.
Prepaid
Expenses
Prepaid
expenses are primarily comprised of advance payments made to vendors for
inventory and services. The Company records prepaid expenses at the
expected recovery amount.
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk
We do not
hold instruments that are sensitive to changes in interest rates, foreign
currency exchange rates or commodity prices. Therefore, we believe that we are
not materially exposed to market
risks resulting from fluctuations from such rates or prices. Currency
and exchange rate fluctuations may negatively impact our financial
results. We expect to pay for the renovations of one of our vessels
(the Island Breeze) in Euros and will therefore be adversely effected if the
value of the U.S. dollar declines against the Euro. Furthermore,
currency fluctuations will directly affect our operational results if we operate
in foreign countries.
32
Item
8. Financial Statements and Supplementary Data
The
financial information required by this item is set forth beginning on page F-1
and is incorporated herein by reference.
Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On June
12, 2009, we dismissed Kyle L. Tingle, CPA, LLC (“KLT Audit”) as our independent
certified public accountants. The decision was approved by our Board of
Directors.
The
report of KLT Audit on the Goldpoint Resources, Inc., (“Goldpoint”) financial
statements for its fiscal years ended December 31, 2007 and 2008 indicated
conditions which raised substantial doubt about Goldpoint’s ability to continue
as a going concern. During Goldpoint’s fiscal years ended December 31,
2007 and 2008 and the subsequent interim periods preceding the termination,
there were no disagreements with KLT Audit on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction of KLT Audit
would have caused KLT Audit to make reference to the subject matter of the
disagreements in connection with its report on the financial statements for such
years or subsequent interim periods.
The
resignation of KLT Audit and the appointment of Bernstein & Pinchuk LLP of
New York, New York (“BP”) as our independent registered public accounting firm
were reported in our Current Report on Form 8-K/A filed with the Securities and
Exchange Commission (“SEC”) on July 10, 2009.
We
provided KLT Audit with a copy of the disclosure in our Form 8-K/A reporting the
dismissal of KLT Audit and KLT Audit furnished the SEC with a letter stating its
agreement with our statements in Item 4.01(a) of that Current Report on Form
8-K/A, which letter was filed as Exhibit 16.1 to that Form 8-K/A.
Effective
June 12, 2009, BP was engaged as our new independent registered accounting
firm. During the two most recent fiscal years and the interim period
preceding the engagement of BP, we have not consulted with BP regarding either:
(i) the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
our financial statements; or (ii) any matter that was either the subject of a
disagreement or event identified in paragraph (a)(1)(iv) of Item 304 of
Regulation S-K.
33
Item
9A. Controls and Procedures
DISCLOSURES
CONTROLS AND PROCEDURES
We have
adopted and maintain disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) that are designed to provide reasonable assurance
that information required to be disclosed in our reports under the Exchange Act,
is recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required
disclosure.
Our Chief
Executive Officer and our Chief Financial Officer evaluated the effectiveness of
our disclosure controls and procedures as of December 31, 2009 as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our management recognizes
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on the evaluation of our disclosure
controls and procedures as of December 31, 2009, our Chief Executive Officer,
who also is our principal executive officer, and our Chief Financial Officer,
who is our principal financial officer, concluded that, as of such date, our
disclosure controls and procedures were effective to provide reasonable
assurance that information required to be declared by us in reports that we file
with or submit to the SEC is (1) recorded, processed, summarized, and reported
within the periods specified in the SEC’s rules and forms and (2) accumulated
and communicated to our management, including our Chief Executive Officer and
our Chief Financial Officer, to allow timely decisions regarding required
disclosure.
Item
9A (T). Controls and Procedures
MANAGEMENT’S
ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our internal control
over financial reporting includes those policies and procedures that are
intended to:
|
1.
|
pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our
assets;
|
|
2.
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of Americas, and that
our receipts and expenditures are being made only in accordance with
authorizations of our management and directors;
and
|
|
3.
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of our assets that could
have a material effect on our financial
statements.
|
34
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management's
assessment of the effectiveness of the small business issuer's internal controls
over financial reporting is as of the year ended December 31, 2009. We believe
that our internal controls over financial reporting are effective. We have not
identified any, current material weaknesses considering the nature and extent of
our current operations and any risks or errors in financial reporting under
current operations. In making this assessment, management used the
criteria set forth in the Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal controls over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only management's report in this annual report.
There was
no change in our internal controls over financial reporting that occurred during
the fiscal quarter ended December 31, 2009, that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.
Item
9B. Other Information
None.
Item
10. Directors, Executive Officers and Corporate
Governance
The
following are our executive officers and directors; each of whom has served
since the closing of the Share Exchange on June 12, 2009.
|
Name
|
Age
|
Positions and
Offices
|
|
Bradley
T. Prader
|
37
|
Chief
Executive Officer ; President; and Chairman
|
|
Sean
F. McManimon
|
50
|
Chief
Operating Officer; and Director
|
|
Michael
C. Hovdestad
|
37
|
Chief
Legal Officer; Secretary; and Director
|
|
Steven
G. Weismann
|
48
|
Chief
Financial Officer
|
|
Thomas
L. Schneider
|
64
|
EVP
of Maritime Operations; and Director
|
|
Craig
A. Szabo
|
56
|
Director
|
35
Bradley
T. Prader
Mr.
Prader has served as our President, Chief Executive Officer, and the Chairman of
our Board of Directors since we closed the Share Exchange. Prior to
such time, he held the same offices with IBI. Prader is a founder and
a Manager of Olympian Cruises, LLC, which was the sole shareholder of IBI prior
to the Share Exchange. From September 2001 to April 2003, Prader was
Chief Executive Officer of Titan Development Group, LLC and its wholly owned
subsidiary, Titan Cruise Lines. During this time, Prader was
responsible for the development of Titan’s gaming vessel project in Florida
(Titan Development Group, LLC has divested its interest in Titan Cruise Lines to
a private investment group). Prior to Titan, Prader was the Chief
Executive Officer of Global Access Holdings, Inc., a New York based equity
trading and software development company conducting business in North America,
Europe, Russia, China, Taiwan, and Australia. Previously, Prader was
a business consultant providing strategic planning, business advisory, and
capital development services to developing and mid-sized
companies. Prader was also a co-founder of a business-to-business
infrastructure company, Chief Operating Officer of a trading technology firm,
financial analyst at Radnor Advisors, a real estate investment/development firm,
as well as an investment banker at Viking Graham, a Philadelphia investment
banking and private equity firm. Although Prader is not currently
registered with a FINRA firm (most recent registration was from July 2006 to
December 2007 with Grossman & Co, LLC), he holds the Series 7, 24, 55, and
63 securities licenses. Prader holds a B.S.B.A. in finance from
Villanova University College of Commerce and Finance.
Sean F.
McManimon
Mr.
McManimon has served as our Chief Operating Officer and a member of our Board of
Directors since we closed the Share Exchange. Prior to such time, he
held the same offices with IBI. McManimon will be responsible for all
of our casino operations. McManimon is a founder and a principal of
Olympian Cruises, LLC, which was the sole shareholder of IBI prior to the Share
Exchange. From September 2001 to April 2003, McManimon was Chief
Operating Officer of Titan Development Group, LLC and its wholly owned
subsidiary Titan Cruise Lines. During this time, McManimon was responsible
for development of Titan’s gaming vessel project in Florida (Titan Development
Group, LLC has divested its interest in Titan Cruise Lines to a private
investment group). McManimon has over thirty (30) years experience in
casino and hospitality operations. From May 1978 to January 2006,
McManimon has held multiple Casino Games Manager positions for Resorts
International in Atlantic City, New Jersey. In this capacity,
McManimon was responsible for the management of a 95,000+ square foot casino;
including daily reconciliation and analysis of cash and gaming tokens, and the
management of more than six hundred (600) casino employees. Additionally,
McManimon was the co-founder and Chief Operating Officer of Casino Technology,
Inc., co-founder of Global Optical Solutions, Inc., as well as a gaming
consultant for ABC Television and Gerson Lehrman Group Council, and gaming
instructor at the Casino Career Institute for Atlantic County Community
College.
36
Michael C. Hovdestad,
Esq.
Mr.
Hovdestad has served as our Chief Legal Officer, Secretary and a member of our
Board of Directors since we closed the Share Exchange. Prior to such
time, he held the same position with IBI. Hovdestad is responsible
for coordinating all legal affairs of the Company. Hovdestad is a
founder and a principal of Olympian Cruises, LLC, which was the sole shareholder
of IBI prior to the Share Exchange. Hovdestad is an attorney
practicing with the law firm of Parker McCay, P.A. where he has been employed
since 2001 and is admitted to practice in New Jersey, Pennsylvania and before
the Federal District Court of New Jersey. He is a member of the New
Jersey and Pennsylvania Bar Associations. He represents established
and emerging growth companies in the areas of Tax Law, Corporate Law, Venture
Capital and Employee Benefits. Hovdestad represented Titan
Development Group, LLC from its inception to the divestiture of its wholly owned
subsidiary, Titan Cruise Lines. Hovdestad received his B.S.B.A. in
finance from the Villanova University College of Commerce and Finance. He
received his J.D. from the Seton Hall University School of Law in Newark, New
Jersey. Hovdestad received his LLM in taxation from the Villanova
University School of Law.
Thomas L.
Schneider
Mr.
Schneider has served as our Executive Vice President of Maritime Operations and
member of our Board of Directors since we closed the Share
Exchange. Prior to such time, he held the same position with
IBI. Schneider is responsible for the oversight of the renovation and
operation of the Company’s vessels. Schneider is a principal of
Olympian Cruises, LLC, which was the sole shareholder of IBI prior to the Share
Exchange. In 1996, Schneider founded The InterMar Group, a
multi-faceted ship’s brokerage and maritime advisory company for passenger
vessel related projects. The InterMar Group began advising marine clients
both in the USA and worldwide. Through Riverboat Management, Inc., a
gaming vessel consultancy founded by Schneider in the early 1990’s, Schneider
has managed the marine operations (including construction, docking facilities,
start-up and on-going operations) of gaming vessels in Indiana,
Illinois, Iowa and Florida as well as offshore Mexico. Previously,
Schneider was Project Manager for Lady Luck Gaming Corporation where he was
responsible for site analysis, outside consultant coordination, gaming license
application, berth layout and shipyard coordination. From 1984 to 1990, he
acted as a Marine Consultant to tanker companies, both domestic and
internationally. From 1977 to 1984, Schneider held positions as Vessel
Master, Senior Advisor and Manager of Vessel Services for Atlantic Richfield
Company (ARCO) where his responsibilities included management and direction of
the vessel operations of fourteen (14) tank vessels (ten (10) domestic and four
(4) foreign). Schneider graduated from the United States Merchant Marine
Academy (Kings Point, NY) and has an MBA from Pepperdine University.
Schneider also holds a U.S. Coast Guard license as Master of Steam and Motor
Vessels, Any Gross Tons, Any Waters, Unlimited and a First Class Pilot’s License
for Valdez, Alaska.
Craig A.
Szabo
Mr. Szabo
has served as a member of our Board of Directors since we closed the Share
Exchange. Szabo is a member of Olympian Cruises, LLC, which was the
sole shareholder of IBI prior to the Share Exchange. Szabo is a CPA
that has practiced public accounting since 1974 and has been President and owner
of Szabo Accountancy Corp. since 1984. He began his career with a
large national CPA firm where he worked for ten (10) years and rose to the
position of Audit Manager. Szabo then formed his own practice in
1984, where he services clients in many industries including medical, real
estate, sports, and entertainment. Szabo graduated from Cal State
University Northridge in 1974 with a B.S. in Business Administration
Accounting. He is a member of the American Institute of Certified
Public Accountants and California Society of Certified Public
Accountants. Szabo has also been an active real estate developer and
currently co-manages a portfolio of commercial properties.
In
addition to Bradley T. Prader, Sean F. McManimon, Michael C. Hovdestad, Thomas
L. Schneider and Craig A. Szabo, who are Members of our Board of Directors, the
following person serves as an executive officer of the
Company.
37
Steven G.
Weismann
Mr.
Weismann has served as our Chief Financial Officer since we closed the Share
Exchange. Mr. Weismann is responsible for overseeing the financial
operations of the Company. Weismann is a principal of Olympian
Cruises, LLC, which was the sole shareholder of IBI prior to the Share
Exchange. From April 2000 to February 2005, Mr. Weismann was
co-founder and President of Global Access Ventures, LLC, a financial consulting
company that advised on potential investment, merger, acquisition and U.S.
public offering opportunities for qualified China based
companies. Prior to Global Access Ventures, Weismann was the Chief
Financial Officer and served as a Director for Seair Group, Inc., and Gourmet
Group, Inc., two publicly traded companies. Included in his
responsibilities were conducting current and forecast accounting as well as
required SEC filings and compliance audits. Weismann served for eight
(8) years in the United States Navy nuclear program. Weismann
graduated with honors from the Naval Nuclear Power School. Mr.
Weismann holds a B.S. from Thomas Edison State College.
Information
Concerning the Board of Directors, Board Committees and Corporate
Governance
Board
Composition
Our Board
of Directors consists of five (5) directors. Our Board has determined that it
has no "independent directors" under the corporate governance rules and
regulations of NASDAQ.
Committees
of the Board
Since
the Company's common stock is quoted on the OTC Bulletin Board and as a result
is not subject to exchange listing requirements, the Board has no immediate
plans or need to establish an audit committee with a financial expert or a
compensation committee to determine guidelines for determining the compensation
of its executive officers or directors. For similar reasons, the Company has not
established a nominating committee, or a written policy for considering
recommendations from shareholders for candidates to serve as directors or with
respect to communications from shareholders.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
directors and executive officers, and persons who beneficially own more than 10%
of a registered class of the Company’s equity securities, to file report of
beneficial ownership and changes in beneficial ownership of the Company’s
securities with the SEC on Forms 3 (initial Statement of Beneficial Ownership),
4 (Statement of Changes of Beneficial Ownership of Securities) and 5 (Annual
Statement of Beneficial Ownership Securities). Directors, executive
officers and beneficial owners of more than 10% of the Company’s common stock
are required by SEC regulations to provide the Company with copies of all
Section 16(a) forms that they file. Except as otherwise set forth
herein, based solely on review of the copies of such forms furnished to the
Company, or written representations that no reports were required, the Company
believes that each current officer, director and beneficial owner of 10% or more
of the Company’s securities filed a Form 3 with the SEC and has had no change of
ownership since such filing and that all of such persons has complied with the
Section 16(a) filing requirements applicable to them. Mr. Patrick
Orr, a director, and Mr. James Orr, president and chief financial officer of the
Company prior to the consummation of the Exchange Agreement, each filed Forms 3
with the SEC after the date on which the forms were required to be filed. Catino
SA, which owns more than 10% of our common stock failed to file a Form 3 with
the SEC with respect to its ownership of our common stock.
38
Code
of Ethics
The
Company has adopted a written code of ethics that applies to the Company's
principal executive officer, principal financial officer, principal accounting
officer and any persons performing similar functions. The Company will provide a
copy of its code of ethics to any person without charge upon written request
addressed to 211 Benigno Blvd, Suite 201, Bellmawr, New Jersey
08031.
Item
11. Executive Compensation
The
following table shows for fiscal years ended December 31, 2009 and 2008,
respectively, compensation awarded or paid to, or earned by, the following
persons in all capacities (collectively, the "Named Executive Officers”) Bradley
T. Prader, our President, Chief Executive Officer and Chairman and Patrick Orr,
Goldpoint’s President until the consummation of the Share Exchange.
None of
our executive officers earned more than $100,000 in salary and bonus for the
2009 or 2008 fiscal years. We did not grant options to acquire shares of our
common stock to them during the period indicated.
SUMMARY
COMPENSATION TABLE
|
NAME AND PRINCIPAL POSITION
|
FISCAL
YEAR
|
SALARY
($)
|
BONUS
($)
|
STOCK
AWARDS
($)
|
ALL OTHER
COMPENSATION
($)
|
TOTAL
($)
|
|||||||||||||||
|
Bradley
T. Prader
|
2009
|
$ | 75,000 | $ | 0 | $ | 0 | $ | 25,644 | $ | 100,644 | ||||||||||
|
President;
Chief Executive Officer; and Chairman (1)
|
2008
|
$ | 75,000 | $ | 0 | $ | 0 | $ | 20,520 | $ | 95,520 | ||||||||||
|
Patrick
Orr
|
2009
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
|
President(2)
|
2008
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
(1) Of
this amount, Mr. Prader was paid $50,455 in 2009 and $71,346 in 2008, the
remainder of the amount shown for 2008 and 2009, $3,654 and $24,545,
respectively, has been accrued by the Company and has not been
paid. Other compensation of $25,644 in fiscal 2009 and $20,520 in
fiscal 2008 represents payments of health insurance premiums.
(2) Mr.
Orr served as Goldpoint’s President until the consummation of the Share Exchange
on June 12, 2009.
39
INCENTIVE
PLANS
In July,
2009, the Board adopted and our shareholder’s approved our 2009 Stock Incentive
Plan which authorized the issuance of up to 5,000,000 shares of our Common Stock
to eligible individuals. No awards were made under the plan through
December 31, 2009.
OPTION
GRANTS IN LAST FISCAL YEAR
We did
not grant to the Named Executive Officers options to purchase shares in fiscal
2009 or 2008.
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
None of
our officers held options to purchase shares of our common stock during fiscal
2009 or 2008.
EMPLOYMENT
AGREEMENTS
We have
not entered into employment agreements with our executive officers or other
employees to date. We may enter into employment agreements with them in the
future.
Director
Compensation
We have
not compensated our Board members for their participation on the Board and do
not have any standard or other arrangements for compensating them for such
service. We may issue shares of our common stock or options to
acquire shares of our Common Stock to members of our Board of Directors in
consideration for their services as members of our Board of
Directors. We do expect to reimburse Directors for expenses incurred
in connection with their attendance at meetings of the Board of
Directors.
40
Item
12. Security Ownership of Certain Beneficial Owners and Management
and Related Shareholder Matters
The
following table sets forth, as of March 31, 2010, certain information regarding
the ownership of our Class A Common Stock and Class B Common Stock by each
stockholder known to our management to be (i) the beneficial owner of more than
5% of our outstanding stock of each of these classes, (ii) our directors, (iii)
our executive officers, and (iv) all executive officers and directors as a
group. We believe that, except as otherwise indicated, the beneficial owners of
our common stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares. Percentage of
ownership is based on 41,126,350 shares of common stock issued and outstanding
at March 31, 2010, plus, as to the holder thereof only and no other person, the
number of shares of common stock which may be acquired on conversion of any
shares of common stock we may have outstanding or are subject to options,
warrants and convertible debentures exercisable or convertible within 60 days of
March 31, 2010 by that person. Except as otherwise stated in the
table, the addresses of the holder is c/o our Company at 211 Benigno Blvd,
Bellmawr, New Jersey 08031.
|
Name
|
Number
of
|
Percentage
of
|
Percentage
|
||
|
Shares(1)
|
Class
|
of the
Vote
|
|||
|
Owner
of More Than 5%
of Class
|
Class
A
Common
Stock*
|
Class
B
Common
Stock
|
Class
A
Common
Stock
|
Class
B
Common
Stock
|
|
|
Olympian
Cruises, LLC
|
13,889,500
|
16,110,500
|
55.5%
|
100%
|
94%
|
|
Olympian
Entertainment, LLC(2)
|
13,889,500
|
16,110,500
|
55.5%
|
100%
|
94%
|
|
Catino,
SA (3)
|
5,566,795
|
0
|
22.3%
|
0%
|
3%
|
|
Directors
and Executive Officers
|
|||||
|
Bradley
T. Prader (4)(6)
|
13,900,250
|
16,110,500
|
55.6%
|
100%
|
94%
|
|
Sean
F. McManimon (4)
|
13,889,500
|
16,110,500
|
55.5%
|
100%
|
94%
|
|
Michael
C. Hovdestad (4)(6)
|
13,892,000
|
16,110,500
|
55.5%
|
100%
|
94%
|
|
Thomas
L. Schneider
|
0
|
0
|
0%
|
0%
|
0%
|
|
Craig
A. Szabo (5)
|
70,000
|
0
|
0.3%
|
0%
|
0%
|
|
Steven
G. Weismann
|
4,000
|
0
|
0.0%
|
0%
|
0%
|
|
All
Directors and Executive
|
13,907,750
|
16,110,500
|
55.6%
|
100%
|
94%
|
|
Officers
as a group (6 persons)
|
|||||
* Assumes
the conversion of the shares of Class B Common Stock owned by the stockholder
listed in the table at the conversion rate of 1 share of Class A Common Stock
for each share of Class B Common Stock, but not for any other
holder. The Class A and Class B Common Stock are substantially
identical except that holders of Class A Common Stock have the right to cast one
vote for each share held of record and holders of Class B Common Stock have the
right to cast ten votes for each share held of record on all matters submitted
to a vote of holders of common stock.
41
(1)
Unless otherwise indicated, includes shares owned by a spouse, minor children
and relatives sharing the same home, as well as entities owned or controlled by
the named person. Unless otherwise noted, shares are owned of record
and beneficially by the named person.
(2)
Consists of 13,889,500 shares of Class A Common Stock and 16,110,500 shares of
Class B Common Stock owned by Olympian Cruises, LLC of which Olympian
Entertainment, LLC is the managing member with the power to vote and dispose of
such shares.
(3) The
address of Catino, SA is Aquilino de la Guardia 8, P.O. Box 0823-02435, Panama,
Republic of Panama.
(4)
Consists of 13,889,500 shares of Class A Common Stock and 16,110,500 shares of
Class B Common Stock owned by Olympian Cruises, LLC which Messrs. Prader,
McManimon and Hovdestad share voting power and the power to dispose of the
shares as managing members of Olympian Entertainment, LLC.
(5)
Consists of 60,000 shares of Class A Common Stock owned by Olympian Cruises, LLC
which Mr. Szabo is a beneficial owner and 10,000 shares of Class A Common Stock
owned by a company in which Mr. Szabo is a principle owner with the power to
vote and dispose of such shares.
(6)
Includes 10,750 shares of Class A Common Stock and 2,500 shares of Class A
Common Stock which Messrs. Prader and Hovdestad, respectively, purchased via the
public market.
Item
13. Certain Relationships and Related Transactions, and Director
Independence
On June
12, 2009, immediately prior to the Share Exchange, Goldpoint redeemed 2,000,000
shares of its common stock from Patrick Orr, Goldpoint’s former President and
one of two members of its Board of Directors prior to the Share Exchange, in
consideration for a convertible promissory note in the amount of $600,000 (the
“Orr Note”). Pursuant to its terms, the Orr Note matured on September
12, 2009, unless sooner converted by the holder at a conversion price of $1.00
per share. The Note also provided that we could force the conversion
of the Orr Note on or before the maturity date on written demand, provided we
pay Mr. Orr $50,000. We paid Mr. Orr the $50,000 in the third quarter
of 2009 and issued and delivered 600,000 shares of our Class A Common Stock to
Mr. Orr in the fourth quarter of 2009 in full satisfaction of the Orr
Note.
As of
June 12, 2009, Olympian, a Delaware limited liability company, acquired control
of Goldpoint (our predecessor company) in a transaction we have referred to
herein as the “Share Exchange”
or the “Reverse Acquisition”. As of such date, Goldpoint issued
30,000,000 shares of its common stock (or approximately 77.8 % of Goldpoint’s
common stock outstanding on that date) to Olympian. In return for
such issuances of shares, Goldpoint received all of the outstanding shares of
capital stock of IBI, a privately held exempt Cayman Islands
company. Thus, IBI became Goldpoint’s wholly-owned subsidiary and the
business of the subsidiary became its only operations. On September
15, 2009, Olympian exchanged 16,110,500 shares of Class A Common Stock for an
identical number of shares of Class B Common Stock, the rights of which are
substantially identical, except that the Class B Common Stock has ten votes per
share and the Class A Common Stock has one vote per share. As of
December 31, 2009, Olympian owned 74.2% of our capital stock (including Class A
and Class B Common Stock) and 94.4% of the total voting power owned by all
stockholder’s of the Company.
42
Item
14. Principal Accountant Fees and Services
Our Board
of Directors was directly responsible for interviewing and retaining our
independent accountant, Bernstein & Pinchuk, LLP (“BP”), considering the
accounting firm's independence and effectiveness, and pre-approving the
engagement fees and other compensation to be paid to, and the services to be
conducted by, the independent accountant. Our Board did not delegate these
responsibilities. During 2009 our Board of Directors and during 2008 the Board
of Directors of IBI pre-approved 100% of the services described
below.
During
fiscal year 2009 and fiscal year 2008, the aggregate fees which we paid to or
were billed by BP for professional services were as follows:
|
Year
Ended December 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Audit
Fees - BP (1)
|
$ | 11,550 | $ | 16,843 | ||||
|
Audit-Related
Fees (2)
|
0 | 0 | ||||||
|
Tax
Fees (3)
|
6,785 | 0 | ||||||
|
All
Other Fees
|
0 | 0 | ||||||
|
Total
|
$ | 18,335 | $ | 16,843 | ||||
(1) Fees
for services to perform an audit or review in accordance with generally accepted
auditing standards and services that generally only our independent registered
public accounting firm can reasonably provide, such as the audit of our
consolidated financial statements, the review of the financial statements
included in our quarterly reports on Form 10-Q, and for services that are
normally provided by independent registered public accounting firms in
connection with statutory and regulatory engagements.
(2) Fees,
if any, for assurance and related services that are traditionally performed by
our independent registered public accounting firm, such as audit attest services
not required by statute or regulation, and consultation concerning financial
accounting and reporting standards.
(3) Fees
for tax compliance. Tax compliance generally involves preparation of original
and amended tax returns, claims for refunds and tax payment planning
services.
43
Item
15. Exhibits and Financial Statement Schedules
Documents
filed as part of this Report:
1.
Financial Statements
Our
consolidated financial statements required by this Item are submitted in a
separate section beginning on page F-1 of this Report.
2.
Financial Statement Schedules:
None
3.
Exhibits
|
Exhibit
No
|
Description
|
||
|
2.1***
|
Agreement
and Plan of Share Exchange, dated as of June 12, 2009, among Goldpoint
Resources, Inc. and Olympian Cruises, LLC.
|
||
|
3.1**
|
Articles
of Incorporation of Goldpoint Resources, Inc.
|
||
|
3.2**
|
By-Laws
Incorporation of Goldpoint Resources, Inc.
|
||
|
3.3*
|
Amended
and Restated Certificate of Incorporation of Island Breeze International,
Inc.
|
||
|
3.4*
|
By-Laws
of Island Breeze International, Inc.
|
||
|
4.1***
|
Form
of Convertible Promissory Note in the principal amount of $500,000 issued
by Island Breeze International to Catino, SA dated May 23,
2008.
|
||
|
4.2***
|
Form
of Convertible Promissory Note in the principal amount of $4,000,000
issued by Island Breeze International to Catino, SA dated May 23,
2008.
|
||
|
4.3***
|
Form
of Convertible Promissory Note in the principal amount of $500,000 issued
by Island Breeze International to Catino, SA dated September 3,
2008.
|
||
|
4.4***
|
Form
of Convertible Promissory Notes issued to investors, in the aggregate
principal amount of $150,000, in June 2009.
|
||
|
4.5***
|
Form
of Convertible Promissory Note issued to Patrick Orr in the amount of
$600,000, dated June 12, 2009.
|
||
|
4.6****
|
Drawdown
Equity Financing Agreement between Island Breeze International, Inc. and
Auctus Private Equity Fund, LLC dated January 25, 2010.
|
||
|
4.7****
|
Registration
Rights Agreement Between Island Breeze International, Inc. and Auctus
Private Equity Fund, LLC dated January 25, 2010.
|
||
|
4.8*
|
Island
Breeze International 2009 Stock Incentive Plan.
|
||
|
10.1***
|
Mortgage
issued as of May, 2008 by Island Breeze International, as Mortgagor, to
Catino, S.A., as Mortgagee.
|
||
|
14*
|
Code
of Ethics.
|
||
|
21.1*
|
Subsidiaries
|
||
|
31.1*
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14a under the Securities
Exchange Act of 1934.
|
||
|
31.2*
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14a under the Securities
Exchange Act of 1934.
|
||
|
32.1*
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. 1350).
|
||
|
32.2*
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. 1350).
|
||
|
99.2*
|
Financial
Statements with Report of Independent Registered Public Accounting Firm
for Island Breeze International for Years ended December 31, 2009 and
December 31, 2008 and the Period from September 27, 2006 (inception)
to December 31, 2009.
|
Numbers
with (*) are filed herewith. Numbers with (**) have been incorporated
by reference from our Form SB-2, filed on December 13, 2007. Numbers
with (***) have been incorporated by reference from our Current Report on Form
8-K, filed on June 18, 2009. Numbers with (****) have been
incorporated by reference from our Current Report on Form 8-K, filed on January
27, 2010.
44
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Consolidated
Balance Sheets
|
F-3
|
|
Consolidated
Statements of Operations
|
F-4
|
|
Consolidated
Statements of Stockholders' Equity
|
F-5
|
|
Consolidated
Statements of Cash Flows
|
F-6
|
|
Notes
to Consolidated Financial Statements
|
F-7
|
45
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
Dated:
April 12, 2010
|
ISLAND
BREEZE INTERNATIONAL, INC.
|
|
|
By:
/s/ Bradley T. Prader
|
||
|
Bradley
T. Prader
|
||
|
President
and Chief Executive Officer
|
||
|
(Principal
Executive Officer)
|
||
|
By:
/s/ Steven G. Weismann
|
||
|
Steven
G. Weismann
|
||
|
Chief
Financial Officer
|
||
|
(Principal
Financial Officer and
|
||
|
Principal
Accounting Officer)
|
46
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant on April 12,
2010 in the capacities indicated.
|
Signature
|
Capacity
|
||
|
/s/Bradley
T. Prader
|
President
and Chief Executive
|
||
|
Bradley
T. Prader
|
Officer,
Chairman and Director
(Principal
Executive Officer)
|
||
|
/s/Steven
G. Weismann
|
Chief
Financial Officer
|
||
|
Steven
G. Weismann
|
(Principal
Financial Officer and
|
||
|
Principal
Accounting Officer)
|
|||
|
/s/Sean F. McManimon
|
Chief
Operating Officer
|
||
|
Sean
F. McManimon
|
and
Director
|
||
|
/s/Michael
C. Hovdestad
|
Chief
Legal Officer, Secretary and Director
|
||
|
Michael
C. Hovdestad
|
|||
|
/s/Thomas
L. Schneider
|
Director
|
||
|
Thomas
L. Schneider
|
|||
|
/s/Craig
A. Szabo
|
Director
|
||
|
Craig
A. Szabo
|
47
Exhibit
Index
|
Exhibit
No.
|
Description
|
||
|
2.1***
|
Agreement
and Plan of Share Exchange, dated as of June 12, 2009, among Goldpoint
Resources, Inc. and Olympian Cruises, LLC.
|
||
|
3.1**
|
Articles
of Incorporation of Goldpoint Resources, Inc.
|
||
|
3.2**
|
By-Laws
Incorporation of Goldpoint Resources, Inc.
|
||
|
3.3*
|
Amended
and Restated Certificate of Incorporation of Island Breeze International,
Inc.
|
||
|
3.4*
|
By-Laws
of Island Breeze International, Inc.
|
||
|
4.1***
|
Form
of Convertible Promissory Note in the principal amount of $500,000 issued
by Island Breeze International to Catino, SA dated May 23,
2008.
|
||
|
4.2***
|
Form
of Convertible Promissory Note in the principal amount of $4,000,000
issued by Island Breeze International to Catino, SA dated May 23,
2008.
|
||
|
4.3***
|
Form
of Convertible Promissory Note in the principal amount of $500,000 issued
by Island Breeze International to Catino, SA dated September 3,
2008.
|
||
|
4.4***
|
Form
of Convertible Promissory Notes issued to investors, in the aggregate
principal amount of $150,000, in June 2009.
|
||
|
4.5***
|
Form
of Convertible Promissory Note issued to Patrick Orr in the amount of
$600,000, dated June 12, 2009.
|
||
|
4.6****
|
Drawdown
Equity Financing Agreement between Island Breeze International, Inc. and
Auctus Private Equity Fund, LLC dated January 25, 2010.
|
||
|
4.7****
|
Registration
Rights Agreement Between Island Breeze International, Inc. and Auctus
Private Equity Fund, LLC dated January 25, 2010.
|
||
|
4.8*
|
Island
Breeze International 2009 Stock Incentive Plan.
|
||
|
10.1***
|
Mortgage
issued as of May, 2008 by Island Breeze International, as Mortgagor, to
Catino, S.A., as Mortgagee.
|
||
|
14*
|
Code
of Ethics.
|
||
|
21.1*
|
Subsidiaries
|
||
|
31.1*
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14a under the Securities
Exchange Act of 1934.
|
||
|
31.2*
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14a under the Securities
Exchange Act of 1934.
|
||
|
32.1*
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. 1350).
|
||
|
32.2*
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. 1350).
|
||
|
99.2*
|
Financial
Statements with Report of Independent Registered Public Accounting Firm
for Island Breeze International for Years ended December 31, 2009 and
December 31, 2008 and the Period from September 27, 2006 (inception)
to December 31, 2009.
|
Numbers
with (*) are filed herewith. Numbers with (**) have been incorporated
by reference from our Form SB-2, filed on December 13, 2007. Numbers
with (***) have been incorporated by reference from our Current Report on Form
8-K, filed on June 18, 2009. Numbers with (****) have been
incorporated by reference from our Current Report on Form 8-K, filed on January
27, 2010.
48