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 31,2000
/ / 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 7,264,104 on May 5, 2000.
<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"). Because of the new SEC
requirement mandating pre filing review by the independent accountants and
because of a recent change of independent accountants, such review of the
accompanying financial statements has been commenced, but the time limitation
has not permitted the completion of the review by the Company's independent
accountants. 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, 1999, 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.
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
March 31, 2000 and June 30, 1999
-----------------------
ASSETS
March 31, June 30,
2000 1999
Unaudited Audited
-------------- --------------
Current assets:
Cash $ 2,565 $ 8,458
Cash Deposits 724 10,000
-------------- --------------
Total current assets 3,289 18,458
-------------- --------------
Fixed assets:
Development costs 32,264 0
Land 1,722,379 0
-------------- --------------
Total fixed assets 1,754,643 0
-------------- --------------
Other assets
Prepaid expense 49,500 0
Escrow Deposits 418,356 0
Deferred tax asset, net of
valuation allowance 0 0
-------------- --------------
467,856 0
-------------- --------------
Total assets $ 2,225,788 $ 18,458
============== ==============
The accompanying notes are an integral part of the
unaudited financial statements
3.
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
March 31, 2000 and June 30, 1999
------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
March 31, June 30,
2000 1999
Unaudited Audited
-------------- --------------
Current liabilities:
Accounts payable $ 575,924 $ 520,745
Accrued taxes and assessments 587,517 900
Accrued expenses 11,147 35,431
Accrued payroll 73,633 73,633
Accrued payroll - President 175,600 130,600
Interest payable 85,189 49,807
Notes and loans payable 657,663 403,626
Advances from President 5,950 5,950
-------------- --------------
Total current liabilities 2,172,623 1,214,742
-------------- --------------
Long term liabilities
Mortgage loan payable 147,864 0
-------------- --------------
Shareholders' equity (deficit)
Preferred stock (100,000,000
shares authorized, no shares
outstanding) - -
Common stock($0.10 par value;
40,000,000 shares authorized,
6,432,765 and 4,343,837 shares
issued and outstanding
respectively) 643,277 434,384
Paid in capital 4,167,904 2,612,827
Retained earnings(deficit) (4,905,880) (4,243,495)
-------------- --------------
Total shareholders' (deficit) (94,699) (1,196,284)
-------------- --------------
Total liabilities and
shareholders' deficit $ 2,225,788 $ 18,458
============== ==============
The accompanying notes are an integral part of the
unaudited financial statements
4.
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the nine month periods ending
March 31, 2000 and 1999
(Unaudited)
Nine months ended March 31
-------------- --------------
2000 1999
-------------- --------------
Revenue $ 0 $ 0
-------------- --------------
Operating costs and
expenses $ 564,999 $ 299,050
Other income (expenses)
Interest (expense) (96,710) (55,768)
-------------- --------------
(Loss) from operations $ (661,709) $ (354,818)
Provision for income taxes (675) (675)
-------------- --------------
Net (loss) $ (662,384) $ (355,493)
============== ==============
Loss per common share and
common share equivalent $ (0.11) $ (0.09)
============== ==============
The accompanying notes are an integral part of the
unaudited financial statements
5.
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the three months ending
March 31, 2000 and 1999
Unaudited
Three months ending March 31
------------------------------
2000 1999
-------------- --------------
Revenue $ 0 0
-------------- --------------
Operating costs and
expenses 79,024 144,339
Other income (expenses)
Interest (expense) (38,319) (19,937)
-------------- --------------
(Loss) from operations $ (117,343) $ (164,276)
Provision for income taxes (225) (225)
-------------- --------------
Net (loss) $ (117,568) $ (164,501)
============== ==============
Loss per common share
and common share
equivalent $ (0.01) $ (0.04)
============== ==============
The accompanying notes are an integral part of the
unaudited financial statements.
6.
<PAGE>
FOCAL CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Year Ended June 30, 1999 and Nine Months ended March 31, 2000
(Unaudited)
-------------------
<TABLE>
<CAPTION>
Common Common Paid-in Retained Total
Shares Stock Capital Earnings
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
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 180,000 18,000 72,000 - 90,000
Sale of stock 25,000 2,500 22,500 - 25,000
Stock issued for
payment of accrued
wages 360,000 36,000 144,000 - 180,000
Stock issued for
services 2,000 200 800 - 1,000
Stock issued
in lieu of bonus 100,000 10,000 40,000 50,000
Net loss - - - (446,978) (446,978)
-------------- -------------- -------------- -------------- --------------
Bal: 6/30/99 4,343,837 $ 434,384 $ 2,612,827 $ (4,243,495) $ (1,196,284)
Stock issued for
for land acquisition 839,856 83,985 755,871 839,856
Stock issued for
accounts payable 26,716 2,672 11,086 13,758
Stock issued
to directors in lieu
of bonus and fees 624,000 62,400 249,600 - 312,000
Stock issued for 180,000 18,000 162,000 180,000
charitable contributions
Stock issued for land
purchase Escrow deposit 418,356 41,836 376,520 418,356
Net Loss (662,385) (662,385)
-------------- -------------- -------------- -------------- --------------
Bal:3/31/00 6,432,765 $ 643,277 $ 4,167,904 $ (4,905,880) $ (94,699)
============== ============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the
unaudited financial statements.
7.
<PAGE>
FOCAL CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED
March 31, 2000 and 1999
(Unaudited)
-------------------
March 31,
2000 1999
-------------- --------------
Cash flows (used) in operating activities:
Net (Loss) $ (662,385) $ (355,493)
Stock issued to President and
Directors in lieu salary,
Bonus and fees 260,700
Stock issued for charitable 180,000
Contributions
Amortization of prepaid expense 1,800
-------------- --------------
(219,885) (355,493)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Decrease (Increase) in accounts receivable 0 (483)
Decrease (Increase) in cash deposits 9,276
Increase (Decrease) in accounts 117,452 (27,096)
payable and accrued expenses
(Increase) in development costs (32,264)
-------------- --------------
Net cash provided by (used in)
operating activities (125,421) (383,072)
Cash flows provided by financing activities:
Borrowing 121,911 37,300
Sale of stock 0 346,000
-------------- --------------
Net cash provided by financing activities 121,911 383,300
-------------- --------------
Cash flows (used) in investing activities
Cash used for closing land acquisitions (2,383)
-------------- --------------
Net increase (decrease) in cash (5,893) 228
-------------- --------------
Cash at beginning of period 8,458 219
-------------- --------------
Cash at end of period $ 2,565 $ 447
============== ==============
The accompanying notes are an integral part of the
unaudited financial statements
8.
<PAGE>
FOCAL CORPORATION
STATEMENTS OF CASH FLOWS
(Continued)
NON CASH INVESTING AND FINANCING TRANSACTIONS:
Common stock issued to President and
Directors in lieu of salary, bonus and fees $ 260,700
Common stock issued to Directors as advances 51,300
Common stock issued for charitable contribution 180,000
Common stock issued for land and escrow deposits 839,858
Notes issued for land acquired 292,078
Taxes and assessments assumed on land 167,992
Common stock issued for accounts payable 13,758
--------------
$ 1,805,616
==============
The accompanying notes are an integral part of the
unaudited financial statements
9.
<PAGE>
FOCAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the three month periods ended
March 31, 2000 and 1999
(Unaudited)
March 31,
2000 1999
-------------- --------------
Cash flows (used) in operating activities:
Net (Loss) $ (117,568) $ (164,501)
Stock issued to President in lieu
of salary 90,000
Amortization of prepaid expense 1,800
-------------- --------------
(25,768) (164,501)
Adjustments to reconcile net loss
To net cash used in operating activities:
Decrease (Increase) accounts receivable 0 (483)
Decrease (increase) in cash deposits (724)
Increase (decrease in accounts payable
and accrued expenses 50,265 1,595
(Increase) in development costs (26,919)
-------------- --------------
Net cash provided by (used in)
Operating activities (3,146) (166,579)
Cash flows provided by financing activities:
Borrowing 3,838 25,200
Sale of stock 141,000
-------------- --------------
Net cash provided by financing activities 3,838 166,200
-------------- --------------
Net increase (decrease) in cash 692 (379)
Cash at beginning of period 1,873 826
-------------- --------------
Cash at end of period $ 2,565 $ 447
============== ==============
The accompanying notes are an integral pert of the
unaudited financial statements.
10.
<PAGE>
FOCAL CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------
1. Financial statements:
---------------------
The financial statements have been prepared assuming the Company will
continue as a going concern. The Company has had no operating income and is
dependent upon funds from borrowing and private placements for funding its
day to day cash requirements and will require additional borrowing to
develop its properties. If the Company is not able to acquire financing,
there is no assurance it will continue to operate.
2. Income taxes:
-------------
The Company files Federal income and State franchise tax returns. Because
of taxable loss carryforwards, the Company has not had a Federal tax
liability. State franchise tax returns require a minimum tax which is
accrued through the year.
3. Loss per common share:
----------------------
Loss per common and common equivalent share, assuming no dilution, is
computed based on the weighted average number of shares of common stock and
common stock equivalents outstanding during each period. Fully diluted per
share data is not presented as the effect would not be dilutive.
11.
<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 real estate in the
Western United States for development. The Company has acquired several tracts
in Rosamond, California. Plans are to develop this into a recreational vehicle
park with 525 recreational vehicle pads which may be either sold or rented, a
fresh water lake with beaches and other recreational oriented facilities.
At the current date, four additional parcels are in escrow. These properties
were acquired by issuance of the Company's common stock and the assumption of
debt. Management believes that development can be financed with loans secured by
the land and by private equity investors. Management believes income generated
will be sufficient to permit the Company to acquire additional properties. The
Company is also in various stages of negotiation on other properties in
California and Nevada. As the Company's finances improve, and as appropriate
opportunities arise, the Company plans to acquire existing shopping centers and
strategically located vacant land suitable for the development of shopping
centers. 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. 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 has a memorandum of understanding for the acquisition of a
mining property in Nevada. The memorandum call for the seller to lease back and
operate the property and pay a royalty to the Company based on production.
The Company has had preliminary discussions on a possible merger or capital
investment by a Real Estate Group. No conclusive agreement on terms or
conditions have been reached.
12.
<PAGE>
Currently, the Company does not own or manage any shopping centers, truck
stops or mining property and has not previously developed any recreational
vehicle parks. However, the Company president has over 25 years of experience in
the development, ownership, and management of shopping centers. The Company also
plans to use experienced consultants to locate, analyze, and develop 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 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.
Indebtedness incurred by the Company may be in the form of bank borrowing,
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
borrowing by the Company may be used for working capital, to refinance existing
indebtedness or to finance acquisitions, expansions or development of new
properties.
13.
<PAGE>
Results of Operations
- ---------------------
The Company had no revenue from operations during the nine months ended
March 31, 2000 and 1999.
The Company's expenses during the nine months ended March 31, 2000 and 1999
amounted to $662,384 and $355,493, respectively. Expenses increased by $306,891
(86%) This is due to acquisition investigation expense 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. During
the current fiscal year, the directors received a stock bonus for continuing
service to the company, and the company made a charitable donation of its stock
in the amount of $180,000. The net loss increased from the corresponding period
of the prior year by $306,891 (86%) for the reason stated above.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity 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 intends to use the land at Rosamond as security for mortgage loans to
develop the property. Although the company believes it will be able to obtain
sufficient funds, there can be no assurance that sufficient financing will be
available. The inability to obtain such financing could have a material and
adverse effect on the Company's operations.
14.
<PAGE>
At March 31, 2000, the Company had total liabilities of $2,320,487,of which
(i)$355,633 represented accounts payable to officers and directors and their
families (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)$147,864 represented a mortgage loans
secured by land; (iv) $586,172 represented taxes and assessments on
land;(v)$1,156,510 represented loans and accounts payable to others (principally
professional advisors and real estate and financial consultants and loans needed
for operations), and (vi)$675 represented accrued income or franchise taxes. On
that same date, the Company had cash of $2,565 and total assets of $2,225,788.
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 develops the land at Rosamond, California. Once the
property is developed, a positive cash flow will be realized which will provide
the liquidity and capital resources necessary to conduct the business of the
Company.
15.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
- --------------------------
On January 10, 2000 Project Design Consultants, a California Corporation,
filed suit for payment of unpaid engineering fees on Gateway Plaza at the
Calexico/Mexicali border in the amount of $58,375.58, the company anticipates
the matter can be satisfactorily resolved.
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.
- -----------------------------------------
Form 8-K was filed on May 5, 2000 to report a change in independent
auditors.
16.
<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: May 12, 2000 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-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 2,565
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,289
<PP&E> 1,754,643
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,225,788
<CURRENT-LIABILITIES> 2,172,623
<BONDS> 0
0
0
<COMMON> 4,811,181
<OTHER-SE> (4,905,880)
<TOTAL-LIABILITY-AND-EQUITY> 2,225,788
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 564,999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96,710
<INCOME-PRETAX> (661,709)
<INCOME-TAX> 675
<INCOME-CONTINUING> (662,384)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (662,384)
<EPS-BASIC> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
