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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
JOINT ANNUAL REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the Fiscal Year Ended: December 31, 1994
Commission File Number: 1-8927 Commission File Number: 0-16156
(formerly 0-6627)
HOMEFREE VILLAGE RESORTS, INC. HOMEFREE INVESTORS L.P.
(Exact name of Registrant (Exact name of Registrant
as specified in its charter) as specified in its charter)
Delaware Delaware
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
37-0959405 84-1062287
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
1400 S. Colorado Boulevard 1400 S. Colorado Boulevard
Denver, Colorado 80222 Denver, Colorado 80222
(Address of principal executive (Address of principal executive
offices, including zip code) offices, including zip code)
(303) 757-3002 (303) 757-3002
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
Securities registered pursuant to Securities registered pursuant to
Section 12(b) of the Act: Section 12(b) of the Act:
Title of each class Title of each class
Common Stock, $.001 par value None
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Name of exchange on which registered Name of exchange on which registered
None None
Securities registered pursuant to Securities registered pursuant to
Section 12(g) of the Act: Section 12(g) of the Act:
None Assignee Limited
Partnership Interests
("paired" with Common Stock,
$.001 par value, of Homefree
Village Resorts, Inc.)
Indicate by checkmark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
YES NO X
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Park III of this Form 10-K or any amendment to
this Form 10-K. X
----
State the aggregate market value of the voting stock held by non-affiliates of
the registrants as of a specified date within 60 days prior to the date of
filing: $72,000 as of June 8, 1995 (based on the average of the closing bid and
asked prices as reported by NASDAQ).
As of May 31, 1995, the Registrants had outstanding 10,483,982 shares of Common
Stock and 10,483,982 assignee limited partnership interests.
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TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . 9
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . 10
PART II
Item 5. MARKET FOR THE REGISTRANTS' "PAIRED SHARES"
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . 11
Item 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . 12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . 13
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . 16
Item 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . 17
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT . . . . . . . . . . . . . . . . . . . . . . 18
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . 21
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . 23
Item 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . 26
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 27
</TABLE>
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PART I
ITEM 1. BUSINESS.
The Registrants are comprised of Homefree Village Resorts, Inc. (the
"Company") and Homefree Investors L.P. (the "Partnership"), a limited
partnership formed by the Company in 1987.
The shares of common stock, par value of $.001 per share, of the
Company (the "Common Stock") and the assignee limited partnership interests,
par value of $.001 per unit ("Assignee Limited Partnership Interest"), are
"paired" on a one-for-one basis and may only be transferred in units ("Paired
Shares") consisting of one share of Common Stock and one Assignee Limited
Partnership Interest.
BUSINESS OF THE COMPANY
General
The Company is engaged primarily in the development and operation of
adult recreational communities containing rental sites for manufactured homes
and recreational homes. In recent years, the Company has focused on the
development of recreational resort communities in Mesa, Arizona which offer
extensive recreational facilities and social activities designed to appeal to
active pre- retirement and retirement age people. During 1994 the Company
operated and had interests in one community containing a total of approximately
832 rental sites located in Arizona. The Company also has interests in two
communities containing approximately 2,300 rental sites located in Arizona.
The Company has interests in such communities through Aristek Properties, Ltd.,
Aristek Western Properties Limited Partnership, and other affiliated
partnerships in which the Company is the General Partner. The Company's
objectives are to create and participate, through such partnerships, in the
cash flow from these communities and share in appreciation in the value of such
properties. The Company also receives income from development, management and
administrative services.
Organization
The Company is a Delaware corporation which was organized in February
1972. The Company has been engaged in the business of operating manufactured
home communities since its organization. In 1977, the Company, then called
Metrix, Inc., acquired all of the capital stock of Aristek Real Estate
Corporation in exchange for 6,230,000 shares of Common Stock of the Company
which were issued to the stockholders of that corporation, including 4,449,600
shares to Craig M. Bollman, Jr. and Phyllis A. Bollman. The name of the
Company was changed to "Aristek Corporation" and
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subsequently changed in 1981 to "Aristek Communities, Inc." In November 1986
the name was again changed to "Homefree Village Resorts, Inc." Aristek Real
Estate Corporation itself was engaged in the development and operation of
manufactured home communities from 1974 to 1977. Since 1977, the business of
the Company has continued to consist primarily of the development and operation
of such communities. However, in recent years, the Company has refocused its
business on adult recreational communities containing rental sites for
manufactured homes. The Company conducts a substantial portion of its business
through the affiliated limited partnerships described below.
The Company owns 100% of the capital stock of Resortparks of America,
Inc. ("Resortparks"), a Delaware corporation organized in September 1982 to
engage in the design, development and management of adult recreational
communities offering extensive recreational facilities and social activities to
pre-retirement and retirement age people. References herein to the Company
include the Company and Resortparks.
In July 1987, the Company formed Homefree Investors L.P., a Delaware
limited partnership. The general partner of Homefree Investors L.P. is
Homefree General Partners, a Delaware general partnership, comprised of the
Company and Bollman Associates, Inc., a Delaware corporation, all of the
capital stock of which is owned by Craig M. Bollman, Jr., President and
Chairman of the Board of the Company. The shares of Common Stock of the
Company and assignee limited partnership interests in Homefree Investors L.P.
have been "paired" to trade only as a unit. When it formed the Partnership,
the Company intended to conduct its business in conjunction with the
Partnership. However, the Partnership never commenced operations.
Affiliated Partnerships
Aristek Properties, Ltd. The principal affiliated partnership of
the Company is Aristek Properties, Ltd. ("Aristek Properties"). Aristek
Properties was formed as a Colorado limited partnership in June 1976. The
Company holds a 1% interest in Aristek Properties as sole General Partner and an
additional 1% interest as a limited partner. Resortparks also owns a 1.3%
interest as a limited partner. The remaining 96.7% of limited partnership
interests is held by individual limited partners. The Company also held a 30%
residual interest in Aristek Properties, which it recently relinquished. See
BUSINESS - Residual Interests in Partnerships.
Although Aristek Properties has provided significant income tax
benefits to its limited partners, Aristek Properties' primary objective is to
create significant long-term capital appreciation which may be realized by the
limited partners and the Company, as General Partner, through net proceeds from
refinancing of the properties and, ultimately, net proceeds from the sale of
such properties or the conversion of such properties to other residential or
commercial uses and the distribution of the resulting cash to the partners.
The Company, as General Partner of Aristek Properties, is also entitled to
receive an
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annual administrative fee (currently an amount equal to 2.5% of the capital
contributions of the partners), leasing commissions, management fees and
development fees.
Aristek Properties has a 99% interest in Monte Vista I Joint Venture,
an Arizona joint venture ("MVI"). The remaining interest in MVI is owned by
the Company. Previously, Aristek Properties owned 60% and Aristek Western
owned 40% of MVI. Aristek Western transferred to Aristek Properties and to the
Company its 40% interest in MVI, 39% to Aristek Properties, and 1% to the
Company.
The interests in MVI were modified again in connection with a
restructuring of certain loans owed by Aristek Properties and MVI to the
Company. The obligors on such loans were not able to make principal and
interest payments. With the consent of most of the limited partners of Aristek
Properties, the Company agreed to extend these loans until June 30, 1998 in
return for a 7% annual interest rate and a 75% participation in MVI's operating
cash flow, and in its net sale or refinancing proceeds after all liabilities
(including those payable to the Company) are satisfied. At the time of the
restructuring, the net amounts owed to the Company by MVI were approximately
$4,053,341. The Company believes that such amount exceeded the value of the
net assets of MVI, after payment of MVI's other liabilities. Aristek
Properties has no material assets other than its interest in MVI. Since the
Company is a creditor of both Aristek Properties and MVI as described above,
the Company expects to be entitled to substantially all of the equity value of
MVI in excess of MVI's existing first mortgage.
In connection with obtaining such consent of the limited partners of
Aristek Properties, such consenting limited partners granted to the Company, or
its designee, an option to purchase their limited partnership interests in
Aristek Properties. The option must be exercised by the Company between
January 1, 1997 and November 30, 1998. The purchase price will be equal to the
greater of $20,000 per limited partner Unit (an original $100,000 investment)
or the fair market value (based on appraisal) of such limited partnership unit.
Holders of twenty-six and one-half (26.5) Units granted the above described
option, which would result in a minimum total purchase price for all such Units
of $530,000.
Aristek Western Properties Limited Partnership. The Company formed
Aristek Western Properties Limited Partnership ("Aristek Western"), a
Massachusetts limited partnership, in October 1984 for the purpose of acquiring,
financing and developing or redeveloping adult recreational communities with
affordable rental homesites for manufactured homes, located primarily in the
Western and Southwestern United States. The Company has a 1% interest in Aristek
Western as the General Partner, a 1.625% limited partnership interest and has
residual equity interests as the General Partner and as a Special Limited
Partner. See BUSINESS - Residual Interests in Partnerships.
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Aristek Western purchased a 50% interest in a joint venture with an
unaffiliated third party in July 1985. The joint venture purchased two adult
recreational communities in Mesa, Arizona, named Good Life and Towerpoint. See
Item 2 - PROPERTIES. In September 1985, Aristek Western acquired from the
Partnership a 30% interest in Monte Vista I Joint Venture. This interest was
increased to 40% in July 1986. This 40% interest was transferred to Aristek
Properties and the Company. See Item 1-BUSINESS OF THE COMPANY - Affiliated
Partnerships; Aristek Properties, Ltd.
Residual Interests in Partnerships
Aristek Properties, Ltd. Prior to the restructuring described
above, as General Partner of Aristek Properties, the Company had a residual
interest in Aristek Properties which entitled it to receive 30% of all excess
cash flow from operations and net proceeds from the refinancing and sale of
properties after distributions have been made to the limited partners in an
amount equal to their initial capital investments. The Company relinquished its
residual interest in Aristek Properties as part of the loan restructuring
described above. As a result, the limited partners of Aristek Properties will be
entitled to all distributions, but only after the Company receives its loan
repayment and participating interest as described above.
Aristek Western Properties Limited Partnership. The Company has a
direct residual interest in Aristek Western which entitles the Company to 30% of
the excess cash flow from operations, refinancings and sales of properties when
Aristek Western has made cash distributions to the limited partners of at least
$65,000 per unit and the sum of the cash distributions per unit plus the product
of the highest marginal Federal income tax rate in effect for each year times
the aggregate net tax losses allocated per unit in each year equal the initial
capital investment. Aristek Western has not yet made any cash distributions to
its limited partners. The Company cannot presently predict when distributions
will be made to the limited partners.
Financial Information about Industry Segments
For the last five fiscal years, the revenues, operating profit and
identifiable assets of the Company have been attributable to one industry
segment--real estate investment, management and development--conducted by the
Company for its own account and on behalf of affiliated partnerships, joint
ventures and unaffiliated third parties.
Development Activities
The Company, through Aristek Properties and in conjunction with
Resortparks, developed a community for recreational homes and park model travel
trailers in Mesa, Arizona, a city 20 miles east of Phoenix. The community,
called Monte Vista, is
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designed to appeal to active adults in the pre-retirement and retirement age
groups and is recreation-oriented.
The Company planned a two-stage development process for Monte Vista.
During the first stage, the Company developed 832 recreational home rental
sites and extensive common facilities, including a 35,600 square foot social
and recreation complex. This first stage is on 80 acres owned by Monte Vista I
Joint Venture. Construction began in 1983 and was substantially completed in
December 1984. Monte Vista opened for occupancy in January 1985.
During the second stage, the Company plans to develop additional
manufactured home sites on a portion of 80 acres conveyed by Aristek Properties
to Monte Vista I Joint Venture. Assuming that market conditions permit, the
Company intends to pursue in the future the funding necessary to develop this
second stage. See Item 2 - PROPERTIES.
Competition
The Company competes generally with all companies engaged in community
development and home construction.
The three properties in Mesa, Arizona compete in what is regarded as a
competitive market for adult recreation manufactured housing communities. The
Company continues to compete in this market by offering special amenities and
adult recreational and educational services.
Each of the Company's geographic markets includes competitors which
are larger and have greater financial and other resources than the Company.
Personnel
During 1994 the Company employed two full-time employees. During
1994, the Company also employed between 27 and 55 additional full-time persons
responsible for property operations. The compensation of these additional
persons is borne by affiliated partnerships.
BUSINESS OF THE PARTNERSHIP
Homefree Investors L.P. (the "Partnership"), a Delaware limited
partnership, was formed on July 20, 1987 for the purpose of engaging in certain
aspects of future business opportunities of the type presently conducted by the
Company. The general partner of the Partnership is Homefree General Partners,
a Delaware general partnership comprised of Bollman Associates, Inc., a
Delaware corporation organized in June 1987, and the Company.
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To date, specific business plans for the Partnership have not been
formulated, and the Partnership has generated no revenues. The Company
anticipates that, where possible, in future real estate acquisitions the
Partnership will acquire an ownership interest and the Company will manage
operations. The Company has no plans to transfer the Company's assets to the
Partnership.
The Agreement of Limited Partnership for the Partnership (the
"Partnership Agreement") provides that it may engage in virtually any business
activity, although the primary focus of its business is intended to be
investment in real estate related activities, which may include, for example,
investing in securities of other real estate companies and participating in
condominium conversion programs. If the Partnership generates capital to
invest, Homefree General Partners, the general partner of the Partnership,
anticipates making investments in such areas. Although the Partnership has the
power under state law to make investments in securities of other entities, the
Partnership cannot be engaged primarily in the business of investing,
reinvesting or trading in securities without subjecting itself to regulation
under the Investment Company Act of 1940. In such event, the Partnership would
be subject to the limitations and disclosure requirements of such act. The
Partnership has no present intention to engage in activities which would cause
it to become subject to regulation under the Investment Company Act of 1940 or
to engage in non-real estate related activities.
The Partnership currently has no employees. The Partnership intends
to utilize employees of the Company on an as-needed basis, and to contribute to
the compensation of such persons on a pro-rata basis.
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ITEM 2. PROPERTIES.
THE COMPANY
The Company, through Aristek Properties and other related limited
partnerships, has ownership interests in the properties described below. The
Company operates the Monte Vista property described below.
Monte Vista. Monte Vista is an adult recreational community located
in Mesa, Arizona containing 832 sites for recreational homes. Most sites are
leased on an annual basis to residents who leave their homes at the site
year-round. Remaining sites are reserved for monthly and weekly rentals. Most
residents and guests stay at the community during the months from November
through April. During the peak months of January through March, Monte Vista
reached 90% occupancy for the past five years. The effective average occupancy
based on annual rental income is 89%. Monte Vista is owned by the Monte Vista
I Joint Venture, which is owned 99% by Aristek Properties and 1% by the
Company. At December 31, 1994 the property was subject to a mortgage in the
amount of $4,492,900 held by a commercial lender.
Monte Vista II . In December 1983, the Company sold to Resortparks an
80-acre parcel on which the development of Monte Vista II is planned. See Item
1 - BUSINESS - Development Activities. This land was transferred in April 1990
to Aristek Properties, Ltd. This land was transferred to Monte Vista in October,
1991 and is subject to the above described mortgage.
Good Life Travel Trailer Resort . Good Life is an adult recreational
community located in Mesa, Arizona containing 1,198 sites for recreational
vehicles. Most sites are rented on an annual basis with the remainder rented on
a monthly or weekly basis. Most residents stay at the community during the
months from November through April. Good Life is owned by H-H Resorts Joint
Venture, which is owned 50% by Aristek Western and 50% by Hankins Enterprises,
an unaffiliated third party. Good Life is managed by Hankins Enterprises and
has historically been 100% occupied from January through April and the effective
average occupancy based on annual rental income is 97%. Good Life is subject to
a mortgage in the principal amount of $9,225,600 held by a commercial lender.
Towerpoint Travel Trailer Resort. Towerpoint is an adult recreational
community located in Mesa, Arizona containing 1,115 sites for recreational
vehicles. Most sites are rented on an annual basis with the remainder rented
on a monthly or weekly basis. Most residents stay at the community during the
months from November through April. Towerpoint is owned by H-H Resorts Joint
Venture and is managed by Hankins Enterprises. Towerpoint has historically
been 100% occupied from November through April and the effective average
occupancy based on annual rental income is 98%.
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Towerpoint is subject to a mortgage in the amount of $9,225,600 held by a
commercial lender.
THE PARTNERSHIP
The Partnership neither owns nor leases any properties.
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ITEM 3. LEGAL PROCEEDINGS.
Neither the Company nor the Partnership is the subject of any legal
proceedings.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR THE REGISTRANTS' "PAIRED SHARES" AND RELATED STOCKHOLDER
MATTERS.
The Registrants' "Paired Shares"(symbol HMFRZ) are no longer traded in
the over-the-counter market of the National Association of Securities Dealers
Automated Quotation System (NASDAQ). The Registrant no longer receives
information on the trading activity for the "Paired Shares."
There were approximately 549 record holders of the "Paired Shares" on
June 8, 1995, as reported by the Registrants' transfer agent.
During the two years ended December 31, 1994, the Company declared no
dividends.
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ITEM 6. SELECTED FINANCIAL DATA.
The following data has been extracted from the combined annual
financial statements of the Company and the Partnership. Such selected
financial data should be read in conjunction with the registrants' financial
statement and related notes incorporated by reference into "Item 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA." As summarized in note 10 to the financial
statements, the Company restated financial statements issued previously for the
years ended December 31, 1993, 1992 and 1991. The financial data summarized
below reflects the restated amounts.
<TABLE>
<CAPTION>
Year Year Year Year
Ended Dec. Ended Dec. Ended Dec. Ended Dec.
31, 1994 31, 1993 31, 1992 31, 1991
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 270,700 $ 285,100 $ 461,700 $1,233,000
Expenses 593,700 488,200 552,800 1,174,200
--------- -------- -------- ----------
Earnings (losses)
before income taxes (323,000) (203,100) (91,100) 58,800
Income tax
Benefit (Provision) 87,000 43,000 (15,000) (4,500)
--------- -------- -------- ----------
Net Income (loss) $(236,000) $(160,100) $(106,100) $54,300
========= ========= ========= ==========
Net earnings (losses)
per share $(.02) $(.02) $(.01) $.01
==== ==== ===== ====
Weighted average
shares out-
standing 10,484,000 10,484,000 10,484,000 10,484,000
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total assets $9,242,300 $9,822,500 $9,922,000 $10,625,000
========== ========== ========== ===========
Long-term debt $7,198,900 $7,204,400 $7,165,200 $7,301,300
========== ========== ========== ==========
Stockholders' $1,257,900 $1,493,900 $1,654,000 $1,760,100
========== ========== ========== ==========
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
THE COMPANY
Historically, the Company has not required large amounts of working
capital because the properties in which the Company has interests have been
acquired, financed and improved by related entities.
During the past four years, the Company has used cash of $24,400 to
$124,000 per year in connection with the Company's operating activities.
During this period, the Company has also used cash of $4,000 to $10,000 per
year to repay principal on long- term debt, and a total $28,000 in 1993 and
$88,000 in 1994 under financing arrangements related to a land option contract.
The remaining payment of $44,000 to exercise the option to acquire a parcel of
land has been deferred until 1996.
The Company's investing activities have generated cash through the net
collection of receivables from unconsolidated entities in each of the past four
years, including $374,000 in 1994. In each of the last four years, the
Company's investing activities have utilized cash of $34,000 to $113,000 in
connection with loans to the Company's President. Management anticipates that a
portion of these loans will be collected in 1995. Other uses of cash over the
past four years have consisted of $35,000 to obtain the land option in 1993,
$50,000 for a residual interest in Aristek Properties during 1994, and $23,000
for the purchase of office equipment. Management does not expect that the
Company will be required to provide capital in 1995 for the Company's
investments in Aristek Properties and Aristek Western, since both entities
recently refinanced their debt obligations. Management believes the /company's
liquidity needs for fiscal 1995 will be met primarily through the collection of
loans receivable from unconsolidated entities. If the Company decides to
undertake any significant development projects in 1995, It is expected that the
initial financing will be derived from an equity offering, debt financing or a
combination thereof. Management emphasizes that there is no assurance that the
Company will be successful in obtaining such development financing.
THE PARTNERSHIP
At present, the Partnership has no liabilities and conducts no
business and thus has no capital needs. While future business of the
Partnership has not been determined, availability of capital will be considered
if and when such business is determined.
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RESULTS OF OPERATIONS
THE COMPANY
The Company and its affiliates serve as a real estate advisor,
developer, manager and marketing agent and perform certain administrative
functions for related entities. Principal sources of revenues are management
and administrative fees, commissions, and cash flow participation from
properties under its direction. See "Consolidated Statement of Operations"
included in the financial statements included with this report.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
The Company incurred a $236,000 loss for the year ended December 31,
1994.
Total revenues for the year ended December 31, 1994 were $270,700 as
compared to $285,100 for the year ended December 31, 1993. The decrease
($14,400) was attributable principally to a reduction in earnings of
unconsolidated entities and management and administrative fees.
Total expenses for the year ended December 31, 1994 were $593,700 as
compared to $477,100 for the previous year. The increase in expenses resulted
from an additional provision for loss on receivables ($53,100) and an increase
in general and administrative expenses of $83,100 partially offset by a
decrease in losses from unconsolidated entities. The increase in general and
administrative expenses includes an increase in accounting services and
external audit fees of $33,000.
The effective tax rate used to calculate the net income tax benefit
for 1994 was 27%. See note 4 to the financial statements for a summary of
income taxes.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
The Company incurred a $149,000 loss for the year ended December 31,
1993.
Total revenues for the year ended December 31, 1993 were $285,100 as
compared to $461,700 for the year ended December 31, 1992. This decrease was
attributable principally to a management decision not to accrue management fees
owed by APL in connection with management of the Monte Vista property because
of the uncertainty of subsequent collection.
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Total expenses for the year ended December 31, 1993 were $477,100 as
compared to $519,400 for the previous year. The decrease ($42,300) was
attributable principally to a reduction in general and administrative expenses
of $22,700, and a decrease in interest expense of $28,200 due to the repayment
of debt. Decreases in expenses were partially offset by increases in losses of
unconsolidated entities and the provision for loss on receivables of $22,900
and $14,100, respectively. Additionally, in the Company's consolidated
financial statements, the net investment in HILP was considered to be impaired
since the partnership has not commenced its planned operations. See note 10 to
the financial statements.
The effective tax rate used to calculate the net income tax benefit
for 1993 was 22%. See note 4 to the financial statements for a summary of
income taxes.
Effects of Inflation
Inflation has not had a material impact on the operations of the
Company and management believes it will not have a material impact on future
operations.
THE PARTNERSHIP
The Partnership has not commenced its planned operations.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary data are included in Part IV of
this report and are incorporated herein by reference.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
The Company's and the Partnership's 1990 financial statements were
audited by Deloitte & Touche, independent certified public accountants. During
1994, the Company changed its auditors to HEIN + ASSOCIATES LLP, which audited
the 1991, 1992, 1993 and 1994 financial statements included in this report.
There were no disagreements between management and the Company's
independent auditors.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
THE COMPANY
(a) Identification of Directors
The following table sets forth the names, ages, positions, and periods
of service of the directors of the Company. There are no arrangements or
understandings pursuant to which any of the directors was or is to be selected
as a director.
<TABLE>
<CAPTION>
Positions Period of Service
Name Age with the Company as Director
- - ---- --- ---------------- -------------------
<S> <C> <C> <C>
Craig M. Bollman, Jr. 57 Chairman of the Since Feb. 24, 1977
Board, President
Phyllis A. Bollman 54 None Since Feb. 24, 1977
W. Phillip Marcum 51 None Since Dec. 11, 1979
Michael T. Oliver 51 None Since Nov. 28, 1977
Anthony B. Petrelli 42 None Since July 19, 1983
</TABLE>
All directors are elected to serve until the next annual meeting of
stockholders or until their successors are chosen and qualify, or until they
resign or are replaced.
(b) Identification of Executive Officer
The name and age of the only executive officer of the Company, the
position and office with the Company held by such person, and the periods
served are as follows:
<TABLE>
<CAPTION>
Period of
Positions with Service as
Name Age the Company an Officer
---- --- --------------------- --------------
<S> <C> <C> <C>
Craig M. Bollman, Jr. 57 Chairman of the Since Feb. 24,
Board, President 1977
</TABLE>
All officers are elected to serve until their successors are duly
elected and qualified or until they resign or are replaced.
(c) Family Relationships
18
<PAGE> 22
Craig M. Bollman, Jr. and Phyllis A. Bollman are married. No other
family relationship exists among the directors or executive officers.
(d) Business Experience
The following is a brief account of the business experience of each
executive officer and director for the past five or more years:
Craig M. Bollman, Jr. Mr. Bollman has been the Chairman of the Board
of Directors of the Company since February 24, 1977. He served as President
from February 24, 1977 to December 1, 1984 and resumed such office as of July
1986. In September 1974, Mr. Bollman founded Aristek Corporation (then called
Aristek Real Estate Corporation), which specialized in working out distressed
loan situations for major national institutional lenders. On February 24,
1977, Metrix, Inc., a publicly-held corporation engaged primarily in the
business of operating manufactured home communities, acquired all of the
capital stock of Aristek Corporation in exchange for 6,230,000 shares of its
Common Stock. The name of Metrix, Inc. was changed to Aristek Corporation, then
to Aristek Communities, Inc. and in 1987 to Homefree Village Resorts, Inc.
Phyllis A. Bollman . Mrs. Bollman has served as a director of the
Company since February 24, 1977. Mrs. Bollman served as the president and a
director of a departmental advisory board at Denver's University Hospital from
1982 until 1986 and was also on the Board of Directors of Colorado Contemporary
Dance from 1983 until 1987. Neither of these organizations is a parent,
subsidiary or other affiliate of the Company.
W. Phillip Marcum. Mr. Marcum has served as a director of the Company
since December 11, 1979. On February 15, 1991, Mr. Marcum became President of
Marcum Natural Gas Services, Inc., a firm providing services to natural gas
concerns. Mr. Marcum previously was Senior Vice President of Corporate Finance
of Boettcher & Co., Inc., an investment banking firm which he joined in
November 1987. Prior to that Mr. Marcum served as Chairman of the Board, a
director, President and Chief Executive Officer of MGF Oil Corporation,
Midland, Texas ("MGF"), an oil and gas exploration and contract drilling
company. Mr. Marcum is also a director of Mallon Resources Corporation, an
oil, gas and mining company. None of these corporations is a parent,
subsidiary or other affiliate of the Company.
Michael T. Oliver. Mr. Oliver has served as a director of the Company
since November 28, 1977. Mr. Oliver joined PRA Securities Advisors, an
investment advisory company specializing in publicly- traded real estate
securities, as President in March 1988. Prior to that he served as Manager of
Pension Realty Advisors, Inc. beginning in April 1987. From 1985 to April 1987
he served as Vice President at Kennedy Associates Real
19
<PAGE> 23
Estate Counsel, Inc., a real estate advisor to pension plans, beginning
February 15, 1985. None of these corporations is a parent, subsidiary or other
affiliate of the Company.
Anthony B. Petrelli . Mr. Petrelli has served as a director of the
Company since July 8, 1983. Mr. Petrelli is Senior Vice President and Manager
of the Investment Banking Department for Neidiger, Tucker, Bruner, Inc., an
investment banking firm, which he joined in June 1987. Prior to that he served
as Senior Vice President and a director of Wall Street West, Inc., an
investment banking firm, which he joined in March 1984 as Vice President,
Manager of Broker & Business Development. From 1978 to March 1984, Mr.
Petrelli was employed by Hanifen, Imhoff, Inc., an investment banking firm, as
Executive Vice President and a director, where he was responsible for corporate
finance and corporate underwriting. None of these corporations is a parent,
subsidiary or other affiliate of the Company.
THE PARTNERSHIP
The general partner of the Partnership is Homefree General Partners, a
Delaware general partnership comprised of Bollman Associates, Inc., and the
Company. See DIRECTORS AND EXECUTIVE OFFICERS - THE COMPANY for information
with respect to the directors and executive officers of the Company. Craig M.
Bollman, Jr. is the sole director and executive officer of Bollman Associates,
Inc.
20
<PAGE> 24
ITEM 11. EXECUTIVE COMPENSATION.
THE COMPANY
(a) Executive Compensation
Set forth below is a summary of the compensation paid to Craig M.
Bollman, the Company's only executive officer, in each of the last three years:
<TABLE>
<CAPTION>
Other Annual(1) Options All Other
Year Salary Bonus Compensation Granted Compensation
---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
1994 $175,000 -- $23,500 -- --
1993 $174,038 $19,000 -- --
1992 $150,000 -- $14,000 -- --
</TABLE>
(1)Cost of health and life insurance.
(b) Compensation of Directors
Four directors, Phyllis A. Bollman, Michael T. Oliver, W. Phillip
Marcum and Anthony B. Petrelli, each received directors fees of $2,000 during
the twelve months ended December 31, 1993, paid $500 per quarter. In addition,
all directors receive $200 for each meeting of the Board of Directors they
attend and are reimbursed for travel expenses incurred in attending such
meetings. One meeting was held in the twelve months ended December 31, 1994.
Directors are expected to receive similar compensation in 1995.
THE PARTNERSHIP
The Partnership presently has no executive officers. Homefree General
Partners will be responsible for the duties customarily associated with the
duties of executive officers of a corporation. Homefree General Partners is
entitled to receive an annual administrative fee from the Partnership. Bollman
Associates, Inc., all of the capital stock of which is owned by Craig M.
Bollman, Jr., the President and Chairman of the Board and principal stockholder
of the Company, is entitled to receive the annual $75,000 administrative fee
when payable by the Partnership to Homefree General Partners for providing
administrative services to the Partnership. Such fee is not payable until such
time as there is available cash or upon liquidation of the Partnership.
21
<PAGE> 25
Compensation to Homefree General Partners
The Partnership Agreement provides for the payment of an
administrative fee to Homefree General Partners of $75,000 per annum. This fee
is subject to adjustment by the Board of Directors of the Company and may be
canceled in any year by the Board of Directors in its capacity as a general
partner of Homefree General Partners. In return for this fee, Homefree General
Partners will attempt to locate and negotiate investment opportunities for the
Partnership, will attempt to arrange financing for such investments and will
administer the affairs of the Partnership. The agreement of Homefree General
Partners provides that the annual administrative fee will be payable to Bollman
Associates, Inc. for providing services to the Partnership, as compensation for
its role as a general partner of Homefree General Partners and for assuming the
risks incident to such role. No amount of such fee was paid for the twelve
months ended December 31, 1994. The Partnership Agreement also provides for
reimbursement to Homefree General Partners of all expenses incurred by it in
connection with the Partnership. To the extent that Bollman Associates, Inc.
incurs expenses, it will be reimbursed by Homefree General Partners, which in
turn will be reimbursed by the Partnership.
The agreement of Homefree General Partners provides that the Company
will be entitled to 90% and Bollman Associates, Inc. will be entitled to 10%
of Homefree General Partners' 1% interest in the Partnership.
In addition to the annual administrative fee and reimbursement of
expenses, Homefree General Partners may enter into contracts with or perform
other services for the Partnership. The partnership agreement between the
partners of Homefree General Partners provides that no additional compensation
will be payable to Bollman Associates, Inc. and that the Company in its
capacity as a general partner of Homefree General Partners is entitled to all
compensation for such additional services. The only compensation to be
received by Bollman Associates, Inc. in connection with the Partnership
Agreement is the reimbursement of expenses, the annual administrative fee and
its share of profits and losses.
22
<PAGE> 26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
THE COMPANY
(a) Security Ownership of Certain Beneficial Owners
As of May 31,1995, persons or groups known to the Company to own
beneficially more than five percent of the issued and outstanding shares of
Common Stock, which is the only class of voting securities of the Company, are
set forth in the following table:
Shares of Common
Stock Beneficially
Owned on May 31, 1995
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent of
of Beneficial Owner Ownership Class (1)
- - ------------------- ---------- ----------
<S> <C> <C>
Craig M. Bollman, Jr. 6,282,428 59.92%
1400 S. Colorado Boulevard
Suite 410
Denver, Colorado 80222
The Aristek Foundation
1400 S. Colorado Boulevard
Suite 410
Denver, Colorado 80222 588,815 5.62%
</TABLE>
(1) The percentages shown are based upon 10,483,982 issued and outstanding
shares of Common Stock. Craig M. Bollman, Jr. is not a holder of any
option to purchase shares of Common Stock of the Company.
(b) Security Ownership of Management
The following table sets forth the shares of Common Stock of the
Company beneficially owned by each director and by the directors and officers
of the Company as a group as of May 31, 1995, and their percentage ownership
thereof:
23
<PAGE> 27
Shares of Common
Stock Beneficially
Owned on May 31, 1995
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Name of Director Ownership Class (1)
- - ---------------- ---------- ----------
<S> <C> <C>
Craig M. Bollman, Jr. 6,282,428 59.9
W. Phillip Marcum -- (2)
Michael T. Oliver 34,928 (2)
Anthony B. Petrelli -- (2)
All directors and 6,317,356 60.3
officers as a group
(5 persons)
</TABLE>
__________________________________
(1) The percentages shown for all directors and the directors and officers
as a group are based upon 10,483,982 shares issued and outstanding as
of May 31, 1995.
(2) The director owns beneficially less than 1% of the Common Stock.
24
<PAGE> 28
THE PARTNERSHIP
The following table sets forth the assignee limited partnership
interests of the Partnership beneficially owned by each director and by the
directors and officers of the Company as a group as of May 31, 1995, and their
percentage ownership thereof:
Assignee Limited Partnership
Interest Beneficially
Owned on May 31, 1995
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Name of Director Ownership Class (1)
- - ---------------- ---------- ----------
<S> <C> <C>
Craig M. Bollman, Jr. 6,282,428 59.9
W. Phillip Marcum -- (2)
Michael T. Oliver 34,928 (2)
Anthony B. Petrelli -- (2)
All directors and 6,317,356 60.3
officers as a group
(5 persons)
</TABLE>
_________________________
(1) The percentages shown for all other directors and the directors and
officers as a group are based upon 10,483,982 assignee limited
partnership interests issued and outstanding as of May 31, 1995.
(2) The director owns beneficially less than 1% of the assignee limited
partnership interests.
25
<PAGE> 29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Certain Business Relationships
Bollman Associates, Inc. and the Company are the general partners of
Homefree General Partners. Homefree General Partners is the general partner of
the Partnership. Bollman Associates, Inc. is entitled to receive a $75,000
annual administrative fee to be paid by the Partnership to Homefree General
Partners for administrative services, when and if such fee is paid by the
Partnership. See Item 11, EXECUTIVE COMPENSATION - THE PARTNERSHIP. The
aggregate amount owed by the Partnership to Bollman Associates, Inc. as of
December 31, 1994 is $582,800. This amount has not been accrued as of December
31, 1994 inasmuch as there can be no assurance that the Partnership will have
sufficient funds to meet the obligation. Craig M. Bollman, Jr., a director,
President and Chairman of the Board of the Company, is the sole stockholder of
Bollman Associates, Inc.
(b) Indebtedness of Management
The Company holds an interest-bearing notes from Craig M. Bollman,
Jr., President and Chairman of the Board, in the aggregate amount of $520,900
at December 31, 1994. This indebtedness was incurred in connection with
personal loans. This note bears interest at the "Applicable Federal Rate"
which is the lowest rate permitted by the Internal Revenue Service without
imputing interest on a transaction. The largest amount outstanding under these
notes during fiscal 1994 was $520,900.
26
<PAGE> 30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT S-1
COMBINED FINANCIAL STATEMENTS
Combined Balance Sheets --
December 31, 1994, 1993, 1992 and 1991 S-2
Combined Statements of Operations --
Years ended December 31, 1994, 1993,
1992 and 1991. S-4
Combined Statement of Stockholders'
Equity and Partners' Deficit --
Years ended December 31, 1994, 1993,
1992 and 1991. S-5
Combined Statements of Cash Flows --
Years ended December 31, 1994, 1993,
1992 and 1991. S-6
CONSOLIDATED FINANCIAL STATEMENTS
OF THE COMPANY
Consolidated Balance Sheets --
December 31, 1994, 1993, 1992 and 1991 S-8
Consolidated Statements of Operations --
Years ended December 31, 1994, 1993,
1992 and 1991. S-10
Consolidated Statement of Stockholders'
Equity -- Years ended December 31, 1994,
1993, 1992 and 1991. S-11
Consolidated Statements of Cash Flows --
Years ended December 31, 1994, 1993
1992 and 1991. S-12
</TABLE>
27
<PAGE> 31
<TABLE>
<S> <C>
FINANCIAL STATEMENTS OF THE PARTNERSHIP
Balance Sheets -- December 31, 1994,
1993, 1992 and 1991 S-14
Statements of Operations -- Years ended
December 31, 1994, 1993, 1992 and 1991. S-14
Statement of Partners' Capital (Deficit) --
Years ended December 31, 1994, 1993,
1992 and 1991. S-16
Statements of Cash Flows --
Years ended December 31, 1994, 1993,
1992 and 1991. S-17
NOTES TO FINANCIAL STATEMENTS --
Years ended December 31, 1994, 1993,
1992 and 1991. S-18
</TABLE>
b. Financial Statement Schedules.
None
Schedules have been omitted because they are not required or
the information is included in the financial statements or
notes thereto.
c. Reports on Form 8-K.
None
d. Exhibits.
THE COMPANY
3.1 Certificate of Amendment to Restated Certificate of
Incorporation of Homefree Village Resorts, Inc.
dated May 2, 1988. Incorporated by reference to
Annual Report on Form lO-K for the year ended March
31, 1988.
28
<PAGE> 32
3.2 Amendment to Restated Certificate of Incorporation
of Homefree Village Resorts, Inc. Incorporated by
reference to Quarterly Report on Form 10-Q for the
quarter ended December 31, 1986.
Restated Certificate of Incorporation of Homefree
Village Resorts, Inc. Incorporated by reference to
Annual Report on Form 10-K for the year ended March
31, 1983.
3.3 Bylaws - Incorporated by reference to Annual Report
on Form 10-K for the year ended March 31, 1981.
4.1 Certificate of Amendment to Restated Certificate of
Incorporation of Homefree Village Resorts, Inc. (see
Exhibit 3.1 hereto.) Incorporated by reference to
Annual Report on Form 10-K for the year ended March
31, 1988.
4.2 Amended and Restated Agreement of Limited
Partnership of Homefree Investors L.P. dated as of
March 1, 1988. Incorporated by reference to Annual
Report on Form 10-K for the year ended March 31,
1988.
4.3 Paired Share Certificate of Homefree Village
Resorts, Inc. and Homefree Investors L.P.
Incorporated by reference to Annual Report on Form
10-K for the year ended March 31, 1988.
4.4 Pairing Agreement dated March 31, 1988 between
Homefree Village Resorts, Inc. and Homefree
Investors L.P. Incorporated by reference to Annual
Report on Form 10-K for the year ended March 31,
1988.
10.1 Partnership Administration Agreement dated May 2,
1988 between Homefree Investors L.P. and Homefree
General Partners. Incorporated by reference to
Annual Report on Form 10-K for the year ended March
31, 1988.
10.2 Letter Agreement for sale of Mesa, Arizona land
dated November 11, 1987 between Homefree Village
Resorts, Inc. and Aristek Western Properties Limited
Partnership and Aristek Properties Limited.
Incorporated by reference to Annual Report on Form
10-K for the year ended March 31, 1988.
29
<PAGE> 33
22.1 The Company has a wholly-owned subsidiary,
Resortparks of America, Inc., which was incorporated
under the laws of Delaware in September 1982.
THE PARTNERSHIP
2.0 Proxy Statement of Homefree Village Resorts, Inc.
(the "Proxy Statement"), filed with the Securities
and Exchange Commission on March 8, 1988.
Incorporated by reference to the Annual Report on
Form 10-K for the year ended December 31, 1987.
3.1 Certificate of Limited Partnership of Homefree
Investors L.P. Incorporated by reference to Exhibit
3.1 to Report on Form 10 of Homefree Investors L.P.
("Form 10") filed with the Securities and Exchange
Commission on August 27, 1987.
3.2 Agreement of Limited Partnership of Homefree
Investors L.P. Incorporated by reference to Exhibit
3.2 to Form 10.
3.3 Amended and Restated Agreement of Limited
Partnership of Homefree Investors L.P. Incorporated
by reference to Exhibit 3.3 to Form 10, as amended
by Amendment No. 2 on Form 8 dated February 29, 1988
("Amended Form 10").
4.0 Paired Share Certificate of Homefree Village
Resorts, Inc. and Homefree Investors L.P.
Incorporated by reference to Exhibit 4 to Amended
Form 10.
10.0 Pairing Agreement. Incorporated by reference to
Exhibit 10.0 to Amended Form 10.
10.1 Partnership Administration Agreement. Incorporated
by reference to Exhibit 10.1 to Amended Form 10.
30
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, each of the Registrants has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
HOMEFREE VILLAGE RESORTS, INC. HOMEFREE INVESTORS L.P.
By
----------------------------- By Homefree General
Craig M. Bollman, Jr. Partners, its General
Chairman of the Board Partner
(Principal Executive Officer)
By Homefree Village Resorts,
Inc., a General Partner
Date: June 8, 1995
By
-------------------------
Craig M. Bollman, Jr.
President
Date: June 8, 1995
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
Registrants and in the capacities and on the dates indicated:
- - ---------------------------------- ------------------------------------
Craig M. Bollman, Jr. Craig M. Bollman, Jr.
Chairman of the Board Sole Director,
(Principal Executive and
Financial Officer) Bollman Associates, Inc.
a General Partner of
Dated: June 8, 1995 Homefree General Partners,
General Partner of
Homefree Investors L.P.
(Principal Executive and
Financial Officer)
Date: June 8, 1995
31
<PAGE> 35
Majority of the Board of Directors
- - ----------------------------------
Craig M. Bollman, Jr.
Director
Date: June 8, 1995
- - ----------------------------------
Phyllis A. Bollman
Director
Date: June 8, 1995
- - ----------------------------------
W. Phillip Marcum
Director
Date: June 8, 1995
- - ----------------------------------
Michael T. Oliver
Director
Date: June 8, 1995
- - ----------------------------------
Anthony B. Petrelli
Director
Date: June 8, 1995
32
<PAGE> 36
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Homefree Village Resorts, Inc.
Denver, Colorado
We have audited the accompanying combined, consolidated and separate balance
sheets of Homefree Village Resorts, Inc. (a Delaware Corporation) and
subsidiaries and Homefree Investors L.P. (a Massachusetts limited partnership)
as of December 31, 1994, 1993, 1992, and 1991, and the related combined,
consolidated and separate statements of operations, stockholders' equity and
partners' capital (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's and Partnership'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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined, consolidated, and separate financial
position of Homefree Village Resorts, Inc. and subsidiaries and Homefree
Investors L.P. as of December 31, 1994, 1993, 1992, and 1991, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company and the partnership will continue as a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. As discussed in Note 1 to the financial statements,
the Company and the Partnership have suffered losses from inception, and
anticipate the need for additional cash to fund operations. These conditions
raise substantial doubt about the ability of the Company and the Partnership to
continue as a going concern. Management's plans in regard to these matters are
also discussed in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
HEIN + ASSOCIATES LLP
Denver, Colorado
June 6, 1995
S-1
<PAGE> 37
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
AND HOMEFREE INVESTORS L.P.
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and equivalents $10,600 $34,500 $284,000 $169,700
Income tax refund receivable - - - 234,500
Other current assets 9,600 3,400 2,800 7,600
----- ----- ----- -----
Total current assets 20,200 37,900 286,800 411,800
RECEIVABLES FROM UNCONSOLIDATED
ENTITIES, net 8,915,600 9,534,700 9,556,000 9,961,400
INVESTMENTS IN UNCONSOLIDATED
ENTITIES 94,400 42,800 58,500 67,900
PROPERTY AND EQUIPMENT, at cost:
Condominium - - - 192,500
Office furniture and equipment 95,100 83,800 73,200 73,200
Vehicles 25,000 25,000 25,000 25,000
------ ------ ------ ------
120,100 108,800 98,200 290,700
Accumulated depreciation (103,600) (97,300) (88,600) (151,300)
-------- ------- ------- --------
Net property and equipment 16,500 11,500 9,600 139,400
------ ------ ----- -------
OTHER ASSETS:
Land option costs 195,600 195,600 - -
Intangible assets, net of accumulated
amortization of $166,900,
$166,900, $155,700, and $122,365,
respectively. - - 11,100 44,500
----- ------ ------ ------
Total other assets 195,600 195,600 11,100 44,500
------- ------- ------ ------
TOTAL ASSETS $9,242,300 $9,822,500 $9,922,000 $10,625,000
========== ========== ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-2
<PAGE> 38
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
AND HOMEFREE INVESTORS L.P.
COMBINED BALANCE SHEETS
(CONTINUED)
LIABILITIES, STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $93,600 $56,300 $46,100 $52,000
Notes payable, bank - - - 315,000
Payable to Aristek Western Properties, Ltd. - - 37,800 -
Current maturities of long-term debt - 93,500 4,600 5,500
----- ------ ----- -----
Total current liabilities 93,600 149,800 88,500 372,500
LONG-TERM DEBT, less current maturities:
Unconsolidated entity 7,154,500 7,154,500 7,154,500 7,154,500
Other 44,400 49,900 10,700 146,800
DEFERRED INCOME TAXES 200,000 287,000 330,000 315,000
DEFERRED PROFIT 488,500 488,500 488,500 488,500
OTHER LIABILITIES:
Accrued interest, Aristek Properties, Ltd. - 148,100 148,100 148,100
Payable to unconsolidated entities 3,400 50,800 47,700 239,500
COMMITMENTS AND CONTINGENCIES
(Notes 1 and 8)
STOCKHOLDERS' EQUITY AND
PARTNERS' DEFICIT:
Preferred stock, $1.00 par value;
3,000,000 shares authorized; none
issued and outstanding - - - -
Common stock, $.001 par value;
15,000,000 shares authorized;
10,484,000 shares issued and
outstanding 10,500 10,500 10,500 10,500
Additional paid-in capital 3,537,000 3,537,000 3,537,000 3,537,000
Accumulated deficit (2,061,800) (1,826,100) (1,677,400) (1,633,400)
Partners' deficit - limited partners (227,800) (227,500) (216,100) (154,000)
-------- -------- -------- --------
Total stockholders' equity and
partners' deficit 1,257,900 1,493,900 1,654,000 1,760,100
--------- --------- --------- ---------
TOTAL LIABILITIES, STOCKHOLDERS'
EQUITY AND PARTNERS' DEFICIT $9,242,300 $9,822,500 $9,922,000 $10,625,000
========== ========== ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-3
<PAGE> 39
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
AND HOMEFREE INVESTORS L.P.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1994 1993 1992 1991
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Management and administrative fees from
unconsolidated entities $244,600 $253,400 $424,300 $403,000
Equity in earnings of unconsolidated entities 10,800 16,900 100 22,000
Interest 15,300 14,800 21,000 806,200
Other, net - - 16,300 1,800
----- ----- ------ -----
270,700 285,100 461,700 1,233,000
EXPENSES:
General and administrative 446,500 374,600 448,500 251,400
Interest 9,600 5,000 33,200 642,100
Equity in losses of unconsolidated entities 8,900 33,000 9,600 -
Provision for loss on related party receivables 128,700 75,600 61,500 280,700
------- ------ ------ -------
593,700 488,200 552,800 1,174,200
INCOME (LOSS) BEFORE INCOME TAXES (323,000) (203,100) (91,100) 58,800
INCOME TAX BENEFIT (PROVISION) 87,000 43,000 (15,000) (4,500)
------ ------ ------- ------
NET INCOME (LOSS) $(236,000) $(160,100) $(106,100) $54,300
========= ========= ========== =======
INCOME (LOSS) PER PAIRED SHARE $(.02) $(.02) $(.01) $.01
===== ===== ===== ====
WEIGHTED AVERAGE PAIRED SHARES
OUTSTANDING 10,484,000 10,484,000 10,484,000 10,484,000
========== ========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-4
<PAGE> 40
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
AND HOMEFREE INVESTORS L.P.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, 1992, AND 1991
<TABLE>
<CAPTION>
ADDITIONAL
PAIRED COMMON STOCK PAID-IN
SHARES AMOUNT CAPITAL
------------- -------------------- --------------------
<S> <C> <C> <C>
BALANCES, January 1, 1991 10,484,000 $10,500 $3,537,000
Net income (loss) - - -
----- ----- -----
BALANCES, December 31, 1991 10,484,000 10,500 3,537,000
Net loss - - -
----- ----- -----
BALANCES, December 31, 1992 10,484,000 10,500 3,537,000
Net loss - - -
----- ----- -----
BALANCES, December 31, 1993 10,484,000 10,500 3,537,000
Net loss - - -
----- ----- -----
BALANCES, December 31, 1994 10,484,000 $10,500 $3,537,000
========== ======= ==========
<CAPTION>
ACCUMULATED PARTNERS'
DEFICIT DEFICIT TOTAL
-------------------- --------------- ----------------
<S> <C> <C> <C>
BALANCES, January 1, 1991 $(1,757,400) $(84,300) $1,705,800
Net income (loss) 124,000 (69,700) 54,300
------- ------- ------
BALANCES, December 31, 1991 (1,633,400) (154,000) 1,760,100
Net loss (44,000) (62,100) (106,100)
------- ------- --------
BALANCES, December 31, 1992 (1,677,400) (216,100) 1,654,000
Net loss (148,700) (11,400) (160,100)
-------- ------- --------
BALANCES, December 31, 1993 (1,826,100) (227,500) 1,493,900
Net loss (235,700) (300) (236,000)
-------- ---- --------
BALANCES, December 31, 1994 $(2,061,800) $(227,800) $1,257,900
=========== ========= ==========
</TABLE>
S-5
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE> 41
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
AND HOMEFREE INVESTORS L.P.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------------------------
1994 1993 1992 1991
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(236,000) $(160,100) $(106,100) $54,300
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation 6,300 8,700 13,100 24,000
Amortization - 11,100 33,400 33,400
Equity in losses (earnings) of unconsolidated
entities, net (1,900) 16,100 9,500 (22,000)
Gain on sale of condominium - - (17,100) -
Provision for loss on related party receivables 128,700 75,600 61,500 280,700
Deferred income taxes (87,000) (43,000) 15,000 343,000
Changes in operating assets and liabilities:
Decrease (increase) in:
Accrued interest receivable - officer
and director (15,300) (13,100) (15,400) (13,000)
Income tax refund receivable - - 234,500 (234,500)
Other assets (6,100) (1,000) 3,800 17,000
Receivables from unconsolidated entities 49,600 15,800 (96,700) (549,300)
Increase (decrease) in:
Accounts payable and accrued expenses 37,300 (27,600) 31,900 (49,400)
Income taxes currently payable - - - (128,600)
Other - 3,100 (191,800) 192,100
---- ----- -------- -------
Net cash used in operating activities (124,400) (114,400) (24,400) (52,300)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash advances to unconsolidated entities (700) (4,500) (99,200) (263,000)
Collection of advances from unconsolidated entities 374,900 10,000 275,000 360,800
Cash advance for land option - (35,000) - -
Investment in unconsolidated entities (50,000) - - -
Cash advances to officer and director (113,400) (62,500) (33,900) (107,900)
Proceeds from sale of property and equipment - - 900 -
Purchase of equipment (11,300) (10,600) - (800)
------- ------- ----- ----
Net cash provided by (used in) investing activities 199,500 (102,600) 142,800 (10,900)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under land option contract (88,400) (27,700) - -
Principal payments on long-term debt (10,600) (4,800) (4,100) (4,800)
------- ------ ------ ------
Net cash used in financing activities (99,000) (32,500) (4,100) (4,800)
------- ------- ------ ------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS (23,900) (249,500) 114,300 (68,000)
CASH AND EQUIVALENTS, beginning of year 34,500 284,000 169,700 237,700
------ ------- ------- -------
CASH AND EQUIVALENTS, end of year $10,600 $34,500 $284,000 $169,700
======= ======= ======== ========
</TABLE>
S-6
<PAGE> 42
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
AND HOMEFREE INVESTORS L.P.
COMBINED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------------------------
1994 1993 1992 1991
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $11,000 $3,600 $2,700 $654,000
======= ====== ====== ========
Income taxes $- $- $- $24,600
====== ====== ====== =======
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Repayment of mortgage in connection with sale
of condominium $- $- $132,900 $-
====== ====== ======== ======
Transfer of land owned by Grandview Club, Ltd.
("GCL") to pay off the Company's bank debt and
satisfy receivable from GCL $- $- $315,000 $-
====== ====== ======== ======
Obligation under land option contract $- $160,600 $- $-
====== ======== ====== ======
Transfer certificate of deposit to satisfy debt
obligation of unconsolidated entity $- $- $- $5,300,000
====== ====== ====== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-7
<PAGE> 43
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1994 1993 1992 1991
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and equivalents $10,600 $34,500 $284,000 $169,700
Income tax refund receivable - - - 234,500
Other current assets 9,600 3,400 2,800 7,600
----- ----- ----- -----
Total current assets 20,200 37,900 286,800 411,800
RECEIVABLES FROM UNCONSOLIDATED
ENTITIES, net 8,915,600 9,534,700 9,556,000 9,961,400
INVESTMENTS IN UNCONSOLIDATED
ENTITIES 94,400 42,800 58,500 67,900
PROPERTY AND EQUIPMENT, at cost:
Condominium - - - 192,500
Office furniture and equipment 95,100 83,800 73,200 73,200
Vehicles 25,000 25,000 25,000 25,000
------ ------ ------ ------
120,100 108,800 98,200 290,700
Accumulated depreciation (103,600) (97,300) (88,600) (151,300)
-------- ------- ------- --------
Net property and equipment 16,500 11,500 9,600 139,400
------ ------ ----- -------
LAND OPTION COSTS 195,600 195,600 - -
------- ------- ----- -----
TOTAL ASSETS $9,242,300 $9,822,500 $9,910,900 $10,580,500
========== ========== ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
S-8
<PAGE> 44
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $93,600 $56,300 $46,100 $52,000
Notes payable, bank - - - 315,000
Payable to Aristek Western Properties, Ltd. - - 37,800 -
Current maturities of long-term debt - 93,500 4,600 5,500
------ ------ ----- -----
Total current liabilities 93,600 149,800 88,500 372,500
LONG-TERM DEBT, less current maturities:
Unconsolidated entity 7,154,500 7,154,500 7,154,500 7,154,500
Other 44,400 49,900 10,700 146,800
DEFERRED INCOME TAXES 200,000 287,000 330,000 315,000
DEFERRED PROFIT 488,500 488,500 488,500 488,500
OTHER LIABILITIES:
Accrued interest, Aristek Properties, Ltd. - 148,100 148,100 148,100
Payable to unconsolidated entities 3,400 50,800 47,700 239,500
COMMITMENTS AND CONTINGENCIES
(Notes 1 and 8)
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 3,000,000
shares authorized; none issued and
outstanding - - - -
Common stock, $.001 par value; 15,000,000
shares authorized; 10,484,000 shares
issued and outstanding 10,500 10,500 10,500 10,500
Additional paid-in capital 3,537,000 3,537,000 3,537,000 3,537,000
Accumulated deficit (2,289,600) (2,053,600) (1,904,600) (1,831,900)
---------- ---------- ---------- ----------
Total stockholders' equity 1,257,900 1,493,900 1,642,900 1,715,600
--------- --------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $9,242,300 $9,822,500 $9,910,900 $10,580,500
========== ========== ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-9
<PAGE> 45
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1994 1993 1992 1991
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Management and administrative fees from
unconsolidated subsidiaries $244,600 $253,400 $424,300 $403,000
Equity in earnings of unconsolidated entities 10,800 16,900 100 22,000
Interest 15,300 14,800 21,000 806,200
Other, net - - 16,300 1,800
----- ----- ------ -----
270,700 285,100 461,700 1,233,000
EXPENSES:
General and administrative 446,200 363,100 385,800 181,000
Interest 9,600 5,000 33,200 642,100
Equity in losses of unconsolidated entities 8,900 33,100 10,200 700
Impairment of investment in HILP 300 300 28,700 198,500
Provision for loss on related party receivables 128,700 75,600 61,500 280,700
------- ------ ------ -------
593,700 477,100 519,400 1,303,000
LOSS BEFORE INCOME TAXES (323,000) (192,000) (57,700) (70,000)
INCOME TAX BENEFIT (PROVISION) 87,000 43,000 (15,000) (4,500)
------ ------ ------- ------
NET LOSS $(236,000) $(149,000) $(72,700) $(74,500)
========= ========= ========= ========
NET LOSS PER COMMON SHARE $(.02) $(.01) $(.01) $(.01)
===== ===== ===== =====
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 10,484,000 10,484,000 10,484,000 10,484,000
========== ========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-10
<PAGE> 46
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, 1992, AND 1991
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN
--------------------------------------
SHARES AMOUNT CAPITAL
------------- -------------------- --------------------
<S> <C> <C> <C>
BALANCES, January 1, 1991 10,484,000 $10,500 $3,537,000
Net loss - - -
----- ----- -----
BALANCES, December 31, 1991 10,484,000 10,500 3,537,000
Net loss - - -
----- ----- -----
BALANCES, December 31, 1992 10,484,000 10,500 3,537,000
Net loss - - -
----- ----- -----
BALANCES, December 31, 1993 10,484,000 10,500 3,537,000
Net loss - - -
----- ----- -----
BALANCES, December 31, 1994 10,484,000 $10,500 $3,537,000
========== ======= ==========
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
-------------------- ----------------
<S> <C> <C>
BALANCES, January 1, 1991 $(1,757,400) $1,790,100
Net loss (74,500) (74,500)
------- -------
BALANCES, December 31, 1991 (1,831,900) 1,715,600
Net loss (72,700) (72,700)
------- -------
BALANCES, December 31, 1992 (1,904,600) 1,642,900
Net loss (149,000) (149,000)
-------- --------
BALANCES, December 31, 1993 (2,053,600) 1,493,900
Net loss (236,000) (236,000)
-------- --------
BALANCES, December 31, 1994 $(2,289,600) $1,257,900
=========== ==========
</TABLE>
S-11
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE> 47
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------------------------
1994 1993 1992 1991
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(236,000) $(149,000) $(72,700) $(74,500)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation 6,300 8,700 13,100 24,000
Equity in losses (earnings) of unconsolidated
entities, net (1,900) 16,200 10,100 (21,300)
Impairment of investment in HILP 300 300 28,700 198,500
Gain on sale of condominium - - (17,100) -
Provision for loss on related party receivables 128,700 75,600 61,500 280,700
Deferred income taxes (87,000) (43,000) 15,000 343,000
Changes in operating assets and liabilities:
Decrease (increase) in:
Accrued interest receivable - officer
and director (15,300) (13,100) (15,400) (13,000)
Income tax refund receivable - - 234,500 (234,500)
Other assets (6,100) (700) 4,800 17,000
Receivables from unconsolidated entities 49,600 15,500 (97,600) (549,300)
Increase (decrease) in:
Accounts payable and accrued expenses 37,300 (27,600) 31,900 (49,400)
Income taxes currently payable - - - (128,600)
Other - 3,100 (191,800) 192,100
---- ----- -------- -------
Net cash provided by (used in) operating activities (124,100) (114,000) 5,000 (15,300)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash advances to unconsolidated entities (700) (4,500) (99,200) (263,000)
Collection of advances from unconsolidated entities 374,900 10,000 275,000 360,800
Cash advance for land option - (35,000) - -
Investment in unconsolidated entities (50,300) (400) (29,300) (37,000)
Cash advances to officer and director (113,400) (62,500) (33,900) (107,900)
Proceeds from sale of property and equipment - - 900 -
Purchase of equipment (11,300) (10,600) - (800)
------- ------- ----- ----
Net cash provided by (used in) investing activities 199,200 (103,000) 113,500 (47,900)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under land option contract (88,400) (27,700) - -
Principal payments on long-term debt (10,600) (4,800) (4,200) (4,800)
------- ------ ------ ------
Net cash used in financing activities (99,000) (32,500) (4,200) (4,800)
------- ------- ------ ------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS (23,900) (249,500) 114,300 (68,000)
CASH AND EQUIVALENTS, beginning of year 34,500 284,000 169,700 237,700
------ ------- ------- -------
CASH AND EQUIVALENTS, end of year $10,600 $34,500 $284,000 $169,700
======= ======= ======== ========
</TABLE>
S-12
<PAGE> 48
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------------------------
1994 1993 1992 1991
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $11,000 $3,600 $2,700 $654,000
======= ====== ====== ========
Income taxes $- $- $- $24,600
====== ====== ====== =======
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Repayment of mortgage in connection with sale
of condominium $- $- $132,900 $-
====== ====== ======== ======
Transfer of land owned by Grandview Club, Ltd.
("GCL") to pay off the Company's bank debt and
satisfy receivable from GCL $- $- $315,000 $-
====== ====== ======== ======
Obligation under land option contract $- $160,600 $- $-
====== ======== ====== ======
Transfer certificate of deposit to satisfy debt
obligation of unconsolidated entity $- $- $- $5,300,000
====== ====== ====== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-13
<PAGE> 49
HOMEFREE INVESTORS L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1994 1993 1992 1991
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
ORGANIZATION COSTS $166,900 $166,900 $166,900 $166,900
ACCUMULATED AMORTIZATION (166,900) (166,900) (155,800) (122,400)
-------- -------- -------- --------
TOTAL ASSETS $- $- $11,100 $44,500
====== ====== ======= =======
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES $- $- $- $-
PARTNERS' CAPITAL - - 11,100 44,500
----- ----- ------ ------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $- $- $11,100 $44,500
====== ====== ======= =======
</TABLE>
S-14
<PAGE> 50
HOMEFREE INVESTORS L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1994 1993 1992 1991
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
REVENUE $ - $ - $ - $ -
EXPENSES:
Amortization of organization costs - 11,100 33,400 33,400
General and administrative 300 400 29,300 37,000
----------- ----------- ------------ -----------
NET LOSS $ (300) $ (11,500) $ (62,700) $ (70,400)
=========== =========== =========== ===========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST $ - $ - $ - $ -
=========== =========== =========== ===========
WEIGHTED AVERAGE LIMITED
PARTNERSHIP INTERESTS OUTSTANDING 10,484,000 10,484,000 10,484,000 10,484,000
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-15
<PAGE> 51
HOMEFREE INVESTORS L.P.
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, 1992, AND 1991
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER* PARTNERS TOTAL
------------ ------------ -----------
<S> <C> <C> <C>
BALANCES, January 1, 1991 $162,200 $ (84,300) $ 77,900
Partner's capital contributions 37,000 - 37,000
Net loss (700) (69,700) (70,400)
-------- --------- --------
BALANCES, December 31, 1991 198,500 (154,000) 44,500
Partner's capital contributions 29,300 - 29,300
Net loss (600) (62,100) (62,700)
-------- --------- --------
BALANCE, December 31, 1992 227,200 (216,100) 11,100
Partner's capital contributions 400 - 400
Net loss (100) (11,400) (11,500)
-------- --------- --------
BALANCE, December 31, 1993 227,500 (227,500) -
Partner's capital contributions 300 - 300
Net loss - (300) (300)
-------- --------- --------
BALANCE, December 31, 1994 $227,800 $(227,800) $ -
======== ========= ========
</TABLE>
________________________
* The General Partner's capital account is eliminated for purposes of the
combined financial statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-16
<PAGE> 52
HOMEFREE INVESTORS L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------------------
1994 1993 1992 1991
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(300) $(11,500) $(62,700) $(70,400)
Adjustments to reconcile net loss to net cash
used in operating activities -
Amortization - 11,100 33,400 33,400
----- -------- -------- --------
Net cash used in operating activities (300) (400) (29,300) (37,000)
----- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES -
Capital contributions by general partner 300 400 29,300 37,000
----- -------- -------- --------
NET CHANGE IN CASH - - - -
CASH, beginning of year - - - -
----- -------- -------- --------
CASH, end of year $ - $ - $ - $ -
===== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-17
<PAGE> 53
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Paired Shares - Effective May 2, 1988, Homefree Village Resorts, Inc.
and subsidiaries (the Company) and Homefree Investors L.P. (the
Partnership), entered into a Pairing Agreement (the Agreement) which
provided for the pairing of assignee limited partnership interests of
the Partnership with shares of common stock of the Company.
Subsequently, the Company funded a distribution of one assignee limited
partnership interest of the Partnership for each share of common stock
of the Company.
The shares of the Company's common stock, par value of $.001 per share,
and the assignee limited partnership interests, par value of $.001 per
unit, are "paired" on a one-for-one basis and may only be transferred in
units (Paired Shares) consisting of one share of common stock and one
limited partnership interest.
Continuing Operations - The accompanying financial statements have been
prepared on a going concern basis which contemplates the realization of
assets and liquidation of liabilities in the ordinary course of
business. Additionally, the Company has experienced a significant
decrease in revenues over the last several years due to cash flow
difficulties experienced by Aristek Properties Limited (APL), an
investment of the Company of which it is also general partner (see Note
3). APL has been unable to pay its management fee to the Company, as a
result, the Company ceased accruing management fee revenues due from
APL. The Company also has extended loans to help finance APL's
operations, which has severely impacted the Company's liquidity. During
1994, the Company restructured debt arrangements with APL which provides
that all of APL's available cash flow will be utilized to repay advances
to the Company (see Note 8). As of December 31, 1994, the Company has a
significant net receivable due from APL and is obligated to purchase the
limited partners' interests in APL at a future date for a minimum of
$530,000. Recovery of the Company's net receivable from and investment
in APL is dependent upon further development of APL's underlying
properties and for APL to ultimate achieve profitable operations on the
sale of APL at a price in excess of its liabilities and partners
investments.
Management has also taken action in recent years to reduce costs,
including staff reductions, relocation of the corporate offices, and
contracting out its accounting and administrative support functions. In
addition, the principal operating property of APL, Monte Vista I Joint
Venture (Monte Vista), recently obtained an additional $450,000 in bank
financing, and deferred the due date on its total bank debt of
$4,500,000 until December 1998. Management believes that these actions
will enable the Company to continue as a going concern.
However, if the Company cannot ultimately achieve profitable operations,
there is substantial doubt about the ability of the Company to continue
as a going concern. The accompanying financial statements do not
include any adjustments which might result from the outcome of this
uncertainty.
Combined and Consolidated Financial Statements - The accompanying
consolidated financial statements include the Company and its
majority-owned subsidiaries. The combined financial statements include
the accounts of the Partnership and the Company. All material
intercompany balances and transactions have been eliminated. The
Company's majority-owned subsidiaries are Resortparks of America, Inc.
(RPA),
S-18
<PAGE> 54
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
which is 100% owned, and Homefree General Partners (HGP), which is 90%
owned. The minority interest in HGP is not material.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Property, Furniture, and Equipment - Office furniture and equipment is
recorded at cost. Depreciation is provided utilizing accelerated
methods over the estimated useful lives of the related assets.
Investments in Unconsolidated Entities - Investments in unconsolidated
entities, which are all less than 20% owned, are accounted for by the
equity method because of the significance of the Company's influence as
general partner over operating and financial policies of its investees.
The Company does not recognize losses in excess of its (investment
including loans and advances) in unconsolidated entities.
Organization Costs - Organization costs incurred in the formation of the
Partnership were amortized using the straight-line method over five
years.
Expenses - Costs of office space and certain employee salaries, shared
by the corporation and affiliated entities, are borne by the entity
utilizing the service.
Income Taxes - The Company accounts for income taxes under the liability
method of SFAS No. 109, whereby current and deferred tax assets and
liabilities are determined based on tax rates and laws enacted as of the
balance sheet date. Deferred tax expense represents the net change in
the deferred tax asset and liability accounts.
No provision for federal and state income taxes or related benefits has
been made for the Partnership since the partnership's taxable income or
loss is required to be reported in the income tax returns of the
partners. The provision for income taxes will not bear a normal
relationship to pre-tax operating results on a combined basis, since no
provision for income taxes has been made for the Partnership.
Income (Loss) Per Share - The computation of net income (loss) per share
is based on the weighted average number of shares of common stock and
equivalent paired shares outstanding during the respective years. The
effect of outstanding stock options on the computation of net income
(loss) per share is antidilutive for all periods presented.
Cash and Equivalents - For purposes of the Statements of Cash Flows, the
Company and the Partnership consider cash and equivalents to include all
highly liquid debt instruments purchased with a maturity of three months
or less.
S-19
<PAGE> 55
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENTS IN UNCONSOLIDATED ENTITIES:
APL was formed in 1976 and the Company is the sole general partner with
a 1% general partner interest and a 2.3% limited partner interest. As
general partner of APL, the Company has a 30% residual interest which
entitles it to receive 30% of all excess cash flow from operations and
net proceeds from the refinancing or sale of properties. APL's
principal asset was a 60% joint venture interest in the Monte Vista I
Joint Venture ("MVIJV"). Aristek Western Properties Limited Partnership
("AWP") owned the remaining 40% joint venture interest until December
1993 when APL increased its ownership to 99% and the company acquired
the remaining 1% interest. MVIJV owns an adult recreational community
containing 832 sites for recreational homes.
As summarized in Notes 5 and 8, the Company has entered into significant
transactions with APL, resulting in $8.9 million of net receivables and
$7.2 million of long-term debt at December 31, 1994 (see Notes 5 and 8).
Due to significant uncertainties about the collectibility of the net
receivables from APL, the Company suspended recording interest income,
interest expense, and management fees effective January 1, 1992. As of
December 31, 1994, APL owed the Company an additional $1.3 million,
which represents the net amount of such items which are not recorded in
the accompanying financial statements.
Effective June 30, 1994, the partners of APL consented to a
restructuring of the intercompany loans whereby all of APL's excess cash
flow will be utilized to repay outstanding advances. The interest rate
was reduced from 8.1% to 7%, and the maturity date was extended to June
30, 1998. The parties to the intercompany loans agreed to provide
set-off rights in the event of a default with respect to either the
restructured notes or the underlying debt of MVIJV. APL also agreed to
pay additional interest equal to 75% of the net proceeds from a
refinancing or sale of the Monte Vista property, after repayment of all
liabilities. In connection with the restructuring, the holders of 26.5
limited partner units of APL agreed to provide the Company with an
option to purchase their units for a minimum purchase price of $20,000
per unit or a total of approximately $530,000. Based on an appraisal of
the Monte Vista property which is required to be prepared at the date
the Company exercises its option, the Company may be required to pay a
higher price per unit. The Company is required to exercise its option
between January 1, 1997 and November 30, 1998.
Unaudited condensed balance sheets and operating statements of APL are
presented below (in thousands).
<TABLE>
<CAPTION>
BALANCE SHEETS
--------------
DECEMBER 31,
-----------------------------------------------------------
1994 1993 1992 1991
---------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
Properties, net of depreciation $ 6,882 $7,266 $ 8,012 $ 8,467
Receivable from the Company 7,154 7,154 7,154 7,154
Other notes and interest receivable 590 743 5,034 4,968
Cash and temporary cash investments 852 518 243 305
Other assets 1,071 1,311 1,293 1,259
------- ------- ------- -------
$16,549 $16,992 $21,736 $22,153
======= ======= ======= =======
</TABLE>
S-20
<PAGE> 56
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1994 1993 1992 1991
---------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
LIABILITIES AND PARTNERS' DEFICIT:
Mortgages and notes payable on properties $ 4,493 $ 4,050 $ 8,545 $ 8,612
Payable to the Company 9,901 10,346 10,342 10,498
Deferred profit on sale of properties 6,359 6,359 11,833 12,275
Other liabilities 2,157 2,606 2,210 1,141
Minority liabilities - 403 734 1,018
Partners' deficit (6,361) (6,772) (11,928) (11,391)
------- ------ -------- --------
$16,549 $16,992 $ 21,736 $ 22,153
======= ======= ======== ========
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1994 1993 1992 1991
---------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Rentals and other operating income $1,903 $1,837 $1,692 $1,827
Gain on sale of properties - 4,232 442 426
Interest and other income 31 225 1,030 1,174
Gain from debt forgiven by the Company - - - 1,300
------ ----- ----- -----
Total 1,934 6,294 3,164 4,727
Expenses:
Operating (1,615) (1,621) (1,881) (1,743)
Interest (363) (446) (1,446) (1,588)
Depreciation and amortization (630) (634) (631) (483)
Minority interest - 331 285 (298)
------ ------ ------ ------
Net income (loss) $(674) $3,924 $ (509) $ 615
====== ====== ====== ======
</TABLE>
The Company also owns a 2.6% interest in AWP and is the general partner. AWP is
a limited partnership with investments in real estate. Until 1994, the Company
owned a 2.0% general partner interest in Grandview Club Ltd. (Grandview Club).
The primary property held by Grandview Club was foreclosed on by a bank in 1991
and the partnership's affairs were concluded in 1994 when all remaining assets
were liquidated.
S-21
<PAGE> 57
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
4. INCOME TAXES:
For income tax reporting purposes, the Company and RPA file a
consolidated return.
The Company adopted the liability method of accounting for income taxes
as prescribed by Statement of Financial Accounting Standards No. 109
(SFAS 109) effective January 1, 1991. Financial statements of prior
years have not been restated to apply the new method retroactively. The
cumulative effect of the change in accounting method had no material
effect on net loss for the year ended December 31, 1991.
Deferred income taxes relate exclusively to long-term assets and
liabilities and consist of the following as of December 31, 1994:
<TABLE>
<S> <C>
Deferred tax assets (liabilities):
Notes receivable - installment sales $(509,000)
Partnership basis differences (133,000)
Receivable reserves 547,000
Net operating loss carryforwards 65,000
Other 7,000
---------
Net (23,000)
Valuation allowance related to deferred tax (177,000)
---------
assets
$(200,000)
=========
</TABLE>
The composition of income tax benefit (expense) for the years ended December
31, is as follows:
<TABLE>
<CAPTION>
1994 1993 1992 1991
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Current $ - $ - $ - $ 338,500
Deferred 87,000 43,000 (15,000) (343,000)
------- ------- -------- --------
Total $87,000 $43,000 $(15,000) $ (4,500)
======= ======= ======== ========
</TABLE>
S-22
<PAGE> 58
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
Following is a reconciliation of the Company's effective tax rate on
consolidated income (loss) to the statutory U.S. Federal income tax rate for
the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992 1991
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Statutory rate (34)% (34)% (34)% (34)%
State taxes, net of Federal benefit (3) (3) (3) (3)
Graduated tax rates - 3 18 16
Change in valuation allowance 10 12 45 27
Non-deductible expenses - - - -
--- --- --- ---
Effective tax rate (27)% (22)% 26% 6%
=== === === ===
</TABLE>
As of December 31, 1994, the Company and RPA had a tax net operating
loss carryforward of $_______. This loss carryforward will expire in
2006 through 2009 if not utilized to offset future taxable income of
the Company and RPA.
5. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1994 1993 1992 1991
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Restructured note payable - APL, interest at 7%,
due June 1998. $7,154,500 $ - $ - $ -
Note payable - APL, interest at 8.10%, payable
quarterly, principal due in April 1995. - 7,154,500 7,154,500 7,154,500
Contract payable for purchase of land, interest
imputed at 12%, principal payments of $88,400 in
1994 and $44,400 in 1996. 44,400 132,800 - -
Note payable to financial institution, interest
at 10.75%, payable in monthly principal and
interest payments of $500 through December 1995
collateralized by vehicle. - 10,600 15,300 19,400
</TABLE>
S-23
<PAGE> 59
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C> <C> <C>
Mortgage note payable, interest at 11.4%. - - - 132,900
Note payable, bank, interest at 10%. - - - 315,000
----- ----- ----- -------
Total 7,198,900 7,297,900 7,169,800 7,621,800
Less current maturities - (93,500) (4,600) (5,500)
----- ------- ------ ------
$7,198,900 $7,204,400 $7,165,200 $7,616,300
========== ========== ========== ==========
</TABLE>
The scheduled annual principal reductions of long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1996 $ 44,400
1998 7,154,500
----------
Total $7,198,900
==========
</TABLE>
6. STOCK INCENTIVE PLANS:
The Company has a stock option plan which enables officers and employees
of the Company to purchase shares of common stock at its fair market
value on the date of the grant. The Company has reserved a total of
1,250,000 shares for options which may be granted under the plan.
Options may be exercised for a maximum term of ten years after the date
of grant. At December 31, 1994, all options previously granted under the
Plan had expired.
The Company also has a stock appreciation rights plan, whereby up to
250,000 rights may be awarded to certain directors, officers and
employees. The plan entitles the holder of the rights to receive upon
redemption, the increase, if any, of the market value of the Company's
common stock at the redemption date over the market value at date of
grant. Each right has a maximum term of ten years after the date of
grant. One right is deemed the equivalent of one share of common stock.
No rights have been granted as of December 31, 1994.
The Company's Profit Sharing Plan and Trust was discontinued and
dissolved during the first quarter of 1991. No contributions were made
for the year ended December 31, 1991.
S-24
<PAGE> 60
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
7. LAND OPTION COSTS:
In October 1993, the Company entered into an option agreement for the
purchase of a parcel of land which is adjacent to property owned by APL.
Under the option agreement, the Company paid $38,200 for the option and
agreed to loan an additional $125,000 to the seller. The option was
originally exercisable until April 1, 1995 through the payment of an
additional $46,800 and the application of the $125,000 loan to the
purchase price. In March 1995, the parties agreed to extend the exercise
period through May 1, 1996.
At December 31, 1994 and 1993, the Company recorded the total payments
required to purchase the land as land option costs in the accompanying
balance sheets. The required payments were discounted at 12% to arrive
at a total cost for the land of $195,600.
8. RELATED-PARTY TRANSACTIONS:
Receivables from unconsolidated entities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------
1994 1993 1992 1991
--------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Receivables from APL and its subsidiaries:
Notes receivable, 8.1%, interest due
quarterly, extended due date for repayment
of principal:
April 1995 $- $5,300,000 $5,300,000 $5,300,000
March 1995 - 3,317,800 3,317,800 3,317,800
December 1994 - 94,400 94,400 94,400
Accrued interest receivable - 180,300 180,300 180,300
Non-interest bearing advances - 1,453,000 1,449,700 1,605,800
Restructured notes receivable, 7%, due June
1998 9,901,100 - - -
--------- ----- ----- -----
Total 9,901,100 10,345,500 10,342,200 10,498,300
Less allowance for doubtful accounts (1,000,000) (1,000,000) (1,000,000) (1,000,000)
---------- ---------- ---------- ----------
Net 8,901,100 9,345,500 9,342,200 9,498,300
--------- --------- --------- ---------
Receivable from Grandview Club,
collateralized by land in 1991 - 353,000 362,000 678,000
Less allowance for doubtful accounts - (228,400) (228,400) (228,400)
----- -------- -------- --------
Net - 124,600 133,600 449,600
----- ------- ------- -------
</TABLE>
S-25
<PAGE> 61
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------
1994 1993 1992 1991
--------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Other receivables, unsecured:
Advances to AWP 3,600 40,800 23,200 13,500
Advances to Monte Vista 10,900 23,800 57,000 -
------ ------ ------ -----
Total $8,915,600 $9,534,700 $9,556,000 $9,961,400
========== ========== ========== ==========
</TABLE>
In 1990, the Company entered into two separate like-kind exchange
transactions with APL. In one transaction, the Company conveyed land to
APL in return for cash and a note receivable for $3,317,800. The Company
has deferred the gain of $488,500 on this transaction until sufficient
cash payments are received by the Company on the note to qualify the
transaction as a sale. In the second transaction, APL conveyed land to
the Company in return for cash and a note payable of $7,154,500 (see Note
5). Also, in connection with this second transaction, the Company
advanced (by delivering a certificate of deposit) $5,300,000 in the form
of a note receivable to APL to enable APL to pay off bank debt it had on
this property. The Company also made non-interest bearing advances to
APL to enable it to finance its operating needs.
The collection of notes receivable and non-interest bearing advances from
APL is dependent upon future events, including the ability of Monte Vista
to develop certain additional land in a manner which will provide APL
with a return of its capital after the repayment of loans made to Monte
Vista. At December 31, 1990, management provided an allowance of
$1,400,000 and $900,000 against these notes receivable and advances,
respectively, due to the uncertainty of the successful outcome of this
development project. In 1991, because of reservations regarding the
ability of APL to continue operations with its existing debt level,
$1,300,000 of the obligation from APL was forgiven by the Company with a
corresponding reduction in the allowance previously provided.
Receivable from Officer and Administrative Fees - At December 31, 1994,
the Company has a note receivable from the Company's president for
$520,900. Due to the uncertainty of collection, the Company recognized a
provision for loss equal to the annual cash advances plus accrued
interest. The total loss recognized in the Company's statements of
operations amounted to $128,700, $75,600, $61,500, and $280,700 for the
years ended December 31, 1994, 1993, 1992, and 1991, respectively.
Pursuant to the Homefree Investors Limited Partnership Agreement, the
Partnership is liable to pay an annual administrative fee of $75,000 per
year to HGP, which in turn pays this fee to a general partner of HGP,
which is an entity owned 100% by the president of the Company. Such
administrative fee is not payable until the earlier of the date that, in
the opinion of the general partners, the Partnership has sufficient cash
to pay the fee without jeopardizing the Partnership or the Company, or
upon liquidation of the Partnership. Due to the lack of operations and
cash flows of the Partnership, no amounts are reflected in the
accompanying financial statements. The total amount payable under this
arrangement, is $582,800 including interest through December 31, 1994.
In the event that the administrative fee is paid in the future, the
Company's president has committed to utilize the proceeds to repay the
receivables from officer discussed above. Since the
S-26
<PAGE> 62
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
Company has already provided an allowance for loss on the receivables
from the president, the future payment of the administrative fee would
only result in a charge to operations to the extent by which such payment
exceeds the receivables.
Revenues - The Company and its corporate subsidiaries serve as a real
estate advisor, developer, manager and marketing agent and perform
certain administrative functions for related entities. The Company's
principal sources of revenue are fees, commissions and cash flow
participation from properties under its supervision (see Note 3).
9. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS:
In March 1995, the Financial Accounting Standards Board issued a new
Statement titled "Accounting for Impairment of Long-Lived Assets." This
new standard is effective for years beginning after December 15, 1995 and
establishes standards for determining impairment of long- lived assets,
such as the Company's land option costs. Although the Company has not
performed a detailed analysis of the impact of this new standard on the
Company's financial statements, management estimates that the application
of the new standard would not have a material impact on the Company's
1994 financial statements. The Company has not yet determined when it
will adopt the new standard.
10. PRIOR PERIOD ADJUSTMENTS:
The Company has restated its previously issued financial statements for
the years ended December 31, 1993, 1992, and 1991. The Company's
combined and consolidated financial statements were restated to reflect
adjustments to record a provision for loss on the receivable from an
officer and director as discussed in Note 8, to correct the allowance for
bad debts for other receivables, and to record the obligation under the
land option contract discussed in Note 7. Additionally, the consolidated
financial statements were adjusted to recognize impairment of the
Company's investment in the Partnership. Presented below is a summary of
the impact of these adjustments on the previously reported results of
operations:
S-27
<PAGE> 63
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------- ------------------------- -------------------------
COMBINED CONSOLIDATED COMBINED CONSOLIDATED COMBINED CONSOLIDATED
----------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes:
As previously reported $(118,900) $(107,400) $(61,500) $600 $252,900 $322,600
Adjustments, net (84,200) (84,600) (29,600) (58,300) (194,100) (392,600)
------- ------- ------- ------- -------- --------
As restated $(203,100) $(192,000) $(91,100) $(57,700) $58,800 $(70,000)
========= ========= ======== ======== ======= ========
Net income (loss):
As previously reported $(79,200) $(67,700) $(61,500) $600 $121,400 $191,100
Adjustments, net (80,900) (81,300) (44,600) (73,300) (67,100) (265,600)
------- ------- ------- ------- ------- --------
As restated $(160,100) $(149,000) $(106,100) $(72,700) $(54,300) $(74,500)
========= ========= ========= ======== ======== ========
Net loss per paired share:
As previously reported $(.01) $(.01) $(.01) $- $(.01) $.02
Adjustments, net (.01) - - (.01) - (.03)
---- ---- ---- ---- ---- ----
As restated $(.02) $(.01) $(.01) $(.01) $(.01) $(.01)
===== ===== ===== ===== ===== =====
</TABLE>
