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, 1996
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 September 30, 1996 were as follows:
Class A Common Stock, $.01 par value 650,049 Shares of Common Stock
Class B Common Stock, $.01 par value 318,297 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, 1996 and December 31, 1995. . . . . . . . . .3
Consolidated Statements of Operations for the Three
Months and Nine Months Ended September 30, 1996 and 1995. . . . 4
Consolidated Statement of Stockholders'
Equity for the Nine Months Ended September 30, 1996 . . . . . . .5
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1996 and 1995 . . . . . .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, 1996 and December 31, 1995
(in thousands except share amounts)
09-30-96 12-31-95
ASSETS
Cash $ 350 $ 639
Restricted Cash 294 464
Securities Purchased under Agreement to Resell - 2,300
Homes Held for Sale 1,322 1,263
Property Held for Development 22,879 22,745
Other Assets 755 709
TOTAL ASSETS $25,600 $28,120
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued Interest and Other Liabilities 755 466
Notes Payable 5,749 8,020
Minority Interest in Joint Venture 111 51
TOTAL LIABILITIES 6,615 8,537
STOCKHOLDERS' EQUITY
Class A Common Stock Par Value, $.01 Per Share --
Authorized 2,000,000 shares; Issued 804,499 at
9/30/96 and 801,778 at 12/31/95 8 8
Class B Common Stock Par Value, $.01 Per Share --
Authorized 1,000,000 shares; Issued 322,857 at
9/30/96 and 325,578 at 12/31/95 3 3
Additional Paid-in Capital 19,184 19,185
Retained Earnings from January 1, 1993 620 1,058
Treasury Stock (154,450 in 1996 and 129,450 in 1995 of
Class A Shares and 4,560 of Class B Shares) (830) (671)
TOTAL STOCKHOLDERS' EQUITY 18,985 19,583
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $25,600 $28,120
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,
1996 1995 1996 1995
Home Sales $ 2,719 $ 1,507 $ 5,165 $ 4,083
Cost of Sales (2,390) (1,104) (4,750) (3,256)
Gross Profit 329 403 415 827
Selling Expenses (252) (315) (551) (622)
General and Administrative
Expenses (142) 129 (408) (198)
(394) (186) (959) (820)
Operating (Loss) Profit (65) 217 (544) 7
Other Income
Interest 21 587 106 630
Total Other Income 21 587 106 630
(Loss) Income before Taxes (44) 804 (438) 637
Provision for Taxes - (215) - (215)
Net (Loss) Income $ (44) $ 589 $ (438) $ 422
Net (Loss) Income Per Share $ (0.05) $ 0.56 $ (0.45) $ 0.40
See accompanying notes to Consolidated Financial Statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1996
(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, 1996 $ 8 $ 3 $19,185 $ 1,058 $ (671) $19,583
Stock Option Exercise $ - - (1) - 2 1
Repurchase of Class A Common
Stock $ - - - - (161) (161)
Net Loss $ - - - (438) - (438)
Balance at September 30, 1996 $ 8 $ $19,184 $ 620 $ (830) $18,985
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, 1996 and 1995
(In thousands)
Nine Months
Ended September 30,
1996 1995
Cash Flows from Operating Activities:
Net (Loss) Income $ (438) $ 422
Reconciliation of Net (Loss) Income to Net Cash
Used in Operating Activities:
Minority Interest 60 (247)
Changes in Assets and Liabilities:
Restricted Cash 170 (429)
Property Held for Development (193) (113)
Other Assets (46) (724)
Accrued Interest and Other Liabilities, Net 288 261
Income Taxes Payable - 105
Net Cash Used in Operating Activities (159) (725)
Cash Flows from Investment Activities:
Proceeds from Securities sold under
Agreement to Resell 2,300 (1,000)
Cash and Securities Held in Trust Account - 634
Additional Paid-In Capital Resulting from
the Recovery of Income Taxes and Interest - 3,880
Net Cash Provided by Investing Activities 2,300 3,514
Cash Flows from Financing Activities:
Repayments of Notes Payable (2,271) (2,407)
Purchase of Common Stock (159) (299)
Net Cash Used in Financing Activities (2,430) (2,706)
Net (Decrease) Increase in Cash (289) 83
Cash at Beginning of Period 639 381
Cash at End of Period $ 350 $ 464
See accompanying notes to Consolidated Financial Statements<PAGE>
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1996
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim consolidated
balance sheets as of September 30, 1996, and December 31, 1995, the related
consolidated statements of operations for the three month and nine month periods
ended September 30, 1996 and 1995, and the consolidated statements of stock-
holders' equity ended September 30, 1996, and cash flows for the nine month
periods ended September 30, 1996 and 1995, reflect all adjustments (consist-
ing of normal recurring accruals and elimination of significant intercompany
transactions and balances) necessary for a fair presentation of Dover Invest-
ments Corporation ("the Company").
The Company elected to wind up and dissolve its wholly-owned subsidiary, H.F.
Properties, Ltd., and its wholly-owned subsidiary, GIC Investments Corpora-
tion, effective February 16, 1996. All remaining assets have been distri-
buted to the Company as the sole shareholder.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance withgenerally 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 1995 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, 1996, 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 968,346 at September 30, 1996, and 1,073,484 at Septem-
ber 30, 1995.
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, a Federal 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 exam-
inations involved settlements which were approved by the Congressional Joint
Tax Committee. Pursuant to such settlements, the Company received
$3,987,918.66 from the IRS in July 1995, $1,029,660.89 of which represents
interest. Additionally, the Company has been allowed a loss carry forward
from 1990 of $37,853,056, due to the worthlessness of the stock of the As-
sociation, 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. A Final Judgment was entered on January 18, 1996. Most of
the claims made by the Company against the RTC had to do with the Company's
potential tax liability to the IRS and the Franchise Tax Board of the State of
California ("FTB"). All tax claims have now been resolved.
The result of the above is that the contingent liabilities for taxes and/or RTC
matters as described above have been satisfied in full.
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 Associa-
tion and its subsidiaries in connection with certain specified actions and
loan transactions. No action has been taken by the RTC on this matter for
quite some time and the RTC went out of existence on December 31, 1995.
Counsel to the Company have advised the Company that in light of these
circumstances and the likelihood of the expiration of the statute of
limitation, they do not see any prospect of material liability to the RTC.
Consequently, the Company has not provided for any further contingencies on
these matters.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND PART I
RESULTS OF OPERATIONS ITEM 2
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company's investment in property held for develop-
ment and homes held for sale increased $193,000 from its carrying value at Dec-
ember 31, 1995. 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 located in Tracy, California
(the "Tracy Joint Venture"). At September 30, 1996, the Company has improved
150 lots, and has built 106 houses at the Marina Vista property. Aside from
five model homes, which are not for sale, all of the houses have been sold.
The company will commence construction in October on an additional 16 houses.
The Marina Vista property has land for an additional 127 lots.
The Glenbriar Joint Venture property located in Tracy was rezoned and has pre-
liminary development approval for 395 lots and a tentative map for 120 of those
lots was submitted to the Tracy Planning Commission. The Glenbriar Joint
Venture is proceeding to complete the city finance plan and related map. The
Glenbriar Venture #2 has zoning and preliminary development approval for appro-
ximately 470 lots. The final development plan was submitted to the Tracy Plan-
ning Commission for approval. The Company anticipates developing and selling
lots in both the Glenbriar Joint Venture property and the Glenbriar #2
property.
During the three months ended September 30, 1996, the Company used its liquidity
to fund expenditures in connection with the Marina Vista property, the Tracy
Joint Ventures, and its general and administrative expenses. The Company met
its funding requirements primarily from cash reserves. The Company also ob-
tained 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, lot sales, and from
construction financing when deemed appropriate. The Company believes that it
will have sufficient cash available to complete the development and construc-
tion of the Marina Vista property, it will have the ability to pay off the
debt discussed below when it becomes due, and make its required contributions
to the Tracy Joint Ventures.
The Company is the obligor on a $2,500,000 promissory note carried back by the
seller of the Marina Vista property. The Company made the required principal
payment of $2,310,814 on September 30, 1996 therefore reducing the loan amount
to $2,500,000. The note requires a final principal payment of $2,500,000 on
March 29, 1997. At September 30, 1996, the Company has outstanding construc-
tion borrowing of $1,346.850 secured by lots and homes under construction with
a maturity date of September 30, 1997. The Company also has previously obtained
an $802,000 loan secured by the four model homes. The loans on the model homes
mature on September 30, 1998. The interest rates on the construction loan and
model homes are prime plus one and one half percent and eleven and one quarter
percent, respectively.
RESULTS OF OPERATIONS
For the quarter ended September 30, 1996, the Company had a net loss of $44,000,
compared to a net income of $589,000 for the same period in 1995. For the
nine months ended September 30, 1996, net loss was $438,000 compared to a net
income of 422,000 for the same period in 1995. Total sales for the nine months
ended September 30, 1996, were $5,165,000, resulting in a gross profit of
$415,000, compared to $4,083,000 in sales and a gross profit of $827,000 for
the same period in 1995.
The real estate market for new homes in the San Francisco Bay Area is highly
competitive. Factors such as interest rates and general economic conditions
influence the prices at which the Company is able to sell homes at Marina
Vista. The Company noted a slowing in the real estate market during 1995 and
therefore adjusted the prices to remain competitive in the market environment
resulting in reduced profit margins.. Sales have picked up substantially
during the last few months. Of the 25 homes currently under construction,
all have been sold, 9 have been closed.
The interest income of $21,000 in the second quarter of 1996 and $106,000 for
the nine months in 1996 were 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, 1996, such overnight investments
were liquidated.
For the nine months ended September 30, 1996, general and administrative
expenses increased by $210,000, from those expenses incurred in the same
period in 1995. The apparent increase is due to the fact that the 1995
administrative expenses were reduced due to reimbursements of professional fees
received by the Company in connection with the IRS settlement and claims against
the RTC. At September 30, 1996, the cost of sales increased by $1,494,000,
compared to the same period in 1995.
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, 1995 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 3.
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
September 30, 1996.
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 under-
signed, thereunto duly authorized.
DOVER INVESTMENTS CORPORATION
Date: October 24, 1996 By: /s/Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board, President
and Chief Executive Officer
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
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<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 24201
<CURRENT-ASSETS> 24845
<PP&E> 755
<DEPRECIATION> 0
<TOTAL-ASSETS> 25600
<CURRENT-LIABILITIES> 755
<BONDS> 5749
0
0
<COMMON> 11
<OTHER-SE> 19085
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<CGS> 5301
<TOTAL-COSTS> 5301
<OTHER-EXPENSES> 408
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (438)
<INCOME-TAX> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (438)
<EPS-PRIMARY> (0.45)
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</TABLE>
