UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File No. 0-27159
National Rehab Properties, Inc.
(Name of Small Business Issuer in its charter)
Nevada 65-0439467
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
2921 NW Sixth Avenue, Miami, Florida 33127
(Address of principal executive offices)
(305) 573-8882
(Issuer's Telephone Number Including Area Code)
(former name, former address and former fiscal year
if changed since last report)
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 x No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date:
Title of each class of Common Stock Outstanding at August 11, 2000
----------------------------------- ------------------------------
Common Stock, $0.001 par value 50,161,866
Transitional Small Business Disclosure Format (check one):
Yes No x
<PAGE>
TABLE OF CONTENTS
FORM 10-QSB REPORT - FOR QUARTER ENDED JUNE 30, 2000
National Rehab Properties, Inc.
PART I
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 2000 (unaudited) and September 30, 1999 (audited) 3
Condensed Consolidated Statements of Operations 4
Nine months ended June 30, 2000 and 1999
(unaudited)
Condensed Consolidated Statements of Operations 5
Three Months ended June 30, 2000 and 1999
(unaudited)
Condensed Consolidated Statements of Cash Flows 6
Nine months ended June 30, 2000 and 1999
(unaudited)
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II
Item 1. Legal Proceedings 11
Item 2. Change in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE PAGE 12
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
National Rehab Properties, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
ASSETS
<CAPTION>
JUNE 30, SEPTEMBER 30,
2000 1999
(UNAUDITED) (AUDITED)
---------- ----------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 827,918 $ 411,257
Inventory-Real Estate Holdings 2,948,055 1,216,381
Subscriptions Receivable - 500,000
Mortgages Receivable 52,241 12,358
Prepaid Expenses 5,000 57,000
---------- ----------
Total Current Assets 3,833,214 2,196,996
Property, Plant and Equipment (Net of $21,657 and $12,061
accumulated depreciation at June 30, 2000 and
September 30, 1999) 47,849 47,435
Other Assets: 453,750 352,062
---------- ----------
Total Assets $4,334,813 $2,596,493
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses $ - $ 82,203
Notes and Mortgages Payable 1,933,191 1,597,500
---------- ----------
Total Current Liabilities 1,933,191 1,679,703
Stockholders' Equity:
Common Stock, $.001 Par Value; authorized 100,000,000
shares; issued and outstanding 45,316,967 and 9,054,773
at June 30,2000 and September 30, 1999 45,317 9,055
Common Stock Class A Voting, $.001 Par Value; authorized
2,000,000 shares; issued and outstanding 1,000,000 and
1,000,000 at June 30, 2000 and September 30, 1999 1,000 1,000
Additional Paid In Capital 3,146,167 1,324,190
Accumulated Deficit (790,862) (417,455)
---------- ----------
Total Stockholders' Equity 2,401,622 916,790
---------- ----------
Total Liabilities and Stockholders' Equity $4,334,813 $2,596,493
========== ==========
</TABLE>
3
<PAGE>
<TABLE>
NATIONAL REHAB PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30,
(UNAUDITED)
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ 1,119 $ 373,819
Cost of Goods Sold 27,941 138,292
---------- ----------
Gross Profit (26,822) 235,527
Operating Expenses 358,562 204,646
---------- ----------
Income (Loss) Before Other Income (Expense) (385,384) 30,881
Interest Income 11,977 5,355
---------- ----------
Net Income (Loss) (373,407) 36,236
========== ==========
Income (Loss) Per Common Share $ (0.0161) $ 0.0371
========== ==========
Weighted Average Common Shares Outstanding 23,147,168 977,370
========== ==========
</TABLE>
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<PAGE>
<TABLE>
NATIONAL REHAB PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30,
(UNAUDITED)
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ - $ 7,300
Cost of Goods Sold 7,598 1,000
---------- ----------
Gross Profit (7,598) 6,300
Operating Expenses
72,743 138,751
---------- ----------
Income (Loss) Before Other Income (Expense) (80,341) (132,451)
Interest Income 4,524 3,039
---------- ----------
Net Income (Loss) (75,817) (129,412)
========== ==========
Income (Loss) Per Common Share $ (0.0033) $ (0.1324)
========== ==========
Weighted Average Common Shares Outstanding 23,147,168 977,370
========== ==========
</TABLE>
5
<PAGE>
<TABLE>
NATIONAL REHAB PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30
<CAPTION>
2000 1999
------------ -----------
<S> <C> <C>
Cash Flow from Operating Activities:
Net Income (Loss) $ (373,407) $ 36,236
Adjustments to Reconcile Net Loss to Net Cash Used For
Operating Activities:
Depreciation and Amortization 15,433 7,803
Changes in Assets and Liabilities:
(Increase) Decrease in Inventory-Real Estate Holdings (1,731,674) 585,690
(Increase) Decrease in Subscriptions Receivable 500,000 -
(Increase) Decrease in Mortgages Receivable (39,883) 17,076
(Increase) Decrease in Prepaid Expenses 52,000 22,283
(Increase) Decrease in Other Assets (101,688) (79,678)
Increase (Decrease) in Accounts Payable and Accrued Expenses (82,203) (41,828)
Increase (Decrease) in Notes and Mortgages Payable 335,691 (674,892)
----------- -----------
Net Cash Used in Operating Activities (1,425,731) (127,310)
Cash Flow from Investing Activities (15,847) (40,681)
Cash Flow from Financing Activities:
Proceeds From Common Stock 1,858,239 469,000
Net increase (decrease) in Cash 416,661 301,009
----------- -----------
Cash - Beginning 411,257 13,754
----------- -----------
Cash - Ending $ 827,918 $ 314,763
============ ===========
</TABLE>
6
<PAGE>
NATIONAL REHAB PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
GENERAL
Basis of Presentation - The unaudited condensed consolidated financial
statements include the accounts of the Company and its subsidiary. Intercompany
balances have been eliminated in consolidation.
Interim Financial Information - The financial information contained herein is
unaudited but includes all normal and recurring adjustments which, in the
opinion of management, are necessary to present fairly the information set
forth. The unaudited condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements, which are included in
the Company's Annual Report on Form 10-KSB for the year ended September 30,
1999.The Company's results for interim periods are not necessarily indicative of
results to be expected for the fiscal year of the Company ending September 30,
2000. The Company believes that this Quarterly Report filed on Form 10-QSB is
representative of its financial position, its results of operations and its cash
flows for the periods ended June 30, 2000 and 1999 covered thereby.
Comprehensive Income - In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income." SFAS 130 requires companies to disclose
comprehensive income and its components. The Company currently has no items of
other comprehensive income and therefore SFAS 130 does not apply.
LEGAL PROCEEDINGS
The Company has no pending legal proceedings at this time.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview
--------
The Company was incorporated in Florida in 1993 and completed a reverse
merger with a Nevada corporation in 1994. The Company has undergone many changes
to date as a result of certain reorganizations, acquisitions and changes of
management. Historical changes are more fully disclosed in the Company's 8-K
dated February 14, 2000. The Company is currently authorized to issue
100,000,000 common shares, $0.001 par value and 2,000,000 shares of Class A
("super voting") common stock. Our offices are located at 2921 NW 6th Avenue,
Miami, Florida 33127 and our telephone number is (305) 573-8882. Our business is
currently based in Miami, Florida. As a public Company, National Rehab
Properties, Inc. is traded over-the-counter as a bulletin board stock under the
symbol "NRPI". We believe that the Company has over 1200 stockholders.
Historically the Company has specialized in renovating or rebuilding
starter homes. In order for us to buy real estate for our business of
rehabilitating houses or building houses, construction financing is necessary.
We finance our real estate projects with first mortgages from banks at bank
rates.
(a) Plan of Operation:
FORWARD-LOOKING STATEMENTS
--------------------------
The securities of the Company are speculative and involve a high degree of
risk, including, but not necessarily limited to, the factors affecting operating
results described in the Form 8K dated February 14, 2000 and other filings with
the SEC. The statements which are not historical facts contained in this report,
including statements containing words such as "believes," "expects," "intends,"
"estimates," "anticipates," or similar expressions, are "forward looking
statements" (as defined in the Private Securities Litigation Reform Act of 1995)
that involve risks and uncertainties.
The foregoing and subsequent discussion contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, which are intended to be
covered by the safe harbors created thereby. These forward-looking statements
include the plans and objectives of management for future operations, including
plans and objectives relating to the possible further capitalization and future
acquisitions of real estate or other cash flow business. The forward-looking
statements included herein are based on current expectations that involve
numerous risks and uncertainties. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive and
market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could be
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Form 10-QSB will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
Current Status and Operations
Subsequent to the year ended September 30, 1999, the Company changed its
operational direction from that of building or remodeling relatively low cost
"starter" homes to the business of developing multifamily housing projects. As a
result of this change in operations, although projects are in the development
stage, no revenues were generated in the six month period ended June 30, 2000.
The Company's financial statements are therefore not indicative of anticipated
revenues which may be attained or expenditures which may be incurred by the
Company in future periods. The Company's ability to achieve profitable
operations is subject to the validity of its assumptions and risk factors within
the industry and pertaining to the Company. The market for real estate
development and housing construction is highly competitive and subject to
economic changes, regulatory developments and emerging industry standards. We
believe that the principal competitive factors in its markets are conformance to
building standards, reliability, safety, price and quality of its final product.
There can be no assurance that the Company will compete successfully in the
future with respect to these or other factors.
8
<PAGE>
For the nine months ending June 30, 2000, the Company incurred a loss from
operations of $385,384, compared to income from operations of $30,881 in the
quarter ending June 30, 1999. The net loss in the nine month period ended June
2000 was the result of change in business direction from remodeling of private
homes to development of multifamily housing projects. As a result of the change
in operational direction, there were no revenues in the quarter ended June 30,
2000. The Company's quarter ended June 30, 2000 financial statements reflect
adjustments and nonrecurring items of both revenue and costs, as well as
development stage costs and are not indicative of anticipated revenues which may
be attained or expenditures which may be incurred by the Company in future
periods.
For the quarter ending June 30, 2000, the Company incurred a loss from
operations of $80,341, compared to a loss from operations of $132,451 in the
quarter ending June 30, 1999. The net loss in the quarter ended June 2000 was
the result of change in business direction from remodeling of private homes to
development of multifamily housing projects. As a result of the change in
operational direction, there were no revenues in the quarter ended June 30,
2000. The Company's Quarter ended June 30, 2000 financial statements reflect
adjustments and nonrecurring items of both revenue and costs, as well as
development stage costs and are not indicative of anticipated revenues which may
be attained or expenditures which may be incurred by the Company in future
periods.
(b) Liquidity and Capital Resources
From July 1, 2000 to the end of fiscal year ended September 30, 2000, the
Company estimates its cash needs to maintain operations under its current
negative cash flow situation is approximately $75,000. This amount is composed
of $75,000 for working capital assuming that current operations continue in its
present status. These amounts do not include offsets for anticipated amounts of
cash generated from operations. The monthly reoccurring costs of our corporate
offices are estimated to be approximately $20,000 per month. The monthly expense
of $20,000 includes payroll, payroll taxes, dues and subscriptions, utilities
for the corporate offices, health insurance for the employees, general liability
insurance, office supplies, postage and freight, professional fees for
accounting, legal and other consultants, corporate office rent, repairs and
maintenance primarily for office equipment, telephone expenses and travel and
entertainment.
The Company has limited capitalization and is dependent on the proceeds of
private or public offerings to continue as a going concern and implementing a
business plan. As of June 30, 2000, the unaudited results of the Company
indicated working capital of $1,900,023. All during fiscal 1999 and to the date
of this filing, the Company has had and continues to have a substantial need for
working capital for normal operating expenses associated with the Company
continuing as a going concern. This lack of cash has slowed its ability to
develop its business plan or initiate any other revenue producing operations.
Any activity in the real estate development business requires adequate financing
and on-going funding sources. The Company has entered this industry with limited
financing and funding sources.
Prior to our inception as a publicly owned company, we relied primarily
upon loans originated by the Company's founder, Richard S. Astrom. These loans
helped to finance working capital needs when operations did not provide enough
cash flow. Additionally, we have relied upon bank financing to acquire
properties and pay operational costs. The bank financing has required the
personal guarantee of Mr. Christopher Astrom. In the future, we will need to
acquire additional financing for the company with the proceeds of mortgage
funding or public or private offerings of stock. However, we currently have
sufficient funds to continue operations and new acquisitions will also supply
additional funds to continue operations. Therefore, any future funding will
result from business expansion and/or improvements to our financial lending
structure. Thus, we do not have a schedule of future funds to be acquired and
quantified because it is difficult to estimate when, or if, business expansion
will occur or when, or if, financial lucrative opportunities present themselves.
If funds are required in the future they may be generated from stock sales or
from the mortgaging of real estate. There can be no assurance that any such
funds will be available on favorable terms and conditions when the capital is
required.
In January 1999 we completed a reverse split of our common stock on a 1 for
10 basis and proceeded to raise $557,500 from the sale and/or conversion into
common stock of senior subordinated debentures. The reverse split was done in
order to reduce the number of shares outstanding so that it would be possible to
attract investment capital through the sale of common stock. In addition, the
Company raised $211,500 from the sale of our restricted stock during the 1999
fiscal year ended September 30, 1999.
9
<PAGE>
On June 12, 2000, by a written consent in lieu of combined special meeting
of Directors and Shareholders, pursuant to permissive provisions of the Nevada
General Corporation Act, Chapter 78, Nevada Revised Statutes, the holders of a
majority of each class of the authorized, issued and outstanding voting capital
stock of the Company consented to the amendment of the articles of incorporation
of the Company increasing the authorized shares of the Company's $.001 par value
Common Stock from 40,000,000 to 100,000,000 shares authorized. No proxy
statement was issued and no shareholder proxies were solicited or accepted for
the written consent in lieu of combined special meeting of Directors and
Shareholders.
On June 17, 1999, by a written consent in lieu of combined special meeting
of Directors and Shareholders, a new class of common stock, "Class A common
stock, " was authorized on June 17, 1999. On that same date, 1,000,000 shares
were issued to Mr. Christopher Astrom. Each share of Class A common stock
entitles Mr. Astrom to the equivalent of 20 common share votes in any matter to
be voted on by the shareholders of the Company. The present principal
shareholders will maintain voting control of the Company based on the issuance
of 1,000,000 Class A common shares on June 17, 1999, which entitle the holder
thereof (Christopher Astrom) to 20 votes for every Class A share held. The
purpose of issuing these shares is to ensure that current management will
maintain control of the Company despite maintaining beneficial ownership of less
than a majority of the shares of the Company's common stock. Furthermore, the
disproportionate vote afforded the Class A common stock will prevent or impede
potential acquirers from seeking to acquire control of the Company, which could
have a depressive effect on the price of our common stock. An additional
1,000,000 of the authorized 2,000,000 shares of Class A common stock is
available for issuance. The Class A common stock is non-transferable except to a
family member. Richard Astrom, President, CEO and Director, is the father of
Christopher Astrom, Vice President, Secretary and Director of the Company.
Richard Astrom and Christopher Astrom make up the majority of the Board of
Directors of the Company and control the activities and actions of the Company.
The Company's debt in the form of secured mortgage notes and real estate
mortgages with regard to real estate transactions which are entered into by the
Company are personally guaranteed by Christopher Astrom.
On March 1, 1999, Christopher Astrom was granted options to acquire
6,000,000 shares of common stock at a price of $.001 per share. On April 3,
2000, Mr. Astrom exercised his option and acquired 6,000,000 shares of the
Company's $.001 par value common stock for payment of $6,000. These options were
authorized and awarded to Mr. Christopher Astrom by a written consent in lieu of
combined special meeting of Directors and Shareholders held on March 1, 1999.
The options were granted to Christopher Astrom in consideration for waiver of
compensation during 1996 and 1997.
The President of the Company, Richard Astrom, owed the Company $302,000
pursuant to a note which matured September 20, 2000. During the quarter ended
June 30, 2000 the $302,000 note and interest accrued thereon was converted from
a note receivable to a prepaid management fee pursuant to an agreement with
Richard Astrom, the Company's President.
On April 1, 2000, the Company acquired, in a transaction exempt from
registration, eighty percent of the common stock of Encore Services, Inc., a
Florida Corporation, in exchange for (a) 250,000 shares of the Company's $.001
par value common stock issued to Braulio Gutierrez, and (b) an assignment and
assumption agreement with Encore Services, Inc. whereby, with the assent of HLKT
Holdings, L.L.C., Encore Services, Inc. assigned to the Company and the Company
irrevocably and unconditionally assumed all the rights and obligations of Encore
Services, Inc. under a $1,000,000 convertible Debenture previously issued by
Encore Services, Inc. to HLKT Holdings, L.L.C., a Colorado Limited Liability
Company, on March 15, 2000. On April 1, 2000 Mr. Gutierrez was appointed as a
Director of the Company. Commencing April 12, 2000, and continuing through June
28, 2000, the total $1,000,000 face amount of the Debenture was presented to the
Company's transfer agent for conversion in accordance with the terms of the
Debenture to unrestricted $.001 par value common stock of the Company pursuant
to the assignment and assumption agreement with Encore Services, Inc. A total of
28,856,464 shares of the Company's $.001 par value common stock were exchanged
for the $1,000,000 Debenture, and an additional 140,023 shares of the Company's
$.001 par value common stock were issued in payment of accrued interest on the
Debenture.
At June 30, 2000, we had $827,918 in cash assets, inventories of real
estate holdings of $2,948,055 and current liabilities of $1,933,191, resulting
in a working capital reserve of $1,900,023 at June 30, 2000. In the quarter
ending June 30, 2000, we recorded a net loss of $75,817. In order to conserve
cash assets, the Company's management expects to take defensive measures,
including slowing construction, acquiring additional mortgage
10
<PAGE>
financing and/or selling additional stock. Management believes that we will be
able to support ourselves with operational cash flow. However, no assurances can
be given that present factors such as favorable economy and attractive interest
rates will continue, the effect of which might severely impact the ability of
the Company to sustain itself in the future. There can be no assurances that
additional funding will be available.
At June 30, 2000 (unaudited), the following contingent stock issue
requirements were outstanding:
None
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of the date hereof, the Company's short and long term debt carries
either fixed and variable interest rates and the fair market value of this debt
is sensitive to changes in prevailing interest rates. The Company runs the risk
that market rates will decline and the required payments on fixed rate debt will
exceed those based on the current market rate as well as the risk of increases
in interest rates on variable rate debt. The Company does not use interest rate
derivative instruments to manage its exposure to interest rate changes.
PART II
ITEM 1. LEGAL PROCEEDINGS
There is no non-course of business legal proceedings to which the Company
is a party or to which the property of the Company is subject pending or is
known by the Company to be contemplated.
ITEM 2. CHANGE IN SECURITIES.
On June 12, 2000, by a written consent in lieu of combined special meeting
of Directors and Shareholders, pursuant to permissive provisions of the Nevada
General Corporation Act, Chapter 78, Nevada Revised Statutes, the holders of a
majority of each class of the authorized, issued and outstanding voting capital
stock of the Company consented to the amendment of the articles of incorporation
of the Company increasing the authorized shares of the Company's $.001 par value
Common Stock from 40,000,000 to 100,000,000 shares authorized. No proxy
statement was issued and no shareholder proxies were solicited or accepted for
the written consent in lieu of combined special meeting of Directors and
Shareholders.
ITEM 3. Defaults Upon Senior Securities. NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 12, 2000, by a written consent in lieu of combined special meeting
of Directors and Shareholders, pursuant to permissive provisions of the Nevada
General Corporation Act, Chapter 78, Nevada Revised Statutes, the holders of a
majority of each class of the authorized, issued and outstanding voting capital
stock of the Company consented to the amendment of the articles of incorporation
of the Company increasing the authorized shares of the Company's $.001 par value
Common Stock from 40,000,000 to 100,000,000 shares authorized. No proxy
statement was issued and no shareholder proxies were solicited or accepted for
the written consent in lieu of combined special meeting of Directors and
Shareholders.
ITEM 5. OTHER INFORMATION:
On March 1, 1999, Christopher Astrom was granted options to acquire
6,000,000 shares of common stock at a price of $.001 per share. On April 3,
2000, Mr. Astrom exercised his option and acquired 6,000,000 shares of the
Company's $.001 par value common stock for payment of $6,000. These options were
authorized and awarded to Mr. Christopher Astrom by a written consent in lieu of
combined special meeting of Directors and Shareholders held on March 1, 1999.
The options were granted to Christopher Astrom in consideration for waiver of
compensation during 1996 and 1997.
On April 1, 2000, the Company acquired, in a transaction exempt from
registration, eighty percent of the common stock of Encore Services, Inc., a
Florida Corporation, in exchange for (a) 250,000 shares of the Company's $.001
par value common stock issued to Braulio Gutierrez, and (b) an assignment and
assumption agreement with
11
<PAGE>
Encore Services, Inc. whereby, with the assent of HLKT Holdings, L.L.C., Encore
Services, Inc. assigned to the Company and the Company irrevocably and
unconditionally assumed all the rights and obligations of Encore Services, Inc.
under a $1,000,000 convertible Debenture previously issued by Encore Services,
Inc. to HLKT Holdings, L.L.C., a Colorado Limited Liability Company, on March
15, 2000. On April 1, 2000, Mr. Gutierrez was appointed as a Director of the
Company. Commencing April 12, 2000, and continuing through June 28, 2000, the
total $1,000,000 face amount of the Debenture was presented to the Company's
transfer agent for conversion in accordance with the terms of the Debenture to
unrestricted $.001 par value common stock of the Company pursuant to the
assignment and assumption agreement with Encore Services, Inc. A total of
28,856,464 shares of the Company's .001 par value common stock were exchanged
for the $1,000,000 Debenture, and an additional 140,023 shares of the Company's
$.001 par value common stock were issued in payment of accrued interest on the
Debenture.
The President of the Company, Richard Astrom, owed the Company $302,000
pursuant to a note which matured September 20, 2000. During the quarter ended
June 30, 2000, the $302,000 note and interest accrued thereon was converted from
a note receivable to a prepaid management fee pursuant to an agreement with
Richard Astrom, the Company's President.
On June 17, 1999, by a written consent in lieu of combined special meeting
of Directors and Shareholders, a new class of common stock, "Class A common
stock," was authorized. On that same date, 1,000,000 shares were issued to Mr.
Christopher Astrom. Each share of Class A common stock entitles Mr. Astrom to
the equivalent of 20 common share votes in any matter to be voted on by the
shareholders of the Company. The present principal shareholders will maintain
voting control of the Company based on the issuance of 1,000,000 Class A common
shares on June 17, 1999, which entitle the holder thereof (Christopher Astrom)
to 20 votes for every Class A share held. The purpose of issuing these shares is
to ensure that current management will maintain control of the Company despite
maintaining beneficial ownership of less than a majority of the shares of the
Company's common stock. Furthermore, the disproportionate vote afforded the
Class A common stock will prevent or impede potential acquirers from seeking to
acquire control of the Company, which could have a depressive effect on the
price of our common stock. An additional 1,000,000 of the authorized 2,000,000
shares of Class A common stock is available for issuance. The Class A common
stock is non-transferable except to a family member. Richard Astrom, President,
CEO and Director, is the father of Christopher Astrom, Vice President, Secretary
and Director of the Company. Richard Astrom and Christopher Astrom make up the
majority of the Board of Directors of the Company and control the activities and
actions of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) The Company filed the following reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report signed on its
behalf by the Undersigned, thereunto duly authorized.
NATIONAL REHAB PROPERTIES, INC.
Date: August 16, 2000 By: /s/ Richard Astrom
--------------------------------
Richard Astrom, President and
Chief Executive Officer
12
