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, 1998
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.)
100 Spear Street, Suite 520, San Francisco, CA 94105
(Address of Principal Executive Offices)
(415) 777-0414
(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, 1998 were as follows:
Class A Common Stock, $.01 par value 746,302 Shares of Common Stock
Class B Common Stock, $.01 par value 316,079 Shares of Common Stock
Transitional Small Business Disclosure Statement
Yes No X
THIS REPORT CONSISTS OF 11 SEQUENTIALLY NUMBERED PAGES.
DOVER INVESTMENTS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets
as of September 30, 1998 and December 31, 1997.........................3
Consolidated Statements of Operations for the Three
Months and Nine Months Ended September 30, 1998 and 1997.............. 4
Consolidated Statement of Stockholders'
Equity for the Nine Months Ended September 30, 1998................... 5
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1998 and 1997................. 6
Notes to Consolidated Financial Statements............................ 7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operation.....................................8
PART II. OTHER INFORMATION ...............................................10
SIGNATURES ................................................................11
DOVER INVESTMENTS CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997
(in thousands except share amounts)
09-30-98 12-31-97
ASSETS
Cash $ 1,721 $ 2,660
Restricted Cash 1,430 1,416
Homes Held for Sale 2,210 1,290
Property Held for Development 25,054 20,610
Notes Receivable 1,543 1,028
Other Assets 1,805 2,105
TOTAL ASSETS $33,763 $29,109
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued Interest and Other Liabilities 1,778 1,373
Notes Payable 9,687 7,063
Minority Interest in Joint Venture 192 226
TOTAL LIABILITIES 11,657 8,662
STOCKHOLDERS' EQUITY
Class A Common Stock Par Value,
$.01 Per Share -- Authorized
2,000,000 Shares; Issued 806,368
at 9/30/98 and 804,927 at 12/31/97 8 8
Class B Common Stock Par Value,
$.01 Per Share -- Authorized
1,000,000 Shares; Issued 320,639
at 9/30/98 and 322,427 at 12/31/97 3 3
Additional Paid-In Capital 20,237 19,810
Retained Earnings from January 1, 1993 2,195 1,272
Treasury Stock (60,066 at 9/30/98
and 119,316 at 12/31/97 of Class A
Shares and 4,560 of Class B Shares (337) (646)
TOTAL STOCKHOLDERS' EQUITY 22,106 20,447
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $33,763 $29,109
See accompanying notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Home Sales $ 5,045 $ 7,020 $10,312 $11,890
Lot Sal - 1,949 4,596 1,949
Total Sales 5,045 8,969 14,908 13,839
Cost of Home Sales (4,099) (6,168) (8,427) (10,520)
Cost of Lot Sales - (1,321) (3,702) (1,321)
Total Cost of Sales (4,099) (7,489) (12,129) (11,841)
Minority Interest in Joint Venture ( 1) (6) ( 9) (6)
Gross Profit 945 1,474 2,770 1,992
Selling Expenses (519) (408) (801) (789)
General and Administrative
Expenses (168) (155) (489) (465)
(687) (563) (1,290) (1,254)
Operating Income 258 911 1,480 738
Other Income
Interest 48 30 125 66
Fees - 34 32 34
Total Other Income 48 64 157 100
Income before Taxes 306 975 1,637 838
Provision for Income Taxes (182) (388) (714) (337)
Net Income $ 124 587 $ 923 $ 501
Basic Earnings Per Share $ 0.12 $ 0.59 $ 0.89 $ 0.50
Diluted Earnings Per Share $ 0.08 $ 0.82
See accompanying notes to Consolidated Financial Statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1998
(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, 1998 $ 8 $ 3 $19,810 $1,272 $ (646) $20,447
Re-issuance of Treasury
Stock $ - - 17 - 309 326
Realization of Prequasi-
reorganization Net
Operating Loss Tax benefits $ - - 410 - - 410
Net Income $ - - - 923 - 923
Balance at
September 30, 1998 $ 8 $ 3 $20,237 $2,195 $(337) $22,106
<FN>
See accompanying notes to Consolidated Financial Statements.
</TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months ended September 30, 1998 and 1997
(in thousands)
Nine Months
Ended September 30,
1998 1997
Cash Flows from Operating Activities:
Net Income $ 923 $ 501
Reconciliation of Net Income to Net Cash
Used in Operating Activities:
Minority Interest (34) 97
Deferred Income Taxes - (9)
Tax Benefit of Utilizing Prequasi-
reorganization Net Operating Losses 410 325
Changes in Assets and Liabilities:
Restricted Cash (14) (2,357)
Property Held for Development (5,364) 671
Other Assets (215) (1,262)
Accrued Interest and Other Liabilities 405 451
Net Cash Used in Operating Activities (3,889) (1,583)
Cash Flows from Investment Activities:
Proceeds from Securities Sold under
Agreement to Resell - 1,400
Net Cash Provided by Investing Activities - 1,400
Cash Flows from Financing Activities:
Proceeds from Notes Payable 2,624 150
Re-issuance of Treasury Stock 326 199
Net Cash Provided by Financing Activities 2,950 349
Net Increase (Decrease) in Cash (939) 166
Cash at Beginning of Period 2,660 1,438
Cash at End of Period $ 1,721 $ 1,604
See accompanying notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
Notes to Consolidated Financial Statements
September 30, 1998
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim consolidated
balance sheets as of September 30, 1998, and December 31, 1997, the related
consolidated statements of operations for the three month and nine month
periods ended September 30, 1998 and 1997, and the consolidated statements of
stockholders' equity for the nine months period ended September 30, 1998, and
cash flows for the nine month periods ended September 30, 1998 and 1997,
reflect all adjustments (consisting of normal recurring accruals and
elimination of significant inter-company transactions and balances) necessary
for a fair presentation of Dover Investments Corporation ("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 1997 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, 1998, are not necessarily indicative of
the results which may be expected for the entire year.
The symbols for the Class A Common Stock and the Class B Common Stock are
"DOVR-A" and "DOVR-B", respectively.
2. NET INCOME PER SHARE
Basic income 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 basic income
per share was 1,042,697 at September 30, 1998, and 990,913 at September 30,
1997. Diluted income per share took into consideration the outstanding stock
options.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND PART I
RESULTS OF OPERATIONS ITEM 2
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company's investment in property held for
development and homes held for sale increased by $5,364,000 from its carrying
value at December 31, 1997. This increase resulted primarily from 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 "Glenbriar Joint Venture"). At September 30, 1998,
the Company has completed lot improvements at Marina Vista on two hundred and
forty nine lots. Of the two hundred and forty nine lots, ten are part of a
model complex, one hundred and eighty three have been built, sold and closed,
twenty five are under construction and have contracts of sale.
The Company continues to be part of a Glenbriar Joint Venture (the "GJV")
with Westco Community Builders, Inc. ("Westco") in Tracy, California which
originally owned one hundred and eight acres of land comprising a portion
of the Glenbriar Estates Project. During 1996, the Company formed a limited
liability company with Westco, known as Glenbriar Venture #2 which holds
options to purchase approximately one hundred and thirty one additional acres
of land also comprising a portion of the Glenbriar Estates Project. GJV and
Glenbriar Venture #2 have succeeded in rezoning the Glenbriar Estates property
to Low Density Residential and have obtained the approval of new tentative
subdivision maps which provide for approximately three hundred and eighty two
lots on the GJV property and approximately five hundred lots on the Glenbriar
Venture #2 property. The tentative subdivision maps provide for four lot
types ranging in size from 6,000 square feet to one acre in size. In 1997,
GJV completed rough grading of the entire GJV property and has installed
the principal off tract and "backbone" improvements. GJV has obtained final
subdivision maps covering one hundred and eighty of the 6,000 square foot
lots (units 5, 6 & 7), and eighty two of the 7,200 square foot lots (units
1 & 2) and 38 lots which are approximately 10,000 square feet or larger
(unit 3). Units 5 & 6 were sold in an "unfinished" state to an unrelated
merchant builder. This builder has sold houses on all of the lots in
units 5 & 6. GJV had also granted this builder an option to purchase an
additional eighty eight lots (unit 7) in an "unfinished" state, and the
builder has exercised the option and the sale has closed. GJV currently has
one other final subdivision map on file with the City of Tracy pending
approval covering forty six lots (unit 4). GJV intends to sell these lots
to a related entity, the Tracy Residential Venture Partners, LLC, in order
to develop these lots by construction of single family homes for sale to the
public. Additional subdivision maps will be submitted for approval as the
market will permit. Glenbriar Venture #2 currently has one final subdivision
map for one hundred and twenty three lots (unit 8) on file with the City of
Tracy pending approval.
During 1997, the Company entered into agreements with Westco whereby Westco
would construct and sell higher priced custom single family homes in the
Silicon Valley Region of California. The profits from these homes will
be split between the partners upon sale. The properties have been purchased
and construction has commenced.
The Company formed a limited liability company with Westco, known as the Tracy
Residential Venture Partners, LLC (the "TRVP") for the purpose of building
and selling single family homes on eighty two 7,200 square foot lots in Units
1 & 2. Model homes have been completed. TRVP has also started construction
on seventy homes, of which all seventy are under contracts of sale.
During the nine months ended September 30, 1998, 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 and from
revenues from home and lot 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, lot 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, as well as pay off the debt discussed below when it
becomes due, and make its required contributions to the Glenbriar Joint
Ventures.
At September 30, 1998, the Company borrowed a total of $9,687,000 to pay
for home construction costs. The loans are secured by lots and homes under
construction and will be paid from the proceeds of home and lot sales.
The loans bear interest at the rate of prime plus 1.25 percent and prime plus
1.50 percent per annum and mature on December 31, 1998 and September 29,
1999. The Company also obtained an $802,000 loan secured by four model
homes. The loan bears interest at the rate of 11.25 percent per annum and
matures on June 30, 1999.
RESULTS OF OPERATIONS
For the quarter ended September 30, 1998, the Company had net income of
$124,000, compared to $587,000 for the same period in 1997. For the nine
months ended September 30, 1998, net income was $923,000, compared to
$501,000 for the same period in 1997. Total sales for the nine months ended
September 30, 1998, were $14,908,000, resulting in a gross profit of
$2,770,000, compared to $13,839,000 in sales and a gross profit of $1,992,000
for the same period in 1997.
The Company expects that the Marina Vista project and the Glenbriar Joint
Ventures will provide a profit from the sale of homes and lots. Factors such
as interest rates and general economic conditions influence the prices at
which the Company is able to sell homes. In order to maintain its market
share of new home sales, the Company keeps home prices competitive with other
builders of a similar product in the vicinity of the property.
Interest income in the third quarter of 1998 increased to $48,000, compared
to $30,000 in 1997, due to higher cash balances from increased sales and
notes receivable.
For the nine months ended September 30, 1998, general and administrative
expenses increased by $24,000, from those expenses incurred in the same
period in 1997. The expense increase resulted primarily from an increase in
payroll and administrative expenses. At September 30, 1998, home and lot
sales increased by $1,069,000, the cost of sales increased by $288,000,
compared to the same period in 1997. The increase resulted from the sale
and construction of a larger number of homes and lot sales.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEDURES
None
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
The exhibits listed below is filed with this report.
27.1 Financial Data Schedule for the Quarter Ended September 30, 1998.
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 2, 1998 By: /s/Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board, President
and Chief Executive Officer
