UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-QSB
( X ) Quarterly report pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934.
For the quarterly period ended March 31, 1998.
( ) Transition report pursuant to Section 13 or 15(d) of the Exchange
Act for the transition period from ______________ to ____________ .
Commission File Number: 333-06328
Sterling Financial Services of Florida I, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Florida 65-0716464
(State of Incorporation) (I.R.S. Employer I.D. No)
239 Halliday Park Drive, Tampa, Florida 33612
(Address of Principal Executive Offices)
(813) 932-2228
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant: (1) has filed all reports required to be filed by
Section 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 ( ) NO (X)
Indicate the number of shares outstanding of each of the issuer's classes of
stock as of June 21, 1999.
1,000 Common Shares
Transitional Small Business Disclosure Format:
YES ( ) NO (X)
<PAGE>
Sterling Financial Services of Florida I, Inc.
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets as of March 31, 1998 and December 31,
1997.............................................................. 3
Statements of Operations for the three-months ended March 31, 1998
and the period January 3, 1997 (date of inception) to March 31,
1997............................................................... 4
Statement of Stockholders' Deficit for the three-months ended March
31, 1998........................................................... 5
Statements of Cash Flows for the three-months ended March 31, 1998
and the period January 3, 1997 (date of inception) to March 31,
1997............................................................... 6
Notes to Financial Statements ..................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................. 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................. 11
Item 2. Changes in Securities ............................... 11
Item 3. Defaults Upon Senior Securities .......................... 11
Item 4. Submission of Matters to a Vote of Securities Holders 11
Item 5. Other Information................................... 11
Item 6. Exhibits and Reports on Form 8-K............................ 11
Signatures
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<PAGE>
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
BALANCE SHEETS
- -------------------------------------------------------------------
March 31 December
ASSETS 1998 31, 1997
- ------ Unaudited
---------- ----------
Cash and cash equivalents $1,033,611 $ 816,433
----------- ------------
Receivables:
Finance 314,693 196,503
Mobile home floor plan 136,540 86,040
Affiliate 12,300 12,550
---------- -----------
Total receivables 463,533 295,093
----------- ----------
Inventories 12,000 12,000
----------- ------------
Property and equipment - net 197,851 173,231
----------- ------------
Deferred debt issuance 211,595 172,856
costs, net
----------- ------------
TOTAL $1,918,590 $ 1,469,613
=========== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES:
Secured notes payable $2,201,000 $ 1,612,000
Accrued and other liabilities 14,728 8,150
----------- ------------
Total liabilities 2,215,728 1,620,150
----------- ------------
STOCKHOLDERS' DEFICIT
Common stock, no par value, 10,000
shares authorized, 1,000 1,000
1,000 shares issued and outstanding
Deficit (298,138) (151,537)
----------- ------------
Total stockholders' deficit (297,138) (150,537)
----------- ------------
TOTAL $1,918,590 $ 1,469,613
=========== ============
- -------------------------------------------------------------------
See accompanying notes.
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<PAGE>
P
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
- --------------------------------------------------------------------------
Period
Three-Months January
Ended 3, 1997
March (inception)
31,1998 to March
31, 1997
----------- -------------
REVENUES:
Interest and fee $ 24,341
Rental 19,180
Other 2,364 $ 450
-------------- ------------
Total revenues 45,885 450
-------------- ------------
OPERATING EXPENSES:
Management fees 48,701
Interest 58,849
Occupancy and equipment 45,268
Professional fees 4,250
Other 35,418
-------------- ------------
Total operating expenses 192,486 0
-------------- ------------
NET INCOME (LOSS) $ (146,601) $ 450
============== ============
INCOME (LOSS) PER COMMON SHARE $ (146.60) $ .45
============== ============
- --------------------------------------------------------------------------
See accompanying notes.
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<PAGE>
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited)
- ------------------------------------------------------------------------------
Common Stock
Shares Amount Deficit Total
-------- ----------- ---------- --------
Balances, December 31, 1,000 1,000 $(151,537) $ (150,537)
1997
Net loss for three-months
ended March 31, 1998 (146,601) (146,601)
-------- ----------- ----------- -----------
Balances, March 31, 1998 1,000 $ 1,000 $(298,138) $ (297,138)
======== =========== =========== ===========
- ------------------------------------------------------------------------------
See accompanying notes.
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<PAGE>
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
- -----------------------------------------------------------------------------
Period
Three-Months January
Ended 3, 1997
March (inception)
31,1998 to March
31, 1997
----------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (146,601) $ 450
Adjustments to reconcile net income (loss) to
net cash provided by
(used in) operating activities:
Depreciation 6,446
Amortization and write off of deferred 12,561
debt issuance costs
Increase in accrued and other 6,578
liabilities
----------- ---------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (121,016) 450
------------ ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (31,066)
Finance receivables originated and
purchased, net of payments (118,190)
and discounts
Floor plan receivables originated, net (50,500)
of payments
------------ ---------------
NET CASH USED BY INVESTING ACTIVITIES (199,756) -
------------ ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,000
Proceeds from issuance of secured notes 589,000 139,000
payable
Decrease in affiliate receivables 250
Cash paid for deferred debt issuance costs (51,300) (6,990)
------------ ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 537,950 133,010
------------ ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 217,178 133,460
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 816,433 0
------------ ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,033,611 $ 133,460
============ ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Interest paid $ 46,288 $ -
============ ===============
- -----------------------------------------------------------------------------
See accompanying notes.
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<PAGE>
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
- -------------------------------------------------------------------------------
NOTE A - FORMATION AND OPERATIONS OF THE COMPANY
Sterling Financial Services of Florida I, Inc, (the "Company") was incorporated
under the laws of the state of Florida on January 3, 1997. The Company, which
was in the development stage through December 31, 1997, is primarily in the
business of originating and purchasing retail mobile home installment sales
contracts created in connection with the financing of manufactured homes. The
Company also owns and rents mobile homes located in the Halliday Village Mobile
Home Park ("Halliday"); a related party. The Company's operations are located in
Tampa, Florida and substantially all of its customers are Florida residents.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principals for interim
financial information and the instructions to Form 10-QSB and Rule 10-1 of
Regulation S-X of the Securities and Exchange Commission (the "SEC").
Accordingly, these financial statements do not include all of the footnotes
required by generally accepted accounting principals. In the opinion of
management, all adjustments (consisting of normal and recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 1998 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1998. The
accompanying financial statements and the notes should be read in conjunction
with the Company's audited financial statements as of December 31, 1997
contained in its Form 10KSB.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principals requires that management make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements. The reported amounts of the revenues and expenses during the
reporting period may be affected by the estimates and assumptions that
management is required to make. Actual results could differ from those
estimates.
Loss Per Common Share
Loss per common share is based on the weighted average number of common and
common equivalent shares outstanding during the period. The weighted average
number of such shares outstanding for the three-months ended March 31, 1998 and
the period January 3, 1997 (date of inception) to March 31, 1997 was 1,000.
NOTE C - SECURED NOTES PAYABLE
Secured notes payable (the "Notes") bear interest at 10.5%, with interest
payable monthly, and mature on June 30, 2002. The Notes are secured by a first
lien on any assets acquired with the proceeds and may be prepaid in whole or in
part at any time without premium or penalty. The Company has registered $9.9
million of Notes, and as of March 31, 1998 is continuing to offer the remaining
$7,699,000 of Notes for sale. The Notes are being offered on a "best-efforts"
basis by broker-dealers, who are members of the National Association of
Securities Dealers, Inc.
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<PAGE>
NOTE D - RELATED PARTY TRANSACTIONS
Affiliate receivables bear interest at 12.9.%, are unsecured and contain no
specified repayment terms.
Sterling Financial Services, Inc. ("SFS"), a related party due to common
ownership manages the Company and provides all services in connection with the
origination, purchase and servicing of receivables. As consideration for these
services, the Company pays SFS for all of its expenses plus 20% of such
expenses. Management fees paid to SFS during the three months ended March 31,
1998 approximated $49,000. No management fees were paid during the period
January 3, 1997 (date of inception) to March 31, 1997.
The Company rents certain office space for its administrative operations and lot
space for mobile home rental units it owns from Halliday, a related party due to
common ownership. Total rent paid under these arrangements approximated $26,000
during the three months ended March 31, 1998. No rent was paid during the period
January 3, 1997 (date of inception) to March 31, 1997.
- --------------------------------------------------------------------------------
-8-
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW
The following discussion and analysis should be read in conjunction with the
balance sheet as of December 31, 1997 and the financial statements as of and for
the three months ended March 31, 1998 and the period January 3, 1997 (date of
inception) to March 31, 1997 included with this Form 10-QSB. The Company did not
have significant operations during the period January 3, 1997 (date of
inception) to March 31, 1997 and as such this analysis does not include any
additional discussion as of and for such period.
The Company, which was in the development stage through December 31, 1997, is
primarily in the business of originating and purchasing retail mobile home
installment sales contracts created in connection with the financing of
manufactured homes. The Company also owns and rents mobile homes located in the
Halliday Village Mobile Home Park ("Halliday"). The Company's operations are
located in Tampa, Florida and substantially all of its customers are Florida
residents.
Readers are referred to the cautionary statement, which addresses
forward-looking statements made by the Company.
RESULTS OF OPERATIONS
During the three months ended March 31, 1998, the Company generated revenues of
approximately $46,000. These revenues resulted substantially from interest and
fee income earned on cash equivalents, and finance and floor plan receivables,
of approximately $8,900 and $15,400, respectively. In addition, the Company
generated approximately $19,200 of revenues from the rental of mobile homes
located in Halliday.
Operating expenses during the three months ended March 31, 1998 approximated
$192,500 and consisted primarily of management fees and rent paid to related
parties ($48,701 and $26,270, respectively), and interest of $58,849 arising
from secured notes payable. The remaining expenses of approximately $59,000 were
spread over a large number of accounts; none of which had significant balances
at March 31, 1998. The management fees and rent were paid to Sterling Financial
Services, Inc. and Halliday, respectively, which are related to the Company by
virtue of common ownership.
The net loss for the three months ended March 31, 1998 approximated $146,600;
such loss occurred because the Company's interest bearing assets did not
generate sufficient income to cover expenses necessary to implement the
Company's business plan.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities used cash of approximately $121,000 during the three months
ended March 31, 1998. This cash was used primarily to fund the Company's
aforementioned net loss for such period.
Investing activities used cash of approximately $199,756 during the three months
ended March 31, 1998; this cash was used primarily to originate and purchase
finance and floor plan receivables with a net balance of approximately $169,000
(such amount is net of principal payments). In addition, the Company purchased
property and equipment having a cost of approximately $31,000 for use in its
operations.
Financing activities generated net cash proceeds of approximately $538,000 from
the sale of secured notes payable (the "Notes"). The Company is continuing to
offer subscriptions for a maximum of 9,900 Notes in the principal amount of
$1,000 each. As such, $7,699,000 remain available for sale as of March 31, 1998.
If all of the remaining Notes are sold, the Company will generate net cash
proceeds of approximately $6,929,000. The Notes bear interest at 10.5% and
mature on June 30, 2002. Interest is payable monthly. The Notes are secured by a
first lien on the
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<PAGE>
assets acquired with proceeds generated from their sale, and may be prepaid in
whole or in part at any time.
The Company believes that it will be able to satisfy its cash requirements for
the foreseeable future if it does not expand its business by originating
additional finance receivable contracts. However, in order for the Company to
expand its dealer base and portfolio of finance receivable contracts, and to
ultimately pay the Notes in full, the Company will have to generate profitable
results of operations and/or secure additional capital resources through
additional debt or equity offerings and/or institutional financing, such as a
line of credit. No assurance can be given that the Company will generate
profitable results of operations or that additional capital resources will be
available, or available on reasonable terms. Also, if the Company is unable to
originate receivable contracts in an amount and at a pace that approximates the
amount and the pace that capital is raised through the issue of the Notes, the
interest earned on the capital raised will not be sufficient to cover the cost
of the interest on the Notes.
CAUTIONARY STATEMENT
This Form 10-QSB, press releases and certain information provided periodically
in writing or orally by the Company's officers or its agents contain statements
which constitute forward-looking statements within the meaning of Section 27A of
the Securities Act, as amended and Section 21E of the Securities Exchange Act of
1934. The words expect, anticipate, believe, goal, plan, intend, estimate and
similar expressions and variations thereof if used are intended to specifically
identify forward-looking statements. Those statements appear in a number of
places in this Form 10-QSB and in other places, particularly, Management's
Discussion and Analysis of Financial Condition and Results of Operations, and
include statements regarding the intent, belief or current expectations of the
Company, its directors or its officers with respect to, among other things: (i)
the Company's liquidity and capital resources; (ii) the Company's financing
opportunities and plans and (iii) the Company's future performance and operating
results. Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors. The factors that might cause such differences include, among others,
the following: (i) any material inability of the Company to successfully
identify, consummate and integrate the acquisition of finance receivables at
reasonable and anticipated costs to the Company; (ii) any material inability of
the Company to successfully internally develop its products; (iii) any adverse
effect or limitations caused by Governmental regulations; (iv) any adverse
effect on the Company's continued positive cash flow and abilities to obtain
acceptable financing in connection with its growth plans; (v) any increased
competition in business; (vi) any inability of the Company to successfully
conduct its business in new markets; and (vii) other risks including those
identified in the Company's filings with the Securities and Exchange Commission.
The Company undertakes no obligation to publicly update or revise the forward
looking statements made in this Form 10-QSB to reflect events or circumstances
after the date of this Form 10-QSB or to reflect the occurrence of unanticipated
events.
- --------------------------------------------------------------------------------
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<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Securities Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
SIGNATURES
Pursuant to the requirements 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.
July 15, 1999 /s/ Anthony A. Sutter
- ---------------------------- --------------------------------
Date Anthony A. Sutter, President
-11-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,033,611
<SECURITIES> 0
<RECEIVABLES> 463,533
<ALLOWANCES> 0
<INVENTORY> 12,000
<CURRENT-ASSETS> 1,509,144
<PP&E> 210,589
<DEPRECIATION> 12,738
<TOTAL-ASSETS> 1,918,590
<CURRENT-LIABILITIES> 14,728
<BONDS> 2,201,000
0
0
<COMMON> 1,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,918,590
<SALES> 0
<TOTAL-REVENUES> 45,885
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 133,637
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,849
<INCOME-PRETAX> (146,601)
<INCOME-TAX> 0
<INCOME-CONTINUING> (146,601)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (146,601)
<EPS-BASIC> (146.60)
<EPS-DILUTED> (146.60)
</TABLE>
