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, 1999.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from _______________ to ________________
Commission file number 1-14462
AmeriVest Properties Inc.
-------------------------
(Exact name of small business issuer as specified in its charter.)
Maryland 84-1240264
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3333 S. Wadsworth Blvd., Suite D-216
Lakewood, Colorado 80227
- ------------------ -----
(Zip Code)
(303) 980-1880
--------------
(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
As of August 12, 1999 the Registrant had outstanding 2,228,850 shares of common
stock, per value $.001.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
FORM 10-QSB
JUNE 30, 1999
Table of Contents
-----------------
Page No.
Part I
Item 1. Financial Statements
Balance Sheets as of December 31, 1998 and
June 30, 1999 3
Statements of Operations for the Three Month and
Six Months Ended June 30, 1998 and 1999 4
Statements of Cash Flows for the Six Months Ended
June 30, 1998 and 1999 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II
Item 4. Submission Of Matters To Vote Of Stockholders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
2
<PAGE>
<TABLE>
<CAPTION>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, June 30,
1998 1999
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Investment in real estate
Land $ 4,745,754 $ 4,745,754
Buildings and improvements 22,363,656 22,390,354
Furniture, fixtures and equipment 284,993 314,882
Tenant improvements 541,058 573,063
Less accumulated depreciation and amortization (5,837,264) (6,301,983)
------------ ------------
Net Investment in Real Estate 22,098,197 21,722,070
Cash and cash equivalents 441,316 371,194
Tenant accounts receivable 48,615 48,222
Deferred financing costs, net 624,917 600,060
Prepaid expenses and other assets 501,889 426,379
------------ ------------
$ 23,714,934 $ 23,167,925
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage loans payable $ 18,861,599 $ 18,742,791
Accounts payable and accrued expenses 121,327 184,313
Accrued interest 108,810 111,820
Accrued real estate taxes 558,745 266,951
Prepaid rents and security deposits 214,912 308,181
Dividends payable 199,052 199,052
------------ ------------
Total Liabilities 20,064,445 19,813,108
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value
Authorized - 5,000,000 shares
Issued and outstanding - none -- --
Common stock, $.001 par value
Authorized - 15,000,000 shares
Issued and outstanding - 1,658,770 shares (1998) 1,659 1,659
And 1,658,770 shares (1999)
Capital in excess of par value 5,607,725 5,607,725
Distribution in excess of accumulated earnings (1,958,895) (2,254,567)
------------ ------------
Total Stockholders' Equity 3,650,489 3,354,817
------------ ------------
$ 23,714,934 $ 23,167,925
============ ============
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
----------------- ----------------
1998 1999 1998 1999
---- ---- ---- ----
(unaudited) (unaudited)
REAL ESTATE OPERATING REVENUE
<S> <C> <C> <C> <C>
Rental revenue
Commercial properties $ 324,592 $ 958,412 $ 661,001 $1,959,514
Storage properties 359,242 352,936 721,138 680,638
---------- ---------- ---------- ----------
683,834 1,311,348 1,382,139 2,640,152
---------- ---------- ---------- ----------
REAL ESTATE OPERATING EXPENSES
Property operating expenses
Operating expenses 147,972 312,535 302,091 593,286
Real estate taxes 75,060 127,414 149,603 267,059
Management fees 36,813 22,126 75,491 44,224
General and administrative 92,416 220,038 197,309 427,246
Interest 179,801 357,080 356,527 720,644
Depreciation and amortization 147,052 246,537 294,755 490,318
---------- ---------- ---------- ----------
679,114 1,285,730 1,375,776 2,542,777
---------- ---------- ---------- ----------
OTHER INCOME
Interest income 1,647 5,376 1,742 5,376
---------- ---------- ---------- ----------
NET INCOME $ 6,367 $ 30,994 $ 8,105 $ 102,751
========== ========== ========== ==========
NET INCOME PER COMMON SHARE $ .00 $ .02 $ .01 $ .06
========== ========== ========== ==========
NET INCOME PER COMMON SHARE
ASSUMING DILUTION $ .00 $ .02 $ .01 $ .06
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,438,110 1,658,770 1,438,110 1,658,770
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ASSUMING DILUTION 1,443,110 1,664,145 1,443,110 1,664,145
========== ========== ========== ==========
4
</TABLE>
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended
June 30
--------------------
1998 1999
---- ----
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,105 102,751
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 294,755 490,318
Changes in assets and liabilities
Decrease in receivables 814 393
(Increase) Decrease in prepaids (578,970) 74,767
Increase in accounts payable 25,929 62,985
(Decrease) in accruals (140,861) (195,832)
----------- -----------
Net cash (used) provided by operating activities (390,228) 535,382
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investments in real estate (129,964) (88,592)
----------- -----------
Net cash (used) by investing activities (129,964) (88,592)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short term borrowings 680,000 --
Repayments of short term borrowings (830,000) --
Proceeds from mortgage loan 1,154,618 --
Payments on mortgage loans (23,991) (118,808)
Dividends paid (321,571) (398,104)
Payment of deferred financing costs (28,324) --
----------- -----------
Net cash provided (used) by financing activities 630,732 (516,912)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 110,540 (70,122)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 99,334 441,316
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 209,874 $ 371,194
=========== ===========
5
<PAGE>
AMERIVEST PROPERTIES INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999
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 31,1998. 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 six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
Subsequent Event
- ----------------
On August 12, 1999, Registrant completed the acquisition of three office
buildings (the "Acquired Buildings") in the State of Indiana. The Acquired
Buildings contain an aggregate of approximately 95,836 square feet. The purchase
price for the Acquired Buildings was $7,944,000, which was paid by assuming
approximately $5,255,000 of existing debt (the "Debt") and $116,400 of related
property taxes on the properties and issuing approximately 541,600 shares of
Registrant's common stock at the rate of $4.75 per share. In conjunction with
the assumption of the Debt, Registrant also assumed joint liability for the
obligations and liabilities of the original guarantors of the Debt with an
indemnification back for any obligations and liabilities accruing prior to the
acquisition.
6
<PAGE>
AMERIVEST PROPERTIES INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
------------------------------------------------------------------------
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.
Results Of Operations
---------------------
Three Months Ended June 30, 1999, Compared With Three Months Ended June 30,
1998.
- --------------------------------------------------------------------------------
The Company's results of operations for the three months ended June 30,
1999 include 24 operating properties, whereas the June 30, 1998 results of
operations include nine operating properties. Revenues for second quarter 1999
increased approximately $627,500, and operating expenses, real estate taxes,
general and administrative, interest, and depreciation and amortization
increased approximately $164,600, $52,400, $127,600, $177,300 and $99,500
respectively, for a total increase of $621,400 as compared with June 30, 1998.
All increases resulted primarily from inclusion of the operations of eleven new
properties as of July 1, 1998 and 4 new properties as of August 18, 1998. The
Company also had interest income of $5,400 for the 1999 period, as compared with
$1,700 for the 1998 period, primarily as a result of investment funds being held
for working capital.
The net income for the three months ended June 30, 1999 was $30,994, or
$.02 per share, as compared to a net income of $6,367, or $.00 per share, for
the three months ended June 30, 1998. The increase in net income resulted
primarily from the inclusion in the 1999 second quarter of the 15 properties
acquired in July and August 1998.
Six Months Ended June 30, 1999, Compared With Six Months Ended June 30, 1998.
- -----------------------------------------------------------------------------
The Company's results of operations for the six months ended June 30, 1999
include 24 operating properties, whereas the June 30, 1998 results of operations
include nine operating properties. Revenues for 1999 increased approximately
$1,258,000, and operating expenses, real estate taxes, general and
administrative, interest, and depreciation and amortization increased
approximately $291,200, $117,500, $229,900, $364,100 and $195,600 respectively,
for a total increase of $1,198,400 as compared with June 30, 1998. All increases
resulted primarily from inclusion of the operations of eleven new properties as
of July 1, 1998 and 4 new properties as of August 18, 1998. The Company also had
interest income of $5,400 for the 1999 period, as compared with $1,700 for the
1998 period, primarily as a result of investment funds being held for working
capital.
7
<PAGE>
The net income for the six months ended June 30, 1999 was $102,751, or $.06
per share, as compared with a net income of $8,105, or $.01 per share, for the
six months ended June 30, 1998.
Financial Condition, Liquidity And Capital Resources
----------------------------------------------------
From December 31, 1998 to June 30, 1999, net investment in real estate
decreased approximately $376,100. The net decrease was primarily due to
depreciation for the six month period.
Deferred financing costs decreased approximately $24,900 as a result of
normal amortization. Prepaid expenses and other assets decreased by
approximately $75,500 due primarily to changes in the escrow reserves for
property taxes and maintenance reserves.
Mortgage loans payable decreased by approximately $119,000 due primarily to
regular periodic amortization payments. Accounts payable and accrued expenses
increased by approximately $63,000 during the period, all of which result from
timing differences in the course of normal operations. Accrued real estate taxes
decreased approximately $292,000 and prepaid rents and security deposits
increased approximately $93,300, both of which resulted from timing differences
in the course of normal operations during the first six months of 1999.
At June 30, 1999, the Company had approximately $371,000 of cash and cash
equivalents, including approximately $199,000 of cash in reserve for a
stockholder dividend distribution which was paid on July 15, 1999.
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.
As indicated in Subsequent Events and elsewhere herein, on August 12, 1999 the
Company closed on the acquisition of three office buildings in Indianapolis,
Indiana.
Management believes that the cash flow from its 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 capital resources in
excess of the Company's operating cash flow are not anticipated in order to
upgrade the facilities in the near future.
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 no contractual restraints against increasing
rents to attempt to respond to inflationary pressures, if any inflationary
pressures should materialize.
8
<PAGE>
Year 2000 Compliance.
- ---------------------
Year 2000 compliance is the ability of computer hardware and software to
respond to the problems posed by the fact that computer programs traditionally
have used two digits rather than four digits to define an applicable year. As a
consequence, any of the Company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
interruption of operations, including temporary inability to send invoices or
engage in normal business activities or to operate equipment such as elevators
and air conditioning units installed in the Company's buildings. The Company has
received assurances from its service contractors that the operation of
elevators, air conditioners, and other equipment installed in the Company's
buildings are Year 2000 compliant. The Company installed new computer hardware
and software that is year 2000 compliant at the beginning of 1999 at a cost of
approximately $25,000. The Company does not expect to incur additional material
expenses for year 2000 compliance.
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.
9
<PAGE>
Part II. Other Information
- --------------------------
Item 4. Submission Of Matters To A Vote Of Stockholders
-----------------------------------------------
On June 29, 1999, the Company's Annual Meeting of Stockholders was held. At
that meeting, the following matters were approved by the stockholders by the
votes indicated below.
1. Robert J. McFann was re-elected as a Class Three Director with a term
expiring at the annual meeting in 2002. There were 1,480,065 votes for and
32,660 votes withheld.
2. The proposal to reincorporate the Company under the laws of the State of
Maryland, including provisions to increase authorized common stock to
15,000,000 shares and to provide for the authorization of 5,000,000 shares
of preferred stock, was approved by a vote of 1,098,779 shares for, 32,880
shares against and 6,050 shares being withheld.
3. The proposal to issue shares of common stock as a portion of the purchase
price for three office buildings located in Indianapolis, Indiana was
approved by a vote of 1,091,447 shares for, 34,687 shares against and
11,475 shares being withheld.
4. The proposal to ratify the selection of Wheeler Wasoff, P.C. as independent
certified accountants for the fiscal year ending December 31, 1999 was
approved with a total of 1,474,565 shares voting in favor, 25,000 voting
against and 13,130 shares being withheld.
Item 5. Other Information
-----------------
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 June 30,1998, the Registrant did not file any
reports on Form 8-K.
10
<PAGE>
SIGNATURES
----------
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.
August 16, 1999
By: /s/ James F. Etter
----------------------
James F. Etter, President and
Principal Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> APR-01-1999 JAN-01-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
<CASH> 371,194 371,194
<SECURITIES> 0 0
<RECEIVABLES> 48,222 48,222
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 28,024,053 28,024,053
<DEPRECIATION> 6,301,983 6,301,983
<TOTAL-ASSETS> 23,167,925 23,167,925
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 1,659 1,659
<OTHER-SE> 3,353,158 3,353,158
<TOTAL-LIABILITY-AND-EQUITY> 23,167,925 23,167,925
<SALES> 1,311,348 2,640,152
<TOTAL-REVENUES> 1,311,348 2,640,152
<CGS> 0 0
<TOTAL-COSTS> 928,650 1,822,133
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 357,080 720,644
<INCOME-PRETAX> 30,994 102,751
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 30,994 102,751
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 30,994 102,751
<EPS-BASIC> .02 .06
<EPS-DILUTED> .02 .06
</TABLE>
