<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the period ended March 31, 1997
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITY EXCHANGE ACT OF 1934
For the transition period
from ___________ to ____________
Commission File No.0-22968
FOCAL CORPORATION
(Name of small business issuer as specified in its charter)
Utah 87-0363789
- ---------------------- ---------------------------
State of incorporation I.R.S. Employer I.D. Number
1415 West North Avenue Anaheim, California 92801
- -------------------------------------------------------------------------
Address of principal executive office Zip code
(714)635-8821
-----------------------------------------------
(Issuer's telephone number, including area code)
____________________________
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
----- -----
The number of shares outstanding of issuer's only class of Common Stock,
$0.10 par value was 2,930,676 on August 5, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Introduction
The financial statements included herein have been prepared by Focal Corporation
("Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission ("Commission"). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading when
read in conjunction with the Company's financial statements for the year ended
June 30, 1996, contained in the Company's Form 10-KSB filed with the Commission.
The financial information presented reflects all adjustments, consisting only of
normal recurring adjustments, which are, in the opinion of Management, necessary
for a fair statement of the results for the interim periods presented.
2.
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FOCAL CORPORATION
BALANCE SHEET
March 31, 1997 and June 30, 1996
--------------------------------
ASSETS
<TABLE>
<CAPTION>
March 30, June 30,
1997 1996
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Current asset:
Cash $ 866 $ 0
Advances to officers 13,941 0
Deferred expenses 174 0
Deposit-Loan Commitment 0 120,000
------- --------
Total assets $14,981 $120,000
======= ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
3.
<PAGE>
FOCAL CORPORATION
BALANCE SHEET
March 31, 1997 and June 30, 1996
--------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
Current liabilities:
Bank overdraft $ 0 $ 411
Accounts payable 383,051 388,905
Accrued payroll 220,333 190,333
Accrued taxes 35,874 35,874
Interest payable 12,764 6,517
Accrued expenses due officers and directors 38,112 35,412
Notes and loans payable 200,496 264,715
----------- -----------
Total current liabilities $ 890,630 $ 922,167
----------- -----------
Shareholders' equity (deficit)
Preferred stock (100,000,000
shares authorized, no shares outstanding) - -
Common stock ($0.10 par value;
40,000,000 shares authorized,
2,930,676 and 2,690,676 shares issued and
outstanding respectively) 293,068 269,068
Paid in capital 2,019,393 1,923,393
Retained earnings(deficit) (3,188,110) (2,994,628)
----------- -----------
Total shareholders' (deficit) (875,649) (802,167)
----------- -----------
Total liabilities and shareholders' deficit $ 14,981 $ 120,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
4.
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FOCAL CORPORATION
STATEMENT OF OPERATIONS
For the nine month periods ending
March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended March 31
--------------------------
1997 1996
------------ -----------
<S> <C> <C>
Revenues
Income from relief of debt $ 77,631 $ 2,140
---------- ----------
Operating costs and expenses $ 259,052 $ 143,826
Other income (expenses)
Interest (expense) (12,061) (5,303)
---------- ----------
Net (loss) $ (193,482) $ (146,989)
---------- ----------
Loss per common share and common share
equivalent $ (0.07) $ (0.05)
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
5.
<PAGE>
FOCAL CORPORATION
STATEMENT OF SHAREHOLDERS' (DEFICIT)
Year Ended June 30, 1996 and Nine Months ended March 31, 1997
(Unaudited)
-----------
<TABLE>
<CAPTION>
Common Common Paid-in Retained
Shares Stock Capital Earnings Total
--------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Bal: 6/30/95 2,690,676 $ 269,068 $1,923,393 (2,725,692) $(533,231)
Net loss - - - (268,936) (268,936)
Bal: 6/30/96 2,690,676 269,068 1,923,393 (2,994,628) (802,167)
Stock issued
to officers in
lieu of salary 240,000 24,000 96,000 - 120,000
Net loss - - - (193,482) (193,482)
--------- --------- ---------- ----------- ---------
Bal: 3/31/97 2,930,676 $ 293,068 $2,019,393 $(3,188,110) $(875,649)
========= ========= ========== =========== =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
6.
<PAGE>
FOCAL CORPORATION
STATEMENT OF CASH FLOWS
For the nine month periods ended
March 31, 1997 and 1996
Increase (Decrease) in Cash Equivalents
(Unaudited)
__________________
<TABLE>
<CAPTION>
March 31,
1997 1996
----------- ---------
<S> <C> <C>
Cash flows (used) in operating
activities:
Net (Loss) $(193,482) $(146,989)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Decrease (Increase) in deposits 120,000 (1,000)
Decrease (Increase) in prepaids
and deferred expense (174) 0
Increase (Decrease) in accounts
payable and accrued expenses 33,093 85,821
Decrease (Increase) in advance
to officers (13,941) ( 9,300)
----------- ---------
Net cash provided by (used in)
operating activities (54,504) (71,468)
Cash flows provided (used) by
financing activities:
Debt reduction (150,000) 0
Borrowing 85,781 62,046
Issuance of Common stock 120,000 0
----------- ---------
Net cash provided by (used in)
financing activities 55,781 62,046
----------- ---------
Net increase (decrease) in cash 1,277 (9,422)
----------- ---------
Cash (overdraft) at beginning of period (411) 3,702
----------- ---------
Cash (overdraft) at end of period $ 866 $ (5,720)
=========== =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
7.
<PAGE>
FOCAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________________
1. Management Plan
---------------
The financial statements have been prepared assuming the Company will
continue as a going concern. The Company currently has no operations and is
dependent upon funds from borrowing and private placement for funding its day
to day cash requirements. The Company has been directing its efforts to
acquiring well-leased, existing ten to twenty acre discount shopping centers,
anchored by major national retail tenants. The Company has located properties
in Arizona, California and Nevada that fit their investment criteria and it
is exploring ways to finance the acquisition of these properties so they may
generate adequate resources for the Company. Focal's President, who has been
in the discount shopping center development business for over twenty-five
years, is currently working with representatives of national retail chains to
select possible sites in various areas for future development of shopping
centers. The Company proposes to construct the facilities and lease them back
to the retailers on long term leases. At the present time there is no
assurance that these events will take place. If the Company is unable to
acquire any properties or obtain additional private financing, there is no
assurance that it will continue to operate.
2. Loss Per Common Share
---------------------
Primary loss per common and common equivalent share, assuming no dilution,
are computed based on the weighted average number of shares of common stock
and common stock equivalents outstanding during each year. Fully diluted per
share data is not presented as the effect would not be dilutive.
8.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations.
Plan of Operations
------------------
The Company's current plan of operations is to acquire commercial shopping
centers in the Western United States. The Company expects to target centers
anchored by long term leases with national, credit-rated retail tenants and
which generate positive cash flows. The Company intends to acquire existing
shopping centers of approximately eight to 20 acres, which are expected to
include a major discount department store and several credit-rated retailers
strategically spaced around the larger anchor. Some complexes also will include
separate out-lots suitable for family type restaurants. In addition, as the
Company's financial condition improves and as appropriate opportunities arise,
the Company plans to option or contract for strategically located vacant land
suitable for the development of shopping centers, such options or contracts to
be subject to negotiating pre-building leases with major retail tenants.
The Company's investment objective in considering each potential
acquisition is to achieve long-term capital appreciation through increased cash
flow and increased value of the acquired property. The Company will seek to
accomplish this investment objective through (i) selective acquisitions of
shopping centers which are strategically located and which generally provide
positive cash flows, (ii) improved operations of the shopping centers and
lease-up of unleased space, and (iii) where deemed appropriate, expansions,
renovations and redevelopments of these properties. A key criterion for
property investments will be that they offer the opportunity for growth in
revenues from operations. The Company may purchase or lease properties for
long-term investment or sell such properties, in whole or in part, when
circumstances warrant. The Company may also participate with other entities in
property ownership, through joint ventures or other types of co-ownership.
Equity investments may be subject to existing mortgage financing and other
indebtedness which have priority over the equity interest of the Company.
Currently, the Company does not own or manage any shopping centers or other
real properties. In addition, the Company does not have funds necessary for the
acquisition or development of shopping centers. However, the Company intends to
rely on its management to successfully negotiate
9.
<PAGE>
the acquisition of existing shopping centers and vacant land in exchange for
shares of the Company's Common Stock or Convertible Preferred Stock. It is
anticipated that each such acquisition will be separately negotiated based on
the Owner's equity or tax base in the subject property. The Company is currently
conducting due diligence on certain shopping centers located in California,
Nevada and Arizona. However, as of current date, the Company had no formal
commitments, arrangements or understandings with regard to the acquisition of
any specific properties.
The Company currently intends to adhere to a policy of limiting the
incurrence of debt so that the Company's ratio of total debt to total equity on
its portfolio of shopping center properties does not exceed 70%. The Company may
from time to time modify its debt policy in light of then current economic
conditions, relative costs of debt and equity capital, the market value of
acquired properties, general conditions in the market for debt and equity
securities, fluctuations in the fair market value of the Company's Common Stock
and Convertible Preferred Stock, growth and acquisition opportunities and other
factors. Accordingly, the Company may increase or decrease the total debt to
total equity ratio beyond the limits described above.
Although the Company currently intends to acquire shopping centers in
exchange for shares of the Company's Common Stock or Convertible Preferred
Stock, if the Board of Directors determines that additional or other funding is
required to acquire the shopping centers, the Company may raise such funds
through equity offerings, debt financing or retention of cash flow, or a
combination of these methods. If the Board of Directors determines to raise
equity capital, it has the authority, without shareholder approval, to Issue
shares of Common Stock or Convertible Preferred Stock in any manner (and on such
terms and for such consideration) it deems appropriate, including in exchange
for property. Existing shareholders have no preemptive right to purchase shares
issued in any offering, and any such offering might cause a dilution of a
shareholder's investment in the Company. Indebtedness incurred by the Company
may be in the form of bank Borrowings, purchase money obligations to the sellers
of properties, secured and unsecured, and publicly and privately placed debt
investments. Such indebtedness may be recourse to all of the properties of the
Company or may be limited to the particular property to which the indebtedness
relates. The proceeds from any borrowings by the Company may be used for working
capital, to refinance existing indebtedness or to finance acquisitions,
expansions or development of new properties.
10.
<PAGE>
Results of Operations
---------------------
The Company had no revenue from operations during the nine months ended March
31, 1997 and 1996. The only income recognized in each period was from relief of
debt.
The Company's expenses during the nine months ended March 31, 1997 and 1996
amounted to $271,113 and $149,029, respectively. Expenses increased by $122,084
(82%). This is due to increased interest and additional salary expense required
as the company seeks sources of capital needed to continue operations and
acquire property. The net loss increased from the corresponding period of the
prior year by $46,493 (32%) for the reasons stated above.
Liquidity and Capital Resources
-------------------------------
The Company's liquidity over the past three years has been materially and
adversely affected by continuing operating losses. The Company currently has no
operations and is dependent on private financing to fund its day to day cash
requirements.
The Company is currently seeking to raise working capital through private
offering of Common Stock at $0.50 per share and warrants to purchase additional
shares of Common Stock at an exercise price between $1.00 and $3.00 per share.
Although there is no assurance that funds will be raised, all funds will be
used to finance general operating expenses while the Company locates and
negotiates for the acquisition of shopping centers which meet the Company's
investment criteria.
At March 31, 1997, the Company had total liabilities of $890,630, of which
(i)$258,445 represented accounts payable to officers and directors (all of whom
have agreed to deter payment until such time as the Company is financially able
to make such payments, although some cash advances have been made to officers,
see statement below) (ii)$596,311 represented loans and accounts payable to
others (principally professional advisors and real estate and financial
consultants and loans needed for operations), and (iii)$35,874 represented
accrued taxes. On that same date, the Company had assets totalling $5,874 of
which $174 represented prepaid and deferred expenses, and $19,981 represented
advances to officers.
11.
<PAGE>
Management believes that proceeds from the private offering will generate
sufficient working capital to conduct the business of the Company during the
period that the Company negotiates for the acquisition of its first shopping
center. Once the Company has acquired a shopping center that meets the
Company's investment criteria, which includes among other things, the ability to
generate positive cash flows, management believes that such cash flows will
provide the liquidity and capital resources necessary to conduct the business of
the Company, Management of the Company believes that between the funds generated
by the private placement and any cash flows resulting from the acquisition of a
shopping center, the Company will generate enough cash to support its
operations.
12.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
- --------------------------
The Company is not a party to any litigation and is not aware of any
pending or threatened litigation against the Company. James Collins, a former
financial consultant of the Company, has stipulated judgment against the Company
for $24,000 in unpaid consulting fees. Jackson, DeMarco & Peckenpaugh, the
Company's former counsel, has recorded a $71,000 judgment (and lien against the
Company's assets) for unpaid legal fees.
Item 2. Changes in Securities.
- ------------------------------
None
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.
- -----------------------------------------
a. 27 Financial Data Schedule
b. None
13.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized
Date: August 5, 1997 FOCAL CORPORATION
By: /s/ HOWARD M. PALMER
--------------------------------
Howard M. Palmer
Chairman of the Board and President
By: /s/ GERALD W. MAY
--------------------------------
Gerald W. May, Treasurer and
Principal Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996
<PERIOD-START> JUL-01-1996 JUL-01-1995
<PERIOD-END> MAR-31-1997 JUN-30-1996
<CASH> 866 0
<SECURITIES> 0 0
<RECEIVABLES> 13,941 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 14,981 120,000
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 14,981 120,000
<CURRENT-LIABILITIES> 890,630 922,167
<BONDS> 0 0
0 0
0 0
<COMMON> 293,068 269,068
<OTHER-SE> 2,019,393 1,923,393
<TOTAL-LIABILITY-AND-EQUITY> 14,981 120,000
<SALES> 0 0
<TOTAL-REVENUES> 77,631 2,140
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 259,052 143,826
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,061 5,303
<INCOME-PRETAX> (193,482) (146,989)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (193,482) (146,989)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (193,482) (146,989)
<EPS-PRIMARY> (.07) (.05)
<EPS-DILUTED> (.07) (.05)
</TABLE>
