<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
----------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) December 29, 1999
LIBERTY SELF-STOR, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland 000-30502 94-6542723
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
8500 Station Street, Suite 100, Mentor, Ohio 44060
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
440-974-3770
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
On January 12, 2000, Liberty Self-Stor, Inc. filed a Form 8-K that
reported the acquisition of Liberty Self-Stor, Ltd., an Ohio limited liability
company which owns 15 self-storage facilities. In Item 7 of the Form 8-K,
Liberty stated that it would file the audited financial statements of Liberty
Self-Stor, Ltd. and unaudited pro forma financial information showing the effect
of the acquisition with the Securities and Exchange Commission on a Form 8-K/A.
(a) Financial Statements of the Business Acquired:
Audited financial statements for Liberty Self-Stor, Ltd. for
the years ended December 28, 1999 and December 31, 1998
(b) Pro Forma Financial Information:
Unaudited pro forma condensed balance sheet as of December 31,
1999 and unaudited pro forma condensed statement of operations
for the year ended December 31, 1999 giving effect to the pro
forma adjustments related to the acquisition of Liberty
Self-Stor, Ltd.
(c) Exhibits: None
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Liberty has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LIBERTY SELF-STOR, INC.
Dated: March 15, 2000 By: /s/ THOMAS J. SMITH
-----------------------------
Thomas J. Smith, President and
Chief Operating Officer
3
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
----------------------------
February 24, 2000
Members
LIBERTY SELF-STOR, LTD.
Mentor, Ohio
We have audited the accompanying balance sheets of the Initial
Properties, as defined in Note 1 of the financial statements, as of December 28,
1999 and December 31, 1998, and the related statements of operations, members'
deficit, 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. 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 the Initial
Properties as of December 28, 1999 and December 31, 1998, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of real estate and
accumulated depreciation included on Pages 17 and 18 of these financial
statements is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. The schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects, the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ Walthall, Drake & Wallace LLP
Cleveland, Ohio
<PAGE> 5
INITIAL PROPERTIES
BALANCE SHEETS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
December 28, December 31,
1999 1998
----------- -----------
CURRENT
<S> <C> <C>
Cash $ 434,765 $ 77,393
Accounts receivable 82,500 36,420
Inventory, at cost -- 30,670
Other 56,188 7,825
----------- -----------
TOTAL CURRENT ASSETS 573,453 152,308
PROPERTY AND EQUIPMENT
Land 1,929,078 1,888,297
Buildings and improvements 13,116,651 10,351,583
Furniture and equipment 577,767 568,374
Vehicles and trailers -- 156,627
----------- -----------
15,623,496 12,964,881
Less: Accumulated depreciation 1,030,973 693,659
----------- -----------
14,592,523 12,271,222
OTHER
Goodwill, net of amortization 992,412 917,656
Other 340,400 275,975
----------- -----------
1,332,812 1,193,631
----------- -----------
TOTAL ASSETS $16,498,788 $13,617,161
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
INITIAL PROPERTIES
BALANCE SHEETS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES
December 28, December 31,
1999 1998
------------ ------------
<S> <C> <C>
CURRENT
Notes payable $ 500,000 $ 500,000
Current maturities of long-term-debt 441,587 330,928
Accounts payable 246,772 84,360
Accrued liabilities:
Real estate taxes 242,144 224,780
Interest 116,239 11,436
Other 40,799 38,242
Prepaid rent 190,067 143,900
------------ ------------
TOTAL CURRENT LIABILITIES 1,777,608 1,333,646
LONG-TERM
Notes payable, net of current portion 18,879,004 15,837,872
Security deposits 41,620 47,155
------------ ------------
18,920,624 15,885,027
------------ ------------
TOTAL LIABILITIES 20,698,232 17,218,673
MEMBERS' DEFICIT
TOTAL MEMBERS' DEFICIT (4,199,444) (3,601,512)
------------ ------------
TOTAL LIABILITIES AND MEMBERS' DEFICIT $ 16,498,788 $ 13,617,161
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 7
INITIAL PROPERTIES
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 28, 1999 AND DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 28, December 31,
1999 1998
----------- -----------
<S> <C> <C>
REVENUES $ 3,168,647 $ 2,465,981
OPERATING EXPENSES
Interest 1,318,519 1,200,292
Salaries and wages 670,057 519,585
Depreciation 411,281 427,070
Property taxes and insurance 393,987 337,663
General and administrative 312,668 207,619
Utilities 103,894 94,620
Amortization 90,445 130,713
Advertising 85,320 90,576
Repairs and maintenance 78,626 53,355
Professional fees 70,800 102,862
Rent 68,775 170,777
Bad debts 59,325 39,180
----------- -----------
3,663,697 3,374,312
----------- -----------
NET LOSS FROM OPERATIONS (495,050) (908,331)
OTHER INCOME
Gain on sale of property 31,849 --
Interest 9,341 1,322
----------- -----------
41,190 1,322
----------- -----------
NET LOSS $ (453,860) $ (907,009)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 8
INITIAL PROPERTIES
STATEMENTS OF MEMBERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 28, 1999 AND DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
BALANCE AT JANUARY 1, 1998 $(2,938,597)
Contributions to capital - year ended December 31, 1998 382,265
Withdrawals from capital - year ended December 31, 1998 (138,171)
Net loss - year ended December 31, 1998 (907,009)
-----------
BALANCE AT DECEMBER 31, 1998 (3,601,512)
Contributions to capital - year ended December 28, 1999 137,482
Withdrawals from capital - year ended December 28, 1999 (281,554)
Net loss - year ended December 28, 1999 (453,860)
-----------
BALANCE AT DECEMBER 28, 1999 $(4,199,444)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 9
INITIAL PROPERTIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 28, 1999 AND DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 28, December 31,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (453,860) $ (907,009)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Deprecation 411,281 427,070
Amortization 90,445 130,713
Gain on sale of property (31,849) --
Changes in assets and liabilities:
Accounts receivable (38,604) (369)
Inventories -- (8,883)
Other assets (122,153) (110,843)
Accounts payable 162,412 (27,376)
Accrued real estate taxes and other 156,153 141,053
----------- -----------
Total adjustments 627,685 551,365
----------- -----------
NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES 173,825 (355,644)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property (2,124,522) (1,597,978)
Proceeds from sale of property 49,017 --
Purchase of new location (8,680) --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (2,084,185) (1,597,978)
CASH FLOWS FROM FINANCING ACTIVITIES
Contributions from member 137,482 1,063,594
Distributions to member (167,521) (138,172)
Issuance of additional debt 4,605,402 1,286,369
Repayments of debt (2,307,631) (208,186)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,267,732 2,003,605
----------- -----------
NET INCREASE IN CASH 357,372 49,983
CASH - BEGINNING 77,393 27,410
----------- -----------
CASH - ENDING $ 434,765 $ 77,393
=========== ===========
</TABLE>
-Continued-
The accompanying notes are an integral part of the financial statements.
<PAGE> 10
INITIAL PROPERTIES
STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 28, 1999 AND DECEMBER 31, 1998
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 28, December 31,
1999 1998
--------------- ---------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Purchase of new location:
<S> <C> <C>
Fair value of asset purchased $ 1,194,145 $ --
Less: Liabilities assumed 15,465 --
--------------- ---------------
1,178,680 --
Less: Loans for purchase 1,170,000 --
--------------- ---------------
Cash paid for purchase $ 8,680 $ --
=============== ===============
Contribution of property by a member $ -- $ 1,200,000
=============== ===============
Debt assumed on property contributed by a member $ -- $ 2,000,000
=============== ===============
Purchase of property and equipment (net of cash paid)
for notes $ -- $ 1,430,207
=============== ===============
Partial release of indebtedness from sale proceeds $ 80,000 $ --
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year:
Interest $ 1,213,716 $ 1,215,361
=============== ===============
Taxes $ -- $ --
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 11
INITIAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
NOTE 1 - BASIS OF PRESENTATION
The initial properties consist of the following self-storage facilities:
Number of
Location Date of Purchase Storage Units
-------- ---------------- -------------
Willoughby, Ohio 9/30/96 277
East Liverpool, Ohio 10/31/96 221
Endicott, New York 11/30/96 297
Cleveland, Ohio 12/31/96 353
Perry, Ohio 1/10/97 397
Canton, Ohio 4/22/97 388
Ravenna, Ohio 4/30/97 150
Dayton, Ohio 5/20/97 368
Louisville, Ohio 5/30/97 361
East Canton, Ohio 5/30/97 177
Catawba, Ohio 6/30/97 302
Avon, Ohio 11/26/97 495
Long Island, New York 1/1/98 552
Mentor, Ohio 3/20/98 441
Riverhead, New York 5/7/99 336
Liberty Self-Stor, Ltd. (the Company), a limited liability company organized in
1996 under the laws of the State of Ohio, purchased and currently operates each
of the facilities listed above.
Each facility rents storage units to customers on a month-to-month basis. In
addition, the Company sells moving and packing supplies, including security
locks. The Company grants credit to its individual and business customers in the
northeastern portion of the United States.
It is proposed that as a part of this reorganization, the members of the Company
will contribute their respective membership interests into a newly formed
limited partnership in exchange for a limited partner interest.
Management believes that these financial statements result in a more meaningful
presentation of the Initial Properties to be acquired by the newly formed
limited partnership and thus appropriately reflect the historical financial
position and results of operations of those properties.
<PAGE> 12
INITIAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- -----------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH
The Company maintains cash balances at several high-credit quality financial
institutions. At times, balances may be in excess of the Federal Deposit
Insurance Corporation limits.
The Company considers amounts deposited in commercial checking and savings
accounts, cash on hand, and certificates of deposits with maturity periods of
six months or less to be cash.
ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully collectible; accordingly,
no allowance for doubtful accounts is required.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation of property and
equipment is provided using accelerated methods for financial reporting purposes
over the following estimated useful lives:
Buildings and improvements 15-39 years
Furniture and equipment 5-7 years
Vehicles and trailers 5-7 years
Maintenance and repairs are charged to operations as incurred; major renewals
and betterments that extend the useful lives of assets are capitalized.
Depreciation expense totaled $411,281 and $427,070 for the years ended December
28, 1999 and December 31, 1998, respectively.
The Company follows Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." Accordingly, the members of the Company review the facilities
for impairment when events or changes in circumstances indicate the carrying
amount of the facilities may not be recoverable. When such conditions exist,
management estimates the future cash flows from operations and dispositions of
the facilities. If the estimated undiscounted future cash flows are less than
the carrying amount of the asset, an adjustment to the related estimated fair
market value would be recorded and an impairment loss would be recognized. No
such impairment losses have been identified for recognition.
<PAGE> 13
INITIAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- -------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS
Goodwill, which represents the excess of the cost of purchased properties over
the fair value of their net assets at the dates of acquisition, is being
amortized on the straight-line method over a term of forty years. Amounts
charged to operations in the accompanying statements of operations was $25,244
and $24,000 for the years ended December 28, 1999 and December 31, 1998,
respectively. Accumulated amortization of goodwill was $67,588 and $42,344 as of
December 28, 1999 and December 31, 1998, respectively.
Noncompetition agreements represent a portion of the purchase price of various
properties whereby the seller agreed not to compete with the Company for a
determined period of time. The costs are being amortized on the straight-line
method over the terms of the respective agreements. The amortization of
noncompetition agreements of $38,445 and $34,745 for the years ended December
28, 1999 and December 31, 1998, respectively has been charged to current
operations included in "Amortization" expense. Accumulated amortization of
noncompetition agreements was $83,730 and $45,285 as of December 28, 1999 and
December 31, 1998, respectively.
Deferred loan costs are being amortized on the straight-line basis over the
terms of the respective loan agreements. The amortization of deferred loan costs
of $20,395 and $69,848 for the years ended December 28, 1999 and December 31,
1998, respectively, has been included in "Amortization" expense in the
accompanying statements of operations. Accumulated amortization of deferred loan
costs was $24,039 and $9,035 as of December 28, 1999 and December 31, 1998,
respectively.
In 1998 the Company refinanced several of its debt obligations with one
obligation to a bank. The prior, unamortized deferred loan costs of $64,499 were
charged to current operations and reported as "Amortization expense" in the
accompanying statement of operations for the year ended December 31, 1998.
USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date for the financial statements, as well as the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from these estimates.
FEDERAL INCOME TAXES
The Company has elected to be taxed under the provision of Subchapter K of the
Internal Revenue Code. The net operations of the Company is taxable to the
individual members. Accordingly, no provision for federal income taxes has been
provided in these financial statements.
<PAGE> 14
INITIAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- -------------------------------------------------------------------------------
NOTE 3 - MORTGAGES AND NOTES PAYABLE
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 28, December 31,
1999 1998
---------------- -------------
<S> <C> <C>
Mortgage note payable to a bank in initial monthly installments of $84,367
including interest at a current rate of 7.72% at December 28, 1999; see note
(a) below, amortized over a twenty-year period with a maturity date of June
1, 2003, secured by certain real property having a net aggregate book value
of $6,931,999 at December 28, 1999, personally guaranteed by a member
of the Company. $ 9,438,332 $ 9,728,525
Note payable to member, non-interest bearing, unsecured. -- 2,000,000
Mortgage note payable to a bank in monthly installments of $9,695
including interest at a current rate of 6.76% at December 28, 1999; see note
(b) below, amortized over a twenty-year period with a maturity date of May
20, 2002, secured by certain real property having a net aggregate book value
of $1,462,921 at December 28, 1999, personally
guaranteed by a member of the Company. 1,235,526 1,263,684
Mortgage note payable to a bank in monthly installments of $11,579 including
interest at a current rate of 8.0% at December 31, 1998; see note (b) below,
amortized over a twenty-year period with a maturity date of March 30, 2003
secured by certain real property having a net aggregate book value of
$2,281,212 at December 28, 1999,
personally guaranteed by a member of the Company. -- 1,171,143
Mortgage note payable to a bank in monthly installments of $7,268 including
interest at a current rate of 8.02%; see note (e) below, amortized over a
twenty-five year period with a maturity date of October 31, 2002 secured by
certain real property having a net aggregate book value of $1,356,299 at
December 28, 1999,
personally guaranteed by a member of the Company. 914,441 926,787
Mortgage note payable to a bank in monthly installments of $2,035 for
construction and term financing of real property, including interest
currently at the bank's prime rate of 7.60% as of December 28, 1999; see
note (c) below, amortized over a twenty-three year period with a maturity
date of June 1, 2003 secured by certain real property having a net aggregate
book value of $462,424 at December 28, 1999, personally guaranteed by a
member of the Company. 262,915 262,977
</TABLE>
<PAGE> 15
INITIAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- ------------------------------------------------------------------------------
NOTE 3 - MORTGAGES AND NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
December 28, December 31,
1999 1998
------------------- ------------
<S> <C> <C>
Mortgage note payable to a bank for construction and term financing of real
property, payable in monthly installments of $4,287 including interest at
7.68% at December 28, 1999; see note (d) below, amortized over a
twenty-three year period with a maturity date of October 31, 2002 secured by
certain real property having a net aggregate book value of $1,356,299 at
December 28, 1999, personally guaranteed by a member of the Company. $550,211 554,704
Note payable to a corporation, due 1,188 months after August 1996, monthly
interest payments of $2,000, secured by certain real property, having a net
aggregate book value of $796,461 at December 28, 1999, personally
guaranteed by a member of the Company. 250,000 250,000
Note payable to a bank in monthly installments, including interest of $381
through 2001, secured by certain equipment. -- 10,980
Mortgage note payable to a bank for construction and term financing of real
property , interest at a rate of 8.17% at December 28, 1999; see note (g)
below, amortized over a twenty-year period with a maturity date of July 1,
2002 secured by certain real property having a net aggregate book value of
$1,177,505 at December 28, 1999, guaranteed by a member of the
Company. 2,652,051 --
Mortgage note payable to a bank for construction and term financing of real
property, interest currently at a rate of 8.0%; see note (h) below, payable
monthly at $15,769 including interest following the construction phase,
amortized over a twenty-year period with a maturity date of June 4, 2009,
secured by certain real property having a net aggregate book value of
$2,281,212 at December 28, 1999, guaranteed by a member of the Company. 1,884,000 --
Mortgage note payable to individuals in monthly installments of $5,207
including interest at 8.5%, payable on a conventional twenty-year
amortization level, due June 2004, secured by certain real property having a
net aggregate
book value of $1,092,648 at December 28, 1999. 594,155 --
</TABLE>
<PAGE> 16
INITIAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- ----------------------------------------------------------------------------
NOTE 3 - MORTGAGES AND NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
December 28, December 31,
1999 1998
------------------- ------------
<S> <C> <C>
Mortgage note payable to a bank for construction and term financing of real
property, interest currently at a rate of 8.5% at December 28, 1999; see
note (i) below, amortized over an eighteen-year period with a maturity date
of June 1, 2003, secured by certain real property having a net aggregate
book value of $1,092,648 at December 28, 1999, guaranteed by a member of
the Company. $ 570,000 $ --
Construction and permanent financing loan payable to a bank in monthly
installments of $2,397 including interest at 7.25% with a maturity date of
May 1, 2001, secured by certain real property, having a net aggregate book
value of $1,462,921 guaranteed by a member of the
Company. 298,319 --
Mortgage note payable to a bank for construction and term financing of real
property, interest currently at a rate of 8.5% at December 28, 1999; see
note (j) below, amortized over an eighteen-year period with a maturity date
of October 31, 2002 secured by certain real property having a net aggregate
book value of $1,253,936 at December 28, 1999, guaranteed by a member of the
Company. 670,641 --
-----------------------------
19,320,591 16,168,800
Less: Current maturities 441,587 330,928
-------------- --------------
$18,879,004 $15,837,872
</TABLE>
<TABLE>
<S> <C>
Long-term debt matures as follows:
2000 $ 441,587
2001 776,970
2002 3,144,489
2003 10,077,440
2004 671,755
2005 146,200
Thereafter 4,062,150
-----------
$19,320,591
===========
</TABLE>
<PAGE> 17
INITIAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- -------------------------------------------------------------------------------
NOTE 3 - MORTGAGES AND NOTES PAYABLE (CONTINUED)
(c) The interest rate shall be computed as follows:
For the first three years of this note commencing May 21, 1998
interest is at a variable rate equal to two and one quarter percent
plus the then current weekly average yield on United States Treasury
Securities adjusted to a constant maturity of three years, as made
available by the Federal Reserve Board. The rate as of the first
adjustment date (June 1, 2001) shall be equal to two and one quarter
percent plus the then current weekly yield on United States Treasury
Securities adjusted to a constant maturity of two years, as made
available by the Federal Reserve Board. This rate as of June 1, 2001
shall remain in effect for the remaining two years of the loan until
the June 1, 2003 maturity date.
(d) The interest rate shall be based on a fixed rate relating to five-year
treasuries plus 230 basis points pursuant to the agreement.
(e) The interest rate shall be computed as follows:
For the real property construction phase of this note commencing June
1, 1998 interest is at the prime rate of the bank, subject to change
upon any change in the prime rate of the bank. The rate commencing on
the completion of the construction phase (May 31, 1999) is a variable
rate equal to two and one quarter percent plus the then current weekly
average yield on United States Treasury Securities adjusted to the
constant maturity of two years, as made available by the Federal
Reserve Board, computed monthly on the basis of a year consisting of
360 days. During the last twenty-four months of the loan, the interest
rate shall be computed at a rate equal to two and one quarter percent
plus the then current weekly average yield on United States Treasury
Securities adjusted to the constant maturity of two years, as made
available by the Federal Reserve Board. Pursuant to the note agreement,
the maturity date of this note is to be co-terminus with the note with
balance due of $9,438,332 at December 28, 1999.
(f) The interest rate shall be computed as follows:
For the real property construction phase of this note commencing June
1, 1998 interest is at the prime rate of the bank, subject to change
upon any change in the prime rate of the bank. The rate commencing on
the completion of the construction phase (May 31, 1999) is a variable
rate equal to two and one quarter percent plus the then current weekly
average yield on United States Treasury Securities adjusted to the
constant maturity of three years, as made available by the Federal
Reserve Board, computed monthly on the basis of a year consisting of
360 days. The maturity date of this note (October 31, 2002) is to be
co-terminus with the first mortgage note with a balance due of $914,441
as of December 28, 1999, pursuant to the note agreement.
(g) The interest rate shall be computed as follows:
The rate is variable and equal to two and one quarter percent plus the
then current weekly average yield on United States Treasury Securities
adjusted to the constant maturity of three years, as made available by
the Federal Reserve Board, computed monthly on the basis of a year
consisting of 360 days. The maturity date of this note (October 31,
2002) is to be co-terminus with the second mortgage note with a balance
due of $550,211 as of December 28, 1999.
<PAGE> 18
INITIAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- -------------------------------------------------------------------------------
NOTE 3 - MORTGAGES AND NOTES PAYABLE (CONTINUED)
(g) The interest rate shall be computed as follows:
For the real property construction phase of this note commencing July 1,
1999 interest is at the prime rate of the bank, subject to change upon any
change in the prime rate of the bank. The rate commencing on the completion
of the construction phase is a variable rate equal to two and one half
percent plus the then current weekly average yield on United States
Treasury Securities adjusted to the constant maturity of three years, as
made available by the Federal Reserve Board, computed monthly on the basis
of a year consisting of 360 days.
(h) The interest rate shall be computed as follows:
For the real property construction phase of this note commencing June 4,
1999 interest is at 8.0%. The rate commencing on the completion of the
construction phase (December 4, 1999) is a variable rate equal to two and
three quarters percent plus the then current weekly average yield on United
States Treasury Securities adjusted to the constant maturity of three
years, as made available by the Federal Reserve Board, computed monthly on
the basis of a year consisting of 360 days.
(i) The interest rate shall be computed as follows:
For the real property construction phase of this note commencing May 17,
1999 interest is at the prime rate of the bank, subject to change upon any
change in the prime rate of the bank. The rate commencing on the completion
of the construction phase (June 1, 2000) is a variable rate equal to two
and one half percent plus the then current weekly average yield on United
States Treasury Securities adjusted to the constant maturity of three
years, as made available by the Federal Reserve Board, computed monthly on
the basis of a year consisting of 360 days.
(j) The interest rate shall be computed as follows:
For the real property construction phase of this note commencing July 1,
1999 interest is at the prime rate of the bank, subject to change upon any
change in the prime rate of the bank. The rate commencing on the completion
of the construction phase (July 1, 2000) is a variable rate equal to two
and one quarter percent plus the then current weekly average yield on
United States Treasury Securities adjusted to the constant maturity of two
years, as made available by the Federal Reserve Board, computed monthly on
the basis of a year consisting of 360 days. The maturity date of this note
(October 31, 2002) is to be co-terminus with the first mortgage note,
pursuant to the note agreement.
<PAGE> 19
INITIAL PROPERTIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- ------------------------------------------------------------------------------
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires disclosure about
fair value for all financial instruments, whether or not recognized for
financial statement purposes. Disclosure about fair value of financial
instruments is based on pertinent information available to management as of
December 28, 1999 and December 31, 1998. Considerable judgment is necessary to
interpret market data and to develop estimated fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts which
could be realized on disposition of the financial instruments. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts. The carrying amounts for cash and
cash equivalents, accounts receivable, notes payable and accounts payable
approximates fair value due to the short maturities of the instruments.
Management estimates that the fair value of long-term debt approximates carrying
value based upon the Company's effective borrowing rate for issuance of debt
with similar terms and remaining maturities.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company leases its headquarter's office space from a corporation in which
the managing member is a majority shareholder. The space is rented on a
month-to-month basis at a rate of $4,000 per month. Total rents were $47,605 and
$48,000 in the years ended December 28, 1999 and December 31, 1998,
respectively.
The Company has an unsecured note payable to a member in the amount of $500,000
at December 28, 1999. The note is payable upon demand and bears interest at a
variable rate which was 8.25% at December 28, 1999.
As disclosed in Note 3, the Company assumed a $2,000,000 obligation from a
member in 1998. This note was repaid in 1999.
<PAGE> 20
SCHEDULE I
INITIAL PROPERTIES
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 28, 1999
<TABLE>
<CAPTION>
COSTS CAPITALIZED SUBSEQUENT GROSS AMOUNTS AT WHICH
INITIAL COST TO ACQUISITION CARRIED AT CLOSE OF PERIOD
------------------------ --------------------------- -----------------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL
- ----------- ------------ ---- ------------ ---- ------------ ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIBERTY SELF-STOR,
CLEVELAND, OHIO $1,533,846 $251,836 - - - - $1,321,538 $ 251,836 $ 1,321,538 $1,573,374
AVON, OHIO 1,464,652 86,462 778,001 - - 557,021 86,462 1,335,022 1,421,484
MENTOR, OHIO 1,884,000 320,500 1,289,267 - - 737,169 320,500 2,026,436 2,346,936
EAST CANTON, OHIO 478,770 35,249 71,566 - - 8,565 35,249 80,131 115,380
WILLOUGHBY, OHIO 1,478,867 300,000 - - 850 1,056,022 300,850 1,056,022 1,356,872
CATAWBA, OHIO 1,123,734 98,683 106,907 - - 273,842 98,683 380,749 479,432
CANTON, OHIO 1,078,441 38,425 285,764 542 27,365 38,967 313,129 352,096
EAST LIVERPOOL, OHIO 955,097 99,980 758,740 - - - - 99,980 758,740 858,720
LOUISVILLE, OHIO 1,217,720 52,732 328,999 - - 11,137 52,732 340,136 392,868
RAVENNA, OHIO 435,245 37,899 268,264 108,794 1,825 146,693 270,089 416,782
PERRY, OHIO 1,860,227 83,491 417,968 - - 713,267 83,491 1,131,235 1,214,726
DAYTON, OHIO 1,279,984 60,815 497,393 - - 734,323 60,815 1,231,716 1,292,531
ENDICOTT, NEW YORK 713,802 117,710 723,478 - - 7,780 117,710 731,258 848,968
LONG ISLAND,
NEW YORK 2,652,051 181,556 1,018,445 - - 18,170 181,556 1,036,615 1,218,171
RIVERHEAD, NEW YORK 1,164,155 53,554 744,372 - - 294,722 53,554 1,039,094 1,092,648
HEADQUARTERS,
MENTOR, OHIO - - - - - - - - 64,741 - - 64,741 64,741
----------- ---------- ---------- -------- ---------- ---------- ------------ -----------
TOTAL $19,320,591 $1,818,892 $7,289,164 $110,186 $5,827,487 $1,929,078 $ 13,116,651 $ 15,045,729
=========== ========== ========== ======== ========== ========== ============ ============
<CAPTION>
LIFE ON WHICH
ACCUMULATED DEPRECIATION IN
DEPRECIATION NET BOOK VALUE STATEMENTS OF
BUILDINGS AND BUILDINGS AND DATE OF DATE OF OPERATIONS
DESCRIPTION IMPROVEMENTS IMPROVEMENTS CONSTRUCTION ACQUISITION IS COMPUTED
- ----------- ------------ ------------ ------------------------ -----------
<S> <C> <C> <C> <C>
LIBERTY SELF-STOR,
CLEVELAND, OHIO $110,453 $1,462,921 N/A 1996 15 - 39 YEARS
AVON, OHIO 65,185 1,356,299 1998 1997 39 YEARS
MENTOR, OHIO 65,724 2,281,212 N/A 1998 7 - 39 YEARS
EAST CANTON, OHIO 6,260 109,120 N/A 1997 7 - 39 YEARS
WILLOUGHBY, OHIO 73,369 1,283,503 N/A 1996 7 - 39 YEARS
CATAWBA, OHIO 17,008 462,424 1997 1997 39 YEARS
CANTON, OHIO 28,006 324,090 N/A 1997 7 - 39 YEARS
EAST LIVERPOOL, OHIO 62,259 796,461 N/A 1996 39 YEARS
LOUISVILLE, OHIO 25,186 367,682 N/A 1997 7 - 39 YEARS
RAVENNA, OHIO 20,053 396,729 1997 1997, 1998 7 - 39 YEARS
PERRY, OHIO 67,054 1,147,672 N/A 1997 39 YEARS
DAYTON, OHIO 38,595 1,253,936 N/A 1997 7 - 39 YEARS
ENDICOTT, NEW YORK 58,586 790,382 N/A 1996 15 - 39 YEARS
LONG ISLAND, NEW 40,666 1,177,505 N/A 1998 39 YEARS
RIVERHEAD, NEW YORK - - 1,092,648 1999 1999 39 YEARS
HEADQUARTERS,
MENTOR, OHIO 4,621 60,120 N/A 1997 39 YEARS
-------- -----------
TOTAL $683,025 $14,362,704
======== ===========
</TABLE>
<PAGE> 21
INITIAL PROPERTIES SCHEDULE I
(CONTINUED) REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 28, 1999 AND DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 28, December 31,
1999 1998
------------ ------------
Reconciliation of land, buildings and improvements:
<S> <C> <C>
Balance - beginning $ 12,239,880 $ 7,352,058
Additions - improvements 2,896,748 4,902,822
Retirements (90,899) (15,000)
------------ ------------
Balance - ending $ 15,045,729 $ 12,239,880
============ ============
Reconciliation of accumulated depreciation:
Balance - beginning $ 362,288 $ 108,627
Depreciation expense 324,464 253,661
Retirements (3,727) --
------------ ------------
Balance - ending $ 683,025 $ 362,288
============ ============
</TABLE>
<PAGE> 22
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed statement of operations for the
year ended December 31, 1999 presents results for Liberty Self-Stor, Inc. as if
the acquisition of the 15 self-storage facilities had occurred at January 1,
1999. The accompanying unaudited pro forma condensed balance sheet as of
December 31, 1999 gives effect to the acquisition as if it had occurred as of
December 31, 1999. The unaudited pro forma condensed financial statements have
been prepared based on estimates of accounting adjustments and, therefore, are
subject to change. The unaudited condensed financial statements have been
prepared from, and should be read in conjunction with, the accompanying notes
hereto, the historical financial statements and related notes of Liberty
Self-Stor, Inc. (as successor-in-interest to Meridian Point Realty Trust '83) as
of and for the year ended December 31, 1999, and the historical financial
statements and related notes for the 15 self-storage properties, the Initial
Properties, as of and for the year ended December 28, 1999. The following
information is not necessarily indicative of the financial position or operating
results that would have occurred had the acquisition of the 15 self-storage
facilities been consummated on the date as of which, or at the beginning of the
period for which, the acquisition is being given effect, nor is it necessarily
indicative of future financial positions or operating results.
<PAGE> 23
LIBERTY SELF-STOR, INC.
PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL(A)
---------------------------------------------- PRO FORMA PRO
ASSETS LIBERTY OHIO LLC SUBTOTAL ADJUSTMENTS FORMA
------ ------- -------- -------- ----------- -----
<S> <C> <C> <C> <C> <C>
CASH AND CASH EQUIVALENTS $ 119,771 $ 434,765 $ 554,536 $ (104,024)G $ 450,512
INVESTMENTS IN MORTGAGE-RELATED
ASSETS 1,390,131 - 1,390,131 1,390,131
ACCOUNTS RECEIVABLE - 82,500 82,500 (26,858)G 55,642
RESTRICTED CASH 3,623 - 3,623 3,623
PROPERTY, PLANT AND
EQUIPMENT, NET - 14,592,523 14,592,523 10,512,160 C 25,097,040
(7,643)G
GOODWILL - 992,412 992,412 (923,802)D 68,581
(29)G
OTHER 808,394 396,588 1,204,982 (397,270)E 82,980
(725,000)B
268 G
------------------------------------------------------------------ ----------------
TOTAL ASSETS $2,321,919 $16,498,788 $18,820,707 $ 8,327,802 $27,148,509
================================================================== ================
LIABILITIES AND EQUITY
ACCOUNTS PAYABLE $ 475,703 $ 246,772 $ 722,475 $16,542 C $ 717,356
(21,661)G
NOTES PAYABLE - 19,820,591 19,820,591 (27,844)G 19,792,747
ACCRUED LIABILITIES AND OTHER 27,600 630,869 658,469 (80,695)G 577,774
MINORITY INTEREST - - - 4,250,102 F 4,250,102
------------------------------------------------------------------ ----------------
503,303 20,698,232 21,201,535 4,136,444 25,337,979
EQUITY 1,818,616 (4,199,444) (2,380,828) (397,270)E 1,810,530
(923,802)D
(4,250,102)F
(725,000)B
10,495,618 C
(8,086)G
------------------------------------------------------------------ ----------------
$2,321,919 $16,498,788 $18,820,707 $ 8,327,802 $27,148,509
================================================================== ================
</TABLE>
<PAGE> 24
LIBERTY SELF-STOR, INC.
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
A Derived from the historical condensed balance sheets as of December 29,
1999 of Liberty and the Ohio LLC, prior to the acquisition transaction.
B Represents the reduction of equity for the transaction costs borne by
the Ohio LLC
C Represents the purchase accounting adjustment to the historical
carrying value of the Ohio LLC's property, plant and equipment. The
operating partnership acquired the member interests in the Ohio LLC in
exchange for limited partnership interests. This transaction was
accounted for as a purchase, with the operating partnership as the
acquirer. The value of the limited partnership units issued as
consideration was based upon the fair value of the assets acquired from
the Ohio LLC. The only asset acquired or liability assumed for which
the fair value exceeds historical carrying value is property, plant and
equipment.
Appraised value of properties acquired $23,620,000
Activity since the appraisal until acquisition,net 1,484,683
Historical carrying value of property and equipment (14,592,523)
------------
Purchase price adjustment to property and equipment 10,512,160
Less accounts payable assumed (16,542)
------------
Net adjustment to equity $10,495,618
============
D Represents the writeoff of the historical goodwill of the Ohio LLC in
the application of purchase accounting and the resulting new goodwill
related to the acquisition.
E Represents the writeoff of the historical carrying values of other
intangible assets of the Ohio LLC, including deferred financing costs
and noncompete agreements.
F Represents minority interest in the operating partnership applicable to
the limited partners therein, excluding the limited interest held by
Liberty. The calculation of minority interest is presented below.
<TABLE>
<S> <C>
Historical deficit of the Ohio LLC $ (4,199,444)
Writeoff of historical goodwill of the Ohio LLC (923,802)
Payment of transaction costs by the Ohio LLC (725,000)
Writeoff of historical intangible assets of the Ohio LLC (397,270)
Purchase accounting adjustment to property, plant and
equipment 10,512,160
Accounts payable assumed in transaction (16,542)
Contribution to the operating partnership by Liberty
of its net assets in exchange for general and limited
partnership interests in the operating partnership 1,818,616
------------
Adjusted equity of the operating partnership $ 6,068,718
============
Liberty's interest $1,818,616 30%
Minority interest 4,250,102 70%
-----------------------------
Total equity of operating partnership $6,068,718 100%
============================
</TABLE>
The above percentage interests of Liberty and the minority interest
holders is based upon the relative values of their contributed
interests as of December 29, 1999, the date of actual consummation of
the Formation Transactions.
G To record the activity of the combined company from December 29, 1999
to December 31, 1999
<PAGE> 25
LIBERTY SELF-STOR, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Historical (A)
--------------------------------------------------------
Self-storage Pro Forma Pro
Liberty Company Riverhead Subtotal Adjustments Forma
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rentals from real estate properties $ 26,984 $ 3,168,647 $ 70,401 $ 3,266,032 $ 3,266,032
Interest and other 92,677 41,190 - - 133,867 133,867
----------- ----------- ----------- ----------- -----------
Total revenues 119,661 3,209,837 70,401 3,399,899 3,399,899
Interest 14,530 1,318,519 8,432 1,341,481 48,820 B 1,390,301
Property operating expenses 11,760 1,246,564 5,254 1,263,578 1,263,578
General and administrative expenses 260,328 596,888 25,136 882,352 882,352
Depreciation, amortization and other 15,022 501,726 8,837 525,585 423,371 C 948,956
----------- ----------- ----------- ----------- ----------- -----------
Total expenses 301,640 3,663,697 47,659 4,012,996 472,191 4,485,187
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before minority interest (181,979) (453,860) 22,742 (613,097) (472,191) (1,085,288)
Minority interest - - - - - - - - 759,702 D 759,702
----------- ----------- ----------- ----------- ----------- -----------
Net (loss) income ($ 181,979) ($ 453,860) $ 22,742 ($ 613,097) $ 287,511 ($ 325,586)
Weighted average shares outstanding 3,031,618 3,031,618
Net (loss) income per share-basic and
diluted ($0.06) ($0.11)
</TABLE>
<PAGE> 26
NOTES TO PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
A Derived from the historical financial statements of Liberty for the
year ended December 31, 1999 (including the self-storage company from
the date of acquisition on December 28, 1999), the self-storage company
for the period prior to acquisition (January 1, 1999 to December 28,
1999), and the Riverhead facility for the period prior to acquisition
(January 1, 1999 to May 26, 1999).
B Represents pro forma interest expense on the $945,000 of borrowings
used to fund the Riverhead acquisition, net of the elimination of
historical interest expense applicable to Riverhead debt not assumed in
that acquisition and $675,000 of borrowings against the Southold
facility in July, 1999
<TABLE>
<CAPTION>
Interest Period
Borrowings Rate 1/1 to 5/26
---------- ---- -----------
<S> <C> <C> <C>
Riverhead acquisition debt
Fixed rate $600,000 8.50% $20,400
Prime rate $345,000 7.75% 10,695
Less-Riverhead historical
Interest expense (8,432)
---------
$22,663
Period
1/1 to 6/30
------------
Southhold debt $675,000 7.75% $26,157
Total Proforma adjustment $48,820
</TABLE>
C Represents additional pro forma depreciation and amortization on
property, equipment and goodwill acquired from Osbornes self-storage
company net of the elimination of historical amortization of intangible
assets. Depreciation is computed using the straight line method and is
based upon useful lives of 25 years for buildings and improvements and
five years for personal property. Goodwill amortization is based upon
its estimated useful live of 20 years. The purchase allocation related
to the acquired property and equipment and the related proforma
depreciation is as follows:
<TABLE>
<CAPTION>
Allocated Estimated Year ended
Cost Life 12/31/99
--------- --------- ----------
<S> <C>
Land $ 2,528,966
Buildings and Improvements 22,403,996 25 896,160
Furniture and Equipment 171,721 5 34,344
Goodwill 68,600 20 3,430
----------- --------
Totals 25,173,283 933,934
Less-Historical depreciation and amortization (510,563)
of the self-storage company and Riverhead
</TABLE>
<PAGE> 27
<TABLE>
<S> <C>
Pro Forma adjustment $423,371
D Represents the minority interest in the pro forma net loss of the
operating partnership calculated below:
Pro forma net loss of the operating partnership ($1,085,288)
Minority interest ownership 70%
------------
Pro forma adjustment ($759,702)
============
</TABLE>
