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 November 30, 1998
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 January 28, 1999, there were 493,500 shares of Common Stock outstanding
and 74,500 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, 1999 calls
for continued development of infrastructure and aggressive marketing. Management
believes that the Company has sufficient capital to carry out its plan of
operation for the twelve months through May 31, 1999. In the year ended May 31,
1998, the Company generated $481,400 in revenues from its operations which
provided the company additional working capital for the continued development of
its business.
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The Company anticipates that its major expense during the twelve month period
ending May 31, 1999 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 does not intend to conduct any product research or development or to
purchase or sell any plant or equipment prior to June, 1998.
PART II.
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
On December 23, 1997, the shareholders voted in favor of a
three-for-one forward stock split and to increase the authorized stock of the
Company to twenty million (20,000,000) shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
A special meeting of shareholders was held on December 23, 1997 to
consider a number of initiatives. The shareholders voted in favor of a
three-for-one forward stock split; to increase the authorized stock of the
Company to twenty million (20,000,000) shares; and to permit the officers and
directors to explore a possible merger.
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: January 28, 1999
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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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
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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 28, 1999
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 November 30, 1998, and the related statement of revenues and expenses for the
three months and six months then ended, and the comparative statement of income
for the three months and six months ended November 30, 1998 and 1997, and the
statement of cash flows for the three months and six 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 28, 1999
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FEDERAL AFFORDABLE HOUSING CORPORATION
Balance Sheets
Assets
<TABLE>
<CAPTION>
November 30, May 31,
1998 1998
------------------- ------------------
<S> <C> <C>
Current assets
Operating cash in bank $ 53,313 $ 68,214
Due from Suncoast Food 4,098
Construction in process:
Land costs/site development 7,273 7,273
------------------- ------------------
Total current assets 64,683 75,487
------------------- ------------------
Other assets
Incorporation fees, legal expenses and registration
statement costs 34,260 34,260
Utility deposits 424 424
Mortgage receivables 242,663 241,475
------------------- ------------------
277,347 276,159
------------------- ------------------
Total assets 342,030 351,646
=================== ==================
Liabilities and Stockholders' Equity
Current liabilities
Due to RemProp, Inc. 13,198 24,713
Due to Key Management 18,632 18,632
Commercial loan payable, SunTrust - -
Construction Loans, SunTrust houses - -
Note payable, R. Metz, demand, bearing interest at 7% 7,943 7,943
------------------- ------------------
Total current liabilities 39,774 51,288
------------------- ------------------
Stockholders' equity
Common stock, no par value
Authorized 20,000,000 shares,
493,500 issued and outstanding 486,887 486,887
Accumulated deficit (184,631) (186,529)
------------------- ------------------
Total stockholders' equity 302,256 300,358
------------------- ------------------
Total liabilities and stockholders' equity $ 342,030 $ 351,646
=================== ==================
</TABLE>
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<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
November 30, November 30,
---------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Income
Sales - homes $ - $ 79,900 $ - $ 79,900
Less cost of sales
Cost of sales - homes - 65,215 - 65,215
--------------- ------------- ------------- --------------
Gross profit - 14,685 - 14,685
Selling, general and administrative
expenses 4,506 4,555 9,290 7,773
--------------- ------------- ------------- --------------
Loss from operations (4,506) 10,130 (9,290) 6,912
Other income
Interest income 4,430 - 8,960 -
Other income - - 2,229 -
--------------- ------------- ------------- --------------
Total other income 4,430 - 11,189 -
Net income (loss) $ (76) $ 10,130 $ 1,899 $ 6,912
=============== ============= ============= ==============
Basic loss per common share $ (0.00) $ 0.02 $ 0.004 $ 0.01
=============== ============= ============= ==============
Weighted average number of
common shares outstanding 493,500 493,500 493,500 493,500
=============== ============= ============= ==============
</TABLE>
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FEDERAL AFFORDABLE HOUSING CORPORATION
Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
November 30, November 30,
------------------------------- ------------------------------
1998 1997 1998 1997
-------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Reconciliation of net income (loss) to net cash
used in operating activities
Net income (loss) $ (76) $ 10,130 $ 1,899 $ 6,912
Adjustments to reconcile net loss to net
cash used in operating activities
Changes in assets and liabilities
Net decrease in intercompany loans,
Construction in process, fees
and costs, and deposits (15,612) 38,425 (15,612) 38,426
-------------- -------------- --------------- ------------
Net cash used in operating activities (15,688) 48,555 (13,713) 45,338
-------------- -------------- --------------- ------------
Increase in notes receivable (1,188) (19,975) (1,188) (19,975)
-------------- -------------- --------------- ------------
Net cash used in investing activities (1,188) (19,975) (1,188) (19,975)
-------------- -------------- --------------- ------------
- 3,000 - 3,821
- (31,800) - (31,800)
-------------- -------------- --------------- ------------
Net cash provided by financing activities - (28,800) - (27,979)
-------------- -------------- --------------- ------------
Net increase (decrease) in cash (16,876) (220) (14,901) (2,616)
70,189 1,449 68,214 3,845
-------------- -------------- --------------- ------------
$ 53,313 $ 1,229 $ 53,313 $ 1,229
============== ============== =============== ============
</TABLE>
FEDERAL AFFORDABLE HOUSING CORPORATION
Computation of Earnings (Loss) Per Common Share
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
November 30, November 30,
------------------------------------- ------------------------------------
1998 1997 1998 1997
---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares outstanding: 493,500 493,500 493,500 493,500
Weighted average shares outstanding 493,500 493,500 493,500 493,500
Net income (loss) $ (76) $ 10,130 $ 1,899 $ 6,912
Net income (loss) per common share $ (0.00) $ 0.02 $ 0.004 $ 0.01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> MAY-31-1998
<PERIOD-END> NOV-30-1998
<CASH> 53,313
<SECURITIES> 0
<RECEIVABLES> 246,761
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 64,683
<PP&E> 7,273
<DEPRECIATION> 0
<TOTAL-ASSETS> 342,030
<CURRENT-LIABILITIES> 39,774
<BONDS> 0
0
0
<COMMON> 486,887
<OTHER-SE> (184,631)
<TOTAL-LIABILITY-AND-EQUITY> 342,030
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,290
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,899
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,899
<EPS-PRIMARY> .004
<EPS-DILUTED> .004
</TABLE>
