SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended 12/31/00
Commission file number 33-27230
FOUNTAIN COLONY VENTURES, INC.
________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Colorado 95-4798345
_____________________________ ___________________________________
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or
organization)
27 Hyakunin-cho
Higashi-ku
Nagoya, Aichi Prefecture
________________________________________
(Address of principal executive offices)
011-81-52-937-8840
________________________________________________
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 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 February 15, 2001, the issuer had outstanding 26,037,361 shares of
its Common Stock, $0.001 par value per share.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited consolidated balance sheet of Fountain Colony Ventures,
Inc., a Colorado corporation, as of December 31, 2000, the unaudited related
consolidated statements of operations and cash flows for the three and six
month periods ended December 31, 2000 and December 31, 1999, and the notes to
the financial statements are attached hereto as Appendix "A" and incorporated
herein by reference.
The accompanying financial statements reflect all adjustments which are,
in the opinion of management, necessary to present fairly the financial
position of Fountain Colony Ventures, Inc. consolidated with Green Medical
Company, Ltd., its wholly-owned Japanese corporation subsidiary. The names
"Fountain Colony", "we", "our" and "us" used in this report refer to Fountain
Colony Ventures, Inc. as consolidated with Green Medical Company, Ltd.
Fountain Colony's predecessor company was organized as a Delaware
corporation on May 6, 1988. Fountain Colony Ventures, Inc. was formed as a
Colorado corporation on February 16, 1999. On or about February 19, 1999, the
domicile of the predecessor corporation was changed from Delaware to the State
of Colorado by merging the predecessor Delaware corporation into the Colorado
corporation, and it is now known as Fountain Colony Ventures, Inc. Effective
April 6, 2000, Fountain Colony acquired 100% ownership of Green Medical
Company, Ltd., a Japanese corporation. At that time, the former management of
Fountain Colony resigned and was replaced by the same persons who serve as
officers and directors of Green Medical Company, Ltd.
Fountain Colony serves as a publicly held holding company, and all of the
business operations are conducted through its wholly-owned subsidiary, Green
Medical Company, Ltd. The subsidiary, Green Medical Company, Ltd., was
organized as a Japanese corporation in November, 1986. It is sometimes
referred to herein as "Green Medical". Since that time Green Medical has been
engaged in the pharmacy business in Japan.
Fountain Colony and Green Medical have a fiscal year ending on June 30.
As of the end of Fountain Colony's last fiscal year, June 30, 2000, Green
Medical Company, Ltd. owned and operated 18 pharmacies. Effective July 1,
2000 Mr. Katumori Hayashi contributed an additional 7 pharmacies to Green
Medical bringing the total number of pharmacies owned and operated by Green
Medical
2
to 25. As of December 31, 2000, Green Medical owned and operated a total of
25 pharmacies in Japan.
All of the 25 pharmacies operated by Green Medical Company, Ltd. are
operated under the trade name of "Sun Green". A total of 23 of the pharmacies
are located in or near Nagoya which is the fourth largest city in Japan which
has a population of approximately 2,200,000 people. The remaining 2
pharmacies are located in Tokyo which is the largest city in Japan.
Item 2. Management's Discussion and Analysis or Plan of Operation.
(a) Plan of Operation. Not Applicable.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations.
During the three months ended December 31, 2000, Fountain Colony earned
net income in the amount of $37,606, or approximately $0.001 per share,
compared to net income of $146,008, or approximately $0.007 per share, for the
three months ended December 31, 1999. During the six months ended December
31, 2000, Fountain Colony earned net income in the amount of $100,039, or
approximately $0.004 per share, compared to a net loss of $3,828, or
approximately ($0.000) per share, for the six months ended December 31, 1999.
As a result of Fountain Colony's expansion from operating 18 pharmacies
during the three month period ended December 31, 1999 to operating 25
pharmacies during the three month period ended December 31, 2000, Fountain
Colony recorded revenue of $4,518,608 for the three month period ended
December 31, 2000 compared to $3,508,249 for the three month period ended
December 31, 1999. Fountain Colony recorded a gross profit of $2,000,125 or
44% for the three month period ended December 31, 2000 compared to $1,736,495
or 49% for the three month period ended December 31, 1999. Operating expenses
increased by $546,719 to $1,900,669 for the three month period ended December
31, 2000 as compared to $1,353,950 for the three month period ended December
31, 1999. These increases in revenue and operating expenses are attributable
to the added stores.
Fountain Colony recorded revenue of $8,548,927 for the six month period
ended December 31, 2000 compared to $6,207,198 for the six month period ended
December 31, 1999. The increase in revenue
3
was attributable to the increased number of pharmacies operated in the later
period. Fountain Colony recorded a gross profit of $4,013,849 or 47% for the
six month period ended December 31, 2000 compared to $2,958,521 or 48% for the
six month period ended December 31, 1999. Operating expenses increased by
$911,908 to $3,729,232 for the six month period ended December 31, 2000 as
compared to $2,817,324 for the six month period ended December 31, 1999. For
the six months ended December 31, 2000, income from operations was $284,617 as
compared with $141,197 for the corresponding period of the preceding year, an
increase attributable to the profits generated from the seven pharmacies which
were contributed to the company in July, 2000.
Operating expenses in the aggregate increased because of increases in
director compensation and increased professional fees associated with becoming
a reporting company in the United States.
However, net income for the six months ended December 31, 2000 was
$100,039 as compared with a net loss in the corresponding period of the
preceding year. During the prior year the Japanese taxing authorities
assessed penalties and interest related to prior years, which caused the
provision for income taxes to increase to $71,557 on pre-tax net income of
$67,729. During fiscal 2000 the income tax provision approximates the
combined Japanese federal, local and business effective tax rate of
approximately 42%.
Liquidity and Capital Resources
Fountain Colony's shareholders' equity increased $501,520 from $2,454,684
at June 30, 2000 to $2,956,204 at December 31, 2000. This increase was
largely due to: (1) the contribution of the net assets of approximately
$385,000 of seven pharmacies to Green Medical Company, Ltd. by Fountain
Colony's president and majority shareholder, which occurred on July 1, 2000;
(2) a contribution to capital of $261,438 made by Fountain Colony's president
and majority shareholder in December 2000; and (3) Fountain Colony's net
income of $100,039 earned during the six months ended December 31, 2000.
Fountain Colony's president and majority shareholder has agreed to contribute
an additional $1,696,132 to capital between December 31, 2000 and June 30,
2001.
Fountain Colony's current assets as of December 31, 2000 were $4,390,470
compared to $5,274,759 at June 30, 2000. Fountain Colony's current
liabilities as of December 31, 2000 were $4,767,069 compared to $5,283,849 at
June 30, 2000. The overall reduction in current assets and liabilities was a
result of a related party paying a major liability, the proceeds of which were
used to pay down accrued taxes and penalties, including amounts remaining from
assessments made in prior years.
Fountain Colony's accounts receivable increased by $509,197 from
$1,905,772 as of June 30, 2000 to $2,414,969 as of December
4
31, 2000. Inventory decreased by $39,111 from $1,235,476 as of June 30, 2000
to $1,196,365 as of December 31, 2000. Accounts and advances receivable from
related party decreased $1,342,242 from $1,342,242 at June 30, 2000 to $0 at
December 31, 2000. Property and equipment, net of accumulated depreciation,
increased $168,730 from $4,248,455 at June 30, 2000 to $4,417,185 at December
31, 2000. Fountain Colony's accounts receivable are for prescriptions which
are reimbursed by the Japanese Government in approximately 45 days after the
end of the period.
Net cash used by operating activities was $192,749, and investing
activities consumed $843,803 principally for the acquisition of property and
equipment. The consumption of cash was financed by bank borrowings and
contributions of capital from a majority shareholder.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REFLECT
MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND INVOLVE RISKS
AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) There are no exhibits included with this report.
5
(b) Fountain Colony filed the following Current Report on Form 8-K during
its second fiscal quarter ended December 31, 2000:
An Amendment No. 1 to Form 8-K dated October 27, 2000 was filed on
November 15, 2000. The Amendment served to amend an earlier current report on
Form 8-K dated September 28, 2000 which was filed on September 29, 2000. The
amendment concerned an Item 4 disclosure indicating that on October 18, 2000,
Fountain Colony decided to dismiss BDO International and/or its affiliates and
to engage Stonefield Josephson, Inc. as Fountain Colony's independent auditor.
6
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FOUNTAIN COLONY VENTURES, INC.
(Registrant)
Date: February 17, 2001 By:/s/ Katumori Hayashi
__________________________________
Katumori Hayashi, Chairman of the
Board of Directors, Chief
Executive Officer, President and
Principal Financial and Chief
Accounting Officer
7
FOUNTAIN COLONY VENTURES, INC.
BALANCE SHEET
December 31,
2000
=============
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 268,844
Accounts receivable 2,414,969
Accounts and advances receivable, related party -
Prepaid expenses and other receivables, net of
allowance for doubtful accounts 116,530
Inventory 1,196,365
Marketable securities, at market value(original cost $244,231) 82,789
Short-term investment 97,168
Deferred tax 198,642
Current maturities of long-term loans receivable 15,163
-------------
Total current assets 4,390,470
-------------
Property and equipment, net of accumulated depreciation 4,417,185
Long-term loans receivable, net of current maturities 23,834
Investment in securities, at market value (original cost $95,848) 143,355
Investments - other 168,392
Other assets:
Lease deposits 306,484
Advanced payments on new store sites 627,451
Deferred taxes 65,915
Other 143,891
1,143,741
-------------
$ 10,286,977
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities-
Accounts payable and accrued expenses $ 3,254,805
Accrued tax and penalties payable 23,210
Bank loans and current maturities of long-term debt 1,356,493
Current maturities of obligation under capital leases 65,477
Refundable deposits 67,084
-------------
Total current liabilities 4,767,069
Long-term debt, less current maturities 2,396,022
Obligation under capital leases, less current maturities 167,682
Shareholders' equity:
Preferred stock; $0.001 par value, 10,000,000 authorized,
no shares issued and outstanding -
Common stock; $.001 par value, 50,000,000 shares authorized
26,037,316 shares issued and outstanding 92,091
Additional paid in capital 3,531,793
Other comprehensive loss (337,034)
Accumulated deficit (330,646)
-------------
Total shareholders' equity 2,956,204
-------------
$ 10,286,977
=============
8
FOUNTAIN COLONY VENTURES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months Three months Six months Six months
ended ended ended ended
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue: $ 4,518,983 $ 3,508,249 $ 8,548,927 $ 6,207,198
Cost of Revenue 2,518,788 1,771,754 4,535,078 3,248,677
------------ ------------ ------------ ------------
Gross profit 2,000,195 1,736,495 4,013,849 2,958,521
Operating expenses:
General & Administrative 1,763,363 1,267,949 3,455,982 2,645,239
Depreciation 137,306 86,001 273,250 172,085
------------ ------------ ------------ ------------
Total operating expenses 1,900,669 1,353,950 3,729,232 2,817,324
Income from operations
before other income
(expense) 99,456 382,545 284,617 141,197
------------ ------------ ------------ ------------
Other income (expense):
Loss on disposal of
property - - (39,416) -
Unrealized income (loss)
on investment (33,330) (47,714) (33,330) (48,242)
Miscellaneous income
(expense) 48,884 13,640 43,075 48,062
Interest expense (41,003) (58,114) (74,590) (73,288)
------------ ------------ ------------ ------------
(25,449) (92,188) (104,261) (73,468)
------------ ------------ ------------ ------------
Net income before provision
for income taxes 74,007 290,357 180,356 67,729
Provision for income taxes 36,401 144,349 80,317 71,557
------------ ------------ ------------ ------------
Net income (loss) $ 37,606 $ 46,008 $ 100,039 $ (3,828)
============ ============ ============ ============
Net loss per share -
basic and diluted $ 0.00 $ 0.01 $ 0.00 $ (0.00)
============ ============ ============ ============
Weighted average number
of shares outstanding -
basic and diluted
at 3/31/00 26,037,316 21,420,000 26,037,316 21,420,000
============ ============ ============ ============
9
FOUNTAIN COLONY VENTURES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six months Six months
Ended Ended
December 31, December 31,
2000 1999
------------- -------------
(Unaudited) (Unaudited)
Cash flows provided by (used for) operating activities:
Net income (loss) $ 100,039 $ (3,828)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation 258,915 183,491
Loss on disposal of property 37,348 -
Unrealized loss (income) on investment 31,582 51,440
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (662,822) (390,661)
Accounts and advances receivable, related party 1,243,208 (97,383)
Prepaid expenses and other receivables, net of
allowance for doubtful accounts (619,828) (207,764)
Inventory (60,481) 200,600
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts payable and accrued expenses 1,121,691 (22,319)
Accounts payable, related party - (491,431)
Accrued tax and penalties payable (1,561,435) (590,532)
Refundable deposits (80,966) (89,475)
------------- -------------
Total adjustments (292,788) (1,454,034)
------------- -------------
Net cash provided by operating activities (192,749) (1,457,862)
Cash flows provided by (used for) investing activities:
Acquisition of property and equipment (887,028) (205,700)
Change in short-term investment 81,482 (129,331)
Proceeds from loans receivable 7,582 -
Purchase of investment securities (45,839) (98,702)
------------- -------------
Net cash used for investing activities (843,803) (433,733)
------------- -------------
Cash flows provided by (used for) financing activities:
Proceeds from long-term debt 1,202,614 2,830,649
Payment on long-term debt (1,127,305) (1,457,754)
(Increase)decrease in bank loans 547,136 811,897
Payment on bank loans - -
Capital contribution 647,258 -
------------- -------------
Net cash provided by financing activities 1,269,703 2,184,792
------------- -------------
Other, net (49,337) 25,284
Net increase (decrease)in cash 183,814 318,481
Cash, beginning of year 85,030 143,131
------------- -------------
Cash, end of year $ 268,844 $ 461,612
============= =============
Supplemental disclosure of non-cash investing and financing activities:
Interest paid $ 70,809 $ 78,145
============= =============
Income taxes paid $ 1,583,861 $ 744,982
============= =============
10
FOUNTAIN COLONY VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 2000
(1) Summary of Significant Accounting Policies:
General:
Fountain Colony Ventures, Inc. was organized as a Delaware corporation
on May 6, 1988, under the name of Argyle Funding, Incorporated. Its initial
business purpose, as a blank check company, was to search for and acquire one
or more appropriate businesses, whether it be through purchase, merger or
other business combination. On February 19, 1999, the domicile of the
corporation was changed from Delaware to the State of Colorado, and
thereafter, the Company changed it's name to Fountain Colony Ventures, Inc.
On April 6, 2000, Fountain Colony Ventures, Inc., and Green Medical
Company, Ltd., a Japanese corporation ("Green Medical") and it's sole
shareholder consummated a stock for stock exchange in a reverse merger. The
sole shareholder of Green Medical transferred ownership of one hundred percent
of all the issued and outstanding shares of capital stock of Green Medical to
Fountain Colony in exchange for 21,420,000 newly issued shares, approximately
85%, of the common stock, $0.001 par value, of Fountain Colony. At that time,
the former management of Fountain Colony resigned and was replaced by the same
persons who serve as officers and directors of Green Medical Company, Ltd.
Inasmuch as the former owners of Green Medical controlled the Company after
the acquisition, the combination was accounted for under APB 16, as a reverse
merger, with Green Medical as acquirer and requiring no adjustment to the
carrying value of the assets or liabilities of the acquired entity, Fountain
Colony. Proforma operating results, as if the acquisition had taken place at
the beginning of the period, have not been presented as the operations of the
acquiree were negligible. The financial position and results of operations of
the subsidiary is included in the consolidated statements of the Company.
Green Medical, headquartered in Nagoya, Japan, was incorporated on
November 12, 1986. Green Medical operates a chain of pharmacies in Nagoya and
the surrounding regions in Japan. Green Medical sells primarily prescription
drugs to private individuals, but does offer a small selection of
over-the-counter products. Green Medical receives payment for all of its
prescription sales from government insurance agencies.
11
FOUNTAIN COLONY VENTURES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED DECEMBER 31, 2000
(1) Summary of Significant Accounting Policies, Continued:
Interim Financial Statements:
The accompanying financial statements include all adjustments
(consisting of only normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results of operations for
the periods presented. Interim results are not necessarily indicative of the
results to be expected for a full year. The financial statements should be
read in conjunction with the financial statements included in the annual
report of Green Medical, Inc. and subsidiaries (the "Company") on Form 10-KSB
for the year ended June 30, 2000 and June 31, 1999.
Principles of Consolidation:
The accompanying consolidated statements include the accounts of Green
Medical, Inc. and subsidiary. All significant intercompany transactions and
accounts have been eliminated.
The financial statements of the subsidiary located outside the United
States are generally measured using the local currency as the functional
currency. Accordingly, assets and liabilities are translated at year-end
exchange rates, and operating statement items are translated at average
exchange rates prevailing during the year. The resulting translation
adjustments are recorded as other comprehensive income. Exchange adjustments
resulting from foreign currency transactions are included in the determination
of net income (loss).
12
FOUNTAIN COLONY VENTURES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED DECEMBER 31, 2000
(2) Significant transactions (Unaudited):
On July 1, 2000, the president and majority shareholder of the Company
contributed the net assets of seven pharmacies to the capital of the
corporation. The contribution was recorded at the historical cost basis of
approximately $385,000.
During fiscal 2001, the president and majority shareholder executed a
promissory note in favor of the corporation to substantiate his borrowings,
agreeing that the amounts were due on demand, or no later than October 31,
2000. All such borrowings were repaid in October 2000.
In December of 2000, the president and majority shareholder entered into
an agreement to contribute an additional $1,957,570 of capital to the
corporation, no later than June 30, 2001. At December 31, 2000 the president
and majority shareholder contributed $261,438 towards this obligation.