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, 1997
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
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (727) 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
Investors' 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 [ ] No [X]
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
amendments to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $14,178
The aggregate market value of the voting stock (assumed to be 74,500 shares)
held by nonaffilliates of registrant (computed by reference to recent bid and
ask prices of $7.00 and $8.00, respectively) was approximately $558,750
As of December 5, 1997, there were 164,500 shares of Common Stock outstanding
and 74,500 Investors' Stock Purchase Warrants outstanding.
2
<PAGE>
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 I 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: (813)
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 through 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 herein by
reference.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS
(a) Remuneration for Fiscal Year 1997
The following table shows, for the fiscal year ended May 31,
1997, annual remuneration of each of the Registrant's two officers and
directors:
3
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Name Capacity Aggregate Remuneration
- ---- -------- ----------------------
Richard E. Metz President, CEO $ 0
Wayne A. Weyrauch Vice President, CFO 0
Total $ 0
(b) Future Remuneration Pursuant to a Plan
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 management.
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 as of May 31, 1997, 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" at 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
(b) Holders
There were eleven registered holders of the Registrant's
common equity as of December 8, 1997.
(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 currently a party to any legal
proceedings.
3
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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 OF FORM 8-K
Not Applicable.
PART F/S
The following financial statements of the Registrant appear at the end
of this report:
Balance Sheets - May 31, 1997 and 1996.
Statement of Operations and Retained Earnings - Year Ended
May 31, 1997 and 1996.
Statement of Stockholders' Equity - Year Ended May 31, 1997
and 1996.
Statement of Cash Flows - Year Ended May 31, 1997 and 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.
NUMBER DESCRIPTION
2.1 Articles of Incorporation of the Registrant (Exhibit 3.A. to Form SB-2)
2.2 Bylaws of the Registrant (Exhibit 3.B. to Form SB-2)
3.1 Form of Common Stock Certificate (Exhibit 4.A. to Form SB-2)
3.2 Form of Investors' Stock Purchase Warrant Certificate
(Exhibit 4.B. to Form SB-2)
6.1 Option Agreement Between Registrant, RemProp, Inc. and Key
Management, Inc. (Exhibit 10.A. to Form SB-2)
4
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6.2 First Amendment to Option Agreement (Exhibit 10.B. to Form SB-2)
6.3 Second Amendment to Option Agreement (Exhibit 10.C. to Form SB-2)
6.4 Lease Agreement between Registrant and RemProp, Inc.
(Exhibit 10.D. to 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 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.
5
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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
December 8, 1997
BY: /s/ Richard F. 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 December 8, 1997
- ---------------------- ----------------------------------
Richard E. Metz Director (Principal Executive Officer)
/s/Wayne A. Weyrauch. Vice-President of Finance, December 8, 1997
- ---------------------- ----------------------------------
Wayne A. Weyrauch Chief Financial Officer, Secretary
(Principal Financial Officer,
Principal Accounting Officer)
6
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FEDERAL AFFORDABLE HOUSING CORPORATION
TABLE OF CONTENTS
PAGE
------
ACCOUNTANT'S REPORT PAGE 8
BALANCE SHEETS 9
STATEMENTS OF OPERATIONS 10
STATEMENTS OF STOCKHOLDERS' EQUITY 11
STATEMENTS OF CASH FLOWS 12
NOTES TO FINANCIAL STATEMENTS 13 & 14
7
<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
August 22, 1997
Board of Directors
Federal Affordable Housing Corporation
1616 Gulf-to-Bay Blvd.
Clearwater, Florida 34615
Gentlemen:
We have audited the accompanying balance sheets of Federal Affordable Housing
Corporation as of May 31, 1997 and 1996 and the related statements of
operations, changes in stockholders' equity, and cash flows for the periods 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 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 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 audits provide 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 as of May 31, 1997 and 1996 and the results of its operations
and its cash flows for the periods then ended in conformity with generally
accepted accounting principles.
/s/ J. Michael Daily
- --------------------------------
J. Michael Daily, CPA
Clearwater, Florida
August 22, 1998
8
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
Balance Sheets
Assets
<TABLE>
<CAPTION>
May 31, May 31,
1997 1996
------------------ ------------------
<S> <C> <C>
Current assets
Operating cash in bank $ 3,845 $ 1,219
Certificate of deposit, Suntrust 300,000 300,000
Due from Suncoast Food Services, Inc. 67,271 35,849
Construction in process:
Land costs/site development 237,964 224,669
Houses 146,604 2,635
------------------ ------------------
Total current assets 755,684 564,372
------------------ ------------------
Other assets
Incorporation fees, legal expenses and registration
statement costs - unamortized 51,390 68,520
Utility deposits 424 455
------------------ ------------------
51,814 68,975
------------------ ------------------
Total assets 807,498 633,347
================== ==================
Liabilities and Stockholders' Equity
Current liabilities
Due to RemProp, Inc. 19,509 -
Commercial loan payable, SunTrust 281,074 186,074
Construction Loans, SunTrust houses 95,400 -
Note payable, R. Metz, demand, bearing interest at 7% 8,931 8,931
------------------ ------------------
Total current liabilities 404,914 195,005
------------------ ------------------
Stockholders' equity
Common stock, no par value
Authorized 5,000,000 shares,
164,500 issued and outstanding 486,887 486,887
Accumulated deficit (84,303) (48,545)
------------------ ------------------
Total stockholders' equity 402,584 438,342
------------------ ------------------
Total liabilities and stockholders' equity $ 807,498 $ 633,347
================== ==================
</TABLE>
See notes to financial statements.
9
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
Statements of Operations
<TABLE>
<CAPTION>
For the Years Ended
-----------------------------------
May 31, May 31,
1997 1996
--------------- -------------
<S> <C> <C>
Income
Interest Earned $ 14,178 $ 15,746
Selling, general and administrative
expenses 49,936 64,060
--------------- -------------
Net loss $ (35,758) $ (48,314)
=============== =============
Basic loss per common share $ (0.22) $ (0.29)
=============== =============
Weighted average number of
common shares outstanding 164,500 164,500
=============== =============
</TABLE>
See notes to financial statements.
10
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock
---------------------------
Number of Accumulated
Shares Amount Deficit Total
------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance May 31, 1995 90,000 $ 58,512 $ (231) $ 58,281
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 one warrant to purchase common stock.
Each unit was sold for $5.75. 74,500 428,375 428,375
Net loss for year ended May 31, 1996 - - (48,314) (48,314)
-------------- ----------- --------------- ---------------
Balance May 31, 1996 164,500 $486,887 $ (48,545) $ 438,342
Net loss for year ended May 31, 1997 - - (35,758) (35,758)
-------------- ----------- --------------- ---------------
Balance May 31, 1997 164,500 $486,887 $ (84,303) $ 402,584
============== =========== =============== ===============
</TABLE>
See notes to consolidated financial statements.
11
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended
----------------------------------
May 31, May 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Reconciliation of net loss to net cash
used in operating activities
Net loss $ (35,758) $ (48,314)
Adjustments to reconcile net loss to net
cash used in operating activities
Amortization of fees and costs 17,130 17,130
Changes in assets and liabilities
Net decrease in intercompany loans,
Construction in process, fees
and costs, and deposits (169,146) (282,253)
--------------- ---------------
Net cash used in operating activities (187,774) (313,437)
--------------- ---------------
Cash flows from investing activities
Addition to certificate of deposit - (300,000)
--------------- ---------------
Net cash used in investing activities - (300,000)
--------------- ---------------
Cash flows from financing activities
Proceeds from issuance of common stock - 428,375
Proceeds from issuance of notes payable 190,400 186,074
--------------- ---------------
Net cash provided by financing activities 190,400 614,449
--------------- ---------------
Net increase (decrease) in cash 2,626 1,012
Cash beginning 1,219 207
--------------- ---------------
Cash ending $ 3,845 $ 1,219
=============== ===============
</TABLE>
See notes to financial statements.
12
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
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, 1997 is $17,130.
Note B - DUE FROM SUNCOAST FOOD SERVICES, INC.
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,
1998. The principal amount of the note may rise to $75,000, 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 F).
Note C - CERTIFICATE OF DEPOSIT AND COMMERCIAL LOAN - SUNTRUST BANK
The Company purchased a certificate of deposit in the amount of $
300,000 on June 27, 1996. It has a term of 12 months, and bears
interest at a rate of 4.690 %. This certificate of deposit has
been pledged as collateral for a revolving line of credit, with a
maximum draw down of $ 300,000. This credit line is due on July
3, 1997. 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, 1997 is $ 281,074.
13
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
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 - CONSTRUCTION LOANS
The Company has secured two construction loans on lots #21 and
#22. Each loan has a maximum draw down of $63,000. As of May 31,
1997, draws on the loan for lot #21 were $63,600, and for lot
#22 were $31,800. Each loan bears interest only paid on a
monthly basis.
Note F - 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. As of
May 31, 1997, the Company owed $19,509 to REMPROP, INC. on an
unsecured loan.
Richard Metz has loaned $8,931 to the company on a Demand Note,
bearing interest at 7%. No other related party transactions have
occurred.
Note G - SUBSEQUENT EVENTS
A letter of intent between Federal Affordable Housing
Corporation and La Salle Group Ltd. was issued on April 3, 1997,
for the transfer of stock, assets, and cash between the two
companies. A closing agreement was signed on April 28, 1997 to
close the transaction. Paragraph 13 of the closing agreement is
an unwind clause, which states that in the event that certain
transactions are not completed timely, then the agreement can be
cancelled. On October 3, 1997, Federal Affordable Housing
Corporation exercised the unwind clause, and the transaction in
the closing agreement were terminated.
14
FEDERAL AFFORDABLE HOUSING CORPORATION
Computation of Loss Per Common Share
For the Years Ended
May 31,
----------------------
1997 1996
--------- ---------
Shares outstanding: 164,500 164,500
Weighted average shares outstanding 164,500 164,500
Net loss $ (35,758) $ (48,314)
Net loss per common share $ (0.22) $ (0.29)
[LOGO]
January 21, 1999
Board of Directors
Federal Affordable Housing Corporation.
We consent to the use of our report dated August 22, 1997, on the financial
statements of Federal Affordable Housing Corporation in Form 10-KSB for the
fiscal year ended May 31, 1997.
/s/ J. Michael Daily & Associates, C.P.A'S
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> MAY-31-1996
<PERIOD-END> MAY-31-1997
<CASH> 303,845
<SECURITIES> 0
<RECEIVABLES> 67,271
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 755,684
<PP&E> 384,568
<DEPRECIATION> 0
<TOTAL-ASSETS> 807,498
<CURRENT-LIABILITIES> 404,914
<BONDS> 0
0
0
<COMMON> 486,887
<OTHER-SE> (84,303)
<TOTAL-LIABILITY-AND-EQUITY> 807,498
<SALES> 14,178
<TOTAL-REVENUES> 14,178
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 49,936
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (35,758)
<INCOME-TAX> 0
<INCOME-CONTINUING> (35,758)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,758)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
