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 June 30, 1997
-------------
/ / 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 / / No / /
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: At March 31, 1999, there
were outstanding 3,313,265 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.
Unaudited Consolidated Balance Sheets - June 30, 1997
and March 31, 1997...............................................2
Unaudited Consolidated Statement of Earnings
Three Months Ended June 30, 1997 and 1996 .......................4
Unaudited Consolidated Statement of Stockholders' Deficiency
Three Months Ended June 30, 1997.................................5
Unaudited Consolidated Statement of Cash Flows
For the Three Months Ended June 30, 1997 and 1996................6
Notes to Unaudited Consolidated Financial Statements...............7
Management's Discussion and Analysis of Plan of Operation..........9
PART II. Other Information:
Exhibits and Reports on Form 8-K..................................11
Signatures........................................................14
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
CURRENT ASSETS 1997 1997
---- ----
<S> <C> <C>
Cash ........................................... $ 74,866 $ 202,924
Accounts receivable, less allowance for doubtful
accounts of $40,000 .......................... 562,996 547,812
Development fees and advances
Due from affiliates, net ....................... 376,141 267,607
Prepaid expenses and other ..................... 511,315 518,393
---------- ----------
Total current assets ................ 1,525,318 1,536,736
PROPERTY AND EQUIPMENT - NET ......................... 2,233,906 2,276,651
OTHER ASSETS
Development fees ............................... 880,500 795,500
Restricted assets .............................. 99,600 99,600
Other assets ................................... 173,169 176,437
---------- ----------
1,153,269 1,071,537
---------- ----------
$4,912,493 $4,884,924
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
CURRENT LIABILITIES
<S> <C> <C>
Current portion of long-term debt $ 310,980 $ 264,918
Accounts payable 531,961 487,758
Accrued expenses 811,045 660,084
Public Offering Costs 587,000 587,000
Income taxes payable 179,482 190,749
------------ ------------
Total Current Liabilities 2,420,468 2,190,509
RESIDENT SECURITY DEPOSITS 264,570 284,526
LONG-TERM DEBT, less current portion 6,216,869 6,334,265
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, 3,308,850 shares and 3,320,950 shares,
June 30, 1997 and March 31, 1997, respectively 33,089 33,210
Additional paid-in capital 6,995,847 7,043,226
Accumulated deficit (11,018,349) (11,000,812)
------------ ------------
(3,989,413) (3,924,376)
------------ ------------
$ 4,912,493 $ 4,884,924
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF EARNINGS
For the Three Months Ended June 30,
1997 1996
Operating Revenues:
Resident Services $ 1,195,210 $ 1,247,844
Health care services 686,316 644,005
Management Fees 30,000 --
Development fees 85,000 85,000
----------- -----------
1,996,526 1,976,849
Operating Expenses:
Residence operating expenses 1,534,303 1,481,302
General and administrative 265,760 155,020
Depreciation and amortization 67,230 69,601
Provision for loss on (Recovery of)
advances to affiliates -- (71,856)
----------- -----------
1,867,293 1,634,067
Income from operations 129,233 342,782
Other Income (expense)
Interest expense, net (141,484) (135,317)
Other income 12,590 20,856
Debt conversion expense -- (156,466)
----------- -----------
Income before income taxes 339 71,855
Income Taxes 17,776 33,250
----------- -----------
NET INCOME (LOSS) $ (17,437) $ 38,605
=========== ===========
Earnings per share (loss) ($ 0.01) $ 0.02
Common shares and equivalents outstanding 3,301,432 2,237,983
=========== ===========
The accompanying notes are an integral part of these statements.
4
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
THREE MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Additional
Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1997 3,320,950 $33,210 $7,043,226 $(11,000,812) $(3,924,376)
Shares purchased and
simultaneously retired (19,600) (196) (69,804) (70,000)
Investment in Vanguard Homes
of N.J., Inc. (100) (100)
Shares issued as compensation 7,500 75 22,425 22,500
Net Income for the 3 mos.
ended June 30, 1997 - - - (17,437) (17,437)
--------- ------- ----------- ------------ -----------
Balance, June 30, 1997 3,308,850 $33,089 $6,995,847 $(11,018,349) $(3,989,413)
========= ======= ========== ============ ===========
</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 THREE MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $(17,437) $38,605
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 65,258 69,601
Common stock issued for services 22,500 2,781
Deferred income taxes - 4,500
Debt Conversion expense - 156,466
Changes in operating assets and liabilities:
Accounts receivable, advances and other receivables (123,716) 340,145
Prepaid expenses and other 12,752 34,662
Development fees (85,000) 25,199
Accounts payable 44,203 (95,795)
Accrued expenses 150,959 70,119
Income taxes payable (11,267) 18,768
Resident security deposits (19,956) 3,600
------- ---------
Net cash provided by operating activities 38,296 668,651
------- -------
Cash flows used in investing activities:
Investment in VHNJ (100)
Purchases of property and equipment (20,778) (26,729)
-------- ----------
(20,878) (26,729)
-------- ----------
Cash flows from financing activities:
Proceeds from borrowings on mortgages and notes payable
Principal repayments of mortgages and notes payable (75,476) (79,235)
Common stock purchased and
simultaneously retired (70,000)
Proceeds from exercise of warrants - 207,074
Increase in deferred offering costs (136,163)
-------- ----------
Net cash used in financing activities (145,476) (8,324)
-------- ------------
NET INCREASE (DECREASE) IN CASH (128,058) 633,598
Cash at beginning of period 202,924 210,245
-------- ----------
Cash at end of period $ 74,866 $ 843,843
======== =========
Cash paid during the year for
Interest $122,200 $ 119,000
======== =========
Income taxes $ 28,288 $ 1,000
======== ===========
Schedule of noncash investing and financing activities:
Capital leases for furniture and equipment - $47,591
Debt converted to equity $ - 1,305,000
-------- ---------
$ 0 $1,352,591
======== ==========
</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 March 31, 1997 and
June 30, 1997, the related consolidated statements of earnings and cash flows
for the three-month periods ended June 30, 1997 and 1996, and the statement of
stockholders' deficiency for the three-month period ended June 30, 1997 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 three months ended June 30,
1997 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-KSB for the year ended March 31, 1997.
The results of operations for the period ended June 30, 1997 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 three months ended June 30, 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 non-employee 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 non-employee 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
non-employee 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 -- beginning on the first anniversary on the date of the grant.
Prior to the adoption of the Directors' Plan, options had been issued to
outside directors, of which options to purchase ____ shares were outstanding at
June 30, 1997.
7
<PAGE>
Employment Agreement
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 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.
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 - 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 percent.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
Three Months Ended 1996 vs. 1997
Revenues
Net revenues of the Company represent its gross consolidated revenues, less
charitable and Supplementary Social Security Income discounts.
Net revenues increased by $20,000, or 1 percent, from $1,977,000 in the
1996 period to $1,997,000 in the 1997 period. The increase is attributable to a
$30,000 management fee on a management contract which began October 1, 1996.
Resident services revenues decreased by $53,000, or 4 percent, from $1,248,000
in the 1996 period to $1,195,000 in the 1997 period. The decrease was a result
of a reduction in occupancy due to a temporary mortorium on admissions at one of
the Company's facilities. From January to October 1997, Olds Manor was subject
to a moratorium on admissions in the Home for the Aged due to the allegation
that certain services being rendered were beyond the scope of the facility's
Home for the Aged License. As a consequence of the moritorium, occupancy dropped
from 95 percent, as of March 31, 1996, to 61 percent, as of June 30, 1997.
Healthcare services revenues increased by $42,000, or 7 percent, from
$644,000 in the 1996 period to $686,000 in the 1997 period. The increase was a
result of higher 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 $53,000, or 4 percent, from
$1,481,000 in the 1996 period to $1,534,000 in the 1997 period. The increase is
mainly attributable to salary increases.
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 $111,000, or 71 percent,
from $155,000 in the 1996 period to $266,000 in the 1997 period. The increase is
primarily attributable to an increase in personnel costs and an increase in
overhead associated with the Company's attempted public offering and plans to
expand its development projects.
Provision for Recovery on Advances to Affiliates
During the three months ended June 30, 1995, the Company recorded a net
recovery of Advances to Affiliates aggregating $72,000. No such recovery was
received in the current quarter. The variance is a function of net funds paid
out or received from the Company's parent (Vanguard) and affiliated companies.
Future recoveries are anticipated as Vanguard liquidates some of its properties.
9
<PAGE>
Interest Expense, Net
Interest expense, net, increased by $6,000, or 5 percent, from $135,000 in
the 1996 period to $143,000 in the 1997 period. The increase is primarily
attributable to interest on an installment loan received in August 1996 (see
Note D).
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 $15,000, or 47 percent, from $33,000 in the 1996
period to $18,000 in the 1997 period. The decrease is due to decline in
Operating Income.
Liquidity and Capital Resources
Cash flow from operations was approximately $38,000 in the 1997 period as
compared to $669,000 in the 1996 period. The change was primarily due to cash
advances made to development projects and fees earned but not collected. In the
1996 period there was collected approximately $590,000 on such advances.
Conversely, in the 1997 period there were advances and fees earned but not
collected of approximately $194,000. The effect of this change was the principal
cause of a $241,000 increase in the working capital deficit as at June 30, 1997.
Included in the deficiency of working capital are $587,000 of remaining
liabilities associated with the Company's unsuccessful public offering.
Management is currently negotiating with these creditors for reductions in
amounts charged and extended payment terms.
The Company's capital is not sufficient to fund its operating plans. Given
the above, the Company is currently negotiating to sell a substantial portion of
its operating and development properties. If such sales are successful, the
Company would have adequate capital to fund future development projects. In
addition, the Company has received a commitment letter from a financial
institution to refinance substantially all of its outstanding mortgages. If the
Company elects to pursue this financing alternative, the Company believes it
will have adequate working capital.
10
<PAGE>
Part II -- OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the quarter ended June 30, 1997.
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11, Unaudited Computation of Earnings Per Share
Exhibit 27, Unaudited 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 Securities and Exchange Act of
1934, as amended, the Registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
UNITED VANGUARD HOMES, INC.
by: /s/ Carl G. Paffendorf
-----------------------------------------
Carl G. Paffendorf, Chairman of the Board
by: /s/ Paul D'Andrea
----------------------------------------
Paul D'Andrea, Vice President - Finance
12
Date: July 22, 1999
EXHIBIT 11
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1997 For the Three Months Ended June 30, 1996
---------------------------------------- ----------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic EPS
<S> <C> <C> <C> <C> <C> <C>
Net Income ($17,437) 3,301,432 ($0.01) $38,605 2,237,983 $0.02
Effect of Dilutive
Securities
Stock Options 28,080 20,772
-------------- ----------- --------- ------------ ----------- ---------
Diluted EPS
Income available
to common stock-
holders plus
assumed
conversions ($17,437) 3,329,512 ($0.01) $38,605 2,258,755 $0.02
======== ========= ====== ======= ========= =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10- QSB for the quarter ended June 30, 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> APR-01-1997
<PERIOD-START> JUN-30-1997
<CASH> 74,866
<SECURITIES> 0
<RECEIVABLES> 602,996
<ALLOWANCES> 40,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,525,318
<PP&E> 6,087,013
<DEPRECIATION> 3,853,107
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 2,420,468
<BONDS> 6,216,869
0
0
<COMMON> 33,089
<OTHER-SE> (4,022,502)
<TOTAL-LIABILITY-AND-EQUITY> 4,912,493
<SALES> 0
<TOTAL-REVENUES> 2,009,516
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,867,293
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141,484
<INCOME-PRETAX> 339
<INCOME-TAX> 17,776
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (17,437)
<NET-INCOME> 0
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
