U.S. SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-QSB

 

| {X} | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934. |
|-----|-----------------------------------------------------------------------------------------|

For the quarterly period ended March 31, 2002

OR

| {  } | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |
|----------------|-----------------------------------------------------------------------------------------|

For the transition period from __________ to_________.

Commission File Number 000-02290

**
EFFICIENCY LODGE, INC.

(Exact name of small business issuer as specified in itscharter)
 

Georgia
58-0898219

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification No.)

 

5342 Old Floyd Road, P. O. Box 635, Mableton, Georgia 30126
(Address of principal executive offices)

(770) 819-0039

(issuer's telephone number, including area code)

 

Check whether the issuer (1) filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90days.

          Yes     /X/          No      /_/

Shares outstanding of each of the issuer's classes of commonequity atMarch 31, 2002: 216,970 shares of Common Stock, no par value.

Transitional Small Business disclosure Format (checkone).

         Yes/_/          No     /X/
 ****
**PART I.  FINANCIAL INFORMATION**

**Item1.                    FinancialStatements**

Efficiency Lodge, Inc.

CONSOLIDATED BALANCE SHEETS

ASSETS

March 31,2002

December 31,2001
  
Property and equipment, net

$

24,951,807 

$

25,062,820

Cash

395,095 

761,172

Investments

2,222,555 

3,008,773

Other assets

1,209,764 

1,127,182
  
$

28,779,221 

$

29,959,947
   
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Liabilities

Mortgage notes payable

$

26,644,697 

$

26,853,897

Other liabilities

884,778 

1,972,182
  
Total liabilities

27,529,475 

28,826,079
 
Stockholders’ equity

Common stock – no par value, 7,500,000 shares  authorized; 297,900 shares issued

240,215 

240,216

Retained earnings

1,674,080 

1,381,756

Accumulated other comprehensive earnings

255,751 

432,196
  
2,170,046 

2,054,168

Less 80,930 shares of common  stock in treasury, at cost

(920,300)

(920,300)
  
1,249,746 

1,133,868
   
$

28,779,221 

$

29,959,947
  
 

The accompanying notes are an integral part of these statements.

2
 
Efficiency Lodge, Inc.

CONSOLIDATED STATEMENTS OF EARNINGS(Unaudited)

For the three months ended March 31, 2002 and 2001

 

2002

2001
 
Revenues

$

1,949,712 

$

2,229,959

Operating expenses

1,298,774 

1,343,713
    
Operating income

650,938 

886,246
 
Other expense (income)

Interest expense

568,183

632,601

Gain on sale of investments

(360,872)

(200,110)

Other, net

(19,050)

(44,916)
    
188,261 

387,575
 
Earnings before income taxes

462,677

498,671

 

Provision for income taxes

170,353 

190,825
     
Net earnings

$

292,324

$

307,846
     
Net earnings per common share – basic

$

1.35 

$

1.42
     
Weighted average number of common  shares outstanding

216,970 

216,970
    
The accompanying notes are an integral part of these statements.

3
 
Efficiency Lodge, Inc.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY(Unaudited)

Three months ended March 31, 2002

Retained earnings

Accumulated other comprehensive earnings

Treasury stock

Total

Shares outstanding

Common stock

Balance at December 31, 2001

216,970
  
$

240,216

$

1,381,756

$

432,196

$

(920,300)

$

1,133,868
 
Net earnings for the three months

-

-

292,324 

-

-

292,324
 
Other comprehensive earnings:

   Unrealized gain on        Investments

-

-

-

184,427

-

184,427

   Reclassification of unrealized        gains to statement of        earnings

-

-

-

(360,872)

-

(360,872)

Comprehensive earnings

-

-

-

-

-

115,879

Balance at March 31, 2002

216,970

$

240,216

$

1,674,080

$

255,751

$

(920,300)

$

1,294,747

The accompanying notes are an integral part of this statement.

4
 
Efficiency Lodge, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

For the three months ended March 31,

2002

2001
 
Increase (decrease) in cash
 
Cash flows from operating activities:

   Net earnings

$

292,324 

$

307,846 

   Adjustments to reconcile net earnings to net     Cash (used in) provided by operating activities:

     Depreciation and amortization

268,653 

292,926 

     Gain on sale of fixed assets

- 

(27,143)

     Gain on sale of investments

(360,872)

(200,110)

        Changes in assets andliabilities:

           Other assets

(104,759)

(48,794)

           Other liabilities

(107,020)

134,022 
 
                  Net cash (used in) provided by operatingactivities

(11,674)

458,747 

Cash flows from investing activities:

    Payments received on notes receivable

7,509 

5,719 

    Proceeds from sale of investments

1,153,059 

377,933 

    Purchase of investments

(290,560)

- 

    Capital expenditures

(142,972)

(83,464)

    Proceeds from sale of fixed assets

- 

93,543 
 
                  Net cash provided by investingactivities

727,036 

393,731 
 
Cash flows from financing activities:

Principal payments on line of credit

(872,240)

- 

Principal payments on long-term debt

(209,199)

(228,419)
 
                  Net cash used in financingactivities

(1,081,439)

(228,419)
 
(Decrease) Increase in cash and cash equivalents

(366,077)

624,059 
 
Cash and cash equivalents, beginning of period

761,172 

658,427 
 
Cash and cash equivalents, end of period

$

395,095 

$

1,282,486 
 
Cash paid during the period for interest

$

568,183 

$

617,601 
 
Cash paid during the period for income taxes

$

356,746 

$

66,433 
 
 The accompanying notes are an integral part of these statements.

5
 
Efficiency Lodge, Inc.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 Three months ended March 31, 2002 and 2001

NOTE A – BASIS OF PREPARATION

The accompanying unaudited interim consolidated financialstatements of Efficiency Lodge, Inc. (the“Company”) have beenprepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interimfinancial statements and with the rules and regulations of the Securities and Exchange Commission.  Accordingly, they do notinclude all of the information and footnotes required by US GAAP for complete financial statements.  In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have beenincluded.

The results of operations for thequarter ended March 31, 2002 are not necessarily indicative of the results that may be expected for the full year.  Theinterim consolidated financial statements should be read in conjunction with the Company’s 2001 consolidated financialstatements and related notes.

 NOTE B – BASIC EARNINGS PERSHARE

 Basic earnings per share iscomputed using the weighted average number of shares of common stock outstanding.

NOTE C – SIGNIFICANT ACCOUNTINGPOLICIES

*Cash and CashEquivalents*

Cash and cash equivalents consist ofcash, bank deposits and highly liquid investments with maturities of three months or less when purchased and are stated at cost,which approximates market.

 *Use ofEstimates*

The preparation of the financialstatements in conformity with accounting principles generally accepted in the United States requires management to make estimatesand assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results coulddiffer from those estimates.

In accordance with FASB Statement No.121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” the Companyrecords impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might beimpaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of thoseassets.  Based on the Company’s estimate of future undiscounted cash flows, the Company expects to recover the carryingamounts of its remaining fixed assets. No write-offs of obsolete equipment were recorded in either of the three-month periods endedMarch 31, 2002 or 2001.

 6
 
Efficiency Lodge, Inc.

NOTES TO INTERIM CONSOLIDATED FINANCIALSTATEMENTS (UNAUDITED)

Three months ended March 31, 2002 and2001

NOTE C – SIGNIFICANT ACCOUNTING POLICIES –Continued

 Impact of Recently IssuedAccounting Standards

In October 2001, the FinancialAccounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 144,*Accounting for the Impairment or Disposal of Long-Lived Assets*.  The Statement supercedes SFAS No. 121, *Accountingfor the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of*, however it retains the fundamentalprovisions of that statement related to the recognition and measurement of the impairment of long-lived assets to be “heldand used.”  The statement is effective for year-ends beginning after December 15, 2001 (e.g. January 1, 2002 for acalendar-year company). The Company is in the process of evaluating the impact SFAS No. 144 will have upon adoption, but does notanticipate it will have a significant impact on its financial position or results of operations.

In June 2001, the FASB issued SFASNo. 141, *Business Combinations*, and SFAS No. 142, *Goodwill and Other Intangible Assets*.  Under the new rules,goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment, or morefrequently if impairment indicators arise.  The Company does not currently have any goodwill or other intangible assets on itsbooks and accordingly, does not expect the adoption of SFAS No. 141 or SFAS No. 142 to have an impact on its financial position orresult of operations.

In June 2001,the FASB issued SFAS No. 143, *Accounting for Asset Retirement Obligations.* This Statement addresses financial accounting and reporting for obligationsassociated with the retirement of tangible long-lived assets and the associatedasset retirement costs.  This statement is effective for financialstatements issued for fiscal years beginning after June 15, 2002.  TheCompany is in the process of evaluating the impact SFAS No. 143 will have uponadoption, but does not anticipate it will have a significant impact on itsfinancial position or results of operations.

NOTE D – SUBSEQUENT EVENTS

Subsequent to March 31, 2002, thecompany sold 17 residential rental properties, which were managed with other similar properties as a lodge.  The aggregateproceeds received from this transaction of $1,504,000 were used to reduce long-term debt originally used to finance the acquisitionof these and other properties.  A gain of $424,500 was recorded on these transactions.

 

7
 **Item2.          Management’s Discussion and Analysis**
Total assets decreased $1,180,726 from $29,959,947 atDecember 31, 2001 to $28,779,221 at March 31, 2002. This decrease was primarily attributable to investment sales of $862,499, net,which in addition to the operating profit for the quarter of $292,323 was used as payment on mortgage notes payable and a line ofcredit of $1,081,440.

Revenue decreased $280,247 from $2,229,959 in the firstquarter of 2001 to $1,949,712 in the first quarter of 2002. This decrease was primarily due to the continued slow economy andreductions in corporate relocations. Operating expenses decreased from $1,343,713 in the first quarter of 2001 to $1,298,774primarily due to no startup cost being incurred for new lodges and decreased maintenance expenses.

During the first quarter of 2002, the Company purchased realestate and equipment totaling $142,971.

 Company realized a gain on the sale of investmentsduring the first quarter of 2002 totaling $360,872. The majority of this gain was included in unrealized gain on investments atDecember 31, 2001.

 
Forward Looking Statements
This report contains statements which, to the extent thatthey are not recitations of historical fact, may constitute "forward looking statements" within the meaning of applicable federalsecurities laws and are based on the Company's current expectations and assumptions.  These expectations and assumptions aresubject to a number of risks and uncertainties which could cause actual results to differ materially from those anticipated, whichinclude but are not limited to the following: ability of the Company to achieve specific occupancy levels, the ability of thecompany to locate and bid successfully on additional lodges, and other factors affecting the Company's business that are beyond theCompany's control. All forward looking statements contained in this report are intended to be subject to the safe harbor protectionprovided by applicable federal securities laws.

 

8
 
SIGNATURES

 

In accordance with the requirements of the Exchange Act, theRegistrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

EFFICIENCY LODGE, INC.

 

DATE:  May 14, 2002

By:
  ***   /s/  Joseph Chappel                                         ***
           Joseph Chappel

            President
 
DATE:  May 14, 2002

By:
 ***   /s/ BonnieByers                                           ***
         Bonnie Byers

         Secretary/Treasurer

 

**