Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (under Rule 14a- 6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Crowell & Co., Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fees (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
CROWELL & CO., INC
924 STEVENS CREEK ROAD
AUGUSTA, GA 30907
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 5, 1999
A Special Meeting of Shareholders of Crowell & Co., Inc. (the "Company"),
will be held at the offices of the Company, 924 Stevens Creek Road, Augusta,
Georgia, on Friday, November 5, 1999, at 9:00 A.M., local time, for the
following purposes:
1. At the Special Meeting, Shareholders of the Company will be asked to
consider and vote upon the Reverse Stock Split Proposal which, if adopted,
will move the Company from public company status subject to the reporting
requirements of the Securities Acts as administered by the Securities and
Exchange Commission to private company status not subject to the Securities
Acts. Shareholders also will be asked to vote on any other matters as may
properly come before the Special Meeting and any postponement or
adjournment thereof. Effective as of the approval of the Reverse Stock
Split Proposal, the Articles of Incorporation of the Company will be
amended to reflect the Reverse Stock Split. Certificates for all
outstanding shares of Common Stock shall be exchanged for the certificates
for the new shares and, if applicable, for cash in lieu of any fractional
new shares.
Information relating to the above matters is set forth in the attached
Proxy Statement. The close of business on October 5, 1999, has been set by the
directors as the record date for determination of Shareholders eligible to
receive notice of and to vote at the meeting. Copies of the 1998 Annual Report
and the 10-QSB for the six months ended June 30, 1999, are enclosed along with
Article 13 of the Georgia Business Code and a sample Notice Of Intention To
Demand Payment.
By Order of the Board of Directors,
Mark L. Gilliam
Secretary
Evans, Georgia
October 22, 1999
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND
RETURN THE ENCLOSED PROXY CARD. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY
REVOKE THE PROXY AND VOTE IN PERSON IF YOU SO DESIRE.
<PAGE>
CROWELL & CO., INC.
PROXY STATEMENT
OCTOBER 22, 1998
This Proxy Statement is furnished to the shareholders of the company
("Shareholders") of Crowell & Co., Inc. (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board")
to be voted at the Special Meeting of Shareholders and at any adjournments
thereof (the "Special Meeting"). The Special Meeting will be held at the offices
of the Company, 924 Stevens Creek Road, Augusta, Georgia, on Friday, November 5,
1999, at 9:00 A.M. local time.
The approximate date on which this Proxy Statement and form of proxy card
are first being sent or given to Shareholders is October 22, 1999.
PURPOSE
At the Special Meeting, Shareholders of the Company will be asked to
consider and vote upon the Reverse Stock Split Proposal which, if adopted, will
move the Company from public company status subject to the reporting
requirements of the Securities Acts as administered by the Securities and
Exchange Commission ("SEC") to private company status not subject to the
Securities Acts. Shareholders also will be asked to vote on any other matters as
may properly come before the Special Meeting and any postponement or adjournment
thereof. Effective as of the approval of the Reverse Stock Split Proposal, the
Articles of Incorporation of the Company will be amended to reflect the Reverse
Stock Split ("Amendment" or "Transaction"). Certificates for all outstanding
shares of common stock of the Company ("Common Stock") shall be exchanged for
the certificates for the new shares and, if applicable, for cash in lieu of any
fractional new shares.
VOTING
GENERAL
The securities that can be voted at the Special Meeting consist of Common
Stock of the Company, without par value, with each share entitling its owner to
one vote on each matter submitted to the Shareholders and Preferred Stock,
stated value $1.00 per share, with every four shares entitling its owner to one
vote on each matter submitted to the Shareholders. The record date for
determining the holders of Common Stock and Preferred Stock who are entitled to
receive notice of and to vote at the Special Meeting is October 5, 1999. On the
record date, 2,520,835 shares of Common Stock and 1,011,899 shares of Preferred
Stock were outstanding and eligible to be voted at the Special Meeting.
QUORUM AND VOTE REQUIRED
The presence, in person or by proxy, of a majority of the outstanding
shares of Common and Preferred Stock of the Company is necessary to constitute a
quorum at the Special Meeting. In counting the votes to determine whether a
quorum exists at the Special Meeting, the proposal receiving the greatest number
of all votes "for", "against", or "withheld" and abstentions (including
instructions to withhold authority to vote) will be used.
The Company believes that approximately 1,899,747 voting shares owned or
controlled on the record date by directors and executive officers of the
Company, constituting approximately 68.5% of the outstanding Common and
Preferred Stock (together the "Voting Stock"), will be voted in favor of the
proposal. Therefore, approval of the transaction is assured.
Adoption of the Reverse Stock Split Proposal requires the affirmative vote
of a majority of the outstanding shares of Company Voting Stock entitled to vote
at the Special Meeting. Otis L. Crowell, Chairman of the Board and President of
the Company, is the beneficial owner of, and has authority to vote 1,898,497
shares of Company Voting Stock, or 68.4 % of the shares of Company Voting Stock
which were issued and outstanding on the Record Date. Mr. Crowell plans to vote
all shares of Company Voting Stock over which he has voting authority to approve
the Reverse Stock Split Proposal. If Mr. Crowell votes all of his shares of
Company Voting Stock over which he has voting authority to approve the Reverse
Stock Split Proposal, the requisite vote for adoption of the Reverse Stock Split
will have been obtained.
2
<PAGE>
The Company's principal executive offices are located at 924 Stevens Creek
Road, Augusta, GA 30907, and its telephone is 706-855-1099.
The date of this Proxy Statement is October 22, 1999.
PROXIES
Shareholders should specify their choices with regard to the proposal on
the enclosed proxy card. All properly executed proxies delivered by Shareholders
to the Company in time to be voted at the Special Meeting and not revoked will
be voted at the Special Meeting in accordance with directions given. IN THE
ABSENCE OF SUCH INSTRUCTIONS, THE SHARES REPRESENTED BY A SIGNED AND DATED PROXY
CARD WILL BE VOTED "FOR" THE PROPOSAL LISTED ON THE PROXY CARD AND DESCRIBED
HEREIN. If any other matters properly come before the Special Meeting, the
persons named as proxies will vote upon such matters according to their
judgment.
Any Shareholder delivering a proxy has the power to revoke it any time
before it is voted by giving written notice to the Secretary of the Company at
924 Stevens Creek Road, Augusta, GA 30907, by executing and delivering to the
Secretary a proxy card bearing a later date or by voting in person at the
Special Meeting.
THE REVERSE STOCK SPLIT
If the proposal is adopted, the Articles of Incorporation of Crowell & Co.,
Inc., will be amended to provide that all shares of outstanding Common Stock,
without par value, be the subject of a reverse stock split, so that each
outstanding share shall, without further action of the Corporation, be entitled
to .000005 of a share of Common Stock, without par value, upon surrender of the
old shares for certificates representing the new shares. (e.g., for every
200,000 shares owned by the Shareholder, the Shareholder would receive 1 share.)
No fractional new shares will be issued. Any common Shareholders who would
otherwise be entitled to a fractional share will be paid for such right at the
rate of $.134 per old share. After the reverse stock split, Mr. Crowell will be
the only Common Stock Shareholder since no other Shareholder owns more then
200,000 shares currently.
BACKGROUND OF AND REASON FOR THE REVERSE STOCK SPLIT
In 1988 Janka, Inc. ("Janka"), a company whose majority shareholder was
Otis L. Crowell, merged with the Mid South Corporation ("Mid South"). Mid South
was a public company with approximately 750 Shareholders. To management of the
Company's knowledge, no dividends had ever been paid on Mid South's common
stock.
After the merger, Mr. Crowell became the majority Shareholder of Mid South.
In 1989, Crowell & Co., Inc. ("Crowell"), a company wholly owned by Mr. Crowell,
was merged into Mid South. Subsequently, the name of the combined companies was
changed to Crowell & Co., Inc.
The purpose of these mergers was to make it possible for the Company to
raise capital for real estate operations through public markets. Over the past
11 years, and after substantial effort, the Company has been unable to develop a
trading market for its Common Stock, thus never realizing the possibility of
raising capital through public markets. Because of this, the reason for merging
Crowell, Janka, and Mid South, the ability to raise capital in public markets,
has never been realized.
The Company has expended substantial dollars and efforts over the past ten
years meeting the reporting rules required by the SEC. Total dollars spent are
in excess of $500,000. Approximately $50,000 per year is incurred because the
Company must meet the filing requirements of the SEC.
Recently, major lenders to the Company have urged the Company to cut
corporate expenses, including the expense of maintaining public company status
because of the Company's general financial condition. One major lender has
informed the Company that it is unwilling to loan the Company additional funds
without the personal guarantee of Mr. Crowell. Mr. Crowell has expressed
hesitancy to continue to do this when he does not own all Common Stock. Mr.
Crowell is the only Shareholder with liability in excess of his investment. If
Mr. Crowell owned all Common Stock, he has indicated his willingness to continue
to personally guarantee all Company debt.
3
<PAGE>
Because of the aforementioned conditions, which are the Company's inability
to raise capital through public markets, the substantial expenses incurred by
the reporting requirements of the Company's public company status, the
recommendation of lenders to cut expenses by terminating public company status,
and the reluctance of Mr. Crowell to continue to personally guarantee the
Company`s debt, the Company's President, Mr. Crowell, and Chief Financial
Officer, Mark L. Gilliam, began exploring ways to terminate public company
status.
Several options were considered including a tender offer, various types of
mergers, corporate reorganization, and a reverse stock split. The excess expense
and uncertainty of success eliminated all options except corporate
reorganization and a reverse stock split.
The reverse stock split was chosen because its outcome was certain,
expenses incurred by the Company were moderate, and Shareholders would receive
payment for their fractional shares as opposed to corporate reorganization where
Shareholders would receive no payment.
If the Amendment is adopted, the Articles of Incorporation of Crowell &
Co., Inc., will be amended to provide that all shares of outstanding Common
Stock, without par value, be the subject of a reverse stock split, so that each
outstanding share shall, without further action of the Corporation, be entitled
to .000005 of a share of Common Stock, without par value, upon surrender of the
old shares for certificates representing the new shares.
No fractional new shares will be issued. Any common Shareholders who would
otherwise be entitled to a fractional share will be paid for such right at the
rate of $.134 per old share.
In the event the proposal is approved, Shareholders would have certain
rights to dissent and demand appraisal of their shares under Section 14-2-1301
et. seq. of the Georgia Code. Dissenting Shareholders who comply with the
requisite statutory procedures would be entitled to receive a judicial
determination and payment of "fair value" of their Shares as of the close of
business on the day prior to the date of Shareholders called to vote on such
Proposal. The value so determined could be more or less than the consideration
offered pursuant to the amount disclosed in this Proxy Statement.
The payment for fractional shares for the Company's Common Stock pursuant
to the Reverse Stock Split is expected to be a fully taxable transaction.
Accordingly, each exchanging Shareholder will recognize gain or loss for federal
income tax purposes measured by the difference between such Shareholder's basis
in the Shares exchanged and the cash received by the Shareholder for the
fractional shares. Such gain or loss will be capital gain or loss if the Shares
were held as a capital asset. All Shareholders are urged to consult with their
own tax advisors as to the tax consequences of the Reverse Stock Split.
The benefit to the Company is the termination of reporting requirements to
the Securities and Exchange Commission. The Company estimates that this will
save approximately $50,000 per year in expense. The detriment to the Company is
the inability to raise capital through a secondary offering after termination of
reporting status.
The benefit to the unaffiliated Shareholders is that they will receive
payment in exchange for their shares, whereas they have not received any
payments of dividends over the past ten years. The Company has no knowledge that
a public trading market has ever existed for its Common Stock. Additionally,
Shareholders may be able to recognize a federal income tax loss on the exchange
which may result in a lowering of their income taxes.
Presently, Shareholders have Common Stock with no trading market. The
Company does not intend to pay dividends on Common Stock in the foreseeable
future. Therefore, the Company sees no detriment to the interests of
unaffiliated Shareholders because of the Transaction.
THE EFFECTS OF THE REVERSE STOCK SPLIT
The result of the reverse stock split will be the attainment of private
company status for the Company and the payment for fractional shares owned by
Shareholders which will be generated by the reverse stock split. The valuation
date of the Company has been set at June 30, 1999, for the payment of fractional
shares. The Board of Directors has determined a value of the Company's Common
Stock as $338,109. This translates to $.134 per share for every share owned
prior to the reverse stock split.
4
<PAGE>
Neither Crowell nor Mr. Crowell have any plan or proposal regarding
activities or transactions which are to occur after the Transaction which relate
to or would result in an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
a sale or transfer of a material amount of assets of the Company or any of its
subsidiaries; any change in the present board of directors or management of the
Company including, but not limited to, any plan or proposal to change the number
or term of directors, to fill any existing vacancy on the board or to change any
material term of the employment contract of any executive officer; any material
change in the present dividend rate or policy or indebtedness or capitalization
of the Company; any other material change in the Company's corporate structure
or business.
After the consummation of the Transaction, the Company will become eligible
for termination of registration under the Securities Exchange Act because there
will be only one remaining common Shareholder, Mr. Crowell. The Company plans to
apply for termination of registration immediately upon completion of the
Transaction.
After the Transaction the Company will be unable to raise capital through
public markets. It should be noted that the Company has been unable to raise
capital in the public market for the past ten years. Consequently, management of
the Company does not believe the Company is in substance gaining anything from
its status as a public company. All financing arranged has been private or bank
financing over the past ten years. The inability to raise equity capital can
have devastating effects on any company. The Company is no exception. Without
the ability to raise capital, Shareholders may lose all or part of their
investment. The Company is completely dependent on internally generated capital,
that is, generated capital from profits, and capital provided through private
and bank loans. Mr. Crowell presently guarantees all loans which have been
obtained by the Company. Mr. Crowell's personal guarantee has been a condition
for the Company obtaining a loan. Unfortunately, the Company is in the position
of having all of the liabilities of being a public company and none of the
benefits of being a public company. The liabilities of being a public company
are the periodic reporting requirements. The Company estimates that
approximately $50,000 per year is expended for attorneys, accountants, postage,
printing, wages, EDGAR filing fees, and other expenses to comply with these
periodic reporting requirements. The benefits of being a public company include
the ability to raise capital through public markets and offering a marketable
stock to investors. These benefits have not been realized by the Company in the
past ten years.
The Company has not paid dividends on its outstanding Preferred Stock in
the past two years. The Preferred Stock dividends are cumulative and must be
paid providing the corporation has funds to pay the dividends. The Company has
$424,236 in unpaid Preferred Stock dividends at June 30, 1999. The Preferred
Stock and accumulated dividends on the Preferred Stock have priority over
payment of Common Stock and dividends on Common Stock in the event of
liquidation. No dividends are unpaid on Common Stock as of June 30, 1999. The
Company has not paid dividends on Common Stock in the past ten years. Management
of the Company does not anticipate paying dividends on Company Common Stock in
the foreseeable future.
After the consummation of the Transaction the Shareholders will be paid for
their shares as determined by the valuation of the Common Stock. The
Shareholders will recognize gain or loss for federal income tax purposes as the
difference between their purchase price and the amount paid by Crowell for their
pre-reverse stock split shares of the Common Stock. Virtually all of the
unaffiliated Shareholders purchased their Common Stock in the Company over
twenty-five years ago. To the management of the Company's knowledge, no
dividends have ever been paid on the Common Stock of the Company. Many of the
original purchasers of the stock have died since their stock purchases in the
late sixties and early seventies. This stock has been transferred to their
beneficiaries. Management of Crowell believes that most Shareholders have
written off this investment years ago. As a practical matter, management
believes that most Shareholders may benefit more from the capital loss which
they can claim on their income tax return than they will from holding a stock
which has no trading market. At June 30, 1999, the Company had a book value per
common share of ($.14), which is a deficit or negative "value". Therefore,
management of the Company believes it would be fair to offer no payment for
fractional shares after the Transaction. Nevertheless the Company will pay $.134
per share for shares held before the reverse stock split.
5
<PAGE>
The Shareholders will receive $.134 per share for their pre-reverse stock
split shares. The payment was determined by valuing the Company as of June 30,
1999. The Shareholders of record on June 30, 1999 will receive payment by check
for their shares after the reverse stock split is consummated. The checks will
be sent by US mail. The Shareholders will not be required to take any action in
order to receive payment for their shares.
Crowell & Co., Inc. & Subsidiaries Computation of Value As of June 30, 1999
<TABLE>
<CAPTION>
Before Value Increase Value Decrease Value After
Reference Adjustments Adjustments Adjustments Adjustments
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Worth @ June 30, 1999 10-Q 6-30-99 $ 1,088,662 $ 1,088,662
Properties held for resale and
development A $ 240,982 240,982
Preferred Stock 10-Q 6-30-99 $ 1,011,899 (1,011,899)
Accumulated Preferred
Stock dividends B 424,236 (424,236)
Net operating loss ("NOL") C 278,600 278,600
Unrecognized gain on the
sale of Petersburg Racquet Club D 166,000 166,000
Computed value of Common
Stock equity 338,109
Mr. Crowell ownership value E 251,703
Minority Stockholders ownership value 86,406
Value per share ($338,109/2,520,835) $ 0.134
Reference A: Properties held for resale and development
- --------------------------------------------------------
Cost is from 10-QSB 6-30-99 $ 4,819,648
5% markup on cost 0.05
------------
$ 240,982
Reference B: Accumulated Preferred Stock Dividends
- ---------------------------------------------------
From 10-KSB 12-31-98 $ 383,760
For six months ended 6-30-99 40,476
------------
$ 424,236
Reference C: Net Operating Loss ("NOL") Value
- ----------------------------------------------
Average taxable income per year for prior seven years $ 192,000
Projected federal and state income tax on above $ 69,650
Discount rate to value above income tax savings of $69,650 per year 25%
Value of NOL at above discount rate ($69,650 divided by .25) $ 278,600
Reference D: Sale of Petersburg Racquet Club
- ---------------------------------------------
Crowell sold Petersburg Racquet Club in 1997 but has not recognized the
gain for book purposes as of June 30, 1999
Reference E: Common Stock shares outstanding 2,520,835
- ---------------------------------------------
Shares owned by Mr. Crowell 1,876,622
% of total shares owned by Mr. Crowell 74.4%
</TABLE>
After the transaction, Mr. Crowell will own 100% of the Common Stock of the
Company.
6
<PAGE>
BOARD RECOMMENDATIONS
The Company's board believes that the reverse stock split proposal is in
the best interests of the Shareholders of the Company and recommends that the
Shareholders of the Company vote to adopt the proposal.
The Board and Mr. Crowell believe the transaction to be fair to
unaffiliated Shareholders. The Board and Mr. Crowell considered the following
factors when reaching this decision. There is no public market for the Common
Stock so market value is not readily determinable. The Board and Mr. Crowell
have no knowledge of anyone who is actively purchasing or selling the Common
Stock so no value could be derived from such transactions. The Board and Mr.
Crowell have no knowledge of any public market for the Common Stock on which to
base a Common Stock value over the past ten years so no value could be derived
from historical market prices. The net book value of the Common Stock is a
negative number. (see The Effects of the Reverse Stock Split.)
Based on the negative book value, paying or not paying anything per share
would be fair to the unaffiliated Shareholders, inasmuch as the Common Stock's
book value would indicate that it is worthless. The going concern value of the
Company is not readily determinable since the Company has experienced net losses
over three of the past four years. Additionally, the continued existence of the
Company relies on the personal guarantee of payment of debt by Mr. Crowell. This
personal guarantee of Mr. Crowell is not a corporate asset and has not been
considered when determining the value of the Company. Therefore, the Board and
Mr. Crowell have relied on what it considers a fair value of the Company based
on the value of its assets in excess of liabilities and Preferred Stock rights.
This valuation yielded a value of approximately $86,325 for unaffiliated
Shareholders. The Board and Mr. Crowell believe that unaffiliated Common Stock
value would be lower if the Company actually attempted to liquidate, based on
past land and lot sales experience.
The transaction is not structured so that approval of at least a majority
of unaffiliated security holders is required.
All directors are employees of the Company.
No firm offers have been made by any unaffiliated person during the
preceding 18 months for the merger or consolidation of the Company into or with
such person or of such person into or with the Company, the sale or other
transfer of all or any substantial part of the assets of the Company, or
securities of the Company which would enable the holder thereof to exercise
control of the Company.
No report, opinion or appraisal and materially related to this Transaction
has been received by the Company.
DISSENTERS' RIGHTS
(a) Summary: In the event the Proposal is approved, Shareholders would have
certain rights to dissent and demand appraisal of their shares under
Section 14-2-1301 et. seq. of the Georgia Code. Dissenting Shareholders who
comply with the requisite statutory procedures would be entitled to receive
a judicial determination and payment of "fair value" of their Shares as of
the close of business on the day prior to the date of Shareholders called
to vote on such Proposal. The value so determined could be more or less
than the consideration offered pursuant to the amount disclosed in this
Proxy Statement. If the Shareholders do not perfect their appraisal right,
they will receive payment for their fractional shares at the rate of $.134
for their shares before the reverse split.
(b) Explanation: In the event the proposal is approved, Shareholders may have
certain rights to dissent and demand payment of the fair value of their
shares under O.C.G.A. ss.14-2-1301 et. seq. The notice sent to Shareholders
of the Shareholders meeting to consider the proposal will contain a copy of
Article 13 of the Georgia Business Code, and will also notify the
Shareholders of the affirmative obligation of any shareholder wishing to
exercise his or her right to dissent and receive the fair value of their
shares to deliver written notice of his or her intent to demand payment for
shares to the corporation before vote is taken at the shareholder meeting.
If the proposed action is approved, a dissenting shareholder must not vote
his or her shares in favor of the proposed action. Failure of a record
shareholder to deliver such notice, or a vote by such shareholder in favor
of the proposal, will disqualify such person from entitlement to receive
payment for his or her shares.
7
<PAGE>
If the proposed action is approved, the corporation will deliver a
written "Dissenter's Notice" to all Shareholders who have satisfied the
requirements stated above. Shareholders wishing to exercise their
dissenter's rights will be required to deposit their stock certificates
with the company as specified in the Dissenter's Notice. The company may
restrict transfer of any uncertified shares to the extend stated in the
Dissenter's Notice. The Dissenter's Notice will also provide a date by
which the corporation must receive a demand for payment by the shareholder,
and be accompanied by a form which a person asserting dissenter's rights
may use to complete the demand for payment. A shareholder wishing to
exercise his dissenter's rights must return the form provided for that
purpose within the time prescribed, and deposit his share certificates in
accordance with the terms of the notice. Any shareholder who demands
payment and deposits his or her share certificates shall retain all of the
rights of a shareholder until the time the proposal goes into effect. Any
shareholder who does not demand payment or deposit his or her share
certificates as required by the date set in the Dissenter's Notice shall
retain ownership of their shares, and shall not be entitled to payment for
their shares.
The corporation shall deliver to each shareholder exercising
dissenter's rights an offer to pay to such dissenter the amount the
corporation estimates to be the fair value of his or her shares, plus
accrued interest. Fair value shall be determined as the value of the shares
immediately before the effectuation of the corporate action, excluding any
appreciation or depreciation in anticipation of the corporate action. The
offer of payment will be accompanied by the following information: (1) the
corporation's balance sheet as of the end of a fiscal year ending not more
than sixteen (16) months before the date of payment, (2) an income
statement for that year; (3) a statement of changes in shareholder's equity
for that year; (4) the latest available interim financial statements, if
any; (5) a statement of the corporation's estimate of the fair value of the
shares; (6) an explanation of how the interest was calculated; (7) a
statement of the right of dissenter's who demand payment for their shares;
and (8) another copy of Article 13 of the Georgia Business Code.
Any dissenter who is dissatisfied with the corporation's estimate of
the fair value of his shares or the amount of interest due must so notify
the corporation within thirty (30) days of the corporation's offer. Such
dissenting shareholder must also notify the corporation in writing of his
own estimate of the fair value of his shares and the amount of interest
due, and make demand for payment. Any dissenter failing to so notify the
company within thirty (30) days after the corporation offers payment for
his or her shares shall be deemed to have accepted the corporation's offer
and to have waived his or her right to demand any additional payment.
If the shareholder's demand for payment remains unsettled, the
corporation shall petition the Superior Court of Richmond County to
determine the fair value of the shares and accrued interest. If the
corporation fails to commence such proceeding within such sixty (60) day
period it shall pay each dissenter whose demand remains unsettled the
amount demanded by the shareholder.
FEDERAL INCOME TAX CONSEQUENCES
The payment for fractional shares for the Company's Common Stock pursuant
to the Reverse Stock Split is expected to be a fully taxable transaction.
Accordingly, each exchanging Shareholder will recognize gain or loss for federal
income tax purposes measured by the difference between such Shareholder's basis
in the Shares exchanged and the cash received by the Shareholder for the
fractional shares. Such gain or loss will be capital gain or loss if the Shares
were held as a capital asset. The transaction will have no federal income tax
consequences to the Company. To the extent that dissenters rights are exercised,
then the basis of the Shareholder's shares may increase or decrease, thus
increasing or decreasing the size of the gain. Legal fees incurred by dissenters
may be deductible on the dissenters federal income tax return. All Shareholders
are urged to consult with their own tax advisors as to the tax consequences of
the Reverse Stock Split.
SOURCES AND AMOUNT OF FUNDS
The source of the funds to be used in the Transaction will be a loan from
Mr. Crowell. The loan will be secured by real estate. The loan will be at prime
rate plus one percent. A repayment plan has not been established.
An itemized statement of all expenses incurred or estimated to be incurred
in connection with the Transaction is as follows:
8
<PAGE>
Printing $ 3,000
Postage 3,000
Legal 4,000
Accounting 500
Filing fees 500
Fractional share purchase 86,325
----------
$ 97,325
BUSINESS OF THE COMPANY
The principal businesses of the Company and its subsidiaries are
home-building, the development of residential properties, and commercial real
estate brokerage. Generally, the Company acquires new properties for development
in the Augusta, Georgia area based on management's assessment of levels of
current and expected consumer demand. The analysis and acquisition of new
properties by personnel of the Company are conducted on a continuous basis.
Keystone Homes, Inc. ("Keystone"), a wholly owned subsidiary of the
Company, builds single-family homes on a presold and speculative basis. Keystone
is the primary builder in all of the Company's developments. Generally, Keystone
does not build outside Crowell developments.
The Company is a Georgia corporation which was organized in 1966. The
offices of the Company are located at 924 Stevens Creek Road, Augusta, GA 30907.
The telephone is 706-855-1099.
MARKET PRICE OF COMPANY COMMON STOCK, AND PREFERRED STOCK
There is currently no established trading market for the Company's Common
or Preferred Stock. No dividends have been paid on the Common Stock in the past
ten years. The Company is not aware of any dividends ever being paid on the
Common Stock. Accumulated unpaid dividends on the Company's Preferred Stock
amount to $424,236 at June 30, 1999.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of June 30, 1999, information with
respect to the beneficial ownership of shares of Common and Preferred Stock of
the Company by each person known to be the beneficial owner of more than 5% of
the outstanding shares of Common and Preferred Stock by each director and by
each executive officer named in the Compensation Table and all directors and
executive officers of the Company as a group. Beneficial ownership as reported
in the table has been determined in accordance with SEC regulations and includes
shares of Common Stock which may be acquired within 60 days upon the exercise of
outstanding stock options and the conversion of shares of Preferred Stock of the
Company. The named persons have sole voting and investment power with regard to
the shares shown as owned by such persons. Pursuant to SEC regulations, all
shares not currently outstanding which are subject to options or conversion
privileges exercisable within 60 days are deemed to be outstanding for the
purpose of computing the "Percent of Class" held by the holder thereof but are
not deemed to be outstanding for the purpose of computing the "Percent of Class"
held by any other Shareholder of the Company.
<TABLE>
<CAPTION>
Common Stock Series A Preferred Series B Preferred Combined Voting
Beneficially Stock Beneficially Stock Beneficially Power (Common and
Owned (Percent Owned (Percent Owned (Percent Preferred Considered
Name and Address of Class) (1) of Class) (2) of Class) (3) as a Single Class) (4)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Florice Clark(5) 121,725 - 486,899 4.4%
3554 Old Ferry Road (4.6%) (100%)
Martinez, GA 30907
Otis L. Crowell*(5) 1,876,622 87,500 - 67.7%
3750 Evans to Locks Road (74.4%) (16.7%)
Augusta, GA 30907
9
<PAGE>
Mark L. Gilliam* 1,250 - - +
3696 El Cordero Road +
Martinez, GA 30907
Robert M. Hunter(5) 70,000 280,000 - 2.5%
3801 High Hampton Drive (2.7%) (53.3%)
Martinez, GA 30907
Dennis Stanfield 161,436 - - 5.8%
P.O. Box 4501 (6.0%)
Martinez, GA 30907
Robert M. Hunter, Jr. 13,125 52,500 - +
3 Beech Lane + (10.0%)
Morristown, NJ 07960
Beverly H. Taylor 13,125 52,500 - +
688 Woodhall Abbey Court + (10.0%)
Martinez, GA 30907
Ben W. Hunter 13,125 52,500 - +
3109 West Road + (10.0%)
Martinez, GA 30907
All executive officers 1,877,872 - - 68.7%
and directors as a group (74.5%)
(3 persons)
</TABLE>
+ Less than 1.0%
* Executive officer or director
(1) Based on 2,520,835 shares of Common Stock outstanding on June 30, 1999.
(2) Based on 525,000 shares of Series A Preferred Stock outstanding on June 30,
1999. Holders of the Series A Preferred Stock vote on the basis of one vote
for each four shares of Series A Preferred Stock held with holders of
Common Stock and holders of Series B Preferred Stock, all voting as a
single class. The Series A Preferred Stock is not registered under Section
12 of the Securities Exchange Act of 1934, and in providing ownership
information the Company has relied on its stock transfer records, which may
not correspond to beneficial ownership. To the extent that the Company is
aware of beneficial ownership that is different from ownership as reflected
by the stock transfer records, such beneficial ownership information has
been provided.
(3) Based on 486,899 shares of Series B Preferred Stock outstanding on June 30,
1999. Holders of the Series A Preferred Stock vote on a one vote for each
four shares of Series B Preferred Stock held with holders of Common Stock
and holders of Series A Preferred Stock, all voting as a single class. The
Series B Preferred Stock is not registered under Section 12 of the
Securities Exchange Act of 1934, and in providing ownership information the
Company has relied on its stock transfer records, which may not correspond
to beneficial ownership. To the extent that the Company is aware of
beneficial ownership that is different from ownership as reflected by the
stock transfer records, such beneficial ownership information has been
provided.
(4) Based on one vote per share for Common Stock and one vote per four shares
for Series A and B Preferred Stock.
(5) The shares of Common Stock beneficially owned by the indicated persons
include shares which may be acquired upon the conversion of outstanding
shares of Series A or B Preferred Stock, as the case may be, as follows:
Ms. Clark - 121,725 shares; Mr. Crowell - 21,875 shares; and Mr. Robert M.
Hunter - 70,000 shares; Mr. Robert M. Hunter, Jr. - 13,125 shares; Ms.
Beverly H. Taylor - 13,125 shares; and Mr. Ben W. Hunter - 13,125 shares.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Elliot Davis & Company has served as independent accountants of the Company
since March 1999. Representatives of Elliot Davis & Company will not be present
at the Special Meeting.
OTHER MATTERS THAT MAY COME BEFORE THE SPECIAL MEETING
The Board of Directors of the Company knows of no matters other than those
referred to in the accompanying Notice of Special Meeting of Shareholders which
may properly come before the Special Meeting. However, if any other matter
should be properly presented for consideration and voting at the Special Meeting
or adjournments thereof, it is the intentions of the persons named as proxies on
the enclosed form of proxy card to vote the shares represented by all valid
proxy cards in accordance with their judgment of what is in the best interest of
the Company.
10
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational filing or submission
requirements of the Exchange Act, and in accordance therewith are required to
file or submit periodic reports and other information with the Securities and
Exchange Commission under the Securities Act of 1934, as amended (the "Exchange
Act") relating to their business, financial condition and other matters. Such
reports, proxy statements and other information may be inspected, without
charge, and copies may be obtained at prescribed rates, at the Commission's
public reference facility at 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission located in Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, 13th Floor, New York, New York 10048 and can also be reviewed through
the Commission's Electronic Data Gathering, Analysis and Retrieval System which
is publicly available through the Commission's Web site (http://www.sec.gov).
All information contained herein with respect to the Company has been
supplied by the Company.
No person has been authorized to give any information or to make any
representation other than those contained or incorporated by reference in this
Proxy Statement and, if given or made, such information or representation should
not be relied upon as having been authorized by the Company. The delivery of
this Proxy Statement shall not , under any circumstances, create any implication
that there has been no change in the affairs of the Company or any subsidiary
thereof since the date hereof or that the information contained or incorporated
by reference herein is correct as of any time subsequent to the date hereof or
thereof. This Proxy Statement does not constitute the solicitation of a proxy in
any jurisdiction to or from any person to whom it is not lawful to make any such
solicitation in such jurisdiction.
By Order of the Board of Directors,
Mark L. Gilliam
Secretary
Augusta, Georgia
- -----------------
The Company's 1998 Annual Report and the 10-QSB for the six months ended June
30, 1999, have been mailed to Shareholders of the Company with these proxy
materials along with Article 13 of the Georgia Business Code and a sample Notice
of Intention to Demand Payment.
11
<PAGE>
ARTICLE 13 OF THE GEORGIA BUSINESS CODE
---------------------------------------
.CODE, 14-2-1301
CODE OF GEORGIA
TITLE 14. CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS
CHAPTER 2. BUSINESS CORPORATIONS
ARTICLE 13. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
Current through the 1999 Regular Session
14-2-1301 DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the corporation
that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under Code Section 14-2-1302 and who exercises that right when and
in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate action
until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares to the
extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial shareholder.
CODE, 14-2-1302
---------------
14-2-1302 RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or 14-2-1104 or the
articles of incorporation and the shareholder is entitled to vote
on the merger; or
(B) If the corporation is a subsidiary that is merged with its parent
under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of the
property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including
a sale pursuant to court order or a sale for cash pursuant to a plan
by which all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within one year after the date of
sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because
it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
12
<PAGE>
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of the
class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting
or nonvoting shareholders are entitled to dissent and obtain payment
for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares under
this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of
the corporation or the vote required to obtain approval of the corporate
action was obtained by fraudulent and deceptive means, regardless of
whether the shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at a meeting at which a plan of merger or
share exchange or a sale or exchange of property or an amendment of the
articles of incorporation is to be acted on, were either listed on a
national securities exchange or held of record by more than 2,000
shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of
the surviving corporation or another publicly held corporation which
at the effective date of the merger or share exchange are either
listed on a national securities exchange or held of record by more
than 2,000 shareholders, except for scrip or cash payments in lieu of
fractional shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
- ----------------------------------------------------
14-2-1320 NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code Section
14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert
dissenters' rights under this article and be accompanied by a copy of this
article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall
notify in writing all shareholders entitled to assert dissenters' rights
that the action was taken and send them the dissenters' notice described in
Code Section 14-2-1322 no later than ten days after the corporate action
was taken.
14-2-1321 NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code Section
14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of subsection
(a) of this Code section is not entitled to payment for his shares under
this article.
14-2-1322 DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code Section
14-2-1302 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
13
<PAGE>
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323 DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code Section
14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of
the proposed corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his shares under this article.
14-2-1324 SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
14-2-1325 OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the later
of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with
Code Section 14-2-1323 offer to pay to such dissenter the amount the
corporation estimates to be the fair value of his or her shares, plus
accrued interest.
(b) The offer of payment must be accompanied by
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to the
corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment
for his or her shares shall be made within 60 days after the making of the
offer or the taking of the proposed corporate action, whichever is later.
14-2-1326 FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days after
the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment
demand procedure.
14
<PAGE>
14-2-1327 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the
interest due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or
she notifies the corporation of his or her demand in writing under
subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section
14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under subsection
(b) of Code Section 14-2-1325, and the corporation shall provide the
information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period of
Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest
due.
PART 3. JUDICIAL APPRAISAL OF SHARES
- ------------------------------------
14-2-1330 COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is
a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of this
state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner
provided by law for the service of a summons and complaint, and upon each
nonresident dissenting shareholder either by registered or certified mail
or by publication, or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this Code section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them or in any amendment to it. Except as
otherwise provided in this chapter, Chapter 11 of Title 9, known as the
"Georgia Civil Practice Act," applies to any proceeding with respect to
dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment for
the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331 COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective
parties. The court shall assess the costs against the corporation, except
that the court may assess the costs against all or some of the dissenters,
in amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Code Section 14-2-1327.
15
<PAGE>
(b) The court may also assess the fees and expenses of attorneys and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the
amounts awarded the dissenters who were benefited.
14-2-1332 LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
16
<PAGE>
NOTICE OF INTENTION TO DEMAND PAYMENT
^[Name of Dissenting Shareholder]
^[Address of Dissenting Shareholder]
^[Date-Prior to Shareholder Vote]
CERTIFIED MAIL, RETURN RECEIPT REQUESTED
Crowell & Co., Inc.
Attention: Secretary
To Crowell & Co., Inc.:
Notice is hereby given that the undersigned owner of an aggregate of ^
shares (the "Shares") of common stock ("Common Stock"), of Crowell & Co., Inc.,
a Georgia corporation, intends to demand payment of the fair value for the
Shares pursuant to Article 13 of the Georgia Business Corporation Code if the
proposed corporate action is effectuated.
The residence address of the undersigned is: ^ All of the Shares are owned
beneficially and of record by the undersigned and the Shares constitute all of
the shares of Common Stock owned by the undersigned as to which the undersigned
has a right to dissent.
This written notice of intention to dissent and demand for payment for the
Shares is being delivered to the Corporation pursuant to Section 14-2-1321 of
the Georgia Business Corporation Code in order to perfect and enforce the rights
of the undersigned to receive payment of the fair value of the Shares.
Very truly yours,
Name:
17
<PAGE>
CROWELL & CO., INC.
SPECIAL MEETING
NOVEMBER 5, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of Common Stock, without par value, (the "Common
Stock") or Preferred Stock, stated value $1.00 per share (the "Preferred
Stock"), of Crowell & Co., Inc. (the "Company"), hereby appoints Otis L. Crowell
and Mark L. Gilliam, and each of them with full power of substitution, proxies
to vote at the Annual Meeting of shareholders of the Company to be held at the
offices of the Company located at 924 Stevens Creek Road, Augusta, Georgia, on
October 29, 1999, at 9:00 a.m., local time, and at any adjournment or
adjournments thereof, hereby revoking any proxies heretofore given, to vote all
shares of Common Stock or Preferred Stock of the Company held or owned by the
undersigned as of the record date (October 5, 1999) as directed below, and in
their discretion upon such other matters as may come before the meeting. The
undersigned may vote in person at the Annual Meeting all shares of Common Stock
or Preferred Stock owned by the undersigned as of the record date (October 5,
1999).
Resolved, that the Articles of Incorporation of Crowell & Co., Inc. be
amended to provide that all shares of outstanding Common Stock, without par
value, be the subject of a reverse stock split, so that each outstanding
share shall, without further action of the Corporation, be entitled to
.000005 of a share of Common Stock, without par value, upon surrender of
the old shares for certificates representing the new shares.
Further resolved, that no fractional new shares be issued, but that
any common shareholders who would otherwise be entitled to a fractional
share be paid for such right at the rate of $.134 per old share.
FOR____________ AGAINST______________ WITHHELD________________
IF NO DIRECTION IS GIVEN THIS PROXY WILL BE VOTED FOR THE APPROVAL OF THIS
PROPOSAL.
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If the signer is a corporation, the full corporate name
should be signed by a duly authorized officer.
Date:___________________________________
________________________________________________________________________________
Shareholder signature and title if applicable
________________________________________________________________________________
Shareholder signature (if jointly held)
18
<PAGE>
CROWELL & CO., INC.
1998 ANNUAL REPORT
COMPANY PROFILE
The principal businesses of the Company and its subsidiaries are
home-building, the development of residential properties, and commercial real
estate brokerage. Generally the Company acquires new properties for development
in the Augusta, Georgia area based on management's assessment of levels of
current and expected consumer demand. The analysis and acquisition of new
properties by personnel of the Company are conducted on a continuous basis.
Keystone Homes, Inc. ("Keystone"), a wholly owned subsidiary of the
Company, builds single-family on a presold and speculative basis. Keystone is
the primary builder in all of the Company's developments. Generally, Keystone
does not build outside Crowell developments.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
The primary objective of the Company's management is to maximize
shareholder wealth. The Company attempts to accomplish this objective by
increasing total revenues and controlling expenses. Management believes that
existing corporate structure is adequate to support increased sales. In
addition, management believes revenues can be increased most rapidly by
increasing home-building efforts.
The statements in this report regarding future sales, expenses, and other
items relating to the future of the Company constitute Forward Looking
Statements under the Private Securities Litigation Reform Act of 1995. Actual
results may differ materially from the Company's expectations as a result of a
number of factors, including the national and local economy, market conditions,
competition, real estate demand, availability of financing, interest rates, and
weather conditions.
RESULTS OF OPERATION
Management continually monitors inventory levels in relation to customer
demand in order to build the needed number of homes. Management believes that
housing inventory needs are dynamic and that a specific inventory level must be
matched with anticipated consumer demand. Therefore, there is no specific amount
of inventory which will always be the optimum.
Home sales increased by $1,228,906 or 23.8%, and commercial brokerage
commissions decreased by $120,872 or 66% for the year ended December 31, 1998,
as compared to the year ended December 31, 1997.
Gross profit percent on home sales increased to 9.7% in 1998 from 5.4% in
1997.
Gross profit percent on commercial brokerage commissions decreased from
34.4% in 1997 to 27.0% in 1998.
Gross profit on lot sales increased from 52.1% in 1997 to 56.3% in 1998.
Salaries decreased in 1998 as compared to 1997 by $16,814 or 4.2%.
Depreciation expense decreased by $784 or 4.6% in 1998 as compared to 1997.
Taxes and licenses decreased by $8,335 or 29.7%, in 1998 as compared to
1997.
Building occupancy decreased by $31,678 or 45.9% in 1998 as compared to
1997.
Office expense decreased in 1998 by $152 or .2% as compared to 1997.
Advertising and promotion increased by $925 or 5.1% in 1998 as compared to
1997.
Legal and accounting expenses decreased by $458 or 1.7% in 1998 as compared
to 1997.
Communications expenses decreased by $1,159 or 6.4% in 1998 as compared to
1997.
Overall operating expenses decreased by $24,746 or 3.5% for 1998 as
compared to 1997.
Interest income increased by $9,354 in 1998 as compared to 1997.
Interest expense from continuing operations increased by $3,368 or 2.3% in
1998 as compared to 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company expects to sell land it presently owns to meet liquidity needs
as it has done in the past. Together with revenues from other sources, such
sales would be expected to generate sufficient cash to meet the Company's
liquidity requirements. At December 31, 1998, available cash and proceeds from
land, lot, and home sales were expected to be sufficient to meet the Company's
requirements until spring of 1999 when home sales typically improve and provide
cash for operations.
The Company has obtained financing historically by borrowing from
conventional lending sources using land acquired for development as security for
loans.
Current and future liquidity needs are expected to be met by use of the
proceeds from lot and land sales and the proceeds from loans, using lands
purchased for development as collateral. Existing development loans and
commitments available to the Company have been made by various financial
institutions and are secured by the improved lots held for resale. The interest
rates on the development loans are 8.25% to 8.75% in December 1998. Payments of
interest are due monthly or quarterly and a portion of the principal is repaid
as each lot is sold. The existing loans terminate in the years ending December
31, 1999 and 2000, at which time all principal and accrued interest are payable.
There are no penalties for prepayment. Management expects to renew the
development loans at that time.
20
<PAGE>
Residential home construction costs are financed through the use of
additional commitments using the improved lots as collateral. Lot acquisition
costs and home construction costs are financed by construction loans from a
number of conventional lending sources, generally lending 90 to 95% of the costs
of the home, secured by the lot and improvements, at rates of 8.25% to 8.75% as
of December 31, 1998. These loans are paid upon the sale of the home. These
loans are negotiated and closed on a project-by-project and lot-by-lot basis.
Financing arrangements for long-term needs have not been made because such
arrangements in the land development business are generally made on a
project-by-project basis. Debt service on existing loans (loan balances totaled
$2,399,759 as of December 31, 1998) and funds for operations are expected to be
met from the proceeds of lot sales, land sales, home sales and real estate
brokerage commissions. Notes maturing in 1999 total $2,379,005. The Company
historically has renewed these notes annually although there are no assurances
that such loans will be renewed by the financial institution. The notes will
eventually be repaid from proceeds of land, lot, and home sales.
The Company's financial condition at December 31, 1998, has improved as
compared to that of December 31, 1997. Stockholders' equity as of December 31,
1998, was $857,758 as compared to $684,689 at December 31, 1997.
Properties held for resale decreased $439,787, or 12.9% from $3,415,398 at
December 31, 1997 to $2,975,611 at December 31, 1998. Properties held for resale
will increase and decrease as management determines and builds the level of
inventory needed to satisfy customer demand.
Cash increased by $51,390 or 26.7%, at December 31, 1998, from December 31,
1997.
Receivables decreased from $94,108 at December 31, 1997, to $75,548 at
December 31, 1998, a decrease of $18,560 or 19.7%, because of collections on a
note receivable in connection with the sale of UDS.
Other assets increased from $60,750 at December 31, 1997, to $64,531 at
December 31, 1998, an increase of $3,781 or 6.2%.
Notes payable decreased from $2,967,064 at December 31, 1997, to $2,399,759
at December 31, 1998, a decrease of $567,305 or 19.1%. Notes payable will
increase and decrease in direct proportion to the level of housing inventory
maintained by the Company.
Accounts payable and accrued liabilities decreased from $181,238 at
December 31, 1997, to $145,994 at December 31, 1998, a decrease of $35,244 or
19.4%.
The Company has net operating loss carryforwards available of approximately
$1,770,000 to offset against future federal taxable income. The maximum value of
these carryforwards computed at maximum federal and state income tax rates is
approximately $690,000. This amount is not reflected in the financial
statements.
IMPACT OF INFLATION
Although inflationary pressures were moderate in 1998 and 1997, the Company
continues to seek ways to reduce the impact of inflation. To the extent
permitted by competition, the Company passes increased costs on to customers by
increasing sales prices of residential lots and homes.
SEASONALITY
The Company typically sells more homes during the second and third quarters
of the year than during the remainder of the year.
21
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
ASSETS
PROPERTIES HELD FOR RESALE
Homes under construction and for sale $ 2,433,454
Developed residential land 710,775
Land held for future development 19,000
-----------
3,163,229
-----------
CASH AND CASH EQUIVALENTS, including escrow funds of $3,984 244,054
-----------
RECEIVABLES
Notes 54,196
Accounts and other 21,352
-----------
75,548
-----------
PROPERTY AND EQUIPMENT
Furniture, fixtures and equipment 149,641
-----------
149,641
Less accumulated depreciation (75,874)
-----------
73,767
-----------
OTHER ASSETS 64,531
-----------
ASSETS OF BUSINESS TRANSFERRED UNDER CONTRACTUAL ARRANGEMENT 606,000
-----------
$ 4,227,129
===========
The accompanying notes are an integral part of this consolidated financial
statement.
22
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
NOTES PAYABLE TO BANKS $ 2,399,759
-----------
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable 297,241
Accrued expenses 32,387
Customer deposits 3,984
-----------
333,612
-----------
OTHER LIABILITIES
Liabilities and deferred credit of business transferred under
contractual arrangement 606,000
Deferred gain on disposal of Petersburg Racquet Club 30,000
-----------
636,000
-----------
TOTAL LIABILITIES $ 3,369,371
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Capital stock:
Preferred, voting and non-participating, without par value;
10,000,000 shares authorized, 1,011,899 designated to Series A
and Series B
Series A preferred, 8% cumulative, stated value $1 per share;
callable at $1 per share plus accumulated dividends,
convertible into common stock at the rate of 1 share for 4
preferred shares; authorized 2,000,000 shares; issued &
outstanding 525,000 shares; accumulated dividends $189,000
($0.36 per share) 525,000
Series B preferred, 8% cumulative, stated value $1 per share;
callable at $1 per share plus accumulated dividends,
convertible into common stock at the rate of 1 share for 4
preferred shares; authorized 486,899 shares; issued &
out-standing 486,899 shares; accumulated dividends $194,760
($0.40 per share) 486,899
Common, without par value; 50,000,000 shares authorized;
2,520,835 shares issued & outstanding at December 31, 1998 696,774
Additional paid-in capital Preferred stock - Series A 33,648
Accumulated deficit (884,563)
-----------
TOTAL STOCKHOLDERS' EQUITY 857,758
-----------
$ 4,227,129
===========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
23
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
1998 1997
----------- -----------
REVENUES
<S> <C> <C>
Home sales $ 6,389,071 $ 5,160,165
Brokerage commissions 61,906 182,778
Other income 136,353 138,420
Lot sales 192,400 388,300
Land sales 175,000 341,000
----------- -----------
6,954,730 6,210,663
----------- -----------
COST OF REVENUES
Homes 5,768,374 4,881,475
Agent commissions 45,172 119,921
Other 31,577 30,117
Lots 84,000 185,923
Land 46,899 133,335
----------- -----------
5,976,022 5,350,771
----------- -----------
OPERATING EXPENSES
Salaries 400,446 417,260
Depreciation 17,174 17,958
Taxes and license 19,768 28,103
Building occupancy 37,309 68,987
Advertising and promotion 19,080 18,155
Office expense 88,016 88,168
Legal and accounting 27,215 27,673
Communications 16,842 18,001
Completed home expenses 46,704 12,996
----------- -----------
672,554 697,301
----------- -----------
OPERATING INCOME 306,154 162,591
----------- -----------
FINANCIAL INCOME (EXPENSE)
Interest income 17,559 8,205
Interest expense (150,644) (147,276)
----------- -----------
(133,085) (139,071)
----------- -----------
INCOME FROM CONTINUING OPERATIONS 173,069 23,520
----------- -----------
DISCONTINUED OPERATIONS
Loss from Petersburg Racquet Club -- (80,700)
----------- -----------
-- (80,700)
----------- -----------
NET INCOME (LOSS) $ 173,069 $ (57,180)
=========== ===========
EARNINGS PER COMMON SHARE:
Weighted average number of common shares outstanding 2,520,835 2,520,835
Basic earnings per share
Income (loss) from continuing operations $ .04 $ (.02)
Loss from discontinued operations -- (.03)
----------- -----------
NET INCOME (LOSS) PER COMMON SHARE $ .04 $ (.05)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Capital Stock Issued Additional
-------------------- Paid-In Capital
--------------- Total
Preferred Preferred Preferred Accumulated Stockholders'
Series A Series B Common Series A Deficit Equity
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $ 525,000 $ 486,899 $ 696,774 $ 33,648 $(1,000,452) $ 741,869
Net loss -- -- -- -- (57,180) (57,180)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 $ 525,000 $ 486,899 $ 696,774 $ 33,648 $(1,057,632) $ 684,689
Net income -- -- -- -- 173,069 173,069
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 $ 525,000 $ 486,899 $ 696,774 $ 33,648 $ (884,563) $ 857,758
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 173,069 $ (57,180)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 17,174 76,766
(Gain) loss on disposal of assets 7,386 (15,139)
Changes in assets and liabilities:
(Increase) decrease in:
Properties held for resale 252,169 77,719
Accounts and other receivables (20,766) 35,005
Home sale notes receivable -- 6,316
Other assets (3,781) (17,418)
Increase (decrease) in:
Accounts payable 164,323 111,763
Accrued expenses (7,517) (3,001)
Customer deposits (4,432) 932
Deferred gain on disposal of Petersburg Racquet Club -- 30,000
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 577,625 245,763
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets 53,672 100,000
Purchase of property and equipment (51,878) (156,944)
Collections on notes receivable 39,276 26,478
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 41,070 (30,466)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans 4,481,906 4,190,611
Payments of bank loans and other debt (5,049,211) (4,275,738)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (567,305) (85,127)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 51,390 130,170
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 192,664 62,494
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 244,054 $ 192,664
=========== ===========
SUPPLEMENTARY DISCLOSURES
Interest paid (net of amount capitalized) $ 156,939 $ 146,932
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - DESCRIPTION OF BUSINESS
The principal operations of Crowell & Co., Inc. ("Crowell"), and its
subsidiaries (the "Company") are development of residential properties for
resale, home-building, and providing commercial real estate brokerage services.
The Company acts as a general contractor on all development and home-building.
Crowell & Co., Inc., the parent company, primarily develops residential
properties in the Augusta, Georgia, Metropolitan Statistical Area ("MSA").
Crowell also provides commercial real estate brokerage services.
Keystone Homes, Inc. ("Keystone"), a wholly owned subsidiary of Crowell,
builds single-family and multi-family homes on a presold and speculative basis
in the Augusta, Georgia, metropolitan statistical area.
All operations of Crowell and its subsidiaries are domestic.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME (LOSS) PER SHARE
Income (loss) per common share is computed by dividing income available to
common stockholders by the weighted average of the number of shares outstanding.
The preferred dividend accrued of $80,952 is subtracted from the income or loss
for continuing operations and net income (loss) for the purposes of computing
the income or loss per common share regardless of whether the preferred dividend
is paid. At the option of the holder, the preferred stock is convertible into
common stock at one share for every four shares owned for a total potential of
252,975 shares; however, because inclusion of convertible preferred stock would
have an anti-dilutive effect on the income (loss) per common share, the
convertible preferred stock conversion is excluded from the computation of the
income (loss) per common share assuming full dilution.
CASH AND CASH EQUIVALENTS
All highly liquid instruments with an original maturity of three months or
less are considered cash equivalents.
RECEIVABLES
The Company uses the allowance method for recording bad debts.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Maintenance and repairs are
expensed as incurred. Improvements that significantly increase the lives of
assets are capitalized and depreciated or amortized over their estimated useful
lives on the straight-line and declining-balance methods for both financial
reporting and income tax purposes. Gains or losses on disposals are credited or
charged to operations.
27
<PAGE>
PROPERTIES HELD FOR RESALE
Properties held for resale are stated at the lower of cost, using the
specific identification method, or net realizable value. Net realizable value
represents estimates, based on management's present plans and intentions, of
sale price less development and disposition cost, assuming that disposition
occurs in the normal course of business.
Homes under construction and for sale include lot costs, construction
costs, capitalized interest and significant indirect costs related to
development and construction activities. Indirect costs that do not relate to
development and construction activities, including general and administrative
expenses, are charged to expense as incurred.
Developed residential land includes land and land development costs. As
each development phase is completed, land development costs, including
capitalized interest and real estate taxes when material, are then allocated to
individual lots based on the total number of lots expected to be developed
within each development.
REVENUE RECOGNITION
The Company recognizes revenues on sales of residential lots, land, and
homes upon a formal closing and receipt of cash. The Company recognizes
commissions earned on real estate brokerage transactions upon a formal closing.
INCOME TAXES
The Company records income taxes on the liability method. This method
requires the recognition of deferred income taxes for the impact of "temporary
differences" between the amount of assets and liabilities for financial
reporting purposes and such amounts as determined by tax regulations.
RECLASSIFICATIONS
Certain prior year information has been reclassified to conform with the
current year presentation.
CONCENTRATION OF RISK
The Company operates in the Augusta, Georgia, MSA. Therefore, the Company
can be adversely affected by local economic conditions. Financial instruments
which potentially subject the Company to concentrations of credit risk consist
principally of temporary cash investments. The Company places its temporary cash
investments with high credit quality financial institutions. At times, such
investments may be in excess of the FDIC insurance limits.
NOTE 3 - NOTES RECEIVABLE
At year end, notes receivable consist of the following:
Note receivable from an individual due in
quarterly installments with interest at 8.8%,
secured by all assets of UDS. (SEE NOTE 9) $ 54,196
Note receivable from an individual due on
December 31, 2002, interest receivable monthly,
beginning January 31, 1999, at 8.3%, secured by PRC. 136,000
Less allowance for doubtful accounts (136,000)
$ 54,196
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company leases office space from the majority stockholder under two
leases, each with a term of twenty (20) years, and expiring in 2009. The leases
provide that the Company pay all property taxes, insurance and maintenance plus
an annual rental. The total minimum rental commitment at December 31, 1998,
under these leases is $1,016,400, which is due as follows:
28
<PAGE>
Year ending December 31,
------------------------
1999 85,200
2000 85,200
2001 87,600
2002 90,000
2003 90,000
Thereafter 578,400
----------
$1,016,400
----------
The total rental expense for these leases included in the consolidated
statements of income for the years ended December 31, 1998 and 1997, was $85,200
and $127,200, respectively. The Company received rental income of approximately
$90,000 for both 1998 and 1997 which offsets the rental expense.
The Company sold Petersburg Racquet Club ("PRC") on December 31, 1997. The
buyer of PRC assumed a note payable to the bank in the amount of approximately
$576,000. The Company remains as a secondary debtor on the assumed note.
Therefore, the Company has a contingent liability in the amount of the note
payable balance in the event that the buyer of PRC fails to make payment under
the note payable agreement.
The Company is generally involved in legal proceedings, arising in the
ordinary course of business, which are covered by insurance. In the opinion of
the Company's management, none of the claims relating to such proceedings will
have a material adverse affect on the financial condition or results of
operations of the Company.
NOTE 5 - NOTES PAYABLE
At year end, notes payable consist of the following:
To banks
Secured by residential properties held for resale, maturing
at various dates through 1999, at interest rates from
prime plus 1.0% to 1.5% (8.5% to 10.0%). $2,371,197
Secured by vehicle, at an interest rate of 8%, payable by
monthly installments due June 25, 2003. 28,562
----------
$2,399,759
Under provisions of financing arrangements outstanding at December 31,
1998, the Company has unused commitments for financing of approximately
$1,985,000. These additional amounts are available upon request and approval of
development progress and are subject to the same terms and obligations as those
existing on December 31, 1998. The majority stockholder has personally
guaranteed all bank loans. The president of Keystone has personally guaranteed
all of Keystone's bank loans which amounts to additional guarantees of
$2,264,257.
Maturities of debt are as follows:
Year ending December 31,
------------------------
1999 $ 2,378,564
2000 5,497
2001 5,953
2002 6,447
2003 3,298
-----------
$ 2,399,759
Capitalized interest (SEE NOTE 2) was approximately $107,000 and $76,000
for the years ended December 31, 1998 and 1997, respectively. All other interest
incurred was recognized as financial expense in the consolidated statements of
income.
29
<PAGE>
NOTE 6 - INCOME TAX MATTERS
For the years ended December 31, 1998 and 1997, Crowell filed consolidated
income tax returns with its subsidiary Keystone.
For the years ended December 31, 1998 and 1997, the Company recorded no
income tax provision. In 1997 and previous years, the Company incurred net
losses and established valuation reserves for the entire amount of its deferred
tax assets. In 1998, the Company had net income and reduced its valuation
reserve by a similar amount. At December 31, 1998, the Company had a valuation
reserve equal to its deferred tax asset as it had determined that it was more
likely than not that the reported asset would not be realized. For the year
ended December 31, 1997, the Company reported $136,000 in income on its income
tax return that was not recorded in income for financial reporting purposes.
This income relates to the note receivable received by the Company on the sale
of PRC. (SEE NOTE 3 AND NOTE 10.) The Company used its net operating loss
carryforward to eliminate the income tax liability on this income.
Deferred tax assets and liabilities at December 31, 1998 and 1997, consist
of the following:
Years ended December 31,
-----------------------
1998 1997
--------- ---------
Deferred tax assets
Federal and state net operating loss carryforwards $ 690,000 $ 760,000
Less valuation allowance (690,000) (760,000)
--------- ---------
Net deferred tax asset $ -- $ --
========= =========
Remaining net operating loss carryforwards of $1,768,804 expire in varying
amounts between December 31, 2002, and December 31, 2011, and are subject to
Internal Revenue Code Section 382 limitations relating to a corporation's
ability to use net operating loss carryforwards subsequent to a change in
ownership. An expiration schedule is as follows:
Year ending December 31
-----------------------
2002 $ 30,902
2003 597,531
2004 154,945
2005 294,482
2010 683,502
2011 7,442
-----------
$ 1,768,804
NOTE 7 - INDUSTRY SEGMENT DATA
The Company conducts its operations in the principal industries of real
estate development and home-building.
The real estate development segment consists principally of the development
of residential properties for resale and construction of single-family and
multi-family housing.
The real estate brokerage segment consists of commission revenue and
related expenses for primarily commercial real estate sales.
Any significant intersegment revenues for the periods presented have been
eliminated. Various industry segment data is as follows:
Year ended December 31,
------------------------
1998 1997
---------- ----------
Net sales
Real estate development $6,892,824 $6,027,885
Real estate brokerage 61,906 182,778
---------- ----------
Net sales $6,954,730 $6,210,663
========== ==========
30
<PAGE>
Operating income
Real estate development $ 289,494 $ 122,767
Real estate brokerage 16,660 39,824
---------- ----------
Operating income $ 306,154 $ 162,591
========== ==========
Capital expenditures
Real estate development $ 51,878 $ 156,944
Real estate brokerage -- --
---------- ----------
Net capital expenditures $ 51,878 $ 156,944
========== ==========
Depreciation and amortization
Real estate development $ 17,174 $ 17,958
Real estate brokerage -- --
---------- ----------
Net depreciation and amortization $ 17,174 $ 17,958
========== ==========
Assets employed
Real estate development $4,039,511 $4,468,991
Real estate brokerage -- --
---------- ----------
$4,039,511 $4,468,991
========== ==========
NOTE 8 - RELATED PARTY TRANSACTIONS
Keystone purchases developed lots for home construction from Home Sites,
Ltd. ("Home Sites"), an entity related by common control. For the year ended
December 31, 1998 such purchases were $58,000. Crowell also provides management
services to Home Sites. For the year ended December 31, 1998 management fees
earned by the Company were $69,645.
The Company received $120,275 in real estate commissions from property sold
to Home Sites by an unrelated party for the year ended December 31, 1997. For
the year ended December 31, 1997, an officer of the Company purchased a home
from the Company. The sales price was $172,069. The cost of the home was
$161,918.
As described in Note 4, the Company leases office space from its majority
stockholder.
NOTE 9 - FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosure About Fair Value of Financial Instruments, defines
the fair value of a financial instrument as the amount at which the instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. The following summarizes the estimated fair
values of financial instruments and the major methods and assumptions used in
estimating such amounts.
The recorded amounts of short term financial instruments (primarily cash
and cash equivalents, accounts receivable, and accounts payable) approximate the
fair values due to the relatively short period to maturity.
The carrying amount of the Company's long term debt at December 31, 1998,
approximate the fair value based upon debt instruments with similar terms and
conditions.
The carrying amount of the Company's notes receivable at December 31, 1998,
approximate the fair value based upon notes with similar terms and conditions.
NOTE 10 - DISCONTINUED OPERATIONS
On December 31, 1997, Crowell sold the real estate and business operation
known as Petersburg Racquet Club ("PRC") to Craig S. Jones, an individual. No
material relationship existed between Mr. Jones and Crowell at the time of the
sale. The purchase price of PRC was approximately $818,000. This amount was
received in the form of approximately $100,000 in cash, the assumption of a
mortgage loan on PRC in the amount of approximately $576,000, the execution of a
note secured by a second mortgage on PRC in favor of Crowell in the amount of
approximately $129,000, the execution of a note in favor of Crowell in the
amount of approximately $7,000 and the obligation to pay Crowell the accounts
receivable of PRC at December 31, 1997, which were approximately $6,000, as they
were received. As a result of the Company remaining liable on the assumed
mortgage note, the Company has accounted for the PRC transaction following the
treatment set forth in the Securities Exchange Commission's Staff Accounting
Bulletins - Topic 5E (SAB Topic 5E) "Accounting for divestiture of a subsidiary
or other business operation". Accordingly, the $606,000 in assets of PRC at the
sale date have been recorded under the caption Assets of business transferred
under contractual arrangement with a corresponding amount recorded under
Liabilities and deferred credit of business transferred. The $166,000 gain on
sale of PRC has been separately deferred as a deferred gain of $30,000 and a
reduction in the notes receivable from Mr. Jones in the amount of $136,000. The
Company will continue to follow this accounting treatment until the amount of
the outstanding debt which Mr. Jones has assumed declines to a level which
permits the Company to record the transaction as a sale. Revenues from PRC for
the year ended December 31, 1997, were $298,563.
31
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Crowell & Co., Inc., and Subsidiaries
Augusta, Georgia
We have audited the accompanying consolidated balance sheet of Crowell &
Co., Inc., and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the two years in the period ended December 31, 1998. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Crowell &
Co., Inc., and subsidiaries as of December 31, 1998, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
ELLIOTT, DAVIS & COMPANY, L.L.P.
Augusta, Georgia
April 13, 1999
32
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
DIRECTORS AND EXECUTIVE OFFICERS
Otis L. Crowell
Director, President and Chairman of the Board
O. Lamar Crowell, Jr.
Director and Vice President
Mark L. Gilliam
Director, Vice President, Secretary and Chief Financial Officer
CORPORATE INFORMATION
CORPORATE OFFICES
924 Stevens Creek Road
Augusta, GA 30907
(706) 855-1099
INDEPENDENT AUDITORS
Elliott, Davis & Company, L.L.P.
Augusta, GA
TRANSFER AGENT
Crowell & Co., Inc.
Augusta, GA
COMMON STOCK AND DIVIDEND INFORMATION
There is no public trading market for the securities of Crowell. As of June 30,
1999, there were approximately 740 holders of record of Crowell's Common Stock
without par value. No dividends have been paid on Crowell's Common Stock for
more than 2 years and the management of Crowell does not intend to pay dividends
in the foreseeable future.
FORM 10-KSB
A copy of the Company's Annual Report on Form 10-KSB (without exhibits) as filed
with the Securities and Exchange Commission for the year ended December 31,
1998, may be obtained without charge by writing to Mark L. Gilliam at the
Company's corporate office.
ADDITIONAL INFORMATION
For additional information, contact Mark L. Gilliam at the Company's corporate
office.
33
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended June 30, 1999
Commission File No. 0-7765
CROWELL & CO., INC.
-----------------------------------------------------------------
(Exact Name of small business issuer as specified in its charter)
GEORGIA 58-1021933
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
432 South Belair Road, Augusta, Georgia 30907
---------------------------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code (706) 855-1099
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of issuer's common equity as of July 31, 1999
is approximately 2,520,835.
34
<PAGE>
CROWELL & CO., INC.
INDEX
PAGE NO.
--------
PART 1 - FINANCIAL INFORMATION
ITEM 1 - Financial Statements .................................... 3
ITEM 2 - Management's Discussion and Analysis .................... 8
35
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following condensed consolidated financial statements of Crowell & Co.,
Inc., and Subsidiaries are included in Item 1:
Condensed Consolidated Balance Sheet
June 30, 1999
Condensed Consolidated Statements of Operations and Accumulated Deficit
Three month and six month periods ended June 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows -
Three month and six month periods ended June 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements
36
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
ASSETS
PROPERTIES HELD FOR RESALE & DEVELOPMENT
Homes under construction and for sale $ 3,640,959
Developed residential 1,149,489
Land held for future development and other 29,200
-----------
4,819,648
-----------
CASH 344,161
-----------
RECEIVABLES 24,198
-----------
PROPERTY AND EQUIPMENT, NET OF DEPRECIATION 80,226
-----------
OTHER ASSETS 70,082
-----------
ASSETS OF BUSINESS TRANSFERRED UNDER CONTRACTUAL AGREEMENT 540,000
-----------
$ 5,878,315
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE TO BANKS $ 3,794,390
-----------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 425,263
-----------
LIABILITIES OF ASSETS OF BUSINESS TRANSFERRED UNDER
CONTRACTUAL AGREEMENT 570,000
-----------
STOCKHOLDERS' EQUITY
Preferred stock 1011,899
Common stock 696,774
Paid-in capital 33,648
Accumulated deficit (653,659)
-----------
1,088,662
-----------
$ 5,878,315
===========
See notes to condensed consolidated financial statements.
37
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JUNE 30, JUNE 30,
-------- --------
1999 1998 1999 1998
----------- ----------- ----------- -----------
REVENUES
<S> <C> <C> <C> <C>
Home sales $ 2,896,494 $ 1,801,607 $ 4,575,448 $ 2,489,807
All other revenues 32,552 143,311 180,049 318,675
----------- ----------- ----------- -----------
2,929,046 1,944,918 4,755,497 2,808,482
----------- ----------- ----------- -----------
COST OF REVENUES
Homes 2,540,918 1,631,199 3,987,643 2,267,878
All other costs 4,241 97,238 82,485 177,914
----------- ----------- ----------- -----------
2,545,159 1,728,437 4,070,128 2,445,792
----------- ----------- ----------- -----------
OPERATING EXPENSES 207,439 159,440 393,155 331,753
----------- ----------- ----------- -----------
OPERATING INCOME 176,447 57,041 292,214 30,937
----------- ----------- ----------- -----------
OTHER INCOME 466 17,994 15,222 26,405
----------- ----------- ----------- -----------
NET FINANCIAL EXPENSE 47,942 44,913 76,532 80,981
----------- ----------- ----------- -----------
NET INCOME (LOSS) 128,971 30,122 230,904 (23,639)
----------- ----------- ----------- -----------
ACCUMULATED DEFICIT
Beginning of period (782,630) (1,081,530) (884,563) (1,027,632)
Miscellaneous adjustment -- -- -- (137)
End of period (653,659) (1,051,408) (653,659) 1,051,408
----------- ----------- ----------- -----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,520,835 2,520,835 2,520,835 2,520,835
----------- ----------- ----------- -----------
NET INCOME (LOSS) PER COMMON SHARE
Primary Income (loss) per share $ .04 $ .00 $ .08 ($ .03)
Fully diluted income (loss) per share .05 N/A .08 N/A
</TABLE>
See notes to condensed consolidated financial statements.
38
<PAGE>
CROWELL & CO., INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JUNE 30, JUNE 30,
-------- --------
1999 1998 1999 1998
----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net (loss) income $ 128,971 $ 31,022 $ 230,904 ($ 23,639)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization 6,900 6,900 13,800 13,800
Net (increase) decrease in inventory,
receivables, prepaids, payables and
accruals (933,962) 436,448 (1,535,981) 193,272
----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities (798,091) 474,370 (1,291,277) 183,433
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment 0 (30,006) (210) (42,115)
Receipts on notes 10,375 9,723 20,750 19,238
----------- ----------- ----------- -----------
Net cash used in investing activities 10,375 (20,283) 20,540 (22,877)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 2,894,520 1,077,727 4,761,900 1,844,225
Payments of borrowings (2,055,565) (1,448,245) (3,391,056) (2,047,577)
----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities 838,955 (370,518) 1,370,844 (203,352)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 51,239 83,569 100,107 (42,796)
CASH AT BEGINNING OF PERIOD 292,922 66,299 244,054 192,664
CASH AT END OF PERIOD $ 344,161 $ 149,868 $ 344,161 $ 149,868
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Interest paid, net of amount capitalized $ 43,869 $ 47,322 $ 72,683 $ 83,333
</TABLE>
See notes to condensed consolidated financial statements.
39
<PAGE>
CROWELL & CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements are presented in accordance with the
requirements of Form 10-QSB and consequently do not include all of the
disclosures normally required by generally accepted accounting principles or
those normally made in the Company's annual Form 10-KSB filing. Accordingly, the
reader of this Form 10-QSB may wish to refer to the Company's Form 10-KSB for
the year ended December 31, 1998, for further information.
The financial information has been prepared in accordance with the Company's
customary accounting practices and has not been audited. In the opinion of
management, the information presented reflects all adjustments necessary for a
fair statement of interim results. All such adjustments are of a normal and
recurring nature.
NOTE 2 - INCOME (LOSS) PER SHARE
The income or loss per common share has been computed using the weighted average
of the number of shares outstanding during the three and six month periods ended
June 30, 1999 and 1998. Because inclusion of convertible preferred stock would
have an anti-dilutive effect on the income or loss per common share, the
convertible preferred stock is excluded from the computation of the income or
loss per common share assuming full dilution for the quarter ended June 30, 1998
and for the six months ended June 30, 1998.
40
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED JUNE 30, 1999 AND 1998
The primary sources of revenue of Crowell & Co., Inc., and Subsidiaries (the
"Company") are the development of residential properties for resale and
homebuilding.
Other sources of revenue are commissions on commercial real estate sales.
Total revenues for the quarter ended June 30, 1999, are $984,128 greater than
revenues for the quarter ended June 30, 1998.
Currently sales backlog on Company constructed homes is $3,308,770. Construction
on these homes is 56.6% complete. Backlog represents signed contracts for the
purchase of homes where the property has not been closed. Therefore, the Company
still holds legal title and has not recognized any income.
The gross profit margin on home sales increased from 9.5% to 12.3% for the
quarter ended June 30, 1999, as compared to the quarter ended June 30, 1998.
Operating expenses increased by $47,999 for the quarter ended June 30, 1999, as
compared to the same quarter last year. Operating expenses include salaries,
office expenses, occupancy, depreciation, advertising and promotion, taxes and
licenses, legal and accounting, communications, and other expenses. These
expenses are fixed in nature and normally do not fluctuate with different
revenue levels.
The Company had net income for the second quarter of 1999 of $128,971 compared
to a net income of $30,122 for the second quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has obtained financing historically by borrowing from conventional
lending sources using land acquired for development as security for loans.
Current and future liquidity needs are expected to be met by use of the proceeds
from home, lot, and land sales and the proceeds from loans, using lands
purchased for development as collateral. Existing development loans and
commitments available to the Company have been made by various financial
institutions and are secured by raw land and the improved lots held for resale.
Payments of interest are due monthly or quarterly and a portion of the principal
is repaid as each lot is sold.
Residential home construction costs are expected to be met through the use of
existing commitments aggregating approximately $1,216,900 as of June 30, 1999,
and through the use of additional commitments also using the improved lots as
collateral. Lot acquisition costs and home construction costs are financed by
construction loans from a number of conventional lending sources, generally
lending 90-95% of the costs of the home, secured by the lot and improvements.
These loans are repaid upon the sale of the home. These loans are negotiated and
closed on a project-by-project and lot-by-lot basis.
The Company also has several other loans with various lenders which are secured
by various Company assets.
41
<PAGE>
Financing arrangements for long-term needs have not been made. Such arrangements
in the land development business are generally made on a project-by-project
basis. Debt service on all existing loans (loan balances totaled $3,794,390 as
of June 30, 1999) and funds for operations are expected to be met from the
proceeds of home, lot, and land sales and brokerage commissions. Notes maturing
in the next twelve months total approximately $3,790,000. At June 30, 1999,
available cash and proceeds from home, lot, and land sales were expected to be
sufficient to meet the Company's requirements for the following quarter. The
Company historically has renewed these notes as is common in the development
business. The notes will eventually be repaid from proceeds of land, lot, and
home sales.
The Company expects to, as it has done in the past, sell land it presently owns
to meet liquidity needs. Coupled with revenues from normal sources, such sales
would be expected to generate sufficient cash to meet liquidity requirements.
The Company has net operating loss carryforwards available of approximately
$1,770,000 to offset against future federal and state taxable income. The
current value of these carryforwards computed at maximum federal and state
income tax rates is approximately $690,000. This amount is not reflected in the
financial statements.
RESULTS OF OPERATIONS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
Total revenues for the six months ended June 30, 1999, are $1,947,015 greater
than for the six months ended June 30, 1998. This can be attributed to an
increase in home sales.
Gross profit percent on home sales increased from 8.9% for the six months ended
June 30, 1998, to 12.8% for the six months ended June 30, 1999. Management
believes gross profit percent will remain stable for the next six months.
Operating expenses increased by $61,402 for the six months ended June 30, 1999,
as compared to the six months ended June 30, 1998. Management believes operating
expenses will remain stable for the six months ending December 31, 1999.
Net income for the six months ended June 30, 1999, was $230,904 compared with a
net loss of $23,639 for the six months ended June 30, 1998.
42
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CROWELL & CO., INC.
August 13, 1999 By: Mark L. Gilliam
-----------------------------------
Mark L. Gilliam
Vice President on Behalf of
the registrant and as Chief
Financial Officer
