<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 THREE MONTH PERIOD ENDED MARCH 31, 1997
- ---
- ---
TRANSITION REPORT UNDER SECTION 13 OR 15 (D)
OF THE 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 of the close of the period covered by this report is 147,464, $2.15
par value.
Total number of sequentially numbered pages - 14
No exhibits filed.
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Current Assets:
Cash $ 59,695
Accounts receivable (less allowance for doubtful accounts of $265,000) 181,318
Interest and other receivables 25,188
Prepaid expenses and other current assets (Note 12) 1,352,956
Deferred tax asset, net (Note 7) 36,000
-----------
Total Current Assets 1,655,157
-----------
Special Funds And Deposits:
Funds for replacements, painting and decorating (Notes 4 and 10) 145,044
Tenants' security deposits - contra 642,272
-----------
Total Special Funds and Deposits 787,316
-----------
Fixed Assets, At Cost: (Notes 2, 3 and 5)
Land 3,273,281
Buildings and building equipment 15,169,718
-----------
18,442,999
Less: Accumulated depreciation 11,020,936
-----------
Net Fixed Assets 7,422,063
-----------
Other Assets:
Deferred tax asset, net (Note 7) 105,000
Other Assets 138,126
-----------
Total Other Assets 243,126
-----------
Total Assets $10,107,662
===========
</TABLE>
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at March 31, 1997 and for the related periods
then ended include all adjustments necessary in order to make the financial
statements not misleading.
2
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)
Liabilities And Stockholders' Equity
------------------------------------
<TABLE>
<CAPTION>
Current Liabilities:
<S> <C>
Accounts payable and accrued expenses (Note 10) $ 1,605,580
Unearned rental income 79,282
Dividends payable 19,023
Current portion of long-term debt (Note 5) 77,257
-----------
Total Current Liabilities 1,781,142
Tenants' Security Deposits - Contra 642,272
Other Liabilities (Note 10) 201,650
Long-Term Debt, less current portion (Note 5) 6,216,639
-----------
Total Liabilities 8,841,703
-----------
Commitments and Contingencies (Note 10)
Stockholders' Equity:
Limited dividend capital stock,
par value $2.15 per share,
Authorized - 348,837 shares;
issued and outstanding - 147,464 (Note 6) 317,048
Retained earnings 943,911
-----------
Total Stockholders' Equity 1,265,959
-----------
Total Liabilities And Stockholders' Equity $10,107,662
===========
</TABLE>
3
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Revenues:
Rentals (Note 11) $2,401,871 $2,289,471
Other income 2,513 36,454
---------- ----------
2,404,384 2,325,925
---------- ----------
Expenses:
Wages and related costs 575,514 543,729
Real estate taxes 207,844 198,361
Utilities 440,340 512,939
Maintenance, repairs and decorating 266,714 264,614
Depreciation and amortization 146,022 103,738
Mortgage and other interest 145,465 157,284
Management fee (Note 8) 221,677 218,830
Miscellaneous operating and general expenses 375,061 350,774
---------- ----------
2,378,637 2,350,269
---------- ----------
Income (loss) before income taxes 25,747 (24,344)
Provision for income taxes (Note 7) 20,000 6,000
---------- ----------
Net income (Loss) 5,747 (30,344)
---------- ----------
Retained earnings at beginning of period
As previously reported 943,164 891,959
Prior period adjustment (Note 2) 0 93,000
---------- ----------
As restated 943,164 984,959
---------- ----------
Retained earnings at end of period $ 948,911 $ 954,615
========== ==========
Net income (loss) per share $0.04 $(0.21)
========== ==========
</TABLE>
4
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,747 $ (30,344)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 146,022 103,738
Provision for bad debts 3,043 0
Deferred income taxes (15,000) 0
Changes in assets (increase) decrease:
Rents receivable 23,638 17,387
Interest and other receivables (10,823) (14,912)
Prepaid expenses and other current assets 257,987 105,756
Other assets (124,374) 0
Changes in liabilities increase (decrease):
Accounts payable and accrued expenses (386,366) (240,903)
Unearned rental income (3,691) 6,757
Other liabilities (10,850) 0
----------- ---------
Net cash used in operating activities (114,667) (52,521)
----------- ---------
Cash Flows From Investing Activities:
Interest earned on reserve fund investments (622) (4,043)
Capital expenditures (82,750) (10,919)
Contributions of cash from operations to replacement fund (140,440) (25,000)
Reimbursement of expenditures paid by housing company
from replacement fund 111,993 186,572
Contributions from sale of investments 0 (57,472)
Proceeds of investments from replacement funds 0 56,930
----------- ---------
Net cash provided by (used in) investing activities (111,819) 146,068
----------- ---------
Cash flows from financing activities:
Proceeds on refinanced mortgage 6,300,000
Payments on pre-existing mortgage debt (6,008,130) (37,239)
Payments on long-term debt (6,014) 0
Payments of bank overdraft 0 (18,826)
----------- ---------
Net cash provided by (used in) financing activities 285,766 (56,065)
----------- ---------
Net increase in cash 59,280 37,482
Cash at beginning of period 415 0
----------- ---------
Cash at end of period $ 59,695 $ 37,482
=========== =========
Supplemental Disclosures Of Cash Flow Information:
Cash paid during the period for:
Interest $ 150,951 $ 157,594
Income taxes 10,000 26,542
</TABLE>
5
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
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.
NOTE 2 - PRIOR PERIOD ADJUSTMENT
-----------------------
The balance of retained earnings at January 1, 1996, has been restated from
amounts previously reported to reflect an increase of $93,000 ($0.63 per
share), resulting from a change in the Company's policy from expensing
appliances as purchased to capitalizing the appliances as fixed assets.
The change was made to conform with generally accepted accounting
principles.
NOTE 3 - 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 March 31, are recorded as unearned rental
income.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------
Bad debts are provided for 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 for on the straight-line and accelerated
methods.
Expenditures for maintenance and repairs are charged to operations as
incurred. 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
three months ended March 31, 1997 and 1996 was approximately $123,000 and
$102,000, respectively.
6
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
INCOME TAXES
------------
Deferred tax assets and liabilities reflect the tax consequences on future
years of differences between the tax bases of assets and liabilities, and
their financial reporting amounts, 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 4) with a high quality credit institution. At times such investments
may be in excess of FDIC insured limits.
INVESTMENTS
-----------
All investments in the replacement, painting and decorating fund (See Note
4) are available for sale and are carried at fair values.
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.
RECLASSIFICATIONS
-----------------
Certain prior year balances have been reclassified to conform with current
year classifications.
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
MARCH 31, 1997 AND 1996
IMPAIRMENT OF LONG-LIVED ASSETS
-------------------------------
In accordance with SFAS No. 121, "Accounting For the Impairment of Long-
Lived Assets and For Long-Lived Assets To Be Disposed Of", the Company
reviews it long-lived assets, including property and equipment, and
intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
fully recoverable. To determine recoverability of its long-lived assets,
the Company evaluates the probability that future undiscounted net cash
flows will be less than the carrying amount of the assets. Impairment
costs, if any, are measured by comparing the carrying amount of the related
assets to their fair value.
NOTE 4 - REPLACEMENT, PAINTING AND DECORATING FUNDS
------------------------------------------
Maintenance of these funds is requested by the Commissioner of Housing and
Community Renewal of the State of New York. These funds were comprised of
the following at March 31, 1997:
Cash $145,044
Investments: Treasury Bills - Available for sale 0
--------
$145,044
========
NOTE 5 - LONG-TERM DEBT
--------------
On January 30, 1997, the Company entered into an extension and modification
agreement with The Greater New York Savings Bank for the principal amount
of $6,300,000 ("Modification Agreement"). The mortgage is payable in
monthly installments of $50,729, inclusive of interest at the rate of 8
1/2% per annum, commencing on March 1, 1997 and due on February 1, 2007.
On the maturity date, the Company may pay the remaining principal balance,
or extend the term of the mortgage for an additional five (5) years. The
mortgage is collaterallized by land, buildings and boilers. The aggregate
maturities for long-term debt for the five years after March 31, 1997 are
$77,257, $83,000, $91,000, $99,000 and $108,000, respectively.
NOTE 6 - 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 March 31, 1997 amounted to $532,643 or
approximately $3.61 per share. Dividends amounting to $19,023 were
declared during 1979, but were not paid as of March 31, 1997. Such
dividends were approved by the DHCR. No dividends were declared or paid in
1997 or 1996.
8
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
NOTE 7 - INCOME TAXES
------------
The provision for income taxes for the three months ended March 31, 1997
and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
------ ------
Current Taxes
--------------
<S> <C> <C>
Federal $ 8,000 $ 0
New York City 27,000 6,000
-------- ------
Total $ 35,000 $6,000
-------- ------
Deferred Taxes
--------------
Federal $(14,000) $ 0
New York City (1,000) 0
-------- ------
Total $(15,000) $ 0
-------- ------
Provision For Income Taxes $ 20,000 $6,000
======== ======
<CAPTION>
The provision for income taxes differs from amounts computed at statutory rates as
follows:
<S> <C> <C>
1997 1996
-------- ------
Federal income taxes
at statutory rate $ 11,000 $ 0
New York City alternative minimum
tax, net of federal benefit 5,000 6,000
Other, net 4,000 0
-------- ------
Total $ 20,000 $6,000
======== ======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. At March
31, 1997, the net deferred tax assets of $141,000 was included in the
Company's balance sheet as follows:
Deferred tax asset, net
- Current $ 36,000
Deferred tax asset, net
- Long term 105,000
--------
Deferred tax asset, net $141,000
========
9
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
INCOME TAXES, continued
-----------------------
Significant components of the Company's net deferred tax asset at March 31,
1997 are as follows:
Tax effects of:
Accounts receivable $ 113,000
Unearned rental income 34,000
Buildings and building equipment 420,000
---------
Gross deferred tax asset 567,000
Valuation allowance (426,000)
---------
Net deferred tax asset $ 141,000
=========
Management believes that a valuation allowance is appropriate given the
current estimates of future taxable income, as well as consideration of
available tax planning strategies. If the Company is unable to generate
sufficient taxable income in the future through operating results,
increases in the valuation allowance will be required through a charge to
expense. However, if the Company achieves profitability to utilize a
greater portion of the deferred tax asset, the valuation allowance will be
reduced through a credit to income. The net change in the valuation
allowance for the three months ended March 31, 1997 was an increase of
$46,000.
NOTE 8 - 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 Company. Such fee is reviewed and may be adjusted annually, effective
July 1 of each year, by the DHCR.
On March 8, 1996 and October 24, 1996 the DHCR approved increases in the
management fee of 2.3% effective July 1, 1995 and 2.75% effective July 1,
1996, respectively.
NOTE 9 - 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. The
Company's contributions for this plan were approximately $18,000 and
$17,000 for the three months ended March 31, 1997 and 1996, respectively.
10
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
NOTE 10- COMMITMENTS AND CONTINGENCIES
-----------------------------
As of March 31, 1997, the Company was in arrears on its contributions as
requested by DHCR to its' special fund for replacements, painting and
decorating in the amount of approximately $196,000 (Note 4). The Company,
in accordance with the Modification Agreement with it's bank dated January
30, 1997 (Note 5), has made a commitment to complete asbestos abatement
work and lead paint remediation work of approximately $425,000 in 1997 and
1998. Remaining costs of approximately $414,000 have been accrued in the
financial statements as of March 31, 1997. The costs of any additional
asbestos abatement or lead paint remediation, if necessary, in excess of
the amounts accrued at March 31, 1997, can not be determined at this time.
NOTE 11- RENTAL INCOME
-------------
During April 1996, the Company received a two step rent increase, which was
approved by the 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.
NOTE 12- PREPAID EXPENSES AND OTHER CURRENT ASSETS
-----------------------------------------
Prepaid expenses and other current assets in the accompanying balance sheet
at March 31, 1997 are as follows:
Escrow Account $ 512,987
Prepaid:
Insurance 445,058
Water and Sewer 101,427
Real Estate Taxes 207,844
Supplies 76,178
Expenses - Other 9,462
----------
TOTAL $1,352,956
==========
11
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC
MANAGEMENTS DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
MARCH 31, 1997
(UNAUDITED)
Liquidity - As of March 31, 1997 the Registrant had a working capital deficit of
approximately $126,000 and was in arrears on its contributions to its special
fund for replacements, painting and decorating of approximately $196,000 as
discussed further in Note 10 to the financial statements.
On January 30, 1997, the Registrant entered into an extension and modification
agreement with The Greater New York Savings Bank for the principal amount of
$6,300,000 (see Note 5 to the financial statements). As a result of this
mortgage extension and modification agreement, the Registrant's annual debt
service will be reduced by approximately $155,000 per annum, effective on March
1, 1997.
During April 1996, the Registrant received a two step rent increase which was
approved by the Division of Housing and Community Renewal. The first increase
of approximately 5.5% was effective June 1, 1996. The second increase of
approximately 5.3% will be effective June 1, 1997.
Capital resources - The Registrant has set aside funds for capital improvements
and repairs amounting to approximately $145,044 as of March 31, 1997.
Results of operations - During the three months ended March 31, 1997, total
revenues increased as compared to the three months ended March 31, 1996, by
approximately 3% due primarily to the rent increase referred to above, partially
offset by decreases in commercial rental income, interest income and other
charges to tenants.
Operating expenses increased by approximately $28,000 or approximately 1.2%
during the three months ended March 31, 1997 as compared to the three months
ended March 31, 1996. Increases in wages and related costs, depreciation and
amortization and miscellaneous operating and general expenses were offset by
decreases in utilities and mortgage and other interest. Wages and related costs
increased by approximately $32,000 or approximately 5.8%, primarily do to
increases in union wage rates, union pension rates and related payroll taxes.
Depreciation and amortization increased by approximately $42,000 or
approximately 40.8% primarily due to the write off of mortgage costs of
approximately $21,000 related to the company's pre-existing mortgage debt, and
additional depreciation expense incurred on the acquisition of fixed assets.
Miscellaneous operating and general expenses increased by approximately $24,000
or approximately 6.9%, primarily due to increases in legal and consulting fees.
Utilities decreased by approximately $73,000 or approximately 16.5%, primarily
due to reductions in fuel oil prices and the City of New York's frontage
charges. Mortgage and other interest decreased by approximately $12,000 or
approximately 8.1% primarily due to the refinancing of the Company's mortgage
debt.
12
<PAGE>
PART II. OTHER INFORMATION
----------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
13
<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: May 20, 1997 By: S/ROBERT GERSHON
-------------------------
ROBERT GERSHON,
Vice President and Treasurer
Dated: May 20, 1997 By: S/MELVIN GERSHON
------------------------
MELVIN GERSHON,
Secretary
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM KNICKERBOCKER VILLAGE INC. AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 59,695
<SECURITIES> 0
<RECEIVABLES> 446,318
<ALLOWANCES> 265,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,655,157
<PP&E> 7,422,063
<DEPRECIATION> 122,635
<TOTAL-ASSETS> 10,107,662
<CURRENT-LIABILITIES> 1,781,142
<BONDS> 6,216,639
317,048
0
<COMMON> 0
<OTHER-SE> 948,911
<TOTAL-LIABILITY-AND-EQUITY> 10,107,662
<SALES> 2,401,871
<TOTAL-REVENUES> 2,404,384
<CGS> 0
<TOTAL-COSTS> 2,378,637
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,465
<INCOME-PRETAX> 25,747
<INCOME-TAX> 20,000
<INCOME-CONTINUING> 5,747
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,747
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0
</TABLE>
