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 June 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 July 29, 1994, were as follows:
Class A Common Stock, $.01 par value 797,871 Shares of Common Stock
Class B Common Stock, $.01 par value 329,489 Shares of Common Stock
Transitional Small Business Disclosure Statement
Yes No X
THIS REPORT CONSISTS OF 13 SEQUENTIALLY NUMBERED PAGES.
DOVER INVESTMENTS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets
as of June 30, 1994 and December 31, 1993................ 3
Consolidated Statements of Operations
for the Six Months Ended June 30, 1994 and 1993.......... 4
Consolidated Statement of Stockholders'
Equity for the Six Months Ended June 30, 1994............ 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 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 .....,,,............................................13
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1994 and December 31, 1993
(in thousands except share amounts)
ASSETS 06-30-94 12-31-93
Cash $ 569 $ 1,667
Restricted Cash 285 516
Securities Purchased under
Agreement to Resell 2,200 2,500
Cash and Securities Held in
Trust Account 2,431 -
Homes Held for Sale 1,412 1,409
Property Held for Development 22,040 19,871
Other Assets 507 1,595
TOTAL ASSETS $29,444 $27,558
LIABILITIES AND STOCKHOLDERS' EQUITY
Income Taxes Payable $ 186 $ 242
Accrued Interest and Other Liabilities 3,370 4,127
Notes Payable 10,900 11,342
TOTAL LIABILITIES 14,456 15,711
LIABILITIES AND STOCKHOLDERS' EQUITY
Class A Common Stock par value, $.01
per share--Authorized 2,000,000 shares;
issued 797,871 at 6/30/94 and
793,914 at 12/31/93 8 8
Class B Common Stock par value, $.01
per share--Authorized 1,000,000 shares;
issued 329,489 at 6/30/94 and
333,441 at 12/31/93 3 3
Additional paid-in capital 14,347 11,478
Retained Earnings 630 358
TOTAL STOCKHOLDERS' EQUITY 14,988 11,847
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $29,444 $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 Six Months Ended
June 30, June 30,
1994 1993 1994 1993
Home Sales $ 3,906 $ 278 $ 4,285 $ 278
Cost of Sales (2,942) (217) (3,217) (217)
Gross Profit 964 61 1,068 61
Selling Expenses (333) (33) (412) (42)
General and Administrative
Expenses (253) (259) (386) (413)
(586) (292) (798) (455)
Operating Profit (Loss) 378 (231) 270 (394)
Other Income
Interest 140 1 166 -
Other - - 22 1
Total Other Income 140 1 188 1
Income (Loss) before Taxes 518 (230) 458 (393)
Provision for Taxes (182) (2) (186) (2)
Net Income (Loss) $ 336 $ (232) $ 272 $ (395)
Net Income (Loss) Per Share $ 0.30 $ (0.20) $ 0.24 $ (0.35)
See accompanying notes to Consolidated Financial Statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 1994
(in thousands)
<CAPTION>
Additional
Common Stock Paid-In Retained
Class A Class B Capital Earnings Total
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $ 8 $ 3 $11,478 $ 358 $11,847
Additions to Paid-In Capital $ - - 2,869 - 2,869
Net Income $ - - - 272 272
Balance at June 30, 1994 $ 8 $ 3 $14,347 $ 630 $14,988
See accompanying notes to Consolidated Financial Statements.
</TABLE>
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months ended June 30, 1994 and 1993
(in thousands)
Six Months Ended June 30,
1994 1993
Increase (Decrease) in Cash
Cash Flows from Operating Activities:
Net Income (Loss) $ 272 $ (395)
Reconciliation of Net Income (Loss) to Net Cash
Used in Operating Activities:
Changes in Assets and Liabilities:
Restricted Cash 231 544
Property Held for Development (2,169) (2,481)
Homes Held for Sale (3) (1,387)
Other Assets 1,088 (162)
Income Taxes Payable (56) -
Accrued Interest and Other
Liabilities, Net 2,112 863
Net Cash Used in Operating Activities: 1,475 (3,018)
Cash Flows from Investment Activities:
Securities Sold under Agreement
to Resell 300 -
Cash and Securities Held in Trust Account (2,431) -
Cash Flows from Financing Activities:
Proceeds from (Repayment of) Notes Payable (442) 2,917
Net Decrease in Cash (1,098) (101)
Cash at Beginning of Period 1,667 1,362
Cash at End of Period $ 569 $ 1,261
See accompanying notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1994
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim consolidated
balance sheets as of June 30, 1994, and December 31, 1993, the related
consolidated statements of operations for the three and six month periods
ended June 30, 1994 and 1993, and the consolidated statements of
stockholders' equity and cash flows for the six month periods ended June 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 June 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 1,127,360 at June 30, 1994, and 1,127,376 at June 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 tax liability for the Association for these
years, including, but not limited to, the $8,600,000 previously reported.
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.
In February 1993 the Company filed a claim with the RTC in Federal District
Court for approximately $3,169,000 for receivables due from the Association
for taxes and interest due to the Franchise Tax Board (the "FTB"). Notices
of proposed assessments totaling $2,600,000 have been received for state
income taxes which are allocable to the Association under the Company's
income tax allocation procedures.
Our claim against the RTC for taxes and other reimbursements is currently
under settlement negotiations between our attorneys and the attorneys for the
RTC. The Company has received approximately $2,400,000 from the RTC which
has been placed in a trust account which will be disbursed upon settlement of
our claim. Upon final settlement, these monies will be disbursed in
accordance with the agreement of the parties. We believe that this matter
will be amicably settled in the near future. We have been informed that the
RTC and the FTB are directly negotiating a resolution of the Association's
state income tax liability.
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 June 30, 1994, the Company's investment in property held for development
and homes held for sale increased by $2,172,000 from its carrying value at
December 31, 1993. This increase resulted in part (approximately $635,000)
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 Company's investment in a joint venture (approximately
$1,100,000 as a secured loan to the venture and $437,000 as a direct
investment in the venture) to develop a 160 lot subdivision in Tracy,
California (the "Tracy Joint Venture"). At June 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, thirty lots
(Releases I and II) have houses which have been built out, sold and closed,
fourteen lots (Release III) have houses which are complete (12 have been sold
and closed), twenty two lots (Release IV) have homes upon which construction
has commenced (seven 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 June 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 six months ended June 30, 1994, the Company's primary liquidity
need was 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'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 $10,000,000 promissory note carried back by
the seller of the Marina Vista property. The note requires principal
payments of $2,500,000 by September 29, 1994; September 29, 1995; and
September 29, 1996. The balance of unpaid principal is payable March 29,
1997. At June 30, 1994, the Company has outstanding construction borrowing
of $100,000 with a maturity date of December 2, 1994. 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 11 and 12 percent.
RESULTS OF OPERATIONS
For the quarter ended June 30, 1994, the Company had a net income of
$336,000, compared to a net loss of $232,000 for the same period in 1993.
For the six months ended June 30, 1994, net income was $272,000, compared to
a net loss of $395,000 for the same period in 1993. The net income for the
quarter and the first six 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 six months ended June 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 $140,000 in the second quarter of 1994 was
attributable to two sources. The $111,000 was received from the IRS relative
to the $2,700,000 refund and $29,000 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 June 30, 1994, such overnight
investments with a weighted average interest rate of 3.85% and a market value
of the underlying collateral of $2,262,208, totaled $2,200,000.
For the quarter and six months ended June 30, 1994, general and
administrative expenses decreased $6,000 and $27,000, respectively, from
those expenses incurred in the same period in 1993. The decrease resulted
from reductions in salary and administrative expenses. At June 30, 1994, the
cost of sales increased by $3,000,000, compared to the same period in 1993.
The increase resulted from the construction of 40 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
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 16, 1994, the Company held its annual meeting of
stockholders for the purpose of electing directors and ratifying
the appointment of the Company's auditors. All of the Company's
nominees were elected directors as follows: Arnold Addison,
558,178 votes for and 4,593 votes withheld; Michael Raddie, 558,718
votes for and 4,003 votes withheld; Larry Freels, 2,914,244 votes
for and 4,950 votes withheld; John Gilbert, 2,914,244 votes for and
4,950 votes withheld; Lawrence Weissberg, 2,914,124 votes for and
5,070 votes withheld; and Will C. Wood, 2,914,244 votes for and
4,950 votes withheld. The proposal to ratify the appointment of
Grant Thornton as the Company's independent public accountant for
the year ended December 31, 1993 was approved with 3,468,637 votes
for, 7,400 votes against and 5,883 votes abstaining.
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: August 9, 1994 By: /s/Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board, President
and Chief Executive Officer
