Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For The Quarter Year Ended March 31, 2000
-----------------------------
Commission File Number 0-8585
--------------
Dynamic Homes, Inc.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0960127
- --------------------------------------- -------------------------
(State of Other Jurisdiction of (IRS Employer
Incorporation of Organization) Identification No.)
525 Roosevelt Avenue, Detroit Lakes, MN 56501
(Address of principal executive offices)
(218) 847-2611
--------------------------
(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 ___
As of March 31, 2000, 2,240,850 common shares, par value, $.10 per share, were
outstanding. On January 7, 1995, the Company implemented a plan to repurchase up
to 100,000 shares of its outstanding common stock. As March 31, 2000, a total of
43,080 shares have been repurchased. During 1996, the Company approved a new
stock option plan and granted 240,000 options to various officers, directors and
employees. The treasury stock and 205,000 available unexercised options have
been excluded from the common shares outstanding.
Page 1
<PAGE>
PART I.
Item 1. Financial Statements
FORM 10 - Q
DYNAMIC HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months
------------
Dynamic Shagawa
Homes, Inc. Resort, Inc. Consolidated 3/31/99
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Sales (Note 11) $ 1,376,000 $ - $ 1,376,000 $ 1,448,000
Cost of Sales (Note 12) 1,322,000 - 1,322,000 1,353,000
------------- ------------- ----------- -----------
Gross Profit 54,000 - 54,000 95,000
Operating Expenses (Note 13) 259,000 - 259,000 316,000
------------- ------------- ----------- -----------
Operating Income (Loss) (205,000) - (205,000) (221,000)
Other (Income) Expense
Interest Expense 32,000 - 32,000 31,000
Other, Net (22,000) - (22,000) (14,000)
------------- ------------- ----------- -----------
Total Other (Income) Expense 10,000 - 10,000 17,000
Income (Loss) Before Taxes (215,000) - (215,000) (238,000)
Income Tax (Provision) Benefit 86,000 - 86,000 95,000
------------- ------------- ----------- -----------
Income (Loss) from Continuing Operations (129,000) - (129,000) (143,000)
Discontinued Operations (Note 2)
Loss from operations of discontinued
subsidiary, Shagawa Resort, Inc., net of
of income tax benefit of $44,000 and $51,000 - (66,000) (66,000) (77,000)
Loss on disposal of Shagawa Resort, Inc.,
net of income taxes of $11,000 (604,000) 17,000 (587,000) -
------------- ------------- ----------- -----------
Net Income (Loss) $ (733,000) $ (49,000) $ (782,000) $ (220,000)
============= ============= =========== ===========
Basic Income (Loss) Per Common Share
Income (Loss) from continuing operations $ (0.06) $ - $ (0.06) $ (0.06)
Loss from discontinued operations:
Loss from operations of discontinued
subsidiary - (0.03) (0.03) (0.03)
Loss on disposal of subsidiary (0.27) 0.01 (0.26) -
------------- ------------- ----------- -----------
Basic net income (loss) $ (0.33) $ (0.02) $ (0.35) $ (0.10)
============= ============= =========== ===========
Diluted Income (Loss) Per Common Share
Income (Loss) from continuing operations $ (0.06) $ - $ (0.06) $ (0.06)
Loss from discontinued operations:
Loss from operations of discontinued
subsidiary - (0.03) (0.03) (0.03)
Loss on disposal of subsidiary (0.27) 0.01 (0.26) -
------------- ------------- ----------- -----------
Basic net income (loss) $ (0.33) $ (0.02) $ (0.35) $ (0.10)
============= ============= =========== ===========
Weighted Basic Average Number of
Shares Outstanding 2,240,900 2,240,900 2,240,900 2,240,900
============= ============= =========== ===========
Weighted Diluted Average Number of
Shares Outstanding 2,240,900 2,240,900 2,240,900 2,240,900
============= ============= =========== ===========
Dividends per Common Share None None None None
============= ============= =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 2
<PAGE>
FORM 10 - Q
DYNAMIC HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000 AND DECEMBER 25, 1999
(Unaudited)
<TABLE>
<CAPTION>
Dynamic Shagawa
Homes, Inc. Resort, Inc. Eliminations Consolidated 12/25/99
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash & cash equivalents $ 621,000 $ 37,000 $ - $ 658,000 $ 932,000
Accounts receivable, less allowance
for doubtful accounts, pledged 814,000 - - 814,000 1,815,000
Inventories pledged (Note 3) 3,320,000 30,000 - 3,350,000 1,875,000
Prepaid expenses (Note 6) 138,000 5,000 - 143,000 69,000
Deferred income taxes (Note 5) 127,000 - - 127,000 127,000
----------- ----------- ----------- ----------- -----------
Total Current Assets 5,020,000 72,000 - 5,092,000 4,818,000
Other Assets:
Investment - Affiliates 1,304,000 - (1,304,000) - -
Other assets (Note 9) 38,000 368,000 - 406,000 409,000
----------- ----------- ----------- ----------- -----------
Total Other Assets 1,342,000 368,000 (1,304,000) 406,000 409,000
Property, Plant, & Equipment, at:
Cost - pledged in part (Note 7) 4,016,000 3,193,000 (587,000) 6,622,000 7,116,000
Less - accumulated depreciation (2,055,000) (604,000) - (2,659,000) (2,559,000)
----------- ----------- ----------- ----------- -----------
Net Property, Plant & Equipment 1,961,000 2,589,000 (587,000) 3,963,000 4,557,000
----------- ----------- ----------- ----------- -----------
Total Assets $ 8,323,000 $ 3,029,000 $(1,891,000) $ 9,461,000 $ 9,784,000
=========== =========== =========== =========== ===========
LIABILITIES
Current Liabilities:
Payables - Affiliates $ - $ 1,291,000 $(1,291,000) $ - $ -
Notes payable - - - - -
Current portion - long-tern debt 223,000 53,000 - 276,000 268,000
Accounts payable 853,000 36,000 - 889,000 347,000
Customer deposits 345,000 - - 345,000 127,000
Accrued expenses
Salaries, Wages and vacations 300,000 24,000 - 324,000 260,000
Taxes, other than income 145,000 51,000 - 196,000 125,000
Warranty 77,000 - - 77,000 76,000
Other 22,000 5,000 - 27,000 271,000
Estimated loss on disposal of
subsidiary (Note 2) 587,000 - (587,000) - -
Income taxes (88,000) (44,000) - (132,000) -
----------- ----------- ----------- ----------- -----------
Total Current Liabilities 2,464,000 1,416,000 (1,878,000) 2,002,000 1,474,000
Long-Term Debt: (Note 8)
Less current portion included above 1,017,000 1,666,000 - 2,683,000 2,752,000
----------- ----------- ----------- ----------- -----------
Deferred Income Taxes (Note 5) 104,000 - - 104,000 104,000
----------- ----------- ----------- ----------- -----------
Total Liabilities 3,585,000 3,082,000 (1,878,000) 4,789,000 4,330,000
STOCKHOLDERS' EQUITY
Investment - Parent - 706,000 (706,000) - -
Common Stock, par value, $.10 per share
Authorized, 5,000,000 shares; issued
and outstanding, 2,284,000 in 1999
and 1998 228,000 - - 228,000 228,000
Paid-in capital in excess of par 147,000 - - 147,000 147,000
Retained earnings 4,507,000 (759,000) 693,000 4,441,000 5,223,000
Less Treasury stock - (43,080) shares (144,000) - - (144,000) (144,000)
----------- ----------- ----------- ----------- -----------
Total Stockholders' Equity 4,738,000 (53,000) (13,000) 4,672,000 5,454,000
----------- ----------- ----------- ----------- -----------
Total Liabilities & Stockholders' Equity $ 8,323,000 $ 3,029,000 $(1,891,000) $ 9,461,000 $ 9,784,000
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE>
FORM 10 - Q
DYNAMIC HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
03/31/00 03/31/99
----------- -----------
Cash Flows From Operating Activities
- ------------------------------------
<S> <C> <C>
Net Income (Loss) $ (782,000) $ (220,000)
Adjust to Reconcile Net Income or Loss
Provided by (Used In) Operating Activities:
Depreciation / Amortization 121,000 114,000
Provision for Doubtful Accounts 3,000 6,000
(Gain) Loss on Sales of Property & Equipment (5,000) -
(Gain) Loss on Sale of Assets of Shagawa Resort, Inc. 587,000 -
Change in Assets & Liabilities:
(Increase) Decrease in Receivables 991,000 795,000
(Increase) Decrease in Inventories (1,475,000) (1,168,000)
(Increase) Decrease in Prepaid Expenses (74,000) (64,000)
(Increase) Decrease in Deferred Income Tax - -
(Increase) Decrease in Other Assets 3,000 1,000
Increase (Decrease) in Accounts Payable 542,000 262,000
Increase (Decrease) in Customer Deposits 218,000 96,000
Increase (Decrease) in Accrued Expenses (108,000) (76,000)
Increase (Decrease) in Income Tax Payable (132,000) (155,000)
----------- -----------
Net Cash Provided by (Used in) Operating Activities (111,000) (409,000)
Cash Flows From Investing Activities
- ------------------------------------
Proceeds From Sale of Property & Equipment 14,000 -
Purchase of Property & Equipment (116,000) (59,000)
----------- -----------
Net Cash Provided by (Used in) Investing Activities (102,000) (59,000)
Cash Flows From Financing Activities
- ------------------------------------
Net Borrowings (Payments) on Revolving Credit Agreements
And Other Short-Term Financing - 125,000
Principal Payments on Long-Term Borrowings Including
Shagawa Resort (61,000) (42,000)
Proceeds From Long-Term Borrowings / Leases - -
----------- -----------
Net Cash Provided (Used in) Financing Activities (61,000) 83,000
Increase (Decrease) in Cash and Equivalents $ (274,000) $ (385,000)
=========== ===========
Cash and Equivalents
- --------------------
Beginning $ 932,000 $ 313,000
Ending $ 658,000 $ (72,000)
Supplemental Disclosures of Cash Flow Information
Cash Payments for:
Income Taxes $ 2,000 $ 9,000
Interest $ 67,000 $ 67,000
</TABLE>
See notes to condensed consolidated financial statements.
Page 4
<PAGE>
FORM 10 - Q
DYNAMIC HOMES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. UNAUDITED STATEMENTS
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company as of March 31, 2000 and December 25, 1999 and
the results of operations and cash flows for the three months ended March 31,
2000 and March 31, 1999.
Note 2. DISCONTINUED OPERATIONS
In May, 2000, the Company completed the sale of its Shagawa Resort, Inc.
subsidiary. The Company has recorded an estimated after-tax loss of $587,000 on
the sale in the 1st quarter of 2000. Shagawa Resort, Inc.'s results of
operations have been classified as discontinued operations and prior periods
have been restated.
Operating results from discontinued operations are as follows:
Three Months Ended March 31,
2000 1999
--------- ---------
Sales $ 394,000 $ 363,000
Cost of sales and expenses 469,000 456,000
--------- ---------
Operating income (loss) (75,000) (93,000)
Other income (expense) (35,000) (35,000)
--------- ---------
Loss before income taxes (110,000) (128,000)
Income tax benefit 44,000 51,000
--------- ---------
Net loss $ (66,000) $ (77,000)
========= =========
Note 3. INVENTORIES
During interim accounting periods, the Company uses the standard cost method of
determining cost of sales and inventory levels at its manufacturing facility.
Cost of sales value is determined monthly based on standards for materials,
labor and overhead by product mix. Deviations from these standards result in
adjustments of the monthly cost of sales amount. Periodic physical inventories
are taken during the fiscal year to determine actual inventory and cost of
sales. No physical inventory was taken during the first quarter of 2000. Shagawa
Resort, Inc. conducts a physical inventory at each month-end.
The breakdown of inventories is as follows:
3/31/00 3/31/99
------------ ------------
Finished Goods (Note 4) $ 1,991,000 $ 2,379,000
Work In Process 183,000 185,000
Raw Materials 1,145,000 938,000
Shagawa Resort, Inc. 31,000 33,000
------------ ------------
Total Inventories $ 3,350,000 $ 3,535,000
============ ============
Note 4. BACKLOG OF ORDERS
The Company's order backlog consists of completed units awaiting delivery,
current production and orders scheduled for future production. As of March 31,
2000 and March 31, 1999, the Company's backlog of committed orders was
approximately $5,473,000 and $5,014,000, respectively. As of December 25, 1999,
the Company's backlog of orders was $1,645,000. The Company's order backlog at
April 30, 2000 stood at $5,826,000 compared with $4,965,000 at April 30, 1999,
or an increase of $861,000. The backlog total at April 30, 1999 also includes
approximately $500,000 of developer carryover units that were produced during
l998 but not set until the second half of 1999. During periods of excess plant
capacity, the Company supplements its production through the building of
inventory units. As of April
Page 5
<PAGE>
30, 2000, 6 inventory units remain and are available for immediate sale. As of
April 30, 1999, the Company had 26 inventory units available for sale. The
inventory units have been excluded from all order backlog values. As of April
30, 2000, the Company has one multi-family/commercial project under contract.
Note 5. DEFERRED INCOME TAXES
Deferred income taxes relate primarily to differences between the basis of
receivables, property and equipment, accrued expenses and book / tax inventory
adjustments for financial and income tax reporting. The deferred tax assets and
liabilities represent future tax return consequences of those differences, which
will either be taxable or deductible when the assets and liabilities are
recovered and settled.
Note 6. PREPAID EXPENSES
<TABLE>
<CAPTION>
3/31/00 3/31/99
------------ ------------
<S> <C> <C>
Advertising $ 6,000 $ 4,000
Insurance 100,000 90,000
Equipment, Supplies Inventory - Shagawa Resort, Inc. 1,000 9,000
Other 36,000 39,000
------------ ------------
$ 143,000 $ 142,000
============ ============
</TABLE>
Note 7. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
3/31/00 3/31/99
----------- -----------
<S> <C> <C>
Dynamic Homes, Inc.
Land and Improvements $ 266,000 $ 241,000
Buildings 1,447,000 1,401,000
Machinery and Equipment 2,123,000 1,971,000
Construction in Process 180,000 42,000
Shagawa Resort, Inc.
Land and Improvements 343,000 343,000
Buildings 2,127,000 2,116,000
Machinery and Equipment 723,000 707,000
Construction in Process - -
Revalue assets due to loss on sale of assets (587,000) -
----------- -----------
6,622,000 6,821,000
Less: Accumulated Depreciation - Dynamic Homes, Inc. (2,055,000) (1,855,000)
Accumulated Depreciation - Shagawa Resort, Inc. (604,000) (436,000)
----------- -----------
$ 3,963,000 $ 4,530,000
=========== ===========
</TABLE>
Note 8. LONG-TERM DEBT
<TABLE>
<CAPTION>
3/31/00 3/31/99
---------- ----------
<S> <C> <C>
Long-term debt (net of current maturity) consists of:
Detroit Lakes - Plant Expansion $ 721,000 $ 803,000
Leasing - Capitalized Cranes, Forklifts, & Trailers 256,000 246,000
Term Mortgage Agreement covering
Shagawa Resort Project (Note 10) 1,666,000 1,725,000
Other Notes and Contracts Payable 40,000 37,000
---------- ----------
$2,683,000 $2,811,000
========== ==========
</TABLE>
Page 6
<PAGE>
Note 9. OTHER ASSETS - NET
3/31/00 3/31/99
-------- --------
Dynamic Homes, Inc.
- Deferred Maintenance Expense $ 4,000 $ 6,000
- Prepaid Debt Expense 11,000 16,000
- Deposits 7,000
23,000
Shagawa Resort, Inc.
- Goodwill 97,000 105,000
- Prepaid Legal / Debt Expense 162,000 173,000
- Asset Replacement Escrow 105,000 102,000
- Other 4,000 11,000
-------- --------
$406,000 $420,000
======== ========
Included in other assets are costs associated with obtaining financing which are
being amortized on the straight-line basis over the life of the loans. Also
included are costs associated with goodwill and a mortgage asset replacement
convenant related to the acquisition of Shagawa Resort, Inc.
Note 10. SHAGAWA RESORT, INC.
On September 7, 1995 Dynamic Homes, Inc. purchased all of the outstanding shares
of Shagawa Resort, Inc. The purchase price consisted of cash and a construction
mortgage assumption to Norwest Bank Minnesota for the financing of the
construction costs associated with completing the Shagawa Resort, Inc. hotel and
resort facility. The hotel and resort remained under construction until May 1,
1996, when the hotel and resort commenced with normal business operations.
During August 1996, the construction mortgage was finalized and converted to a
long-term mortgage loan that is secured by the assets of Shagawa Resort, Inc.
and a partial guarantee of the Small Business Administration. Monthly
installments of principal and interest approximate $16,000 with a blended
interest rate of approximately 8 percent (Note 8).
In conjunction with the purchase of Shagawa Resort, Inc., the Company
simultaneously entered into a management agreement with a managing agent to
operate and manage the hotel/resort. On March 17, 1997, the Company and the
managing agent collectively reached an Asset Purchase Agreement whereby the
Company purchased substantially all assets of the business. Consequently,
effective March 17, 1997, the Company has assumed the management obligations and
rights associated with the Shagawa Resort, Inc. facility.
On March 17, 2000, the Company signed a purchase agreement for the sale of the
assets of Shagawa Resort, Inc. and has subsequently sold the assets of the
resort on May 1, 2000.
Note 11. - Sales
2000 1999
------------ ------------
Single-family $ 1,005,000 $ 768,000
Multi-family 218,000 518,000
Transportation 73,000 88,000
Other 80,000 74,000
------------ ------------
$ 1,376,000 $ 1,448,000
============ ============
Note 12 - Cost of Sales
2000 1999
------------ ------------
Materials $ 753,000 $ 759,000
Labor 134,000 136,000
Overhead 235,000 248,000
Transportation 200,000 210,000
------------ ------------
$ 1,322,000 $ 1,353,000
============ ============
Note 13- Operating Expenses
2000 1999
------------ ------------
Marketing $ 52,000 $ 95,000
Administration 207,000 221,000
------------ ------------
$ 259,000 $ 316,000
============ ============
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<PAGE>
DYNAMIC HOMES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Three months ended March 31, 2000 and 1999
NET SALES:
As a result of the sale of the assets of the hospitality sector (Shagawa Resort,
Inc.), the Company's revenue and operating results encompass only the
manufacturing sector (Dynamic Homes, Inc.).
The Company's revenue from the manufacturing sector for the three months ended
March 31, 2000 was $1,376,000, a decrease of $72,000 from the $1,448,000
recorded during the same period of 1999. However, single-family revenue
increased $237,000 from $768,000 in 1999 to $l,005,000 during the first quarter
of 2000. In contrast, multi-family/commercial revenue during the first quarter
of 2000 decreased by $300,000 from $518,000 during 1999 to $218,000 in 2000.
Transportation and other (retail) revenue were similar for each period at
$153,000 for 2000 and $162,000 for 1999.
COST OF SALES:
Dynamic Homes, Inc. 2000 gross profit was $54,000 as compared with $95,000 for
the first quarter of 1999. The gross profit percentage for 2000 is 3.9% versus
6.6% for 1999. The gross margin for each year was affected by several fall and
winter promotional programs. Promotional related discounts recognized during the
first quarter of 2000 were approximately 2 percent of net sales higher than the
corresponding 1999 quarter. This is due to the timing of deliveries and the
discounts relative to these sales. Transportation related expenses were similar
for each of the periods at $200,000 during 2000 and $210,000 for 1999. Material
prices remained relatively stable during the first quarter of 2000. The Company
is monitoring the situation and the impact these prices have on the Company's
gross margin percentage.
OPERATING EXPENSES:
Dynamic Homes, Inc. operating expenses, which include marketing and
administration decreased by $57,000 from the 1999 level of $316,000 to $259,000
for 2000. Overall operating expenses decreased from approximately 21.8% of net
sales in 1999 to 18.8% of net sales during 2000. Due to the Company's efforts in
cost containment, 2000 related marketing expenses decreased by $43,000 from
$95,000 for 1999 to $52,000 for the current period. Administration related
expenses for the first quarter of 2000 total $207,000 or $14,000 less than the
$221,000 reported during 1999. The reduction in administration expense is widely
distributed and represents the affects of cost containment measures.
OPERATING INCOME:
The manufacturing operating cycle for the first quarter of 2000 resulted in an
operating loss of $205,000. During the same period of 1999, the operating loss
for the manufacturing facility was $221,000. The modest reduction to the net
operating loss for 2000 was due to cost containment efforts.
NET NON-OPERATING INCOME AND EXPENSE:
Net non-operating expense was $10,000 or $7,000 less than the $17,000 reported
in 1999. Dynamic Homes, Inc. incurred $32,000 of interest costs mainly
associated with the capital lease financing of transportation vehicle,
manufacturing equipment, computer related upgrades and a long-term financing
package supporting prior expansions of the manufacturing facility. Other income
for both periods consists mainly of interest income and gains from the sale of
capital assets.
FEDERAL AND STATE INCOME TAXES:
During the first quarter of both 2000 and 1999, the Company recorded
consolidated operational estimated income taxes benefits of $86,000 and $95,000,
respectively. Income tax obligations and benefits are estimated at the normal
statutory rate.
Page 8
<PAGE>
NET INCOME:
The consolidated net losses from continuing operations, were $129,000 for 2000
and $143,000 during 1999. Both basic and diluted earnings per common share
outstanding resulted in net losses of $0.06 per share for 2000 and 1999.
Considerations for unexercised stock options were recognized as diluted common
shares outstanding for each of the periods.
Results of Discontinued Operations
Three months ended March 31, 2000 and 1999
First quarter revenue associated with Shagawa Resort, Inc. improved from
$363,000 during 1999 to $394,000 for 2000. The increase in revenue of $31,000 is
primarily attributed to an improvement in the resorts occupancy rates. Due to
the location and seasonal nature of the resort business, sales are traditionally
soft during the winter and early spring months but strengthen considerably
during the summer tourist season.
Shagawa Resort, Inc. recorded a gross profit of $139,000 or an increase of
$13,000 over the $126,000 reported during the first quarter of 1999. The
improved gross margin reflects an improvement in the resort's first quarter
occupancy rate.
Shagawa Resort, Inc. incurred operating expenses of $214,000 during 2000 and
$219,000 during 1999. Overall, operating expenses decreased from 60.3% of sales
during 1999 to 54.3% for 2000 and reflects an increased emphasis on expense
controls.
Shagawa Resort, Inc. incurred a net loss of $66,000 during 2000 versus a net
loss of $77,000 during 1999. The small improvement to the 2000 operating cycle
reflects the modest increase in first quarter revenues and operational cost
reductions.
(Balance of page left intentionally blank.)
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<PAGE>
DYNAMIC HOMES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION & ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Financial Condition
As of March 31, 2000
The Company's consolidated working capital at March 31, 2000 was a positive
$3,090,000 as compared to positive working capital positions of $2,824,000 at
March 31, 1999 and $3,344,000 at December 25, 1999. The current ratio for March
31, 2000 is 2.5 to 1.0 as compared with 3.3 to 1.0 at December 25, 1999 and 2.7
to 1.0 at March 31, 1999. The change in working capital in 2000 is due to the
estimated accrual for the loss on the sale of the assets of Shagawa Resort, Inc.
During the first quarter of 2000, cash outflows were required for the build-up
of inventory (finished goods), renewal of the Company's insurance package,
acquisition of capital assets, reduction of accrued expenses and for support of
the Company's daily operations. Cash flows to support the referenced activities
were primarily provided by utilizing the Company's year-end cash and cash
equivalent position, receivable collections, customer deposits, supplier payment
terms and non-cash-related depreciation and amortization.
Long-term debt and capital leases, net of current maturities, decreased from
$2,752,000 at December 25, 1999 to $2,683,000 at March 31, 2000. On March 31,
1999, long-term debt and capital leases, net of current maturities, was
$2,811,000. In contrast, the current portion of long-term debt increased from
$197,000 at March 31, 1999 to $268,000 at December 25, 1999 and $276,000 at
March 31, 2000. Long-term debt consists primarily of a long-term mortgage loan,
which is secured by substantially all of the assets of Shagawa Resort, Inc., six
capitalized lease obligations secured by transportation vehicles, material
handling and computer equipment, a restructured long-term financing arrangement
secured by a real estate mortgage related to a prior year plant expansion and a
contract for deed covering the purchase of adjacent land and warehouse. The new
financing package is a composite of three financing sources and was used for
financing the plant expansion, including equipment and working capital for
additional inventory requirements. Debt retirement associated with the plant
expansion and equipment varies in maturity from three to fifteen years,
dependent on the funding source (reference Note 8).
The consolidated ratio of long-term debt to stockholders' equity changed from
.58 to 1.0 at March 31, 1999, to .50 to 1.0 at December 25, 1999 and to .57 to
1.0 at March 31, 2000. Due to the consolidated net loss incurred during the
first quarter of 2000, stockholders' equity, net of treasury stock, decreased
from $5,454,000 at December 25, 1999 to $4,672,000 at March 31, 2000.
Stockholders' equity on March 31, 1999 was $4,887,000.
Dynamic Homes, Inc. has available a line of credit which is collateralized by
inventories and receivables. The credit available is based upon specified
percentages of inventory and receivables. On May 2, 2000, the Company renewed
its credit line for a period of one year and without any compensating balance
requirements. The credit line has a maximum available borrowing of $1,500,000 at
an interest rate equal to the bank's prime rate. As of March 31, 2000, the
Company did not have any borrowings outstanding against the available credit
line.
Shagawa Resort, Inc. does not have any operating line of credit. Consequently,
Shagawa Resort, Inc. is dependent on Dynamic Homes, Inc. as its source of
additional funds. Periodically, Dynamic Homes, Inc. is required to advance
funds, during the slower winter months, to support the resort's ongoing
operations. However, during the stronger summer months, the resort generates
adequate levels of funds to support its operational requirements and
periodically reduce some of the outstanding advances made by Dynamic Homes, Inc.
During the first quarter of 2000, net cash advances to Shagawa Resort were
approximately $14,000.
The Company's management anticipates that the normal operating cycle will
generate sufficient cash, in conjunction with short-term borrowings from the
existing credit line and supplemented by long-term financing will provide
adequate funds to support the Company's operations and scheduled capital asset
requirements during the remainder of fiscal 2000. The Company continues to focus
on efforts to strengthen and enlarge the customer base through various marketing
programs. In addition, the Company has recently added four new builder-dealers
in or near high population centers. The Company expects improved results over
the balance of the fiscal year as its marketing and cost control efforts produce
the anticipated results. As previously reported, the Company has engaged the
services of a securities investment firm to explore alternatives for enhancing
shareholder value which may include the sale or merger of the Company. However,
there is no assurance this exploration will result in any acceptable proposals
or that any type of transaction will be consummated.
Page 10
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Statements regarding the Company's operations, performance and financial
condition are subject to certain risks and uncertainties. Theses risks and
uncertainties include but are not limited to: rising mortgage interest rates and
/ or weakness in regional and national economic conditions that could have an
adverse impact on new home and multi-family and commercial sales. Likewise,
future escalating and volatile material costs and unfavorable weather conditions
could also affect the Company's profit levels.
(Balance of page left intentionally blank)
Page 11
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PART II.
Items 1, 2, 3, and 4 are omitted as each is either not applicable or the answer
to the item is negative.
Item 5. Other Information;
Disposition of Assets
On March 17, 2000, Shagawa Resort, Inc., a wholly owned subsidiary of the
Registrant, signed a Purchase Agreement providing for the sale of its assets to
Grand Ely Lodge, LLC, a Minnesota limited liability company. Pursuant to the
terms of the Purchase Agreement, Shagawa Resort, Inc. sold its assets, including
the real property known as Holiday Inn SunSpree Resort, to Grand Ely Lodge, LLC
for a purchase price of $2,300,000 plus the assumption of various obligations of
the Resort. The sale closed on May 1, 2000.
The directors of the Registrant received and reviewed numerous offers relating
to the sale of Shagawa Resort, Inc. and, believing it to be in the best
interests of the Registrant's shareholders, accepted the offer of Grand Ely
Lodge, LLC. Shenehon Company provided the Registrant with a Market Value
Appraisal dated February 28, 2000.
One of the owners of Grand Ely Lodge, LLC is Steve Madison, a grandson of
Raymond Madison, one of the directors of the Registrant.
A copy of the Purchase Agreement is attached hereto and incorporated by
reference herein.
Item 6. Exhibits and Reports on Form 8 - K:
A report on Form 8 - K was filed on March 20, 2000 during the quarter ended
March 31, 2000.
(Balance of page left intentionally blank.)
Page 12
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SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: May 9, 2000 Dynamic Homes, Inc.
---------------------------- ----------------------------
(Registrant)
----------------------------
Eldon Matz
Controller
PURCHASE AGREEMENT
THIS AGREEMENT is made as of March 17, 2000, between SHAGAWA RESORT,
INC., a Minnesota corporation ("Seller"), and GRAND ELY LODGE, LLC, a Minnesota
limited liability company ("Buyer") and or its Assigns.
In consideration of the mutual promises and covenants contained in this
Agreement, Seller and Buyer agree as follows:
1. SALE OF PROPERTY. Seller agrees to sell to Buyer, and Buyer agrees
to buy from Seller, the following property (collectively, "Property"):
(a) Real Property. The real property, commonly known as
Holiday Inn Sunspree Resort, located in Ely, St. Louis County,
Minnesota, described on the attached Exhibit A (the "Land") together
with (1) all buildings and improvements constructed or located on the
Land ("Buildings") and (2) all easements and rights benefitting or
appurtenant to the Land (collectively the "Real Property").
(b) Personal Property. All of the personal property situated
in or about the Real Property owned by Seller that is used in
connection with the operation of, or located at, the Real Property, all
as described on the inventory attached to this Agreement as Exhibit B
("Personal Property").
(c) Plans. All originals and copies of the as-built
blueprints, plans and specifications regarding the Real Property and
the Personal Property, if any ("Plans").
(d) Contracts, Agreements and Leases. Seller's interests in
those existing service and maintenance contracts, equipment leases,
franchise/licensing agreements, and other contracts regarding the Real
Property and the Personal Property, including but not limited to those
described on the attached Exhibit C ("Contracts"), which Buyer desires
to purchase (all others shall be terminated by Seller as of the date of
closing).
(e) Permits. Seller's interests in all the permits and
licenses currently possessed by Seller relating to the Real Property
and/or Personal Property, and the operation thereof, including, but not
limited to, those described on attached Exhibit D ("Permits").
(f) Records. All records of Seller regarding the Real Property
and the Personal Property, including, without limitation, all records
regarding management and leasing, real estate taxes and assessments,
insurance, maintenance, repairs, capital improvements and services, but
excluding tax returns (but Seller agrees to provide to the SBA or its
agent tax returns which they have requested) ("Records").
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(g) Warranties. All of Seller's interest in and to all
warranties and guaranties given to, assigned to, or benefitting Seller
or the Real Property or the Personal Property regarding the
acquisition, construction, design, use, operation, management, or
maintenance of the Real Property and the Personal Property (the
"Warranties").
(h) Website. To the extent not prohibited by the existing
Holiday Inn franchise/license agreement, all of Seller's interest in
and to the domain name registration for "ElyHolidayInn.com" and the
accompanying right to use such domain name, which is currently being
used in connection with the Real Property.
(i) Trademarks/Service Mark. To the extent not prohibited by
the existing Holiday Inn franchise/license agreement, all of Seller's
interest in and to the Trademarks and Service Marks used in connection
with the Property, together with the goodwill of the businesses with
which the Trademarks and Service Marks are used.
2. PURCHASE PRICE, ASSURED OBLIGATIONS AND MANNER OF PAYMENT. The total
purchase price ("Purchase Price") to be paid by Buyer to Seller for the Property
shall be Two Million Three Hundred Thousand ($2,300,000.00) Dollars. The
Purchase Price shall be payable as follows:
(a). Earnest Money. Seventy-Five Thousand Dollars ($75,000.00)
as earnest money ("Earnest Money") which Earnest Money shall be held by
Crow Wing Abstract & Title ("Title") as escrow agent.
(b). Remainder.
(1) Eight Hundred and Fifty-Eight Thousand One
Hundred Twenty-Five and 93/100ths ($858,125.93) Dollars
(pay-off figure assumes all regular payments are made between
the date of the Agreement and the Closing), or such other
amount confirmed as of the date of closing by assumption of
the outstanding balance due under that certain Small Business
Administration ("SBA") promissory note and mortgage, dated May
23, 1996, between Seller, as borrower, and Minnesota Business
Finance, Inc., as lender (the "SBA Mortgage"), and the release
of Seller therefrom, to the extent consented to by SBA and
lender; and/or
(2) The remaining balance of the Purchase Price in
certified funds or by wire transfer of U.S. Federal Funds to
be received in Title's trust account on or before 12:00 p.m.
on the Closing Date.
(c) In addition to the purchase price stated above, Buyer
shall (subject to Buyer's reasonable review and approval thereof)
reimburse Seller at closing for
<PAGE>
the then-outstanding receivables, inventories, and prepaid expenses,
including, but not limited to, insurance and Holiday Inn franchise
fees, at the amounts carried on Seller's books as of the closing date.
Provided that Buyer shall not purchase any receivables that Buyer
reasonably deems to be "bad debts." Seller shall retain all cash in
Seller's bank accounts, including the replacement reserve account. All
cash, checks, and other funds on-site, including without limitation,
till money at the time of closing shall purchased by Buyer at closing,
and paid for in addition to the purchase price stated above.
(d) Buyer shall assume the obligations of Seller to its
employees for accrued paid vacation amounts as of the Closing Date. The
aggregate of such amounts is estimated to be approximately $10,500 as
of the Closing Date. Buyer shall also assume all payroll obligations
with respect to Seller's employees, as of 7:00 a.m. on May 1, 2000.
(e) The Real Property is presently subject to a mortgage in
favor of the SBA. If Buyer is unable to assume the SBA Mortgage, Buyer
shall be responsible for the pre-payment penalty assessed by the SBA as
a result of the pre-payment of the SBA mortgage occurring as a result
of this sale, and shall hold Seller harmless from payment of same. At
closing, Buyer shall pay the SBA mortgage pre-payment penalty, if any,
in addition to the Purchase Price.
(f) Buyer intends to apply to transfer the Holiday Inn
franchise license held by Seller to Buyer. Regardless of whether such
transfer is approved or denied, or whether Buyer is granted a new
Holiday Inn franchise license, Buyer shall assume and pay, and
indemnify, defend and hold Seller harmless with respect to, all
franchise fees, damages, or other amounts accruing to Holiday
Hospitality Franchising, Inc. after the Closing Date.
(g) The Purchase Price shall be allocated as set forth in the
attached Exhibit E.
3. CONTINGENCIES. The obligations of Buyer under this Agreement are
contingent upon each of the following:
(a) Representations and Warranties. The representations and
warranties of Seller contained in this Agreement must be true now and
on the Closing Date as if made on the Closing Date.
(b) Title. Title shall have been found acceptable, or been
made acceptable, in accordance with the requirements and terms of
Section 7 below.
(c) Performance of Seller's Obligations. Seller shall have
performed all of the obligations required to be performed by Seller
under this Agreement, as
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and when required by this Agreement. Included within the obligations of
Seller under this Agreement shall be the following:
(1) Seller shall allow Buyer, and Buyer's agents,
access to the Real Property without charge and at all
reasonable times upon 24 hours written notice to Seller, for
the purpose of Buyer's investigation and testing of the same.
Buyer shall pay all costs and expenses of such investigation
and testing and shall hold Seller and the Real Property
harmless from all costs and liabilities relating to the
Buyer's activities. Buyer shall further repair and restore any
damage to the Real Property caused by or occurring during
Buyer's testing and return the Real Property and/or Personal
Property to substantially the same conditions as existed prior
to such entry.
(2) Seller shall, without charge to Buyer, cooperate
in Buyer's attempts to obtain: (i) the assignment of Seller's
rights under the existing Holiday Inn franchise/license
agreement; and (ii) all governmental approvals necessary in
Buyer's judgment in order to make that use of the Property
which Buyer intends, which use shall be for resort operations
a lawful use of the Property. Buyer shall pay all filing fees,
legal fees and other expenses related to its obtaining such
governmental approvals, and hold Seller harmless form payment
of same.
(3) On or before ten (10) days after the date of this
Agreement is signed, Seller shall deliver to Buyer true and
correct copies of Seller's copies of all Contracts, Permits,
Plans, Records, Existing Encumbrances (as hereinafter defined)
and other material information regarding the Property for
Buyer's review and analysis. Buyer hereby agrees that it will
not share, divulge, or communicate in any manner whatsoever or
to any person or entity whatsoever, except to attorneys,
lenders, consultants and others involved in the transaction
contemplated in this Agreement, or as required by law, any
information which Buyer may obtain during its investigation of
the Property or which Seller may provide pursuant to the terms
of this Agreement and designate thereon as "CONFIDENTIAL" (the
"Confidential Information"). Buyer acknowledges that if Buyer
breaches the confidentiality terms of this Agreement Seller
shall be entitled to a mandatory injunction restraining Buyer
from violating the confidentiality terms of this Agreement.
Upon termination of this Agreement Buyer shall return all
Plans and Records concerning the Property.
(d) Survey. On or before the Contingency Date, Buyer, may
obtain a current ALTA/ACSM survey (the "Survey") of the Real Property,
certified to Buyer, Buyer's lender, and Title, by a Registered Land
Surveyor properly licensed to practice in the State of Minnesota. The
survey shall locate all wells and storage
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tanks, which are on the Real Property. Buyer and Seller shall split the
cost of such survey.
(e) Environmental Testing. On or before the Contingency Date,
Buyer shall be satisfied, in Buyer's reasonable discretion, with: (i)
soil tests, engineering inspections, hazardous waste and environmental
reviews and other tests and inspections of the Property, as provided by
Seller; and (ii) any additional tests and inspections of the Property
undertaken at Buyer's sole cost and expense, all to assure Buyer that
the Property is suitable for its intended use.
(f) Document Review. Buyer shall have determined, on or before
the Contingency Date, that it is satisfied with its review and analysis
of the Plans, Contracts, Permits, Warranties, Records and Existing
Encumbrances.
(g) Access. On or before the Contingency Date, Buyer shall be
satisfied, in Buyer's reasonable discretion, that the Real Property has
direct legal access to, abuts, and is served by a publicly-dedicated
and maintained road that provides a valid means of ingress and egress
to and from the Real Property, and that Seller has received no notice
that any abutting roads are under threat of condemnation.
(h) Compliance with Laws. On or before the Contingency Date,
Buyer shall have reasonably determined that the Property and the
current use thereof fully complies with all existing local, state, and
federal regulations concerning the maintenance and operation of the
Property, including zoning, building, health and safety, fire safety,
and environmental codes and laws and such use is a legal conforming
use.
(i) TIF Commitment. On or before the Contingency Date, Buyer
shall have obtained a binding commitment from the City of Ely, in form
and substance satisfactory to Buyer in Buyer's sole judgment, that the
transaction contemplated herein will not accelerate any debt payments
and that any revenue to the Property generated by a "pay-as-you-go"
project will be assigned to Buyer.
(j) Holiday Inn License. On or before the Contingency Date,
Buyer shall have received approval of its pending request to transfer
the existing Holiday Inn Franchise License from Seller to Buyer in form
and substance satisfactory to Buyer.
The "Contingency Date" shall be the April 19, 2000. If any contingency
except those set forth in subparagraphs a, b and c described herein has not been
satisfied on or before the Contingency Date, then this Agreement may be
terminated, at Buyer's option, by written notice from Buyer to Seller. Such
notice of termination may be given at any time on or before the Contingency
Date. Upon such termination, the Earnest Money and any interest accrued thereon
shall be returned to Buyer and Buyer shall execute a
5
<PAGE>
release of all rights in and to the Purchase Agreement and the Property by quit
claim deed in favor or Seller. Provided, however, that if the purchase agreement
is terminated based upon the contingency set forth in either subparagraph (i) or
(j), $25,000 of the earnest money shall be forfeited and paid to Seller. All the
contingencies set forth in this Agreement are specifically stated and agreed to
be for the sole and exclusive benefit of the Buyer and the Buyer shall have the
right to unilaterally waive any contingency by written notice to Seller. The
contingencies set forth in subparagraphs a, b and c shall survive until the
closing.
4. RIGHT OF FIRST REFUSAL. The parties to this Purchase Agreement
acknowledge and agree that the transaction contemplated herein is subject to a
right of first refusal held by Holiday Hospitality Franchising, Inc. ("HHF")
pursuant to the September 25, 1998 Renewal License Agreement between Seller and
HHF. Upon execution of this Agreement, Seller shall give notice to HHF of
Buyer's offer to purchase the property in order to commence the thirty (30) day
right of first refusal period. In the event that HHF exercises its right of
first refusal, the parties agree that this Purchase Agreement shall be null and
void, and that neither party shall have any further obligation to one another
hereunder, except that Seller shall instruct Title to return the Earnest Money
to Buyer.
5. CLOSING. The closing of the purchase and sale contemplated by this
Agreement (the "Closing") shall occur on or before May 1, 2000, or such other
date as may be mutually agreed on by the parties (the "Closing Date"). The
Closing shall take place at 10:00 a.m. local times of the office of Title or at
such other place as may be agreed to by Buyer and Seller. Seller agrees to
deliver sole and exclusive possession of the Property to Buyer at 12:00 p.m. on
the Closing Date.
(a) Seller's Closing Documents. On the Closing Date, Seller
shall execute and/or deliver to Buyer the following (collectively,
"Seller's Closing Documents"):
(1) Deed. A General Warranty Deed, in form reasonable
satisfactory to Buyer, conveying the Real Property to Buyer,
free and clear of all encumbrances, except the Permitted
Encumbrances hereafter defined.
(2) Bill of Sale. A Bill of Sale, in form reasonable
satisfactory to Buyer conveying the Personal Property to
Buyer.
(3) Assignment of Contracts and Agreements. An
Assignment of Contracts and Agreements in form reasonably
satisfactory to Buyer, conveying Seller's interest in such
Contracts and Agreements as desired by Buyer, to Buyer, free
and clear of all encumbrances.
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(4) Assignment of Permits. An Assignment of Permits
and Licenses, in form reasonably satisfactory to Buyer,
conveying the Permits and Licenses to Buyer, free and clear of
all encumbrances.
(5) Title Commitment. A currently updated Commitment
for Title Insurance initiated by Title, in the form required
by this Agreement.
(6) Opinion of Seller's Counsel. An opinion of
Seller's counsel, dated as of the Closing Date, in form
reasonably satisfactory to Buyer, that Seller has been duly
organized and is in good standing under the laws of the State
of Minnesota; that Seller is duly qualified to transact
business in the State of Minnesota; that Seller has the
requisite power and authority to enter into and perform this
Agreement, and those Seller's Closing Documents signed by it;
that such documents have been duly authorized by all necessary
action on the party of Seller and have been duly executed and
delivered; that the execution, delivery and performance by
Seller of such documents to not conflict with or result in a
violation of Seller's organizational documents or, to the
knowledge of Seller's counsel, any judgment, order or decree
of any court of arbiter to which Seller is a party; that such
documents are valid and binding obligations of Seller,
enforceable in accordance with their terms.
(7) Seller's Affidavit. An Affidavit of Title by
Seller indicating that on the Closing Date there are not
outstanding, unsatisfied judgments, tax liens or bankruptcies
against or involving Seller or the Real Property; that there
has been no skill, labor or material furnished to the Real
Property for which payment has not been made or for which
mechanics' liens could be filed; and that there are not other
unrecorded interests in the Real Property, together with
whatever standard owner's affidavit and/or indemnity which may
be required by Title to issue and Owner's Policy of Title
Insurance in the form required by Section 7.
(8) Original Documents. Original or copies of the
Plans, Permits, Contracts, Warranties, and the Records, if
any.
(9) FIRPTA Affidavit. A non-foreign affidavit,
properly executed and in recordable form, containing such
information as is required by IRC Section 1445(b) (2) and its
regulations.
(10) Owner's Duplicate Certificates of Title. The
owner's duplicate certificates of title regarding the Real
Property, if any.
(11) IRS Form. A Designation Agreement designating
the "reporting person' for purposes of completing
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(12) Well Certificate. A Certificate signed by Seller
warranting that there are no "Wells" on the Property within
the meaning of Minn. Stat.ss. 1031 or if there are "Wells," a
Well Certificate in the form required by law, which may be
incorporated into the deed.
(13) Assignment of Franchise/License Agreement. If
approved by the franchisor/licensor under the existing Holiday
Inn franchise/license agreement, a transfer or assignment to
Buyer of all of Sellers' rights in such franchise/license
agreements affecting the Property, including a waiver of all
rights to purchase the Property that may exist in favor of the
franchisor or licensor, in form reasonably satisfactory to
Buyer.
(14) Resolution. A current corporate resolution of
Seller, authorizing the transaction contemplated by this
Agreement and the execution and delivery of Seller's closing
documents.
(15) Other Documents. All other documents reasonably
determined by Buyer to be necessary to transfer the Property
to Buyer free and clear of all encumbrances except pPermitted
eEncumbrances.
B. Buyer's Closing Documents. On the Closing Date, Buyer will
execute and/or deliver to Seller the following (collectively "Buyer's
Closing Documents"):
(1) Purchase Price. The Purchase price, by wire
transfer of U.S. Federal Funds or by certified check to be
received in Title's trust account on or before 12:00 p.m. on
the Closing Date.
(3) Title Documents. Such affidavits of Buyer,
Certificates of Value or other closing documents as may be
reasonably required by Title in order to record the Seller's
Closing Documents and issue the Title Insurance Policy
required by this Agreement.
(4) IRS Form. A Designation Agreement designating the
"reporting person" for purposes of completing Internal Revenue
Form 1099 and, if applicable, Internal Revenue Form 8594.
6. PRORATIONS. Seller and Buyer agree to the following prorations and
allocation of costs regarding this Agreement:
(a) Title Insurance and Closing Fee. Seller will pay all costs
of Title Evidence. Buyer will pay all premiums required for the
issuance of any Title
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Policy required by Buyer. Seller and Buyer will share in the Cost of
all reasonable and customary closing fee or charge imposed by any
closing agent designated by the Title Company.
(b) Deed Tax. Seller shall pay all state deed tax regarding
the Warranty Deed to be delivered by Seller under this Agreement. Buyer
shall pay all Mortgage Registry Tax regarding the recording of the
mortgage securing the Buyer's loan.
(c) Real Estate Taxes and Special Assessments. Seller will
pay, on or before the Closing Date, any installments of special
assessments including interest payable with general real estate taxes
in 1999 and prior years. General real estate taxes payable in 1999 and
all prior years will be paid by Seller. General real estate taxes and
installments of special assessments payable in 2000 shall be prorated
by Seller and Buyer as of the Closing Date based upon a calendar fiscal
year. Seller shall pay all deferred real estate taxes, if any, which
may become payable as a result of the sale contemplated hereby. Buyer
shall assume and pay all real estate taxes and special assessments,
levied, or pending from and after the Closing Date.
(d) Recording Costs. Seller will pay the cost of recording all
documents necessary to place record title in the condition warranted by
Seller in this Agreement. Buyer will pay the cost of recording all
other documents.
(e) Security Deposits and Advance Payments. The aggregate
amount of deposits and advance payments received by Seller prior to the
Closing Date for future services and bookings not yet performed, shall
be paid to Buyer at Closing.
(f) Other Costs. All other operating costs of the Property
will be allocated between Seller and Buyer as of the Closing Date so
that Seller pays that part of such other operating costs attributable
to the period of time before the Closing Date, and Buyer pays that part
of such operating costs attributable to the period of time from and
after the Closing Date.
7. TITLE EXAMINATION. Title Examination will be conducted as follows:
(a) Seller's Title Evidence. Seller shall, within ten (10)
days after the date of this Agreement, furnish the following
(collectively, "Title Evidence") to Buyer:
(1) Title Insurance Commitment. A commitment ("Title
Commitment") for an ALTA Form B 1970 Owner's Policy of Title
Insurance insuring title to the Real Property, deleting
standard exceptions
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and including affirmative insurance regarding zoning,
contiguity, appurtenant easements and such other matters as
may be identified by Buyer, in the amount of the Purchase
Price, issued by Title. If the Property is abstract property,
Seller shall also deliver to Title or Buyer an Abstract of
Title to the Real Property certified to a current date to
include all appropriate judgment and bankruptcy searches.
(2) Survey. The Survey.
(3) UCC Searches. A report of UCC Searches made of
the Uniform Commercial Code records of the Secretary of State
of Minnesota and the County in which the Property is located,
made by said Secretary of State, or by a search firm
acceptable to Buyer, showing no UCC filings regarding any of
the Property.
(b) Buyer's Objections. Within fifteen (15) days after
receiving the last of the Title Evidence, Buyer will make written
objections ("Objections") to the form and/or contents of the Title
Evidence. Buyer's failure to make Objections within such time period
will constitute waiver of Objections. Any matter shown on such Title
Evidence and not objected to by Buyer shall be a "Permitted
Encumbrance" hereunder. Seller shall use its best efforts to cure the
Objections, but such efforts shall not postpone the Closing. To the
extent an Objection can be satisfied by the payment of money, Buyer
shall have the right to apply a portion of the cash payable to Seller
at the Closing to satisfaction of such Objection and the amount so
applied shall reduce the amount of cash payable to Seller at the
Closing. If the Objections are not cured by the Closing Date, Buyer
will have the option to:
(1) Terminate this Agreement and receive a refund of
the Earnest Money and the interest accrued and unpaid on the
Earnest Money, if any; and
(2) Withhold from the Purchase Price an amount which,
in the reasonable judgement of Title, is sufficient to assure
cure of the Objections. Any amount so withheld will be placed
in escrow with the Title, pending such cure. If Seller does
not cure such Objections within ninety (90) days after such
escrow is established, Buyer may then cure such Objections and
charge the costs of such cure (including reasonable attorney's
fees) against the escrowed amount. If such escrow is
established, the parties agree to execute and deliver such
documents as may be reasonably required by Title, and Seller
agrees to pay the charges of Title to create and administer
the escrow.
(3) Waive the Objections and proceed to close.
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Notwithstanding anything to the contrary herein, Buyer understands that
the real property is subject to a Tax Increment Financing Agreement.
(c) Title Policy. Seller will furnish to Buyer at closing a
suitably marked up Commitment initialed by Title undertaking to issue
such a Title Policy in the form required by the Commitment as approved
by Buyer.
8. OPERATION PRIOR TO CLOSING. During the period from the date of
Seller's acceptance of this Agreement to the Closing Date (the "Executory
Period"), Seller shall operate and maintain the Property in the ordinary course
of business in accordance with prudent, reasonable business standards, including
the maintenance of adequate liability insurance and insurance against loss by
fire, windstorm and other hazards, casualties and contingencies, including
vandalism and malicious mischief. However, Seller shall execute no contracts,
leases or other agreements regarding the Property during the Executory Period
that are not terminable on or before the Closing Date, without the written
consent of Buyer, which consent may be withheld by Buyer in its sole discretion.
9. REPRESENTATIONS AND WARRANTIES BY SELLER. As an inducement for Buyer
to enter into this Agreement and consummate the transaction contemplated hereby,
Seller hereby represents and warrants to Buyer that each and all of the
following are true and correct as of the date of this Agreement and will be true
and correct as of the date of Closing:
(a) Seller is duly organized and in good standing under the
laws of the State of Minnesota; duly qualified to transact business in
the State of Minnesota. The execution, delivery and performance of this
Agreement, including the documents, instruments and agreements to be
executed and/or delivered by Seller pursuant to this Agreement, and the
consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on
the part of Seller. This Agreement and the documents, instruments and
agreements to be executed and/or delivered by Seller pursuant to this
Agreement have been or will be on or before the date of Closing duly
and validly authorized, executed and delivered by Seller and the
obligations of Seller hereunder and thereunder are or will be upon such
execution or delivery valid, legally binding, and enforceable against
Seller in accordance with their respective terms.
(b) Seller owns the Real Property, free and clear of all
encumbrances, except the Existing Encumbrances identified on Exhibit F
attached hereto (the "Existing Encumbrances").
(c) Seller owns the Personal Property, free and clear of all
encumbrances, except those identified on Exhibit B.
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(d) There are no condemnation proceedings pending or, to
Seller's knowledge, threatened as of the date of this Agreement with
respect to all or any part of the Real Property.
(e) Except as otherwise described in Exhibit G attached
hereto, no major or structural repairs have been performed, or to the
best of Seller's knowledge, without inquiry, have been necessary, with
respect to the improvements on the Real Property during the two (2)
years immediately preceding the date hereof. The physical condition of
such improvements on the Closing Date will not differ in any material
adverse respect from the condition of such improvements on the date of
this Agreement.
(f) Mechanic's Liens. All labor and materials which have been
provided to the Property have been fully paid for or will be fully paid
for, or will be fully paid for, prior to the Closing Date.
(g) Utilities. Gas, sanitary, and storm sewer and water lines
are connected to the Property and all charges for such connections have
been paid. Seller has received no notice of actual or threatened
reduction or curtailment of any utility service now supplied to the
Property.
(h) Personal Property and Equipment. The physical condition of
the Personal Property and equipment located on the Real Property on the
Closing Date will not differ in any material adverse respect from the
condition of such items on the date of this Agreement.
(i) Compliance with Laws. To the best of Seller's knowledge,
without inquiry, the Property and the current use thereof fully
complies with all existing local, state, and federal regulations
concerning the maintenance and operation of the Property, including
zoning, building, health and safety, fire safety, and environmental
codes and laws and such use is a legal conforming use. No notice of
violations of the same have been received. To the best of Seller's
knowledge (i) the Permits are in full force and Seller is not in
default thereunder, and (ii) no other permits or licenses are required
in order to operate the Property as it is now operated.
(j) Litigation and Other Matters. Seller has received no
notice, and has no knowledge of any pending notice, of a violation of
any statutes, ordinances, regulations, judicial decrees, or orders, or
the pendency of any lawsuits, administrative or arbitration hearings,
governmental investigations, proceedings, applications, petitioners, or
other matters affecting the Property or the use thereof.
12
<PAGE>
(k) Rights of Others to Purchase Property. Except for the
right of first refusal granted to licensor/franchisor under the
existing Holiday Inn license/franchise agreement, Seller has not
entered into any other contracts, agreements or understandings, whether
oral or written, for the sale of all or any portion of the Property,
and there are no existing rights of first refusal or options to
purchase all or any portion of the Property, or any other rights of
others that might prevent the consummation of this Agreement.
(l) Access. To the best of Seller's knowledge, without
inquiry, the Real Property has direct legal access to, abuts, and is
served by a publicly dedicated and maintained road that provides a
valid means of ingress and egress to and from the Real Property, and
Seller has received no notice that any abutting roads are under threat
of condemnation.
(m) Private Restrictions. To the best of Seller's knowledge,
without inquiry, except as already disclosed in this Agreement, there
are no contracts, leases, private restrictions or agreements with any
public authority that will not appear in the Title Commitment and that
will affect the present or future uses that may be made of the
Property, including but not limited to size or cost of buildings or
structures; limitation on use or restrictions in regard to fences,
roofs, garages, and heights of buildings or structures, except for
building and zoning codes; agreements to subject architectural plans to
an association or other group; provisions requiring improvements;
provisions requiring the joining of others in group actions; or
restrictions imposed on the Property due to its historical
significance.
(n) Hazardous Substances. To the best of Seller's knowledge,
without inquiry, no toxic or hazardous substances, or wastes,
pollutants, or contaminants (including, without limitation, any
hazardous substance as defined in, or regulated under, federal, state
or local laws, rules or regulations) have been generated, treated,
stored, released, or disposed of on the Property. To the best of
Seller's knowledge, no substances or conditions exist in or on the
Property that may support a claim or cause of action under any federal,
state, or local environmental statutes, regulations, ordinances, or
other environmental regulatory requirements. To the best of Seller's
knowledge, no above-ground or underground tanks are located in or about
the Property or have been located under, in, or about the Property and
have subsequently been removed or filled.
(o) Assessments. Seller has not received any notice of any
actual or proposed special assessments or reassessments of the Real
Property.
(p) Americans With Disabilities Act. To the best of Seller's
knowledge, without inquiry, the improvements located on the Real
Property are readily accessible to and usable by persons with
disabilities, and the primary function
13
<PAGE>
areas of such improvements, including without limitation the common
areas, public areas, lobbies, dining areas, parking areas, wash and
toilet rooms, and public telephone and drinking fountain areas, and the
path of travel to and from any such primary function area, comply with
Title III of the Americans With Disabilities Act of 1990 (the "ADA")
and the ADA Accessibility Guidelines for Buildings and Facilities.
(q) Agents and Employees. No management agents or other
personnel employed in connection with the operation of the Property
have the right to continue such employment after the Closing Date.
There are no claims for brokerage commissions or other payments with
respect to the Property that will survive and remain unpaid after the
Closing Date.
The representations and warranties set forth in this paragraph 8 shall
be continuing and shall be true and correct on and as of the date of Closing
with the same force an effect as if made at that time and all such
representations, warranties and covenants shall survive closing and shall not be
affected by any investigation, verification or approval by any party hereto or
by anyone on behalf of any party hereto and shall not merge into Seller's deed
being delivered at Closing.
Notwithstanding anything contained herein to the contrary, it is
understood and agreed that, except as specifically provided in this agreement
and the documents, instruments and agreements to be executed and/or delivered by
Seller pursuant to this Agreement, Seller, its affiliates and agents have not
made and are not now making and they specifically disclaim any warranties,
representations or guaranties of any kind or character, express or implied, oral
or written, past, present or future, with respect to the Real Property, and
Buyer has not relied upon and will not rely upon, either directly or indirectly,
any representation or warranty of Seller or its affiliates or agents. Buyer
represents that it is knowledgeable, experienced and sophisticated purchaser of
real estate and that it is relying solely on the representations, warranties,
covenants and agreements of Seller contained in this Agreement and the
documents, instruments and agreements to be executed and/or delivered by Seller
pursuant to this Agreement, as well as on its own expertise and that of Buyer's
consultants in purchasing the Real Property. Buyer will or will have had the
opportunity to conduct such inspections and investigations of the Real Property
and Personal Property as Buyer deems necessary, including, but not limited to,
the physical and environmental conditions thereof, and shall rely upon the same.
Buyer acknowledges and agrees that except as otherwise provided in this
Agreement, Seller shall sell and convey to Buyer and Buyer shall accept the Real
Property and Personal Property "AS IS", "WHERE IS", with all faults. The terms
and conditions of this paragraph 8 shall survive the closing of the purchase and
sale transaction contemplated in this Agreement and shall not merge with the
provisions of any closing documents. Seller is not liable or bound in any manner
by any oral or written statements, representations or information concerning the
Real Property or Personal Property furnished by any real estate broker, agent,
employee, servant or
14
<PAGE>
other person. Buyer acknowledges that the Purchase Price reflects the "AS IS"
nature of this sale and any faults, liabilities, defects or other adverse
matters that may be associated with the Real Property and Personal Property.
Buyer has fully reviewed the disclaimers and waivers set forth in this agreement
with its counsel and understands the significance and effect thereof. Buyer, on
its own behalf and on behalf of its affiliates and designees, hereby
acknowledges the disclaimer of representations and warranties set forth in this
paragraph 9.
10. REPRESENTATIONS AND WARRANTIES BY BUYER. Buyer represents and
warrants to Seller that Buyer is a duly organized and is in good standing under
the laws of the State of Minnesota; that Buyer has the requisite power and
authority to enter into this Agreement and the Buyer's Closing Documents signed
by it; such documents have been duly authorized by all necessary action on the
part of Buyer and have been duly executed and delivered; that the execution,
delivery and performance by Buyer of such documents do not conflict with or
result in violation of Buyer's organizational documents or any judgment, order
or decree of any court or arbiter to which Buyer is a party; such documents are
valid and binding obligations of Buyer, and are enforceable in accordance with
their terms.
11. DAMAGE. If, prior to the Closing Date, all or any part of the
Property is substantially damaged by fire casualty, the elements or any other
cause, Seller shall immediately give notice to Buyer of such fact and at Buyer's
option (to be exercised within thirty days after Seller's notice), this
Agreement shall terminate, in which event neither party will have any further
obligations under this Agreement and the Earnest Money, together with any
accrued interest, shall be refunded to Buyer. If Buyer fails to elect to
terminate despite such damage, or if the Property is damaged but not
substantially, Seller shall promptly commence to repair such damage or
destruction and return the property to its condition prior to such damage. If
such damage shall be completely repaired prior to the Closing Date then there
shall be no reduction in the Purchase Price and Seller shall retain the proceeds
of all insurance related to such damage. If such damage shall not be completely
repaired prior to the Closing Date but Seller is diligently proceeding to
repair, Buyer shall have the right to delay the Closing Date until repair is
completed, or escrow one hundred and ten (110%) percent of the estimated cost to
complete the repairs from the Seller's proceeds and close the transaction. If
Seller shall fail to diligently proceed to repair such damage then Buyer shall
have the right to require a closing to occur and the Purchase Price (and
specifically the cash portion payable at the Closing Date) shall be reduced by
the cost of such repair, or at Buyer's option, the Seller shall assign to Buyer
all right to receive the proceeds of all insurance related to such damage and
the Purchase Price shall remain the same. For purposes of this Section, the
words "substantially damaged" mean damage that would cost Fifty Thousand and
No/100 ($50,000.00) Dollars or more to repair.
12. CONDEMNATION. If, prior to the Closing Date, eminent domain
proceedings are commenced against all of any part of the Property, Seller shall
15
<PAGE>
immediately give notice to Buyer of such fact and at Buyer's option (to be
exercised within thirty days after Seller's notice), this Agreement shall
terminate, in which event neither party will have further obligations under this
Agreement and the Earnest Money, together with any accrued interest, shall be
refunded to Buyer. If Buyer shall fail to give such notice then there shall be
no reduction in the Purchase Price, and Seller shall assign to Buyer at the
Closing Date all of Seller's right, title and interest in and to any award made
or to be made in the condemnation proceedings. Prior to the Closing Date, Seller
shall not designate counsel, appear in, or otherwise act with respect to the
condemnation proceedings without Buyer's prior written consent.
13. BROKER'S COMMISSION. Seller and Buyer represent and warrant to each
other that they have dealt with no brokers. Buyer and Seller both agree that
there are no finders fees or the like in connection with this transaction, and
agree to indemnify each other and to hold each other harmless against all
claims, damages, costs or expenses of or for any other such fees or commissions
resulting from their actions or agreements regarding the execution of
performance of this Agreement, and will pay all costs of defending any action or
lawsuit brought to recover any such fees or commissions incurred by the other
party, including reasonable attorneys' fees.
14. ASSIGNMENT. Neither party may assign its rights under this
Agreement without the prior written consent of the other party which said
consent from the seller shall not be unreasonably withheld, before or after the
Closing except that either party may assign its rights to an affiliated entity
or person under same common control with the assigning party. Any such
assignment will not relieve such assigning party of its obligations under this
Agreement.
15. SURVIVAL. All of the terms of this Agreement will survive and be
enforceable after the Closing.
16. NOTICES. Any notice required or permitted to be given by any party
upon the other is given in accordance with this Agreement if it is directed to
Seller by delivering it personally to an officer of Seller; or if it is directed
to Buyer, by delivering it personally to an officer of Buyer; or if mailed in a
sealed wrapper by United States registered or certified mail, return receipt
requested, postage prepaid; or if transmitted by facsimile, copy followed by
mailed notice as above required; or if deposited cost paid with a nationally
recognized, reputable overnight courier, properly addressed as follows:
If to Seller:
Attention: Mr. Scott Lindemann
Dynamic Homes, Inc.
525 Roosevelt Avenue
Detroit Lakes, MN 56501
With a copy to:
16
<PAGE>
Attention: Roger V. Stageberg
James M. Lockhart
Lommen, Nelson, Cole & Stageberg, P.A.
1800 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
If to Buyer:
Grand Ely Lodge, LLC
c/o Madison Properties
2215 South 6th St., PO Box 612
Brainerd, Minnesota 56401
With a copy to:
Larkin, Hoffman, Daly & Lindgren, Ltd
Attn: Larry D. Martin, Esq.
7900 Xerxes Avenue South, Suite 1500
Bloomington, Minnesota 55431
Notices shall be deemed effective on the earlier of the date of receipt or the
date of deposit as aforesaid; provided, however, that if notice is given by
deposit, that the time for response to any notice by the other party shall
commence to run one business day after any such deposit. Any party may change
its address for the service of notice by giving written notice of such change to
the other party, in any manner above specified, 10 days prior to the effective
date of such change.
17. CAPTIONS. The paragraph headings or captions appearing in this
Agreement are for convenience only, are not a part of this Agreement and are not
to be considered in interpreting this Agreement.
18. ENTIRE AGREEMENT; MODIFICATION. This written Agreement constitutes
the complete agreement between the parties and supersedes any prior oral or
written agreements between the parties regarding the Property. There are no
verbal agreements that change this Agreement and no waiver of any of its terms
will be effective unless expressed in a writing executed by the parties.
19. BINDING EFFECT. This Agreement binds and benefits the parties and
their successors and assigns.
20. CONTROLLING LAW. This Agreement has been made under the laws of the
State of Minnesota, and such laws will control its interpretation.
17
<PAGE>
21. REMEDIES. If Buyer defaults under this Agreement, Seller shall have
the right to terminate this Agreement by giving written notice to Buyer. If
Buyer fails to cure such default within 30 days of the date of such notice, this
Agreement will terminate, and upon such termination Seller will retain the
Earnest Money as liquidated damages, time being of the essence of this
Agreement. The termination of this Agreement and retention of the Earnest Money
shall be Seller's sole remedy. If Seller defaults under this Agreement, Buyer
may terminate this Agreement and obtain a refund of the Earnest Money, or seek
and recover from Seller damages for nonperformance or specific performance of
this Agreement. Except as otherwise specified elsewhere herein, all rights,
powers or remedies afforded the parties hereunder or at law shall be cumulative
and the exercise of one shall not bar exercise of another.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
Agreement.
23. FACSIMILE SIGNATURES. This Agreement may be executed with
signatures transmitted by facsimile and shall constitute a binding agreement
with such signatures. Nonetheless, any party providing facsimile signatures
shall provide the other party with the original signatures within five (5)
business days after providing the facsimile signature page(s).
SELLER:
SHAGAWA RESORT, INC.
By S/Scott Lindemann
-----------------
Its President
---------
BUYER:
GRAND ELY LODGE, LLC
By S/Steven Madison
----------------
Its Chief Manager
-------------
18
<PAGE>
EXHIBIT A
REAL ESTATE DESCRIPTION (PARA 1(A))
PARCEL 1: That part of Lot Four (4) of Section Twenty-seven (27) in Township
Sixty-three (63) North, Range Twelve (12) West of the Fourth Principal Meridian,
lying north of the center line of Pioneer Road, according to the United States
Government survey thereof, bounded as follows: Beginning at the Southwest corner
of said Lot 4 go northerly along the west boundary line thereof 700 feet; thence
easterly parallel to said south boundary line thereof 700 feet; thence southerly
parallel to said west boundary line 700 feet to said south boundary line; and
thence westerly along said south boundary line 700 feet to the point of
beginning. The center line of Pioneer Road is described as follows: Assuming the
West line of said Government Lot 4 to bear North 01 degrees, 08'38" West and
from the Southwest corner of said Government Lot 4, run North 01 degrees 08'38"
West along said West Line, a distance of 157.34 feet to the POINT OF BEGINNING
of said center line. Thence North 59 degrees, 07'45" East, a distance of 175.04
feet; thence along a tangential curve, concave to the Northwest, central angle
of 18 degrees, 48'02", radius of 640.27 feet, a distance of 210.09 feet; thence
North 40 degrees 19'43" East, a distance of 101.24 feet; thence along a
tangential curve concave to the Southeast, central angle of 35 degrees, 33'35",
radius of 447.65, a distance of 277.83 feet; thence North 75 degrees, 53'18"
East, a distance of 85.93 feet to the centerline of platted road as shown in the
plat of "North Chandler Fourth Addition," located in said Section 27, and there
to terminate.
PARCEL II: Tract A: Lots One (1), Two (2), Three (3), Four (4) and Five (5),
Block One (1), NORTH CHANDLER FOURTH ADDITION.
PARCEL II: Tract B: That part of Government Lot One (1), Section Twenty-eight
(28), Township Sixty-three (63) North, Range Twelve (12) West, described as
follows: Beginning at a point on the East boundary line of said Lot 1, 700' from
the Southeast corner thereof, go Southerly along said boundary line to said
Southeast corner, thence Westerly along the Southerly boundary line of said Lot
1 500 fee and thence Northeasterly in a straight line to the point of beginning,
EXCEPT that part thereof which lies westerly of a line drawn parallel to and 300
feet Westerly of the East boundary line of said Lot 1, and EXCEPT that part
thereof which lies south and East of the centerline of Pioneer Road, and EXCEPT
that portion, if any, of said parcel platted as North Chandler Second Addition.
EXCEPT minerals and mineral rights as previously reserved.
Roadway easement for Pioneer Road and all easements of record.
All in St. Louis County, Minnesota.
<PAGE>
EXHIBIT B
Personal Property (Para l(b) and 9(c)
List available upon request.
<PAGE>
EXHIBIT C
Contracts, Agreements and Leases
Copies of contracts, Agreements, and Leases are available from the Company upon
request.
<PAGE>
EXHIBIT D
Permits
Copies of permits are available from the Company upon request.
<PAGE>
EXHIBIT E
PURCHASE PRICE ALLOCATION
Land $ 170,000
Buildings 1,230,000
Personal Property/Furnishings 600,000
Goodwill 300,000
<PAGE>
EXHIBIT F
Existing Encumbrances (Paras. 8(c))
1. Taxes and installments of special assessments not yet due and payable.
2. Utility, drainage and driveway easements not interfering with existing
or Buyer's proposed use or improvements.
3. Covenants and restrictions not containing a forfeiture provision and
not interfering with existing or Buyer's proposed use or improvements.
4. Tax Increment Financing Agreements.
5. Easements to the City of Ely.
<PAGE>
EXHIBIT G
MAJOR/STRUCTURAL REPAIRS
None
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Dynamic Homes, Inc. and Subsidiaries
Three Months ended March 31, 2000
Financial Data Schedule
Exhibit No. 27
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 658,000
<SECURITIES> 0
<RECEIVABLES> 828,000
<ALLOWANCES> (14,000)
<INVENTORY> 3,350,000
<CURRENT-ASSETS> 5,092,000
<PP&E> 6,622,000
<DEPRECIATION> (2,659,000)
<TOTAL-ASSETS> 9,461,000
<CURRENT-LIABILITIES> 2,002,000
<BONDS> 2,683,000
0
0
<COMMON> 228,000
<OTHER-SE> 4,444,000
<TOTAL-LIABILITY-AND-EQUITY> 9,461,000
<SALES> 1,296,000
<TOTAL-REVENUES> 80,000
<CGS> 1,122,000
<TOTAL-COSTS> 1,322,000
<OTHER-EXPENSES> 256,000
<LOSS-PROVISION> 3,000
<INTEREST-EXPENSE> 32,000
<INCOME-PRETAX> (215,000)
<INCOME-TAX> 86,000
<INCOME-CONTINUING> (129,000)
<DISCONTINUED> (653,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (782,000)
<EPS-BASIC> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
