<PAGE> 1
FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 333-65057
MEADOWS PRESERVATION, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0860249
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2555 PGA BOULEVARD, PALM BEACH GARDENS, FLORIDA 33410
(Address of principal executive offices)
(561) 626-0888
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 (X) No ( )
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes ( ) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 457 shares of Common Stock as
of April 30, 1999.
<PAGE> 2
MEADOWS PRESERVATION, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page
----
<S> <C>
Balance Sheets as of March 31, 1999 and December 31, 1998..................................................3
Statements of Operations for the quarters ended March 31, 1999 and 1998....................................4
Statements of Cash Flows for the quarters ended March 31, 1999 and 1998....................................5
Notes to Financial Statements..............................................................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............8
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings..................................................................................11
ITEM 6. Exhibits and Reports on Form 8-K...................................................................11
</TABLE>
2
<PAGE> 3
MEADOWS PRESERVATION, INC.
BALANCE SHEETS
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Cash .................................................. $ 685 $ 14,841
Restricted deposits ................................... 632,263 864,939
Accounts receivable ................................... 0 17,571
Due from management company ........................... 0 766,451
Investment in partnership ............................. 15,792 0
Rental property:
Land .............................................. 0 3,093,726
Improvements ...................................... 0 9,340,468
------------ ------------
0 12,434,194
Accumulated depreciation .......................... 0 (322,517)
------------ ------------
Net rental property ........................... 0 12,111,677
------------ ------------
Total assets .......................................... $ 648,740 $ 13,775,479
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Note payable ...................................... $ 0 $ 12,341,693
Equity interest payable ........................... 457,000 0
Accounts payable and accrued expenses ............. 0 59,516
Accrued interest .................................. 0 863,188
Advances payable to homeowners .................... 175,263 863,939
------------ ------------
Total liabilities ..................................... 632,263 14,128,336
------------ ------------
Commitments and contingencies
Stockholders' equity
Preferred stock deficiency, no par value,
400 shares authorized, 225 and 235 shares
issued and outstanding for 1999 and 1998,
respectively (liquidation value $5,625 and
$5,825, respectively) ........................... (8,194) (8,194)
Common stock, $.01 par value,
10,000 shares authorized, 457 and 1 share(s)
issued and outstanding for 1999 and 1998,
respectively .................................... 5 0
Additional paid-in capital ....................... 456,995 1,000
Retained deficit .................................. (432,329) (345,663)
------------ ------------
Total stockholders' equity ............................ 16,477 (352,857)
------------ ------------
Total liabilities and stockholders' equity ............ $ 648,740 $ 13,775,479
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
MEADOWS PRESERVATION, INC.
STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Predecessor
Business
March 31, March 31,
1999 1998
--------- ------------
<S> <C> <C>
REVENUES
Rental income .............................. $ 350,207 $ 347,240
Association revenues........................ 0 1,370
Interest and other income .................. 3,019 1,854
--------- ---------
Total revenues ......................... 353,226 350,464
--------- ---------
EXPENSES
Association expenses ..................... 264 6,779
Property operating and maintenance ....... 111,327 65,039
Property management ...................... 14,127 13,580
Real estate taxes ........................ 45,000 42,445
General and administrative ............... 8,602 12,856
Interest ................................. 182,721 228,030
Depreciation ............................. 77,851 77,817
--------- ---------
Total expenses ......................... 439,892 446,546
--------- ---------
Net loss ................................... $ (86,666) $ (96,082)
========= =========
Earnings per share ......................... $ (189.64) $ (210.25)
========= =========
Weighted average common shares outstanding 457 457
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
MEADOWS PRESERVATION, INC.
STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Predecessor
Business
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................... $ (86,666) $ (96,082)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation ................................................ 77,851 77,817
Decrease (increase) in restricted deposits .................. 232,676 (6,588)
(Decrease) increase in advances payable to homeowners ........ (232,676) 6,588
Decrease (increase) in accounts receivable .................. 1,520 (11,888)
Increase in due from management company ..................... (201,805) (259,727)
Increase in accrued interest ................................ 182,721 228,030
Increase in accounts payable and accrued expenses ........... 72,073 64,634
------------ ------------
Net cash provided by operating activities .......................... 45,694 2,784
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to rental property .............................. (1,600) (2,552)
------------ ------------
Net cash used in investing activities .............................. (1,600) (2,552)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan costs .................................................... (58,250) 0
------------ ------------
Net cash used in financing activities .............................. (58,250) 0
------------ ------------
Net (decrease) increase in cash and cash equivalents ............... (14,156) 232
Cash and cash equivalents, beginning of period ..................... 14,841 10,021
------------ ------------
Cash and cash equivalents, end of period ........................... $ 685 $ 10,253
============ ============
SUPPLEMENTAL DISCLOSURES:
Noncash investing and financing transactions:
Contribution to partnership
Accounts receivable ....................................... $ (16,051)
Due from management company ............................... (968,256)
Investment in partnership ................................. 15,792
Loan costs ................................................ (58,250)
Land ...................................................... (3,093,726)
Improvements, net ......................................... (8,941,700)
Notes payable ............................................. 12,341,693
Equity interest payable ................................... (457,000)
Accrued interest .......................................... 1,045,909
Accounts payable and accrued expenses ..................... 131,589
------------
$ 0
============
Conversion of advances payable to homeowners to common stock .... $ 456,000
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
MEADOWS PRESERVATION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Meadows Preservation, Inc., a Florida not-for-profit corporation was formed
on March 2, 1988, to act as the homeowners' association for The Meadows Mobile
Home Park ("The Meadows"), a fifty-five acre property containing 381
manufactured home sites located in Palm Beach Gardens, Florida. On July 2, 1998,
the corporation completed a series of non-cash mergers with entities of the same
name formed in June 1998. This series of mergers did not have any effect on the
operations or purpose of the corporation. The mergers, which occurred in the
jurisdictions of two different states, resulted in the corporation becoming a
Florida for-profit corporation "MPI" which may issue equity securities. MPI
subsequently filed a registration statement with the Securities and Exchange
Commission, which was declared effective on February 12, 1999. Accordingly, MPI
is a small business issuer as defined in the Securities Exchange Act of 1934
("Exchange Act") regulations.
On March 19, 1999, MPI completed two offers in connection with the issuance
of MPI common stock: (1) an offer to sell up to 2,347 of MPI's common shares to
owners of manufactured homes located in The Meadows ("Homeowners"), and (2a) a
rescission offer to return $802,000 to Homeowners who made advances to
predecessors of MPI (the "Advances") or (2b) convert such Advances into shares
of MPI common stock (the "Offerings"). Prior to the Offerings, a director of MPI
purchased one share of MPI common stock for $1,000 and other directors converted
previous Advances totaling $6,000 into six shares of MPI common stock.
Accordingly, a total of 457 shares of common stock were purchased or converted
from Advances, at a price of $1,000 per share, resulting in gross proceeds of
$457,000.
As of March 31, 1999, $175,263 was payable to Homeowners who accepted the
rescission offer to return their Advances. The refunds will include a payment of
interest on the money advanced at the rate of ten percent per annum.
On September 30, 1998, MPI entered into a Florida general partnership,
known as The Meadows Resort Partnership (the "Partnership"), with Blue Ribbon
Communities Limited Partnership, a Delaware limited partnership ("BRC"), to
operate The Meadows. On March 31, 1999, MPI made a commitment to contribute
$457,000 of proceeds it received from the issuance of MPI common stock, along
with MPI's beneficial interest in The Meadows and the related mortgage payable,
to the Partnership for a 9.7% interest in the Partnership. The cash contribution
was paid by MPI and credited by the Partnership on April 1, 1999. MPI accounts
for its investment in the Partnership using the equity method and, accordingly,
receives its proportionate ownership share of the operating income and losses of
the Partnership.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RENTAL PROPERTY
On March 31, 1999, MPI contributed the beneficial interest in the rental
property (i.e., The Meadows) to the Partnership. Prior to such contribution, the
rental property was stated at cost. Depreciation of improvements, which
substantially consisted of pads for manufactured homes, streets, a clubhouse and
a pool, was computed on the straight line basis over 30 years.
RENTAL REVENUE RECOGNITION
Rental income is generated from short-term leases and is recorded as
revenue when earned.
6
<PAGE> 7
MEADOWS PRESERVATION, INC.
NOTES TO FINANCIAL STATEMENTS
UNAUDITED INTERIM FINANCIAL STATEMENTS
The balance sheets as of March 31, 1999 and December 31, 1998, and the
statements of operations and cash flows for the three month periods ended March
31, 1999 and 1998, and related footnote disclosures are unaudited. In the
opinion of management, such financial statements reflect all adjustments
necessary for a fair presentation of the results of the interim periods. All
such adjustments are of a normal and recurring nature.
NOTE 2 - NOTE PAYABLE
On March 31, 1999, the $12,341,693 outstanding mortgage note secured by The
Meadows, including $1,045,909 of accrued interest, was assumed by the
Partnership.
NOTE 3 - INCOME TAXES
No provision for income taxes has been provided for the periods ended March
31, 1999 and 1998 due to the operating loss position of MPI.
NOTE 4 - CONTINGENCIES
The discussion of Contingencies in MPI's Form SB-1, filed on February 12,
1999, is hereby incorporated by reference.
7
<PAGE> 8
MEADOWS PRESERVATION, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following is a discussion of the interim results of operations, financial
condition and liquidity and capital resources of MPI for the three months ended
March 31, 1999 compared to the corresponding period in 1998. The following
discussion may contain certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, which reflect management's
current views with respect to future events and financial performance. Such
forward-looking statements are subject to certain risks and uncertainties,
including, but not limited to, the effects of future events on MPI's financial
performance; the adverse impact of external factors such as inflation and
consumer confidence; and the risks associated with real estate ownership.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 TO THREE MONTHS ENDED MARCH 31,
1998
On September 30, 1998, MPI entered into a Florida general partnership, known as
The Partnership, with BRC, to operate The Meadows. On March 31, 1999, MPI made a
commitment to contribute $457,000 of proceeds it received from the issuance of
MPI common stock, along with MPI's beneficial interest in The Meadows and the
related mortgage payable, to the Partnership for a 9.7% interest in the
Partnership. The cash contribution was paid by MPI and credited by the
Partnership on April 1, 1999. MPI accounts for its investment in the Partnership
using the equity method and, accordingly, receives its proportionate ownership
share of the operating income and losses of the Partnership. A condensed balance
sheet of the Partnership as of March 31, 1999, prepared in conformity with
generally accepted accounting principles, is summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
March 31,
1999
----------
<S> <C>
Current assets .............................................. $ 473,051
Rental property, net ........................................ 12,907,913
Other assets ................................................ 58,250
-----------
Total assets .......................................... 13,439,214
===========
Current liabilities ......................................... 131,589
Long-term liabilities ....................................... 6,585,304
-----------
Total liabilities ..................................... 6,716,893
-----------
Partners' capital ........................................... 6,722,321
-----------
Total liabilities and partners' capital ............... $13,439,214
===========
- ---------------------------------------------------------------------------
</TABLE>
Property operating and maintenance expense ($111,327) increased $46,288 or
71.2%. The increase was primarily due to a $15,000 landscaping contract that
began April 1998 and $10,000 for the hiring of a community manager for The
Meadows in March of 1998.
General and administrative expense ($8,602) decreased $4,254 or 33.1%. The
decrease was primarily due to the expense of an interim community manager for
The Meadows during the quarter ended March 1998.
Interest expense ($182,721) decreased $45,309 or 19.9%. The decrease was
primarily due to the increase in property operating and maintenance expense of
$46,288.
8
<PAGE> 9
MEADOWS PRESERVATION, INC.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $14,156 when compared to December 31,
1998.
Net cash provided by operating activities increased $42,910 from $2,784 for
the quarter ended March 31, 1998 to $45,694 for the quarter ended March 31,
1999. This increase was primarily due to the decrease in due from management
company.
Net cash used in financing activities increased $58,250 from $0 for the
quarter ended March 31, 1998 to ($58,250) for the quarter ended March 31, 1999.
This increase is primarily due to the payment of loan costs.
9
<PAGE> 10
MEADOWS PRESERVATION, INC.
YEAR 2000
The year 2000 issue ("Year 2000") is the result of computer programs and
embedded processors ("Systems") failing to properly account for the end of 1999
and the rollover to the year 2000. The Year 2000 issue comes from three
date-related problems and practices. First, some Systems define the year-portion
of date fields with two digits instead of four. As a result, programs and
equipment that have time-sensitive functions may interpret a date using "00" as
being 1900 rather than 2000. Second, the year 2000 is a leap year. There is a
possibility that some Systems may fail to account for the leap day properly.
Third, in practice, an artificial date of "9/9/99" is sometimes used as a
fictitious date when testing Systems. It is possible that some Systems will
reject the actual date of "September 9, 1999" as fictitious. Problems arising
from one or more of these problems and practices could result in failure of one
or more Systems causing a disruption of operations, including, among other
things, a temporary inability to process transactions, collect rents, or engage
in similar normal business activities.
Aside from catastrophic failure of banks, governmental agencies, etc., MPI
believes that it could continue operations unaffected by Year 2000 issues.
10
<PAGE> 11
MEADOWS PRESERVATION, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The discussion of Legal Proceedings in MPI's Form SB-1, filed
on February 12, 1999, is hereby incorporated by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
11
<PAGE> 12
SIGNATURES
----------
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned thereunto duly
authorized.
MEADOWS PRESERVATION, INC.
BY: /s/ Stanley Wilk
-----------------------------
Stanley Wilk
President
/s/ Mary Bachiochi
-----------------------------
Mary Bachiochi
Principal Accounting Officer
DATE: May 11, 1999
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001061708
<NAME> MEADOWS PRESERVATION, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 685
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 685
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 648,740
<CURRENT-LIABILITIES> 632,263
<BONDS> 0
0
(8,194)
<COMMON> 5
<OTHER-SE> 24,666
<TOTAL-LIABILITY-AND-EQUITY> 648,740
<SALES> 350,207
<TOTAL-REVENUES> 353,226
<CGS> 0
<TOTAL-COSTS> 170,718
<OTHER-EXPENSES> 8,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182,721
<INCOME-PRETAX> (86,666)
<INCOME-TAX> 0
<INCOME-CONTINUING> (86,666)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86,666)
<EPS-PRIMARY> (1.90)
<EPS-DILUTED> (1.90)
</TABLE>
