U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1994
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number 1-8631
Dover Investments Corporation
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 94-1712121
(State or Other Jurisdiction (I.R.S.Employer
of Incorporation or Organization) Identification No.)
350 California Street, Suite 1650, San Francisco, CA 94104
(Address of Principal Executive Offices)
(415) 951-0200
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of each of the issuer's classes of common
stock, as of October 31, 1994, were as follows:
Class A Common Stock, $.01 par value 788,961 Shares of Common Stock
Class B Common Stock, $.01 par value 329,439 Shares of Common Stock
Transitional Small Business Disclosure Statement
Yes No X
THIS REPORT CONSISTS OF 14 SEQUENTIALLY NUMBERED PAGES.
DOVER INVESTMENTS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets
as of September 30, 1994 and December 31, 1993........... 3
Consolidated Statements of Operations
for the Nine Months Ended September 30, 1994 and 1993.... 4
Consolidated Statement of Stockholders'
Equity for the Nine Months Ended September 30, 1994...... 5
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1994 and 1993.... 6
Notes to Consolidated Financial Statements............... 7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operation.......................10
PART II. OTHER INFORMATION ................................12
SIGNATURES ....................................................14
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1994 and December 31, 1993
(in thousands except share amounts)
ASSETS 09-30-94 12-31-93
Cash $ 2,249 $ 1,667
Restricted Cash 132 516
Securities Purchased under
Agreement to Resell 1,150 2,500
Cash and Securities Held in
Trust Account 2,431 -
Homes Held for Sale 1,412 1,409
Property Held for Development 22,698 19,871
Other Assets 477 1,595
TOTAL ASSETS $30,549 $27,558
LIABILITIES AND STOCKHOLDERS' EQUITY
Income Taxes Payable $ 228 $ 242
Accrued Interest and Other Liabilities 3,484 4,127
Notes Payable 12,000 11,342
TOTAL LIABILITIES 15,712 15,711
STOCKHOLDERS' EQUITY
Class A Common Stock par value, $.01
per share--Authorized 2,000,000 shares;
issued 788,962 at 9/30/94 and
793,914 at 12/31/93 8 8
Class B Common Stock par value, $.01
per share--Authorized 1,000,000 shares;
issued 329,439 at 9/30/94 and
333,441 at 12/31/93 3 3
Additional paid-in capital 14,347 11,478
Retained Earnings 496 358
Treasury Stock (5000 Shares Class A) (17) -
TOTAL STOCKHOLDERS' EQUITY 14,837 11,847
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $30,549 $27,558
See accompanying notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share amounts)
Quarters Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Home Sales $ 1,644 $ 3,921 $ 5,929 $ 4,199
Cost of Sales (1,270) (2,900) (4,487) (3,117)
Gross Profit 374 1,021 1,442 1,082
Selling Expenses (182) (310) (594) (352)
General and Administrative
Expenses (156) (152) (542) (563)
(338) (462) (1,136) (915)
Operating Profit 36 559 306 167
Other Income
Interest 26 20 192 20
Other - (75) 22 (76)
Total Other Income (Loss) 26 (55) 214 (56)
Income before Taxes 62 504 520 111
Provision for Taxes (196) (12) (382) (14)
Net Income (Loss) $ (134) $ 492 $ 138 $ 97
Net Income (Loss) Per Share $ (0.12) $ 0.44 $ 0.12 $ 0.09
See accompanying notes to Consolidated Financial Statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1994
(in thousands)
<CAPTION>
Additional Treasury
Common Stock Paid-In Retained Stock
Class A Class B Capital Earnings at Cost Total
<S> <S> <S> <S> <S> <S> <S>
Balance at January 1, 1994 $ 8 $ 3 $11,478 $ 358 $ - $11,847
Additions to Paid-In Capital $ - - 2,869 - - 2,869
Treasury Stock $ - - - - (17) (17) 138 - 138
Net Income $ - - - 138 - 138
Balance at September 30, 1994 $ 8 $ 3 $14,347 $ 496 $ (17) $14,837
See accompanying notes to Consolidated Financial Statements.
</TABLE>
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months ended September 30, 1994 and 1993
(in thousands)
Nine Months
Ended September 30,
1994 1993
Increase in Cash
Cash Flows from Operating Activities:
Net Income $ 138 $ 97
Reconciliation of Net Income to Net Cash
(Used in) Provided by Operating Activities:
Changes in Assets and Liabilities:
Restricted Cash 384 583
Property Held for Development (2,827) (1,232)
Homes Held for Sale (3) (1,387)
Other Assets 1,118 (89)
Income Taxes Payable (14) 12
Accrued Interest and Other
Liabilities, Net (643) 2,272
Net Cash (Used in) Provided by
Operating Activities: (1,847) 256
Cash Flows from Investment Activities:
Securities Sold under Agreement
to Resell 1,350 100
Cash and Securities Held in Trust Account (2,431) -
Additional Paid-In Capital Increased and
Accrued Interest and Other Liabilities
Decreased by $2,869 Resulting from the
Recovery of Taxes and Interest 2,869 -
Cash Flows from Financing Activities:
Proceeds from Notes Payable 658 2,373
Treasury Stock (17) -
Net Decrease in Cash 582 2,729
Cash at Beginning of Period 1,667 1,362
Cash at End of Period $ 2,249 $ 4,091
See accompanying notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1994
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim consolidated
balance sheets as of September 30, 1994, and December 31, 1993, the related
consolidated statements of operations for the three and nine month periods
ended September 30, 1994 and 1993, and the consolidated statements of
stockholders' equity and cash flows for the nine month periods ended
September 30, 1994 and 1993, reflect all adjustments (consisting of normal
recurring accruals and elimination of significant intercompany transactions
and balances) necessary for a fair presentation of Dover Investments
Corporation ("Dover") and its wholly-owned subsidiaries (collectively with
Dover, the "Company").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Accordingly, these statements
should be read in conjunction with the statements and notes thereto included
in the Company's 1993 Form 10-KSB and the Notes to the Consolidated Financial
Statements, included therein. The results of operations for the quarter
ended September 30, 1994, are not necessarily indicative of the results which
may be expected for the entire year.
Prior year financial statements have been reclassified to conform to current
year presentation.
2. ORGANIZATION AND ACCOUNTING POLICIES
In connection with the Company's change of business focus from a savings and
loan holding company to a builder of single family homes, the Company, with
the approval of its Board of Directors, adopted a quasi-reorganization
effective January 1, 1993. The quasi-reorganization, which did not require
the approval of the Company's stockholders, resulted in the elimination of
the accumulated deficit of $16,017,000, the cancellation of the treasury
stock having a cost of $14,526,000, a decrease in additional paid-in capital
of $30,512,000, a decrease in Class A Common Stock of $25,000, and a decrease
in Class B Common Stock of $6,000, but did not result in any adjustments to
the value of assets or liabilities. As part of the plan, 2,479,929 Class A
and 594,029 Class B Common Shares held by the Company as treasury shares were
cancelled.
The symbols for the Class A Common Stock and the Class B Common Stock are
"DOVR-A" and "DOVR-B", respectively.
3. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed, on a combined basis, for the two
classes of common stock, Class A and Class B. Computations are based upon
the weighted average number of common shares outstanding. The weighted
average number of Class A and Class B share equivalents used to compute net
income per share was 1,118,401 at September 30, 1994, and 1,127,362 at
September 30, 1993.
4. CONTINGENCIES
The Company was the parent company of Homestead Savings, A Federal Savings
and Loan Association (the "Association"), until August 1991, at which time
the Company's voting interest in the Association was reduced to 20.7% of the
total shares eligible to vote. The Association was placed in receivership on
October 30, 1992, with the Resolution Trust Corporation (the "RTC") appointed
receiver. The Company, as the parent company of a group of affiliated
corporations filing consolidated federal income tax returns, is contingently
liable for any tax assessments arising with respect to the Association from
such returns filed for tax years through August 6, 1991.
The Internal Revenue Service (the "IRS") has examined the Company's
consolidated federal tax returns for the years 1985 through 1990 and issued
reports for each of the years. The Company has been advised that the reports
for 1985, 1986, 1988 and 1989 have been favorably settled with no payment by
the Company. Additionally, all settlements for these years have been
approved by the Joint Congressional Committee on Taxation. Therefore, the
Company has been relieved of all federal tax liability for the Association
for these years, including, but not limited to, the $8,600,000 that the IRS
had previously claimed for 1986.
The Company has filed a protest with respect to the report issued for the tax
years 1987 and 1990. It should be noted, however, that these years, 1987 and
1990, do not contain any tax liability which would have a material adverse
effect on the Company.
On February 2, 1993, the Company filed a Proof of Claim with the RTC. This
Claim was allowed in part and disallowed in part. On the allowed part of the
Claim, the RTC refunded to the Company $1,488,919. This amount, together
with $942,126 in tax refunds received from the IRS, is now on deposit in the
Company attorney's trust account pending resolution of its claims with the
RTC. On April 20, 1994, the Company filed a Complaint in the Federal
District Court in San Francisco against the RTC for the disallowed portion of
its claim. The unresolved claims with the RTC include $2,600,000 claimed by
the State of California, for state income taxes which are allocable to the
Association under the Company's income tax allocation procedures. The RTC is
attempting to resolve this tax claim directly with the State. The Company's
claim against the RTC for taxes and other reimbursements is currently under
settlement negotiations. We believe that this will be amicably settled in
the near future.
Since the Company was the parent company of the Association, it is possible
that the RTC may make claims against the Company for services rendered by the
Association in previous years for the maintenance of accounting records for
the Company, losses incurred by the Association in connection with the
Company's acquisition of the Marina Vista property in San Leandro,
California, and certain stock issuance expenses incurred by the Association
in the exchange of certain debt for its voting preferred stock in August,
1991. The Company has not recorded a liability for any of these potential
claims as it does not believe any of them are valid.
The Company has an agreement to indemnify its directors and officers who
formerly served as directors and/or officers of the Association and its
subsidiaries. If the RTC asserts claims against the former officers and
directors of the Association, the Company may have a potential liability
under the indemnity agreement. The Company maintained a directors and
officers liability insurance policy to cover such potential liabilities. The
Company cannot estimate at this time its liability, if any, under the
indemnity agreement nor can it estimate the extent of its insurance coverage
with respect to such potential claims.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND PART I
RESULTS OF OPERATIONS ITEM 2
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1994, the Company's investment in property held for
development and homes held for sale increased by $2,830,000 from its carrying
value at December 31, 1993. This increase resulted in part (approximately
$1,026,000) from the capitalized expenditures for the ongoing development of
real property located in San Leandro, California (the "Marina Vista
property"), and in part from the joint venture (approximately $1,100,000 as
a secured loan and $704,000 as a direct investment in the venture) to develop
a 160 lot subdivision in Tracy, California (the "Tracy Joint Venture"). At
September 30, 1994, the Marina Vista property has 97 substantially "finished"
lots of which four lots have model homes, six lots are retained as part of
the sales complex, forty four lots (Releases I, II and III) have houses which
have been built out, sold and closed, twenty two lots (Release IV) have homes
upon which construction has commenced (two sold and closed, of the thirteen
which are presold), and twenty one lots (Release V) are held for future
construction. In addition, the Marina Vista property has land for an
additional 152 lots. At September 30, 1994, the Tracy Joint Venture is
working to complete the final engineering on this property which will enhance
the eventual development or sale of the property.
During the nine months ended September 30, 1994, the Company's primary
liquidity needs were to fund expenditures in connection with the Marina Vista
property, the Tracy Joint Venture, and its general and administrative
expenses. The Company met its funding requirements primarily from cash
reserves and from revenues from home sales. The Company also obtained
construction financing from private sources secured by the homes under
construction. The Company's primary source of liquidity in the future will
continue to be from revenues generated from home sales and from construction
financing when deemed appropriate. The Company believes that it will have
sufficient cash available to complete the development and construction of the
Marina Vista property, has the ability to pay off the debt discussed below
when it becomes due, and make its required contributions to the Tracy Joint
Venture.
The Company is the obligor on a $7,500,000 promissory note carried back by
the seller of the Marina Vista property. The required principal payment of
$2,500,000 was made on September 29, 1994. The note requires principal
payments of $2,500,000 by September 29, 1995, and September 29, 1996. The
balance of unpaid principal is payable March 29, 1997. At September 30,
1994, the Company has outstanding construction borrowing of $100,000 and
$2,500,000 with maturity dates of December 2, 1994, and September 29, 1995.
The Company also has previously obtained an $800,000 loan secured by the four
model homes. The loans on the model homes mature on July 1, 1995. The
interest rates on the construction loan and model homes range between prime
plus one and one half percent and 12 percent.
RESULTS OF OPERATIONS
For the quarter ended September 30, 1994, the Company had a net loss of
$134,000, compared to a net income of $492,000 for the same period in 1993.
For the nine months ended September 30, 1994, net income was $138,000,
compared to a net income of $97,000 for the same period in 1993. The net
income for the first nine months of 1994 resulted primarily from home sales
on the Marina Vista property and interest income.
The increase in additional paid-in capital in the nine months ended September
30, 1994, was a result of the recovery of the $2,700,000 advanced to the IRS
by the Company on behalf of the Association, together with $169,000 in
accrued interest. The increase is related to the period prior to the quasi-
reorganization.
The interest income of $26,000 in the third quarter of 1994 and $192,000 for
the nine months in 1994 were attributable to two sources; $111,000 was
received from the IRS relative to the $2,700,000 refund and $81,000 was
attributable to the Company investing its funds in overnight investments
which are collateralized by mortgage-backed certificates and are held on
behalf of the Company by the dealers who arranged the transaction. At
September 30, 1994, such overnight investments, with a weighted average
interest rate of 4.44% and a market value of the underlying collateral of
$1,173,075, totaled $1,150,000.
For the nine months ended September 30, 1994, general and administrative
expenses decreased by $21,000, from those expenses incurred in the same
period in 1993. The decrease resulted from reductions in professional fees
and other administrative expenses. Tax expenses increased due to the payment
of $154,000 in franchise taxes to the State of Delaware. At September 30,
1994, the cost of sales increased by $1,370,000, compared to the same period
in 1993. The increase resulted from the construction of additional homes.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEDURES
Information required by this item is incorporated by reference to
footnote 4 to the notes to the Consolidated Unaudited Financial
Statements included herein and to Item 3 of the Annual Report on
Form 10-KSB for the year ended December 31, 1993 of the Company.
There have been no material developments since the filing of such
report except as to the income tax disclosure described in
footnote 4.
Item 2. CHANGES IN SECURITIES
(a)-(b) On October 28, 1994, the Company amended its Restated
Certificate of Incorporation to (a) reduce the number of authorized
shares of Class A Common Stock, $.01 par value per share, and Class
B Common Stock, $.01 par value per share, to 2,000,000 and
1,000,000, respectively, and (b) eliminate the provisions thereof
authorizing and relating to Preferred Stock.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a)-(d) The stockholder owning a majority of the voting power of
Dover Investments Corporation, a Delaware corporation (the
"corporation"), consented in writing to a resolution approving,
effective as of October 19, 1994, a Restated Certificate of
Incorporation of the corporation which amends the current Restated
Certificate of Incorporation to (a) reduce the number of authorized
shares of Class A Common Stock, $.01 par value per share, and Class
B Common Stock, $.01 par value per share, to 2,000,000 and
1,000,000, respectively, and (b) eliminate the provisions thereof
authorizing and relating to Preferred Stock. Such action was taken
by Mr. Lawrence Weissberg, Chairman of the Board, President and
Chief Executive Officer of the Company (the "Majority
Stockholder"). The Majority Stockholder beneficially owned in the
aggregate 68,521 shares of Class A Common Stock and 245,114 shares
of Class B Common Stock as of the record date for the taking of
such action (September 27, 1994), which shares constituted
approximately 8.6% of the then outstanding Class A Common Stock and
approximately 73.4% of the then outstanding Class B Common Stock.
Accordingly, as of such record date, the Majority Stockholder was
the beneficial owner of approximately 61.0% of the total combined
voting power of the Company. In accordance with Delaware law, the
Company's stockholders were notified of the taking of such action
by written consent.
Item 5. OTHER INFORMATION
The Company's Class A Common Stock and Class B Common Stock are
traded on the National Quotation Bureau pink sheets and on the NASD
OTC Bulletin Board under the symbols DOVR-A and DOVR-B.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Incorporated by reference to Item 13 of the Annual Report on Form
10-KSB for the year ended December 31, 1993 of the Company.
B. Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DOVER INVESTMENTS CORPORATION
Date: November 10, 1994 By: /s/Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board, President
and Chief Executive Officer
