UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2001
Commission file Number 000-30007
NORTHBOROUGH HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
COLORADO
(State or Other Jurisdiction of Incorporation)
000-30007 05-0508624
(Commission File Number) (I.R.S. Employer Identification Number)
17 WEST CHEYENNE MOUNTAIN BLVD.
Colorado Springs, Colorado 80906
(Address of Principal Executive Offices) (Zip Code)
(401) 453-6870
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Common Stock, $.001 par value - 1,200,000 shares as of September 30, 2001.
FORWARD-LOOKING INFORMATION
THIS FORM 10QSB AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
NORTHBOROUGH HOLDINGS, INC. (THE "COMPANY") OR ITS REPRESENTATIVES CONTAIN
STATEMENTS WHICH MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
FIFTEEN U.S.C.A. SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTS
INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS
OF THE COMPANY AND MEMBERS OF ITS MANAGEMENT TEAM AS WELL AS THE
ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY
KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE IN FORWARD-LOOKING STATEMENTS ARE SET FORTH IN THE SAFE HARBOR COMPLIANCE
STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THIS
FORM 10QSB AND ARE HEREBY INCORPORATED HEREIN BY REFERENCE. THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO
REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES
TO FUTURE OPERATING RESULTS OVER TIME.
1
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F-1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND EXHIBITS
(a) The following financial statements of the Company are filed as part of
this registration statement:
NORTHBOROUGH HOLDINGS, INC.
BALANCE SHEET
September 30, 2001
ASSETS
Current Assets
Checking/Savings $ 5,375.31
Total Current Assets $ 5,375.31
Fixed Assets $158,893.01
Other Assets $958,235.99
TOTAL ASSETS $1,122,504.31
LIABILITIES & EQUITY
Liabilities
Current Liabilities 0
Other Current Liabilities
Escrow deposits $ 1,146.26
Accrued Accounts payable (967.14)
Textron Line of Credit 682,672.37
Security Deposit 2,650.00
Total Other Current Liabilities $685,501.49
Total Current Liabilities $685,501.49
Long Term Liabilities $112,351.58
Total Liabilities $797,853.07
Equity
Distributions (554,540.00)
Opening Balance Equity 386.14
Member Contributions 141,454.50
Retained Earnings 639,041.32
Net Income 98,309.28
Total Equity 324,651.24
Total Liabilities and Equity $1,122,504.31
NORTHBOROUGH HOLDINGS, INC.
PROFIT & LOSS
March 31, 2000
Ordinary Income/Expense
Income $229,974.27
Total Income $229,974.27
Expense
Returned Deposited Item 2,000.00
Advertisement 2,161.69
Bank Service Charges 273.09
Equipment Rental 196.00
Filing Fees 955.00
Insurance 20,403.13
Interest Expense
Loan Interest 16,073.61
Mortgage 7,722.69
Total Interest Expense $ 23,796.30
Legal 907.72
Maintenance of R/E 570.84
Postage and Delivery 231.70
Professional Fees
Auction 1,992.00
Commitment 45,017.50
Legal Fees 8,513.29
Rent 2,250.00
Repairs
Building Repairs 940.00
Total Professional Fees 55,522.79
Taxes
Property $ 5,905.56
State 25.00
Total Taxes $ 5,930.56
Travel & Entertainment $ 8,688.67
Utilities
Gas and Electric $ 3,858.19
Water $ 1,110.09
Total Utilities $ 4,968.28
Total Expense $130,147.53
Net Ordinary Income $ 99,826.74
Other Income/Expense
Other Income
Interest Income $ 635.54
Total Other Income $ 635.54
Other Expense 2,153.00
Total Other Income 2,153.00
Net Other Income $ (1,517.46)
NET INCOME $ 98,309.28
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
PAGE
Independent Auditors' Report 1
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Changes in Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Northborough Holdings, Inc. and Subsidiary
Providence, Rhode Island
We have audited the accompanying consolidated balance sheets of Northborough
Holdings, Inc. and Subsidiary as of December 31, 2000 and 1999, and the
related consolidated statements of operations, changes in equity, and cash
flows for the years 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
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Northborough Holdings, Inc. and Subsidiary as of December 31, 2000 and 1999,
and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/Rooney, Plotkin & Willey, LLP
ROONEY, PLOTKIN & WILLEY, LLP
February 9, 2001
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31,
2000 1999
----------- ------
ASSETS
Cash $ 50,456 $ 5,910
Notes Receivable (Note 2) 120,325 108,994
Mortgage Loans and Other
Receivable, Net (Note 3) 258,725 436,778
Real Estate Under Operating
Lease, Net (Notes 4 and 10) 158,893 164,857
Other Assets (Note 5) 300 105,000
----------- ---------
Total Assets $ 588,699 $821,539
=========== ==========
LIABILITIES AND EQITY
Liabilities:
Note Payable, Bank (Note 6) $ - $ 37,000
Income Taxes Payable (Note 7) 123,767 250
Accrued Distributions - 240,000
Accrued Expenses 14,500 15,000
Long-Term Debt (Note 8) 122,783 136,682
Security Deposit 2,650 2,650
----------- ----------
Total Liabilities 263,700 431,582
----------- ----------
Equity: (Note 1A)
Members' Equity - 389,957
Common Stock (Note 9) 1,200 -
Additional Paid-In Capital 132,729 -
Retained Earnings 191,070 -
----------- ----------
Total Equity 324,999 389,957
----------- ----------
Total Liabilities and Equity $ 588,699 $821,539
=========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Years Ended December 31,
2000 1999
----------- -----------
Operating Revenues:
Interest Income $ 305,204 $ 150,492
Fee Income 9,803 31,327
Gain on Disposition of
Mortgage Loans $ 140,689 70,950
----------- ------------
Total Operating Revenues 455,696 252,769
General and Administrative Expenses 73,193 31,036
----------- ------------
Income from Operations 382,503 221,733
----------- ------------
Other Income (Expense):
Rental Income, Net (Note 10) 21,011 24,474
Interest Income 5,710 4,529
Interest on Note Payable, Bank (18,415) (1,984)
----------- ------------
Total Other Income 8,306 27,019
----------- ------------
Income before Provision for Income Taxes 390,809 248,752
Provision for Income Taxes (Note 7) 123,767 250
----------- ------------
Net Income $ 267,042 $ 248,502
=========== ============
The accompanying notes are an integral part of these consolidated financial
statements.
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Equity
Additional
Common Paid-In Retained Members'
Stock Capital Earnings Equity Total
----------- ------------- ------------ ----------- ----------
Balance,
December 31, 1998 $ - $ - $ - $ 481,455 $ 481,455
Net Income - - - 248,502 248,502
Distributions to Members - - - (340,000) (340,000)
----------- ------------- ------------ ------------ -----------
Balance,
December 31, 1999 - - - 389,957 389,957
Net Income, Prior to
Exchange of Members'
Equity for Common
Stock - - - 75,972 75,972
Distributions to Members
Prior to Exchange - - - (332,000) (332,000)
----------- ------------ ------------ ------------ -----------
Subtotal Members'
Equity - - - 133,929 133,929
Exchange of Members'
Equity for Common
Stock 1,200 132,729 - (133,929) -
Net Income, After
Exchange of Members'
Equity for Common
Stock - - 191,070 - 191,070
----------- ------------ ------------ ------------ -----------
Balance,
December 31, 2000 $ 1,200 $ 132,729 $ 191,070 $ - $324,999
=========== ============ ============ ============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31,
2000 1999
------------ ------------
Operating Activities:
Net Income $ 267,042 $ 248,502
------------ ------------
Adjustments to Reconcile Net
Income to Net Cash
Provided by Operating Activities:
Depreciation 5,964 5,996
Bad Debt Expense 7,999 -
Gain on Disposition of Mortgage Loans (140,689) (70,950)
Change In:
Accrued Expenses (500) 15,000
Income Taxes Payable 123,517 -
------------ ------------
Total Adjustments (3,709) (49,954)
------------ ------------
Net Cash Provided by Operating Activities 263,333 198,548
------------ ------------
Investing Activities:
Notes Receivable (75,000) (70,000)
Repayments on Notes Receivable 63,669 14,640
Purchases of Mortgage Loans and Other
Receivable (242,735) (221,200)
Repayments Collected on Mortgage Loans 56,372 23,992
Proceeds on Disposition of Mortgage Loan 497,106 215,950
Maturity of Certificate of Deposit 100,000 -
Other 4,700 (4,583)
------------ ------------
Net Cash Provided by (Used in) Investing
Activities 404,112 (41,201)
------------ ------------
Financing Activities:
Proceeds from Issuance of Long-Term
Debt - 139,000
Net Repayments on Note Payable, Bank (37,000) (193,000)
Principal Payments on Long-Term Debt (13,899) (2,318)
Distributions to Members (572,000) (100,000)
------------ ------------
Net Cash Used in Financing Activities (622,899) (156,318)
------------ ------------
Increase in Cash 44,546 1,029
Cash, Beginning of Year 5,910 4,881
------------ ------------
Cash, End of Year $ 50,456 $ 5,910
============ ============
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Year for Interest $ 29,804 $ 3,999
============ ============
Supplemental Disclosures of Non-Cash Investing and Financial Activities:
During 2000 the Company issues common stock of $1,200 and recorded additional
paid-in capital of $132,729 in an exchange for members' equity as part of a
reorganization of the Company.
During 1999 the Company declared $240,000 of member distributions which were
paid in January 2000.
The accompanying notes are an integral part of these consolidated financial
statements.
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
A. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION:
These consolidated financial statements include Northborough
Holdings, Inc. (NHI), a Colorado corporation, and its wholly owned
subsidiary, Northborough Realty Holdings, LLC (NRH), a Rhode Island
limited liability company. NHI and NRH are collectively referred
to as "the Company". All significant inter-company balances and
transactions have been eliminated in consolidation.
NHI was organized on November 20, 1999 to become the holding
company for NRH. On March 13, 2000, NHI acquired full ownership of
NRH in an exchange of common stock and additional paid-in capital
for members' equity. During 1999 there was no activity in NHI.
NRH was organized on May 29, 1996 and terminates no later than May
29, 2046.
The Company is principally engaged in the acquisition and
subsequent sale of distressed financial assets, primarily
commercial mortgage loans acquired from financial institutions and
other entities at a discount. The Company manages these assets by
collecting payments based on the original terms or renegotiated
terms, or by foreclosure and liquidation of the collateral. The
Company also originates mortgage loans, performs collections
activity for a fee and operates a rental property acquired in a
foreclosure transaction.
B. NOTES RECEIVABLE:
Notes receivable represent mortgage financing originated by the Company.
Notes receivable are recorded at the aggregate lower of cost or market
and are collateralized by commercial property, personal guarantees, and
other business assets. Management believes that the value of such
collateral is in excess of the notes receivable as of December 31, 2000
and 1999 and therefore, no allowance has been provided.
C. MORTGAGE LOANS AND OTHER RECEIVABLE, NET:
Mortgage loans and other receivable represent notes and other financial
assets acquired at a discount and are recorded at cost. All
mortgage loans and the other receivable are collateralized by
commercial property. Management believes that the value of such
collateral is in excess of cost as of December 31, 2000 and 1999
and therefore, no allowance has been provided.
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
------------------------------------------
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:(Continued)
D. REAL ESTATE UNDER OPERATING LEASE:
Real estate acquired through foreclosure is recorded at the fair
value of the property at the time of the foreclosure auction. The
property acquired is primarily used as an income-producing asset.
Capitalizable improvements to real property are recorded at cost.
Depreciation is provided using the straight-line method over the
estimated useful lives of the related assets.
E. REVENUE RECOGNITION:
Discount amortization revenue is recognized to the extent payments
received are earned and is included in operating revenues as
interest income. Gain or loss on the disposition of these
financially distressed assets is calculated based on gross proceeds
from the sale of the asset or collateral, less the expenses related
to the sale or foreclosure, less the book value of the asset.
F. INCOME TAXES:
The Company's provision for income taxes for 2000 is based on NHI's
share of the distributive income of NRH. NRH net income for 2000
was allocated between the period prior to and subsequent to the
acquisition of NRH by NHI (see Note 1A) based on the per-share,
per-day ownership of NRH. Upon the acquisition of NRH by NHI, NRH
became disregarded as an entity separate from NHI for income tax
purposes. As such, all of the activity of NRH will be reported on
the income tax return of NHI.
Prior to the acquisition of NRH by NHI, NRH, by unanimous consent
of its members, elected to be treated as a partnership for income
tax purposes and as such was not taxed. Under subchapter K of the
Internal Revenue Code each member was taxed separately on their
distributive share of the Company's income whether or not that
income was actually distributed.
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
-------------------------------------------
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:(Continued)
G. USE OF ESTIMATES:
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those
estimates.
H. RECLASSIFICATIONS:
Certain reclassifications have been made to the 1999 financial
statements in order for them to conform to the current year
presentation.
2. NOTES RECEIVABLE:
Notes receivable originated by the Company consist of the following:
2000 1999
---- ----
10.00% note receivable of $56,000 due in
monthly principal installments of $467
plus interest from July 1, 1998 to
May 1, 2001. The note is due in full
June 1, 2001. Secured by real estate,
personal guarantee and other business
assets. $ 41,325 $ 46,994
Note receivable of $50,000 due in monthly
principal installments of $1,000 for
August and September 1999, $2,000 for
October 1999 to January 2000, and $5,000
for February and March 2000, plus accrued
interest. The note was paid in full in
August 2000. - 44,000
14.00% note receivable of $20,000 due in
monthly principal installments of $1,000
from November 1, 1999 through June 1, 2001,
plus interest. Secured by real estate,
other business assets, and a personal
guarantee. 4,000 18,000
2. NOTES RECEIVABLE: (Continued)
2000 1999
16.00% note receivable of $75,000 due in
monthly payments of interest only. The
remaining principal and interest on the
loan is due in full January 2001.
Secured by real estate, other business
assets, and a personal guarantee. 75,000 -
-------- --------
Total Notes Receivable $ 120,325 $108,994
-------- --------
3. MORTGAGE LOANS AND OTHER RECEIVABLE, NET:
Mortgage loans and other receivable acquired
at a discount consist of the following:
2000 1999
---- ----
Original Principal Amount $407,720 $972,394
Unamortized Discount (148,995) (535,616)
-------- -------
Mortgage Loans and Other Receivable, Net $258,725 $436,778
-------- --------
Original loans consist of the following at December 31, 2000:
Principal
Unamortized
Amount
Discount
9.05% mortgage loan, due 1998 $ 191,220 $ 635
10.00% mortgage loan, due 2002 144,261 110,600
10.50% mortgage loan, due 2012 34,713 24,641
10.50% mortgage loan, due 2002 7,441 3,034
Other non-interest bearing secured
receivable, due 1995 30,085 10,085
--------- --------
Totals $407,720 $148,995
--------- --------
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
------------------------------------------
3. MORTGAGE LOANS AND OTHER RECEIVABLE, NET: (Continued)
Original loans consist of the following at December 31, 1999:
Principal Unamortized
Amount Discount
--------- -----------
8.30% mortgage loan, due 2008 $ 437,400 $ 266,083
10.50% mortgage loan, due 1989 242,404 187,404
8.00% mortgage loan, due 1996 99,585 9,485
9.05% mortgage loan, due 1998 68,735 635
10.50% mortgage loan, due 2012 40,231 28,559
11.50% mortgage loan, due 1999 32,700 24,700
10.50% mortgage loan, due 2002 21,254 8,665
Other non-interest bearing secured
receivable, due 1995 30,085 10,085
--------- ---------
Totals $ 972,394 $ 535,616
The discounts are based on imputed interest rates ranging from 8.00% to
11.50%.
4. REAL ESTATE UNDER OPERATING LEASE, NET:
Real estate under operating lease consists of the following:
2000 1999
Land and Improvements $ 60,075 $ 60,075
Building and Improvements 114,500 114,500
Subtotal 174,575 174,575
Less Accumulated Depreciation 15,682 9,718
--------- ---------
Real Estate Under Operating Lease, Net $ 158,893 $ 164,857
--------- ---------
The Company is a lessor of the above real estate. See Note 10.
5. OTHER ASSETS:
At December 31, 2000 other assets consisted of accrued interest
receivable of $300. At December 31, 1999 other assets consisted of a
$100,000 certificate of deposit and an other deposit of $5,000. The
certificate of deposit matured in December 2000.
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
------------------------------------------
6. NOTE PAYABLE, BANK:
The Company has a combined $1,000,000 credit facility consisting of a
$750,000 ($400,000 in 1999) demand line-of-credit and $250,000
available on a term loan agreement with a local bank. Interest on the
demand line-of-credit is payable monthly and is at the lender's base
rate, which was 9.50% and 8.50% at December 31, 2000 and 1999,
respectively. Interest on the available term loan would be at either
the lender's base rate or at a fixed rate based on the lender's cost
of funds plus 2.25%. The credit facility is subject to certain covenant
provisions including, but not limited to, maintenance of a debt to
worth ratio and an operating cash flow to debt service ratio. It is
secured by all of the assets of the Company and the personal guarantee
of the stockholders.
7. PROVISION FOR INCOME TAXES:
The components of the provision for income taxes are as follows:
2000 1999
----- ----
Current:
Federal $ 95,141 $ -
State 28,626 250
----------- ------
Total Provision for Income Taxes $ 123,767 $ 250
----------- ------
8. LONG-TERM DEBT:
Long-term debt consists of an 8.59% mortgage note payable to a local
bank. The mortgage is due in monthly principal installments of $1,159
plus interest. A final installment of principal and interest is due
September 30, 2004. The mortgage includes certain covenant provisions
including, but not limited to, maintenance of the property, insurance
coverage and the maintenance of an operating cash flow to debt service
ratio. Interest expense on all debt was $29,804 and $3,999 at
December 31, 2000 and 1999, respectively. The mortgage note payable
matures as follows:
Year ending December 31,
2001 $ 13,908
2002 13,908
2003 13,908
2004 81,059
----------
$ 122,783
----------
NORTHBOROUGH HOLDINGS, INC. AND SUBSIDAIRY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
------------------------------------------
1. Capital Stock:
The capital stock of the Company at December 31, 2000 and 1999 is as
follows:
2000 1999
Common Stock, $.001 Par Value
Authorized Shares 50,000,000 50,000,000
Issued and Outstanding Shares 1,200,000 -
Series A Convertible Preferred Stock,
$.001 Par Value
Authorized Shares 50,000,000 50,000,000
Issued and Outstanding Shares - -
The common stock and preferred stock are identical in all respects
except for certain rights held by preferred stockholders in regard to
any voluntary or involuntary liquidation, dissolution, or winding-up of
the Company.
10. RENTAL INCOME:
The Company leases its land, building and improvements (see Note 4)
under an operating lease. The initial five-year term of the lease
expires December 31, 2002. The lease is renewable, at the lessee's
option, for one additional five-year term. The base monthly rent was
$3,050 and $2,850 for 2000 and 1999, respectively, and it increases
$200 per year during the initial lease term. Rental income for the
years ended December 31, 2000 and 1999 was $44,577 and $42,723,
respectively and is presented net of depreciation, property taxes,
mortgage interest (see Note 8), and repair and maintenance charges.
The initial lease term includes a provision for additional rent based
on the cost of land improvements incurred by the Company.
Future minimum rental receipts under this operating lease are as
follows:
Year ending December 31,
2001 $ 46,654
2002 49,054
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
1. PLAN OF OPERATION FOR THE NEXT 12 MONTHS
The plan of operation for the next twelve months is to engage
in those activities described in Item 1 under the BUSINESS OF COMPANY
section of the Registrant's Form 10-SB. The corporate policy regarding these
activities will be formed through a generation of ideas and direction
from a Board of Directors. The day-to-day operations and decisions
will be delegated to a senior management team directed by a chief
executive officer with counsel and implementation from experienced officers.
The four primary officers of the Company who will be responsible for the
day-to-day implementation of the corporate policy and direction will
be James R. Simmons, Scott B. Adams, Richard Nadeau, Jr. and Kevin Gillis.
All four were founding members of Realty. Realty has been in the business
of acquiring defaulted loan obligations from financial institutions and
collecting said obligations through negotiation or foreclosure on the
collateral securing the loan. Its emphasis has been on purchasing individual
assets from New England banks. These assets are generally smaller loans
($150,000 to $300,000) which are ripe for immediate restructure or conversion
to foreclosure or refinance. The Company's success will largely be driven by
the proven experience of its management who have already demonstrated the
viability of the Company's business plan through the experiences of Realty.
The collective practical experience of this group in the areas of business the
Company will engage in is important in the operations of the Company. Each
brings a specific set of skills and knowledge that include commercial banking,
loan workout, real estate, environmental liability and law. These
individuals have already developed the necessary contacts and demonstrated
their abilities with major financial institutions such that they are now
called on a regular basis to acquire individual or bulk sale assets. The
principals are critical as there is truly a "barrier of entry" into the Asset
acquisition business which has already been bridged by this group. Further,
management has developed a system of performing due diligence on these assets
and proven formula for successful bidding. Realty has earned over $1.4 million
net profit on an original capital investment of $300,000 in its three and one-
half (3.5) years of operation, having experienced average rates of
return on equity of over fifty percent (50%). Realty has also identified
and acquired medium and long-term "performing" assets at significant
discounts which provide ongoing cash flow. These asset are typically loans
which had historic payment defaults, but which Realty has resurrected by
restructuring the payment provisions or convincing the borrower to
reinstate to avoid lose of the collateral.
2. NEED FOR ADDITIONAL FINANCING
Northborough Capital Partners, LLC, a wholly-owned subsidiary of the
Registrant, has secured a $2,000,000 Revolving Line of Credit. No commitments
to provide additional funds have been made by management or other
stockholders. Accordingly, there can be no assurance that any additional funds
will be available to the Company to allow it to cover its expenses.
However, given its current operations and extended business plan, the Company
has sufficient cash flow and line of credit.
3. NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" ("SFAS 121") issued by the FASB, is effective for financial
statements for fiscal years beginning after December 15, 1995. The standard
establishes new guidelines regarding when impairment losses on long-lived
assets, which include plant and equipment, certain identifiable intangible
assets, and goodwill, should be recognized and how impairment losses should
be measured.
The Company does not expect adoption to have a material effect on
its financial position or results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123") issued by the FASB, is effective
for specific transactions entered into after December 15, 1995. The
disclosure requirements of SFAS 123 are effective for financial statements
for fiscal years beginning no later than December 15, 1995. The new
standard established a fair value method of accounting for stock-based
compensation plans and for transactions in which an entity acquires goods
or services from non-employees in exchange for equity instruments. The
Company does not expect adoption to have a material effect on its financial
position or results of operations.
CAUTIONARY STATEMENT
This Quarterly Report on Form 10-QSB contains statements relating to
future results of the Company (including certain projections and business
trends) that are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Actual results may differ
materially from those projected as a result of certain risks and
uncertainties, including but not limited to changes in political and
economic conditions; domestic and foreign government spending, budgetary
and trade policies; Asset performance, successful development of new
business lines, and competition as well as other risks and uncertainties,
including but not limited to those described above in the discussion under
RISK FACTORS, and those detailed from time to time in the filings of the
Company with the Securities and Exchange Commission.
14
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
Neither the Registrant nor any of its affiliates are a
party, nor is any of their property subject, to material
pending legal proceedings or material proceedings known
to be contemplated by governmental authorities.
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. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8 K
None
15
INDEX TO EXHIBITS
EXHIBIT NO DESCRIPTION
# 3.1 Articles of Incorporation of the Registrant, as
amended;
# 3.2 Bylaws of the Registrant;
# 4.1 Instruments Defining Rights of Security Holders/Minutes of
Annual/Special Meetings of the Registrant;
# 10.1 Issuance of Restricted Shares from Authorized Shares;
# 23.1 Consent of Nadeau & Simmons, P.C.;
x 27 Financial Data Schedule
x 99.1 Safe Harbor Compliance Statement
_______________________
x Filed herewith.
# Incorporated by reference from the Registrant's Registration
Statement filed on Form 10-SB on or about April 14, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NORTHBOROUGH HOLDINGS, INC.
/s/ Nadeau & Simmons, P.C.
DATE: August 15, 2001 By: NADEAU & SIMMONS, P.C.
Title: Filing Agent