U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended August 31, 1997
FEDERAL AFFORDABLE HOUSING CORPORATION
--------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Minnesota 59-3169033
--------- ----------
(state or other Jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1616 Gulf-to-Bay Boulevard Clearwater, Florida 34615
- ---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (727) 446-7981
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 [ ] No [ X ]
As of August 31, 1997, there were 164,500 shares of Common Stock outstanding and
7,450 Investor's Stock Purchase Warrants outstanding.
Transitional Small Business Disclosure Format: Yes [X] No [ ]
INFORMATION REQUIRED IN QUARTERLY REPORT OF TRANSITIONAL SMALL BUSINESS ISSUERS.
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The information required by Item 310(b) of Regulation S-B is attached.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
[The Registrant is a transitional small business issuer which relied upon
Alternative 2 under "Information Required in Annual Report of Transitional Small
Business Issuers" in its most recent 10-KSB, and accordingly, chooses here to
update the response to Item 6(a) (3) (i) to Model B of Form 1-A. ]
The Company completed its public offering on June 6, 1995 and received net
proceeds of $359,336.
The Company's plan of operation for the 12 month period ended May 31, 1998 calls
for continued development of infrastructure scaled according to the net proceeds
of its offering and aggressive marketing. Management believes that the balance
remaining of its net proceeds of $359,336 from its offering is sufficient to
carry out its plan of operation for the twelve months through May 31, 1998,
without revenues from operations.
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<PAGE>
The Company anticipates that its major expense during the twelve month period
ending May 31, 1998 will be infrastructure development. Upon completion of
infrastructure development, the company anticipates that its only expenses will
be executive compensation, real estate taxes, general corporate purposes
(including marketing and sales) and perhaps model home construction. In
addition, the Company plans to limit additional property acquisitions and
infrastructure development until purchase agreements have been executed for
approximately half of the developed lots. The Company believes that its plan of
scaled infrastructure development and limitation on acquisition and development
will enable it to operate with the net proceeds of its public offering, without
revenues from operations, for the twelve month period ending May 31, 1998.
The Company anticipates that it will hire additional commissioned sales persons
prior to June, 1998. However, such sales persons will be paid only on a straight
commission basis and will be entitled to payment only upon revenue generation.
Accordingly, the Company does not expect that hiring such commissioned sales
persons will have a significant impact on the Company's ability to operate
without revenues from operations.
The company does not intend to conduct any product research or development or to
purchase or sell any plant or equipment prior to June, 1998.
Information concerning the comparable interim period for the preceding year is
not included.
PART II.
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See the Indexes to Exhibits, below.
(b) Reports on Form 8-K. Not Applicable.
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, except for Item 27.1, which is included with this filing.
Number Description
4.1 Form of Common Stock Certificate
(Exhibit 4.A of Form SB-2)
4.2 Form of Investor's Stock Purchase Warrant Certificate
(Exhibit 4.B of Form SB-2)
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10.1 Option Agreement between Registrant, RemProp, Inc. and
Key Management, Inc.
(Exhibit 10.A. of Form SB-2)
10.2 First Amendment to Option Agreement
(Exhibit 10.B. to Form SB-2)
10.3 Second Amendment to Option Agreement
(Exhibit 10.C. to Form SB-2)
10.4 Lease Agreement between Registrant and RemProp, Inc.
(Exhibit 10.D. to Form SB-2)
27.1 Financial Data Schedule*
99.1 Registrant's Registration Statement on Form SB-2, as
amended.
99.2 Registrant's Final Prospectus, dated March 10, 1995,
filed under Rule 424(b) of the 1933 Act.
* Included with this report. All other items are incorporated by reference to
the Registrant's Form SB-2, File No. 33-67536-A, effective March 10, 1995.
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.
FEDERAL AFFORDABLE HOUSING CORPORATION
Date: December 15, 1997
By: /s/ Richard E. Metz
------------------------------------
Richard E. Metz, President, CEO
By: /s/ Wayne A. Weyrauch
------------------------------------
Wayne A. Weyrauch
Vice President of Finance, CFO
(Principal Financial officer,
Principal Accounting officer)
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<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
TABLE OF CONTENTS
PAGE
-------
ACCOUNTANT'S REPORT PAGE 5
BALANCE SHEETS 6
STATEMENTS OF OPERATIONS 7
STATEMENTS OF CASH FLOWS 8
4
<PAGE>
J. MICHAEL DAILY & ASSOCIATES
Certified Public Accountants
1822 Drew Street, Suite 1
Clearwater, Florida 34625
727-447-6860
Fax 727-441-1840
Members
American Institute
of Certified Public
Accountants
Florida Institute
of Certified Public
Accountants
January 16, 1998
Board of Directors
Federal Affordable Housing Corporation
1616 Gulf-to-Bay Blvd.
Clearwater, Florida 34615
Gentlemen:
We have compiled the accompanying balance sheet of FEDERAL AFFORDABLE HOUSING as
of August 31, 1997, and the related statement of revenues and expenses for the
three months then ended, and the comparative statement of income for the three
months ended August 31, 1997 and 1996, and the statement of cash flows for the
three months then ended in accordance with Statements on Standards for
Accounting and Review services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the disclosures were included in
the financial statements, they might influence the user's conclusions about the
Company's financial position, results of operations and cash flows. Accordingly,
these financial statements are not designed for those who are not informed about
such matters.
/s/ J. Michael Daily
- -------------------------------
J. Michael Daily, CPA
Clearwater, Florida
January 16,1998
5
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
Balance Sheets
Assets
<TABLE>
<CAPTION>
August 31, May 31,
1997 1997
------------------ ------------------
<S> <C> <C>
Current assets
Operating cash in bank $ 1,449 $ 3,845
Certificate of deposit, Suntrust 300,000 300,000
Due from Suncoast Food Services, Inc. 67,271 67,271
Construction in process:
Land costs/site development 237,964 237,964
Houses 146,604 146,604
------------------ ------------------
Total current assets 753,288 755,684
------------------ ------------------
Other assets
Incorporation fees, legal expenses and registration
statement costs - unamortized 51,390 51,390
Utility deposits 424 424
------------------ ------------------
51,814 51,814
------------------ ------------------
Total assets 805,102 807,498
================== ==================
Liabilities and Stockholders' Equity
Current liabilities
Due to RemProp, Inc. 19,509 19,509
Commercial loan payable, SunTrust 281,895 281,074
Construction Loans, SunTrust houses 95,400 95,400
Note payable, R. Metz, demand, bearing interest at 7% 8,931 8,931
------------------ ------------------
Total current liabilities 405,735 404,914
------------------ ------------------
Stockholders' equity
Common stock, no par value
Authorized 5,000,000 shares,
164,500 issued and outstanding 486,887 486,887
Accumulated deficit (87,521) (84,303)
------------------ ------------------
Total stockholders' equity 399,367 402,584
------------------ ------------------
Total liabilities and stockholders' equity $ 805,102 $ 807,498
================== ==================
</TABLE>
6
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended
August 31,
-----------------------------------
1997 1996
--------------- -------------
<S> <C> <C>
Income
Interest Earned $ - $ -
Selling, general and administrative
expenses 3,218 8,825
--------------- -------------
Net loss $ (3,218) $ (8,825)
=============== =============
Basic loss per common share $ (0.02) $ (0.05)
=============== =============
Weighted average number of
common shares outstanding 164,500 164,500
=============== =============
</TABLE>
7
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Three Months Ended
August 31,
----------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Reconciliation of net loss to net cash
used in operating activities
Net loss $ (3,218) $ (8,825)
Adjustments to reconcile net loss to net
cash used in operating activities
Amortization of fees and costs
Changes in assets and liabilities
Net decrease in intercompany loans,
Construction in process, fees
and costs, and deposits (41,086)
--------------- ---------------
(3,218) (49,911)
--------------- ---------------
Cash flows from investing activities
Addition to certificate of deposit - -
--------------- ---------------
Net cash used in investing activities - -
--------------- ---------------
Cash flows from financing activities
Proceeds from issuance of common stock - -
Proceeds from issuance of notes payable 821 50,000
--------------- ---------------
Net cash provided by financing activities 821 50,000
--------------- ---------------
Net increase (decrease) in cash (2,396) 89
Cash beginning 3,845 1,219
--------------- ---------------
Cash ending $ 1,449 $ 1,308
=============== ===============
</TABLE>
8
FEDERAL AFFORDABLE HOUSING CORPORATION
Computation of Loss Per Common Share
For the Three Months Ended
August 31,
--------------------------
1997 1996
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Shares outstanding: 164,500 164,500
Weighted average shares outstanding 164,500 164,500
Net loss $ (3,218) $ (8,825)
Net loss per common share $ (0.02) $ (0.05)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAY-31-1997
<PERIOD-END> AUG-31-1997
<CASH> 301,449
<SECURITIES> 0
<RECEIVABLES> 67,271
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 753,288
<PP&E> 384,568
<DEPRECIATION> 0
<TOTAL-ASSETS> 805,102
<CURRENT-LIABILITIES> 405,735
<BONDS> 0
0
0
<COMMON> 486,887
<OTHER-SE> (87,521)
<TOTAL-LIABILITY-AND-EQUITY> 805,102
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,218)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,218)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,218)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
