<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 SEPTEMBER 30, 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 of (I.R.S. Employer Identification No.)
incorporation or organization)
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 October 31, 1999.
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MEADOWS PRESERVATION, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Balance Sheets as of September 30, 1999 and December 31, 1998..............................................3
Statements of Operations for the nine months and quarters ended September 30, 1999 and 1998................4
Statements of Cash Flows for the nine months ended September 30, 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
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MEADOWS PRESERVATION, INC.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
--------------- -----------------
<S> <C> <C>
ASSETS
Cash....................................................................... $ 67,921 $ 14,841
Restricted deposits........................................................ 0 864,939
Accounts receivable........................................................ 0 17,571
Due from management company................................................ 0 766,451
Investment in partnership.................................................. 12,571 0
Rental property:
Land..................................................................... 0 3,093,726
Improvements............................................................. 0 9,340,468
---------------- ------------------
0 12,434,194
0 (322,517)
Accumulated depreciation................................................. ---------------- ------------------
Net rental property.................................................... 0 12,111,677
---------------- ------------------
Total assets............................................................... $ 80,492 $ 13,775,479
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Note payable ........................................................... $ 0 $ 12,341,693
Accounts payable and accrued expenses.................................... 0 59,516
Accrued interest......................................................... 0 863,188
Advances payable to homeowners........................................... 55,763 863,939
---------------- ------------------
Total liabilities.......................................................... 55,763 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......................................................... (424,077) (345,663)
---------------- ------------------
Total stockholders' equity................................................. 24,729 (352,857)
---------------- ------------------
Total liabilities and stockholders' equity................................. $ 80,492 $ 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 NINE MONTHS AND QUARTERS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended For the Quarters Ended
September 30, September 30,
1999 1998 1999 1998
----------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Rental income................................ $ 350,207 $ 1,042,492 $ 0 $ 348,806
Association revenues......................... 0 2,387 0 1,007
Interest and other income.................... 19,971 9,136 6,470 3,093
Total revenues.......................... ----------------------------------------------------------------
370,178 1,054,015 6,470 352,906
----------------------------------------------------------------
EXPENSES
Association expenses......................... 5,743 10,293 4,883 2,807
Property operating and maintenance........... 111,327 271,104 0 104,021
Property management.......................... 14,127 41,279 0 13,934
Real estate taxes............................ 45,000 127,335 0 42,445
General and administrative................... 8,602 21,250 0 7,321
Interest..................................... 182,721 611,911 0 191,499
Depreciation................................. 77,851 232,510 0 77,350
----------------------------------------------------------------
Total expenses.......................... 445,371 1,315,682 4,883 439,377
Loss from equity in partnership........... (3,221) 0 (1,434) 0
----------------------------------------------------------------
Net income/(loss)......................... $ (78,414) $ (261,667) $ 153 $ (86,471)
================================================================
Earnings per share........................ $ (171.58) $ (572.58) $ .33 $ (189.21)
================================================================
Weighted average common shares
outstanding.................................... 457 457 457 457
================================================================
</TABLE>
The accompanying notes are integral part of the financial statements.
4
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MEADOWS PRESERVATION, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
UNAUDITED)
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
----------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................ $ (78,414) $ (261,667)
Adjustments to reconcile net loss to
Cash provided by operating activities:
Depreciation................................................... 77,851 232,510
Loss from equity in partnership................................ 3,221 0
Decrease in restricted deposits................................ 864,939 17,867
Decrease in advances payable to homeowners..................... (352,176) (17,867)
Decrease (increase) in accounts receivable..................... 1,520 (16,967)
Increase in due from management company........................ (201,805) (688,160)
Increase in accrued interest................................... 182,721 611,911
Increase in accounts payable and accrued expenses.............. 72,073 177,086
----------------------------------
Net cash provided by operating activities............................ 569,930 54,713
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to rental property................................ (1,600) (56,847)
Decrease in equity interest payable............................ (457,000) 0
----------------------------------
Net cash used in investing activities................................ (458,600) (56,847)
----------------------------------
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................. 53,080 (2,134)
Cash and cash equivalents, beginning of period....................... 14,841 10,021
----------------------------------
Cash and cash equivalents, end of period............................. $ 67,921 $ 7,887
==================================
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES:
Noncash investing and financing transactions:
<S> <C>
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
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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 September 30, 1999, $55,763 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 contributed its beneficial interest
in The Meadows and the related mortgage payable, along with a commitment to
contribute $457,000 of proceeds it received from the issuance of MPI common
stock, to the Partnership for a 9.7% interest in the Partnership. The cash
contribution was paid by MPI on April 1, 1999. MPI, as of the date of the
contribution, accounts for its investment in the Partnership using the equity
method. Accordingly, MPI recognizes 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.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The balance sheets as of September 30, 1999 and December 31, 1998, and the
statements of operations and cash flows for the nine month periods and quarters
ended September 30, 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 - INCOME TAXES
No provision for income taxes has been provided for the periods ended
September 30, 1999 and 1998 due to the operating loss position of MPI.
6
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MEADOWS PRESERVATION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - CONTINGENCIES
The discussion of Contingencies in MPI's Form SB-1, filed on February 12,
1999, is hereby incorporated by reference.
7
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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 quarter and nine
months ended September 30, 1999 compared to the corresponding periods 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 QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1999 TO QUARTER AND
NINE MONTHS ENDED SEPTEMBER 30, 1998
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 contributed its beneficial interest
in The Meadows and the related mortgage payable, along with a commitment to
contribute $457,000 of proceeds it received from the issuance of MPI common
stock, to the Partnership for a 9.7% interest in the Partnership. The cash
contribution was paid by MPI on April 1, 1999. MPI, as of the date of the
contribution, accounts for its investment in the Partnership using the equity
method. Accordingly, MPI recognizes its proportionate ownership share of the
operating income and losses of the Partnership. An unaudited condensed balance
sheet of the Partnership as of September 30, 1999 and an unaudited condensed
income statement for the quarter ended September 30, 1999, prepared in
conformity with generally accepted accounting principles, are summarized below:
<TABLE>
<CAPTION>
September 30, 1999
---------------------
<S> <C>
Current assets............................................................. $ 298,584
Rental property, net....................................................... 12,906,175
---------------------
Total assets......................................................... 13,204,759
=====================
Current liabilities........................................................ 172,209
Long-term liabilities...................................................... 6,406,103
---------------------
Total liabilities.................................................... 6,578,312
---------------------
Partners' capital.......................................................... 6,626,447
---------------------
Total liabilities and partners' capital.............................. $ 13,204,759
=====================
<CAPTION>
Quarter Ended
September 30, 1999
---------------------
<S> <C>
Rental income $ 349,496
Interest and other income.................................................. 9,780
---------------------
Total revenues........................................................ 359,276
---------------------
Total property expenses.................................................... 153,148
Interest .................................................................. 137,886
Depreciation ......................................................... 83,010
---------------------
Total expenses........................................................ 374,044
---------------------
Net loss .................................................................. $ (14,768)
=====================
MPI's percentage ownership interest........................................ 9.7%
---------------------
MPI's loss from equity in partnership...................................... $ (1,434)
=====================
</TABLE>
8
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MEADOWS PRESERVATION, INC.
The results of operations reflected on the Statements of Operations for the
quarter and nine months ended September 30, 1999 decreased from the same periods
of the prior year primarily due to the contribution of The Meadows to the
Partnership on March 31, 1999. For comparison purposes, the following table
details the operations of The Meadows for the quarters and nine months ended
September 30, 1999 and 1998.
<TABLE>
<CAPTION>
Nine Months Ended Quarter Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rental income $ 1,050,469 $ 1,042,492 $ 349,496 $ 348,806
Interest and other income 17,044 9,136 9,780 3,093
---------------------------------------------------------------------
Total revenues 1,067,513 1,051,628 359,276 351,899
---------------------------------------------------------------------
Property operating and maintenance 292,733 271,104 91,924 104,021
Property management 41,268 41,279 13,563 13,934
Real estate taxes 135,000 127,335 45,000 42,445
General and administrative 15,602 21,250 2,661 7,321
Interest 460,518 611,911 137,886 191,499
Depreciation 241,969 232,510 83,010 77,350
---------------------------------------------------------------------
Total expenses 1,187,090 1,305,389 374,044 436,570
---------------------------------------------------------------------
Net loss $ (119,577) $ (253,761) $ (14,768) $ (84,671)
======================================================================
</TABLE>
Property operating and maintenance ($292,733) increased $21,629 for the
nine months ended September 30, 1999 compared to the same period in the prior
year. The increase was due to increased landscaping and payroll costs. For the
quarter ended September 30, 1999, the amount ($91,924) decreased $12,097
compared to the same quarter of the prior year due to decreases in utility
costs.
Interest ($460,518) and ($137,886) for the nine months and quarter ended
September 30, 1999, respectively, decreased $151,393 and $53,613, respectively,
compared to the same periods in the prior year. The decreases are primarily due
to the paydown of the note on March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased $53,080 compared to December 31, 1998
primarily due to the transfer of funds from the restricted deposit account to
the checking account.
Net cash provided by operating activities increased $515,217 from $54,713
for the nine months ended September 30, 1998 to $569,930 for the nine months
ended September 30, 1999. This increase was primarily due to the decrease in
restricted deposits.
Net cash used in investing activities increased $401,753 from $(56,847) for
the nine months ended September 30, 1998 to $(458,600) for the nine months ended
September 30, 1999. This increase is primarily due to the payment of the MPI's
contribution to the Partnership.
Net cash used in financing activities increased $58,250 from $0 for the nine
months ended September 30, 1998 to $(58,250) for the nine months ended September
30, 1999. This increase is due to the payment of a loan application fee during
the period.
9
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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
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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. The
litigation referenced therein has been dismissed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
11
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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: November 1, 1999
12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001061708
<NAME> MEADOWS PRESERVATION, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 67,921
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,921
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 80,827
<CURRENT-LIABILITIES> 55,763
<BONDS> 0
0
(8,194)
<COMMON> 5
<OTHER-SE> 33,253
<TOTAL-LIABILITY-AND-EQUITY> 80,827
<SALES> 350,207
<TOTAL-REVENUES> 370,178
<CGS> 0
<TOTAL-COSTS> 176,197
<OTHER-EXPENSES> 8,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182,721
<INCOME-PRETAX> (78,414)
<INCOME-TAX> 0
<INCOME-CONTINUING> (78,414)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78,414)
<EPS-BASIC> (172)
<EPS-DILUTED> (172)
</TABLE>
