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, 2000
|_| 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 identification No.)
incorporation or organization)
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, 2000
(UNAUDITED)
Assets
Current Assets:
Cash and cash equivalents $ 746,243
Accounts receivable (less allowance for
doubtful accounts of $308,000) 97,789
Interest and other receivables 199,714
Prepaid expenses and other current assets 958,538
Deferred tax asset, net 75,000
-----------
Total Current Assets 2,077,284
-----------
Special Funds And Deposits:
Funds for replacements, painting
and decorating 352,768
Tenants' security deposits - contra 674,765
-----------
Total Special Funds and Deposits 1,027,533
-----------
Fixed Assets:
Land 3,273,281
Buildings and Building Equipment 17,029,807
-----------
20,303,088
Less: Accumulated depreciation 12,603,992
-----------
Net Fixed Assets 7,699,096
-----------
Other Assets:
Deferred tax asset, net 293,000
Other assets 96,306
-----------
389,306
-----------
Total Assets $11,193,219
===========
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at March 31, 2000 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, 2000
(UNAUDITED)
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $ 2,642,362
Unearned rental income 41,638
Dividends payable 19,023
Current portion of long-term debt 98,907
Current portion of capital lease obligation 2,318
-----------
Total Current Liabilities 2,804,248
Tenants' Security Deposits - Contra 674,765
Long-Term Debt, less current portion 5,943,906
-----------
Total Liabilities 9,422,919
-----------
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 1,453,252
-----------
Total Stockholders' Equity 1,770,300
-----------
Total Liabilities and Stockholders' Equity $11,193,219
===========
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at March 31, 2000 and for the related periods
then ended include all adjustments necessary in order to make the financial
statements not misleading.
3
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF NET INCOME, COMPREHENSIVE INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
Revenues:
Rentals $ 2,655,797 $ 2,602,972
Other income 8,688 4,429
----------- -----------
2,664,485 2,607,401
----------- -----------
Expenses:
Wages and related costs 645,061 599,752
Real estate taxes 174,448 193,462
Utilities 595,016 381,505
Maintenance, repairs and decorating 389,022 240,102
Depreciation and amortization 111,808 134,461
Mortgage and other interest 134,632 136,477
Management and administrative fee 241,225 237,815
Provision for doubtful accounts 684 3,000
Miscellaneous operating and general expenses 411,822 385,273
----------- -----------
2,703,718 2,311,847
----------- -----------
Income (loss) before income taxes (39,233) 295,554
Provision (benefit) for income taxes (3,000) 137,000
----------- -----------
Net income (loss) and comprehensive income (loss) (36,233) 158,554
Retained earnings at beginning of the period 1,489,485 1,278,589
----------- -----------
Retained earnings at end of the period $ 1,453,252 $ 1,437,143
=========== ===========
Earnings (loss) per share $ (0.25) $ 1.08
=========== ===========
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at March 31, 2000 and for the related periods
then ended include all adjustments necessary in order to make the financial
statements not misleading.
4
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (36,233) $ 158,554
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 111,807 134,461
Provision for bad debts 684 3,000
Deferred income taxes (8,000) (25,000)
Changes in assets (increase) decrease:
Accounts receivable 20,701 14,277
Interest and other assets (14,538) (16,969)
Prepaid expenses 350,213 648,281
Other assets 1,141 0
Changes in liabilities increase (decrease):
Accounts payable and accrued expenses 2,913 (99,873)
Unearned rental income 17,471 56,631
--------- ---------
Net cash provided by operating activities 446,159 873,362
--------- ---------
Cash Flows From Investing Activities:
Interest earned on reserve fund investments (1,045) (1,276)
Capital expenditures (199,232) (19,389)
Contributions of cash from operations to replacement fund (228,870) (290,580)
Reimbursement of expenditures paid by housing company
from replacement fund 237,027 14,425
--------- ---------
Net cash used in investing activities (192,120) (296,820)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt (23,446) (21,541)
Payments on capital lease obligation (2,101) (2,101)
--------- ---------
Net cash used in financing activities (25,547) (23,642)
--------- ---------
Net increase in cash 228,492 552,900
Cash at beginning of period 517,751 92,956
--------- ---------
Cash at end of period $ 746,243 $ 645,856
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 135,000 $ 137,000
========= =========
Income taxes $ 22,000 $ 25,000
========= =========
</TABLE>
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at March 31, 2000 and for the related periods
then ended include all adjustments necessary in order to make the financial
statements not misleading.
5
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
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 March 31, are recorded as unearned rental
income.
CASH AND CASH EQUIVALENTS
For the purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments purchases with a maturity of three
months or less to be cash equivalents.
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 consist 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 was
approximately $108,000 and $130,000 for the three months ended March 31,
2000 and 1999, respectively.
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.
6
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES---(continued)
CONCENTRATION OF CREDIT RISK
The Company places its cash and investments for its Replacement Fund (See
Note 3) with a high quality credit 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.
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. Receivables - The carrying amount approximates fair value because of
the short maturity of these instruments.
3. Debt - The carrying amounts approximate fair value based on
borrowing rates currently available to the Company for bank loans
with similar terms.
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.
COMPREHENSIVE INCOME
The company adopted SFAS No. 130, "Reporting Comprehensive Income" in 1998
for the years ended December 31, 1998 and 1997. There are no items of
other comprehensive income as defined in the pronouncement.
7
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 3 - 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, 2000:
Cash $ 352,768
==========
NOTE 4 - LONG-TERM DEBT
On January 31, 1997, the Company entered into an extension and
modification agreement with The Greater New York Savings Bank, now known
as Astoria Federal Savings Bank (the "Bank") for the principal amount of
$6,300,000. The mortgage is payable in monthly installments of $50,729,
inclusive of interest at the rate of 8 1/2% per annum, and is 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 collateralized by land, buildings and
boilers. The aggregate maturities for long-term debt for the five years
after March 31, 2000 are approximately $99,000, (2001); $108,000, (2002);
$117,000, (2003); $128,000 (2004); and $139,000,(2005); $5,452,000,
(thereafter).
NOTE 5 - CAPITAL LEASE OBLIGATIONS
The Company leases certain equipment under long term leases and has the
option to purchase the equipment at a nominal cost at the termination of
the leases. Included in building equipment are the following assets held
under capital leases:
Building Equipment $ 34,961
Less accumulated depreciation 14,196
----------
$ 20,765
==========
Future minimum payments for assets under capital leases are as follows at
March 31, 2000:
Total minimum lease payments $ 2,844
Less amounts representing interest 566
----------
Present value of net minimum lease payments $ 2,318
==========
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.
8
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 6 - DIVIDENDS PAYABLE AND CAPITAL STOCK---(continued)
Cumulative dividends unpaid to March 31, 2000 amounted to $608,735 or
approximately $4.13 per share and unpaid to March 31, 1999 amounted to
$589,712 or approximately $4.00 per share. Dividends amounting to $19,023
were declared during 1979, but were not paid as of March 31, 2000. Such
dividends were approved by the DHCR. No dividends were declared or paid in
2000 or 1999.
NOTE 7 - INCOME TAXES
The provision for income taxes for the years ended March 31, 2000 and 1999
consist of the following:
2000 1999
--------- ---------
Current Taxes
Federal $ 0 $ 126,000
New York City 5,000 36,000
--------- ---------
Total 5,000 162,000
--------- ---------
Deferred Taxes
Federal (6,000) (20,000)
New York City (2,000) (5,000)
--------- ---------
Total (8,000) (25,000)
--------- ---------
Provision For Income Taxes $ (3,000) $ 137,000
========= =========
The provision for income taxes differs from amounts computed at statutory
rates as follows:
2000 1999
--------- ---------
Federal income taxes at statutory rate $ (12,000) $ 100,000
New York City corporation tax -
net of federal benefit 3,000 33,000
Other, net 6,000 4,000
--------- ---------
Total $ (3,000) $ 137,000
========= =========
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, 2000, the net deferred tax assets of $368,000, were included in the
Company's balance sheet as follows.
Deferred tax asset, net - current $ 75,000
Deferred tax asset, net - Long term 293,000
---------
Deferred tax asset, net $ 368,000
=========
9
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 7 - INCOME TAXES---(continued)
Significant components of the Company's net deferred tax asset at March
31, 2000 are as follows:
Tax effects of:
Accounts receivable $ 132,000
Unearned rental income 18,000
Buildings and building equipment 586,000
---------
Gross deferred tax asset 736,000
Valuation allowance (368,000)
---------
Net deferred tax asset $ 368,000
=========
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, 2000 was increase of
$8,000.
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 September 2, 1999, the DHCR approved an increase in the management fee
of approximately 1.4% effective July 1, 1999.
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 $23,000 and
$20,000 for the three months ended March 31, 2000 and 1999 respectively.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company, in accordance with the Modification Agreement with its Bank
dated January 30, 1997 (Note 4), has made a commitment to complete
asbestos abatement work and lead paint remediation work of approximately
$425,000. As of March 31, 2000, the commitment has been fulfilled. The
costs of any additional asbestos abatement or lead paint remediation, if
necessary, cannot be determined at this time.
10
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 11- RENTAL INCOME
During December 1998, the Company received a two step rent increase, which
was approved by the DHCR. The first increase of approximately 3.3% was
effective February 1, 1999. The second increase of approximately 3.2% was
deferred by the Company from February 1, 2000 to April 1, 2000 (See Note
13).
NOTE 12- PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets in the accompanying balance
sheet at March 31, 2000 are as follows:
Escrow Account $243,172
Prepaid:
Insurance 434,522
Real Estate Taxes 174,448
Supplies 93,397
Federal Corporation Income Taxes 11,000
Expenses - Other 1,999
--------
TOTAL $958,538
========
NOTE 13- SUBSEQUENT EVENTS
Effective April 1, 2000, the Company received a rent increase of
approximately 3.2%, which was approved by the DHCR.
11
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC
MANAGEMENTS DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
MARCH 31, 2000
(UNAUDITED)
Liquidity - As of March 31, 2000, the Registrant has a working capital deficit
of approximately $ 727,000. During December 1998, the Company received a two
step rent increase, which was approved by the DHCR. The first increase of
approximately 3.3% became effective February 1, 1999. The Company deferred the
second increase of approximately 3.2%, from February 1, 2000 to April 1, 2000.
Capital resources - The Registrant has set aside funds for capital improvements
and repairs amounting to approximately $353,000 as of March 31, 2000.
Results of operations - During the three months ended March 31, 2000, as
compared to the three months ended March 31, 1999, total revenues increased by
approximately $57,000 or approximately 2.2%, due primarily to increases in
rental income, resulting from tenant move outs, and surcharges.
Operating expenses increased by approximately $392,000 or approximately 17.0%
during the three months ended March 31, 2000, as compared to the three months
ended March 31, 1999. This is primarily attributable to increases in wages and
related costs, utilities, maintenance, repairs and decorating expense and
miscellaneous operating and general expenses offset by reductions in real estate
taxes and depreciation and amortization. Wages and related costs increased by
approximately $45,000 or approximately 7.6%, primarily due to increases in union
wage rates, union pension rates and related payroll taxes. Utilities increased
by approximately $214,000 or approximately 56.0%, primarily due to significant
increases in the price of fuel oil in 2000 as compared to 1999. Maintenance,
repairs and decorating expense increased by approximately $149,000 or
approximately 62.0% primarily due to increases in electrical repairs, plumbing,
structural expenses, painting and decorating, supplies and grounds expenses,
offset by a decrease in heating repairs. Miscellaneous operating and general
expenses increased by approximately $24,000 or approximately 6.2% primarily due
to increases in legal and consulting fees. The increase in legal fees was
attributable to a corresponding reduction in the assessed valuation of the
properties for the tax year ended June 30, 2000. Real estate taxes decreased by
approximately $19,000 or approximately 9.8% due to a decrease in the property's
assessed value for the tax year ended June 30, 2000. Depreciation and
amortization decreased by approximately $23,000 or approximately 16.9% due to
the fact that the majority of the fixed assets are in the latter part of their
useful lives. The provision for taxes decreased by approximately $140,000 or
approximately 102.2%, primarily due to a decrease in income (loss) before taxes
(see Note 7 to the financial statements pages 9 and 10).
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.
<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 17, 2000 By: /S/ ROBERT GERSHON
---------------------------------
ROBERT GERSHON,
Vice President and Treasurer
Dated: May 17, 2000 By: /S/ MELVIN GERSHON
---------------------------------
MELVIN GERSHON,
Secretary
<TABLE> <S> <C>
<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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 746,243
<SECURITIES> 0
<RECEIVABLES> 406,789
<ALLOWANCES> 308,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,077,284
<PP&E> 7,699,096
<DEPRECIATION> 108,323
<TOTAL-ASSETS> 11,193,219
<CURRENT-LIABILITIES> 2,804,248
<BONDS> 5,943,906
0
0
<COMMON> 317,048
<OTHER-SE> 1,483,252
<TOTAL-LIABILITY-AND-EQUITY> 11,193,219
<SALES> 2,655,797
<TOTAL-REVENUES> 2,664,485
<CGS> 0
<TOTAL-COSTS> 2,703,718
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134,632
<INCOME-PRETAX> (39,233)
<INCOME-TAX> (3,000)
<INCOME-CONTINUING> (36,233)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36,233)
<EPS-BASIC> (0.25)
<EPS-DILUTED> 0
</TABLE>
