AMERICAN LEISURE HOLDINGS, INC. - 10QSB/A - 20070319 - LEGAL_PROCEEDING
ITEM 1. LEGAL PROCEEDINGS
Our subsidiary American Leisure, Inc. and our Chief Executive Officer and
Chairman, Malcolm J. Wright are parties to an action that was filed in Orange
County, Florida and styled as Rock Investment Trust, P.L.C. and RIT, L.L.C. vs.
Malcolm J. Wright, American Vacation Resorts, Inc., American Leisure, Inc.,
Inversora Tetuan, S.A., Sunstone Golf Resort, Inc., and Sun Gate Resort Villas,
Inc., Case No. CIO-01-4874, Ninth Judicial Circuit, Orange County, Florida. In
June, 2001, after almost 2 years from receiving notice from Malcolm J. Wright
that one Mr. Roger Smee, doing business under the names Rock Investment Trust,
PLC (a British limited company) and RIT, LLC (a Florida limited liability
company) (collectively, the "Smee Entities") had defaulted under various
agreements to loan or to joint venture or to fund investment into various real
estate enterprises founded by Mr. Wright, the Smee Entities brought the lawsuit
against Mr. Wright, American Leisure, Inc. and several other entities. The
gravamen of the initial complaint is that the Smee Entities made financial
advances to Wright with some expectation of participation in a Wright real
estate enterprise. In general, the suit requests either a return of the Smee
Entities' alleged advances of $500,000 or an undefined ownership interest in one
or more of the defendant entities. Mr. Wright, American Leisure, Inc., and
Inversora Tetuan, S.A., have filed a counterclaim and cross complaint against
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the Smee Entities and Mr. Smee denying the claims and such damages in the amount
of $10 million. If the court rules that Mr. Wright is liable under his guarantee
of an American Leisure, Inc. obligation to Smee, it is believed that such a
ruling would not directly affect American Leisure Holdings, Inc. The litigation
is in the discovery phase and is not currently set for trial. We have been
advised by our attorneys in this matter that Mr. Wright's position on the facts
and the law is stronger than the positions asserted by the Smee Entities.
In March 2004, Manuel Sanchez and Luis Vanegas as plaintiffs filed a lawsuit,
Case No. 04-4549 CA 09, in the Circuit Court of the Eleventh Judicial Circuit in
and for Miami Dade County, Florida which includes American Leisure Holdings,
Inc., Hickory Travel Systems, Inc., Malcolm J. Wright and L. William Chiles as
defendants. They are claiming securities fraud, violation of Florida Securities
and Investor Protection Act, breach of their employment contracts, and claims
for fraudulent inducement. We and the other defendants have denied all claims
and have a counterclaim against Manuel Sanchez and Luis Vanegas for damages. The
litigation will shortly enter the discovery phase and is not currently set for
trial. We believe that Manuel Sanchez' and Luis Vanegas' claims are without
merit and the claims are not material to us. We are vigorously defending the
lawsuit.
In early May 2004, Around The World Travel, Inc., of which we subsequently
purchased substantially all of the assets, filed a lawsuit in the Miami-Dade
Florida Circuit Court against Seamless Technologies, Inc. and e-TraveLeaders,
Inc. alleging breach of contract and seeking relief that includes monetary
damages and termination of the contracts. We were granted leave to intervene as
plaintiffs in the original lawsuits against Seamless and e-TraveLeaders. On June
28, 2004, the above named defendants brought suit against Around The World
Travel and American Leisure Holdings, Inc. in an action styled Seamless
Technologies, Inc. et al. v. Keith St. Clair et al. This suit alleges that
Around The World Travel has breached the contracts and also that American
Leisure Holdings, Inc. and Around The World Travel's Chief Executive Officer
were complicit with certain officers and directors of Around The World Travel in
securing ownership of certain assets for American Leisure Holdings, Inc. that
were alleged to have been a business opportunity for Around The World Travel.
This lawsuit involves allegations of fraud against Malcolm J. Wright. The
lawsuit filed by Seamless has been abated and consolidated with the original
lawsuit filed by Around The World Travel. In a related matter, Seamless'
attorneys brought another action entitled Peter Hairston v. Keith St. Clair et
al. This suit mimics the misappropriation of business opportunity claim, but it
is framed within a shareholder derivative action. The relief sought against
American Leisure Holdings, Inc. includes monetary damages and litigation costs.
We intend to vigorously support the original litigation filed against Seamless
and defend the counterclaim and allegations against us. In June of 2005, the
court dismissed certain claims of tortious interference against the Company and
Malcolm J. Wright and provided Seamless with leave to amend all of their other
claims with specificity. In addition, the court dismissed a claim of conspiracy
and a demand for judgment. As of January 18, 2006, the Defendants filed their
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amended answer and amended counterclaim. The Company's attorneys have filed a
comprehensive reply seeking to dismiss the counterclaim against the Company and
Mr. Wright.
On May 4, 2005, Simon Hassine, along with members of his family, filed a lawsuit
against us and Around The World Travel in the Circuit Court of Dade County,
Florida, Civil Division, Case Number 05-09137CA. The plaintiffs are the former
majority shareholders of Around The World Travel. The plaintiffs allege that
that they have not been paid for i) a subordinated promissory note owed by AWT
in the principal amount of $3,550,000 plus interest on such note which they
allege was issued to them by Around The World Travel in connection with their
sale of 88% of the common stock in Around The World Travel to Around The World
Holdings, LLC; and ii) subordinated undistributed retained earnings and accrued
bonuses in an aggregate amount of $1,108,806 which they allege were due to them
as part of the sale to Around The World Holdings, LLC. The plaintiffs allege
that the note was issued to them net of $450,000 of preferred stock of Around
The World Travel that they further allege they never received. Despite the
absence of any executed agreements, the plaintiffs also allege that in December
2004 they entered into a settlement agreement with the Company regarding some of
these matters. The plaintiffs are pursuing a claim of breach of the alleged
settlement agreement with damages in excess of $1,000,000, interest and costs as
well as performance under the alleged settlement agreement. The Plaintiffs also
seek a declaratory judgment that they are not bound by a provision in the
underlying documents on which they rely that their action is barred by said
provision. In the alternative, the Plaintiffs seek a ruling that the promissory
note, undistributed retained earnings and accrued bonuses are not subordinated
to the Galileo Debt. The suit seeks full payment of the promissory note,
undistributed retained earnings and accrued bonuses plus prejudgment interest,
stated interest on the note, costs and reasonable attorney's fees. Despite the
absence of any executed agreements, the plaintiffs are also pursuing a claim for
breach of contract regarding the preferred stock of Around The World Travel and
seeking $450,000 plus interest, costs and reasonable attorney's fees. The
plaintiffs are also pursuing claims of fraudulent transfer regarding our
acquisition of interests in the debt and equity of Around The World Travel and
seeking unspecified amounts. We intend to vigorously defend the lawsuit. We
filed various motions including a motion to dismiss the complaint in its
entirety as against us and Malcolm J. Wright due to the failure by the
plaintiffs to comply with a provision in the underlying documents that grants
exclusive jurisdiction to the courts located in Cook County, Illinois; a motion
to disqualify, based upon an alleged conflict of interest by the plaintiff's
attorneys. A hearing on the case is scheduled to occur in September 2006.
On August 10, 2006, Patsy Berman and Berman Mortgage Corporation served a
complaint against Tierra del Sol Resort, Inc., Malcolm Wright, our Chief
Executive Officer and Chairman, and a non-existent entity, Vantage Circa 39
Condotel Limited Partnership ("Vantage"), in the 11th Judicial Circuit in and
for Miami-Dade County, Florida. The complaint alleges that Tierra del Sol and
Vantage sought loans, that the plaintiffs offered to make loans, that Mr. Wright
guaranteed the loans, that valid contracts were formed, and that because such
loans did not close, the plaintiffs claim $3,550,000 in damages, representing
funding fees, brokerage fees, and interest. We have concluded that the
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plaintiffs' complaint is wholly frivolous, and we intend to vigorously defend
the action and to seek attorney fees from the plaintiffs and their attorney.
We are not aware of any proceeding to which any of our directors, officers,
affiliates or security holders are a party adverse to us or have a material
interest adverse to us.
ITEM 2. CHANGES IN SECURITIES
In May 2006, Daniel Bogar exercised 19,250 of his outstanding stock options,
which options had an exercise price of $0.001 per share, in consideration for an
aggregate of $19.25, and was issued 19,250 shares of our restricted common stock
in consideration for such issuance. The Company relied on the exemption from
registration set forth in Section 4(2) of the Act in issuing the shares as the
issuance of the securities did not involve a public offering, the recipient
acquired the shares for investment purposes and the Company took appropriate
measures to restrict transfer. No underwriters or agents were involved in the
foregoing issuance and no underwriting discounts were paid by the Company.
In May 2006, Osvaldo Pi exercised 19,250 of his outstanding stock options, which
options had an exercise price of $0.001 per share, in consideration for an
aggregate of $19.25, and was issued 19,250 shares of our restricted common stock
in consideration for such issuance. The Company relied on the exemption from
registration set forth in Section 4(2) of the Act in issuing the shares as the
issuance of the securities did not involve a public offering, the recipient
acquired the shares for investment purposes and the Company took appropriate
measures to restrict transfer. No underwriters or agents were involved in the
foregoing issuance and no underwriting discounts were paid by the Company.
In May 2006, SIBL exercised 231,000 of its outstanding stock options, which
options had an exercise price of $0.001 per share, in consideration for an
aggregate of $231, and was issued 231,000 shares of our restricted common stock
in consideration for such issuance. The Company relied on the exemption from
registration set forth in Section 4(2) of the Act in issuing the shares as the
issuance of the securities did not involve a public offering, the recipient
acquired the shares for investment purposes and the Company took appropriate
measures to restrict transfer. No underwriters or agents were involved in the
foregoing issuance and no underwriting discounts were paid by the Company.
Pursuant to a Stock Purchase Agreement SIBL, effective June 30, 2006, we sold
all of our interest in our former wholly owned subsidiary CLM, along with a
promissory note payable to us by CLM in the amount of $5,663,274, which amount
evidences our total investment in CLM, for an aggregate purchase price of
$5,663,275. In connection with the purchase, SIBL also agreed to forgive the
interest on several of our outstanding promissory notes with SIBL, and to amend
the due date of such notes, described in greater detail above under "Recent
Events," and we agreed to grant SIBL a warrant to purchase 355,000 shares of our
common stock at an exercise price of $10.00 per share, which warrants have an
expiration date of April 30, 2008, and contain certain anti-dilution clauses,
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whereby if we grant any options or sell any shares of common stock for less than
$1.02 per share, the exercise price of the 355,000 warrants will reset to such
lower price. We relied on an exemption from registration set forth in Section
4(2) of the Act in issuing the securities as the issuance of the securities did
not involve a public offering, the recipient acquired the securities for
investment purposes and we took appropriate measures to restrict transfer. No
underwriters or agents were involved in the foregoing issuance and no
underwriting discounts were paid by us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit No. Description
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10.01(1) Commitment Letter with KeyBank National Association for $96,000,000
for Phase I
10.02(1) Commitment Letter with KeyBank National Association for $14,850,000
for Phase II
10.03(2) Re-Stated Promissory Note for $6,356,740 issued in favor of Around
The World Travel, Inc. dated June 30, 2005.
10.04(3) Commitment Letter with KeyBank National Association for $96,000,000
for Phase I
10.05(4) Commitment Letter with KeyBank National Association for $14,850,000
for Phase II
10.06(4) Commitment Letter with KeyBank National Association for up to
72,550,000, with a maximum principal balance of $40,000,000 for
Phase 1 dated December 1, 2005
10.07(4) Commitment Letter with KeyBank National Association for up to
$14,850,000 for Phase 2 dated December 1, 2005
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10.08(5) Construction Loan Agreement with KeyBank National Association for
$40,000,000 for Phase 1 dated December 29, 2005
10.09(5) Promissory Note with KeyBank National Association for $40,000,000
10.10(5) Loan Agreement with KeyBank National Association for 14,850,000
for Phase 2 dated December 29, 2005
10.11(5) Promissory Note with KeyBank National Association for $14,850,000
10.12(5) Promissory Note for $4,000,000 issued by TDS Management, LLC in
favor of PCL Construction Enterprises, Inc.
10.13(5) Guaranty by the Registrant of the $4,000,000 Promissory Note to
PCL Construction Enterprises, Inc.
10.14(5) Guaranty of Malcolm J. Wright guaranteeing the $4,000,000
Promissory Note to PCL Construction Enterprises, Inc.
10.15(5) Addendum to Construction Loan Agreement Condominium and Townhouse
Project Development
10.16(5) Payment Guaranty Phase 1
10.17(5) Payment Guaranty Phase 2
10.18(5) Amended Debt Guarantor Agreement
10.19(5) Guaranty of Tierra Del Sol (Phase 1), Ltd. guaranteeing the
$4,000,000 Promissory Note to PCL Construction Enterprises, Inc.
10.20(5) Performance and Completion Guaranty
10.21(5) Pledge and Security Agreement
10.22(6) Option Exercise Agreement with Stanford Financial Group Company
10.23(6) Assignment of Interest in Reedy Creek Acquisition Company, LLC
10.24(7) Registration Rights Agreement with SIBL dated January 4, 2006
10.25(7) Credit Agreement with SIBL
10.26(6) $7,000,000 Promissory Note with Bankers Credit Corporation
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10.27(6) Modification and Reaffirmation of Guaranty and Environmental
Indemnity Agreement
10.28(6) Renewed, Amended and Increased Promissory Note
10.29(7) Stanford International Bank, Ltd. Warrant for 77,000 shares at
$0.001 per share
10.30(7) Stanford International Bank, Ltd. Warrant for 154,000 shares at
$5.00 per share
10.31(6) Irrevocable and Unconditional Guaranty
10.32(7) Registration Rights Agreement with SIBL dated December 28, 2005
10.33(6) SIBL $2.1 million note
10.34(7) Partnership Interest Pledge and Security Agreement and Collateral
Assignment (Phase 1)
10.35(7) Partnership Interest Pledge and Security Agreement and Collateral
Assignment (Phase 2)
10.36(7) SIBL Warrant Agreement for 2% Phase 1 interest
10.37(7) SIBL Warrant Agreement for 2% Phase 2 interest
10.38(6) Stanford International Bank, Ltd. Warrant for 154,000 at $0.001
per share
10.39(6) Stanford International Bank, Ltd. Warrant for 308,000 at $5.00
per share
10.40(8) Original Purchase Agreement
10.41(9) First Amendment to Asset Purchase Agreement
10.42(10) Settlement Agreement effective as of December 31, 2005 by and
among American Leisure Holdings, Inc., American Leisure Equities
Corporation and Around The World Travel, Inc.
10.43(11) Stock Purchase Agreement between Harborage Leasing Corporation
and the Company
10.44(11) $1,411,705 Promissory Note payable to Harborage Leasing
Corporation
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10.45(11) Malcolm J. Wright Guaranty Agreement regarding $1,411,705
Promissory Note with Harborage Leasing Corporation
10.46(11) Harborage Leasing Corporation warrant to purchase 300,000 shares
of common stock at $5.00 per share
10.47(12) Note Modification Agreement with SIBL
10.48(13) Stock Purchase Agreement with SIBL for the purchase of our Antigua
call center operations
10.49(13) Warrant Agreement with SIBL for the purchase of up to 355,000
shares of common stock at the exercise price of $10.00 per share
31.1* Certification of Chief Executive Officer and Cheif Financial
Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 10 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
* Filed Herein.
(1) Filed as Exhibit 10.1 and 10.2, respectively to the Registrant's Form 8-K on
August 18, 2005, and incorporated herein by reference.
(2) Filed as Exhibit 10.5 to the Registrant's Form 8-K on August 19, 2005, and
incorporated herein by reference.
(3) Filed as Exhibits to our Report on Form 8-K filed with the Commission on
August 18, 2005, and incorporated herein by reference.
(4) Filed as Exhibits to our Report on Form 8-K filed with the Commission on
December 15, 2005 and incorporated herein by reference.
(5) Filed as Exhibits to the Registrant's report on form 8-K on January 12, 2006
and incorporated by reference herein.
(6) Filed as Exhibits to the Registrant's report on Form 8-K filed on January
19, 2006 and incorporated herein by reference.
(7) Filed as Exhibits to the Company's report on Form 8-K, which was filed with
the SEC on March 28, 2006.
(8) Filed as Exhibit 10.1 to the Company's report on Form 8-K, which was filed
with the SEC on January 6, 2005, and is incorporated herein by reference.
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(9) Filed as Exhibit 10.44 to the Company's report on Form 10-QSB for the
quarter ended March 31, 2005, which was filed with the SEC on May 23, 2005, and
is incorporated herein by reference.
(10) Filed as Exhibit 10.3 to the Company's report on Form 8-K, which was filed
with the SEC on March 2, 2006, and is incorporated herein by reference.
(11) Filed as Exhibits to the Company's Report on Form 8-K, which was filed with
the SEC on March 29, 2006, and is incorporated herein by reference.
(12) Filed an Exhibit to the Company's Report on Form 10-KSB, which was filed
with the SEC on March 31, 2006, and is incorporated herein by reference.
(13) Filed as exhibits to the Company's Report on Form 10-QSB for the quarter
ended June 30, 2006, which was filed with the SEC on August 21, 2006, and is
incorporated herein by reference.
b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the fiscal period covered by
this report. The Company filed one report on Form 8-K subsequent to the fiscal
period covered by this report and prior to the date this report was filed:
o On August 1, 2006, to report that the Company had notified
KeyBank that it elected not to open the $40,000,000 revolving credit
facility for the construction of Phase 1 of the Sonesta Resort.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN LEISURE HOLDINGS, INC.
DATED: March 16, 2007 By: /s/ Malcolm J. Wright
------------------------
Malcolm J. Wright
Chief Executive Officer
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Malcolm J. Wright, certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB/A of American
Leisure
Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
small business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report
is being prepared;
b) Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release No. 33-8238;
c) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's ability
to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal control over financial reporting.
American Leisure Holdings, Inc.
DATED: March 16, 2007 By: /s/ Malcolm J. Wright
-----------------------
Malcolm J. Wright
Chief Executive Officer and
Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Malcolm J. Wright, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Quarterly Report of American Leisure Holdings, Inc. on Form 10-QSB/A for the
quarterly period ended June 30, 2006 fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
information contained in such Form 10-QSB/A fairly presents in all material
respects the financial condition and results of operations of American Leisure
Holdings, Inc.
American Leisure Holdings, Inc.
DATED: March 16, 2007 By: /s/ Malcolm J. Wright
---------------------
Malcolm J. Wright
Chief Executive Officer and
Chief Financial Officer
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