EFFICIENCY LODGE, INC. FORM 10-Q
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 June 30, 1998
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 June 30, 1998: 1,043,683 shares of Common Stock,
$0.10 per value share.
Transitional Small Business Disclosure Format (check one)
Yes / / No / X /<PAGE>
Efficiency Lodge, Inc.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
June 30, 1998 December 31, 1997
------------- -----------------
(Unaudited)
<S> <C> <C>
Property and equipment, net $10,428,343 $10,197,674
Cash 561,114 169,246
Other assets 1,206,832 1,479,390
----------- -----------
$12,196,289 $11,846,310
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $10,977,311 $11,222,325
Other liabilities 729,278 519,549
----------- -----------
Total liabilities 11,706,589 11,741,874
Stockholders' equity
Common stock 104,368 104,368
Additional paid-in capital 52,674 52,674
Accumulated earnings 332,658 (52,606)
----------- -----------
Total stockholders' equity 489,700 104,436
----------- -----------
$12,196,289 $11,846,310
=========== ===========
/TABLE
<PAGE>
Efficiency Lodge, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Six months ended June 30, 1998
<TABLE>
<CAPTION>
Additional
Common paid-in Accumulated
stock capital earnings Total
-------- ----------- ------------ --------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $104,368 $ 52,674 $ (52,606) $104,436
Net income for the six months -- -- 385,264 385,264
-------- --------- --------- --------
Balance at June 30, 1998 $104,368 $ 52,674 $ 332,658 $489,700
</TABLE>
<PAGE>
Efficiency Lodge, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Quarter Ending June 30, 1998 and 1997
For the Six Months Ended June 30 1998 and 1997
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $1,214,586 $1,141,640 $2,408,784 $2,000,303
Operating expenses 633,433 662,449 1,286,692 1,345,536
---------- ---------- ---------- ----------
Operating income 581,153 479,191 1,122,092 654,767
Other (income) expense, net 280,712 336,361 577,140 606,378
---------- ---------- ---------- ----------
Earning (loss) before income
taxes 300,441 142,830 544,952 48,389
Provision for income taxes 107,571 45,161 159,688 10,161
---------- ---------- ---------- ----------
Net earnings (loss) $ 192,870 $ 97,669 $ 385,264 $ 38,228
========== ========== ========== ==========
Net earnings (loss) per common
share $ .18 $ .09 $ .37 $ .04
========== ========== ========== ==========
Weighted average number of
common shares outstanding 1,043,683 1,026,880 1,043,683 1,026,880
========== ========== ========== ==========
</TABLE>
<PAGE>
Efficiency Lodge, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six months ended June 30,
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 385,264 $ 38,228
Adjustments to reconcile net earnings (loss) to
to net cash provided by operating activities:
Depreciation and amortization 213,626 198,509
Changes in assets and liabilities:
Loss on sale of asset -- 46,953
Other assets (69,279) (76,065)
Other liabilities 209,727 135,388
---------- ----------
Net cash provided by operating activities 739,338 343,013
Cash flows from investing activities:
Increase in advance to affiliate -- (18,648)
Proceeds from sale of building -- 84,448
Capital expenditures (102,456) (1,653,405)
---------- ----------
Net cash used for investing activities (102,456) (1,587,605)
Cash flows from financing activities:
Payoff of note on building sold -- (37,963)
Principal payments on long-term debt (245,014) (208,613)
Proceeds from issuance of debt -- 1,700,000
---------- ----------
Net cash provided (used) be financing activities (245,014) 1,453,424
---------- ----------
Increase (decrease) in cash and cash equivalents 391,868 208,832
Cash and cash equivalents, beginning of period 169,246 159,944
---------- ----------
Cash and cash equivalents, end of period $ 561,114 $ 368,776
---------- ----------
Cash paid during the period for interest $ 605,831 $ 596,569
========== ==========
/TABLE
<PAGE>
Efficiency Lodge, Inc.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six months ended June 30, 1998
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 June 30,
1998 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 primary 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
The following pro forma results of operations for the six
months ended June 30, 1998 are unaudited and were prepared
under the assumption that the Company was a taxable entity.
Net earnings $ 385,264
Earnings per share $ .37<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
Total assets increased during the second quarter from
$11,846,310 on December 31, 1997 to $12,196,289 on June 30, 1998.
This increase is primarily the result of an increase in cash from
$169,246 to $561,114 during the same period.
Revenue increased during the second quarter from $1,141,640
in the second quarter of 1997 to $1,214,586 in 1998. This
increase can be attributed to two factors. First, increased
occupancies in existing facilities and secondly, the addition of
a new lodge in DeKalb County, Georgia that has revenue only for
one month in the first quarter during 1997. Operating expenses
decreased in the second quarter from $662,449 in 1997 to $633,433
in 1998. This decrease is primarily attributable to the one time
start up expenses of DeKalb Lodge in 1997. As a result of the
increased revenue and decreased expenses, operating income during
the second quarter of 1998 was $581,153 compared to $479,191 for
the same period in 1997. Other expenses decreased from $336,361
in the second quarter of 1997 to $280,712 in 1998 which was
primarily attributable to the increased expense of the additional
loge. Earnings before taxes were $300,441 compared to $142,830
during the same period in 1997. Net earnings were $192,870 for
the second quarter of 1998 compared to $97,669 in the second
quarter of 1997. Improved earnings were again the result of
increased revenue and decreased operating expenses.
Occupancies continue to be strong after recovery during the
year 1997. A new lodge in Columbus, Georgia was completed and
became operational in August 1998. The costs incurred in the
construction of the Columbus lodge have been incurred by a
corporation owned by the two controlling shareholders of the
Company, except for $178,747 which has been loaned by the
Company. Upon completion and a permanent financing, the
ownership of such corporation will be transferred to the Company
at no profit to the controlling shareholders. A contract has
been entered into by the Company to purchase for cash an existing
lodge. The closing date has been set for August 1998. The
contract to purchase an additional lodge for cash and stock, as
previously reported, has expired and is not being considered at
this time.<PAGE>
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are filed as 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: 8/10/1998 By: /s/ W. Ray Barnes
W. Ray Barnes
President and Chief Executive Officer
DATE: 8/10/1998 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.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 561,114
<SECURITIES> 0
<RECEIVABLES> 973,898
<ALLOWANCES> 0
<INVENTORY> 57,046
<CURRENT-ASSETS> 0
<PP&E> 13,732,767
<DEPRECIATION> 3,097,450
<TOTAL-ASSETS> 12,196,289
<CURRENT-LIABILITIES> 0
<BONDS> 10,977,311
0
0
<COMMON> 104,368
<OTHER-SE> 52,674
<TOTAL-LIABILITY-AND-EQUITY> 12,196,289
<SALES> 0
<TOTAL-REVENUES> 2,408,784
<CGS> 0
<TOTAL-COSTS> 1,286,692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 605,831
<INCOME-PRETAX> 544,952
<INCOME-TAX> 159,688
<INCOME-CONTINUING> 385,264
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 385,264
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
