10QSB: MPTV INC
(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.
This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, including,
without limitation, statements regarding the Company's expectations, beliefs, intentions, or future strategies that are signified by
the words "expects," "anticipates," "intends," "believes," or similar language. These forward-looking statements involve risks,
uncertainties, and other factors. All forward- looking statements included in this document are based on information available to
the Company on the date hereof and speak only as of the date hereof. The factors discussed below under "Forward-Looking Statements"
and elsewhere in this Quarterly Report on Form 10-QSB are among those factors that in some cases have affected the Company's results
and could cause the actual results to differ materially from those projected in the forward-looking statements.
The following discussion and analysis should be read together with the Condensed Consolidated Financial Statements and Notes thereto
included elsewhere herein.
General
We are engaged in the timeshare industry. Through our wholly-owned subsidiaries, Consolidated Resort Enterprises, Inc. ("CRE") and
Continental Resort Services, Inc. ("CRS"), we develop, market, and manage timeshare resort properties. Our principal asset is an
investment in a multi-million dollar resort property called "Lake Tropicana," located in Las Vegas, Nevada, adjacent to the MGM
Grand Hotel/Casino and Theme Park.
The planned renovation program for the Lake Tropicana project is intended to appeal to family-oriented visitors to Las Vegas. Phase
one entails the transformation of 40 existing units into deluxe two-bedroom suites with fireplaces, marble baths and kitchens,
upgraded plumbing, air conditioning, anddeluxe furniture, fixtures, and appliances The exteriors will have new roofs, the railing
will be replaced with stucco walls, and new patio doors and windows will be installed. This renovation will require approximately
three months to complete. In addition, plans are to construct a decorative block and stucco wall around the property, extensive
landscaping in the front, and a new sign at the entrance. A guardhouse is also planned for the entrance to the project. All of the
exteriors of the buildings will be repainted, the landscaping will be upgraded throughout the project, and the waterfall and lagoon
will be repaired. In addition to the planned renovation of the 40 existing units, 50 units will be painted, refurnished, and
refurbished, to be used for mini-vacations for vacation ownership prospects. At the same time, revised permits will be applied for,
in California and Nevada, to sell vacation ownership intervals, and the Company will commence sales upon approval. Phases two and
three entail tearing down all of the structures on the property with the exception of the 40 remodeled units, and constructing a
high-rise in two phases that will contain 310 units. The design for these units allows for seventy-two one-bedroom units and two
hundred-thirty-eight two-bedroom units to maximize flexibility. Each two-bedroom unit (1,350 sq. ft.) includes three bathrooms, a
kitchen, and a kitchenette. This unit is designed so that it can be locked off, creating a deluxe one-bedroom with a full kitchen
and deluxe bath, and a standard one-bedroom with a kitchenette, one bath, living room, and master bedroom. This plan allows for the
sale of all units as two-bedrooms, or all units as two one-bedroom suites. Based on statistics of types of units purchased by
vacation ownership buyers, the most likely mix of units will be 238 two-bedroom units and 72 one-bedroom deluxe units.
Phase two includes an attractive lobby area, and a 16,000 square foot sales office on the top floor of the high-rise building. The
sales office will remain on the property after initial sales are completed. In addition, we plan to construct a new pool with a
waterfall, and a tennis court.
On a designated parcel contained within the project, a free-standing 56,000 square foot health club and spa facility will be
constructed that will offer a full weight room, cardiovascular machines, cardio theatre, spinning, aerobics, a pro shop, a childcare
center, a video arcade, and a restaurant. Also included in this 30,000 square foot facility are deluxe locker rooms, a sauna, steam
room, whirlpools, and a cold plunge. The spa facility will be equal to those found in major metropolitan areas today and it will
include herbal wraps, skin care, hair care, massage therapy, body hair waxing, hair styling, manicures, and pedicures. The facility
will also include a natural healing center, which will be supervised by a natural healing medical doctor. Treatments will include a
blood analysis, weight and bodyfat analysis, and medical history examinations. The healing center will provide a recommended program
of appropriate dietary supplementation and a healthy eating plan to treat symptoms with all-natural products. There will also be an
on-site licensed nutritionist to design custom individual programs. The use of this facility is included in each vacation ownership
annual assessment. Personalized services, food, beverages, pro shop purchases, spa purchase, and natural healing products will all
be available at a special discount for vacation owners.
At the present time, we have not completed phase one of the renovations (phase one was delayed due to lack of financing in 1997),
and have not commenced any of the other construction projects referenced above. There can be no assurance that we will be able to
secure the financing for these projects, or that the projects will be completed successfully.
Results of Operations
Three Months Ended June 30, 2002 Compared With Three Months Ended June 30, 2001
At June 30, 2002, we were in the development stage, with no significant operating revenues to date. For the three months ended June
30, 2002 and the three months ended June 30, 2001, we had no sales of timeshare resort interests. Revenue from rentals of the Lake
Tropicana Apartments are considered incidental to the business of development and sale of timeshare intervals and the numbers are
netted against related expenses in the accompanying statements of operations. Other revenues are unrelated to the business activity
currently in development. No revenues or expenses were recorded for Lake Tropicana rental activities in the second quarter of 2002
or 2001.
We incurred interest expense of $140,418 in the second quarter of 2002 as compared to $370,809 in the second quarter of 2001. The
decrease is primarily due to the reduction of long-term debt and the reduction of late and extension fees through payment of debt
and issuance of stock for debt. Interest costs incurred for the development of Lake Tropicana timeshares were capitalized to
property held from timeshare development during periods of active development based on qualifying assets. The project ceased to be
under active development for accounting purposes in April 1995. As Lake Tropicana went into receivership in 1997, interest payments
related to the mortgages on the property ceased. The 2002 and 2001 interest expense consisted primarily of interest related to notes
payable.
Our general, administrative and consulting expenses in the three months ended June 30, 2002 equalled $529,965, an increase from
$488,538 for the comparable period in 2001. The majority of the general and administrative expenses in the second quarter of 2001
were comprised of consulting, legal and accounting fees, consultants' fees related to the financing of our Lake Tropicana resort.
The increase in these expenses in 2002 over 2001 arise from new investor relations, consulting, and financing fees.
We incurred no depreciation and amortization expense for the three months ended June 30, 2002 and June 30, 2001, as all capitalized
and depreciable office furniture and equipment has been fully depreciated.
We incurred no research and development expenses for the three months ended June 30, 2002 and June 30, 2001.
During the three months ended June 30, 2002, we had a negative net cash flow of $73,076. This net negative cash flow was comprised
of negative cash flows of $155,629 from investing activities and negative cash flows of $232,380 from operating activities, offset
by positive cash flows of $314,933 from financing activities. A substantial portion of financing activities consisted of the sale of
common stock. A substantial portion of the investing activities consist of the investment in the Lake Tropicana project. A
substantial portion of the operating activities reflects stock issued for the investment in Lake Tropicana project and for debt and
services.
As a result of the foregoing factors, our net loss decreased to $670,383 for the three months ended June 30, 2002, from a net loss
of $859,347 for the three months ended June 30, 2001. Our net loss per share for the two periods remained consistent at $0.01 per
share.
Six Months Ended June 30, 2002 Compared With Six Months Ended June 30, 2001
For the six months ended June 30, 2002 and the six months ended June 30, 2001, we had no sales. Revenue from rentals of the Lake
Tropicana Apartments are considered incidental to the business of development and sale of timeshare intervals and the numbers are
netted against related expenses in the accompanying statements of operations. Other revenues are unrelated to the business activity
currently in development. In the first half of 2001, revenues in the amount of $15,000 were earned from Lake Tropicana rental
activities.
We incurred interest expense of $281,011 in the first half of 2002 as compared to $526,599 in the first half of 2001. The decrease
is primarily due to the interest recorded in 2001 on short-term loans and extension fees. Interest costs incurred for the
development of Lake Tropicana timeshares were capitalized to property held from timeshare development during periods of active
development based on qualifying assets. The project ceased to be under active development for accounting purposes in April 1995. As
Lake Tropicana went into receivership, interest payments related to the mortgages on the property ceased. The 2002 and 2001 interest
consisted primarily of interest related to notes payable and loan extension fees.
Our general, administrative and consulting expenses in the six months ended June 30, 2002 equalled $2,107,616, a substantial
increase over $1,300,279 for the comparable period in 2001. Substantially all of the general and administrative expenses in the
first half of 2002 and 2001 were derived from consulting, legal and accounting fees, and payroll. Professional fees and consulting
expenses increased in 2002 over 2001 as a result of the efforts to acquire a majority ownership of Lake Trop, obtain refinancing for
the project, and expenses related to the reverse stock split. These amounts represent a substantial decrease from previous years,
due to a significant decrease in financing fees (incurred as a result of the Company's attempts to locate and obtain financing for
the development of its Lake Tropicana Resort), commissions and marketing expenditures, and reductions in payroll and other
administrative expenses.
We incurred no depreciation and amortization expense for the six months ended June 30, 2002 and June 30, 2001, as all capitalized
and depreciable office furniture and equipment has been fully depreciated.
We incurred no research and development expenses for the the six months ended June 30, 2002 and June 30, 2001.
During the six months ended June 30, 2002, the Company had a positive net cash flow of $38,103. This net positive cash flow was
comprised of positive cash flows of $861,053 from financing activities offset by a negative cash flow of $296,196 from operating
activities and negative cash flows of $526,754 from investing activities. A substantial portion of financing activities consisted of
the issuance of stock. A substantial portion of the investing activities consist of the investment in the Lake Trop project. A
substantial portion of the operating activities reflects stock issued for the investment in Lake Trop and for debt and services.
As a result of the foregoing factors, our net loss increased to $2,388,627 for the six months ended June 30, 2002, from a net loss
of $1,811,838 for the six months ended June 30, 2001.
Liquidity and Capital Resources
Our consolidated financial statements at June 30, 2002 and for the period then ended have been presented on the basis that we are a
going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
Continuation of MPTV as a going concern is dependent upon our raising additional financing and achieving and sustaining profitable
operations. Because of the uncertainties regarding our ability to achieve these goals, no assurance can be given that we will be
able to continue in existence. Based on our interest in Lake Tropicana, and the potential to raise additional debt and/or equity
financing (see below), we believe that there will be sufficient capital available to complete existing contracts and projects. The
financial statements do not include any adjustments relating to the recoverability of recorded asset amounts or the amounts of
liabilities that might be necessary should we be unable to continue as a going concern.
To date, we have funded our operations primarily through private placements of equity securities and secondarily through our
interest in Lake Tropicana. At June 30, 2002, we had a working capital deficit of $5,498,717, including cash of $156,516, compared
to a working capital deficit of $3,747,959, including $127,883 in cash, at June 30, 2001.
Risk Factors
The forward-looking statements contained in this Quarterly Report on Form 10-QSB are subject to various risks, uncertainties and
other factors that could cause actual results to differ materially from the results anticipated in such forward-looking statements.
Included among the important risks, uncertainties and other factors are those discussed below:
WE HAVE SUFFERED LOSSES SINCE INCEPTION AND ARE IN IMMEDIATE NEED OF FUNDING
TO SERVICE DEBT AND SUSTAIN OUR OPERATIONS.
Our recurring losses from operations show a need for additional funding that raises substantial concerns about our ability to
continue as a going concern. We have incurred cumulative net losses of $54,986,283 since inception, and are also in default on
certain of our secured and unsecured notes payable. In the event that we cannot refinance or renegotiate these notes, we may be
subject to collection actions and foreclosure proceedings. We require capital to conduct our timeshare unit development and
marketing activities, and for operating expenses, interest and note obligations. Our ability to continue as a going concern is
dependent upon our ability to obtain outside financing through the issuance of either equity or debt securities and, ultimately,
upon future development of profitability through sales of timeshare units at Lake Tropicana. While we are currently attempting to
raise funds through a private placement of debt securities and the refinancing of the Lake Tropicana resort, there can be no
assurance that a private placement will be successfully consummated. In addition, even if successfully completed, such private
placement may not meet all our future capital requirements. In the future we may offer additional or other securities for sale or
attempt to secure financing from banks or other financial institutions. If significant indebtedness is then outstanding, our ability
to obtain additional financing will be adverselyaffected. If and to the extent that we incur additional indebtedness, debt service
requirements will have a negative effect on earnings. Further, if we are unable to service our indebtedness and to renew or
refinance such obligations on a continuing basis, our ability to operate profitably will be materially threatened. No assurance can
be given that we will be able to obtain financing on acceptable terms, if at all.
The availability of equity and debt financing is also affected by, among other things, domestic and world economic conditions and
the competition for funds as well as our perceived ability to service such obligations should such financing be consummated. Rising
interest rates might affect the feasibility of debt financing that is offered. Potential investors and lenders will be influenced by
their evaluations of us and our prospects and comparisons with alternative investment opportunities. There can be no assurance that
we will be able to obtain financing on acceptable terms, if at all.
DEVELOPMENT OF THE RESORT HAS BEEN DELAYED
MPTV commenced the development of the Lake Tropicana timeshare resort in 1994. However, the first phase of the renovation was
suspended due to liquidity and other financial concerns, and has yet to be completed. Management currently anticipates that the
first phase will be completed by the end of 2002, subject to obtaining required permits and financing, and that the remainder of the
renovation will occur in a number of phases over the succeeding twelve months. Although marketing of the timeshare units in Lake
Tropicana commenced in July 1997, it was suspended in December 1997. There can be no assurance that we will be able to obtain
adequate financing to complete the renovation. Our failure to successfully complete our development, construction, redevelopment,
conversion, acquisition and expansion activities may have a material adverse effect on our results of operations.
WE MAY HAVE ISSUED SECURITIES IN VIOLATION OF FEDERAL AND STATE
SECURITIES LAWS.
Shares of our freely tradeable Common Stock may hve been improperly issued without registration under Federal and state securities
laws. In addition to administrative remedies which may be pursued by governmental agencies, the recipients of these shares of Common
Stock may seek recovery of the purchase price of the stock plus interest through a rescission offer, the amount of which cannot be
presently determined, which could have a material adverse impact upon our financial position and liquidity. We intend to prepare and
file a registration statement with the Securities and Exchange Commission to register these shares. There can be no assurance,
however, that such filing will provide an adequate remedy. Until resolved, the impact of such issuances on our ability to raise
additional capital through the future issuance of Common Stock is unknown.
OUR COMMON STOCK IS SUBJECT TO "PENNY STOCK" RULES WHICH COULD MAKE
TRADING MORE DIFFICULT AND VOLATILE.
The trading price of our Common Stock is less than $5.00 per share. Therefore, trading in our Common Stock is subject to the
requirements of Rule 15c2-6 and/or Rule 15g-9 promulgated under the Exchange Act. Under such Rules, broker/dealers who recommend
such low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice
requirements, including a requirement that they make an individualized written suitability determination for the purchase and
receive the purchaser's written consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of
1990 also requires additional disclosure in connection with any trades involving a stock defined as a "penny stock" (generally,
according to recent regulations adopted by the Securities and Exchange Commission, any non-NASDAQ equity security that has a market
price of less than $5.00 per share, subject to certain exemptions), including the delivery, prior to any penny stock transaction, of
a disclosure schedule explaining the penny stock market and the risks associated therewith. Such requirements could severely limit
the market liquidity of the Common Stock and the ability of purchasers of our Common Stock to sell their securities in the open
market.
OUR OPERATIONS ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATIONS.
Our marketing and sales of timeshare units will be subject to extensive regulations by the federal government and the regulatory
authorities of the State of Nevada and other states in which its timeshare units may be marketed and sold. We may be subject to
regulation on a federal level under the Federal Trade Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which we are or may be subject includes the Truth-In-Lending Act and Regulation Z,
the Equal Credit Opportunity Act and Regulation B, the Interstate Land Sales Full Disclosure Act, Telephone Consumer Protection Act,
Telemarketing and Consumer Fraud and Abuse Prevention Act, Fair Housing Act and the Civil Rights Act of 1964 and 1968. We are or may
be subject to laws that regulate its activities such as real estate licensure, exchange program registration, anti-fraud laws,
telemarketing laws, prize, gift and sweepstakes laws, and labor laws. Any failure to comply with applicable laws or regulations
could have a material adverse effect on us.
As property developers, we may be subject to liability with respect to construction defects discovered or repairs made by future
owners of its property. Pursuant to such laws, future owners may recover from us amounts in connection with the repairs made to the
developed property.
We are or may be subject to various federal, state, local and foreign environmental, health, safety and land use laws, ordinances,
regulations and similar requirements (collectively, "Environmental Laws"). Pursuant to these Environmental Laws, a current or
previous owner or operator of real property may be required to investigate and clean up hazardous or toxic substances or wastes or
releases of petroleum products or wastes at such property, and may be held liable to a governmental entity or to third parties for
associated damages and for investigation and substantial clean-up costs incurred by such parties in connection with the
contamination. Such laws may impose clean-up responsibility and liability without regard to whether the owner knew of or caused the
presence of the contaminants.
It is possible that the timeshare units may be deemed to be securities as defined in Section 2(1) of the Securities Act of 1933, as
amended, or the securities laws of one or more states. If the timeshare units were determined to be securities for such purpose,
their sale would require registration under the Securities Act and such states securities laws. We do not intend to do so in the
future. If the sale of the timeshare units were found to have violated the registration provisions of the Securities Act, or such
states securities laws, many purchasers of timeshare units would have the right to rescind their purchases of timeshare units. Our
business could be materially adversely affected if a substantial number of owners sought rescission.
WE HAVE SEVERAL COMPETITORS IN THE TIMESHARE RESORT MARKET, MOST OF WHOM HAVE
GREATER FINANCIAL AND OTHER RESOURCES.
Our timeshare resorts do not provide an exclusive solution for potential purchasers, and such purchasers may choose alternative
timeshare resorts or vacation destinations. We face significant competition from many of the world's established and recognized
lodging, hospitality, entertainment and vacation ownership companies, as well as buyers who later resell their vacation interests.
Many of our competitors have greater financial resources than us.
CHANGES IN THE ECONOMY MAY ADVERSELY AFFECT OUR OPERATIONS.
Any further downturn in general economic or industry conditions could decrease the demand for vacation ownership units, impair our
ability to collect our mortgages receivable and increase our costs.
Any downturn in economic conditions or any price increases related to the travel and tourism industry, such as higher airfares or
increased gasoline prices, could depress discretionary consumer spending and have a material adverse effect on our business. Any
such economic conditions, including recession, may also adversely affect the future availability of attractive financing rates for
us or our customers and may materially adversely affect our business. Further, adverse changes such as an oversupply of timeshare
units, a reduction in demand for such units, changes in travel and vacation patterns, changes in governmental regulation of the
industry, increases in construction costs or taxes, and negative publicity for the industry, could have a material adverse effect on
our operations.
OUR COMMON SHAREHOLDERS MAY EXPERIENCE SUBSTANTIAL DILUTION
The sale of a substantial number of shares of our common stock in the public market, or the prospect of such sales, could materially
and adversely affect the market price of our common stock. We are authorized to issue up to 1,900,000,000 shares of common stock. To
the extent of such authorization, our Board of Directors will have the ability, without seeking stockholder approval, to issue
additional shares of common stock in the future for such consideration as its Board of Directors may consider sufficient. The
issuance of additional common stock in the future will reduce the proportionate ownership and voting power of our common stock held
by existing stockholders.
(c) 1995-2002 Cybernet Data Systems, Inc. All Rights Reserved
Received by Edgar Online Aug 14, 2002
CIK Code: 0000808715
Accession Number: 0000808715-02-000006 |
