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 period ended January 31, 1998
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 February 1,
1998: 14,677,604.
Transitional Small Business Disclosure Format Yes __
No X
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 nine months ended January 31, 1998 are
not necessarily indicative of the results for the year
ending April 30, 1998.
UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
January 31,
1998
(Unaudited)
ASSETS:
Cash and cash equivalents $ 786,192
Prepaid expense 275,000
Deposits 10,316
Assets from discontinued operations 29,814
Cash restricted for regulatory
capitalization requirements 5,300,000
Organizational costs (net of
accumulated amortization of $1,978) 152,738
Total Current Assets $ 6,554,060
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable $ 948,079
Accrued expenses 334,727
Due to related parties 399,444
Other 6,931
Total Current Liabilities $ 1,689,181
STOCKHOLDERS' EQUITY (DEFICIENCY):
Cumulative preferred stock, $.01 per
value; 1,000,000 shares authorized;
138,640 shares issued and outstanding 1,387
Common Stock, $.01 par value,
20,000,000 shares authorized
14,677,604 shares issued at
January 31, 1997 and 3,229,442 at April
30, 1997 and outstanding 146,326
Additional paid-in capital 14,688,981
Accumulated deficit (9,971,815)
Subscriptions receivable -
Total Stockholders' Equity (Deficiency) 4,864,879
Total Liabilities and Stockholders'
Equity (Deficiency) $ 6,554,060
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 JANUARY 31, 1998
Nine Months Ended
January 31,
1998 1997
OPERATING EXPENSES
General and administrative $(661,290) $(608,462)
LOSS FROM OPERATIONS (661,290) (608,462)
OTHER INCOME & EXPENSES
Interest income 54,667 925
Interest expense (5,122) (9,280)
Total Other Income (Expense) 49,545 (8,355)
LOSS FROM CONTINUING OPERATIONS (611,745) (616,817)
DISCONTINUED OPERATIONS:
Loss from operations and disposal
of Sports Novelty and Souvenir (637,877) (73,660)
NET LOSS $ (1,249,622) $(690,477)
LOSS PER COMMON SHARES:
Basic
Loss from continuing operations $ (0.11) $ (0.21)
Loss from discontinued operations (0.11) (0.02)
NET LOSS $ (0.22) $ (0.23)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 5,637,000 2,968,000
The accompanying notes to consolidated financial statements
are an integral part of these statements.
UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
Nine Months Ended
January 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
CONTINUING OPERATION:
Net loss from continuing operations $ (611,745) $ (616,817)
Adjustments to reconcile net
loss from continuing operations
to net cash used in continuing
operations:
Stock issued for services 118,201 -
Interest on convertible debt - -
Change in assets and liabilities:
Decrease in deposits - -
Net cash used in continuing operations (493,544) (616,817)
DISCONTINUED OPERATIONS:
Loss from discontinued operations (637,877) ( 73,660)
Adjustments to reconcile loss
from discontinued operations to net
cash used in discontinued operations:
Stock issued for services 88,750 (20,034)
Depreciation and amortization 35,752 -
Provision for doubtful accounts - 86,207
Write down of inventories to net
realizable value 138,324 -
Loss on disposal of property,
equipment and patents 250,257 -
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable - 70,282
Inventories 140,198 ( 11,390)
Other current assets (427,741) (113,366)
Increase in:
Accounts payable and accrued expenses 235,528 1,660
Net cash provided by (used in)
discontinued operations (176,809) ( 60,301)
Net cash used in operating activities (670,353) (677,118)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment - (7,647)
Acquisition of patents and trademarks - 13,773
Acquisition of businesses - -
Deposit for regulatory capitalization
requirements (5,300,000) -
Net cash used in investing activities (5,300,000) 6,086
The accompanying notes to consolidated financial statements
are in integral part of these statements.
UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOW
Nine Months Ended
January 31, January 31,
1998 1997
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common
stock 6,717,189 460,000
Net repayments under line of credit - -
Advances from stockholders 12,500 191,796
Issuance of related party loans - -
Repayment of loans payable - -
Payment on capital lease obligations (8,413) (9,594)
Net cash provided by financing activities 6,721,276 642,202
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 750,923 (28,830)
CASH AND CASH EQUIVALENTS,
Beginning of Period 35,269 30,337
CASH AND CASH EQUIVALENTS,
End of Period $ 786,192 $ 1,507
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid $ 4,155 $ 8,831
SUPPLEMENTAL NONCASH FINANCING AND
INVESTING ACTIVITIES
Preferred stock issued in
exchange for debt $ - $ -
Common stock issued in exchange
for debt $ 58,125 $ 259,767
Common stock issued in exchange
for services $ 206,951 $ 288,300
Common stock issued in exchange
for acquisitions $ - $ 735,728
Write-off of fully depreciated
fixed assets: $ 184,447 $ 510,524
The accompanying notes to consolidated financial statements
are in integral part of these statements.
UNIVERSAL HEIGHTS, INC.
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned
subsidiary, Universal Property & Casualty Insurance Company.
All intercompany accounts and transactions have been
eliminated in consolidation.
The Company formed a wholly-owned subsidiary, Universal
Property & Casualty Insurance Company. The subsidiary's
application to become a Florida licensed property and
casualty insurance company was filed in May 1997 with the
Florida Department of Insurance and approved on October 29,
1997. In 1998, the subsidiary began operation through the
acquisition of homeowner insurance policies issued by the
Florida Residential Property and Casualty Joint Underwriting
Association ("JUA").
The JUA was established in 1992 as a temporary measure
to provide insurance coverage for individuals who could not
obtain coverage from private carriers because of the impact
on the private insurance market of Hurricane Andrew in 1992.
Rather than serving as a temporary source of emergency
insurance coverage as was originally intended, the JUA has
become a major provider of original and renewal insurance
coverage of Florida residents. In an attempt to reduce the
number of policies in the JUA, and thus the exposure of the
program to liability, the Florida legislature has approved a
number of initiatives to depopulate the JUA, which to date
has resulted in policies being acquired by private insurers
and provides additional incentives to private insurance
companies to acquire policies from the JUA.
On December 4, 1997, the Company raised approximately
$6,700,000 in a private offering with various institutional
and/or otherwise accredited investors pursuant to which the
Company issued, in the aggregate, 11,208,996 shares of its
Common Stock at a price of $.60 per share. The proceeds of
this transaction are being used partially for working
capital purposes and to meet the minimum regulatory
capitalization requirements ($5,300,000) required by the
Florida Department of Insurance to engage in this type of
homeowners insurance company business.
The consolidated balance sheet of Universal Heights,
Inc. and Subsidiary (the "Company"), as of January 31, 1998,
and the related consolidated statements of operations and
cash flows for the period ended January 31, 1998 and 1997
are unaudited. The consolidated balance sheet as of April
30, 1997 has been derived from audited financial statements.
The consolidated financial statements should be read in
conjunction with the audited financial statement and
footnotes of the year ended April 30, 1997, included in the
Company's report on Form 10-KSB for the year ended April 30,
1997 and as amended.
The interim financial statement reflects all adjustments
(consisting of only normal and recurring accruals and
adjustments) which are, in the opinion of management,
necessary to a fair particular interim period may not
be indicative of results for the full year.
UNIVERSAL HEIGHTS, INC.
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Certain reclassifications have been made in the 1997
financial statements to conform them to and make them
consistent with the presentation used in the 1998 financial
statements.
In February 1998, the Company made a decision to change
its accounting fiscal year end from April 30 to December 31.
NOTE 2 - DISCONTINUED OPERATIONS
As of April 30, 1997, the Company ceased all marketing
efforts of its core souvenir business and sports related
products. During the nine-month period ended January 31,
1998, the Company limited its efforts to dispose of the
remaining inventories and patents and charged an additional
$637,877 to operations.
Item 6. Management's Discussion And Analysis or Plan of
Operation
The following discussion and analysis of the Company's
consolidated financial condition and results of operations
should be read in conjunction with the Company's Condensed
Consolidated Financial Statements and Notes thereto. This
document may contain forward-looking statements that involve
risks and uncertainties. The Company's actual results may
differ significantly from the results discussed in the
forward-looking statements.
Overview
As previously disclosed in the Company's annual report
on Form 10-KSB for the year ended April 30, 1997 ("Annual
Report") filed with the Securities and Exchange Commission
on August 13, 1997 and as amended on October 14, 1997, the
Company has begun to implement its plan to become a
financial services company and, through its wholly-owned
insurance subsidiary, Universal Property & Casualty Company
("UPCIC"), has positioned itself to take advantage of what
management believes to be profitable business and growth
opportunities in the marketplace.
On October 29, 1997, the Florida Department of
Insurance ("DOI") approved the Company's application for a
permit to organize UPCIC as a domestic insurance company in
the State of Florida. On December 4, 1997, the Company
raised approximately $6.72 million in a private offering
with various institutional and/or otherwise accredited
investors pursuant to which the Company issued, in the
aggregate, 11,208,996 shares of its Common Stock at a price
of $.60 per share ("Private Offering"). The proceeds of the
Private Offering have been used to meet the minimum
regulatory capitalization requirements ($5,300,000) required
by the DOI to obtain an insurance company license and for
general working capital purposes. The Company received on
December 31, 1997 a license to engage in underwriting
homeowners insurance in the state of Florida.
The Company intends to continue to devote its efforts
to the business plan for UPCIC as previously outlined and
disclosed in the Annual Report.
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, cash equivalents and cash restricted for
regulatory requirements at January 31, 1998 were $6,086,192
as compared with $35,269 at April 30, 1997. The increase is
primarily the result of $6,725,380 capital raised in the
Private Offering.
Due to related parties at January 31, 1998 was $399,444
as compared to $305,678 at April 30, 1997. The increase is
due to Deferred Salary to the President.
The Company expects that the proceeds from the Private
Offering will be sufficient to finance its proposed plan of
operations for the next twelve months.
Results of Operations-- Nine Months Ended January 31, 1998
versus January 31, 1997
During the nine months ended January 31, 1998, the
Company did not actively market its core product line
resulting in sales decreasing from $149,622 for the nine
months ended January 31, 1997 to $9,170 for the nine months
ended January 31, 1998. The decision to discontinue
marketing efforts was based on the projected continued
losses, inability to achieve critical mass and lessened
demand for the products because of market factors. The
Company does not expect to incur material losses on the
disposition of these product lines.
The Company is actively pursuing its strategy of
diversifying into the financial services industry. The
Company is now licensed as a property and casualty insurer
in the state of Florida.
Results of Operations-- Three Months Ended January 31, 1998
versus January 31, 1997
During the three months ended January 31, 1998, the
Company did not engage in sales or marketing of its core
product line. The decision to discontinue marketing efforts
was based on the projected continued losses, inability to
achieve critical mass and lessened damand for the products
because of market factors.
UNIVERSAL HEIGHTS, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On May 15, 1997, two former employees of the
Company, Johnny Walker and Larry Martin filed a lawsuit
against the Company in the Circuit Court for Pinellas
County, Florida. The Plaintiffs asserted claims for an
injunction and for damages for breach of an Asset Purchase
Agreement. The Complaint also includes breach of employment
agreements, breach of royalty agreements and other relief.
In connection therewith, the Plaintiff's are demanding
unpaid salaries amounting to approximately $130,000. The
case is currently in the discovery stage.
Item 2. Changes in Securities
On January 14, 1998, the Company agreed to issue
45,000 shares of Common Stock of the Company at a price of
$1.00 per share to Sherman and Fischman, P.A., with whom the
Company has had an ongoing professional relationship, in
consideration for services rendered to the Company. In
addition, pursuant to an investment banking agreement dated
December 24, 1997 between the Company and Hermitage Capital
Corp. ("Hermitage"), the Company agreed to issue 200,000
shares of Common Stock to Hermitage at a price of $.75 per
share. The shares of Common Stock in each of the above
issuance were issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act of
1933, as amended.
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: March 20, 1998
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1,387 1,387
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<LOSS-PROVISION> 637,877 479,153
<INTEREST-EXPENSE> (49,545) (52,534)
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<INCOME-CONTINUING> (611,745) (28,650)
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<EPS-DILUTED> (0.22) (0.06)
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