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 March 31, 1998.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 1-14462
AmeriVest Properties, Inc.
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(Exact name of small business issuer as specified in its charter.)
Delaware 84-1240264
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7100 Grandview Avenue, Suite 1
Arvada, Colorado 80002
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(Zip Code)
(303) 421-1224
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(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 X No
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As of May 11, 1998 the Registrant had outstanding 1,438,070 shares of common
stock, per value $.001.
Transitional Small Business Disclosure Format (check one):
Yes No X
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AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
FORM 10-QSB
March 31, 1998
Table of Contents
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Page No.
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Part I
Item 1. Financial Statements
Balance Sheets as of December 31, 1997 and
March 31, 1998 3
Statements of Operations for the Three Months
Ended March 31, 1997 and 1998 4
Statements of Cash Flows for the Three Months Ended
March 31, 1997 and 1998 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
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<TABLE>
<CAPTION>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, March 31,
1997 1998
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(Unaudited)
<S> <C> <C>
ASSETS
Investment in real estate
Land $ 2,668,758 $ 2,680,098
Buildings and improvements 13,064,287 13,109,690
Furniture, fixtures and equipment 248,667 249,650
Tenant improvements 519,945 524,506
Less accumulated depreciation and amortization (5,118,271) (5,258,862)
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Net Investment in Real Estate 11,383,386 11,305,082
Cash and cash equivalents 99,334 122,457
Tenant accounts receivable 34,625 54,387
Deferred financing costs, net 85,956 79,661
Prepaid expenses and other assets 38,767 315,074
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$ 11,642,068 $ 11,876,661
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage loans and notes payable $ 7,413,077 $ 7,752,331
Accounts payable and accrued expenses 48,543 49,388
Accrued interest 56,219 57,590
Accrued real estate taxes 298,074 304,347
Prepaid rents and security deposits 120,799 126,211
Dividends payable 160,801 160,771
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Total Liabilities 8,097,513 8,450,638
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STOCKHOLDERS' EQUITY
Common stock, $.001 par value
Authorized - 10,000,000 shares
Issued and outstanding - 1,429,070 shares (1997)
and 1,438,070 shares (1998) 1,429 1,438
Capital in excess of par value 4,463,955 4,504,446
Distribution in excess of accumulated earnings (920,829) (1,079,861)
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Total Stockholders' Equity 3,544,555 3,426,023
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$ 11,642,068 $ 11,876,661
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</TABLE>
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AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
March 31
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1997 1998
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(unaudited)
REAL ESTATE OPERATING REVENUE
Rental revenue
Commercial properties $ 290,669 $ 336,409
Storage properties 313,094 361,896
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603,763 698,305
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REAL ESTATE OPERATING EXPENSES
Property operating expenses
Operating expenses 120,997 154,119
Real estate taxes 60,182 74,543
Management fees 31,839 38,679
General and administrative 87,632 104,798
Interest 171,347 176,726
Depreciation and amortization 142,495 147,702
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614,492 696,567
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OTHER INCOME
Interest income 12,947
NET INCOME $ 2,218 $ 1,738
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INCOME PER COMMON SHARE $ .002 $ .001
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INCOME PER COMMON SHARE
ASSUMING DILUTION $ .002 $ .001
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WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,382,870 1,438,070
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - ASSUMING DILUTION 1,382,870 1,443,070
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<TABLE>
<CAPTION>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended
March
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1997 1998
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(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,218 $ 1,738
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation and amortization 142,495 147,702
Changes in assets and liabilities
(Increase) in receivables (22,707) (19,762)
(Increase) in prepaids (13,366) (276,600)
(Decrease) increase in accounts payable (10,325) 844
Increase in accruals 11,698 12,534
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Net cash provided (used) by operating activities 110,013 (133,544)
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investments in real estate (3,008) (21,787)
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Net cash (used) by investing activities (3,008) (21,787)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short term borrowings -- 375,000
Payments on mortgage loans (32,557) (35,746)
Dividends paid -- (160,800)
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Net cash (used) provided by financing activities (32,557) 178,454
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NET INCREASE IN CASH AND
CASH EQUIVALENTS 74,448 23,123
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,230,640 99,334
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,305,088 $ 122,457
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<PAGE>
AMERIVEST PROPERTIES INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998
General
The unaudited financial statements included herein were prepared from the
records of the Company in accordance with Generally Accepted Accounting
Principles and reflect all adjustments which are, in the opinion of management,
necessary to provide a fair statement of the results of operations and financial
position for the interim periods. Such financial statements generally conform to
the presentation reflected in the Company's Form 10-KSB filed with the
Securities and Exchange Commission for the year ended December 31,1997. The
current interim period reported herein should be read in conjunction with the
Company's Form 10-KSB subject to independent audit at the end of the year.
The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.
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<PAGE>
AMERIVEST PROPERTIES INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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The following discussion and analysis of the consolidated financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in the Company's
Form 10-KSB and elsewhere. These financial statements present the operations of
the Company subsequent to the consummation of the Company's initial public
offering on October 29, 1997 (the "IPO") and its acquisition of five properties
on October 30, 1997, effective as of July 1, 1997, and of three properties,
effective August 1, 1997.
Results Of Operations
---------------------
Three Months Ended March 31, 1998, Compared With Three Months Ended March 31,
1997.
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The Company's results of operations for the three months ended March 31,
1998 include nine operating properties, whereas the March 31, 1997 results of
operations include six operating properties. Revenues for first quarter 1998
increased approximately $95,000 or 15%, and operating expenses, management fees,
interest, and depreciation and amortization increased approximately $33,000,
$7,000, $5,000 and $5,000 respectively, as compared with March 31, 1997. All
increases resulted primarily from including the operations of three new
properties as of August 1, 1997. Real estate taxes increased $14,000 ($57,000 on
an annualized basis) when compared with prior year's taxes. The general and
administrative expenses increased approximately $17,000 due primarily to costs
associated with public relations and travel.
The net income for the three months ended March 31, 1998 was $1,738, or
$.001 per share, as compared to a net income of $2,218, or $.002 per share, for
the three months ended March 31, 1997.
Financial Condition, Liquidity And Capital Resources
----------------------------------------------------
The consolidated financial condition of the Company evidenced the following
changes from December 31, 1997 to March 31, 1998. Net Investment in Real Estate
decreased approximately $78,000, due primarily to depreciation of $140,000 for
the three month period. Deferred financing costs, net, decreased approximately
$6,000 due to amortization for the three months ended March 31, 1998. Mortgage
loans and notes payable increased by approximately $339,000. This increase was
primarily due to an additional $375,000 of borrowing against lines of credit, of
this amount $55,000 was paid as earnest money deposits on the eleven Texas
properties that the Company has contracted to purchase and $190,000 was paid as
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<PAGE>
a deposit for certain advance costs related to the proposed refinancing and new
acquisition financing described below. On April 1, 1998 the Company's bank line
of credit was increased from $400,000 to $650,000. Accounts payable and accrued
expenses, prepaid rents and accrued real estate taxes all remained relatively
constant for the period.
At March 31, 1998, the Company had approximately $122,000 of cash available
for working capital. Prepaid expenses and other assets increased by
approximately $276,000 primarily as a result of deposits on proposed property
acquisitions of $242,000. Tenant receivables increased by approximately $20,000
in March as a result of additional billings to tenants for prior year's
operating costs. Approximately $161,000 was distributed as dividends on April 9,
1998.
In November 1997, the Company entered into purchase and sale agreements for
the acquisition of eleven commercial real estate properties located in Texas.
The aggregate purchase price for the eleven properties is approximately
$7,316,000, comprised of $6,103,000 cash, 204,300 shares of the Company's common
stock and a promissory note in the amount of $192,000. The financing
arrangements for these acquisitions are in process and are expected to be
finalized during the second quarter of 1998.
In addition, the Company is in the process of refinancing its current real
estate portfolio at terms the Company believes favorable to its long term
operating and growth strategies. The Giltedge Office Building is expected to
complete its refinancing during May 1998. The terms of the loan commitment are
for a loan of $3,200,000 at an interest rate of 7.75%, amortized over a term of
30 years, with a balloon payment for the balance due May 2008. The proceeds from
the loan will be used to repay the current mortgage of $2,002,500, pay off the
Company's current lines of credit of $525,000 and the remaining balance will be
used for working capital. Terms of the other refinancing arrangements for the
self-storage and industrial properties have not been finalized.
The Company desires to acquire additional properties and, in order to do
so, it may need to raise additional debt or equity capital. The Company also
intends to obtain credit facilities for short and long-term borrowing with
commercial banks or other financial institutions. The issuance of such
securities or increase in debt for additional properties, of which there is no
assurance, could adversely affect the amount of dividends paid to stockholders.
Management believes that the cash flow from the properties will be
sufficient to meet the Company's working capital needs for the next year. All
properties have been maintained on an ongoing basis so that additional capital
resources to upgrade the facilities in the near future are not anticipated.
Management believes that inflation should not have a material adverse
effect on the Company. The Company's leases of office and showroom space require
the tenants to pay increases in operating expenses, and the self-storage leases
are short-term so that there are not contractual restraints against increasing
rents to attempt to respond to inflationary pressures, if any inflationary
pressure should materialize.
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<PAGE>
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Exchange Act
of 1934. Although the Company believes that the expectations reflected in the
forward-looking statements and the assumptions upon which the forward-looking
statements are based are reasonable, it can give no assurance that such
expectations and assumptions will prove to have been correct. See the Company's
Annual Report on Form 10-KSB for additional statements concerning important
factors, including occupancy and rental rates and operating costs, that could
cause actual results to differ materially from the Company's expectations.
Part II. Other Information
Item 5. Other Information
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None
Item 6. Exhibits And Reports On Form 8-K.
---------------------------------
(a) The following Exhibit is filed as part of this Quarterly
Report on Form 10-QSB:
27. Financial Data Schedule
(b) During the quarter ended March 31,1998, the Registrant did not
file any reports on Form 8-K.
SIGNATURES
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Pursuant to the requirements of the Securities And Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERIVEST PROPERTIES INC.
May 15, 1998
By: /s/ James F. Etter
-------------------------------------
James F. Etter, President and
Principal Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 122,457
<SECURITIES> 0
<RECEIVABLES> 54,387
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 571,579
<PP&E> 16,563,944
<DEPRECIATION> (5,258,862)
<TOTAL-ASSETS> 11,305,082
<CURRENT-LIABILITIES> 2,473,231
<BONDS> 0
0
0
<COMMON> 1,438
<OTHER-SE> 3,424,585
<TOTAL-LIABILITY-AND-EQUITY> 11,305,082
<SALES> 698,305
<TOTAL-REVENUES> 698,305
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 519,841
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 176,726
<INCOME-PRETAX> 1,738
<INCOME-TAX> 1,738
<INCOME-CONTINUING> 1,738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,738
<EPS-PRIMARY> .001
<EPS-DILUTED> .001
</TABLE>
