SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
| [X] | Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2003
| [ ] | Transition report under Section 13 or 15 (d) of the Exchange Act |
For the transition period from ________ to ________
Commission file number: 000-24167
| EBS Building, L.L.C. |
| (Exact Name of Small Business Issuer as Specified in Its Charter) |
| Delaware | 43-1794872 | |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
| c/o FTI Consulting , 1200 Abernathy Road, Suite 1700, 600 Northpark Town Center, Atlanta, GA 30328 |
| (Address of Principal Executive Offices) |
| (770) 551-8259 |
| (Issuer's Telephone Number, Including Area Code) |
| N/A |
| (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) |
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrants filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of March 31, 2003, there were 10,000,000 Class A Membership Units outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
EBS BUILDING, L.L.C.
Balance Sheets
| March 31, 2003 (unaudited) | December 31, 2002 | |||||||
| Assets | ||||||||
| Rental property, net | $ | 25,694,345 | $ | 25,646,046 | ||||
| Cash - operating | 1,777,356 | 1,138,043 | ||||||
| Security deposit escrow | 10,402 | 10,381 | ||||||
| Tax and insurance escrow | 329,524 | 163,355 | ||||||
| Rents receivable | 1,101,018 | 1,051,297 | ||||||
| Prepaid expenses | 20,184 | 80,721 | ||||||
| Lease commissions, net | 1,989,913 | 2,047,564 | ||||||
| Loan costs, net | 110,199 | 135,630 | ||||||
| Deposits | 202 | 202 | ||||||
| Total assets | $ | 31,033,143 | $ | 30,273,239 | ||||
| Liabilities | ||||||||
| Note payable | $ | 16,853,140 | $ | 16,853,140 | ||||
| Accounts payable | 73,580 | 154,374 | ||||||
| Accrued expenses | 382,291 | 177,497 | ||||||
| Tenant security deposits | 9,477 | 9,902 | ||||||
| Total liabilities | 17,318,488 | 17,194,913 | ||||||
| Members' equity: | ||||||||
| Membership Units (Class A - 10,000,000 authorized, | ||||||||
| issued and outstanding) | -- | -- | ||||||
| Paid-in capital | 19,810,522 | 19,810,522 | ||||||
| Retained earnings (deficit) | (6,095,867 | ) | (6,732,196 | ) | ||||
| Total members' equity | 13,714,655 | 13,078,326 | ||||||
| Total liabilities and members' equity | $ | 31,033,143 | $ | 30,273,239 | ||||
The accompanying notes are an integral part of these financial statements.
EBS BUILDING, L.L.C.
Statements of Operations
| For the 3 months ended March 31, 2003 (unaudited) | For the 3 months ended March 31, 2002 (unaudited) | |||||||
| Income: | ||||||||
| Rent | $ | 1,571,902 | $ | 898,200 | ||||
| Other | 531,463 | 119,665 | ||||||
| Total income | 2,103,365 | 1,017,865 | ||||||
| Expenses: | ||||||||
| Maintenance | 236,274 | 297,848 | ||||||
| Professional fees | 113,706 | 102,509 | ||||||
| Utilities | 171,627 | 170,202 | ||||||
| General and administrative | 153,061 | 147,751 | ||||||
| Depreciation & amortization | 449,403 | 338,204 | ||||||
| Real estate taxes | 99,999 | 99,999 | ||||||
| Interest and finance fees | 139,849 | 148,814 | ||||||
| Other operating expenses | 103,117 | 52,006 | ||||||
| Total expenses | 1,467,036 | 1,357,333 | ||||||
| Net income (loss) | $ | 636,329 | $ | (339,468 | ) | |||
| Net income (loss) per Class A Unit - basic and diluted | ||||||||
| $ | 0.06 | $ | (0.03 | ) | ||||
The accompanying notes are an integral part of these financial statements.
EBS BUILDING, L.L.C.
Statement of Changes in Members' Equity
For the Three Months Ended March 31, 2003
| Class A Membership Units | Paid In Capital | Retained Earnings (Deficit) | Total | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance, December 31, 2002 | 10,000,000 | $ | 19,810,522 | $ | (6,732,196 | ) | $ | 13,078,326 | ||||||
| Net income (unaudited) | -- | -- | 636,329 | 636,329 | ||||||||||
| Balance, March 31, 2003 (unaudited) | 10,000,000 | $ | 19,810,522 | $ | (6,095,867 | ) | $ | 13,714,655 | ||||||
The accompanying notes are an integral part of these financial statements.
EBS BUILDING, L.L.C.
Statements of Cash Flows
| For the 3 months ended March 31, 2003 (unaudited) | For the 3 months ended March 31, 2002 (unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | 636,329 | $ | (339,468 | ) | |||
| Reconciliation of net income (loss) to cash flows | ||||||||
| provided by operating activities: | ||||||||
| Depreciation & amortization expense | 449,403 | 338,204 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in escrows, rents | ||||||||
| receivable, prepaid expenses and deposits | (155,373 | ) | (129,564 | ) | ||||
| Increase in liabilities, excluding note payable | 123,574 | 361,231 | ||||||
| Cash flows provided by operating activities | 1,053,933 | 230,403 | ||||||
| Cash flows from investing activities: | ||||||||
| Payments for lease commissions | (10,566 | ) | -- | |||||
| Additions to rental property | (404,054 | ) | (501,110 | ) | ||||
| Cash flows used by investing activities | (414,620 | ) | (501,110 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from note payable | -- | 161,710 | ||||||
| Cash flows provided by financing activities | -- | 161,710 | ||||||
| Net increase (decrease) in cash | 639,313 | (108,997 | ) | |||||
| Cash, beginning of period | 1,138,043 | 198,160 | ||||||
| Cash, end of period | $ | 1,777,356 | $ | 89,163 | ||||
The accompanying notes are an integral part of these financial statements.
EBS BUILDING, L.L.C.
Notes to Financial Statements (unaudited)
March 31, 2003 and December 31, 2002
| 1. | The accompanying unaudited financial statements of EBS Building, L.L.C. (the “Company”), in the opinion of the Manager, include all adjustments necessary for a fair presentation of the results for the interim periods presented. These adjustments consist of normal recurring accruals. The financial statements are presented in accordance with the requirements of Form 10-QSB and consequently do not include all the disclosures required by generally accepted accounting principles. For further information, refer to the financial statements and notes thereto for the year ended December 31, 2002 included in the Company's Annual Report on Form 10-KSB filed on March 31, 2003. |
| 2. | The following table sets forth the computation of basic and diluted earnings (loss) per unit for the periods ended: |
| For the 3 months ended March 31, 2003 (unaudited) | For the 3 months ended March 31, 2002 (unaudited) | |||||||
| Numerator: | ||||||||
| Net Earnings/(Loss) - Basic and Diluted | $ | 636,329 | $ | (339,468 | ) | |||
| Denominator: | ||||||||
| Weighted Average Units Outstanding - Basic | 10,000,000 | 10,000,000 | ||||||
| Effect of Potentially Dilutive Units | -- | -- | ||||||
| Units Outstanding - Diluted | 10,000,000 | 10,000,000 | ||||||
| Basic and Diluted Earnings/(Loss) per Unit | $ | 0.06 | $ | (0.03 | ) | |||
| 3. | Rental property consists of the following: |
| March 31, 2003 (unaudited) | December 31, 2002 | |||||||
| Land | $ | 2,250,520 | $ | 2,250,520 | ||||
| Building | 17,765,629 | 17,765,629 | ||||||
| Building Improvements | 1,507,154 | 1,507,154 | ||||||
| Tenant Improvements | 8,806,810 | 8,806,810 | ||||||
| Construction in progress | 404,054 | -- | ||||||
| 30,734,167 | 30,330,113 | |||||||
| Less Accumulated Depreciation | 5,039,822 | 4,684,067 | ||||||
| $ | 25,694,345 | $ | 25,646,046 | |||||
| The building and building improvements are depreciated using the straight-line method over their estimated useful lives of 38 and 39 years, respectively. Tenant improvements are depreciated over the term of the tenant's lease. |
| 4. | Rents receivable include an accrual for the straight-line recognition of escalating tenant rental rates in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 13, Accounting for Leases. Such tenant rents are recognized on a straight-line basis over the term of the lease. |
EBS BUILDING, L.L.C.
Notes to Financial Statements (unaudited)
March 31, 2003
| 5. | On May 31, 2001, the Company entered into an $18,600,000 revolving line of credit with Commerce Bank, N.A. (the "Line of Credit"). The Line of Credit, which expires in May 2004, replaces the $12,000,000 line of credit previously extended by FINPRO. L.L.C., which became due and payable on May 31, 2001. The Company presently intends to use the Line of Credit for working capital needs, tenant improvements and lease commissions. Borrowings under the Line of Credit bear interest at a rate equal to the ninety (90) day LIBOR interest rate plus one hundred ninety (190) basis points. As of March 31, 2003, the Company had outstanding borrowings of $16,853,140 under the Line of Credit. |
Item 2. Management’s Discussion and Analysis or Plan of Operation.
During the forthcoming twelve months of operations, EBS Building, L.L.C. (the “Company”) intends to continue owning, managing, maintaining, repairing, leasing, selling, hypothecating, mortgaging or otherwise dealing with the building located at 501 North Broadway, St. Louis, Missouri (the “Building”). Further, the Company intends to continue actively marketing the Building for sale during the forthcoming twelve months as well as to continue to secure additional tenant leasing agreements.
On May 31, 2001, the Company entered into an $18,600,000.00 credit facility (the “Credit Facility”) with Commerce Bank, N.A in order to refinance its existing mortgage loan and obtain funds for improvements, interest carry and other working capital needs. Borrowings under the Credit Facility will be at an interest rate equal to the ninety (90) day LIBOR interest rate plus one hundred ninety (190) basis points. Borrowings under the Credit Facility are secured by substantially all of the assets of the Company. Management believes that funds from operations and the Company’s present availability under its revolving line of credit provide sufficient resources to meet the Company’s present and anticipated financing needs.
During the three months ended March 31, 2003, the Company’s rental income increased by 75.0% over the first quarter of the prior year, from $898,200 during the first quarter of 2002 to $1,571,902 during the first quarter of 2003. This increase over the prior year is due to the commencement of the rental payments on September 1, 2002 by Jacobs Engineering, Inc. The new Jacobs Engineering, Inc. lease was entered into on February 22, 2001, however rental payments did not commence until September 1, 2002. Other income increased from $119,665 in the first quarter of 2002 to $531,463 in the same period in 2003. This significant increase in other income is primarily due to additional revenue for parking, conference room usage and other expenses from the new Jacobs Engineering, Inc. lease. The Company’s total expenses increased by 8.1% over the first quarter of the prior year, with the largest increase in depreciation and amortization. Depreciation and amortization expense increased from $338,204 during the three months of 2002 to $449,403 during the first quarter of 2003 due to the capitalization of additional tenant improvements associated with the Jacobs Engineering Group, Inc. lease entered into on February 22, 2001. Maintenance expense decreased 20.7% over the prior year from $297,848 in the first quarter of 2002 to $236,274 in the first quarter of 2003. This decrease was attributable to deferred repairs being completed in 2002 as a result of the Jacobs Engineering, Inc. occupancy and additional maintenance for elevator repairs as a result of the state inspection. In addition, the janitorial contract was bid at the end of 2002 resulting in janitorial cost savings in 2003.
Item 3. Controls and Procedures
Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Senior Managing Director of the Manager of the Company, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Senior Managing Director of the Manager of the Company concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings.
There have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 of Regulation S-B)
| 3.1: | Articles of Organization of the Issuer filed with the Delaware Secretary of State on September 24, 1997 incorporated by reference to the Issuer's Registration Statement on Form 10-SB filed on April 30, 1998, Exhibit 2.1. |
| 3.2: | Members Agreement of EBS Building, L.L.C. a Limited Liability Company, dated as of September 26, 1997 incorporated by reference to the Issuer's Registration Statement on Form 10-SB filed on April 30, 1998, Exhibit 2.2. |
| 4: | See the Members Agreement, referenced as Exhibit 3.2. |
| 99.1: | Certification of the Senior Managing Director of the Manager of the Company pursuant to Section 906 of Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350. |
(b) Reports on Form 8-K. The Issuer did not file any reports on Form 8-K during the first fiscal quarter.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | REGISTRANT: EBS Building, L.L.C. By: FTI Consulting, Inc., as Manager | |
| By: | /s/ Keith F. Cooper | |
| Keith F. Cooper, Senior Managing Director | ||
Date: May 15, 2003
CERTIFICATIONS
I, Keith F. Cooper, Senior Managing Director of the Manager of EBS Building, L.L.C., who serves in the position equivalent to chief executive officer and chief financial officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of EBS Building, L.L.C.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
| | EBS BUILDING, L.L.C. By: FTI Consulting, Inc., as Manager | |
| By: | /s/ Keith F. Cooper | |
| Keith F. Cooper, Senior Managing Director | ||
Exhibit Index
| 3.1: | Articles of Organization of the Issuer filed with the Delaware Secretary of State on September 24, 1997 incorporated by reference to the Issuer's Registration Statement on Form 10-SB filed on April 30, 1998, Exhibit 2.1. |
| 3.2: | Members Agreement of EBS Building, L.L.C. a Limited Liability Company, dated as of September 26, 1997 incorporated by reference to the Issuer's Registration Statement on Form 10-SB filed on April 30, 1998, Exhibit 2.2. |
| 4: | See the Members Agreement, referenced as Exhibit 3.2. |
| 99.1: | Certification of the Senior Managing Director of the Manager of the Company pursuant to Section 906 of Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350. |