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 and Exchange
Act of 1934
For the quarterly period ended March 31, 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, 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 April 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
THIS REPORT CONSISTS OF 13 SEQUENTIALLY NUMBERED PAGES.
DOVER INVESTMENTS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Unaudited Balance Sheets
as of March 31, 1994 and December 31, 1993............... 3
Consolidated Unaudited Statements of Operations
for the Three Months Ended March 31, 1994 and 1993....... 4
Consolidated Unaudited Statement of Stockholders'
Equity for the Three Months Ended March 31, 1994......... 5
Consolidated Unaudited Statements of Cash Flows
for the Three Months Ended March 31, 1994 and 1993....... 6
Notes to Consolidated Unaudited 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
March 31, 1994 and December 31, 1993
(in thousands except share amounts)
UNAUDITED
ASSETS 03-31-94 12-31-93
Cash $ 562 $ 1,667
Restricted Cash 283 516
Securities Purchased under
Agreement to Resell 2,500 2,500
Homes Held for Sale 1,410 1,409
Property Held for Development 22,472 19,871
Other Assets 478 1,595
TOTAL ASSETS 27,705 27,558
LIABILITIES AND STOCKHOLDERS' EQUITY
Income Taxes Payable 230 242
Accrued Interest and Other Liabilities 3,687 4,127
Notes Payable 12,005 11,342
TOTAL LIABILITIES 15,922 15,711
STOCKHOLDERS' EQUITY
Class A Common Stock par value, $.01
per share--Authorized 2,000,000 shares;
issued 797,871 at 3/31/94 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 3/31/94 and
333,441 at 12/31/93 3 3
Additional paid-in capital 11,478 11,478
Retained Earnings 294 358
TOTAL STOCKHOLDERS' EQUITY 11,783 11,847
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $27,705 $27,558
See accompanying notes to Consolidated Unaudited Financial Statements.
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(in thousands except share amounts)
Three Months Ended
March 31,
1994 1993
Home Sales $ 379 $ -
Cost of Sales (275) -
Gross Profit 104 -
Selling Expenses (79) (9)
General and Administrative
Expenses (133) (155)
Total Expenses (212) (164)
Other Income
Interest 26 -
Other 22 1
Total Other Income 48 1
Loss before Taxes (60) (163)
Provision for Taxes (4) -
Net Los $ (64) $ (163)
Net Loss Per Share $ (0.06) $ (0.14)
See accompanying notes to Consolidated Unaudited Financial Statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Three Months Ended March 31, 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
Net Loss for Quarter $ - - - (64) (64)
Balance at March 31, 1994 $ 8 $ 3 $11,478 $ 294 $11,783
<FN>
See accompanying notes to Consolidated Unaudited Financial Statements.
</TABLE>
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
For the Three Months ended March 31, 1994 and 1993
(in thousands)
Three Months Ended March 31,
1994 1993
Increase (Decrease) in Cash
Cash Flows from Operating Activities:
Net Loss $ (64) $ (163)
Reconciliation of Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Changes in Assets and Liabilities:
Restricted Cash 233 114
Property Held for Development (2,602) (310)
Homes Held for Sale (1) (1,330)
Other Assets 1,117 (94)
Income Taxes Payable (12) -
Accrued Interest and Other
Liabilities, Net (439) (28)
Net Cash Used in Operating Activities: (1,768) (1,811)
Cash Flows from Financing Activities:
Proceeds from Notes Payable 663 1,000
Net Decrease in Cash (1,105) (811)
Cash at Beginning of Period 1,667 1,362
Cash at End of Period $ 562 $ 551
See accompanying notes to Consolidated Unaudited Financial Statements.
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Unaudited Financial Statements
March 31, 1994
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim consolidated
balance sheets as of March 31, 1994, and December 31, 1993, the related
consolidated statements of operations for the three month periods ended March
31, 1994, and 1993, the consolidated statement of stockholders' equity for
the three months ended March 31, 1994, and the consolidated statements of
cash flows for the three month periods ended March 31, 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 March 31, 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 Board of Directors and the stockholders approved a 1-for-10 reverse stock
split of all shares of the Company's Class A Common Stock and Class B Common
Stock outstanding as of the close of business on May 17, 1993. Each share of
Class A Common Stock outstanding on May 17, 1993, was converted into one-
tenth of a share of Class A Common Stock, and each share of Class B Common
Stock was converted into one-tenth of a share of Class B Common Stock. The
Company paid each stockholder who would have received a fraction of a share
cash equal to the average of the bid and ask prices of a share of the Class
A Common Stock or Class B Common Stock, as applicable, on the OTC Bulletin
Board at the close of business on May 17, 1993, multiplied by the number of
shares resulting in the fractional interest.
On May 19, 1993, Homestead Financial Corporation changed its name to "Dover
Investments Corporation". The name change was approved by the stockholders
of the Company at the 1993 Annual Meeting of Stockholders and became
effective upon the filing of a Certificate of Amendment of the Certificate of
Incorporation of the Company in Delaware on May 19, 1993.
The symbols for the Class A Common Stock and the Class B Common Stock have
been changed to "DOVR-A" and "DOVR-B", respectively, reflecting the name
change.
3. NET LOSS PER SHARE
Net loss per share is computed, on a combined basis, for the two classes of
common stock, Class A and Class B, adjusted for the 1-for-10 reverse stock
split. 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 March 31,
1994, and 1,127,362 at March 31, 1993, adjusted for the 1-for-10 reverse
stock split.
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 has examined the Company's consolidated federal
income tax returns through 1990 and subsequent to March 31, 1994, issued
reports for the years 1985 to 1990. The reports reflect no adjustments that
would have a material adverse effect on the Company. The report for the
years 1985, 1986, 1988 and 1989 still require the approval of the Joint
Congressional Committee on Taxation. The Company intends to file a protest
with respect to the report issued for the years 1987 and 1990. Any
additional income taxes and interest proposed by the reports would be
allocable to the Association under the Company's tax allocation procedures.
In addition, notices of proposed assessments totaling $2,600,000 have been
received for state income taxes which would be allocable to the Association
under the Company's income tax allocation procedures. The placing of the
Association in receivership raises substantial doubt about the Company's
ability to collect from the Association all payments of tax and interest that
the Company may make with respect to the proposed assessments. The
consolidated financial statements do not include provision for all
liabilities that may arise from these tax uncertainties.
The Company has filed a claim with the RTC for approximately $3,169,000 for
receivables due from the Association for taxes and interest and amounts due
to GMC and HISI. The claim also covered unspecified amounts that may arise
from assessments of additional taxes, penalties, and related interest. In
February 1994, the RTC advised the Company that it denied part of the claim.
The Company filed a complaint in federal district court against the RTC to
contest this disallowance and is unable to determine at this time the
ultimate resolution of the claim.
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 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 March 31, 1994, the Company's investment in property held for development
and homes held for sale increased by $2,744,000 from its carrying value at
December 31, 1993. This increase resulted in part (approximately $1,100,000)
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 $550,000 as a direct
investment in the venture) to develop a 160 lot subdivision in Tracy,
California (the "Tracy Joint Venture"). At March 31, 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
(Release I and II) have houses which have been built out, sold and closed,
fourteen lots (Release III) have houses which are substantially complete (10
have been sold and should close in April and May), twenty two lots (Release
IV) have homes upon which construction has just 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 March 31, 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 three months ended March 31, 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,
construction financing secured by the Release III homes under construction,
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 has sufficient cash available to complete the development and
construction of the Marina Vista property and to 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 March 31, 1994, the Company's outstanding construction borrowings
range in amounts from $100,000 to $1,104,523. The loans are secured by 16
lots currently under development and have maturity dates beginning October
16, 1994 through 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 and
model homes range between 7.5 and 11 percent.
RESULTS OF OPERATIONS
For the quarter ended March 31, 1994, the Company had a net loss of $64,000,
compared to a net loss of $163,000 for the same period in 1993. The net loss
for the quarter resulted primarily from the Company having only one completed
home sale and thus insufficient revenue to cover general and administrative
expenses. In the first quarter of 1993, there were no home sales.
The interest income of $26,000 in the first quarter of 1994 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 March 31, 1994, such
overnight investments with a weighted average interest rate of 3.288% and a
market value of the underlying collateral of $2,562,269, totaled $2,500,000.
General and administrative expenses decreased from $154,000 for the first
quarter of 1993 to $133,000 for the 1994 period because of decreased expenses
related to salaries and other administrative expenses.
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.
Ther have been no material developments since the filing of such
report.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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: May 9, 1994 By: /s/Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board, President
and Chief Executive Officer
