<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
Amendment No. 1 to
FORM 10-QSB/A
-----------
(Mark one)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
--------- ---------
Commission file number 000-27371
---------
SENIOR CARE INDUSTRIES, INC.
----------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 68-0221599
-------- ------------
(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) 376-8575
---------------
(Issuer's telephone number)
State the number of shares outstanding of each of the issuer's classes of common
equity as of September 30, 1999: Common stock 7,412,904 shares Preferred Stock
400,000 shares
Transitional Small Business Disclosure Format
(Check one): Yes [ ] No [x]
<PAGE>
TABLE OF CONTENTS
PART 1- FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements..................................... 4/7
Item 2. Plan of Operation........................................ 10/12
PART 11- OTHER INFORMATION
Item 1. Legal Proceedings........................................ 13
Item 2. Changes in Securities.................................... 14
Item 3. Defaults Upon Senior Securities.......................... 14
Item 4. Submission of Matters to a Vote of Security Holders...... 14
Item 5. Other Information........................................ 14
Item 6. Exhibits and Reports on Form 8-K......................... 14
SIGNATURES....................................................... 15
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements.
Unaudited Balance sheet at March 31, 2000 and March 31, 1999
Unaudited Statements of Operations for the three, six and nine month
periods ended March 31, 2000.
Unaudited Statements of Cash Flows for the six and nine month period
ended March 31, 2000.
Notes to the financial statements.
3
<PAGE>
CONTENTS
Consolidated Balance Sheets F - 2
Consolidated Statements of Income F - 4
Consolidated Statement of Stockholders' Equity F - 5
Consolidated Statements of Cash Flows F - 6
Notes to the Financial Statements F - 7
<PAGE>
<TABLE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------
ASSETS
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 2000
(UNCONSOLIDATED) (CONSOLIDATED)
------------ ------------
<S> <C> <C>
Current assets:
Cash $ 38,117 $ 93,338
Deposits - 65,859
Accounts receivable - 554,603
Inventory - 744,957
Other current assets 2,550 1,455
------------ ------------
Total current assets 40,667 1,460,212
Property held for resale:
Construction in progress 13,744,857 9,073,476
Property and equipment, net of accumulated depreciation 1,777,778 8,329,863
Other assets:
Investment in LLC 3,234,000 3,234,000
------------ ------------
Total other assets 3,234,000 3,234,000
------------ ------------
Total assets $18,797,302 $22,097,551
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
<TABLE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 2000
(UNCONSOLIDATED) (CONSOLIDATED)
------------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable $ - $ 347,549
Accrued expenses - 27,566
Current portion of real estate loans 200,000 10,751,073
Notes payable - current portion - 111,959
Lines of credit - 656,517
Capital lease obligation-current portion - 12,839
------------- -------------
Total current liabilities 200,000 11,907,503
------------- -------------
Real estate loans, net of current portion 9,635,613 -
Notes payable, net of current portion 700,000 706,008
Lines of credit, net of current portion - 190,423
Accrued interest on notes payable 65,333 96,845
------------- -------------
Total liabilities 10,600,946 12,900,779
Stockholders' equity :
Series A convertible preferred stock, $.001 par value, 34,500 shares
authorized, 34,500 shares issued and outstanding at December 31,
1999 and March 31, 2000, respectively 34 34
Series B convertible preferred stock, $.001 par value 400,000 shares
authorized, 400,000 shares issued and outstanding at December 31,
1999 and March 31, 2000, respectively 400 400
Common stock, $.001 par value, 25,000,000 shares authorized,
6,662,154 and 7,412,154 shares issued and outstanding at December 31,
1999 and March 31, 2000, respectively 6,662 7,412
Additional paid in capital 10,262,533 11,494,890
Accumulated deficit (2,073,273) (2,305,964)
------------- -------------
Total stockholders' equity 8,196,356 9,196,772
------------- -------------
Total liabilities and stockholders' equity $ 18,797,302 $ 22,097,551
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 2000
(UNCONSOLIDATED) (CONSOLIDATED)
------------ ------------
<S> <C> <C>
Revenue $ - $ 1,285,440
Cost of sales - (878,699)
------------ ------------
Gross profit - 406,741
------------ ------------
Rental property income - 123,701
------------ ------------
Operating expense:
Selling, general and administrative 1,342 517,816
Depreciation and amortization - 93,453
------------ ------------
Total operating expenses 1,342 611,269
------------ ------------
Operating loss (1,342) (80,827)
------------ ------------
Other income(expense):
Interest expense - (151,864)
------------ ------------
Loss before provision for income taxes (1,342) (232,691)
Provision for income taxes - -
------------ ------------
Net loss $ (1,342) $ (232,691)
============ ============
Earnings per share:
Basic $ (.007) $ (.031)
============ ============
Weighted average shares
outstanding 182,032 7,412,154
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SERIES A SERIES B
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
---------------- ---------------- -----------------
ADDITIONAL RETAINED TOTAL
NUMBER PAR NUMBER PAR NUMBER PAR PAID-IN EARNINGS STOCKHOLDERS'
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE CAPITAL (DEFICIT) EQUITY
--------- ----- --------- ----- --------- ------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 34,500 $ 34 400,000 $ 400 6,662,154 $ 6,662 $10,262,533 $ (2,073,273) $ 8,196,356
Shares issued in acquisition - - - - 750,000 750 1,232,357 - 1,233,107
Net loss - - - - - - - (232,691) (232,691)
--------- ----- --------- ----- --------- ------- ------------ ------------- -------------
Balance, March 34,500 $ 34 400,000 $ 400 7,412,154 $ 7,412 $11,494,890 $ (2,305,964) $ 9,196,772
========= ===== ========= ===== ========= ======= ============ ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
<TABLE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
=======================================================================================================
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 2000
(UNCONSOLIDATED) (CONSOLIDATED)
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,342) $ (232,691)
------------ ------------
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation and amortization - 93,453
Decrease (increase) in assets:
Accounts receivable - (554,603)
Inventory - (744,957)
Deposits - (65,859)
Prepaids - 1,095
Construction in progress - (912,430)
Increase (decrease) in liabilities:
Accounts payable trade - 347,549
Accrued liability - 27,566
Accrued interest on notes payable - 96,845
------------ ------------
Total adjustments (1,342) (1,711,341)
------------ ------------
Net cash used in operating activities (1,342) (1,944,032)
------------ ------------
Cash flows used by investing activities:
Purchase of property and equipment - (1,061,728
------------ ------------
Net cash used by investing activities - (1,061,728)
------------ ------------
Cash flows from financing activities:
Net proceeds from debt - 1,827,874
Issuance of common stock - 1,233,107
------------ ------------
Net cash provided by financing activities - 3,060,981
------------ ------------
Net decrease in cash (1,342) 55,221
Cash, beginning of period 832 38,117
------------ ------------
Cash, end of period $ (510) $ 93,338
============ ============
Cash paid for interest and taxes are as follows:
Interest, net of amounts capitalized $ - $ 464,228
============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING, INVESTING, AND
FINANCING ACTIVITIES:
Issuance of Common Stock in acquisition $ - $ 1,233,107
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000
--------------------------------------------------------------------------------
1. INTERIM FINANCIAL INFORMATION
-----------------------------
The consolidated interim financial statements included herein have been
prepared by the Company, pursuant to rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments which, in the opinion of the management, are
necessary for fair presentation of the information contained therein,
it is suggested that these consolidated condensed financial statements
be read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1999. The Company follows the same accounting
policies in preparation of interim reports.
Results of operations for the interim periods are not indicative of
annual results.
2. PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements at March 31, 2000, and for the
three months then ended include the accounts of the Company and its
Subsidiary. All material intercompany balances and intercompany
transactions have been eliminated. The financial statements at March
31, 1999, and for the three months then ended were not consolidated.
3. ACQUISITION
-----------
On June 30, 2000, the Company purchased Noble Concepts - Fidelity
(Noble), a household furniture manufacturer for 750,000 shares of
common stock valued at $1,233,107. The transaction is effective as of
January 1, 2000 and was accounted for under the purchase method of
accounting. The results of operations of Noble were included in the
consolidated income statement of the Company beginning January 1, 2000
and the assets acquired were restated at their fair value. No goodwill
was recorded.
The following unaudited Pro Forma Condensed Consolidated Statement of
Income and Expense reflects adjustments to Senior Care Industries,
Inc.'s historical income statement for the year ended December 31,
1999, to give effect to this acquisition.
The accompanying unaudited Pro Forma information is presented for
illustrative purposes only and is not necessarily indicative of the
financial position or results of operations which would actually have
been reported had the acquisition been in effect during the periods
presented, or which may be reported in the future.
F-7
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000
--------------------------------------------------------------------------------
3. ACQUISITION (CONTINUED)
The accompanying unaudited Pro Forma Condensed Consolidated Statement
of Income and Expense should be read in conjunction with the historical
financial statements and related notes thereto for Senior Care
Industries, Inc.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND EXPENSE
FOR THE YEAR ENDED
DECEMBER 31, 1999
------------------
Revenues $ 4,630,457
==================
Loss from continued operations $ (98,418)
Loss on discontinued operations (20,816)
------------------
Net loss $ (119,234)
==================
Loss per share from discontinued operations $ (.004)
==================
Net loss per share $ (.025)
==================
4. INVESTMENT IN LIMITED LIABILITY COMPANY
---------------------------------------
As part of the purchase of East West Communities Developer (East West)
the Company acquired a 45% interest in Delran Associates LLC ("LLC").
The LLC has invested in undeveloped land with an approximate appraisal
value of $7,187,000. The Company's 45% interest in the LLC is valued at
$3,234,000. On April 12, 2000, Delran Associates, LLC ("Delran") filed
a claim against the Company, stating that it had a first right of
refusal to purchase the 45% interest from East West pursuant to the
terms of the Delran operating agreement. Delran is seeking to exercise
its first right of refusal. In Management's opinion, the Company should
prevail in this matter, although it is too early to predict the
eventual outcome.
F-8
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000
--------------------------------------------------------------------------------
5. REAL ESTATE LOANS AND NOTES PAYABLE
-----------------------------------
The Company has real estate and notes payable obligations as follows:
<TABLE>
REAL ESTATE LOANS
-----------------
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 2000
----------------- -----------------
<S> <C> <C>
Note payable to a bank, bearing interest at 8.5%, secured
by Deed of Trust payable in equal monthly installments
of $17,313, with a balloon payment due 2009 $ 2,139,435 $ 2,130,711
A construction loan with a mortgage company, secured by Deed of Trust
bearing interest at 12.5% payable in interest only monthly installments
of $26,695. Balloon payment
due June 1, 2001 2,297,025 2,297,025
Note payable to a bank, bearing interest at 9.25%, secured by a Deed of
Trust, payable in equal monthly installments
of $9,090 with a balloon payment due December 2004 990,000 996,090
A construction loan with a bank, bearing interest at 12.75%, secured by
a Deed of Trust, payable in interest-only monthly
installments, with a balloon payment due May 2000 770,000 990,000
Note payable to an individual, bearing interest at 10%, secured by a
second Deed of Trust, payable in interest-only monthly installments.
Maturity on the note is upon completion
of one of the Company's real estate projects. - 40,000
Note payable to a bank, secured by a Deed of Trust bearing interest at
8.375% payable in monthly installments of principal
and interest of $5,594 through March 2027. 692,079 690,538
Note payable to a bank, secured by a second Deed of Trust loan with a
bank, bearing interest at prime plus 5% payable in monthly installments
of interest only of approximately
$3,425 through February 2001. Balloon payment due February 2001. 311,789 311,789
F-9
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000
--------------------------------------------------------------------------------
5. REAL ESTATE LOANS AND NOTES PAYABLE (CONTINUED)
-----------------------------------
REAL ESTATE LOANS (CONTINUED)
-----------------
DECEMBER 31, 1999 MARCH 31, 2000
----------------- -----------------
A construction loan with a bank, secured by a second Deed of Trust,
bearing interest at prime plus 1.25% payable in interest only monthly
installments. Balloon payment due
February 2001. 2,635,285 3,294,920
----------------- -----------------
9,835,613 10,751,073
Less: current portion (200,000) (10,751,073)
----------------- -----------------
Total $ 9,635,613 $ -
================= =================
</TABLE>
The real estate loan agreements required the borrower to obtain consent
from the lender prior to the transfer of the loans to the Company. No
waivers have been obtained from those lenders to date. The loan
agreement contains various remedies to the lenders, including the
ability to call the loans. It is Management's opinion that such
transfers are common place within the construction and development
industry and no remedies by the lenders are anticipated. However, these
loans have been classified as current in the financial statements due
to aforementioned uncertainties.
<TABLE>
NOTES PAYABLE
-------------
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 2000
----------------- -----------------
<S> <C> <C>
A loan with a finance company, secured by related
equipment, bearing interest at prime plus 2% per
annum with a balloon payment of $74,984 plus all
accrued interest due September 7, 2000.
The loan was refinanced in September 2000, with a $100,000 term loan
bearing interest of prime plus 3% per annum, payments of principal and
interest of $2,100 due monthly through September 2003, secured
by the Company's assets. $ - $ 85,404
F-10
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000
--------------------------------------------------------------------------------
5. REAL ESTATE LOANS AND NOTES PAYABLE (CONTINUED)
-----------------------------------
NOTES PAYABLE (CONTINUED)
-------------
DECEMBER 31, 1999 MARCH 31, 2000
----------------- -----------------
The Company has an unsecured note payable to a company owned by a
former shareholder of Noble Concepts - Fidelity, Inc. ("Noble"), which
the Company assumed in the purchase of Noble. (Note 3) The note payable
bears an interest rate of 8.43% per annum, has monthly payments of
interest and principal in the amount of $2,350 and is due on
June 15, 2001. - 32,563
The Company, as a part of an asset purchase agreement, agreed to issue
to a third party a $700,000 note, accrued interest paid monthly
beginning April 2001, principal and unpaid accrued interest due on
March 29, 2002, or the date Evergreen Manor II, a project of the
Company is sold out, whichever is earlier. The note has no prepayment
penalty and bears an interest rate of 14% per annum. 700,000 700,000
----------------- -----------------
700,000 817,967
Less: current portion - (111,959)
----------------- -----------------
Total $ 700,000 $ 706,008
================ =================
</TABLE>
<TABLE>
Minimum maturities of notes payable at March 31, 2000 are as follows:
<CAPTION>
REAL ESTATE LOANS NOTES PAYABLE TOTAL
--------------- --------------- ---------------
<S> <C> <C> <C>
2001 $ 10,751,073 $ 111,959 $ 10,863,032
2002 - 706,008 706,008
2003 - - -
2004 - - -
2005 and thereafter - - -
--------------- --------------- ---------------
$ 10,751,073 $ 817,967 $ 11,569,040
=============== =============== ===============
</TABLE>
F-11
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000
--------------------------------------------------------------------------------
6. LINES OF CREDIT
---------------
<TABLE>
The Company has the following lines of credit available:
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 2000
----------------- -----------------
<S> <C> <C>
An unsecured $500,000 line of credit from a vendor,
bearing an interest rate of 14% per annum. The line
of credit expires September 21, 2001. $ - $ 4,995
An unsecured $1,000,000 line of credit with a
financial consultant of the Company, bearing interest
at 14% per annum. Interest and principal are due on
January 1, 2002. - 190,423
A $1,000,000 revolving credit loan with a finance
company, bearing interest at prime plus 2% per annum,
which expired August 7, 2000. The line of credit was
secured by the accounts receivable and inventory of
the Company's Noble Furniture division.
The revolving line of credit was refinanced in September 2000 with
another $1,000,000 revolving credit facility with a finance company,
bearing interest of the greater (a) prime plus 3% per annum or (b)
12.5% per annum, secured by accounts receivable, inventory, and all of
the assets of the Company. The revolving line of credit expires on the
first anniversary of the loan and is automatically renewed each
subsequent anniversary date unless either party terminates the
agreement. - 651,522
----------------- -----------------
- 846,940
Less: current portion - (656,517)
----------------- -----------------
Total $ - $ 190,423
================= =================
</TABLE>
F-12
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000
--------------------------------------------------------------------------------
7. CAPITAL STOCK
-------------
PREFERRED STOCK
---------------
The Company has 5,000,000 shares of $0.001 par value preferred stock
authorized, which is allocated as follows:
SERIES A CONVERTIBLE
--------------------
The Company has issued 34,500 shares of Series A $0.001 preferred
stock. Each share of preferred stock is convertible into .12
shares of the Company's $0.001 par value common stock. The Series
A Convertible Preferred Stock has no voting rights or dividend or
liquidation preferences.
SERIES B CONVERTIBLE
--------------------
The Company has issued 400,000 shares of Series B $0.001 par value
preferred stock. Each share of Series B preferred stock is
convertible into 5 shares of the Company's $0.001 par value common
stock. The Series B Convertible Preferred Stock has no voting
rights or dividend or liquidation preferences.
CONVERSION OF PREFERRED 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.
8. INCOME TAXES
------------
The Company incurred taxable losses for federal and state purposes for
the period ended March 31, 2000. Accordingly, the Company did not incur
any federal income tax expense for the period other than the minimum
required taxes for state purposes.
Deferred income tax assets and liabilities are computed based on
temporary differences between the financial statement and income tax
bases of assets and liabilities using the enacted marginal income tax
rate in effect for the year in which the differences are expected to
reverse. Deferred income tax expenses or credits are based on the
changes in the deferred income tax assets or liabilities from period to
period.
F-13
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000
--------------------------------------------------------------------------------
8. INCOME TAXES (CONTINUED)
------------
The Company's effective tax benefit on pretax loss differs from the
U.S. Federal statutory tax rate for the period ended March 31, 2000 as
follows:
Federal statutory tax (benefit) (34.00%)
State of California tax (benefit) (5.83%)
--------------------
(39.83%)
====================
Significant components of the Company's deferred tax asset at March 31,
2000 is as follows:
STATE OF
FEDERAL CALIFORNIA
--------------- ---------------
Net operating loss carryforwards $ 767,000 $ 20,300
--------------- ---------------
Gross deferred tax assets 767,000 20,300
Valuation allowance (767,000) (20,300)
--------------- ---------------
Net deferred tax assets $ - $ -
=============== ===============
At March 31, 2000, the Company had net operating loss carryforwards of
approximately $2,306,000 related to federal and California state income
taxes, which can be used to offset future federal and state taxable
income from operations. These carryforwards will begin to expire in
2007 and will expire in 2020 for federal purposes and will expire in
2007 for state purposes.
SFAS No. 109 requires a valuation allowance to be recorded when it is
more likely than not that some or all of the deferred tax assets will
not be realized. At March 31, 2000, a valuation for the full amount of
the net deferred tax asset was recorded due to the uncertainties as to
amount of taxable income that would be generated in future years.
Due to the "change in ownership" provisions in Internal Revenue Code
Section 382, the availability of the Company's net operating loss carry
forwards may be subject to an annual limitation against taxable income
carry forwards.
F-14
<PAGE>
SENIOR CARE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND MARCH 31, 2000
--------------------------------------------------------------------------------
9. 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 party
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 its early stages and the ultimate
outcome of this proceeding cannot be predicted.
F-15
<PAGE>
Item 2. Plan of Operation
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.
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.
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.
Senior Care Industries is a diversified firm consisting of a real estate
division a manufacturing division, and a pharmaceutical.nutriceutical division.
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.
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.
11
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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 will complete construction on a 44 unit senior condominium project
in Monterey Park, California in October of 2000 known as Evergreen Manor II.
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.
Additionally, the Company has entered into escrow on the purchase of a 15,000
acre site in the State of Tennessee which contains timber and substantial coal
reserves. The Company intends to lease the timber for harvesting and replanting.
It also intends to develop 1,000 acres of the land into a senior oriented
fishing and outdoor sports resort along the banks of a river and stream that
runs through the property.
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
November, 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.
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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.
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.
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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.
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Item 2. Changes in Securities
The following issuance of securities was made pursuant to an S-8
Registration which was filed on April 8, 2000 for securities issued during the
first quarter:
The following persons and entities acquired shares in the Company pursuant to a
compensatory benefit plan with SENR for legal and consulting services they
provided to SENR and received shares as set forth below:
NUMBER OF NUMBER OF % OF SHARES
SHARES SHARES NUMBER OF OWNED BY
SELLING OWNED REGISTERED BY SHARES OWNED SHAREHOLDER
SHAREHOLDERS(1) BEFORE SALE PROSPECTUS AFTER SALE AFTER SALE
----------------------- ------------- ------------- ------------ -----------
Globalwide 7,000 7,000 -0- -0-
Investment Co., LLC (1)
----------------------- ------------- ------------- ------------ -----------
Defined Holding
Corporation (2) 50,000 50,000 -0- -0-
----------------------- ------------- ------------- ------------ -----------
American Accounting
& Auditing, Inc. (3) 50,000 50,000 -0- -0-
----------------------- ------------- ------------- ------------ -----------
(1) Brian Dvorak, Esq., is the managing member of Globalwide Investment Co. LLC
and performed consulting services for SENR and has chosen to take his fees
through the investment company.
(2) Defined Holding Corporation is the agent for Public Securities Services,
Inc. who performed consulting services for SENR in connection with the
drafting and filing of all of its current reports with the Securities and
Exchange Commission. Lawrence R. Young, Esq. is an attorney who passed upon
this offering is a beneficial owner of 50% of the outstanding stock in
Defined Holding Corporation, the agent for Public Securities Services, Inc.
John Cruickshank is the other 50% owner of stock in Defined Holding
Corporation.
(3) American Accounting and Auditing, Inc. performed accounting and consulting
services for SENR.
All other issuances of the Company's securities were disclosed in its Annual
Report, 10-KSB, filed on March 27, 2000.
Item 3. Defaults Upon 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.
The following 8-K Reports were filed by the Company which relate to
the first quarter of 2000:
An 8-K Report filed on April 21, 2000 noting changes in the Company's
certifying accountants.
An 8-K Report 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 filed on May 15, 2000 noting the acquisition by the
Company of Nobel Concepts Fidelity, Inc., a furniture manufacturing company.
All of the above noted 8-K Reports are incorporated herein by reference
as though fully set forth.
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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: September 22, 2000 /s/ Stephen Reeder
----------------------------
Stephen Reeder
Chief Executive Officer
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