<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 December 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 6,664,748 on February 8, 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"). 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.
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FOCAL CORPORATION
BALANCE SHEET
December 31, 1999 and June 30, 1999
-----------------------
ASSETS
December 31, June 30,
1999 1999
Unaudited Audited
---------- ----------
Current assets:
Cash $ 1,873 $ 8,458
Cash Deposits 0 10,000
----------- ----------
Total current assets 1,873 18,458
----------- ----------
Fixed assets:
Development costs 5,345 0
Land 1,722,379 0
----------- ----------
Total fixed assets 1,727,724 0
----------- ----------
Other assets
Prepaid expense 50,400 0
Escrow Deposits 425,356 0
----------- ----------
475,756 0
Total assets $2,205,353 $ 18,458
=========== ==========
The accompanying notes are an integral part of the
consolidated financial statements
3.
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FOCAL CORPORATION
BALANCE SHEET
December 31,1999 and June 30, 1999
------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
December 31, June 30,
1999 1999
Unaudited Audited
------------ ------------
Current liabilities:
Accounts payable $ 493,804 $ 520,745
Accrued taxes and assessments 586,172 900
Accrued expenses 9,634 35,431
Accrued wages due officers
and directors 294,233 204,233
Interest payable 76,448 49,807
Notes and loans payable 665,128 403,626
------------ ------------
Total current liabilities 2,125,419 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,
6,251,965 and 4,343,837 shares
issued and outstanding
respectively) 625,197 434,384
Paid in capital 4,095,184 2,612,827
Retained earnings(deficit) (4,788,311) (4,243,495)
------------ ------------
Total shareholders' (deficit) ( 67,930) (1,196,284)
------------ ------------
Total liabilities and share-
holders' deficit $ 2,205,353 $ 18,458
============ ============
The accompanying notes are an integral part of the
consolidated financial statements
4.
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FOCAL CORPORATION
STATEMENT OF OPERATIONS
For the six month periods ending
December 31, 1999 and 1998
(Unaudited)
Six months ended December 31
----------------------------
1999 1998
------------ ------------
Revenue $ 0 $ 0
------------ ------------
Operating costs and
expenses $ 485,975 $ 154,711
Other income (expenses)
Interest (expense) (58,391) (35,831)
------------ ------------
(Loss) from operations ($544,366) ($ 190,542)
Provision for income taxes (450) (450)
------------ ------------
Net (loss) ($544,816) ($ 190,992)
============ ============
Loss per common share
and common share
equivalent ($0.10) ($0.05)
============ ============
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, 1999 and Six Months ended December 31, 1999
(Unaudited)
-------------
<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 acqusistion 839,856 83,985 755,871 839,856
Stock issued for
accounts payable 25,916 2,592 10,366 12,958
Stock issued
to directors in lieu
of bonus and fees 444,000 44,400 177,600 - 222,000
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 (544,816) (544,816)
----------- ----------- ----------- ------------ ------------
Bal:12/31/99 6,251,965 $625,197 $4,095,184 ($4,788,311 ($ 67,930)
=========== =========== =========== ============ ============
</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 six month periods ended
December 31, 1999 and 1998
Increase (Decrease) in Cash Equivalents
(Unaudited)
-------------------
December 31,
1999 1998
------------ ------------
Cash flows (used) in operating activities:
Net (Loss) ($544,816) ($190,992)
Stock issued to President and
Directors in lieu salary,
bonus and fees 171,600
Stock issued for charitable 180,000
Contributions
------------ ------------
(193,216) (190,992)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Decrease (Increase) in cash deposits 10,000
Increase (Decrease) in accounts
payable and accrued expenses 63,903 ( 25,501)
(Increase) in development costs (5,345)
------------ ------------
Net cash provided by (used in)
operating activities (124,658) (216,493)
Cash flows provided (used) by financing activities:
Borrowing 118,073 15,100
Debt reduction 0 (3,000)
Sale of stock 205,000
------------ ------------
Net increase (decrease) in cash (6,585) 607
------------ ------------
Cash at beginning of period 8,458 219
------------ ------------
Cash at end of period $ 1,873 $ 826
============ ============
NON CASH INVESTING AND FINANCING TRANSACTIONS:
Common stock issued to President and
Directors in lieu of salary, bonus and fees $ 171,600 -
Common stock issued to Directors as advances 50,400 -
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 167,922 -
Common stock issued for accounts payable 12,958 -
------------ ------------
$ 1,714,816 -
============ ============
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. 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. 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:
---------------------
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 for development. The Company recently 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
are 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 is also
investigating the acquisition of mining properties.
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.
9.
<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.
10.
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Results of Operations
- ---------------------
The Company had no revenue from operations during the six months ended
December 31, 1999 and 1998.
The Company's expenses during the six months ended December 31, 1999 and
1998 amounted to $544,816 and $190,992, respectively. Expenses increased by
$353,824 (185%) 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. During
the current period, the directors received a stock bonus for continuing service
to the company. 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 $353,824 (185%) 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.
11.
<PAGE>
At December 31, 1999 the Company had total liabilities of $2,273,283,of
which (i)$294,233 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)$147,864 represented a mortgage loans secured by land; (iv)
$586,172 represented taxes and assessments on land;(v)$1,170,931 represented
loans and accounts payable to others (principally professional advisors and real
estate and financial consultants and loans needed for operations), and (vi)$450
represented accrued taxes. On that same date, the Company had cash of $1,873 and
total assets of $2,205,353.
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.
12.
<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.
- -----------------------------------------
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: February 10, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,873
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,873
<PP&E> 1,727,724
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,205,353
<CURRENT-LIABILITIES> 2,125,419
<BONDS> 0
0
0
<COMMON> 4,720,381
<OTHER-SE> (4,788,311)
<TOTAL-LIABILITY-AND-EQUITY> 2,205,353
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 485,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,391
<INCOME-PRETAX> (544,366)
<INCOME-TAX> 450
<INCOME-CONTINUING> (544,816)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (544,816)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
