U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
XX ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-2864
DIVERSIFIED REALTY, INC.
(Name of small business issuer in its charter)
Montana
(State or other jurisdiction 81-0268110
of incorporation or organization) (I.R.S. Employer Identification Number)
128 Second Street South, Great Falls, Montana 59405
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (406) 727-2600
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange On Which Registered
NONE N/A
Securities registered under Section 12(g) of the Exchange Act:
Common Stock Without Par Value
(Title of class)
Check whether the issurer (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 XX No
Check, if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10KSB.
State issuer's revenues for its most recent fiscal year $104,917.
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within the past 60 days.
(See definition of affiliate in Rule 12b-2 of the Exchange Act).
As of February 28, 1997, 297,626 shares held by nonaffiliates were
outstanding. The registrant's stock is not traded on any securities
exchange. To registrant's knowledge, neither bid nor asked quotations for
registrant's stock have appeared in any established quotation system
during the past sixty business days. To registrant's knowledge, neither bid
nor asked quotations for registrant's stock are reported in any newspapers
nor are records kept of any quotations by the National Quotation Bureau, Inc.
There exists no public market for registrant's stock.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
1,872,915 shares no par value common stock are outstanding as
of February 28, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENTS FORM 10-KSB REFERENCE
Annual Report to Shareholders for Part I, Items 1 and 2
the year ended December 31, 1996. Part II, Items 5, 6 and 7
Part III, Item 12
Part IV, Item 13
Transitional Small Business Disclosure Format (check one): Yes ; No X .
<PAGE>
DIVERSIFIED REALTY, INC.
PART I
ITEM 1. DESCRIPTION OF BUSINESS AND
ITEM 2. DESCRIPTION OF PROPERTY
A description of the Company's business and property ownership is set forth
on Page 1 of Exhibit 13, the Annual Report to Shareholders for the year ended
December 31, 1996, which description is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
No legal proceedings presently pending by or against Diversified Realty, Inc.
are described herein as management believes that the outcome of such
litigation should not have a material adverse effect on the financial
position of the Company taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A meeting of security holders was held during the fourth quarter of 1996
at which the Company's entire Board of Directors was elected. Directors
elected to the board were L. H. LaValley, Charles E. Reed and S. M. McCann.
The Company's security holders also authorized the Board of Directors to
select an independent certified public accounting firm to audit the
Company's financial statements for 1996.
I-1
1.
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DIVERSIFIED REALTY, INC.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ITEM 7. FINANCIAL STATEMENTS
Items 5, 6 and 7 are set forth on Page 12, Pages 1 and 2 and Pages 3 to 11,
respectively, of Exhibit 13, the Annual Report to Shareholders for the year
ended December 31, 1996, which report is incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements concerning accounting principles or
practices or financial statement disclosures between the Company and the
Company's independent auditor during the two most recent years.
II-1
2.
<PAGE>
DIVERSIFIED REALTY, INC.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following are the directors and executive officers of the Company.
All directors and officers serve as such until the 1997 annual meeting of
shareholders or until their successors are elected and qualify.
NAME, AGE, AND YEAR ELECTED DIRECTOR POSITION
L. H. LaValley, 32, 1991 President and Director
S. M. McCann, 33, 1990 Director
Charles E. Reed, 79, 1974 Vice President and Director
S. M. McCann is the president and a director of UAC, Inc., an affiliate of
the Company, the president and a director of M Corp and a director of
GNI, Inc. (parent company of M Corp).
Family Relationships
S. M. McCann is the daughter of Anne Marie and Paul J. McCann.
Members of the Anne Marie and Paul J. McCann family control a majority of
the common stock of M Corp. Anne Marie McCann and Paul J. McCann each
disclaim beneficial ownership of any shares of stock not owned of record
directly by them. Anne Marie and Paul J. McCann do not personally own any
stock of the Company.
Following are the executive officers of the Company and a description of
their principal business experience.
Name and Position Business Experience During Past 5 Years
L. H. LaValley Vice President
President TranSecurities International, Inc.
Spokane, Washington
S. M. McCann Attorney at Law, Investor
Vice-President San Luis Obispo, California
and Director
Charles E. Reed President, Continental Realty and Escrow,
Butte, Montana.
Based solely on its review of reports of persons subject to Section 16 of
the Securities and Exchange Act, the Company believes that required reports
were filed in a timely manner disclosing transactions involving the
Company's common stock.
III-1
3.
<PAGE>
DIVERSIFIED REALTY, INC.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table. The following table shows the cash compensation
paid by the Company to its President and Chief Executive Officer for 1996,
1995 and 1994. No officer or director of the Company received total cash
compensation exceeding $100,000 for 1996, 1995 or 1994.
Summary Compensation Table
Name and Calendar Total Cash
Principal Position Year Compensation
L.H. LaValley 1996 $ 100
President, Director 1995 $ 0
and Chief Executive 1994 $ 250
Officer
The Company has no pension plan, no stock option or stock appreciation right
plans and no long-term incentive plans and there was no other material
compensation paid during the years ended December 31, 1996, 1995 and 1994.
The Company has not adopted a formal plan for the compensation of directors.
During 1996 the Company paid a total of $100 for directors fees.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Set forth below is certain information concerning persons who are known by
the Company to own beneficially more than 5% of the Company's voting shares
on February 28, 1997.
Title of Class No Par Value
Common Stock
Name and Address M Corp
of Beneficial Owner 110 Second Street South
Great Falls, Montana
Amount and Nature 1,572,257 (1)
of Beneficial Direct
Ownership
Percent 83.9%
of Class
(1) Members of the Anne Marie and Paul J. McCann family own indirectly a
majority of the outstanding stock of M Corp, which company owns 1,572,257
shares (83.9%) of the outstanding common stock of the Company. Members of
the Anne Marie and Paul J. McCann family own directly 3,033 shares (.2%)
of the Company's stock. Anne Marie and Paul J. McCann, parents of S. M.
McCann, each disclaim beneficial ownership of any shares of stock not owned
of record directly by them. Neither Anne Marie nor Paul J. McCann personally
own any shares of stock in the Company.
III-2
4.
<PAGE>
DIVERSIFIED REALTY, INC.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -
Continued
(b) Security Ownership of Management
The following table sets forth as of February 28, 1997, information concerning
the beneficial ownership of the Company's common stock by each director, each
executive officer named in the Company's Summary Compensation Table and by
all directors and executive officers of the Company as a group:
Amount and Nature
Name of of Beneficial
Beneficial Owner Ownership Percent
Charles E. Reed 20 Direct -
L. H. LaValley - -
S. M. McCann -(1) -
All Directors and Officers
as a Group 20 (1) -
(1) See Note (1) Item 11(a) on preceding page.
(c) Changes In Control
The Company knows of no contractual arrangements which may at a subsequent
date result in a change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with the Company's parent company, M Corp and its other
subsidiaries, are disclosed in Note 6 of the notes to financial statements
in the Annual Report to Shareholders for the year ended December 31, 1996,
which note is incorporated herein by reference. M Corp owns approximately
83.9% of the Company's outstanding common stock.
III-3
5.
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DIVERSIFIED REALTY, INC.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
No. 13 - Diversified Realty, Inc., Annual Report to Shareholders for the
year ended December 31, 1996, incorporated by reference in this Annual Report
on Form 10-KSB.
No. 27 - Financial Data Schedule
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed by the Company during the three
months ended December 31, 1996.
IV-1
6.
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DIVERSIFIED REALTY, INC.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DIVERSIFIED REALTY, INC.
Date: February 28, 1997 By:s/L. H. LaValley
L. H. LaValley, President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated
on February 28, 1997.
Director s/L. H. LaValley
L. H. LaValley
Director s/S. M. McCann
S. M. McCann
Principal Accountant s/Jerry K. Mohland
Jerry K. Mohland
IV-2
7.
<PAGE>
DIVERSIFIED REALTY, INC.
ANNUAL REPORT
1996
<PAGE>
DIVERSIFIED REALTY, INC.
ANNUAL REPORT
DESCRIPTION AND LINES OF BUSINESS
Diversified Realty, Inc. (herein referred to as "DRI" or the "Company") is a
majority-owned subsidiary of M Corp, a financial holding company. As of
December 31, 1996, M Corp owned approximately eighty-four percent of the
outstanding common stock of the Company.
For the past several years, the Company has been primarily engaged in the
ownership and rental of real property. As of December 31, 1996, DRI owned
property in Florida and Montana.
Information as of December 31, 1996, concerning the gross carrying amount of
real property, accumulated depreciation and encumbrances on a property by
property basis is presented in Note 8, Investments in Real Estate, of the
Notes to Financial Statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net income decreased $44,867 (117.7%) in 1996 as compared with 1995. The
decrease in net income in 1996 as compared with 1995 was due in part to an
decrease in revenues and in part to a increase in expenses.
Rent income decreased $3,161 (4.2%) in 1996 as compared with 1995 due
primarily to economic conditions. Interest income decreased $23,653(41.8%)
in 1996 as compared with 1995. The decrease in interest income in 1996 as
compared with 1995 was due primarily to a decrease in the amount of interest
charged by the Company to its parent company. During 1995 the Company charged
1
<PAGE>
DIVERSIFIED REALTY, INC.
ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
its parent company interest in the amount of $27,031. The Company's parent
company repaid substantially all advances it had owed to the Company
and as a result the Company did not charge the parent company interest during
1996. Transactions with the Company's parent company and its affiliates
during 1996 and 1995 are disclosed in Note 6, Related Party Transactions, of
the Notes to Financial Statements.
Operating expenses in total, increased $28,478 (38.7%) in 1996 as compared
with 1995. Maintenance expenses increased $19,298 (75.0%) in 1996 as
compared with 1995 due primarily to increases in maintenance costs. The
provision for depreciation decreased $2,314 (11.1%) in 1996 as compared with
1995 due to some of the Company's assets being fully depreciated during 1996
and 1995.
Income tax expense decreased $10,450 (52.3%) in 1996 as compared with 1995
due to the decrease in pre-tax income. The Company files a consolidated
income tax return with the Company's parent company and other affiliated
companies.
Although there are no present plans with respect thereto, the Company is
involved in an ongoing basis in examining and investigating investment
opportunities available to the Company which could possibly result in a
change in the liquidity of the Company. The Company knows of no existing
trends, demands, commitments, events or uncertainties not otherwise mentioned
herein that could result in a material change in the Company's liquidity.
The Company knows of no material trends, favorable or unfavorable,
in the Company's capital resources.
2
<PAGE>
DIVERSIFIED REALTY, INC.
FINANCIAL REPORT
DECEMBER 31, 1996
CONTENTS
PAGE
AUDITOR'S REPORT 4
FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1996 and 1995 5
Statements of Income and Accumulated Deficit for
the Years Ended December 31, 1996 and 1995 6
Statements of Cash Flows for the Years
Ended December 31, 1996 and 1995 7
Notes to Financial Statements 8-11
OTHER INFORMATION 12
3
<PAGE>
Report of Independent Auditors
To The Board of Directors
Diversified Realty, Inc.
Great Falls, MT 59405
We have audited the accompanying balance sheets of Diversified Realty, Inc.,
as of December 31, 1996 and 1995 and the related statements of income and
accumulated deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsiblity is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Diversified Realty, Inc.,
as of December 31, 1996 and 1995 and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
DWYER & KEITH, CPA's, P.C.
March 21, 1997
Great Falls, Montana
4
<PAGE>
DIVERSIFIED REALTY, INC.
BALANCE SHEETS
DECEMBER 31, 1996 and 1995
1996 1995
ASSETS
Current Assets
Cash (Note 2) $ 947,813 $ 614,560
Income Tax Prepayments 2,582 -
Investment Securities (Note 3) - 6
Current Portion of Contract Receivable (Note 4) 1,854 1,703
Due from Parent Company 3,200 306,225
Total Current Assets 955,549 922,494
Long-Term Contract Receivable, Less Current
Portion Included Above (Note 4) 11,463 13,316
Investments in Property and Property, Plant
and Equipment (Notes 1 and 8)
Land 14,261 14,261
Buildings 392,975 392,975
Furniture, Fixtures and Equipment 71,124 71,124
478,360 478,360
Less Accumulated Depreciation (202,495) (183,870)
275,865 294,490
Total Assets $ 1,242,877 $ 1,230,300
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities-
Accrued Liabilities $ 27,319 $ 7,372
Stockholders' Equity
Common Stock - No Par Value,
5,000,000 shares authorized,
1,875,000 shares issued 1,416,908 1,416,908
Accumulated Deficit (200,725) (193,980)
Cost of Common Stock in Treasury (2,085 shares) (625) -
Total Stockholder's Equity 1,215,558 1,222,928
Total Liabilities and
Stockholders' Equity $ 1,242,877 $ 1,230,300
See Notes to Financial Statements.
5
<PAGE>
DIVERSIFIED REALTY, INC.
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995
1996 1995
Income
Rent $ 71,930 $ 75,091
Interest 32,947 56,600
Other 40 65
104,917 131,756
Expenses
Maintenance 45,045 25,747
Depreciation 18,625 20,939
Property Taxes and Licenses 15,379 15,254
Office Supplies and Postage 6,514 1,996
Travel 5,677 2,886
Insurance 2,868 2,997
Legal and Accounting Fees 2,000 2,164
Interest 1,616 -
Salaries and Payroll Costs 1,410 214
Telephone 994 652
Directors Fees 100 250
Other 1,884 535
102,112 73,634
Income Before Income Taxes 2,805 58,122
Income Taxes (Notes 1 and 5) (9,550) (20,000)
NET INCOME (LOSS) (6,745) 38,122
Accumulated Deficit, Beginning of Year (193,980) (232,102)
Accumulated Deficit, End of Year $ (200,725) $ (193,980)
NET INCOME PER COMMON SHARE (Note 1)
NET INCOME PER SHARE $ .00 $ .02
See Notes to Financial Statements.
6
<PAGE>
DIVERSIFIED REALTY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995
INCREASE (DECREASE) IN CASH
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received From Customers $ 71,314 $ 75,606
Cash Paid to Suppliers and Employees (61,282) (52,741)
Interest Received in Cash 32,947 56,600
Interest Paid In Cash (1,616) -
Income Tax Payments Made in Cash (12,132) (20,000)
Net Cash Provided By
Operating Activities 29,231 59,465
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash Proceeds From Sales
of Current Investments 20 -
Cash Received on Principal of
Notes Receivable 1,702 1,540
Net Cash Provided By
Investing Activities 1,722 1,540
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Purchases of Treasury Stock (625) -
Net Cash Advances From (To) Parent Company 303,025 (4,681)
Net Cash Provided (Used) By
Financing Activities 302,400 (4,681)
NET INCREASE IN CASH 333,353 56,324
CASH - BEGINNING OF YEAR 614,560 558,236
CASH - END OF YEAR $ 947,913 $ 614,560
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
Net Income (Loss) $ (6,745) $ 38,122
Adjustments to Reconcile Net Income to Net
Cash Provided By Operating Activities
Depreciation 18,625 20,939
(Gain) on Sales of Current Investments (16) -
Changes in Operating Assets and Liabilities
(Increase) in Income Tax Prepayments (2,582) -
Increase in Accrued Liabilities 19,949 404
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 29,231 $ 59,465
See Notes to Financial Statements.
7
<PAGE>
DIVERSIFIED REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of Operations, Risks and Uncertainties
The Company is engaged in the ownership and rental of properties located
primarily in Yellowstone County, Montana.
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the reported amounts of certain types of assets, liabilities,
revenues and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements. Actual
results could differ from those estimates.
(b) Depreciation
Depreciation for the various classifications of rental property, plant and
equipment is computed using the straight-line and accelerated methods over the
estimated useful lives of the assets as follows:
Buildings 15 - 27 Years
Furniture, Fixtures and Equipment 3 - 10 Years
(c) Income Taxes
The Company files a consolidated income tax return with its parent company.
Income taxes are allocated to the Company based upon the ratio of the
Company's pre-tax income to total consolidated pre-tax income.
(d) Policy of Cash Equivalents
For the purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit and money market accounts, all with original
maturities of three months or less.
(e) Earnings Per Share
The computation of earnings per share in the accompanying statements is based
on the weighted average number of shares outstanding, as follows:
Year Ended December 31, 1996 - 1,873,923 shares
Year Ended December 31, 1995 - 1,875,000 shares
(f) Reclassifications
Certain reclassifications have been made to the prior year amounts to make
them comparable to the 1996 presentation. These changes had no impact on
previously reported results of operations or shareholders' equity.
8
<PAGE>
DIVERSIFIED REALTY, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
2. CASH BALANCES
The Company maintains accounts with various stock brokerage firms. The
accounts contain cash and securities. Cash balances are insured up to
$100,000 by the Securities Investor Protection Corporation ("SIPC").
At December 31, 1996, a cash balance totalling $732,575 was uninsured by the
SIPC.
3. INVESTMENT SECURITIES
The Company adopted Statement of Financial Accounting Standards No. 115
("SFAS 115"), "Accounting For Investments in Certain Debt and Equity
Securities" effective January 1, 1994. In accordance with SFAS No. 115, the
Company has classified its investment as a trading security at December 31,
1995.
The statements of income for the years ended December 31, 1996 and 1995
contain net realized gains or losses on the disposition of investment
securities in the amounts of $(228). and $0, respectively, and contain a
provision for unrealized gains or losses in the amounts of $244 and $0,
respectively.
4. CONTRACT RECEIVABLE
The contract receivable at December 31 consists of the following:
1996 1995
9% Contract For Deed, due in monthly
installments of $248 including interest to
September, 2002 $ 13,317 $ 15,019
Less Current Portion 1,854 1,703
Long-Term Contract Receivable $ 11,463 $ 13,316
The above contract receivable is secured by real property, the sale of which
resulted in the receivable. In the event the receivable becomes uncollectible
and the underlying collateral is completely worthless, the Company would
incur a loss in the amount of the receivable.
9
<PAGE>
DIVERSIFIED REALTY, INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
5. INCOME TAXES
Income tax expense consists of the following, all currently payable:
1996 1995
U.S. Income Taxes $ (3,200) $ 19,950
State Income Taxes 12,750 50
$ 9,550 $ 20,000
The income tax expense reflected in the financial statements differs from the
amounts that would normally be expected by applying the U.S. Federal income
tax rates to income before income taxes. The reasons for these differences
are as follows:
1996 1995
Computed "Expected" Tax Expense $ 900 $ 19,800
State Income Taxes 8,650 -
Other - 200
$ 9,550 $ 20,000
6. RELATED PARTY TRANSACTIONS
During 1996 and 1995 the Company received managerial assistance from its
parent company at no cost to the Company. In addition, the Company has had
transactions with its parent company or subsidiaries of its parent company,
as follows:
1996 1995
Net Cash Transfers To (From) Parent $ (303,825) $ 7,260
Income Tax Allocation 3,200 (19,950)
Was Charged For Insurance (2,400) (2,400)
Charged Interest To Parent - 27,031
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosure for financial instruments. The carrying amounts
reported in the balance sheet for cash and the receivable from the Company's
parent company approximate those assets' fair value. Fair value for investment
securities is based on quoted market prices. The Company believes that the
fair value of its contract receivable, which has a stated interest rate of
9.0 %, approximates carrying value due to the credit risk involved.
10
<PAGE>
DIVERSIFIED REALTY, INC.
NOTES TO FINANCIAL STATEMENTS - Continued
<TABLE>
<CAPTION>
8. INVESTMENTS IN REAL ESTATE
INITIAL COST TO COMPANY AND GROSS ESTIMATED LIFE
AMOUNT CARRIED ON BALANCE SHEET USED IN
AT DECEMBER 31, 1996 COMPUTING
ENCUM- ACCUMULATED DATE DATE DEPRECIATION
DESCRIPTION BRANCES LAND BUILDING TOTAL DEPRECIATION OF CONSTRUCTION ACQUIRED (YEARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Property $ - $ - $122,000 $122,000 $ 26,632 1988 1991 27
Florida
Rental Units
Florida - 1,500 46,950 48,450 46,950 1975 1982 15-27
Rental Units
Montana - - 224,025 224,025 58,347 Var Var 27
Miscellaneous
Properties - 12,761 - 12,761 -
Totals $ - $14,261 $392,975 $407,236 $ 131,929
</TABLE>
Reconciliations Of Total Real Estate Carrying Value For The Two Years Ended
December 31, 1996 are as follows:
1996 1995
Balance, Beginning of Year $407,236 $407,236
Add Acquisitions, at Cost -- --
Less Cost of Property Recovered or Sold -- --
Balance, End of Year $407,236 $407,236
Reconciliations Of Accumulated Depreciation For The Two Years Ended
December 31, 1996 are as follows:
1996 1995
Balance, Beginning of Year $114,867 $ 99,939
Add Provision for Depreciation 17,062 14,928
Less Properties Sold During Year -- --
Balance, End of Year $131,929 $114,867
11
<PAGE>
DIVERSIFIED REALTY, INC.
DIRECTORS AND OFFICERS
NAME OCCUPATION
L. H. LaValley Vice-President, TranSecurities
President and International, Inc.
Director Spokane, Washington
S. M. McCann Attorney at Law, Investor,
Director San Luis Obispo, California
Charles E. Reed Real Estate Broker,
Vice President Butte, Montana
and Director
MARKET INFORMATION
The common stock of Diversified Realty, Inc. is not traded on any securities
exchange, nor are records kept of any quotations by securities dealers or the
National Quotation Bureau, Inc. To the best knowledge of the Company, bid and
asked quotations for Diversified Realty, Inc., common stock are not reported
in any newspapers.
No dividends were paid in 1996 or 1995.
There are approximately 2,270 holders of record of the Company's common stock.
A copy of the Form 10-KSB Annual Report may be obtained upon written request
to the Company.
DIVERSIFIED REALTY, INC.
P.O. Box 2249
110 Second Street South
Great Falls, MT 59403-2249
12
<PAGE>
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<ARTICLE> 5
<C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 947913
<SECURITIES> 0
<RECEIVABLES> 1854
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 955549
<PP&E> 478360
<DEPRECIATION> 202495
<TOTAL-ASSETS> 1242877
<CURRENT-LIABILITIES> 27319
<BONDS> 0
0
0
<COMMON> 1416908
<OTHER-SE> (201350)
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