<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____ to ____
Commission File Number 000-02290
EFFICIENCY LODGE, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-0898219
- ---------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
5342 Old Floyd Road, P.O. Box 635, Mableton, Georgia 30059
----------------------------------------------------------
(Address of principal executive offices)
(770) 819-0039
------------------------------------------------
(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 Securities Exchange Act of 1934 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 /x/ No / /
Shares outstanding of each of the issuer's classes of common equity at
November 10, 1997: 1,026,880 shares of Common Stock, $0.10 par value share.
Transitional Small Business Disclosure Format (check one)
Yes / / No /x/
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Efficiency Lodge, Inc.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
September 30, 1997 December 31, 1996
------------------ -----------------
(Unaudited)
<S> <C> <C>
Property and equipment, net $10,468,025 $ 8,844,764
Cash 550,176 159,944
Other assets 1,294,084 1,532,390
----------- -----------
$12,312,285 $ 10,537,098
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $11,381,977 $10,038,389
Other liabilities 772,368 503,251
----------- -----------
Total liabilities 12,154,345 10,541,640
Stockholders' equity
Common stock 102,688 102,688
Additional paid-in capital 52,674 52,674
Accumulated earnings 2,578 (159,904)
----------- -----------
Total stockholders' equity 157,940 (4,542)
----------- -----------
$12,312,285 $10,537,098
=========== ===========
/TABLE
<PAGE>
Efficiency Lodge, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30, 1997
---------------------------------------------------------------
Additional
Common paid-in Accumulated
stock capital earnings Total
------ ---------- ----------- -----
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $102,688 $ 52,674 $ (159,904) $ (4,542)
Net income for the nine months -- -- 162,482 162,482
-------- -------- ---------- ---------
Balance at September 30, 1997 $102,688 $ 52,674 $ 2,578 $ 157,940
======== ========= ========== =========
/TABLE
<PAGE>
Efficiency Lodge, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Quarters Ending September 30, 1997 and 1996
For the Nine Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, 1997 September 30, 1997
1997 1996 1997 1996
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ 1,215,235 $1,079,720 $3,215,538 $3,082,297
Operating expenses 703,689 614,833 2,049,225 1,761,794
----------- --------- ---------- ---------
Operating income 511,546 464,887 1,166,313 1,320,503
Other (income) expense, net 291,527 267,230 897,905 766,543
----------- --------- ---------- ---------
Earning (loss) before income
taxes 220,019 197,657 268,408 553,960
Provision for income taxes 82,317 -- 105,926 --
----------- ----------- ---------- ----------
Net earnings (loss) $ 137,702 $ 197,657 $ 162,482 $ 553,960
=========== ========== =========== ===========
Net earnings (loss) per common
share $ .13 $ 219.62 $ .16 $ 615.51
=========== ========== =========== ===========
Weighted average number of
common shares outstanding 1,026,880 900 1,026,880 900
=========== ========== =========== ===========
Historical earnings before income
taxes $ 197,657 $ 553,960
Pro forma income tax expense 71,000 211,000
---------- ---------
Pro forma net earnings $ 126,657 $ 342,960
========== ==========
Pro forma earnings per share $ 140.73 $ 391.01
/TABLE
<PAGE>
Efficiency Lodge, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine months ended September 30,
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 162,482 $ 553,960
Adjustments to reconcile net earnings (loss) to
to net cash provided by operating activities:
Depreciation and amortization 297,389 284,540
Changes in assets and liabilities:
Other assets (96,844) (54,984)
Other liabilities 269,175 247,763
Loss on sale of asset 46,953 --
------------ ---------
Net cash provided by operating activities 679,155 1,031,279
Cash flows from investing activities:
Capital expenditures (1,664,794) (16,534)
Increase in due from stockholders -- (90,681)
Increase in advance to affiliate (52,165) (233,500)
Proceeds from sale of building 84,448 --
------------ ---------
Net cash used for investing activities (1,632,511) (340,715)
Cash flows from financing activities:
Principal payments on long-term debt (318,449) (255,082)
Due to stockholders -- (30,000)
Cash distributions to stockholders -- (210,000)
Proceeds from issuance of debt 1,700,000 --
Payoff of note on building sold (37,963) --
------------ ---------
Net cash provided (used) be financing activities 1,343,588 (495,082)
------------ ---------
Increase (decrease) in cash and cash equivalents 390,232 195,482
Cash and cash equivalents, beginning of period 159,944 84,064
------------ ----------
Cash and cash equivalents, end of period $ 550,176 $ 279,546
=========== ==========
Cash paid during the period for interest $ 888,264 $ 732,116
=========== ==========
</TABLE>
During the three month period ended March 31, 1997, advances to an
affiliate totaling $265,095 were forgiven in connection with the purchase
of a facility from the affiliate.
During the three month period ending June 30, 1997, a building was sold
which had a cost of $132,626 and accumulated depreciation of $1,225.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
Comparison of fixed assets from December 31, 1996 shows an
increase which is attributable to the acquiring and equipping of
DeKalb Lodge which opened on March 1, 1997. The assumption of
the DeKalb debt at Columbus Bank and Trust was also the reason
for the increase in the mortgage debt. The increase in other
liabilities compared to December 31 was the result of expenses
incurred in the opening of DeKalb Lodge and as result of the
merger with Southern Acceptance.
Revenue for the quarter ending September 30, was $1,215,235
compared to $1,079,720 for the same quarter in 1996. On a store
to store basis, excluding DeKalb Lodge which opened in the first
quarter of 1997, the revenue for the quarter was $1,004,423
compared to $1,079,720 in the same quarter in 1996. Revenue for
the 9 months ending September 30 was $3,215,538 compared to
$3,082,297 for the same period in 1996. Excluding DeKalb, the
revenue was $2,731,038 compared to $3,082,297 for the same period
in 1996. Revenue was down most dramatically in the first
quarter, and has stabilized and improved since such time.
Decrease in revenue can be attributed to a wet winter, a decrease
in construction workers and an end to the Olympics. Overbuilding
from the Olympics and the absorption caused by increased
competition is also a factor.
General and Administrative Expenses for the quarter ending
September 30 were $1,010,538 compared to $986,182 for the same
quarter in 1996. The greatest increase in expenses was an
increase in accounting, advertising, maintenance supplies,
management fees, repairs and maintenance, subcontractors, and
utilities. These increases were connected with the merger with
Southern Acceptance which was completed December 31, 1996, the
addition of DeKalb Lodge or normal repair and maintenance of the
existing lodges.
Earnings before income tax expense for the quarter was
$220,019 compared to $197,657 for the same quarter in 1996. This
increase can be attributed to the addition of DeKalb Lodge. Net
earnings for the quarter was $137,702 compared to $197,657 for
the same quarter in 1996. The decrease can be attributed to
income tax expense. In 1996, the company was an S corporation
and did not incur a tax expense.
An additional lodge is under construction in Columbus, Georgia
financed by Columbus Bank and Trust. Opening is anticipated
during the first quarter of 1998.<PAGE>
Efficiency Lodge, Inc.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine months ended September 30, 1997
NOTE A - BASIS OF PREPARATION
The accompanying unaudited interim consolidated financial
statements of Efficiency Lodge, Inc. (The "Company") have been
prepared in accordance with generally accepted accounting
principles for interim financial statements and with the rules
and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have
been included.
The results of operations for the quarter ended September 30,
1997 are not necessarily indicative of the results that may be
expected for the full year. The interim consolidated financial
statements should be read in conjunction with the Company's
1997 consolidated financial statements and related notes.
NOTE B - NEW ACCOUNTING PRONOUNCEMENT
The FASB has issued Statement of Financial Accounting Standards
No. 128, EARNINGS PER SHARE, which is effective for financial
statements issued after December 15, 1997. Early adoption of
the new standard is not permitted. The new standard eliminates
primarily and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together
with disclosures of how the per share amounts were computed.
The adoption of this new standard is not expected to have a
material impact on the disclosure of earnings per share in the
financial statements.
NOTE C - PRO FORMA RESULTS OF OPERATIONS
On December 31, 1996, the Company merged with Southern
Acceptance Corporation, Inc. (SAC). The merger was recorded
under the purchase method of accounting with ELI being
considered the acquiring company. SAC's results of operations
have been included in the Company's statement of operations
from the date of acquisition. Accordingly, the three
accompanying historical results of operations for the nine
months ended September 30, 1996 and six months ended September 30,
1996 do not include SAC's results of operations.
The following pro forma results of operations for the nine
months ended September 30, 1996 are unaudited and were prepared
under the assumption that the merger with SAC occurred on
January 1, 1996 and that the Company was a taxable entity.
These pro forma amounts are not necessarily indicative of what
the actual results of operations might have been if merger had
occurred at the beginning of fiscal year 1996.
Net earnings $ 342,960
Earnings per share $ 381.07
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibits are filed as of part of this
report:
Exhibit
Number Description
-------- -----------------------
27 Financial Data Schedule - (for SEC use only)
<PAGE>
SIGNATURE
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.
EFFICIENCY LODGE, INC.
DATE: November 10, 1997 By: /s/ W. Ray Barnes
W. Ray Barnes
President and Chief Executive
Officer
DATE: November 10, 1997 By: /s/ Roy E. Barnes
Roy E. Barnes
Secretary/Treasurer
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000092066
<NAME> EFFICIENCY LODGE, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 550,176
<SECURITIES> 0
<RECEIVABLES> 977,831
<ALLOWANCES> 0
<INVENTORY> 68,397
<CURRENT-ASSETS> 0
<PP&E> 13,082,598
<DEPRECIATION> 2,723,445
<TOTAL-ASSETS> 1,231,285
<CURRENT-LIABILITIES> 0
<BONDS> 11,381,977
0
0
<COMMON> 102,688
<OTHER-SE> 55,252
<TOTAL-LIABILITY-AND-EQUITY> 1,231,285
<SALES> 0
<TOTAL-REVENUES> 3,215,538
<CGS> 0
<TOTAL-COSTS> 2,049,225
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 903,418
<INCOME-PRETAX> 268,408
<INCOME-TAX> 105,926
<INCOME-CONTINUING> 162,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162,482
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
