<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-KSB/A-1
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 0-20047
ROYALE INVESTMENTS, INC.
(Exact Name of Registrant as Specified in its Charter)
MINNESOTA 41-1691930
(State or Other Jurisdiction (IRS Employer
of Incorporation) Identification No.)
3430 LIST PLACE, MINNEAPOLIS, MINNESOTA 55416
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 612/920-4078
________________________________________
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, .01 PAR VALUE
Check whether the issuer (1) 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 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 this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $2,509,548
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock, as of a specified date within 60 days. (SEE
definition of affiliate in Rule 12b-2 of the Exchange Act): $7,100,000 AS OF
MARCH 14, 1997
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date: 1,420,000 SHARES OF COMMON
STOCK AS OF MARCH 14, 1997
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Transitional Small Business Disclosure Format (check one) Yes_____ No X
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth certain information regarding the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Office Director Since
- ---- --- ------ --------------
<S> <C> <C> <C>
Vernon R. Beck 55 President, Treasurer and Director 1988
John Parsinen 54 Vice President, Secretary and Director 1988
Orvin J. Hall 70 Director 1990
Kurt Schoenrock 64 Director 1990
Kenneth D. Wethe 55 Director 1990
Allen C. Gehrke 62 Director 1995
</TABLE>
VERNON R. BECK is Chairman of the Board of Directors of the Company. Mr.
Beck has served as President of the Company since 1988 and as President of Crown
Advisors, Inc., the Company's advisor, since its inception in 1988. Since
1976, Mr. Beck has been President of Vernon Beck & Associates, Inc. a commercial
mortgage banking and real estate development firm, which has developed and
financed numerous commercial real estate projects. Mr. Beck is a former
commercial loan officer with IDS Mortgage Corporation and senior analyst with
Northwestern National Life Insurance Company. Mr. Beck is also Vice President
of Enterprise Maintenance, LLC, a company which provides maintenance services to
commercial buildings.
JOHN PARSINEN has over 29 years of experience in commercial real estate.
Mr. Parsinen has developed and owns various real estate projects. Mr. Parsinen
has been a senior attorney at Parsinen Kaplan Levy Rosberg & Gotlieb, P.A.
(Minneapolis, Minnesota) since it was formed in 1982. Mr. Parsinen specializes
in commercial real estate and represents mortgage lenders, brokers, and
developers in all types of residential and commercial transactions. Mr.
Parsinen owns 50% of Guaranty Title, Inc., a Minneapolis-based real estate title
insurance company. Mr. Parsinen was a general partner of Earle Brown
-2-
<PAGE>
Commons Limited Partnership II, which owned and operated an elderly housing
facility in Brooklyn Center, MN. In 1994, the limited partnership initiated a
Chapter 11 bankruptcy reorganization proceeding to restructure certain tax and
debt obligations. The bankruptcy was dismissed in 1995 and the project was
sold. Mr. Parsinen is Vice President of Crown Advisors, Inc., the Company's
advisor, and also an owner of Enterprise Maintenance, LLC.
ORVIN J. HALL has over 31 years of real estate experience. Mr. Hall is now
retired from Towle Real Estate, a Minneapolis-based real estate management
company. Mr. Hall has been a real estate sales associate for several agencies
since 1980. Prior to that, Mr. Hall worked as Mortgage Branch Manager for
Investors Diversified Services, Inc. for 14 years, Mortgage Underwriter at
Northwestern National Life Insurance Company for five years and worked for five
years at Equitable Life Assurance Society of the United States. Mr. Hall is a
Member of the Appraisal Institute (MAI).
KURT SCHOENROCK has over 31 years in real estate activities. Mr.
Schoenrock is currently an officer and director of Suncoast Appraisers, a full
line real estate appraisal and consulting firm in St. Petersburg, Florida. Prior
to starting his own appraisal firm, Mr. Schoenrock, for approximately 20 years,
was the senior real estate appraiser for Aid Association for Lutherans (AAL),
the world's largest fraternal association with assets exceeding $3.5 billion.
Mr. Schoenrock is a licensed real estate broker in the State of Florida. Mr.
Schoenrock is a Member of the Appraisal Institute (MAI).
KENNETH D. WETHE is a certified public accountant (CPA). He has a master's
degree in business administration (MBA) from Pepperdine University and has over
26 years of experience in the group insurance and employee benefits area. Mr.
Wethe is a Fellow of the Life Office Management Institute. Since 1990, Mr.
Wethe has been the owner and principal officer of Wethe & Associates, a
Dallas-based firm providing independent risk management, insurance and employee
benefit services to school districts and governmental agencies. Since 1988, Mr.
Wethe also has been a consultant to Robert W. Lazarus & Associates in the area
of employee benefits.
ALLEN C. GEHRKE has over 43 years of real estate construction and
development experience. Mr. Gehrke is a private investor who retired from
Fleming Companies, Inc., in 1995 after 35 years with the company. His most
recent position with the Milwaukee division of Fleming was Senior Vice President
of Corporate Development. His responsibilities included management of all
company physical assets, market research, store design and construction, fixture
purchasing and installation, lease negotiations and real estate financing.
Prior to his employment with Fleming Companies, he was in the construction
business for 7 years with Midwest Contractors and L.A. Construction Co. of
Milwaukee. Mr. Gehrke is a former director of United Cerebral Palsy, Milwaukee
Yacht Club, and Keep Greater Milwaukee Beautiful.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORT COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers to file reports of changes in beneficial ownership of the
Company's common stock with the Securities and Exchange Commission. Based on
information provided to the Company, the Company is not aware of any executive
officer or director of the Company who failed to timely file any report required
to be filed.
ITEM 10. EXECUTIVE COMPENSATION
No individual officer of the Company was paid any cash or other
compensation for the years ended December 31, 1994, 1995 or 1996. Mr. Beck and
Mr. Parsinen each received options to purchase 2,500 shares of Common Stock from
the Company pursuant to the Company's Stock Option Plan for Directors during the
year ended December 31, 1996. The options become exercisable May 20, 1997 at an
option price of $5.625 per share. No officer of the Company has received
options or warrants to purchase securities of the Company by reason of that
person's position as an officer, and no options or warrants held by officers of
the Company were exercised, adjusted or repriced in 1994, 1995 or 1996.
CERTAIN INFORMATION REGARDING
THE BOARD OF DIRECTORS AND COMMITTEES
AUDIT COMMITTEE. The Company has a standing Audit Committee which
currently consists of Kenneth D. Wethe (Chairman) and Orvin J. Hall. The Audit
Committee reviews, recommends and reports to the board on (1) independent
auditors, (2) the quality and effectiveness of internal controls, (3) engagement
or discharge of the independent auditors, (4) professional services provided by
the independent auditors, and (5) the review and approval of major changes in
the Company's accounting principles and practices. During 1996, the Audit
Committee held one meeting.
-3-
<PAGE>
The Board presently does not have a Compensation Committee and acts as its
own Nominating Committee.
During the year ended December 31, 1996, the Board of the Company held five
regular meetings and four special meetings. No director attended fewer than 75%
of the aggregate number of meetings of the Board and the committees on which
they serve.
COMPENSATION OF DIRECTORS
DIRECTORS' FEES AND EXPENSES.
Directors who are not officers of the Company receive an annual fee of
$3,000, plus $500 for each meeting (other than telephonic Board meetings) they
attend. Directors incurring travel expenses in connection with their duties as
directors of the Company are reimbursed in full. The total directors' fees and
travel expense reimbursement in the year 1996 was approximately $18,000. Mr.
Beck and Mr. Parsinen received no fees in connection with board meetings for
1996.
AUTOMATIC OPTION GRANTS
Since 1993, the Company has maintained a Stock Option Plan for Directors.
A total of 75,000 shares of the Company's common stock are reserved for issuance
under this plan. Each director of the Company is eligible to participate in the
plan. The plan provides that each director will receive, upon initial election
or appointment, an option to purchase 2,500 shares of the Company's common stock
at the then fair market value of the common stock. The plan also provides for
the grant of an option to purchase an additional 2,500 shares of the Company's
common stock upon each director's re-election to the Board. The options become
exercisable in full one year after date of grant and expire ten years from the
date of grant.
The following table sets forth outstanding options granted to officers and
directors of the Company under the Stock Option Plan for Directors:
EXERCISE
NUMBER OF VESTING PRICE EXPIRATION
NAME SECURITIES DATE PER SHARE DATE
---- ---------- ------- --------- ----------
Vernon R. Beck 2,500 5-24-94 $9.50 5-24-03
2,500 5-16-95 9.87 5-16-04
2,500 5-15-96 5.38 5-15-05
2,500 5-20-97 5.63 5-20-06
John Parsinen 2,500 5-24-94 9.50 5-24-03
2,500 5-16-95 9.87 5-16-04
2,500 5-15-96 5.38 5-15-05
2,500 5-20-97 5.63 5-20-06
Kenneth D. Wethe 2,500 5-24-94 9.50 5-24-03
2,500 5-16-95 9.87 5-16-04
2,500 5-15-96 5.38 5-15-05
2,500 5-20-97 5.63 5-20-06
-4-
<PAGE>
Orvin J. Hall 2,500 5-24-94 9.50 5-24-03
2,500 5-16-95 9.87 5-16-04
2,500 5-15-96 5.38 5-15-05
2,500 5-20-97 5.63 5-20-06
Kurt Schoenrock 2,500 5-24-94 9.50 5-24-03
2,500 5-16-95 9.87 5-16-04
2,500 5-15-96 5.38 5-15-05
2,500 5-20-97 5.63 5-20-06
Allen C. Gehrke 2,500 5-15-96 5.38 5-15-05
2,500 5-20-97 5.63 5-20-06
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 31, 1997,
relating to the number of shares of Common Stock beneficially owned by each
director and by all executive officers and directors as a group. The Company is
not aware of any beneficial owner of more than five percent (5%) of the
outstanding shares of the Company's common stock.
SHARES OF COMMON STOCK
-5-
<PAGE>
BENEFICIALLY OWNED
-----------------------------
DIRECTORS AND OFFICERS NUMBER(1) PERCENT
---------------------- --------- -------
Vernon R. Beck 23,116 (2)(3) 1.6%
John Parsinen 20,687 (2)(3) 1.5%
Orvin J. Hall 7,500 (3)(4) *
Kurt Schoenrock 7,606 (3)(4) *
Kenneth D. Wethe 7,724 (3)(4) *
Allen C. Gehrke 2,750 (3)(5) *
All executives, officers and
directors as a group
(seven individuals) 69,726 (6) 4.9%
- ---------------------
* Less than one percent (1%)
(1) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to such shares.
(2) Includes fifty percent of the 26,374 shares of Common Stock owned by Crown
Advisors, Inc., the Company's Advisor, which is owned equally by Messrs.
Beck and Parsinen. See "Certain Transactions and Related Transactions."
(3) Does not include 2,500 shares of Common Stock issuable upon exercise of
options granted in 1996 under the Company's Stock Option Plan for Directors
as they are not presently exercisable.
(4) Includes 7,500 shares of common stock issuable upon exercise of presently
exercisable options.
(5) Includes 2,500 shares of common stock issuable upon exercise of presently
exercisable options.
(6) Includes 40,000 shares of common stock issuable upon exercise of presently
exercisable options.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective December 23, 1991, the Company issued five-year warrants to each
of Vernon R. Beck, John Parsinen, Orvin J. Hall, Kurt Schoenrock and Kenneth D.
Wethe to purchase 10,000, 10,000, 2,500, 2,500 and 2,500 shares of Common Stock,
respectively, at a purchase price of $10 per share. These warrants expired on
December 23, 1996. Options to purchase 2,500 shares of Common Stock were also
granted to the Company's directors in 1993, 1994, 1995 and 1996 under the
Company's Stock Option Plan for Directors.
-6-
<PAGE>
These options expire ten years after their issue date. See the table under
"CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES".
Subject to the supervision of the Company's Board of Directors, the
business of the Company is managed by the Advisor, which provides investment
advisory and administrative services to the Company. The Advisor is owned by
John Parsinen and Vernon R. Beck, officers and directors of the Company. As of
March 31, 1997, the Advisor employed three persons on a full-time basis.
Pursuant to an advisory agreement, the Company must pay the Advisor certain
advisory fees, expenses and performance fees, as defined in the agreement and a
3% fee for each real estate acquisition or disposition. For each of the years
ended December 31, 1996 and 1995, the advisory fee was $250,000. For the year
ended December 31, 1994, the advisory fee was $240,000 and the acquisition fee
was $271,000. There have been no performance fees in any of the above years.
Upon termination of the advisory agreement, the Company must pay a fee
equal to 3% of the invested real estate assets plus 25% of the increase in value
of invested real estate assets from the date of acquisition to the date of
termination.
Parsinen Kaplan Levy Rosberg & Gotlieb, P.A. was compensated for legal
services provided to the Company in connection with the 1991 initial public
offering of its Common Stock and the acquisition of the Company's properties in
1992, 1993 and 1994. The firm continues to provide legal services to the
Company, and incurred legal fees of $9,000 in 1996 and $0 in 1995. John
Parsinen is an officer, director and shareholder of Parsinen Kaplan Levy Rosberg
& Gotlieb, P.A.
See also Item 10.
-7-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 16, 1997 ROYALE INVESTMENTS, INC.
By: /s/ Vernon R. Beck
------------------------------
Vernon R. Beck
President and
Chief Executive Officer
