<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
-----------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 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 incorporation (I.R.S. Employer
or organization) Identification No.)
10 Monroe Street, New York, New York 10002
- --------------------------------------------- ------------------------
(Address of principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code: (212) 227-0955
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- -----------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Limited Dividend Capital Stock, Par Value $2.15
- --------------------------------------------------------------------------------
(Title of class)
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B and will not be contained to the best of Registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form
10-KSB __________.
Check 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 periods that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes X No
---- ----
<PAGE>
State Registrant's revenues for its most recent fiscal year: $9,345,599
----------
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant as of February 28, 1995. Approximately $16,000 which is based
on par value of the voting stock. No active trading market exists for the
Registrant's Capital Stock.
Indicate the number of shares outstanding of each of the Issuer's classes
of Common Stock, as of February 28, 1995.
Capital Stock, $2.15 par value - 147,464 Shares
DOCUMENTS INCORPORATED BY REFERENCE - NONE
Transitional Small Business Disclosure Format:
Yes No X
---- ----
2
<PAGE>
KNICKERBOCKER VILLAGE, INC.
INDEX TO FORM 10-KSB - PARTS I - IV
-----------------------------------
PAGE NO.
--------
PART I -
Item 1. DESCRIPTION OF BUSINESS.................................. 5-7
Item 2. DESCRIPTION OF PROPERTIES................................ 7-8
Item 3. LEGAL PROCEEDINGS........................................ 9
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS...................................... 9
PART II -
Item 5. MARKET FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...................................... 9
Item 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION............................ 9-10
Item 7 FINANCIAL STATEMENTS..................................... 11
Item 8 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE..................................... 11
PART III -
Item 9. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH 16(a) OF
THE EXCHANGE ACT......................................... 12-13
3
<PAGE>
PAGE NO.
--------
Item 10. EXECUTIVE COMPENSATION................................... 13
Item 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT............................................... 14-15
Item 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS..................................... 5
PART IV -
Item 13. EXHIBITS AND REPORTS ON
FORM 8-K................................................. 15
Exhibit Index.......................................................... 17
Exhibit 10.1 - Contract for Managing Agent Extension Agreement, dated as of
July 1, 1995, by and between Knickerbocker Village, Inc. and Cherry Green
Property Corp. and approved by the New York State Division of Housing and
Community Renewal on March 8, 1996..................................... 18
4
<PAGE>
PART I
------
ITEM 1 DESCRIPTION OF BUSINESS
- ------ -----------------------
The Registrant is a "limited dividend housing corporation" created and
formed under the New York Private Housing Law on September 5, 1933.
The Registrant owns a housing development located at the corners of
Monroe, Market, Catherine and Cherry Streets in Manhattan, New York.
The properties are managed by Cherry Green Property Corp., the
Managing Agent, subject to the supervision of the New York State
Division of Housing and Community Renewal ("DHCR"), which must approve
all rent increases and contracts in excess of $10,000. (See "Item 12-
Certain Relationships and Related Transactions"). Dividends to
stockholders are limited to six percent (6.0%) of par value on a
cumulative basis. The Registrant has not paid any dividends since
1968. As a result, the cumulative dividends unpaid through December
31, 1995, amounted to $513,620 or approximately $3.48 per share. (See
Note 5 of Notes to Financial Statements). No dividends were declared
or paid during 1995 or 1994. In the event of liquidation,
stockholders cannot receive more than the cumulative unpaid dividends,
plus the amount of their original investment. Any surplus in excess
of such amounts reverts to public authorities.
The Registrant's properties are managed by Cherry Green Property
Corp., pursuant to a Management Contract approved by the DHCR. Cherry
Green Property Corp. is the record and beneficial owner of
approximately ninety-five percent (95.0%) of the Registrant's
outstanding shares. During 1995, the Registrant paid Cherry Green
Property Corp. a management fee approved by the DHCR in the amount of
$876,183 compared to $917,452 paid in 1994. (See Note 7 of Notes to
Financial Statements.) The Registrant employs fifty-two (52) persons.
In 1993, the Registrant received a two-step rent increase. The first
increase of approximately 5.3% was effective November 1, 1993 and the
second increase of approximately 5.0% was effective November 1, 1994.
Accordingly, base residential rental income increased by approximately
$341,000 over 1994 amounts. Operating expenses for 1995 increased by
approximately $354,000 (four percent (4.0%)) over 1994 amounts due to
increases in miscellaneous operating and general expenses, real estate
taxes, utilities and maintenance, repairs and decorating expenses
offset by decreases in management fees and wages and related costs.
Maintenance, repairs and decorating expenses increased primarily due
to the costs of a terrace and stair replacement projects and plumbing,
in 1995
5
<PAGE>
compared to 1994. Miscellaneous operating and general expenses
increased primarily due to additional security guard services.
Utilities increased in 1995 compared to 1994, due to an increase in
Con Edison rates. Real estate taxes increased due to tax rate
increases.
The decrease in wages and related costs in 1995, resulted from less
snow removal costs than in 1994. Management and administrative fees
decreased due to a management agent award of approximately $70,000
granted in 1994.
During the year ended December 31, 1985, effective for the year ending
December 31, 1983, the Registrant changed its accounting policy by
expensing appliances as purchased, rather than capitalizing such
costs. This policy change was effective as of January 1, 1983, and
resulted in a decrease in the Registrant's net income for the year
ended December 31, 1995 of $8,000 and had no effect on the
Registrant's net income for the year ended December 31, 1994. (See
Note 9 of Notes to Financial Statements.)
The Registrant showed net income of approximately $5,000 from
operations in 1995 compared to $93,000 from operations for 1994.
However, had the Registrant not received a one time gain of
approximately $90,000 upon the sale of all of its stock in an
insurance company, the Registrant's 1994 net income would have been
minimal.
The Registrant had working capital of approximately $24,000 and
$180,000 as of December 31, 1995 and 1994, respectively. This
decrease is due, in part, to increased funding to the Registrant's
capital improvement and repair fund. The Registrant, on June 12,
1987, received a $7,000,000 mortgage with interest at ten percent
(10%) per annum from The Greater New York Savings Bank, which has a
remaining principal balance of approximately $6,163,000 at December
31, 1995. Monthly payments in 1995, inclusive of interest were
approximately $64,000. The mortgage has been approved by the DHCR.
Principal payments due on the mortgage for the next two (2) years are
approximately: $155,000 (1996); and $6,008,000 due by July 1, 1997.
The Mortgage may not be prepaid in whole or in part during the first,
second, sixth and seventh years of the Mortgage. The Registrant may
prepay the entire principal balance in the third, fourth, fifth,
eighth, ninth and tenth years subject to the payment of a premium for
the privilege of so prepaying as follows:
(i) 3.0% of the outstanding principal balance if prepaid during the
third or eighth years;
(ii) 2.0% of the outstanding principal balance if prepaid during the
fourth or ninth years;
6
<PAGE>
(iii) 1.0% of the outstanding balance during the first 10 months of
the 10th year. There is no prepayment penalty during the last 2
months of the 10th year.
ITEM 2 DESCRIPTION OF PROPERTIES
- ------ -------------------------
The Registrant's property consists of twelve (12) apartment buildings,
each of which is twelve (12) stories high, constructed in 1934 at
Monroe and Catherine Streets in New York City and consisting of
approximately 6,000 rooms in approximately 1,600 apartments with
commercial stores on the ground floor of some of the buildings. The
Registrant believes that such premises are in satisfactory condition
and are suitable for use as residential dwellings and commercial
units, as applicable. The buildings, land and boiler are subject to a
mortgage in the principal amount of approximately $6,163,000 owing at
December 31, 1995. (See Item 1 above and Note 4 to Financial
Statements.)
Management believes that the Registrant's properties are adequately
covered by insurance.
The Registrant's residential properties have an occupancy rate of
approximately ninety-nine (99%) percent. No tenant occupies ten (10%)
percent or more of the rentable square footage of the properties. The
Registrant's properties are principally used for rental of residential
apartments for low to middle income families. The average effective
annual rental per room is $117.00. The average apartment is three and
one-half (3 1/2) rooms. Annual revenues from residential leases was
approximately $8,617,000 for the year ended December 31, 1995.
Residential leases are generally renewed. Total annual rentals on
sixteen (16) commercial leases for the year ended December 31, 1995
was approximately $293,000.
7
<PAGE>
The Registrant's estimated replacement, repairs and renovation budget
and status of projects for 1996 and 1997 is as follows:
1996 PROJECTS APPROXIMATE COST
------------- ----------------
Appliance Replacement $ 60,000.00
Mailbox Replacement 150,000.00
Terrace/Waterproofing 100,000.00
Lead Paint Abatement 200,000.00
Playground Feasibility Study 15,000.00
Consulting Fees 50,000.00
-----------
TOTAL: $575,000.00
1997 PROJECTS APPROXIMATE COST
------------- ----------------
Appliance Replacement $ 60,000.00
Emergency Lighting 97,000.00
Terrace/Waterproofing 100,000.00
Lead Paint Abatement 100,000.00
Smoke Detectors/Stairways 108,000.00
Water Distribution 100,000.00
Asbestos Abatement 100,000.00
-----------
TOTAL: $665,000.00
The above estimates are for informational purposes only, and the
actual costs of such projects may differ. The cost of these projects are funded
from operations, and the money is deposited in an escrow account which is
supposed to be funded monthly in an amount of approximately $58,000. However,
the Registrant was in arrears in its monthly funding in an amount of
approximately $575,000 for the year ended December 31, 1995. (See Notes 3 and 8
to Financial Statements.)
8
<PAGE>
In 1995, the Registrant obtained an asbestos report of its properties
at an approximate cost, including fees and expenses of $22,000 and
expended approximately $13,000 on asbestos abatement. The DHCR and
the Registrant have reviewed this report and have budgeted
approximately $100,000 for asbestos abatement for the years ended
December 31, 1996 and 1997. The costs of additional abatement, if
necessary, at the Registrant's properties in excess of the aforesaid
amount can not be determined at this time.
The Registrant has budgeted approximately $300,000 for the years ended
December 31, 1996 and 1997, for lead paint remediation at the
Registrant's properties. Although lead paint may be present in other
areas of the Registrant's properties, the cost of additional
encapsulation can not be determined at this time.
ITEM 3 LEGAL PROCEEDINGS
- ------ -----------------
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
- ------ -----------------------------------------------------
None.
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON
- ------ ----------------------------------
EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------
The Company's Limited Dividend Capital Stock, par value $2.15
("Capital Stock"), is traded over-the-counter. No established trading
market exists with respect to such stock since approximately 140,242
shares (approximately 95%) of the 147,464 shares outstanding are owned
by Cherry Green Property Corp. Since 1971, no bid and asked prices
have been reported by the National Quotation Bureau, Inc.
No dividends have been paid since 1968. The holders of Capital Stock
cannot, at any time, receive repayment of their investment in excess
of the par value of the stock, together with cumulative unpaid
dividends at the rate of 6.0% of par value ($2.15 per share) per annum
(without interest). Dividends amounting to $19,023 were declared
during 1979, but were not paid as of December 31, 1995. No dividends
were declared or paid in 1995. Cumulative dividends unpaid as of
December 31, 1995 and December 31, 1994 amounted to $513,620 and
$494,597 (approximately $3.48 and $3.35 per share), respectively.
(See Note 5 of Notes to Financial Statements.)
9
<PAGE>
There are approximately 540 holders of record of the Registrant's
Capital Stock as of March 1, 1996.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------ ------------------------------------
OR PLAN OF OPERATIONS
---------------------
a) Liquidity - As of December 31, 1995, the Registrant had working
capital of approximately $24,000. At December 31, 1994, the
Registrant had working capital of approximately $180,000. This
decrease is due, in part, to increased funding by the Registrant
to its capital improvement and repair fund. (See Item 6 (b)
below.) As at December 31, 1995, the Registrant was in arrears
on its required contributions to its special fund for
replacements, painting and decorating in the amount of
approximately $575,000. The Registrant received a two-step rent
increase, effective November 1, 1993, which was approved by the
DHCR. A rent increase of 5.3% was effective as of November 1,
1993 and the second increase of approximately 5.0% was effective
November 1, 1994. In March of 1996, the Registrant's application
for a rent increase was heard by the DHCR and the decision of the
DHCR, which is expected by June 1, 1996 will greatly effect the
Registrant's liquidity. In addition, the Registrant's mortgage
will become due in July 1997 and the ability of the Registrant to
re-finance on beneficial terms will also effect its future
liquidity. (See Item 1 above and (c) below and Note 10 to
Financial Statements, page F-11).
b) Capital Resources - The Registrant has set aside funds for
capital improvements and repairs amounting to $350,901 and
$556,393 as of December 31, 1995 and 1994 (see Note 3 to
Financial Statements, page F-9). The Registrant's capital
project's budget is set forth in Item 2 above.
c) Results of Operations -
In 1994, the Registrant received a two-step rent increase. The
first increase of approximately 5.3% was effective November 1,
1993 and the second increase of approximately 5.0% was effective
November 1, 1994. Accordingly, base residential rental income
increased by approximately $341,000 over 1994 amounts. Operating
expenses for 1995 increased by approximately $354,000 (four
percent (4.0%)) over 1994 amounts due to increases in
miscellaneous operating and general expenses, real estate taxes,
utilities and maintenance, repairs and decorating expenses offset
by decreases in management fees and wages and related costs.
10
<PAGE>
Maintenance, repairs and decorating expenses increased primarily
due to the costs of a terrace replacement and stair repair
projects and plumbing expenses in 1995 compared to 1994.
Miscellaneous operating and general expenses increased primarily
due to additional security guard services. Utilities increased in
1995 compared to 1994, due to an increase in Con Edison rates.
Real estate taxes increased due to tax rate increases.
The decrease in wages and related costs resulted from reduced
snow removal costs in 1995 compared to 1994. Management and
administrative fees decreased due to a management agent award of
approximately $70,000 granted in 1994.
During the year ended December 31, 1985, effective for the year
ending December 31, 1983, the Registrant changed its accounting
policy by expensing appliances as purchased, rather than
capitalizing such costs. This policy change was effective as of
January 1, 1983, and resulted in a decrease in the Registrant's
net income for the year ended December 31, 1995 of approximately
$8,000 and had no effect on net income for the year ended
December 31, 1994. (See Note 9 of Notes to Financial Statements.)
The Registrant showed net income of approximately $5,000 from
operations in 1995 compared to $93,000 from operations for 1994.
However, had the Registrant not received a one time gain of
approximately $90,000 upon the sale of all of its stock in an
insurance company, the Registrant's 1994 net income would have
been minimal.
ITEM 7 FINANCIAL STATEMENTS
- ------ --------------------
Information required by this Item is attached to this Report as pages
F-1 through F-11 following Part IV, Item 13.
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- ------ ---------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------
None.
11
<PAGE>
PART III
--------
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
- ------ -------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------
<TABLE>
<CAPTION>
Position with Held Principal
Name Age Registrant Since Occupation
- ---- --- -------------- ----- ----------
<S> <C> <C> <C> <C>
Irene Pletka (1) 54 President and 1977 Commercial Photographer
Director
Peter Pletka (1) 58 Vice President 1992 Physician
Howard Kestenberg 39 Director and 1992 Real Estate Entrepreneur
Vice President
Robert Gershon (2) 59 Director, Vice 1977 Principal in the firm of
President and Carl Gershon & Co., a
Treasurer Real Estate Brokerage.
Melvin Gershon (2) 53 Director and 1977 Principal in the firm of
Secretary Carl Gershon & Co.
Ray Knight 45 Director 1993 Housing Management
Representative, New York
State Division of Housing
and Community Renewal.
</TABLE>
__________________________________________________
(1) Peter Pletka and Irene Pletka are husband and wife.
(2) Melvin Gershon and Robert Gershon are brothers.
The respective terms of the officers and directors of the Registrant will
continue until the next Annual Meeting of Shareholders or until their
successors have been elected and qualified in accordance with the
Registrant's By-laws.
12
<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act of 1934
--------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and executive officers, and
persons who own more than ten percent (10%) of a registered class of
the Company's equity securities, to file with the Securities and
Exchange Commission ("SEC") and the American Stock Exchange, initial
reports of ownership and reports of changes in ownership of common
stock and other equity securities of the Company. Officers, directors
and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a)
forms they file.
Cherry Green Property Corp. has made all requisite filings of Form 5
required to be filed under 16(a) of the Exchange Act relating to the
Registrant during the two (2) fiscal years ended December 31, 1995 and
1994, respectively.
ITEM 10 EXECUTIVE COMPENSATION
- ------- ----------------------
During the year ended December 31, 1995, no officer or director of the
Registrant received any compensation from the Registrant for his or
her services. The Registrant did not grant or award stock options,
stock appreciation rights or long-term incentive plans to any of its
executive officers in the last fiscal year. The Registrant does not
presently maintain a pension plan or other retirement plan for its
named executive officers.
The housing complex owned by the Registrant is managed by Cherry Green
Property Corp. pursuant to a contract approved by the DHCR. Cherry
Green was granted an increase its management fee of 2.3%, effective
July 1, 1995, pursuant to a Contract for Managing Agents Extension
Agreement, approved by the DHCR on March 8, 1996. (See Exhibit 10.1
annexed hereto.) Cherry Green Property Corp. owns over 95.0% of the
Registrant's Capital Stock. Several officers and directors of Cherry
Green Property Corp. are officers and directors of the Registrant.
During 1995, the Registrant paid Cherry Green Property Corp. a
management and administrative fee of $876,000. Such fee was approved
by the DHCR. Management and administrative fees decreased in 1995
compared to 1994 due to a management agent award of approximately
$70,000 granted in 1994. (See Items 1 and 11 and Note 7 of Notes to
Financial Statements.)
13
<PAGE>
ITEM 11 SECURITY OWNERSHIP OF CERTAIN
- ------- -----------------------------
BENEFICIAL OWNERS AND MANAGEMENT.
---------------------------------
(a) Security Ownership of Certain Beneficial Owners. Following is a
list of those persons known by the Registrant to be the
beneficial owners of more than 5% of the outstanding Capital
Stock of the Registrant as of December 31, 1995:
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of
Title of Class of Beneficial Owner of Beneficial Ownership Class
- ------------------- ------------------- ----------------------- ------
<S> <C> <C> <C>
Limited Dividend Cherry Green 140,242 Shares of 95%
Capital Stock, Property Corp. Record and Beneficial
(par value $2.15) 11 Monroe Street Ownership
New York, NY
</TABLE>
(b) Security Ownership of Management
As of December 31, 1995, no Directors or Officers owned any
shares of the Registrant's Limited Dividend Capital Stock, $2.15
par value. However, the following Officers and Directors of the
Registrant own of record and beneficially that percentage of
Common Stock of Cherry Green Property Corp. as set forth below:
<TABLE>
<CAPTION>
Percent Owned of Cherry
Name Position with Registrant Green Property Corp.
- -------------------- --------------------------- -----------------------
<S> <C> <C>
Irene Pletka (1) Director and President 53.3
Peter Pletka (1) Vice President 53.3
Howard Kestenberg Director and Vice President 18.3
Robert Gershon (2) Director, Vice President 9.6
and Treasurer
Melvin Gershon (2) Director and Secretary 6.3
</TABLE>
- ---------------
(1) Such shares of Cherry Green Property Corp. are owned collectively
by Mr. and Mrs. Pletka.
(2) Robert Gershon and Melvin Gershon are brothers.
14
<PAGE>
(c) Change in control.
There are no known arrangements, the application of which may at
a subsequent date result in a change in control of the
Registrant.
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The Registrant is managed by Cherry Green Property Corp., the owner of
over 95% of the Registrant's outstanding Capital Stock. Several
officers and directors of the Registrant are shareholders, officers
and directors of Cherry Green Property Corp. (See Item 11 herein).
During 1995, the Registrant paid Cherry Green Property Corp. a
management and administrative fee of $876,183. Such fee was approved
by the DHCR pursuant to a contract, effective November 1, 1994, and as
amended, effective July 1, 1995. (See Exhibit 10.1 annexed hereto)
(See Note 7 of Notes to Financial Statements).
PART IV
-------
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) The list of Financial Statements and Notes required by Item 7 and
by Item 13(a) are set forth on pages F-1 through F-11 attached
hereto.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
10.1 - Contract for Managing Agent Extension Agreement, dated as
of July 1, 1995, by and between Knickerbocker Village, Inc. and
Cherry Green Property Corp. and approved by the New York State
Division of Housing and Community Renewal on March 8, 1996.
15
<PAGE>
KNICKERBOCKER VILLAGE, INC.
---------------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Independent Accountants Report F-2
Balance Sheets F-3 to F-4
Statements of Income and Retained Earnings,
Years Ended December 31, 1995 and 1994 F-5
Statements of Cash Flows,
Years Ended December 31, 1995 and 1994 F-6
Notes to Financial Statements F-7 to F-11
F-1
<PAGE>
HELD KRANZLER & COMPANY
257 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10010
(212) 533-2727
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Knickerbocker Village, Inc.
10 Monroe Street
New York, New York 10002
We have audited the accompanying balance sheets of Knickerbocker Village, Inc.,
as of December 31, 1995 and 1994, and the related statements of income and
retained earnings and cash flows for each of the years in the two-year period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As more fully described in Note 9 to the financial statements, the Company has
excluded from fixed assets in the accompanying balance sheets the acquisition of
appliances that, in our opinion, should be included to conform with generally
accepted accounting principles which require that appliances be capitalized and
depreciated over their estimated useful lives. If those acquisitions of
appliances were accounted for in accordance with generally accepted accounting
principles, fixed assets, net of depreciation would be increased by $110,000 and
$100,000 and retained earnings by $110,000 and $100,000 as of December 31, 1995
and 1994, and net income would be increased by $8,000 for the year ended
December 31, 1995. There would be no effect on net income for the year ended
December 31, 1994.
In our opinion, except for the effects of not including the appliances in fixed
assets as discussed in the preceding paragraph, the financial statements
referred to above present fairly, in all material respects, the financial
position of Knickerbocker Village, Inc., as of December 31, 1995 and 1994, and
the results of its operations and its cash flows for each of the years in the
two-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
March 8, 1996 HELD KRANZLER & COMPANY
F-2
<PAGE>
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
Assets
------
<S> <C> <C>
Current Assets:
Cash $ 0 $ 65,914
Rents receivable (less allowance for
doubtful accounts of $312,000 in 1995
and $240,000 in 1994) 253,888 180,914
Interest and other receivables 11,379 96,912
Prepaid expenses and other current assets 1,468,277 1,569,530
Deferred tax asset, net (Note 6) 134,000 0
----------- -----------
Total Current Assets 1,867,544 1,913,270
----------- -----------
Special Funds and Deposits:
Funds for replacements, painting and
decorating (Notes 3 and 8) 350,901 556,393
Tenants' security deposits - contra 628,582 582,270
----------- -----------
Total Special Funds and Deposits 979,483 1,138,663
----------- -----------
Fixed Assets, at Cost (Notes 2, 4 and 9)
Land 3,273,281 3,273,281
Buildings and building equipment 13,732,733 13,130,246
----------- -----------
17,006,014 16,403,527
Less: Accumulated depreciation 10,219,499 9,836,204
----------- -----------
Net Fixed Assets 6,786,515 6,567,323
----------- -----------
Other Assets 55,831 64,313
----------- -----------
TOTAL ASSETS $ 9,689,373 $ 9,683,569
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ------------------------------------ ----------- -----------
<S> <C> <C>
Current Liabilities
Accounts payable and accrued expenses $1,608,240 $1,530,626
Unearned rental income 42,866 44,429
Dividends payable (Note 5) 19,023 19,023
Current portion of long-term debt (Note 4) 154,699 140,035
Bank Overdraft 18,826 0
---------- ----------
Total Current Liabilities 1,843,654 1,734,113
Tenants' Security Deposits - Contra 628,582 582,270
Long-Term Debt, less current portion (Note 4) 6,008,130 6,162,830
---------- ----------
Total Liabilities 8,480,366 8,479,213
---------- ----------
Commitments and Contingencies (Note 8)
Stockholders' Equity:
Limited dividend capital stock,
par value $2.15 per share:
Authorized - 348,837 shares;
issued and outstanding - 147,464 317,048 317,048
Retained earnings (Note 5) 891,959 887,308
---------- ----------
Total Stockholders' Equity 1,209,007 1,204,356
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $9,689,373 $9,683,569
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Revenues:
Rentals (Note 10) $9,307,966 $8,967,414
Other income 37,633 125,912
---------- ----------
9,345,599 9,093,326
---------- ----------
Expenses:
Wages and related costs 2,162,234 2,181,469
Real estate taxes 754,653 720,944
Utilities 1,772,728 1,665,016
Maintenance, repairs and decorating
(Note 9) 1,189,759 998,939
Depreciation and amortization 391,778 386,141
Mortgage and other interest (Note 4) 638,146 652,266
Management and administrative fee (Note 7) 876,183 917,452
Provision for doubtful accounts 83,298 125,000
Miscellaneous operating and general
expenses 1,471,467 1,339,042
---------- ----------
9,340,246 8,986,269
---------- ----------
Income before income taxes 5,353 107,057
Provision for city income taxes (Note 6) 702 14,000
---------- ----------
Net Income 4,651 93,057
Retained earnings at beginning of the
year 887,308 794,251
---------- ----------
Retained earnings at end of the year $ 891,959 $ 887,308
========== ==========
Earnings per share $ 0.03 $ 0.63
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 4,651 $ 93,057
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 391,778 386,141
Provision for bad debts 72,000 125,000
Changes in assets (increase) decrease:
Rents receivable (144,974) (80,658)
Interest and other assets 85,532 (86,448)
Prepaid expenses (32,747) (35,987)
Changes in liabilities increase (decrease):
Accounts payable and accrued expenses 77,614 216,475
Unearned rental income (1,563) 17,388
--------- ---------
Net cash provided by operating activities 452,291 634,968
--------- ---------
Cash flows from investing activities:
Capital expenditures (602,487) (271,020)
Contributions of cash from operations
to replacement fund (366,666) (540,000)
Reimbursement of expenditures paid by
housing company from replacement fund 394,534 477,214
Purchase of investments for replacement
funds (327,392) (389,956)
Proceeds of investments for replacement
funds 505,016 241,861
--------- ---------
Net cash used in investing activities (396,995) (481,901)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt (140,036) (126,761)
Bank overdraft 18,826 0
--------- ---------
Net cash used in financing activities (121,210) (126,761)
--------- ---------
Net increase in cash (65,914) 26,306
Cash at beginning of year 65,914 39,608
--------- ---------
Cash at end of year $ 0 $ 65,914
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the years for:
Interest $ 639,313 $ 653,323
Income taxes 4,567 53,754
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
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 December 31, 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 years ended December 31, 1995 and 1994 was
approximately $383,000 and 377,700, respectively.
F-7
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
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.
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.
F-8
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 3 - REPLACEMENT, PAINTING AND DECORATING FUNDS
------------------------------------------
Maintenance of these funds is required by the DHCR (See Note 8).
These funds were comprised of the following at December 31:
1995 1994
--------- ---------
Cash $ 118,054 $ 166,437
Investments - Treasury Bills 232,847 389,956
--------- ---------
$ 350,901 $ 556,393
========= =========
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 $155,000 (1996) 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 December 31, 1995 amounted to $513,620 or
approximately $3.48 per share and unpaid to December 31, 1994 amounted
amounting to $19,023 were declared during 1979, but were not paid as of
December 31, 1995. Such dividends were approved by the DHCR. No
dividends were to $494,597 or approximately $3.35 per share. Dividends
declared or paid in 1995 or 1994.
F-9
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 6 - INCOME TAXES
------------
Total federal income tax expense for the year ended December 31, 1995
and the amount of income tax expense that would result from applying
statutory tax rates to pretax income are different due to the
realization of deferred tax assets. The differences in total federal
income tax expense for the year ended December 31, 1994 and the amount
of income tax that would result from applying statutory tax rates to
pretax income are due to the utilization of $87,000 of net operating
loss carryforward that reduced the Company's current federal income tax
liability.
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:
December 31, 1995
-----------------
Total Deferred Tax Asset $ 506,000
Less: Valuation Allowance 372,000
----------
Net Deferred Tax Asset $ 134,000
==========
There was no valuation allowance as of December 31, 1994.
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. As such, this increase has been accrued in
the financial statements as of December 31, 1995.
F-10
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 8 - COMMITMENTS AND CONTINGENCIES
-----------------------------
As of December 31, 1995, 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
$575,000 (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 December 31, 1995.
NOTE 9 - 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
indicated that the normal useful life of such appliances (including
refrigerators and stoves) were considerably shorter. This departure
from generally accepted accounting principles resulted in a decrease in
the Company's net income of approximately $8,000 for the year ended
accepted accounting principles. Management's experience has December
31, 1995 and had no effect on net income for the year ended December
31, 1994.
NOTE 10 - RENTAL INCOME
-------------
Effective November 1, 1993, the Company received a two step rent
increase which was approved by DHCR. The first increase of
approximately 5.3% was effective November 1, 1993 and the second
increase of approximately 5.0% was effective November 1, 1994.
F-11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
(Registrant): KNICKERBOCKER VILLAGE, INC.:
- -----------------------------------------------------------------
By (Signature and Title) :S/ROBERT GERSHON
- ------------------------------------------------------------------
ROBERT GERSHON, Director and Treasurer
Dated: March 26, 1996
- ----------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
(Signature and Title) :S/IRENE PLETKA
- -------------------------------------------------------------------
IRENE PLETKA, Director and President
Dated: March 26, 1996
- ----------------------
(Signature and Title) :S/PETER PLETKA
- -------------------------------------------------------------------
PETER PLETKA, Vice President
Dated: March 26, 1996
- -----------------------
(Signature and Title) :S/MELVIN GERSHON
- -------------------------------------------------------------------
MELVIN GERSHON, Director and Secretary
Dated: March 26, 1996
- -----------------------
<PAGE>
EXHIBIT INDEX
Exhibit 10.1 - Contract for Managing Agent Extension Agreement, dated as of
July 1, 1995, by and between Knickerbocker Village, Inc. and Cherry Green
Property Corp. and approved by the New York State Division of Housing and
Community Renewal on March 8, 1996.
<PAGE>
EXHIBIT 10.1
CONTRACT FOR MANAGING AGENTS EXTENSION AGREEMENT
Agreement made as of the first day of July 1995 by and between Knickerbocker
- ----------------
Village Inc. Owner, and Cherry Green Property Corp. as Managing Agent for the
- ------------ ---------------------------
premises known as: Knickerbocker Village 10-40 Monroe St. New York NY 10002
------------------------ -----------------------------------
HCLD #9 (Address and Location)
- ---------
Project #
Whereas, the parties have heretofore entered into a Contract for Managing
Agents as of July 1, 1983. Subsequent extensions have been entered into with the
------
last extension effective for the period July 1, 1994 to June 30, 1995; and
- -
Whereas, the parties wish to further extend the Contract for Managing Agents;
therefore it is agreed as follows:
1. The Contract for Managing Agent is extended from July 1, 1995 to
-
June 30, 1996.
-
2. Article 5.1(a) of the Owner-Agent Agreement is amended as follows:
Managing Agent Fee - $66,774.00 per month.
---------
This amount represents the sum of:
1. $59,989.00 per month as the Project's Base Rate; plus
---------
2. $ 6,785.00 per month as the Project's Administrative Expense Fee.
---------
3. The Management Plan [X] has [_] has not been amended. If amended,
the pages on which changes have been made are attached.
4. Article 5.1(e) of the Owner-Agent Agreement is amended as follows:
Site Manager Reimbursement - $55,513.80 per year payable in monthly
---------
installments as indicated in par. 5 (Submit breakdown and supporting
computations as to determination of Site Manager Reimbursement. Attach
amended Management Plan page.)
5. Other: Site Manager reimbursement to be taken as follows:
-------------------------------------------------------------------
July, 1995 -- Oct., 1995 -- $4,799.87 per month
Nov., 1995 -- June, 1996 -- $4,539.29 per month
- --------------------------------------------------------------------------------
(Use attachments if necessary)
- ------------------------------------------------
- --------------------------------------------------------------------------------
This agreement is subject to approval by the New York State Division of Housing
and Community Renewal (DHCR).
Owner Agent
Knickerbocker Village, Inc. Cherry Green Property Corp.
- --------------------------------------- ---------------------------------------
/s/ Robert Gershon /s/ Robert Gershon
- --------------------------------------- ---------------------------------------
Signature Signature
R o b e r t G e r s h o n R o b e r t G e r s h o n
Treasurer Vice-President
- --------------------------------------- ---------------------------------------
Name/Title (Please Type) Name/Title (Please Type)
12/7/95 12/7/95
- --------------------------------------- ---------------------------------------
Date: Date:
Approved:
March 8, 1996
- ---------------------------------------
Date:
New York State Division of Housing and Community Renewal
/s/ Jane Berrie
- -------------------------------------------------
/s/ Jane Berrie, Assistant Director of Management
- -------------------------------------------------
Name/Title (Please Type)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-K OF
KNICKERBOCKER VILLAGE, INC. FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 565,888
<ALLOWANCES> 312,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,867,544
<PP&E> 17,006,014
<DEPRECIATION> 10,219,499
<TOTAL-ASSETS> 9,689,373
<CURRENT-LIABILITIES> 1,843,654
<BONDS> 6,008,130
317,048
0
<COMMON> 0
<OTHER-SE> 891,959
<TOTAL-LIABILITY-AND-EQUITY> 9,689,373
<SALES> 9,307,966
<TOTAL-REVENUES> 9,345,599
<CGS> 0
<TOTAL-COSTS> 9,340,246
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 83,298
<INTEREST-EXPENSE> 638,146
<INCOME-PRETAX> 5,353
<INCOME-TAX> 702
<INCOME-CONTINUING> 4,651
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,651
<EPS-PRIMARY> .032
<EPS-DILUTED> 0
</TABLE>
