12
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly ended July 31, 1997
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 0-20848
UNIVERSAL HEIGHTS, INC.
(Name of small business issuer in its charter)
Delaware 65-0231984
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19589 N.E. 10th Avenue
Miami, Florida 33179
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (305)653-4274
Indicate by check mark whether the Company (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
Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Number of shares of the Common Stock of Universal
Heights, Inc. issued and outstanding as of July 31, 1997:
3,425,588.
UNIVERSAL HEIGHTS, INC.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The following unaudited, condensed consolidated
financial statements of the Company have been prepared in
accordance with the instructions to Form 10-QSB and,
therefore, omit or condense certain footnotes and other
information normally included in financial statements
prepared in accordance with generally accepted accounting
principles. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for
a fair presentation of the financial information for the
interim periods reported have been made. Results of
operations for the three months ended July 31, 1997 are not
necessarily indicative of the results for the year ending
April 30, 1998.
UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
July 31, April 27,
1997 1997
(Unaudited)
ASSETS:
Cash and cash equivalents 24,137 35,269
Prepaid Insurance 0 2,502
Deposits 9,816 9,816
Assets from discontinued
operations 576,766 592,367
Total Current Assets 610,719 639,954
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable 1,059,267 987,619
Accrued expenses 196,245 199,050
Due to related parties 340,024 305,678
Capitalized lease obligations 12,217 15,344
Total Current Liabilities 1,607,753 1,507,691
STOCKHOLDERS' DEFICIENCY:
Cumulative preferred stock, $.01
per value; 1,000,000 shares
authorized; 138,640 shares
issued and outstanding 1,387 1,387
Common Stock, $.01 par value,
20,000,000 shares authorized
3,425,588 shares issued and
outstanding 32,294 32,294
Additional paid-in capital 7,247,748 7,247,748
Accumulated deficit (8,231,463) (8,102,166)
Subscriptions receivable (47,000) (47,000)
Total Stockholders' Deficiency (997,034) (867,737)
Total Liabilities and Stockholders'
Deficiency 610,719 639,954
The accompanying notes to consolidated financial statements
are an integral part of these statements.
UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JULY 31, 1997
Three Months Ended
July 31, 1997 July 31, 1996
OPERATING EXPENSES
General and administrative (228,939) (73,050)
LOSS FROM OPERATIONS (228,939) (73,050)
OTHER EXPENSES
Interest expense (1,559) (2,651)
LOSS FROM CONTINUING OPERATIONS (230,498) (75,701)
DISCONTINUED OPERATIONS:
Gain from operations of the Sports
Novelty and Souvenir business to be
disposed of 101,229 (128,213)
Estimated gain on disposal of sports
Novelty and Souvenir business - -
101,229 (128,213)
NET LOSS (129,269) (203,914)
GAIN (LOSS) PER COMMON SHARES:
Loss from continuing operations (0.07) (0.03)
Gain from discontinued operations 0.03 (0.05)
NET LOSS (0.04) (0.08)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 3,229,431 2,740,000
The accompanying notes to consolidated financial statements
are an integral part of these statements.
UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended
July 31, July 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
CONTINUING OPERATION:
Net Loss from continuing operations (230,498) (75,701)
Change in assets and liabilities:
Decrease in deposits - -
Net cash used in continuing operations (230,498) (75,701)
DISCONTINUED OPERATIONS:
Gain from discontinued operations 101,229 (128,215)
Adjustments to reconcile gain
from discontinued operations
to net cash used in discontinued
operations:
Depreciation and amortization 12,651 26,760
Provision for doubtful accounts
Write down of inventories to net
realizable value
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable (3,555) 29,334
Inventories 6,477 (4,909)
Other current assets 2,502 36,392
Increase (decrease) in:
Accounts payable and accrued
expenses 61,173 (66,882)
Net cash used in discontinued
operations 180,477 (107,520)
Net cash used in operating activities (50,021) (183,221)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment - 3,318
Acquisition of patents and trademarks - ( 176)
Acquisition of business - -
Net cash used in investing activities 0 3,142
The accompanying notes to consolidated financial statements
are in integral part of these statements.
UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOW
Three Months Ended
July 31, July 31,
1997 1996
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common
stock - 218,750
Net repayments under line of credit - -
Advances from stockholders 42,016 33,694
Issuance of related party loans - -
Repayment of loans payable - -
Payment on capital lease obligations (3,127) (3,476)
Net cash provided by financing
activities 38,889 248,968
NET INCREASE (DECREASE) IN CASH AND (11,132) (68,889)
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, Beginning
of Year 35,269 30,337
CASH AND CASH EQUIVALENTS, End of Year 24,137 99,226
SUPPLEMENT DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid 0 509
SUPPLEMENTAL NONCASH FINANCING AND
INVESTING ACTIVITIES
Preferred stock issued in
exchange for debt - -
Common stock issued in exchange
for debt - 566,000
Common stock issued in exchange
for services provided - -
Common stock issued in exchange
for acquisitions - -
Write-off of fully depreciated
fixed assets - -
The accompanying notes to consolidated financial statements
are in integral part of these statements.
Item 6. Management's Discussion And Analysis or Plan of
Operation
Over the past two years, the Company's sales have
declined as a result primarily of labor problems
experienced by Major League Baseball (MLB), the National
Hockey League (NHL) and the National Basketball Association
(NBA). Such problems included substantial strikes by both
MLB and the NHL and a threatened strike by the NBA. As a
result, the Company has changed its strategy and intends to
become a financial services company positioned to take
advantage of what management believes to be profitable
business and growth opportunities in the marketplace. In
connection therewith, in April 1997, the Company organized
Universal Property & Casualty Insurance Company (UPCIC).
UPCIC was formed to participate in the transfer of homeowner
insurance policies from the Florida Residential Property and
Casualty Joint Underwriting Association (JUA).
UPCIC's application to become a Florida licensed
property and casualty insurance company was filed with the
Florida Department of Insurance (Department) on May 14, 1997
and is pending. UPCIC's proposal to begin operations through
the acquisition of approximately 45,000 homeowner insurance
policies issued by JUA was approved by the JUA on May 21,
1997, subject to certain minimum capitalization and other
requirements.
The Company is currently in the process of a proposed
private offering of debt and/or equity securities in order
to meet the minimum capitalization requirements of the JUA.
No assurances can be given whether the Company can obtain
such funds or the terms thereof. Failure to obtain such
funds would have a material adverse affect on the Company.
Historically, the Company's primary demands for cash
included payments to obtain inventory, payments to obtain
licenses and royalty payments. To fund such demands, the
Company has generated funds from sales of its products and
from outside sources through the sale of its debt and equity
securities, primarily to related parties. In the future, the
Company will attempt to obtain additional funds from
internal cash flow and the raising of additional working
capital. The Company is also working closely with its
vendors on a payment plan for its accounts payable.
In July 1996, a group of investors purchased warrants
at $.05 per warrant from the Company entitling the holders
to purchase 1,433,333 shares of the Company's Common Stock
at $.70 a share. During July, warrants to purchase 254,760
shares were exercised. As a result of these transactions
the Company received gross proceeds of approximately
$250,000. The remaining warrants to purchase shares of
common stock expired in January 1997.
On April 24, 1997, the Company issued an investor
100,000 shares of Common Stock and warrants to purchase
100,000 shares of Common Stock at an exercise price of $2.00
per share, warrants to purchase 100,000 shares of Common
Stock at an exercise price of $2.75 per share and warrants
to purchase 100,000 shares of Common Stock at an exercise
price of $3.50 per share at an aggregate purchase price of
$97,000.
Seasonality
Sales of the Company's novelty and souvenir products
were correlated with the visibility of the various
proprietary marks and their owners. The Company does not
believe that there will be any seasonality in the insurance
business.
Financial Condition
Cash and cash equivalents at July 31, 1997 were $24,137
as compared with $35,269 at April 30, 1997. The decrease is
primarily the result of $50,021 being used for operating
activities offset by $38,889 of financing activities. The
operating activities were supported by the liquidation of a
portion of the souvenir product inventory from discontinued
operations of $140,000.
Due to related parties at July 31, 1997 was $340,024 as
compared to $305,678 at April 30, 1997. The increase is due
to Deferred Salary to the President.
At the Company's present level of sales and operations,
the Company does not have and is not generating sufficient
funds from operations or otherwise to finance its proposed
plan of operations for the next twelve months. In order to
finance the proposed operations of UPCIC, the Company is
attempting to raise funds through an additional equity
financing or debt financing. Excluding related party loans,
the Company has not secured additional sources of financing.
There is no assurance that any such financing will be
available on commercially reasonable terms or at all. The
Company's inability to obtain future financing on terms
acceptable to the Company would have a material adverse
effect on the Company's proposed insurance operations.
UNIVERSAL HEIGHTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES:
Except as disclosed below, the accounting policies
followed for quarterly financial reporting are the same as
those disclosed in Note (1) of the Notes to Consolidated
Financial Statements included in the Company's Annual Report
on Form 10-KSB for the fiscal year ended April 30, 1997.
As of April 28, 1996, the Company changed its
accounting fiscal year from a conventional 52/53 week fiscal
year ending on the Saturday closest to April 30 to a
calendar year ending on April 30.
(2) SALE OF COMMON STOCK AND WARRANTS:
In July 1996, a group of investors purchased warrants
from the Company at $.05 per warrant entitling the holders
to purchase 1,433,333 shares of the Company's Common Stock
at $.70 per share. The warrants are exercisable for six
months. During July, warrants to purchase 254,760 shares
were exercised. As a result of these transactions, the
Company received gross proceeds of $250,000. The remaining
warrants to purchase shares of common stock expired January
1997.
On April 24, 1997, the Company issued an investor
100,000 shares of Common Stock and warrants to purchase
100,000 shares of Common Stock at an exercise price of $2.00
per share, warrants to purchase 100,000 shares of Common
Stock at an exercise price of $2.75 per share and warrants
to purchase 100,000 shares of Common Stock at an exercise
price of $3.50 per share at an aggregate purchase price of
$97,000.
(3) CONVERSION OF DEBT TO COMMON STOCK: AND PREFERRED STOCK
As of December 3, 1996, an additional $65,850 of
related party debt was converted into 175,600 shares of
common stock and 131,700 warrants to purchase common stock
at an exercise price of $.75. This transaction is reflected
in the accompany condensed consolidated balance sheet as of
October 31, 1996.
As of February 27, 1997, $10,000 of related party debt
was converted into 26,666 shares of common stock and an
additional $88,690 of related party debt was converted into
88,690 shares of preferred stock. This preferred stock can
be converted to common stock at a conversion price of
$.1875. These transactions are reflected in the accompany
condensed balance sheet as of January 31, 1997.
(4) ISSUANCE OF WARRANTS:
In February 1997, the Company issued 1,000,000 warrants
to purchase Common Stock at $.75 and 1,000,000 warrants to
purchase the Company's Common Stock at $1.25 to a consultant
for financial consulting services. The warrants expire
March 1, 2000.
(5) SERIES A PREFERRED STOCK:
In December 1996, the Company and its Series A
Convertible Preferred Stockholders agreed to amend the
Agreement to Convert Debt to Equity and to have all past and
future Series A Convertible Preferred Stock dividends be due
on April 30, 1998.
UNIVERSAL HEIGHTS, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Walker and Martin vs. Universal Heights, Inc.
disclosed in the Company's Form 10-KSB for the year ended April 30,
1997.
Item 2. Changes in Securities
In June 1997, the Company issued 1,250,000 warrants to
purchase Common Stock at $.625 per share to an officer of UPCIC
in consideration for management services to be rendered by such
officer. Upon approval andlicensing from the Florida Department
of Insurance for the insurance subsidiary and the insurance
subsidiary's reaching certain levels of profitability, the warrants
will vest incrementally.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security
Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
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.
UNIVERSAL HEIGHTS,INC.
BRADLEY I. MEIER, President
DATE: SEPTEMBER 12, 1997
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