U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
/ X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended DECEMBER 31, 1996
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to ______________
Commission file number 0-5097
UNITED VANGUARD HOMES, INC.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-2032899
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
4 Cedar Swamp Road, Glen Cove, New York 11542
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(516) 759-1188
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
- --------------------------------------------------------------------------------
(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 practicable date: At December 31, 1996, there
were outstanding 3,320,950 shares of the Registrant's Common Stock, $.01 par
value.
Transitional Small Business Disclosure Format:
Yes / /No / X /
<PAGE>
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION: Page No.
Consolidated Balance Sheets (Unaudited) -
Dec. 31 and March 31, 1996........................................2
Consolidated Statement of Earnings (Unaudited)
Three and Nine Months Ended December 31, 1996 and 1995 ...........4
Consolidated Statement of Stockholders' Deficiency (Unaudited)
Nine Months Ended Dec. 31, 1996...................................5
Unaudited Consolidated Statement of Cash Flows
For the Nine Months Ended Dec. 31, 1996 and 1995..................6
Notes to Unaudited Consolidated Financial Statements................7
Management's Discussion and Analysis or Plan of Operation...........9
PART II. OTHER INFORMATION:
Exhibits and Reports on Form 8-K...................................11
Signatures.........................................................12
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
Dec. 31, March 31,
CURRENT ASSETS 1996 1996
---- ----
<S> <C> <C>
Cash $ 534,820 $ 210,245
Accounts receivable, less allowance for doubtful
accounts of $40,000 529,721 413,539
Development fees and advances 408,504 270,864
Due from affiliates, net 165,189 658,717
Prepaid expenses and other 271,684 274,654
---------- ----------
Total current assets 1,909,918 1,828,019
PROPERTY AND EQUIPMENT - NET 2,315,730 2,361,698
OTHER ASSETS
Development fees 795,020 575,017
Restricted assets 99,600 176,352
Deferred income taxes 981,000 981,000
Other assets 128,256 165,453
---------- ----------
2,003,876 1,897,822
---------- ----------
$6,229,524 $6,087,539
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
2
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
Dec. 31, March 31,
1996 1996
---- ----
CURRENT LIABILITIES
<S> <C> <C>
Current portion of long-term debt $ 4,847,802 $626,043
Accounts payable 162,202 242,470
Accrued expenses 1,228,685 617,043
Income taxes payable 416,389 442,371
----------- -----------
Total Current Liabilities 6,655,078 1,927,927
RESIDENT SECURITY DEPOSITS 315,214 314,705
LONG-TERM DEBT, less current portion 1,853,626 7,172,982
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Preferred stock $.001 par value; 1,000,000
shares authorized; none issued and outstanding
Common stock, $.01 par value; authorized,
14,000,000 shares; issued and outstanding,
3,320,950 shares and 1,827,833 shares in
Dec. 31, and March 31, 1996, respectively 33,210 18,278
Additional paid-in capital 7,205,226 5,619,905
Accumulated deficit (9,832,830) (8,966,258)
---------- ----------
(2,594,394) (3,328,075)
---------- ----------
$6,229,524 $6,087,539
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
3
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
1996 1995 1996 1995
---- ---- ---- ----
Operating Revenues:
<S> <C> <C> <C> <C>
Resident Services $ 1,256,595 $1,207,920 $3,777,826 $3,631,923
Health care services 656,567 659,458 1,973,387 1,970,920
Management Fees 30,000 - 30,000 -
Development fees 81,040 510,215 220,000 930,215
----------- ---------- ---------- ----------
2,024,202 2,377,593 6,001,213 6,533,058
Operating Expenses:
Residence operating expenses 1,590,863 1,571,891 4,566,278 4,432,632
General and administrative 249,824 139,058 557,967 301,630
Depreciation and amortization 65,966 94,141 203,922 312,693
Provision for loss on (Recovery of)
advances to affiliates - (41,898) 42,494 354,461
----------- ---------- ----------- ----------
1,906,653 1,763,192 5,370,661 5,401,416
Income from operations 117,549 614,401 630,552 1,131,642
Other Income (expense)
Interest expense, net (145,399) (113,181) (415,327) (460,763)
Other income 13,531 119,291 129,677 163,474
Debt conversion expense - - (156,466) -
Cost related to aborted Public Offering (1,000,000) - (1,000,000) -
------------ ---------- ----------- --------
Income before income taxes (1,014,319) 620,511 (811,564) 834,353
Income Taxes (47,492) 252,615 55,008 339,672
------------ ---------- ----------- ----------
NET INCOME (LOSS) $ (966,827) $ 367,896 $(866,572) $ 494,681
============ ========== ========== ==========
Earnings per share $(.29) $.32 $(.39) $.25
Common shares and equivalents outstanding 3,320,950 1,158,118 2,243,895 1,972,342
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
NINE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, April 1, 1996 1,827,833 $18,278 $5,619,905 $(8,966,258) $(3,328,075)
Shares issued upon conversion
of debt 347,996 3,480 1,386,918 1,390,398
Exercise of warrants 62,121 622 206,452 207,074
Shares issued as compensation 3,000 30 2,751 2,781
Shares reissued to VVI previously
canceled conditional on completion
of public offering 1,080,000 10,800 (10,800)
Net loss for the nine months
ended December 31, 1996 (866,572) (866,572)
--------- -------- ---------- ----------- -----------
Balance, December 31, 1996 3,320,950 $33,210 $7,205,226 $(9,832,830) $(2,594,394)
========= ======= ========== ============ ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1996 1995
---- ----
Cash flows from operating activities
<S> <C> <C>
Net income ($866,572) $494,681
Adjustments to reconcile net income to net cash provided
by (used in) operating activities
Depreciation and amortization 238,925 312,742
Common stock issued for services 2,781
Deferred income taxes (498,309)
Debt Conversion expense 156,466
Changes in operating assets and liabilities
Accounts receivable, advances and other receivables (73,708) 877,504
Prepaid expenses and other 18,578 (296,466)
Development fees 154,806 368,034
Decrease in due to affiliates (61,278)
Accounts payable (80,365) (38,940)
Accrued expenses 611,642 (166,912)
Income taxes payable (26,000) 196,119
Resident security deposits 507 8,037
Deferred revenue (177,221)
--------- ---------
Net cash provided by operating activities 75,782 1,079,269
--------- ---------
Cash flows used in investing activities
Purchases of property and equipment (144,600) (46,257)
--------- --------
Cash flows from financing activities
Proceeds from borrowings on mortgages and notes payable 547,591
Principal repayments of mortgages and notes payable (352,612) (1,489,905)
Proceeds from exercise of warrants 207,074
Increase in additional paid-in capital 661,167
Increase in deferred cost (8,660)
------- ----------
Net cash used in financing activities 393,393 (828,738)
------- --------
NET INCREASE IN CASH 324,575 204,274
Cash at beginning of period 210,245 249,561
------- --------
Cash at end of period $534,820 $453,835
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest $416,000 $470,000
======== ========
Income taxes $81,000 $0
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
6
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of December 31, 1996 and March
31, 1996, and the related consolidated statements of earnings and cash flows for
the nine month periods ended December 31, 1996 and 1995 and the statement of
stockholders' deficiency for the nine month period ended December 31, 1996 have
been prepared by the management of United Vanguard Homes, Inc. (the "Company")
without audit. In the opinion of management, all adjustments (which include only
normal recurring accrual adjustments) necessary to present fairly the financial
position and results of operations as of and for the nine months ended December
31, 1996 have been made.
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
have been condensed or omitted. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended March 31, 1996. The
results of operations for the period ended December 31, 1996 are not necessarily
indicative of the operating results expected for a full year.
NOTE B - STOCKHOLDERS' EQUITY
CONVERTIBLE DEBT
In March 1996, the Company offered the convertible mortgage holders and
noteholders the option to convert, through April 30, 1996, to shares of common
stock at a price of $3.75 instead of prices ranging from $6.67 through $7.22. In
April 1996, 347,996 common shares were issued in connection with the offer. As a
result of the offer, the Company issued 167,877 additional shares upon
conversion, the fair value of which, $156,466, has been recorded as debt
conversion expense in the accompanying consolidated statement of operations for
the nine months ended December 31, 1996.
STOCK OPTION PLAN
In June 1996, the Company adopted the 1996 Outside Directors' Stock Option
Plan (the "Directors Plan"), which provides for the grant of options to purchase
common stock of the Company to nonemployee directors of the Company. The
Directors' Plan authorizes the issuance of a maximum of 90,000 shares of common
stock.
The Directors' Plan is administered by the Board of Directors. Under the
Directors' Plan, each nonemployee director elected after April 1, 1996 will
receive options for 3,000 shares of common stock upon election. To the extent
that shares of common stock remain available for the grant of options under the
Directors' Plan, each year on April 1, commencing April 1, 1997, each
nonemployee director will be granted an option to purchase 1,800 shares of
common stock. The exercise price per share for all options granted under the
Directors' Plan will be equal to the fair market value of the common stock as of
the date preceding the date of grant. All options vest in three equal annual
installments.
EMPLOYMENT AGREEMENTS
As of April 1, 1996, the Company entered into an employment agreement with
the Company's President and Chief Operating Officer pursuant to which an annual
base salary under the employment agreement is $100,000. In December 1995, the
President received a $25,000 cash bonus and the Company agreed to issue 9,000
shares of the Company's common stock fair valued at $5.55 per share. In June
1996, The President received a $25,000 cash bonus and 3,000 shares of the
Company's common stock fair valued at $.93 per share. An additional bonus of
$25,000 and 3,000 shares of the Company's common stock is payable on March 31,
1998, subject to continued employment.
7
<PAGE>
NOTE C - CONTINGENCIES
An affiliate of Vanguard Ventures, Inc. ("Vanguard"), the Company's
majority stockholder, was indebted under a first mortgage in the principal
amount of $4,081,000. The mortgage securing this loan provides that a default
under such loan is a default under each of the Company's Hillside Terrace and
Whitcomb Tower Mortgages. Therefore, a potential Vanguard default on this
affiliate's loan could result in the foreclosure of Hillside Terrace and
Whitcomb Tower.
Health care and senior living facilities are areas of extensive and
frequent regulatory change. Changes in the laws or new interpretations of
existing laws can have a significant effect on methods of doing business, costs
of doing business and amounts of reimbursement, from governmental and other
payors. The Company at all times attempts to comply with all applicable fraud
and abuse laws; however, there can be no assurance that administrative or
judicial interpretation of existing laws or regulations will not have a material
adverse effect on the Company's operations or financial conditions.
NOTE D - WITHDRAWAL FROM PUBLIC OFFERING
The Company withdrew from its Public Offering due to adverse market
conditions relating to the senior living facility industry sector at the time of
the Offering.
NOTE E - RE-ISSUE OF COMMON STOCK
Due to the cancellation of the Public Offering, 1,080,000 shares were
re-issued to Vanguard Ventures, Inc. which were previously canceled conditional
on completion of the Public Offering.
NOTE F - PROMISSORY NOTE
In August 1996, the Company received a $450,000 installment loan from State
Bank of Long Island. The principal is payable in 36 equal installments plus
interest at prime plus 1 1/2.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
NINE MONTHS ENDED 1996 VS. 1995
REVENUES
Net revenues of the Company represent its gross consolidated revenues, less
charitable and Supplementary Social Security Income discounts.
Net revenues decreased by $532,000, or 8%, from $6,533,000 in the 1995
period to $6,001,000 in the 1996 period. Approximately $710,000 of the decrease
represented development fees. Development fees can vary substantially from
quarter to quarter depending upon the number of projects in development, the
percentage of completion and, in certain instances, the project owner's
financial condition. Development fees are generally deferred in periods in which
the project owner's ability to remit such fees is uncertain. Resident and
healthcare services revenues increased by $148,000, or 3%, from $5,604,000 in
the 1995 period to $5,752,000 in the 1996 period. Resident and healthcare
services revenues increased as a result of higher rates as well as a slight
increase in occupancy rates.
RESIDENCE OPERATING EXPENSES
Residence operating expenses include all retirement and healthcare center
operating expenses, including, among other things, payroll and employments
costs, food, utilities, repairs and maintenance, insurance and property taxes.
Residence operating expenses increased by $134,000, or 3%, from $4,430,000
in the 1995 period to $4,570,000 in the 1996 period. During the 1996 period,
payroll costs increased by approximately $173,000 due to salary increases and
additional personnel. Further, in the 1996 period, $173,000 of additional
maintenance was performed at the Company's Michigan facilities as part of the
Company's refurbishment plan.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses include all marketing costs, as well as
the general and administrative expenses incurred at the Company's principal
executive offices. General and administrative expenses include, among other
things, administrative salaries, rent, utilities, insurance and related
expenses.
General and administrative expenses increased by $303,000, or 85%, from
$302,000 in the 1995 period to $558,000 in the 1996 period. The increase is
primarily attributable to increased administrative staff and salary increases.
PROVISION FOR RECOVERY ON ADVANCES TO AFFILIATES
Losses on advances to affiliates decreased by $312,000 in the 1995 period
to $43,000 in the 1996 period. The decrease is primarily attributable to the
Company's successful turn around efforts at the Whittier, an affiliate managed
by the Company, and by a reduction in operating cash requirements of other
affiliates.
COSTS RELATED TO ABORTED PUBLIC OFFERING
A write-off of estimated expenses incurred during the nine month period
ended December 31, 1996 in connection with the proposed Public Offering,
Registration Statement Nos. 33-80812 and 333-09037.
INTEREST EXPENSE, NET
Interest expense, net, decreased by $45,000 or 10%, from $461,000, in the
1995 period to $415,000 in the 1996 period. The decrease is primarily
attributable to the conversion of $1,305,000 of debt to equity.
9
<PAGE>
DEBT CONVERSION EXPENSE
The Company offered its debtholders an inducement in the form of a reduced
conversion price on its then outstanding debt. As a result of such inducement an
aggregate of $1,305,000 of the Company's debt was converted into 347,996 shares
of the Company's Common Stock effective April 1, 1996. As a result of such
inducement, the Company issued 167,877 additional shares upon conversion, the
fair value of which, $156,466, has been recorded as debt conversion expense
during the 1996 period.
INCOME TAXES
Income taxes decreased by $285,000, or 83%, from $340,000 in the 1995
period to $55,000 in the 1996 period. The decrease is due to the Net Loss
primarily attribute to the write-off of costs related to the aborted Public
Offering.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996 the Company's cash position was improved by $324,600
due to the August 1996 installment loan. Current liabilities were up $4,700,000,
primarily due to the reclassification of part of the Company's mortgage debt
from long-term to short-term. Mortgages on Hillside Terrace and the Whitcomb
Tower in the amount of $4,330,000 are due April 30, 1997. Failure to extend or
refinance these mortgages would have a material adverse effect on the Company.
However, the Company anticipates that these mortgages will be extended on a
year-to-year basis as they have been for the last two years. In addition, the
Company is pursuing alternate permanent financing for these properties.
When used in Management's Discussion and Analysis or Plan of Operation, the
words "anticipate," "estimate" and similar expressions are intended to identify
forward-looking statements. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected.
THREE MONTHS 1996 VS. 1995
The principal reasons for the changes in operations for the three months
ended December 31, 1996 vs. 1995 are outlined in the discussion of the Nine
months Results. No material items which adversely affected liquidity and the
financial position occurred in the three-month period.
10
<PAGE>
Part II -- OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11, Computation of Earnings Per Share.
Exhibit 27, Financial Data Schedule.
(b) Report on 8-K
No reports on Form 8-K were filed during this period.
11
<PAGE>
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.
/s/ Carl G. Paffendorf
-----------------------------------------
Carl G. Paffendorf, Chairman of the Board
/s/ Paul D'Andrea
-----------------------------------------
Paul D'Andrea, Vice President - Finance
Date: April 30, 1997
12
EXHIBIT 11
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Primary Earnings per Share
--------------------------
For the three months For the nine months
ended December 31, ended December 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings $ (966,827) $ 367,896 $ (866,572) $ 494,681
Shares:
Weighted average shares outstanding 3,320,950 1,158,118 2,243,895 1,972,342
Dilutive stock options and warrants - - - -
------------ ----------- ------------ ----------
Weighted average common and
equivalent shares outstanding 3,320,950 1,158,118 2,243,895 1,972,342
------------ ----------- ------------ ----------
Primary earnings per share: $(0.29) $0.32 $(0.39) $0.25
============= ============= ============== =============
</TABLE>
<TABLE>
<CAPTION>
Fully Diluted Earnings per Share
--------------------------------
For the three months For the six months
ended December 31, ended December 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings $ (966,827) $ 367,896 $ (866,572) $ 494,681
Net interest expense related to convertible debt 22,280 40,073 66,599 120,218
------------ ------------ ------------- ------------
Adjusted net earnings (944,547) 407,969 (799,973) 614,899
------------ ------------ ------------- ------------
Shares:
Weighted average shares outstanding 3,320,950 1,158,118 2,243,895 1,972,342
Dilutive stock options and warrants - - - -
Common shares issuable upon conversion 190,876 400,280 190,876 400,280
Weighted average common and equivalent shares
outstanding 3,511,826 1,558,398 2,434,771 2,372,622
------------ ---------- ----------- ----------
Fully diluted earnings per share $(0.27) $0.26 $(0.33) $0.26
============= ========== =========== ==========
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-QSB for the quarter ended December 31, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<PERIOD-START> OCT-01-1996
<CASH> 534,820
<SECURITIES> 0
<RECEIVABLES> 1,773,245
<ALLOWANCES> 40,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,909,918
<PP&E> 6,033,394
<DEPRECIATION> 3,717,664
<TOTAL-ASSETS> 6,229,524
<CURRENT-LIABILITIES> 6,655,078
<BONDS> 5,722,343
0
0
<COMMON> 33,210
<OTHER-SE> (2,627,604)
<TOTAL-LIABILITY-AND-EQUITY> 6,229,524
<SALES> 0
<TOTAL-REVENUES> 2,024,202
<CGS> 0
<TOTAL-COSTS> 1,906,653
<OTHER-EXPENSES> (13,531)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,399
<INCOME-PRETAX> (1,014,319)
<INCOME-TAX> (47,492)
<INCOME-CONTINUING> (966,827)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (966,827)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.27)
</TABLE>
