Registration of Securities (General Form) · Form 10
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-12G Form 10 74 327K
2: EX-3.I Certificate of Incorporation 10 34K
3: EX-3.II Bylaws of Apple Homes Corporation 10 43K
4: EX-10.1 Employment Agreement 5 31K
5: EX-10.2.1 Agreement 1 8K
6: EX-10.2.2 Agreement 1 8K
7: EX-16.1 Letter From Accountant 1 10K
8: EX-16.2 Letter of Serotta Maddocks Evans & Co., Cpa's 1 8K
9: EX-21 Subsidiaries 1 6K
10: EX-23.1 Consent 1 7K
11: EX-23.2 Consent 1 8K
12: EX-23.3 Consent 1 7K
13: EX-27 Financial Data Schedule 1 10K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
Apple Homes Corporation
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(Exact name of registrant as specified in its charter)
Delaware 13-3525328
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
124 North Belair Road
Evans Georgia 30809
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(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code 706-650-2015
Securities to be registered pursuant to Section 12(b) of the Act
None
Securities to be registered pursuant to Section 12(g) of the Act
Common Stock, $.002 Par Value
Item 1. Business
General Information
Apple Homes Corporation (the "Company") is a retailer of factory built
manufactured homes, known in the industry as manufactured housing. It presently
operates 12 retail sales locations-four in Augusta, Georgia, two in Thomson,
Georgia, and one each in Wrens, Washington, Statesboro and Waynesboro, Georgia
and Aiken and Anderson, South Carolina. It also operates a reconditioning and
used sales lot in Augusta, this lot houses its Mobile Air Systems subsidiary
offering air conditioning sales and service to manufactured home owners. All of
the Company's retail sales locations and other mobile home operations use the
trade name "Apple Homes".
The Company presently purchases homes for resale from six manufacturers
located in the southeastern United States. Purchases are financed through
wholesale floor plan financing lines totaling $10,275,000 provided by three
major financial institutions and three local banks. To promote retail sales and
generate additional fee income, the Company assists its customers in finding
mortgage financing for the purchase of homes and also places homeowners
insurance for home buyers.
The Company is also involved in development and sale of two adjoining real
estate subdivisions in Richmond County, Georgia. The sites, known as Mayfair
Acres and The Timbers, consist of 47 developed lots, of which seven lots remain
available for sale, and 10 rental homes owned by the Company. The Company also
owns 6.3 acres of undeveloped land in the area which it is presently considering
developing by installing roads and utilities and obtaining the necessary zoning
approval. The Company believes that the property may be subdivided into
approximately 40 lots for sale to retail purchasers of its manufactured homes.
The Company was organized as a Delaware corporation on April 17, 1989 under
the name PLAM Properties, Inc. It changed its name to Mayfair Homes Corporation
in 1993 and again to Apple Homes Corporation in 1997. It presently operates
three of its retail sales centers and its used sales lot under its own name and
the remaining nine retail sales centers through six wholly or partially owned
subsidiaries: Augusta Housing Center, Inc., which is 100% owned and operates one
center; Big Daddy's Mobile Homes, Inc., 80% owned and operating two centers;
Evans-Lanier, Inc., 80% owned and operating two centers; Apple Homes, Inc., 100%
owned and operating one center; J.C. Homes, Inc., 80% owned and operating one
center; and Tim Phillips Homes, Inc., 100% owned and operating two centers.
(2)
Industry Overview
Manufactured homes are complete single family residences built in a factory
and transported to the site on which they are to be located. These homes consist
of two types: manufactured homes, which are constructed on a chassis equipped
with wheels and are transported by tow trucks to their destination; and modular
homes, which are not equipped with a chassis and are transported on flat bed
trailers. Substantially all of the Company's sales are of manufactured homes.
Manufactured homes offer most of the amenities of and are generally built with
the same materials as site-built homes. They are produced in sections, also
referred to as "floors;" finished homes may consist of one or more sections.
Because of their lower costs of construction when compared to costs of
site-built homes, manufactured homes have historically served as one of the most
affordable alternatives for the home buyer. According to statistics compiled by
the Georgia Manufactured Housing Institute for 1998, the average cost per square
foot of a single-section manufactured home in the state of Georgia (where 84% of
the Company's sales originated in that year) averaged $23 for a manufactured
home, compared to an average cost of $55 per square foot for a site-built home
(in each case excluding land costs).
Since they are relatively less expensive than traditional housing,
manufactured homes have been an attractive means for home buyers to overcome the
obstacle of large down payments and high monthly mortgage payments. According to
the Manufactured Housing Institute, industry wide domestic shipments accounted
for 29.6% of the overall new housing market in the United States during 1998.
The use of manufactured housing in the southeastern United States, in which the
Company's primary market area is located, is even greater than for the nation as
a whole. The Georgia Manufactured Housing Association has reported that the
State of Georgia alone has more than 30 plants manufacturing housing and over
1,000 manufactured home retail sales locations. During 1997, according to the
National Conference of States on Building Codes and Standards, the states of
Georgia and South Carolina (which now comprise the principal market area for the
Company) ranked third and fifth in manufactured home shipments, and Georgia was
the leading producer of manufactured homes, a ranking it has held since 1984.
Notwithstanding the increase in demand in recent years, the manufactured
housing industry is cyclical and is affected by many of the same factors that
influence the housing industry generally, including inflation, interest rates,
availability of financing, regional economic and demographic conditions and
(3)
consumer confidence levels, as well as the affordability and availability of
alternative housing such as apartments, condominiums and conventional site-built
homes. Accordingly, there can be no assurance that demand will continue at
present levels or that the Company's plans of capitalizing upon it by expanding
the size of its retail sales operations will be successful.
Sales of manufactured homes are typically conducted in retail sales centers
whose operators range from small proprietors to large regional or national
dealerships, many of whom manufacture their own retail products. Because of
economies of scale, the ability to obtain larger rebates and discounts from
manufacturers and better financing for inventory and customers, these large
retail dealerships have a distinct advantage over small single location
operators. The Company's goal is to move its operations toward the level of
these large dealership networks.
The Company's Retail Operations
Commencing in 1992 with the acquisition of its first two retail sales
centers, the Company's sales operations have expanded substantially over the
past five years. Sales during this period, which are not necessarily indicative
of future performance by the Company, have been as follows:
· Download Table
Year Ended March 31,
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1999 1998 1997 1996 1995 1994
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Home Units Sold (1) 792 639 399 278 195 112
Retail Sales 12 9 6 3 3 2
Centers Owned (2)
Weighted Average 66 71 67 93 65 56
Unit Sales per
Center
(4)
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(1) Sales are divided between single-section and multi-section homes, with
single-section homes accounting for 34% and multi-section homes accounting
for 66% of sales in fiscal 1999. The range of home sale prices during
fiscal 1999 was $16,500 for the least expensive single-section unit to
$94,000 for the most expensive multi-section home, excluding land costs.
(2) Based on number of centers open at least three months during the period.
The Company believes that these statistics are typical for retail sales
dealerships in its primary market area. In addition to sales of new manufactured
homes, the Company also deals in used homes acquired in trade-ins, which account
for approximately 4% of sales.
Sales are conducted through commissioned retail sales representatives located at
each sales center. Each sales center typically has onsite at any given time from
15 to 20 manufactured home units in a variety of models and price ranges,
although some sales centers carry a smaller inventory. All units are equipped
with basic appliances and some are furnished, and every unit is ready to move
onto the customer's site on purchase.
To enhance sales, the Company provides assistance to its customers in locating
purchase money financing. The Company has agreements with several large retail
finance companies including Green Point, Bergen, Bombardier, Deutsche Bank and
Dynex, under which it introduces its customers who require purchase money
financing. The Company receives fees for these services in the form of financial
participation. Revenues from this source were $136,460 for fiscal 1998 and
$430,000 for fiscal 1999.
As part of its placement of retail financing for its customers, applications and
supporting documentation required by the lenders are submitted by the Company.
In certain cases, if a lender discovers a loan has been made on the basis of an
erroneous application, it will look to the Company for recourse. This practice,
which is common in the industry, has resulted in contingent recourse liability
to the Company that, at March 31, 1999 amounted to $859,000. Industry statistics
and Company performance indicate that an average loss of 10-15% of this amount
can be expected if the Company has to repossess a home. The Company does not
believe that this contingent liabilty is significant to its operations or
financial condition, however, as it is in a position to relieve itself of this
liability in any given case by repossessing and reselling the home in question.
The Company also receives significant revenues from various commissions and
rebates. The sources of these revenues include the placement of homeowner's
insurance for American Modern Insurance Company, the placement of advertising
in-house (which commenced in fiscal 1999), rebates on freight contracts for the
delivery of its inventory, the sale of repossessed homes for lending
institutions, furniture sales and other miscellaneous items. Total commission
and rebate income was $107,000 for fiscal 1998 and $231,000 for fiscal 1999.
(5)
The Company's retail sales centers each consist of a tract of land ranging from
one to six acres on which 15 to 20 manufactured home units are displayed, and a
sales office. The land on which all centers are located is leased by the Company
with the exception of one lot in Thomson Georgia which it purchased in March
1999 for $275,000 paid by a purchase money mortgage, and one lot formerly
operated in Pelzer South Carolina which it purchased in September 1998 for a
price of $50,000. The sales offices on the lots are manufactured homes used for
that purpose. The Company owns or has financed 7 offices, rents 2 offices from
unrelated parties, rents 3 offices from minority shareholders and rents 3
offices from the Company President The Company also owns three tow trucks and
two escort vehicles to transport units sold to customer sites, as well as other
necessary equipment.
Each sales center has personnel available to transport each purchased home to
the customer's site and to install and make it fully operational at the site.
Some of these personnel are Company employees, while others are independent
contractors who supply their own transportation equipment. The equipment and
personnel used for these activities typically service more than one location,
thus reducing overall costs of installation and transportation. The Company
believes that by expanding its retail sales network to new locations, it will be
able to enhance its profitability per inventory unit by emphasizing integration
of these activities among these new and existing sales centers.
In addition to its retail sales activities, the Company went into the air
conditioning sales and service business in January 1999 with the purchase of
Mobile Air Systems, Inc.("MAS"). The subsidiary was purchased from Robert Steed
for a price of $257,500, of which $30,000 was paid in cash and the balance by
issuing the owner 130,000 shares of Company Common Stock at its then market
price of $1.75 per share. Gross revenues for MAS during calendar 1998 were
$595,500 and its profit for the year was $76,349. As of the date of its purchase
by the Company, MAS had a net worth per its books of $76,449.
Real Estate Development Activities
The Company's original business, commenced in 1989, involved a real estate
subdivision and development in the Augusta, Georgia area known as Mayfair Acres.
The first phase of this development, which consists of 11 acres, contains 29
developed lots, and the remaining 6.7 acres are not yet developed. The developed
lots were acquired by the Company in 1989 for $30,000 and were developed at a
cost of $160,000. The Company is presently marketing the remaining seven
developed lots on the site, four of which include a manufactured home installed
(6)
on the lot. It is considering the development of the remaining 6.7 acres in
Mayfair Acres into a subdivision with approximately 40 lots for sale to
prospective retail purchasers.
In addition to its Mayfair Acres subdivision, the Company purchased 18 homes in
The Timbers, a subdivision located near Mayfair Acres. Nine of the homes were
purchased from Robert S. Wilson, a Company director and promoter, and Ted C.
Smith, a stockholder of the Company, for a purchase price of $200,000
(approximately the cost of these housing units to the sellers). The other nine
houses were acquired from LEAP Associates, a partnership of which Mr. Wilson is
an owner, for 70,500 shares of Common Stock. Ten of the 18 houses are rented and
eight have been sold under installment sales contracts for prices ranging from
$30,000 to $42,000.
In May 1999, the Company sold installment contracts on 18 of the homes in
Mayfair Acres and The Timbers for $320,000, leaving it with a total of 7 homes
and/or lots and the undeveloped acreage owned in the two sites.
Suppliers
The Company currently purchases manufactured homes from six manufacturers, all
located in the Southeastern United States. Two of these suppliers, General
Housing of Waycross, Georgia and Bellcrest Homes of Millen, Georgia accounted
for over 75% of inventory purchased in fiscal 1999. Eight of the Company's
retail sales centers sell General Housing homes exclusively, and the inventory
costs at those centers are borne by that supplier. The Company purchases
inventory units on a deal-by-deal basis and has one year contracts with each
supplier, the terms of which are reviewed annually. While the Company does not
anticipate any problems in continued supply of product from these suppliers and
believes that it can replace any of them by substituting the products of other
manufacturers located in the Southeastern region, the loss of any of its major
suppliers may have a material adverse effect on the Company's operations. Each
supplier offers incentive payments to the Company based upon its volume of
purchases. During fiscal 1999 these incentives amounted to an average of $2,150
per unit.
Dealer Financing
The Company finances purchases of manufactured housing units through "floor
plan" financing. Under these financing arrangements, the Company borrows the
purchase price for each manufactured home it acquires from a bank or other
(7)
lending institution pursuant to a master contract, each loan being secured by
the unit purchased with its proceeds. When the unit is sold to a retail
customer, the Company must pay off the loan and obtain a release of the lender's
security interest, in order to give the buyer free and clear title to the
property.
The Company now has floor plan financing contracts with six lenders, three of
whom are major financial institutions and three are local banks. The Company's
floor plan financing lines now total $10.275 million at interest rates of 1% to
2% over prime. The lines are reviewed and extended on an annual basis. E. Samuel
Evans, the Company's President, has personally guaranteed all of this financing
for which he receives an annual fee from the Company.
The Company believes that its lines of credit are sufficient to finance
purchases of inventory in its existing locations for the foreseeable future.
However, if its retail operations continue to increase, it may have to increase
them, as each retail sales center typically requires up to $500,000 to finance
inventory units on hand. The Company believes that new floor plan financing will
be available as needed to cover the requirements for its proposed new sales
centers, but there can be no assurance that this availability will continue to
exist or that the present interest rates and other credit terms it now enjoys
(which are subject to changes in lending practices of its present lenders and
other general economic conditions) will continue to be available. The Company
has no present commitments for any expanded dealer financing.
Competition
The retail manufactured home sales business is highly competitive, as capital
requirements for entry are relatively small. Competition is based primarily on
price, reputation for service and quality, depth of field inventory, sales
promotion and merchandising and terms and availability of retail customer
financing. In its existing sales areas (the 150 mile radius around Augusta,
Georgia) there are many manufactured home retail sales centers with which the
Company competes. The Company generally expects that any areas in which it opens
new retail sales centers will have similar numbers of competitors in the market
place. While the Company is larger than most of its competitors, at least one
competitor in the Augusta, Georgia area is substantially larger than the
Company, now operating over 30 retail sales locations. In addition, many
(8)
national and regional manufactured home producers operate their own retail sales
locations throughout the country. At least two of these producers are currently
operating in the Company's primary marketing areas and other companies (which
because of their size and integrated operations may offer better pricing and
terms of financing than the Company has available) may become competitors in the
future.
Government Regulation
There are a number of federal, state and local laws and regulations affecting
the manufacture, sale and financing of manufactured homes. Manufacturers are
governed by federal laws including the Department of Housing and Urban
Development's comprehensive national construction standards, affecting such
items as structural integrity, fire, safety, thermal protection and ventilation.
State and local building and zoning codes may also affect the quality, type and
number of manufactured homes the Company is permitted to sell within any given
geographic area. The Company believes that the homes it is currently selling
meet all of these federal, state and local laws and regulations.
The sale and financing of manufactured homes are also the subject of extensive
federal and local regulation. These include Federal Trade Commission rules
involving unfair credit and collection practices, Federal Reserve rules
requiring written disclosure of financing terms and information used as a basis
for denial of credit, and laws prohibiting discrimination in sales and lending
practices. In addition, the Company's activities as a mortgage broker and
insurance agent require licenses from state agencies which also govern allowable
charges and sales practices. The Company believes that it is currently in
compliance with all such governmental regulations.
Federal, state and local legislation and regulations are proposed from time to
time that, if enacted, could significantly affect the regulatory climate for
sales and financing of manufactured homes. It is not possible at this time to
predict what if any changes such legislation and regulations may have upon the
Company's business in the future.
Employees
At March 31, 1999, the Company had 94 full time employees, including 39 in
sales, 13 in transportation, installation and repair, and 42 in general or
administrative positions, as well as 110 independent contractors who are used
for site preparation and installation of homes. The Company has no collective
bargaining agreement with its employees and has not experienced any work
stoppages as a result of labor disputes. It considers that its relations with
its employees are good. All employees with the exception of sales personnel are
salaried; sales employees are paid by commission based upon their production.
(9)
Item 2. Financial Information
A. Summary Financial and Operating Data
Summary operating and financial data for the Company's five fiscal years ended
March 31,1995 through March 31, 1999 and balance sheets as of those dates are as
follows:
· Enlarge/Download Table
YEAR ENDED MARCH 31
1995 1996 1997 1998 1999
STMT OF OPERATIONS ------------------------------------------------------------------------------
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NET SALES (REVENUES) $ 6,768,965 $ 8,442,228 $ 15,549,376 $ 25,615,535 $ 33,776,250
INCOME (LOSS) FROM OPERATIONS 244,334 179,296 116,538 34,962 (247,196)
OTHER INCOME (LOSS) (137,835) (274,399) (518,346) 37,785 434,228
NET INCOME (LOSS) 106,499 (93,434) (439,526) (51,531) 104,304
INCOME (LOSS) PER COMMON SHARE 0.08 (0.10) (0.40) (0.03) 0.05
WEIGHTED AVG SHARES O/S 1,269,087 946,264 1,109,669 1,491,423 1,925,012
OPERATING DATA
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HOMES SOLD 195 278 399 639 792
NUMBER OF RETAIL CENTERS 3 3 6 9 12
WEIGHTED AVG UNITS SOLD / CTR 65 93 67 71 66
BALANCE SHEET DATA
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WORKING CAPITAL
(CURR ASSETS LESS CURR LIAB) $ (103,648) $ (36,090) $ (143,743) $ 640,812 $ 1,442,991
TOTAL ASSETS 3,804,957 3,442,001 6,628,919 8,331,753 12,906,584
LONG TERM OBLIGATIONS 510,769 528,485 1,085,323 491,508 1,054,316
SHAREHOLDERS' EQUITY 568,923 723,296 333,427 1,609,056 2,291,110
B. Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and the notes thereto included
elsewhere in this Memorandum. The discussions of results, causes and trends
should not be construed to imply any conclusion that such results or trends will
necessarily continue in the future.
(10)
Results of Operations -- Fiscal Years ended March 31, 1997, March 31, 1998
and March 31, 1999
The following table shows the components of the results of operations for fiscal
years 1997, 1998 and 1999 in amounts and percentage of revenues (000 omitted):
· Enlarge/Download Table
YEAR ENDED MARCH 31
DESCRIPTION 1997 1998 1999
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Sales 15,549 100.0% 25,616 100.0% 33,776 100.0%
Cost of Sales 12,327 79.3% 20,544 80.2% 27,849 82.5%
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Gross Profit 3,222 20.7% 5,072 19.8% 5,927 17.5%
Operating Expenses:
Compensation 1,416 9.2% 2,355 9.2% 2,949 8.7%
Advertising 194 1.2% 353 1.4% 639 1.9%
Occupancy and vehicle 240 1.6% 358 1.4% 269 0.8%
Depreciation and amortization 38 0.2% 70 0.3% 98 0.3%
Insurance 101 0.6% 196 0.8% 223 0.7%
Professional fees 147 1.0% 219 0.9% 126 0.4%
Taxes and licenses 141 0.9% 296 1.2% 301 0.9%
Miscellaneous 829 5.3% 1,190 4.6% 1,569 4.6%
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Total Operating Expenses 3,106 20.0% 5,037 19.7% 6,174 18.2%
Other Income (Expense):
Commissions earned 37 0.2% 108 0.5% 231 0.6%
Rental income 92 0.3%
Interest income 49 0.3% 27 0.1% 88 0.3%
Other income (expense) (5) 0.0% 380 1.5% 18 0.1%
Finance participation 137 0.5% 430 1.3%
Interest expense (599) (3.8%) (614) (2.4%) (425) (1.3%)
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Total Other Income (Expense) (518) (3.3%) 38 0.2% 434 1.3%
Income (Loss) Before Income Tax
Provision and Minority Interest (402) (2.6%) 73 0.3% 187 0.5%
Income tax provision 33 0.2% 116 0.4% (73) (0.2%)
Minority interest in net income (71) (0.5%) (240) (0.9%) (10) (0.0%)
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Net Income (440) (2.9%) (51) (0.2%) 104 0.3%
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Comparison of Fiscal 1999 to Fiscal 1998. Sales in 1999 rose by approximately $8
million, or 32%, on an increase of 153 units sold, or 24%, primarily due to a
net increase of three sales lots in 1999. However, these greater sales did not
result in an increase in gross profit margin, which decreased as a percentage of
sales to 17.5% in 1999 from 19.8% in 1998. This decrease was due primarily to a
more competitive market which demands a decreased sales price per unit. Another
factor is the additional costs to implement governmental restrictions related to
the set-up and placement of homes. The Company is using inventory management
methods in an effort to address these conditions in fiscal 2000. Despite this
adverse condition, net profit for 1999 increased by $155,000 in 1999, or over
300%, due to two primary factors which offset the decrease in gross margin.
These were a reduction in operating costs from 19.7% of sales in 1998 to 18.2%
of sales in 1999 and an increase in other income from .1% of sales in 1998 to
1.2% of sales in 1999. These resulted from the following factors: (i) spreading
the operating costs over a greater sales base: (ii) an increase in commission,
rental, interest and finance participation income; and (iii) a large decrease in
interest expense due to the assumption of floor plan expense by manufacturers at
a number of retail sales centers featuring their products exclusively. Minority
(11)
Interest in Net Income decreased from $240,392 in Fiscal 1998 to $9,989 in
Fiscal 1999. This is due to an agreement between the Company and the minority
shareholders to pay bonuses based on performance. As a result of this new plan,
the Company paid $193,460 to the minority shareholders, which was recorded as
compensation. The effect of this was to reduce the profits in the minority
ownership subsidiaries, resulting in a reduction in the amount recorded as
Minority Interest in Net Income of Consolidated Subsidiaries.
Comparison of Fiscal 1998 to Fiscal 1997. Sales rose by approximately $10
million, or 65%, in 1998 on increased unit sales of 260, or 60%. This increase
was primarily attributable to a net increase of three sales lots in that year.
Gross margin dropped in 1998 by .9% from 20.7% in 1997 to 19.8% in 1998 due to
the same factors adversely affecting gross margin in 1999, although the effect
of these conditions was not as severe as in the latter year. The net loss was
reduced from $440,000 in 1997 to $51,000 in 1998 due almost entirely to a very
substantial increase in commission, interest and finance participation income
from $86,000 in 1997 to $642,000 in 1998. This increase resulted from better
terms the Company was able to negotiate with its suppliers because of the very
large increase in Company purchases from them.
Liquidity and Capital Resources
Since its formation in 1990, the Company has funded its operations and capital
expenditures primarily through contributions from its founders and private
placements of its equity securities and debt, including convertible notes. In
the most recent placements of securities made by the Company (i) in 1997, it
received a total of $ 485,000 in capital contributions through the conversion of
notes originally sold in 1996 and the sale of 200,000 shares of common stock in
a private offering, and (ii) in fiscal 1999 it received $202,500 from the sale
of convertible debentures and $100,000 from the sale of warrants in another
private placement.
As an addition source of capital, the Company recently sold to a local finance
company for $565,204 a total of 34 retail installment sales contracts held
received from the sale of lots and homes.
The Company has used these proceeds to open and supply inventory to new retail
locations and to improve its working capital position. The Company believes that
the proceeds from these placements, together with cash flow from its operations
and its present lines of floor plan financing, should provide it with sufficient
liquidity to conduct operations and maintain its expansion of sales for the next
several months. There can be no assurance that such will be the case, however,
particularly if general economic conditions result in a downturn in the sale of
housing in the Augusta Georgia market.
(12)
Forward Looking Statements
The discussion contained in this Section and elsewhere in this Memorandum
contain certain "forward looking statements" (within the meaning of that term as
defined in the Securities Act and the Exchange Act), about the Company's future
operations. These statements include, among other things, projections of
revenues from existing and future retail sales centers, the Company's plans to
open new sales centers and to obtain the needed floor plan financing for them,
and the Company's anticipation that this expansion will result in a substantial
increase in profitability. The likelihood of the Company's success in
undertaking these activities and achieving these results is based upon a number
of assumptions and estimates which are inherently subject to significant
uncertainties and contingencies, many of which are beyond the control of the
Company and which reflect business conditions that are subject to change. These
include adverse changes in the financial markets, which may in turn adversely
affect the Company's ability to borrow funds and the price at which those funds
will be available, changes in the mortgage market, which may adversely affect
the ability of the Company's customers to finance the purchase of new homes, and
in economic conditions in those areas in which the Company's retail sales
centers are located. As a result of these uncertainties, actual results may vary
substantially from these forward looking statements contained herein and
prospective investors should not place undue reliance on any of them.
C. Qualitative and Quantitative Disclosures about Market Risk.
The Company does not hold and has not held any derivative securities such as
options or other market risk sensitive instruments and, accordingly, is not
presently subject to the risks of investment in such vehicles.
Item 3. Properties
The Company's principal offices are located in building at 124 North Belair
Road, Evans, Georgia which it acquired in January 1999 for a price of $285,000.
The property has 3,340 square feet of modern office space and is adequate for
the Company's requirements for the foreseeable future. It was financed by a
$230,000 mortgage loan from Suntrust Bank personally guaranteed by E. Samuel
Evans, the Company's President and Robert S. Wilson, one of its directors and
original promoters. The mortgage is due in monthly installments of $2,115,
including interest at 7.25% per annum, with the balance of the principal due on
December 5, 2001.
(13)
The Company holds a continuing interest in the Mayfair Acres and Timbers
properties consisting of seven lots for sale (four with mobile homes installed
on them), 10 rental units and 6.7 acres of undeveloped land.
Eleven of the Company's retail mobile home sales lots, consisting of
approximately two to five acres each, are leased for a total rental of $260,852
per year. One lot at Thomson Georgia, consisting of 1.5 acres, was purchased by
the Company in March 1999 for a price of $275,000, payable in monthly
installments of $2,663 each, or the same amount the Company was formerly paying
as rent for the property to its owner. The Company also owns a lot in Pelzer
South Carolina formerly used a sales center. The property was acquired in 1998
for a price of $50,000.
The sales offices on the lots are manufactured homes used for that purpose.
Three of these offices are leased from E. Samuel Evans, the Company's president
and three are leased from other shareholders. The Company owns three tow trucks
and two escort vehicles to transport units sold to customer sites, as well as
five service trucks and other necessary sales and office equipment. Total book
value of these vehicles and equipment was $120,898 at March 31, 1999 against
outstanding financing owing by the Company of $114,962.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding the beneficial ownership of
the Company's Common Stock at June 1, 1999, of (i) each person who is known by
the Company to own beneficially more than five percent of its Common Stock, (ii)
each executive officer and director of the Company, and (iii) all officers and
directors of the Company as a group. The Company has been advised by each
stockholder identified in the table that he possesses all voting and investment
power with respect to the stock beneficially owned by him.
(14)
Name, Address Shares Percentage of
and Affiliation Beneficially Outstanding
with Company Owned Shares
--------------- ------------ --------------
E. Samuel Evans, 195,000(1) 9.3%
President and Director
845 Vivian Court
Evans GA 30809
Robert S. Wilson, 194,138(2) 9.3%
Director(2)
4715 Lake Front Drive
Martinez, Georgia 30907
Richard Belz, Director -0- -0-
101 Fairchild Avenue
Plainview NY 11803
Laura Rollins, Chief 3,000 0.1%
Financial Officer,
Secretary and Treasurer
3690 Inverness Way
Martinez GA 30907
Bryce N. Batzer, -0-(3) -0-%
Director
2263 N.E. 26th Street
Lighthouse Point, FL
33064
All officers and 392,138 18.7%
directors as a group
(five persons)
---------------------------
(1) Does not include 200,000 shares issuable on exercise of Class A Warrants
owned by Mr. Evans.
(2) Mr. Wilson resigned as Chairman of the Board of the Company as of June 30
1999 but remains a director. This table does not include 51,000 shares held
by Mr. Wilson's wife, 2,813 shares held by Stock Builders Corp., a
corporation of which Mr. Wilson and members of his immediate family own
41.67%, and 328,000 shares issuable upon exercise of Class A Warrants owned
by him.
(3) Does not include 128,672 shares held by trusts agreement for the benefit of
members of his family, 33,000 shares issuable on conversion of $90,000 in
Convertible Debentures and 50,000 shares issuable upon exercise of Class A
Warrants issued to him as a director.
(15)
Item 5. Directors and Executive Officers
The directors and executive officers of the Company are:
Name Age Position
---- --- --------
E. Samuel Evans 50 President, CEO and
Director
Robert S. Wilson 76 Director
Bryce N. Batzer 78 Director
Richard Belz 43 Director
Cynthia D. Holley 36 Vice President-
Operations
Chester C. Helmick 57 General Sales Director
Laura H. Rollins 43 CFO, Secretary and
Treasurer
E. Samuel Evans has served as president and a director of the Company since
1992. Prior to that date his principal occupation was as president and owner of
Augusta Housing Center Inc. from its formation in 1982 until its sale to the
Company in 1992. Mr. Evans is a graduate of Augusta College with a degree in
business administration in 1971 and a graduate of Woodrow Wilson College of Law
in Atlanta, Georgia in 1979. He is licensed to practice law in the State of
Georgia.
Robert S. Wilson has been chairman of the board of the Company since its
founding in 1989. He has resigned as Chairman effective June 30. 1999. He served
as its president and chief executive officer until 1992 and as secretary and
treasurer until 1998. Prior to his founding of the Company, Mr. Wilson was
active for 34 years in the securities industry as an executive with S.D. Cohn &
Company, a retail broker/dealer in New York City from 1981 to 1984 and, prior to
that date, as a sales representative or wholesaler of mutual funds with several
other firms. From 1986 to 1989, he was self-employed as a real estate broker and
from 1984 to 1986, he was an employee of Lease/Purchase Corporation, a real
estate dealer and developer. Until 1999, he held a real estate sales license in
the State of New York and is a 1947 graduate of Cornell University.
Bryce N. Batzer has been a director of the Company since 1994. He is currently
the owner of Cedarbrook Development Company Inc., a Florida land and home
developer which he organized in 1987. He is also vice president of American
Marine Products Inc., a manufacturer of marine windows, boat windshields and
other marine products. Mr. Batzer was the president of Plastiline Inc., a
publicly held company, from 1955 through 1976, and until 1996 he served Florida
Coast Banks Inc. for over 25 years as a member of the executive committee,
chairman of the loan committee and chairman of the compensation committee. Mr.
Batzer was a founder and board member of the Broward Manufacturers Association
(16)
and a founder, director and chairman of the Broward Industrial Development
Board, both of which are instrumental in developing an industrial economic base
for Broward County, Florida. He is a graduate of Syracuse University, holding a
bachelor's degree in industrial engineering.
Laura H. Rollins joined the Company as Comptroller in August, 1998. She
previously worked for the Company's auditors, Serotta, Maddox, Evans & Co. for
one year and for C. C. McGregor & Co. of Columbia, South Carolina for the prior
two and one-half years. She is a certified public accountant licensed in South
Carolina and Georgia and a graduate of the University of North Carolina. She is
a member of the AICPA and the South Carolina and Georgia Societies of CPA's.
Richard Belz was elected a director of the Company in November 1998. He has been
a principal and officer of Redstone Securities, Inc. since 1989. He is a
licensed securities representative and certified public accountant.
Cynthia D. Holley has been an employee of the Company since October 1995 as
office manager and administrative assistant and was promoted to her present
position in April 1999. She is a graduate of Mercer University with a BBA in
marketing management and holds certificates as human relations specialist and
GMHA housing consultant.
Chester C. Helmick joined Augusta Housing Center, one of the Company's
subsidiaries, in 1984 as a housing consultant and has served the Company in
various managerial positions since its acquisition of that subsidiary. He was
elected to his present position with the Company in March 1999. Mr. Helmick is
retired from the United States Army in which he served for 20 years.
Mr. Wilson and Mr. Evans may be deemed promoters of the Company. They, members
of their families, and Mr. Batzer have been involved in several transactions
with the Company, described in "Certain Transactions".
Each director serves for a term of one year and is elected at the annual meeting
of shareholders. The Company's officers are appointed by its Directors and hold
office at their discretion.
(17)
Item 6. Executive Compensation
The following table sets forth information concerning total compensation paid
by the Company during its last three fiscal years to the Company's chief
executive officer and its officers and directors as a group:
Year Ended
Name Position March 31 Compensation (1)
---- -------- -------- ----------------
E. Samuel Evans President 1999 $ 110,332
1998 $ 105,741
1997 $ 94,259
All directors and officers 1999 $ 307,182
as a group (6 in number) 1998 $ 259,211
1997 $ 156,759
----------------
(1) This compensation consisted entirely of salary. It did not include
automobile allowances in the amount of $18,000 paid to Mr. Evans in fiscal
1998, the cost of health insurance benefits, or the guarantee fee paid
annually to Mr. Evans for his personal guarantee of the Company's floor
plan financing. See "Certain Relationships and Related Transactions".
In fiscal 1997, 1998 and 1999, the Company granted a total of 200,000 Class A
Warrants each to Messrs. Wilson and Evans. These grants were made in
consideration for services they rendered to the Company. The Warrants had no
significant value at the dates they were issued.
Mr. Batzer and Mr. Belz serve as directors for minimal cash compensation but are
reimbursed for out-of-pocket expenses in attending to the affairs of the
Company. Mr. Batzer has also been granted 50,000 Class A Warrants for his
services.
The Company has entered into an employment agreement terminating on March 31,
2000 with Mr. Evans calling for compensation of $96,000 per year plus bonuses to
be determined by the Board of Directors based upon profitability of the
Company's operations. The employment contract also contains a covenant not to
compete with the Company for a period of one year following termination of
employment.
Equity Incentive Plan
---------------------
On April 26, 1996 the Company adopted an Equity Incentive Plan and reserved 1
million shares for issuance pursuant to options and awards granted under the
Plan. All full time employees are eligible for participation in the Plan,
including senior management and directors. All awards and options issued under
the Plan must be approved by a committee of the Board of Directors not including
members of senior management, which will fix the terms of the options and awards
granted. At this date no such awards or options remain in effect.
(18)
Item 7. Certain Relationships and Related Transactions
The Company and its subsidiaries have engaged in the following transactions with
officers and directors of the Company and members of their immediate families
since April 1, 1998:
1. On May 24, 1999, the Company paid off a mortgage loan in the amount of
$114,424 from McDuffie Bank & Trust Co. of Thomson, Georgia, the proceeds
of which were used to repay a loan of $40,000 made to purchase the Mayfair
Acres property and to pay for the development of the lots and site
improvements on the property. This bank loan had been personally guaranteed
by Messrs. Evans and Wilson, and in consideration for giving their personal
guarantees, the Company had issued to each of them 20,000 shares of Common
Stock in March 1994.
2. Mr. Evans has personally guaranteed payment of the Company's obligations
under its existing floor plan lines of credit. For these guarantees, the
Company has paid him a fee which during fiscal 1999 amounted to $147,560.
3. The Company employs Sheryl Evans, wife of Mr. Evans, as consultant in the
decoration and furnishing of mobile homes it sells to its retail customers.
During fiscal 1999, Mrs. Evans received $152,725 for her services to the
Company in this capacity, and incurred approximately $24,000 in expenses
for the purchase of materials used in Company displays.
4. On April 28, 1999, the Company purchased two manufactured homes from Bryce
Batzer, a director of the Company, for a total purchase price of $62,349,
which was approximately his cost in the homes. On that day, Mr. Batzer used
the proceeds from the sale to acquire a $65,000 convertible debenture of
the Company. The remaining $2,651 was treated as a miscellaneous expense of
the Company.
5. The Company rents three mobile homes from E. Samuel Evans for use as sales
offices on its lots in Augusta and Statesboro, Georgia and Anderson, South
Carolina. Total rental for these homes is $33,446 per year.
6. On October 1, 1998, the Company acquired Southern States Lenders, Inc. a
local Augusta Georgia mortgage lender and servicer, for a price of $20,000.
After coming to the conclusion that this acquisition would not serve the
Company's best interests, in April, 1999 it distributed to its shareholders
the shares it held in Southern States, and certain directors and officers
of the Company, including Messrs. Evans and Wilson, acquired the remaining
shares of that company. No transactions undertaken by Southern States have
been recorded on the Company's books. The Company has recovered from
Southern States its entire investment in that company and has no remaining
connections with it.
The Company believes that these transactions with its officers and shareholders
have been and will be on terms no less favorable to the Company than those
available from unaffiliated parties.
(19)
Item 8. Legal Proceedings
The Company is currently a defendant in several lawsuits, none of which is
material to its operations or would, in the event of an adverse decision, be
materially adverse to its business.
Item 9. Market Price and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
The Company's Common Stock have traded on the OTC Bulletin Board since May 11,
1998. The following table sets forth the high and low bid and asked prices for
both securities and the volume of trading on a quarterly basis since that date.
Quarter Ended Bid Asked
------------- --- -----
June 30, 1998 3.00--9.12 4.00--9.62
September 30, 1998 3.50--5.62 3.62--6.00
December 31-1998 0.94--3.68 1.75--4.50
March 31, 1999 1.75--3.25 1.75--4.00
June 30 1999 1.62--2.37 1.87--3.00
On June 30 1999 the Common Stock was quoted at 2.12 bid and 2.37 asked.
Item 10 Recent Sales of Unregistered Securities
Since April 1, 1996, the Company has issued shares of Common Stock, warrants to
purchase Common Stock and debentures convertible into Common Stock in the
following transactions. None of these securities was registered under the
Securities Act of 1933 on the basis of the exemptions stated below.
1. In June 1996 the Company issued to 19 purchasers a total of $600,000 in
debentures convertible at $2.00 per share into Common Stock; the purchasers
also acquired for no additional consideration warrants to purchase 600,000
shares of Common Stock for an exercise price of $6.50 per share. This
issuance was made pursuant to the provisions of the Rules of Regulation D,
including Rule 504,and was consequently exempt from registration.
2. In June 1997 $481,500 of the foregoing debentures were converted into
240,750 shares of Common Stock at the conversion price of $2.00 per share.
This issuance was exempt from registration pursuant to Section 3(a)9 of the
Act.
(20)
3. During 1998 a total of $77,500 in debentures issued by the Company in a
private offering in 1993 were converted into 62,000 shares of Common Stock
in accordance with their terms. The issuance of these shares was also
exempt from registration by reason of the provisions of Section 3(a)9.
4. In December 1997 the Company issued to 12 purchasers a total of 201,172
shares of Common Stock for a price of $5.00 per share, or a total of
$1,005,860. As part of the transaction, the agent placing these shares was
granted the right to purchase for a price of 10 cents per warrant 100,000
warrants to purchase shares of Common Stock at $6.50 per share and issued
75,000 shares of Common Stock. This transaction was conducted pursuant to
Regulation D, including Rule 504, and was therefore exempt from
registration under the Act.
5. From January to April 1999, the Company issued to a total of eight
investors, including Bryce Batzer, one of its directors, a total of
$202,500 in debentures convertible into Common Stock at a price of $4.00
per share. This issuance was conducted pursuant to the provisions of
Regulation D, including Rule 506, and was thus exempt from registration
under the Act. The debentures have been legended as "restricted
securities", as that term is defined in Rule 144, and may not be
transferred except in accordance with the provisions of that Rule.
6. During fiscal 1999 the Company issued a total of 12,000 shares to two
persons for the performance of internal financial reporting services and
25,000 shares to a financial public relations firm for assistance in
preparing press releases and reports to stockholders. These shares were
issued as "restricted shares" under Section 4(2) of the Act and Rule 144,
are legended as such and may not be sold or trasferred except in compliance
with Rule 144.
Item 11. Description of Registrant's Securities to be Registered
Common Stock
The Company is authorized to issue 10,000,000 shares of Common Stock, $.002 par
value. At June 30, 1999, there were 2,091,539 shares of Common Stock issued and
outstanding, owned by 61 stockholders of record. Based on its inquiries with the
market makers for the Common Stock, the Company believes there to be at least
250 beneficial owners holding their shares in brokerage accounts. The following
description of the Company's securities does not purport to be complete and is
subject to and qualified in its entirety by reference to the Certificate of
Incorporation and By-laws of the Company and the provisions of applicable law.
Each holder of Common Stock is entitled to all rights and privileges of holders
of common stock under Delaware law, which provides that: (1) such holders are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of legally available funds; (2) in the
event of the liquidation, dissolution or winding up of a corporation, such
holders are entitled to share ratably in all assets remaining after the payment
of liabilities and (3) such holders do not have preemptive rights or other
(21)
rights to subscribe for additional shares. There are no redemption or sinking
fund provisions applicable to the Common Stock. Each Common Stock holder has the
right to one vote for each share he owns. As there is no cumulative voting for
the election of directors or any other purpose, the persons holding a majority
of the outstanding shares voted in any election of directors will be able to
elect all directors. All outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and non-assessable. All shares of Common Stock are
issued in registered form and are freely transferable, subject to applicable
securities laws and to restrictive agreements between the Company and the
holders of such shares.
Transfer Agent
The Transfer Agent for the Common Stock and Class A Warrants is OTC Corporate
Transfer Service Company, P.O. Box 501, Hicksville, New York 11801
(516-433-6503).
Item 12. Indemnification of Directors and Officers
Section 102(b)(7) of the Delaware General Corporation Law grants corporations
the right to limit or eliminate the personal liability of their directors for
monetary damages for breach of their fiduciary duty except for breaches of the
director's duty of loyalty to the corporation or its stockholders, for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, for certain transactions involving unlawful payments on
account of dividends or repurchase or redemption of the corporation's stock, and
for transactions in which the directors derive an improper personal benefit. The
Company's Certificate of Incorporation provides for the elimination of personal
liability of a director to the Company and its stockholders for monetary damages
for the breach of the director's fiduciary duty to the full extent allowable
under Section 102(b)(7).
Section 145 of the Delaware General Corporation Law grants corporations the
right to indemnify their directors, officers, employees and agents against
expenses, judgment, fines and other amounts paid pursuant to settlement of any
pending, completed or threatened legal action to which any of such persons
becomes a party by reason of the fact that he is or was a director, officer,
employee or agent of the corporation so long as the indemnity has acted in good
faith and in a manner he reasonably believes to be or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, has had no reasonable cause to believe that his conduct was
unlawful. The Company's Certificate of Incorporation provides for
indemnification of such persons to the full extent allowable under applicable
law.
(22)
Item 13. Financial Statements and Supplementary Data
See the attached financial statements listed in Item 15.
Item 14. Changes in Registrant's Certifying Accountants
The Company's consolidated financial statements were previously audited by
Cherry Bekaert & Holland LLP as of and for the year ended March 31, 1997 and by
Serotta Maddocks Evans & Co. as of and for the year ended March 31, 1998. The
Company in March, 1998 decided, with approval by the Board of Directors, to
dismiss Cherry Bekaert & Holland LLP and change to Serotta Maddocks Evans & Co.
On March 18, 1999, the Company, with the approval by the Board of Directors,
decided to change audit services from Serotta Maddocks Evans & Co. to Gifford,
Hillegass & Ingwersen, P.C. This decision was based on the fact that Serotta
Maddocks Evans & Co. does not provide audit services to SEC reporting entities.
The reports of Cherry Bekaert & Holland LLP and Serotta Maddocks Evans & Co.
over the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with the audits for the two most recent fiscal years and through
March 18, 1999, there have been no disagreements with Cherry Bekaert & Holland
LLP or Serotta Maddocks Evans & Co. on any matter of accounting principles or
practices, financial statements disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of Cherry Bekaert &
Holland LLP and Serotta Maddocks Evans & Co. would have caused them to make
reference thereto in their report on the financial statements for such years.
There have been no reportable events during the two most recent fiscal years and
through March 18, 1999.
(23)
Item 15. Financial Statements and Exhibits
Financial Statements
Item Page No.
---- --------
Report of Gifford Hillegass & Ingwersen, P.C. F-1
Independent Accountants
Consolidated Balance Sheets as of March 31, 1998 F-3
and March 31, 1999
Consolidated Statement of Operations for the F-5
years ended March 31, 1997, March
31, 1998 and March 31, 1999
Consolidated Statement of Changes in F-6
Shareholders' Equity for the years ended
March 31, 1997, March 31, 1998 and March 31, 1999
Consolidated Statement of Cash Flows for the year F-7
ended March 31, 1997, March 31, 1998 and March 31, 1999
Notes to Financial Statements F-9
Report of Serotta Maddocks Evans & Co., CPA's F-23
Independent Accountants
Consolidated Balance Sheet as of March 31, 1998 F-24
Consolidated Statement of Operations F-25
for the year ended March 31, 1998
Consolidated Statement of Changes in Shareholders' Equity F-26
for the year ended March 31, 1998
Consolidated Statements of Cash Flows for the year ended F-27
March 31, 1998
Notes to Financial Statements F-28
Report of Cherry Bekaert & Holland LLP, F-35
Independent Accountants
Consolidated Balance Sheet as of March 31, 1997 F-36
Consolidated Statement of Operations F-38
for the year ended March 31, 1997
Consolidated Statement of Changes in Shareholders' Equity F-39
for the year ended March 31, 1997
Consolidated Statements of Cash Flows for the year ended F-40
March 31, 1997
Notes to Financial Statements F-41
Exhibits
3(i) Certificate of Incorporation of the Company, E-1
as amended
3(ii) By-laws of the Company E-11
10.1 Employment Agreement between the Company and E. E-21
Samuel Evans dated April 26, 1996
10.2.1 Rental Agreement between the Company and E. E-26
Samuel Evans dated February 15, 1995
covering the rental of manufactured home sales
office
10.2.2 Rental Agreement between the Company and E-27
E. Samuel Evans dated January 1, 1997 covering
the rental of a manufactured home sales office
16.1 Letter re changes in certifying accountants E-28
from Cherry, Bekaert & Holland, LLP
16.2 Letter re changes in certifying accountants E-29
from Serotta Maddocks Evans & Co., CPA'S
21 List of subsidiaries of the Company E-30
23.1 Consent of Independent Accountants E-31
Cherry Bekaert & Holland, LLP
23.2 Consent of Independent Accountants E-32
Serotta Maddocks Evans & Co., CPA'S
23.3 Consent of Independent Accountants E-33
Gifford Hillegass & Ingwersen, P.C.
27 Financial Data Schedule
(24)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Apple Homes Corporation and Subsidiaries
Evans, Georgia
We have audited the accompanying consolidated balance sheet of Apple Homes
Corporation and Subsidiaries at March 31, 1999, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
consolidated financial statements of Apple Homes Corporation as of March 31,
1998 were audited by other auditors whose report dated June 15, 1998 (except for
Notes 13 and 16, dated June 23, 1999) expressed an unqualified opinion on those
statements. The consolidated financial statements of Apple Homes Corporation as
of March 31, 1997 were audited by other auditors, whose report dated January 26,
1998 expressed an unqualified opinion on those statements. As discussed in Note
M to these consolidated financial statements, the consolidated financial
statements for March 31, 1998 and 1997 have been adjusted to reflect correction
of errors related to these years.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 audit provides a
reasonable basis for our opinion.
F-1
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Apple Homes
Corporation and Subsidiaries as of March 31, 1999, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Gifford, Hillegass & Ingwersen, P.C.
-----------------------------------------
GIFFORD, HILLEGASS & INGWERSEN, P.C.
June 23, 1999
F-2
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APPLE HOMES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
====================================================================================
Assets
March 31,
-------------------------
1999 1998 