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, 1995
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, 1995, were are follows:
Class A Common Stock, $.01 par value 728,619 Shares of Common Stock
Class B Common Stock, $.01 par value 327,338 Shares of Common Stock
Transitional Small Business Disclosure Statement
Yes No X
THIS REPORT CONSISTS OF 12 SEQUENTIALLY NUMBERED PAGES.
DOVER INVESTMENTS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets
as of September 30, 1995 and December 31, 1994........... 3
Consolidated Statements of Operations for the
Three Months and Nine Months Ended September 30, 1995
and 1994................................................. 4
Consolidated Statement of Stockholders'
Equity for the Nine Months Ended September 30, 1995...... 5
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1995 and 1994.... 6
Notes to Consolidated Financial Statements............... 7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operation........................9
PART II. OTHER INFORMATION ................................11
SIGNATURES ....................................................12
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and December 31, 1994
(in thousands except share amounts)
ASSETS 09-30-95 12-31-94
Cash $ 464 $ 381
Restricted Cash 521 92
Securities Purchased under
Agreement to Resell 3,400 2,400
Cash and Securities Held in
Trust Account 1,866 2,500
Homes Held for Sale 1,485 1,291
Property Held for Development 22,150 22,231
Other Assets 1,647 923
TOTAL ASSETS $31,533 $29,818
LIABILITIES AND STOCKHOLDERS' EQUITY
Income Taxes Payable $ 335 $ 230
Accrued Interest and Other Liabilities 3,837 3,576
Notes Payable 7,993 10,400
TOTAL LIABILITIES 12,165 14,206
Minority Interest in Joint Venture 50 297
STOCKHOLDERS' EQUITY
Class A Common Stock par value, $.01
per share--Authorized 2,000,000 shares;
issued 795,020 at 9/30/95 and
795,020 at 12/31/94 8 8
Class B Common Stock par value, $.01
per share--Authorized 1,000,000 shares;
issued 327,338 at 9/30/95 and
327,338 at 12/31/94 3 3
Additional paid-in capital 18,595 14,715
Retained Earnings from January 1, 1993 1,028 606
Treasury Stock (Class A Common Stock
71,400 shares at 9/30/95 and 5,000
shares at 12/31/94) (316) (17)
TOTAL STOCKHOLDERS' EQUITY 19,318 15,315
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $31,533 $29,818
See accompanying notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Home Sales $ 1,507 $ 1,644 $ 4,083 $ 5,929
Cost of Sales (1,104) (1,270) (3,256) (4,487)
Gross Profit 403 374 827 1,442
Selling Expenses (315) (182) (622) (594)
General and Administrative
Expenses 129 (156) (198) (542)
(186) (338) (820) (1,136)
Operating Profit 217 36 7 306
Other Income
Interest 587 26 630 192
Other - - - 22
Total Other Income 587 26 630 214
Income before Taxes 804 62 637 520
Provision for Taxes (215) (196) (215) (382)
Net Income (Loss) $ 589 $ (134) $ 422 $ 138
Net Income (Loss) Per Share $ 0.56 $ (0.12) $ 0.40 $ 0.12
See accompanying notes to Consolidated Financial Statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1995
(in thousands)
<CAPTION>
Additional Treasury
Common Stock Paid-In Retained Stock
Class A Class B Capital Earnings at Cost Total
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $ 8 $ 3 $14,715 $ 606 $ (17) $15,315
Repurchase of 71,400 shares
of Class A Common Stock
at 9/30/95 $ - - - - (299) (299)
Additions to Paid-In Capital $ - - 3,880 - - 3,880
Net Gain $ - - - 422 - 422
Balance at September 30, 1995 $ 8 $ 3 $18,595 $ 1,028 $ (316) $19,318
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, 1995 and 1994
(in thousands)
Nine Months
Ended September 30,
1995 1994
Increase in Cash
Cash Flows from Operating Activities:
Net Income $ 422 $ 138
Reconciliation of Net Income to Net Cash
(Used in) Provided by Operating Activities:
Changes in Assets and Liabilities:
Restricted Cash (429) 384
Property Held for Development 81 (2,827)
Homes Held for Sale (194) (3)
Other Assets (724) 1,118
Income Taxes Payable 105 (14)
Accrued Interest and Other
Liabilities, Net 261 (643)
Net Cash Used in
Operating Activities: (478) (1,847)
Cash Flows from Investment Activities:
Equity of Minority Interest (247) -
Securities (Purchased) Sold Under
Agreement to Resell (1,000) 1,350
Cash and Securities Held in Trust Account 634 (2,431)
Additional Paid-In Capital
Resulting from the Recovery of
Income Taxes and Interest 3,880 2,869
Cash Flows from Financing Activities:
Repayment of Notes Payable (2,407) -
Proceeds from Notes Payable - 658
Treasury Stock (299) (17)
Net Increase in Cash 83 582
Cash at Beginning of Period 381 1,667
Cash at End of Period $ 464 $ 2,249
See accompanying notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1995
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim consolidated
balance sheets as of September 30, 1995, and December 31, 1994, the related
consolidated statements of operations for the three month and nine month
periods ended September 30, 1995 and 1994, the consolidated statements of
stockholders' equity ended September 30, 1995, and cash flows for the nine
month periods ended September 30, 1995 and 1994, 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 1994 Form 10-KSB and the Notes to the Consolidated Financial
Statements, included therein. The results of operations for the three months
and nine months ended September 30, 1995, 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.
The symbols for the Class A Common Stock and the Class B Common Stock are
"DOVR-A" and "DOVR-B", respectively.
2. 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 1,073,484 at September 30, 1995, and 1,118,401 at
September 30, 1994.
3. CONTINGENCIES
The Company, as the parent company of a group of affiliated corporations
filing consolidated Federal income tax returns, was contingently liable for
any liabilities arising with respect to Homestead Savings and Loan
Association (the "Association") from such returns filed for tax years through
August 6, 1991. The Internal Revenue Service ("IRS") has completed
examinations of all such federal income tax returns from 1985 through 1990;
no examination of the 1991 return is anticipated. The resolution of such
examinations involved settlements which were approved by the Congressional
Joint Tax Committee. Pursuant to such settlements, the Company received a
check from the IRS in July 1995, for $3,987,918.66, of which $1,029,660.89
represents interest. Additionally, the Company has been allowed a loss
carryforward (from 1990) of $34,682,841, due to the worthlessness of the
stock of the Association, which occurred in the taxable year ended December
31, 1990.
The Company filed a lawsuit against the Resolution Trust Corporation ("RTC")
in 1994, based on the RTC's disallowance of certain claims made against the
RTC by the Company in its capacity as a creditor of the Association. This
lawsuit has now been settled. Most of the claims made by the Company against
the RTC had to do with the Company's potential liability to the IRS, and to
the Franchise Tax Board of the State of California ("FTB"), for taxes, which
tax claims have now been resolved.
The settlement agreement which has been entered into by the Company and the
RTC settling the Company's lawsuit against the RTC provides: (1) of
approximately $2,500,000 which had been held in a Trust Account, $707,395
plus interest, was to be distributed to the Company (this distribution was
made September 21, 1995); (2) the balance of such Trust Account will be
distributed to the RTC; and (3) the RTC will pay to the FTB certain taxes and
interest attributable to operations of the Association and which total
approximately $1,000,000 plus interest. The remaining distribution from the
Trust Account, under the terms of the settlement, will be made after the RTC
makes its payment to the FTB.
The Company has an agreement to indemnify its directors who formerly served
as directors and/or officers of the Association and its subsidiaries. The
RTC, in a letter dated March 10, 1993, advised the present and former
directors and officers of the Association and its subsidiaries of potential
claims that the RTC may assert against them for the recovery of losses
suffered by the Association and its subsidiaries in connection with certain
specified actions and loan transactions. 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 September 30, 1995, the Company's investment in property held for
development and homes held for sale increased by $113,000 from its carrying
value at December 31, 1994. This increase resulted from the capitalized
expenditures for the ongoing development of real property located in San
Leandro, California (the "Marina Vista property"), and the subdivision in
Tracy, California (the "Tracy Joint Venture").
At September 30, 1995, the Company has completed lot improvements on 97 lots
and is currently constructing lot improvements for an additional 53 lots.
The Company has built 80 homes at Marina Vista and, aside from the four model
homes which are not for sale, all but 8 have been sold and closed. In
addition to the lots which are currently improved or under construction, the
Company has land for an additional 99 lots at Marina Vista. The market for
homes at Marina Vista has been slow and the Company is examining ways to
increase the pace of sales.
The Tracy Joint Venture property has an approved vested tentative subdivision
map for 160 half-acre lots (the Old Map). The engineering has been completed
for the improvements plans and final subdivision map on the first 50 lots
covered by the Old Map. Notwithstanding the Old Map, the Tracy Joint Venture
is proceeding to process applications for a new subdivision map for the
property covered by the Old Map which if approved would subdivide the
property into approximately 390 lots. The Tracy Joint Venture believes that
such a new subdivision of the property would enhance the eventual development
and sale of the property. On October 25, 1995, the Tracy City Planning
Commission (i) approved the application of the Tracy Joint Venture for an
amendment to the Tracy General Plan which would allow a change in the zoning
on the property from Very Low Density Residential ("VLDR"), which permits no
more than two lots to the acre, to Low Density Residential ("LDR"), which
permits up to six lots per acre; (ii) approved the application of the Tracy
Joint Venture for a change in the zoning from VLDR to LDR; and (iii)
recommended to the Tracy City Council that it certify the new Supplemental
Environmental Impact Report on the property which has been completed and is
consistent with a subdivision of the property into 390 lots. The Tracy Joint
Venture is continuing to process the various applications necessary to
complete the entitlement of the property for 390 lots.
During the nine months ended September 30, 1995, 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 Company paid additional
principal payments of $1,500,000 on December 6, 1994, and $1,189,188 on
September 29, 1995, therefore reducing the loan amount to $4,810,000. The
note requires a principal payment of $2,500,000 on September 29, 1996, and
the balance of unpaid principal on March 29, 1997. At September 30, 1995,
the Company has outstanding construction borrowing of $1,279,850 secured by
lots and homes under construction with a maturity date of September 30, 1996.
The Company has also obtained an $802,000 loan secured by the four model
homes. The loan on the model homes matures on June 30, 1998. The interest
rates on the construction loan and model homes range between prime plus one
and one half percent and eleven and one quarter percent.
RESULTS OF OPERATIONS
For the quarter ended September 30, 1995, the Company had a net income of
$589,000, compared to a net loss of $134,000 for the same period in 1994.
For the nine months ended September 30, 1995, net income was $422,000,
compared to a net income of $138,000 for the same period in 1994. The net
income for the first nine months of 1995 resulted from interest income
received pertaining to the IRS tax settlements.
The increase in additional paid-in capital in the nine months ended September
30, 1995, was a result of the recovery of $3,137,000 in tax refunds together
with $629,000 in accrued interest. The increase is related to the period
prior to the quasi-reorganization.
The interest income of $587,000 in the third quarter of 1995 and $630,000 for
the nine months in 1995 were attributable to two sources: $567,000 was
received from the IRS relative to the $3,137,000 tax refund and $63,000 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, 1995, such overnight investments, with an average interest rate
of 5.68% and a market value of the underlying collateral of $3,539,577,
totaled $3,400,000.
For the nine months ended September 30, 1995, general and administrative
expenses decreased by $344,000, from those expenses incurred in the same
period in 1994. The decrease of $325,000 resulted from reimbursement of
professional fees incurred by the Company in connection with the IRS
settlement and preparation and filing of claims against the RTC.
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, 1994 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
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 FINANCIAL DATA SCHEDULE AND REPORTS ON FORM 8-K
A. Exhibits
The exhibit listed below is filed with this report.
27.1 Financial Data Schedule for the Quarter Ended June 30,
1995.
B Reports on Form 8-K
A report on Form 8-K, dated April 28, 1995, reported a tax
settlement with the IRS for tax years 1985 - 1990.
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 7, 1995 By: /s/Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board, President
and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 985
<SECURITIES> 5266
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 23635
<CURRENT-ASSETS> 29886
<PP&E> 1647
<DEPRECIATION> 0
<TOTAL-ASSETS> 31533
<CURRENT-LIABILITIES> 4172
<BONDS> 7993
<COMMON> 11
0
0
<OTHER-SE> 19357
<TOTAL-LIABILITY-AND-EQUITY> 31533
<SALES> 205
<TOTAL-REVENUES> 4713
<CGS> 3878
<TOTAL-COSTS> 3878
<OTHER-EXPENSES> 198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 637
<INCOME-TAX> 215
<INCOME-CONTINUING> 422
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 422
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0
</TABLE>
