<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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(Mark one)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 000-27371
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SENIOR CARE INDUSTRIES, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 68-0221599
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
410 Broadway, 2nd Floor
Laguna Beach, California 92651
(Address of principal executive offices)
(949) 376-3125
---------------
(Issuer's telephone number)
State the number of shares outstanding of each of the issuer's classes of common
equity as of September 30, 2000: Common stock 13,440,681 shares
Transitional Small Business Disclosure Format
(Check one): Yes [ ] No [x]
<PAGE>
TABLE OF CONTENTS
PART 1- FINANCIAL INFORMATION
PAGE
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Item 1. Financial Statements..................................... F-1/8
Item 2. Plan of Operation........................................ 4/6
PART 11- OTHER INFORMATION
Item 1. Legal Proceedings........................................ 6
Item 2. Changes in Securities.................................... 7
Item 3. Defaults Upon Senior Securities.......................... 7
Item 4. Submission of Matters to a Vote of Security Holders...... 7
Item 5. Other Information........................................ 7
Item 6. Exhibits and Reports on Form 8-K......................... 8
SIGNATURES....................................................... 9
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements.
Unaudited Balance sheet at September 30, 2000 and September 30, 1999
Unaudited Statements of Operations for the three month and six month
periods ended September 30, 2000.
Unaudited Statements of Cash Flows for the six and nine month period
ended September 30, 2000.
Notes to the financial statements.
3
<PAGE>
CONTENTS
Consolidated Balance Sheets F - 2
Consolidated Statements of Income and Expense F - 3
Consolidated Statements of Cash Flows F - 4
Notes to the Financial Statements F - 5
4
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
ASSETS
Current Assets
Cash $ 503,727
Accounts receivable 735,701
Inventory 581,702
Prepaid expenses 26,496
Other current assets 167,864
-------------
Total Current Assets 2,015,490
Property Held for Resale
Construction in progress 10,430,659
Property and Equipment
Machinery & equipment 1,005,592
Capital lease 50,673
Leasehold improvement 28,933
Rental property 4,418,971
Land 2,966,160
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8,470,329
Less: accumulated depreciation (176,151)
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Total Property and Equipment 8,294,178
Other Assets
Investment in LLC 3,234,000
Goodwill, net of accumulated amortization of $86,612 1,645,628
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Total Other Assets 4,879,628
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TOTAL ASSETS $ 25,619,955
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LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 394,520
Accrued expenses 36,799
Real estate loans 11,431,947
Lines of credit, current portion 79,484
Capital lese obligation, current portion 10,227
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Total Current Liabilities 11,952,977
Long-Term Liabilities
Line of credit, net of current portion 1,108,221
Note payable 1,559,470
Accrued interest 138,833
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Total Long-Term Liabilities 2,806,524
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Total Liabilities 14,759,501
Stockholders' Equity
Series A Convertible Preferred Stock, $.001 par value,
34,500 shares authorized, none issued
Series B Convertible Preferred Stock, $.001 par value,
400,000 shares authorized, none issued
Common stock, $.001 par value, 50,000,000 shares
authorized, 13,440,681 shares issued and outstanding 13,441
Paid-in capital 13,182,467
Accumulated deficit (2,335,454)
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Total Stockholders' Equity 10,860,454
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,619,955
=============
See accompanying notes to financial statements and accountant's report
F-2
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<TABLE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Consolidated) (Unconsolidated) (Consolidated) (Unconsolidated)
<S> <C> <C> <C> <C>
Revenue
Rental income $ 157,324 $ - $ 438,587 $ -
Sales 1,374,111 - 4,067,992 -
Sales returns & allowances (44,839) - (109,907) -
------------ ------------ ------------ ------------
Total Revenue 1,486,596 - 4,396,672 -
Cost of Sales 1,175,037 - 3,142,373 -
------------ ------------ ------------ ------------
Gross Profit 311,559 - 1,254,299 -
Operating Expenses
Selling, general, and administrative 372,944 1,070,690 1,342
Depreciation and amortization 39,545 - 172,145 -
------------ ------------ ------------ ------------
Total Operating Expenses 412,489 - 1,242,835 1,342
------------ ------------ ------------ ------------
Income from Operations (100,930) - 11,464 (1,342)
Other Income and (Expenses)
Interest income - 1,750
Interest expense (100,601) (275,395)
------------ ------------ ------------ ------------
Total Other Income and (Expenses) (100,601) - (273,645) -
------------ ------------ ------------ ------------
Income Before Income Taxes (201,531) - (262,181) (1,342)
Provision for Income Taxes - -
------------ ------------ ------------ ------------
Net Income (Loss) $ (201,531) $ - $ (262,181) $ (1,342)
============ ============ ============ ============
Earnings Per Share - Basic $ (0.15) $ - $ (0.02) $ (0.00)
============ ============ ============ ============
Weighted Average Number of Shares 13,440,681 6,662,154 13,440,681 6,662,154
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements and accountant's report
F-3
<PAGE>
<TABLE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
<CAPTION>
2000 1999
------------ ------------
(Consolidated) (Unconsolidated)
<S> <C> <C>
Cash Flow from Operating Activities:
Net income (loss) $ (262,181) $ (1,342)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Stock issued for services 29,029
Depreciation and amortization 172,145 -
(Increase) decrease in accounts receivable (176,276) -
(Increase) decrease in inventory 164,456 -
(Increase) decrease in prepaid expenses (16,253) -
(Increase) decrease in other current assets (152,005)
Increase (decrease) in accounts payable 44,254 -
Increase (decrease) in accrued interest 73,500
Increase (decrease) in accrued expenses 8,400 -
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Net Cash Provided (Used) by Operating Activities: (114,931) (1,342)
Cash Flow from Investing Activities:
Cash provided from asset purchase agreement - 610
Cash used by construction in progress (2,263,755) -
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Net Cash Provided (Used) by Investing Activities: (2,263,755) 610
Cash Flow from Financing Activities:
Net proceeds (payments) from notes payable 2,787,079 -
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Net Cash Provided (Used) by Financing Activities: 2,787,079 -
------------ ------------
Net Increase (Decrease) in Cash 408,393 (732)
Cash Balance at Beginning of Period 95,334 832
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Cash Balance at End of Period $ 503,727 $ 100
============ ============
Supplemental Disclosures:
Cash paid during the period for interest, including amounts
capitalized $ 996,678 $ -
============ ============
Cash paid during the period for income tax $ - $ -
============ ============
Supplemental Schedules of Noncash Operating, Investing,
and Financing Activities:
Issuance of common stock for services $ 29,029 $ -
============ ============
Capital lease incurred for acquisition of machinery and
equipment $ 50,673 $ -
============ ============
Issuance of common stock in acquisition of Noble
Fidelity, Inc. $ 2,897,250 $ -
============ ============
Issuance of common stock in conversion of preferred
stock $ 2,173 $ -
============ ============
</TABLE>
See accompanying notes to financial statements and accountant's report
F-4
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
September 30, 2000
(Unaudited)
NOTE 1 - ACCOUNTING POLICIES AND PROCEDURES
1. Senior Care Industries, Inc. ("the Company") uses the accrual method of
accounting, recording revenues when a transaction occurs where the
Company has a reasonable expectation of receiving the revenue.
2. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
3. The costs of operational equipment and real property improvements are
depreciated over the estimated useful life of the asset utilizing the
straight-line method of depreciation.
4. The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates
and assumptions which affect the reported amounts of assets and
liabilities as of the date of the financial statements and revenues and
expenses for the period reported. Actual results may differ from these
estimates.
5. The Company has a net operating loss carry forward as of December 31,
1999. The Company will review its need for a provision for federal
income tax after each operating quarter and each period for which a
statement of operations is issued. The Company's' marginal tax rate is
34%. The Company's effective tax rate is 0% due to the tax loss carry
forward.
6. The Company evaluates the recoverability of long-lived assets in
accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. "SFAS" No. 121 requires
recognition of impairment of long-lived assets in the event the net
book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. At September 30, 2000, management
determined that there has been no impairment of the Company's
long-lived assets. There can be no assurance, however, that market
conditions will not change or demands for the Company's services will
continue which could result in future long-lived asset impairments.
F-5
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SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
September 30, 2000
(Unaudited)
NOTE 2 - CAPITAL STOCK
In April 2000 the holders of Series A and B Convertible Preferred Stock
converted its preferred stock on a 5 to 1 basis. This conversion required the
Company to issue 2,172,500 additional common shares.
NOTE 3 - ACQUISITIONS
On May 1, 2000 the Company purchased Nobel Furniture, Inc. (Nobel) for 750,000
shares of Company common stock valued at $3,187,500. The combination has been
accounted for by the purchase method. Accordingly, the Company recorded assets
acquired at their fair values. The Company accounted for the acquisition under
the purchase method of accounting and recorded a total of $1,732,240 in
goodwill, which is being amortized over 15 years. The Company recorded $86,612
in amortization expense for the nine months ended September 30, 2000. The
effective date of the combination was agreed to as January 1, 2000. Therefore
the results of operations of Nobel have been included in the income statement of
the Company beginning January 1, 2000.
NOTE 4 - SEGMENT INFORMATION
The Company has adopted Statement of Financial Accounting Standards No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 changes the way public companies report information about
segments of their business in their annual financial statements and requires
them to report selected segment information in their quarterly reports issued to
stockholders. It also requires entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues and its major customers. The Company acquired Nobel furniture,
Inc. as discussed in note 2. Nobel manufactures furniture for the national
market.
Selected information for the three months ending June 30, 2000
Furniture Senior Care
manufacturer Industries
Gross sales $ 3,958,085 $ 438,587
Operating income 57,716 (46,253)
Assets 2,275,131 22,844,824
Liabilities 1,624,256 13,135,245
F-6
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SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
September 30, 2000
(Unaudited)
NOTE 5 - EARNINGS PER SHARE
Basic net income per common share is computed by dividing the net income
available to common stockholders for the period by the weighted average number
of common shares outstanding during the period. Incremental common shares
issuable upon the exercise of stock options and warrants, are included in the
computation of diluted net income per common share to the extent such shares are
dilutive.
Numerator:
Numerator for basic loss per share - net loss $ (60,650)
Denominator:
Denominator for basic loss per share- weighted
Average share outstanding 13,440,681
F-7
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE FINANCIAL STATEMENTS
---------------------------------
September 30, 2000
(Unaudited)
NOTE 6 - LITIGATION
An action was filed on April 12, 2000 naming the Company, as a successor to an
unrelated company, that it is liable to a third part for a note entered into by
that company in the amount of $923,208 plus accrued interest. The Company has
denied this claim and is vigorously defending its position. Management believes
that it will prevail in this matter, however discovery is in process and will
not be complete for several months.
NOTE 7 - SUBSEQUENT EVENTS
On October 3, 2000, the Company purchased 5,000,000 shares of common stock in
Rent USA, Inc. in exchange for 2,000,000 shares of common stock in Senior Care
Industries, Inc. the stock position of Senior Care Industries, Inc. gives it
actual control of Rent USA, Inc.
F-8
<PAGE>
Item 2. Plan of Operation
History of the Company
----------------------
The Company was organized under the laws of the State of Idaho, February 26,
1968, as Golden Chest, Inc., for the purpose of acquiring and developing mineral
properties. On April 5, 1999, the board of directors changed the Company name to
Senior Care Industries, Inc., and changed corporate situs from Idaho to Nevada.
The Company was re-incorporated on August 26, 1999 under the laws of the State
of Nevada.
In 1985, the Company merged with TAP Resources, Ltd, (TAP) a British Columbia
corporation in a transaction where the Company issued 1.25 shares of Golden
Chest Inc common stock in exchange for each share of TAP common stock. At the
time of the merger, the Company and TAP were partners in a minerals exploration
joint venture. After the merger Golden Chest Inc. was the surviving corporation
while TAP Resources was dissolved.
In 1990, the Company merged with Petro Gold Inc, a Washington corporation, in a
transaction where the Company issued 3,000,000 shares of Senior Care Industries,
Inc. common stock in exchange for all shares of Petro Gold, Inc. common stock.
After the merger Senior Care Industries, Inc. was the surviving corporation
while Petro Gold, Inc. was dissolved.
In 1999, the company transferred its assets and liabilities to Paymaster
Resources Incorporated.
Significant Acquisitions of Senior Care Industries
--------------------------------------------------
On August 31, 1999, the Company completed an asset purchase agreement where it
purchased the assets and liabilities of East-West Developer, Inc. for a note
payable of $700,000 and 1,880,122 shares or Senior Care Industries, Inc.'s
common stock which was issued directly to the property owners whose properties
were sold to the Company through this transaction.
As a result of the East-West Developer acquisition, Senior Care obtained title
to the following properties and assets:
1. a 45% membership interest in a limited liability company which owns a
development project in Delran, New Jersey;
2. a 44 unit senior condominium project in Monterey Park, California known as
Evergreen Manor II;
3. a 57 unit Senior Apartment Project in Albuquerque, New Mexico;
4. a 25,000 square foot strip center known as Friendly Bear Plaza located in Las
Vegas, Nevada;
5. a 32,000 square foot office in Las Vegas, Nevada known as the Pecos Russell
Commercial Center;
6. the Company office headquarters building at 410 Broadway in Laguna Beach,
California known as Broadway Acacia.
On April 28, 2000, the Company purchased all of the outstanding stock in Noble
Concepts Fidelity, Inc., a furniture manufacturing company in San Diego,
California. The effective date of the purchase was January 1, 2000 and the
income and expense of that corporation is reflected on the first quarter income
statement for Senior Care Industries, Inc.
12
<PAGE>
On September 22, 2000, the Company believed that it had completed the purchase
of all of the outstanding shares of stock in A. Tresston, Inc. That
corporation's sole asset is its title to 15,000 acres of land in Fentress
County, Tennessee. Within two days after the Company issued an initial 1,500,000
shares of common stock to complete the purchase, it discovered that there may be
problems with title to the land. The Company then engaged counsel in Tennessee
to provide a complete title opinion. The title opinion confirms that A.
Tresston, Inc. does not have fee simple title to the property and that to obtain
title would most likely result in considerable, complicated and lengthy
litigation. As a result, on November 10, 2000, the Company informed Arden
Oliphant, the sole shareholder of A. Tresston, Inc. that the Board of Directors
of Senior Care voted to terminate the contract to purchase A. Tresston, Inc.,
return all documents and shares in that company and to cancel the issuance of
all shares of Senior Care stock which had been issued in connection with this
transaction.
Arden Oliphant has agreed to accept the termination of the contract and
cancellation of the Senior Care stock issued in connection therewith.
The Company had issued 1,500,000 shares of common stock to Arden
Oliphant, the sole shareholder of A. Tresston, Inc. which represented the
initial payment under the terms of the contract to purchase all stock in that
corporation. Additionally, it had issued a total of 500,000 shares of
common stock to Lawrence Hill who had acted as a consultant on the transaction.
Those shares have been canceled as well. As in the case of Arden Oliphant,
Lawrence Hill has informed the Company that he has agreed to accept the
cancellation of the shares.
Because the Company never completed the transaction, it has not filed an 8-K
Report with the Securities & Exchange Commission regarding the acquisition
of the Tennessee land.
On October 3, 2000, the Company purchased 5,000,000 shares of common stock in
Rent USA, Inc. in exchange for 2,000,000 shares of common stock in Senior Care
Industries, Inc. The stock position of Senior Care Industries, Inc. gives it
actual control of Rent USA, Inc.
Rent USA, Inc. is a publicly held company that became a fully reporting company
with the Securities & Exchange Commission earlier this year. Rent USA, Inc. is
not yet trading on any public market but a Form 211 was filed by Olsen Paine, a
brokerage firm who will act as Rent USA's initial market maker, on or about
October 16, 2000 to commence trading on the over the counter bulletin board.
As of the date of the acquisition by Senior Care Industries, Inc., Rent USA had
a total after the sale to Senior Care Industries, Inc.of 11,098,289 common
shares outstanding. Both the shares issued to Rent USA by Senior Care and the
Rent USA shares received by Senior Care Industries were issued pursuant to
Section 4(2) of the Securities & Exchange Act of 1933, as amended, and are
restricted.
Rent USA, Inc. provides services in four categories under the umbrella of its
current domestic rental and sales business which is to be known as Equip USA.
Those rentals and sales are generally from the following sources:
1. Equipment Rentals - the principal service, consists of renting
equipment to small and large contractors, and construction companies.
2. Equipment Sales - The sale of new and used equipment to small and
large contractors and construction companies. The Company is presently
negotiating an agreement whereby it will become a dealer for New Holland, a
manufacturer of heavy construction equipment.
3. Re-Rentals - this means re-renting equipment which the Company must
rent from others and does not own, then re-renting that equipment to an end user
at an anticipated 20% markup over the amount which the Company must pay the
owner of the equipment.
4. Trade Rentals - this means renting equipment on a long term basis to
other rental yards, which they, in turn, will mark up and re-rent to the general
public at a markup, generally 20%.
As of September 30, 2000, the Company had not yet commenced the sale of
new equipment.
Rent USA maintains a rental yard in Chino, California where it stores
and maintains its equipment when it is not being used.
13
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The Nature of Senior Care's Business
------------------------------------
Senior Care Industries is a diversified firm consisting of a real estate
division, a manufacturing division, and eventually a third division to be known
as the pharmaceutical.nutriceutical division is contemplated.
The Company's real estate division invests in, manages, and develops senior
housing, and is a leader quality for-sale and rental, independent living
age-restricted communities.
The Company's manufacturing division targets for acquisition, ancillary
companies whose products and services are in high demand by Seniors such as
medical device manufacturers, specialty food manufacturing companies and
furniture manufacturing companies, enabling the firm to service seniors both in
and out of its age restricted communities with its own products.
The Company's Nutriceutical and pharmaceutical division targets for acquisition
nutriceutical and/or pharmaceutical manufacturing companies and web based health
products distributors as a feeder to manufacture and sell the products through
an "E-commerce" pharmacy. The Company's pharmaceutical division utilizes a
program to include a full service web-based senior support system that sells
direct to the consumer, related health products in the financial services
sector, including life insurance, health insurance, dietary advice, holistic
medical alternatives, water and air purification. The Company is finalizing a
web-site and a support staff offering 24 hour access to these products and
services once an acquisition closes.
Presently, the Company has no operations in the nutriceutical or pharmaceutical
division but is actively seeking acquisitions in this area and on November 2,
2000, did execute a binding letter of intent to purchase a controlling
interest in Physicians Nutritional Laboratories, a manufacturer of nutritional
products. Additionally, the Company also signed a binding letter of intent
to purchase a controlling interest in Microdentix, a laboratory offering
DNA analysis to dentists to determine the propensity for gum disease in
patients.
The Company's projects and/ or the services the Company may offer fall under the
auspices of various state and federal regulatory agencies and various licensing
and or zoning requirements and programs, such as the "Medicaid waiver programs"
The company currently owns a project in Monterey Park, California whose zoning
approval required a non-profit organization be formed to own a 10% interest at
the request of the city of Monterey Park.
The company owns a 45% membership interest in a limited liability company which
owns a development project in Delran, New Jersey. The first three phases of this
development have already been completed and only the fourth phase which involves
the development of a shopping mall is yet to be built.
The company has completed construction on its 44 unit senior condominium project
in Monterey Park, California known as Evergreen Manor II and unit sales are
underway.
In addition, the Company owns and, or is under construction on projects located
in the following communities and states:
1. a 57 unit Senior Apartment Project in Albuquerque, New Mexico which is in the
beginning phase of construction.
2. a 25,000 square foot strip center known as Friendly Bear Plaza located in Las
Vegas, Nevada which is a strip mall that is 95% leased to a variety of small
businesses.
3. A 32,000 square foot office in Las Vegas, Nevada known as the Pecos Russell
Commercial Center, a four building complex of which two buildings are presently
complete and are leased with the third building presently under construction.
Also, the Company owns its office headquarters building at 410 Broadway in
Laguna Beach, California known as Broadway Acacia and has tenants in the
building in addition to corporate headquarters.
14
<PAGE>
Additionally, the Company also has entered escrow on a 223 residential lot
senior restricted housing development in San Jacinto approximately 40 minutes
from Palm Springs and 10 minutes from Hemet, California.
Another project known as Flamingo 55 located in the City of Las Vegas, Nevada at
the intersection of Flamingo Blvd. and Freeway 95 will build 55 senior
restricted town homes. The Company intends to break ground on this project in
December, 2000. Plans were submitted to the Clark County Planning Department on
this project in early August, 2000.
By far the largest project presently being undertaken by the Company is the 715
acre project at the Lakes in Pahrump Valley, Nevada. This project which will
take nearly 10 years to build eventually will comprise 2 golf courses, 2,000
residential housing units in a mixed use age restricted fully planned community.
Escrow on this project was opened in July, 2000 and the plan development process
is underway.
On August 7, 2000, the Company agreed to purchase the Bellflower Christian
Retirement Center, a 99 unit retirement home in Bellflower, California.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the meaning
of the "safe-harbor" provisions of the Private Securities Litigation Reform Act
of 1995. Such statements are based on management's current expectations and are
subject to a number of factors and uncertainties that could cause actual results
to differ materially from those described in the forward- looking statements.
All statements, other than statements of historical facts include in this Form,
including without limitation, statements under "Plan of Operations" regarding
the Company's financial position, business strategy, and plans and objectives of
management of the Company for future operations, are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations include, but
are not limited to, market conditions, competition and the ability to
successfully complete financing.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 25, 2000, the Company was named as a defendant in a bankruptcy
court adversary proceeding in the matter of Willy Farah, Debtor, United States
Bankruptcy Court, District of New Jersey, Case No. 98-44940 (NLW), Robert B.
Wasserman, Chapter 7 Trustee v. Willy Farah, Madeline Farah, Aziz Holdings,
Inc., Senior Care Industries, Inc., First American Stock Transfer, Inc. and Asia
Bank, N.A. The complaint seeks to avoid the transfer of certain shares in Senior
Care Industries, Inc. presently held by Madeline Farah and Aziz Holdings, Inc.
and seeks injunctive relief and to sell the stock pursuant to Section 363(h) of
the Bankruptcy Code [11 U.S.C. Section 101, et seq.]. The Chapter 7 Trustee
seeks to enjoin the transfer of a total of 800,000 unregistered and restricted
shares which Madeline Farah and Aziz Holdings, Inc. own in Senior Care
Industries, Inc. The Trustee claims that those shares are properly the property
of the debtor's estate. Madeline Farah and Aziz Holdings, Inc. claim that they
are not property of the estate of Willy Farah. Senior Care Industries, Inc.
takes no position on the matter. Pending a determination of the claims of the
various parties, on April 28, 2000, the Bankruptcy Court has temporarily
enjoined and restrained the stock transfer agent for Senior Care Industries,
Inc., First American Stock Transfer, Inc. from transferring any of the shares in
question until a further hearing on the matter.
15
<PAGE>
Another lawsuit which is related to the above matter was brought in the Superior
Court of New Jersey, Burlington County Law Division, Case No. BUR L-3667-99 by
International Thermal Packaging as Plaintiff against CRT Corporation, American
Auditors, LLC, Delran Associates, LLC, Senior Care Industries, Inc., Aspi K.
Irani and Joseph Lipari.
International Thermal Packaging [ITP] claims that American Auditors, LLC
borrowed $700,000.00 from ITP which is now due and owing. The money was to be
secured by a portion of the Delran Associates membership interest owned by CRT
Corporation at the time the loan was obtained. At a later time, the Delran
membership interest which was owned by CRT Corporation was sold to Senior Care
Industries, Inc. having been assigned to it in a package deal from East West
Community Developer, Inc. Senior Care purchased a number of assets and assumed
various liabilities from East West. However, Senior Care is not liable for the
money owed to ITP and has never become obligated to pay the $700,000.00 loan
which American Auditors, LLC obtained from ITP.
In the lawsuit, ITP requests that Senior Care impose a constructive trust on any
proceeds which it may receive from the liquidation of its Delran membership
interest or from dividends paid to it by Delran Associates. Senior Care has
taken the position that it has no objection to an imposition of a constructive
trust under those conditions and has offered to secure ITP's position with a
security interest in its Delran membership interest. To date, that offer has not
been accepted by ITP but is still on the table.
The $700,000.00 obligation is a portion of an obligation which Senior Care owes
to East West Community Developer. That obligation becomes due on April 30, 2001.
The managing member of the Delran limited liability company has challenged the
propriety of the transfer from Willy Farah's membership interest to Senior Care
and claims that certain procedures which were required by the Operating
Agreement were not followed when the transfer was made thus voiding the
transfer. This issue has only been raised, to date, in a counter claim filed in
the State Court action. Senior Care disputes this contention and has answered
the allegations denying all of the facts set forth in the counter claim.
The Company has retained the services of Connell Foley, LLP, Attorneys at Law,
85 Livingston Ave., Roseland, NJ 07068, telephone (973) 535-5000, Fax No. (973)
535-9217. The attorneys primarily assigned to this matter are Peter Pizzi, Esq.
and James Jacobus, Esq. of that firm. They have made appearances in both the
bankruptcy litigation and in the state litigation brought by ITP.
Item 2. Changes in Securities
The following issuance of securities in the Company was made during the
quarter ended September 30, 2000 or shortly thereafter:
The Board of Directors authorized and the Company made an 11 for 10 forward
stock split as a stock dividend to all shareholders of record in the Company as
of August 15, 2000. This resulted in the issuance of a total of 1,132,411 shares
of common stock to shareholders of the Company was they received on August 19,
2000.
The Company issued on September 22, 2000, 1,500,000 shares of common stock
to Arden Oliphant in exchange for all of his shares in A. Tresston, Inc. and
additionally authorized the issuance of 500,000 shares of common stock to
Lawrence Hill who acted as a consultant with respect to the purchase of
the A. Tresston, Inc. shares. That corporation's sole asset is its title to
15,000 acres of land in Fentress County, Tennessee. As noted above, all of
those shares were canceled on November 10, 2000.
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On October 3, 2000, the Company issued 2,000,000 shares of common stock to Rent
USA, Inc. in exchange for 5,000,000 shares of common stock of Rent USA, Inc. The
stock position of Senior Care Industries, Inc. gives it actual control of Rent
USA, Inc.
Rent USA, Inc. is a publicly held company that became a fully reporting company
with the Securities & Exchange Commission earlier this year. Rent USA, Inc. is
not yet trading on any public market but a Form 211 was filed by Olsen Paine, a
brokerage firm who will act as Rent USA's initial market maker, on or about
October 16, 2000 to commence trading on the over the counter bulletin board.
As of the date of the acquisition by Senior Care Industries, Inc., Rent USA had
a total after the sale to Senior Care Industries, Inc. of 11,098,289 common
shares outstanding.
As the Company reported in its Annual Report [Form 10KSB/A filed on June 27,
2000] on October 19, 1999, the Board of Directors authorized the issuance of
restricted stock to various members of the Board of Directors and officers of
the corporation as an incentive bonus for work done by them toward the
development of the company and in lieu of monetary compensation up to and
through the date of the authorization. The shares which were authorized and the
persons to whom the were issued are as follows:
Tom Reichman, President and Director, 100,000 shares Stephen Reeder, Chairman,
CEO and Director, 100,000 shares Martin Richelli, Vice President and Director,
50,000 shares Richard Hart, Vice President, 50,000 shares Scott Brake, Director,
50,000 shares, to be issued to the Brake Trust dated April 15, 1998 Robert
Coberly, Vice President, 50,000 shares Kenneth Schultz, Vice President, 50,000
shares David Tsai, Vice President, 100,000 shares, to be issued on his behalf to
Mildred Properties, LLC.
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During the course of an audit which was conducted by the firm of Mendoza &
Berger with respect to the first quarter of the year 2000, which was made
necessary by a requirement of the American Stock Exchange, Mendoza & Berger
determined that unless the Company recalled those shares, it would become
necessary that the Company suffer an expense adjustment equal to the number of
shares issued on October 19, 2000 multiplied by the actual bid price of the
shares on the date the shares were actually issued which was on January 10, 2000
which would have resulted in an expense charged against income of in excess of
$2,200,000.00 during the first quarter of 2000. The Company was further informed
by Mendoza & Berger that it would be necessary to issue Forms 1099 to each
officer and director requiring them to report the receipt of income from
obtaining these shares even though the shares were restricted under Section
230.144 until at least October 19, 2000. As a result, on August 8, 2000, the
Board of Directors authorized the cancellation of a total of 550,000 common
shares as follows:
Ken Schultz 50,000
Richard Hart 50,000
Martin Richelli 50,000
Mildred Properties 100,000
Robert Coberly 50,000
Scott Brake Trust 50,000
Fuego Family Trust 100,000
Stephen Reeder 100,000
Thereafter, the Board of Directors took the following action:
On October 6, 2000, the Board of Directors of Senior Care Industries, Inc.
resolved to issue a total of 610,000 shares of common stock in the corporation
upon payment into the treasury of the Company at the rate of $.10 per share to
the herein below named officers and directors of the Company who were entitled
to receive shares under the terms of the 2000 Stock Option Agreement which
became effective on January 31, 2000:
Richard Hart 55,000
Martin Richelli 55,000
Denzel Harvey 55,000
David Tsai 55,000
Stephen Reeder 115,000
Bob Coberly 55,000
John Cruickshank 55,000
Scott Brake 55,000
Al Harvey 55,000
Bob Eschwege 55,000
On October 10, 2000, the Company authorized the sale of 99025 common shares
pursuant to Regulation S. These shares were issued following that date with a
restricted legend condition under Regulation S to persons in the European
Economic Community for which the Company received a total of $55,597.50. This
sale of securities was made offshore pursuant to Section 230.901 of Regulation
S. These securities have not been registered in the United States and may not be
offered for sale in the United States unless registered or an exemption from
registration is available.
All other issuances of the Company's securities were disclosed in its Annual
Report, 10-KSB/A filed on June 27, 2000, in its first quarter Form 10QSB/A filed
on September 22, 2000 and in its second quarter Form 10QSB filed on August 17,
2000.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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Item 5. Other Information
On August 1, 2000, the Company engaged the auditing firm of Mendoza and Berger,
CPA"s, 25200 La Paz Road, Suite 111, Laguna Hills, CA 92653, telephone (949)
598-8105 as its auditor for the special purpose of auditing the first quarter of
2000 which is a special
requirement made upon the Company by the American Stock Exchange as a part of
the Company's application to become listed on that exchange. The reason for the
selection of Mendoza & Berger to perform this audit rather than the audit being
performed by the Company's regular auditor, John Spurgeon, CPA, is as follows:
The Company made application with the American Stock Exchange and in connection
with that application, the analyst requested information regarding the status of
the Company's auditor with AICPA as a member of the SEC practice section. The
Company's auditor, John Spurgeon, CPA was admitted to the practice section on
April 3, 2000. However, he had not undergone peer review. Because the work done
to audit the Company's financial statements for the year 1999 was done prior to
the admission to the practice section, it was determined that the audit should
be redone after his admission and that the work should be reviewed by a member
of the practice section who had already undergone peer review since the
Company's auditor, John Spurgeon had not.
For that reason, the Company engaged the firm of Corbin & Wertz to review Mr.
Spurgeon's work for the year 1999 which would be reviewed by Corbin & Wertz,
CPA's who were members of the practice section and had undergone peer review.
However, once the reviewed restated audit for 1999 was filed on an amended
10KSB/A on June 27, 2000, it was determined that a stub audit for the first
quarter of the year 2000 would be required in lieu of a complete reaudit of the
year 1999 since the review by Corbin & Wertz was not deemed sufficient. The
Company then solicited bids from three auditing firms, all of whom were members
of the SEC Practice Section of the AICPA. The lowest bid and the firm which the
Company believed could complete the audit most readily was Mendoza & Berger whom
the Company then engaged as its auditor to undertake that work and to become its
regular auditor.
The engagement of Mendoza & Berger for the purpose of performing the audit of
the first quarter of 2000, was recommended and approved by the Board of
Directors after considering all of the information set forth hereinabove.
John Spurgeon continued as the Company's primary auditor after the special
audit of the first quarter of 2000 was completed by Mendoza & Berger. However,
Mendoza & Berger reviewed the original financial statements which were filed
with the 10-QSB which the Company filed on August 17, 2000. The revised
10-QSB/A filed concurrently herewith was reviewed by John Spurgeon, CPA.
The Company is unaware of any disagreement between John Spurgeon, Mendoza &
Berger and/or Corbin & Wertz in connection with any audit which was performed by
John Spurgeon for any of the prior two fiscal years and/or any subsequent period
preceding the date when Mendoza & Berger were engaged and there are no
disagreement with any former accountant on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure.
James E. Slayton, the Company's auditor through the early part of 1999 made the
following qualification in his Auditor's Report which was attached to the
original Registration Statement filed by the Company on Form 10SB as a
developmental stage company filed on December 23, 1999 and covering the audit
period from date of inception through April 30, 1999:
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"The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. as discussed in Note 3 to the financial
statements, the Company has had limited operations and has not established a
long term source of revenue. The Company has had operating losses in its
previous operating periods. This raises substantial doubt about its ability to
continue as a going concern. Management's plan in regard to these matters are
also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty."
John Spurgeon, CPA, who audited the Company's business through December 31, 1999
and whose restated audit was reviewed by Corbin & Wertz, and filed by the
Company on Form 10KSB on June 27, 2000, contains no adverse opinion or
disclaimer of opinion nor was it qualified or modified as to uncertainty, audit
scope or accounting principles.
Item 6. Exhibits and Reports on Form 8-K.
The following 8-K Reports were filed by the Company which relate to
the third quarter of 2000:
An 8-K Report was filed on May 8, 2000 noting Resignation of
Registrant's Director and Officer, Tom Reichman, noting the appointment of
Stephen Reeder as President, John Cruickshank as Senior Vice President and the
naming of two new directors.
An 8-K Report was filed on May 15, 2000 noting the acquisition by the
Company of Noble Concepts Fidelity, Inc., a furniture manufacturing company.
An 8-K Report was filed on August 15, 2000 noting changes in the
Company's certifying accountants as discussed hereinabove in Item 5.
An 8-K/A Report was filed on October 12, 2000 noting changes in the
Company's certifying accountants as discussed hereinabove in Item 5.
An 8-K Report was filed on October 26, 2000 relating to the purchase of
a controlling interest in Rent USA, Inc.
All of the above noted 8-K Reports are incorporated herein by reference
as though fully set forth.
The following additional filings were made which should be read in
conjunction with this filing:
An amended 10Q-SB was filed for the first quarter of 2000 on September
26, 2000.
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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.
Senior Care Industries, Inc.
----------------------------
Date: November 10, 2000 /s/ Stephen Reeder
----------------------------
Stephen Reeder
Chief Executive Officer
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