<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, 1999
/_/ 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 St. #302 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 5,301,355 on September 30, 1999.
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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, 1998, 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, 1999 and June 30, 1998
-----------------------
ASSETS
March 31, June 30,
1999 1998
---------- ----------
Current assets:
Cash $ 447 $ 219
Accounts receivable 483 0
---------- ----------
Total assets $ 930 $ 219
========== ==========
The accompanying notes are an integral part of the
consolidated financial statements
3.
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FOCAL CORPORATION
BALANCE SHEET
March 31, 1999 and June 30, 1998
------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
March 31, June 30,
1999 1998
------------ ------------
Current liabilities:
Accounts payable $ 512,476 $ 425,124
Accrued taxes 675 900
Accrued expenses 34,181 27,980
Accrued wages due officers
and directors 159,233 294,233
Interest payable 49,193 34,617
Notes and loans payable 349,971 312,671
------------ ------------
Total current liabilities $ 1,105,729 $ 1,095,525
------------ ------------
Shareholders' equity (deficit)
Preferred stock (100,000,000
shares authorized, no shares
outstanding) - -
Common stock($0.10 par value;
40,000,000 shares authorized,
4,343,837 and 3,676,837 shares
issued and outstanding
respectively) 434,384 367,684
Paid in capital 2,612,827 2,333,527
Retained earnings(deficit) (4,152,010) (3,796,517)
------------ ------------
Total shareholders' (deficit) (1,104,799) (1,095,306)
------------ ------------
Total liabilities and share-
holders' deficit $ 930 $ 219
============ ============
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, 1999 and 1998
(Unaudited)
Nine months ended March 31
--------------------------
1999 1998
------------ ------------
Revenues
Income from relief
of debt $ 0 $ 29,530
------------ ------------
Operating costs and
expenses $ 299,725 $ 212,239
Other income (expenses)
Interest (expense) (55,768) (28,994)
------------ ------------
Net (loss) ($355,493) ($211,703)
============ ============
Loss per common share
and common share
equivalent ($0.09) ($0.06)
============ ============
The accompanying notes are an integral part of the
consolidated financial statements
5.
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<TABLE>
FOCAL CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Year Ended June 30, 1998 and Nine Months ended March 31, 1999
(Unaudited)
-------------
<CAPTION>
Common Common Paid-in Retained Total
Shares Stock Capital Earnings
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Bal 6/30/97 3,340,576 $334,058 $2,183,353 ($3,494,931) ($977,520)
Retirement of
common stock (31,339) (3,134) 3,134 0
Stock issued
for services 4,600 460 1,840 2,300
Stock issued
to officers in
lieu of salary 240,000 24,000 96,000 - 120,000
Stock issued
for payment of
notes and
advances 123,000 12,300 49,200 61,500
Net loss - - - (301,586) (301,586)
----------- ----------- ----------- ------------ ------------
Bal: 6/30/98 3,676,837 $367,684 $2,333,527 ($3,796,517) ($1,095,306)
Stock issued
to officers in
lieu of salary 540,000 54,000 216,000 - 270,000
Stock issued
for services 100,000 10,000 40,000 50,000
Sale of stock 27,000 2,700 23,300 26,000
Net Loss (355,493) (355,493)
----------- ----------- ----------- ------------ ------------
Bal: 3/31/99 4,343,837 $434,384 $2,612,827 ($4,152,010) ($1,104,799)
=========== =========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
6.
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FOCAL CORPORATION
STATEMENT OF CASH FLOWS
For the nine month periods ended
March 31, 1999 and 1998
Increase (Decrease) in Cash Equivalents
(Unaudited)
-------------------
March 31,
1999 1998
------------ ------------
Cash flows (used) in operating activities:
Net (Loss) ($355,493) ($211,703)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Decrease (Increase) in accounts
receivable ( 483) 0
Decrease (Increase) in advances 0 ( 6,930)
Increase (Decrease) in accounts
payable and accrued expenses ( 27,096) 11,894
------------ ------------
Net cash provided by (used in)
operating activities (383,072) (206,739)
Cash flows provided (used) by financing activities:
Debt reduction ( 45,000)
Borrowing 37,300 91,641
Issuance of Common stock 346,000 172,800
------------ ------------
Net cash provided by (used in)
financing activities 383,300 219,441
------------ ------------
Net increase (decrease) in cash 228 12,702
------------ ------------
Cash (overdraft) at beginning of period 219 (11,600)
------------ ------------
Cash (overdraft) at end of period $ 447 $ 1,102
============ ============
The accompanying notes are an integral part of the
consolidated financial statements
7.
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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 real estate for development and existing well-leased, eight to
twenty acre shopping centers, anchored by a major discount department
store, a major supermarket and several credit rated retail tenants. The
Company has located properties in 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 also currently working with
representatives of national retail chains to select possible sites in
various areas for future development. 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.
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Item 2. Management's Discussion and Analysis or Plan of Operations.
Plan of Operations
- ------------------
The Company's current plan of operations is to acquire real estate in the
Western United States. The Company expects to target shopping centers anchored
by long term leases with national, credit-rated retail tenants which generate
positive cash flows. The Company intends to acquire existing centers of
approximately eight to twenty 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 and recreational parks. The company is also
investigating the development of truck stops and other commercial buildings,
such as motels and office buildings, at strategic locations along interstate
highways and at the U.S. border with Mexico. The company anticipates that such
options or contracts would 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
properties which are strategically located and which generally provide positive
cash flows, (ii) improved operations of the properties 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.
9.
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Currently, the Company does not own or manage any shopping centers or truck
stops. Subsequent to the date of these statements, the company closed on an 80
acre parcel of undeveloped land at Rosamond, California. The company intends to
develop this as a recreational area. The company believes it will be able to use
the land as security for borrowing funds needed for the development. The Company
does not have funds necessary for the acquisition or development of shopping
centers or other development. However, the Company intends to rely on its
management to successfully negotiate 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 and Nevada. However, as of current date, the
Company had no formal commitments, arrangements or understandings with regard to
the acquisition of any specific properties other than the 80 acre parcel
referenced above.
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 properties in exchange
for shares of the Company's Common Stock or Preferred Stock, if the Board of
Directors determines that additional or other funding is required to acquire
properties, 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 Preferred Stock
in any manner (and on such terms and for such consideration) it deems
appropriate, including in exchange for property. Any Securities and Exchange
filings which may be required will be prepared.
10.
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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.
Results of Operations
- ---------------------
The Company had no revenue from operations during the nine months ended
March 31, 1999 and 1998. The only income recognized was from relief of debt.
The Company's expenses during the nine months ended March 31, 1999 and 1998
amounted to $355,493 and $211,703, respectively. Expenses increased by $114,260
(47%). This is due to project development costs as the company seeks projects
which would achieve its objectives and increased interest as the company has
continued to require borrowing funds to continue operations. The net loss
increased from the corresponding period of the prior year by $143,790 (68%)
because income was recognized from relief of debt in the prior year.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity over the past five 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 of approximately
$1,000,000. The funds will be used to finance general operating expenses while
the Company locates and negotiates for the acquisition of properties which meet
the Company's investment criteria.
11.
<PAGE>
At March 31, 1999, the Company had total liabilities of $1,105,729, of
which (i)$125,731 represented accounts payable to officers and directors (all of
whom have agreed to defer payment until such time as the Company is financially
able to make such payments. (ii)$73,633 represents accrued payroll to a former
officer. (iii)$905,690 represented loans and accounts payable to others
(principally professional advisors and real estate and financial consultants and
loans needed for operations), and (iv)$675 represented accrued taxes. On that
same date, the Company had cash and accounts receivable totalling $930 which
were the only assets.
Management believes that proceeds from additional borrowing will generate
sufficient working capital to conduct the business of the Company during the
period that the Company negotiates for the acquisition of properties. Once the
Company has acquired properties 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 believes
the Company will be able to acqire properties that will generate enough cash to
support its operations.
12.
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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.
- -----------------------------------------
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: October 5, 1999 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>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 447
<SECURITIES> 0
<RECEIVABLES> 483
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 930
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 930
<CURRENT-LIABILITIES> 1,105,729
<BONDS> 0
0
0
<COMMON> 434,384
<OTHER-SE> (1,539,183)
<TOTAL-LIABILITY-AND-EQUITY> 930
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 299,725
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,768
<INCOME-PRETAX> (355,493)
<INCOME-TAX> 0
<INCOME-CONTINUING> (355,493)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (355,493)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
