U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDING JUNE 30, 1999
[ ] TRANSACTION REPORT PURSUANT SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSACTION PERIOD FROM __________ TO __________.
Commission file number 333-68213
SARATOGA HOLDINGS I, INC.
(Exact name of small business issuer as specific in its charter)
TEXAS 78-2896910
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 CONGRESS AVENUE, SUITE 1550, AUSTIN, TEXAS 78701
(Address of principal executive offices)
(512) 478-5717
(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 CORPORATE ISSUERS
State the number of shares outstanding of the issuer's class of common
equity, as of the latest practicable date: common stock, $0.001 par value as of
July 15, 1999: 3,766,667 shares
Transactional Small Business Disclosure Format (check one);
Yes [X] No [ ]
<PAGE>
Saratoga Holdings I, Inc.
Unaudited Financial Statements
Three and Six Months Ended June 30, 1999
INDEX TO UNAUDITED FINANCIAL STATEMENTS
Unaudited Financial Statements
Balance Sheets.........................................................3
Statements of Operations...............................................4
Statements of Cash Flows...............................................5
Notes to Financial Statements..........................................6
2
<PAGE>
Saratoga Holdings I, Inc.
Balance Sheets
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
(UNAUDITED)
ASSETS
Current assets - cash ........................... $ 2,000 1,000
Investment in past due accounts receivable ...... 9,000 10,000
------------ ------------
Total assets .................................... $ 11,000 $ 11,000
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities - accrued expenses .......... $ 8,000 --
Preferred stock, par value $.001; 100,000
shares authorized; none outstanding ........... -- --
Common stock, par value $.001; 100,000,000
shares authorized; 3,766,667 shares issued
and outstanding ............................... 4,000 4,000
Additional paid-in capital ...................... 7,000 7,000
Retained earnings (accumulated deficit) ......... (8,000) --
------------ ------------
Total liabilities and stockholder's equity ...... $ 11,000 $ 11,000
============ ============
SEE ACCOMPANYING NOTES.
3
<PAGE>
Saratoga Holdings I, Inc.
Statements of Operations
(Unaudited)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 1999
------------- -------------
Revenues ..................................... $ -- $ --
Expenses:
General and administrative expenses ........ 8,000 8,000
------------- -------------
Net loss ..................................... $ (8,000) $ (8,000)
============= =============
Basic and diluted earnings per share ......... $ 0.00 $ 0.00
============= =============
Weighted-average number of common shares
outstanding ................................ 3,766,667 3,766,667
SEE ACCOMPANYING NOTES
4
<PAGE>
Saratoga Holdings I, Inc.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 1999
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ............................................. $ (8,000) $ (8,000)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Changes in operating assets and liabilities:
Investment in past due accounts receivable........ -- 1,000
Accrued expenses ................................. 8,000 8,000
-------------- --------------
Net cash provided by operating activities ............ -- 1,000
-------------- --------------
Net increase in cash ................................. -- 1,000
Cash at beginning of period .......................... 2,000 1,000
-------------- --------------
Cash at end of period ................................ $ 2,000 $ 2,000
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
Saratoga Holdings I, Inc.
Notes to Unaudited Financial Statements
Three and Six Months Ended June 30, 1999
1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Saratoga Holdings I, Inc. (the Company), a Texas corporation, is a wholly owned
subsidiary of Saratoga Resources, Inc. As of June 30, 1999, the Company has no
operations other than those related to a portfolio of past due account
receivables purchased on November 12, 1998. Accordingly, no prior year
comparable numbers are presented for the statements of operations and cash
flows. The Company is in the business of purchasing portfolios of accounts
receivable at a discount and of collecting receivables or reselling them in the
same or in differently configured portfolios. Effective May 17, 1999, the
Company's registration statement on Form SB-2 was declared effective by the
Securities and Exchange Commission and, accordingly, the company is subject to
the reporting requirements of section 15(d) of the securities exchange act of
1934. Its shares are now publicly registered. It is the intention of Saratoga
Resources, Inc. to distribute the shares of the Company to the stockholders of
Saratoga Resources, Inc. in the form of a dividend, but such distribution has
not yet occurred.
The accompanying unaudited financial statements are those of the Company, and
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Regulation S-B. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation for
the periods indicated have been included. Operating results for the three and
six month periods ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999. The balance
sheet at December 31, 1998 has been derived from the audited financial
statements at that date, but does not include all of the information and notes
required by generally accepted accounting principles for complete financial
statements. The accompanying financial statements should be read in conjunction
with the audited financial statements (including the notes thereto) for the year
ended December 31, 1998.
2. GOING CONCERN
The Company's financial statements have been prepared in conformity with
generally accepted accounting principles for interim financial information,
which contemplates continuation of the Company as a going concern. However, the
Company had no operating activities prior to November 12, 1998 and had limited
cash, working capital and available sources of financing at June 30, 1999,
raising substantial doubt about the entity's ability to continue as a going
concern. The Company currently has limited expenses other than legal, accounting
and commissions which the Company intends to pay with collections of the past
due accounts receivable. A wholly owned subsidiary of Saratoga Resources, Inc.
has agreed to pay the Company's legal, accounting and reporting expenses up to
$40,000 for the first 18 months of the Company's operations subject to repayment
if the Company becomes profitable. This agreement is documented by a note dated
November 12, 1998 which provides for interest at the rate of 10% per annum. In
addition, the Company hopes that it will be able to support some of its
operations through the collection of accounts receivable.
<PAGE>
Saratoga Holdings I, Inc.
Notes to Unaudited Financial Statements
Three and Six Months Ended June 30, 1999
3. RELATED PARTY TRANSACTION
On May 17, 1999, the Company's registration statement on Form SB-2 was declared
effective by the Securities and Exchange Commission, publicly registering the
stock of Saratoga Holdings I, Inc. proposed to be spun off by Saratoga
Resources, its parent.
Randall Johnson, the President of the Company, is also a stockholder, officer
and director of both the company that sold the past due accounts receivable to
Saratoga Holdings and of the company that Saratoga Holdings has hired to collect
the receivables (the Premium Group). The Premium Group's primary role will be to
provide management expertise and strategic direction to the company for the
acquisition of companies and consolidation of collection companies. On June 14,
1999, the Company agreed to the following compensation, upon the closing of one
or more acquisitions of collection companies by the Company resulting in pro
forma after tax earnings of $4 million: issuance to Randall Johnson and the
Premium Group collectively 376,668 shares of common stock of the Company as well
as warrants to purchase an additional 376,668 shares. Half of these warrants, at
an exercise price of 110% of the average Company stock price 90 days after the
first acquisition, will vest one year after the first acquisition and expire two
years later. The remaining half of the warrants, at an exercise price of 200% of
the average Company stock price 90 days after the first acquisition, will vest
two years after the first acquisition and expire two years later. In exchange
for these shares and warrants, the Company received an option to acquire all of
the equity ownership of the Premium Group within 90 days of an acquisition, at a
price based on the EBITDA of the acquired collection agencies. If no
acquisitions of collection agencies has been made by December 31, 1999, the
agreement expires.
<PAGE>
Saratoga Holdings I, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Overview. Since the consummation of the spin off of Saratoga Holdings I,
Inc. ("SHI") from Saratoga Resources, Inc. in May, 1999, management has sought
new business opportunities relating to the acquisition, resale, management, and
collection of portfolios of delinquent and defaulted accounts receivable.
SHI has also entered into a strategic alliance with The Premium Group
("Premium"), a regional collection agency located in Georgetown, Texas. In
accordance with this agreement, Premium will act as the exclusive agent to
assist SHI in the location, purchase and sale of receivables. Using its current
customer base and extensive contacts within the industry, Premium will assist
SHI in the acquisition of these portfolios. This agreement will serve to allow
SHI to negotiate for larger portfolios and to take advantage of associated
volume discounts.
Additionally, SHI is currently negotiating with investment bankers to
raise approximately $40 million to be dedicated to the acquisition of regional
and national collection agencies, as described in the "Business Strategy"
section of the Prospectus of SHI's registration statement on Form SB-2.
YEAR 2000 ISSUE
The Registrant utilizes software and related technologies that may be
affected by the Year 2000 issue, which is common to most businesses. The
Registrant is addressing the effect of the potential Year 2000 issue on all its
critical systems and with all of its critical vendors, customers and clients. At
this time, critical information systems throughout the Registrant are Year 2000
compliant. No extra costs were incurred in obtaining this compliance. Management
has determined that no critical business areas will be adversely affected by
Year 2000 issues, but the Registrant continues to work with its vendors,
customers and others to ensure a smooth transition. Based on the foregoing,
management does not consider any contingency plan to be necessary, and
management believes that any costs and risks related to Year 2000 compliance
will not have a material adverse impact on the liquidity or financial position
of the Registrant. If the Registrant hereafter engages in acquisitions or
business combinations, such as the purchase of the consumer debt accounts
receivable in 1999, management will address possible new Year 2000 problems
related to such transactions at the time of such transactions.
FORWARD-LOOKING STATEMENTS
Statements contained herein that relate to the Registrant's future
performance, including without limitation statements with respect to the
Registrant's anticipated results for any portion of 1999, shall be deemed
forward looking statements within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. A number of factors affecting the
Registrant's business and operations could cause actual results to differ
materially from those contemplated by the forward looking statements. Those
factors include, but are not limited to, demand and competition for the
Registrant's products and services, changes in the requirements of clients and
customers, and changes in general economic conditions that may affect demand for
the Registrant's products and services or otherwise affect results of operations
or the value of the Registrant's assets. The forward-looking statements that are
included in this report were
<PAGE>
prepared by management and have not been audited by, examined by, compiled by or
subjected to agreed-upon procedures by independent accountants, and no third
party has independently verified or reviewed such statements. Readers of this
report should consider these facts in evaluating the information and are
cautioned not to place undue reliance on the forward-looking statements
contained herein.
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
None
b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the period covered
by this report.
<PAGE>
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SARATOGA HOLDINGS I, INC., A TEXAS
CORPORATION
Date: July 31, 1999 ______________________________________
Thomas F. Cooke, Chief Executive
Officer and Principal Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS IN THE 10Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,000
<SECURITIES> 0
<RECEIVABLES> 32
<ALLOWANCES> (23)
<INVENTORY> 0
<CURRENT-ASSETS> 2,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,000
<CURRENT-LIABILITIES> 8,000
<BONDS> 0
0
0
<COMMON> 4,000
<OTHER-SE> (1,000)
<TOTAL-LIABILITY-AND-EQUITY> 11,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 8,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,000)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
