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, 1998
/ / 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 Number)
Incorporation or Organization)
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 /X/
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,
1999, there were outstanding 3,324,265 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, 1998
and March 31, 1998............................................2
Unaudited Consolidated Statement of Earnings
Three Months Ended June 30, 1998 and 1997 ....................4
Unaudited Consolidated Statement of Stockholders' Deficiency
Three Months Ended June 30, 1998..............................5
Unaudited Consolidated Statement of Cash Flows
For the Three Months Ended June 30, 1998 and 1997.............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
<TABLE>
<CAPTION>
ASSETS
June 30, March 31,
1998 1998
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 184,674 $256,188
Accounts receivable, less allowance for doubtful
accounts of $40,000 453,897 620,627
Development fees and advances 1,000,440 981,000
Due from affiliates, net 191,155 179,552
Prepaid expenses and other 285,388 177,123
------------ ----------
Total current assets 2,115,536 2,214,490
PROPERTY AND EQUIPMENT - NET 2,056,922 2,110,610
OTHER ASSETS
Restricted assets 99,600 108,352
Other assets 200,932 203,161
------------ ------------
300,532 311,513
------------ ------------
$ 4,472,990 $ 4,636,613
============ ============
</TABLE>
2
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND
STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
---- ----
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 511,466 $661,466
Accounts payable 279,977 350,244
Accrued expenses 914,462 568,511
Public Offering Costs 286,141 328,641
Income taxes payable 144,925 156,316
---------- ----------
Total Current Liabilities 2,136,971 2,065,178
RESIDENT SECURITY DEPOSITS 281,570 282,400
LONG-TERM DEBT, less current portion 5,849,485 5,946,281
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, 3,311,765 shares and 3,309,890 shares,
June 30, 1998 and March 31, 1998, respectively 33,118 33,099
Additional paid-in capital 7,004,563 6,998,957
Accumulated deficit (10,832,717) (10,689,302)
----------- -----------
( 3,795,036) ( 3,657,246)
------------ ------------
$ 4,472,990 $ 4,636,613
============= =============
</TABLE>
3
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
1998 1997
---- ----
<S> <C> <C>
Operating Revenues:
Resident Services $1,185,396 $1,195,210
Health care services 681,712 686,316
Management Fees 30,000 30,000
Development fees 19,440 85,000
------------ -----------
1,916,548 1,996,526
Operating Expenses:
Residence operating expenses 1,524,453 1,534,303
General and administrative 244,438 265,760
Depreciation and amortization 67,844 67,230
Provision for loss on (Recovery of)
advances to affiliates 87,593
------------- -----------------
1,924,328 1,867,293
Income from operations (7,780) 129,233
Other Income (expense)
Interest expense, net (139,475) (141,484)
Other income 21, 839 12,590
Income (Loss) before income taxes (125,416) 339
Income Taxes 18,000 17,776
------------- -----------
NET INCOME (LOSS) $ (143,416) $ (17,437)
========== ============
Loss per share $(0.04) $(0.01)
===== =====
Weighted average common shares:
Basic shares 3,309,910 3,301,432
Diluted shares 3,344,110 3,329,512
</TABLE>
4
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
THREE MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Additional
Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1998 3,309,890 $33,099 $6,998,957 $(10,689,302) $(3,657,246)
Shares Issued as
Compensation 1,875 19 5,606 5,625
Net Loss (143,416) (143,416)
--------- ------- ---------- ------------ -----------
Balance, June 30, 1998 3,311,765 $33,118 $7,004,563 $(10,832,718) $(3,795,037)
========= ======= ========== ============ ===========
</TABLE>
5
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $(143,416) $(17,437)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 67,844 65,258
Common stock issued for services 5,625 22,500
Changes in operating assets and liabilities:
Accounts receivable, advances and other receivables 147,430 (123,716)
Prepaid expenses and other (104,124) 12,752
Other Assets 1,638
Development fees (19,440) (85,000)
Accounts payable (70,267) 44,203
Accrued expenses 311,167 150,959
Income taxes payable (11,391) (11,267)
Resident security deposits ( 830) (19,956)
----------- ----------
Net cash provided by operating activities 184,237 38,296
-------- ----------
Cash flows used in investing activities:
Investment in VHNJ (100)
Purchases of property and equipment (13,565) (20,778)
---------- ----------
(13,565) (20,878)
---------- ----------
Cash flows from financing activities:
Principal repayments of mortgages and notes payable (250,938) (75,476)
Common stock purchased and
simultaneously retired 0 (70,000)
Restricted cash financing 8,752
------------ ----------------
Net cash used in financing activities (242,187) (145,476)
--------- ----------
NET INCREASE (DECREASE) IN CASH (71,515) (128,058)
Cash at beginning of period 256,190 202,924
-------- ----------
Cash at end of period $ 184,675 $ 74,866
========= ==========
Cash paid during the year for
Interest $ 145,021 $ 122,200
========= =========
Income taxes $ 29,391 $ 28,288
========== ============
</TABLE>
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, 1998 and
June 30, 1998, the related consolidated statements of earnings and cash flows
for the three-month periods ended June 30, 1998 and 1997, and the statement of
stockholders' deficiency for the three-month period ended June 30, 1998 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,
1998 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, 1998.
The results of operations for the period ended June 30, 1998 are not necessarily
indicative of the operating results expected for a full year.
NOTE B - STOCKHOLDERS' EQUITY
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. Each
option will be for a ten-year term, subject to earlier termination in the event
of death or permanent disability.
Prior to the adoption of the Directors' Plan, options had been issued to
outside directors, of which options to purchase 28,800 shares were outstanding
at June 30, 1998.
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. Mr. Laird's employment with the Company
ended as of November 1, 1998.
7
<PAGE>
NOTE C - CONTINGENCIES
Whittier Towers, Inc., the owner of The Whittier, an independent living
facility managed by The Company, was indebted under a first mortgage in the
principal amount of approximately $4 million. 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 Whittier
Towers, Inc. default on this 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.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
THREE MONTHS ENDED 1997 VS. 1998
REVENUES
Net revenues of the Company represent its gross consolidated revenues, less
charitable and Supplementary Social Security Income discounts.
Net revenues decreased by $80,000, or 4 percent, from $1,997,000 in the
1997 period to $1,917,000 in the 1998 period. The decrease is mostly
attributable to $66,000 in development fees. Resident services revenues
decreased by $10,000, or 1 percent, from $1,195,000 in the 1997 period to
$1,185,000 in the 1998 period. The decrease was a result of a reduction in
occupancy.
Healthcare services revenues decreased by $4,000, or 1 percent, from
$686,000 in the 1997 period to $682,000 in the 1998 period. The decrease was a
result of lower occupancy.
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 decreased by $10,000, or 1 percent, from
$1,534,000 in the 1997 period to $1,524,000 in the 1998 period. The decrease is
mainly attributable to food costs, as a result of decreased occupancy.
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 decreased by $21,000, or 8 percent,
from $266,000 in the 1997 period to $244,000 in the 1998 period. The decrease is
primarily attributable to a decrease in personnel costs.
PROVISION FOR LOSS ON ADVANCES TO AFFILIATES
During the three months ended June 30, 1998, the Company recorded a net
loss of Advances to Affiliates aggregating $88,000. No such loss was recorded in
the quarter ended June 30, 1997. 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 assets.
INTEREST EXPENSE, NET
Interest expense, net, decreased by $1,000, or 1 percent, from $143,000 in
the 1997 period to $142,000 in the 1998 period.
9
<PAGE>
INCOME TAXES
Income taxes in the amount of $18,000 during the 1998 period was the same
amount as in the 1997 period.
LIQUIDITY AND CAPITAL RESOURCES
During the 1998 period operating activities provided cash of approximately
$184,000 compared to requiring cash of approximately $38,000 from operating
activities in the 1997 period. The increase in cash flows from operating
activities was principally due to colletion on Accounts Receivable and increases
in Accrued expenses.
As of June 30, 1998 the Company had a deficiency of working capital of
$21,000. The Company's lack of working capital has limited the Company's ability
to pursue its development projects. The Company is presently pursuing various
strategies to increase available working capital, including refinancing a
substantial portion of the Company's mortgage indebtedness. Although there can
be no assurance that any of the strategies will be successful, the Company
believes that the underlying value of its properties will allow the Company to
successfully implement its strategies.
10
<PAGE>
Part II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the quarter ended June 30, 1998.
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.
/s/ Carl G. Paffendorf
by: -----------------------------------------
Carl G. Paffendorf, Chairman of the Board
/s/ Paul D'Andrea
by: -----------------------------------------
Paul D'Andrea, Vice President - Finance
Date: January 7, 2000
12
EXHIBIT 11
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
UNAUDITED COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1998 For the Three Months Ended June 30, 1997
----------------------------------------------------------------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income ($143,416) 3,309,910 ($0.04) ($17,437) 3,301,432 ($0.01)
Effect of Dilutive
Securities
Stock Options 34,200 28,080
-------------- ----------- --------- ------------ ----------- ---------
Diluted EPS
Income available
to common stock-
holders plus
assumed
conversions ($143,416) 3,344,110 ($0.04) $(17,437) 3,329,512 ($0.01)
========= ========= ====== ========= ========= =======
</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, 1998 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> $184,674
<SECURITIES> 0
<RECEIVABLES> 493,879
<ALLOWANCES> 40,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,115,536
<PP&E> 6,175,276
<DEPRECIATION> 4,118,355
<TOTAL-ASSETS> 2,866,971
<CURRENT-LIABILITIES> 5,119,485
<BONDS> 0
<COMMON> 0
33,118
(3,828,154)
<OTHER-SE> 4,472,990
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 1,916,548
<TOTAL-REVENUES> 21,839
<CGS> 0
<TOTAL-COSTS> 1,924,328
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,475
<INCOME-PRETAX> (125,416)
<INCOME-TAX> 18,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (143,416)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
