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:
JUNE 30, 2000
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
124 North Belair Road
Evans, Georgia 30809
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(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 June 30, 2000 there were 2,101,367 shares of Common Stock outstanding.
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APPLE HOMES CORPORATION
FORM 10-Q
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30,
2000 and March 31, 2000 (Unaudited) 2
Consolidated Statements of Operations for the
Quarters ended June 30, 2000 and 1999
(Unaudited) 4
Consolidated Statements of Changes in Stockholders'
Equity for the Quarter Ended June 30, 2000
(Unaudited) 5
Consolidated Statements of Cash Flows for the
Quarters ended June 30, 2000 and 1999
(Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
APPLE HOMES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
--------------------------------------------------------------------------------------------------------
Assets
June 30, 2000 March 31, 2000
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash $ 701,530 $ 1,169,811
Accounts receivable 230,107 316,982
Rebates receivable 139,517 351,954
Other receivables 37,611 35,569
Inventories 8,468,556 8,831,880
Other current assets 167,825 110,403
Deferred taxes 199,188 154,056
Notes receivable, current portion 66,149 68,695
----------- -----------
Total current assets 10,010,483 11,039,350
----------- -----------
Property and equipment, net 1,331,203 1,359,105
----------- -----------
Other assets
Notes receivable, net of current portion 544,988 475,139
Deferred loan costs, net of accumulated
amortization of $120,523 and $115,009 61,756 67,270
Goodwill, net of accumulated amortization
of $60,325 and $56,166 438,797 442,956
Other assets 10,635 10,635
----------- -----------
Total other assets 1,056,176 996,000
----------- -----------
TOTAL ASSETS $12,397,862 $13,394,455
=========== ===========
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2
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Liabilities and Stockholders' Equity
June 30, 2000 March 31, 2000
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Current liabilities
Floorplan payable $ 7,828,199 $ 8,157,069
Accounts payable 544,587 894,914
Sales tax payable 107,152 184,027
Accrued salaries and commissions 73,661 110,988
Other accrued liabilities 214,116 286,808
Customer deposits 175,839 130,451
Notes payable, current portion 125,887 100,029
------------ ------------
Total current liabilities 9,069,441 9,864,286
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Long term liabilities
Notes payable 1,224,681 1,237,756
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Minority interest in net assets of
consolidated corporation 50,596 60,885
------------ ------------
Stockholders' equity
Common stock, $.002 par value; authorized
10,000,000 shares; 2,101,367
issued and outstanding 4,203 4,203
Additional paid-in capital 2,784,529 2,784,529
Retained deficit (735,588) (557,204)
------------ ------------
Total stockholders' equity 2,053,144 2,231,528
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,397,862 $ 13,394,455
============ ============
----------------------------------------------------------------------------------------------------------
See accompanying notes.
3
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APPLE HOMES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
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Quarter ended June 30,
2000 1999
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Sales $ 7,743,362 $ 8,894,341
Cost of Sales 6,259,276 7,293,094
----------- -----------
Gross Profit 1,484,086 1,601,247
----------- -----------
Operating expenses
Compensation 835,282 807,694
Occupancy and vehicle 74,631 50,192
Advertising 179,425 173,311
Insurance 57,505 89,610
Taxes and licenses 84,207 94,933
Professional fees 65,767 42,899
Guarantee fees 39,778 42,844
Depreciation and amortization 34,822 31,088
Utilities 92,418 72,737
Office and lot 218,523 181,900
Travel and entertainment 11,216 16,916
Rent and maintenance 113,199 115,064
----------- -----------
Total operating expenses 1,806,773 1,719,188
----------- -----------
Operating income (loss) (322,687) (117,941)
Other income (expense)
Finance participation 130,454 153,917
Rental income 20,644 19,997
Interest income 21,291 17,850
Commissions 67,318 104,689
Gain (loss) on sales of assets (3,503) 0
Other income (expense) 0 7,781
Interest expense (147,322) (177,535)
----------- -----------
Total other income (expense) 88,882 126,699
----------- -----------
Income (loss) before income tax provision and minority interest (233,805) 8,758
Income tax (provision) benefit 45,132 (6,413)
Minority interest in net (income) loss of consolidated subsidiaries 10,289 (10,749)
----------- -----------
NET INCOME (LOSS) $ (178,384) $ (8,404)
=========== ===========
Per share data:
Weighted average number of shares outstanding 2,101,367 2,091,539
Net income (loss) per share (0.085) (0.004)
------------------------------------------------------------------------------------------------------------------
See accompanying notes.
4
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APPLE HOMES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
Quarter ended June 30, 2000
-------------------------------------------------------------------------------------------------------------------------------
Additional Retained
Number of Common Paid-in Earnings
Shares Stock Capital (Deficit) Total
-------------------------------------------------------------------------------------------------------------------------------
Balance, March 31,2000 2,101,367 $ 4,203 $2,784,529 $ (557,204) $2,231,528
Net loss (178,384) (178,384)
---------- ---------- ---------- ---------- ----------
Balance, June 30, 2000 2,101,367 $ 4,203 $2,784,529 $ (735,588) $2,053,144
========== ========== ========== ========== ==========
-------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
5
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APPLE HOMES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
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For the Quarter Ended June 30,
-----------------------------
2000 1999
-------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(178,384) $ (8,404)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Bad debt expense 9,470 14,374
Deferred income taxes (45,132) 6,089
Depreciation and amortization 34,822 31,088
Loss on disposal of fixed assets 3,503 0
Minority interest in net income of
consolidated subsidiary (10,289) 10,749
Change in assets and liabilities
Accounts receivable 86,875 (151,357)
Other receivables 209,575 (64,701)
Inventories 423,415 (103,062)
Other current assets (57,422) (68,991)
Notes receivable (86,108) 323,616
Other assets 0 30,625
Floorplan payable (328,870) 192,815
Accounts payable (350,327) 17,773
Accrued expenses (193,930) (26,501)
Customer deposits 45,388 (26,061)
Other liabilities 0 (18,834)
--------- ---------
Net cash provided by (used in) operating activities (437,414) 159,218
--------- ---------
Cash flows from investing activities:
Additions to property and equipment (24,766) (30,373)
Proceeds from sale of property and equipment 15,000 0
Purchase minority ownership from shareholder 0 (28,646)
--------- ---------
Net cash used in investing activities (9,766) (59,019)
--------- ---------
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6
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For the Quarter Ended June 30,
-------------------------------
2000 1999
----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on notes payable $ (28,137) $ (157,328)
Due (to) from minority stockholders, net 7,036 (7,515)
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Net cash used by financing activities (21,101) (164,843)
----------- -----------
Net decrease in cash (468,281) (64,644)
Cash, beginning of quarter 1,169,811 683,452
----------- -----------
Cash, end of quarter $ 701,530 $ 618,808
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the quarter for interest $ 161,174 $ 175,634
=========== ===========
Cash paid during the quarter for income taxes $ 0 $ 19,150
=========== ===========
Non cash investing and financing activities:
Financed property and equipment purchases $ 14,500 $ 87,906
Repossessed mobile home units
converted to inventory 10,155 84,640
Fixed assets transferred to inventory 23,516 0
Financed land inventory 26,420 0
-----------------------------------------------------------------------------------------------------------------
See accompanying notes.
7
</TABLE>
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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, 2000 year end report included in the 10-K
filed with the SEC on June 29, 2000.
NOTE B - SUBSEQUENT EVENTS
Subsequent to March 31, 2000, Apple Homes Corporation, a Delaware corporation
("Apple"), Bravo.com Acquisition Corporation ("Bravo"), PlayRadio.net
Acquisition Corporation ("Radio") and Apple Homes Acquisition Corporation, a
Georgia Corporation ("New Apple"), entered into an Agreement and Plan of Merger
and Sale of Assets, ("the Agreement"). The Agreement provides that each share of
common stock of Bravo and Radio shall be converted into one share of common
stock of Apple. Bravo presently has 10,000,000 shares issued and outstanding and
Radio presently has 10,000,000 shares issued and outstanding. The 20,000,000
shares of Apple's common stock issued to Bravo and Radio shareholders will
represent approximately 90.5% of Apple's outstanding common stock after the
merger, and the common shares held currently by Apple shareholders will
represent approximately 9.5%. Apple will increase the authorized common stock to
60 million shares, each having a $.002 par value. Apple will be the surviving
corporation and will change its name to Letterpath, Inc. The Board of Directors
of Apple approved the Agreement in a vote taken on May 12, 2000. The Board has
recommended that the stockholders of Apple vote for this merger and sale of
assets, and expects it to be passed.
The Agreement also provides that on the effective date of closing, the surviving
corporation will sell all of Apple's existing assets and business along with the
assumption to all of Apple's contracts, liabilities and duties other than
Apple's debentures and Apple's warrants ("the Sale of Assets") to New Apple. New
Apple, Bravo and Radio have a major common shareholder. As a purchase price for
the Sale of Assets, New Apple shall pay to Apple $1,500,000 less the amount by
which the cash and cash equivalents of Apple transferred to New Apple in the
transaction are less than $800,000. The employment contract of certain key
management positions will transfer to New Apple. There are certain conditions
which have to be met before execution of the closing, including approval from
shareholders. A formal vote by shareholders is anticipated to take place on
August 21, 2000. For additional information, including pro forma financial
information, reference should be made to Apple's Definitive Proxy Statement
filed on July 19, 2000.
8
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APPLE HOMES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE C - SELECTED QUARTERLY FINANCIAL DATA
(in thousands except per share data and operating data)
June 30, 1999 June 30, 2000
-------------------------------
Net sales $ 7,743 $ 8,894
Gross Profit 1,484 1,601
Net income (loss) (178) (8)
Earnings (loss) per share (.085) (.004)
Weighted average
shares outstanding 2,101,367 2,091,539
Operating Data:
Homes Sold
174 194
Number of Retail Centers 13 12
Weighted Avg Units sold/ctr 13 16
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations
RESULTS OF OPERATIONS
Results of Operations - Three months ended June 30, 2000 and 1999
The following table shows the components of the results of operations for fiscal
quarters ended June 30, 2000 and 1999 in amounts and percentages of revenues
(000 omitted)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
DESCRIPTION 2000 1999
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<S> <C> <C> <C> <C>
Net Sales $ 7,743 100.0% $ 8,894 100.0%
Cost of Sales 6,259 80.8% 7,293 82.0%
Gross Profit 1,484 19.2% 1,601 18.0%
Total Operating Expenses 1,806 23.3% 1,719 19.3%
Total Other Income (Expense) 89 1.1% 127 1.4%
------- ------- ------- -----
Income(Loss) before Income Tax
Provision and Minority Interest (233) -3.0% 9 0.1%
Minority interest in net income 10 0.1% (11) -0.1%
Income tax provision 45 0.6% (6) -0.1%
------- ------- ------- -----
Net Income (Loss) $ (178) -2.3% $ (8) -0.1%
======= ======= ======= =====
</TABLE>
COMPARISON OF FISCAL QUARTERS ENDED JUNE 30, 2000 AND 1999
Sales for the fiscal quarter ended June 30, 2000 are 13% less than the sales for
the same period one year ago. This $1.15 million decrease in net sales has had a
severe impact on the financial results of Apple Homes. In spite of this decrease
in sales, management is encouraged by the continued improvement in our gross
profit. Gross profit has increased 1.2% from the fiscal quarter ended June 30,
1999, as shown in the above table.
Operating Expenses increased by $87,000 in comparison to the same time period
for the prior year, mostly due to the additions in personnel in anticipation of
the upcoming merger and asset sale and to the costs related to that merger. The
decrease in sales has also led to a decrease in Other Income for the Company, as
our finance participation income and our commission income are directly tied to
the number of customers we assist with financing. Interest expense is less than
in the same period of the prior year, mainly due to the Company's negotiations
with our manufacturers to develop exclusive arrangements on all of our sales
locations. An exclusive arrangement with a manufacturer includes the agreement
that the manufacturer will pay a percentage of our interest expense in return
for selling a negotiated number of their homes and for carrying at least 75% of
their homes on a single location.
10
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OUTLOOK
On July 19, 2000 the Company mailed to all shareholders and filed with the
Security and Exchange Commission a proxy statement for its special meeting of
shareholders to be held on August 21, 2000 to approve the merger of the Company
and Bravo.net Acquisition Corporation and PlayRadio.net Acquisition Corporation
and the sale of the Company's current business and assets to Apple Homes
Acquisition Corporation. When these transactions are completed, which we
anticipate will take place on or before September 30, 2000, the Company will
relinquish its present mobile home retail sales operations and thereafter
operate the internet related businesses of Bravo and PlayRadio. The proxy
statement, which is available on the SEC's web site (www.sec.gov), contains a
complete discussion of these proposed transactions and the reasons management of
the Company supports them.
If, for any reason, the transactions are not completed as contemplated by the
parties, we expect that the Company will continue to suffer from the current
prolonged slump in the market slowdown for mobile home sales, which could
continue during the next year. As competitors are forced out of business, more
merchandise will be forced on the market at reduced prices, causing us to cut
our margins to maintain sales. This could result in continued losses and
negative cash flow for the foreseeable future. While we believe the Company is
in no immediate danger of ceasing operations, such a continuing slump could
eventually put its business in serious jeopardy.
11
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LIQUIDITY AND CAPITAL RESOURCES
As might be expected with the decrease in net sales, cash flows from operations
suffered, causing a substantial decrease of $468,000 in liquidity during the
quarter ended June 30, 2000. Management has no plans or commitments from
investors to raise capital nor does it anticipate at this time the need for any
new capital resources. There will be no significant capital expenditures in the
foreseeable future, and all available cash is being used exclusively to weather
the current slowdown in business. So far as we are now aware, all of the
Company's outstanding floor plan lines of credit and the available financing for
its customers will continue in place over the next year. We are now continuing
to cut back on costs in several areas and do not anticipate any severe problems
in maintaining at our present level of operations, but any increased drop in
sales could change this picture.
When and if the merger with the Bravo - PlayRadio group is completed, the
Company will, of course, be in an entirely new business and under entirely new
management. For a discussion of the plans for this new business, you are
referred to the Company's proxy statement noted above. We have been advised by
representatives of the Bravo - PlayRadio group that there have been no material
adverse changes in their plans or prospects, as outlined in the proxy statement.
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, 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 most important of these factors is the
proposed Bravo - PlayRadio merger and sale of assets. If these transactions are
completed, the Company and its shareholders will be in the hands of new
management, operating and developing an entirely new business. The failure of
these transactions to materialize would raise other factors beyond the Company's
control which could adversely affect its actual results. Some of these factors
include: failure to maintain breakeven levels of mobile homes sales in the face
of the industry's continued downturn and the resulting flooding of the market
with distressed inventory; difficulty in maintaining current credit arrangements
with our floor plan lenders to stock inventory at appropriate levels; possible
reduced availability of financing to our customers at affordable interest rates;
and a slowdown in economic conditions generally within the southeastern United
States and particularly in Georgia and western South Carolina, where the
Company's operations are located.
Additional information concerning these and other factors which could affect the
Company is contained in the Company's 10-K Report for its fiscal year ended
March 31, 2000, filed with the Securities and Exchange Commission dated June 29,
2000, which is available on the Commission's web site, www.sec.gov.
12
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
11.1 Earnings per Share Calculation
27 Financial Data Schedule
99 Definitive Proxy Statement for the Company's Special Meeting of
Shareholders, filed by the Company on July 19, 2000 and hereby
Incorporated by Reference
(b) Reports on Form 8-K
None
13
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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
August 14, 2000 /s/ Laura H. Rollins
--------------- -----------------------------------
(Date) Laura H. Rollins
Chief Financial Officer
Apple Homes Corporation
14
