SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
For the fiscal year ended June 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from _____ to_____.
Commission File Number 0-1937
OAKRIDGE HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
MINNESOTA 41-0843268
(State of Incorporation) (I.R.S. Employer Identification No.)
4810 120TH STREET WEST, APPLE VALLEY, MINNESOTA 55124
(Address of Principal Executive Offices)
(612) 686-5495
(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class)
Check whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the past 12 months (or for such shorter period
that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to the Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year were
$2,585,443.
The aggregate market value of voting stock held by non-affiliates
on September 23, 1997, was approximately $1,043,643 based on the
average of the bid and ask price.
The number of shares outstanding of Registrant's only class of
common equity on June 30, 1997, was 1,309,670.
No documents are incorporated by reference into this form.
Transitional small business disclosure format. Yes [ ] No [X]
PART I
ITEM 1: BUSINESS
Oakridge Holdings, Inc., the registrant (the "Company") is a
Minnesota corporation organized on March 6, 1961. It is
primarily engaged in the operation of two cemeteries in Cook
County, Illinois. The Company is involved in real estate
holdings in Mohave County, Arizona. During fiscal 1995, the
Company did not change its form of organization or mode of
conducting business, except for: (1) acquisition of 10 waterfront
lots on Colorado River in Mohave County, Arizona, with the option
to purchase 31 additional lots, (2) acquisition of an option to
develop a 18 hole championship golf course in Mohave County,
Arizona, which the company did not exercise November, 1995, (3)
retirement of 752,745 shares of common stock, and (4) a
settlement of $250,000 to Aztar Casualty receiver in settlement
of litigation.
CURRENT OPERATIONS
Through two wholly owned subsidiaries, Oakridge Cemetery
(Hillside), Inc. and Glen Oak Cemetery the Company operates two
adjacent cemeteries near Hillside, Illinois, used for the
internment of human remains. The cemetery operations of the
Company are discussed on a consolidated basis. The Company makes
no functional distinction between the two cemeteries, except
where noted.
The combined cemeteries have 176.7 total acres of which 12.8 are
used for interior roads and other improvements leaving 163.9 net
acres with 137,000 burial plots, of which 39,068 remain in
inventory. The cemeteries have two mausoleums with 975 niches
and 3,190 crypts of which 152 niches and 359 crypts remain in
inventory. The Company also holds deeds to 188 unsold crypts
located in Forest Home Cemetery in Forest Park, Illinois. Cook
and DuPage Counties in Illinois serve as the principal market for
the Company's services.
The Company estimates that it has an inventory of cemetery and
mausoleum spaces representing between a 26 to 35 year supply,
based on the maintenance of current sales levels. This inventory
is considered adequate, and the Company is presently developing a
plan for adding more niches and crypts in the future.
SUMMARY FINANCIAL INFORMATION
FISCAL YEARS ENDED JUNE 30
1997 1996
__________ __________
Revenues:
Cemetery $2,585,443 $2,614,973
Other 0 0
---------- ----------
Total $2,585,443 $2,614,973
========== ==========
Operating Profit (Loss) from Operations Before Other Income
(Expense), Income Taxes and Extraordinary Items:
Cemetery $384,014 $446,940
Environmental Costs 0 (33,258)
Interest (86,338) (119,641)
Other Expense (244) (49,546)
-------- --------
Total $297,432 $244,495
======== ========
GOVERNMENTAL REGULATION
The Company holds all governmental licenses necessary to carry on
its cemetery business and all such licenses are current.
The Company is required to place a portion of all sales proceeds
of cemetery lots, niches, and crypts in a trust fund for the
perpetual care of the cemeteries. The Company is required by
Illinois law to place 15% of the revenues from the sale of grave
spaces and 10% of revenues from the sale of crypt spaces into a
perpetual care fund. Earnings from these funds are recognized in
current cemetery revenues and are intended to defray cemetery
maintenance costs. The Company's perpetual care funds balance as
of June 30, 1997, was approximately $3,850,000.
The Company has a pre-need trust account for the delivery of
vaults and internment services. The market value of the trust as
of June 30, 1997 was approximately $477,000. The trust is
administered by Access Financial Group, Inc., through a master
trust with the Illinois Cemetery Association.
COMPETITION
The Company's cemetery business competes in Cook and DuPage
Counties in Illinois. Competitive factors in the cemetery
business are primarily predicated on location, convenience,
service, and heritage. Decisions made by customers are only
minimally influenced, it at all, by pricing.
OTHER BUSINESS INFLUENCES
The Company's cemetery business does not exercise seasonal
fluctuations, nor is it dependent upon any customer or group of
customers, the loss of which would have a material adverse effect
on its business, and discussion of backlog is not material to any
understanding of Company's business.
MARKETING
Sales are made to customers utilizing the facilities primarily on
an at-need basis, i.e., on the occurrence of a death in the
family when the products and services and interment space are
sold to the relatives of the deceased. Marketing, per se, takes
the form of satisfied customers based on superior location and
services rendered, and resultant word-of-mouth recommendation.
EMPLOYEES
As of June 30, 1997, the Company has 20 full time and 8 part time
or seasonal employees. The Company considers its labor relations
to be good.
ENVIRONMENTAL
Subsequent to fiscal year 1994, the Company commissioned an
engineering study of its property for the purpose of determining
the full extent of possible soil contamination. Five underground
fuel tanks were found to require removal and the adjoining soil
to undergo remediation.
During 1997, the Company expensed $-0- for current or future
expenditures and a total of approximately $292,000 has been spent
in its clean-up efforts. Furthermore, the Company was notified
by the Illinois Environmental Protection Agency that the clean-up
plan may not be in full compliance with EPA guidelines. The
Company has responded to the Illinois Environmental Protection
Agency with a work plan that calls for additional costs of
approximately $28,500 with the possibility of additional costs.
The Company is awaiting a response on the work plan from the
Illinois Environmental Protection Agency. Additional costs
beyond the $28,500 accrued for at June 30, 1997 may be incurred,
however, management cannot reasonably estimate those costs. In
addition, the Company may not file for reimbursement from the
Leaking Underground Storage Tank Fund until the plan has EPA
approval. Accordingly, the Company has made no provision for
reimbursement.
REAL ESTATE DEVELOPMENT
Mohave County, Arizona Water Front Lots
On December 27, 1994, the Company acquired from Mohave Shores
Development, Inc. the right to a 50 year sublease for the land
leased from the Fort Mojave Tribal Corporation for 10 residential
dwelling units adjacent to the Colorado River and an option for
an additional 31 residential dwelling units in that leased land.
The Company paid Mohave Shores Development, Inc. $250,000 for
these rights and options. The Company, at the present time, plans
to hold the property and sell the lots to builders or home
buyers. Additional expenditures will be immaterial.
ITEM 2: PROPERTIES.
The Company's principal executive offices are located at 4810
120th Street West, Apple Valley, Minnesota. The Company moved its
offices to this address on August 30, 1996, from Minneapolis,
Minnesota where the offices were located since January 1993.
As of June 30, 1997, the principal properties of the Company are
the cemeteries in Hillside, Illinois. The cemetery operations
are discussed in Business.
The cemeteries are subject to a mortgage in the principal amount
of $685,190. See Financial Statements, beginning on page F-1 for
payment details.
ITEM 3: LEGAL PROCEEDINGS
None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Trading in the Company's common stock is in the over-the-counter
market, primarily through listings in the National Quotation
Bureau "pink sheets", although the market in the stock is still
not well-established. The table below sets forth the range of
bid and ask prices for the two most recent fiscal years. Prices
used in the table were reported to the Company by National
Quotation Bureau, Inc. These quotations represent inter-dealer
prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.
FISCAL YEAR
1997 1996
First Quarter $.63 - 1.19 $.25 - .63
Second Quarter .63 - 1.13 .50 - .94
Third Quarter .63 - .88 .57 - .94
Fourth Quarter .38 - .75 .63 - 1.32
As of September 18, 1997, the number of holders of record of the
Company's Common Stock was 1,930.
The Company has never paid dividends on its common stock and does
not anticipate a change in this policy in the foreseeable future.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS
FISCAL 1997
LIQUIDITY AND CAPITAL RESOURCES
The Company relies on cash flow from continuing cemetery
operations to meet cash needs and funding capital requirements
for operations. Funeral industry businesses have provided
sufficient cash during the past three years to support day-to-day
operations and cover immediate debt service requirements. Since
1995 cash flow from operations has increased, and liquidity has
continued to improve. The registrant has secured a line of
credit for $225,000 to meet any uncertainties that are likely to
materially affect liquidity.
There are no expected changes in the number of full time, part-
time or seasonal employees employed by the Company.
The Company operating subsidiaries have a five year plan for
capital expenditures in the 1997 to 2001 period of approximately
$600,000 for road improvements, fencing of property, increased
inventory of niches and crypts in Mausoleum and outdoors,
equipment and modernization programs for computer software and
hardware.
Net income in fiscal year 1997 resulted in the company's ability
to generate sufficient cash flow from operations to finance its
operations, fund capital expenditures, pay immediate debt and
continue to solve its environmental problems.
RESULTS OF OPERATIONS
In fiscal year 1997, cemetery revenues remained relatively flat
with cemetery lot sales and interment fees remaining stable in
comparison to prior years, but Mausoleum sales and cremations
fees decreased approximately $37,090 (or 15%). The decrease is
primarily attributable to the increased competition, change in
marketing strategies and publicity surrounding the past lawsuit
in regards to idenmifaction of cremation remains. Investment
income from the cemetery care funds increased $3,591 or 2%, which
was due primarily to the increase in trust assets.
Gross profit before expenses decreased $2,877 or 1% over the
prior fiscal year. The decrease in attributable to decreased
costs of Mausoleum sales and related costs.
Operating expenses remained constant with a less than 1% decrease
in comparison to prior fiscal years.
Selling expenses increased $22,858 or 10% over the prior fiscal
year. The increase is attributable to the having a full-time
sales manager for twelve months. When retained by management it
was atticapted that this individual would be able to increase
productivity and enhance customer service. Customer service was
improved but sales continue to remain flat.
General and administrative expenses increased $9,091 or 1% over
the prior fiscal year, primarily due to increased legal expenses
of $41,230 or 44%, which was due to prior lawsuits brought
against the Company, which were either settled for a immaterial
cost or dismissed by the courts. All other costs remained
constant or decreased due to effective cost controls.
Other expenses decreased $115,863 or 43% over the prior fiscal
year, primarily due to the company recording no environmental
expenditures in 1997 and $33,258 in 1996, no loss on investment
in property rights in 1997 and $50,000 in 1996 and because of
decreased interest expense associated with reduced debt.
FISCAL 1996
LIQUIDITY AND CAPITAL RESOURCES
The Company relies on cash flow from continuing cemetery
operations to meet cash needs and funding capital requirements
for operations. Funeral industry businesses have provided
sufficient cash during the past three years to support day-to-day
operations and cover immediate debt service requirements. Ever
since new management was installed in 1993 cash flow from
operations has increased, and liquidity has continued to improve.
The registrant has secured a commitment for a line of credit for
$250,000 to meet any uncertainties that are likely to materially
affect liquidity.
The Company operating subsidiaries have a five year plan for
capital expenditures in the 1996 to 2000 period of approximately
$750,000 for road improvements, increased inventory of niches
and crypts in Mausoleum and outdoors, and modernization programs
for computer software and hardware.
Net income in fiscal year 1996 resulted in the Company's ability
to generate sufficient cash flow from operations to finance its
operations, continue to solve its environmental problems, fund
capital expenditures and pay immediate debt.
RESULTS OF OPERATIONS
In fiscal year 1996, cemetery revenues increased $28,764 or 2%.
This modest increase was achieved despite a decrease in at need
services of 148 services or 9% from the prior fiscal year.
Decrease in services or increase in revenues is primarily
attributable to managements' efforts to maximize the cemetery's
remaining inventory by increasing the ratio of higher end
services in relation to prior years. Memorial sales decreased
$57,470 over fiscal year 1995 (or 17%). This decrease is
primarily attributable to the increase competition by both
funeral homes, and memorial stores and dramatic changes in the
cemetery's marketing staff. Interest earned from the cemetery
care funds increased $12,494 or 6%, which was due primarily to
higher rates of return on the trust assets.
Gross profit from operating subsidiaries before expenses
increased $48,347 or 3% over the prior fiscal year. This
increase is attributable to management's continuing efforts to
secure the most competitive pricing available.
Operating expenses from operating subsidiaries increased $29,273
or 3% over the prior fiscal year, primarily due to the increase
in repair and maintenance expenditures of $10,660, wages paid to
grounds personnel of $6,786, and depreciation expense of $10,207,
caused by the increased level of depreciable assets.
Selling expenses from operating subsidiaries increased $23,496 or
12% over the prior fiscal year. The increase is attributable to
the hiring of a full-time sales manager. It is contemplated by
management that this individual will be able to increase
productivity of the family service counselors and enhance
customer service.
General and Administrative expenses decreased $28,863 or 3% over
the prior fiscal year, primarily due to decreased travel costs,
with other costs remaining constant or decreasing due to
effective cost controls by management.
Other expenses increased $81,135 primarily because of interest
associated with debt and loss on investment in property rights of
$50,000.
ITEM 7: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements of the Company for the fiscal years ending
June 30, 1997 and 1996 are included at Item 13, F-1.
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
During fiscal year 1996 the board of directors approved the
change of accounting firms to Stirtz Bernards Boyden Surdel &
Larter P. A.
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT.
Directors hold office for a one-year term or until their
successors are duly elected and qualify. Each director has
served continuously since the year indicated. The age and
principal occupation or employment of all directors as set forth
below. All occupations or directors are the Company, unless
otherwise indicated.
Robert C. Harvey, (46), Director, Chairman of the Board, and
Chief Executive Officer since 1992. Mr. Harvey is also a partner
in the accounting firm of Harvey & Co. from 1992 to the present.
Robert B. Gregor, (46), Secretary and Director since 1993. Mr.
Gregor has been the Senior Account Executive of E.F. Johnson Co.
since 1993. From 1977 to 1993, Mr. Gregor was a Sales Team
Manager at Motorola Communications.
Hugh H. McDaniel, (57), Director since 1992. Mr. McDaniel has
been a residential real estate broker since 1973.
<TABLE>
ITEM 10: EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Long Term
Compensation Compensation
_________________________________________________ ____________
Name and Other Annual Awards
Principal Position Year Salary(1) Bonus Compensation(3) Options
<S> <C> <C> <C> <C>
Robert C. Harvey(2)
Chairman of the Board
and Chief Executive
Officer 1997 $90,000
1996 $90,000 $1,750 $15,200
(1) Includes amounts accrued by the Company to Mr. Harvey of
$15,000 in 1997 and $45,000 in 1996.
(2) Mr. Harvey was employed by the Company as Chairman of the
Board and Chief Executive Officer in November 1992.
(3) Medical insurance
</TABLE>
OPTION GRANTS AND EXERCISES
The following table summarizes options granted to named executive
officer during 1997 and 1996.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of
Securities % of Total Exercise
Underlying Options Granted or Base
Options to Employees Price Expiration
Name (1)Granted in Fiscal Year ($/SH) Date
_________________________________________________________________
Robert C. Harvey
1997 - -
1996 40,000(2) 100% $0.25 06/30/99
_________________________________________________________________
(1) All the options granted to Mr. Harvey were granted pursuant
to his employment contract. See "Executive Compensation and
Other Benefits -- Employment Agreement". Options are exercisable
so long as Mr. Harvey remains in the employ of the Company.
(2) These options were granted on June 30, 1996 and are fully
vested.
EMPLOYMENT AGREEMENT
The Company has an employment contract with Mr. Harvey, the
Chairman of the Board and Chief Executive Officer of the Company.
Under the agreement, Mr. Harvey is to receive annual compensation
of $90,000 and a bonus equal to 10% of the company's net income
over $300,000 and 15% of the company's net income over $500,000.
Under this agreement, in addition to his salary and bonus, Mr.
Harvey will receive options to purchase an additional 10,000
shares at $0.25 per share for each $100,000 of net income the
Company achieves over $300,000 and options to purchase 40,000
shares based on the performance of the Company's stock in the
public market. Mr. Harvey was granted options to purchase 40,000
shares in June, 1996, under the terms of his employment agreement
with the Company.
COMPENSATION OF DIRECTORS
Directors who are not salaried employees of the Company are
paid $500 as an annual director's fee plus a fee of $200 per
meeting attended. Directors are also reimbursed for travel and
lodging expenses as appropriate. There was one board of
directors meeting and two meetings by telephone and directors
received $1,000 for these meetings.
On May 18, 1990, the Board of Directors approved a nonqualified
stock option plan for outside directors. Under the plan, each
outside director received options to purchase 3,500 shares of the
Company s common stock at an excercise price per share equal to
the market price at the grant date. These stock options are
exercisable for a period of ten years from the grant date for
active board members or for a period of twelve months from the
date of termination for former board members. The Company
reserved 21,000 shares of common stock for issuance under the
plan, of which 3,500 shares have been issued, an option for 3,500
shares is outstanding and 14,000 shares are available for
issuance.
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table contains information as of June 30, 1997,
concerning the beneficial ownership of the Company's common
shares by Mr. Robert C. Harvey, each director, by all directors
and officers as a group, and by each person known to the Company
to "beneficially own" more than 5% of its common shares.
Name of Individual
or Persons in Group Number of Shares(a) % of Class
_________________________________________________________________
Robert C. Harvey 249,594(b) 19.1%
4810 120th Street West
Apple Valley, MN 55124
Robert B. Gregor 118,264(c) 9.0%
844 Oriole Lane
Chaska, MN 55337
Hugh McDaniel 5,100(d) *
4090 Mission Blvd.
San Diego, CA 92109
All Officers and Directors 372,958 28.5%
as a Group (3 persons)
*Less than 1.0%
(a) Unless otherwise noted, all shares shown are held by persons
possessing sole voting and investment power with respect to such
shares.
(b) Includes 40,572 held by Mr. Harvey's wife and children to
which Mr. Harvey may be deemed to share voting and investment
power, but as to which he disclaims beneficial ownership. In
addition, 40,000 of the 249,594 share total listed in the table
are shares that could be acquired upon exercise of an option. In
addition 10,000 are held jointly by Mr. Harvey and his wife.
(c) Includes 5,450 held by Mr. Gregor's wife and children to
which Mr. Gregor may be deemed to share voting and investment
power, but as to which he disclaims beneficial ownership. In
addition 77,100 are held jointly by Mr. Gregor and his wife.
(d) Includes 3,500 of the 5,100 share total listed in the table
are shares that could be acquired upon exercise of options as a
board member.
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the years ended June 30, 1997 and 1996, amounts paid for
compliance services to entities related to the chief executive
officer were $12,192 and $10,908, respectively.
ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) The following documents are filed or incorporated by
reference as part of this Form 10-KSB.
(1) The following consolidated financial statements of
Oakridge Holdings, Inc. and Subsidiaries, together with the
Independent Auditors Report are filed in this report at
Item 13, F-1:
Independent Auditor's Report
Consolidated Balance Sheets as of June 30, 1997 and 1996
Consolidated Statements of Operations for Years Ended
June 30, 1997 and 1996
Consolidated Statements of Stockholders' Equity for Years
Ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows for Years Ended
June 30, 1997 and 1996
Notes to Consolidated Financial Statements
(2) The schedule of exhibits required to be furnished by Item 601
of Regulations S-B is as follows:
3(i)Amended and Restated Articles of Incorporation as
amended. (1)
3(ii)Amended and Superseding By-Laws as amended. (1)
10(a)Outside Directors Non-qualified Stock Option Plan. (1)
10(b)Robert C. Harvey Employment Agreement. (1)
10(c)Stock purchase agreement. (1)
10(d) Loan documents for Line of Credit.
10(e) Subordinated Debenture Agreement. (1)
10(f) Loan documents for Mortgage Note Payable.
21 Subsidiaries of Registrant.
(1) Filed as exhibit to Form 10-KSB for fiscal year
ended June 30, 1996
(b) No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
F-1
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1997 AND 1996
TABLE OF CONTENTS
PAGE
Independent Auditors' Report 1
Consolidated Financial Statements:
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
{Letterhead of Independent Auditors}
To The Board of Directors and Stockholders
Oakridge Holdings, Inc. and Subsidiaries
Apple Valley, Minnesota
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of
Oakridge Holdings, Inc. and Subsidiaries as of June 30, 1997 and
1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated 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 Oakridge Holdings, Inc. and Subsidiaries as of June
30, 1997 and 1996, and the results of their operations and their
cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Stirtz Bernards Boyden Surdel & Larter, P.A.
Edina, Minnesota
September 5, 1997
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,
______________________
1997 1996
__________ __________
ASSETS
Cash and cash equivalents $ 382,287 $ 264,691
---------- ----------
Receivables:
Trade, less allowance for
doubtful accounts of $15,000
in 1997 and $33,800 in 1996 476,443 446,891
Trust income (Note 12) 106,855 66,750
---------- ----------
Total receivables 583,298 513,641
---------- ----------
Inventories:
Cemetery and mausoleum space
available for sale 682,108 701,490
Markers, urns and flowers 15,924 15,6756
---------- ----------
Total inventories 698,032 717,165
---------- ----------
Property and equipment:
Property and equipment 1,760,528 1,701,490
Less accumulated depreciation (1,286,611) (1,217,310)
---------- ----------
Total property and
equipment, net 473,917 484,180
---------- ----------
Prepaid expenses and
other assets 39,384 46,331
---------- ----------
Deferred income taxes 256,000 337,429
---------- ----------
Investment in property rights-
Mohave Shores Development Inc. 250,000 250,000
---------- ----------
$2,682,918 $2,613,437
========== ==========
June 30,
______________________
1997 1996
__________ __________
LIABILITIES AND STOCKHOLDERS'
EQUITY
Note payable bank $ 75,000 $ -
---------- ----------
Accounts payable - trade 42,418 70,199
---------- ----------
Accrued liabilities:
Accrued salaries and
payroll taxes 124,971 151,182
Perpetual care trust funds 227,087 190,135
Deferred revenue 389,609 314,483
Accrued marker and
inscription costs 77,976 76,026
Accrued environmental costs 28,500 28,500
Other 7,167 4,692
---------- ----------
Total accrued liabilities 855,310 765,018
---------- ----------
Mortgage and other notes payable 706,603 989,065
---------- ----------
Commitments and contingencies
(Note 7) - -
Stockholders' equity:
Preferred stock - $.10 par
value; authorized - 1,000,000
shares; issued - none - -
Common stock - $.10 par value;
authorized - 5,000,000 shares;
issued and outstanding -
1,309,670 shares in 1997
and 1996 130,968 130,968
Additional paid-in capital 1,875,500 1,875,500
Accumulated deficit (1,002,881) (1,217,313)
---------- ----------
Total stockholders' equity 1,003,587 789,155
---------- ----------
$2,682,918 $2,613,437
========== ==========
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
June 30,
______________________
1997 1996
__________ __________
Revenue:
Cemetery $2,344,988 $2,378,109
Trust and interest income 240,455 236,864
---------- ----------
Total revenue 2,585,443 2,614,973
---------- ----------
Operating expenses:
Cemetery 1,210,979 1,209,532
Selling 247,800 224,942
General and administrative 742,650 733,559
---------- ----------
Total operating expenses 2,201,429 2,168,033
---------- ----------
Income from operations 384,014 446,940
---------- ----------
Other income (expense):
Environmental costs - (33,258)
Interest expense (86,338) (119,641)
Loss on investment in
property rights - (50,000)
Other (244) 454
---------- ----------
Total other income
(expense) (86,582) (202,445)
---------- ----------
Income before income taxes 297,432 244,495
Income taxes 83,000 70,000
---------- ----------
Net income $ 214,432 $ 174,495
========== ==========
Primary earnings and fully
diluted earnings per common
share $.16 $.12
========== ==========
See Notes to Consolidated Financial Statements
<TABLE>
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1997 AND 1996
<CAPTION>
Additional
Common Stock Paid-In
Accumulated
Shares Amount Capital Deficit Total
___________________ __________ ___________ __________
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1995 1,623,242 $162,325 $2,282,193 $(1,391,808) $1,052,710
Return of escrow stock in
December, 1995 (425,000) (42,500) (488,750) - (531,250)
Conversion of subordinated
debentures into common
stock on June 25, 1996 111,428 11,143 66,857 - 78,000
Paid-in capital - stock
options, June 30, 1996 - - 15,200 - 15,200
Net income - - - 174,495 174,495
--------- -------- ---------- ----------- ----------
Balance, June 30, 1996 1,309,670 130,968 1,875,500 (1,217,313) 789,155
Net income - - - 214,432 214,432
--------- -------- ---------- ----------- ----------
Balance, June 30, 1997 1,309,670 $130,968 $1,875,500 $(1,002,881) $1,003,587
========= ======== ========== =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
June 30,
______________________
1997 1996
__________ __________
Cash flows from operating activities:
Net income $ 214,432 $ 174,495
Adjustments to reconcile net
income to net cash flows
from operating activities:
Depreciation 69,301 66,321
Deferred income taxes 81,429 69,820
Loss on investment in property rights - 50,000
Compensation expense - stock options - 15,200
Receivables (69,657) (53,355)
Inventories 19,133 21,021
Prepaid expenses and other assets 6,947 33,247
Accounts payable - trade (27,781) (25,285)
Accrued liabilities 90,292 103,102
---------- ----------
Net cash flows from
operating activities 384,096 454,566
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (59,038) (134,146)
---------- ----------
Net cash flows from
investing activities (59,038) (134,146)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (282,462) (254,890)
Increase in note payable bank 75,000 -
Issuance of long-term debt - 28,470
Principle payments on debentures - (22,000)
---------- ----------
Net cash flows from
financing activities (207,462) (248,420)
---------- ----------
Net change in cash and
cash equivalents 117,596 72,000
Cash and cash equivalents,
beginning of year 264,691 192,691
---------- ----------
Cash and cash equivalents,
end of year $ 382,287 $ 264,691
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
June 30,
______________________
1997 1996
__________ __________
Cash paid during the years for:
Interest $ 86,338 $ 133,932
========== ==========
Income taxes $ 560 $ -
========== ==========
OTHER NONCASH INVESTING AND FINANCING ACTIVITIES
In January 1997, $750,000 of long-term debt was refinanced with the
issuance of long-term debt.
In June 1996, $78,000 of subordinated debentures were converted into
111,428 shares of common stock.
In December 1995, common stock valued at $531,250 was returned to the
Company from escrow and retired, and the investment in property rights -
Mohave Shores Development, Inc. was reduced by $531,250.
See Notes to Consolidated Financial Statements
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIRES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company is a Minnesota corporation organized on March 6, 1961. It
is engaged in the operation of two cemeteries in Illinois. The cemetery
operations routinely grant credit to pre-need customers, substantially
all of whom are in the Chicago area.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries, each of which is wholly owned. All
material intercompany balances and transactions have been eliminated in
consolidation.
UNCLASSIFIED BALANCE SHEETS
The Company presents unclassified balance sheets. The
current/noncurrent presentation is deemed to have little or no relevance
due to the nature of the Company's operations.
ESTIMATES AND ASSUMPTIONS
The preparation of consolidated 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 consolidated financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
INVENTORIES
The cemetery and mausoleum space available for sale is stated at the
lower of cost (determined by an allocation of the total purchase and
development costs of each of the properties to the number of spaces
available) or market. Included in cemetery space available for sale is
land held in a land trust in which a wholly owned subsidiary of the
Company is the sole beneficiary.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
related assets. When assets are retired or otherwise disposed of, the
cost and related accumulated depreciation are removed from the accounts
and any resulting gain or loss is recognized in income for the period.
The cost of maintenance and repairs is charged to operations as incurred
and significant renewals and betterments are capitalized.
INVESTMENT IN PROPERTY RIGHTS - MOHAVE SHORES DEVELOPMENT INC.
The Company considers the costs of these intangibles to be part of the
developmental cost and will be matched against any revenue from the
development.
CEMETERY AND MAUSOLEUM SPACE REVENUE
Under the Cemetery Care Act of the State of Illinois, the Company is
required to transfer a portion of the proceeds of each sale of cemetery
and mausoleum space to perpetual care trust funds. The reported net
revenue has been reduced by the portion of the sales price that is
required to be remitted to the perpetual care trusts.
Income on the perpetual care trust funds is recorded as cemetery revenue
in the accompanying consolidated financial statements as earned.
Distributions from the perpetual care trusts are used for care and
maintenance of the cemetery. Expenses are recognized as incurred.
DEFERRED REVENUE
Pre-need contracts include charges for services to be performed at a
later date. Revenue on these services is deferred to the period in
which the services are performed.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported
in the consolidated financial statements and consist of taxes currently
due plus deferred income taxes. Deferred income taxes relate to
differences between the financial and tax bases of certain assets and
liabilities. The significant temporary differences relate to fixed
assets, valuation allowances, certain accruals and operating loss
carryforwards that are available to offset future taxable income.
Deferred income tax assets and liabilities represent the future tax
return consequences of those differences, which will either be taxable
or deductible when the assets and liabilities are recovered or settled.
STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock-Based Compensation. This new standard defines a fair value
based method of accounting for an employee stock option or similar
equity instrument. This statement gives entities a choice of
recognizing related compensation expense by adopting the new fair value
method or to continue to measure compensation using the intrinsic value
approach under Accounting Principles Board (APB) Option No. 25, the
former standard. If the former standard for measurement is elected,
SFAS No. 123 requires supplemental disclosure to show the pro forma net
income and earnings per share as if SFAS No. 123 had been adopted. This
statement is effective for the Company s 1997 fiscal year. However,
there were no stock options issued in fiscal year 1997, and the effect
of the stock options issued in 1996 under SFAS No. 123 is immaterial to
the 1996 net income and earnings per share. The Company intends to
continue using the measurement prescribed by APB Opinion No. 25, and
accordingly, this pronouncement will not affect the Company s financial
position or results of operations.
ENVIRONMENTAL COSTS
Environmental expenditures that pertain to current operations or relate
to future revenue are expensed or capitalized consistent with the
Company's capitalization policy. Expenditures that result from the
remediation of an existing condition caused by past operations that do
not contribute to current or future revenue are expensed. Liabilities
are recognized for remedial activities when the clean-up is probable and
the cost can be reasonably estimated.
CONCENTRATIONS OF CREDIT RISK
The Company's cash deposits from time to time exceed federally insured
limits. The Company has not experienced any losses on its cash deposits
in the past.
Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of accounts receivable.
The credit risk is limited due to the large number of entities
comprising the Company's customer base. At June 30, 1997, the Company
had no significant concentrations of credit risk.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company has adopted Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of (SFAS 121), effective July 1, 1996. SFAS
121 requires an impairment loss be recognized in accordance with the
statement when the carrying amount of long-lived assets and certain
identifiable intangibles exceeds their fair value. The effect of
adopting SFAS 121 was not significant to the Company s consolidated
financial statements.
2. INVENTORIES
Inventories of cemetery and mausoleum space available for sale consist
of the following:
1997 1996
__________ __________
Cemetery space $ 556,265 $ 572,523
Mausoleum space 125,843 128,967
---------- ----------
$ 682,108 $ 701,490
========== ==========
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
1997 1996
__________ __________
Land $ 50,000 $ 50,000
Land improvements 252,373 213,773
Building and improvements 522,881 522,881
Vehicles 198,617 198,617
Equipment 736,657 716,219
---------- ----------
$1,760,528 $1,701,490
========== ==========
Depreciation charged to operations was $69,301 in 1997 and $66,321 in
1996.
4. INVESTMENT IN PROPERTY RIGHTS
Mohave Shores Development Inc. (MSD), a Nevada corporation, has a master
lease agreement with the Fort Mohave Tribal Corporation (Tribal
Corporation) located in Arizona. In December 1994, the Company
purchased from MSD a development ground sublease and an option to
develop and operate a golf course. The option to develop and operate a
golf course expired November 30, 1995. The property under rights is
located in the County of Mohave, Arizona.
Development Ground Sublease
The Company purchased the right to develop 10 dwelling units for
$250,000. The right has a term of 50 years. In addition, the Company
has the right to purchase 31 additional development units in increments.
Each increment would require additional fees to a total aggregate of
$1,300,000.
Development of a Golf Course
The Company acquired from Mohave Shores Development, Inc. the right to
negotiate with the Tribal Corporation for the development of a golf
course, reception of the proceeds of up to $6,000,000 of bonds when
sponsored by the Tribal Corporation, allocation of 1,500 acre feet of
water rights for use in connection with the golf course, an option to
develop either a 200-unit lodge or 200 dwelling unit lots adjacent to
the golf course, and an option to the commercial site proposed under the
master lease. The Company paid Mohave Shores Development, Inc. $50,000
cash and 425,000 shares of the Company's common stock for these rights
to negotiate. The shares were issued into escrow pending the execution
of the golf course lease by the Tribal Corporation, the delivery of the
bond proceeds and the execution of the water rights agreement. The
rights of Mohave Shares Development, Inc. to the cash and the Company
common stock were terminated November 30, 1995 and the 425,000 shares of
common stock was returned, and the $50,000 was written off as
uncollectible.
5. NOTE PAYABLE - BANK
The Company has a $225,000 line-of-credit of which $150,000 was unused
and available at June 30, 1997. Interest is payable monthly at the
prime rate (8.25% at June 30, 1997). The note is secured by the assets
of a wholly owned subsidiary and matures November 1, 1997.
6. MORTGAGE AND OTHER NOTES PAYABLE
Mortgage, debentures and other notes payable consisted of the following:
1997 1996
__________ __________
Mortgage note payable bank,
payable in monthly installments
of $9,350 including interest at
8.625%, maturing January 2001,
secured by real estate and the
assets of the Company. $ 685,190 $ -
Mortgage note payable - bank,
payable in monthly installments
of $10,000 plus interest at
.75% over prime, maturing in
March 1998, secured by real
estate, assignment of interest
in a land trust, accounts
receivable and inventories. - 950,000
Note payable, payable in
monthly installments of $365
including interest at 8.75%,
maturing in April 1998,
secured by equipment. 3,120 6,577
Note payable, payable in
monthly installments of $765
including interest at 8.75%,
maturing in November 1999,
secured by equipment. 18,293 25,413
Note payable, payable in
monthly installments of $819
including interest at 9.79%,
secured by equipment. - 7,075
---------- ----------
Mortgages, debentures and
other notes payable $ 706,603 $ 989,065
========== ==========
Subsequent maturities as of June 30, 1997 are as follows:
Years Ending June 30:
1998 $ 17,075
1999 64,164
2000 63,371
2001 561,993
----------
$ 706,603
==========
7. ENVIRONMENTAL COSTS
Subsequent to June 30, 1994, the Company commissioned an engineering
study of its property for the purpose of determining the full extent of
possible soil contamination. Five underground fuel tanks were found to
require removal and the adjoining soil to undergo remediation.
Environmental costs expensed to operations were $-0- in 1997, $33,258 in
1996, and approximately $258,523 in years prior to those presented.
Furthermore, the Company was notified by the Illinois Environmental
Protection Agency (IEPA) that the clean-up plan may not be in full
compliance with IEPA guidelines. The Company has responded to the IEPA
with a work plan that calls for additional costs of approximately
$28,500 with the possibility of additional costs. The Company is
awaiting a response on the work plan from the IEPA. Additional costs
beyond the $28,500 accrued for at June 30, 1997 may be incurred,
however, management cannot reasonably estimate those costs. In addition,
the Company may not file for reimbursement from the Leaking Underground
Storage Tank Fund until the work plan has IEPA approval. Accordingly,
the Company has made no provision for reimbursements.
8. INCOME TAXES
The provision for income taxes consisted on the following:
1997 1996
__________ __________
Current:
Federal $ - $ -
State 1,571 180
---------- ----------
1,571 180
---------- ----------
Deferred:
Federal 70,000 59,320
State 11,429 10,500
---------- ----------
81,429 69,820
---------- ----------
$ 83,000 $ 70,000
========== ==========
Principal reasons for variations between the statutory federal tax rate
and the effective tax rate were as follows:
1997 1996
__________ __________
Federal tax rate 34% 34%
State taxes, net of federal benefit 3 6
Utilization of deferred income tax
assets at rates different than
originally capitalized (9) (11)
---------- ----------
28% 29%
========== ==========
The net deferred income tax assets in the accompanying consolidated
balance sheets included the following components as of June 30, 1997 and
1996:
1997 1996
__________ __________
Deferred income tax liabilities $ (6,000) $ (7,000)
Deferred income tax assets:
Net operating loss carryforwards 218,600 298,000
Environmental liability 8,000 8,000
Other 54,300 58,329
Deferred income tax asset
valuation allowances (18,900) (19,900)
---------- ----------
Net deferred income tax assets $ 256,000 $ 337,429
========== ==========
The Company has operating loss carryforwards of approximately $780,000,
which expire in 2007 and 2008, that may be offset against future taxable
income and investment tax credits totaling approximately $18,900 that
may be offset against future federal income taxes. If not used, the
investment tax credits will expire as follows:
1998 $ 2,000
1999 3,100
2000 3,200
2001 10,600
----------
$ 18,900
==========
The operating loss carryforwards expire as follows:
2007 $ 187,000
2008 593,000
----------
$ 780,000
==========
9. RELATED PARTY TRANSACTIONS
During the years ended June 30, 1997 and 1996, amounts paid for
compliance services to entities related to the chief executive officer
were $12,192 and $10,908, respectively.
10. PENSION PLAN
Certain subsidiaries of the Company participate in a multi-employer
union administer defined benefit pension plan that covers the cemetery
employees. Pension expense under this plan was $15,113 in 1997 and
$14,856 in 1996.
11. EMPLOYMENT CONTRACTS AND STOCK OPTIONS
The Company is committed under an employment contract with its chief
executive officer (CEO) to pay annual compensation and bonus payments
for three years ending December 31, 1998. Under this agreement, the
Company is committed to pay a bonus of 10% of the Company net income
over $300,000 and 15% of the Company net income over $500,000. The
Company accrued $-0- under these terms of the agreement for the years
ended June 30, 1997 and 1996. The annual compensation expense under the
employment contract is $90,000.
In addition, the contract provides for stock options subject to certain
performance levels:
a) 10,000 shares at fair market value for each $100,000 of net income
over a base income amount of $300,000.
b)40,000 shares at fair market value based on the performance of the
Company's stock in the public market.
The employment agreement expires December 31, 1998, and the exercise
date of the stock options must be between three years of their grant or
90 days after the termination of the CEO's employment, whichever is
first.
Under the agreement, stock options for 40,000 shares of common stock at
$.25 per share were earned in 1996. $15,200 of compensation expense was
recognized with these stock options. No other stock options were issued
in 1997 or 1996, subject to the above performance criteria.
On May 18, 1990, the Board of Directors approved a nonqualified stock
option plan for outside directors. Under the plan, each outside director
received options to purchase 3,500 shares of the Company's common stock
at an exercise price per share equal to the market price at the grant
date. These stock options are exercisable for a period of ten years from
the grant date for active board members or for a period of twelve months
from the date of termination for former board members. The Company
reserved 21,000 shares of common stock for issuance under the plan, of
which 3,500 shares have been issued, an option for 3,500 shares is
outstanding and 14,000 shares are available for issuance.
12. CEMETERY AND MAUSOLEUM TRUST FUNDS
Two of the Company's wholly-owned subsidiaries are beneficiaries of
perpetual care trust funds established under the Cemetery Care Act of
the State of Illinois. Earnings on these perpetual care trust funds are
to be used for the care, preservation and ornamentation of the Company's
cemetery and mausoleum properties.
Earnings on these perpetual care trust funds totaled $226,973 in 1997
and $225,223 in 1996. These earnings are included in cemetery revenue in
the accompanying consolidated financial statements.
Perpetual care trust fund assets totaled approximately $3,850,000 and
$3,670,000 at June 30, 1997 and 1996, respectively.
13. WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
The following table reconciles the weighted average number of shares of
common stock outstanding.
1997 1996
__________ __________
Common stock shares
outstanding at June 30 1,309,670 1,309,670
Effect of weighted average
common stock shares - 68,158
Effect of treasury stock
method for stock options 30,240 27,965
---------- ----------
Weighted average common stock shares
for primary and fully diluted
earnings per share at June 30 1,339,910 1,405,793
========== ==========
14. FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at June
30, 1997, and the methods and assumptions used to estimate such fair
values, were as follows:
Cash and cash equivalents - the fair value approximates the carrying
amount because of the short maturity of those financial instruments.
Mortgages, debentures and other notes payable - the fair value
approximates the carrying amount, as the interest rates on the debt
approximate current interest rates.
15. RECLASSIFICATIONS
Certain reclassifications were made to the 1996 consolidated financial
statements to conform to the 1997 presentation which had no effect on
net income.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the
Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OAKRIDGE HOLDINGS, INC.
Dated: March 26, 1998 By /s/ Robert C. Harvey
Robert C. Harvey
Chairman of the Board of Directors
In accordance with the Exchange Act, this report has also been signed
below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
Dated: March 26, 1998 By /s/ Robert C. Harvey
Robert C. Harvey
Chief Executive Officer
Chief Financial Officer
Dated: March 26, 1998 By /s/ Robert B. Gregor
Robert B. Gregor
Secretary
Director
