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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
Commission File Number 0-25908
JUST LIKE HOME, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0568234
(State or other jurisdiction of (I.R.S. Employer
of incorporation or organization) Identification No.)
WILDEWOOD PROFESSIONAL PARK
3655 CORTEZ ROAD WEST, SUITE 110
BRADENTON, FLORIDA 34210
941-756-2555
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
($.001 par value)
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 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 [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
On October 22, 1999, the aggregate market value of the voting stock
held by non-affiliates of the registrant was $2,278,105 (based on the average
bid and asked prices on such date). For purposes of determination of the above
stated amount, only directors, executive officers and 10% or greater
shareholders are deemed affiliates.
As of October 22, 1999, there were outstanding 12,319,397 shares of
Common Stock, $.001 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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1998 FORM 10-KSB
TABLE OF CONTENTS
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Page
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Part I
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Item 1. Description of Business 1
Item 2. Description of Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
Price Range of Common Stock 9
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 7. Financial Statements 12
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 12
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 13
Item 10. Executive Compensation 15
Item 11. Security Ownership of Certain Beneficial Owners and Management 15
Item 12. Certain Relationships and Related Transactions 17
Item 13. Exhibits and Reports on Form 8-K 17
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ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
Just Like Home, Inc. (the "Company" or "JLH") was founded on the
belief that retirement assisted living should offer the elderly a chance to
live out a long and happy extension of a normal, interesting life with minimal
assistance. Although many elderly and frail people need the more extensive
level of care provided by nursing homes, many do not. The Company offers
assisted living facilities and services to those elderly and frail individuals
who do not need the level of care offered by nursing homes. This assistance is
provided in a small scale residential setting that allows the resident to
maintain dignity and a degree of independence at a reasonable cost.
The facilities leased by the Company range in size from approximately
7,000 square feet designed for occupancy by up to 16 residents, to
approximately 21,000 square feet, designed for occupancy by up to 45 residents.
Based upon its experience in developing and managing assisted living
facilities, the Company has developed two prototype facilities. One facility is
21,000 square feet designed as a 42-unit (45 bed), and the other a two
building, 52-unit comprised of 29,000 square feet.
Each center provides housing and services to the elderly who desire to
maintain independence within a system of medically and socially integrated
programs in a home-like environment. The objective of JLH is to offer a
pro-active life program and trained staff to deliver a level of care that
nurtures the health, dignity, privacy and spirit of each resident.
The Company's markets are the physically frail and cognitively
impaired elderly, age 75 years and older. The physically frail are those
elderly who are mentally capable, but are frail and require assistance with
basic daily activities. The cognitively impaired are elderly who are physically
capable, but suffer from various forms of dementia, such as Alzheimer's
disease.
The typical resident of an assisted living center is age 75 years or
older, female and widowed or single according to the Assisted Living Facilities
Association of America. Most residents (approximately 75%-90%) come from within
a 5-10 mile radius of a given facility. Each elderly person typically has a
supporting adult child who is instrumental in the decision making process.
The primary marketing programs used by JLH include community public
relations, advertising, tours, developing positive referral relationships with
hospitals and nursing homes, a newsletter and a direct mail program. The
primary referral targets are doctors, lawyers, bank trust officers,
accountants, social workers, nurses, clergy, ministers, elderly organizations
and guardians.
THE JUST LIKE HOME CONCEPT
JLH offers its assisted living services to the physically frail or
cognitively impaired in "home like" settings. Each Just Like Home is designed
to meet the elderly residents' needs for comfort, security, quality of life and
a degree of independence.
The Company strives to combine in its facilities the best aspects of
independent living with the protection and safety of assisted living, with
trained staff members who provide 24-hour care and monitoring of every
resident. Each Just Like Home, as the name implies, is a home in a neighborhood
with a yard, a porch and a kitchen. The assisted living facilities are designed
and decorated to have a home-like atmosphere. Residents are encouraged to
furnish their rooms with personal items they have
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collected during their lifetime. Monthly rates currently range from
approximately $1,250 for double occupancy up to $1,850 for a single room.
Just Like Home assisted living facilities compete with
individually-owned and large retirement community facilities. JLH offers
personalized care services in a small scale residential setting that allows the
resident to maintain independence and dignity at a reasonable cost through
professional management of multiple, single purpose facilities. By developing
multiple locations within the same geographic area, JLH believes it is able to
provide centralized professional management not found in individually owned and
operated facilities.
In the opinion of the Company, the smaller residence is the primary
advantage Just Like Home facilities have over larger facilities. The smaller
Just Like Home residential setting allows for more individualized care giving.
The Company believes that nowhere is this more important than with the
cognitively impaired. People with mild and moderate states of Alzheimer and
related cognitive diseases can be cared for in an assisted living facility at
approximately half the cost of comparable nursing home care.
Home managers are responsible for the overall daily operations of each
Just Like Home facility. The manager is assisted by various levels of trained
personnel, some of whom may be independent providers or part-time personnel,
including nurses, personal service assistants, maintenance and kitchen
personnel. The Company consults with outside providers, such as pharmacists and
dietitians, for purposes of medication review, menu planning and responding to
any special dietary needs of its residents. Personal care, dietary services,
housekeeping and laundry services are performed primarily by on-site care
givers who are full-time employees of the Company.
There are staff personnel on duty at each Just Like Home facility
24-hours a day who provide the necessary home-making and resident care
services. Weekend and relief staff rotate among the homes. An activity director
oversees the exercise and activity program as well as arranging transportation
of residents to physicians' offices and weekly outings.
The typical profile of the facility staff is a person who has care
giving and housekeeping skills. They are encouraged (but not required) to take
the Certified Nursing Assistant training program. All are required, however, to
have training in assisting residents with medication, hygiene, first aid, and
CPR which includes classes in aging, psychology of care giving to the elderly,
and practical management skills.
The duties of the staff include all housekeeping, laundry, meal
preparation, assistance in activities of daily living, games, walks, exercise
programs, interaction with visitors and families, daily record documentation
and delivery of medication. Each resident is carefully monitored as to their
individual abilities and if required he or she is not permitted to venture off
the property without a signed release from a guardian, adult child or the
supervision of one of the Just Like Home staff members. The staff is also
available to manage medications, prescribed by a resident's doctor. Daily
activities such as bingo, walks and exercise programs are provided for all
residents and are overseen by the staff and the activities director.
JUST LIKE FAMILY
The Company also provides a senior service related business that
augments the Company's basic business. These services include related
non-medical, in-house assisted living support to individuals
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wishing to remain in their own homes. The Company provides aides to assist with
bathing, dressing, general housekeeping, shopping, meal preparation in the
client's own home and transportation for medical appointments.
THE ASSISTED LIVING INDUSTRY
The long-term elderly care industry encompasses a wide variety of
accommodations and health care services. For those requiring limited services,
home-based care in the elderly person's home or in a retirement center offers a
viable option for assistance on an "as needed" basis. Services provided by
congregate and retirement communities are often limited to meals, housekeeping
and laundry. As an elderly person's needs for assistance increase, care in an
assisted living residence, where assistance with personal care (such as
dressing and bathing), support services (such as housekeeping and laundry) and
routine nursing services (such as assistance with taking medications and health
monitoring) are available, is often preferable to home-based care. For those
elderly in need of specialized support, rehabilitative, nutritional,
respiratory and other skilled treatments, medical care in a nursing facility
may be required. Generally, assisted living center residents require higher
care levels than those of residents of congregate and retirement living
communities, but lower than that of patients in skilled nursing facilities.
Assisted living facilities, such as those operated by the Company,
differ from skilled nursing facilities in that assisted living facilities do
not provide the more extensive, and costly, nursing and medical care found in
nursing homes. Assisted living facilities differ from continuing care
retirement communities in that, among other things, residents of assisted
living facilities are not obligated to purchase frequently expensive lifetime
contracts for residential living and care.
The number of persons over the age of 65 has been increasing faster
than the overall population, largely as a result of advances in medical
technology which has increased life expectancy. The percentage of total
population over the age of 65 in the United States has grown from approximately
8.1% in 1950, to approximately 12.0% in 1985. The 1990 Census indicates that
this has further increased to 12.6% or 31.2 million individuals. Current
estimates indicate that by the year 2010, 39.4 million people in the United
States will be age 65 or older.
The 85 years and older segment is the fastest growing segment of the
entire population. In 1990, the 85 and older age group was estimated at 3.5
million, or 1.4% of the population, and such segment is expected to double by
the year 2010. Based on these statistics, the Company believes that, as the
number of older individuals continues to increase, the number of people who
require assistance with the activities of daily living will increase.
COMPETITION
The long-term care industry is highly competitive, and the Company
expects that the assisted living business in particular will become more
competitive in the future. The Company competes with numerous other companies
providing similar long-term care alternatives such as home health agencies,
life care at home, community-based service programs, retirement communities and
convalescent facilities. Nursing facilities that provide long-term care
services are also a potential source of competition for the Company.
Providers of assisted living communities compete for residents
primarily on the basis of quality of care, price, reputation, physical
appearance of the facilities, services offered, family preferences, physician
referrals, and locations. Some of the Company's competitors are significantly
larger than the
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Company and have, or may obtain, greater financial resources than those
currently available to the Company.
FUNDING FOR ASSISTED LIVING CARE
The Company's revenue from residents is all private pay. Accordingly,
the Company competes with other comparably and higher priced facilities for
elderly residents who have the financial resources to pay the room and other
charges of an assisted living facility. As discussed below, government funding
for assisted living services is limited and that which is available is at rates
substantially less than the Company's current room charges.
The Company believes that current government programs that pay the
costs of nursing home care, but not the cost of assisted living services (with
some exceptions, as described below), have been an incentive for individuals
who cannot afford the costs of assisted living services to enter nursing homes
in order to receive assisted living services. Although government funding for
assisted living facilities may increase in an effort to shift elderly care from
more expensive nursing homes to less expensive assisted living facilities, the
Company does not anticipate that any increase will materially affect the
Company's payor mix or its operations.
GOVERNMENT REGULATION
The Company's assisted living facilities are subject to various
regulations and licensing requirements by the State of Florida. Florida does
not, however, impose any financial requirements for assisted living facilities.
In order to qualify as a state licensed facility, assisted living facilities
must comply with regulations that address, among other things, staffing,
physical design, required services and resident characteristics. The facilities
are also subject to various local building codes and other ordinances,
including fire safety codes. To the extent that the Company opens Just Like
Home facilities in states other than Florida, applicable regulations of those
states will apply. These requirements vary from state to state and are
monitored, to varying degrees, by state agencies.
The Company believes that its facilities are in substantial compliance
with all applicable regulatory requirements. In the ordinary course of
business, however, a facility could be cited for a deficiency. No actions are
currently pending at any of the Company's facilities.
If the Company receives revenues under the Medicaid Waiver Program, it
would be subject to Medicaid fraud and abuse laws, which prohibit any bribe,
kickback, or remuneration of any kind in return for the referral of Medicaid
patients or to induce the purchasing, leasing, ordering or arranging of any
goods or services to be paid for by Medicaid. Violations of these laws may
result in civil and criminal penalties and exclusions from participation in the
Medicaid program. The Inspector General of the Federal Department of Health and
Human Services has issued "safe harbor" regulations specifying certain business
practices which are exempt from the sanctions under the fraud and abuse law.
The State of Florida has laws that prohibit certain direct or indirect payments
or fee-splitting arrangements between healthcare providers if such arrangements
are designed to induce or encourage the referral of patients to a particular
provider. The current management of the Company is not aware of any Company
agreements or arrangements that are subject to the Medicaid fraud and abuse
laws.
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EMPLOYEES
The Company currently employs 175 persons, four of whom work at its
corporate office. The Company has entered into an agreement with a contract
human resource service for the leasing of most of its employees. The service
company is responsible for all payroll functions and for the payment of taxes
and wages for the leased employees. The Company pays the service a monthly
lease fee equal to the Company's total gross payroll plus a fixed fee based on
the number of employees. None of the Company's employees is represented by a
labor union.
A significant risk for the Company is its ability to attract and
retain qualified employees, particularly at the Company's facilities. The
Company has historically experienced a high level of turnover among its hourly
employees.
RECENT DEVELOPMENTS
1. SETTLEMENT OF THE HEALTH CARE REIT LEASE TERMINATION LITIGATION.
As the Company previously reported, in March 1999, the Company
received from Health Care REIT, Inc. ("HCRI") Notices of Termination of its
Lease Agreements for all eight facilities operated by the Company. The Company
filed counterclaims in various courts in Florida, seeking among other things,
to block the terminations of the leases and to construe the leases as financing
arrangements subject to Florida laws regarding foreclosure of mortgages.
By Letter Agreement dated April 16, 1999, the Company and HCRI
reached a settlement of all pending disputes between them, which went into
effect on April 30, 1999. The Letter Agreement provides in pertinent respects
for the following:
1. The parties entered into a stipulated Judgment Entry in each
of the actions pending in Florida, in which the court specifically found that
the leases between the parties were true leases, that the leases were not a
financing lease or a mortgage, that the Company did not have an option to
purchase, that the Company did not have any type of ownership interest in any
of the leased property, that the Company was in default of the leases, and that
HCRI had the right to, and properly did, terminate the leases without prior
notice to the Company. The stipulated Judgment Entry also provided that, if the
Company defaults under the new lease referred to below, HCRI may provide notice
of the default to the Company by facsimile, during the hours of 9:00 a.m. -
5:00 p.m. Monday through Friday, and, if the default is not cured within 48
hours, not including weekends, the court, upon the filing of an affidavit by a
representative of HCRI stating that a default has occurred and the 48 hour cure
period has expired without the cure being effectuated, will issue an immediate
order evicting the Company without any other prior notice to the Company.
2. The Company and HCRI have entered a new single lease for a
nine-month term. The property subject to the new lease is all eight facilities
operated by the Company (collectively the "Leased Property"). The rent due
under the new lease is the same as the rents under the terminated leases.
3. HCRI previously drew on the Letters of Credit issued on
behalf of the Company in the amount of $521,019. The amount necessary to be
paid by the Company for rent and other expenses through April 1999 was
$516,894, which was fully offset by the amounts drawn by HCRI on the Letters of
Credit. In addition, the Company agreed to pay to HCRI a total of $200,000 to
compensate HCRI for the attorneys' fees and expenses incurred by HCRI in
enforcing its remedies under the leases. The
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Company paid $102,161 of this amount to HCRI in April, and paid an additional
$47,839 in installments through September 1999. If the Company purchases the
Leased Property, it will pay to HCRI all remaining amounts still owed for
HCRI's attorneys' fees and expenses, up to a total of $200,000.
4. The Company also agreed to pay timely the Company's new
payables and provide evidence of all money being invested in or contributed to
the Company. "New Payables" means all amounts actually owed by the Company
falling due after the date of the Letter Agreement. The Company, within 30 days
after execution of the Letter Agreement, paid $200,000 toward accounts payable
existing as of the date of the Letter Agreement. In addition, the Company
agreed to pay (and did pay) an additional $25,000 per month toward accounts
payable existing as of the date of the Letter Agreement.
5. The Company also agreed to establish certain additional
Letters of Credit with HCRI if certain operating benchmarks were not met. The
Company and HCRI have been discussing how to apply the benchmarks to the
Company's actual results of operations and are presently negotiating an
alternative arrangement by which the Company may establish an additional escrow
account to pay operating expenses of the Company.
6. In addition to the Letters of Credit referenced above, at
closing, the Company provided a new Letter of Credit in favor of HCRI in the
amount of $270,000 as security for the payment of rent under the new lease and
to insure that the Company will, upon termination or expiration of the lease,
fulfill its promise to immediately surrender the Leased Property without
resistance, not file bankruptcy, and take all necessary actions to assist in
the transfer of the Leased Property to HCRI or its designee. Failure to do any
of the above, will allow HCRI to immediately draw the entire amount of the
Letter of Credit.
7. Unless the new lease has been terminated or the Company is in
default of any term of the lease, the Company will have the right to purchase
the Leased Property at any time during the lease term but this right will
automatically expire at the end of the lease term. If the Company is going to
exercise this right to purchase, the Company must purchase all of the Leased
Property from HCRI. The approximate total cost to the Company to exercise this
purchase option is $11,500,000. This amount includes approximately $10,670,000
as purchase price for the Leased Property plus the payment of various other
items to HCRI described above that remain unpaid as of the purchase date for
the Leased Property. If, during the lease term, the Company delivers to HCRI a
binding commitment letter for the financing of the Company's purchase of the
Leased Property from a lender acceptable to HCRI ("Commitment Letter"), the
Company will be allowed to extend the lease term up to three months (to April
30, 2000) to allow for the consummation of the purchase of the Leased Property.
During each month following the original nine-month lease term, the purchase
price for the Leased Property will continue to increase 3/4% each month. The
Company will not have the right to purchase the Leased Property if it is in
default of the lease or if the lease has expired or terminated. If HCRI has not
received a Commitment Letter from the Company during the nine-month lease term,
the Company will have no right to purchase the facilities after the original
nine-month lease term. The right to purchase the property will immediately, and
automatically, be forfeited upon the termination or expiration of the lease.
Under no circumstances, will the lease be for a period longer than 12 months
nor will the Company's right to purchase the Leased Property be for a period
longer than 12 months.
The settlement with HCRI was effective April 30, 1999. As of the
date of the filing of this Report, the Company is current in its financial
obligations to HCRI under the Letter Agreement.
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As stated repeatedly in the Letter Agreement, any default by the
Company in virtually any of its financial or nonfinancial obligations under the
Letter Agreement or the new lease will result in termination of the new lease
for all eight facilities upon 48 hours facsimile notice by HCRI. If that were
to occur, the Company would have no operating assets and no prospects for
continued operations.
2. SETTLEMENT OF THE CONTRACTOR LITIGATION.
At the time the Company was negotiating with HCRI, the Company was
also involved in litigation with the general contractor for its two
most-recently constructed facilities (the Lake Wales and Haines City, Florida
facilities), which facilities had been financed by HCRI. At the time of the
closing of the Letter Agreement with HCRI, this litigation was unsettled. The
Company provided a Letter of Credit in favor of HCRI in the amount of $50,000
as security that the Company would pay the contractor on the two facilities,
which Letter of Credit remains in effect.
The Company has since reached a complete settlement with the
contractor. As part of the settlement, the Company paid the contractor
$200,000, agreed to pay the contractor $19,200 per month for nine months (four
months of which have been paid as of October 15, 1999), and agreed to pay the
contractor an additional $252,000 on May 1, 2000. Under the Company's Letter
Agreement with HCRI, the Company must, prior to or at the time of closing on
its purchase of the Leased Property, pay all amounts owed to the contractor
under this settlement.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company presently owns no assisted living facilities and leases 8
assisted living facilities from HCRI.
As described immediately above under "Item 1. Description of Business
- - Recent Developments," the Company has entered into a settlement agreement
with HCRI for a lease of all eight facilities from HCRI, which lease will
expire on January 31, 2000, if not earlier terminated, or extend to April 30,
2000, on the limited terms described above. If the Company is unable to raise
the financing to exercise its purchase option by January 31, 2000 (or April 30,
2000, if the extension terms are satisfied), the lease for all eight facilities
will terminate and the Company will cease operations. Additionally, the Letter
Agreement with HCRI and the lease provide that they may be terminated upon
48-hours notice if the Company defaults in the performance of any of its
obligations under the Letter Agreement or the lease.
The Company leases the following real property:
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LICENSED OCCUPANCY
NAME/LOCATION DATE OPENED UNITS BEDS (4/30/99) (9/30/99)
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Shaw's Point 12/87 16 16 13 14
Bradenton, Florida
Village Green 1/89 16 20 18 16
Bradenton, Florida
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<TABLE>
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LICENSED OCCUPANCY
NAME/LOCATION DATE OPENED UNITS BEDS (4/30/99) (9/30/99)
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Twin Oaks - Acacia 7/96 18 20 15 16
Bradenton, Florida
Twin Oaks - Bougainvallea 12/96 18 20 18 17
Bradenton, Florida
Haines City 11/98 42 45 6 20
Haines City, Florida
Lake Wales 11/98 42 45 27 33
Lake Wales, Florida
Charis Centre 4/96 31 36 29 27
Leesburg, Florida
Orange City 6/98 42 45 31 36
Orange City, Florida
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
An action was filed against two subsidiaries of the Company in May
1999 in the Circuit Court in Manatee County, Florida alleging negligent care of
a resident resulting in cuts, bruises and a fractured hip (which allegedly
resulted in the resident's death) from November 1996 through June 1998. The
complaint also alleges violations of certain Florida statutes regarding the
rights of residents in long-term care facilities. The complaint also names as a
defendant the National Foundation on Gerontology, Inc. (the "Foundation"), a
Florida nonprofit corporation. During the period in question, the facility at
which the alleged acts occurred was owned by the Foundation and was managed by
the Company under a management agreement. The management agreement was
terminated in February 1998. The Company's insurer has assumed the defense of
this matter, subject to a $1,000 deductible.
There is another lawsuit pending against the Company in Springfield,
Ohio in which a real estate broker is claiming a commission due on the sale of
certain property previously owned by the Company in Ohio. The claimed
commission is less than $10,000.
Additionally, various vendors to the Company have threatened lawsuits
against the Company in the past six months due to late payments on their
invoices.
Except as described above, there presently is no other litigation
pending, or to the knowledge of management, threatened against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None. The Company did not hold an annual meeting of stockholders in
1998 and has not yet held an annual meeting of stockholders in 1999. The
Company has scheduled an annual meeting for December 10, 1999.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS PRICE RANGE
OF COMMON STOCK
The Company's common stock trades on OTC bulletin board under the
symbol "JLHC." The following is the range of high and low sales prices for the
Company's common stock for the last two calendar years.
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High Low
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1997
First Quarter $2.25 $1.25
Second Quarter 2.75 1.50
Third Quarter 2.75 1.50
Fourth Quarter 2.00 0.63
1998
First Quarter $2.75 $0.625
Second Quarter 2.344 0.1063
Third Quarter 1.25 0.31
Fourth Quarter 0.531 0.188
</TABLE>
On October 22, 1999, the closing sale price of the Company's Common
Stock was $0.40625 per share. The above quotations reflect inter-dealer
quotations, without retail mark-up, mark-down or commission, and may not
represent actual transactions.
As of October 22, 1999, the Company had approximately 1,000 record and
beneficial holders of the Company's Common Stock. The Company has not paid any
dividends on its Common Stock since its inception and does not anticipate
paying any dividends on its Common Stock in the foreseeable future. The Company
currently plans to retain earnings, if any, to finance its business operations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion and analysis contains both historical and
forward-looking information. The forward-looking statements may be
significantly affected by risks and uncertainties and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
There can be no assurance that anticipated future results will be achieved.
Readers are cautioned that a number of factors, which are described in this
report and below, could adversely affect the Company's ability to attain these
results, including the Company's ability to obtain the financing necessary to
exercise the Company's option to purchase the Leased Property under the Letter
Agreement with HCRI described above. If the Company is unable to raise the
financing to exercise its purchase option, the lease for all eight facilities
will terminate and the Company will cease operations. Additionally, the Letter
Agreement with HCRI and the lease provide that they may be terminated upon
48-hours notice if the Company defaults in the performance of any of its
obligations under the Letter Agreement or the lease. Additionally, the
Company's future performance will be affected by its ability or inability to
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operate its current facilities on a break-even or profitable basis (which it
has been unable to do since its initial public offering in 1996), the
availability of long-term financing for the development of new facilities, the
availability of financing for the anticipated operating losses associated with
the development of new facilities, the ability of the Company to operate its
facilities efficiently, the ability to fill-up current and new facilities and
the ability to attract qualified personnel.
OVERVIEW
The Company's revenues historically consisted primarily of (i) rental
of residences in assisted living facilities, (ii) management fees for the
provision of such services to facilities owned by other entities (for 1997 and
prior years), (iii) companion care fees, and (iv) consulting fees (for 1997 and
prior years). Effective April 1, 1998, the Company terminated an unprofitable,
long-term management arrangement, and in 1997 the Company sold the operations
of its consulting subsidiary. Resident rental rates are reviewed annually and
adjustments, if any, are based on changes in the Company's operating costs or
as market conditions dictate. The level of service provided to each resident is
also reviewed on a continuous basis to determine whether individual needs have
changed, which require an adjustment of services and, therefore, rates. The
Company's expenses for facilities include (i) residence operating expenses,
such as staff payroll, food, utilities, insurance, property taxes, and other
direct residence operating expenses, (ii) depreciation and amortization for
owned facilities, (iii) interest expense, and (iv) for leased facilities,
rental expense. General and administrative expenses consisting of marketing,
legal, accounting and other administrative expenses are incurred for Company
owned and leased facilities.
RESULTS OF OPERATIONS
The Company incurred a net loss for 1998 of $4,105,000, compared to a
net loss for 1997 of $2,227,000. The Company had a decrease in revenues for
1998 to $2,496,000, compared to $2,613,000 in 1997. However, resident fee
revenues increased by $102,000 in 1998 due to the opening of new facilities
during 1998. The companion care services revenues increased in 1998 to
$598,000, an increase of $214,000 over 1997 revenues. No consulting revenues
were received in 1998 because that division was sold in 1997. Consulting
revenues were $336,000 in 1997. No management fee income was recorded in 1998,
as all management contracts were cancelled. Management fees of $47,000 recorded
in 1997 were not collected.
The Company's operating expenses in 1998 were $4,648,000, up $316,000
(or 7.3%) from 1997. Assisted living expenses increased $560,000 in 1998 to
$1,992,000 due to the opening of two new facilities. Companion care expenses
increased $101,000 in 1998 to $572,000 due to increased payroll associated with
additional billable service hours. Consulting expenses were not incurred in
1998 because the consulting division was sold in 1997. General and
administrative expenses were down $169,000 in 1998 to $1,460,000 due to
cutbacks of home office expenses. Non-operating expenses increased in 1998 due
to the termination of leases of $499,000 and a loss from impairment of property
held for sale of $859,000. See "Item 1. Description of Business - Recent
Developments," for an extensive discussion of the settlement of litigation with
HCRI relating to the termination of the leases for the eight facilities and the
execution of a new short-term lease.
The Company also wrote down property held for sale $296,000 in 1998.
This write-down was based upon actual sale prices of the property held for
sale. In addition, goodwill associated with the merger of Community Assisted
Living Centers, Inc. into a wholly-owned subsidiary of the Company in April
1997, in the amount of $564,000 was written off in 1998. The Company reported a
loss of
-10-
<PAGE> 13
$249,000 on the sale of assets, consisting primarily, of the sale of the
corporate headquarters. In 1997 the Company reported a gain of $83,000 on the
sale of assets.
LIQUIDITY AND CAPITAL RESOURCES
As described above under "Item 1. Description of Business - Recent
Developments," the Company has entered into a settlement agreement with HCRI
for a lease of all eight facilities from HCRI, which lease will expire on
January 31, 2000, if not earlier terminated. The Company may extend the lease
to April 30, 2000, if prior to January 31, 2000, the Company obtains a
satisfactory binding commitment to finance the Company's option to purchase all
the Leased Properties. The Company estimates that the option exercise price,
including associated expenses, will be approximately $11,500,000. If the
Company is unable to raise the financing to exercise its purchase option, the
lease for all eight facilities will terminate and the Company will cease
operations. Additionally, the Letter Agreement with HCRI and the lease provide
that they may be terminated upon 48-hours notice if the Company defaults in the
performance of any of its obligations under the Letter Agreement or the lease.
The Company is pursuing a financing for the Company with the
representatives of several institutional lenders. The current discussions
involve bridge financing to be converted to permanent debt, although the final
form of the financing, if completed at all, cannot be predicted at this time.
If the Company is unable to obtain the necessary financing to acquire the
assisted living facilities, the Company's lease of the assisted living
properties will terminate and operations will consist only of companion care
services.
On an ongoing basis, the primary cash needs of the Company relate to
start-up costs associated with opening new facilities and projected operating
losses for those facilities until they reach a stabilized occupancy and
corporate office expense until all facilities are generating sufficient cash
flow to cover those expenses. Additionally, the Company incurred substantial
cash expenses associated with the defense and short-term settlement of the
lease termination dispute with HCRI described above under "Item 1. Description
of Business - Recent Developments."
The Company entered into a letter of intent with Peridot Enterprises,
Inc. ("Peridot") in April 1999, under which Peridot committed to invest
$1,000,000 in the Company. The Company initially agreed to issue shares of
Common Stock and shares of a new class of preferred stock to Peridot or its
assigns in exchange for the $1,000,000 investment. The Company and Peridot
later agreed that the Company would issue an aggregate of 2,920,000 shares of
its Common Stock to Peridot or its assigns in exchange for the $1,000,000
investment, and no shares of preferred stock. As of September 30, 1999, all
$1,000,000 has been invested by Peridot or its affiliates, and all 2,920,000
shares of Common Stock have been issued by the Company to various assignees of
Peridot, including Robert C. Lohr, who now serves as the Chairman of the Board
and Chief Executive Officer of the Company.
The Company has used the proceeds of this stock sale to fund certain
expenses associated with the settlement with HCRI, to fund the settlement with
KDA, and to fund the operations of the Company since April 1999. Currently, the
occupancy of the assisted living facilities is not yet sufficient to fully
cover the home office overhead. The Company expects to reach break even
occupancy levels by December 1999.
The losses incurred by the Company during 1997 and 1998 were
funded primarily through (i) approximately $565,000 in cash and cash
equivalents received by the Company from the merger of Community Assisted
Living Centers, Inc. into a wholly owned subsidiary of the Company in April,
-11-
<PAGE> 14
1997, (ii) approximately $1,510,000 in proceeds of a private placement of
common stock of the Company in April, 1997, and (iii) approximately $1,625,000
in cash generated from the sale and leaseback financing of five facilities of
the Company under the sale leaseback financings with HCRI.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are contained on pages F-1 through
F-23 of this Report:
Report of Independent Accountants
Consolidated Balance Sheet - December 31, 1998
Consolidated Statements of Operations - Years Ended December 31, 1998
and 1997
Consolidated Statements of Stockholders' Equity (Deficit) - Years
Ended December 31, 1998 and 1997
Consolidated Statements of Cash Flows - Years Ended December 31, 1998
and 1997
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
As previously reported, effective May 25, 1999, the Company dismissed
PricewaterhouseCoopers LLP as the Company's independent accountants. The
reports of PricewaterhouseCoopers LLP on the financial statements of the
Company for each of the years ended December 31, 1996 and 1997, did not contain
an adverse opinion or disclaimer of opinion, nor were they modified as to
uncertainty, audit scope or accounting principles. The decision to change
accountants was approved by the Board of Directors of the Company.
For the fiscal years ended December 31, 1996 and 1997, and for the
period from January 1, 1998 through May 25, 1999, there were no disagreements
with PricewaterhouseCoopers LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure,
which, if not resolved to the satisfaction of PricewaterhouseCoopers LLP, would
have caused it to make reference to the subject matter of the disagreement in
connection with its report on these financial statements for those years.
On May 19, 1999, the Company engaged Templeton & Company, P.A., Royal
Palm Beach, Florida, as independent auditors for purposes of auditing the
Company's financial statements for the year ended December 31, 1998. The
Company did not consult with Templeton & Company, P.A. regarding the
application of accounting principles to a specific completed or contemplated
transaction or the type of audit opinion that might be rendered on the
Company's financial statements, and no written or oral advice was provided by
Templeton & Company, P.A. that was an important factor considered by the
Company in reaching a decision as to the accounting, auditing or financial
reporting issue.
-12-
<PAGE> 15
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The name, age and position of each director and executive officer of
the Company is as follows:
<TABLE>
<CAPTION>
DIRECTOR AND EXECUTIVE OFFICERS AGE POSITIONS AND OFFICES HELD
- ------------------------------- --- --------------------------
<S> <C> <C>
Robert C. Lohr 53 Chairman of the Board and Chief
Executive Officer
Bruce C. Baldwin 54 Director
Ronald O. Braun 55 Director
Elizabeth A. Conard 61 Executive Vice President, Secretary
and Director
Michael W. Monahan, CPA 45 Director
Isidore Siegel 81 Director
Raymond G. Smith 57 Director
</TABLE>
- -------------------------------------------------------------------------------
ROBERT C. LOHR became Chairman of the Board and Chief Executive
Officer of the Company effective April 30, 1999. Mr. Lohr was elected to those
positions as part of the commitment by Peridot Enterprises, Inc. ("Peridot
Enterprises"), a company controlled by Mr. Lohr, to invest up to $1,000,000 in
the Company. Mr. Lohr's first assisted living business was started in a nursing
facility in 1980. Since then Mr. Lohr has been involved in the operations of
more than 40 assisted living residences and has opened newly-constructed
facilities and facilities that were renovations of vacant schools, convents,
private homes and historic hotels. Mr. Lohr founded Peridot Enterprises in 1991
to own, operate and consult in long-term care. Peridot Enterprises currently
owns one nursing facility in Pennsylvania and five assisted living residences
in Florida, in addition to its investment in Just Like Home. Mr. Lohr holds a
Bachelor of Science degree from Slippery Rock University and a Master of
Science degree and additional certifications from Duquesne University, and he
is a licensed nursing home administrator (NHA). He has served three terms as
the president of the Pennsylvania Health Care Association and is currently the
chairman of the National Center for Assisted Living, the assisted living
section of the American Health Care Association. He has been a featured speaker
at various seminars across the country; and, most recently, he testified on
behalf of the assisted living industry before the U.S. Senate's Subcommittee on
Aging.
BRUCE C. BALDWIN became a director of the Company in May 1999 with the
election of Mr. Lohr to the Board. Mr. Baldwin is the President and Chief
Executive Officer of Baldwin, Thomas and Associates, Inc., a health care
management company, which owns three skilled nursing homes in Florida. His past
experience includes Director of Operations for United Health Services, Inc.,
hospital administrator at the University of Virginia Medical Center, and
nursing home administrator in the states of Florida and Virginia. Mr. Baldwin
has also been active in the Florida Health Care Association and the
-13-
<PAGE> 16
American Health Care Association since 1980. He holds a Bachelor of Arts Degree
from Randolph-Macon College and a Masters Degree in Hospital and Health Care
Administration from the Medical College of Virginia.
RONALD O. BRAUN became a director of the Company in April, 1997. Mr.
Braun is an investment banker with U.S. Bancorp Piper Jaffray Inc., where he
specializes in health care finance with an emphasis on long-term care projects
for not-for-profit and proprietary clients. Prior to joining U.S. Bancorp Piper
Jaffray Inc., Mr. Braun was a corporate Vice President of A.G. Edwards & Sons,
Inc. for approximately eight years, where he concentrated primarily in the
long-term care sector of the health care industry. Earlier in his career, he
spent over seven years in health care administration as a Vice President of a
332-bed hospital.
ELIZABETH A. CONARD has served as a director of the Company since it
was organized. Ms. Conard served as President and Chief Operating Officer of
the Company and its various subsidiaries from the dates they were formed until
April 10, 1997. Since that date, Ms. Conard has served as an Executive Vice
President of the Company and continues as the corporate Secretary and a
director of the Company. Mrs. Conard has over 20 years experience in the
ownership and operation of retirement communities, including independent and
congregate facilities, assisted living, dementia units and nursing homes. Mrs.
Conard serves on the Florida Health Care Association Board of Directors and has
served four years as the state Assisted Living Vice Chairman. She was the
Assisted Living Vice Chairman of the American Health Care Association's
National Center for Assisted Living for the past two years. Mrs. Conard
conducts seminars and workshops and is a frequent speaker at state and national
conventions in Assisted Living.
MICHAEL W. MONAHAN, CPA, served as Treasurer and Chief Financial
Officer of the Company from April 1997, until August 1998. From July 1996 to
August 1998, Mr. Monahan was also Treasurer and Chief Financial Officer of
Community Assisted Living Centers, Inc., which the Company acquired by merger
on April 10, 1997. Prior to joining Community Assisted Living Centers, Inc.,
Mr. Monahan had been engaged in public accounting, including serving as senior
audit manager with a Big 6 firm, a partner in a smaller regional firm, and a
shareholder in a Sarasota-area firm. Mr. Monahan resigned as the Treasurer and
Chief Financial Officer of the Company in August 1998, at which time he
returned to private practice in his own CPA firm. In May 1999, Mr. Monahan was
elected to the Board of Directors as part of the investment in the Company by
Mr. Lohr and his affiliates, and continues to work with the Company on a
consulting basis in connection with certain ongoing financial and reporting
matters and as agreed to on special projects.
ISIDORE SIEGEL is a retired attorney. Mr. Siegel was named Acting
Chief Executive Office and Chairman of the Board effective March 25, 1999, when
Daniel D. Levitan resigned as Chairman of the Board and Chief Executive Officer
of the Company, and Darryl R. Callahan resigned as President of the Company.
Mr. Levitan assumed the positions of Chairman of the Board and CEO of the
Company effective September 28, 1998, in anticipation of an equity investment
in the Company by an investor group led by Mr. Levitan. Neither Mr. Levitan nor
any group associated with him ever made an equity investment in the Company.
Effective April 30, 1999, Mr. Seigel stepped aside as Acting Chief Executive
Officer and Chairman of the Board. Mr. Siegel has served as a member of the
Board of Directors since 1995. Until July, 1990, Mr. Siegel was a senior
partner with the law firm of Siegel & Godt in Garden City, New York. Until
June, 1994, Mr. Siegel served as corporate secretary of Weldotron Corporation,
an AMEX listed company engaged in the manufacture and sale of stretch and
shrink packaging machinery. Mr. Siegel also served as a director of that
company until April, 1993. At various times, Mr. Siegel has also been a
developer, owner and operator of nursing homes. During the
-14-
<PAGE> 17
late 1960s, Mr. Siegel developed and owned two nursing homes, and from the
mid-1970s to 1990, Mr. Siegel developed, owned and operated two other nursing
homes. Mr. Siegel is currently a part owner in four nursing home facilities.
RAYMOND G. SMITH became a director of the Company in May 1999 with the
election of Mr. Lohr to the Board. Mr. Smith has served as Vice President and
General Manager of Ranbar Electrical Materials, Inc. since 1995, where he is
responsible for all facets of managing this specialty chemical company. His
career encompasses more than 25 years of experience in a variety of business
enterprises, including as an executive with Westinghouse Electric Corporation,
and management responsibility in manufacturing, marketing/sales, strategic
planning quality and technology. Mr. Smith received his BA in Economics from
UCLA and his MBA from the University of Pittsburgh.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the cash and other compensation paid in
1996, 1997 and 1998 to the Chief Executive Officers of the Company during those
three years. No other executive officer of the Company earned in excess of
$100,000 in 1996, 1997 or 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION(1)
- --------------------------- ---- ------ ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Daniel D. Levitan(2) 1998 $36,000 -0- -0- -0-
John F. Robenalt(2) 1998 59,731 -0- -0- -0-
1997 30,000 -0- -0- -0-
Richard T. Conard, M.D.(3) 1997 75,000 -0- -0- $3,500
1996 75,000 -0- -0- 6,000
</TABLE>
- ---------------
(1) Consists of automobile allowance.
(2) Mr. Levitan replaced Mr. Robenalt as Chief Executive Officer of the
Company in September 1998.
(3) Mr. Robenalt replaced Dr. Conard as Chief Executive Officer of the Company
on April 10, 1997.
No stock options, stock appreciation rights or similar stock-based
benefits were granted or issued to any of the named persons in 1996, 1997 or
1998, and no executive officer of the Company, including the named persons,
presently holds any stock options or stock appreciation rights or similar
stock-based compensation arrangements.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of October 11, 1999, certain
information with regard to the beneficial ownership of the Common Stock by (i)
all persons known by the Company to be the beneficial owners of more than 5% of
the outstanding Common Stock; (ii) each director and nominee for director of
the Company; (iii) each executive officer named in the Summary Compensation
Table in Item 10; and (iv) all directors and executive officers of the Company
as a group. Unless otherwise indicated, all shares shown in the table below are
held with sole voting and investment power by the person indicated.
-15-
<PAGE> 18
<TABLE>
<CAPTION>
TOTAL PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------------ ---------- -------
<S> <C> <C>
Robert C. Lohr . . . . . . . . . . . . . . . . . . . . . . . . . 3,340,200(1) 27.1
Elizabeth A. Conard. . . . . . . . . . . . . . . . . . . . . . . 2,475,000(2) 20.0
Ronald O. Braun. . . . . . . . . . . . . . . . . . . . . . . . . 250,000 2.0
Isidore Siegel . . . . . . . . . . . . . . . . . . . . . . . . . 20,000(3) *
Michael W. Monahan . . . . . . . . . . . . . . . . . . . . . . . 42,500* *
Bruce C. Baldwin . . . . . . . . . . . . . . . . . . . . . . . . 181,457 1.5
Raymond G. Smith . . . . . . . . . . . . . . . . . . . . . . . . 116,800 *
All directors and executive officers as a group (7 persons). . . 4,025,957 32.7
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 511,000 shares of Common Stock held directly by Mr. Lohr, 29,200
shares held by Periodot Enterprises, which is controlled by Mr. Lohr, and
2,800,000 shares over which Mr. Lohr has voting control under the voting
agreements described below.
(2) Of the 2,475,000 shares, 2,400,000 shares are registered in the name of
Mr. Lohr as voting trustee under the voting agreement described below.
Beneficial economic ownership of 1,400,000 shares is held in a family
limited partnership, beneficial economic ownership of 1,000,000 shares is
held in a charitable remainder trust and beneficial economic ownership of
75,000 shares is owned individually. Ms. Conard has direct or indirect
dispositive power over all 2,475,000 shares of Common Stock.
(3) Held by a family limited partnership of which Mr. Siegel is a general
partner.
VOTING AGREEMENTS
By Agreement dated April 23, 1999, Mrs. Conard agreed to transfer the
2,400,000 shares of Common Stock of the Company held by her to Mr. Lohr as
voting trustee, thereby giving Mr. Lohr, as voting trustee, the right to vote
those shares in his sole and absolute discretion in all matters coming before a
meeting of the shareholders of the Company. The agreement with Mrs. Conard is
effective until December 31, 2004. The agreement further provides that Mrs.
Conard may sell shares of Common Stock subject to the agreement in accordance
with SEC Rule 144 (which contains certain limitations on the number of shares
that may be sold by Mrs. Conard in any three-month period).
By Shareholder Agreement dated April 21, 1999, John F. Robenalt, the
former Chief Executive Officer of the Company, granted to Mr. Lohr all of the
voting rights with respect to all shares of Common Stock of the Company held by
Mr. Robenalt or his wife. The Shareholder Agreement is effective until December
31, 2003. Additionally, the Shareholder Agreement terminates if Mr. Lohr ceases
to be the Chief Executive Officer of the Company at any time prior to July 1,
2000, or ceases to be the Chairman of the Board of Directors of the Company at
any time thereafter. As of October 11, 1999, Mr. Robenalt and his affiliates
own an aggregate of 400,000 shares of Common Stock, which are subject to the
Shareholder Agreement with Mr. Lohr.
The Shareholder Agreement with Mr. Robenalt does not restrict his
ability to sell shares, and any shares sold will be transferred free and clear
of the voting rights granted to Mr. Lohr. Additionally,
-16-
<PAGE> 19
Mr. Robenalt has granted certain rights of first refusal with respect to any
shares of Common Stock that Mr. Robenalt proposes to sell.
As a result of these agreements and his appointment as President and
CEO of the Company, Mr. Lohr effectively acquired control of the Company as of
April 30, 1999.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time since 1987, Elizabeth A. Conard has made loans to
the Company to support its operations. The Company has repaid only a portion of
those loans. At December 31, 1998, the total amount of the loans, including
interest, was $238,839. The loans bear interest at 10% per annum, payable
monthly and the principal is payable in installments beginning in September
1998. The Company has made no principal or interest payments on this loan since
September 1998.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibits are filed with this Form 10-KSB or are
incorporated herein by reference.
3(a) Articles of Incorporation, as amended.(1)
3(b) Bylaws.(1)
4 Form of Common Stock Certificate.(1)
10(a) 1995 Incentive and Non-Qualified Stock Option Plan.(1)
(b) Agreement dated as of February 26, 1998, among National
Foundation on Gereontology, Inc., the Company and certain
subsidiaries of the Company (terminating the Management
Agreement).(2)
(c) Employee Leasing Agreement(1)
(d) Trademark Assignment.(1)
(e) Merger Agreement, dated February 13, 1997, among Just
Like Home, Inc., JLH Acquisition Corp. and Community
Assisted Living Centers, Inc.(3)
(f) Settlement Agreement dated April 10, 1997, among Just
Like Home, Inc., Whitaker's Landing, Inc., Joann
Desrosiers, David Desrosiers and Jeffrey S. Russell as
Co-Personal Representatives.(4)
(g) Stock Issuance Agreement dated as of September 20, 1999,
among the Company, Joann Desrosiers and various trusts
for the benefit of Desrosiers family members.(6)
(h) [Voting] Agreement dated April 23, 1999, between
Elizabeth Conard and Robert C. Lohr.(5)
(i) Shareholder Agreement dated April 21, 1999, among the
Company, John F. Robenalt and Robert C. Lohr.(5)
(j) Letter Agreement (Settlement Agreement) with Health Care
REIT, Inc. effective April 30, 1999.(5)
21 Subsidiaries of the Registrant.(6)
27 Financial Data Schedule (for SEC use only).(6)
(b) Reports on Form 8-K.
None.
-17-
<PAGE> 20
- -------------
(1) Incorporated by reference to the exhibit filed as part of the Company
Registration Statement (File No. 33-910120A) ordered effective July 6,
1995.
(2) Incorporated by reference to the exhibit filed as part of the Company's
Form 10-KSB for the year ended December 31, 1997, as amended.
(3) Incorporated by reference to the exhibit filed as part of the Company's
Form 8-K filed on February 16, 1997, as amended.
(4) Incorporated by reference to the exhibit filed as part of the Company's
Form 10-QSB for the quarter ended March 31, 1997.
(5) Incorporated by reference to the exhibit filed as part of the Company's
Form 8-K dated April 30,1999, as amended.
(6) Filed herewith.
-18-
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
JUST LIKE HOME, INC.
By: /s/ Robert C. Lohr
-------------------------------------
Robert C. Lohr
Chairman of the Board and
Chief Executive Officer
Date: November 2, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 2nd day of November, 1999.
Signature Title
/s/ ROBERT C. LOHR
------------------------- Chairman of the Board and Chief
Robert C. Lohr Executive Officer
/s/ BRUCE C. BALDWIN
------------------------- Director
Bruce C. Baldwin
/s/ RONALD O. BRAUN
------------------------- Director
Ronald O. Braun
/s/ ELIZABETH A. CONARD
------------------------- Executive Vice President,
Elizabeth A. Conard Secretary and Director
/s/ MICHAEL W. MONAHAN
------------------------- Director
Michael W. Monahan
/s/ ISIDORE SIEGEL
------------------------- Director
Isidore Siegel
/s/ RAYMOND G. SMITH
------------------------- Director
Raymond G. Smith
-19-
<PAGE> 22
JUST LIKE HOME, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page #
------
<S> <C>
Report of independent accountants F-2 - F-3
Consolidated financial statements:
Consolidated balance sheet F-4
Consolidated statements of operations F-5
Consolidated statements of stockholders' equity
(deficit) F-6
Consolidated statements of cash flows F-7 - F-8
Notes to consolidated financial statements F-9 - F-23
</TABLE>
F-1
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
Just Like Home, Inc.
We have audited the accompanying consolidated balance sheet of Just Like Home,
Inc. and subsidiaries as of December 31, 1998 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for
each of the two years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Just Like Home, Inc.
and subsidiaries as of December 31, 1998, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
As discussed in Note 3, the accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. The
Company's recurring losses from operations, negative cash flows from
operations, working capital and stockholders' deficits, and questions regarding
its ability to obtain the financing needed to exercise its rights to purchase
F-2
<PAGE> 24
certain assisted living facilities raise substantial doubt about its ability to
continue as a going concern. Management's plans as to these matters are also
described in Note 3. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Templeton & Company, P.A.
Royal Palm Beach, Florida
July 26, 1999
F-3
<PAGE> 25
JUST LIKE HOME, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
ASSETS
Current assets:
<S> <C>
Cash and cash equivalents $ 88,752
Restricted cash and certificates of deposit 554,668
Accounts receivable 51,802
Property held for sale 1,334,243
Other current assets 55,262
------------
Total current assets 2,084,727
Property and equipment, net 187,359
Other assets, net 30,190
------------
Total assets $ 2,302,276
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 578,041
Accrued liabilities 405,784
Current portion of long-term debt 1,545,680
Other current liabilities 72,299
------------
Total current liabilities 2,601,804
Long-term debt, less current portion 656,349
------------
Total liabilities 3,258,153
------------
Common stock and options subject to put options 924,683
------------
Commitments and contingencies (Notes 3 and 6)
Stockholders' deficit:
Preferred stock, $.01 par value; 2,000,000 shares
authorized; none issued and outstanding --
Common stock, $.001 par value; 13,000,000 authorized;
6,917,601 shares issued and outstanding 6,917
Additional paid-in capital 8,934,753
Accumulated deficit (10,822,230)
------------
Total stockholders' deficit (1,880,560)
------------
Total liabilities and stockholders'
deficit $ 2,302,276
============
</TABLE>
See notes to financial statements.
F-4
<PAGE> 26
JUST LIKE HOME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenue:
Assisted living facilities resident
fees $ 1,839,498 $ 1,737,197
Companion fees 597,846 383,832
Consulting fees -- 336,148
Management fees -- 46,536
Other income 58,685 109,163
----------- -----------
Total revenue 2,496,029 2,612,876
----------- -----------
Expenses:
Assisted living facilities operations 1,992,387 1,431,949
Companion care operations 571,684 470,770
Consulting operations -- 391,792
General and administrative 1,460,201 1,628,609
Depreciation and amortization 623,832 408,718
=========== ===========
Total expenses 4,648,104 4,331,838
=========== ===========
Operating loss (2,152,075) (1,718,962)
Non-operating income (expense):
Interest expense (397,194) (377,248)
Interest income 51,293 82,906
Gain (loss) on sales of assets (249,018) 83,070
Provision for termination of leases (498,737) --
Loss from impairment of property held
for sale and certain goodwill (859,336) (227,000)
Litigation settlement -- (70,000)
----------- -----------
Loss before income taxes (4,105,067) (2,227,234)
Income tax expense -- --
----------- -----------
Net loss $(4,105,067) $(2,227,234)
=========== ===========
Net loss per common share:
Basic $ (.59) $ (0.36)
=========== ===========
Diluted $ (.59) $ (0.36)
=========== ===========
Weighted average shares of common stock outstanding:
Basic 6,909,110 6,269,143
=========== ===========
Diluted 6,909,110 6,269,143
=========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 27
JUST LIKE HOME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common Stock Additional
----------------------- Paid-in Accumulated
No. Shares Amount Capital Deficit Total
---------- ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 3,917,461 $ 3,917 $ 6,135,981 $ (4,489,929) $ 1,649,969
Issuance of common stock:
As director compensation 24,500 25 36,225 -- 36,250
Private placement 1,510,000 1,510 1,508,490 -- 1,510,000
Merger with Community
Assisted Living
Centers, Inc. 1,646,250 1,646 1,644,604 -- 1,646,250
Issuance of put options (214,882) (215) (424,785) -- (425,000)
Net loss for the year
ended December 31, 1997 -- -- -- (2,227,234) (2,227,234)
---------- ------- ----------- ------------ -----------
Balance, December 31, 1997 6,883,329 6,883 8,900,515 (6,717,163) 2,190,235
Cancellation of sub-
scription receivable (10,000) (10) (9,990) -- (10,000)
Issuance of common stock
as compensation 44,272 44 44,228 -- 44,272
Net loss for the year
ended December 31, 1998 -- -- -- (4,105,067) (4,105,067)
---------- ------- ----------- ------------ -----------
Balance, December 31, 1998 6,917,601 $ 6,917 $ 8,934,753 $(10,822,230) $(1,880,560)
========== ======= =========== ============ ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 28
JUST LIKE HOME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(4,105,067) $(2,227,234)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation 79,963 178,457
Amortization 543,869 230,261
Provision for termination of leases 498,737 --
(Gain) loss on sales of assets 249,018 (83,070)
Non-cash loss from impairment of
property held for sale and
certain goodwill 859,336 227,000
Provision for losses on amounts
due from related party -- 75,363
Deferred income taxes -- 17,964
Common stock issued as
compensation 44,272 36,250
Changes in operating assets and
liabilities:
Increase in accounts receivable (15,176) (123,407)
Decrease (increase) in other
current assets 773,768 (661,419)
(Increase) decrease in other
assets 148,469 (13,515)
(Decrease) increase in accounts
payable and accrued liabilities 277,966 (50,993)
(Decrease) increase in other
current liabilities (20,313) (17,661)
----------- -----------
Net cash used in operating activities (665,158) (2,412,004)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (55,318) (232,952)
Proceeds from sales of assets 1,948,651 3,328,857
Proceeds from sale of Project
Marketing Decisions -- 131,250
Loans to related parties -- (179,177)
Deposits into restricted cash accounts -- (389,954)
Purchase of certificates of deposit -- (25,000)
Certificates of deposit redeemed 139,444 --
Payments for other assets -- (80,234)
----------- -----------
Net cash provided by investing
activities 2,032,777 2,552,790
----------- -----------
</TABLE>
See notes to financial statements.
F-7
<PAGE> 29
JUST LIKE HOME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of long-term
debt $ -- $ 172,602
Repayment of long-term debt (1,690,657) (1,940,887)
Financing in excess of costs paid
on build-to-suit facilities 334,267 --
Proceeds from issuances of common
stock -- 1,510,000
Borrowings from related parties -- 170,019
Repayment of related-party loans (63,166) (98,966)
----------- -----------
Net cash used in financing activities (1,419,556) (187,232)
----------- -----------
Net decrease in cash and
cash equivalents (51,937) (46,446)
Cash and cash equivalents, beginning
of year 140,689 187,135
----------- -----------
Cash and cash equivalents, end of
year $ 88,752 $ 140,689
=========== ===========
Supplemental disclosure of cash flow information:
Total interest paid $ 375,445 $ 432,686
=========== ===========
</TABLE>
Non-cash investing and financing transactions:
1997 Transactions:
------------------
o The Company issued 1,646,250 shares of common stock, valued at
$1,646,250, in connection with the merger with Community Assisted
Living Centers, Inc.
o The Company issued 24,500 shares of common stock, valued at
$36,250, as director compensation.
1998 Transactions:
------------------
o The Company issued 44,272 shares of common stock, valued at
$44,272, as officer compensation.
o The Company cancelled a subscription receivable from a prior year
for 10,000 shares of common stock valued at $10,000.
o The Company incurred debt of $336,500 to purchase certain property
held for sale and certain furniture, fixtures, and equipment.
o The Company incurred $571,830 of long-term financing payable to
the contractor in connection with the construction of certain
build-to-suit facilities.
See notes to financial statements.
F-8
<PAGE> 30
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
The accompanying consolidated financial statements present the consolidated
historical results of operations for Just Like Home, Inc. and subsidiaries (the
Company), and includes the accounts of JLH Series I, Inc., which operates seven
leased assisted living facilities; four in Bradenton, Florida, one in Lake
Wales, Florida (opened November 1998), one in Haines City, Florida (opened
November 1998), and one in Orange City, Florida (opened July 1998); Charis
Place, Inc., which operates one leased assisted living facility in Leesburg,
Florida; Just Like Family, Inc., which operates a companion care service to
residents in Manatee County, Florida; JLH Franchising Corporation, which
previously sold franchises for Just Like Home, Inc.; Project Market Decisions,
Inc., which was a consulting practice that was sold in 1997 (see Note 14); JLH
Management Corporation, which previously managed properties for the related
National Foundation on Gerontology, Inc. (see Note 11); Just Like Home IV,
Inc., and JLH Realty, Inc., which are inactive; Just Like Home Corporate
Center, Inc., which owned and operated an office building in Bradenton,
Florida, which was sold in 1998 (see Note 14); and Edgewood Double Drive, Inc.,
which owns a vacant lot held for sale in Sarasota, Florida (see Note 8).
The Company is principally engaged in the business of developing, operating and
managing assisted living facilities located in Florida. The Company also
provides companion services to senior citizens in Florida who, although
generally mobile, need help with the activities of daily living, or are in need
of companionship. Additionally, the Company provided demographic analysis and
related consulting services to the assisted living residential industry in the
eastern United States (see Note 14).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies used in preparing the
accompanying financial statements follows:
Principles of Consolidation
The consolidated financial statements include Just Like Home, Inc. and
all of its subsidiaries. All significant intercompany transactions and
accounts are eliminated in the consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash
equivalents.
F-9
<PAGE> 31
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Accounts Receivable
Accounts receivable relate primarily to amounts due from residents in
the various assisted living facilities.
Revenue Recognition
The Company charges fees to residents of its assisted living
facilities pursuant to short-term operating lease agreements. Resident
fees are recognized as revenue ratably over the term of the related
leases. Companion fees relate to the Just Like Family program and are
recognized when all services have been substantially performed.
Management and consulting fees are recognized as services are
provided.
Depreciation
Depreciation expense is provided for furniture, fixtures, and
equipment using the straight-line method over the estimated lives
ranging from five to seven years.
Property Held for Sale
The Company holds certain parcels of land as property held for sale.
The Company values the property held for sale at the cost to acquire
such property less any provisions relating to impairments on each
parcel of land. Properties expected to be sold within one year after
the balance sheet date are classified as current.
Goodwill and Other Intangible Assets
The Company amortizes costs in excess of fair value of net assets of
businesses acquired using the straight-line method over ten years.
Costs incurred in connection with the issuance of debt are deferred
and amortized over the term of the related debt using the
straight-line method, which approximates the effective interest
method.
Long-Lived Assets
The Company reviews long-lived assets and certain identifiable
intangibles for impairment on a periodic basis and whenever events or
changes in circumstances indicate that the carrying amount of the
asset may not be recoverable. The Company records a provision when it
has been determined that assets are impaired. All remaining goodwill
and certain other intangible assets at December 31, 1998 were written
off (see Notes 6 and 15).
F-10
<PAGE> 32
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Capitalization of Interest
Interest incurred during construction or major renovations is
capitalized.
Earnings (Net Loss) per Common Share
Earnings (net loss) per common share is computed in accordance with
Financial Accounting Standards Board Statement 128 (FAS 128). Basic
earnings (net loss) per common share excludes dilution and is computed
by dividing income available to common shareholders by the weighted
average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the Company's earnings. The effect
of potentially dilutive securities outstanding during 1998 and 1997 is
anti-dilutive; therefore, basic and diluted earnings per share are the
same for both years. Securities that could potentially dilute basic
earnings per share in future periods include warrants to purchase
100,000 shares at $7.20 per share.
Segment Reporting
FAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," which is effective for fiscal years beginning after
December 15, 1997, establishes standards for reporting information
about operating segments in annual financial statements and interim
financial reports issued to shareholders. Generally, certain financial
information is required to be reported on the basis that is used
internally for evaluating performance of and allocation of resources
to operating segments. Management believes that its operations are
focused in the assisted living industry and that financial reports
issued to shareholders are presented on the basis used internally to
evaluate performance. Accordingly, additional information to
disaggregate the Company's results of operations among industry
segments is not presented.
Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the consolidated financial statements. Deferred taxes are recorded
to reflect the tax consequences in future
F-11
<PAGE> 33
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Income Taxes, continued
years of temporary differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year-end
based on enacted tax laws and statutory tax rates applicable to
periods in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax
expense is the tax currently payable for the period and the change
during the period in deferred tax assets and liabilities at the
statutory tax rates.
Management Estimates
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts of consolidated
assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the consolidated financial statements and
the report amounts of consolidated revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentration of credit risk, include temporary cash investments. The
Company places its cash and temporary cash investments with high
credit quality financial institutions. Such balances may exceed the
FDIC insurance limit.
NOTE 3 - GOING CONCERN
The Company's consolidated financial statements have been prepared on a going
concern basis, which contemplate the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying
consolidated financial statements, the Company has incurred substantial
operating losses and negative cash flows from operations for each of the two
years ended December 31, 1998. At December 31, 1998, the Company had a working
capital deficit of approximately $517,000 and stockholders' deficit of
approximately $1,880,000. Additionally, as discussed in Note 6, the Company was
declared in default of certain terms and covenants of the leases for all eight
of the facilities it operates and subsequently executed a
F-12
<PAGE> 34
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 3 - GOING CONCERN, CONTINUED
new short-term lease for the facilities with a purchase option. The Company's
continued operation of such facilities beyond the new lease term depends upon
its ability to obtain alternative financing to exercise its purchase option.
These factors may indicate that the Company will be unable to continue as a
going concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of assets and liabilities that might be
necessary should the Company be unable to continue as a going concern. As
described in Notes 6 and 7, the Company appointed a new chief executive
officer, obtained certain financing and is seeking long-term financing to
exercise its right to purchase the eight assisted living facilities. The
Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
obtain long-term financing to exercise its rights to purchase the assisted
living facilities, and ultimately to attain profitability.
NOTE 4 - RESTRICTED CASH AND CERTIFICATES OF DEPOSIT:
Cash and certificates of deposit were restricted for the following as of
December 31, 1998:
<TABLE>
<CAPTION>
Certificates
Cash of Deposit
-------- ------------
<S> <C> <C>
Resident security deposits $ 38,652 $ --
Resident petty cash funds 3,407 --
Collateral for various mortgage debt -- 104,750
Escrow account related to Health
Care REIT, Inc. (see Note 6) -- 407,859
-------- --------
$ 42,059 $512,609
======== ========
</TABLE>
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and includes the following at December
31, 1998:
<TABLE>
<S> <C>
Furniture, fixtures, and equipment $ 290,381
Less accumulated depreciation (103,022)
----------
$ 187,359
==========
</TABLE>
F-13
<PAGE> 35
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 6 - DESCRIPTION OF LEASING ARRANGEMENTS
The Company's leasing arrangements for the assisted living facilities which it
operates and for other operating leases are described as follows:
Assisted Living Facilities Financing
On April 30, 1997, the Company entered into a financing agreement with
Health Care REIT, Inc. (HCR) for up to $41.8 million in operating
lease financings for assisted living facilities. During 1997, the
Company sold four facilities which it owned and operated to HCR and
leased back such facilities pursuant to a ten-year lease agreement
(the 1997 lease) with an option to extend the lease for an additional
ten years. No profit was recognized on such transaction. During 1998,
the construction of three additional facilities was completed with HCR
financing on a build-to-suit basis, and the Company entered into
ten-year lease agreements with options to extend the leases for
additional ten-year periods for each of the three facilities. The
costs incurred by the Company to build the facilities in excess of the
HCR financing was deferred and amortizable over the terms of the
leases (see below). Also during 1998, the Company sold a facility
originally acquired in 1996 to HCR and entered into a ten-year lease
agreement with an option to extend the lease for an additional ten
years.
The Company originally accounted for the 1997 lease as an operating
lease and removed the assets and related financing from its
consolidated balance sheet. During the second quarter of 1998, the
Company capitalized the 1997 lease due to the modification of certain
lease terms.
As of December 31, 1998, the Company was in default with respect to
certain substantive terms and covenants of all of its leases with HCR
and such leases and the financing agreement were effectively
terminated. On February 19, 1999, the Company received formal
termination notices from HCR.
During April 1999, the Company reached a settlement agreement with HCR
which provided for the following:
o The execution of a single lease agreement for all eight facilities
for a nine-month term commencing May 1999.
o The payment of $200,000 for HCR's legal fees and expenses.
o The payment of rent and other expenses due HCR through April 1999
from funds held in escrow (see Note 4).
F-14
<PAGE> 36
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 6 - DESCRIPTION OF LEASING ARRANGEMENTS, CONTINUED
Assisted Living Facilities Financing, continued
o The settlement of certain litigation with the general contractor
for two of the facilities built in 1998 (see Note 8).
o The appointment of Robert Lohr as the Company's chief executive
officer (see Note 7).
o The granting of the right to the Company to purchase the eight
facilities for $10,406,510 for the first four months of the lease,
increasing by .75% each month through the end of the ninth month
at which time the right terminates.
o The establishment of a $270,000 letter of credit in favor of HCR
as additional collateral for the payment of rent under the new
lease.
As a result of the above transactions, the Company recorded the
following provision for termination of leases in its 1998 financial statements
which is comprised as follows:
<TABLE>
<CAPTION>
Item Amount
---------------------------------------------- ------
<S> <C>
Write off of costs in excess of financing
provided for three build-to-suit leases $ 237,563
Write off of deferred financing costs 196,688
Write off of goodwill associated with the
acquisition of certain assisted living
facilities 241,442
Write off of capitalized costs and lease
obligations for leases capitalized and
subsequently terminated during 1998 (376,956)
Accrual of HCR legal fees and expenses 200,000
---------
Total provision for termination of leases $ 498,737
=========
</TABLE>
Other Operating Leases
The Company is obligated under operating lease agreements for office
space at December 31, 1998. Future minimum lease payments required under these
leases are $19,944 in 1999, $20,670 in 2000, and $17,750 in 2001. During May
1999, the Company reduced its office space resulting in net reductions to its
future minimum lease commitments.
Total rent on all operating leases for the years 1998 and 1997 is
summarized as follows:
F-15
<PAGE> 37
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 6 - DESCRIPTION OF LEASING ARRANGEMENTS, CONTINUED
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Assisted living facilities $204,027 $124,014
Other 37,534 --
-------- --------
Total $241,561 $124,014
======== ========
</TABLE>
NOTE 7 - SUBSEQUENT TRANSACTIONS WITH PERIDOT ENTERPRISES, INC.
During April 1999, the Company entered into a letter agreement with Peridot
Enterprises, Inc. (Peridot), a company controlled by Robert Lohr, which
transferred operating control of the Company to Mr. Lohr and provided certain
financing for the continued operation of the Company. As provided under the
agreement, Peridot subsequently assigned its rights to an investor group. In
conjunction with this agreement, certain settlement arrangements were executed
in connection with certain outstanding litigation and other matters (see Note
6). The terms of the letter agreement are summarized as follows:
o The investor group purchased 400,000 shares of the Company's
common stock for $100,000.
o The investor group agreed to purchase 1,800,000 shares of
convertible preferred stock for $900,000 (convertible into
2,520,000 shares of common stock).
o Mr. Lohr was named the Company's chief executive officer.
o Mr. Lohr assumed control of two voting trusts which include a
substantial interest in the Company's common stock.
o Mr. Lohr was entitled to name two additional board members.
NOTE 8 - LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998:
Mortgage note payable (in default), interest at
prime plus 1% (8.75% at December 31, 1998);
satisfied in May 1999 by conveyance of a vacant
lot held for sale. $ 750,000
Note payable, interest at 5.5%, payable in monthly
principal and interest payments of $647 through
September 1999, non-collateralized. 5,686
F-16
<PAGE> 38
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 8 - LONG-TERM DEBT, CONTINUED
Note payable to an individual, interest at prime plus 1%
(8.75% at December 31, 1998); interest only due monthly;
all principal due in May 2000, collateralized by certain
property held for sale commencing in 1999. 288,044
Note payable, interest at 9%, monthly principal and
interest payments of $364 through July 2002,
collateralized by equipment. 13,026
Notes payable (in default) to certain individuals,
interest at 8.5%, principal and interest due in 1999,
collateralized by certain property held for sale. 300,000
Contractor settlement payable, principal and interest of
10% due through May 2000, collateralized by facility
under operating lease (see Note 6). 571,830
Note payable, principal and interest of 9.5%, due in
monthly installments through September 2000,
collateralized by equipment. 34,604
Note payable to related party, interest at 10% payable
in monthly installments of $22,581 plus interest
beginning in September 1998. 238,839
-----------
2,202,029
Less current portion (1,545,680)
-----------
$ 656,349
===========
The following table presents principal payments required on
long-term debt for each of the years subsequent to December 31,
1998:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ------
<S> <C>
1999 $1,545,680
2000 631,682
2001 13,436
2002 11,231
----------
$2,202,029
==========
</TABLE>
F-17
<PAGE> 39
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 9 - INCOME TAXES
The components of the net deferred tax asset recognized in the
accompanying consolidated balance sheet at December 31, 1998 are
as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforward $ 2,757,512
Accrued liabilities not deductible
until paid 86,480
Difference between book and tax bases
of property held for sale 196,493
Other 167,201
-----------
3,207,686
Valuation allowance (3,207,686)
-----------
Net deferred tax assets $ --
===========
</TABLE>
The following is a reconciliation of tax computed at the
statutory federal rate to the income tax expense in the
consolidated statements of operations:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------
1998 1997
------------------------ -------------------
Amount % Amount %
----------- ---- --------- ---
<S> <C> <C> <C> <C>
Tax computed at statu-
tory federal rate $(1,395,723) (34)% $(751,151) (34)%
Effect of:
Goodwill amortization
and write off 355,612 9 -- --
Litigation settlement -- -- 23,800 1
Change in valuation
allowance 1,118,255 27 912,751 41
Other (78,144) (2) (185,400) (8)
----------- ---- --------- ---
$ -- --% $ -- --%
=========== ==== ========= ===
</TABLE>
For federal income tax purposes, net operating loss carryfowards
aggregating approximately $7,334,000 are available at December
31, 1998 which expire $25,000 in 2008, $122,000 in 2009, $892,000
in 2010, $1,484,000 in 2011, $1,838,000 in 2012, and $2,973,000
in 2013. The loss carryforwards expiring in the years 2008 and
2009 are generally subject to separate return limitations.
F-18
<PAGE> 40
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 10 - COMMUNITY ASSISTED LIVING CENTERS, INC. MERGER
Effective April 10, 1997, the Company merged with Community
Assisted Living Centers, Inc. (CALCI). Each CALCI share of common
stock was converted into one and one-half shares of common stock
of the Company. The Company issued 1,646,250 shares of common
stock having an aggregate value of $1,646,250. The merger was
accounted for using the purchase method of accounting and,
accordingly, the purchase price was allocated to the fair market
value of assets acquired. The goodwill resulting from the merger,
of $867,305, was being amortized over a five-year period (see
Note 15).
The operating results of CALCI are included in the Company's
consolidated results of operations from the date of the merger.
The following table reflects pro forma combined results of
operations of the Company and CALCI for the year ended December
31, 1997 assuming that the merger had taken place and was
recorded at the beginning of the year:
Revenue $ 2,615,866
Net loss $(2,381,980)
Net loss per common share:
Basic $ 0.36
Diluted $ 0.36
Weighted average shares of common stock
outstanding used in computation:
Basic 6,568,760
Diluted 6,568,760
NOTE 11 - RELATED PARTY TRANSACTIONS
Transactions with National Foundation on Gerontology, Inc.
In 1994, the Company sold three operating residential facilities and
certain vacant land to National Foundation on Gerontology, Inc.
(Foundation), a not-for-profit corporation. The former co-chairman of
the Board of Directors of the Company served as President of the
Foundation and his son served as Foundation President and Director
during 1997. The Company received a $500,000 second mortgage note with
interest of 10.5% from the Foundation in connection with this sale.
Principal and interest on the note were payable solely from available
cash from the Foundation's operations after payment of debt service on
the primary mortgage.
The Company was recognizing profit on the sale under the cost recovery
method, whereby profit is recognized to the extent cash received
exceeds the cost of the property sold. For financial reporting
purposes, the $500,000 subordinated note
F-19
<PAGE> 41
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 11 - RELATED PARTY TRANSACTIONS, CONTINUED
Transactions with National Foundation on Gerontology, Inc. continued
receivable was presented net of the related deferred gross profit. No
payments were received on this note in 1997 and, during 1998, the note
was cancelled without payment. Therefore, no gross profit or interest
on this note was recognized.
During 1994, the Company also entered into a management and marketing
agreement with the Foundation whereby the Company was entitled to an
annual fee of 9% of the gross revenues derived from the managed
facilities. Payment of the fee was subordinated to the Foundation's
debt service obligations. During 1997, the management and marketing
fee was $37,188. The agreement was terminated in April 1998 and no
fees were recognized as revenue during 1998.
In connection with the termination of its management agreement with
the Foundation during 1998, the Company forgave a promissory note in
the amount of $252,015 together with any accrued interest thereon. The
forgiveness had no effect on results of operations in 1998 since all
amounts due from the Foundation were reserved in prior years.
Expense Allocation
During 1997, the Company allocated certain administrative expenses
amounting to $11,090 to Stancon Management Corporation, a company
50%-owned by the former co-chairman of the Company's Board of
Directors.
Office Lease
During 1998, the Company leased office space from a company controlled
by the Company's former chief executive officer pursuant to an
informal, month-to-month arrangement. Total rent charged in 1998
amounted to $32,100.
NOTE 12 - COMMON STOCK AND OPTIONS SUBJECT TO PUT OPTIONS
In 1996, a corporation which is a 5.5% holder of the Company's common stock
filed a lawsuit against the Company in the Twelfth Judicial Circuit of Florida.
The plaintiff corporation alleged that the 214,882 common shares received in
December 1994 should have been freely tradable and not subject to Rule 144
restrictions. In 1997, the Company entered into a settlement agreement in which
the Company agreed to purchase a parcel of land for $70,000, and to repurchase
the above
F-20
<PAGE> 42
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 12 - COMMON STOCK AND OPTIONS SUBJECT TO PUT OPTIONS, CONTINUED
common shares at $4.00 per share in 1999, at the shareholder's option.
Additionally, the Company issued an option to the stockholder to purchase
50,000 additional shares of common stock at an option price of $2.00 per share.
The Company would be required to repurchase these shares at $4.00 per share as
described above. The Company charged the present value of the obligation to
expense in 1996. The common stock related to this transaction was recorded to
common stock and options subject to put options in 1997.
Subsequent to December 31, 1998, the Company and the shareholder agreed in
principle to the following:
o The Company will issue 1,919,056 of convertible preferred stock to
the shareholder in exchange for the common stock and options
subject to put options.
o The preferred stock will be convertible into the Company's common
stock after eight months from issuance at the rate of 1.4 common
shares for each preferred share (2,686,678 common shares).
Consummation of the agreement is subject to approval by a majority of the
Company's shareholders for the authorization and issuance of additional shares
of preferred stock. The common stock and options subject to put options will be
reclassified as preferred stock when the exchange is consummated.
NOTE 13 - STOCK OPTIONS AND WARRANTS
Stock Options
In March 1995, the Company adopted a Stock Option Plan (the "Plan")
under which 200,000 shares of common stock are reserved for issuance
upon exercise of stock options. Options may be granted to all eligible
employees of the Company, including officers and non-employee
directors and others who perform services for the Company.
Options are granted under the Plan on such terms and at such prices as
determined by the Board of Directors, except that the per share
exercise price of incentive stock options cannot be less than the fair
market value of the common stock on the date of the grant. Each option
is exercisable after the period or periods specified in the option
agreement, but no option may be exercisable after the expiration of
ten years from the date of grant.
F-21
<PAGE> 43
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 13 - STOCK OPTIONS AND WARRANTS, CONTINUED
Stock Options, continued
The following table summarizes the stock options outstanding under the
Plan:
<TABLE>
<CAPTION>
Options Number of Weighted
Available for Shares Average
Future Grant Under Option Option Price
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1997 114,166 85,834
Options cancelled 85,834 (85,834) $ 8.97
------- ------
Balance, December 31,
1997 and 1998 200,000 --
======= =======
</TABLE>
Disclosure of Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation expense has been
recognized for the stock option plan.
Warrants
During 1995, the Company issued warrants to purchase up to 100,000
shares of common stock at $7.20 per share. The warrants are
exercisable for a period of five years, beginning in 1996. No shares
have been purchased with these warrants as of December 31, 1998.
NOTE 14 - SIGNIFICANT SALES OF ASSETS
Sale of Project Market Decisions
Effective July 1, 1997, the Company sold all of the assets of Project
Market Decisions, Inc. d/b/a PMD, Inc. (PMD) for $175,000, which
included $125,000 in cash and a subordinated promissory note of
$50,000. The Company recognized a gain on the sale of PMD of $75,772
which has been included in the consolidated statements of operations
for the year ended December 31, 1997. The subordinated promissory note
calls for interest to accrue at 8% per annum on the unpaid principal
balance and for principal payments of $6,250 commencing October 1,
1997 to July 1, 1999.
F-22
<PAGE> 44
JUST LIKE HOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 14 - SIGNIFICANT SALES OF ASSETS, CONTINUED
Sale of Just Like Home Corporate Center
The loss on sales of assets for the year ended December 31, 1998
primarily relates to the Company's sale of an office complex which it
owned, operated, and occupied.
NOTE 15 - IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
DISPOSED OF
In accordance with FAS No. 121, long-lived assets to be disposed of must be
reported in the consolidated balance sheet at the lower of their carrying
amount or the fair value less costs to sell. The Company holds certain property
for sale which it expects to dispose of during 1999. During 1998 and 1997, a
loss on impairment of property held for sale was recorded in the amount of
$295,588 and $227,000, respectively.
Also, as of December 31, 1998, the Company wrote off the remaining unamortized
goodwill associated with the CALCI merger (see Note 10) in the amount of
$563,748.
NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, which include
certificates of deposit and long-term debt, approximates the fair values of
those instruments. Fair values have been estimated based upon expected cash
flows at rates currently available to the Company for financial instruments
with similar terms and remaining maturities.
NOTE 17 - FOURTH QUARTER ADJUSTMENTS
During the fourth quarter of 1998 and 1997, the Company recorded the following
adjustments:
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Impairment of value of property held
for sale (see Note 15) $ 212,486 $170,000
Allowance for uncollectible
receivables (see Note 11) -- 75,363
Provision for lease termination (see
Note 6) 498,737 --
Write off of certain goodwill (see
Note 15) 563,748 --
Reclassification of certain revenue
as reduction of capitalized costs 166,000 --
---------- --------
$1,440,971 $245,363
========== ========
</TABLE>
F-23
<PAGE> 1
EXHIBIT 10(g)
STOCK ISSUANCE AGREEMENT
This Stock Issuance Agreement is entered into effective as of
September 20, 1999, by and among Just Like Home, Inc., a Florida corporation
(the "Corporation"), Jeffrey S. Russell, as Trustee of the Jacqueline D.
Russell Irrevocable Trust u/a/d December 29, 1994; Jeffrey S. Russell, as
Trustee of the Jeanne M. Desrosiers Irrevocable Trust u/a/d December 29, 1994;
Jeffrey S. Russell, as Trustee of the David P. Desrosiers Irrevocable Trust
u/a/d December 29, 1994; Jeffrey S. Russell, as Trustee of the John C.
Desrosiers Irrevocable Trust u/a/d December 29, 1994; Jeffrey S. Russell, as
Trustee of the Danielle Kanter Irrevocable Trust u/a/d December 29, 1994;
Jeffrey S. Russell, as Trustee of the Caroline Daher Irrevocable Trust u/a/d
December 31, 1994 (collectively, the "Trusts"), and Joann Desrosiers ("JD"). JD
and the Trusts are collectively sometimes hereinafter referred to as the
"Shareholders."
BACKGROUND
Initially, JD owned an aggregate of 75,000 shares of the common stock
of the Corporation (the "Common Stock"), as evidenced by share certificate No.
JLH 0036, and Whitaker's Landing, Inc. ("Whitaker's Landing") owned 139,000
shares of the Common Stock, as evidenced by share certificate JLH 0035.
Subsequent to the initial issuance of the Common Stock, and in settlement of
that certain litigation filed in the Circuit Court of the Twelfth Judicial
District in and for Sarasota County, Florida, Case No. 96-1978-CA-01, the
Corporation, the Shareholders, Just Like Home, Inc., a Nevada corporation,
Community Assisted Living Centers, Inc., a Florida corporation, and Richard T.
Conard and Elizabeth A. Conard (Richard T. Conard and Elizabeth A. Conard being
referred to collectively as the "Conards") entered into a settlement agreement
(the "Settlement Agreement").
Pursuant to the terms of the Settlement Agreement, the Corporation
granted to JD the option to purchase an additional 17,500 shares of Common
Stock for a purchase price of $2.00 per share and granted to Whitaker's Landing
an option to purchase an additional 32,500 shares of Common Stock for a
purchase price of $2.00 per share (collectively, the "Additional Purchase"). In
addition, pursuant to the terms of the Settlement Agreement, among other
rights, the Shareholders had the right to sell to the Corporation and the
Corporation had the obligation to purchase all shares of Common Stock owned by
the Shareholders for $4.00 per share (the "Put").
In January of 1999, Whitaker's Landing transferred its stock and its
rights pursuant to the Settlement Agreement to the Trusts; however, this
transaction has not yet been recorded on the books of the Corporation.
The parties have agreed to extend the exercise period for the
Shareholders to exercise the Additional Purchase and to exercise the Put. In
lieu of exercising the Additional Purchase and the Put, the parties desire to
enter into this Agreement.
Now, therefore, in consideration of the mutual promises and covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1
<PAGE> 2
TERMS
1. Issuance of Common Stock. On or before the Closing Date, the
Corporation will issue to the Shareholders an aggregate of 2,686,678 shares of
Common Stock of the Corporation, of which 940,324 shares of Common Stock shall
be issued to Joann Desrosiers and 1,746,341 shares of Common Stock shall be
issued to the Trusts.
2. Cancellation of Common Stock. On the Closing Date, provided that
the conditions of this Agreement have been fulfilled, including the Corporation
issuing to the Shareholders the Common Stock as set forth in Section 1 of this
Agreement, the shares of Common Stock owned by the Shareholders and represented
by share certificate Nos. JLH 0035 and JLH 0036 shall be cancelled and the
Shareholders shall have no further rights with respect to such Common Stock,
nor shall the Shareholders have the right to exercise the Put or the Additional
Purchase. The Shareholders will return certificates Nos. JLH 00035 and JLH
00036 to the Corporation's stock transfer agent for cancellation.
3. Closing. The closing of the transactions contemplated by this
Agreement shall take place on or before September 30, 1999 (the "Closing
Date"), at a time mutually convenient to the parties, at the law offices of
Abel, Band, Russell, Collier, Pitchford & Gordon, Chartered, 240 S. Pineapple
Avenue, Sarasota, Florida 34236 (or at such other time or place as the parties
shall mutually agree).
4. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of Florida.
5. Counterparts; Facsimile Signatures. This Agreement may be executed
simultaneously in two (4) or more counterparts, each of which shall constitute
one and the same agreement. The facsimile signatures of any party hereto shall
be deemed to be an original signature of such party, valid and effective for
all purposes.
6. Persons Bound. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns. Whenever required by the context, the
singular number shall include the plural, the plural the singular, and the use
of any gender shall include any other gender as appropriate in the context.
7. Attorneys' Fees. The Corporation agrees to pay to the Shareholders
on the Closing Date up to $2,000.00 for the attorneys' fees and expenses
incurred by the Shareholders in connection with the negotiation and preparation
of this Agreement. Notwithstanding the foregoing, if a dispute arises between
the parties relative to the terms of this Agreement, the prevailing party shall
be entitled to recover reasonable attorney fees and costs.
8. Severability. If any term or provision of this Agreement shall be
unlawful, then such term or provision shall be null and void, but the remainder
of this Agreement shall remain in full force and effect.
9. Other Provisions. Other than as specifically set forth in this
Agreement, all other provisions of the Settlement Agreement and other
agreements among the parties, are hereby acknowledged and affirmed, and all
such other provisions shall remain in full force and effect.
2
<PAGE> 3
In witness whereof, the parties to this Agreement have executed this
Agreement as of the date first above written.
CORPORATION
Just Like Home, Inc., a Florida corporation
By: /s/ Robert C. Lohr, CEO
------------------------------------------
THE TRUSTS
By: /s/ Jeffrey S. Russell, as trustee
------------------------------------------
JD
/s/ Joann Desrosiers
------------------------------------------
3
<PAGE> 1
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
AS OF SEPTEMBER 30, 1999
1. Just Like Home, Inc., a Florida corporation
2. Just Like Family, Inc., a Florida corporation
3. Just Like Home IV, Inc., a Florida corporation (Inactive)
4. Project Market Decisions, Inc., a Nevada corporation
5. Just Like Home Corporate Center, Inc., a Florida corporation
6. JLH Series I, Inc., a Florida corporation
7. JLH Management Corp., a Florida corporation
8. JLH Franchising Corp., a Florida corporation
9. Edgewood Double Drive, Inc., a Florida corporation
10. JLH Realty, Inc., an Ohio corporation
11. Charis Place, Inc., a Florida corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 88,752
<SECURITIES> 0
<RECEIVABLES> 51,802
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 55,262
<PP&E> 290,381
<DEPRECIATION> 103,022
<TOTAL-ASSETS> 2,302,276
<CURRENT-LIABILITIES> 2,601,804
<BONDS> 656,349
0
0
<COMMON> 6,917
<OTHER-SE> (1,887,477)
<TOTAL-LIABILITY-AND-EQUITY> 2,302,276
<SALES> 2,437,344
<TOTAL-REVENUES> 2,496,029
<CGS> 0
<TOTAL-COSTS> 4,648,104
<OTHER-EXPENSES> 1,952,992
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,105,067)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,105,067)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,105,067)
<EPS-BASIC> (0.59)
<EPS-DILUTED> (0.59)
</TABLE>
