UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( X ) Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended:
SEPTEMBER 30, 1999
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period from _____________ to
______________.
Commission File Number 0-22045
APPLE HOMES CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3525328
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
124 North Belair Road
Evans, Georgia 30809
-------------- -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (706) 650-2015
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
YES__X____ NO______
As of September 30, 1999, there were 2,091,367 shares of Common Stock
outstanding.
<PAGE>
APPLE HOMES CORPORATION
FORM 10-Q
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30,
1999 and March 31, 1999 (Unaudited) 2
Consolidated Statements of Operations for the
Quarter ended September 30, 1999 and 1998 and
the Six Months ended September 30, 1999 and
1998 (Unaudited) 4
Consolidated Statements of Changes in Stockholders'
Equity for the Six Months Ended September 30, 1999
(Unaudited) 5
Consolidated Statements of Cash Flows for the Six
Months ended September 30, 1999 and 1998
(Unaudited) 6
Notes to Consolidated Financial
Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
ii
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
APPLE HOMES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
- - --------------------------------------------------------------------------------
Assets
September 30, March 31,
1999 1999
- - --------------------------------------------------------------------------------
Current assets
Cash $ 682,051 $ 683,452
Accounts receivable 871,198 781,723
Rebates receivable 233,802 409,011
Other receivables 80,455 57,645
Inventories 9,306,609 8,317,210
Other current assets 121,852 18,116
Deferred taxes 134,544 107,520
Notes receivable, current portion 55,065 544,955
----------- -----------
Total current assets 11,485,576 10,919,632
----------- -----------
Property and equipment, net 1,353,992 1,235,876
----------- -----------
Other assets
Notes receivable, net of current portion 276,234 184,215
Deferred loan costs, net of accumulated
amortization of $103,982 and $92,954 78,297 89,325
Goodwill, net of accumulated amortization
of $47,847 and $39,747 450,087 434,341
Other assets 12,545 43,195
----------- -----------
Total other assets 817,163 751,076
----------- -----------
TOTAL ASSETS $13,656,731 $12,906,584
=========== ===========
- - --------------------------------------------------------------------------------
2
<PAGE>
Consolidated Balance Sheets (con't.)
(Unaudited)
- - --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
September 30, March 31,
1999 1999
- - --------------------------------------------------------------------------------
Current liabilities
Floorplan payable $ 8,511,624 $ 7,993,154
Accounts payable 1,147,009 746,969
Sales tax payable 130,019 170,749
Accrued salaries and commissions 68,589 90,926
Other accrued liabilities 190,680 195,640
Customer deposits 157,966 132,037
Income tax payable 2,892 18,826
Due to minority stockholders 31,061 40,407
Notes payable, current portion 96,559 87,933
------------ ------------
Total current liabilities 10,336,399 9,476,641
------------ ------------
Long term liabilities
Notes payable 1,023,133 1,054,316
------------ ------------
Minority interest in net assets of
consolidated corporation 81,837 84,517
------------ ------------
Stockholders' equity
Common stock, $.002 par value; authorized
10,000,000 shares; 2,091,367 and
2,091,539 issued and outstanding 4,183 4,183
Additional paid-in capital 2,726,949 2,727,809
Retained deficit (515,770) (440,882)
------------ ------------
Total stockholders' equity 2,215,362 2,291,110
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,656,731 $ 12,906,584
============ ============
- - --------------------------------------------------------------------------------
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
APPLE HOMES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
- - --------------------------------------------------------------------------------------------------------
Quarter ended September 30, Six months ended September 30,
1999 1998 1999 1998
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 7,803,437 $ 10,490,304 $ 16,944,112 $ 18,632,998
Cost of Sales 6,351,317 8,812,992 13,890,745 15,210,986
--------- --------- ---------- ----------
Gross Profit 1,452,120 1,677,312 3,053,367 3,422,012
--------- --------- --------- ---------
Operating expenses
Compensation 781,202 738,371 1,588,896 1,456,903
Occupancy and vehicle 51,180 22,825 100,625 165,406
Advertising 203,422 144,610 376,733 301,472
Insurance 51,934 70,117 141,544 124,152
Taxes and licenses 89,486 73,232 184,419 132,807
Professional fees 91,286 32,555 139,441 66,797
Guarantee fees 42,968 37,526 85,812 73,533
Depreciation and amortization 38,758 5,166 69,846 34,939
Utilities 91,780 81,886 164,517 148,432
Office and lot 193,275 189,572 369,919 346,321
Travel, training and entertainment 25,652 14,799 43,315 82,529
Rent and maintenance 96,294 120,524 211,358 214,055
--------- --------- --------- ---------
Total operating expenses 1,757,237 1,531,183 3,476,425 3,147,346
--------- --------- --------- ---------
Operating income (loss) (305,117) 146,129 (423,058) 274,666
Other income (expense)
Finance participation 253,548 131,450 407,465 172,772
Rental income 17,864 12,036 37,861 34,399
Interest income 9,672 11,804 27,522 34,791
Commissions 67,557 22,461 172,246 54,461
Gain(Loss) on sale of assets (11,428) 30,657 (11,428) 30,657
Other income (expense) 372 77,797 8,153 (5,470)
Interest expense (167,623) (127,252) (345,158) (157,496)
---------- ---------- ---------- ----------
Total other income (expense) 169,962 158,953 296,661 164,114
---------- ---------- ---------- ----------
Income (loss) before income tax provision
and minority interest (135,155) 305,082 (126,397) 438,780
Income tax (provision) benefit 58,129 (243,121) 51,716 (238,633)
Minority interest in net (income) loss
of consolidated subsidiaries 10,542 (41,674) (207) (30,633)
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (66,484) $ 20,287 $ (74,888) $ 169,514
========== ========== ========== ==========
Per share data:
Weighted avg number of shares
outstanding 2,091,538 1,855,084 2,091,538 1,855,084
Net income (loss) per share (0.032) 0.011 (0.036) 0.091
- - --------------------------------------------------------------------------------------------------------
See accompanying notes.
4
<PAGE>
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Six months ended September 30, 1999
- - ------------------------------------------------------------------------------------------------------------
Additional Retained
Number of Common Paid-in Earnings
Shares Stock Capital (Deficit) Total
- - ------------------------------------------------------------------------------------------------------------
Balance, March 31, 1999 2,091,539 $ 4,183 $ 2,727,809 $ (440,882) $ 2,291,110
Redeemption of Stock (172) (860) (860)
Net loss (74,888) (74,888)
------------ ------------ ------------ ------------ ------------
Balance, September 30, 1999 2,091,367 $ 4,183 $ 2,726,949 $ (515,770) $ 2,215,362
============ ============ ============ ============ ============
- - ------------------------------------------------------------------------------------------------------------
See accompanying notes.
5
<PAGE>
APPLE HOMES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
- - ------------------------------------------------------------------------------------------------------------
For the Six Months Ended September 30,
--------------------------------------
1999 1998
- - ------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $ (74,888) $ 169,513
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Bad debt expense 15,146 33,060
Deferred income taxes (27,024) 120,633
Depreciation and amortization 69,839 34,939
Loss on disposal of fixed assets 11,428 0
Issuance of common stock for
professional services 0 74,000
Issuance of common stock in lieu of
payment of interest expense 0 38,750
Minority interest in net income of
consolidated subsidiary 207 30,633
Change in assets and liabilities, net of effects from
purchase of subsidiary
Accounts receivable (89,475) (337,230)
Other receivables 152,399 (29,906)
Inventories (914,094) (957,392)
Other current assets (103,736) 87,131
Notes receivable 276,032 (240,939)
Other assets 30,650 (12,746)
Floorplan payable 518,470 1,361,693
Accounts payable 400,040 108,520
Accrued expenses (68,027) (201,474)
Customer deposits 25,929 73,621
Other liabilities (15,934) 108,746
----------- -----------
Net cash provided by operating activities 206,962 461,552
----------- -----------
Cash flows from investing activities:
Additions to property and equipment (27,936) (150,077)
Proceeds from sale of fixed assets 250 0
Purchase minority ownership from shareholder (28,646) 0
----------- -----------
Net cash (used in) investing activities (56,332) (150,077)
----------- -----------
- - ------------------------------------------------------------------------------------------------------------
6
<PAGE>
Consolidated Statements of Cash Flows (con't.)
(Unaudited)
- - -------------------------------------------------------------------------------------------------------------
For the Six Months Ended September 30,
--------------------------------------
1999 1998
- - -------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on notes payable $ (176,796) $ (58,972)
Addition of note payable 33,059 0
Repurchase of 172 shares common stock (860) 0
Due to/from minority stockholders, net (7,434) (64,950)
----------- -----------
Net cash (used) by financing activities (152,031) (123,922)
----------- -----------
Net increase (decrease) in cash (1,401) 187,553
Cash, beginning of six months 683,452 922,176
----------- -----------
Cash, end of six months $ 682,051 $ 1,109,729
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the six months for interest $ 332,951 $ 138,007
=========== ===========
Cash paid during the six months for income taxes $ 19,150 $ 0
=========== ===========
Non-cash investing and financing activities:
Financed property and equipment purchases $ 121,180 $ 0
Repossessed mobile home units
converted to inventory 106,693 140,000
Land reclassed from inventory to fixed assets 70,000 0
Rental units reclassed to inventory 38,612 0
Debentures converted to common stock 0 37,500
Note payable and interest converted to common stock 0 39,750
Issuance of stock for professional services 0 74,000
- - ------------------------------------------------------------------------------------------------------------
See accompanying notes.
7
</TABLE>
<PAGE>
APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE A - BASIS OF PRESENTATION
The unaudited financial information included in this report includes all
adjustments (consisting of only normal recurring adjustments) which are, in the
opinion of management, necessary to reflect a fair statement of the results for
the interim periods presented. The operations for the interim periods shown
herein are not necessarily indicative of the results of the full fiscal year.
While certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission rules and regulations governing Form 10-Q, the Company believes that
the disclosures herein are adequate to make the information presented not
misleading. The condensed financial statements included in this report should be
read in conjunction with the audited financial statements and notes thereto
included in the Registrant's March 31, 1999 year end report and the unaudited
June 30, 1999 quarterly report included in the Form 10 filed with the SEC on
July 16, 1999.
NOTE B - SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
Quarter Ended June 30, Quarter Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands except per share data)
<S> <C> <C> <C> <C>
Net sales $ 9,141 $ 8,143 $ 7,803 $ 10,490
Gross Profit 1,601 1,745 1,452 1,677
Net income (loss) (8) 149 (66) 20
Earnings per share (.004) .007 (.032) .011
========== ========== ========== ==========
Weighted average
shares outstanding 2,091,539 1,811,942 2,091,538 1,855,084
========== ========== ========== ==========
Operating Data
- - --------------
Homes Sold 194 198 182 249
Number of Retail Centers 12 12 12 12
Weighted Avg Units sold/ctr 16 16 16 21
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
RESULTS OF OPERATIONS
Results of Operationes Quarters ended September 30, 1999 and 1998
The following table shows the components of the results of operations for
fiscal quarters ended September 30, 1999 and 1998 in amounts and percentages of
revenues (000 omitted)
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30
DESCRIPTION 1999 1998
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $7,803 100.0% $10,490 100.0%
Cost of Sales 6,351 81.4% 8,813 84.0%
--------------------------------------------------------------
Gross Profit 1,452 18.6% 1,677 16.0%
Operating Expenses:
Compensation 781 10.0% 738 7.0%
Occupancy and vehicle 51 0.7% 23 0.2%
Advertising 203 2.6% 145 1.4%
Insurance 52 0.7% 70 0.7%
Taxes and licenses 90 1.2% 73 0.7%
Professional fees 91 1.2% 33 0.3%
Guarantee fees 43 0.6% 37 0.4%
Depreciation and amortization 39 0.5% 5 0.0%
Utilities 92 1.2% 82 0.8%
Office and lot 193 2.5% 190 1.8%
Travel, training and entertainment 26 0.3% 15 0.1%
Rent and maintenance 96 1.2% 120 1.1%
--------------------------------------------------------------
Total Operating Expenses 1,757 22.5% 1,531 14.6%
Other Income (Expense):
Finance participation 253 3.2% 131 1.2%
Rental income 18 0.2% 12 0.1%
Interest income 10 0.1% 12 0.1%
Commissions 68 0.9% 22 0.2%
Gain (loss) on sale of assets (11) (0.1%) 31 0.3%
Other income (expense) 0 0.0% 78 0.7%
Interest expense (168) (2.2%) (127) (1.2%)
--------------------------------------------------------------
Total Other Income (Expense) 170 2.2% 159 1.5%
Income(Loss) before Income Tax
Provision and Minority Interest (135) (1.7%) 305 2.9%
Miniority interest in net income 11 0.1% (42) (0.4%)
Income tax provision 58 0.7% (243) (2.3%)
--------------------------------------------------------------
Net Income $ (66) (0.8%) 20 0.2%
==============================================================
9
<PAGE>
Results of Operations - Six Months ended September 30, 1999 and 1998
The following table shows the components of the results of operations for
the fiscal six months ended September 30, 1999 and 1998 in amounts and
percentages of revenues (000 omitted)
SIX MONTHS ENDED SEPTEMBER 30
DESCRIPTION 1999 1998
- - -------------------------------------------------------------------------------------------------------------------
Net Sales $16,944 100.0% $18,633 100.0%
Cost of Sales 13,891 82.0% 15,211 81.6%
--------------------------------------------------------------
Gross Profit 3,053 18.0% 3,422 18.4%
Operating Expenses:
Compensation 1,589 9.4% 1,457 7.8%
Occupancy and vehicle 101 0.6% 165 0.9%
Advertising 377 2.2% 301 1.6%
Insurance 142 0.8% 124 0.7%
Taxes and licenses 184 1.1% 133 0.7%
Professional fees 139 0.8% 67 0.4%
Guarantee fees 86 0.5% 74 0.4%
Depreciation and amortization 70 0.4% 35 0.2%
Utilities 165 1.0% 148 0.8%
Office and lot 370 2.2% 346 1.9%
Travel, training and entertainment 43 0.3% 83 0.4%
Rent and maintenance 211 1.2% 214 1.1%
--------------------------------------------------------------
Total Operating Expenses 3,477 20.5% 3,147 16.9%
Other Income (Expense):
Finance participation 407 2.4% 173 0.9%
Rental income 38 0.2% 34 0.2%
Interest income 28 0.2% 35 0.2%
Commissions 172 1.0% 54 0.3%
Gain on sale of assets (11) (0.1%) 31 0.2%
Other income (expense) 8 0.0% (5) (0.0%)
Interest expense (345) (2.0%) (157) (0.8%)
--------------------------------------------------------------
Total Other Income (Expense) 297 1.8% 165 0.9%
Income(Loss) before Income Tax
Provision and Minority Interest (127) (0.7%) 440 2.4%
Miniority interest in net income -- 0.0% (31) (0.2%)
Income tax provision 52 0.3% (239) (1.3%)
--------------------------------------------------------------
Net Income $ (75) (0.4%) $ 170 0.9%
==============================================================
</TABLE>
10
<PAGE>
Net Sales
Net sales for the quarter ended September 30, 1999 are down $2.6 (or 26%)
million from the same quarter for 1998. Net sales for the six months ended
September 30, 1999 have decreased $1.7 million (or 9.1%) as compared with the
same period of 1998. This overall drop in sales of is primarily due to an
industry-wide softening of the manufactured housing market in our area.
According to the Manufactured Housing Institute in its August 1999 report, home
shipments (which relate directly to sales) in Georgia are down 15% for the month
of August and 17.9% for the year to date. Home shipments in South Carolina are
down 27.2% for the month of August and 15.4% year to date. All of our sales
locations are located in South Carolina and Georgia The Company is taking
measures to return to profitability in the face of this downturn. Training
programs have been instituted for all of our sales personnel, corporate
management teams have been developed to work with each sales location, and
management has been changed on seven of the twelve locations in the last six
months. The Company opened one new location in April 1999 and closed one
unprofitable location in July 1999. The results of these changes can already be
seen, with our gross profit for the September 30 quarter up to 18.0% as compared
to 18.0% for the six month period ended September 30, 1999 and 17.5% for the
year ended March 31, 1999.
In spite of the decrease in profits and sales that the Company is experiencing,
there are several actions that have been taken to improve profitability in the
future. Apple Homes is in the process of negotiating a contract with Pioneer
Housing to have three of our existing locations converted to Pioneer exclusives.
This program will be similar to ones that the Company presently has with General
Housing and Bellcrest and will allow the Company to have exclusive agreements on
all 12 locations. An exclusive means that a minimum of 75% of the total
inventory on a location belongs to a specific manufacturer. That manufacturer,
in turn, pays all floorplan interest expense related to its product, as long as
certain volume sales amounts are achieved. It also allows for a higher volume
rebate to be earned by the Company. We are also entering into discussions with
Palm Harbor Homes to carry more of their line. These discussions are not final
at this point.
The Company is also in the process of negotiating a new floorplan lending
contract with John Deere Credit Company. This agreement will extend our total
line of credit by $2 million, for a total credit line of $12.275 million.
11
<PAGE>
Management felt that this was important for several reasons. First, we are now
in a position to begin to expand our operations once the market picks up and
sales are again on an increasing scale. Also, management wanted additional lines
of credit available to enable us to better negotiate interest rates and reduce
or remove guarantees presently required on our lending contracts. John Deere
offers a lower rate for Pioneer products (prime for the first six months) than
any other lender, said rate being lower than we are paying to our present
lenders.
Operating Expenses
Compensation as a percentage of sales has increased, from 7.8% at September 30,
1998 to 9.4% at September 30, 1999. This is primarily due to the addition of
five new employees in the corporate office to train and better manage the
Company, and to the bonuses being paid to sales people to encourage the sales of
older, used and repossessed inventory that can cost more to keep on the
locations. Negotiations are in progress to adjust compensation packages of
several of the Company's management and sales personnel.
Professional fees have more than doubled in comparison with last year. This
expense, which is principally caused by the Company being forced to become a
public reporting entity, is one that management had not anticipated. If this
single line item was reduced to the previous year's level, the Company would
have come much closer to a break even point for the six months ended September
30, 1999. Management does believe that some of these expenses are a "one-time
only" expense, and that reductions in professional fees will be likely in the
future.
Advertising expenses have substantially increased over the same period last
year. Some of this increase is due to a change in classification of expenses
that are currently included in advertising, such as letterhead stationary,
display flags and newspaper advertising. In the past, these items have been
classified as "lot expense." Management has made the decision to continue
certain levels of advertising despite the downturn of sales, primarily due to
the belief that keeping the Company's name in front of buyers is even more
important in these slow times. There is an ongoing review of advertising
expenses, and opportunities to get more advertising impact from the same dollars
are being actively explored.
Other Income and Expenses
Income from finance participation and commissions has continued to rise. Finance
participation (the amount that the Company receives from retail lenders in
return for our sending them customers) has more than doubled from a year ago.
Commission income (coming from insurance commissions earned, sales tax
commissions earned, commissions earned on the sale of repossessed homes as a
service for our retail lenders, and other items) has more than tripled. The
Company intends to continue to look to these areas of income to expand our
profit base. It should be noted however, that the majority of this income is
related to sales volume in some fashion. Decreases in total volume of sales will
also decrease the income that can be earned from any of these sources.
12
<PAGE>
Interest expense also went up significantly in the six months ended September
30, 1999. Since our exclusive agreements with manufacturers depend, in part, on
the total volume that we sell, a lower volume means not only a reduction in the
rebates paid to us, but also a reduction in the floorplan interest paid for us
by the lenders. As is evident from these figures, a reduction in sales costs the
Company in more ways than just the loss of revenues. Interest expense for the
future should however, be reduced by the three Pioneer exclusives as indicated
earlier.
A tax benefit of $51,716 is included in the net income for the six months ended
September 30, 1999. Management feels that this benefit will be realizable in the
future, and has decided not to record a valuation allowance against the deferred
tax asset recorded. This decision is carefully reviewed on a quarter by quarter
basis.
OUTLOOK
Most industry veterans believe this present market slowdown will continue
through December 2000. We agree that it will continue at least through our
fourth quarter ending March 2000. Whether it continues beyond that will probably
be determined to a large degree by how many sales centers go out of business
between now and the end of the first calendar quarter of the year 2000. Every
time a sales center goes out of business, that area is overloaded with
distressed inventory. The ability of the market to absorb that inventory is a
major factor in coming out of this slowdown.
One very positive area is that the ability to obtain retail financing for our
customers continues to be relatively easy. There are many more strong financial
institutions committed to the manufactured housing industry now than there were
in previous slowdowns. We don't foresee any problems relating to this vital area
of wholesale and retail financing.
Interest rates are predicted to increse slightly over the next six months;
however, our industry is not usually as interest rate sensitive as the stick
built housing industry. Management does not anticipate any further slowdown in
sales related to interest rates.
Y2K compliance issues, as stated in our Form 10 filed with the Securities
and Exchange Commission, are being reassessed on a continuous basis by
management. We do not anticipate or expect any adverse effects on the
results from operations at this point in time. We will follow any
developments closely as the year 2000 approaches.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow is essentially flat for the six months ended September 30, 1999, and
although the Company is still showing positive cash flows from operating
activities, the amount is less than half of the amount from a year ago.
Management is working on selling more of the mortgage notes that it is presently
carrying, as we did in May 1999. We are also attempting to lower the total
amount of inventory that the Company has purchased, to have better use of the
capital resources.
13
<PAGE>
In the first fiscal quarter, management bought out a minority shareholder in one
of our subsidiaries for $28,464. We have made arrangements to buy out another
minority shareholder in the third fiscal quarter for $25,000. This will leave
the Company with only two remaining minority shareholders in subsidiary
companies. Management believes that this will enhance the overall profitability
of the Company, and provide the opportunity for improved profits for the common
stockholders.
Expenditures for capital resources are being reduced while the Company goes
through the slowdown in sales in our market area. While management realizes that
limiting growth and expansion will limit our ability to grow sales as we have
done in the past three years, current conditions have warranted this slowdown
while management puts more efforts into profitability of the Company. Each new
location opened takes almost a full year to show a profit. Once all of our
locations are profitable, increased expansion will again be considered. There is
one area of capital expenditure that the Company is considering. We are looking
at the purchase of specialized computer software to allow us a better tracking
system for each sale that we make. There are several companies that make this
software, and consideration will be given to the cost savings that can be
realized in better management in the purchase decision on this item. No decision
has been made by management or the Board of Directors on new computer software
at this time.
FORWARD LOOKING STATEMENTS
The preceding discussion by the management of the Company contains various
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represent the Company's expectations or beliefs concerning
future events. When used in this document, the words "expects," "plans,"
"anticipates," and similar expressions are intended to identify forward looking
statements. Forward looking statements include, without limitation, expectations
as to results of operations and financial condition including changes in
capacity, revenues and costs, expectations of future financing needs, Year 2000
readiness, overall economic projections and the Company's overall objectives for
future operation. All forward looking statements in this report are based upon
information available to management on the date of this report. The Company
undertakes no obligation to publicly update or revise any forward looking
statement, whether as a result of new information, future events, or otherwise.
Forward looking statements are subject to a number of factors that could cause
actual results to differ materially from our expectations. The following
factors, in addition to other possible factors not listed, could cause the
Company's actual results to differ materially from those expressed in forward
looking statements: uncertainty of future sales due primarily to the slowdown in
sales the market area is now experiencing, agreements with manufacturers and
lenders related to our inventory management, ability to obtain continuing
financing for our customers at reasonable and affordable interest rates,
competition within the industry within our market area, a flooding of our market
area with reduced price inventory due primarily to other locations going out of
business, government regulations, Year 2000 readiness of our primary
manufacturers and financing companies and other economic conditions and factors
beyond our control.
Additional information concerning these and other factors is contained in the
Company's Form 10 filing with the Securities and Exchange Commission dated July
16, 1999 and amended on September 10, 1999 and October 20, 1999.
14
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On September 28, 1999, Apple Homes Corporation held its Annual Meeting of
Stockholders. At that meeting, two votes were held. The first vote was for the
election of Directors. The following directors were elected: Mr. E. Samuel
Evans, Mr. Robert S. Wilson, Mr. Bryce N. Batzer, Mr. Wayne Bridges and Mr.
Richard Belz. All directors were elected by a majority of the votes cast, and a
quorum was received for the meeting. Immediately following the election, Mr.
Wilson resigned from the Board, and his resignation was accepted.
The second vote was for the appointment of auditors. The firm of Gifford,
Hillegass & Ingwersen, PC was approved for the audit of the fiscal year ended
March 31, 2000 by a majority of the votes cast.
No other matters were voted on at the meeting.
The results of the votes are as follows:
For Against Abstain
--- ------- -------
E. Samuel Evans 1,051,912 201,650 2,400
Robert S. Wilson 829,124 23,500 403,338
Bryce N. Batzer 996,911 156,600 102,451
Wayne Bridges 1,215,712 26,600 13,650
Richard Belz 776,311 377,200 102,451
Appointment of Auditors 1,136,137 84,925 34,900
15
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
11.1 Earnings per Share Calculation
Apple Homes Corporation
Earnings per share calculation
Six Months ended Quarter ended
September 30,1999 September 30, 1999
----------------- ------------------
Basic EPS:
<S> <C> <C>
Income available to common stockholders $ (74,888) $ (66,484)
Weighted average # of shares outstanding 2,091,538 2,091,538
---------- ----------
Basic EPS (0.0358) (0.0318)
========== ==========
Diluted EPS:
Income available to common stockholders $ (74,888) $ (66,484)
Adjusted for 10% interest charge on
convertible debentures 20,708 10,625
Adjusted for income tax effect @ 40.00% 21,672 22,344
---------- ----------
Diluted income available to common
stockholders (32,508) (33,515)
Diluted weighted average # of shares
outstanding 2,312,038 2,312,038
---------- ----------
Diluted EPS (0.0141) (0.0145)
========== ==========
antidilutive antidilutive
</TABLE>
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APPLE HOMES CORPORATION
November 12, 1999 /s/ Laura H. Rollins
- - ----------------- -----------------------------------
(Date) Laura H. Rollins
Chief Financial Officer
Apple Homes Corporation
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 682,051
<SECURITIES> 0
<RECEIVABLES> 1,546,545
<ALLOWANCES> 29,791
<INVENTORY> 9,306,609
<CURRENT-ASSETS> 11,627,266
<PP&E> 1,509,994
<DEPRECIATION> 156,002
<TOTAL-ASSETS> 13,656,731
<CURRENT-LIABILITIES> 10,336,398
<BONDS> 1,119,693
<COMMON> 4,183
0
0
<OTHER-SE> 2,215,362
<TOTAL-LIABILITY-AND-EQUITY> 13,656,731
<SALES> 16,944,112
<TOTAL-REVENUES> 17,597,359
<CGS> 13,890,745
<TOTAL-COSTS> 17,723,756
<OTHER-EXPENSES> 207
<LOSS-PROVISION> 15,146
<INTEREST-EXPENSE> 345,158
<INCOME-PRETAX> (126,397)
<INCOME-TAX> (51,716)
<INCOME-CONTINUING> (74,888)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,888)
<EPS-BASIC> (0.035)
<EPS-DILUTED> 0
</TABLE>