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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _________________ to ___________________
Commission file number: 333-65057
Meadows Preservation, Inc.
(Name of small business issuer in its charter)
Florida 65-0860249
(State or other jurisdiction of (I.R.S. Employee Identification No.)
incorporation or organization)
2555 PGA Boulevard, Palm Beach Gardens, FL 33410 (Address of principal
executive offices) (Zip code)
Issuer's telephone number: (561) 626-0888
Securities registered under Section 12(b) of the Act:
Common Stock, $.01 par value
(Title of Class)
Securities registered under Section 12(g) of the Act: None
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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $420,287
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the last reported sale price of such stock as of March 9, 1999
was $0.
The number of shares of the issuer's Common Stock outstanding as of January 31,
2000 is 457.
Transitional Small Business Disclosure Format Yes [ ] No [X]
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TABLE OF CONTENTS
PART I
Item 1: Description of Business.................................. 3
Item 2: Description of Property.................................. 6
Item 3: Legal Proceedings........................................ 7
Item 4: Submission of Matters to a Vote of Security Holders...... 7
PART II
Item 5: Market for Common Equity and Related
Stockholder Matters...................................... 7
Item 6: Management's Discussion and Analysis..................... 7
Item 7: Financial Statements..................................... 10
Item 8: Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure ..................... 10
PART III
Item 9: Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange
Act. .................................................... 11
Item 10: Executive Compensation................................... 11
Item 11: Security Ownership of Certain Beneficial Owners and
Management............................................... 11
Item 12: Certain Relationships and Related Transactions........... 11
Item 13: Exhibits and Reports on Form 8-K......................... 11
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Meadows Preservation, Inc. ("MPI"), 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. Manufactured
home communities are residential developments designed and improved for the
placement of detached, single-family manufactured homes which are produced
off-site and installed within the community. The owner of each home leases the
site on which it is located. Modern manufactured home communities are similar to
typical residential subdivisions containing centralized entrances, paved
streets, curbs and gutters and parkways. Utilities are provided or arranged for
by the owner of the community.
FORMATION OF THE COMPANY
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
recission 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.
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 and thereafter, 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.
MPI currently has no employees and does not anticipate hiring any
employees. It does not intend to engage in any activities other than acting as a
general partner of the Partnership and acting as the homeowners' association
under the Florida Mobile Home Act.
MANAGEMENT OF THE PARK
MHC Management LP manages the Park in accordance with the terms of a
property management and leasing agreement entered into between the Partnership
and MHC Management LP, an affiliate of BRC (the "Management Agreement").
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MHC Management LP receives a management fee of 4% of the Partnership's
gross annual revenues. If at any time MHC Management LP (or another affiliate of
BRC) does not manage the Park, BRC or its affiliate will receive a fee equal to
one percent of the annual gross revenues of the Partnership. BRC or its
affiliate will also receive a one-time placement fee of $120,000 from the
Partnership.
The Management Agreement provides that MHC Management LP, as manager, will
perform all services and actions customarily performed or taken by managing
agents of properties of similar nature, location and character to the Park at
the Partnership's expense.
MHC Management LP, in accordance with the Management Agreement, is responsible
for:
- collecting all rents and paying expenses of the Park;
- hiring andsupervising MHC Management personnel;
- contracting with third parties;
- maintaining the Park's equipment and the common areas of the Park;
- repairs to the Park;
- supervision of Meadows homeowners' complaints, relocation, tenancies,
etc.;
- maintaining insurance on the Park;
- advertising;
- complying with all laws, rules, regulations and other legal
requirements;
- leasing currently occupied lots in the Park that become unoccupied;
- preparing an annual operating budget as well as year-end, monthly and
interim operating reports; and
- maintaining the Park's books and records and operating account.
MHC Management LP will subcontract, as necessary, for some or all of these
services at the Partnership's expense. The Partnership currently has no
employees.
The Management Agreement also provides that the Partnership indemnify MHC
Management LP for all liabilities, claims, suits, damages, judgments, and
reasonable costs and expenses, including reasonable attorneys' fees it incurs,
arising from (1) MHC Management LP's proper performance under the Management
Agreement; (2) the Partnership's negligent, willful or fraudulent acts; and (3)
the Partnership's performance of actions not permitted by the Management
Agreement.
RENTAL PROSPECTUS
Each Meadows homeowner rents a lot in the park based on the terms of a
prospectus (rental agreement), in a form that has been approved by the State of
Florida, Department of Business and Professional Regulation, Division of Land
Sales, Condominiums and Mobile Homes. The prospectus summarizes the management
of the park and the rental and other obligations of the tenants to the park
owner. Each prospectus continues to operate as a binding agreement between the
Partnership, as owner of the park, and the applicable Meadows homeowner.
The amount of "base rent" payable by each tenant is stated in the
prospectus applicable to him or her. In addition to the base rent, tenants are
required to pay: (1) "special use fees" such as security deposits, pet fees,
guest fees and pest control fees; (2) "governmental and utilities charges"
including real estate taxes and special assessments, water, sewer, wastewater,
trash, and cable television fees; and (3) "miscellaneous financial obiligations"
such as delinquent rent charges, returned check charges, costs of construction
of improvements to the park mandated by statute and future utility, educational
and recreational costs and expenses. The approved prospectus also requires that
the tenants install certain improvements and states that tenants must comply
with the Rules and Regulations of the park.
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REGULATIONS AND INSURANCE
General. Manufactured home communities are subject to various laws,
ordinances and regulations, including regulations relating to recreational
facilities such as swimming pools, clubhouses and other common areas.
Rent Control Legislation. State and local rent control laws limit the
ability to increase rents and to recover increases in operating expenses and the
costs of capital improvements. Florida has enacted a law which generally
provides that rental increases must be reasonable.
Insurance. The Meadows is covered by adequate insurance provided by
reputable companies and with commercially reasonable deductibles and limits.
MANUFACTURED HOUSING
Based on the current growth in the number of individuals living in
manufactured homes, this type of housing is increasingly viewed by the public as
an attractive and economical form of housing. According to the industry's trade
association, nearly one in four new single family homes sold in the United
States today is factory-built. The growing popularity of manufactured housing
can be attributed to the following factors:
- Importance of home ownership. According to the Fannie Mae 1998
National Housing Survey ("FNMA Survey") renters' desire to own a
home is stronger now than at any time in the 1990's. Security and
permanence are thought to be non-financial reasons to own a home.
The commitment to home ownership is tempered by an awareness of
the high cost of owning a home. The affordability of manufactured
housing allows many individuals to achieve this goal without
jeopardizing their financial security.
- Affordability. For a significant number of persons, manufactured
housing represents the only means of achieving home ownership. In
addition, the total cost of housing in a manufactured home
community (home cost, site rent and related occupancy costs) is
competitive with and often lower than the total cost of
alternative housing, such as apartments and condominiums.
- Lifestyle choice. As the average age of the United States
population has increased, manufactured housing has become an
increasingly popular housing alternative for retirement and
"empty-nest" living. According to the FNMA, among those people who
are nearing retirement (age 40 to 54), approximately 33% plan on
moving upon retirement. Approximately 44% of adults age 40 to 54
and 14% of adults age 55 and over are expected to become "empty
nesters" within the next ten years. To these individuals,
manufactured housing is especially attractive when located within
a community that offers an appealing amenity package, close
proximity to local services, social activities, low maintenance
and a secure environment.
- Construction quality. Since 1976, all manufactured housing has
been required to meet stringent Federal standards, resulting in
significant increases in the quality of the industry's product.
The Department of Housing and Urban Development's standards for
manufactured housing construction quality are the only Federally
regulated standards governing housing quality of any type in the
United States. Manufactured homes produced since 1976 have
received a "red and silver" government seal certifying that they
were built in compliance with the Federal code. The code regulates
manufactured home design and construction, strength and
durability, fire resistance and energy efficiency, and the
installation and performance of heating, plumbing, air
conditioning, thermal and electrical systems. In newer homes, top
grade lumber and dry wall materials are common. Also,
manufacturers are required to follow the same fire codes as
builders of site-built structures.
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- Comparability to site-built homes. The manufactured housing
industry has experienced a recent trend towards multi-section
homes. Many modern manufactured homes are longer (up to 80 feet
compared to 50 feet in the 1960's) and wider than earlier models.
Many homes have vaulted ceilings, fireplaces and as many as four
bedrooms and closely resemble single family site-built homes.
ITEM 2. DESCRIPTION OF PROPERTY.
The Meadows is located at 2555 PGA Boulevard, Palm Beach Gardens, Florida,
33410. The Meadows is a fifty-five acre property containing 381 manufactured
home sites whose lots are divided into two phases: Phase I, constructed in 1968,
contains 235 lots; Phase II, constructed in 1981, contains 146 lots. The typical
mobile home lot in the park is approximately 60 by 68 feet in size; the smallest
lot is 25 by 60 feet and the largest lot is 87 by 72 feet. The residents own
their own home, so it is their responsibility to maintain their homes and the
surrounding area.
The Meadows is a family community whose amenities include a multiple
purpose building (incorporating a billiard room, social room, bathrooms, storage
rooms, and laundry room); a heated pool; a jacuzzi; a deck area; six
regulation-size cement shuffleboard courts; a mobile home (with garage) used as
an administrative office and for storage; a system of private asphalt roads that
run throughout the park, approximately 1.5 miles in length and 20 feet wide; 32
parking spaces appurtenant to the park's clubhouse and other facilities; and a
pump house with four auxiliary pumps for use by tenants for irrigation purposes.
The average occupancy rate of the lots in the Park has been approximately
78% for the last 5 years. Currently, 299 of the 381 lots are occupied by Meadows
homeowners, 81 lots are unoccupied, and 1 lot is used as an office. The
following table summarizes the occupancy rate of the Park's lots for each of the
last 5 years:
Year Percentage of Occupied Lots
- ---------------------------------------------------------------
1995 78.4%
1996 78.1%
1997 78.1%
1998 78.4%
1999 78.4%
None of the Meadows homeowners leases more than 1 percent of the lots. The only
business carried on at the Park is the day-to-day management and administration
of the Park, and the leasing of lots in the Park to new tenants.
The average annual rent paid per lot for each of the last 5 years is as
follows:
Year Average Annual Rent per Lot
- ---------------------------------------------------------------
1995 $ 4,488
1996 $ 4,608
1997 $ 4,608
1998 $ 4,704
1999 $ 4,704
The rental prospectuses provide no fixed expiration dates for the leases. The
rental income from the lots in the Park constitutes approximately 99% of the
gross annual revenues of the Park's owner.
The real estate tax rate or "millage" rate for the Park is $21.04850 per $1,000
of the assessed value of the Park's real property. The amount of annual real
estate taxes paid on the Park in 1999 was $160,491.
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Future renovation projects may include expanding and remodeling the
clubhouse, adding access control to the Park's entrance, redesigning the
entrance and adding an additional entrance to the Park. Any such projects would
be financed out of BRC's additional capital contribution of $200,000, per the
partnership agreement, towards capital improvements, the Partnership's gross
revenues or through borrowings.
ITEM 3. LEGAL PROCEEDINGS.
On December 8, 1997, Penn Florida Realty, L.P., a Delaware limited
partnership, d/b/a PNFLA Realty Limited Partnership and Penn Florida, Inc. (the
"Plaintiffs") filed an action in the Circuit Court for Palm Beach County,
Florida, against MPI-1, a predecessor of MPI, seeking declaratory relief
pursuant to Chapter 86, Florida Statutes and damages in an unspecified amount.
In their Second Amended Complaint, the Plaintiffs alleged that they had entered
into a contract with the Park's then-owners to purchase the Park for
$12,000,000. They asserted that MPI-1 "breached its obligation of good faith and
fiduciary duty," "conspired with" BRC and certain of BRC's affiliates to defeat
the Plaintiffs' purchase rights, and tortiously interfered with Plaintiffs'
purchase rights, all in order to enable BRC to purchase an otherwise unavailable
property or an interest in such property. Before selling the Park to the
Plaintiffs, acting pursuant to the Florida Mobile Home Act, the owners gave
MPI-1, as the homeowners' association for the Park, notice of the price, terms
and conditions of the intended sale to the Plaintiffs and offered MPI-1 the
opportunity to purchase the Park pursuant to the same price, terms and
conditions. MPI-1 thereupon executed an agreement with the owners to purchase
the Park and did purchase the Park for $12,000,000.
In response to these events, the Plaintiffs brought the action described
above, alleging that MPI-1's purchase of the Park pursuant to the Florida Mobile
Home Act violated the Plaintiffs' constitutional and contractual rights. The
Plaintiffs were seeking judgment (1) finding that Section 723.071, Florida
Statutes is unconstitutional, on its face or as applied, (2) entitling them to
close their purchase of the Park pursuant to the terms of their contract, and/or
(3) for compensatory damages, court costs, and such other relief as the court
deems appropriate.
On July 15, 1999 this action was settled. The terms of the settlement required
MPI to pay $40,000 to the plaintiff, however, the obligation was accepted (in a
non-cash transaction) by the Partnership who subsequently paid the amounts in
1999, because the Partnership was joined in the settlement agreement. The
settlement had no effect on the operations of MPI or the property.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's stock is not traded on any public exchange. The number of
beneficial holders of The Meadows common stock at December 31, 1999, was 92. No
dividends have been declared or paid for the years ended December 31, 1999 and
1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
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.
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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, and
thereafter, accounts for its investment in the Partnership using the equity
method. Accordingly, MPI recognizes its proportionate ownership share of the
operating income and losses in the Partnership.
The following discussion and analysis should be read in conjunction with
the Financial Statements of MPI as of December 31, 1999 and 1998, and the Notes
thereto and other financial information included elsewhere in this Report. The
discussion of results and trends does not necessarily imply that these results
and trends will continue.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO YEAR ENDED DECEMBER 31, 1998
The results of operations reflected on the Statements of Operations for the
twelve months ended December 31, 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. As such, the results of operations for MPI includes the
operation of the Meadows for 3 months ended March 31, 1999, the date of
contribution to the Partnership, and income from its investment in the
Partnership thereafter. Aside from activities related to the entity formation
and capitalization, MPI's sole significant activity has been the operation of
the Meadows or the investment in the Partnership. As a result the discussion
below focuses on the Partnership and the operations of the Meadows.
A condensed balance sheet and income statement of the Partnership, a
significant investee of MPI, as of December 31, 1999 and for the year then ended
(however, significant operations did not commence until April 1, 1999) prepared
in conformity with generally accepted accounting principles, is summarized
below. The Partnership's sole activity is the operation of the Meadows.
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December 31, 1999
Current assets .............................................. $ 331,305
Rental property, net ........................................ 12,964,445
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Total assets ........................................... 13,295,750
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Current liabilities ......................................... 153,570
Long-term liabilities ....................................... 6,543,990
-----------
Total liabilities ...................................... 6,697,560
Partners' capital ........................................... 6,598,190
-----------
Total liabilities and partners' capital ................ $13,295,750
===========
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December 31, 1999
Rental income ................................... $ 1,050,245
Interest and other income ....................... 18,641
-----------
Total revenues ............................. 1,068,886
-----------
Total property expenses ......................... 475,762
Interest ........................................ 415,683
Depreciation .................................... 242,223
-----------
Total expenses ............................. 1,133,668
-----------
Net (loss) ...................................... $ (64,782)
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MPI's percentage ownership ...................... 9.7%
-----------
MPI's loss from equity in partnership ........... $ (6,289)
===========
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For comparison purposes, the following table details the operations of The
Meadows for the twelve months ended December 31, 1999 and 1998 of which the 1st
calendar quarter of 1999, is included in MPI's 1999 statement of operations with
the remainder recorded by the Partnership and included in the condensed
information shown in the table above.
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Year Ended December 31
1999 1998
Rental income .................... $ 1,400,452 $ 1,393,428
Interest and other income ........ 21,660 11,991
Total revenues .............. 1,422,112 1,405,419
Property operating and maintenance 427,574 355,857
Property management .............. 55,522 55,279
Real estate taxes ................ 160,491 169,780
General and administrative ....... 11,231 25,982
Interest ......................... 598,404 824,506
Depreciation ..................... 320,074 309,889
Total expenses .............. 1,573,296 1,741,293
Net (loss) ....................... $ (151,184) $ (335,874)
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The following changes in operations and discussions thereon relate to the
property operations of the Meadows for the years ended December 31, 1999 and
1998.
Rental income ($1,400,452) increased 7,024 or .5%.
Interest and other income (21,660) increased $9,669 or 80.6%. This increase
is primarily due to the interest earned on the local bank account.
Property operating and maintenance expenses ($427,574) increased $71,717 or
20.2%. The increase was due to increased landscaping/tree trimming and
payroll costs.
Property management ($55,522) increased $243 or .4%. The increase is due to
the increase in rental income.
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Real estate taxes ($160,491) decreased $9,289 or 5.5%. The decrease is due
to the trash portion of the real estate tax bill being included in property
operations and maintenance in the current year.
General and administrative expense ($11,231) decreased $14,751 or 56.8%.
This is due primarily to the reclassification of expense to the capital
account.
Interest expense ($598,404) decreased $226,102 or 27.4%. The decrease is
primarily due to a partial paydown of the note on March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents of MPI increased $59,780 compared to December 31,
1998, primarily due to the transfer of funds from the restricted deposit account
to the checking account, once restrictions were lifted.
Net cash provided by operating activities increased $512,521 from $64,109
for the twelve months ended December 31, 1998 to $576,630 for the twelve months
ended December 31, 1999. This increase was primarily due to the decrease in
restricted deposits, offset by decreases in payables to homeowners and payable
to the management company.
Cash used in investing activities increased $399,311 from $(59,289) for the
twelve months ended December 31, 1998 to $(458,600) for the twelve months ended
December 31, 1999. This increase is primarily due to the payment of the MPI's
contribution to the Partnership.
Cash used in financing activities increased $58,250 from $0 for the twelve
months ended December 31, 1998 to $(58,250) for the twelve months ended December
31, 1999. This increase is due to the payment of a loan application fee during
the period.
YEAR 2000
The Company has experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company will
continue to monitor its mission critical computer applications and those of its
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
ITEM 7. FINANCIAL STATEMENTS.
See Index to Financial Statements on page F-1 of this Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
ITEM 10. EXECUTIVE COMPENSATION.
No director or officer of MPI will receive any compensation for serving as
a director or officer of MPI.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Each of the MPI directors, with the exception of Mr. McCann, owns one share
of MPI Preferred Stock which they received in exchange for their membership
interests in MPI-1 (predecessor to MPI) as the result of the series of mergers
whereby MPI-1 was merged into MPI. Mr. McCann owns three shares of MPI Preferred
Stock since he leases three lots in the park. MPI's directors and officers made
Advances to MPI-1 aggregating $58,000 and each of them has converted all of
these Advances into MPI Common Shares. Accordingly, each of MPI's directors and
officers, other than Messrs. McCann and Flynn, owns 10 MPI Common Shares. Mr.
McCann owns 18 MPI Common Shares and Mr. Flynn owns 7 Common Shares. The
percentage of MPI Common Shares owned by each MPI officer and director will
depend on the total number of MPI Common Shares subscribed for by Meadows
homeowners. There are no outstanding options or warrants to acquire any MPI
Common Shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See Item 1 above for description of Company's relationship and transactions
with BRC and its affiliates.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
No Form 8-K's have been filed for the current fiscal year 1999.
Exhibit 27 Financial Data Schedule
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MEADOWS PRESERVATION, INC.
INDEPENDENT AUDITOR'S REPORT
AND
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT..............................................F - 2
CONSOLIDATED FINANCIAL STATEMENTS
Balance sheets.......................................................F - 3
Statements of operations.............................................F - 4
Statements of changes in stockholders' equity....................... F - 5
Statements of cash flows.............................................F - 6
Notes to financial statements........................................F - 7
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REPORT OF INDEPENDENT AUDITOR'S
To the Board of Directors
Meadows Preservation, Inc.
We have audited the accompanying balance sheets of Meadows Preservation, Inc.,
as of December 31, 1999 and 1998, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 audits provide 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 Meadows Preservation, Inc., as
of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Chicago, Illinois
March 15, 2000
F - 2
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MEADOWS PRESERVATION, INC.
BALANCE SHEETS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
ASSETS
Cash ............................................. $ 74,621 $ 14,841
Restricted deposits .............................. 0 864,939
Accounts receivable .............................. 0 17,571
Due from management company ...................... 0 766,451
Investment in partnership ........................ 0 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 ..................................... $ 74,621 $ 13,775,479
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Note payable ................................... $ 0 $ 12,341,693
Amount due to Partnership....................... 3,207 0
Accounts payable and accrued expenses .......... 0 59,516
Accrued interest ............................... 0 863,188
Advances payable to homeowners ................. 0 864,939
------------ ------------
Total liabilities ................................ 3,207 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 ............................... (377,392) (345,663)
Total stockholders' equity ....................... 71,414 (352,857)
------------ ------------
Total liabilities and stockholders' equity ....... $ 74,621 $ 13,775,479
============ ============
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
F - 3
<PAGE> 16
MEADOWS PRESERVATION, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1999 1998
---------------------------
REVENUES
Rental income ............................... $ 350,207 $ 1,393,428
Association revenues ........................ 0 2,391
Interest and other income ................... 70,080 11,991
----------- -----------
Total revenues ......................... 420,287 1,407,810
EXPENSES
Association expenses ........................ 6,099 11,515
Property operating and maintenance .......... 111,327 355,857
Property management ......................... 14,127 55,279
Real estate taxes ........................... 45,000 169,780
General and administrative .................. 8,602 25,982
Interest .................................... 182,721 824,506
Depreciation ................................ 77,851 309,889
----------- -----------
Total expenses ......................... 445,727 1,752,808
Loss from equity in partnership ............. (6,289) 0
----------- -----------
Net Loss .................................... $ (31,729) $ (344,998)
=========== ===========
Net Loss per share (basic and diluted)....... $ (92.24) $ (344,998)
=========== ===========
Weighted average common shares outstanding
(basic and diluted)......................... 344 1
=========== ===========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
F - 4
<PAGE> 17
MEADOWS PRESERVATION, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
--------------------------
PREFERRED STOCK, NO PAR VALUE
Balance, beginning of year ....................... $ (8,194) $ 0
Issuance of preferred stock ................... (8,194)
----------------------
Balance, end of year ............................. $ (8,194) $ (8,194)
======================
COMMON STOCK, $.01 PAR VALUE
Balance, beginning of year ....................... $ 0 $ 0
Issuance of common stock ...................... 5
----------------------
Balance, end of year ............................. $ 5 $ 0
======================
PAID-IN CAPITAL
Balance, beginning of year ....................... $ 1,000 $
Issuance of common stock ...................... 455,995 1,000
Issuance of preferred stock ................... 0
----------------------
Balance, end of year ............................. $ 456,995 $ 1,000
======================
RETAINED DEFICIT
Balance, beginning of year ....................... $(345,663) $ 7,529
Allocation to preferred stock ................. (8,194)
Net loss, year ended December 31, 1999......... (31,729)
Net loss, year ended December 31, 1998......... (344,998)
----------------------
Balance, end of year ............................. $(377,392) $(345,663)
======================
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F - 5
<PAGE> 18
MEADOWS PRESERVATION, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................................. $ (31,729) $(344,998)
Adjustments to reconcile net loss to Cash provided by operating activities:
Depreciation .......................................................... 77,851 309,889
Loss from equity in partnership ....................................... 6,289 0
Decrease in restricted deposits ....................................... 864,939 11,268
Decrease in advances payable to homeowners ............................ (407,939) (11,268)
Decrease (increase) in accounts receivable ............................ 1,520 (17,571)
(Increase) in due from management company ............................. (201,805) (766,353)
Increase in accrued interest .......................................... 182,721 824,506
Increase in accounts payable and accrued expenses ..................... 72,073 58,636
--------- ---------
Net cash provided by operating activities ................................. 563,920 64,109
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to rental property ....................................... (1,600) (59,289)
Contribution to Partnership .......................................... (457,000) 0
Distributions received from Partnership................................ 12,710 0
--------- ---------
Cash used in investing activities ......................................... (445,890) (59,289)
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan costs ............................................................ (58,250) 0
--------- ---------
Cash used in financing activities ......................................... (58,250) 0
--------- ---------
Net increase in cash and cash equivalents ................................. 59,780 4,820
Cash and cash equivalents, beginning of year .............................. 14,841 10,021
--------- ---------
Cash and cash equivalents, end of year .................................... $ 74,621 $ 14,841
========= =========
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES:
<S> <C> <C>
Noncash investing and financing transactions:
Contribution to Partnership on March 31, 1999 (see Note 3)
Accounts receivable ..................................................... $ (16,051)
Due from management company ............................................. (968,256)
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
------------
Investment in Partnership $ 15,792
============
Conversion of advances payable to homeowners
to common stock ...................................................... $ 456,000
============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F - 6
<PAGE> 19
MEADOWS PRESERVATION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
ORGANIZATION
Meadows Preservation, Inc. ("MPI"), 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 December
18, 1997, MPI purchased The Meadows.
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
recission 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.
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 and thereafter, 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 accounting
principles generally accepted in the United States 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
Rental property as of December 31, 1998, was stated at cost. Depreciation
was computed during 1998 and through March 31, 1999, on the straight line basis
over the estimated useful lives of the assets - 30 years for improvements.
F - 7
<PAGE> 20
MANAGEMENT FEE AGREEMENT
During 1998 and for the three months ending March 31, 1999, the Company
engaged MHC Management LP, an affiliate of BRC, to manage the property. The
Management Agreement provided that the manager receive a "management fee" equal
to 4% of gross annual revenues. For the three months ended March 31, 1999 and
for the year ended December 31, 1998, MHC Management LP earned fees amounting to
$14,127 and $55,279, respectively.
RENTAL REVENUE RECOGNITION
Rental income for 1998 and for the three months ending March 31, 1999 was
generated from short term leases and recorded as revenue when earned.
INCOME TAXES
No provision for income taxes has been provided in the accompanying
financial statements because of operating losses. The future realization of any
benefit of operating losses is not presently determinable. As such, a deferred
tax asset that would result from the realization of the operating losses has
been fully reserved.
DUE FROM MANAGEMENT COMPANY
The management company, MHC Management LP, for 1998 and the three months
ending March 31, 1999, collected all revenues and disbursed all expenses related
to the property from its central cash account. The amount collected by the
management company in excess of the expenses paid is due to MPI.
2. NOTE PAYABLE
As of December 31, 1998, MPI was the borrower under a $12,341,693 mortgage note
payable to an affiliate of BRC and secured by the Property. As described in Note
1 on March 31, 1999, the note was contributed to the Partnership. The note bore
interest at the rate of the lesser of nine percent per annum, or at the rate
derived from dividing the net operating income, as defined, annualized for the
full year by the annualized outstanding note balance. The rate calculated by
this formula for 1999 and 1998 was approximately 5.92% and 6.68% respectively.
Interest expense for the years ending December 31, 1999 and 1998 amounted to
$182,721 and $824,506, respectively.
3. ADVANCES PAYABLE TO HOMEOWNERS
Advances payable to homeowners as of December 31, 1998, was cash received by the
Company in advance of the Offerings for the initial purchase of the Meadows.
These advances were, as of December 31, 1999, either converted to stock
($456,000) or refunded to the respective homeowners ($407,939).
F - 8
<PAGE> 21
4. INVESTMENT IN PARTNERSHIP
An condensed balance sheet and income statement of the Partnership described in
note 1, as of December 31, 1999, and for the year then ended is summarized
below.
- -------------------------------------------------------------------------------
December 31,
1999
Current assets ......................... $ 331,305
Rental property, net ................... 12,964,445
Total assets ...................... 13,295,750
===========
Current liabilities .................... 153,570
Long-term liabilities .................. 6,543,990
Total liabilities ................. 6,697,560
Partners' capital ...................... 6,598,190
Total liabilities and partners' capital $13,295,750
===========
- -------------------------------------------------------------------------------
December 31,
1999
Rental income .................... $ 1,050,245
Interest and other income ........ 18,641
-----------
Total revenues .............. 1,068,886
-----------
Total property expenses........... 475,762
Interest.......................... 415,683
Depreciation ..................... 242,223
-----------
Total expenses .............. 1,133,668
-----------
Net (loss) ....................... $ (64,782)
-----------
MPI's percentage ownership........ 9.7%
MPI's loss from equity in
partnership..................... $ 6,289
-----------
- -------------------------------------------------------------------------------
The Company received distributions in 1999 in excess of it's initial
contributions to the Partnership, and as such has an amount due to the
Partnership of $3,207 as of December 31, 1999.
5. LEGAL PROCEEDINGS
On December 8, 1997, Penn Florida Realty, L.P., a Delaware limited
partnership, d/b/a PNFLA Realty Limited Partnership and Penn Florida, Inc. (the
"Plaintiffs") filed an action in the Circuit Court for Palm Beach County,
Florida, against MPI-1, a predecessor of MPI, seeking declaratory relief
pursuant to Chapter 86, Florida Statutes and damages in an unspecified amount.
In their Second Amended Complaint, the Plaintiffs alleged that they had entered
into a contract with the Park's then-owners to purchase the Park for
$12,000,000. They asserted that MPI-1 "breached its obligation of good faith and
fiduciary duty," "conspired with" BRC and certain of BRC's affiliates to defeat
the Plaintiffs' purchase rights, and tortiously interfered with Plaintiffs'
purchase rights, all in order to enable BRC to purchase an otherwise unavailable
property or an interest in such property. Before selling the Park to the
Plaintiffs, acting pursuant to the Florida Mobile Home Act, the owners gave
MPI-1, as the homeowners' association for the Park, notice of the price, terms
and conditions of the intended sale to the Plaintiffs and offered MPI-1 the
opportunity to purchase the Park pursuant to the same price, terms and
conditions. MPI-1 thereupon executed an agreement with the owners to purchase
the Park and did purchase the Park for $12,000,000.
F - 9
<PAGE> 22
In response to these events, the Plaintiffs brought the action
described above, alleging that MPI-1's purchase of the Park pursuant to the
Florida Mobile Home Act violated the Plaintiffs' constitutional and contractual
rights. The Plaintiffs were seeking judgment (1) finding that Section 723.071,
Florida Statutes is unconstitutional, on its face or as applied, (2) entitling
them to close their purchase of the Park pursuant to the terms of their
contract, and/or (3) for compensatory damages, court costs, and such other
relief as the court deems appropriate.
On July 15, 1999 this action was settled at no cost to MPI. Additionally, the
settlement had no effect on the operations of MPI or the property.
F - 10
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.
(Registrant) Meadows Preservation, Inc.
By: /s/ Mike Paymar
---------------------------------------------------
Mike Paymar, President
Date: March 15, 2000
Pursuant to the requirements of Section 13 of the Exchange Act, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ Mike Paymar
---------------------------------------------------
Mike Paymar, President
Date: March 15, 2000
By: /s/ Phil McMahon
---------------------------------------------------
Phil McMahon, Principal Accounting Officer
Date: March 15, 2000
<PAGE> 24
MEADOWS PRESERVATION, INC. - SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C>
/s/ Mike Paymar Chairman of the Board
- ----------------------------------------
Mike Paymar March 28, 2000
-----------------------
/s/ Mary Bachiochi Director
- ----------------------------------------
Mary Bachiochi March 28, 2000
-----------------------
/s/ Lionel DeLacey Director
- ----------------------------------------
Lionel DeLacey March 28, 2000
-----------------------
/s/ Joanne Montgomery Director
- ----------------------------------------
Joanne Montgomery March 28, 2000
-----------------------
/s/ Doratha Smalenbach Director
- ----------------------------------------
Doratha Smalenbach March 28, 2000
-----------------------
/s/ Ted Stephenson Director
- ----------------------------------------
Ted Stephenson March 28, 2000
-----------------------
/s/ Stan Wilk Director
- ----------------------------------------
Stan Wilk March 28, 2000
-----------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED 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
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 74,621
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 74,621
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,124
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
(8,194)
<COMMON> 5
<OTHER-SE> 92,313
<TOTAL-LIABILITY-AND-EQUITY> 84,124
<SALES> 350,207
<TOTAL-REVENUES> 432,997
<CGS> 0
<TOTAL-COSTS> 176,553
<OTHER-EXPENSES> 8,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182,721
<INCOME-PRETAX> (19,019)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,019)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,019)
<EPS-BASIC> (42)
<EPS-DILUTED> (42)
</TABLE>
