-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IpP5jPyMoU0XIt5KWupSSl91FlyICXF3OPDR/aSetoDQwt1LbtqylcZHb3K9HfCl FCMC1tj/2bdNNdbfnTeo/g== 0000704874-98-000003.txt : 19980817 0000704874-98-000003.hdr.sgml : 19980817 ACCESSION NUMBER: 0000704874-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: AMEX SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSION WEST PROPERTIES/NEW/ CENTRAL INDEX KEY: 0000704874 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 952635431 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08383 FILM NUMBER: 98688835 BUSINESS ADDRESS: STREET 1: 10050 BANDLEY DR CITY: CUPERTINO STATE: CA ZIP: 95014 BUSINESS PHONE: 4087250700 MAIL ADDRESS: STREET 1: 10050 BANDLEY DRIVE STREET 2: SUITE 250 CITY: CUPERTINO STATE: CA ZIP: 95014 10-Q 1 QUARTERLY REPORT FOR MISSION WEST PROPERTIES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------- FORM 10-Q (Mark One) [X]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended JUNE 30, 1998; or [ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ____________ . Commission file number 1-8383 MISSION WEST PROPERTIES (Exact name of registrant as specified in its charter) CALIFORNIA 95-2635431 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION INCORPORATION OR ORGANIZATION) NUMBER) 10050 BANDLEY DRIVE CUPERTINO, CALIFORNIA 95014-2188 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) Registrant's telephone number, including area code is (408) 725-0700 ----------- Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH Common, no par value REGISTERED American Stock Exchange Pacific Exchange, Incorporated Securities registered pursuant to Section 12(g) of the Act: None ----------- 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. (1) Yes X No (2) Yes X No ----- ----- ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock no par value 1,698,536 shares ------------------------------- -------------------------------- (Class) (Outstanding at August 10, 1998) - 1 - MISSION WEST PROPERTIES FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 INDEX
PAGE PART I FINANCIAL INFORMATION Item 1 Financial Statements: Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997........................................3 Consolidated Statements of Operations for the three and six months ended June 30, 1998 and 1997..................4 Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1997......................5 Notes to Consolidated Financial Statements...................6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations..........................7 PART II OTHER INFORMATION Item 5 Other Information............................................9 Item 6 Exhibits and Reports on Form 8-K.............................9 SIGNATURES............................................................10
- 2 - ================================================================================ Part I - Financial Information ITEM 1 CONSOLIDATED FINANCIAL STATEMENTS MISSION WEST PROPERTIES CONSOLIDATED BALANCE SHEETS (in thousands) -----
June 30, 1998 December 31, 1997 -------------- -------------- (Unaudited) ASSETS Cash and cash equivalents $ 4,224 $ 5,569 Other assets 1,068 194 -------------- -------------- Total assets 5,292 $ 5,763 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses 225 $ 552 -------------- -------------- Total liabilities 225 552 -------------- -------------- Stockholders' equity: Common stock, no par value, 200,000,000 shares authorized 1,698,536 and 1,501,104 shares issued and outstanding at June 30, 1998 and December 31, 1997, respectively 27,596 26,707 Less, amounts receivable on private placement (941) (334) -------------- -------------- 26,655 26,373 Accumulated deficit (21,588) (21,162) -------------- -------------- Total shareholders' equity 5,067 5,211 -------------- -------------- Total liabilities and shareholders' equity $ 5,292 $ 5,763 ============== ==============
The accompanying notes are an integral part of these condensed consolidated financial statements. - 3 - MISSION WEST PROPERTIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) ---------
Three months ended Six months ended June 30, June 30, -------------------- ------------------- 1998 1997 1998 1997 ---------- ---------- --------- --------- Revenue: Rental revenues from real estate - $ 99 - $ 741 Other income, including interest $ 64 128 $ 141 259 ---------- ---------- --------- --------- 64 227 141 1,000 ---------- ---------- --------- --------- Expenses: Operating expenses of real estate - 6 - 101 Depreciation of real estate - 16 - 131 General and administrative 337 178 567 426 Interest - - - 178 ---------- ---------- --------- --------- Total expenses 337 200 567 836 ---------- ---------- --------- --------- (Loss)/income before gain on sale of real estate and income taxes (273) 27 (426) 164 (Loss)/gain on sale of real estate - (173) - 4,676 ---------- ---------- --------- --------- (Loss)/income before income taxes (273) (146) (426) 4,840 Provision for income taxes - 266 - (1,385) ---------- ---------- --------- --------- Net (loss)/income $ (273) $ 120 $ (426) 3,455 ========== ========== ========= ========= Basic net (loss)/income per share $(0.16) $ 2.35 $ (0.27) $69.35 Diluted net (loss)/income per $(0.16) $ 2.35 $ (0.27) $69.35 ========== ========== ========= ========= Weighted average number of common shares outstanding (basic and diluted) 1,698,536 51,104 1,601,770 49,821 ========== ========== ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. - 4 - MISSION WEST PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except per share amounts) (unaudited) -----
Six months ended June 30, ---------------------- 1998 1997 ----------- ---------- Cash flows from operating activities: Net (loss)/income $ (426) $ 3,455 Adjustments to reconcile net income to net cash Used in operating activities: Net gain on sale of real estate assets - (4,676) Depreciation - 131 Tax effect of cancelled stock options - (33) Changes in assets and liabilities: Net real estate investments - 2 Other assets (874) 1,228 Accounts payable and accrued expenses (327) (1,047) ----------- ---------- Net cash used in operating activities (1,627) (940) ----------- ---------- Cash flows from investing activities: Net proceeds from sales of real estate - 46,443 ----------- ---------- Net cash provided by investing activities - 46,443 ----------- ---------- Cash flows from financing activities: Principal payments on mortgage notes payable - (30,753) Proceeds from issuance of common stock 293 - Proceeds from stock options exercised - 759 Repurchase of common stock (11) - Dividends paid - (13,798) ----------- ---------- Net cash used in financing activities 282 (43,792) ----------- ---------- Net decrease in cash and cash equivalents (1,345) 1,711 Cash and cash equivalents, beginning 5,569 3,164 ----------- ---------- Cash and cash equivalents, ending $ 4,224 $ 4,875 =========== ========== Supplemental information: Cash paid for interest $ - $ 178 =========== ========== Cash paid for income taxes $ 115 $ 848 =========== ========== Supplemental schedule of non-cash investing and financing activities: Note receivable in connection with the $ 900 $ - issuance of Common Stock =========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. - 5 - MISSION WEST PROPERTIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) (unaudited) ----- 1. BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation have been included. The Company presumes that users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, footnote disclosure which would substantially duplicate the disclosure contained in the Company's 1997 Annual Report on Form 10-K has been omitted. 2. ISSUANCE OF COMMON STOCK On March 30, 1998, the Company issued 200,000 shares of common stock at $4.50 per share to an executive officer of the Company in exchange for a $900,000 note receivable payable to the Company. The note is a full recourse promissory note bearing interest at 5.59% and is secured by a pledge of the shares. Interest is payable annually and principal is due March 30, 2003. During the second quarter of 1998, the Company received total payments of $293,000 relating to amounts receivable on private placement. 3. NET INCOME PER SHARE The computation of net income per share is based on the weighted average number of common shares outstanding during the period. Common stock options have not been included in the computation since their inclusion would have no effect on net income per share. 4. INCOME TAXES The Company intends to qualify and elect to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ending December 31, 1998. Accordingly, no provision has been made for federal income taxes for the three and six month periods ended June 30, 1998. 5. RECENT ACCOUNTING PRONOUNCEMENTS On June 15, 1998, the Financial Accounting Standards Board issued Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), SFAS 133 is effective for fiscal years beginning after June 15, 1999, but earlier application is permitted as of the beginning of any fiscal quarter subsequent to June 15, 1998. SFAS 133 requires all derivatives to be recognized in the statement of financial position as either assets or liabilities and measured at fair value. The Company does not believe the application of SFAS 133 will have a material effect on its consolidated financial statements. - 6 - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto contained herein and the Company's consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K as of and for the year ended December 31, 1997. The results for the three and six month periods ended June 30, 1998 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 1998. OVERVIEW Mission West Properties (the "Company"), with corporate offices located in Cupertino, California, is a California corporation that historically has been engaged in developing, owning, operating, and selling income-producing commercial real estate. RESULTS OF OPERATIONS COMPARISON OF THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1998 TO THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1997. During the three and six month periods ended June 30, 1998, the Company held minimal assets, primarily cash and cash equivalents obtained from recent sales of common stock. Therefore, there was minimal operating activity during these periods. For the three month period ended June 30, 1998, the Company recognized interest income in the amount of $64,000 and general and administrative costs of $337,000, resulting in a net loss of $273,000. For the six month period ended June 30, 1998, the Company recognized interest income in the amount of $141,000 and general and administrative costs of $567,000, resulting in a net loss of $426,000. During the six month period ended June 30, 1997, the Company sold its entire real estate portfolio of 11 properties. Nine of the 11 real estate properties ("the nine properties") were sold during the first quarter of 1997. The nine properties consisted of occupied office, light industrial buildings and vacant land in Chandler, Arizona. The remaining two properties were sold in the second quarter of 1997 and consisted of leaseholds, together with hangar and office buildings, thereon, comprising approximately 25 percent of the land at Palomar-McClellan Airport in San Diego, California. Upon completion of the sale of the nine properties, the Company received $47,200,000 in cash, from which it repaid all debt encumbering the properties (thus the elimination of all future interest expense) and paid a majority of the related transaction and closing costs, including $3,000,000 in "break-up" fees from previously terminated sales transactions. Upon completing the sale of the remaining two properties in the second quarter of 1997, the Company received $3,000,000 cash, from which related transaction and closing costs were paid. The Company recognized a net gain on the sale of the eleven properties of $4,676,000. The Company declared a special dividend of $9.00 per share to shareholders during February 1997. That dividend represented the available portion of the proceeds from the sale of the nine properties. Following the sale of the 11 properties, coupled with the cash dividends paid to shareholders, only cash and receivables were left in the Company and, therefore, the resulting corporate entity had insignificant revenue-generating and cash-generating capabilities and minimal operations, aside from interest income and general and administrative expenses. CHANGES IN FINANCIAL CONDITION There were no significant changes in financial condition during the six month period ended June 30, 1998, except for the sale of 200,000 shares of common stock at $4.50 per share to an executive officer in exchange for a $900,000 note receivable payable to the Company, as well as the receipt of $293,000 in connection with amounts receivable on private placement. - 7 - LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1998, the Company's assets consisted principally of cash and cash equivalents obtained from sales of common stock in September and November 1997. The Company's Form S-4 Registration Statement No. 333-52835, filed on May 15, 1998, as amended (the "S-4 Registration Statement"), is incorporated by reference into this Form 10-Q. FORWARD LOOKING STATEMENTS Forward-looking statements involve a number of risks and uncertainties. Some of the important factors that could cause actual results to differ materially from those in the forward-looking statements include the following: Future transactions intended to raise capital for the Company and result in the Company's conduct of a new real estate business are subject to applicable California and federal laws, the regulations of stock exchanges or other markets on which the common stock of the Company is traded, real estate market conditions, stock market conditions, or other factors. In October 1997, the American Stock Exchange ("AMEX") halted trading of the Company's common stock. Trading has not yet resumed. In the absence of appropriate actions by the Company, there is a risk, therefore, that the Company's common stock will be de-listed from such exchanges and there may no longer exist a trading market for the common stock. If the Company does raise sufficient capital to maintain the AMEX and the Pacific Stock Exchange ("PSE") listings of the Company's common stock, but does not re-enter the real estate business during fiscal year 1998, the Company may become subject to the Investment Company Act of 1940, as amended, which would entail substantially more regulation of the Company at significant additional expense. At present, approximately 64.6 percent of the outstanding common stock of the Company is owned by members of the Berg Voting Group. All such shares are subject to Voting Rights Agreements obligating those shareholders to vote their shares in the manner recommended by Berg and Berg Enterprises, Inc. and Carl E. Berg, who as a result, should be viewed as possessing effective control of the Company. There can be no assurance that such control will be exercised to cause the occurrence of any transaction described in the forward-looking statements. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS The Company does not believe recently issued accounting standards have a current impact on the Company's financial statements. YEAR 2000 CONSIDERATIONS The Company utilizes computer software for its corporate and real property accounting records and to prepare its financial statements. The vendor of the Company's current principal software accounting system has advised the Company that it will provide a Year 2000 compliance software upgrade to the Company in early 1999. If necessary, the Company could prepare all required accounting entries manually without incurring material additional operating expenses. Conceivably, tenants of the Properties could experience delays in processing their accounting records and making required lease payments, if they encounter Year 2000 compliance problems. The Company does not believe that any such delays would have a material adverse effect on the Company. - 8 - ================================================================================ Part II - Other Information ITEM 5 OTHER INFORMATION RECENT DEVELOPMENTS The Company's Form S-4 Registration Statement No. 333-52835, filed on May 15, 1998, as amended (the "S-4 Registration Statement"), is incorporated by reference into this Form 10-Q. On August 6, 1998, Berg & Berg Developers and Microsoft Corporation ("Microsoft") announced that Microsoft had signed a lease with respect to an approximate 515,000 square foot R&D Property to be constructed by Microsoft on the site at L'Avenida in Mountain View, California, which is one of the Pending Development Projects described in the S-4 Registration Statement. Microsoft has announced its intention to use this facility as its Silicon Valley campus. Under the Pending Projects Acquisition Agreement, which is subject to shareholder approval at the Special Meeting described in the S-4 Registration Statement, the Company would have the right to acquire this Pending Development Project through the Operating Partnerships (described in the S-4 Registration Statement) when the building proposed by Microsoft has been completed and fully leased. The terms of the lease signed on August 6, 1998 provide for a triple net monthly rental rate of approximately $2.95 per square foot, and include other material terms and conditions. Microsoft controls the construction of this facility which is scheduled to be completed in phases between March and May 1999, and subject to certain conditions, the lease requires rental payments to commence in phases in March and May 1999. There can be no assurance that Microsoft will complete this facility, no assurance that the Company will hold the Special Meeting, and no assurance that the shareholders of the Company will approve the Pending Projects Acquisition Agreement. Unless all of the foregoing events occur, the Company will have no right to acquire the L'Avenida Pending Development Project, or any interest therein. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K a. EXHIBITS Exhibit 27 Article 5 Financial Data Schedule for 2nd Quarter. b. REPORTS ON FORM 8-K During the quarter ended June 30, 1998, the Company filed no reports on Form 8-K. - 9 - ================================================================================ 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 thereto duly authorized. MISSION WEST PROPERTIES (Registrant) Date: August 14, 1998 By: /s/ Marianne K. Aguiar ---------------------------------------- Marianne K. Aguiar Vice President of Finance and Controller (Principal Accounting Officer) - 10 - EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 1,000 6-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 4,224 0 0 0 0 0 0 0 5,292 0 0 0 0 27,596 (941) 5,292 0 141 0 0 567 0 0 (426) 0 (426) 0 0 0 (426) (0.27) (0.27)
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