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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB/A
(AMENDMENT NO. 1)
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER
000-25313
AGEMARK CORPORATION
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
NEVADA 94-32701689
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2614 TELEGRAPH AVENUE, BERKELEY, CALIFORNIA 94704
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 548-6600
--------------------
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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
PROCEEDINGS 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 court. Yes X No__.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: The number of shares of
Common Stock, $.001 par value per share, outstanding on June 30, 1999, was
1,000,000.
Transitional Small Business Disclosure Format (check one): Yes__ No X.
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TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements..................................................2
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K....................................12
SIGNATURES...................................................................13
EXHIBIT INDEX................................................................14
1
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INDEPENDENT ACCOUNTANT'S REPORT
To the Stockholders and
Board of Directors of
Agemark Corporation
We have reviewed the accompanying balance sheet of AGEMARK CORPORATION (a Nevada
corporation) as of March 31, 2000, and the related statement of stockholders'
equity for the six-month period then ended and statements of operations for the
three-month and six-month periods ended March 31, 2000 and 1999 and statements
of cash flows for the six-month periods ended March 31, 2000 and 1999. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim information
consists principally of applying analytical procedures to financial data and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
TIMPSON GARCIA
Oakland, California
May 5, 2000
2
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AGEMARK CORPORATION
BALANCE SHEET
MARCH 31, 2000
(IN THOUSANDS EXCEPT SHARE DATA)
UNAUDITED
ASSETS
Cash and cash equivalents $ 369
Property and equipment, net 21,058
Deferred tax assets 445
Loan costs 30
Other assets 274
----------
Total assets $ 22,176
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued liabilities $ 1,799
Notes payable 14,995
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Total liabilities $ 16,794
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STOCKHOLDERS' EQUITY
Common stock, stated value $.001, 20,000,000 shares authorized,
1,000,000 shares issued and outstanding $ 1
Additional paid in capital 6,224
Accumulated deficit (843)
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Total stockholders' equity $ 5,382
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Total liabilities and stockholders' equity $ 22,176
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See accompanying notes to financial statements.
3
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AGEMARK CORPORATION
STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS EXCEPT SHARE DATA)
(UNAUDITED)
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Three Months Six Months
Ended March 31, Ended March 31,
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2000 1999 2000 1999
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Revenue
Property gross revenue $ 2,544 $ 2,441 $ 5,080 $ 4,813
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Other income 11 23 16 42
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Total revenue $ 2,555 $ 2,464 $ 5,096 $ 4,855
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Expenses
Property operating expenses $ 2,160 $ 1,983 $ 4,380 $ 3,987
Administrative and overhead expenses 233 232 411 411
Stock option compensation 75 57 138 57
Interest expense 238 226 479 459
Depreciation 157 154 315 307
------------- ---------- ----------- --------
Total expenses $ 2,863 $ 2,652 $ 5,585 $ 5,164
------------- ---------- ----------- --------
Net (loss) $ (308) $ (188) $ (627) $ (366)
============= ========== =========== ========
Basic (loss) per common share $ (0.31) $ (0.19) $ (0.63) $ (0.37)
============= ========== =========== ========
Fully diluted (loss) per common share $ (0.26) $ (0.16) $ (0.53) $ (0.33)
============= ========== =========== ========
<FN>
See accompanying notes to financial statements.
</FN>
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4
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AGEMARK CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
(UNAUDITED)
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ADDITIONAL ACCUMULATED
COMMON STOCK PAID-IN CAPITAL (DEFICIT) TOTAL
------------ --------------- ----------- -----
Balance, September 30, 1999 $ 1 $ 6,086 $ (216) $ 5,871
Stock option compensation 138 138
Net (loss) (627) (627)
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Balance, March 31, 2000 $ 1 $ 6,224 $ (843) $ 5,382
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<FN>
See accompanying notes to financial statements.
</FN>
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5
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AGEMARK CORPORATION
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS)
(UNAUDITED)
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CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
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Net income (loss) $ (627) $ (366)
Adjustments to reconcile net (loss) to net cash provided by operating
activities:
Depreciation 315 307
Stock option compensation 138 57
Change in assets and liabilities:
Decrease in other assets 89 109
(Decrease) in accounts payable and accrued liabilities (162) (54)
----------- ----------
Net cash provided by (used in) operating activities $ (247) $ 53
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment $ (112) $ (184)
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Net cash (used in) investing activities $ (112) $ (184)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable $ (22) $ (529)
New loan costs paid (30) (51)
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Net cash (used in) financing activities $ (52) $ (580)
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Net (decrease) in cash and cash equivalents $ (411) $ (711)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 780 1,469
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Cash and cash equivalents, end of period $ 369 $ 758
=========== ==========
SUPPLEMENTAL DISCLOSURES Cash payments for:
Interest $ 337 $ 316
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Taxes $ 0 $ 0
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<FN>
See accompanying notes to financial statements.
</FN>
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6
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AGEMARK CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The interim financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments which, in the opinion of management, are
necessary for fair presentation of the information contained
therein. It is suggested that these interim financial statements be
read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-KSB for the year
ended September 30, 1999. The Company follows the same accounting
policies in preparation of interim reports.
NOTE 2. TRANSACTIONS WITH AFFILIATES
The Company contracts with Evergreen Management, Inc. ("EMI") for
the management of its owned and operated properties. EMI is
co-owned by Richard J. Westin and Jesse A. Pittore, directors and
officers of the Company. Compensation for these management services
is 4.5% of gross income paid monthly. For the three and six months
ended March 31, 2000 management fees of $114,589 and $228,586,
respectively, are included in the property operating expenses on
the statement of operations for services provided by EMI. At March
31, 2000, accounts payable includes $38,124 owed by the Company to
EMI.
For the three and six months ended March 31, 2000 and 1999, the
Company paid rent for the Company's headquarters in Berkeley, CA in
the amount of $6,000 and $12,000, respectively, pursuant to a lease
between the Company and the Waterford Company, which is owned by
members of Richard J. Westin's family. The lease is for a one-year
term starting October 1, 1998 at a rent of $2,000 per month. The
lease renews automatically unless terminated by either party. The
lessee is responsible for limited maintenance and repair expenses
and all utilities. The Waterford Company is responsible for major
repairs, real estate taxes and debt service.
7
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NOTES TO FINANCIAL STATEMENTS
NOTE 3. EMPLOYEE STOCK INCENTIVE PLAN
In December, 1998 the stockholders approved the adoption of the
1997 Employee Stock Incentive Plan, a stock option plan for certain
employees and directors. The total number of shares that may be
issued upon the exercise of options under this plan is 250,000.
Also under this plan, no participant may be granted more than
100,000 shares and no awards may be granted after November 21,
2007.
Options to purchase up to a total of 237,164 shares of common stock
have been granted at exercise prices ranging from $1.00 to $1.10
per share to the officers, directors and employees of the Company.
The options will vest as follows:
Exercise Price
Date of Grant Shares Granted Per Share Date Fully Vested
--------------- ---------------- ------------- --------------------
January 1, 1999 166,666 $1.10 July 1, 1999
January 1, 1999 1,000 1.00 January 1, 2000
January 1, 1999 42,750 1.00 January 1, 2003
April 1, 1999 18,748 1.00 April 1, 2001
November 10, 1999 5,000 1.00 November 1, 2001
December 22, 1999 3,000 1.00 December 1, 2000
The stock of the Company has not been listed for sale on any public
exchange. For purposes of accounting for compensation expense arising from
the granting of stock options under APB Opinion No. 25, the book value of
$5.97 per share on September 30, 1998 has been used in the absence of any
other reliable market information. In the case of the 166,666 options which
fully vest July 1, 1999, the compensation represented by the difference
between the $1.10 exercise price and the $5.97 net book value is being
recognized over the 57 months remaining of the terms of the employment
contracts of the officers to whom the options were granted. The
compensation attributable to the remaining 70,498 options is being
recognized over their respective 12 month and 48 month vesting periods.
Total compensation for the three and six months ended March 31, 1999 under
APB Opinion No. 25 was $57,000. Total compensation for the three and six
months ended March 31, 2000 under APB Opinion No. 25 was $75,000 and
$138,000, respectively.
If the Company had used the fair value based method of accounting for its
employee stock incentive plan, as prescribed by Statement of Financial
Accounting Standards No. 123, stock option compensation cost in the
statements of operations for the three and six months ended March 31, 1999
would have decreased by $43,000, resulting in net losses of $145,000 and
$323,000, respectively and basic losses per common share would have been
$0.15 and $0.32, respectively. For the three and six months ended March 31,
2000, stock option compensation cost would have decreased by $53,000 and
$89,000, respectively, resulting in net losses of $255,000 and $541,000,
respectively and basic losses per common share would have been $0.26 and
$0.54, respectively.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this Quarterly Report on Form 10-QSB concerning the
Company's outlook or future economic performance; anticipated profitability,
gross rentals, expenses or other financial items; and statements concerning
assumptions made or exceptions to any future events, conditions, performance or
other matter are "forward looking statements" as that term is defined under the
Federal Securities Laws. Forward-looking statements are subject to risks,
uncertainties, and other factors that would cause actual results to differ
materially from those stated in such statements, including those set forth under
the caption "Factors That May Affect Results" in the description of the
Company's business in the Company's Annual Report on Form 10-KSB.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1999
Property gross revenue increased from $2,441,000 in the three months
ended March 31, 1999 to $2,544,000 in the three months ended March 31, 2000
reflecting generally higher rental rates. Property operating expenses also
increased in the 2000 period to $2,160,000 from $1,983,000 in the 1999 period.
This increase was attributable primarily to increased maintenance, marketing and
personnel costs. Administrative expenses increased from $232,000 in 1999 to
$233,000 in 2000. Stock option compensation increased from $57,000 in 1999 to
$75,000 in 2000 reflecting the greater number of options outstanding in the
current period. Interest expense was $238,000 for the three months ended March
31, 2000 compared to $226,000 for the three months ended March 31, 1999
reflecting higher expenses on the Company's Rock Island Note partially offset by
lower expenses on the Company's tax notes which are amortizing. Depreciation
expense was $157,000 in 2000 compared to $154,000.
SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 1999
Property gross revenue increased from $5,080,000 in the six months
ended March 31, 1999 to $4,813,000 in the six months ended March 31, 2000
reflecting generally higher rental rates. Property operating expenses also
increased in the 2000 period to $4,380,000 from $3,987,000 in the 1999 period.
This increase was attributable primarily to increased maintenance, marketing and
personnel costs. Administrative expenses were the same in both periods at
$411,000. Stock option compensation increased from $57,000 in 1999 to $138,000
in 2000 reflecting the greater number of options outstanding in the current
period. Interest expense was $479,000 for the six months ended March 31, 2000
compared to $459,000 for the six months ended March 31, 1999 reflecting higher
expenses on the Company's Rock Island Note partially offset by lower expenses on
the Company's tax notes which are amortizing. Depreciation expense was $315,000
in 2000 compared to $307,000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations during the six months ended March 31, 2000
was $247,000. The largest single expenditure during the period was to pay off
the previously appealed taxes and interest on the Port Huron, MI facility in the
amount of $247,000.
The Company's investing activities for the six months ended March 31,
2000 used $112,000 for improvements to the Company's properties. Capital
expenditures were primarily concentrated on the Company's property in Dickinson,
ND.
The Company's financing activities used $52,000 during six months ended
March 31, 2000. Regularly scheduled principal payments of $22,000 were paid on
tax notes.
Cash and cash equivalents at March 31, 2000 totaled $306,000, down
$411,000 from September 30, 1999. The principal cause of this decrease was the
one-time payment of $247,000 to retire the entire amount of the appealed real
property taxes and interest on the Company's facility in Port Huron, MI.
Management believes that funds provided from operations and cash reserves will
be adequate to support its short-term cash requirements for capital
expenditures, repayment of debt and maintenance of working capital. The Company
anticipates that new sources of capital, such as the refinancing of its
portfolio of properties, will be necessary to meet its long-term cash
requirements as presently contemplated.
9
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PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBIT.
EXHIBIT NO. DESCRIPTION
----------- -------------------------------
11 Statement Regarding Computation of Earnings Per Share
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K. The Registrant filed no reports on Form 8-K during
the quarter ended March 31, 2000.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AGEMARK CORPORATION
November 21, 2000 /S/ RICHARD J. WESTIN
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Richard J. Westin,
Chief Executive Officer
November 21, 2000 /s/ JAMES P. TOLLEY
--------------------------------------------------
James P. Tolley,
Chief Financial Officer and
Chief Accounting Officer
11
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EXHIBIT INDEX
TO QUARTERLY REPORT ON FORM 10-QSB
FOR AGEMARK CORPORATION
EXHIBIT NO. DESCRIPTION
----------- -------------------------------------------------------
11 Statement Regarding Computation of Earnings Per Share
27 Financial Data Schedule
12
