<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
-----------
(Mark
One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the six month period ended June 30, 1996
_____ TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT
For the period of transition from ________ to _______
Commission File No. 0-1322
KNICKERBOCKER VILLAGE, INC.
---------------------------
(exact name of registrant as specified in its Charter)
NEW YORK 13-0924285
- -------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Monroe Street, New York, N.Y. 10002
- ------------------------------------------------ -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 227-0955
Indicate by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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
--- ---
The number of shares outstanding of each of the issuer's classes
of common stock, as the close of the period covered by this
report is 147,464, $2.15 par value.
Total number of sequentially numbered pages - 12
No exhibits filed.
<PAGE>
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEET
AS OF JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1996
-----------
<S> <C>
Assets
------
Current Assets:
Cash $ 47,380
Rents receivable (less allowance for
doubtful accounts of $355,000 in 1996
and $312,000 in 1995) 258,210
Interest and other receivables 16,084
Prepaid expenses and other current assets 1,213,066
Deferred tax asset, net (Note 6) 134,000
-----------
Total Current Assets 1,668,740
-----------
Special Funds and Deposits:
Funds for replacements, painting and
decorating (Notes 3 and 9) 157,905
Tenants' security deposits - contra 633,448
-----------
Total Special Funds and Deposits 791,353
-----------
Fixed Assets, at Cost (Notes 2, 4 and 10)
Land 3,273,281
Buildings and building equipment 13,924,676
----------
17,197,957
Less: Accumulated depreciation 10,421,531
-----------
Net Fixed Assets 6,776,426
-----------
Other Assets 43,178
-----------
TOTAL ASSETS $ 9,279,697
===========
</TABLE>
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at June 30, 1996 and for the related
periods then ended include all adjustments necessary in order to make the
financial statements not misleading.
2
<PAGE>
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEET
AS OF JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996
------------------------------------ ------------
<S> <C>
Current Liabilities
Accounts payable and accrued expenses $ 1,259,261
Unearned rental income 49,747
Dividends payable (Note 5) 19,023
Current portion of long-term debt (Note 4) 162,597
------------
Total Current Liabilities 1,490,628
Tenants' Security Deposits - Contra 633,448
Long-Term Debt, less current portion (Note 4) 5,924,808
------------
Total Liabilities 8,048,884
------------
Commitments and Contingencies (Notes 8 and 9)
Stockholders' Equity:
Limited dividend capital stock,
par value $2.15 per share:
Authorized - 348,837 shares;
issued and outstanding - 147,464 317,048
Retained earnings (Note 5) 913,765
------------
Total Stockholders' Equity 1,230,813
------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 9,279,697
============
</TABLE>
3
<PAGE>
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Rentals (Note 11) $ 4,714,689 $ 4,587,793
Other income 8,196 17,886
----------- -----------
4,722,885 4,605,679
----------- -----------
Expenses:
Wages and related costs 1,064,572 1,078,172
Real estate taxes 396,723 357,930
Utilities 926,905 817,313
Maintenance, repairs and decorating
(Note 10) 576,443 529,314
Depreciation and amortization 214,684 203,749
Mortgage and other interest (Note 4) 316,150 323,380
Management and administrative fee (Note 7) 433,970 421,389
Miscellaneous operating and general
expenses 734,632 749,970
----------- -----------
4,664,079 4,481,217
----------- -----------
Income before income taxes 58,806 124,462
Provision for income taxes
(Note 6) 37,000 39,000
----------- -----------
Net Income 21,806 85,462
Retained earnings at beginning of the
period 891,959 887,308
---------- ----------
Retained earnings at end of the period $ 913,765 $ 972,770
========== ==========
Earnings per share $ 0.15 $ 0.58
========== ==========
</TABLE>
4
<PAGE>
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 21,806 $ 85,462
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 214,684 203,749
Provision for bad debts 43,000 9,000
Changes in assets (increase) decrease:
Rents receivable (47,322) 19,471
Interest and other receivables (4,705) (10,903)
Prepaid expenses and other assets 255,211 272,447
Changes in liabilities increase (decrease):
Accounts payable and accrued expenses (348,979) (318,028)
Unearned rental income 6,881 20,417
--------- ---------
Net cash provided by operating
activities 140,576 281,615
--------- ---------
Cash flows from investing activities:
Interest earned on reserve fund investments (4,632) (4,770)
Capital expenditures (191,943) (184,738)
Contributions of cash from operations
to replacement fund (50,000) (250,000)
Reimbursement of expenditures paid by
housing company from replacement fund 248,060 168,252
Contributions from sale of investments (135,044) 0
Proceeds of investments from replacement
funds 134,613 0
--------- ---------
Net cash provided by (used in) investing
activities 1,054 (271,256)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt (75,424) (68,275)
Payments of bank overdraft (18,826) 0
--------- ---------
Net cash used in financing activities (94,250) (68,275)
--------- ---------
Net increase (decrease) in cash 47,380 (57,916)
Cash at beginning of period 0 65,914
--------- ---------
Cash at end of period $ 47,380 $ 7,998
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the years for:
Interest $ 316,779 $ 323,949
Income taxes 66,322 4,110
</TABLE>
5
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
NOTE 1 - CORPORATE ORGANIZATION
----------------------
Knickerbocker Village, Inc. (the Company), is a public limited
dividend housing company formed, pursuant to the Housing Laws of the
State of New York, on September 5, 1933. The Company is regulated by
the Division of Housing and Community Renewal (DHCR), a New York State
regulatory agency. The Company is located in lower Manhattan and
operates approximately 1,600 rental units ranging in size from studios
through three bedroom apartments. The Company requires one (1) month's
rent as a security deposit on all apartments.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
-------------------------------------------
REVENUE RECOGNITION
-------------------
The Company recognizes revenue in the accounting period that
corresponds to the month for which rental income is billed. Rents
received but not recognized as revenue as of June 30, are recorded as
unearned rental income.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------
Bad debts are provided on the allowance method based on historical
experience and management's evaluation of outstanding rents
receivable.
FIXED ASSETS
------------
Fixed assets consists primarily of building improvements and equipment
and are recorded at cost. Depreciation is provided for financial
statement purposes on the straight-line method, over the estimated
useful lives, of the fixed asset, which range from 5 to 30 years. For
federal income tax purposes, depreciation is provided on the straight-
line and accelerated methods.
Expenditures for maintenance and repairs are charged to operations as
incurred (See Note 9). Upon sale or retirement of property, the cost
and accumulated depreciation are removed from the respective accounts
and any gain or loss is reflected in operations for the year.
Depreciation expense for the periods ended June 30, 1996 and 1995 was
approximately $203,000 and $200,000 respectively.
6
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, continued
-------------------------------------------------------
INCOME TAXES
------------
Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and
liabilities, using enacted tax rates in effect for the year in which
the differences are expected to reverse.
CONCENTRATION OF CREDIT RISK
----------------------------
The Company places its cash and investments for its Replacement Fund
(See Note 3) with a high credit quality institution. At times such
investments may be in excess of FDIC insured limits.
RECLASSIFICATIONS
-----------------
Certain 1995 amounts have been reclassified for purposes of comparison
with the 1996 presentation.
ESTIMATES
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
1. Cash and cash equivalents - The carrying amounts approximate
fair value because of the short maturity of these instruments.
2. Investments - Fair value approximates quoted market value.
3. Receivables - The carrying amount approximates fair value
because of the short maturity of these instruments.
4. Debt - The carrying amounts approximate fair value based on
borrowing rates currently available to the Company for bank loans
with similar terms.
7
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
NOTE 3 - REPLACEMENT, PAINTING AND DECORATING FUNDS
------------------------------------------
Maintenance of these funds is required by the DHCR (See Note 9).
These funds were comprised of the following at June 30, 1996:
1996
----------
Cash $ 58,139
Investments - Treasury Bills 99,766
=========
$ 157,905
=========
NOTE 4 - LONG-TERM DEBT
--------------
Long-term debt represents a mortgage payable to the Greater New York
Savings Bank, collateralized by land, buildings and boiler, due July
1, 1997. Monthly payments inclusive of interest at 10% per annum are
$63,642 and the balance of the principal is due on July 1, 1997.
Principal payments due on this mortgage for the next two years are
approximately $79,000 (1996-six months) and $6,008,000 (1997).
NOTE 5 - DIVIDENDS PAYABLE AND CAPITAL STOCK
-----------------------------------
The holders of the Company's capital stock cannot at any time receive,
in repayment of their investment, any sums in excess of the par value
of the stock together with cumulative dividends at the rate of 6% of
par value per annum (without interest). Any surplus in excess of such
amounts upon dissolution reverts to the public authorities. Cumulative
dividends unpaid to June 30, 1996 amounted to $523,132 or
approximately $3.55 per share. Dividends amounting to $19,023 were
declared during 1979, but were not paid as of June 30, 1996. Such
dividends were approved by the DHCR. No dividends were declared or
paid in 1996 or 1995.
8
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
NOTE 6 - INCOME TAXES
------------
Deferred tax assets are due primarily to the different methods of
depreciation of fixed assets and write-offs for accounts receivable
used for financial reporting and tax reporting purposes. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
Net deferred tax assets in the accompanying balance sheets are as
follows:
June 30, 1996
-------------
Total Deferred Tax Asset $ 487,000
Less: Valuation Allowance 353,000
-------------
Net Deferred Tax Asset $ 134,000
=============
There has been no change in the allowance as of June 30, 1996.
NOTE 7 - MANAGEMENT FEE
--------------
The management fee, set by DHCR, was paid to Cherry Green Property
Corp. (Cherry Green), the owner of approximately 95% of the
outstanding shares of the Registrant. Such fee is reviewed and
adjusted annually effective July 1 of each year, by the DHCR.
On March 8, 1996 the DHCR approved a 2.3% increase in the management
fee effective July 1, 1995.
NOTE 8 - PENSION PLAN
------------
Certain employees of the Company are covered under a union sponsored,
multi-employer defined benefit pension plan. This plan is not
administered by the Company and contributions are determined by the
union. Contributions for this plan were approximately $35,000 and
$22,000 for the six months ended June 30, 1996 and 1995, respectively.
9
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
NOTE 9 - COMMITMENTS AND CONTINGENCIES
-----------------------------
As of June 30, 1996, the Company was in arrears on its contributions
as required by DHCR to its' special fund for replacements, painting
and decorating in the amount of approximately $886,000 (Note 3).
The Company has future commitments for expenditures relating to lead
paint remediation and asbestos abatement of approximately $400,000 for
the years ending December 31, 1996 and 1997. Costs of any additional
expenditures relating to the Company's buildings, if necessary, cannot
be determined at this time. No costs have been accrued in the
financial statements as of June 30, 1996.
NOTE 10 - DEPARTURE FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
-------------------------------------------------------
The Company has a policy of expensing appliances as they are
purchased, rather than capitalizing these fixed assets to conform with
generally accepted accounting principles. Management's experience has
indicated that the normal useful life of such appliances (including
refrigerators and stoves) were considerably shorter. This departure
from generally accepted accounting principles had no effect on net
income (loss) for the six months ended June 30, 1996 and 1995.
NOTE 11 - RENTAL INCOME
-------------
During April, 1996 the Company received a two step rent increase which
was approved by DHCR. The first increase of approximately 5.5% was
effective June 1, 1996 and the second increase of approximately 5.3%
will be effective June 1, 1997.
10
<PAGE>
PART II. OTHER INFORMATION
----------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
KNICKERBOCKER VILLAGE, INC.:
Dated: August 13, 1996 By:S/ROBERT GERSHON
-------------------------
ROBERT GERSHON,
Vice President and Treasurer
Dated: August 13, 1996 By:S/MELVIN GERSHON
------------------------
MELVIN GERSHON,
Secretary
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 47,380
<SECURITIES> 0
<RECEIVABLES> 613,210
<ALLOWANCES> 355,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,668,740
<PP&E> 6,776,426
<DEPRECIATION> 202,031
<TOTAL-ASSETS> 9,279,697
<CURRENT-LIABILITIES> 1,490,628
<BONDS> 5,924,808
0
0
<COMMON> 317,048
<OTHER-SE> 913,765
<TOTAL-LIABILITY-AND-EQUITY> 9,279,697
<SALES> 4,714,689
<TOTAL-REVENUES> 4,722,885
<CGS> 0
<TOTAL-COSTS> 4,664,079
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 316,150
<INCOME-PRETAX> 58,806
<INCOME-TAX> 37,000
<INCOME-CONTINUING> 21,806
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,806
<EPS-PRIMARY> .15
<EPS-DILUTED> 0
</TABLE>
