<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
COMMISSION FILE NUMBER 1-9885
LEGEND PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3465359
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3755 7TH TERRACE, SUITE 301, VERO BEACH, FLORIDA 32960
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (561) 778-0180
----------------
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 [ ].
Shares of common stock outstanding as of August 13 , 1999: 6,290,874.
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1999 (unaudited) and
December 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the Three Months
Ended June 30, 1999 and 1998 (unaudited) . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Operations for the Six Months
Ended June 30, 1999 and 1998 (unaudited) . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 (unaudited) . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements (unaudited) . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3 Quantitative and Qualitative Disclosures about Market Risks . . . . . . . . . . . 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports of Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 21
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDING,INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
------
Real estate inventory $ 78,727,150 82,873,914
Asset held for sale 12,351,376 7,916,175
Cash and cash equivalents 1,306,353 4,446,864
Restricted cash and investments 11,958,012 19,017,860
Accounts and notes receivable 1,617,052 1,491,267
Property and equipment, net 23,662,553 24,645,281
Intangible assets, net 1,522,133 1,646,542
Other assets, net 1,716,512 5,520,388
-----------------------------
$ 132,861,141 147,558,291
-----------------------------
Liabilities and Stockholders' Equity (Deficit)
----------------------------------------------
Notes payable to banks and others $ 29,969,584 40,722,737
Payables to related parties 89,954,864 84,744,478
Accounts payable 2,586,452 3,033,693
Other notes and liabilities 13,225,752 14,443,250
-----------------------------
135,736,652 142,944,158
-----------------------------
Stockholders' equity (deficit):
Common stock, $.01 par value. Authorized 10,000,000 shares;
6,311,678 shares issued and 6,290,874 shares outstanding 63,117 63,117
Additional paid-in capital 44,171,143 44,171,103
Accumulated deficit (46,988,455) (39,498,771)
Treasury stock, 20,804 shares (121,316) (121,316)
-----------------------------
Total stockholders' equity (deficit) (2,875,511) 4,614,133
- -----------------------------------------------------------------------------------------------------------
$ 132,861,141 147,558,291
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the Condensed Consolidated Financial Statements
3
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(A SUBSIDIARY OF RGI HOLDINGS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Real estate sales $ 9,827,051 8,983,230
Club operations 1,764,560 1,421,717
Patient services 727,056 605,843
Other 689,396 751,843
---------------------------------
Total revenues 13,008,063 11,762,633
---------------------------------
Operating costs and expenses:
Real estate sales 7,112,070 6,752,770
Club operations 1,960,528 1,673,209
Patient services 518,418 419,981
Other 748,215 278,129
Selling, general and administrative 3,529,437 3,371,153
Depreciation and amortization 450,717 539,938
---------------------------------
Total operating costs and expenses 14,319,385 13,035,180
---------------------------------
Operating loss (1,303,322) (1,272,547)
---------------------------------
Other income (expense):
Interest income 116,960 198,681
Interest expense, including loan cost amortization (638,135) (1,185,481)
Interest expense, related party (1,914,336) (1,192,931)
Other, net - 25,000
---------------------------------
Net other expense (2,435,511) (2,154,731)
---------------------------------
Net loss $ (3,746,833) (3,427,278)
---------------------------------
Net loss per share - basic and diluted $ (0.60) (0.54)
---------------------------------
Weighted average number of common shares outstanding 6,290,874 6,290,874
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the Condensed Consolidated Financial Statements
4
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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Real estate sales $ 24,850,412 18,814,371
Club operations 3,953,229 3,235,964
Patient services 1,421,213 1,319,875
Other 1,436,322 1,212,064
-------------------------------
Total revenues 31,661,176 24,582,274
-------------------------------
Operating costs and expenses:
Real estate sales 18,102,800 12,367,446
Club operations 4,111,196 3,481,965
Patient services 1,023,142 873,981
Other 1,323,458 484,939
Selling, general and administrative 8,745,564 7,538,584
Depreciation and amortization 897,241 1,058,834
-------------------------------
Total operating costs and expenses 34,203,401 25,805,749
-------------------------------
Operating loss (2,542,225) (1,223,475)
-------------------------------
Other income (expense):
Interest income 323,795 464,434
Interest expense, including loan cost amortization (1,478,624) (2,540,823)
Interest expense, related party (3,792,629) (2,467,719)
Other, net - 376,937
-------------------------------
Net other expense (4,947,458) (4,167,171)
-------------------------------
Net loss $ (7,489,683) (5,390,646)
-------------------------------
Net loss per share - basic and diluted $ (1.19) (0.86)
-------------------------------
Weighted average number of common shares outstanding 6,290,874 6,290,874
-------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the Condensed Consolidated Financial Statements
5
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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUSIDIARY OF RGI HOLDINGS,INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (7,489,683) (5,390,646)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,032,609 1,352,109
Related party interest expense not paid 3,708,602 2,839,514
Loss on sale of property and equipment - -
Change in certain assets and liabilities:
Increase in real estate inventory and
assets held for sale (288,437) (8,533,411)
Decrease (increase) in accounts and notes
receivable and other assets 3,670,863 (69,214)
Decrease in accounts payable and other notes and
liabilities (1,664,739) (131,456)
---------------------------------------
Net cash used in operating activities (1,030,785) (9,933,104)
---------------------------------------
Cash flows from investing activities:
Decrease (increase) in restricted cash and investments 7,059,848 (1,648,907)
Proceeds from sale of property and equipment 560,499 -
Purchase of property and equipment (390,339) (259,704)
---------------------------------------
Net cash provided by (used in) investing activities 7,230,008 (1,908,611)
---------------------------------------
Cash flows from financing activities:
Proceeds from notes payable to bank and others 8,430,196 12,129,886
Repayment of notes payable to bank and others (19,183,348) (12,342,689)
Proceeds from loans from related parties 3,750,000 -
Repayment of loans from related parties (2,248,279) -
Payment of loan fees and other (88,303) (56,106)
---------------------------------------
Net cash used in financing activities (9,339,734) (268,909)
---------------------------------------
Net decrease in cash and cash equivalents (3,140,511) (12,110,624)
Cash and cash equivalents at beginning of period 4,446,864 12,732,681
---------------------------------------
Cash and cash equivalents at end of period $ 1,306,353 622,057
---------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest,
net of amount capitalized of $502,579 in 1999
and $1,013,027 in 1998 $ 1,247,636 1,734,478
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the Condensed Consolidated Financial Statements
6
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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
1. BASIS OF PRESENTATION
Legend Properties, Inc. (the Company or Legend) formerly known as Banyan
Mortgage Investment Fund (Banyan), is the surviving corporation from the
December 31, 1996 merger (the Merger) with RGI U.S. Holdings, Inc. (RGI/US).
Prior to the Merger, RGI/US was a wholly-owned subsidiary of RGI Holdings, Inc.
(Holdings). As of June 30, 1999, Holdings owns approximately 80% of the
outstanding common shares of Legend Properties, Inc.
The condensed consolidated financial statements include the accounts of Legend
and its subsidiaries . In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for the periods presented. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the related disclosures
contained in the Company's Annual Report on Form 10- K for the year ended
December 31, 1998, filed with the Securities and Exchange Commission.
The results of operations for the six months ended June 30, 1999 are not
necessarily indicative of the results to be expected for the full fiscal year.
2. ACQUISITION OF REAL ESTATE
On April 19, 1999, Ashburn Front Five LLC, a wholly owned subsidiary of the
Company, acquired the second parcel of the Ashburn Corporate Center which
comprises nearly 28 acres for an approximate purchase price of $4.3 million.
In Management's view, the acquisition of the additional parcel was necessary to
facilitate the disposition of the entire Ashburn Corporate Center. Management
believes that strong development activity in Northern Virginia has created an
opportunity to achieve an acceptable return on the outright sale of the
property rather than proceeding with development as originally planned.
In April 1999, the Company executed a contract for the sale of the entire
project to an unrelated third party. In accordance with the contract, the
purchaser deposited a $100,000 non-refundable deposit into escrow.
Subsequently, the purchaser was unwilling to move forward with the closing so
in June, 1999 the Company, in accordance with the contract, terminated the
contract and received the $100,000 deposit. The deposit was recorded as other
income in the Company's financial statements. The Company subsequently
executed a contract for sale of the property to a unrelated third party which
is expected to close in the 3rd quarter of 1999.
3. NOTES PAYABLE TO BANKS AND OTHERS
As of June 30, 1999, the Company's debt obligations totaled $119,924,448 of
which $17,701,041 matures by December 31, 1999 and an additional $3,675,738 by
December 31, 2000. Of these maturities, $3,793,672 and $0 relate to payables to
Holdings for 1999 and 2000, respectively. In addition to the debt maturities
under existing financings, the Company requires additional financing to advance
its business plan. As of June 30, 1999, the Company had $1,306,353 of cash and
cash equivalents, which will not be sufficient to fund these obligations. The
Company anticipates meeting its existing debt obligations during the remainder
of 1999 by utilizing the net proceeds from the potential sale of Ashburn
7
<PAGE> 8
that was discussed in Note 2, the renewal and extension of existing construction
lines, and internally generated funds from real estate sales and operations.
If sufficient funds are not available from the above sources, the Company
anticipates refinancing certain land acquisition financing and delaying certain
quarterly interest payments as allowed under the debt agreements. The Company
also has available, if needed, $1.25 million under a $5 million credit facility
from Holdings.
There can be no assurance that the Company will be able to sell Ashburn and
obtain the necessary construction and development financing to satisfy the
Company's liquidity needs and implement its business plan. If the Company is
unable to secure the necessary financing or capital when needed, the plans for
its projects will likely be materially revised which would have a material
adverse effect on the Company's financial condition and results of operations.
4. RELATED PARTY TRANSACTIONS
On May 18, 1999 the Company borrowed $3,750,000 under the $5 million credit
facility with Holdings. The advance is secured by certain real estate inventory
and property and bears interest at the prime rate plus 2 percent. Principal
and accrued interest are due the earlier of September 30, 1999 or the
disposition of Ashburn.
Funds from the $3,750,000 advance were used to repay a $2,248,279 unsecured
note payable to Holdings which matured on June 1, 1999 and to repay a portion
of a $2,950,000 note payable to an unrelated third party.
5. CONTINGENCIES
Corporate Relocation and Management Restructuring
As part of the corporate relocation to Vero Beach, Florida and a restructuring
of the corporate and project management, certain employment relationships were
terminated. The Company has recorded a charge for the base compensation
associated with certain contracts, other severance payments, and relocation
costs of $850,000. Some employment contracts also provide for certain
incentive and similar payments which are contingent upon future events and
circumstances that are not readily predictable. Accordingly, the Company is
unable to make a meaningful estimate of the amount or range of additional
compensation costs due, if any, under the agreement.
Ashburn Corporate Center
During August 1998, Legend filed a lawsuit and a memorandum of Lis Pendens in
the Circuit Court of Loudoun County, Virginia against Atlantic Research
Corporation (ARC) which was amended in November 1998. Legend was seeking
specific performance under a real estate contract and any other relief the
court would offer. During the first quarter of 1999, Legend and ARC came to an
agreement concerning the real estate contract which resulted in Legend's
acquisition of the second Ashburn Corporate Center parcel (see Note 2). As a
result, the litigation noted above has been withdrawn and dismissed.
General Legal Matters
The Company is subject to various lawsuits arising in the ordinary course of
business. The Company is of the opinion that the outcome of any such lawsuits
will not have a material adverse effect on its operations.
8
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6. OPERATING SEGMENTS
The Company's reportable operating segments are distinct operations that service
differing markets. The real estate segment consists of the development,
construction and sales activities for all of the Company's properties. The club
operations segment consists of the clubhouse and related activities for Grand
Harbor and Oak Harbor. Patient services consist of the Royal Palm Convalescent
Center which offers skilled nursing care, and Somerset House which offers
assisted living care. Summarized information concerning the reportable segments
for the six and three months ended June 30, 1999 and 1998, is presented in the
following table.
Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
Other,
Real Club Patient Corporate and
($000's omitted) Estate Operations Services Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
1999
<S> <C> <C> <C> <C> <C>
Revenues $ 24,850 3,953 1,421 1,437 31,661
Operating costs and expenses (23,046) (5,294) (1,751) (3,819) (33,910)
Other income/ expenses (4,322) (61) (148) (416) (4,947)
------------------------------------------------------------------------
Net income (loss) $ (2,518) (1,402) (478) (2,798) (7,196)
------------------------------------------------------------------------
1998
Revenues $ 18,814 3,236 1,320 1,212 24,582
Operating cost and expenses (18,563) (4,013) (1,257) (1,973) (25,806)
Other income/expenses (3,203) (255) (67) (642) (4,167)
------------------------------------------------------------------------
Net income (loss) $ (2,952) (1,032) (4) (1,403) (5,391)
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
Other,
Real Club Patient Corporate and
($000's omitted) Estate Operations Services Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
1999
<S> <C> <C> <C> <C> <C>
Revenues $ 9,827 1,764 727 690 13,008
Operating costs and expenses (9,254) (2,348) (870) (1,554) (14,026)
Other income/ expenses (2,150) (18) (85) (183) (2,436)
------------------------------------------------------------------------
Net income (loss) $ (1,577) (602) (228) (1,047) (3,454)
------------------------------------------------------------------------
1998
Revenues
Operating cost and expenses $ 8,983 1,436 606 737 11,762
Other income/expenses (9,943) (1,673) (420) (999) (13,035)
Net income (loss) (876) - - (1,279) (2,155)
------------------------------------------------------------------------
(1,836) (237) (186) (1,541) (3,428)
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</TABLE>
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Legend Properties, Inc., formerly known as Banyan Mortgage Ivestment Fund (the
Company or Legend), is the surviving corporation from the December 31, 1996
merger (the Merger) of Banyan Mortgage Investment Fund (Banyan ) with RGI U.S.
Holdings, Inc. (RGI/US), a wholly owned subsidiary of RGI Holdings, Inc.
(Holdings). As of June 30, 1999, Holdings owns approximately 80% of the
outstanding common shares of the Company.
The Company's strategy is to realize and enhance the market potential of its
core assets. The Company currently controls more than 2,800 acres of land in a
master planned community (Southbridge), a residential golf community (Grand
Harbor), a retirement community (Oak Harbor), and a commercial business park
development (Ashburn Corporate Center).
Grand Harbor, including the Grand Harbor Golf and Beach Club, is a 772-acre
residential golf community located in Vero Beach, Florida. Oak Harbor,
including the Oak Harbor Club, Royal Palm Convalescent Center and Sommerset
House, is a 116-acre retirement community also located in Vero Beach, Florida.
The Royal Palm Convalescent Center and Sommerset House are skilled nursing care
and assisted living facilities. Southbridge is a 2,685-acre master planned
development located in Prince William County, Virginia. The Ashburn Corporate
Center (Ashburn) is a 116-acre commercial business park development located in
Loudoun County, Virginia planned for office and flex/tech uses.
The Company is currently focused on continuing the development of
infrastructure, amenities and residential units at Grand Harbor and Oak Harbor
consistent with approved zoning and development plans. At Southbridge, the
Company intends to develop and sell land parcels. The Company's ability to
achieve these objectives is dependent on, among other things, securing
short-term and long-term financing related to the development on acceptable
terms.
On April 19, 1999, Ashburn Front Five LLC, a wholly owned subsidiary of the
Company, acquired the second parcel of the Ashburn Corporate Center which
comprises nearly 28 acres for an approximate purchase price of $4.3 million. In
Management's view, the acquisition of the additional parcel was necessary to
facilitate the disposition of the entire Ashburn Corporate Center. Management
believes that strong development activity in Northern Virginia has created an
opportunity to achieve an acceptable return on the outright sale of the
property rather than proceeding with development as originally planned.
In April 1999, the Company executed a contract for the sale of the entire
project to an unrelated third party. In accordance with the contract, the
purchaser deposited a $100,000 non-refundable deposit into escrow.
Subsequently, the purchaser was unwilling to move forward with the closing so
in June, 1999 the Company, in accordance with the contract, terminated the
contract and received the $100,000 deposit. The deposit was recorded as other
income in the Company's financial statements. The Company subsequently
executed a contract for sale of the property to a unrelated third party which
is expected to close in the 3rd quarter of 1999.
Certain statements in this quarterly report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Without limiting the foregoing,
words such as "anticipates," "expects," "intends," "plans" and similar
expressions are intended to identify forward-looking statements. These
statements are subject to a number of risks and uncertainties. For a discussion
of the factors affecting the Company's business plan, see the Company's 1998
Annual Report on Form 10-K "Management's Discussion and Analysis - Factors
Affecting Legend's Business Plan." Actual results could differ materially from
those projected in the forward-looking statements. The Company undertakes no
obligation to update these forward-looking statements to reflect future events
or circumstances.
10
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LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has utilized internally generated funds, third party
borrowings, loans from Holdings and affiliated entities, to fund its
construction and development activities, and ongoing operating expenses. The
deferral of interest due to Holdings pursuant to the terms of the loan
agreements has also assisted in allowing the Company to maintain and preserve
its liquidity and capital resources
During the remainder of 1999, the Company contemplates continued expenditures
for development and construction activities at Grand Harbor, Oak Harbor and
Southbridge. For Grand Harbor and Oak Harbor, the Company anticipates
utilizing or renewing existing construction lines for the majority of the
construction financing and securing additional construction lines from existing
external lenders for the remainder. Existing construction lines are typically
renewed after the bank's review of the loan and the payment of extension fees.
At Southbridge, the Company must arrange for development financing.
During the six months ended June 30, 1999 the Company utilized existing cash
and cash equivalents and third party borrowings to fund its development,
construction and operating activities. In addition, the Company borrowed $3.75
million from Holdings which was utilized to repay the $2,248,279 unsecured note
payable owed to Holdings and to repay a portion of a $2,950,000 note payable
owed to an unrelated third party.
As of June 30, 1999, the Company's debt obligations totaled $119,924,448 of
which $17,701,041 matures by December 31, 1999 and an additional $3,675,738 by
December 31, 2000. Of these maturities, $3,793,672 and $0 relate to payables
to Holdings for 1999 and 2000, respectively. In addition to the debt
maturities under existing financings, the Company requires additional financing
to advance its business plan. As of June 30, 1999 the Company had $1,306,353
of cash and cash equivalents, which will not be sufficient to fund these
obligations. The Company anticipates meeting its existing debt obligations
during the remainder of 1999 by utilizing the net proceeds from the potential
sale of Ashburn that was discussed earlier, the renewal and extension of
existing construction lines, and internally generated funds from real estate
sales and operations. If sufficient funds are not available from the above
sources, the Company anticipates refinancing certain land acquisition financing
and delaying certain quarterly interest payments as allowed under the debt
agreements. The Company also has available, if needed, $1.25 million under a
$5 million credit facility from Holdings.
For future construction and development activities, the Company anticipates
utilizing existing or additional construction lines as noted above.
There can be no assurance that the Company will be able to sell Ashburn and
obtain the necessary construction and development financing to satisfy the
Company's liquidity needs and implement its business plan. If the Company is
unable to secure the necessary additional financing or capital when needed, the
plans for its projects will likely be materially revised, which would have a
material adverse effect on the Company's financial condition and results of
operations. See the Company's 1998 Annual Report on Form 10-K "Factors
Affecting Legend's Business Plan".
For each of Legend's projects, cash flow generated from operations can differ
substantially from reported earnings, depending on the status of the
development cycle. At Southbridge, which is in the initial stages of
development, significant cash outlays are required for, among other things,
land acquisitions, processing zoning and other regulatory approvals,
construction of amenities, sales facilities, major roads, utilities, general
landscaping and debt service. Since a major part of these initial expenditures
is capitalized, income reported for financial statement purposes during the
initial years may significantly exceed operating cash flow. At the Grand
Harbor and Oak Harbor properties, which have completed the initial stages of
development, operating cash flow can exceed earnings reported for financial
statement purposes, since expenses include charges for substantial amounts
previously capitalized.
11
<PAGE> 12
Six Months Ended June 30, 1999
The Company had cash and cash equivalents of $1,306,353 and $4,446,864 at June
30, 1999 and December 31, 1998, respectively. The decrease during the six
month ended June 30, 1999 is attributable to $1,030,785 and $9,339,734 in cash
being used in operating and financing activities, respectively, which was
partially offset by cash provided by investing activities of $7,230,008.
Cash Flows from Operating Activities: For the six month ended June 30, 1999,
the Company utilized cash flow from operating activities of $1,030,785,
primarily due to the following:
- - Net losses of $7,489,683 due to substantial interest expenses, corporate
overhead, including severance costs of $850,000 and operating losses at
Oak Harbor, Southbridge, and Ashburn, offset by an operating profit at
Grand Harbor. Ashburn incurred certain costs associated with holding the
property during the period it has been held for sale without any
compensating revenues. Grand Harbor's operating profits have resulted
from the timing of unit closing which are traditionally higher during the
first half and better than expected sales results.
- - A slight increase in real estate inventory and assets held for sale of
$288,437 primarily due to the acquisition of the second parcel in Ashburn
and additional costs for construction and development of $13,729,871.
These increases were offset by the sale of 39 units at Grand Harbor, 16
units at Oak Harbor, and 74 residential lots at Southbridge, which reduced
inventory by $15,628,840. Construction of residential units at Grand
Harbor and Oak Harbor and development of residential lots at Southbridge
continues so that finished units and lots will be available during the
remainder of 1999 and beyond to satisfy existing contracts.
Partially offset by the following:
- - Depreciation and amortization of $1,032,609 related primarily to fixed
asset depreciation and loan cost amortization for Grand Harbor and Oak
Harbor.
- - Related party interest expense of $3,708,602 that was not paid pursuant to
the terms of the loan agreements.
- - A decrease in accounts and notes receivable and other assets of $3,670,863
partially offset by a decrease in accounts payable and other notes and
liabilities of $1,664,739. Fluctuations in these accounts are generally
due to the timing of the payments or collections related to certain assets
and liabilities, including trade accounts payable, advances from
customers, prepaid expenses, and accounts and notes receivable. These
fluctuations can vary significantly from period to period depending on the
timing of closings, and construction and development activities. Due to
the nature of the Company's business, significant fluctuations in these
operating assets and liabilities are not considered unusual
Cash Flows from Investing Activities: For the six months ended June 30, 1999,
the Company generated cash flow from investing activities of $7,230,008.
Certain deposits that were held as collateral against a bank loan were released
and used to pay down that debt pursuant to a renegotiated loan agreement.
Moreover, customer deposits declined as a result of sales activity which, when
combined with the release of the deposit, caused a decline in restricted cash
and investments of $7,059,848. Proceeds from sale of property and equipment
totaled $560,499 which relates to the Company's disposition of a corporate
condo. All of these were partially offset by the purchase of $390,339 of
property and equipment.
Cash Flows from Financing Activities: The Company used $9,339,734 in cash for
financing activities during the six months ended June 30, 1999. Borrowings
from third-party lenders to fund certain construction and development costs at
Grand Harbor and Oak Harbor totaled $8,430,196. A portion of the debt
repayments of $19,183,348 relate to the loan payment made from the release of
the deposit
12
<PAGE> 13
that was discussed previously. The remainder resulted from the sale of
residential units and club memberships at Grand Harbor and Oak Harbor. In
addition, the Company borrowed $3,750,000 from related parties which was used
to repay $2,248,279 of maturing related party debt and a portion of maturing
third party lender debt.
Six Months Ended June 30, 1998
The Company's cash and cash equivalents balance at June 30, 1998, and December
31, 1997, was $622,057 and $12,732,681 respectively. The decrease in the six
months ended June 30, 1998 is attributable to cash utilized in operating,
investing and financing activities of $9,933,104, $1,908,611 and $266,309
respectively.
Cash Flows from Operating Activities: For the six months ended June 30, 1998,
the Company utilized cash in operating activities of $9,933,104, primarily due
to the following:
- - Net losses of $5,390,646, due primarily to operating losses at the Oak
Harbor, Southbridge and Chapman's Landing developments, substantial
interest expense as well as corporate overhead expenses. These losses are
primarily offset by an operating profit at the Grand Harbor project. Sales
at Oak Harbor were less than anticipated and lower than the comparable
period of 1997, while Southbridge experienced delays in lot develpment due
to an extremely wet winter and spring in the Washington D.C. area, and
closed on only 20 lots in the six months ended June 30, 1998. Due to
delays in obtaining the final permits and the ongoing negotiations with
the State of Maryland, the Company had only commenced limited development
at Chapman's Landing, but continued to incur substantial expense to obtain
the final permits required for significant development to begin. Grand
Harbor generated an operating profit, mainly because of the sale of a
20-acre parcel of raw land and the sale 38 residential units, compared to
24 units in 1997.
- - An increase in real estate inventory and assets held for sale of
$8,533,411. The primary reason for this increase was the acquisition of
the initial parcel in the Ashburn Corporate Center and related development
activity totaling approximately $8.1 million. In addition, construction
of residential units continued at Grand Harbor and Oak Harbor.
Development activities continued at Southbridge in order to develop
finished lots for expected deliveries in 1998 and beyond under existing
contracts, however development activities were slow during the early part
of the year because of the extremely wet winter in the area. In total,
land acquisition, development and construction activities totaled
$20,900,857. This was offset by sales of 38 and 9 units at Grand Harbor
and Oak Harbor, respectively, 20 residential lot sales at Southbridge and
the sale of a 20-acre parcel of raw land at Grand Harbor. These sales
reduced inventory by $12,367,446.
- - An increase in accounts and notes receivable and other assets of $69,214
and a decrease in accounts payable and other liabilities of $131,456
during the six months ended June 30, 1998. Fluctuations in these accounts
are generally due to the timing of the payment of certain liabilities,
including trade payables, advances from customers, prepaid expenses, and
the collection of accounts, and notes receivable. These fluctuations can
vary significantly from period to period depending on the timing of sale
closing, and development and construction activities. Due to the nature
of Legend's business, significant fluctuations in operating assets and
liablities are not considered unusual.
Partially offset by the following:
- - Related party interest expense of $2,836,514 was accrued but not paid
during the six months ended June 30, 1998 pursuant to the terms of the
loan agreements.
- - Depreciation and amortization of $1,352,109 related primarily to fixed
assets at Grand Harbor and Oak Harbor and amortization of deferred loan
costs.
13
<PAGE> 14
Cash Flows form Investing Activities: For the six months ended June 30, 1998,
the Company utilized cash flow in investing activities of $1,908,611. Cash
utilized in investing activities was attributable to an increase in customer
deposits and other restricted cash at Grand Harbor and Oak Harbor, and the
establishment of development cash escrows for the Ashburn project. In addition
property and equipment was purchased for a total of $259,704.
Cash Flows from Financing Activities: For the six months ended June 30, 1998,
the Company utilized net cash from financing activities in the amount of
$268,909. The Company borrowed an additional $12,129,886 from external parties
($5,940,000 at Ashburn, $4,728,617 at Grand Harbor and $1,461,269 at Oak
Harbor). The borrowing at Ashburn was used to finance the first takedown of
land acquisition decscribed above, while the borrowings at Grand Harbor and Oak
Harbor was used primarily to fund certain construction and development costs.
Repayments on external debt totaled $12,342,689 (Grand Harbor $8,973,475 and
Oak Harbor $3,369,214). Repayments were made primarily from funds generated
through sales of residential units and club memberships and from existing cash
resources.
RESULTS OF OPERATIONS
Results of operations for the three and six months ended June 30, 1999, are
composed of the consolidated revenues and expenses of Southbridge, Grand
Harbor, Oak Harbor and Ashburn, whereas the results of operations for the three
and six months ended June 30, 1998 are composed of the consolidated revenues
and expenses of Southbridge, Chapman's Landing, Grand Harbor, Oak Harbor, and
Ashburn. Chapman's Landing (a 2,227-acre parcel in Charles County, Maryland)
was sold during October 1998, while Ashburn was acquired during March 1998 and
April 1999.
Six months ended June 30, 1999 compared with 1998
Total revenues for the six months ended June 30, 1999 and 1998 were $31,661,176
and $24,582,274, respectively. Increases in real estate sales at Grand Harbor,
Oak Harbor and Southbridge primarily caused the growth in revenues.
Real estate sales increased $6,036,041 for the six months ended June 30, 1999
as compared to 1998. Grand Harbor sold 39 units at an average sales price of
$366,000 during the six months ended June 30 1999, while 38 units were sold
during the corresponding period of 1998 at an approximate average of $328,000.
This was caused by improved marketing strategies, which include increased
advertising and promotion, and the health of the US economy. Similar causes
lead to Oak Harbor's sale of 16 units at an average sales price of $342,000
during 1999 versus 9 units at an approximate average of $397,000 during the
corresponding 1998 period. Sales prices range from $165,000 to $1,100,000 at
Grand Harbor and Oak Harbor, and accordingly average sales prices may fluctuate
significantly from period to period. The 1998 results also include the sale of
a 20-acre raw land parcel at Grand Harbor while 1999 does not include a
comparable item.
Southbridge sold 74 lots at an average sales price of approximately $41,000
during the first quarter of 1999 as compared to 20 lots at an average of
$42,500 for the corresponding period of 1998. This increase in lots sold
reflects a more active marketing strategy, which had been limited during 1998
because of extremely wet weather. Lot sales prices range from $24,000 to over
$65,000 at Southbridge and accordingly, average sales prices may fluctuate from
period to period.
Also contributing to the growth in revenues was the increase in club
operations. Continued sales activities at both Grand Harbor and Oak Harbor was
the chief component in the rise of club membership and the corresponding
operating revenues between the six months ended June 30, 1998 and 1999.
14
<PAGE> 15
A growth in real estate sales expense was primarily responsible for the
increase in operating costs and expenses between the six months ended June 30,
1999 and 1998. This change corresponds chiefly to the increase in sales
discussed above.
Gross margin as a percentage of real estate sales was 27% for the six months
ended June 30, 1999, compared to 34%(29% excluding the sale of the 20 acre
parcel of raw land at Grand Harbor) for the comparable period in 1998. Gross
margins realized on the sale of residential units at Grand Harbor and Oak
Harbor may fluctuate significantly depending upon the type of product sold.
Changes in the mix of product types sold accounts for the decline in the gross
margin, excluding the 20 acre parcel, between 1998 and 1999.
Club operations costs and expenses increased $629,231 between 1998 and 1999.
This increase is chiefly due to the rise in club operations that was discussed
earlier. The Club operations for Grand Harbor are an amenity provided to Grand
Harbor residences in order to spur real estate sales, while the Oak Harbor
Club is in its initial stages of operations. Profitability of these operations
can vary from period to period depending upon sales volume and operating costs,
which are linked to factors such as the seasonal nature of their usage
depending on the time of year, overall membership levels, and similar factors.
Patient services costs and expenses increased $149,224 between 1998 and 1999
which is attributable to higher patient levels.
An increase in selling, general and administrative expenses between 1998 and
1999 also contributed to the rise in operating costs and expenses. A growth in
marketing costs, which accompanied the improved marketing strategies that were
previously discussed, certain payroll incentive and $850,000 in severance costs
were the chief cause of this increase. Also contributing to this was the cost
of holding Ashburn during the period it has been held for sale. These
increases were offset by the decline between 1998 and 1999 in operating costs
for Chapman's Landing, which was sold during 1998.
Total other expense increased primarily as a result of the increase in related
party interest expense and a decrease in other, net income between 1998 and
1999. The 1998 other, net income includes distributions received from
liquidating trusts whereas 1999 does not have a comparable item. The increase
in related party interest expense between 1998 and 1999 is due to the higher
outstanding payable to related parties which is attributable to additional
advances during the second half of 1998 and the capitalization of unpaid
interest into the payable balance on December 31, 1998. Interest expense
declined because of a net reduction in external indebtedness that was caused by
significant loan payments made out of the proceeds from the previously
discussed sale of Chapman's Landing and sales of units at Grand Harbor and Oak
Harbor, which was offset by the borrowings related to acquiring Ashburn.
The combination of the above changes resulted in a net loss of $7,498,683
($1.19 per share) for the six months ended June 30, 1999, as compared to a net
loss of $5,390,646 ($0.86 per share) for the six months ended June 30, 1998.
Three months ended June 30, 1999 compared with 1998
Total revenues for the three months ended June 30, 1999 and 1998 were
$9,827,051 and $8,983,230, respectively. Increases in real estate sales at
Grand Harbor, Oak Harbor and Southbridge primarily caused the growth in
revenues.
Real estate sales increased $843,821 for the three months ended June 30, 1999
as compared to 1998. Grand Harbor sold 16 units at an approximate average sales
price of $327,000 during the three months ended June 30, 1999, while 22 units
were sold during the corresponding period of 1998 at an approximate average of
$248,000. At Oak Harbor, 7 units at an average sales price of $365,000 were
sold during 1999 versus 5 units at an approximate average of $430,000 during
the corresponding 1998 period. Southbridge sold 34 lots at an average sales
price of approximately $37,000 during the three months ended June 30, 1999 as
compared to 12 lots at an average of $42,500 for the corresponding period of
1998.
15
<PAGE> 16
Also contributing to the growth in revenues was the increase in club
operations. Continued sales activities at both Grand Harbor and Oak Harbor was
the chief component in the rise of club membership and the corresponding
operating revenues between the three months ended June 30, 1998 and 1999.
A growth in real estate sales expense was primarily responsible for the
increase in operating costs and expenses between the three months ended June
30, 1999 and 1998. This change corresponds chiefly to the increase in sales
discussed earlier.
Gross margin as a percentage of real estate sales was 28% for the three months
ended June 30, 1999, compared to 25% for the comparable period in 1998.
Club operations costs and expenses increased $287,319 for the three months
ended June 30, 1999 as compared to 1998. This increase is chiefly due to the
rise in club operations that was discussed earlier.
Patient services costs and expenses increased $257,319 between 1998 and 1999
which is attributable to higher patient levels.
An increase in other operating expenses between 1998 and 1999 also contributed
to the rise in operating costs and expenses.
Total other expense increased primarily as a result of an increase in related
party interest expense between 1998 and 1999. The increase in related party
interest expense between 1998 and 1999 is due to higher outstanding payable
balances as a result of additional advances during the second half of 1998 and
the capitalization of unpaid interest into the loans at December 31, 1998.
Interest expense declined because of a net reduction in external indebtedness
that was caused by significant loan payments made out of the proceeds from the
previously discussed sale of Chapman's Landing and sales of units at Grand
Harbor and Oak Harbor, which was offset by the borrowings related to acquiring
Ashburn.
The combination of the above changes resulted in a net loss of $3,746,833
($0.60 per share) for the three months ended June 30, 1999, as compared to a
net loss of $3,427,278 ($0.54 per share) for the three months ended June 30,
1998.
YEAR 2000 UPDATE
The Company is continuing to advance its program to address the issue of
computer programs and embedded computer chips that are unable to distinguish
between the year 1900 and 2000. The problems arise from computer software and
hardware that fail to distinguish dates in the "2000's" from dates in the
"1900's", because historically computers and software have used only two digits
to identify the year in a date. The Company has identified all of the assets
that may be affected by this problem, and has completed an assessment of these
assets which include business computers and related software, building
mechanical systems, and certain equipment. Most of the major or significant
computer systems, mechanical systems, and equipment were assessed by inquiries
with the related vendor or testing of the systems. The majority of the systems
were found to be compliant. The Company is progressing with its program to
replace the few non-compliant systems found by its assessment. It has actively
sought quotes for purchasing new systems, and is near to completing this
process. The estimated cost of modifications to become "Year 2000" compliant
is not expected to exceed $150,000, and should be completed during the third
quarter or 1999.
The nature of the Company's business minimizes its exposure to the "Year 2000"
problem. Nevertheless, it is possible during the implementation phase that
other significant risks could be identified. Contingency plans are being
developed to address various possible interruptions, which include the failure
of accounting and related information systems including point of sales systems,
building mechanical devises, and equipment. To date, the Company has
identified and is replacing all systems that could present a material risk of
not being "Year 2000" ready. However it is possible that unforeseen business
interruptions could have a material adverse effect on financial conditions and
results of operations. Moreover, if any third parties that provide important
goods or services to the Company fail to appropriately address their "Year
2000" issues, there could be a material adverse effect on the Company's
financial conditions and results of operations.
16
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS
The Company is exposed to market risks associated with interest changes on the
debt used to fund its construction, development, and operating activities. The
Company's interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flow and to lower overall borrowing
costs. The Company uses a mixture of fixed rate debt, interest rate swap
agreements, and offsetting financial instruments such as annuity contracts to
mitigate this risk. The Company does not enter into other derivative financial
instruments for speculative purposes.
The Company's interest rate risk is monitored by management. The table below
presents the principal amounts, weighted-average interest rates and fair values
required to evaluate the expected cash flows of the Company under debt and
related agreements and its sensitivity to interest rate changes at June 30,
1999.
<TABLE>
<CAPTION>
There Fair
(000,000's omitted) 2000 2001 2002 2003 2004 -after Total Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt 6.3 0.4 0.4 0.4 0.4 2.8 10.7 10.7
Average interest rate 12.8% 6.3% 6.3% 6.3% 6.3% 6.3%
Variable rate LIBOR debt 0.1 0.2 0.2 0.2 35.0 - 35.7 35.7
Average interest rate 7.6% 7.6% 7.6% 7.6% 7.6% -
Variable rate prime debt 7.4 1.0 - - 58.1 - 66.5 66.5
Average interest rate 9.5% 9.7% 9.8% 9.8% 9.8% -
Variable rate bank cost of funds debt 0.6 2.1 2.6 1.8 - - 7.1 7.1
Average interest rate 7.6% 7.6% 7.6% 7.6% - -
</TABLE>
The table incorporates those exposures that exist as of June 30, 1999, and does
not consider those exposures or positions which could arise after that date.
As a result the Company's cost of funds with respect to interest rate
fluctuations will depend on the exposures that arise after June 30, 1999, the
Company's hedging strategy during that period and interest rates.
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Ashburn Corporate Center
During August 1998, Legend filed a lawsuit and a memorandum of Lis Pendens in
the Circuit Court of Loudoun County, Virginia against Atlantic Research
Corporation (ARC) which was subsequently amended in November 1998. Legend was
seeking specific performance under a real estate contract and any other relief
the court would offer. During the first quarter of 1999, Legend and ARC came
to an agreement concerning the real estate sales contract which resulted in
Legend's acquisition of the second Ashburn Corporate Center parcel that was
discussed previously. As a result, the litigation noted above has been settled
and dismissed.
General Legal Matters
The Company is subject to various lawsuits arising in the ordinary course of
business. The Company is of the opinion that the outcome of any such lawsuits
will not have a material adverse effect on its operations.
18
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
EXHIBIT NO.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.(1)
3.2 Bylaws of Registrant, as amended and restated as of July 1, 1996. (2
10.1 Edward F. Podboy's Employment Contract dated _________,1998(3)
10.2 Credit Agreements, Notes and Warrants between Registrant and Morgens
Waterfall, Vintiadis & Co, Inc.(4)10.3 Loan Modification Agreement,
dated as May 20, 1996, by and between Registrant and RGI Holdings,
Inc. (SoGen Loan) (5)
10.4 Loan Modification Agreement, dated as of May 21, 1996, by and between
Registrant and RGI Holdings, Inc. (Morgens Loan) (5
10.5 Registration Rights Agreement, dated as of May 21,1996, by and between
Registrant and RGI Holdings,Inc. (5)
10.6 Second Stipulation and Agreement of Settlement, signed September 17,
1997, In Re: Banyan Mortgage Investment Fund Shareholders
Litigation.(6)
27.1 Financial Data Schedule
99.1 Form of Director Stock Option Agreements dated July 1, 1993, July
24,1994 and July 7, 1995.(7)
99.2 Form of Executive Stock Option Agreements dated July 1, 1993, January
12, 1994 and February 8, 1995.(7)
- --------------------------------------------------------------------------------
(1) Incorporated by reference to the Registrant's Report on Form 10-K for
the year ended December 31, 1996.
(2) Incorporated by reference to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1996.
(3) Incorporated by reference to the Registrant's Report on Form 10-K for
the year ended December 31, 1997.
(4) Incorporated by reference to Exhibits 10(a) through 10(n) to the
Registrant's Report on Form 10-k for the year ended December 31, 1994.
(5) Incorporated by reference to the Registrant's Report on Form 8-K dated
May 20, 1996.
(6) Incorporated by reference to the Registrant's Report on Form 10-K for
the quarter ended September 30, 1997.
(7) Incorporated by reference to the Registrant's Report on Form 10-K for
the year ended December 31, 1995.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended June 30,
1999
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 20, 1999 LEGEND PROPERTIES, INC
By: /s/ Peter J. Henn
---------------------
Peter J. Henn
President and Chief Executive Officer
By: /s/ Robert B. Cavoto
-------------------------
Robert B. Cavoto
Chief Financial Officer
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) LEGEND
PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
JUNE 30, 1999 QUARTERLY REPORT FILED ON FORM 10-Q AND 1998 ANNUAL REPORT FILED
ON FORM 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,264,365
<SECURITIES> 0
<RECEIVABLES> 1,617,052
<ALLOWANCES> 0
<INVENTORY> 78,727,150
<CURRENT-ASSETS> 0
<PP&E> 31,008,670
<DEPRECIATION> 7,346,117
<TOTAL-ASSETS> 132,861,141
<CURRENT-LIABILITIES> 0
<BONDS> 29,969,584
63,117
0
<COMMON> 0
<OTHER-SE> (2,938,628)
<TOTAL-LIABILITY-AND-EQUITY> 132,861,141
<SALES> 24,850,412
<TOTAL-REVENUES> 31,661,176
<CGS> 18,102,800
<TOTAL-COSTS> 34,203,401
<OTHER-EXPENSES> 4,947,458
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,271,253
<INCOME-PRETAX> (7,489,683)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,489,683)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,489,683)
<EPS-BASIC> (1.19)
<EPS-DILUTED> (1.19)
</TABLE>
