U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 0-26777
-------
APTA HOLDINGS, INC.
------------------
(Exact name of business issuer as specified in its charter)
Delaware 22-3662292
-------- ----------
(State or other jurisdiction (IRS Employer Identification
of incorporation) number)
215 West Main Street, Maple Shade, New Jersey 08052
---------------------------------------------- -------
(Address of principal executive offices) (Zip code)
(856) 667-0600
--------------
(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 XX No
---- ----
The Company had 1,000,000 shares of common stock, par value $.001 per share,
outstanding as of November 10, 1999.
-1-
APTA HOLDINGS, INC. AND SUBSIDIARIES
INDEX
PAGE
PART 1. FINANCIAL INFORMATION ----
ITEM 1. FINANCIAL STATEMENTS
APTA HOLDINGS, INC. AND SUBSIDIARIES
-------------------------
CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 1999 AND 1998..............................3
CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998........4
CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998........5
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND 1998........................6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...............8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.....................15
PART II. OTHER INFORMATION.............................................19
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K...............19
SIGNATURES........................................................20
-2-
APTA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
ASSETS
1999 1998
---- ----
Rental property, net $3,263,430 $3,343,341
Cash 71,918 61,517
Cash held in escrow 43,943 64,325
Marketable securities -0- 7,155
Accounts receivable 6,361 11,169
Notes receivable 223,523 40,000
Prepaid expenses 66,103 56,581
Deferred financing costs, net 69,051 77,691
Organization Costs, net 0 1,125
---------- ----------
TOTAL ASSETS $3,744,329 $3,662,904
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgage notes payable $3,364,530 $3,398,713
Notes payable 315,000 153,900
Accrued interest 41,876 38,183
Accounts payable 16,420 13,967
Accrued expenses 30,598 23,412
Security deposits payable 65,379 58,323
Other liabilities 13,185 0
---------- ----------
TOTAL LIABILITIES 3,846,988 3,686,498
Minority Interest 25,680 9,943
Commitments and contingencies
Stockholders' Deficit
Investment by predecessor -0- ( 26,353)
Common stock, $.001 par value
2,000,000 shares authorized,
1,000,000 shares issued
and outstanding 1,000 -0-
Additional paid in capital 149,000 -0-
Accumulated deficit (278,339) ( 7,184)
--------- ---------
Total stockholders' deficit (128,339) (33,537)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $3,744,329 $3,662,904
========== ==========
-3-
APTA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(Accounting
Predecessor)
1999 1998
---- ----
Revenues
Rental real estate $600,293 $593,654
Financial Services 19,135 519
-------- -------
TOTAL REVENUES 619,428 594,173
Operating expenses
Administrative expenses 115,129 86,471
Utilities expense 64,276 61,264
Operating and maintenance 81,388 91,129
Taxes and insurance 92,222 88,160
Depreciation and amortization 81,574 77,707
-------- --------
TOTAL OPERATING EXPENSES 434,589 404,731
-------- --------
Operating income 184,839 189,422
Other income (expense)
Interest income 1,412 816
Interest expense (229,978) (223,068)
--------- --------
Total other income (expense) (228,566) (222,252)
--------- --------
Loss before minority interest (43,727) (32,810)
Minority interest 661 (57)
-------- --------
Net loss ($44,388) ($32,753)
========= =========
Basic net loss per share
Loss before minority interest ($.04) ($.02)
Minority interest -0- -0-
--------- --------
Net loss ($.04) ($.02)
========= =========
Average number of common
shares outstanding - basic 1,000,000 1,516,667
========= =========
-4-
APTA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(Accounting
Predecessor)
1999 1998
---- ----
Cash flows from operating activities
Net loss ($44,388) ($32,753)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Minority interest in net income
(loss) of subsidiary 661 ( 57)
Depreciation and amortization expense 81,574 77,707
(Increase) decrease in:
Accounts receivable 4,168 (2,429)
Prepaid expenses (12,675) (5,046)
Cash held in escrow 8,856 14,307
Increase (decrease) in:
Accounts payable (5,425) (3,446)
Accrued interest -0- 10,987
Accrued expenses (50,158) (48,741)
Other liabilities 9,615 (3,701)
Security deposits payable 8,972 (2,839)
-------- ---------
Net cash provided by (used in)
operating activities 1,200 9,667
-------- ---------
Cash flows from investing activities:
Purchases of property and equipment (15,171) (37,757)
Cash received from acquisition -0- 7,637
Cash received from predecessor 85,100 -0-
Collection of installment notes receivable 17,151 55,000
Loans made (167,321) -0-
Purchases of investments -0- (7,155)
------- -------
Net cash provided by (used in)
investing activities (80,241) 17,725
Cash flows from financing activities
Repayment of mortgage notes payable (25,899) (23,855)
Repayment of short term notes (53,900) (51,100)
Proceeds from notes payable 135,000 13,000
Contribution from predecessor -0- 25,000
Minority interest 15,000 10,000
------- -------
Net cash provided by (used in)
financing activities 70,201 (26,955)
-5-
APTA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(Accounting
Predecessor)
1999 1998
---- ----
Increase (decrease) in cash ( 8,840) 437
Cash, beginning 80,758 61,080
------- -------
Cash, ending $71,918 $61,517
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
1999 1998
---- ----
Cash paid for interest $230,903 $212,081
======== ========
Cash paid for income taxes $ 400 $ 200
======== ========
Non-cash investing and financing activities:
On June 28, 1999, assets and liabilities of ARCA Corp. were transferred
to the Company as follows:
Accrued expenses $55,100
Notes payable 30,000
-------
Cash received from predecessor $85,100
=======
During the nine months ended September 30, 1998, the Company acquired S&P
Custom Homes, Inc. through a subsidiary, as follows:
Contribution from predecessor 100,000
Notes receivable (95,000)
Other current assets ( 963)
Accrued expenses 3,600
-------
Cash received from acquisition $ 7,637
=======
-6-
<PAGE>
APTA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Investment Additional Total
By Common Stock Paid-in Accumulated Stockholder's
Predecessor Shares Amount Capital Deficit Deficit
----------- ----------------- -------- ------------ -------------
Balance,
01/01/98 $(125,784) 0 $ 0 $ 0 $ 0 $ (125,784)
Contribution
from
Predecessor 125,000 0 0 0 0 125,000
Net loss (32,753) 0 0 0 0 (32,753)
------------ --------- ----- -------- ----------- -------
Balance
09/30/98 $( 33,537) 0 $ 0 $ 0 $ 0 $( 33,537)
Balance
01/01/00 $( 83,951) 0 $ 0 $ 0 $ 0 $( 83,951)
Net loss
prior to
spin-off ( 42,486) 0 $ 0 $ 0 $ 0 $( 42,486)
Initial
capitali-
zation
resulting
from
spin-off 126,437 1,000,000 1,000 149,000 (276,437) 0
Net loss
subsequent to
spin-off 0 0 0 0 ( 1,902) ( 1,902)
------------ --------- ----- -------- ----------- -------
Balance
09/30/99 0 1,000,000 $1,000 $149,000 ($278,339) $(128,339)
============ ========= ===== ======== =========== =======
</TABLE>
-7-
APTA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
UNAUDITED FINANCIAL STATEMENTS - The consolidated balance sheets as of
September 31, 1999 and 1998, the consolidated statements of operations for
the nine months ended September 31, 1999 and 1998, the consolidated statement
of cash flows for the nine months ended September 31, 1999 and 1998, the
consolidated statement of changes in stockholders' deficit for the nine months
ended September 30, 1999 and 1998 for the Company, and the related
information contained in these notes have been prepared by management without
audit. In the opinion of management, all accruals (consisting of normal
recurring accruals) which are necessary for a fair presentation of financial
position and results of operations for such periods have been made. Results
for an interim period should not be considered as indicative of results for a
full year.
NOTE 1 - ORGANIZATION
APTA Holdings, Inc. ("APTA"), a Delaware corporation, ("the Company")
was formed on June 4, 1999, as a subsidiary of ARCA Corp. ("ARCA"), a New
Jersey corporation, in connection with a transaction in which ARCA was merged
into Agate Technologies, Inc. ("Agate") on June 28, 1999. Immediately prior
to the closing of the merger, ARCA transferred all of its assets and
liabilities to APTA. On June 28, 1999, the common stock of APTA was spun off
to the common shareholders of ARCA. Eligible ARCA shareholders of record on
June 28, 1999 ("Dividend Record Date") received one share of APTA's common
stock for each share of ARCA's common stock held on the Dividend Record Date.
On June 28, 1999, 1,000,000 shares of $.001 par value APTA common stock were
issued to eligible ARCA shareholders.
NOTE 2 BASIS OF PRESENTATION
The consolidated financial statements for periods prior to the spin off
include only those assets and liabilities contributed by ARCA as described
above. These financial statements have been prepared using ARCA's historical
basis of the assets and liabilities and the historical results of operations
and have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission applicable for subsidiaries which have been
spun off. These rules stipulated that statements shall be prepared as if the
entity had existed prior to the existence of the new company. Such statements
are not those of a real entity, but describe a hypothetical "accounting
predecessor" to APTA Holdings, Inc. The financial statements presented
include all the operations of the Company as well as the operations of the
Company's predecessor prior to the spin-off, and have been accounted for in a
manner similar to that in a pooling of interests.
-8-
APTA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 2 BASIS OF PRESENTATION (CONTINUED)
In management's opinion, the accompanying consolidated financial
statements include all common and corporate level expenses which would have
been incurred on behalf of the accounting predecessor by ARCA. Management has
allocated such expenses based on its best estimate of the actual time and
effort expended for the benefit of APTA, and believes such allocation to be
reasonable.
Net loss per Share
Net loss per share has been computed giving effect to the distribution
ratio of 1 common share of APTA for each common share of ARCA. Accordingly,
weighted average common shares outstanding, have been computed based on the
shares outstanding of ARCA for the respective period. Calculated earnings per
share may not be representative of earnings per share subsequent to the
transfer of the assets and liabilities from ARCA since the level of other
expenses incurred by APTA may be higher than was incurred on a historical
basis.
NOTE 3 NATURE OF OPERATIONS
On December 31, 1995, the Company acquired, through its wholly owned
subsidiary Spring Village Holdings, Inc., an 80% partnership interest in SVG
Properties, L.P. (T/A Spring Village Apartments), which owns a 124 unit
residential apartment complex in Sharon Hill, Pennsylvania. The Company's 80%
partnership interest is comprised of a 4.5% general partnership interest and
75.5% limited partnership interest. The remaining 20% limited partnership
interests are held by unrelated individuals.
On March 31, 1998, the Company formed Beran Corp. ("Beran") and on May 28,
1998, entered into the financial services business through the acquisition of
the lending operations of a real estate development company. On November 24,
1998, Beran became a licensed lender of consumer loans in the State of New
Jersey. Beran is an 80% and 91% owned subsidiary of the Company as of
September 30, 1999 and September 30, 1998, respectively.
NOTE 4 BUSINESS ACQUISITION
Effective May 28, 1998, the Company, Beran and S&P Custom Homes, Inc.
("S&P") entered into an Agreement and Plan of Merger (the "Merger") pursuant
to which S&P was merged into Beran. S&P was a real estate developer and
specialty finance company in which officers of the Company were stockholders.
Pursuant to the Merger,
-9-
APTA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 4 BUSINESS ACQUISITION (CONTINUED)
each share of S&P common stock was exchanged for one share of the Company's
common stock, except for four S&P stockholders who agreed to accept less than
a one-for-one share exchange. This resulted in a $100,000 increase in the net
assets of the Company representing the historical basis of the assets and
liabilities merged from S&P. The merger has been accounted for in a manner
similar to that of a pooling of interests, and accordingly, financial
information for periods prior to the merger reflect retroactive restatement of
the combined financial position and operating results of Beran and S&P with no
change in the historical basis of the assets and liabilities merged. Net
revenues, loss before extraordinary item and minority interest, and net loss
of Beran and S&P prior to the merger were immaterial. There were no
intercompany transactions between the companies prior to the merger.
NOTE 5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies is included in the notes to the
consolidated financial statements for the year ended December 31, 1998 and
1997 which were audited and appear in the Form 10-SB previously filed by the
Company.
NOTE 6 RENTAL PROPERTY
Rental property at September 30, 1999 and 1998 consisted of the
following:
1999 1998
<TABLE>
<S> <C> <C>
Land $ 292,792 $ 292,792
Building and improvements 3,193,017 3,185,504
Building equipment 105,928 98,709
Office equipment 14,777 11,214
Furniture and fixtures 7,083 3,517
--------- ---------
3,613,597 3,591,736
Less accumulated depreciation ( 350,167) ( 248,395)
--------- ---------
Rental property, net $3,263,430 $3,343,341
</TABLE>
Depreciation expense for the nine months ended September 30, 1999 and
1998 was $75,094 and $70,852.
-10-
APTA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 7 CASH HELD IN ESCROW
Cash held in escrow at September 30, 1999 and 1998 consisted of the
following:
1999 1998
<TABLE>
<S> <C> <C>
Mortgage escrow deposits $ 15,445 $ 41,810
Reserve fund for replacements 11,865 12,309
Specified work escrow 16,633 10,206
---------- --------
$ 43,943 $ 64,325
========== ========
</TABLE>
NOTE 8 NOTES RECEIVABLE
Notes receivable at September 30, 1999 and 1998 consist of the
following:
<TABLE>
<S> <C> <C>
1999 1998
---- ----
Mortgage notes receivable from company
owned by minority stockholders bearing
interest at 12%, secured by related real
estate, repaid in 1998 $ -0- $ 40,000
Installment notes receivable in monthly payments
ranging from $180 to $440 including interest
at 25% through June 2002, secured by related
vehicles 142,962 -0-
Installment note receivable from a related party
in monthly payments of $760 including
interest at 12% through December 2004,
secured by equipment 39,231 -0-
Installment note receivable from minority
stockholder in monthly payments of
interest only at 12%, due
December 31, 1999, unsecured 41,330 -0-
--------- ---------
$223,523 $ 40,000
========= =========
</TABLE>
-11-
APTA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 9 MORTGAGE NOTES PAYABLE
Mortgage notes payable at September 30, 1999 and 1998 consisted of the
following:
<TABLE>
<S> <C> <C>
1999 1998
---- ----
Mortgage note payable to First Union National
Bank in monthly installments of $17,962 including
Interest at 7.78%, due October 2007, secured by
first mortgage on rental property, assignment of
leases, rents and security deposits, substantially
all assets of a subsidiary, and a limited payment
and performance guaranty of a stockholder $2,456,651 $2,480,070
Mortgage note payable to Resource Properties,
Inc. ("RPI") in monthly installments of $7,964
Including interest at 9.28%, (or 100% of the
Subsidiary's net cash flow, as defined in the
Agreement, if less), due October 2022, secured
by second mortgage on rental property and
the common stock of a subsidiary 907,879 918,643
----------- ----------
$3,364,530 $3,398,713
=========== ==========
</TABLE>
Maturities of mortgage notes payable as of September 30, 1999 are as follows:
<TABLE>
<S> <C>
September 30, 2000 $ 37,384
September 30, 2001 40,299
September 30, 2002 43,758
September 30, 2003 47,517
September 30, 2004 51,601
Thereafter 3,143,971
-------------
$ 3,364,530
=============
</TABLE>
-12-
APTA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 10 NOTES PAYABLE
Notes payable at September 30, 1999 and 1998 consists of the
following:
<TABLE>
<S> <C> <C>
1999 1998
---- ----
Note payable to stockholder with interest at 12%
due on demand, unsecured $ 17,500 $ -0-
Note payable to related parties with interest at
12%, due on demand, unsecured 147,500 3,900
Note payable to stockholder in monthly payments
of $1,688 (or net cash flow after all debt service
of a subsidiary, if less), bears interest at 12%,
due December 31, 2000, unsecured 150,000 150,000
--------- --------
$315,000 $153,900
========= ========
</TABLE>
NOTE 11 INCOME TAXES
The Company has deferred tax assets of $104,000 and $91,000 at September
30, 1999 and 1998 which represent the tax effects of net operating loss
carryforwards. The deferred tax assets have been reduced in their entirety by
a valuation allowance in each period. At September 30, 1999, the Company has
approximately $434,000 of net operating loss carryforwards to offset future
taxable income for both federal and state income tax purposes, expiring in
various years through 2019 for federal purposes and 2006 for state purposes.
NOTE 12 RELATED PARTY TRANSACTIONS
Management of Rental Property
The rental property is managed by a company which is owned by a
stockholder. The current management agreement provides for a management fee
of 5% of gross income, which is typical for the industry. Management fees for
the nine months ended September 30, 1999 and 1998 were $33,750 and $30,910.
Included in the accrued expenses are management fees payable of $3,750
and $3,356 at September 30, 1999 and 1998.
-13-
APTA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 12 RELATED PARTY TRANSACTIONS (CONTINUED)
Leases
The Company leases its office space from a company which is owned by a
stockholder. Monthly rental payments are $300 per month. Rent expense for
the nine months ended September 30, 1999 and 1998 was $2,700 and $1,800.
-14-
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in
this Form 10-QSB and in the previously filed Form 10-SB.
General
- -------
Apta Holdings, Inc. ("Apta" or the "Company") was incorporated on June 4, 1999
in the State of Delaware as a wholly owned subsidiary of ARCA Corp. On June
28, 1999, the Company acquired 100% of the assets and liabilities of the
parent, ARCA, as part of a merger by ARCA with Agate Technologies, Inc.
Included in the assets acquired by Apta were ARCA's wholly owned real estate
subsidiary, Spring Village Holdings, Inc. and ARCA's 80% owned finance company
subsidiary, Beran Corp. The following discussion of the business of the
Company includes the businesses of the two subsidiaries and incorporates the
prior activities of ARCA Corp.
The Company is currently engaged in two lines of business; owning and
operating income producing real estate, and the originating and
servicing of loans to businesses, generally secured by real estate or other
business assets ("business lending"), and to individuals, generally secured by
vehicles or other personal property ("consumer lending").
On December 31, 1995, the Company acquired through a subsidiary, for $50,000,
an 80% controlling interest in a 124 unit apartment complex located in Sharon
Hill, Pennsylvania. The Company secured bridge financing to make certain
improvements needed to refinance the property. Upon completion of the
improvements, rents, occupancy and net cash flow increased and the property
was successfully refinanced on September 19, 1997. Subsequent to the
refinancing, the Company has used its positive operating cash flow to reduce
debt.
On March 31, 1998, Beran Corp. was incorporated in the State of Delaware, and
on May 28, 1998, entered into business lending through the acquisition of the
business lending operations of a real estate development company.
On November 24, 1998, Beran became a licensed lender in the State of New
Jersey. Beran started making secured consumer loans in the first quarter of
1999. Beran reported $19,135 in financial services revenues for the nine
month period ending September 30, 1999, and contributed $3,303 in net income
to consolidated results. As of September 30, 1999, Beran had $223,523 in
loans outstanding. Beran's operations for the nine months ending September
30, 1998 were minimal since it had only recently commenced operations.
-15-
The Company intends to utilize its contacts and business expertise to locate
and acquire additional properties, primarily apartments, preferably those
that are undervalued or which can be acquired at less than fair value due to
the financial difficulties of their owners. There is no assurance that such
properties can be obtained under terms and conditions that are favorable to
the Company. The Company also intends to expand its finance company.
Currently the Company has $223,523 in loans outstanding. The Company intends
to increase the loans outstanding to $250,000 by December 31, 1999. In order
to meet its stated goal, the Company has been and anticipates that it will
originate approximately $15,000 per month in new consumer loans.
Results of Operations
- ----------------------
The following discussion is for the nine months ending September 30, 1999 and
1998, respectively.
Revenues increased by $25,255 or 4%, from $594,173 in 1998 to $619,428 in
1999. Occupancy was approximately 95% as of September 30, 1999, and was 94% in
1998. A small increase in the average unit rental rate, combined with a
slight increase in occupancy, resulted in a $6,639 increase in rental revenue.
Financial services revenue increased by $18,616 to $19,135 due to more loans
outstanding.
Administrative expenses increased to $115,129 in 1999 from $86,471 in 1998,
primarily due to costs related to an increase in staff at the apartment
complex and the start-up of our finance company. Utilities increased by
$3,012. Operating and maintenance expense decreased from $91,129 in 1998 to
$81,388 in 1999. Taxes and insurance increased by $4,062, primarily due to
expanded insurance coverage. Depreciation increased by $3,867 to $81,574 in
1999, reflecting recent capital improvements being depreciated. Total
operating expense increased by $29,858, from $404,731 in 1998 to $434,589 in
1999.
Operating income declined from $189,442 in 1998 to $184,839 in 1999, primarily
due to the increases in expenses discussed above, which were only partially
offset by the increase in revenues.
Interest expense, net of interest income, increased by $6,314 from $222,252 in
1998 to $228,566 in 1999.
Net loss increased from ($32,753) in 1998 to ($44,388) in 1999. Basic net
loss per share increased from ($.02) in 1998 to ($.04) in 1999.
The Company is taxed as a C-corporation for federal and state income tax
purposes. As such, the Company will pay taxes on its net income as defined by
the Internal Revenue Code. No tax attributes of the Company flow through to
the shareholders except for the regular taxation of dividends paid, if any.
Liquidity and Capital Resources
- --------------------------------
At September 30, 1999, the Company had working capital of $42,006, including
cash held in escrow for anticipated future expenses. The Company needs
additional financing to expand its business and carry out its business plan.
-16-
On January 1, 1999, the Company had $80,758 in cash, exclusive of $52,799 in
cash held in escrow accounts.
During the nine months ending September 30, 1999, the Company received $81,100
in proceeds from notes payable net of repayments, $85,100 from predecessor,
and $15,000 from the sale of stock in Beran Corp., the Company's finance
subsidiary. This sale of Beran Corp. stock represented an additional purchase
by an accredited investor and reduced the Company's ownership of Beran Corp.
from 91% to 80% as of September 30, 1999. Operations provided $1,200. The
Company used $15,171 to purchase property and equipment, made $150,170 in
loans net of repayments, and reduced mortgage debt by $25,899. The net
decrease in cash for the period was $8,840. The Company had $71,918 in cash
on September 30, 1999, exclusive of $43,943 in cash held in escrow accounts.
As a result of the refinancing which occurred on September 19, 1997, the
Company anticipates breakeven net cash flow after all scheduled debt service
in 1999, including principal payments totaling $34,893 on long term debt.
There can be no assurance that the Company will be successful in its efforts
to generate sufficient cash flow to meet its scheduled debt service or other
cash requirements.
The Company's balance sheet is highly leveraged. The Company plans to reduce
this leverage through future equity offerings as well as by funds generated
from operations. The Company plans to offer for sale 250,000 shares of its
common stock at an offering price of $1.00 per share by means of a private
offering under Rule 506 of Regulation D of the Securities Act of 1933, as
amended. The Company believes it can support operations and planned capital
expenditures for at least twelve months. Thereafter, the Company's continued
success will be dependant upon its ability to maintain occupancy at 93% or
above and to keep operating costs under control.
In the event that the Company's plans change or its assumptions change or
prove to be inaccurate, the Company may be required to seek additional
financing sooner than currently anticipated. The Company has not identified
any potential sources of debt or equity financing and there can be no
assurance that the Company will be able to obtain additional financing if and
when needed or that, if available, financing will be on terms acceptable to
the Company.
IMPACT OF THE YEAR 2000 ISSUE
- ------------------------------
The Company's State of Readiness
- ---------------------------------
The Company has reviewed its critical information systems for Year 2000
compliance. The compliance review revealed that the Company's critical
accounting information systems are Year 2000 compliant due to the fact that
the Company's hardware and operating system are "off-the-shelf" products from
third parties with Year 2000 compliant versions. The Company does not rely
on to any significant degree on any other computerized information systems.
-17-
As part of the Company's Year 2000 compliance review, the Company contacted
its primary vendors to determine the extent of their readiness, and has been
informed by them that they are Year 2000 compliant.
The Cost to Address the Company's Year 2000 Issues
- ---------------------------------------------------
The Company has spent less than $1,000 on Year 2000 compliance issues and does
not expect future expenditures, if any, to be material to the Company's
financial position, cash flow, or results of operations.
The Risks Associated with the Company's Year 2000 Issues
- ---------------------------------------------------------
The Company believes that the risks associated with Year 2000 issues
primarily relate to the failure of third parties, particularly banks and
utilities, upon whom the Company's business relies to timely remediate their
Year 2000 issues. Failure by third parties to timely remediate their Year
2000 issues could result in disruptions in the Company's supply of parts and
materials, late, missed, or unapplied payments, temporary disruptions, and
other general problems related to the Company's daily operations.
The Company's Contingency Plan
- -------------------------------
The Company has implemented a Year 2000 contingency plan. The Company is
prepared to run manually and without automated systems in the event of a Year
2000 system failure. The Company is however dependent on certain suppliers,
particularly two banks where the Company maintains its operating accounts,
and suppliers of utilities. Except for utilities, the Company has arranged
for the use of multiple suppliers, including banks, to provide alternatives
should one or more suppliers experience difficulties.
Forward Looking Statements
- ---------------------------
The Company is making this statement in order to satisfy the "safe harbor"
provisions contained in the Private Securities Litigation Reform Act of 1995.
The foregoing discussion includes forward-looking statements relating to the
business of the Company. Forward-looking statements contained herein or in
other statements made by the Company are made based on management's
expectations and beliefs concerning future events impacting the Company and
are subject to uncertainties and factors relating to the Company's operations
and business environment, all of which are difficult to predict and many of
which are beyond the control of the Company, that could cause actual results
of the Company to differ materially from those matters expressed in or implied
by forward-looking statements. The Company believes that the following
factors, among others, could affect its future performance and cause actual
results of the Company to differ materially from those expressed in or implied
by forward-looking statements made by or on behalf of the Company: (a) the
effect of changes in interest rates; (b) the rental rate and demand for
apartment rental units; (c) fluctuations in the costs to operate the
properties owned by the Company; (d) uninsurable risks; and (e) general
economic conditions.
-18-
PART II
OTHER INFORMATION
- ------------------
ITEM 1 LEGAL PROCEEDINGS
NONE
ITEM 2 CHANGES IN SECURITIES
NONE
ITEM 3 DEFAULTS ON SENIOR SECURITIES
NONE
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5 OTHER INFORMATION
NONE
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 1 - Earnings Per Share Schedule
Exhibit 27FDS - Financial Data Schedule
(b) Reports on Form 8-K
None
-19-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
APTA HOLDINGS, INC.
Dated: November 15, 1999 /s/ Harry J. Santoro
----------------------------------------
Harry J. Santoro
President, Chief Executive Officer and
Chief Financial Officer
-20-
EARNINGS PER SHARE SCHEDULE
Calculation of net income
Net Income (loss) ($44,388)
Assumed interest expense reduction 0
Assumed interest income increase 0
---------
($44,388)
=========
Calculation of weighted average number of shares
Weighted average shares outstanding 1,000,000
Common stock equivalents 0
----------
1,000,000
==========
Net income (loss) per share
($0.04)
==========
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001091325
<NAME> APTA HOLDINGS, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 71,918
<SECURITIES> 0
<RECEIVABLES> 229,884
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 411,848
<PP&E> 3,613,597
<DEPRECIATION> 350,167
<TOTAL-ASSETS> 3,744,329
<CURRENT-LIABILITIES> 369,842
<BONDS> 3,679,530
0
0
<COMMON> 1,000
<OTHER-SE> (129,339)
<TOTAL-LIABILITY-AND-EQUITY> 3,744,329
<SALES> 0
<TOTAL-REVENUES> 619,428
<CGS> 0
<TOTAL-COSTS> 434,589
<OTHER-EXPENSES> 661
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 228,566
<INCOME-PRETAX> (44,388)
<INCOME-TAX> 0
<INCOME-CONTINUING> (44,388)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,388)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
