<PAGE>
FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1999
/ / TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ____________ to ___________
Commission file number ______________________________
ROYAL FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 13-3961109
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2000 E. LAMAR BLVD., SUITE 290, ARLINGTON, TEXAS 76006
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(817) 861-4000
- --------------------------------------------------------------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes / / 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:
7,464,382
- ---------------------
Transitional Small Business Disclosure Format (Check one): Yes / / No /X/
<PAGE>
ROYAL FINANCIAL CORPORATION
Form 10-QSB
November 30, 1999
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets:
November 30, 1999 and August 31, 1999 3
Consolidated Statements of Operations:
Three-month Periods Ended November 30, 1999 and 1998 4
Consolidated Statements of Cash Flows:
Three-month Periods Ended November 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 9
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings 10
ITEM 4. Submission of Matters to a Vote of Security Holders 10
ITEM 6. Exhibits and Reports 11
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROYAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, August 31,
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 479,064 $ 315,927
Prepaid expenses and other current assets 135,937 222,225
Manufactured home inventory 841,826 831,328
------------ ------------
Total Current Assets 1,456,827 1,369,480
INVESTMENTS:
Land for future development or sales 1,155,140 1,098,997
Mortgage loan portfolio, net 2,311,578 2,384,794
Real estate portfolio, net 369,621 748,962
Tax lien certificates and other 98,416 22,060
------------ ------------
Total Investments 3,934,755 4,254,813
PROPERTY, PLANT AND EQUIPMENT-MANUFACTURED
HOUSING COMMUNITY, NET 2,712,235 2,697,299
OFFICE PROPERTY AND EQUIPMENT, NET 79,176 128,845
OTHER ASSETS 29,448 42,976
------------ ------------
Total Assets $ 8,212,441 $ 8,493,413
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
November 30, August 31,
1999 1999
------------ ------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 119,952 $ 110,265
8 1/2% Senior Convertible Debentures 1,290,000 1,290,000
------------ ------------
Total Current Liabilities 1,409,952 1,400,265
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.001 par value: authorized 50,000,000
shares; issued and outstanding, 7,464,382 shares 7,464 7,464
Additional paid-in capital 14,062,657 14,062,657
Accumulated deficit (7,264,632) (6,976,973)
------------ ------------
Total Stockholders' Equity 6,802,489 7,093,148
------------ ------------
Total Liabilities and Stockholders' Equity $ 8,212,441 $ 8,493,413
============ ============
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
ROYAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
November 30,
------------------------------------
1999 1998
---------------- ---------------
(Unaudited)
<S> <C> <C>
Revenues
Gains (losses) on sales of operating assets
Loans $ (492) $ --
Real estate 65,803 67,407
Other repossessed assets -- (3,771)
Lot rental income 43,275 43,321
Sales of manufactured homes 56,500 --
Other -- 785
---------------- ---------------
165,086 107,742
Operating expenses
Cost of sales of manufactured homes sold 51,664 --
Salaries and benefits 117,981 132,413
Professional fees 54,188 45,244
Promotional 16,423 63,573
Travel and lodging 2,537 4,893
General and administrative 37,480 34,060
Depreciation 14,498 28,984
Office rent 16,483 33,939
Insurance 18,110 11,111
Real estate holding costs 29,689 13,548
Taxes - payroll and other 28,471 57,753
Due diligence expenses 2,801 30,846
---------------- ---------------
390,325 456,364
---------------- ---------------
Operating loss
(225,239) (348,622)
Other income (expense)
Interest income 3,447 31,016
Interest expense (39,859) (27,413)
Loss on sale of office property and equipment (26,400) --
Failed offering costs (3,500) --
---------------- ---------------
(66,312) 3,603
---------------- ---------------
Net loss $ (291,551) $ (345,019)
================ ===============
Loss per share - basic and diluted $ (0.04) $ (0.05)
================ ===============
Weighted average shares outstanding 7,464,382 7,464,382
================ ===============
The accompanying notes are an integral part of these statements.
4
<PAGE>
ROYAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended
November 30,
------------------------------------
1999 1998
---------------- ---------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net loss $ (291,551) $ (345,019)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 14,498 28,984
Amortization of debenture costs 13,528 --
Loss on sale of office property and equipment 26,400 --
Write off of loan 11,525 --
Changes in operating assets and liabilities
Prepaid expenses and other assets 75,790 (190,135)
Accounts payable and accrued liabilities 9,687 (66,960)
---------------- ---------------
Net cash used in operating activities (140,123) (573,130)
---------------- ---------------
Cash used in investing activities
Purchase of additional land (56,143) --
Principal collections on tax lien certificates 691 86,793
Purchases of property and equipment (16,340) (12,057)
Sale of property and equipment 10,175
Investments in loans (69,191) (63,922)
Collection on loans 49,130 7,509
Disposition of loans 62,533 --
Sale of real estate and other assets 410,163 402,091
Purchases of real estate properties and other investments (87,758) (721,213)
Investment in manufactured housing community development -- (185,173)
---------------- ---------------
Net cash provided by/(used) in investing activities 303,260 (485,972)
---------------- ---------------
Cash provided by (used in) financing activities
Payments for deferred financing costs -- (99,215)
---------------- ---------------
Net cash used in financing activities -- (99,215)
---------------- ---------------
Net (decrease) increase in cash and cash equivalents 163,137 (1,158,317)
Cash and cash equivalents, beginning of period 315,927 3,912,255
================ ===============
Cash and cash equivalents, end of period $ 479,064 $ 2,753,938
================ ===============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
ROYAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999
(Unaudited)
NOTE A - ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Royal Financial Corporation (together with its subsidiaries, the
"Company") is a real estate investment company with a portfolio consisting of a
manufactured housing community in Florida, undeveloped land in Florida zoned for
manufactured housing development, single family residential properties and
non-performing mortgage loans collateralized by residential and commercial real
estate properties. Most of the Company's current investment properties are
located in the state of Florida.
The Company came into being in August 1998 when Royal Mortgage
Corporation and Davenport Ventures, Inc. merged and the name was changed to
Royal Financial Corporation. The controlling shareholder group of both companies
prior to the merger was substantially the same. Accordingly, the merger was
treated as a combination of entities under common control.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In management's opinion, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation of
the unaudited interim financial statements have been included. Operating results
for interim periods reflected are not necessarily indicative of the results that
may be expected for a full fiscal year. These financial statements should be
read in conjunction with the financial statements and notes thereto for the year
ended August 31, 1999 included in the Company's Form 10-KSB.
Certain amounts in prior year financial statements have been
reclassified to conform with the current year presentation.
NOTE B - ACCOUNTING POLICY MATTERS
In June, 1999, the FASB issued Interpretation (FIN) 43, "Real Estate
Sales (An Interpretation of FASB Statement No. 66)", which defines real estate
more broadly than current practice. There is a very regimented threshold under
FASB 66 to achieve sale accounting (specifically, down payment requirements,
minimum investment provisions, absence of numerous forms of continuing
involvement, etc.). Under FIN 43, some transactions that would have been
accounted for as sales in the past will no longer be accounted for as sales
after June 30, 1999. All of the Company's investment properties fall under the
definition of real estate and thus are subject to FASB Statement No. 66.
Therefore, FIN 43 has no impact on the Company's financial statements.
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of", requires that long-lived assets to be disposed of and for which
management has committed to a plan to dispose of the assets, be reported at
the lower of carrying amount or fair value less cost to sell. The Company has
developed a plan to begin marketing the manufactured housing community.
Accordingly, the Company's investment in Property, Plant and Equipment -
Manufactured Housing Community is reflected in the accompanying consolidated
balance sheet as of November 30, 1999 at the lower of carrying amount or fair
value less cost to sell and no depreciation has been recognized in the
accompanying consolidated statement of operations for the three months ended
November 30, 1999.
NOTE C - MANAGEMENT'S PLANS FOR CONTINUED EXISTENCE
As shown in the accompanying financial statements, the Company incurred
net losses of $291,551 and $345,019 for the three months ended November 30, 1999
and 1998, respectively, and has incurred losses since inception. Management's
plans to maintain sufficient future cash flows to meet its future financial
obligations and to continue funding activities include the sale of real estate
properties in the normal course of the Company's business and continued efforts
to reduce general and administrative costs. Management also believes that debt
financing, if necessary, is available. Accordingly, Management believes that
sufficient cash flow will be provided to meet the Company's financial
obligations for the coming twelve months.
6
<PAGE>
NOTE D - CASH FLOW INFORMATION
Supplemental information on cash flows and noncash investing and
financing transactions is as follows:
<TABLE>
<S> <C>
Supplemental Cash Flow Information
Interest paid $ 54,825
Schedule of noncash investing activities:
Real estate acquired through foreclosure $114,130
Real estate sold and financed by the Company $101,827
</TABLE>
NOTE E - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment - manufactured housing community consist
of the following:
<TABLE>
<CAPTION>
November 30,
1999
-----------
<S> <C>
Land $ 1,368,282
Land improvements and buildings 1,321,579
Furniture, fixtures and equipment 83,963
------------
2,773,824
Less accumulated depreciation (61,589)
------------
Investment property and equipment, net $ 2,712,235
============
Office property and equipment consist of the following:
Furniture, fixtures and equipment $ 121,707
Leasehold improvements 73,015
------------
194,722
Less accumulated depreciation (115,546)
------------
Office property and equipment, net $ 79,176
============
</TABLE>
NOTE F - CHANGES IN STOCK OPTIONS
On December 16, 1999, the Company issued stock options to the Company's
directors to purchase a total of 40,000 shares of the Company's common stock at
an exercise price of $0.20 per share. These options are fully vested at date of
grant and expire in five years.
As of November 30, 1999 there were a total of 1,498,667 options
outstanding at a weighted average exercise price of $2.15. On January 5, 2000,
one director exercised his options for 10,000 shares at $0.20 per share.
NOTE G - COMMITMENTS
The agreement that the Company had entered into on August 24, 1998 with
a financial public relations firm whereby the Company was to pay $15,000 per
month for twelve months beginning August 4, 1998, grant 250,000 options at
various exercise prices and issue 70,000 free-trading shares of common stock
upon filing of a Form S-1 was terminated in December, 1998. The Company no
longer has any obligations under this agreement.
The agreements that the Company had entered into on March 23, 1999 with
certain consulting firms to provide financial public relations and marketing and
other corporate advisory services geared to assist the Company and its growth
were terminated in May, 1999. In connection therewith, the options to purchase
150,000 shares of the Company's common stock that were issued the principals of
one firm were cancelled. In addition, the obligation to grant options to a
second firm to purchase 300,000 shares of the Company's common stock at $.01 per
share in lieu of fees was also cancelled. The Company no longer has any
obligations under these agreements.
In December 1998, the Company paid a $112,500 deposit in connection
with a contract to purchase approximately 30 acres in Charlotte County, Florida.
Upon closing of the contract, which is subject to the resolution of certain
contingencies, an additional payment of $217,500 will be required.
7
<PAGE>
NOTE H - SEGMENT REPORTING
The Company currently has two major operating segments: Manufactured
Housing and Residential.
The Manufactured Housing Segment has two primary sources of revenue:
rental of homesites and the sale of manufactured homes. The primary source of
revenue for the Residential Segment is disposition/sale of mortgage loans and
real estate properties. In computing income (loss) by operating segment, the
following items were considered in the Corporate and Other category: interest
expense, payroll and administrative expenses not directly attributable to other
segments and financing costs. Corporate assets are principally investment in
land, cash, furniture, fixtures and equipment, receivables and deferred charges.
<TABLE>
<CAPTION>
Three Months Ended November 30, 1999
- -------------------------------------------------------------------------------------------------
Manufactured Corporate
Housing Residential and other Consolidated
------------ ----------- --------- ------------
<S> <C> <C> <C> <C>
Lot rental income $ 43,275 $ -- $ -- $ 43,275
Manufactured home sales 56,500 -- -- 56,500
Manufactured home cost of goods sold (51,664) -- -- (51,664)
Interest and other -- -- 3,447 3,447
Loss on sale of loans -- (492) -- (492)
Gain on sale of real estate -- 65,803 -- 65,803
------------ ----------- --------- ------------
Total revenue 48,111 65,311 3,447 116,869
Net income (loss) $ (24,127) $ 48,127 $ (315,551) $ (291,551)
Depreciation $ -- $ -- $ 14,498 $ 14,498
Identifiable assets $3,594,294 $2,702,568 $1,915,579 $8,212,441
Capital expenditures $ 16,554 $ 79,902 $ 132,976 $ 229,432
Three Months Ended November 30, 1998
- -------------------------------------------------------------------------------------------------
Manufactured Corporate
Housing Residential and other Consolidated
------------ ----------- --------- ------------
Lot rental income $ 43,671 $ -- $ -- $ 43,671
Manufactured home sales 68,688 -- -- 68,688
Manufactured home cost of goods sold (60,938) -- -- (60,938)
Interest and other -- -- 42,866 42,866
Loss on sale of loans -- -- -- --
Gain on sale of real estate -- 54,744 -- 54,744
------------ ----------- --------- ------------
Total revenue 51,421 54,744 42,866 149,031
Net income (loss) $ (11,956) $ 26,219 $ (359,282) $ (345,019)
Depreciation $ 6,000 $ -- $ 22,984 $ 28,984
Identifiable assets $2,092,049 $4,495,734 $3,717,899 $10,305,682
Capital expenditures $ 185,173 $ 715,386 $ 12,057 $ 912,616
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's unaudited financial statements and notes thereto included herein,
and the Form 10-KSB for the fiscal year ended August 31,1999. In connection
with, and because it desires to take advantage of, the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers regarding certain forward looking statements in the
following discussion and elsewhere in this report and in any other statement
made by, or on the behalf of the Company, whether or not in future filings
with the Securities and Exchange Commission. Forward looking statements are
statements not based on historical information and which relate to future
operations, strategies, financial results or other developments. Forward
looking statements are necessarily based upon estimates and assumptions that
are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's
control and many of which, with respect to future business decisions, are
subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those
expressed in any forward looking statements made by, or on behalf of, the
Company. The Company disclaims any obligation to update forward looking
statements.
OVERVIEW
The Company was originally organized as Davenport Ventures, Inc.
("Davenport") in the state of Nevada on August 18, 1993. In June 1998,
controlling interest in the Company was acquired by certain shareholders of
Royal Mortgage Corporation. On August 10, 1998 the shareholders of Davenport
and Royal Mortgage Corporation, a Texas corporation ("RMC") approved the
terms of a Restated and Amended Agreement and Plan of Merger between the two
entities. As a result of the merger, the total number of common shares
outstanding as of August 18, 1998 (the effective date of the merger) was
7,464,382. The Company changed its name from Davenport Ventures, Inc. to
Royal Financial Corporation and changed its year end from December 31 to
August 31.
In March 1999, the Company's Form 10-SB was approved by the
Securities and Exchange Commission and the Company became a reporting company
under the Securities Exchange Act of 1934, as amended.
The Company is a real estate financial holding company which invests
in the asset backed real estate and mortgage markets. The Company's
investments include residential and commercial non-performing mortgages,
distressed residential properties purchased at foreclosure sale auctions, tax
lien certificates which result from unpaid property taxes owed to municipal
and county taxing authorities, ownership and operation of a manufactured
housing community in Florida, and land for future development of manufactured
housing communities.
SOURCES OF REVENUES
Currently, the majority of the Company's net revenues is derived
from net gains and/or losses form the disposition of investment properties
and lot rental income from the Company's manufactured housing community in
Florida. In addition, substantial revenues have been derived from interest
earned on short-term investments. Due to the capital nature of many of the
Company's investments, the timing of cash flows from dispositions as well as
funds needed for investment opportunities which may arise has a certain
degree of uncertainty. Management has concluded that the most prudent use of
the Company's cash reserves at this time is in low risk investments that are
readily convertible into cash. In addition to the current sources of revenue
discussed above, the Company will realize revenues from the sale of new
manufactured homes.
As the Company completes expansion and development of additional
manufactured homesites, the Company will purchase model homes directly from
the Manufacturer and sell the homes to persons that decide to live in the
community and rent a lot from the Company.
RESULTS OF OPERATIONS - THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
Total revenues increased approximately $57,000 or 53%, to $165,086
for the three months ended November 30, 1999, as compared to $107,742 for the
three months ended November 30, 1998. The increase in sales of manufactured
homes of $56,500 and the related cost of sales of manufactured homes of
$51,664 is due to this being a new source of revenue for the Company in
connection with the addition of 125 homesites and the related sale of
manufactured homes to persons who decided to live in the manufactured housing
community.
Total operating expenses decreased approximately $129,000 or 25%, to
$396,084 for the three months ended November 30, 1999, as compared to $525,137
for the three months ended November 30, 1998. The decrease in promotional
expenses of approximately $47,000 is attributable to steps taken in 1998 to
establish a market presence by engaging certain investor relations firms,
establishing an internet web site, and other promotional activities. Such
activities were not undertaken in the current year. Office rent decreased
approximately $17,000 due to the Company moving to a smaller office space for
its Texas operations and subleasing its Florida office space to another
company. The decrease in taxes - payroll and other of approximately $29,000 is
primarily due to less real estate properties held in the current year and
resulting lower holding costs and reductions in personnel in 1999. Due
diligence expenses decreased approximately $28,000 due to the Company not being
as active in pursuing new investment opportunities as in the prior year.
The decrease in interest income of approximately $28,000 is due to
lower average idle cash balances in the current period. The loss on sale of
office property and equipment in 1999 of $26,400 occurred as a result of the
Company selling all office furniture and fixtures, computer and telephone
equipment in the Naples, Florida office to a third party for $10,000. The
remaining balance of these assets of $26,400 was written off in September,
1999.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In December, 1999, the Company's Board of Directors approved a
change in investment strategy to shift the majority of the Company's assets
to cash and cash equivalents in the coming months. Once a substantial portion
of the Company's assets have been converted to cash and cash equivalents, the
Board will re-evaluate the real estate market and make a decision regarding
the re-investment of funds or the return of capital to stockholders.
Cash and cash equivalents ere approximately $479,000 and $316,000 at
November 30, 1999 and August 31, 1999, respectively. The increase is
attributable to approximately $140,000 used in operating activities and
approximately $303,000 provided by investing activities. The outflow of cash
from operating activities is primarily attributable to corporate and property
operation offset by depreciation and amortization, and loss on sale of office
property and equipment. The Company realized approximately $303,000 of cash
flow primarily from the following investment activities: (i) sale of real
estate assets ($410,000); (ii) additional expenditures on land parcels in
Florida purchased during the year ended August 31, 1999 and (iii) additional
loan investments ($69,000).
In December 1998, the Company paid a $112,500 deposit in connection
with a contract to purchase approximately 30 acres in Charlotte County,
Florida. Upon closing of the contract, which is subject to the resolution of
certain contingencies, an additional payment of $217,500 will be required.
The remaining $1,290,000 of the 8 1/2% Senior Convertible Debentures
outstanding at November 30, 1999 mature on March 31, 2000. Management
believes that sufficient cash flow will be available to satisfy this
obligation from the sale of operating assets in the normal course of
business. Management also believes that debt financing, if necessary, is
available. However, the time period required to sell certain assets or secure
additional financing is uncertain and there can be no assurance that the
Company will be successful in closing asset sales or securing financing which
will generate sufficient cash flow to meet this obligation. In the event that
the Company is unsuccessful in generating sufficient cash flow to meet this
obligation, it could have a material adverse affect on the Company's
financial condition.
YEAR 2000
The Year 2000 ("Y2K") issue relates to whether computer systems will
properly recognize date-sensitive information to allow accurate processing of
transactions and data relating to the year 2000 and beyond. As of January 14,
2000, the Company has experienced no adverse effects as a result of Year
2000. As a result, although no assurances can be given, the Company does not
expect to incur any material costs relating to the Y2K issue. The Company
will continue to monitor its systems and those of third parties, such as its
tenants, service providers, vendors, financial institutions, the Company's
transfer agent and other unaffiliated parties the Company conducts business
with. The Company anticipates, although no assurances can be given, that it
would be able to switch suppliers, bank or service providers if any are
unable to convert their systems appropriately.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is currently involved as plaintiff in various lawsuits
of a nature regularly incurred in the ordinary course of the Company's
business. Neither the Company nor any of its subsidiaries is involved in any
litigation, arbitration or other proceedings relating to claims which are
material to the Company's financial position or results of operations. To the
best of management's knowledge, there is no pending or threatened litigation
against the Company or any of its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On December 16, 1999, the Company held its annual meeting of
shareholders ("Annual Meeting").
(b) At the Annual Meeting, the shareholders elected Mr. Michael J.
Pilgrim, Mark J. Teinert, David E. Wentsch and Richard Bergner as
directors to hold office until the 2000 Annual Meeting or until
their successors are duly elected and qualified.
(c) The matters voted on at the Annual Meeting and the number of
votes cast for, against or withheld, as well as the number of
abstentions and broker non-votes as to each such matter are as
follows:
<TABLE>
<CAPTION>
(i) Election of the Board of Directors:
<S> <C> <C> <C>
Michael J. Pilgrim Votes for: 5,247,611
Votes against: 295,000
Votes Abstentions/Withheld: 51,000
Broker Non-Votes: 0
Mark J. Teinert Votes for: 5,542,611
Votes against: 43,333
Votes Abstentions/Withheld: 7,667
Broker Non-Votes: 0
David E. Wentsch Votes for: 5,365,111
Votes against: 220,833
Votes Abstentions/Withheld: 7,667
Broker Non-Votes: 0
10
<PAGE>
Richard Bergner Votes for: 5,247,611
Votes against: 295,000
Votes Abstentions/Withheld: 51,000
Broker Non-Votes: 0
(ii) Re-appointment of Grant Thornton LLP as the independent accounts for the Company
for the fiscal year ending August 31, 2000:
Votes for: 5,591,611
Votes against: 2,000
Votes Abstentions/Withheld: 0
Broker Non-Votes 0
(ii) Approval of the Company's 1999 Stock Option Plan:
Votes for: 3,366,203
Votes against: 279,932
Votes Abstentions/Withheld 117,500
Broker Non-Votes 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Restated and Amended Agreement and Plan of Merger*
3.1 Articles of Incorporation, as amended of Davenport
Ventures, Inc.*
3.2 By Laws of Davenport Ventures, Inc.*
3.3 Articles of Merger of Royal Mortgage Corporation
into Davenport Ventures, Inc.*
3.4 Articles of Incorporation, as amended, or Royal
Mortgage Corporation*
3.5 By Laws of Royal Mortgage Corporation
3.6 Articles of Incorporation, as amended, of Royal
Mortgage Brokerage, Inc.*
3.7 By Laws of Royal Mortgage Brokerage, Inc.*
3.8 Authorization to Transact Business in Florida of
Royal Mortgage Brokerage, Inc.*
3.9 Articles of Incorporation of Walden Woods of
Sugarmill, Inc.*
3.10 By Laws of Walden Woods of Sugarmill, Inc.*
3.11 Articles of Incorporation of Walden Woods of
Sugarmill Sales, Inc.*
4.1 81/2% Convertible Senior Debenture due 2000 (filed
as Exhibit No 4.1 for the fiscal quarter ended
February 28, 1999 and incorporated herein by
reference)
27 Financial Data Schedule (filed herewith)
*filed as exhibits with the same numbers as indicated above
on Form 10-SB and incorporated herein by reference.
(b) No reports on Form 8-K have been filed during the
period for which this report is filed
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ROYAL FINANCIAL CORPORATION
(Registrant)
Date: January 14, 2000 /s/ MICHAEL J. PILGRIM
--------------------------------------------
Michael J. Pilgrim, President & CEO
Date: January 14, 2000 /s/ MARK J. TEINERT
--------------------------------------------
Mark J. Teinert, Secretary/Treasurer
Date: January 14, 2000 /s/ SUSAN M. STEIN
--------------------------------------------
Susan M. Stein, V.P. - Finance
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD
ENDED NOVEMBER 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 479,064
<SECURITIES> 0
<RECEIVABLES> 2,311,578<F1>
<ALLOWANCES> 0
<INVENTORY> 841,826
<CURRENT-ASSETS> 1,456,827
<PP&E> 172,317<F2>
<DEPRECIATION> (114,425)
<TOTAL-ASSETS> 8,212,441
<CURRENT-LIABILITIES> 1,409,952
<BONDS> 1,290,000<F3>
0
0
<COMMON> 7,464
<OTHER-SE> 6,798,025
<TOTAL-LIABILITY-AND-EQUITY> 8,212,441
<SALES> 595,659<F4>
<TOTAL-REVENUES> 165,086
<CGS> 512,552<F5>
<TOTAL-COSTS> 512,552
<OTHER-EXPENSES> 456,637<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,859
<INCOME-PRETAX> (291,551)
<INCOME-TAX> 0
<INCOME-CONTINUING> (291,551)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (291,551)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
<FN>
<F1>INCLUDES MORTGAGE LOAN PORTFOLIO, NET
<F2>OFFICE PROPERTY AND EQUIPMENT ONLY
<F3>8 1/2% SENIOR CONVERTIBLE DEBENTURES DUE MARCH 2000
<F4>INCLUDES NET SALES PROCEEDS FROM INVESTMENT PROPERTIES AND MANUFACTURED
HOME SALES
<F5>INCLUDES THE COST BASIS AT DATE OF SALES OF INVESTMENT PROPERTIES AND
MANUFACTURED HOMES
<F6>INCLUDES OPERATING EXPENSES AND OTHER EXPENSES, NET
</FN>
</TABLE>
