<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 September 30, 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 6,718,380 on September 30, 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 a recent change in
independent accountants, the financial statement review had not been completed
by the filing deadline. 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, 2000, 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
BALANCE SHEET
September 30, 2000 and June 30, 2000
-----------------------
ASSETS
September 30, June 30,
2000 2000
Unaudited Audited
---------- ----------
Current assets:
Cash $ 0 $ 752
Cash Deposits 280 1,000
---------- ----------
Total current assets 280 1,752
---------- ----------
Fixed assets:
Development costs 62,001 35,001
Land 780,000 780,000
---------- ----------
Total fixed assets 842,001 815,001
---------- ----------
Total assets $ 842,281 $816,753
========== ==========
The accompanying notes are an integral part of the
unaudited financial statements
3.
<PAGE>
FOCAL CORPORATION
BALANCE SHEET
September 30, 2000 and June 30, 2000
------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
September 30, June 30,
2000 2000
Unaudited Audited
------------ ------------
Current liabilities:
Bank overdraft $ 1,134 $ 0
Accounts payable 716,131 632,587
Accrued taxes and assessments 681,052 658,628
Accrued wages due officers
and directors 249,233 204,233
Interest payable 125,962 112,282
Notes and loans payable 839,128 846,177
------------ ------------
Total current liabilities 2,612,640 2,453,907
------------ ------------
Shareholders' equity (deficit)
Preferred stock (100,000,000
shares authorized, no shares
outstanding) - -
Common stock($0.10 par value;
40,000,000 shares authorized,
6,718,380 and 6,637,380 shares
issued and outstanding
respectively) 671,838 663,738
Paid in capital 2,694,771 2,662,371
Retained earnings(deficit) (5,136,968) (4,963,263)
------------ ------------
Total shareholders' (deficit) (1,770,359) (1,637,154)
------------ ------------
Total liabilities and share-
holders' deficit $ 842,281 $ 816,753
============ ============
The accompanying notes are an integral part of the
unaudited financial statements
4.
<PAGE>
FOCAL CORPORATION
STATEMENT OF OPERATIONS
For the three month periods ending
September 30, 2000 and 1999
(Unaudited)
Three months ended September 30
----------------------------
2000 1999
------------ ------------
Revenue $ 0 $ 0
------------ ------------
Operating costs and
expenses $ 134,334 $ 57,288
Other income (expenses)
Interest (expense) (39,146) (17,270)
------------ ------------
(Loss) from operations ($173,480) ($ 74,558)
Provision for income taxes (225) (225)
------------ ------------
Net (loss) ($173,705) ($ 74,783)
============ ============
Loss per common share
and common share
equivalent ($0.03) ($0.02)
============ ============
The accompanying notes are an integral part of the
unaudited financial statements
5.
<PAGE>
<TABLE>
FOCAL CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) Year Ended
June 30, 2000 and Three Months ended September 30, 2000
(Unaudited)
-------------
<CAPTION>
Bb Common Common Paid-in Retained Total
Shares Stock Capital Earnings
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Bal: 6/30/99 4,343,837 $434,384 $2,612,827 ($4,243,495) ($1,196,284)
Stock issued for
for land acquisition 862,968 86,297 (86,297) -
Stock issued for
conversion of
notes payable 24,000 2,400 9,600 12,000
Stock issued for payment
of accrued liabilities,
salaries, and directors
fees 829,916 82,992 183,200 266,192
Stock issued for other
services 1,415 141 565 706
Stock issued for
charitable contributions 180,000 18,000 (18,000) -
Stock issued for land
purchase Escrow deposit 395,244 39,524 (39,524) -
Net Loss (719,768) (719,768)
----------- ----------- ----------- ------------- -----------
Bal:6/30/00 6,637,380 $663,738 $2,662,371 ($4,963,263) ($1,637,154)
Stock issued for
conversion of
notes payable 81,000 8,100 32,400 40,500
Net loss (173,705) (173,705)
----------- ----------- ------------ ------------ -----------
Bal:9/30/00 6,718,380 $671,838 $2,694,771 ($5,136,968) ($1,770,359)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the unaudited
financial statements.
6.
<PAGE>
FOCAL CORPORATION
STATEMENT OF CASH FLOWS
For the three month periods ended
September 30, 2000 and 1999
Increase (Decrease) in Cash Equivalents
(Unaudited)
-------------------
September 30,
2000 1999
------------ ------------
Cash flows (used) in operating activities:
Net (Loss) ($173,705) ($254,548)
Stock issued to President and
Directors in lieu salary,
bonus and fees 170,700
------------ ------------
(173,705) ( 83,848)
Adjustments to reconcile net loss
to net cash used in operating activities:
Decrease (Increase) in cash deposits 720 10,000
Increase (Decrease) in accounts
payable and accrued expenses 164,648 42,736
(Increase) in development costs (27,000) 0
------------ ------------
Net cash provided by (used in)
operating activities (35,337) (31,112)
Cash flows provided by financing activities:
Borrowing 33,451 25,000
------------ ------------
Net increase (decrease) in cash (1,886) (6,112)
------------ ------------
Cash at beginning of period 752 8,458
------------ ------------
Cash (overdraft) at end of period $ (1,134) $ 2,346
============ ============
The accompanying notes are an integral part of the
unaudited financial statements
7.
<PAGE>
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. Significant accounting policies:
Costs that relate to land development projects are capitalized. Costs are
allocated to project components by the specific identification method
whenever possible. Interest costs are capitalized while development is in
progress.
3. 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 period. 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 real estate in the
Western United States for development. The Company has acquired several
tracts in Rosamond, California. Plans are to develop the largest parcel, which
is 80 acres 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'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.
<PAGE>
Results of Operations
---------------------
The Company had no revenue from operations during the three months ended
September 30, 2000 and 1999.
The Company's expenses during the three months ended September 30, 2000 and
1999 amounted to $173,705 and $74,783, respectively. Expenses increased by
$98,922 (133%). 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. Because
there was no revenue during either period, the operating expenses also represent
the losses of each period.
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 or a portion of the property may be sold to obtain funds.
The Company has been notified that a forced sale of certain parcels may occur to
pay delinquent property taxes. Foreclosure has also been initiated due to
delinquent utility bond assessments. 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 September 30, 2000 the Company had total liabilities of $2,612,640,of
which (i)$1,134 represented a bank overdraft. (ii)$197,247 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.
(iii)$73,633 represents accrued payroll to a former officer. (iv)$147,864
represented a mortgage loans secured by land; (v) $680,827 represented taxes and
assessments on land;(vi)$1,511,710 represented loans and accounts payable to
others (principally professional advisors and real estate and financial
consultants and loans needed for operations), and (vii)$225 represented accrued
taxes. On that same date, the Company no cash and total assets of $842,201.
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. Judgment in the amount of approximately $60,000 has
been entered by the court in favor of the plaintiff.
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 form 8-K was filed on November 2, 2000 to report a change in independent
auditors.
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: November 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
