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, 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 July 31, 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 June 30, 1996 and December 31, 1995............................ 3
Consolidated Statements of Operations for the Three
Months and Six Months Ended June 30, 1996 and 1995................... 4
Consolidated Statement of Stockholders'
Equity for the Six Months Ended June 30, 1996........................ 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 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
June 30, 1996 and December 31, 1995
(in thousands except share amounts)
06-30-96 12-31-95
ASSETS
Cash $ 217 $ 639
Restricted Cash 301 464
Securities Purchased under Agreement to Resell 1,200 2,300
Homes Held for Sale 1,275 1,263
Property Held for Development 22,617 22,745
Other Assets 1,175 709
TOTAL ASSETS $26,785 $28,120
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued Interest and Other Liabilities 639 466
Notes Payable 7,020 8,020
TOTAL LIABILITIES 7,659 8,486
Minority Interest in Joint Venture 97 51
STOCKHOLDERS' EQUITY
Class A Common Stock Par Value, $.01 Per Share --
Authorized 2,000,000 shares; Issued 804,499 at
6/30/96 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
6/30/96 and 325,578 at 12/31/95 3 3
Additional Paid-in Capital 19,184 19,185
Retained Earnings from January 1, 1993 664 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 19,029 19,583
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,78 $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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Home Sales $ - $ 1,568 $ 2,446 $ 2,575
Cost of Sales - (1,333) (2,360) (2,152)
Gross Profit - 235 86 423
Selling Expenses (66) (174) (299) (307)
General and Administrative
Expenses (121) (159) (266) (327)
(187) (333) (565) (634)
Operating Loss (187) (98) (479) (211)
Other Income
Interest 37 14 85 43
Other - - - -
Total Other Income 37 14 85 43
Loss before Taxes (150) (84) (394) (168)
Provision for Taxes - - - -
Net Loss $ (150) $ (84) $ (394) $ (168)
Net Loss Per Share $ (0.15) $ (0.08) $ (0.41) $ (0.15)
See accompanying notes to Consolidated Financial Statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 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 $ - - - (394) - (394)
Balance at June 30, 1996 $ 8 $ 3 $19,184 $ 664 $ (830) $19,029
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, 1996 and 1995
(in thousands)
Six Months
Ended June 30,
1996 1995
Cash Flows from Operating Activities:
Net Loss $ (394) $ (168)
Reconciliation of Net Loss to Net Cash
Used in Operating Activities:
Minority Interest 46 -
Changes in Assets and Liabilities:
Restricted Cash 163 5
Property Held for Development 116 (512)
Other Assets (466) (849)
Accrued Interest and Other Liabilities, Net 173 917
Net Cash Used in Operating Activities (362) (607)
Cash Flows from Investment Activities:
Proceeds from Securities Sold under Agreement to Resell 1,100 1,900
Net Cash Provided by Investing Activities 1,100 1,900
Cash Flows from Financing Activities:
Repayments of Notes Payable (1,000) (978)
Stock Option Exercise 1 -
Purchase of Common Stock (161) (105)
Net Cash Used in Financing Activities (1,160) (1,083)
Net (Decrease) Increase in Cash (422) 210
Cash at Beginning of Period 639 381
Cash at End of Period $ 217 $ 591
See accompanying notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1996
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim consolidated
balance sheets as of June 30, 1996, and December 31, 1995, the related
consolidated statements of operations for the three month and six month
periods ended June 30, 1996 and 1995, and the consolidated statements of
stockholders' equity ended June 30, 1996, and cash flows for the six month
periods ended June 30, 1996 and 1995, 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 ("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
Corporation, effective February 16, 1996. All remaining assets have been
distributed to the Company as the sole shareholder.
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 1995 Form 10-KSB and the Notes to the Consolidated Financial
Statements, included therein. The results of operations for the three months
and six months ended June 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 975,119 at June 30, 1996, and 1,113,558 at June 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
examinations 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 carryforward from
1990 of $37,853,056, 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. 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 liability to the IRS and the Franchise Tax Board of
the State of California ("FTB"), for taxes which 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 Association 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 June 30, 1996, the Company's investment in property held for development
and homes held for sale decreased by $128,000 from its carrying value at
December 31, 1995. This decrease resulted primarily from the sale of homes
and a reduction of 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 June 30, 1996, the Company has improved 150 lots, and has built
105 houses at the Marina Vista property. Aside from four model homes, which
are not for sale, all but 4 of the houses have been sold. The Company will
commence construction on an additional 14 houses. In addition, the Marina
Vista property has land for an additional 144 lots.
The Glenbriar Joint Venture property located in Tracy was rezoned and has
preliminary 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
approximately 470 lots. The final development plan was submitted to the Tracy
Planning 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 June 30, 1996, the Company used its liquidity 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. 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 $4,810,814 promissory note carried back by the
seller of the Marina Vista property. 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 June 30, 1996, the Company has outstanding construction
borrowing of $306,850 secured by lots and homes under construction with a
maturity date of September 30, 1996. The Company also has previously obtained
an $802,000 loan secured by the four model homes. The loans on the model
homes mature on June 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 June 30, 1996, the Company had a net loss of $150,000,
compared to a net loss of $84,000 for the same period in 1995. For the six
months ended June 30, 1996, net loss was $394,000, compared to a net loss of
$168,000 for the same period in 1995. Total sales for the six months ended
June 30, 1996, were $2,446,000, resulting in a gross profit of $86,000,
compared to $2,575,000 in sales and a gross profit of $423,000 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 has noted a slowing in the real estate market during 1995
and has therefore adjusted the prices to remain competitive in the current
market environment. Sales picked up substantially during the last few months.
Of the 25 homes currently under construction, all but 4 of the houses have
been sold but have not closed.
The interest income of $37,000 in the second quarter of 1996 and $85,000 for
the six 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 June 30, 1996, such overnight investments, with an average
interest rate of 5.19% and a market value of the underlying collateral of
$1,230,181, totaled $1,200,000.
For the six months ended June 30, 1996, general and administrative expenses
decreased by $61,000, from those expenses incurred in the same period in 1995.
The decrease resulted from reductions in professional fees and other
administrative expenses. At June 30, 1996, the cost of sales increased by
$208,000, 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
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 exhibits listed below is filed with this report.
27.1 Financial Data Schedule for the Quarter Ended June 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
undersigned, thereunto duly authorized.
DOVER INVESTMENTS CORPORATION
Date: August 9, 1996 By: /s/Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board, President
and Chief Executive Officer
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<PERIOD-END> JUN-30-1996
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<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 23892
<CURRENT-ASSETS> 25610
<PP&E> 1175
<DEPRECIATION> 0
<TOTAL-ASSETS> 26785
<CURRENT-LIABILITIES> 639
<BONDS> 7020
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<OTHER-SE> 19115
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