Form 10QSB for ALTRIMEGA HEALTH CORP
--------------------------------------------------------------------------------
23-Aug-2004
Quarterly Report
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION
GENERAL
The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements, and the Notes thereto included herein. The information contained below includes statements of Altrimega's or management's beliefs, expectations, hopes, goals and plans that, if not historical, are forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. For a discussion on forward-looking statements, see the information set forth in the Introductory Note to this Annual Report under the caption "Forward Looking Statements", which information is incorporated herein by reference.
GOING CONCERN
As reflected in Altrimega's financial statements for the three months ended June 30, 2004, Altrimega's accumulated deficit of $865,008 and its working capital deficiency of $546,024 raise substantial doubt about its ability to continue as a going concern. The ability of Altrimega to continue as a going concern is dependent on Altrimega's ability to raise additional debt or capital. The financial statements for June30, 2004 do not include any adjustments that might be necessary if Altrimega is unable to continue as a going concern.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. At each balance sheet date, management evaluates its estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The estimates and critical accounting policies that are most important in fully understanding and evaluating our financial condition and results of operations include those listed below.
REVENUE RECOGNITION
Gains from sales of operating properties and revenues from land sales are recognized using the full accrual method provided that various criteria relating to the terms of the transactions and any subsequent involvement by the Company with the properties sold are met. Gains or revenues relating to transactions which do not meet the established criteria are deferred and recognized when the criteria are met or using the installment or cost recovery methods, as appropriate in the circumstances. For land sale transactions under terms in which the Company is required to perform additional services and incur significant costs after title has passed, revenues and costs of sales are recognized proportionately on a percentage of completion basis. Deposits received prior to closing are recorded as a liability until the consummation of the sale at which time such amounts are generally applied toward the purchase price.
Cost of land sales is generally determined as a specific percentage of land sales revenues recognized for each land development project. The cost percentages used are based on estimates of development costs and sales revenues to completion of each project and are revised periodically for changes in estimates or development plans. The specific identification method is used to determine cost of sales of certain parcels of land.
PROPERTIES
Properties under development are carried at cost reduced for impairment losses, where appropriate. Properties held for sale are carried at cost reduced for valuation allowances, where appropriate. Acquisition, development and construction costs of properties in development and land development projects are capitalized including, where applicable, salaries and related costs, real estate taxes, interest and preconstruction costs. The pre-construction development (or an expansion of an existing property) includes efforts and related costs to secure land control and zoning, evaluate feasibility, and complete other initial tasks, which are essential to development. Provisions are made for potentially unsuccessful preconstruction efforts by charges to operations.
Properties held for sale are carried at the lower of their carrying values (i.e., cost less accumulated depreciation and any impairment loss recognized, where applicable) or estimated fair values less costs to sell. Generally, revenues and expenses related to property interests acquired with the intention to resell are not recognized.
Stock-based compensation - The Company applies Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and Related Interpretations, in accounting for stock options issued to employees. Under APB No. 25, employee compensation cost is recognized when estimated fair value of the underlying stock on date of the grant exceeds exercise price of the stock option. For stock options and warrants issued to non-employees, the Company applies SFAS No. 123, Accounting for Stock-Based Compensation, which requires the recognition of compensation cost based upon the fair value of stock options at the grant date using the Black-Scholes option pricing model.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure. SFAS No. 148 amends the transition and disclosure provisions of SFAS No. 123. The Company is currently evaluating SFAS No. 148 to determine if it will adopt SFAS No. 123 to account for employee stock options using the fair value method and, if so, when to begin transition to that method.
PRINCIPALS OF CONSOLIDATION
The consolidated financial statements shown in this report excludes the historical operating information of the parent before September 30, 2002, and includes the operating information of the subsidiary, Creative Holdings, Inc., from July 3, 2002 (date of inception of the subsidiary), and the operating information of Sea Garden Funding, LLC from November 2002 (the date of the purchase of 80% of the LLC) to December 31, 2002.
All intercompany transactions have been eliminated.
RESTATEMENT OF FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
Subsequent to the issuance of the Company's financial statements, management became aware that those financial statements did not reflect account balances properly for the period from July 3, 2002 (date of inception) through December 31, 2002. Properly accounting of these items in the revised financial statements has the following effect:
For the period from July 3, 2002 (date of inception) through December 31, 2002, the change in the statement of operations primarily related to the accounting for the share exchange agreement between Altrimega and Creative Holdings, which was not properly reported as a transaction identical to that resulting from a reverse acquisition, except goodwill or other intangible assets are not recorded. The net change of $171,756 increased the net loss from $494,507 ($0.01 per weighted average common share outstanding) to $666,263 ($0.06 per weighted average common share outstanding) for the period from July 3, 2002 (date of inception) through December 31, 2002. The Company has filed an amendment to its Form 10-KSB for fiscal year ended December 31, 2002, as well as amendments to its quarterly reports for fiscal year 2003.
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2004, COMPARED TO THE THREE MONTH PERIOD ENDED JUNE 30, 2003
REVENUES
Revenue for the three month period ended June 30, 2004, was $0.00, a decrease of $181,210, as compared to $181,210 in revenues for the same period ended June 30, 2003. The decrease in revenues in 2004 was attributable to no sales of units at the Sea Garden project in the second quarter, where the Company sold 2 units in 2003. We anticipate revenues for the fiscal year ending 2004 to consist mainly or completely of the sale of units at the Sea Garden Project.
COST OF REVENUE. There was $1,629 cost of revenue for the three month period ended June 30, 2004, compared to $167,139 in the June 30, 2003 period. The difference is attributable to the 2 unit sales in 2003 compared to -0- unit sales in 2004.
GROSS PROFIT. Gross profit for the three month period ended June 30, 2004 was ($1,629). The gross profit for the three months ended June 30,2004 of $13,571related to the sale of units at the Sea Garden project.
OPERATING EXPENSES. Operating expenses for the three month period ended June 30, 2004, were $28,801, as compared to $70,010, for the three period ended June 30, 2003. Operating expenses in 2004 consisted of $28,801 in general and administrative expenses. The decrease of $41,209 from 2003 to 2004 was almost entirely attributable to a decrease in consulting and professional fees, which equaled $45,000 in the three month period ended June 30, 2003.
OTHER INCOME (EXPENSE). Other income (expense) for the three month period ended June 30, 2004, was a net expense of $8,624, a decrease of $8,244, as compared to a net expense of $16,868 for the three month period ended June 30, 2003. The decrease in other expense in 2004 was primarily attributable to less interest expense from loans used in the construction of buildings at Sea Gardens and the two mortgages on the remaining land at the Sea Garden project.
NET LOSS. Altrimega had a net loss of $35,289 for the three month period ended June 30, 2004, as compared to a net loss of $71,016 for the period ended June 30, 2003. The decrease of $35,727 was mostly attributable to decreased consulting fees in the June 30, 2004 period.
RESULTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2004, COMPARED TO THE PERIOD ENDED JUNE 30, 2003
REVENUES
Revenue for the six month period ended June 30, 2004, was $0.00, a decrease of $363,189, as compared to $363,189 in revenues for the six month period ended June 30, 2003. The decrease in revenues in 2004 was attributable to no sales of units at the Sea Garden project in the first half of 2004, where the Company sold four units in first half of 2003. We anticipate revenues for the fiscal year ending 2004 to consist mainly or completely of the sale of units at the Sea Garden Project.
COST OF REVENUE
There was $1,629 cost of revenue for the six month period ended June 30, 2004, compared to $322,248 in the June 30, 2003 six month period. The difference is attributable to the four unit sales in 2003 compared to -0- unit sales in 2004.
GROSS PROFIT
Gross profit for the six month period ended June 30, 2004 was ($1,629). The gross profit relates to the sale of units at the Sea Garden project. The gross profit for the six month period ended June 30, 2003 was $40,941.
OPERATING EXPENSES
Operating expenses for the six month period ended June 30, 2004, were $55,123, as compared to $98,634, for the six month period ended June 30, 2003. Operating expenses in 2004 consisted of $55,123 in general and administrative expenses. The decrease of $43,511 from 2003 to 2004 was almost entirely attributable to a decrease in consulting and professional fees, which equaled $69,500 in the six month period ended June 30, 2003.
OTHER INCOME (EXPENSE)
Other income (expense) for the six month period ended June 30, 2004, was a net expense of $17,129, an increase of $261, as compared to a net expense of $16,868 for the six month period ended June 30, 2003. The increase in other expense in 2004 was primarily attributable to increased interest expense from loans used in the construction of buildings at Sea Gardens and the two mortgages on the remaining land at the Sea Garden project.
NET LOSS
Altrimega had a net loss of $65,923 for the six month period ended June 30, 2004, as compared to a net loss of $78,205 for the six month period ended June 30, 2003. The decrease of $12,282 was mostly attributable to decreased consulting fees in the June 30, 2004 six month period.
LIQUIDITY AND CAPITAL RESOURCES
Altrimega's financial statements have been prepared on a going concern basis that contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Altrimega incurred a net loss of $35,289 and $71,016 for the periods ended June 30, 2004 and June 30, 2003, respectively, and has an accumulated deficit of $865,008 at June 30, 2004. As of June 30, 2004, we had total assets of $1,482,309 and total liabilities of $1,933,773, a difference of $451,464. Additionally, our current assets were $1,387,749 and our current liabilities were $1,933,773, creating a working capital deficit of $546,024. The majority of the assets, $1,382,149 consist of building sites contained within the Sea Garden town home community.
Consequently, the majority of our liabilities, $1,526,575 are mortgage loans on the Sea Garden assets. Accounts payable to related parties equal to $262,823 are also included in our liabilities. Management recognizes that Altrimega must generate or obtain additional capital to enable it to continue operations. Management is planning to obtain additional capital principally through the sale of equity securities. The realization of assets and satisfaction of liabilities in the normal course of business is dependent upon Altrimega obtaining additional equity capital and ultimately obtaining profitable operations. However, no assurances can be given that Altrimega will be successful in these activities. Should any of these events not occur, the accompanying consolidated financial statements will be materially affected.
We had limited operations and revenues during the period ended June 30, 2004. Our shortfall in working capital has been met through advances from our president, John Gandy, and other shareholders who have advanced funds to pay expenses incurred by the Company from time to time. At no time during the period did these short term loans exceed $50,000.
For the six months ended June 30, 2004, the Company used net cash in operations of $683,314, no cash for investing activities and had $681,575 in cash provided by financing activities.
We anticipate that we will require significant capital to maintain our corporate viability and execute our plan to develop real estate projects. We anticipate necessary funds will most likely be provided by our existing shareholders, our officers and directors, and outside investors. We will require significant loan guarantees to acquire properties for development and to complete construction on any additional construction projects. We may be required to pledge equity in the Company to induce individuals, officers or directors or other shareholders to guarantee our loans when necessary.
Altrimega is at present meeting its current obligations from its monthly cash flows, which during 2003, and to date in 2004 has included cash from operations, investor capital, and loans from related parties. However, due to insufficient cash generated from operations, Altrimega currently does not have internally generated cash sufficient to pay all of its incurred expenses and other liabilities. As a result, Altrimega is dependent on investor capital and loans to meet its expenses and obligations. Although related party loans have allowed Altrimega to meet its obligations in the recent past, there can be no assurances that Altrimega's present methods of generating cash flow will be sufficient to meet future obligations. There can be no assurances that Altrimega will be able to raise sufficient additional capital in the future.
We have incurred losses since inception. Management believes that it will require approximately $150,000 in additional capital to fund overall Company operations for the next twelve months. This amount does not include monies necessary to construct new townhouse units at Sea Garden. Altrimega currently has approximately $-0- in cash and cash equivalents as of June 30, 2004.
PLAN OF OPERATION
The Company derives it revenue from the sale of developed or undeveloped real estate parcels. At present, the Company has one project generating revenues, Sea Garden Town Homes, located in North Myrtle Beach, South Carolina These Town Homes sell in the $95,000 to $105,000 range per Town Home unit. The Company owns the building sites for an additional 49 units and is under construction on 15 units. These units have been pre-sold and construction is set to begin on another 10 units in June, 2004.
It is important for the Company to raise capital funds through the sell of its common stock in order to provide funding for additional projects. The projected revenues and subsequent net earnings from the Sea Garden project are not adequate to cover the Company's annual operating costs on an ongoing basis.
Altrimega intends to strive to locate, evaluate and proceed to finance and develop multiple projects located primarily in the Myrtle Beach, South Carolina area and the Carolinas area of the United States. Management believes that these areas provide the population growth necessary to achieve profits from new construction projects. For the last three years, Horry County, South Carolina has been one of the top three fastest growing counties in the United States. In 1997, Horry County showed a population of only 180,000. Based on current projections and the 2000 census data, the county will have a permanent population of 500,000. The principal industries of the area are tourism related. Myrtle Beach is considered a drive-in market, where tourists will drive their cars rather than fly to the destination. The tourism industry in Myrtle Beach has developed three seasons, spring golf, summer beach vacations and fall golf. The spring and fall golf seasons bring approximately 150,000 visitors per week to play on the areas over 100 golf courses. The summer vacation season brings in approximately 400,000 per week. The average tourist stay is one week.
Altrimega's business strategy includes a focus on interval ownership properties, also known as time-share properties, that cater to this major tourism industry. As well, we intend to develop projects in the medium price ranges for the areas permanent service industry population.
Management intends to attempt to seek out low-risk projects that do not require large financing commitments. In addition, we will continue to evaluate projects throughout the Carolinas in high growth areas.
Our continuation as a going concern is dependent on our ability to meet our obligations and obtain additional debt or equity financing required until our current and proposed real estate projects are under way and generating earnings. Until such time as these projects are generating earnings, we have taken the following steps to revise our operating and financial requirements in an effort to enable us to continue in existence:
o We have reduced administrative expenses to a minimum by consolidating management responsibilities to our president and chief executive officer.
o We intend to seek either equity or further debt funding.
o We intend to attempt to obtain the professional services of third-parties through favorable financing arrangements or payment by the issuance of our common stock.
We believe that the foregoing plan should enable us to generate sufficient funds to continue its operations for the next twelve months.
Management has implemented this plan to attempt to overcome the Company's serious going concern conditions. The first step is to reduce operating costs. To this end the Company's President and Chief Executive Officer, John Gandy, has assumed almost all of the Company's functions from sales and marketing, locating and evaluating new real estate projects, most accounting functions, shareholder relations and general administrative functions. Mr. Gandy has foregone any compensation for the last half of 2003, and has committed to continue with no compensation through at least the first six months of 2004. The Company's Chief Financial Officer is receiving no compensation. The Company anticipates reduced consulting expense in the next fiscal year. Only one consultant is on hand for additional help in evaluating projects and working with the accounting and reporting functions of the Company. Administrative expenses, including mostly legal and accounting charges, will constitute the largest expense items for the year. The Company has made arrangements with these outside professionals to work more efficiently with them to help reduce the overall costs associated with these services.
In addition, the Company has located some potential sources of equity financing that could contribute to the Company's financial requirements in the upcoming fiscal year. This element is especially critical to the Company's going concern situation. Before these sources can be fully explored, the Company must correct its prior Schedule 14A Preliminary Information Statement filed with the Securities and Exchange Commission. Management is in the process of correcting this filing.
For the next 12 months we anticipate that we will need $150,000 to continue to fund basic operations, in addition to funding necessary to acquire and develop real estate projects. The Company anticipates approximately $50,000 in consulting fees in the next fiscal year and only minor operating expenses. Any new real estate projects will require debt financing. In summary, we expect expenses to decline in the coming fiscal year due to a decrease in consulting fees and no other increases in operating expenses.
The Company plans to continue operating with small administrative and consulting fees in the next fiscal year in order to continue operations. Continuing to work with its accounting and legal professionals more efficiently, the Company plans to reduce its fees for such services. In addition, the Company plans to utilize only one consultant for accounting services.
From time to time, Altrimega may evaluate potential acquisitions involving complementary businesses, content, products or technologies. Altrimega has no present agreements or understanding with respect to any such acquisition. Altrimega's future capital requirements will depend on many factors, including an increase in Altrimega's real estate projects, and other factors including the results of future operations.
--------------------------------------
http://quote.barchart.com/quote.asp?sym=CRHM
http://stockcharts.com/def/servlet/SC.web?c=crhm,uu[m,a]daclyyay[pb50!b20][vc60][iUb14!La12,26,9]&pref=G
--------------------------------------
The last minute of the day saw it jump from 0.004 up to 0.0047 (100 share signal) then 0.005 (100 share signal) then 0.0047 (100 share signal) and 0.005 (100 share signal). It had opened at 0.0029 and got as high as 0.0054. With 5,514,065 shares traded with a near double at stake, how the hell did we miss it Friday? RUFF????
I'd keep an eye on it.............RUFF......
------------------
Dog
UBBFriend: Email this page to someone!
Printer-friendly view of this topic
