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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, 1995
Commission File Number: 1-8297 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
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.)
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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 Part 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. There have been no reported trades within the last twelve months on
which to base a determination of market value. Based on a proposal for the
Company to "go private" on the basis of a reverse stock split, the price to be
paid for fractional shares would be at the rate of $.05 per share. Based on
such price per share, such aggregate market value would be $208,000.
As of May 19, 1996, 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
PAGE
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PART I
<TABLE>
<S> <C> <C>
Item 1. BUSINESS 4
Item 2. PROPERTIES 9
Item 3. LEGAL PROCEEDINGS 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
PART II
Item 5. MARKET FOR THE REGISTRANTS' "PAIRED SHARES" AND RELATED
STOCKHOLDER MATTERS 12
Item 6. SELECTED FINANCIAL DATA 13
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 18
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 19
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 20
Item 11. EXECUTIVE COMPENSATION 22
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 24
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 1995 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.
RECENT DEVELOPMENTS
The Company has filed a Transaction Statement on Schedule 13E-3 and a
related Information Statement under Regulation 14(c) in connection with a
proposed going private transaction and related one-for-100,000 reverse stock
split of the Company's Paired Shares. The Company is in the process of
responding to written comments received from the Securities and Exchange
Commission ("SEC"). The Company's Board of Directors has approved the proposed
going private transaction and the stockholders have approved the reverse stock
split by the written consent of Craig M. Bollman, Jr., the Company's majority
stockholder. The Company's Board of Directors, however, may postpone or
abandon the proposed going private transaction and related reverse stock split
at any time prior to its consummation, for any reason, including without
limitation, if in the Directors' sole judgment, consummation of the reverse
stock split would unduly deplete the Company's working capital.
If the proposed reverse stock split is effected, it is anticipated that the
Company will cease to be a reporting company under the Exchange Act. As a
result, the Company would no longer file annual and quarterly reports, proxy
statements, and other documents with the SEC. In addition, the Company would
no longer be required to comply with the proxy rules of Regulation 14A
promulgated under Section 14 of the Exchange Act, and its officers, directors,
and 10%-or-greater stockholders would no longer be subject to the reporting
requirements and "short-swing" security trading restrictions under Section 16
of the Exchange Act. Continuing stockholders will no longer be entitled to
receive annual reports and proxy statements and will no longer have the benefit
of a public market for their shares of the Company's stock.
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 subsequently changed in 1981 to "Aristek Communities,
Inc." In November
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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 Affiliated 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 annual administrative fee (currently an amount equal to 2.5% of the capital
contributions of the partners), leasing commissions, management fees and
development fees. However, this fee has not been paid since 1993.
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
Properties Limited Partnership ("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
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in Aristek Properties. The option may be exercised by the Company between
January 1, 1997 and November 30, 1998; in any event, the Company is required to
exercise the option by 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 Affiliated Partnerships.
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 AFFILIATED 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 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
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foot social and recreation complex. This first stage is on 80 acres owned by
MVI. 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 MVI, but such development is subject to the Company's ability to obtain
financing for this development. There can be no assurance that the Company can
obtain such financing. 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 1995 the Company employed two full-time employees. During 1995, 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.
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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, all of the capital stock of which
is owned by Craig M. Bollman, Jr., President and Chairman of the Board of the
Company, and the Company.
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 was approximately 95% during 1995. Monte Vista is
owned by MVI, which is owned 99% by Aristek Properties and 1% by the Company.
At December 31, 1995 the property was subject to a mortgage in the amount of
$5,015,345 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. This land was transferred to MVI 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 was 97% in 1995. At
December 31, 1995, Good Life, together with the Towerpoint property described
below, was subject to a mortgage in the principal amount of $9,122,124 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 was 98% in 1995. At December 31, 1995,
Towerpoint, together with the Good Life property described above, was subject
to a mortgage in the amount of $9,122,124 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 548 record holders of the "Paired Shares" on
December 31, 1995, as reported by the Registrants' transfer agent.
During the two years ended December 31, 1995, 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.".
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED DEC. ENDED DEC. ENDED DEC. ENDED DEC. ENDED DEC.
31, 1995 31, 1994 31, 1993 31, 1992 31, 1991
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 268,500 $ 270,700 $ 285,100 $ 461,700 $ 1,233,000
Expenses 700,100 593,700 488,200 552,800 1,174,200
Earnings (losses)
before income taxes (431,600) (323,000) (203,100) (91,100) 58,800
-----------
Income tax
Benefit (Provision) 200,000 87,000 43,000 (15,000) (4,500)
----------- ----------- ----------- ------------ -----------
Net income (loss) $ (231,600) $ (236,000) $ (160,100) $ (106,100) $ 54,300
------------ ============ =========== =========== ===========
Net earnings (losses)
per share $ (.02) $ (.02) $ (.02) $ (.01) $ .01
=========== =========== =========== =========== ===========
Weighted average
shares outstanding $10,484,000 $10,484,000 $10,484,000 $10,484,000 $10,484,000
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total assets $8,958,800 $9,242,300 $9,822,500 $9,922,000 $10,625,000
Long-term debt $7,154,500 $7,198,900 $7,204,400 $7,165,200 $ 7,301,300
Stockholders' Equity $1,026,300 $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 three years, the Company has used cash of $176,500 to
$413,300 per year in connection with the Company's operating activities. In
each of the last three years, cash used for operating activities has included
amounts ranging from $62,500 to $210,200 in connection with loans to the
Company's President. During 1995, amounts aggregating $433,200 were applied as
repayment of these loans. See Note 8 to the Financial Statements for a summary
of loan activity and further discussion.
During the three-year period, the Company has also used cash of $4,800 to
$10,600 per year to repay principal on long- term debt, and a total $27,700 in
1993 and $88,400 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 1997. Cash generated from financing
activities totalled $150,500 in 1995. Pursuant to an agreement between Aristek
Western and the Company, the partnership borrowed this amount from Aristek
Western and loaned the proceeds to the Company. It is anticipated that this
obligation will be repaid prior to end of the 1996 second quarter.
The Company's investing activities have generated cash through the net
collection of receivables from unconsolidated entities in each of the past
three years, including $299,000 in 1995. Other uses of cash over the past
three 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 $29,700
for the purchase of office equipment from a third party. Management does not
expect that the Company will be required to provide capital in 1996 for the
Company's investments in Aristek Properties and Aristek Western, since both
entities recently refinanced their debt obligations.
The Company believes that it will be able to continue as a going concern.
The Company is presently completing a response to the SEC's comments to its
"going private". If completed this transaction will result in the Company's
savings of approximately $50,000 per year in direct accounting, legal and
administrative costs, along with a savings of considerable management time,
thereby improving the Company's cash flow and efficiency of management.
Further, the Company expects that improved operations of the Monte Vista
project will generate additional cash flow, thereby resulting in additional
repayment of the Company's loans to Aristek Properties and MV I. MV I also
recently restructured its first mortgage debt, and generated additional
financing, which will improve the Company's liquidity. The Company will also
continue to reduce personnel and administrative costs, so as to minimize cash
outflow until new sources of revenues can be obtained. The Company itself does
not have long term debt and therefore, has no long term liquidity requirements.
Aristek Properties Ltd. and Aristek Western Properties, in which the Company
has an interest, are separate entities and have long term debt which the
Company believes can be satisfied from the assets of the two entities.
The Company's debt from affiliated entities was restructured in 1994. See
Note 3 to the Financial Statements for a discussion of the provisions of such
restructuring.
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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.
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, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The Company incurred a $231,600 loss for the year ended December 31, 1995.
Total revenues for the year ended December 31, 1995 were $268,500 as
compared to $270,700 for the year ended December 31, 1994.
The decrease ($2,200) was attributable principally to a reduction in
interest income partially offset by nominal increases in management and
administrative fees and equity in earnings of unconsolidated entities.
Management and administrative fees earned by the Company during 1995 are
summarized below:
<TABLE>
<CAPTION>
1995
-----------------------------------------------------------------------------------
Aristek Western
---------------
H-H Resorts Monte Vista Properties
----------- ----------- ----------
<S> <C> <C> <C>
Management Fees $ 83,900 $ 61,500 $ -
Administrative Fees $ - $ - $ 100,000
--------- --------- ---------
$ 83,900 $ 61,500 $ 100,000
========= ========= =========
</TABLE>
Management fees earned by the Company during 1995 in connection with H-H
Resorts' operation were calculated at 1.5% of the property's gross annual
receipts ($5,491,900). Management fees earned by the Company during 1995 in
connection with Monte Vista operations are calculated at 3.0% of the property's
gross annual receipts ($2,051,100). Administrative fees earned during 1995
totalled $100,000 and were related to administrative functions for Aristek
Western.
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Management and administrative fees earned by the Company during 1994 are
summarized below:
<TABLE>
<CAPTION>
1994
---------------------------------------------------------------------------
Aristek Western
---------------
H-H Resorts Monte Vista Properties
----------- ----------- ----------
<S> <C> <C> <C>
Management Fees $ 82,200 $ 62,400 $ -
Administrative Fees $ - $ - $ 100,000
--------- --------- ---------
$ 82,200 $ 62,400 $ 100,000
========= ========= =========
</TABLE>
Management and administrative fees for 1994 were calculated on the same
basis as those for 1995. Gross receipts for H-H Resorts and Monte Vista
totaled $5,435,800 and $2,081,700 respectively for 1994.
See (Item 2 PROPERTIES) for a discussion concerning occupancy rates for
the properties.
Total expenses for the year ended December 31, 1995 were $700,100 as
compared to $593,700 for the previous year. The increase in expenses resulted
principally from losses of $93,600 recorded in connection with related party
receivables and administrative fees. The receivables from officer and
administrative fees are more fully described in Note 8 to the Financial
Statements.
The effective tax rate used to calculate the net income tax benefit for
1995 was 49%. See Note 4 to the Financial Statements for a summary of income
taxes.
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. 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.
Management and administrative fees for 1994 ($244,600) were $8,800
below 1993 levels principally because of a decision not to accrue management
fees owed by APL. Gross receipts from operations of the H-H Resorts and Monte
Vista properties totalled $5,255,100 and $1,969,300 respectively for 1993.
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
principally from an additional provision for loss on receivables ($53,100) and
an increase in general and administrative expenses of $45,900 and an increase
in equity in losses of APL ($13,000). 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.
16
<PAGE> 17
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.
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 1995 financial statement.
17
<PAGE> 18
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.
18
<PAGE> 19
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. In 1994, the
Company changed its auditors to HEIN + ASSOCIATES LLP, which audited the 1991
and 1992, and the 1993, 1994 and 1995 financial statements included in this
report.
There were no disagreements between management and the Company's
independent auditors.
19
<PAGE> 20
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>
POSITION PERIOD OF SERVICE
NAME AGE WITH THE COMPANY AS DIRECTOR
- ---- --- ---------------- -----------
<S> <C> <C> <C>
Craig M. Bollman, Jr. 58 Chairman of the Since Feb. 24, 1977
Board, President
Phyllis A. Bollman 55 None Since Feb. 24, 1977
Taylor M. Bollman 18 None Since Feb. 18, 1996
</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.
During the year 1995, the Company had a Board of Directors consisting of
Craig M. Bollman, Jr., Phyllis A. Bollman, W. Phillip Marcum, Michael T. Oliver
and Anthony B. Petrelli. Messrs. Marcum, Oliver and Petrelli resigned from the
Board as of February 18, 1996, at which time the Board was reduced to three
members and Taylor M. Bollman was elected as the third director.
(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>
POSITION PERIOD OF SERVICE
NAME AGE WITH THE COMPANY AS DIRECTOR
- ---- --- ---------------- -----------
<S> <C> <C> <C>
Craig M. Bollman, Jr. 58 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
Craig M. Bollman, Jr. and Phyllis A. Bollman are married, Taylor M. Bollman
is Mr. and Mrs. Bollman's son. 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:
20
<PAGE> 21
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. Neither of these organizations is a parent, subsidiary or other affiliate
of the Company.
TAYLOR M. BOLLMAN. Mr. Bollman will attend Harvard college in the fall of
1996.
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.
21
<PAGE> 22
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 (2)
YEAR SALARY BONUS COMPENSATION GRANTED COMPENSATION
- ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
1995 $175,000 -- $23,048 -- --$210,200
1994 $175,000 -- $23,500 -- --$113,400
1993 $174,038 -- $19,000 -- --$ 62,500
</TABLE>
(1) Cost of health and life insurance.
(2) Represents payments by Bollman Associates, Inc. to Mr. Bollman of accrued
administrative fees payable by the Partnership to Homefree General
Partners.
(B) COMPENSATION OF DIRECTORS
Phyllis A. Bollman, a current director, and Messrs. Marcum, Oliver and
Petrelli, former directors, each received directors fees of $2,000 during the
twelve months ended December 31, 1995. Taylor M. Bollman was not a director in
1995, and received no fees of any type. One meeting was held in the twelve
months ended December 31, 1995. 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, 1995. Directors are expected to receive
similar compensation in 1996.
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.
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. Such fees aggregating $210,200 were paid for the twelve
months ended December 31, 1995. 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. Homefree General Partners has not
incurred any expenses on behalf of the Partnership for which it would be
entitled to reimbursement.
22
<PAGE> 23
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.
23
<PAGE> 24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
THE COMPANY
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of May 19, 1996, 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:
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED ON MAY 19, 1996
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS (1)
- ------------------- --------- ---------
<S> <C> <C>
Craig M. Bollman, Jr. 6,325,288 60.3%
1400 S. Colorado Boulevard
Suite 410
Denver, CO 80222
The Aristek Foundation 711,652 (2) 6.8%
1400 S. Colorado Boulevard
Suite 410
Denver, CO 80222
</TABLE>
(1) The percentages shown are based upon 10,483,982 issued and outstanding
shares of Common Stock as of May 19, 1996. Craig M. Bollman, Jr. is not a
holder of any option to purchase shares of Common Stock of the Company.
(2) With respect to shares held by The Aristek Foundation, Mr. Bollman has sole
voting and investment power, but in which he has no pecuniary interest.
Mr. Bollman disclaims beneficial ownership of the shares held by The
Aristek Foundation.
(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 19, 1996, and their percentage ownership thereof:
24
<PAGE> 25
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY
OWNED ON MAY 19, 1996
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF DIRECTOR OWNERSHIP CLASS (1)
- ---------------- --------- ---------
<S> <C> <C>
Craig M. Bollman, Jr. 6,325,288 60.3%
The Aristek Foundation 711,652 (2) 6.8%
All directors and officers as a 7,036,940 67.1%
group (1 person and one
Foundation)
</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 19,
1996.
(2) With respect to shares held by The Aristek Foundation, Mr. Bollman has sole
voting and investment power, but in which he has no pecuniary interest.
Mr. Bollman disclaims beneficial ownership of the shares held by The
Aristek Foundation.
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 19, 1996, and their percentage
ownership thereof:
ASSIGNEE LIMITED PARTNERSHIP
INTEREST BENEFICIALLY
OWNED ON MAY 19, 1996
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF DIRECTOR OWNERSHIP CLASS (1)
- ---------------- --------- ---------
<S> <C> <C>
Craig M. Bollman, Jr. 6,325,288 60.3%
The Aristek Foundation 711,652 (2) 6.8%
All directors and officers as 7,036,940 67.1%
a group (1 person and 1
Foundation)
</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 19, 1996.
(2) With respect to shares held by The Aristek Foundation, Mr. Bollman has sole
voting and investment power, but in which he has no pecuniary interest.
Mr. Bollman disclaims beneficial ownership of the shares held by The
Aristek Foundation.
25
<PAGE> 26
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, 1995 is $240,845. This amount has not been accrued as of December
31, 1995 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 note from Craig M. Bollman, Jr.,
President and Chairman of the Board, in the aggregate amount of $310,000 at
December 31, 1995. 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 1995 was $310,000.
26
<PAGE> 27
PART IV
<TABLE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Page
----
<S> <C>
HOMEFREE VILLAGE RESORTS, INC. AND HOMEFREE INVESTORS L.P.
- ----------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT S-1
Combined Balance Sheets -- December 31, 1995 and 1994 S-2
Combined Statements of Operations -- Years ended December 31, 1995, 1994 and 1993, S-3
Combined Statement of Stockholders' Equity and Partners' Deficit --
Years ended December 31, 1995, 1994 and 1993 S-4
Combined Statements of Cash Flows -- Years ended December 31, 1995, 1994 and 1993. S-5
HOMEFREE VILLAGE RESORTS, INC.
- ------------------------------
Independent Auditor's Report S-6
Consolidated Balance Sheets -- December 31, 1995, 1994, and 1993. S-7
Consolidated Statements of Operations -- Years ended December 31, 1995, 1994 and
1993. S-8
Consolidated Statement of Stockholders' Equity -- Years ended December 31,
1995, 1994, and 1993. S-9
Consolidated Statements of Cash Flows -- Years ended December 31, 1995, 1994
and 1993 . S-10
HOMEFREE INVESTORS L.P.
- -----------------------
Independent Auditor's Report S-11
Balance Sheets -- December 31, 1995 and 1994. S-12
Statements of Operations -- Years ended December 31, 1995, 1994 and 1993 S-13
Statement of Partners' Capital (Deficit) -- Years ended December 31, 1995, 1994,
and 1993. S-14
Statements of Cash Flows -- Years ended December 31, 1995, 1994 and 1993. S-15
NOTES TO FINANCIAL STATEMENTS -- Years ended December 31, 1995, 1994,
and 1993. S-16
ARISTEK PROPERTIES, LTD.
- ------------------------
Independent Auditor's Report S-27
Balance Sheets -- December 31, 1995 and 1994. S-28
Statements of Operations -- Years ended December 31, 1995, 1994 and 1993 S-29
Statement of Partners' Capital -- Years ended December 31, 1995, 1994,
and 1993. S-30
Statements of Cash Flows -- Years ended December 31, 1995, 1994 and 1993. S-31
NOTES TO FINANCIAL STATEMENTS S-33
</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
27
<PAGE> 28
D. EXHIBITS.
THE COMPANY
<TABLE>
<S> <C>
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.
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.
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.
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C>
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.
27.1 FDS - Homefree Village Resorts, Inc.
27.2 FDS - Homefree Investors L.P.
</TABLE>
29
<PAGE> 30
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.
/s/ CRAIG BOLLMAN, JR. /s/ CRAIG M. BOLLMAN, JR.
- ----------------------------------- -------------------------------------
By: (s) Craig Bollman, Jr. By: Homefree General Partners,
Craig M. Bollman, Jr. its General Partner
Chairman of the Board
(Principal Executive Officer)
By Homefree Village Resorts,
Inc., a General Partner
Date: June 14, 1996
By: (s) Craig M. Bollman, Jr.
Craig M. Bollman, Jr.
President
Date: June 14, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
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 14, 1996 Homefree General Partners,
General Partner of
Homefree Investors L.P.
(Principal Executive and Financial Officer)
Date: June 14, 1996
MAJORITY OF THE BOARD OF DIRECTORS
Craig M. Bollman, Jr.
Director
Date: June 14, 1996
Phyllis A. Bollman
Director
Date: June 14, 1996
30
<PAGE> 31
[ARTICLE] 5
[CIK] 0000065291
[NAME] HOMEFREE VILAGE RESORTS, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[CASH] 38,700
[SECURITIES] 0
[RECEIVABLES] 8,620,200
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 42,700
[PP&E] 127,900
[DEPRECIATION] 110,000
[TOTAL-ASSETS] 8,958,800
[CURRENT-LIABILITIES] 289,500
[BONDS] 7,154,500
[COMMON] 10,500
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 1,015,800
[TOTAL-LIABILITY-AND-EQUITY] 8,958,800
[SALES] 0
[TOTAL-REVENUES] 268,500
[CGS] 0
[TOTAL-COSTS] 477,800
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 222,300
[INTEREST-EXPENSE] 3,900
[INCOME-PRETAX] (431,600)
[INCOME-TAX] (200,000)
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (231,600)
[EPS-PRIMARY] (.02)
[EPS-DILUTED] 0
</TABLE>
<PAGE> 32
[ARTICLE] 5
[CIK] 0000820889
[NAME] HOMEFREE INVESTORS LP
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[CASH] 38,700
[SECURITIES] 0
[RECEIVABLES] 8,620,200
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 42,700
[PP&E] 127,900
[DEPRECIATION] 110,000
[TOTAL-ASSETS] 8,958,800
[CURRENT-LIABILITIES] 289,500
[BONDS] 7,154,500
[COMMON] 10,500
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 1,015,800
[TOTAL-LIABILITY-AND-EQUITY] 8,958,800
[SALES] 0
[TOTAL-REVENUES] 268,500
[CGS] 0
[TOTAL-COSTS] 477,800
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 222,300
[INTEREST-EXPENSE] 3,900
[INCOME-PRETAX] (431,600)
[INCOME-TAX] (200,000)
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (231,600)
[EPS-PRIMARY] (.02)
[EPS-DILUTED] 0
</TABLE>
<PAGE> 33
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HOMEFREE VILLAGE RESORTS, INC. AND HOMEFREE INVESTORS L.P.
INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
COMBINED BALANCE SHEETS - December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
COMBINED STATEMENTS OF OPERATIONS - For the Years Ended December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . S-3
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT - For the Years Ended
December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
COMBINED STATEMENTS OF CASH FLOWS - For the Years Ended December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . S-5
HOMEFREE VILLAGE RESORTS, INC.
INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
CONSOLIDATED BALANCE SHEETS - December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
CONSOLIDATED STATEMENTS OF OPERATIONS - For the Years Ended December 31, 1995, 1994, and 1993 . . . . . . . . . . . . S-8
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - For the Years Ended December 31,
1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
CONSOLIDATED STATEMENTS OF CASH FLOWS - For the Years Ended December 31, 1995, 1994, and 1993 . . . . . . . . . . . S-10
HOMEFREE INVESTORS L.P.
INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
BALANCE SHEETS - December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
STATEMENTS OF OPERATIONS - For the Years Ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . S-13
STATEMENTS OF PARTNERS' CAPITAL - For the Years Ended December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . S-14
STATEMENTS OF CASH FLOWS - For the Years Ended December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . S-15
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
ARISTEK PROPERTIES, LTD.
INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-27
CONSOLIDATED BALANCE SHEETS - December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-28
CONSOLIDATED STATEMENTS OF OPERATIONS - For the Years Ended December 31, 1995, 1994, and 1993 . . . . . . . . . . . S-29
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT - For the Years Ended
December 31, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-30
CONSOLIDATED STATEMENTS OF CASH FLOWS - For the Years Ended December 31, 1995,
1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33
</TABLE>
<PAGE> 34
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Homefree Village Resorts, Inc.
Denver, Colorado
To the Partners
Homefree Investors L.P.
Denver, Colorado
We have audited the accompanying combined 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, 1995 and 1994,
and the related combined statements of operations, stockholders' equity and
partners' deficit, and cash flows for the years ended December 31, 1995, 1994,
and 1993. 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 financial position of Homefree Village
Resorts, Inc. and subsidiaries and Homefree Investors L.P. as of December 31,
1995 and 1994, and the results of their operations and their cash flows for the
years ended December 31, 1995, 1994, and 1993 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 concerns, which
contemplate 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 substantial operating losses, 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.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
June 12, 1996
S-1
<PAGE> 35
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
AND HOMEFREE INVESTORS L.P.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 38,700 $ 10,600
Other current assets 4,000 9,600
---------- ----------
Total current assets 42,700 20,200
RECEIVABLES FROM UNCONSOLIDATED ENTITIES, net 8,620,200 8,915,600
INVESTMENTS IN UNCONSOLIDATED ENTITIES 82,400 94,400
PROPERTY AND EQUIPMENT, at cost:
Office furniture and equipment 102,900 95,100
Vehicles 25,000 25,000
---------- ----------
127,900 120,100
Accumulated depreciation (110,000) (103,600)
---------- ----------
Net property and equipment 17,900 16,500
LAND OPTION COSTS 195,600 195,600
---------- ----------
TOTAL ASSETS $8,958,800 $9,242,300
LIABILITIES, STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 94,600 $ 93,600
Payable to AWP 150,500 -
Current maturities of long-term debt 44,400 -
Total current liabilities 289,500 93,600
LONG-TERM DEBT, less current maturities:
Unconsolidated entity 7,154,500 7,154,500
Other - 44,400
DEFERRED INCOME TAXES - 200,000
DEFERRED PROFIT 488,500 488,500
OTHER LIABILITIES, payable to unconsolidated entities - 3,400
COMMITMENTS AND CONTINGENCIES (Notes 1, 3 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
Additional paid-in capital 3,537,000 3,537,000
Accumulated deficit (2,293,100) (2,061,800)
Partners' deficit - limited partners (228,100) (227,800)
---------- ----------
Total stockholders' equity and partners' deficit 1,026,300 1,257,900
TOTAL LIABILITIES, STOCKHOLDERS' EQUITY AND
PARTNERS' DEFICIT $8,958,800 $9,242,300
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-2
<PAGE> 36
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
AND HOMEFREE INVESTORS L.P.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Management and administrative fees from
unconsolidated entities $ 245,400 $ 244,600 $ 253,400
Equity in earnings of AWP 11,000 10,800 16,900
Interest 12,100 15,300 14,800
268,500 270,700 285,100
EXPENSES:
General and administrative 450,900 429,400 394,600
Interest 3,900 9,600 5,000
Equity in losses of APL 23,000 26,000 13,000
Loss on related party receivables/administrative fee 222,300 128,700 75,600
----------- ----------- -----------
700,100 593,700 488,200
LOSS BEFORE INCOME TAXES (431,600) (323,000) (203,100)
DEFERRED INCOME TAX BENEFIT 200,000 87,000 43,000
----------- ----------- -----------
NET LOSS $ (231,600) $ (236,000) $ (160,100)
NET LOSS PER PAIRED SHARE $ (.02) $ (.02) $ (.02)
WEIGHTED AVERAGE PAIRED SHARES OUTSTANDING 10,484,000 10,484,000 10,484,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-3
<PAGE> 37
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, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
ADDITIONAL
PAIRED COMMON STOCK PAID-IN ACCUMULATED PARTNERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT TOTAL
---------- ------------ ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, January 1, 1993 10,484,000 $10,500 $ 3,537,000 $(1,677,400) $(216,100) $1,654,000
Net loss - - - (148,700) (11,400) (160,100)
BALANCES, December 31, 1993 10,484,000 10,500 3,537,000 (1,826,100) (227,500) 1,493,900
Net loss - - - (235,700) (300) (236,000)
---------- ------- ---------- ----------- --------- ----------
BALANCES, December 31, 1994 10,484,000 10,500 3,537,000 (2,061,800) (227,800) 1,257,900
Net loss - - - (231,300) (300) (231,600)
BALANCES, December 31, 1995 10,484,000 $10,500 $3,537,000 $(2,293,100) $(228,100) $1,026,300
---------- ------- ---------- ----------- --------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE> 38
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
AND HOMEFREE INVESTORS L.P.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(231,600) $(236,000) $(160,100)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 6,400 6,300 8,700
Amortization - - 11,100
Equity in losses (earnings) of unconsolidated
entities, net 12,000 15,200 (3,900)
Cash advances to officer and director (210,200) (113,400) (62,500)
Provision for loss on related party receivables 222,300 128,700 75,600
Deferred income taxes (200,000) (87,000) (43,000)
Changes in operating assets and liabilities:
Decrease (increase) in:
Accrued interest receivable - officer and director (12,100) (15,300) (13,100)
Other assets 5,600 (23,200) 19,000
Receivables from unconsolidated entities (3,600) 49,600 15,800
Increase (decrease) in:
Accounts payable and accrued expenses 1,000 37,300 (27,600)
Other (3,400) - 3,100
-------- -------- --------
Net cash used in operating activities (413,600) (237,800) (176,900)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash advances to unconsolidated entities - (700) (4,500)
Collection of advances from unconsolidated entities 299,000 374,900 10,000
Cash advance for land option - - (35,000)
Investment in unconsolidated entities - (50,000) -
Purchase of equipment (7,800) (11,300) (10,600)
-------- -------- --------
Net cash provided by (used in) investing activities 291,200 312,900 (40,100)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advance from related party 150,500 - -
Payments under land option contract - (88,400) (27,700)
Principal payments on long-term debt - (10,600) (4,800)
Net cash provided by (used in) financing activities 150,500 (99,000) (32,500)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 28,100 (23,900) (249,500)
CASH AND EQUIVALENTS, beginning of year 10,600 34,500 284,000
-------- -------- --------
CASH AND EQUIVALENTS, end of year $ 38,700 $ 10,600 $ 34,500
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid for:
Interest $ 3,900 $ 11,000 $ 3,600
======== ======== ========
Income taxes $ - $ - $ -
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES -
Obligation under land option contract $ - $160,600 $ -
======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-5
<PAGE> 39
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Homefree Village Resorts, Inc.
Denver, Colorado
We have audited the accompanying consolidated balance sheets of Homefree
Village Resorts, Inc. (a Delaware Corporation) and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1995,
1994, and 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Homefree Village
Resorts, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years ended December
31, 1995, 1994, and 1993 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company 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 has suffered
substantial operating losses and anticipates the need for additional cash to
fund operations. These conditions raise substantial doubt about the ability of
the Company 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.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
June 12, 1996
S-6
<PAGE> 40
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 38,700 $ 10,600
Other current assets 4,000 9,600
----------- -----------
Total current assets 42,700 20,200
RECEIVABLES FROM UNCONSOLIDATED ENTITIES, net 8,620,200 8,915,600
INVESTMENTS IN UNCONSOLIDATED ENTITIES 82,400 94,400
PROPERTY AND EQUIPMENT, at cost:
Office furniture and equipment 102,900 95,100
Vehicles 25,000 25,000
127,900 120,100
Accumulated depreciation (110,000) (103,600)
Net property and equipment 17,900 16,500
LAND OPTION COSTS 195,600 195,600
----------- -----------
TOTAL ASSETS $ 8,958,800 $ 9,242,300
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 94,600 $ 93,600
Payable to AWP 150,500 -
Current maturities of long-term debt 44,400 -
Total current liabilities 289,500 93,600
LONG-TERM DEBT, less current maturities:
Unconsolidated entity 7,154,500 7,154,500
Other - 44,400
DEFERRED INCOME TAXES - 200,000
DEFERRED PROFIT 488,500 488,500
OTHER LIABILITIES, payable to unconsolidated entities - 3,400
COMMITMENTS AND CONTINGENCIES (Notes 1, 3 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
Additional paid-in capital 3,537,000 3,537,000
Accumulated deficit (2,521,200) (2,289,600)
Total stockholders' equity 1,026,300 1,257,900
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,958,800 $ 9,242,300
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-7
<PAGE> 41
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
REVENUES:
Management and administrative fees from unconsolidated
entities $ 245,400 $ 244,600 $ 253,400
Equity in earnings of AWP 11,000 10,800 16,900
Interest 12,100 15,300 14,800
----------- ----------- -----------
268,500 270,700 285,100
EXPENSES:
General and administrative 450,600 429,100 383,200
Interest 3,900 9,600 5,000
Equity in losses of APL 23,000 26,000 13,000
Impairment of investment in HILP 300 300 300
Loss on related party receivables/administrative fee 222,300 128,700 75,600
----------- ----------- -----------
700,100 593,700 477,100
LOSS BEFORE INCOME TAXES (431,600) (323,000) (192,000)
DEFERRED INCOME TAX BENEFIT 200,000 87,000 43,000
----------- ----------- -----------
NET LOSS $ (231,600) $ (236,000) $ (149,000)
NET LOSS PER COMMON SHARE $ (.02) $ (.02) $ (.01)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 10,484,000 10,484,000 10,484,000
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-8
<PAGE> 42
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
COMMON STOCK Additional
----------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
BALANCES, January 1, 1993 10,484,000 $10,500 $3,537,000 $(1,904,600) $1,642,900
Net loss - - - (149,000) (149,000)
---------- ------- ---------- ----------- ----------
BALANCES, December 31, 1993 10,484,000 10,500 3,537,000 (2,053,600) 1,493,900
Net loss - - - (236,000) (236,000)
---------- ------- ---------- ----------- ----------
BALANCES, December 31, 1994 10,484,000 10,500 3,537,000 (2,289,600) 1,257,900
Net loss - - - (231,600) (231,600)
---------- ------- ---------- ----------- ----------
BALANCES, December 31, 1995 10,484,000 $10,500 $3,537,000 $(2,521,200) $1,026,300
========== ======= ========== =========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-9
<PAGE> 43
HOMEFREE VILLAGE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(231,600) $(236,000) $(149,000)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 6,400 6,300 8,700
Equity in losses (earnings) of unconsolidated
entities, net 12,000 15,200 (3,900)
Impairment of investment in HILP 300 300 300
Cash advances to officer and director (210,200) (113,400) (62,500)
Provision for loss on related party receivables 222,300 128,700 75,600
Deferred income tax benefit (200,000) (87,000) (43,000)
Changes in operating assets and liabilities:
Decrease (increase) in:
Accrued interest receivable - officer and
director (12,100) (15,300) (13,100)
Other assets 5,600 (23,200) 19,400
Receivables from unconsolidated entities (3,600) 49,600 15,500
Increase (decrease) in:
Accounts payable and accrued expenses 1,000 37,300 (27,600)
Other (3,400) - 3,100
Net cash used in operating activities (413,300) (237,500) (176,500)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash advances to unconsolidated entities - (700) (4,500)
Collection of advances from unconsolidated entities 299,000 374,900 10,000
Cash advance for land option - - (35,000)
Investment in unconsolidated entities (300) (50,300) (400)
Purchase of equipment (7,800) (11,300) (10,600)
--------- --------- ---------
Net cash provided by (used in) investing activities 290,900 312,600 (40,500)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advance from related party 150,500 - -
Payments under land option contract - (88,400) (27,700)
Principal payments on long-term debt - (10,600) (4,800)
Net cash provided by (used in) financing activities 150,500 (99,000) (32,500)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 28,100 (23,900) (249,500)
CASH AND EQUIVALENTS, beginning of year 10,600 34,500 284,000
CASH AND EQUIVALENTS, end of year $ 38,700 $ 10,600 $ 34,500
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid for:
Interest $ 3,900 $ 11,000 $ 3,600
========= ========= =========
Income taxes $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES -
Obligation under land option contract $ - $ 160,600 $ -
========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-10
<PAGE> 44
INDEPENDENT AUDITOR'S REPORT
To the Partners
Homefree Investors L.P.
Denver, Colorado
We have audited the accompanying balance sheets of Homefree Investors L.P. (a
Massachusetts limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital and cash flows for the
years ended December 31, 1995, 1994, and 1993. These financial statements are
the responsibility of the 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 financial position of Homefree Investors L.P. as of
December 31, 1995 and 1994, and the results of its operations and cash flows
for the years ended December 31, 1995, 1994, and 1993 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that 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 Partnership
has suffered losses from inception, and anticipates the need for additional
cash to fund operations. These conditions raise substantial doubt about the
ability of 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.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
June 12, 1996
S-11
<PAGE> 45
HOMEFREE INVESTORS L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
--------------- -------------
<S> <C> <C>
ASSETS
------
CURRENT ASSET, receivable from Homefree Village Resorts, Inc. $150,500 $-
======== ======
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITY, payable to AWP $150,500 $-
COMMITMENT (NOTE 8)
PARTNERS' CAPITAL - -
TOTAL LIABILITIES AND PARTNERS' CAPITAL $150,500 $-
======== ======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-12
<PAGE> 46
HOMEFREE INVESTORS L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993
------------------ ---------------- ---------------
<S> <C> <C> <C>
REVENUE $- $- $-
EXPENSES:
Amortization of organization costs - - 11,100
General and administrative 300 300 400
----- ----- --------
NET LOSS $(300) $(300) $(11,500)
===== ===== ========
NET LOSS PER LIMITED PARTNERSHIP INTEREST $- $- $-
WEIGHTED AVERAGE LIMITED PARTNERSHIP
INTERESTS OUTSTANDING 10,484,000 10,484,000 10,484,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-13
<PAGE> 47
HOMEFREE INVESTORS L.P.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER* PARTNERS TOTAL
---------------- --------------- -------------
<S> <C> <C> <C>
BALANCES, January 1, 1993 $227,200 $(216,100) $11,100
Partner's capital contributions 400 - 400
Net loss (100) (11,400) (11,500)
BALANCES, December 31, 1993 227,500 (227,500) -
Partner's capital contributions 300 - 300
Net loss - (300) (300)
----- ---- ----
BALANCES, December 31, 1994 227,800 (227,800) -
Partner's capital contributions 300 - 300
Net loss - (300) (300)
----- ---- ----
BALANCES, December 31, 1995 $228,100 $(228,100) $-
</TABLE>
________________________
* The General Partner's capital account is eliminated for purposes of the
combined financial statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-14
<PAGE> 48
HOMEFREE INVESTORS L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------- ------------ --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(300) $(300) $(11,500)
Adjustments to reconcile net loss to net cash from operating
activities:
Amortization - - 11,100
Increase in:
Receivable from Homefree Village Resorts, Inc. (150,500) - -
Payable to related party 150,500 - -
------- ----- -----
Net cash provided by operating activities (300) (300) (400)
CASH FLOWS FROM INVESTING ACTIVITIES - - -
CASH FLOWS FROM FINANCING ACTIVITIES -
Capital contributions by general partner 300 300 400
--- --- ---
NET CHANGE IN CASH - - -
CASH, beginning of year - - -
----- ----- -----
CASH, end of year $- $- $-
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
S-15
<PAGE> 49
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS:
Nature of Operations - The Company is engaged primarily in the
development and operation of adult recreational communities containing
rental sites for manufactured homes and recreational homes. The Company
has interests in such communities through Aristek Properties, Ltd., and
Aristek Western Properties Limited Partnership, 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.
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.
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, 1995, 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
ultimately achieve profitable operations or the sale of APL at a price in
excess of its liabilities and partners investments.
These conditions raise 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.
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 $525,000 in bank
financing, and deferred the due date on its total bank debt of $5,015,000
until December 1998. Management believes that these actions will enable
the Company to continue as a going concern.
S-16
<PAGE> 50
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
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), 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 and Equipment - Property 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.
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. The deferred tax benefit 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.
Loss Per Share - The computation of net 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 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 an original maturity of
three months or less.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and the accompanying notes. The
actual results could differ from those estimates.
The Company's financial statements are based on a number of significant
estimates including the realizability of the Company's investments and
receivables due from unconsolidated entities, and the realizability of
land option costs.
S-17
<PAGE> 51
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
Reclassifications - Certain reclassifications have been made to the 1994
and 1993 financial statements to conform to the presentation in 1995.
The reclassifications had no effect on the net loss for 1994 and 1993.
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. Due to APL's controlling interest, the
accounts of MVIJV are consolidated in APL's financial statements.
As summarized in Notes 5 and 8, the Company has entered into significant
transactions with APL, resulting in $8.6 million of net receivables and
$7.2 million of long-term debt at December 31, 1995. 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, 1995, APL
owed the Company an additional $1.5 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. No gain or loss was recognized on this restructuring transaction.
S-18
<PAGE> 52
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
Condensed balance sheets and operating statements of APL are
presented below (in thousands).
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
ASSETS:
Properties, net of depreciation $6,355 $6,596 $6,817
Receivables from the Company:
Notes 7,154 7,154 7,154
Accrued interest 764 256 1,325
Cash and temporary cash investments 665 833 490
Other assets 304 320 833
--- --- ---
$15,242 $15,159 $16,619
LIABILITIES AND PARTNERS' DEFICIT:
Mortgage payable $5,015 $4,493 $4,050
Payable to the Company:
Notes 11,208 11,208 10,144
Accrued interest 694 198 2,297
Management and administrative fees 361 226 100
Other liabilities 1,542 1,490 1,290
Partners' deficit (3,578) (2,456) (1,262)
------ ------ ------
$15,242 $15,159 $16,619
======= ======= =======
STATEMENTS OF OPERATIONS
------------------------
REVENUES:
Rentals and other operating income $2,045 $1,905 $1,836
Interest and other income 533 575 723
Total 2,578 2,480 2,559
Expenses:
Operating (1,973) (1,954) (1,847)
Interest (1,325) (1,310) (1,422)
Depreciation and amortization (402) (410) (406)
Minority interest - - 352
----- ----- ---
NET LOSS $(1,122) $(1,194) $(764)
</TABLE>
S-19
<PAGE> 53
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
Presented below is a reconciliation of APL's net loss to the Company's equity
in the losses of APL:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NET LOSS OF APL $(1,122) $(1,194) $(764)
Adjustments to remove net expenses of APL which are
not recorded as income by the Company:
Interest expense 795 815 835
Interest income (508) (547) (588)
Administrative fees 95 95 95
Management fees 41 42 28
-- -- --
ADJUSTED LOSS $(699) $(789) $(394)
EQUITY IN LOSS BASED ON 3.3% OWNERSHIP INTEREST $(23) $(26) $(13)
</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.
4. INCOME TAXES:
Deferred income taxes relate exclusively to long-term assets and
liabilities and consist of the following as of December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Deferred tax assets (liabilities):
Notes receivable - installment sales $(509,000) $(509,000)
Partnership basis differences 38,000 (133,000)
Receivable reserves 485,000 547,000
Net operating loss carryforwards 198,000 65,000
Other 14,000 7,000
Net 226,000 (23,000)
Valuation allowance related to deferred tax assets (226,000) (177,000)
-------- --------
$- $(200,000)
======== =========
</TABLE>
S-20
<PAGE> 54
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
For income tax reporting purposes, the Company and RPA file a
consolidated return. The composition of the income tax benefit for
the years ended December 31, 1995, 1994, and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Current $- $- $-
Deferred:
Federal 183,800 80,000 40,000
State 16,200 7,000 3,000
------ ----- -----
Total $200,000 $87,000 $43,000
</TABLE>
Following is a reconciliation of the Company's effective tax rate on the
consolidated loss to the statutory U.S. Federal income tax rate for the
years ended December 31, 1995, 1994, and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Statutory rate (34)% (34)% (34)%
State taxes, net of Federal benefit (3) (3) (3)
Graduated tax rates - - 3
Change in valuation allowance (12) 10 12
--- -- --
Effective tax rate (49)% (27)% (22)%
=== === ===
</TABLE>
As of December 31, 1995, the Company and RPA had a tax net operating
loss carryforward of approximately $500,000. This loss carryforward
will expire in 2009 and 2010 if not previously utilized to offset
taxable income of the Company and RPA.
During 1993 and 1994, the Company provided a valuation allowance for a
portion of the Company's deferred tax assets since the treatment of
certain items reported on the Company's income tax returns was
uncertain. During 1995, the Internal Revenue Service completed an
examination of the Company's Federal income tax returns for 1992
through 1994 and it became apparent that the items were properly
reported. Accordingly, a portion of the valuation allowance provided
in prior years was reversed in 1995. The valuation allowance also
increased due to 1995 losses.
S-21
<PAGE> 55
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
5. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
Restructured note payable - APL, interest at 7%, due June 1998. $7,154,500 $7,154,500
Contract payable for purchase of land, interest imputed at 12%, due July
1997. 44,400 44,400
------ ------
Total 7,198,900 7,198,900
Less current maturities (44,400) -
$7,154,500 $7,198,900
</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, 1995, 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, 1995.
S-22
<PAGE> 56
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. During 1996, the parties agreed to extend the exercise
period through July 1, 1997.
At December 31, 1995 and 1994, 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,
--------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
Restructured notes receivable from APL, 7%, due June 1998 $9,602,100 $9,901,100
Less allowance for doubtful accounts (1,000,000) (1,000,000)
Net 8,602,100 8,901,100
Other receivables, unsecured:
Advances to AWP 6,400 3,600
Advances to Monte Vista 11,700 10,900
Total $8,620,200 $8,915,600
========== ==========
</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 advances to APL to enable it to
finance its operating needs.
The collection of notes receivable and 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
S-23
<PAGE> 57
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
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 - 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 accrued in the accompanying financial
statements.
Over the past several years, the Company has made a series of cash
advances to, and on behalf of, the Company's president. These advances
are evidenced by formal notes which bear interest at approximately 3.8%
as of December 31, 1995. The following is a summary of activity during
the years ended December 31, 1995, 1994, and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------- --------------
<S> <C> <C> <C>
Balances, beginning of year $520,900 $392,200 $316,600
Cash advances 210,200 113,400 62,500
Accrued interest 12,100 15,300 13,100
Deemed repayment (433,200) - -
Balances, end of year $310,000 $520,900 $392,200
======== ======== ========
</TABLE>
The president has always intended to repay the notes from the annual
administrative fee discussed above. Accordingly, since the Company would
be required to fund the administrative fee in order to collect the
receivable, the Company recorded a provision for loss as cash advances
were made to the president. During 1995, a total of $433,200 was
designated for the deemed payment of administrative fees and related
repayment of notes receivable with no effect on the Company's cash flows.
Without regard to this transaction, through December 31, 1995, the
Company has recognized cumulative losses on the notes receivable of
$743,200 compared to cumulative administrative fees of $674,000.
Accordingly, the Company's financial statements include recognition of
$69,200 of expenses in excess of the contractual amount of the
administrative fee.
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
S-24
<PAGE> 58
HOMEFREE VILLAGE RESORTS, INC. AND
SUBSIDIARIES AND HOMEFREE INVESTORS L.P.
NOTES TO FINANCIAL STATEMENTS
sources of revenue are fees, commissions and cash flow participation from
properties under its supervision (see Note 3).
9. FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107 requires all entities
to disclose the fair value of certain financial instruments in their
financial statements. Accordingly, at December 31, 1995, management's
best estimate is that the carrying amount of cash and equivalents,
contract payable, and accounts payable and accrued expenses approximates
fair value due to the short maturity of these instruments. Due to
uncertainty about the fair value of the properties owned by APL and AWP,
it is not practicable to estimate the fair value of the Company's
investment and receivables due from these entities. However, management
believes that fair value exceeds the carrying value as of December 31,
1995.
10. SIGNIFICANT CONCENTRATIONS:
The Company has an investment of $18,100, receivables of $8,613,800, and
long-term debt of $7,154,500 which is payable to APL and its subsidiary.
Due to the Company's current general and limited partner interests in APL
and the commitment described in Note 3 to purchase an additional 26.5
limited partner units, the Company has a substantial concentration of its
net assets which are dependent upon the future success of APL.
Substantially all of the Company's receivables, investments in
partnerships, and land option costs relate to properties which are
located in the Phoenix, Arizona metropolitan area. This concentration
may impact the Company's ability, either positively or negatively, to
realize the carrying value of these assets.
The Company earns substantially all of its management and administrative
fees from APL and Aristek Western Properties Limited Partnership.
11. 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
1995 financial statements. The Company will adopt the new standard in
the first quarter of 1996.
S-25
<PAGE> 59
INDEPENDENT AUDITOR'S REPORT
To the Partners
Aristek Properties, Ltd.
Denver, Colorado
We have audited the accompanying consolidated balance sheets of Aristek
Properties, Ltd. (a limited partnership) and its subsidiary as of December 31,
1995 and 1994, and the related consolidated statements of operations, changes
in partners' deficit, and cash flows for each of the years in the three-year
period ended December 31, 1995. These financial statements are the
responsibility of the 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aristek Properties,
Ltd., and its subsidiary as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that 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 Partnership
has suffered substantial operating losses, and anticipates the need for
additional cash to fund operations. These conditions raise substantial doubt
about the ability of 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 12, 1996
S-26
<PAGE> 60
ARISTEK PROPERTIES, LTD. AND SUBSIDIARY
(A LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
ASSETS
------
OPERATING PROPERTIES:
Land $1,239,381 $1,239,381
Land improvements 5,235,140 5,135,346
Buildings and improvements 2,716,077 2,712,942
Furniture and equipment 1,300,019 1,242,724
Total operating properties 10,490,617 10,330,393
Less accumulated depreciation and amortization (5,185,898) (4,784,278)
---------- ----------
Net operating properties 5,304,719 5,546,115
OTHER ASSETS:
Cash and equivalents 664,730 833,236
Note receivable from General Partner 7,154,529 7,154,529
Accrued interest receivable - General Partner 764,000 256,000
Deferred loan costs, net of accumulated amortization of $73,405 and
$18,270 166,382 219,241
Land held for development 1,050,000 1,050,000
Rent and other receivables 103,890 59,568
Other assets 34,033 40,735
TOTAL ASSETS $15,242,283 $15,159,424
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
LIABILITIES:
Mortgage payable $5,015,346 $4,492,913
Notes payable to General Partner 11,207,870 11,207,870
Accrued interest payable - General Partner 694,000 198,000
Accrued management and administrative fees - General Partner 360,679 225,876
Accounts payable and accrued expenses 125,798 144,376
Unearned rental income 1,228,124 1,257,384
Payable to affiliate 188,433 88,933
------- ------
Total liabilities 18,820,250 17,615,352
COMMITMENT AND CONTINGENCY (NOTE 1)
PARTNERS' DEFICIT (3,577,967) (2,455,928)
TOTAL LIABILITIES AND PARTNERS' DEFICIT $15,242,283 $15,159,424
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
S-27
<PAGE> 61
ARISTEK PROPERTIES, LTD. AND SUBSIDIARY
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
OPERATING REVENUE:
Rental income $ 2,004,648 $1,862,058 $1,797,419
Other 40,671 43,149 38,928
Total revenue 2,045,319 1,905,207 1,836,347
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Salaries, wages and benefits 623,131 667,081 601,675
Maintenance and repairs 227,252 204,053 235,203
Utilities 260,827 279,916 247,258
Property taxes 69,221 72,092 73,681
Management and administrative fees - General Partner 191,533 194,853 182,708
Depreciation 401,621 409,884 406,050
General and administrative 601,764 536,915 506,517
Total operating costs and expenses 2,375,349 2,364,794 2,253,092
--------- --------- ---------
OPERATING LOSS (330,030) (459,587) (416,745)
OTHER INCOME (EXPENSE):
Interest income:
General Partner 508,000 547,398 587,566
Other 24,981 27,704 134,935
Interest expense:
General Partner (795,000) (814,806) (835,493)
Other (529,990) (495,095) (586,686)
LOSS BEFORE MINORITY INTEREST (1,122,039) (1,194,386) (1,116,423)
MINORITY INTEREST SHARE OF MVIJV LOSS - - 352,441
NET LOSS $(1,122,039) $(1,194,386) $(763,982)
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
S-28
<PAGE> 62
ARISTEK PROPERTIES, LTD. AND SUBSIDIARY
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<S> <C>
PARTNERS' DEFICIT, January 1, 1993 $(538,572)
Advances from AWP contributed to capital in connection with sale of 40%
interest in MVIJV, net of minority interest in loss of MVIJV 41,012
Net loss (763,982)
--------
PARTNERS' DEFICIT, December 31, 1993 (1,261,542)
Net loss (1,194,386)
----------
PARTNERS' DEFICIT, December 31, 1994 (2,455,928)
Net loss (1,122,039)
PARTNERS' DEFICIT, December 31, 1995 $(3,577,967)
===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
S-29
<PAGE> 63
ARISTEK PROPERTIES, LTD. AND SUBSIDIARY
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------------------------
1995 1994 1993
--------------- ---------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,122,039) $(1,194,386) $(763,982)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Minority interest - - (352,441)
Depreciation 401,621 409,884 406,050
Amortization of deferred loan costs 55,137 136,376 141,052
Changes in operating assets and liabilities:
Decrease (increase) in:
Rent and other receivables (44,322) 19,841 37,384
Accrued interest receivable - General
Partner (508,000) (547,398) (587,566)
Other (71,905) 5,954 137,833
Increase (decrease) in:
Accounts payable and accrued expenses 116,225 62,569 144,217
Accrued interest payable - General Partner 496,000 675,875 756,077
Unearned rental income 49,346 173,710 96,557
Payable to affiliate 99,500 79,183 -
Net cash provided by (used in) operating activities (528,437) (178,392) 15,181
-------- -------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from collection of note receivable - - 46,398
Land development costs - - (45,650)
Capital expenditures for operating properties (160,224) (189,156) (40,144)
Net cash used in investing activities (160,224) (189,156) (39,396)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage loans 522,043 269,300 -
Principal payments on mortgage loans (1,888) (7,087) -
Principal payments on loans from General Partner - (95,000) (75,129)
Proceeds from release of loan escrow deposit - 600,000 -
Payment of deferred loan costs - (56,811) -
Advances from AWP to MVIJV - - 393,453
Net cash provided by financing activities 520,155 710,402 318,324
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (168,506) 342,854 294,109
CASH AND EQUIVALENTS, at beginning of year 833,236 490,382 196,273
------- ------- -------
CASH AND EQUIVALENTS, at end of year $664,730 $833,236 $490,382
</TABLE>
S-30
<PAGE> 64
ARISTEK PROPERTIES, LTD. AND SUBSIDIARY
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------------------------
1995 1994 1993
--------------- ---------------- ---------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION-
Cash paid for interest $773,853 $560,719 $445,634
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Repayment of note payable in connection with collection of
note receivable $- $- $4,250,292
Payment of deferred loan costs from mortgage loan proceeds 2,278 180,700 -
Land conveyed to former partner in settlement of note
payable - - 245,000
Purchase of AWP interest in MVIJV - - 9,750
Net accrued interest converted to note payable to General
Partner - 2,775,236 -
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
S-31
<PAGE> 65
ARISTEK PROPERTIES, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS:
Organization - Aristek Properties, Ltd. ("the Partnership") is a
Colorado limited partnership formed on June 29, 1976. At December 31,
1995, the sole general partner is Homefree Village Resorts, Inc. (the
"General Partner"). In accordance with the terms of the Partnership
Agreement, the partnership was extended by the General Partner to
December 31, 1998. The Partnership Agreement provides that partnership
profit and loss, after adjustment for certain gains earned solely by the
General Partner, shall be allocated 1% to the General Partner and 99% to
the Limited Partners, in direct proportion to their respective ownership
of limited partnership units. Under the terms of the agreement, as
amended, distributions may be made to the General Partner based on the
adjusted cash flow from operations, sales and refinancing of the
Partnership's properties.
Pursuant to the partnership agreement, the General Partner earns an
annual administrative fee of $94,750. In addition, the Partnership
Agreement provides for additional compensation to the General Partner
for certain services rendered and payment of costs and expenses incurred
by the General Partner on behalf of the Partnership.
Effective June 30, 1994, the partners of the Partnership consented to a
restructuring of the intercompany loans whereby all of the Partnership's
excess cash flow will be utilized to repay outstanding debt to the
General Partner. The interest rate was reduced from 8.1% to 7%, and the
maturity date was extended to June 30, 1998. The parties to the 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. The
Partnership 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 the
Partnership agreed to provide the General Partner 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 General Partner may be required to pay a
higher price per unit. The General Partner is required to exercise its
option between January 1, 1997 and November 30, 1998. No gain or loss
was recognized on this restructuring transaction. When this option is
exercised, there will be a change in control of the Partnership to the
General Partner. However, the General Partner does not presently have
sufficient liquidity to exercise the option.
Nature of Operations - The Partnership is engaged primarily in the
development and operation of an adult recreational community containing
832 rental sites for manufactured homes and recreational homes. This
community is located in Mesa, Arizona and offers extensive recreational
facilities and social activities designed to appeal to active
pre-retirement and retirement age people. The rental operations
generally include operating leases which do not extend beyond one year.
Going Concern - 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. At December 31, 1995, the Partnership has approximately $5
million of debt (net of receivables) payable to the General Partner and
a partners' deficit of approximately $3.6 million. The Partnership has
experienced operating losses in each of the past three years and the
Partnership's operating activities have not generated net cash flow in
either of the past two years. Due to the Partnership's lack of
liquidity, it was necessary to restructure outstanding debt payable to
the General Partner during 1994 and, as a result, the Partnership is
required to pay all excess cash flow to the General Partner until
maturity of the debt in 1998. However, the
S-32
<PAGE> 66
ARISTEK PROPERTIES, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Partner has also experienced financial difficulties over the
past several years and is not presently expected to be capable of
providing capital to support operations.
These conditions raise substantial doubt about the ability of the
Partnership to continue as a going concern. The accompanying financial
statements do not include any adjustments which might result from the
outcome of this uncertainty.
In addition to financial support from the General Partner, in recent
years the Partnership has relied on debt financing from a commercial
lender to support operations and the commercial lender has extended the
due date until December 1998. However, management believes that the
ultimate success of the Partnership is dependent upon the ability to
obtain additional funding to develop its 75-acre parcel of land which is
adjacent to the Monte Vista property. Management believes the
Partnership has financing arrangements in place to allow it to continue
in operation through 1997 and efforts are continuing to obtain
additional financing to fully develop the project.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation - The financial statements include the
accounts of the Partnership and its affiliate, Monte Vista I Joint
Venture (MVIJV). All material intercompany transactions and balances
have been eliminated. Through 1993, AWP owned a 40% minority interest in
MVIJV. In December 1993, the Partnership acquired 97.5% of AWP's
interest and the General Partner acquired the remaining 2.5%. No
amounts are reflected in the accompanying financial statements for the
General Partner's minority interest since MVIJV incurred losses in each
of the past two years and HVR is not funding its share of the losses.
The General Partner's share of such losses is approximately $15,000
through December 31, 1995.
Property and Equipment - Property is recorded at cost, which does not
exceed the estimated fair market value. Depreciation is provided using
the straight-line method over estimated useful lives, as follows:
<TABLE>
<CAPTION>
Years
----------------
<S> <C>
Land improvements 20
Buildings and improvements 25
Furniture and equipment 7
</TABLE>
The cost of normal maintenance and repairs is charged to operating
expenses as incurred. Material expenditures which increase the life of
an asset are capitalized and depreciated over the estimated remaining
useful life of the asset. The cost of properties sold, or otherwise
disposed of, and the related accumulated depreciation or amortization
are removed from the accounts, and any gains or losses are reflected in
current operations.
Partnership Accounting - All income or loss is allocated to the partners
in accordance with the Partnership Agreement. The accompanying
financial statements do not include any assets, liabilities or
operations attributable to the partners' individual activities and no
provision has been made for income taxes (credits), as they are the
responsibility of the partners.
S-33
<PAGE> 67
ARISTEK PROPERTIES, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash Equivalents - For purposes of the statements of cash flows, the
Partnership considers cash and equivalents to include cash on hand and
all highly liquid debt instruments purchased with an original maturity
of three months or less.
Deferred Loan Costs - Deferred loan costs were incurred in connection
with the origination of the mortgage note discussed in Note 4. These
costs are being amortized using the interest method.
Unearned Rental Income - Rental income is typically received in advance
for a one year period. The Partnership recognizes rental income ratably
over the period for which the payment relates.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and the accompanying notes. The
actual results could differ from those estimates.
The Partnership's financial statements are based on a number of
significant estimates including the realizability of net operating
properties and land held for development, selection of depreciation
methods and estimated useful lives, and the realization of receivables
which affects recognition of profit on the sale of real estate.
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 would change
the Partnership's method of determining impairment of long- lived
assets. Although the Partnership has not performed a detailed analysis
of the impact of this new standard on the Partnership's financial
statements, the Partnership does not believe that adoption of the new
standard will have a material effect on the financial statements.
3. NOTE RECEIVABLE:
The note receivable of $7,154,529 at December 31, 1995 is due from the
General Partner and bears interest at 7%. Principal and interest are
due at the maturity date in June 1998.
4. MORTGAGE AND NOTES PAYABLE:
At December 31, 1995 and 1994, the Partnership has a mortgage note
payable with an outstanding principal balance of $5,015,346 and
$4,492,913, respectively. This note bears interest at 4% above the
published LIBOR rate (total of $9.9% at December 31, 1995) and requires
minimum monthly payments at 10%. Payments that exceed the monthly
interest rate are applied to principal. The borrower also covenants
that, so long as any of the indebtedness remains outstanding, as of May
31 of any given loan year, borrower shall have cash balances in its bank
accounts for the trust property that equal the greater of $400,000, or
an amount sufficient to cover property operations and debt service
during the months of June, July, and August of said loan year. The note
is collateralized by operating properties and land held for development.
Notes payable to the General Partner amount to $11,207,870 at December
31, 1995 and 1994. These notes bear interest at 7% and no principal or
interest payments are due until the maturity date in June 1998.
S-34
<PAGE> 68
ARISTEK PROPERTIES, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assuming the interest rate in effect under the mortgage note payable
does not change after December 31, 1995, the aggregate maturities of
debt are as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Notes Mortgage
------------------------ ---------------- ---------------
<S> <C> <C>
1996 $ - $9,600
1997 - 10,000
1998 11,207,870 4,995,746
$11,207,870 $5,015,346
=========== ==========
</TABLE>
5. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK:
At December 31, 1995, the Partnership had cash and money market
investments with a single bank which totaled approximately $560,000.
The Company has mortgage debt with a single lender and substantially all
of the Company's tangible assets are pledged as collateral for this
obligation.
At December 31, 1995, the Partnership had a note receivable from the
General Partner for $7,154,529 and notes payable to the General Partner
for $11,207,870. A right of set-off exists between these instruments
but none of the notes are collateralized. Management does not believe
it is practicable to estimate the fair value of the parables and
receivables from the General Partner due to the financial interest of
the General Partner. Management believes that the fair value of the
bank debt is equivalent to the carrying value due to the floating
interest rate. Management believes that the fair value and carrying
value are approximately the same for all other financial instruments due
to the relatively short maturities.
S-35
<PAGE> 69
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------ ------------------- ----
<S> <C>
27.1 Financial Data Schedule Homefree Village Resorts, Inc.
27.2 Financial Data Schedule Homefree Investors LLP
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000065291
<NAME> HOMEFREE VILLAGE RESORTS INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 38,700
<SECURITIES> 0
<RECEIVABLES> 8,620,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,700
<PP&E> 127,900
<DEPRECIATION> 110,000
<TOTAL-ASSETS> 8,958,800
<CURRENT-LIABILITIES> 289,500
<BONDS> 7,154,500
<COMMON> 10,500
0
0
<OTHER-SE> 1,015,800
<TOTAL-LIABILITY-AND-EQUITY> 8,958,800
<SALES> 0
<TOTAL-REVENUES> 268,500
<CGS> 0
<TOTAL-COSTS> 477,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 222,300
<INTEREST-EXPENSE> 3,900
<INCOME-PRETAX> (431,600)
<INCOME-TAX> (200,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (231,600)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000820889
<NAME> HOMEFREE INVESTORS LP
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 38,700
<SECURITIES> 0
<RECEIVABLES> 8,620,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,700
<PP&E> 127,900
<DEPRECIATION> 110,000
<TOTAL-ASSETS> 8,958,800
<CURRENT-LIABILITIES> 289,500
<BONDS> 7,154,500
<COMMON> 10,500
0
0
<OTHER-SE> 1,015,800
<TOTAL-LIABILITY-AND-EQUITY> 8,958,800
<SALES> 0
<TOTAL-REVENUES> 268,500
<CGS> 0
<TOTAL-COSTS> 477,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 222,300
<INTEREST-EXPENSE> 3,900
<INCOME-PRETAX> (431,600)
<INCOME-TAX> (200,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (231,600)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
