U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 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, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to _______________
Commission File No. 0-17069
Excal Enterprises, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 59-2855398
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 North Tampa Street, Suite 3575, Tampa, Florida 33602
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(Address of principal executive offices)
(813) 224-0228
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Issuer's telephone number
___________________________________________________
(Former Name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of July 31, 2000, there were 3,871,377 shares of the issuer's common stock,
par value $0.001, outstanding.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
EXCAL ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
ASSETS (unaudited)
Current assets
Cash and cash equivalents $ 6,470,602
Marketable securities 206,601
Accounts receivable, less allowance of $144,421 760,835
Notes receivable 306,736
Income tax receivable 181,000
Inventory 702,279
Prepaid expenses and deposits 579,829
Deferred tax asset 284,000
----------
Total current assets 9,491,882
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Property, plant and equipment
Land 1,600,000
Buildings and improvements 6,954,676
Furniture, fixtures, vehicles and equipment 2,158,496
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10,713,172
Less accumulated depreciation and amortization 2,276,955
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Net property, plant and equipment 8,436,217
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Notes receivable - related parties 261,394
Restricted cash reserves 621,956
Commission costs, less accumulated amortization of $336,832 319,633
Loan costs, less accumulated amortization of $458,141 374,843
----------
Total Assets $ 19,505,925
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 615,960
Accrued liabilities 455,939
Reserve for litigation 434,246
Revolving line of credit 386,711
Current portion of long-term debt 501,079
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Total current liabilities 2,393,935
Long-term debt 13,025,272
Deferred tax liability 1,247,000
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Total liabilities 16,666,207
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Minority interest equity 1,041
Stockholders' equity
Preferred stock, $.01 par value, 7,500,000 shares authorized,
5,000,000 shares issued, no shares outstanding --
Common stock, $.001 par value, 20,000,000 shares authorized,
4,738,866 shares issued, 3,871,377 shares outstanding 4,738
Additional paid-in capital 3,985,842
Retained earnings 2,717,237
Less 867,489 shares of common stock held in treasury at cost ( 2,751,510)
----------
3,956,307
Less notes receivable from stockholders ( 1,117,630)
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Total stockholders' equity 2,838,677
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Total Liabilities and Stockholders' Equity $ 19,505,925
==========
The accompanying notes are an integral part
of the consolidated financial statements.
EXCAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended June30
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2000 1999
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Rental revenue $ 1,291,638 $ 1,198,833
Sports licensing sales 409,741 304,102
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Total net revenue 1,701,379 1,502,935
Cost of sports licensing sales 389,218 316,317
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Gross margin 1,312,161 1,186,618
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Rental operating costs 597,115 545,992
Sports licensing operating costs 450,381 338,337
Depreciation and amortization 154,113 160,140
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Total operating costs 1,201,609 1,044,469
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Net operating profit 110,552 142,149
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Other expense (income)
Interest expense 319,520 322,802
Professional fees related to litigation 59,372 48,499
Net realized and unrealized
loss on marketable securities 188,457 --
Gain on disposals of assets ( 1,741) --
Interest income ( 141,463) ( 141,673)
Miscellaneous income ( 11,574) ( 20,885)
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Net other expense 412,571 208,743
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Loss before income taxes ( 302,019) ( 66,594)
Income tax provision (benefit) 15,000 ( 26,000)
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Net loss $( 317,019) $( 40,594)
========= =========
Loss per share
Basic $( .08) $( .01)
========= =========
Diluted $( .08) $( .01)
========= =========
Weighted average shares outstanding
Common 3,876,731 4,262,349
Common and equivalent 3,876,731 4,262,349
The accompanying notes are an integral part
of the consolidated financial statements.
EXCAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended June 30
--------------------------
2000 1999
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Cash provided by operating activities
Net loss $( 317,019) $( 40,594)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 183,169 193,130
Other adjustments 42,908 ( 42,410)
Increase in net operating assets ( 792,410) ( 475,955)
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Net cash used by operating activities ( 883,352) ( 365,829)
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Cash flows from investing activities
Proceeds from sale of assets 5,000 --
Property and equipment additions ( 53,582) ( 8,763)
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Net cash used by investing activities ( 48,582) ( 8,763
--------- ---------
Cash flows from financing activities
Net proceeds from notes payable 13,624 10,034
Principal repayments of long-term debt ( 50,293) ( 43,094)
Purchase of treasury stock ( 45,422) ( 148,983)
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Net cash used by financing activities ( 82,091) ( 182,043)
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Decrease in cash (1,014,025) ( 556,635)
Cash and cash equivalents at beginning of period 7,484,627 9,655,973
--------- ---------
Cash and cash equivalents at end of period $ 6,470,602 $ 9,099,338
========= =========
The accompanying notes are an integral part
of the consolidated financial statements.
EXCAL ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three-month periods ended June 30, 2000 and 1999, (b) the
financial position at June 30, 2000, and (c) cash flows for the three-month
periods ended June 30, 2000 and 1999, have been made. Certain
reclassifications have been made to the financial statements for the three-
month periods ended June 30, 1999 to conform to the June 30, 2000
presentation. None of the reclassifications affected the financial position
or results of operations.
The unaudited consolidated financial statements and notes are presented as
permitted by Form 10-QSB. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. The
accompanying consolidated financial statements and notes should be read in
conjunction with the audited financial statements and notes of the Company for
the fiscal year ended March 31, 2000. The revenue of the sports licensing
division has been very seasonal with the majority of its revenue in the months
of July through November. The results of operations for the three-month
period ended June 30, 2000 are not necessarily indicative of those to be
expected for the entire year.
NOTE 2 - NOTES PAYABLE
The Company's $375,000 line of credit with European American Bank expired
in July 2000. Renewal terms have not been finalized. In addition, Roxbury
was in violation of the financial loan covenants regarding the level of equity
and debt-to-equity ratio at June 30, 2000. Therefore, the entire balance of
the term loan is included in the current portion of long-term debt at June 30,
2000.
NOTE 3 - STOCKHOLDERS' EQUITY
During the three months ended June 30, 2000, the Company purchased 20,300
shares of its common stock in market transactions at an aggregate cost of
$45,422.
NOTE 4 - SEGMENT INFORMATION
The Company has two reportable business segments. These segments have
been determined by product line and consist of the rental of commercial real
estate and the manufacture and distribution of sports licensing products. The
revenue shown on the face of the financial statements was from external
sources. The segment information disclosures not included on the face of the
financial statements are detailed in the tables below. The "Other" category
includes corporate related items and income and expense items not allocated to
reportable segments.
Three Months Ended June 30
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2000 1999
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Segment income (loss) before income taxes
Real estate operations $ 352,278 $ 267,620
Sports licensing operations ( 475,597) ( 380,822)
Other ( 178,700) 46,608
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Total income (loss) before income taxes $( 302,019) $( 66,594)
========= =========
As of June 30
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2000 1999
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Identifiable assets
Real estate operations $14,221,173 $13,323,226
Sports licensing operations 2,086,862 2,500,103
Other 3,197,890 6,186,442
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Total identifiable assets $19,505,925 $22,009,771
========== ==========
Item 2. Management's Discussion and Analysis.
Except for historical matters, the matters discussed in this Form 10-QSB
are forward-looking statements based on current expectations. Forward-looking
statements, including without limitation, statements relating to the Company's
plans, strategies, objectives, expectations, intentions and adequacy of
resources, are made pursuant to the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that such
forward-looking statements involve risks and uncertainties including without
limitation the following: (i) the Company's plans, strategies, objectives,
expectations and intentions are subject to change at any time at the
discretion of the Company, (ii) the Company's plans and results of operations
will be affected by economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services, and
prices; and (iii) other risks and uncertainties as indicated from time to time
in the Company's filings with the Securities and Exchange Commission.
The following discussion should be read in conjunction with the
information contained in the financial statements of the Company and the notes
thereto appearing elsewhere herein and in conjunction with Management's
Discussion and Analysis set forth in the Company's Form 10-KSB for the fiscal
year ended March 31, 2000.
The following discussion compares the results of operations for the three-
month period ended June 30, 2000 (First Quarter 2001) with the three-month
period ended June 30, 1999 (First Quarter 2000).
Results of Continuing Operations
The Company's operations fall into two distinct businesses: the
manufacture and distribution of sports licensing products and the rental of
commercial real estate. In December 1998, the Company acquired Roxbury
Industries Corp ("Roxbury"), which produces and distributes knit products
licensed by most professional and major college teams. The Company owns,
leases, and manages a two story warehouse and office facility containing
approximately 1,666,000 square feet of rentable space located on approximately
74 acres in an industrial park in Duval County, Florida.
Sports Licensing Products
Roxbury's revenue has been very seasonal with the majority of its revenue
in the months of July through November. Revenue increased by 35% in First
Quarter 2001 to $409,741 from $304,102 in First Quarter 2000. The majority of
the increased revenue was in the private-label product line. The 4.0T product
line had a 34% increase in revenue in First Quarter 2001. These two product
lines accounted for 65% of total revenue in the last fiscal year and 78% of
revenue in First Quarter 2001. While revenue for First Quarter 2001 was 35%
over First Quarter 2000, the sales orders booked in First Quarter 2001 were
84% over First Quarter 2000. The 4.0T sales orders booked in the First
Quarter 2001 were 109% over First Quarter 2000. After evaluating operating
costs and gross margins, the Company decided to sell its screen printing
operation. The operation was closed in June 2000 and the equipment was sold.
Screen printing operations only accounted for $160,000 in revenue in the last
fiscal year and $46,000 in revenue for First Quarter 2001.
The cost of goods sold increased 23% as a result of increased revenue.
However, cost of goods sold decreased as a percentage of revenue from 104% in
First Quarter 2000 to 95% in First Quarter 2001. The cost of goods sold for
First Quarter 2001 is higher than is to be expected on an annual basis because
the manufacturing overhead is allocated over less goods during the slower
months of the Company's seasonal business. Approximately $69,000 in overhead
costs were allocated to cost of goods sold in the first quarter of both 2001
and 2000. As revenue increases in the next two quarters, the overhead, as a
percentage of revenue, will decrease. Also, as licensed product revenue
becomes a larger percentage of total revenue, the gross margin is expected to
increase. Operating costs increased $112,044 (33%) to $450,381 in First
Quarter 2001 from $338,337 in First Quarter 2000. This increase is due to
increased expenditures on market research and various marketing programs and
the addition of personnel in sales, sales support, operations, customer
service and design.
Depreciation and amortization included in operating costs decreased by
$1,030 in First Quarter 2001 as compared to First Quarter 2000. The
depreciation and amortization included in cost of goods sold decreased from
$32,990 in First Quarter 2000 to $29,055 in First Quarter 2001. The net
operating loss of the sports licensing division increased from $357,826 in
First Quarter 2000 to $436,102 in First Quarter 2001.
Commercial Real Estate
The commercial real estate operations consist of the lease and management
of property located in Jacksonville, Florida (Imeson Center). The property
consists of approximately 1,392,000 square feet of warehouse space and 274,000
square feet of office space. The Company's lease agreements are structured to
include a base minimum rental fee, a contingent rental fee to reimburse the
Company for operating expenses, common area maintenance costs, insurance and
property taxes, and a requirement that the tenant pay for its own utilities.
Net revenue increased 8% to $1,291,638 in First Quarter 2001 from
$1,198,833 in First Quarter 2000. The base minimum rental fee increased by
$38,433 (4%) in First Quarter 2001 as a result of increases in the base
minimum rent per square foot. The contingent rental fee increased by $54,372
(25%) in the three-month period as a result of an increase in reimbursable
operating costs, primarily property taxes.
Operating costs increased $51,123 (9%) to $597,115 in First Quarter 2001
from $545,992 in First Quarter 2000. The primary reason for the increase was
an increase in property taxes and professional fees. Property taxes increased
significantly due to a revaluation of the Imeson Center by the Duval County
property appraiser in September 1999.
Depreciation and amortization decreased by $4,997 in First Quarter 2001 to
$147,869, as compared to First Quarter 2000. The net operating profit of the
commercial real estate division increased from $499,975 in First Quarter 2000
to $546,654 in First Quarter 2001.
Consolidated Operating Results
Revenue increased by 13% to $1,701,379 for First Quarter 2001 from
$1,502,935 for First Quarter 2000. The increase was the result of increased
revenue in both the commercial real estate and sports licensing operations.
The increase in costs of goods sold was the result of increased revenue in the
sports licensing operation offset by a decrease in cost of goods sold as a
percentage of revenue.
Operating costs increased by 15% to $1,201,609 in First Quarter 2001 from
$1,044,469 in First Quarter 2000. The increase was the result of an increase
in property taxes in the commercial real estate operation and additional sales
and marketing expenditures in the sports licensing operation. The net
operating profit declined $31,597 in First Quarter 2001 to $110,552 as
compared to $142,149 in First Quarter 2000.
Beginning in the fourth quarter of fiscal 2000, the Company invested in
publicly traded equity securities. The Company incurred a loss of $188,457 in
First Quarter 2001 from these investments. An income tax provision of $15,000
was recorded in First Quarter 2001 despite having a consolidated loss before
income taxes. This occurred because Roxbury files separate income tax returns
and $135,000 in tax benefits from its losses were not recognized in First
Quarter 2001. The benefit from these losses will be recognized when Roxbury
generates pretax income.
Liquidity and Capital Resources
The cash used by operating activities was $883,352 in First Quarter 2001
compared to $365,829 in First Quarter 2000. The Company's operations used
$90,942 in working capital in First Quarter 2001 compared to $110,126 of
working capital provided in First Quarter 2000. The increases in net
operating assets for both First Quarter 2001 and First Quarter 2000 were
primarily from an increase in accounts receivable and inventory in the sports
licensing division, an increase in prepaid property taxes in the real estate
division and a reduction in corporate accrued expenses. In addition, the
accounts payable of the sports licensing division were reduced by over 20% in
First Quarter 2001.
Property and equipment additions in First Quarter 2001 were primarily for
equipment used at the Imeson Center. Property and equipment additions in
First Quarter 2000 were for equipment used at Roxbury.
Cash of $82,091 was used by financing activities in First Quarter 2001, as
compared to cash used by financing activities of $182,043 in First Quarter
2000. The decrease in cash used by financing activities was related to a
reduction in the number of shares of its common stock the Company purchased in
First Quarter 2001 as compared to First Quarter 2000.
The Company did not have any material commitments for capital expenditures
as of June 30, 2000 other than for ordinary expenses incurred during the usual
course of business. The Company is currently negotiating with Laney & Duke
for the renewal of their lease of the warehouse space at Imeson Center that
expires on December 31, 2000. This lessee accounted for the majority of the
commercial rental revenue and non-renewal would have a significant impact on
the Company's operating results and liquidity. The Company is looking for
additional tenants for Imeson Center for the remaining 41,000 square feet of
office space and to replace America Online when their lease expires in June
2002. It is expected that any new tenant will require the Company to incur
significant costs related to renovation of the property to meet the tenant's
needs. Additionally, the Company is considering opportunities to further
develop the Imeson Center. Roxbury is incurring additional marketing expenses
to expand its revenue base and distribution channels. These expanded
marketing activities may not generate the revenue projected and result in
future losses. Although the Company has not identified any specific
opportunities at this time, the Company is expending resources to identify
potential opportunities to expand the Company's business operations into other
areas. Any new business operation will likely involve a substantial
commitment of Company resources and a significant degree of risk. The Company
also has potential liability related to litigation. In addition, the Company
has been and expects to continue repurchasing shares of its stock. Roxbury is
in violation of the loan covenants of its loans from European American Bank
and has not finalized terms for renewal of its line of credit. While the
Company has a significant current liquidity position, any of the above
mentioned items could require significant capital resources in excess of the
Company's current liquidity position, requiring it to raise additional capital
through public or private debt or equity financing. The availability of these
capital sources will depend upon prevailing market conditions, interest rates,
and the then existing financial position and results of operations of the
Company. Therefore, no assurances can be made by the Company that such
additional capital will be available.
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
No material events have occurred in the Company's ongoing litigation
matters. For the history of such litigation, please refer to the Company's
Annual Report on Form 10-KSB for the fiscal year ended March 31, 2000.
Item 2. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
(c) Sales of Unregistered Securities.
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
EXCAL ENTERPRISES, INC.
Registrant
Dated: August 9, 2000 /s/ W. CAREY WEBB
W. Carey Webb
President and Chief Executive Officer
Dated: August 9, 2000 /s/ TIMOTHY R. BARNES
Timothy R. Barnes
Vice President and Chief Financial Officer
