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, 1998
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: $481,400
The aggregate market value of the voting stock (assumed to be 223,500 shares)
held by nonaffilliates of registrant (computed by reference to recent bid and
ask prices of $2.00 and $3.00, respectively) was approximately $558,750
As of January 27, 1999, there were 493,500 shares of Common Stock outstanding
and 74,500 Investors' Stock Purchase Warrants outstanding.
1
<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
ARegistrant" 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: (727)
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 1998
The following table shows, for the fiscal year ended May 31,
1998, annual remuneration of each of the Registrant's two officers and
directors:
2
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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, 1998, 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 January 27, 1999.
(c) Dividends
The Registrant paid dividends in the fiscal year ended
May 31, 1998 of $67,271. These dividends consisted of common
stock of Suncoast Foods, Inc. which was issued in payment of
a note receivable on the Company's books of $67,271.
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, 1998 and 1997.
Statement of Operations and Retained Earnings - Year
Ended May 31, 1998 and 1997. Statement of
Stockholders' Equity - Year Ended May 31, 1998 and
1997. Statement of Cash Flows - Year Ended May 31,
1998 and 1997.
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
January 27, 1999
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 January 27, 1999
- --------------------- -----------------------------------
Richard E. Metz Director (Principal Executive Officer)
/s/ Wayne A. Weyrauch. Vice-President of Finance, January 27, 1999
- -------------------- -----------------------------------
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
January 27, 1999
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, 1998 and 1997 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
January 27, 1999
8
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
Balance Sheets
Assets
<TABLE>
<CAPTION>
May 31, May 31,
1998 1997
----------------- -----------------
<S> <C> <C>
Current assets
Operating cash in bank $ 68,214 $ 3,845
Certificate of deposit, Suntrust - 300,000
Due from Suncoast Food Services, Inc. - 67,271
Construction in process:
Land costs/site development 7,273 237,964
Houses - 146,604
----------------- -----------------
Total current assets 75,487 755,684
----------------- -----------------
Other assets
Incorporation fees, legal expenses and registration
statement costs 34,260 51,390
Utility deposits 424 424
Mortgage receivables 241,475 -
----------------- -----------------
276,159 51,814
----------------- -----------------
Total assets 351,646 807,498
================= =================
Liabilities and Stockholders' Equity
Current liabilities
Due to RemProp, Inc. 24,713 19,509
Due to Key Management 18,632 -
Commercial loan payable, SunTrust - 281,074
Construction Loans, SunTrust houses - 95,400
Note payable, R. Metz, demand, bearing interest at 7% 7,943 8,931
----------------- -----------------
Total current liabilities 51,288 404,914
----------------- -----------------
Stockholders' equity
Common stock, no par value
Authorized 20,000,000 shares,
493,500 issued and outstanding 486,887 486,887
Accumulated deficit (186,529) (84,303)
----------------- -----------------
Total stockholders' equity 300,358 402,584
----------------- -----------------
Total liabilities and stockholders' equity $ 351,646 $ 807,498
================= =================
</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,
1998 1997
--------------- -------------
<S> <C> <C>
Income
Sales $ 481,400 $ 14,178
Less cost of sales
Cost of sales 457,275 -
--------------- -------------
Gross profit 24,125 -
Selling, general and administrative
expenses 68,123 49,936
--------------- -------------
Loss from operations (43,998) (35,758)
Other income
Interest income 9,044 -
--------------- -------------
Net Loss $ (34,955) $ (35,758)
=============== =============
Basic loss per common share $ (0.07) $ (0.07)
=============== =============
Weighted average number of
common shares outstanding 493,500 493,500
=============== =============
</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, 1996 493,500 $ 486,887 $ (48,545) $ 438,342
Net loss for year ended May 31, 1997 - - (35,758) (35,758)
------------- ----------- --------------- ---------------
Balance May 31, 1997 493,500 $ 486,887 $ (84,303) $ 402,584
Dividends paid - - (67,271) (67,271)
Net loss for year ended May 31, 1998 - - (34,955) (34,955)
============= =========== =============== ===============
Balance May 31, 1998 493,500 $ 486,887 $ (186,529) $ 300,358
============= =========== =============== ===============
</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,
1998 1997
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Reconciliation of net loss to net cash
used in operating activities
Net loss $ (34,955) $ (35,758)
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 468,402 (169,146)
--------------- ---------------
Net cash used in operating activities 450,577 (187,774)
--------------- ---------------
Cash flows from investing activities
Proceeds from sale of investments 300,000 -
Increase in notes receivable (241,475) -
--------------- ---------------
Net cash used in investing activities 58,525 -
--------------- ---------------
Cash flows from financing activities
Principal payments on notes payable (376,474) 190,400
Decreases in stockholder loan (988) -
Dividends paid (67,271)
--------------- ---------------
Net cash provided by financing activities (444,733) 190,400
--------------- ---------------
Net increase (decrease) in cash 64,369 2,626
Cash beginning 3,845 1,219
--------------- ---------------
Cash ending $ 68,214 $ 3,845
=============== ===============
</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.
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 was
$17,130 for the year ended May 31, 1998 and 1997.
Note B - DUE FROM SUNCOAST FOOD SERVICES, INC.
Federal Affordable Housing Corporation made short-term loans to
Suncoast Food Services, Inc., secured by a promissory note dated
March 15, 1996. This note had maturity date of March 31, 1998
and was satisified by Suncoast Food Services by issuing a 15%
equity interest in its business. The common stock was issued as
a dividend to the Company's shareholders in the fiscal year
ended May 31, 1998. (See Note H).
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 had a term of 12 months, and bore
interest at a rate of 4.690%. This certificate of deposit was
pledged as collateral for a revolving line of credit, with a
maximum draw down of $300,000. The certificate of deposit
matured on June 27, 1997 and the proceeds were used to satisfy
the Company's line of credit in July 1997.
Note D - CONSTRUCTION IN PROCESS
The company has an option to purchase 74 lots located in
Zephyrhills, Florida and Dade City, Florida, 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 H). Additional costs
of construction for site development and homes have also been
incurred.
13
<PAGE>
FEDERAL AFFORDABLE HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note E - SALES OF HOMES AND LOTS
In the fiscal year ended May 31, 1998, the Company sold 32 lots
and 3 houses. The Company has a mortgage receivable of $241,475
on its books from this transaction at May 31, 1998.
Note F - CONSTRUCTION LOANS
The Company had secured two construction loans on lots #21 and
#22. Each loan had 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. These loans were paid in full in the fiscal year
ended May 31, 1998 with the proceeds from the sale of homes/lots
on lots #21 and #22.
Note G - STOCK TRANSACTIONS
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. This
stock split caused the number of shares issued and outstanding
to increase from 164,500 shares to 493,500 in the fiscal year
ended May 31, 1998.
Note H - 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, 1998 and 1997, the Company owed $24,713 and $19,509,
respectively to REMPROP, INC. on an unsecured loan. The Company
owed $18,632 to Key Management, Inc. on an unsecured loan as of
May 31, 1998.
Richard Metz had loaned $8,931 to the company on a Demand Note,
bearing interest at 7%. During the fiscal year ended May 31,
1998 a principal payment of $988 was made by the Company toward
the balance of this loan. No other related party transactions
have occurred.
14
FEDERAL AFFORDABLE HOUSING CORPORATION
Computation of Loss Per Common Share
For the Years Ended
May 31,
---------------------------------
1998 1997
-------------- ---------------
Shares outstanding: 493,500 493,500
Weighted average shares outstanding 493,500 493,500
Net loss $ (34,955) $ (35,758)
Net loss per common share $ (0.07) $ (0.07)
[LOGO]
January 27, 1999
Board of Directors
Federal Affordable Housing Corporation.
We consent to the use of our report dated January 27, 1999, on the financial
statements of Federal Affordable Housing Corporation in Form 10-KSB for the
fiscal year ended May 31, 1998.
/s/ J. Michael Daily & Associates, C.P.A'S
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAY-31-1997
<PERIOD-END> MAY-31-1998
<CASH> 68,214
<SECURITIES> 0
<RECEIVABLES> 241,475
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 75,487
<PP&E> 7,273
<DEPRECIATION> 0
<TOTAL-ASSETS> 351,646
<CURRENT-LIABILITIES> 51,288
<BONDS> 0
0
0
<COMMON> 486,887
<OTHER-SE> (186,529)
<TOTAL-LIABILITY-AND-EQUITY> 351,646
<SALES> 481,400
<TOTAL-REVENUES> 481,400
<CGS> 457,275
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 68,123
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (34,955)
<INCOME-TAX> 0
<INCOME-CONTINUING> (34,955)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,955)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
