- UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[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
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 1-10641
MILESTONE PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
150 E. Palmetto Park Rd. 4th Floor, Boca Raton, FL 33432
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 394 - 9533
--------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
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
As of August 12, 1999, 4,943,633 shares of the Registrant's Common
Stock, par value $.01 per share, were outstanding and 16,423 shares of the
Registrant's $.78 Convertible Series A Preferred Stock were outstanding.
<PAGE>
Part I: Financial Information
Item 1. Financial Statements
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1999 (Unaudited) and December 31, 1998
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 6,679,325 $ 11,826,301
Restricted cash 222,000 222,000
Reserved cash for settlement 1,759,218 0
Loans receivable 1,408,194 1,444,442
Accounts receivable 675,944 812,555
Accrued interest receivable 2,049,084 5,185,432
Due from related party 781,187 837,400
Prepaid expenses and other 975,088 1,231,663
--------------- ----------
Total current assets 14,550,040 21,559,793
Property, improvements and equipment, net 21,343,571 21,517,884
Wraparound notes, net 30,677,857 39,529,787
Deferred income tax asset, net 2,793,820 2,994,070
Investment in affiliate 457,469 0
Investments in preferred stock 0 445,500
Management contract rights, net 155,732 193,600
Goodwill and other, net 671,930 681,562
--------------- -------
Total assets $ 70,650,419 $ 86,922,196
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Accounts payable and accrued expenses $ 1,164,753 $ 2,436,964
Accrued litigation payable 2,502,636 9,692,454
Accrued interest payable 311,414 306,846
Master lease payable 3,341,537 8,962,828
Current portion of mortgages and notes payable 4,847,135 5,782,950
Income taxes payable 2,763,071 2,836,496
-------------- ---------
Total current liabilities 14,930,546 30,018,538
Mortgages and notes payable 41,281,936 42,194,179
---------- ----------
Total liabilities 56,212,482 72,212,717
---------- ----------
Commitments and Contingencies
Stockholders' equity:
Common stock ($.01 par value, 10,000,000 shares authorized, 4,943,633 issued
and outstanding at June 30, 1999 and
December 31, 1998; 692,591 shares in treasury) 49,436 49,436
Preferred stock (Series A $.01 par value, $10 liquidation
preference, 10,000,000 shares authorized, 16,423 and
2,999,707 shares issued and outstanding at June 30, 1999
and December 31, 1998, respectively) 164 29,997
Additional paid in surplus 45,527,013 45,497,180
Accumulated deficit (27,698,258) (27,426,716)
Shares held in treasury - at cost (3,440,418) (3,440,418)
----------- ---------------
Total stockholders' equity 14,437,937 14,709,479
---------- --------------
Total liabilities and stockholders' equity $ 70,650,419 $ 86,922,196
=============== ===============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
(Unaudited)
For the Three Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
REVENUES
<S> <C> <C>
Rent $ 1,947,369 $ 2,598,415
Interest income 1,234,337 2,227,375
Revenue from management company operations 159,218 99,203
Tenant reimbursements 257,896 276,218
Management and reimbursement income 21,381 26,935
Percentage rent 123,249 201,759
Gain on sale of real estate and real estate related assets 1,273,793 0
--------- ---------------
Total revenues 5,017,243 5,429,905
--------- ---------
EXPENSES
Master lease expense 1,668,342 3,445,833
Interest expense 919,272 1,581,007
Depreciation and amortization 191,126 197,948
Salaries, general and administrative 882,406 588,632
Property expenses 492,594 548,846
Expenses for management company operations 267,469 294,431
Professional fees 148,153 308,294
------------ ----------
Total expenses 4,569,362 6,964,991
------------ ----------
Income (loss) before income taxes 447,881 (1,535,086)
Provision (benefit) for income taxes 486,366 (498,584)
------------ ---------
Net loss attributable to common stockholders $ (38,485) $ (1,036,502)
=========== ==============
Loss per common share, basic and diluted $ (0.01) $ (0.25)
=============== ===============
Weighted average common shares outstanding 4,250,992 4,225,727
============ ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
(Unaudited)
For the Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
REVENUES
<S> <C> <C>
Rent $ 3,989,466 $ 5,344,220
Interest income 2,741,371 4,467,931
Revenue from management company operations 328,898 295,045
Tenant reimbursements 535,450 533,602
Management and reimbursement income 40,823 55,986
Percentage rent 178,446 311,007
Gain on sale of real estate and real estate related assets 1,273,793 81,890
--------- -----------
Total revenues 9,088,247 11,089,681
--------- ----------
EXPENSES
Master lease expense 3,623,396 6,891,666
Interest expense 1,989,245 3,100,605
Depreciation and amortization 382,921 406,021
Salaries, general and administrative 1,435,042 1,164,960
Property expenses 942,364 992,512
Expenses for management company operations 444,399 562,696
Professional fees 342,172 527,639
--------- ----------
Total expenses 9,159,539 13,646,099
---------- -----------
Loss before income taxes (71,292) (2,556,418)
Provision (benefit) for income taxes 200,250 (985,622)
------------- ---------
Net loss attributable to common stockholders $ (271,542) $ (1,570,796)
============ ==============
Loss per common share, basic and diluted $ (0.06) $ (0.37)
=============== ===============
Weighted average common shares outstanding 4,250,992 4,219,548
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
4
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
Common Stock Preferred Stock Treasury Stock
Shares Cost Shares Cost Shares Cost
============================================== =========== =========== ============== =========== =========== ==============
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 4,943,633 $ 49,436 2,999,707 $ 29,997 (692,591) $ (3,440,418)
Cancellation of Series A Preferred Stock 2,983,284 (29,833)
Net loss for the six months ended June 30, 1999
Balance, June 30, 1999 4,943,633 $ 49,436 16,423 $ 164 (692,591) $ (3,440,418)
=========== =========== ============== =========== =========== ==============
Additional
paid in Accumulated Stockholders'
surplus deficit equity
=============================================== =============== =============== ===============
<S> <C> <C> <C>
Balance, January 1, 1999 $ 45,497,180 $ (27,426,716) $ 14,709,479
Cancellation of Series A Preferred Stock 29,833 0
Net loss for the six months ended June 30, 1999 (271,542) (271,542)
Balance, June 30, 1999 $ 45,527,013 $ (27,698,258) $ 14,437,937
=============== =============== ===============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (271,542) $ (1,570,796)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 382,921 406,021
Deferred taxes 200,250 (1,055,702)
Gain on sale of real estate and real estate related assets (1,273,793) (81,890)
Changes in operating assets and liabilities
Decrease in accounts receivable 136,611 368,105
Decrease (increase) in due from related party 56,213 (93,592)
Decrease in accrued interest receivable 3,136,348 4,685,570
Decrease (increase) in prepaid expenses and other 198,813 (925,335)
Decrease in accounts payable and accrued expenses (1,345,636) (918,678)
Decrease in accrued litigation payable (7,189,818) 0
Increase (decrease) in accrued interest payable 4,568 (17,097)
Decrease in master lease payable (5,621,291) (6,726,243)
------------- -----------
Net cash used in operating activities (11,586,356) (5,929,637)
------------ -----------
CASH FLOW FROM INVESTING ACTIVITIES
Principal repayments on loans receivable 36,248 33,470
Principal repayments on wraparound notes 3,782,763 5,025,520
Investment in wraparound notes 0 25,410
Investment in affiliate (457,469) 0
Purchase of building and land 0 (3,650,000)
Purchase of leasehold improvements (243,021) (227,631)
Proceeds from realization of real estate related assets, net 6,482,635 75,000
Proceeds from redemption of investments in preferred stock 445,500 891,000
------------- -------
Net cash provided by investing activities 10,046,656 2,172,769
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from mortgages and notes payable 1,750,000 6,497,746
Principal payments on mortgages and notes payable (3,598,058) (3,310,795)
Amounts in restricted cash (1,759,218) 0
------------ --------------
Net cash (used in) provided by financing activities (3,607,276) 3,186,951
------------ ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,146,976) (569,917)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,826,301 13,435,237
----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,679,325 $ 12,865,320
=========== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 1,984,677 $ 3,117,702
=========== ============
Cash paid during the period for income taxes $ 73,425 $ 70,080
============= ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying consolidated financial statements of Milestone Properties, Inc.
("Milestone") and its wholly owned subsidiaries (collectively, Milestone with
its subsidiaries is the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
financial statements as of and for the periods ended June 30, 1999 and 1998 are
unaudited. The results of operations for the interim periods shown in this
report are not necessarily indicative of the results of operations to be
expected for the fiscal year. Certain information for 1998 has been reclassified
to conform to the 1999 presentation. These consolidated interim financial
statements should be read in conjunction with the annual financial statements
and footnotes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
The Company is engaged in the business of owning, acquiring, managing,
developing and investing in commercial real estate and real estate related
assets. The Company is primarily engaged in the ownership, operation and
management of interests in commercial real estate properties, currently (as of
the date of this filing) consisting of (i) 10 properties owned in fee (the "Fee
Properties"), (ii) the ownership of wraparound notes (the "Wraparound Notes")
and wraparound mortgages (the "Wraparound Mortgages" and, together with the
Wraparound Notes, the "Wrap Debt") which are secured by 22 commercial real
properties (the "Underlying Properties" and, together with the Fee Properties,
the "Properties") and (iii) the operation and management of the Properties. At
June 30, 1999, the Company possessed interests in 33 commercial real estate
properties consisting of (i) 10 properties owned in fee and (ii) the ownership
of wraparound notes and wraparound mortgages secured by 23 commercial real
properties. At June 30, 1998, the Company possessed interests in 33 commercial
real properties consisting of (i) 6 properties owned in fee and (ii) the
ownership of wraparound notes and wraparound mortgages secured by 27 commercial
real properties.
1. Acquisition and Disposition of Real Estate Related Assets
On April 6, 1999, a wraparound note held by the Company on a 125,803 square foot
shopping center property located in Pascagoula, Mississippi (the "Pascagoula
Property"), was paid as a result of the sale of the Pascagoula Property by its
owner, an affiliate of the Company (the partnership that owned the Pascagoula
Property), to an unrelated third party. In connection with the sale of the
Pascagoula Property, the Company, as the master lessee on a master lease on the
Pascagoula Property, canceled such master lease. As a result of the payment of
the wraparound note, the Company realized net cash proceeds of approximately
$2,178,000 and a book gain of approximately $885,000 in the second quarter of
1999.
7
<PAGE>
On April 27, 1999, a wraparound note held by the Company on a 52,700 square foot
shopping center property located in Baton Rouge, Louisiana (the "Baton Rouge
Property"), was paid as a result of the sale of the Baton Rouge Property by its
owner, an affiliate of the Company (the partnership that owned the Baton Rouge
Property), to an unrelated third party. In connection with the sale of the Baton
Rouge Property, the Company, as the master lessee on a master lease on the Baton
Rouge Property, canceled such master lease. Of the gross proceeds, $1,896,208
was used to satisfy the underlying mortgage debt on the Baton Rouge Property. As
a result of the payment of the wraparound note and the satisfaction of the
underlying mortgage debt, the Company realized net cash proceeds of
approximately $2,045,000 and a book gain of approximately $389,000 in the second
quarter of 1999.
On July 30, 1999, a wraparound note held by the Company on a 31,170 square foot
single tenant commercial building located in Franklin, Pennsylvania (the
"Franklin Property"), was paid as a result of the sale of the Franklin Property
by its owner, an affiliate of the Company (the partnership that owned the
Franklin Property), to an unrelated third party. In connection with the sale of
the Franklin Property, the Company, as the master lessee on a master lease on
the Franklin Property, canceled such master lease. Of the gross proceeds,
$1,348,000 was used to defease the underlying bond debt. As a result of the
payment of the wraparound note, the Company realized net cash proceeds of
approximately $896,000 and will recognize a book gain of approximately
$1,544,000 in the third quarter of 1999.
2. Income Taxes
The Company is required by Statement of Financial Accounting Standards (SFAS)
No. 109 to record a deferred tax asset or liability for the basis of an asset or
liability that is temporarily different for financial reporting purposes and tax
reporting purposes. Income taxes for interim periods are generally computed
using the effective tax rate estimated to be applicable for the full fiscal
year. The interim tax provision is adjusted for specific significant
transactions which affect deferred tax assets or liabilities as recorded under
SFAS 109. During the second quarter of 1999, the wraparound notes held by the
Company on the Pascagoula and Baton Rouge Properties were satisfied. Relating to
such wraparound notes, the Company had previously recorded deferred tax assets
which were realized through the provision for income taxes in the second quarter
of 1999. The Company did not realize any such deferred tax asset in the second
quarter of 1998.
3. Legal Proceedings
As previously reported, during 1996 Milestone, certain past and present members
of its Board of Directors and executive officers, and Concord Assets Group, Inc.
("Concord"), a New York Corporation, were named as defendants in a purported
class action and derivative lawsuit (the "Winston Actions") commenced in the
Court of Chancery of the State of Delaware (the "Delaware Court"). In the
Winston Actions, the plaintiff, a Series A Preferred Stockholder purporting to
bring the action on behalf of himself, all other Series A Preferred Stockholders
and derivatively on behalf of Milestone, alleged that in connection with
Milestone's acquisition in October 1995 of certain wraparound notes, wraparound
mortgages and fee properties from certain affiliates of Concord and certain
related transactions (collectively, the "Transactions"), Milestone and its
directors engaged in self-dealing, violated federal securities laws and an
injunction against such violations and breached their fiduciary duties to the
Series A Preferred Stockholders. The plaintiff claimed, among other
8
<PAGE>
things, that, as a result of the Transactions, Milestone would not have
sufficient funds to pay dividends on the Series A Preferred Stock and that the
properties which were not transferred to Union Properties Investors, Inc.
("UPI"), a then wholly-owned Delaware subsidiary of Milestone, in the Transfer
were grossly inferior to the properties that were transferred to UPI.
On August 5, 1998, the counsel for the named plaintiff in the Winston Actions
and the counsel for the defendants entered into a Stipulation and Agreement of
Settlement (the "Winston Settlement Agreement") which memorialized the terms of
a settlement (the "Winston Settlement") of the Winston Actions. On January 28,
1999, the Delaware Court approved the Winston Settlement Agreement, which
approval became final effective as of the close of business on March 5, 1999. At
such time, (i) the shares of Series A Preferred Stock owned by each Series A
Preferred Stockholder who was eligible to participate in the Winston Settlement
and who did not properly opt out of the Winston Settlement and who owned shares
of Series A Preferred Stock as of the close of business on March 5, 1999 were
canceled and represented only the right of such Series A Preferred Stockholder
to receive $3.00 in cash from the Company in exchange for each such share; (ii)
the holders of shares of the Series A Preferred Stock between October 23, 1995
and the close of business on March 5, 1999, other than Series A Preferred
Stockholders who properly opted out of the Winston Settlement Agreement or who
were precluded from participating in the Winston Settlement, released any and
all claims they may have had against the Company and the other named defendants
in connection with the Transactions; (iii) Milestone's stockholders other than
Series A Preferred Stockholders who were eligible to participate in the Winston
Settlement and who properly opted out of the Winston Settlement released all
derivative claims in connection with the Transactions; and (iv) the Winston
Actions were dismissed. In connection with the Winston Actions, the Company
retained counsel for all of the defendants (including, without limitation,
Leonard S. Mandor, Robert A. Mandor, Harvey Jacobson, Gregory McMahon and
Geoffrey Aaronson (each of whom is a director and/or officer of the Company))
and assumed responsibility for the payment of all legal fees incurred by such
persons in connection with the Winston Actions and the Winston Settlement
(subject to the insurance coverage litigation described below).
The foregoing description of the Winston Settlement and the Winston Settlement
Agreement is qualified in its entirety by reference to the Winston Settlement
Agreement, a copy of which was filed by the Company with the Securities and
Exchange Commission (the "Commission") on August 14, 1998 as Exhibit 10.01 to
the Company's Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1998.
The Company maintains a directors and officers insurance and company
reimbursement policy (the "National Policy") issued by National Union Fire
Insurance Company of Pittsburgh, PA ("National Union") with a $2,000,000 limit
and an excess directors and officers liability and company reimbursement policy
(the "Stonewall Policy") issued by Stonewall Surplus Lines Insurance Company,
now known as American Dynasty Surplus Lines Insurance Company ("Stonewall"),
with a $2,000,000 limit. The Company believes that the amounts that it has to
pay pursuant to the Winston Settlement and in connection with the Winston
Actions are covered losses under both the National Union Policy and the
Stonewall Policy. In addition, the Company believes that the legal fees and
other expenses incurred by the Company and the other defendants in connection
with the Winston Actions are also covered losses under the National Union Policy
and the Stonewall Policy. In connection with a previous proposed settlement of
the Winston Actions which was never
9
<PAGE>
consummated, National Union and Stonewall both refused to contribute to such
proposed settlement, asserting that such proposed settlement did not encompass
any covered loss (as defined in the National Policy and the Stonewall Policy,
respectively). On January 29, 1998, the Company commenced a lawsuit in the
United States District Court for the Southern District of New York against
National Union and Stonewall in connection with such refusal to contribute to
such proposed settlement. In the complaint, the plaintiffs alleged that National
Union and Stonewall wrongfully failed to contribute to the proposed settlement
and sought reimbursement from National Union and Stonewall up to the limits of
their respective policies. National Union and Stonewall both answered the
complaint and denied liability. As a result of the termination of the previously
proposed settlement, the Company on one hand, and Stonewall and National Union,
on the other hand, agreed to dismiss such action without prejudice and such
action was dismissed on May 29, 1998 by the United States District Court for the
Southern District of New York. The Company gave both National Union and
Stonewall notice of the Winston Settlement and provided each of them with a copy
of the Winston Settlement Agreement on August 12, 1998. National Union and
Stonewall reviewed the Winston Settlement Agreement and separately informed the
Company that their basic position, denying coverage, had not changed. On
February 12, 1999, the Company commenced a lawsuit in the Circuit Court for the
Fifteenth Judicial Circuit in and for Palm Beach County, Florida against both
National Union and Stonewall alleging, among other things, that National Union
and Stonewall have wrongfully refused to contribute to the Winston Settlement
and seeking reimbursement from National Union and Stonewall up to the limits of
their respective policies. The initial complaint in the new lawsuit was served
on each of National Union and Stonewall on February 12, 1999 and on March 17,
1999 the Company filed an amended complaint, which, among other things, added
certain of the other defendants to the Winston Actions as plaintiffs. On April
12, 1999, National Union served a motion to dismiss the amended complaint or to
strike part thereof and a motion to recuse the Company's Florida counsel.
National Union has since agreed to withdraw its motion to dismiss and to serve
its answer to the amended complaint by June 1, 1999. The motion to recuse the
Company's Florida Counsel was denied; however, the plaintiffs and the defendants
have agreed that Geoffrey Aaronson, a partner with the Company's Florida counsel
and a director of the Company, may not personally act as counsel for the Company
in the proceedings as he may be called as a witness in the proceedings. On April
12, 1999, Stonewall served its answer to the amended complaint and denied
liability. On July 12, 1999, National Union served its first request for
production and interrogatories to which the Company must respond before August
26, 1999. In connection with this action, the Company has retained counsel for
all of the plaintiffs and is assuming responsibility for the payment of all
legal fees incurred by such persons in connection with this action. At this
time, the Company is not in a position to render an opinion as to the outcome of
this action.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
This Quarterly Report on Form 10-Q for the interim period ended June 30, 1999
filed by Milestone contains or incorporates by reference certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and Milestone intends that
such forward-looking statements be subject to the safe harbors created thereby.
Such forward-looking statements involve risks and uncertainties and include, but
are not
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limited to, statements regarding future events and Milestone's plans, goals and
objectives. Such statements are generally accompanied by words such as "intend,"
"anticipate," "believe," "estimate," "expect" or similar terms. Milestone's
actual results may differ materially from such statements. Factors that could
cause or contribute to such differences include, without limitation, the
following: (i) its plans, strategies, objectives, expectations and intentions
are subject to change at any time at its discretion; (ii) general economic and
business conditions, which may, among other things, affect the demand for retail
space or retails goods, the availability and creditworthiness of prospective
tenants, rental terms and the terms and availability of financing, are subject
to change at any time; (iii) adverse changes in real estate markets including,
among other things, competition with other companies; (iv) adverse changes in
the properties Milestone owns which could require the expenditure of funds to
fix or maintain such properties; (v) the general risks of real estate
development and acquisitions, such as changes in demographics, construction
delays, cost overruns, work stoppages and slowdowns, the cost and availability
of skilled labor and weather conditions; (vi) governmental actions and
initiatives, such as seizures of property, condemnation and construction of
alternative roadways; (vii) environmental and safety conditions and hazards;
(viii) the adequacy of Year 2000 compliance measures; and (ix) other risks and
uncertainties indicated from time to time in Milestone's filings with the
Securities and Exchange Commission and in the documents incorporated herein by
reference. Although Milestone believes that the assumptions underlying its
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, Milestone cannot make any assurances that the results
contemplated in such forward-looking statements will be realized. The inclusion
of such forward-looking information should not be regarded as a representation
by Milestone or any other person that the future events, plans or expectations
contemplated by Milestone will be achieved. Furthermore, past performance is not
necessarily an indicator of future performance.
The Company is engaged in the business of owning, acquiring, managing,
developing and investing in commercial real estate and real estate related
assets. The Company is primarily engaged in the ownership, operation and
management of interests in commercial real estate properties, currently (as of
the date of this filing) consisting of (i) 10 properties owned in fee (the "Fee
Properties"), (ii) the ownership of wraparound notes (the "Wraparound Notes")
and wraparound mortgages (the "Wraparound Mortgages" and, together with the
Wraparound Notes, the "Wrap Debt") which are secured by 22 commercial real
properties (the "Underlying Properties" and, together with the Fee Properties,
the "Properties") and (iii) the operation and management of the Properties. At
June 30, 1999, the Company possessed interests in 33 commercial real estate
properties consisting of (i) 10 Fee Properties and (ii) Wrap Debt interests in
23 Underlying Properties. At June 30, 1998, the Company possessed interests in
33 commercial real properties consisting of (i) 6 Fee Properties and (ii) Wrap
Debt interests in 27 Underlying Properties.
Impact of Year 2000
The Year 2000 problem arises from the historic use of only two digits (rather
than four) for the designation of a year in date information within computer
programs. If not corrected, any of the Company's equipment or software programs
that perform time sensitive calculations may incorrectly identify the year 2000
and beyond or not function after December 31, 1999. This could result in
11
<PAGE>
miscalculations or a major failure of certain systems. The Company may also be
vulnerable to the Year 2000 problems of its tenants, financial institutions or
other service vendors and/or other companies with which it conducts business
(e.g., utility companies, etc).
Early in calendar year 1998, the Company developed and initiated a Year 2000
compliance program, including information systems modifications, in an effort to
ensure that its business is not interrupted by the Year 2000 problem. The
Company's Year 2000 compliance program is broken into the following components:
Renovating internal systems and applications and ensuring compliance of
peripheral third party systems. The Company's internal systems and applications
include the accounting system, the lease asset management system and the
operating system (AS 400). As a result of the Company's commitment to ensure
that its systems are year 2000 compliant, management decided to replace the old
AS400 with a new AS400. The Company anticipates that the new AS400 will be
installed by the beginning of September 1999. The Company uses a number of third
party package systems to supplement its internally developed programs. From time
to time, the Company updates the accounting system and the operating system with
upgrades it receives from the software manufacturers. The software manufacturers
have informed the Company that they will continue to provide all updates
necessary for such systems to be Year 2000 compliant. These software
manufacturers have provided all such upgrades to the Company. The Company
anticipates that it will be able to implement all upgrades by the end of
September 1999. The lease asset management system is currently being updated to
be Year 2000 compliant by the Company using in-house technology. The Company
anticipates that this upgrade to the lease asset management system will be
completed by the end of September 1999.
Ensuring Year 2000 compliance by external companies that conduct business with
the Company. The Company has contacted all of its major tenants which remit rent
and other payments to the Company and financial institutions which process the
rental and other payments from major tenants on behalf of the Company, to
inquire about their Year 2000 compliance. The Company has not received responses
from all those contacted, but those who have responded have not indicated any
problems at this time. For those financial institutions that process payroll
electronically by debiting the Company's bank account and crediting the
employees' bank accounts, the Company will be conducting tests to determine Year
2000 compliance. These tests are expected to be completed by September 1999. If
such financial institutions are not Year 2000 compliant by December 31, 1999, it
is possible that employees will not receive direct deposit pay, or the correct
amount of such pay, or that the Company's bank accounts will be debited
incorrect amounts of money.
Implementing standards and conducting testing in an effort to ensure that the
Company's existing and future systems are Year 2000 compliant. All new systems,
whether hardware or software, are tested before implementation in an effort to
ensure Year 2000 compliance.
The Company believes that the total cost of its Year 2000 compliance program
will not exceed $50,000. The new AS400 will be leased over the next 5 years at
an annual lease rate of $7,500. To date, the Company has incurred approximately
$13,000 of such expenses which includes hardware and software purchases and
upgrades. The Company does not anticipate that the costs of any
12
<PAGE>
required modifications to its information technology or embedded technology
systems will have a material adverse effect on its financial position, results
of operations or liquidity, although there can be no assurances that this will
be the case.
Although the Company believes that it will have its own systems compliant prior
to September 1999, there can be no assurances that it will be able to do so nor
can there be any assurances that, even if the Company completes timely its Year
2000 compliance program, the systems, when actually implemented in full, will
work properly independently or in conjunction with the systems of any third
parties. In addition, the Company would continue to bear the risk of a material
adverse affect, if any, if its third party systems do not appropriately address
their own Year 2000 compliance issues. The Company's current estimates of the
impact of the Year 2000 problem on its operations and financial results do not
include costs and time that may be incurred as a result of other companies'
failure to become Year 2000 compliant on a timely basis, which costs could be
material. There can be no assurance that such other companies will achieve Year
2000 compliance or that any conversions by such companies to become Year 2000
compliant will be compatible with the Company's computer and operating systems.
The inability of the Company or any of its material third parties to become Year
2000 compliant in a timely manner could have a material adverse effect on the
Company's financial condition or results of operations.
In the event that the Company or material third parties fail to complete their
Year 2000 compliance programs successfully and on time, the Company's ability to
operate its business, service tenants, bill, collect its revenue in a timely
manner, pay debts and communicate generally could be adversely affected.
Although there can be no assurance that the conversion of the Company's systems
will be successful or that the Company's key third-party relationships will have
successful conversion programs, management does not expect that any such failure
would have a material adverse effect on the financial position, results of
operations or liquidity of the Company, although there can be no assurances that
this will be the case.
The Company has day-to-day operational contingency plans, and management is in
the process of updating these plans for possible Year 2000 specific operational
requirements. If the Company's major tenants, financial institutions or third
party systems are not Year 2000 compliant, it may have to arrange for
alternative sources of services in the fall of 1999 in preparation for the Year
2000. The Company does not have any other contingency plans with respect to
other problems that could arise in its business as a result of the Year 2000
problem. Any of these could have a material adverse effect on the Company's
financial condition or results of operations.
Recent Developments
On March 29, 1999, an agreement (the "SGSC Agreement") which was in effect
between the Company and certain of its affiliates, on one hand, and Societe
Generale Securities Corporation ("SGSC") on the other hand, was terminated by
the Company and such affiliates, via written notice. The Company and such
affiliates had retained SGSC to act as financial advisor in connection with a
transaction involving the sale of a number of shopping center properties owned
by such affiliates and two retail properties owned by the Company. Pursuant to
the terms of the SGSC Agreement, upon certain dispositions of the properties
covered by the SGSC Agreement prior to March 29, 2000 to persons or entities to
whom SGSC had shown such properties, the Company and or such affiliates would be
obligated to pay SGSC a fee based on the sale price of such properties.
13
<PAGE>
The Winston Settlement became effective at the close of business on March 5,
1999. At such time, pursuant to the terms of the Winston Settlement Agreement,
Milestone canceled and retired 2,983,284 shares of Series A Preferred Stock,
representing more than 99% of the then outstanding shares of Series A Preferred
Stock. In connection with the Winston Settlement, on March 18, 1999, Milestone
transferred approximately $9,000,000 to a court appointed trustee to be held for
the benefit of the plaintiffs and to be exchanged for their canceled shares in
accordance with the Winston Settlement Agreement. See Part II-Other Information,
Item 1. Legal Proceedings for a description of the Winston Settlement and
Liquidity and Capital Resources within this section for a discussion of the
costs associated with the Winston Settlement.
On February 12, 1999, the Company served a complaint against each of National
Union Fire Insurance Company of Pittsburgh, PA and Stonewall Surplus Line
Insurance Company, now known as American Dynasty Surplus Line Insurance Company,
wherein the Company alleged that National Union and Stonewall wrongfully failed
to contribute to the Winston Settlement and sought reimbursement from National
Union and Stonewall up to the limits of their respective policies. See Part II -
Other Information, Item 1. Legal Proceedings for a description of the lawsuit
against National Union and Stonewall.
Results of Operations
Three Months Ended June 30, 1999 compared to Three Months Ended June 30, 1998
For the three months ended June 30, 1999, the Company recognized a net loss of
$38,485, or $0.01 per share of common stock, on total revenues of $5,017,243.
For the three months ended June 30, 1998, the Company recognized a net loss of
$1,036,502, or $0.25 per share of common stock, on total revenues of $5,429,905.
Total revenues for the three months ended June 30, 1999 were $5,017,243, as
compared to $5,429,905 for the three months ended June 30, 1998, a decrease of
$412,662, or 8%, due to the following:
Rent decreased $651,046, or 25%, to $1,947,369 for the three months ended June
30, 1999 as compared to $2,598,415 for the three months ended June 30, 1998.
This decrease is primarily due to property sales in 1998.
Interest income decreased $993,038, or 45% to $1,234,337 for the three months
ended June 30, 1999 compared to $2,227,375 the three months ended June 30, 1998.
This decrease is primarily due to property sales in 1998 by the owners of the
underlying properties which caused the Company to receive final payment during
1998 on wraparound notes held by the Company.
Gain on sale of real estate and real estate related assets of $1,273,793 for the
three months ended June 30, 1999 as compared to no gain or loss on sale of real
estate and real estate related assets for the same period in 1998. This increase
is due to the property sales of Pascagoula and Baton Rouge.
14
<PAGE>
Total operating expenses for the three months ended June 30, 1999 were
$4,569,362, as compared to $6,964,991 for the three months ended June 30, 1998,
a decrease of $2,395,629, or 34%, due primarily to a decrease in master lease
expense of approximately $1,777,000 resulting from a decrease in the number of
properties leased by the Company as a result of the sale of some of the
underlying properties by their owners during 1998.
Interest expense for the three months ended June 30, 1999 was $919,272, a
decrease of $661,735, or 42%, from $1,581,007 for the three months ended June
30, 1998. Such decrease is due to a reduction in the underlying debt of the
Company resulting from property sales in 1998.
Six Months Ended June 30, 1999 compared to Six Months Ended June 30, 1998
For the six months ended June 30, 1999, the Company recognized a net loss of
$271,542, or $0.06 per share of common stock, on total revenues of $9,088,247.
For the six months ended June 30, 1998, the Company recognized a net loss of
$1,570,796, or $0.37 per share of common stock, on total revenues of
$11,089,681.
Total revenues for the six months ended June 30, 1999 were $9,088,247, as
compared to $11,089,681 for the six months ended June 30, 1998, a decrease of
$2,001,434, or 18%, due to the following:
Rent decreased $1,354,754, or 25% to $3,989,466 for the six months ended June
30, 1999 as compared to $5,344,220 for the six months ended June 30, 1998. This
decrease is primarily due to property sales in 1998.
Interest income decreased $1,726,560, or 39% to $2,741,371 for the six months
ended June 30, 1999 compared to $4,467,931 for the six months ended June 30,
1998. This decrease is primarily due to property sales in 1998 by the owners of
the underlying properties which caused the Company to receive final payment
during 1998 on wraparound notes held by the Company.
Gain on sale of real estate and real estate related assets of $1,273,793 for the
six months ended June 30, 1999 compared to $81,890 for the six months ended June
30, 1998. The increase is due to the property sales of Pascagoula and Baton
Rouge.
Total operating expenses for the six months ended June 30, 1999 were $9,159,539,
as compared to $13,646,099 for the six months ended June 30, 1998, a decrease of
$4,486,560, or 33%, due primarily to a decrease in master lease expense of
approximately $3,268,000 resulting from a decrease in the number of properties
leased by the Company as a result of the sale of some of the underlying
properties by their owners during 1998.
Interest expense for the six months ended June 30, 1999 was $1,989,245, a
decrease of $1,111,360, or 36%, from $3,100,605 for the six months ended June
30, 1998. Such decrease is due to a reduction in the underlying debt of the
Company resulting from property sales in 1998.
15
<PAGE>
Cash Flows
For the six months ended June 30, 1999, the Company had a decrease in cash and
cash equivalents of $5,146,976, as compared to a decrease in cash and cash
equivalents of $569,917 for the six months ended June 30, 1998. For the six
months ended June 30, 1999, cash used in operating activities was $11,586,356,
cash provided by investing activities was $10,046,656 and cash used in financing
activities was $3,607,276. The decrease in cash and cash equivalents is
primarily due to the payment of approximately $8,949,000 of cash to the bank as
exchange agent in connection with the cancellation of Series A Preferred Stock
in accordance with the Winston Settlement Agreement. See Part II - Other
Information, Item 1. Legal Proceedings for a description of the Winston Actions
and the Winston Settlement.
Liquidity and Capital Resources
The Company, as the holder of 44,550 shares of Kranzco Series C Redeemable
Preferred Shares of Kranzco Realty Trust, a Maryland real estate investment
trust ("Kranzco") as of January 1, 1999, received from the redemption of such
shares, in one installment on January 29, 1999, an aggregate amount of cash
equal to approximately $445,500, plus interest at the rate of 8% per annum on
the applicable outstanding balance of such shares. Such redemption payment
liquidated the Company's holdings of Kranzco Series C Redeemable Preferred
Shares.
The Underlying Debt on the Property located in Quincy, Illinois, (the "Quincy
Property") came due in July 1998. The mortgagee holding the Underlying Debt did
not demand payment while the Partnership, that owns the Quincy Property
attempted to sell the Quincy Property. Although the Underlying Debt on the
Quincy Property has not been satisfied, regular monthly debt payments have been
made by the Company through March 1999. On March 1, 1999, the mortgagee holding
the Underlying Debt sent a demand letter seeking to collect the outstanding
balance of the Underlying Debt of approximately $2,883,000. At this time, the
Partnership that owns the Quincy Property expects to convey ownership and title
of the property to the mortgagee. If conveyance occurs, the Company expects to
record a book gain of approximately $1,660,000 but no cash proceeds.
On May 28, 1999, the Company successfully completed the refinancing of the Fee
Property located in Zanesville, Ohio, (the "Zanesville Property"). The new
Zanesville Property first mortgage is for $1,750,000 and bears interest at a
rate of 8.16% per annum. Such first mortgage requires monthly principal and
interest payments of $13,693 based on a 25 year amortization schedule, with a
balloon payment of approximately $1,453,100 due June 1, 2009. In conjunction
with such refinancing, the Company satisfied the prior first mortgage with a
payment of $810,000.
The Company repurchased 222,200 options to purchase shares of the Company's
common stock, par value $.01 per share from certain executives of the Company
for approximately $650,000, representing the excess of the current market price
of the Common Stock over the exercise price of the options.
Currently, the Company has invested approximately $595,000 in a joint venture
partnership with an unrelated third party, which has contracted for the
acquisition of three land parcels in the south Florida area. As of June 30,
1999, all such investment is at risk.
16
<PAGE>
The Company's existing borrowings and the encumbrances on the properties
securing those borrowings may inhibit, or result in increased costs to the
Company in connection with, its ability to incur future indebtedness and/or
raise substantial equity capital in the marketplace.
The Company has invested available funds in secure, short-term, interest bearing
investments. The Company believes that its levels of working capital, liquidity
and funds from operations are sufficient to support present operations and make
any additional payments which may be required by the Winston Settlement.
As a result of, and in connection with, the settlement of the Winston Actions,
the Company has disbursed approximately $7.8 million, which amount includes a
portion of the settlement consideration to Series A Preferred Stockholders,
defendants's attorneys fees, court and Commission filing fees, printing costs
and other expenses. The Company expects to disburse additional cash of
approximately $2.5 million, including payments of the settlement consideration
to Series A Preferred Stockholders and fees of the plaintiff's lawyers. Although
the expected expenditures of such funds represents a substantial amount of the
Company's cash reserves, the Company believes that it would have sufficient cash
to continue operating in the ordinary course of business. The Company, however,
is considering whether to, and ways it could, raise cash to make additional
investments in suitable real estate properties. If the Company determines to
raise additional funds, it may decide to do so through a public or private sale
of debt or equity securities, by selling or realizing on assets (including, but
not limited to, sales of its properties and interest in the Wrap Debt), through
a rights offering, through corporate borrowings, or by other means.
Other than described herein, management is not aware of any other trends,
events, commitments or uncertainties that will, or are likely to, materially
impact the Company's liquidity.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
At June 30, 1999, the Company was not invested in any market risk sensitive
instruments held for either trading purposes or for purposes other than trading.
Also, the Company does not have any variable or adjustable rate mortgages on any
of its properties. As a result, the Company is not subject to interest rate
risk, foreign currency exchange rate risk, commodity price risk, or other
relevant market risks, such as equity price risk.
17
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, during 1996 Milestone, certain past and present members
of its Board of Directors and executive officers, and Concord were named as
defendants in the Winston Actions which were commenced in the Delaware Court. In
the Winston Actions, the plaintiff, a Series A Preferred Stockholder purporting
to bring the action on behalf of himself, all other Series A Preferred
Stockholders and derivatively on behalf of Milestone, alleged that in connection
with Milestone's acquisition in October 1995 of certain wraparound notes,
wraparound mortgages and fee properties from certain affiliates of Concord and
certain related transactions, Milestone and its directors engaged in
self-dealing, violated federal securities laws and an injunction against such
violations and breached their fiduciary duties to the Series A Preferred
Stockholders. The plaintiff claimed, among other things, that, as a result of
the Transactions, Milestone would not have sufficient funds to pay dividends on
the Series A Preferred Stock and that the properties which were not transferred
to UPI in the Transfer were grossly inferior to the properties that were
transferred to UPI.
On August 5, 1998, the counsel for the named plaintiff in the Winston Actions
and the counsel for the defendants entered into the Winston Settlement Agreement
which memorialized the terms of the Winston Settlement. On January 28, 1999, the
Delaware Court approved the Winston Settlement Agreement, which approval became
final effective as of the close of business on March 5, 1999. At such time, (i)
the shares of Series A Preferred Stock owned by each Series A Preferred
Stockholder who was eligible to participate in the Winston Settlement and who
did not properly opt out of the Winston Settlement and who owned shares of
Series A Preferred Stock as of the close of business on March 5, 1999 were
canceled and represented only the right of such Series A Preferred Stockholder
to receive $3.00 in cash from the Company in exchange for each such share; (ii)
the holders of shares of the Series A Preferred Stock between October 23, 1995
and the close of business on March 5, 1999, other than Series A Preferred
Stockholders who properly opted out of the Winston Settlement Agreement or who
were precluded from participating in the Winston Settlement, released any and
all claims they may have had against the Company and the other named defendants
in connection with the Transactions; (iii) Milestone's stockholders other than
Series A Preferred Stockholders who were eligible to participate in the Winston
Settlement and who properly opted out of the Winston Settlement released all
derivative claims in connection with the Transactions; and (iv) the Winston
Actions were dismissed. In connection with the Winston Actions, the Company
retained counsel for all of the defendants (including, without limitation,
Leonard S. Mandor, Robert A. Mandor, Harvey Jacobson, Gregory McMahon and
Geoffrey Aaronson (each of whom is a director and/or officer of the Company))
and assumed responsibility for the payment of all legal fees incurred by such
persons in connection with the Winston Actions and the Winston Settlement
(subject to the insurance coverage litigation described below).
18
<PAGE>
The foregoing description of the Winston Settlement and the Winston Settlement
Agreement is qualified in its entirety by reference to the Winston Settlement
Agreement, a copy of which was filed by the Company with the Commission on
August 14, 1998 as Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1998.
The Company maintains a directors and officers insurance and company
reimbursement policy issued by National Union with a $2,000,000 limit and an
excess directors and officers liability and company reimbursement policy issued
by Stonewall with a $2,000,000 limit. The Company believes that the amounts that
it has to pay pursuant to the Winston Settlement and in connection with the
Winston Actions are covered losses under both the National Union Policy and the
Stonewall Policy. In addition, the Company believes that the legal fees and
other expenses incurred by the Company and the other defendants in connection
with the Winston Actions are also covered losses under the National Union Policy
and the Stonewall Policy. In connection with a previous proposed settlement of
the Winston Actions which was never consummated, National Union and Stonewall
both refused to contribute to such proposed settlement, asserting that such
proposed settlement did not encompass any covered loss (as defined in the
National Policy and the Stonewall Policy, respectively). On January 29, 1998,
the Company commenced a lawsuit in the United States District Court for the
Southern District of New York against National Union and Stonewall in connection
with such refusal to contribute to such proposed settlement. In the complaint,
the plaintiffs alleged that National Union and Stonewall wrongfully failed to
contribute to the proposed settlement and sought reimbursement from National
Union and Stonewall up to the limits of their respective policies. National
Union and Stonewall both answered the complaint and denied liability. As a
result of the termination of the previously proposed settlement, the Company on
one hand, and Stonewall and National Union, on the other hand, agreed to dismiss
such action without prejudice and such action was dismissed on May 29, 1998 by
the United States District Court for the Southern District of New York. The
Company gave both National Union and Stonewall notice of the Winston Settlement
and provided each of them with a copy of the Winston Settlement Agreement on
August 12, 1998. National Union and Stonewall reviewed the Winston Settlement
Agreement and separately informed the Company that their basic position, denying
coverage, had not changed. On February 12, 1999, the Company commenced a lawsuit
in the Circuit Court for the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida against both National Union and Stonewall alleging, among other
things, that National Union and Stonewall have wrongfully refused to contribute
to the Winston Settlement and seeking reimbursement from National Union and
Stonewall up to the limits of their respective policies. The initial complaint
in the new lawsuit was served on each of National Union and Stonewall on
February 12, 1999 and on March 17, 1999 the Company filed an amended complaint,
which, among other things, added certain of the other defendants to the Winston
Actions as plaintiffs. On April 12, 1999, National Union served a motion to
dismiss the amended complaint or to strike part thereof, and a motion to recuse
the Company's Florida counsel. National Union has since agreed to withdraw its
motion to dismiss and to serve its answer to the amended complaint by June 1,
1999. The motion to recuse the Company's Florida Counsel was denied; however,
the plaintiffs and the defendants have agreed that Geoffrey Aaronson, a partner
with the Company's Florida counsel and a director of the Company, may not
personally act as counsel for the Company in the proceedings as he may be called
as a witness in the proceedings. On April 12, 1999, Stonewall served its answer
to the amended complaint and denied liability. On July 12, 1999, National Union
served its first request for production and interrogatories to which the Company
must respond before August 26, 1999. In connection with this action, the Company
has retained counsel for all of the plaintiffs and is assuming
19
<PAGE>
responsibility for the payment of all legal fees incurred by such persons in
connection with this action. At this time, the Company is not in a position to
render an opinion as to the outcome of this action.
Item 4. Submission of Matters to a Vote of Security Holders
On May 28, 1999, the Company held its Annual Meeting of Stockholders (the
"Meeting"). In connection with the Meeting, the Company solicited proxies from
its stockholders pursuant to Regulation 14 of the Securities Exchange Act of
1934.
At the Meeting, the Company's common stockholders elected Robert A. Mandor and
Harvey Jacobson as Class II directors and Leonard S. Mandor as Class III
director. The Company's preferred stock holders elected Harvey Shore and Gregory
McMahon as Class III directors.
In addition, the Company's common stockholders (i) approved the adoption of the
Company's 1999 Stock Incentive Plan, (ii) approved an amendment to the Company's
Certificate of Incorporation to reduce the authorized number of shares of
capital stock and preferred stock of the Company, (iii) approved an amendment to
the Company's Certificate of Incorporation to amend the procedures for the
submission by a holder of the Company's common stock of a proposal to be
considered at an annual meeting of the stockholders, and (iv) ratified the
selection by the Board of Directors of Ahearn, Jasco + Company, P.A. as
independent certified public accountants of the Company for the year ending
December 31, 1999.
The following tables summarize the votes cast at the meeting on the matters
brought before the shareholders:
1. Election of Class II Directors by common stockholders.
Nominee Votes Votes
Name For Withheld
Robert A. Mandor 3,765,255 28,854
Harvey Jacobson 3,764,429 30,680
2. Election of Class III Directors by common stockholders.
Nominee Votes Votes
Name For Withheld
Leonard S. Mandor 3,758,868 36,241
Election of Class III Directors by preferred stockholders.
Nominee Votes Votes
Name For Withheld
Gregory McMahon 14,310 0
Harvey Shore 14,310 0
20
<PAGE>
3. Approval of the Company's 1999 Stock Incentive Plan.
Votes Votes Against,
For Abstentions and
Broker Non-Votes
3,398,491 396,618
4. Approval of the amendment to the Company's Certificate of Incorporation
to reduce the authorized number of shares of capital stock and
preferred stock of the Company.
Votes Votes Against,
For Abstentions and
Broker Non-Votes
3,408,677 386,432
5. Approval of the amendment to the Company's Certificate of Incorporation
to amend the procedures for the submission by a holder of the Company's
common stock of a proposal to be considered at an annual meeting of the
stockholders.
Votes Votes Against,
For Abstentions and
Broker Non-Votes
3,404,154 390,955
6. Ratification of Ahearn, Jasco + Company, P.A. as independent certified
public accountants of the Company for the year ending December 31,
1999.
Votes Votes Against,
For Abstentions and
Broker Non-Votes
3,768,316 26,793
21
<PAGE>
Item 5. Other Information
Milestone's Board of Directors determined not to declare any dividends on the
Series A Preferred Stock during the years ended December 31, 1996, 1997 and 1998
and during the six months ended June 30, 1999. The last dividend declared by
Milestone was for the quarter ended December 31, 1995 and was paid on February
15, 1996 at $0.195 per share of Series A Preferred Stock.
After September 30, 1995, holders of the Series A Preferred Stock have not been
entitled to receive dividends on a cumulative basis. Pursuant to the Certificate
of Designations of the Series A Preferred Stock, after such date, no cash
dividend may be paid on the Common Stock unless full dividends of $0.195 on all
outstanding shares of Series A Preferred Stock for the then current quarterly
dividend period are declared and either paid or sufficient sums for the payment
thereof are set apart. As a result of Milestone's Board of Directors'
determination not to declare a dividend for the quarter ended June 30, 1997,
which was the sixth consecutive quarter for which no dividend was declared, the
number of persons entitled to serve as directors on Milestone's Board of
Directors has been increased by one, and the holders of the Series A Preferred
Stock, who are otherwise entitled to elect one member of the Board of Directors,
became entitled to elect a second member of the Board of Directors to fill such
newly created directorship. At the annual meeting of stockholders on May 28,
1999, the Series A Preferred Stockholders elected Harvey Shore to the Board of
Directors to fill such newly created directorship. Any decision as to the future
payment of dividends on the Series A Preferred Stock will depend on the results
of operations and the financial condition of the Company and such other factors
as Milestone's Board of Directors, in its discretion, deems relevant. See Part
I-Financial Information, Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation, Liquidity and Capital Resources.
22
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
27 Financial Data Schedule Article 5 included for
Electronic Data Gathering, Analysis and Retrieval
(EDGAR) purposes only. This Schedule contains
summary financial information extracted from the
consolidated balance sheets and consolidated
statements of revenues and expenses of the Company
as of and for the six month period ended June 30,
1999, and is qualified in its entirety by reference
to such financial statements.
(b) Reports on Form 8-K: None.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MILESTONE PROPERTIES, INC.
(Registrant)
Date: August 13, 1999 By /s/ Robert A. Mandor
--------------------------------------------
Robert A. Mandor
President and Chief Financial Officer
Date: August 13, 1999 By /s/ Patrick S. Kirse
--------------------------------------------
Patrick S. Kirse
Vice President of Accounting
(Principal Accounting Officer)
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<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> jun-30-1999
<CASH> 6,679,325
<SECURITIES> 0
<RECEIVABLES> 4,914,409
<ALLOWANCES> 0
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<CURRENT-ASSETS> 14,550,040
<PP&E> 23,870,825
<DEPRECIATION> 2,527,254
<TOTAL-ASSETS> 70,650,419
<CURRENT-LIABILITIES> 14,930,546
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<COMMON> 49,436
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<INCOME-PRETAX> (71,292)
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<INCOME-CONTINUING> (271,542)
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