UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] Annual Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996
[ ] Transition Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _____________
Commission file number: 0-5370
GENERAL RESIDENTIAL CORPORATION
-------------------------------
(Name of small business issuer in its charter)
Delaware 95-2679815
- ------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
17992 Darmel Place, Santa Ana, California 92705
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (714) 633-4275
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
----------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ X ] No [ ]
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 10-KSB. [ ]
The issuer's revenues for the fiscal year ended December 31, 1996, were
$362,752.
The aggregate market value of the voting common stock held by
nonaffiliates of the registrant on March 6, 1997, was $0.
As of March 6, 1997, the Company had 16,359,260 shares of common stock
issued and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
Documents incorporated by reference: None.
Exhibit index page number: 8.
Total sequentially numbered pages in this document: 18.
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<PAGE> PART I
ITEM 1. DESCRIPTION OF BUSINESS
General Residential Corporation, a California corporation (the "Company"),
owns three properties in Southern California which are leased to an
unrelated entity under long-term leases. The unrelated entity operates the
properties as residential board and care facilities.
The Company has no employees and all services are performed by outside
contractors or officers/directors (see "ITEM 10. EXECUTIVE COMPENSATION").
ITEM 2. DESCRIPTION OF PROPERTY
The Company's three facilities are subject to long-term, fixed payment
leases to one party expiring through April 30, 2005, as follows:
Square Feet
-----------
Location Building Land Rooms
-------- -------- ---- -----
Santa Ana, California 40,000 43,000 75
Orange, California 32,000 47,000 60
Whittier, California 32,000 37,000 65
ITEM 3. LEGAL PROCEEDINGS
During the year ended December 31, 1996, neither the Company nor any
property of the Company was a party to or the subject of any material
legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of its security holders
during the fourth quarter of the fiscal year ended December 31, 1996.
-2-
<PAGE> PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market information: There has been and currently is no established
public trading market for the Company's common stock. Accordingly, no
quotations are presented herein.
(b) Holders:
Approximate Number of Record Holders
Title of Class (as of March 6, 1997)
-------------- ---------------------
Common stock, $.01 par value 1,404(1)
______________
(1) Included in the number of stockholders of record are 33 record
holders who hold 39,488 shares as nominees or under "street name."
(c) Dividends: The Company has never paid cash dividends on its common
stock. The declaration and payment of dividends is within the discretion
of the Company's board of directors and will depend, among other factors,
on earnings and debt service requirements, and the operating and financial
condition of the Company. At the present time, the Company's anticipated
operating and debt service requirements are such that it intends to follow
a policy of retaining earnings in order to finance the operations and debt
service requirements of its business. Accordingly, the Company does not
expect to pay a cash dividend within the foreseeable future (see "ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION").
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Fiscal Years Ended December 31, 1995 and 1996:
Results of Operations: The Company leases its three properties to an
unrelated entity which operates the properties as residential board and
care facilities. The Company has a fixed yearly lease income of
approximately $353,000 through April 2005. The Company has no other
sources of operating revenues.
Capital Resources: The Company has no material commitments for
capital expenditures as of December 31, 1996.
Liquidity: The Company expects to generate sufficient cash flow from
operations to fund operating expenses and scheduled debt service
requirements during the fiscal year ending December 31, 1997.
ITEM 7. FINANCIAL STATEMENTS
The financial statements are listed at "INDEX TO FINANCIAL
STATEMENTS" in this document.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-3-
<PAGE> PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table and text sets forth the names and ages of all
directors and executive officers of the Company and their positions and
offices with the Company. All of the directors will serve until the next
annual meeting of shareholders and until their successors are elected and
qualified, or until their earlier death, retirement, resignation or
removal. There are no family relationships among directors and executive
officers. Officers serve at the direction of the Board of Directors. Also
provided is a brief description of the business experience of each
director and executive officer during the past five years and an
indication of directorships held by each director in other companies
subject to the reporting requirements under the Federal securities law.
Name Age Position(s) Director Since
- ---- --- ----------- --------------
Paul M. Kuefler 73 President and Director January 1981
Daniel Lezak 63 Secretary/Treasurer and Director May 1978
Herbert Wolas 63 Vice President and Director December 1982
Biographies of Directors and/or Officers:
PAUL M. KUEFLER, PRESIDENT AND DIRECTOR. Mr. Kuefler is a graduate of the
University of Southern California, with a B.S. Degree in Electrical
Engineering. Mr. Kuefler has had extensive executive experience with
manufacturing and engineering companies. During the past five years, Mr.
Kuefler has been an independent investor/consultant.
DANIEL LEZAK, SECRETARY/TREASURER AND DIRECTOR. Mr. Lezak holds a B.S.
Degree in Accounting from Roosevelt University in Chicago, Illinois, and
is a certified public accountant. Mr. Lezak has a background as a
corporate troubleshooter, and during the past five years has been active
in the rehabilitation of public and private companies.
In April 1989, Mr. Lezak was elected director and president of Weaver
Arms, Inc., which became the subject of a Chapter 11 bankruptcy proceeding
in July 1989, and which confirmed its Second Amended Plan of
Reorganization (as Modified) on January 21, 1994. Weaver Arms, Inc.
subsequently changed its name to Madera International, Inc. Mr. Lezak
resigned as an officer and director of Madera International, Inc. during
May 1996.
Mr. Lezak was president and a director of Turbo, Inc. (formerly Lucky
Chance Mining Company, Inc.), which became the subject of a Chapter 11
bankruptcy proceeding in August 1989, and which confirmed its Plan of
Reorganization in June 1992.
Mr. Lezak was president of Gerant Industries, Inc. from October 8, 1991
through April 15, 1993, and was a director from January 22, 1991 through
January 10, 1994. On March 1, 1994, Gerant Industries, Inc. became the
subject of a Chapter 11 bankruptcy proceeding, and confirmed its Third
Amended Plan of Reorganization in August 1996. Gerant Industries, Inc.
subsequently changed its name to Xplorer, S.A.
Mr. Lezak is currently an officer and/or director of Turbo, Inc. and
Newcorp-One, both of which are public companies.
-4-
<PAGE>
HERBERT WOLAS, VICE PRESIDENT AND DIRECTOR. Mr. Wolas currently maintains
a law practice located in Century City, Los Angeles, California. From July
1987 through October 1991, Mr. Wolas was a senior member of the law firm
of Wolas, Soref and Ickowicz. Mr. Wolas was admitted to the practice of
law in 1961, after graduating with an L.L.B. degree from UCLA in 1960.
Compliance with Section 16(a) of the Exchange Act:
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16(a)-3(e) during the year ended
December 31, 1996, and Forms 5 and amendments thereto furnished to the
Company with respect to the year ended December 31, 1996, and any written
representation received by the Company from the reporting person, the
following reporting persons each failed to timely file one report required
to be filed with the Securities and Exchange Commission pursuant to
Section 16(a) of the Securities Exchange Act of 1934 during the year ended
December 31, 1996, as follows:
Paul M. Kuefler failed to timely report the transfer of 323,622 shares of
common stock to Sylvia L. Marienthal on September 4, 1996, and Sylvia L.
Marienthal failed to timely report the receipt of 323,622 shares of common
stock from Paul M. Kuefler on September 4, 1996. The delinquent reports
were filed during March 1997.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
--------------------------
Name and Fiscal Principal Annual Other Annual
Principal Position Year Compensation Compensation
------------------ ---- ------------ ------------
Paul Kuefler, 1996 $ 49,500 $ 2,000
President 1995 36,000 2,000
and Director 1994 36,000 2,000
Daniel Lezak, 1996 $ 49,500 $ 2,000
Secretary/Treasurer 1995 36,000 2,000
and Director 1994 36,000 2,000
Herbert Wolas, 1996 $ 49,500 $ 2,000
Vice President 1995 36,000 2,000
and Director 1994 36,000 2,000
Compensation Arrangements: Officers are each compensated under month-to-
month consulting arrangements for their services at the rate of $42,000
per year commencing April 1, 1996, plus reimbursable expenses. During the
period January 1, 1994 through March 31, 1996, officers were compensated
at the rate of $24,000 per year. In addition, directors are compensated at
the rate of $12,000 per year plus expenses of $2,000 per year.
Board of Directors: During the fiscal year ended December 31, 1996, two
meetings of the board of directors were held at which all directors
eligible to attend were present. The Company had no audit, nominating, or
compensation committees, or committees performing similar functions,
during the fiscal year ended December 31, 1996.
-5-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As used in this section, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of
1934 as consisting of sole or shared voting power (including the power to
vote or direct the vote) and/or sole or shared investment power (including
the power to dispose of or direct the disposition of) with respect to
security through any contract, arrangement, understanding, relationship or
otherwise, subject to community property laws.
As of March 6, 1997, the Company had 16,359,260 shares of its voting
common stock ($.01 par value) issued and outstanding. There are no other
classes of stock outstanding.
The following table sets forth, as of March 6, 1997: (a) the name and
address of each beneficial owner of more than five percent (5%) of the
Company's common stock known to the Company, the number of shares of
common stock beneficially owned by each such person, and the percent of
the Company's common stock so owned; and (b) the number of shares of
common stock of the Company beneficially owned, and the percentage of the
Company's common stock so owned, by each director and by all directors and
officers of the Company as a group. Each such person has sole voting and
investment power with respect to the shares of common stock, except as
otherwise indicated. Beneficial ownership consists of a direct interest in
the shares of common stock, except as otherwise indicated.
Name and Amount and Nature Percent of Shares
Address of of Beneficial of Common Stock
Beneficial Owner Ownership Outstanding
- ---------------- --------- -----------
Paul M. Kuefler
President and Director
17992 Darmel Place
Santa Ana, CA 92705 2,000,000(1) 12.2%
Daniel Lezak
Secretary/Treasurer
and Director
1098 Lucerne Way
Incline Village, NV 89452 3,392,285(2) 20.7%
Herbert Wolas
Vice President and Director
1875 Century Park East,
Suite 2000
Los Angeles, CA 90067 2,296,287(3) 14.0%
All Directors and Officers
as a Group (3 persons) 7,688,572 47.0%
Sylvia L. Marienthal
88 Almador
Irvine, CA 92714 3,580,850(1) 21.9%
____________________
(1)Shares with respect to Paul M. Kuefler are held by the Kuefler Family
Trust, of which Paul M. and Claire H. Kuefler are co-trustees. Excludes
3,580,850 shares held by Sylvia L. Marienthal, the adult daughter of Mr.
and Mrs. Kuefler, as to which they disclaim beneficial ownership, and
whose shareholdings are shown separately herein.
-6-
<PAGE>
(2)Includes 100,000 shares owned by a corporation owned by Mr. Lezak,
311,213 shares owned by Mr. Lezak's wife, 555,333 shares owned by Mr.
Lezak's wife as trustee for his minor son, and 1,076,325 shares owned by a
corporation owned by Mr. Lezak's minor son. Excludes 222,425 shares owned
by Mr. Lezak's two adult sons, as to which Mr. Lezak disclaims beneficial
ownership.
(3)Includes 1,132,060 shares owned by the Wolas Family Trust, of which
Herbert and Annette Wolas are co-trustees. Excludes 2,723,891 shares owned
by Mr. Wolas' three adult daughters, as to which Mr. Wolas disclaims
beneficial ownership.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The officers/directors of the Company have periodically advanced funds to
the Company to fund common stock repurchases and working capital
requirements. Such advances are unsecured, bear interest at 11% per annum
and are due on demand. There were no principal repayments to
officers/directors during the fiscal years ended December 31, 1995 and
1996. During the fiscal years ended December 31, 1995 and 1996, the
Company borrowed $0 and $15,500 from its officers/directors, respectively.
-7-
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description of Document
- ------ -----------------------
3(i)(1) Restated Certificate of Incorporation - July 27, 1973*
3(i)(2) Certificate of Amendment of Certificate of Incorporation -
January 10, 1981*
3(i)(3) Certificate of Amendment of Certificate of Incorporation -
March 11, 1982*
3(ii) By-Laws as Amended*
10 Form of Lease of Improved Real Property*
*Previously filed as an exhibit to the Company's Amended Annual Report on
Form 10-K for the fiscal year ended September 30, 1988, and incorporated
herein by reference.
(b) Reports on Form 8-K - Fourth Quarter ended December 31, 1996: None.
-8-
<PAGE> SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GENERAL RESIDENTIAL CORPORATION
-------------------------------
(Registrant)
/s/ Paul M. Kuefler
Date: March 25, 1997 By: ____________________________________
Paul M. Kuefler
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
and on the dates indicated.
/s/ Paul M. Kuefler
Date: March 25, 1997 By: ____________________________________
Paul M. Kuefler
President, Chief
Executive Officer and
Director (Principal
Executive Officer)
/s/ Daniel Lezak
Date: March 25, 1997 By: ____________________________________
Daniel Lezak
Chief Financial Officer
and Director (Principal
Financial and Accounting
Officer)
/s/ Herbert Wolas
Date: March 25, 1997 By: ____________________________________
Herbert Wolas
Vice President and Director
-9-
<PAGE>
GENERAL RESIDENTIAL CORPORATION
Index to Financial Statements
Page
Number
------
Report of Independent Auditors -
Hollander, Gilbert & Co. 11
Balance Sheets -
December 31, 1995 and 1996 12
Statements of Operations -
Years Ended December 31, 1995 and 1996 13
Statement of Shareholders' Equity -
Years Ended December 31, 1995 and 1996 14
Statements of Cash Flows -
Years Ended December 31, 1995 and 1996 15
Notes to Financial Statements -
Years Ended December 31, 1995 and 1996 16-18
-10-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
General Residential Corporation
Santa Ana, California
We have audited the accompanying balance sheets of General Residential
Corporation as of December 31, 1995 and 1996, and the related statements
of operations, shareholders' equity and cash flows for the years then
ended. These statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These 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 audits
provide 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 General
Residential Corporation as of December 31, 1995 and 1996 and the results
of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Hollander, Gilbert & Co.
Los Angeles, California
March 7, 1997
-11-
<PAGE>
GENERAL RESIDENTIAL CORPORATION
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
1995 1996
------------ ------------
ASSETS
CASH $ 10,118 $ 4,265
INCOME TAXES RECEIVABLE 8,655
PROPERTY AND EQUIPMENT, net of
accumulated depreciation (Notes 3 and 4) 1,999,213 1,902,169
------------ ------------
$ 2,009,331 $ 1,915,089
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Notes payable (Note 4) $ 138,941 $ 31,236
Accounts payable and accrued expenses 6,350 14,195
Income taxes payable (Note 7) 13,118
Deferred income taxes (Note 7) 504,000 489,000
Due to related parties (Note 2) 135,000 150,500
------------ ------------
TOTAL LIABILITIES 797,409 684,931
------------ ------------
SHAREHOLDERS' EQUITY (Notes 2 and 5)
Common stock, $.01 par value;
authorized - 50,000,000 shares;
issued and outstanding -
16,549,501 shares at December 31, 1995
and 16,359,260 shares at December 31, 1996 165,495 163,593
Additional paid-in capital 1,334,393 1,324,880
Accumulated deficit (287,966) (258,315)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 1,211,922 1,230,158
------------ ------------
$ 2,009,331 $ 1,915,089
============ ============
See accompanying notes to financial statements.
-12-
<PAGE>
GENERAL RESIDENTIAL CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
1995 1996
------------ ------------
REVENUES $ 362,556 $ 362,752
------------ ------------
COSTS AND EXPENSES
Fees and expenses to directors
and officers (Note 2) 114,000 154,500
General and administrative 42,240 42,820
Depreciation 97,044 97,044
Interest ($14,850 in 1995 and
$15,551 in 1996 to related parties) 34,673 22,672
------------ ------------
TOTAL COSTS AND EXPENSES 287,957 317,036
------------ ------------
INCOME BEFORE INCOME TAXES 74,599 45,716
INCOME TAXES (NOTE 7) 21,097 16,065
------------ ------------
NET INCOME $ 53,502 $ 29,651
============ ============
NET INCOME PER SHARE $ .003 $ .002
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 16,613,514 16,499,319
============ ============
See accompanying notes to financial statements.
-13-
<PAGE>
GENERAL RESIDENTIAL CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE -
December 31, 1994 16,658,688 $ 166,587 $ 1,340,349 $ (341,468) $ 1,165,468
Shares repurchased and
retired (Note 5) (117,320) (1,173) (5,875) (7,048)
Shares reinstated 8,133 81 (81)
Net income 53,502 53,502
------------ ------------ ------------ ------------ ------------
BALANCE -
December 31, 1995 16,549,501 165,495 1,334,393 (287,966) 1,211,922
Shares repurchased and
retired (Note 5) (190,241) (1,902) (9,513) (11,415)
Net income 29,651 29,651
------------ ------------ ------------ ------------ ------------
BALANCE -
December 31, 1996 16,359,260 $ 163,593 $ 1,324,880 $ (258,315) $ 1,230,158
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
-14-
<PAGE>
GENERAL RESIDENTIAL CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
1995 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from lessees $ 362,556 $ 362,752
Interest paid to related parties (14,850) (15,551)
Interest paid to others (19,823) (7,121)
Income taxes paid (23,642) (44,993)
Payments to directors and officers
for fees and expenses (114,000) (154,500)
General and administrative expenses (42,240) (42,820)
------------ ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 148,001 97,767
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable,
secured by deeds of trust (138,993) (107,705)
Borrowings from related parties 15,500
Common stock repurchased and retired (7,048) (11,415)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (146,041) (103,620)
------------ ------------
NET INCREASE (DECREASE) IN CASH 1,960 (5,853)
CASH BALANCE AT BEGINNING OF YEAR 8,158 10,118
------------ ------------
CASH BALANCE AT END OF YEAR $ 10,118 $ 4,265
============ ============
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Net income $ 53,502 $ 29,651
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation of property and equipment 97,044 97,044
Increase in income taxes receivable (8,655)
Increase in accounts payable and
accrued expenses 7,845
Decrease in income taxes payable
and deferred taxes (2,545) (28,118)
------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 148,001 $ 97,767
------------ ------------
See accompanying notes to financial statements.
-15-
<PAGE>
GENERAL RESIDENTIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
1. SUMMARY OF SIGNIFICANT ASSOUNTING POLICIES
Description of Business - General Residential Corporation (the "Company")
is the lessor of three structures in Southern California which are
utilized as residential board and care facilities.
Property and Equipment - Land, buildings and improvements were valued in
connection with a reorganization effective December 11, 1980, at
management's estimate of net realizable value as derived from information
provided by an independent appraisal dated January 1, 1981. Related
depreciation is computed on the straight-line method based upon an
estimated useful life of 30 years. Office equipment is stated at cost and
is being depreciated on the straight-line method over its estimated
useful life of five years.
Income Taxes - In 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included on the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse (see Note 7).
Impairment of Long-Lived Assets - The Company periodically assess the
recoverability of the carrying amounts of long-lived assets, including
intangible assets. A loss is recognized when expected undiscounted future
cash flows are less than the carrying amount of the asset. The impairment
loss is the difference by which the carrying amount of the asset exceeds
its fair value. The Company does not expect to have any significant
losses resulting from its review of impairment of long-lived assets.
Net Income Per Share - Net income per share is calculated using the
weighted average number of shares of common stock outstanding.
2. RELATED PARTY TRANSACTIONS
The Company compensated officers under month-to-month consulting
arrangements at the rate of $24,000 per year from January 1, 1995 through
March 31, 1996, and at the rate of $42,000 per year commencing April 1,
1996, plus reimbursable expenses. In addition, directors are compensated
at the rate of $12,000 per year plus expenses of $2,000 per year. During
the years ended December 31, 1995 and 1996, fees and expenses to officers
and directors totalled $114,000 and $154,500, respectively.
The officers/directors of the Company have periodically advanced funds to
the Company on an unsecured basis to fund common stock repurchases and
working capital requirements. Such advances bear interest at 11% per
annum and are due upon demand. During the fiscal year ended December 31,
1996, the Company borrowed $15,500 from its officers/directors. At
December 31, 1995 and 1996, due to related parties consisted of the
following:
-16-
<PAGE>
1995 1996
------------ ------------
Paul M. Kuefler $ 45,000 $ 51,500
Herbert Wolas 45,000 49,500
Daniel Lezak 45,000 49,500
------------ ------------
$ 135,000 $ 150,500
============ ============
3. PROPERTY AND EQUIPMENT
At December 31, 1995 and 1996, property and equipment consisted of the
following:
1995 1996
------------ ------------
Land $ 553,300 $ 553,300
Buildings and improvements 2,889,700 2,889,700
Office equipment 3,608 3,608
------------ ------------
3,446,608 3,446,608
Less accumulated depreciation (1,447,395) (1,544,439)
------------ ------------
$ 1,999,213 $ 1,902,169
============ ============
4. NOTES PAYABLE
At December 31, 1995 and 1996, notes payable consisted of the following:
1995 1996
------------ ------------
Note payable secured by first deed
of trust, payable in monthly
installments of principal and
interest (at 8-3/4%) of $4,938,
due July 1997. $ 85,169 $ 31,236
Note payable secured by first deed
of trust, payable in monthly
installments of principal and
interest (at 9%) of $5,380,
paid in full in 1996. 53,772
------------ ------------
$ 138,941 $ 31,236
============ ============
5. SHAREHOLDERS' EQUITY
During the years ended ended December 31, 1995 and 1996, the Company
purchased and retired 117,320 and 190,241 shares of its common stock for
total cash consideration of $7,048 and $11,415, respectively. During the
year ended December 31, 1995, the Company reinstated 8,133 shares of
common stock originally issued January 1, 1988 that were inadvertently
deleted from the Company's shareholders' listing.
6. LEASES
The Company leases its three properties to an unrelated party under
noncancelable operating leases. At December 31, 1996, minimum payments
required under the leases are as follows:
Years Ended
December 31,
------------
1997 $ 352,800
1998 352,800
1999 352,800
2000 352,800
Thereafter 1,538,800
------------
$ 2,950,000
============
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<PAGE>
7. INCOME TAXES
The components of income tax expense for the years ended December 31,
1995 and 1996 consisted of the following:
Federal State Total
------------ ------------ ------------
1995:
Current $ 18,292 $ 8,805 $ 27,097
Deferred (4,000) (2,000) (6,000)
------------ ------------ ------------
$ 14,292 $ 6,805 $ 21,097
============ ============ ============
1996:
Current $ 29,107 $ 12,057 $ 41,164
Deferred (17,099) (8,000) (25,099)
------------ ------------ ------------
$ 12,008 $ 4,057 $ 16,065
============ ============ ============
The components of deferred tax liabilities (assets) at December 31, 1995
and 1996 consisted of the following:
1995 1996
------------ ------------
Cost bases of property and equipment -
excess of financial statements
over tax bases $ 608,814 $ 608,814
Other 154
------------ ------------
Gross deferred tax liability 608,968 608,814
------------ ------------
Depreciation (58,796) (85,477)
State income tax (36,073) (34,337)
AMT credit carryforward (10,099)
------------ ------------
Gross deferred tax asset (104,968) (119,814)
------------ ------------
Valuation allowance -- --
Net deferred tax liability $ 504,000 $ 489,000
============ ============
Income tax expense totaled $21,097 in 1995 and $16,065 in 1996,
reflecting effective tax rates of 28% and 35%, respectively. The actual
tax expense differs from the expected tax expense (computed by applying
the Federal corporate tax rate of 34% to earnings before income taxes) as
follows:
1995 1996
------------ ------------
Expected statutory tax $ 25,364 $ 15,543
State income tax 4,579 2,806
Graduated tax rates (11,714) (2,284)
Alternative minimum tax 845
Other 2,023
------------ ------------
Actual tax $ 21,097 $ 16,065
============ ============
-18-
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,265
<SECURITIES> 0
<RECEIVABLES> 8,655
<ALLOWANCES> 0
<INVENTORY> 0
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<PP&E> 3,446,608
<DEPRECIATION> 1,544,439
<TOTAL-ASSETS> 1,915,089
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0
0
<COMMON> 163,593
<OTHER-SE> 1,066,565
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<TOTAL-REVENUES> 362,752
<CGS> 0
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<OTHER-EXPENSES> 294,364
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<INCOME-PRETAX> 45,716
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