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September 26, 2002 Court No: 25-082885 Estate
No: 25-082885 Trustee’s
Preliminary Report In the Matter of the Bankruptcy of Bartizan Capital
Corporation Assignment On September 9, 2002
an Assignment for the general benefit of creditors was made by Bartizan Capital
Corporation (“Bartizan” or the “Company”) and was filed with the
Official Receiver on September 10, 2002. Operations of the Company have been discontinued. Statutory Obligations The Trustee has
notified all known creditors, advertised the bankruptcy, and otherwise
fulfilled its statutory obligations under the Bankruptcy and Insolvency Act. Conservatory and Protective Measures The Company owns a 28-unit apartment complex
known as the Lynwood Ridge Development located in Regina, Saskatchewan. The complex
is professionally managed by Orange Properties Ltd. who is responsible for the
day-to-day operation of the building, including maintenance, collection of
rents and insurance. The property manager has been instructed to direct all
rental revenue from the building, net of any maintenance and insurance costs,
to the Trustee. A copy of the Insurance Certificate was provided to the
Trustee, and appears to be provide adequate coverage. The Company also owns fixed assets including
computers, furniture and equipment as well as lawn cutting equipment most of
which are located in a self-storage facility in Edmonton, Alberta. The Trustee
has contacted the management of Sentinel Self-Storage and has instructed them
to change the lock in order to restrict access. The rental of the storage
locker has been paid up to November 3, 2002. Other assets of the Company are located at the residence of
Margo Kaufman, who is known by a former Bartizan
director, Keith Talbot. Bartizan management
has indicated that all fixed assets are of nominal value and, as a result, the
Trustee has not secured insurance for these assets . Books and Records The books and records
of the Company have been completed up
to the date of bankruptcy. The Trustee has engaged Bartizan’s former CFO to complete all corporate filings, including
a GST return and payroll filings up to the date of bankruptcy. To date, Canada
Customs and Revenue Agency has not contacted the Trustee with respect to
arranging for payroll and GST audits on the Company’s
records. Assets Summary The Statement of
Affairs filed by the Company was
compiled through discussions held with Bartizan’s
CFO and a Director. The following table summarizes the Statement of Affairs
as follows:
In addition to
meeting with representatives of the Company,
the Trustee has also met with the Company’s
auditor, held discussions with the debtor’s legal counsel and corresponded
with various parties regarding the assets. Based upon these investigations to
date, the status of assets owned by the Company
as at the date of bankruptcy as well as those assets listed on the Company’s
last audited financial statement dated December 30, 2001 is discussed below. Cash and Funds Held
in Trust The Trustee currently
has $173,275 held in trust for the Company.
This amount includes funds received from the Company’s bank account, trust funds received from Parlee McLaws and
Mark Shaner, rent monies received from Orange Properties Ltd. representing
August net rents on the Lynwood Ridge Development, and funds received as a
return of equity on the Larcon Developments joint venture. According to the Company’s records, trust funds are also
held by Hustwick Wetsch, Bryenton Rosberg & Company and Faber &
Company. The Trustee has requested that these funds be returned for the benefit
of the estate’s creditors. To date, Bryenton Rosberg & Company has
indicated that they hold no funds in trust for Bartizan. Amounts Due From
Shareholder Bartizan has
indicated that $210,883 is owed to the Company
by way of a shareholder loan to Keith Talbot, a former Director. The
Trustee has requested Mr. Talbot repay this loan. Mr. Talbot has indicated in a
letter to the Trustee dated September 18, 2002 that the balance of the
shareholder loan account should be nil. The Trustee has requested further
information regarding this receivable from the company’s director, Tony Mayer. Investments in Real
Estate As at the date of Bartizan’s last audited financial
statement, the Company had
investments in two real estate properties, one located in Miami, Florida and
the other in Regina, Saskatchewan. The Miami property
was valued at $1,083,593 as at December 31, 2001. It should be noted that this
property was not in fact purchased. The Company’s
interest in the property was limited to the registration of a quitclaim
deed as security for funds advanced to an agent of the Company’s wholly owned subsidiary Diamond Holdings LLC. Based upon
preliminary investigations, it appears
this registration may be of little monetary value. The Trustee has
endeavored to contact the Company’s legal
counsel in Florida without any success to date. Information
pertaining to the Regina property was noted previously in the report. The Company has estimated the value of this property per the Statement of
Affairs at $1,150,000. Net of the outstanding mortgage on this property it appears that there is equity in the property
of approximately $350,000 before real estate selling costs. Mortgages and Notes
Receivable As at December 31,
2001, Bartizan had three mortgages
receivable secured by land or building as well as an unsecured note receivable
which were previously classified as marketable securities. The status of these
mortgages and notes is as follows: The Trustee will
endeavor to confirm the repayment of the above amounts in due course. Other Investments The Company has a number of investments
including investments in private companies, investments in joint ventures, and
investments in wholly-owned subsidiaries. Investment in AMC Technologies Corporation AMC Technologies
Corporation (“AMC”) is a private
Alberta company established to develop and supply micro fabricated products for
bio analysis and telecommunications. According to Bartizan records, the Company purchased 3,408,333 shares of
AMC Technologies Corporation (“AMC”)
with a book value of $369,621. However, the Trustee has not yet been able to
examine an executed share purchase agreement to substantiate the nature of this
investment or review current financial information. The Trustee has contacted AMC and has instructed the company’s
controller, to forward an executed copy of the share purchase agreement and
copies of the share certificates. It is the Trustee’s understanding that AMC was to go public, but was not
successful in this regard. Accordingly, the value of this investment cannot be
reasonably determined. Investment in Consolidated Kaitone Holdings Ltd. The Company has purchased shares in
Consolidated Kaitone Holdings Ltd. (“Kaitone”)
a company trading on the Toronto Venture Exchange. Bartizan records
indicate a book value of $74,186 for the Kaitone
shares; the number of shares however is unknown. Bartizan management has
informed the Trustee, that the shares are held in an account at Bank Hopaoline
B.M. in Toronto. The Trustee has been unsuccessful in attempts to contact
representatives of Bank Hopaoline B.M. in both Toronto and Tel Aviv, Israel to
secure said shares. Kaitone’s shares
lasted traded on July 30 at $.05 Investment in 955091 Alberta Ltd. (a Joint Venture) This joint venture
was established to develop and market single and multi-family homes in Fort
McMurray, Alberta. The parties to the
joint venture are Larcon Developments Ltd. (“Larcon”) and Bartizan and
the joint venture is carried on under the Larcon
name. It is the understanding of the Trustee that Larcon was responsible for the day-to-day operations of the joint
venture. The Trustee has
contacted Stan Larson, the principal of Larcon
to discuss the history and current status of the joint venture. Mr. Larson
(“Larson”) indicated that Bartizan had initially advanced $500,000
to the joint venture for its stated purpose of developing homes in Fort
McMurray. Specifically, these funds were used to secure deposits on 40 lots
with the intention of developing the lots upon securing additional third party
financing of up to $2 million. According to Larson,
Larcon was not able to secure the
financing due to a number of legal matters involving Bartizan. As a result 38 of the 40 lots were sold leaving Larcon to complete two homes under
construction. According to Larson these
homes have now been completed and sold and the joint venture has ceased
operations. To date, Bartizan has received $255,000 as a
return on its initial advance of $500,000. According to Larson future repayments are not anticipated. The Trustee has
requested and received financial statements including a detailed copy of the
general ledger. Given the late receipt of these items, the Trustee has not
yet reviewed this financial
information. Investment in Diamond Holdings LLC (“Diamond”) Diamond Holdings LLC
is a wholly owned subsidiary of Bartizan.
According to Bartizan management,
Diamond was incorporated in Florida
for the purpose of marketing rough, uncut diamonds. The Trustee has received
very little information on this investment but understands it is linked to the
quitclaim deed on the Miami property and possibly to a prior investment in Rave
Group LLC. According to Bartizan management, the Company advanced funds totaling $852,557
to Diamond who then advanced these
funds to K.C. Chetty (“Chetty”), an
individual who was to purchase and market the diamonds on behalf of Diamond. Again, according to Bartizan management and the Company’s legal counsel in the US, Chetty purchased diamonds which were
subsequently stolen from a New York
Hotel safety deposit box. As a result, Bartizan
registered the quitclaim deed on the Miami property, which is owned by Chetty. Per discussion with Mark Shaner,
Bartizan’s legal counsel in the US,
the value of this quitclaim deed is likely nil as it is his understanding that
the property was foreclosed upon earlier this year. As previously noted, the
Trustee has endeavored to obtain additional information from the Florida
counsel who registered the quitclaim deed. Investment in 3851281 Canada Inc. o/a Overseas Development
Corp. (“Overseas”) Bartizan is
believed to have purchased $149,800 in shares of the above captioned company
whose principal business involves developing and marketing single and
multi-family homes in a joint venture with the Government of Jamaica. It should be noted that
the president of Overseas, is Khan Agha, a former director of Bartizan. The Trustee has requested that
Overseas provide current financial
statements and a statement of all funds received and disbursed by Overseas to date. This information has
not yet been received. As such, the Trustee is not able to determine the value
of this investment. Investments in Bartizan Management and Bartizan Capital (US)
LLC These companies are
wholly owned subsidiaries of Bartizan and
contain no cash or other assets. As such, the value of these investments is
nil. Investments in Kingman Fund Inc., Kingman Mortgage
Investment Fund and Kingborough Equities These companies are
wholly owned subsidiaries of Bartizan
that were advanced funds from the Company.
The Trustee’s information regarding these investments is limited to
unaudited Notice to Reader financial statements for all companies dated June
30, 2001. Details regarding the nature of these investments are not known,
however, the financial statements indicate that there are no assets in these
companies and all liabilities are owed to Bartizan.
Claims of Creditors As at September 26,
2002, Collins Barrow Limited has received provable claims totaling $1,764,595
with known claims according to the Statement of Affairs filed by the company
totaling $14,234,403. The claims are broken down as follows: Pending Legal Actions The Company is party
to a number of legal actions, the largest involving a contingent claim from the
Milton Shoong Foundation (“Shoong”).
This claim is the result of a judgment against the Company’s wholly owned subsidiary, Bartizan Capital (US) LLC (“Bartizan US”) in favor of the Milton
Shoong Foundation totaling $13,152,260. Initially the funds were advanced to
Bartizan Capital (US) LLC from Accord Trading Limited (“Accord”). It is the understanding of the Trustee that Accord then forwarded these funds to Bartizan US. Furthermore it is the
understanding of the Trustee that Accord
no longer exists. As a result Shoong obtained
a judgment against Bartizan US for
repayment. Accordingly, the Trustee has listed an unsecured claim in favor of Bartizan US for the same amount. The Trustee was
recently notified of a further contingent claim against the Company again as a result of advances to
Bartizan US from Accord. Missions 2000 Ltd.(“Missions”),
an Australian charitable foundation indicates that it advanced $2,000,000 USD
to Accord. These funds were
subsequently advanced to Bartizan US.
Missions had previously demanded repayment of this advance from Bartizan US and received a promissory
note for $1,093,200 USD ($1,738,188 CAD. This claim has come to light since the
date of bankruptcy. The Trustee has
contacted all known legal counsel of Bartizan
to request information regarding further outstanding legal matters. As at
the date of this report the Trustee has not completed its review in this
regard. Realization
and Projected Distribution Given the complex
nature of the debtor’s affairs, including the number of contingent claims that
may exist, it is impossible for the Trustee to accurately project the
realization and distribution to the creditors. Other Matters General Security Agreement for the Indemnification of
Directors The Director’s of Bartizan were unable to obtain
Director’s liability insurance and as a consequence obtained an indemnity from
the company that is secured by $100,000 that is being held in a separate trust
account. The timing of the release of these funds to the trustee for the
benefit of the creditors is unknown and dependent upon the nature of claims, if
any, which might be made against the directors. The Trustee has
sought preliminary legal advice from Macleod Dixon LLP regarding a number of
matters. It should be noted that Macleod Dixon LLP is also listed as a creditor
of the bankrupt and is owed $70,000. DATED
at Calgary, Alberta, September 26, 2002 COLLINS
BARROW LIMITED Per:
_________________ Certificate of Appointment Notice of Assignment Notice of Bankruptcy & First Meeting of Creditors Minutes of First Meeting of Creditors - Sept 26/02 Statement of Affairs Proof of Claim Trustee's Preliminary Report - Sept 26/02 Trustee's Second Report - Dec 20/02 |