SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-KSB
( X ) Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.
For the Year Ended December 31, 1997
( ) 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: 333-06328
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
(Exact name of Registrant as specified in its Charter)
FLORIDA 65-0716464
(State of or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
239 Halliday Park Drive, Tampa, Florida 33612
Address of Principle Executive Offices:
(813) 932-2228
Registrant's telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by 7 Section 13 or 15(d) of the Securities Exchange act of 1934
during the preceding 12 months (or for such other shorter period that the
registrant was required to file such reports), and (20 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-B is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by referencing Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. _____
Issuer's revenues for the most recent fiscal year: $25,449.00
The aggregate market value of the voting stock held by non-affiliates of the
registrant at December 31, 1997 was $0. Shares of common stock held by each
officer and director and by each person who owns more that 5% of the outstanding
common stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of June 15, 1999.
1,000 Common Shares
Documents Incorporated By Reference
NONE
Transitional small business disclosure format. ___ Yes _X_No
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Sterling Financial Services of Florida I, Inc.
FORM 10 - KSB
Table of Contents
PART I.
ITEM 1. Business 2
ITEM 2. Properties 11
ITEM 3. Legal Proceedings 11
ITEM 4. Submission of Matters to a Vote of 11
Security Holders
PART II
ITEM 5. Market for the Common Equity and
Related Stockholder Matters 11
ITEM 6. Management's Discussion and Analysis 12
of Financial Condition and Results
of Operations
ITEM 7. Financial Statements 14
ITEM 8. Changes In and Disagreements With 26
Accountants on Accounting and
Financial Disclosures
PART III
ITEM 9 Directors, Executive Officers,
Promoters and Control Persons;
Compliance with Section 16(a) of the 26
Exchange Act
ITEM 10 Executive Compensation 27
ITEM 11 Security Ownership of Certain 27
Beneficial Owners and Management
ITEM 12 Certain Relationships and Related 28
Transactions
ITEM 13 Exhibits, Financial Statement 28
Schedules and
Reports on Form 8-K
Signatures 29
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PART I.
ITEM 1
BUSINESS
Sterling Financial Services of Florida I, Inc. (the "Corporation") was
formed in January 1997 under the laws of the State of Florida primarily to offer
a package of financial services to the sub-prime mobile home industry, including
originating, purchasing and refinancing for its own account retail mobile home
installment sales contracts (the "Contracts") created in connection with the
financing of used as well as new mobile homes (the "Homes"), selling Contracts
to other lenders; and providing certain floor plan financing to mobile home
dealers (the "Dealers") (collectively, the "Financing Activities"). In addition,
the Corporation may also (1) purchase, refurbish and lease or sell new or used
Homes; (2) buy and improve land for development of mobile home parks (the
"Parks"), or provide financing to others for such purposes; (3) buy and sell
Parks; and (4) purchase other sub-prime financial companies in the mobile home
lending business (collectively, the "Other Activities").
The Corporation has been offering subscriptions for a maximum $9,900,000
of secured notes payable (the "Notes") in the principal amount of $1,000 each.
The Notes, which provide for monthly interest payments at the rate of 10.5% per
annum, are payable in full on June 30, 2002. During the period January 3, 1997
(date of inception) to December 31, 1997, the Corporation sold $1,612,000 of
these Notes. Subsequent to December 31, 1997, the Corporation has sold
additional Notes of approximately $6,780,000. The offering is scheduled to
terminate on June 30, 1999.
The Corporation is using the proceeds from the sale of the Notes to fund
its Financing and Other Activities, and its operating losses. The Notes are
secured by a first lien on the assets acquired with the proceeds of the offering
or other assets acquired with funds obtained from the repayment, sale or
refinancing or such assets (these assets are collectively referred to as the
"Collateral"). The primary source of payment on the Notes will be payments made
by sub-prime borrowers on the Contracts (see Mobile Home Finance Industry -
Sub-Prime Market Segment for definition of a sub-prime borrower).
It was initially anticipated that approximately 85% of the Corporation's
business would involve originating and refinancing Contracts created in
connection with the financing of primarily used as well as some new Homes. The
Corporation intended to originate Contracts, as opposed to purchasing Contracts
at a discount from Dealers or others. As a secondary activity, not anticipated
to exceed approximately 15% of the Corporation's business was the Corporation's
intention to provide certain floor plan financing to mobile home dealers. In
addition, from time to time, it was anticipated that the Corporation would
participate in Other Activities. Notwithstanding such parameters, most the of
the Corporation's outstanding finance receivables have been purchased at a
discount. In addition, a significant portion of the Corporation's available
funds has been invested in a Park (see Item 12-Certain Relationships and Related
Transactions).
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Risk Factors
An investment in the Notes involves various risks, including the
following:
o Because most of the borrowers under the Contracts are considered
sub-prime, the risk of default on the Contracts is greater than if the
Corporation originated Contracts with A or Prime credit borrowers.
o Over the past several years, lenders to sub-prime borrowers have
experienced increased rates of delinquency, default and credit losses.
o There are various conflicts of interest resulting from the relationship
between the Corporation and Sterling Financial Services, Inc., a
Florida corporation (the "Servicing Company").
o Increased competition in the sub-prime mobile home finance business and
deviations from credit underwriting guidelines could result in the
Corporation originating Contracts with a greater risk of loss. Although
the Corporation has established certain guidelines with minimum
acceptable criteria for Contract origination, there is no limitation
upon the number of Contracts which can deviate from these guidelines.
o The Corporation has not had significant operations as of December 31,
1997.
o The Corporation has experienced negative interest income and net
operating losses since its inception; these losses are being funded
from proceeds generated from the sale of the Notes.
o There are limited sources of payment of interest and principal on the
Notes.
o The value of the Collateral will be less than the principal due on the
Notes.
o No public or other market for the Notes exists and there can be no
assurance that one may develop in the future.
o The success of the Corporation will, to a large extent, depend on the
quality of services provided by Mr. Sutter and the Servicing Company's
employees. The Corporation does not have an employment contract with
Mr. Sutter and the loss of his services could materially adversely
affect the business of the Corporation.
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MOBILE HOME FINANCE INDUSTRY
Sub-Prime Market Segment
The Corporation operates in the sub-prime segment of the mobile home
finance market, focusing on financing used homes sold to sub-prime borrowers. A
sub-prime borrower is a purchaser of a home who does not qualify for traditional
A or prime credit, which in general means that the borrower does not have all of
the following characteristics: (i) a long credit history and no defaults, (ii)
at his/her current job for at least 18 months, (iii) can easily finance a Home
through a traditional financial institution, such as a bank, (iv) usually a
homeowner, and (v) typical risk of loan loss is less than 3% and whose typical
cost of credit is prime plus 1% to 3%. Sub-prime borrowers are generally rated
"B," "C" or "D" based upon the degree of variance from the foregoing
characteristics.
It has been management's experience that lenders to prime mobile home
financing borrowers impose interest rates less than the maximum provided by law.
Management anticipates that almost all of its Contracts will be at the maximum
interest rate permitted by law. See "Consumer Finance Laws and Regulations." To
the extent this interest rate differential continues, Contracts financed in the
sub-prime market segment will have the potential for higher yields, but, because
sub-prime borrowers are not as creditworthy as prime borrowers, these Contracts
also present greater risk of default and loss. Accordingly, the net yield on
sub-prime contracts may be less than that on prime contracts.
Competition
Although there is some competition in the mobile home finance business,
the Corporation believes that there are few competitors providing financing to
sub-prime purchasers of Homes. The sub-prime market is highly fragmented and, to
date, is served by only a few non-traditional consumer finance sources. Because
the Corporation provides financing to borrowers who do not qualify for
traditional financing, the Corporation does not believe that it competes with
most commercial banks, savings and loans, credit unions and other consumer
lenders that apply more traditional lending criteria to the credit approval
process. Historically, these traditional sources of mobile home financing (some
of which are larger and have significantly greater financial resources) have not
served the Corporation's sub-prime market segment to any significant extent.
However, if these and other companies expand their activities in the market
served by the Corporation, the competition for suitable Contracts in that market
will continue to intensify, which could have an adverse effect on the
Corporation.
In connection with the origination of Contracts, the Corporation will
encounter competition from persons or entities that may have objectives similar
in whole or in part to those of the Corporation. Most of such competitors may be
substantially better financed and have reputations and public awareness of their
operations that are more widely known and accepted. The pressure of such
competition may require that the Corporation pay more for Contracts it
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originates or purchases, or result in the Corporation originating Contracts of
lesser quality, which could reduce or eliminate payments to Note Holders.
ORIGINATION AND SERVICING OF CONTRACTS
The Corporation has entered into a Servicing Agreement with the Servicing
Company, to provide all services in connection with Contract origination and
servicing. The agreement may be terminated by either party without cause upon 15
days' notice. Because the Servicing Company must operate within the guidelines
established by the Corporation, all management and operational decisions made by
the Servicing Company will be the same as would be made if the Corporation made
such decisions directly. A description of the guidelines of the Corporation is
set forth below. No funds of the Corporation are deposited or kept in any
account commingled with funds of the Servicing Company or any other person or
entity. See "Business - Relationship with Servicing Company."
Origination
The Servicing Company will contact borrowers as well as park owners and
Dealers to advise them of the Corporation's program for Contract origination. In
addition, print advertising directed at individual borrowers may be used. The
Corporation does not anticipate that it will be dependent upon one or a few park
owners or Dealers for identifying potential borrowers. Also, the Corporation
anticipates that park owners, Dealers or potential borrowers will contact the
Corporation regarding the availability of financing, and the Corporation will
make a credit application available directly to the borrower.
When the credit application from the borrower is received, an investigator
will review the application and obtain the applicant's credit bureau and other
information.
Contract origination guidelines include the following minimum acceptable
criteria:
o Employment history - at least six months on the job;
o Income - depends on the amount of the loan and the debt to income ratio
(see below) of the borrower;
o Time at residence - at least one year at current residence;
o Debt to income ratio - personal debt cannot exceed 50% of the
borrower's net income;
o Bankruptcy - all debts must have been fully discharged at least one
year prior to application for the loan;
o Child support - if the borrower is paying child support, it will be
treated as a personal debt and factored into the debt to income ratio;
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if the borrower is receiving child support, such income will only be
considered if court mandated;
o Repossessions - must have occurred at least one year prior to
application for the loan;
o Liens/judgments - will be decided on a case-by-case basis, depending on
the type of lien or judgment, the amount involved and the age thereof;
o Previous delinquencies, collections and charge-offs - will be decided
on a case-by-case basis with consideration taken for mitigating
circumstances, such as divorce, disability, extended illness or layoff
due to downsizing; and
o Co-buyers and co-signers - will also be subject to the minimum
acceptable criteria set forth above.
There are no fixed criteria pursuant to which material deviation of these
guidelines will be permitted. However, no Contract will be originated to a
borrower deviating from these guidelines for which there is not an increased
down payment or a co-signer meeting the guidelines, or both. The additional down
payment required will increase with the increase in deviation from the
guidelines, although there is no fixed formula for determining the amount of
increased down payment required.
Prior to the origination of the Contract, the Corporation reviews the
financing to determine the following: (i) all required documentation has been
included, (ii) the math is correct, (iii) regulatory requirements have been
satisfied, (iv) the amount financed does not exceed the maximum loan allowed,
and (v) any conditions imposed have been satisfied. The Corporation will contact
the insurance carrier to confirm insurance.
Servicing
Billing. The Servicing Company generates monthly statements which are sent
to the borrower.
Collections. The Corporation has established certain collection guidelines,
which guidelines will not necessarily be followed in all cases and which are
subject to modification at any time.
When a delinquency occurs, a collector will make a call by the eleventh
day of the delinquency. If no response is received, a Notice of Default Letter
will be sent to the borrower on the sixteenth day. If the account has still not
been brought current, a collector will personally visit the delinquent borrower.
If the borrower is unable to make all required payments on a current basis, a
collector may make reasonable payment arrangements to cure the delinquency. If
all of these collection processes are not successful, the repossession process
commences immediately.
Repossessions and Resale Department. Either the borrower voluntarily agrees
to vacate the Home, or an attorney is contacted by the Corporation to effect an
involuntary
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repossession. All costs associated with the repossession are an obligation of
the borrower. To effect an involuntary repossession, in general, the borrower is
first given written notice of intent to repossess, and a period of time,
generally five days, to cure all defaults. If the defaults are not cured within
said time period, a complaint is filed and a judgment obtained. After the
judgment is obtained, a writ of possession is obtained and given to the
appropriate law enforcement agencies, who evict the borrower from the Home. The
Home will be renovated as necessary and sold in its then current location, if
possible, or moved to a Dealer's lot or another Park for resale.
Laws limiting or prohibiting deficiency judgments, Federal bankruptcy laws
and numerous other related federal and state laws may interfere with or affect
the ability of a secured party to repossess Collateral and/or to enforce a
deficiency judgment. For example, in a Chapter 13 proceeding under the Federal
Bankruptcy Code, a court may prevent a lender from repossessing a mobile home,
and, as part of the rehabilitation plan, reduce the amount of the secured
indebtedness to the market value of the Home at the time of bankruptcy, leaving
the lender as a general unsecured creditor for the remainder of the
indebtedness. A bankruptcy court may also reduce the monthly payments due under
a Contract or change the rate of interest and time of repayment of the
indebtedness. This may limit the Corporation's ability to receive full payments
on a Contract or recovery in the event of a default under a Contract, which may
decrease funds available to make payments on the Notes.
SALE OF CONTRACTS
The Corporation may from time to time sell blocks of Contracts (the "Sale
Contracts") which it originates to other lenders. The Corporation does not
anticipate selling such Contracts until at least twelve (12) months after the
origination date. No such sales have occurred as of the date of this Form
10-KSB.
FLOOR PLAN FINANCING
The Corporation provides financing to Dealers for Homes held for resale to
Home purchasers, called floor plan financing. The Corporation anticipates that
the financing will be at effective interest rates ranging from 14% to 24% (the
A.P.R. may be less, but the effective rate includes additional interest payments
in the form of points or similar charges allowed by law). Advances under floor
plan arrangements are secured by the mobile home purchased with the proceeds of
the borrowing and generally are due on the earlier of the date the inventory is
sold or six months from the inception of the advance.
OTHER BUSINESS SEGMENTS
The Corporation may also: (1) purchase, refurbish (if necessary) and lease
or sell new or used Homes; (2) buy and improve land for development of Parks or
provide financing to others for such purpose; (3) buy and sell Parks; and (4)
purchase other sub-prime financial companies in the mobile home lending
business. In connection therewith, the Corporation has purchased a 25% interest
in a mobile home park in Hillsborough County, Florida (the Corporation's
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majority stockholder and President owns the remaining 75% of the Park). In
addition, the Corporation has purchased significant new home inventories, which
they are selling substantially at this Park. Finally, the Corporation owns and
rents Homes located in the Halliday Village Mobile Home Park (which is wholly
owned by the Corporation's majority stockholder and President). The Corporation
anticipates that it may continue to engage in such activities if it becomes
aware of favorable opportunities.
MARKETING
The Corporation anticipates that it will not have to engage in any
significant marketing activities because of the anticipated high demand for the
financing it provides and the lack of significant competition to provide such
financing. However, the Corporation intends to contact Dealers throughout
Florida to advise them of the availability of the Corporations financing
program.
MARKET AREA
There are a large number of Home purchases in Florida and there is
significant wealth in Florida because of the nature and size of the population.
The Corporation believes that Florida currently benefits from a strong economy.
According to the Florida Chamber of Commerce, Florida is the fourth largest
consumer market in the U.S. In 1993, Florida's population was over 13.4 million,
with approximately 70% of new arrivals in the 18 to 44 age bracket. Florida
emerged as a major economic force in the U.S. in the 1980's. By the end of the
decade, Florida had become the nation's leader in major new plant locations or
expansions. Florida consistently ranks as one of the top locations for industry.
Florida has consistently been a pacesetter in new business incorporation,
leading the nation a number of recent years. Florida has three cities in the
nation's top twelve metropolitan statistical areas in terms of percentage growth
in the number of new. The state has the largest number of manufacturing plants
in the Southeast. Numerous economists predict moderate but continued steady
growth in Florida's economy.
However, because the Corporation intends to limit its operations to
Florida, the Corporation's operations could be unfavorably impacted by adverse
changes in the economic environment in Florida which could adversely affect the
creditworthiness of the Corporation's prospective borrowers in the sub-prime
market in Florida. Although the Corporation believes Florida's economy will
continue to grow, there can be no assurance that this is the case. The resulting
lack of diversity in the geographic area in which the Corporation operates may
increase the risk of loss to the Corporation and the Note Holders because
adverse economic conditions which may occur in Florida but not elsewhere in the
country will have a greater adverse affect on the Corporation's operations and
thus its ability to make payments on the Notes than if the Corporation operated
in a broader geographic area.
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CHANGES IN PROGRAMS, PRODUCTS, POLICIES AND PROCEDURES
Factors such as increased competition in the industry and other industry
trends described above, as well as other reasons, may cause the Corporation from
time to time to review and change its financing programs, products and services
offered, and other business policies and procedures. To the extent there are
future changes in these areas, the Corporation may originate Contracts or be
subject to other circumstances which may increase the risk of loss to Note
Holders. The Corporation will continually review these areas and reserves the
right to change any criteria related thereto described herein or otherwise as it
deems appropriate.
CONSUMER FINANCE LAWS AND REGULATIONS
The Corporation's business activities, particularly its Finance
Activities, are subject to regulation and licensing under various Federal,
Florida and local consumer finance statutes, regulations and ordinances. These
laws, rules and regulations: (i) govern the way the Corporation can operate;
(ii) limit the interest rate and other charges that may be imposed by, or
prescribe certain other terms of, the Contracts that the Corporation originates;
and (iii) define the Corporation's rights to repossess and sell Collateral. If
the Corporation fails to comply with these laws and regulations, it could be
required to cease operations or be subject to fines and penalties, and borrowers
under the Contracts could have civil remedies against the Corporation and
defenses under the Contracts which could adversely affect the Corporations
ability to enforce its rights and collect payment of sums due thereunder, all of
which could eliminate or reduce the Corporation's cash flow and thereby its
ability to make payments on the Notes. There is no assurance that laws and
regulations under which the Corporation operates will not become more
restrictive, which could reduce the Corporation's cash flow and thereby its
ability to make payments on the Notes.
RELATIONSHIP WITH SERVICING COMPANY
Servicing Agreement
The Corporation has entered into a Servicing Agreement with the Servicing
Company, to provide all services in connection with Contact origination and
servicing. The Servicing Agreement is for an initial term commencing January 1,
1997 through June 30, 2002, after which date it may be extended at the sole
discretion of the Corporation upon such terms and conditions and for such
periods as mutually agreed between the Corporation and the Servicing Company.
Either party may terminate the Servicing Agreement for any reason upon 15 days'
advance notice.
Because the Servicing Company must operate within the guidelines
established by the Corporation, all management and operational decisions made by
the Servicing Company will be the same as would be made if the Corporation made
such decisions directly. No funds of the Corporation are deposited or kept in
any account commingled with funds of the Servicing Company or any other person
or entity.
The Corporation will pay the Servicing Company an amount equal to all
expenses of the Servicing Company computed on an accrual basis ("Actual Costs")
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plus twenty percent (20%) of Actual Costs for services rendered, except that if
the Servicing Company provides similar services to other entities, the
Corporation will pay the Servicing Company: (i) for any out-of-pocket cash
expenditures, such as attorneys' fees and court costs incurred in connection
with origination and servicing of the Corporation's Contracts (the "Direct
Expenses"), and (ii) for their pro-rata amount of Actual Costs less Direct
Expenses - with such pro-ration based upon the ratio of the total number of
Contracts held by each entity to the total number of Contracts held by all
entities.
It was anticipated that the Corporation would loan up to $75,000 to the
Servicing Company for the purchase and/or lease of office space, office
equipment, trucks and automobiles, however to date this transaction has not been
consummated. In the event such a transaction occurs, the Corporation anticipates
that it will repay any advanced funds in equal monthly installments of principal
and interest at the rate of 10.5% per annum, with the final payment due on June
30, 2002.
Reason for Using the Servicing Company
A separate servicing company was formed for administrative convenience. It
is anticipated that additional employees will need to be hired to perform
servicing functions for the Corporation. In addition, if affiliated entities are
formed, the same employees performing servicing functions for the Corporation
would perform similar servicing functions for such entities. If there were no
separate servicing company, such employees would be considered to be employees
of the Corporation and the affiliated entities, requiring separate paychecks and
related income tax filings and deposits to be made by each separate entity.
Conflicts of Interest
Anthony A. Sutter, the sole officer and director of the Corporation and
the Servicing Company, may engage for his own account, or for the account of
others, including the affiliated entities, in other business ventures, some of
which may have the same investment objectives as the Corporation, and therefore
compete with the Corporation.
To the extent the Corporation competes with other businesses, including
affiliated entities, competition for origination of suitable Contracts would
intensify, which could have an adverse effect on the Corporation because the
Corporation may originate Contracts with a greater risk of loss, which could
adversely affect the Note Holders by reducing the funds available to make
payments on the Notes and the value of the Collateral.
This competition for origination of Contracts creates a potential conflict
of interest because it is anticipated that the Servicing Company, which is
responsible for originating Contracts, will provide similar origination services
to any affiliated entities formed by Mr. Sutter or his affiliates which are
engaged in businesses similar to that of the Corporation. An additional conflict
of interest with respect thereto exists because the Corporation and Servicing
Company are both managed by Mr. Sutter. Accordingly, there is no assurance that
decisions concerning Contract origination and other matters will be made which
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more favorably impact the Corporation than the affiliated entities, increasing
the risk of default on the Notes.
In order to minimize the foregoing conflicts of interest, the Corporation
and the Servicing Company have agreed that if the Corporation and affiliated
entities both have funds available for Contract origination, Contracts will be
originated on an alternating basis, meaning first the Corporation will originate
a Contract, then the affiliated entities will originate a Contract (or Contracts
if there is more than one affiliated entity with funds available), then the
Corporation will originate a Contract, and so on.
EMPLOYEE
As of December 31, 1997, there was only one (1) employee of the
Corporation, Mr. Sutter. Management of the Corporation and the employee are the
same individual. Mr. Sutter is not represented by a collective bargaining
agreement nor is he bound by an employment agreement (see Business - Risk
Factors).
ITEM 2 - PROPERTIES
The Corporation's executive offices are located at 12408 North Florida
Avenue, Tampa, Florida. Pursuant to an oral agreement, the office is leased from
Halliday Village Mobile Home Park, Inc., an entity wholly owned by the
Corporation's majority stockholder and President, on a month-to-month basis at
$2,200 per month.
ITEM 3 - LEGAL PROCEEDINGS
NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II.
ITEM 5 - MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
NONE
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ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW:
The Corporation, which was incorporated in January 1997, and began operating in
April, 1997 is considered to be in the development stage, as defined in
Financial Accounting Standards Board Statement No. 7. The Corporation offers
financial services to the mobile home industry by originating, purchasing and/or
refinancing sub-prime mobile home installment contracts, providing dealer floor
plan financing and renting mobile homes.
RESULTS OF OPERATIONS:
The Corporation generated revenues of $25,449 during the period January 3, 1997
(date of inception) to December 31, 1997. Approximately $12,300 of these
revenues resulted from interest earned on finance receivables and cash
equivalents. The remaining revenues of approximately $13,000 consisted of
revenues from the rental of mobile homes and various fees charged to Dealers and
Borrowers. The Corporation incurred operating expenses of $176,986 during its
initial period of operations. This amount consisted substantially of management
fees of $62,368 paid under the aforementioned Servicing Agreement, interest
expense of $71,622 incurred on the Notes and office and lot rent of $33,450 paid
to Halliday Mobile Home Park, Inc. In addition, depreciation expense amounted to
$6,097 for the period January 3, 1997 to December 31, 1997. The net loss for the
period January 3, 1997 to December was $151,537. The losses result from the
initial start-up costs incurred to implement the Corporation's business plan,
and because there is normally a lag time between the receipt of proceeds from
the Notes and investment of such funds in receivables (the cost of the
indebtedness is significantly higher that the return on cash equivalents).
LIQUIDITY AND CAPITAL RESOURCES:
Operating activities used $126,174 of cash flow during the period January 3,
1997 (date of inception) to December 31, 1997. The cash was used primarily to
fund the net loss for the period January 3, 1997 to December 31, 1997 of
$151,537, as adjusted for non-cash expenses such as depreciation and
amortization of deferred debt issuance costs totaling $29,213,and to purchase
mobile home inventory of $12,000. Cash used in operating activities was offset
by an increase in accrued expenses of $8,1505.
The Corporation's investing activities used $461,871 of cash during the period
January 3, 1997 (date of inception) to December 31, 1997. These funds were used
to purchase property and equipment for $179,328 (consisting of furniture and
equipment of $21,372 and mobile homes held for rental of $157,956), and to
originate floor plan and finance receivables of $86,040 and $196,503,
respectively). At December 31, 1997, finance receivables had terms of 60 to 120
months and interest rates ranging from 13% to 17.9%. The Corporation is
attempting to limit its exposure to interest rate spread by investing funds in
finance installment contracts as Notes are sold since the cost of the funds is
significantly higher than the yield on cash and cash equivalents.
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Financing activities generated cash flow of $1,404,478 during the period January
3, 1997 (date of inception) to December 31, 1997. This amount was generated from
the sale of the Notes (which resulted in net cash proceeds of approximately
$1,416,028 after consideration of the payment of deferred debt issuance costs).
The net impact of the above operating, investing and financing activities was
that cash and cash equivalents increased by $816,433 during the Corporation's
first period of operations.
The Corporation is offering subscriptions for a maximum of 9,900 Notes in the
principal amount of $1,000 each. The Notes bear simple interest at 10.5%
(interest payable monthly) and are payable in full on June 30, 2002. The Notes,
which are secured by the Collateral, may be prepaid in whole or in part at any
time without premium or penalty. The Corporation has sold $1,612,000 of Notes as
of December 31, 1997, and through the date of this Form 10-KSB has subsequently
sold an additional $6,780,000 of such Notes. Accordingly, the Corporation may
sell an additional $1,508,000 of Notes through June 30, 1999 (the date on which
the offering of such Notes will be terminated). If the Corporation is successful
in selling the remaining Notes of $1,508,000, they will generate net cash of
approximately $1,357,000 ($1,508,000 less debt issuance costs of approximately
$151,000).
The Corporation 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 Corporation
to continue to expand its Dealer base and portfolio of finance receivable
contracts, and to ultimately pay the Notes in full, the Corporation will have to
generate cash from operations and/or secure additional capital resources (e.g.
other debt or equity). No assurance can be given that such capital resources
will be available or available on reasonable terms.
Impact of Inflation and Changing Prices
Although the Corporation does not believe that inflation directly has a
material adverse affect on its financial condition or results of operations,
increases in the inflation rate generally are associated with increased interest
rates. Because the Corporation's current debt is at a fixed rate and in most
cases the Corporation purchases finance contracts bearing a fixed rate equal to
the maximum interest rate permitted by law, increased costs of borrowed funds
will likely not have a material adverse impact on the Corporation's
profitability, however, they could have a material adverse impact on the
Corporation's ability to expand. Inflation could also adversely affect the
Corporation's operating expenses.
14
<PAGE>
ITEM 7 - FINANCIAL STATEMENTS
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
(A Development Stage Enterprise)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
Independent Auditors' Report 16
Financial Statements as of and for the period January 3, 1997 (date of
inception) to December 31, 1997:
Balance Sheet 17
Statement of Operations 18
Statement of Stockholders' Deficit 19
Statement of Cash Flows 20
Notes to Financial Statements 21 - 26
15
<PAGE>
[Letterhead of Beard, Nertney, Kingery, Crouse & Hohl, P.A.]
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Sterling Financial Services of Florida I, Inc.:
We have audited the accompanying balance sheet of Sterling Financial Services of
Florida I, Inc. (the "Company"), a development stage enterprise, as of December
31, 1997, and the related statements of operations, stockholders' deficit and
cash flows for the period January 3, 1997 (date of inception) to December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1997, and the results of its operations and cash flows for the period January 3,
1997 (date of inception) to December 31, 1997 in conformity with generally
accepted accounting principles.
Beard, Nertney, Kingery, Crouse & Hohl, P.A.
September 11, 1998
Tampa, FL
16
<PAGE>
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
(A Development Stage Enterprise)
BALANCE SHEET AS OF
DECEMBER 31, 1997
- ------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 816,433
-----------
Receivables:
Finance 196,503
Mobile home floor plan 86,040
Affiliate 12,550
-----------
Total receivables 295,093
-----------
Inventories 12,000
Property and equipment - net 173,231
Deferred debt issuance costs, net 172,856
-----------
TOTAL $1,469,613
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES:
Secured notes payable $1,612,000
Accrued and other liabilities 8,150
-----------
Total liabilities 1,620,150
-----------
STOCKHOLDERS' DEFICIT:
Common stock, no par value, 10,000 shares
Authorized; 1,000 shares issued and 1,000
outstanding
Deficit accumulated during the development (151,537)
stage
-----------
Total stockholders' deficit (150,537)
-----------
TOTAL $1,469,613
===========
- ------------------------------------------------------------------------
See notes to financial statements.
17
<PAGE>
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 3, 1997 (DATE OF INCEPTION)
TO DECEMBER 31, 1997
---------------------------------------------------------------------
REVENUES:
Interest:
Receivables $ 4,473
Cash and cash equivalents 7,836
Rental income 6,260
Floor plan 3,630
Appraisal fees 3,250
----------
Total revenues 25,449
----------
OPERATING EXPENSES:
Management fees-related party 62,368
Interest 71,622
Office rent-related party 17,600
Lot rent-related party 15,850
Depreciation 6,097
Other 3,449
----------
Total operating expenses 176,986
----------
NET LOSS $(151,537)
==========
LOSS PER COMMON SHARE $ (152)
==========
---------------------------------------------------------------------
See notes to financial statements.
18
<PAGE>
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD JANUARY 3, 1997 (DATE OF INCEPTION)
TO DECEMBER 31, 1997
- -------------------------------------------------------------------------------
Deficit
Accumulated
During the
Common Stock Development
----------------------
Shares Amount Stage Total
---------- ----------------------- ------------
Balances at January 3,
1997 (inception) 0 $ 0 $ 0 $ 0
Issuance of
Common stock 1,000
1,000 0 1,000
Net loss
(151,537) (151,537)
---------- ----------------------- ------------
Balances at
December 31, 1997 1,000 $ 1,000 $(151,537) $(150,537)
========== ======================= ============
- --------------------------------------------------------------------------
See notes to financial statements.
19
<PAGE>
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 3, 1997 (DATE OF INCEPTION)
TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (151,537)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation 6,097
Amortization and write off of deferred debt
issuance costs 23,116
Increase in inventories (12,000)
Increase in accrued and other liabilities 8,150
------------
NET CASH USED BY OPERATING ACTIVITIES (126,174)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (179,328)
Finance receivables originated, net of payments and
discounts (196,503)
Floor plan receivables, net of payments and discounts (86,040)
------------
CASH USED BY INVESTING ACTIVITIES (461,871)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,000
Proceeds from issuance of secured notes payable 1,612,000
Increase in affiliate receivables (12,550)
Cash paid for deferred debt issuance costs (195,972)
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,404,478
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 816,433
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 0
------------
CASH AND CASH EQUIVALENTS, END
OF PERIOD $ 816,433
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION-Interest paid $ 48,506
============
- --------------------------------------------------------------------------
See notes to financial statements.
20
<PAGE>
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 3, 1997 (DATE OF INCEPTION)
- -------------------------------------------------------------------------------
TO DECEMBER 31, 1997
NOTE A - FORMATION AND OPERATIONS OF THE COMPANY
Sterling Financial Services of Florida I, Inc. (the "Company") which was
incorporated under the laws of the state of Florida on January 3, 1997, is
considered to be in the development stage as defined in Financial Accounting
Standards Board Statement No.7. The Company's finance receivables consist of
retail installment sales contracts and dealer floor plans collateralized by new
and used mobile homes subject to credit approval. The Company also owns and
rents mobile homes located in the Halliday Village Mobile Home Park in Tampa,
Florida. The Company's operations are located in Tampa, Florida and
substantially all of their customers are residents of Florida.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Company's financial statements are prepared using the accrual method of
accounting.
Revenue Recognition
Interest income is recognized using the interest (actuarial) method. Unearned
finance charges are rebated to customers under the Rule of 78's method. The
difference between income previously recognized under the interest (actuarial)
method and the rule of 78's method is recognized as an adjustment to interest
income at the time of the rebate. Accrual of interest income on finance
receivables is generally suspended when no payment has been received for ninety
days; the accrual of income is not resumed until management believes such
interest is collectible.
Nonrefundable Acquisition Discounts and Allowance for Credit Losses
The Company enters into agreements with dealers that establish nonrefundable
acquisition discounts to protect the Company from potential losses associated
with such contracts. All or a portion of these negotiated discounts are
available to absorb credit losses. Management attempts to maintain the
nonrefundable discount at a level consistent with anticipated loan charge offs.
The allowance for credit losses is established through a charge to earnings
based on management's evaluation of potential losses inherent in the portfolio.
Such evaluation includes a review of all such assets for which full
recoverability may not be reasonably assured. At December 31, 1997, management
believes no allowance for credit losses is necessary.
21
<PAGE>
Credit loss experience, contractual delinquency of loan receivables, the value
of underlying collateral and current economic conditions are factors management
uses in negotiating the discounts and assessing the overall adequacy of the
discounts to absorb losse
The Company generally initiates repossession proceedings when an account is more
than two payments contractually past due, but the repossession process is
accelerated for loans which become delinquent in the first or second payment.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles 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 revenues and expenses during the reporting
period may be affected by the estimates and assumptions management is required
to make. Actual results could differ from those estimates. Significant estimates
have been made by management with respect to the allowance for credit losses. It
is at least reasonably possible that certain of the Company's estimates will
change in the near term with respect to this matter.
Financial Instruments
The Company believes the book value of their cash and cash equivalents, and
accrued and other liabilities approximates their fair values due to their
short-term nature. Management also believes the book value of the Company's
secured notes payable and finance and mobile home floor plan receivables
approximates their fair values as the current interest rates on such items
approximate rates at which similar types of borrowing and lending arrangements
could be currently negotiated by the Company.
Property and Equipment
Property and equipment are stated at cost. Major additions are capitalized,
while minor additions and maintenance and repairs which do not extend the useful
life of an asset are expensed as incurred. Depreciation is computed using an
accelerated method over the assets' estimated useful lives of 5 to 27.5 years.
Inventories
Inventories are valued at the lower of cost or market and consist of mobile home
inventories.
Income Taxes
The Company has elected to be taxed under Subchapter S of the Internal Revenue
Code, and accordingly, is not subject to income taxes as the results of
operations flow through to the stockholders, for inclusion in their personal
income tax returns.
22
<PAGE>
Deferred Debt Issuance Costs
Direct costs incurred to register and issue the secured notes payable are
deferred and amortized to interest expense over the lives of the loans using the
interest method. From time to time the Company evaluates this asset for
impairment. In connection with such evaluation, the Company wrote off
approximately $8,693 of such costs at December 31, 1997; such amount has been
included in interest expense in the accompanying statement of operations.
Loss per Common Share
Loss per common share is based on the weighted average number of common and
common equivalent shares outstanding during each period. The weighted average
number of common shares outstanding during the period January 3, 1997 (date of
inception) to December 31, 1997 was 1,000.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of receivables and cash. Management believes risk
with respect to such receivables is mitigated because they are collateralized by
/mobile homes purchased by the Company's customers.
With respect to cash balances, the Company maintains all of its cash and cash
equivalents at one FDIC insured institution which has a maximum insurance limit
of $100,000. At December 31, 1997, the Company's uninsured cash balances
approximated $745,000.
NOTE C - PROPERTY AND EQUIPMENT-NET
Property and equipment consists of the following:
Rental mobile homes $157,956
Furniture, fixtures and office equipment 21,372
Less accumulated depreciation (6,097)
-----------
Property and equipment - net $173,231
23
<PAGE>
NOTE D - FINANCE RECEIVABLES - NET
Finance receivables consist of the following:
Finance receivables, gross $426,121
Less unearned finance charges (210,487)
---------
Finance receivables, principal 215,634
Less non-refundable discounts ( 19,131)
----------
Finance receivables, net $196,503
Finance receivables generally have terms of 60 to 120 months with rates ranging
from 13 % to 17.9 %. At December 31, 1997 no interest income has been suspended
on finance receivables.
Principal collections on finance receivables totaled $14,165 for the period
ended December 31, 1997. These collections represented 6% of the average
outstanding principal balances for 1997. Contractual maturities of the finance
receivables by year are as follows:
Years Ending
December 31, Amounts
1998 $ 60,119
1999 49,569
2000 49,569
2001 49,569
2002 48,734
Thereafter 168,561
Total $426,121
Changes in the allowance for credit losses and the nonrefundable acquisition
discount during the period January 3, 1997 (date of inception) to December 31,
1997, were as follows:
Allowance for credit losses:
Beginning balance $0
Provision for credit losses 0
Finance receivables charged off (0)
---
Ending balance $0
24
<PAGE>
Nonrefundable acquisition discount:
Beginning balance $ 0
Discounts acquired 19,131
Discounts accreted to income 0
Finance receivables charged off 0
-----------
Ending balance $19,131
NOTE E - SECURED NOTES PAYABLE
Secured notes payable bear interest at 10.5%, with interest payable monthly, and
mature on June 30, 2002. The notes are secured by a first lien on the
installment sales contracts. The secured notes are prepayable in whole or in
part at any time without premium or penalty. The Company has registered $9.9
million of such notes and is continuing to offer the remaining $8,288,000 of
secured 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.
NOTE F - RELATED PARTY TRANSACTIONS
In 1997, the Company's majority stockholder advanced $30,350 to the Company of
which $28,600 was repaid; the remaining $1,750 is included in accrued and other
liabilities in the accompanying balance sheet. The advances were, and are,
unsecured, non-interest bearing and due on demand.
The Company is managed by Sterling Financial Services, ("SFS"), a related party
by virtue of common ownership. Management fees paid to SFS, including direct and
indirect charges allocated to the Company, during the period January 3, 1997
(date of inception) to December 31, 1997 were $62,368.
The Company rents certain office space and lot space for its rental units from
Halliday Village M.H.P. ("Halliday"), a related party by virtue of common
ownership. These lot spaces are rented on a month to month basis and no contract
or lease has been signed. During the period January 3, 1997 (date of inception)
to December 31, 1997, the Company paid office and lot rent of $17,600 and
$15,850, respectively, to Halliday.
NOTE G - PROFORMA NET LOSS AS IF THE COMPANY WAS A "C"
CORPORATION
If the Company was a "C" corporation it would be required to record a provision
or benefit for income taxes. The following information presents the proforma net
loss as if the Company was a
25
<PAGE>
"C" corporation. The presentation used is in accordance with Financial
Accounting Standard Statement No. 109, "Accounting for Income Taxes".
Loss before income taxes ($151,537)
Income tax expense (benefit) (0)
----------
Net Loss ($151,537)
==========
No benefit for income taxes has been recorded because the realizability of such
benefit, and the related deferred income tax asset, did not meet the required
recognition standards established by SFAS 109.
- --------------------------------------------------------------------------------
26
<PAGE>
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
NONE
PART III.
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Set forth below is certain information as of December 31, 1997 with
respect to any persons known to the Corporation to be the beneficial owner of
more than 5% of the Corporation's Common Stock and of the Common Stock owned by
the sole officer and director of the Corporation.
Amount and
Nature of
Beneficial
Name of Beneficial Owner Title of Class Ownership % of Class
Anthony A. Sutter Common 800 80%
Judith Estrin, Trustee; Common 200 20%
Stanley D. Estrin --- ---
Irrevocable Trust dated
3/16/93
All officers and directors 800 80%
=== ===
as a group (1 person)
- ----------------------------
Anthony A. Sutter, age 48, has been the President, Chief Executive
Officer, Secretary, Treasurer and Sole Director of the Corporation and the
Servicing Company since their inception. He has also been the sole officer and
director of Sterling Properties Management, Inc., a Tampa, Florida property
management company, since October. 1989. He is also the sole officer and
director of four Florida corporations owning mobile home parks in Florida,
Halliday Village Mobile Home Park, Inc., Oak Bend Mobile Home Park, Inc., Hidden
Oaks Mobile Home Park, Inc., and Regency Oaks Mobile Home Park, Inc., and has a
75% interest in Parkwood Mobile Home Park, L.C. (in which the Corporation has
purchased a 25% interest). He received a B.S. degree in Accounting and Economics
from St. Louis University, St. Louis, Missouri in 1973. He has been involved in
the residential housing business for 26 years, during which time he has owned,
managed and operated many properties, including mobile home parks.
The Corporation does not have a written employment agreement with Mr.
Sutter. All compensation paid to Mr. Sutter will be paid by the Servicing
Company, based upon available funds, with no other limitation. No compensation
has been paid to Mr. Sutter since the Corporation's inception.
27
<PAGE>
ITEM 10 - EXECUTIVE COMPENSATION
Name Position Compensation
Anthony A. Sutter President, Chief Executive NONE
Officer, Secretary, Treasurer
and Sole Director
The Corporation does not directly pay salaries to Management. Management
would receive salaries from the Servicing Company, which salaries would be
allocated between the Corporation and Affiliated Corporations. See "Business -
Relationship with Servicing Company - Servicing Agreement." Mr. Sutter receives
no salary from the Corporation, and accordingly no officer, director or employee
of the Corporation receives compensation attributable to services rendered to
the Corporation in excess of $100,000 per year.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information as of December 31, 1997 with
respect to any persons known to the Corporation to be the beneficial owner of
more than 5% of the Corporation's Common Stock and of the Common Stock owned by
the sole officer and director of the Corporation.
Amount and
Nature of
Beneficial
Name of Beneficial Owner Title of Class Ownership % of Class
Anthony A. Sutter Common 800 80%
Judith Estrin, Trustee; Common 200 20%
Stanley D. Estrin --- ---
Irrevocable Trust dated
3/16/93
All officers and directors 800 80%
=== ===
as a group (1 person)
- ---------------------------
28
<PAGE>
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Sutter is President, Chief Executive Officer, Secretary, Treasurer and
Sole Director of both the Corporation and the Servicing Company. Mr. Sutter owns
the controlling interest in both the Corporation and the Servicing Company.
The Corporation may sell or lease homes to affiliates. Any lease will be
at fair market value, based upon the Corporation's lease rates to independent
third parties, and any sale will be at fair market value based upon wholesale
value published by the National Automobile Dealers Association.
Pursuant to the Servicing Agreement, the Servicing Company will act as
agent for the Corporation. From inception to December 31, 1997, the Corporation
has paid $62,368 to the Servicing Company under the terms of the agreement. For
a description of the Agency Agreement, see "Business - Relationship with
Servicing Company - Servicing Agreement."
The Corporation may loan up to $75,000 to the Servicing Company for the
purchase and/or lease of office space, office equipment, trucks and automobiles.
The Servicing Company will repay any advanced funds in equal monthly
installments of principal and interest at the rate of 10.5% per annum, with the
final payment due on June 30, 2002. See "Business - Relationship with Servicing
Company - Servicing Agreement."
The Corporation's executive offices are located at 12408 North Florida
Avenue, Tampa, Florida. Pursuant to an oral agreement, the office is leased from
Halliday Village Mobile Home Park, Inc., an entity wholly owned by Mr. Sutter,
on a month-to-month basis for $2,200 per month . The Corporaton also leases lot
space for its rental units from Halliday. These lot spaces are rented on a month
to month basis and no contract or lease has been signed. During 1997, the
Corporation paid $17,600 in office rent and $15,850 in lot rents.
The Corporation periodically advances funds to Mr. Sutter and/or other
affiliated entities. These advances generally bear interest at approximately
13%, are unsecured and contain no specified repayment terms.
In 1998, the Corporation purchased a 25% interest in a Park in which Mr.
Sutter owns the remaining 75%. The purchase price was approximately $556,000 in
cash. In addition, the Corporation has agreed to loan the Park up to $350,000 to
fund cash flow needs. Through the date of this Form 10-KSB, the Corporation has
advanced $125,000 under this arrangement. The advances bear interest at 12.9%,
are unsecured and have no specified repayment terms.
Item 13-Exhibits, Financial Statement Schedules and Reports on Form 8-K
Exhibits - None.
Financial Statement Schedules - None.
Reports on Form 8-K - None.
29
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
STERLING FINANCIAL SERVICES OF FLORIDA I, INC.
By: /s/ Anthony A. Sutter
___________________________________________________
Chief Executive Officer
Dated: June 15, 1999
In accordance with Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dated indicated.
SIGNATURE TITLE DATE
Director, Chief Accounting June 15, 1999
/s/ Anthony A. Sutter Officer
- ----------------------------
30
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 816,433
<SECURITIES> 0
<RECEIVABLES> 215,634
<ALLOWANCES> 19,131
<INVENTORY> 12,000
<CURRENT-ASSETS> 1,123,526
<PP&E> 179,328
<DEPRECIATION> 6,097
<TOTAL-ASSETS> 1,469,613
<CURRENT-LIABILITIES> 8,150
<BONDS> 1,612,000
0
0
<COMMON> 1,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,469,613
<SALES> 0
<TOTAL-REVENUES> 25,449
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 105,364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,622
<INCOME-PRETAX> (151,537)
<INCOME-TAX> 0
<INCOME-CONTINUING> (151,537)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (151,537)
<EPS-BASIC> (152)
<EPS-DILUTED> (152)
</TABLE>
