SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT of 1934
For the Fiscal Year Ended May 31, 1996
Commission File Number 33-67536-A
FEDERAL AFFORDABLE HOUSING CORPORATION
(Name of Small Business Issuer in its charter)
Minnesota 59-3169033
State of Incorporation IRS Employer Identification No.
1616 Gulf-to-Bay Boulevard
Clearwater, Florida 34615
TELEPHONE NUMBER: (813) 446-7981
Securities Registered Under Section 12(b) of the Exchange Act: None
Securities Registered Under Section 12(g) of the Exchange Act: None
Securities Subject to Section 15(d) of the Exchange Act:
Common Stock, no par value
Investor's Stock Purchase Warrants
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 (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 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. [ X ]
State issuer's revenues for its most recent fiscal year: $15,746.
The aggregate market value of the voting stock (assumed to be 74,500 shares)
held by nonaffiliates of Registrant (computed by reference to recent bid and
asked prices of $7.00 and $8.00, respectively) was approximately $558,750.
As of September 16, 1996, there were 164,500 shares of Common Stock outstanding
and 74,500 Investor's Stock Purchase Warrants outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Registrant's Final Prospectus, dated March 10, 1995, (filed under Rule
424(b) of the 1933 Act), incorporated by reference into Part 1 of this Annual
Report.
2. Registrant's Registration Statement on Form SB-2 (File No. 33-67536-A),
effective March 10, 1995.
Transitional Small Business Disclosure Form: Yes x No
INFORMATION REQUIRED IN ANNUAL REPORT OF TRANSITIONAL SMALL BUSINESS
ISSUERS.
PART I
[Alternative 2 - Items 6-11 of Model B of Form 1-A]
ITEM 6. DESCRIPTION OF BUSINESS
FEDERAL AFFORDABLE HOUSING CORPORATION (called the "Registrant" in
this document) is engaged in one industry segment, the development and marketing
of affordable housing in the Tampa Bay, Florida market. The Registrant's
executive offices are located at 1616 Gulf-to-Bay Boulevard, Clearwater, Florida
34615, and its telephone number is: (913) 446-7981.
The balance of the discussion of this item is contained under the
captions "Business" and "Plan of Operations" on pages 17 through 29, inclusive,
of the Registrant's Final Prospectus, dated March 10, 1995, which is
incorporated by reference.
ITEM 7. DESCRIPTION OF PROPERTY
This Item is contained under the captions "Business - Proposed
Developments" and "Option to Purchase Additional Lots," on pages 18 through 23,
inclusive, and pages 25-26, respectively, of the Registrant's Final Prospectus,
dated March 10, 1995, which is incorporated by reference.
ITEM 8. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
Reference is made to the material under the captions "Promoters" and
"Management," contained on pages 31 through 33, inclusive, of the Registrant's
Final Prospectus, dated March 10, 1995, which is incorporated by reference.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS
(a) Renumeration for Fiscal Year 1996
The following table shows, for the fiscal year ended May 31, 1996,
the aggregate annual renumeration of each of the Registrant's two officers and
directors:
Name Capacity Aggregate Renumeration
Richard E. Metz President, CEO $12,000
Wayne A. Weyrauch Vice President, CFO 12,000
Total $24,000
(b) Future renumeration pursuant to a Plan
The executive officers of the Registrant receive a monthly management
fee equal to 10% of the Company's gross sales. From that amount, management is
obligated to pay all real estate commissions, some of which may be received by
management. Management will, in the aggregate, receive an advance of $3,000
per month for up to 9 months, which will be offset against future management
fees. Such advance was paid in fiscal year 1996 with respect to four months.
See Business "Compensation to Affiliates" in the Registrant's
Prospectus, dated March 10, 1995, which is incorporated by reference, for a
discussion of compensation payments to be made to the Company's management in
the future. See also "Business-Option to Purchase Additional Lots" for a
discussion of certain transactions which might be construed as benefitting the
Registrant's managment.
ITEM 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY
HOLDERS
This material is contained under the caption "Principal Shareholders"
on pages 36 and 37 of the Registrant's Final Prospectus, dated March 10, 1995,
which is incorporated by reference. The information provided in such location
remained accurate at May 31, 1996, the Registrant's fiscal year end.
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS
This material is contained under the caption "Certain Transactions" on
page 30 of the Registrant's Final Prospectus, dated March 10, 1995, which is
incorporated by reference.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
(a) Market Information
At fiscal year-end, the Registrant's units were listed on the NASDAQ
"Bulletin Board" system.
The range of high and low bid prices for the Registrant's units for
each quarter within the last fiscal year is as follows:
Fiscal Year 1996
Fiscal Quarter High Bid Low Bid
First 7 1/4 7.0
Second 7 7.0
Third 7 7.0
Fourth 7 7.0
This information was obtained by the Registrant from data available
on the NASDAQ OTC Bulletin Board. The Registrant's units (consisting of one
share of Common Stock and one warrant to purchase one share of Common Stock)
have not yet been split into their constituent parts for trading purposes.
The quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions.
(b) Holders
There were 11 registered holders of the Registrant's common equity as
of September 27, 1996.
(c) Dividends
The Registrant has never paid dividends on its common equity and does
not expect to do so for the foreseeable future.
ITEM 2 LEGAL PROCEEDINGS
The Registrant is not presently a party to any legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Not applicable.
ITEM 6. REPORTS ON FORM 8-K
Not applicable.
PART F/S
The following financial statements of the Registrant appear at the end of
this report:
Balance Sheet--May 31, 1996.
Statement of Operations and Retained Earnings --Year Ended May 31,
1996.
Statement of Stockholders' Equity--Year Ended May 31, 1996.
Statement of Cash Flows--Year Ended May 31, 1996.
Notes to Financial Statements.
PART III
ITEM 1. INDEX TO EXHIBITS.
All of the items below are incorporated by reference to the
Registrant's Registration Statement on Form SB-2, File No. 33-67536-A, effective
March 10, 1995. Page Number in
Sequential
Numbering
Number Description System
2.1 Articles of Incorporation of the Registrant.
(Exhibit 3.A. of Form SB-2)
2.2 By-Laws of the Registrant
(Exhibit 3.B. of Form SB-2)
3.1 Form of Common Stock Certificate
(Exhibit 4.A. of Form SB-2)
3.2 Form of Investor's Stock Purchase Warrant Certificate
(Exhibit 4.B. of Form SB-2)
6.1 Option Agreement between Registrant, RemProp, Inc.,
and Key Management, Inc.
(Exhibit 10.A. of Form SB-2)
6.2 First Amendment to Option Agreement
(Exhibit 10.B. of Form SB-2)
6.3 Second Amendment to Option Agreement
(Exhibit 10.C. of Form SB-2)
6.4 Lease Agreement between Registrant and RemProp, Inc.
(Exhibit 10.D. of Form SB-2)
12.1 Registrant's Registration Statement on Form SB-2, as
amended.
12.2 Registrant's Final Prospectus, dated March 10, 1995,
filed under Rule 424(b) of the 1933 Act.
ITEM 2. DESCRIPTION OF EXHIBITS.
The index to exhibits was prepared with reference to items 2, 3, 5,
6 and 7 of Item 2 of Part III of Form 1-A (as required by Item 2 of Part III of
this Form 10-KSB).
Supplemental information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Exchange Act By Non-reporting Issuers
As of the date hereof, the Registrant has not prepared nor sent to any of
its security holders any of the following:
1. Any annual report to security holders covering the Registrant's last
fiscal year; and
2. Any proxy statement, form of proxy or other proxy soliciting material
with respect to any annual or other meeting of security holders.
If the Registrant decides to prepare and furnish any of such report or
proxy material to security holders subsequent to the filing of the annual
report on this Form, the Registrant shall furnish copies of such material to
the Commission when it is sent to security holders.
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.
FEDERAL AFFORDABLE HOUSING CORPORATION
September 30, 1996
By: /s/ Richard E. Metz
Richard E. Metz, President, CEO
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Name Title/Capacity Date
/s/ Richard E. Metz President, Chief Executive Officer, September 30, 1996
Richard E. Metz Director, (Principal Executive
Officer)
/s/ Wayne A. Weyrauch Vice President of Finance, September 30, 1996
Wayne A. Weyrauch Chief Financial Officer, Secretary
(Principal Financial Officer,
Principal Accounting Officer)
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.
FEDERAL AFFORDABLE HOUSING CORPORATION
September 30, 1996
By: /s/ Richard E. Metz
Richard E. Metz, President, CEO
In accordance with the Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Name Title/Capacity Date
/s/ Richard E. Metz President, Chief Executive Officer, September 30, 1996
Richard E. Metz Director, (Principal Executive
Officer)
/s/ Wayne A. Weyrauch Vice President of Finance, September 30, 1996
Wayne A. Weyrauch Chief Financial Officer, Secretary
(Principal Financial Officer,
Principal Accounting Officer)
TABLE OF CONTENTS
ACCOUNTANT'S REPORT PAGE 1
BALANCE SHEET EXHIBIT A
STATEMENT OF OPERATIONS
AND RETAINED EARNINGS EXHIBIT B
STATEMENT OF STOCKHOLDERS' EQUITY EXHIBIT C
STATEMENT OF CASH FLOWS EXHIBIT D
NOTES TO FINANCIAL STATEMENTS EXHIBIT E
J. MICHAEL DAILY & ASSOCIATES
Certified Public Accountants
1822 Drew Street . Suite 1
Clearwater, Florida 34625
(813) 447-6860
FAX 441-1840
Members
American Institute
of Certified Public
Accountants
J.Michael Daily, CPA
Phillip D. Pidgeon, CPA Florida Institute
of Certified Public
Accountants
September 1, 1996
Page 1
Board of Directors
Federal Affordable Housing Corporation
1616 Gulf-to-Bay Blvd.
Clearwater, Florida 34615
Gentlemen:
We have audited the accompanying balance sheet of Federal Affordable Housing
Corporation as of May 31, 1996 and the related statement of operations and
retained earnings, and cash flows for the fiscal year then ended. 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 audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Federal Affordable Housing
Corporation as of May 31, 1996, and the results of its operations and its cash
flows for the fiscal year then ended in conformity with generally accepted
accounting principles.
J. MICHAEL DAILY & ASSOCIATES, C.P.A.'S
Exhibit A
FEDERAL AFFORDABLE HOUSING CORPORATION
CLEARWATER, FLORIDA
BALANCE SHEET
MAY 31, 1996
ASSETS
CURRENT ASSETS:
Operating Cash in Bank $ 1,219
Certificate of Deposit, SUNTRUST 300,000
Due From Suncoast Food 35,849
Construction in Process:
Land Costs / Site Development 224,669
Houses 2,635 227,304
TOTAL CURRENT ASSETS 564,372
OTHER ASSETS:
Incorporation fees, legal expenses and
registrations statement costs - Unamortized 68,520
Utility Deposits 455
TOTAL OTHER ASSETS 68,975
TOTAL ASSETS 633,347
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Commercial loan payable, SUNTRUST 186,074
Note payable, R. Metz, demand, bearing
interest at 7% 8,931
TOTAL CURRENT LIABILITIES 195,005
STOCKHOLDERS EQUITY:
Common Stock, No par value, 5,000,000
Shares authorized, 166,500 shares issued
and outstanding 486,887
Retained earnings (Deficit) (48,545)
TOTAL STOCKHOLDERS' EQUITY 438,342
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 633,347
The accompanying notes are an integral part of these statements
Exhibit B
FEDERAL AFFORDABLE HOUSING CORPORATION
CLEARWATER, FLORIDA
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE FISCAL YEAR ENDED MAY 31, 1996
INCOME:
Interest Earned $ 15,746
EXPENSES:
Advertising 67
Amortization 17,130
Bank Charges 138
Dues & Subscriptions 300
Escrow Fees 814
Interest Expense 3,764
Legal & Accounting 1,710
Management Fees 24,000
Office Expense 716
Rent 5,315
Taxes & Licenses 7,103
Telephone 1,269
Utilities 1,734
Total Expenses 64,060
NET (LOSS) (48,314)
RETAINED EARNINGS, MAY 31, 1995 (Deficit) ( 231)
RETAINED EARNINGS, MAY 31, 1996 (Deficit) $ (48,545)
The accompanying notes are an integral part of these statements
Exhibit C
FEDERAL AFFORDABLE HOUSING CORPORATION
CLEARWATER, FLORIDA
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE FISCAL YEAR ENDED MAY 31, 1996
Initial offering of 90,000 shares of common stock on April 27, 1993
to purchase a parcel of Real Estate consisting of 12 lots at a cost of
4,876 per lot. The basis for assigning amount to common stock is the cost
basis of the land to the related selling company, RemProp, Inc.$ 58,512
On June 6, 1995, the Company received net proceeds of $359,336 from a
public offering of 74,500 units. Each unit consists of one share of
common stock and are warrant to purchase common stock.
Each unit was sold for $5.75 each. 428,375
NET (LOSS) FROM OPERATIONS (48,314)
DEFICIT ACCUMULATED DURING THE DEVELOPMENT
STAGE (BEGINNING) (231)
TOTAL STOCKHOLDERS' EQUITY - MAY 31, 1996 $ 438,342
The accompanying notes are an integral part of these statements
Exhibit D
FEDERAL AFFORDABLE HOUSING CORPORATION
CLEARWATER, FLORIDA
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED MAY 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (48,314)
Adjustments needed to reconcile
Net (loss) to cash provided by
operating activities.
Amortization of fees and costs 17,130
Changes in Assets:
Net increase in loans,
construction in process, fees
and costs, and deposits. (282,253)
NET CASH USED IN OPERATING ACTIVITIES (313,437)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from issuance of Capital Stock 428,375
Addition to Certificate of Deposit (300,000)
NET CASH PROVIDED BY INVESTING ACTIVITIES 128,375
CASH FLOWS FROM FINANCING ACTIVITY:
Net Proceeds from borrowings 186,074
NET INCREASE IN CASH 1,012
CASH, May 31, 1995 207
CASH, MAY 31, 1996 $ 1,219
The accompanying notes are an integral part of these statement
Exhibit E
FEDERAL AFFORDABLE HOUSING CORPORATION
CLEARWATER, FLORIDA
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996
Note A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Federal Affordable
Housing Corporation is presented to assist in understanding the company's
financial statements. The financial statements and notes are
representations of the company's management who is responsible for their
integrity and objectivity. These accounting policies conform to
generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
BUSINESS ACTIVITY
The company is in the business of developing land for the purpose of
building and selling residential housing.
CONSTRUCTION IN PROCESS
Costs of construction for land and houses are accumulated as the costs
are expended. These are short-term contracts, and income will be
recorded on the completed-contract method of accounting.
AMORTIZATION OF INCORPORATION AND LEGAL FEES
Cost of incorporation and start-up legal fees will be amortized over 5 years
on a straight-line basis. Amortization Expense for the year ended
May 31, 1996 is $ 17,130.
Note B - DUE FROM SUNCOAST FOOD
Federal Affordable Housing Corporation has made short-term loans to
Suncoast Food Services, Inc., secured by a promissory note dated March
15, 1996. This note has a maturity date of March 31, 1997. The
principal amount of the note may rise to $50,000, with interest due at
maturity at the higher of 2% of gross sales or 20% per annum. The note is
personally guaranteed by the Stockholders' of Suncoast Food Services,
Inc. Suncoast Food Services,Inc. is owned 50% by Richard E. Metz, and
50% by Wayne A. Weyrauch. (See Note E).
Note C - CERTIFICATE OF DEPOSIT AND COMMERCIAL LOAN - SUNTRUST BANK
The Company purchased a certificate of deposit in the amount of $ 300,000 on
July 18, 1995. It has a term of 12 months, and bears interest at a rate
of 5.100 %. This certificate of deposit has been pledged as
collateralfor a revolving line of credit, with a maximum draw down of
$ 300,000. This credit line is due on June 27, 1996. Interest is paid
monthly at a rate of 6.625 %. No principal payments are due during the
term of this loan. The current note balance as of May 31, 1996 is
$ 186,074.
Note D - CONSTRUCTION IN PROCESS
Land (five lots) to be used for building of residential housing was
acquired on April 27, 1993 from RemProp, Inc., a Florida corporation. The
consideration given for the land was 90,000 shares of no-par value stock
issued to RemProp, Inc. Also included was an option to purchase 81
additional lots located in Zephyrhills, Florida and Dade City, Florida.
Subsequent to the acquisition of the 5 lots, and the option for 81
additional lots, the company acquired an additional 7 lots.
Consequently 74 lots remain available for purchase by the company
pursuant to the option agreement as of October 31, 1994. The company
has a commitment to remit $12,000 to RemProp, Inc. upon the sale of each
lot. The method for determining the valuation of the 58,512 for the 12
lots is based on lot cost of 4,876 per lot to RemProp, Inc., a related
company (See Note C). Additional costs of construction for site
development and homes have also been incurred.
Note E - RELATED PARTY TRANSACTIONS
RemProp, Inc. is a related party to the company. After the purchase of
the 5 lots, (Note B) on April 27, 1993 the only shareholder of the
company was RemProp, Inc., whose sole shareholder is Richard E. Metz,
President, Secretary and C.E.O. of Federal Affordable Housing Corp. On
or about September 1, 1993 RemProp , Inc. transferred 45,000 shares to
Key Management, Inc., whose sole shareholder is Wayne A. Weyrauch, Vice
President,Treasurer, and C.F.O. of Federal Affordable Housing Corp.
Subsequent to this transfer the other 7 lots were acquired.
Richard Metz has loaned $8,931 to the company on a Demand Note, bearing
interest at 7%. No other related party transactions have occurred.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE
(PURSUANT TO RULE 601(C) OF REGULATION S-B,
APPENDIX A/ARTICLE 5 OF S-X)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FEDERAL AFFORDABLE HOUSING CORPORATION AS OF AND FOR
THE YEAR ENDED MAY 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 301,219
<SECURITIES> 0
<RECEIVABLES> 35,849
<ALLOWANCES> 0
<INVENTORY> 227,304
<CURRENT-ASSETS> 564,372
<PP&E> 68,975
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<TOTAL-ASSETS> 633,347
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<COMMON> 486,887
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