ITEM 1. BUSINESS
General
Dover Investments Corporation (the "Company") engages primarily in residential real estate development. Westco Community Builders, Inc., an independent California corporation ("WCB"), is primarily responsible for the construction and the development of the real estate.
The Company and WCB have formed one California general partnership, Glenbriar Joint Venture, and three California limited liability companies, Glenbriar Venture #2, LLC, Tracy Residential Venture Partners, LLC and Meadowbrook Ventures, LLC (collectively, the "Developers"), for development of the Glenbriar Estates project described below, another California limited liability company, South Tracy Industrial Park, LLC ("STIP"), for development of the South Tracy Industrial Park project described below, another California limited liability company, Halcyon Properties, LLC ("Halcyon"), for development of the San Leandro project described below, and another California limited liability company, Woodview Estates, LLC ("Woodview"), for development of the Novato project described below. For each of the above entities the Company contributes all of the capital (except that for Glenbriar Venture #2, LLC, WCB contributed 25% of the capital through December 1998). WCB is paid a fee for managing the construction and development of the real estate. The Company (and WCB, with respect to Glenbriar Venture #2, LLC) receives a preferred return on equity in the above entities, at an annual rate of 10% to12%, through December 31, 2001, and of approximately 7%, since January 1, 2002. Remaining profits in each entity are split, 50% to the Company and 50% to WCB (or, in the case of Glenbriar Venture #2, LLC, 50% to 75% to the Company and the remainder to WCB) according to the governing agreements.
The Company has also, together with three other independent parties, formed a New York limited liability company, SPM, LLC ("SPM"), for development of the Coram Plaza Shopping Center project described below. Capital contributions and distributions to the members are made according to membership interest. Initially, each member had a 25% membership interest. In 2000, the Company and two of the other members of SPM purchased an additional 5% interest each from the fourth member, thereby increasing the membership interest of the three members to 30% each, with the fourth member retaining a 10% membership interest in SPM.
Real Estate Development
Below is a summary of the Company's major real estate development activities during 2001.
GLENBRIAR ESTATES
The Company, through its various ventures, continued to develop the Glenbriar Estates project in Tracy, California.
All of the land owned by the ventures is covered by either vesting tentative subdivision maps or final subdivision maps. The ventures have two model complexes for two product types of homes at Glenbriar Estates, the Glenbrook Subdivision and the Meadowbrook Subdivision.
In November of 2000, the voters of Tracy passed a "slow growth" initiative which is intended to slow residential development within the City of Tracy. The ventures brought legal actions against the City of Tracy to, among other things, confirm that the initiative did not apply to Glenbriar Estates because the land owned by the ventures was covered by vesting tentative subdivision maps which predated the effective date of the initiative. The ventures and the City of Tracy have settled all litigation relating to this matter and the City has acknowledged, among other things, that the initiative does not apply to the land owned by the ventures so long as the existing vesting tentative subdivision maps remain in effect. At this time the Company no longer believes that the passage of the initiative will disrupt the orderly development of the remainder of the Glenbriar Estates project. Pursuant to the settlement of the litigation referred to above, the City of Tracy provided sewer and water capacity and residential growth allocations for approximately fifty percent (50%) of the remainder of the Glenbriar Estates project in August 2001 and water capacity for the balance of the Glenbriar Estates project in January 2002. Sewer capacity and residential growth allocations for the balance of the Glenbriar Estates project were secured in February 2002.
During 2001 a downturn in the national and regional economy significantly reduced the demand for new homes in the Tracy area. Buyer activity in the Tracy area was extremely weak and standing inventory among builders in the area was at unusually high levels. New home prices also came under pressure in 2001. In addition, during a part of the second and third quarters of 2001 prior to August 2001, the ventures had used up all residential growth allocations previously allocated by the City of Tracy or purchased from other builders, preventing the ventures from building additional homes.
HIGHER PRICED HOME
In September of 1999, the Company entered into a joint venture with WCB to develop a large (approximately 9,600 square feet) higher priced "custom" home in Atherton, California. Construction of the home was completed in December 2001. The home went on the market in January 2002.
OTHER RESIDENTIAL PROPERTIES
The Company, through Halcyon, has purchased a property in San Leandro, California. The property has been approved for eighteen single family homes, and site work is expected to commence during the second quarter of 2002. The venture intends to construct and sell the eighteen homes during 2002.
In June 2001, the Company, through Woodview, purchased an additional property in Novato, California. The property has been approved for twenty single family homes, and it is the intention of the venture to build and sell twenty homes on the property during 2002 and 2003. The property has an approved vested tentative subdivision map and is currently going through design review for its house plans.
SOUTH TRACY INDUSTRIAL PARK
In 1999 the Company, through STIP, entered into an agreement to purchase and develop for industrial use approximately fifty acres of industrial property in the southern part of the City of Tracy. A tentative subdivision map for the entire property and a final subdivision map for Phase I of the property have been approved by the City of Tracy. Site improvements have been completed on Phase I of the property and construction of the first industrial building commenced in the first quarter of 2002. The venture previously had anticipated starting construction of the first two industrial buildings at the same time; however, in view of the downturn in the economy, the venture has determined to proceed with one building at this time and to proceed with additional buildings as occupancy levels justify. Development and rental of the entire industrial park is expected to continue for several years.
CORAM PLAZA SHOPPING CENTER, CORAM, NEW YORK
In 1999 SPM purchased a property, with buildings and improvements, located in the Coram Plaza Shopping Center, in Coram, New York. A portion of the property was sold in 2000. SPM has completed development of the remaining property for commercial use and is currently leasing the property to tenants. Competitive Position of the Company
The development and sale of residential properties is highly competitive, and the Company competes with numerous national, regional and local builders primarily on the basis of price, location, design, reputation, quality and amenities. In addition, the Company competes with other housing alternatives including existing homes and rental housing. Although the Company believes that it competes effectively with respect to each of these factors, there can be no assurance that the Company will maintain its competitive position against current and potential competitors.
Homebuilding Industry
The homebuilding industry is cyclical and is affected by changes in general and local economic and other conditions including employment levels, demographic considerations, availability of financing, interest rate levels, federal income tax provisions, consumer confidence and housing demand. In addition, homebuilders are subject to various risks, many of them outside of the control of the homebuilder, including availability and cost of land, availability and cost of materials and labor, weather conditions, delays in construction schedules, cost overruns, changes in government regulations and increases in property taxes and other local government fees. Net orders often vary on a seasonal basis, with the lowest order activity typically occurring in the winter months.
Government Regulation and Environmental Matters
The homebuilding industry is subject to various federal, state and local laws, ordinances, rules and regulations concerning zoning, building design, construction and similar matters. The operations of the Company are also affected by environmental laws and regulations, including regulations pertaining to availability of water, municipal sewage treatment capacity, land use, protection of endangered species and population density. Compliance with these laws and regulations may result in delays and may cause the Company to incur substantial costs.
Various permits and approvals are required to complete the Company's real estate developments. The ability of the Company to obtain such permits and approvals is often beyond the Company's control. The length of time necessary to obtain permits and approvals increases the carrying costs of unimproved property acquired for the purpose of development and can delay the timing of the closing of its sales. In addition, the continued effectiveness of permits already granted is subject to changes in policies, rules and regulations and their interpretation and application.
Backlog
The Company has a backlog of homes and lots for which it has entered into sales contracts but which it has not yet delivered. The Company's backlog at December 31, 2001 was approximately sixteen homes at an aggregate sales price of approximately $5,493,000. As the Company's sales contracts are subject to certain conditions being satisfied and generally may be cancelled by the customer in the event mortgage financing is unobtainable within a specified period of time, no assurances can be given that homes subject to pending sales contracts will result in closings.
Employees
The Company currently has five full-time employees, all of whom work at the Company's executive offices in San Francisco.
Executive Officers of the Company
The following is information with respect to the executive officer of the Company who is not also a director of the Company:
Erika Kleczek - Ms. Kleczek, age 59, has served as the Company's Principal Financial Officer since January 1997 and as the Company's Secretary and Treasurer since February 1991. Ms. Kleczek served in various managerial positions for the Company and Homestead Savings and Loan Association, a former subsidiary of the Company, from June 1983 to February 1991.
ITEM 2.
ITEM 2. PROPERTIES
The Company leases its executive office space in San Francisco, California under a lease that commenced on October 1, 1997 with an initial term ending on September 30, 2002. On November 15, 2001, the Company exercised an option to extend the lease for an additional period of two years ending on September 30, 2004.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Shares of the Company's Class A Common Stock and Class B Common Stock are currently traded on the NASD OTC Bulletin Board under the symbols DOVR-A and DOVR-B, respectively.
The high and low bid information for 2001 and 2000 are as reported on the National Quotation Bureau Pink Sheets. Such bid quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Dividends
The Company has not paid dividends on the Class A Common Stock and Class B Common Stock since June 30, 1989 and presently has no intention to pay dividends in the foreseeable future.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Quarterly Financial Data:
The following table sets forth certain consolidated financial data for the periods indicated and should be read in conjunction with the Consolidated Financial Statements, related notes and other financial information appearing elsewhere in Part II of this Form 10-K Annual Report as well as the sections of our Quarterly Reports Form 10-Q (dollar amounts in thousands, except per share amounts).
Annual Financial Data:
The following table sets forth certain consolidated financial data for the periods indicated and should be read in conjunction with the Consolidated Financial Statements, related notes and other financial information appearing elsewhere in Part II of this Form 10-K Annual Report (dollar amounts in thousands, except per share amounts).
Restatement
The Company has restated prior period lot sales and cost of home and lot sales to correct the elimination of inter-company transactions. The restatement had no impact on gross profit, net income or earnings per share in the Company's previously issued financial statements. See Note A to the Company's Consolidated Financial Statements included as Appendix A to this report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information set forth below and elsewhere in this Annual Report contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 concerning the Company's business operations and financial condition. The words or phrases "can be", "may affect", "may depend", "expect", "believe", "anticipate", "intend", "will", "estimate", "project" and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements are subject to various known and unknown risks and uncertainties and the Company cautions you that any forward-looking information provided by or on behalf of the Company is not a guarantee of future performance. Actual results could differ materially from those anticipated in such forward-looking statements due to a number of factors, some of which are beyond the Company's control, in addition to those discussed in this document or in the Company's other public filings, including (i) the continued impact of the terrorist attacks against the United States on September 11, 2001, (ii) changes in general and local economic conditions, (iii) consumer confidence and housing demand, (iv) competition, (v) government regulations affecting the Company's operations, (vi) the availability and cost of land, materials and labor and (vii) conditions in the capital, credit and homebuilding markets. All such forward-looking statements are current only as of the date on which such statements were made. The Company does not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.
Results of Operations for the Years Ended December 31, 2001 and 2000
The Company had net income of $2,422,000 for the year ended December 31, 2001, compared to $5,317,000 in 2000.
In the year ended December 31, 2001, the Company had no home sales at the Marina Vista development project (which was completed in 2000), compared to 8 such sales in 2000. At the Glenbriar Estates project, the Company closed the sale of 56 homes for the year ended December 31, 2001, compared to 136 homes in 2000. In 2000, the Company also closed the sale of a portion of the Glenbriar Estates property to the City of Tracy for the use as a park site, and another portion of the property to the Jefferson School District for use as part of a school site. The Company did not sell any higher priced custom homes in the years ended December 31, 2001 and 2000.
Total sales for the year ended December 31, 2001 were $22,099,000, resulting in a gross profit of $5,922,000 and a gross profit margin of 26.80%, compared to total sales of $48,384,000, resulting in a gross profit of $12,214,000 and a gross profit margin of 25.24%, for the same period in 2000. The decrease in sales resulted primarily from the reduced demand for new homes in the Tracy area during 2001 and the resulting decrease in sales at the Glenbriar Estates project, the lack of residential growth allocations for the Glenbriar Estates project during a part of the second and third quarters of 2001 prior to August 2001, and the absence of sales at the Marina Vista project during 2001. See the discussion of the Glenbriar Estates project under "BUSINESS - Real Estate Development" above.
Minority interest in joint ventures for the year ended December 31, 2001 decreased to $3,336,000, compared to $4,625,000 for 2000. The decrease in minority interest is attributable to decreased sales of homes and lots at the Glenbriar Estates and the Marina Vista projects.
Selling expenses for the year ended December 31, 2001 were $1,272,000, which represents 5.76% of revenues for 2001, compared to $2,535,000, which represents 5.24% of revenues for 2000. The decrease in selling expenses was primarily due to decreased sales at the development projects and decreased marketing and related commission expenses.
General and administrative expenses for the year ended December 31, 2001 were $1,504,000, compared to $1,666,000 for 2000, a decrease of 9.72% compared to 2000. The decrease was primarily due to the absence of performance based compensation, partially offset by increased legal fees and other administrative expenses.
Interest income in 2001 decreased to $887,000, compared to $1,591,000 in 2000. The decrease is attributable to decreases in interest rates and decreased interest income from notes receivable.
The Company expects that the development projects will continue to generate profits. See "BUSINESS - Homebuilding Industry" above for a discussion of general economic conditions and competitive factors that influence the Company's profitability.
Results of Operations for the Years Ended December 31, 2000 and 1999
The Company had net income of $5,317,000 for the year ended December 31, 2000, compared to $4,305,000 for the year ended December 31, 1999.
In the year ended December 31, 2000, the Company closed the sale of 8 homes at the Marina Vista development project, compared to 45 closed home sales in 1999. At the Glenbriar Estates project, the Company closed the sale of 136 homes for the year ended December 31, 2000, compared to 121 homes in 1999. In 2000, the Company also closed the sale of a portion of the Glenbriar Estates property to the City of Tracy for the use as a park site, and another portion of the property to the Jefferson School District for use as part of a school site. In the year ended December 31, 2000, the Company did not sell any higher priced homes, compared to the sale of three homes in 1999.
Total sales for the year ended December 31, 2000 were $48,384,000, resulting in a gross profit of $12,214,000 and a gross profit margin of 25.24%, compared to total sales of $64,294,000, resulting in a gross profit of $11,805,000 and a gross profit margin of 18.36%, for the same period in 1999. The increase in gross profit resulted primarily from increases in sales prices and the strong California real estate market in general. The decrease in sales resulted primarily from decreased sales at the Marina Vista project and the absence of sales of higher priced homes.
Minority interest in joint ventures for the year ended December 31, 2000 decreased to $4,625,000, compared to $5,370,000 for 1999. The decrease in minority interest is attributable to the absence of sales of higher priced homes, which offset increases otherwise resulting from the sale of a larger number of homes and lots at the Glenbriar Estates project.
Selling expenses for the year ended December 31, 2000 were $2,535,000, which represents 5.24% of revenues for 2000, compared to $3,560,000, which represents 5.54% of revenues for 1999. The decrease in selling expenses was primarily due to decreased sales at the Marina Vista project, decreased staffing at the development projects and decreased marketing and related commission expenses.
General and administrative expenses for the year ended December 31, 2000 were $1,666,000, compared to $1,207,000 for 1999, an increase of 38.03% compared to 1999. The increase was primarily due to increased staffing and higher levels of personnel, salary increases, increased performance based compensation, the initial funding of the Company's qualified retirement plan, and increased professional and legal fees.
Interest income in 2000 increased to $1,591,000, compared to $824,000 in 1999. The increase is attributable to increases in interest rates and increased interest from notes receivable.
Restatement
The Company has restated prior period lot sales and cost of home and lot sales to correct the elimination of inter-company transactions. The restatement had no impact on gross profit, net income or earnings per share in the Company's previously issued financial statements. See Note A to the Company's Consolidated Financial Statements included as Appendix A to this report.
Liquidity and Capital Resources
At December 31, 2001, the Company had total assets of $51,408,000, as compared to total assets of $43,245,000 at December 31, 2000. The cost of the Company's property being developed was $28,473,000 in 2001, compared to $19,855,000 in 2000. The increase is primarily due to the purchase of the properties in San Leandro and Novato, California and development costs of the higher priced custom home in Atherton, California. Highly liquid assets were $18,377,000 at December 31, 2001, compared to $20,531,000 at December 31, 2000.
The Company's total liabilities increased to $8,430,000 at December 31, 2001, compared to $5,508,000 at December 31, 2000. This increase is attributable primarily to an increase in notes payable. Notes payable increased to $6,570,000 in 2001, from $2,479,000 in 2000. The increase is attributable to additional investments in properties.
The additional paid-in capital of $2,819,000 for the year ended December 31, 2001 is due to realization of the tax benefits related to net operating losses incurred prior to the Company's quasi-reorganization in 1993 in the amount of $2,804,000 and the issuance of stock of $15,000.
During 2001, the Company's primary liquidity needs were related to funding development costs of the Glenbriar Estates project and the higher priced home and interest payments in the amount of $61,000.
At December 31, 2001, the Company had an aggregate outstanding balance of $6,570,000 under revolving credit agreements. The loans are secured by lots and homes under construction and will be repaid from the proceeds of home and lot sales. The loans bear interest at the rate of prime plus 0.75% through 1.00% per annum and have various maturity dates. We have contractual obligations totaling approximately $6,700,000. The majority of these relate to notes payable and operating leases. The notes payable are principally for property held for development while the operating leases are primarily related to office space.
The Company's primary sources of liquidity during 2001 were revolving credit agreements and the proceeds of home sales. The Company may also borrow funds from time to time for development of real estate projects.
Outlook
The Company sold two homes at the Glenbriar Estates project during the first quarter of 2002 and entered into sales contracts for fourteen additional homes at the Glenbriar Estates project in October, November and December 2001 and January 2002. The Company believes that one of these fourteen homes will likely close in the first quarter of 2002 and that the other fourteen homes will likely close in the second quarter of 2002. As the Company's sales contracts are subject to satisfaction of certain conditions and cancellation by the customer, no assurances can be given that the sales contracts for these fourteen homes will result in actual closings. See "BUSINESS - Backlog" above. In addition, the Company's higher priced home in Atherton, California is currently being marketed for sale. The Company cannot predict when that home will be sold.
Based on the foregoing, the Company expects sales for the first quarter of 2002 to be significantly lower than for the same period in 2001. Based on the foregoing, the Company also expects sales for the second quarter of 2002 to be significantly lower than for the same period in 2001 (unless the higher priced home is sold during the second quarter of 2002, in which case sales for this period would likely be higher than for the same period in 2001).
The Company believes, based on the number of homes at the Glenbriar Estates project for which the Company entered into sales contracts in October, November and December 2001 and January 2002, that interest among buyers at the Glenbriar Estates project has increased somewhat.
Critical Accounting Policies
The Company's most critical accounting policies mainly involve the use of estimates in the valuation of certain assets and liabilities. In particular, at December 31, 2001 homes held for sale amounting to $l,848,000 and property held for development amounting to $26,625,000 are recorded at cost, which the Company has estimated to be lower than fair market value. Further, the Company has recorded a warranty reserve of $591,000 at December 31, 2001 to cover warranty expenses incurred subsequent to sales being recorded. Based on historical trends and other information, the Company considers this reserve to be adequate.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its majority owned and controlled Joint Venture and Limited Liability Companies. All significant inter-company transactions are eliminated in consolidation.
Revenue From and Cost of Home Sales
The Company recognizes income from home sales upon closing and transfer of title to the buyer. The cost of a home sold, includes land, site development, construction, management fees and financing costs. For each home sold, a reserve equal to one percent of the selling price is established to cover warranty expense incurred subsequent to the home sale. Warranty expenditures are charged to the reserve when paid. Sale of lots are recognized upon the closing and transfer of title to the buyer. The cost of the lot sold, includes land, site improvement, development and financing costs.
SPM, LLC
The Company accounts for its investment in SPM, LLC on the cost method since it does not have significant influence over the operations of SPM, LLC. The Company includes this investment with its property held for development at cost, which the Company considers to be lower than estimated market value.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk for changes in interest rates relates primarily to the Company's investment in high credit quality securities maintained with three financial institutions and the Company's notes receivable and notes payable. The Company's objective in managing its exposure to interest rate changes is to limit the impact of changes on earnings and cash flow and to lower its overall borrowing costs. The Company believes the financial risks associated with these investments and notes are minimal.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company, as set forth on the pages indicated, are filed as part of this report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to the information set forth under the caption "Proposal 1 -- Election of Directors" contained in the Proxy Statement to be used by the Company in connection with its 2002 Annual Meeting of Stockholders, except for the information regarding the Company's executive officer who is not also a director of the Company, which is included in "BUSINESS - Executive Officers of the Company" above.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the information set forth under the caption "Compensation of Executive Officers and Directors" contained in the Proxy Statement to be used by the Company in connection with its 2002 Annual Meeting of Stockholders.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" contained in the Proxy Statement to be used by the Company in connection with its 2002 Annual Meeting of Stockholders.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the information set forth under the caption "Certain Transactions" contained in the Proxy Statement to be used by the Company in connection with its 2002 Annual Meeting of Stockholders.
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) See "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" above for a list of the financial statements filed as part of this report. The exhibits listed below are filed with or incorporated into this report.
3.1 Restated Certificate of Incorporation and Restated By-Laws of the Company.(1) 10.5 Partnership Agreement, Glenbriar Joint Venture, dated January 7, 1994 between GIC Investment Corporation and Westco Community Builders.(1) 10.7 Form of Nonqualified Stock Option Agreement as of November 16, 1994.(1) 10.9 Form of Incentive Stock Option Agreement.(1) 10.10 Form of Nonqualified Stock Option Agreement.(1) 10.11 Partnership Agreement, Tracy Residential Venture Partners, LLC, dated April 6, 1998 between the Company and Westco Community Builders, Inc.(2) 10.12 $3,350,000 Line of Credit Collateralized by a Deed of Trust dated October 22, 1998.(3) 10.13 $10,500,000 Promissory Note and Loan Agreement Collateralized by a Deed of Trust dated July 22, 1998.(3) 10.14 Lease Agreement, dated October 1, 1997.(4) 10.15 Sublease Agreement, dated October 1, 1997 between the Company and Wilfred, Inc.(4) 10.16 1995 Stock Option Plan, as amended. (5) 10.17 Partnership Agreement, Meadowbrook Ventures, LLC.(6) 10.18 Partnership Agreement, South Tracy Industrial Park, LLC.(7) 10.19 Partnership Agreement, SPM, LLC.(7) 10.20 Stock Option Plan for Non-employee Directors, as amended and restated. (8) 10.21 Partnership Agreement, Halcyon Properties, LLC.(9) 10.12 Partnership Agreement, Woodview Estates, LLC.(10) 21.1 Subsidiaries of the Company.
(1) - Incorporated by reference to Exhibits 3.1, 10.5, 10.7, 10.9 and 10.10 in the Company's Annual Report on Form 10-K for the Year Ended December 31, 2000. (2) - Incorporated by reference to Exhibit 10.11 in the Company's Annual Report on Form 10-KSB for the Year Ended December 31, 1999. (3) - Incorporated by reference to Exhibits 10.12 and 10.13 in the Company's Annual Report on Form 10-KSB for the Year Ended December 31, 1998. (4) - Incorporated by reference to Exhibits 10.14 and 10.15 in the Company's Quarterly Report on Form 10-QSB for the Quarter Ended March 31, 1999. (5) - Incorporated by reference to Exhibit 10.16 in the Company's Quarterly Report on Form 10-QSB for the Quarter Ended June 30, 1999. (6) - Incorporated by reference to Exhibit 10.17 in the Company's Quarterly Report on Form 10-QSB for the Quarter Ended September 30, 1999. (7) - Incorporated by reference to Exhibits 10.18 and 10.19 in the Company's Annual Report on Form 10-KSB for the Year Ended December 31, 1999. (8) - Incorporated by reference to Exhibit 10.20 in the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2000. (9) - Incorporated by reference to Exhibit 10.21 in the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2001. (10) - Incorporated by reference to Exhibit 10.22 in the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2001.
(b.) No reports on Form 8-K were filed with the Securities and Exchange Commission during the fourth quarter of the year ended December 31, 2001.
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.
DOVER INVESTMENTS CORPORATION
Date: March 26, 2002 By: /s/ Frederick M. Weissberg Frederick M. Weissberg Chairman of the Board and President
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.
APPENDIX A
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
DOVER INVESTMENTS CORPORATION AND SUBSIDIARIES
December 31, 2001, 2000 and 1999
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders Dover Investments Corporation
We have audited the accompanying consolidated balance sheets of Dover Investments Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States of America. 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 consolidated financial position of Dover Investments Corporation and subsidiaries as of December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.
GRANT THORNTON LLP
San Francisco, California March 4, 2002
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001, 2000 and 1999 (in thousands, except share and per share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES
Dover Investments Corporation (the "Company") engages primarily in residential real estate development. Westco Community Builders, Inc., an independent California corporation ("WCB"), is primarily responsible for the construction and development of the real estate. WCB is not owned nor controlled by the Company and accordingly is not part of these consolidated financial statements.
The Company and WCB have formed one California general partnership, Glenbriar Joint Venture, and three California limited liability companies, Glenbriar Venture #2, LLC, Tracy Residential Venture Partners, LLC and Meadowbrook Ventures, LLC (collectively, the "Developers"), for development of the Glenbriar Estates project, another California limited liability company, South Tracy Industrial Park, LLC ("STIP"), for development of the South Tracy Industrial Park project, another California limited liability company, Halcyon Properties, LLC ("Halcyon"), for development of the San Leandro project, and another California limited liability company, Woodview Estates, LLC ("Woodview"), for development of the Novato project. For each of the above entities the Company contributes all of the capital (except that for Glenbriar Venture #2, LLC, WCB contributed 25% of the capital through December 1998). WCB is paid a fee for managing the construction and development of the real estate. The Company (and WCB, with respect to Glenbriar Venture #2, LLC) receives a preferred return on equity in the above entities at an annual rate of 10% to12%, through December 31, 2001, and of approximately 7%, since January 1, 2002. Remaining profits in each entity are split, 50% to the Company and 50% to WCB (or, in the case of Glenbriar Venture #2, LLC, 50% to 75% to the Company and the remainder to WCB) according to the governing agreements.
The Company has also, together with three other independent parties, formed a New York limited liability company, SPM, LLC ("SPM"), for development of the Coram Plaza Shopping Center project. Capital contributions and distributions to the members are made according to membership interest. Initially, each member had a 25% membership interest. In 2000, the Company and two of the other members of SPM purchased an additional 5% interest each from the fourth member, thereby increasing the membership interest of the three members to 30% each, with the fourth member retaining a 10% membership interest in the company.
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001, 2000 and 1999 (in thousands, except share and per share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES (continued)
Use of Estimates
In preparing the financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its majority owned and controlled Joint Venture and Limited Liability Companies. All significant inter-company transactions are eliminated in consolidation.
Property Held for Development
Costs for the development of property and the building of homes are capitalized during the construction period. Such costs include expenditures for land, land improvements, model homes, capitalized interest, and construction in progress. When a home is sold, the cost of the sale is recognized, which includes land, site development, construction, management fees and financing costs using the specific identification method.
Revenues From and Cost of Home Sales
The Company recognizes revenue from home sales upon the closing and transfer of title to the buyer. The cost of a home sold, includes land, site development, construction, management fees and financing costs. For each home sold, a reserve equal to one percent of the selling price is established to cover warranty expense incurred subsequent to the home sale. Warranty expenditures are charged to the reserve when paid. Sale of lots are recognized upon the closing and transfer of title to the buyer. The cost of the lot sold, includes land, site improvement, development and financing costs.
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001, 2000 and 1999 (in thousands, except share and per share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES (continued)
SPM, LLC
The Company accounts for its investment in SPM, LLC on the cost method since it does not have significant influence over the operations of SPM, LLC. The Company includes this investment with its property held for development at cost, which the Company considers to be lower than estimated market value.
Income Taxes
The Company follows the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and on the expected future tax benefit to be derived from tax loss carry forwards, if any. Additionally, deferred tax items are measured using current tax rates. A valuation allowance is established to reflect the likelihood of realization of deferred tax assets.
Concentrations of Risk
The Company maintains its cash balances, which exceed federally insured limits, in major financial institutions. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk or loss. The Company's development projects are primarily located in Northern California. Any changes to the housing market in this area could affect the Company's operations. The Company operates as a single segment.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents for purposes of the Statement of Cash Flows. Amounts also include purchased securities, in the amount of $13,738 under agreements to resell (repurchase agreements) with primary securities dealers. Such repurchase agreements are typically overnight investments and collateralized by mortgage-backed certificates which are held on behalf
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001 2000 and 1999 (in thousands, except share and per share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES (continued)
of the Company by the dealers who arrange the transaction. At December 31, 2001, the weighted average interest rate of such repurchase agreements was 4.04%. The market value of the repurchase agreements approximates cost.
Reclassification
Certain prior year amounts have been reclassified to conform to current year presentation.
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001 2000 and 1999 (in thousands, except share and per share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES (continued)
Effect Of New Accounting Standards
During 2001, the Financial Accounting Standards Board (FASB) approved for issuance Statement of Financial Accounting Standards (SFAS) 141, Business Combinations, and SFAS 142, Goodwill and Other Intangible Assets. SFAS 141 provisions relating to the initial measurement and recording of goodwill and intangible assets, as well as financial statement disclosures, are effective for purchase business combinations completed after June 30, 2001. SFAS 142 is effective for fiscal years beginning after December 15, 2001; however, certain provisions of this Statement apply to goodwill and other intangible assets acquired between July 1, 2001 and the effective date of SFAS 142. Major provisions of these Statements and their effective dates for the Company are as follows:
All business combinations initiated after June 30, 2001 must use the purchase method of accounting. The pooling of interest method accounting is prohibited except for transactions initiated before July 1, 2001.
Intangible assets acquired in a business combination must be recorded separately from goodwill if they arise from contractual or other legal rights or are separable from the acquired entity and can be sold, transferred, licensed, rented or exchanged, either individually or as part of a related contract, asset or liability.
Goodwill as well as intangible assets with indefinite lives, acquired after June 30, 2001, will not be amortized. Effective January 1, 2001, all previously recognized goodwill and intangible assets with indefinite lives will no longer be subject to amortization.
Effective January 1, 2002, goodwill and intangible assets with indefinite lives will be tested for impairment annually and whenever there is an impairment indicator.
All acquired goodwill must be assigned to reporting units for purposes of impairment testing and segment reporting.
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001 2000 and 1999 (in thousands, except share and per share amounts)
NOTE A - ORGANIZATION AND ACCOUNTING POLICIES (continued)
The Financial Accounting Standards Board also issued SFAS 143, Accounting for Asset Retirement Obligations. SFAS 143 applies to all entities that have legal obligations associated with the retirement of a tangible long-lived asset that result from acquisition, construction, or development and (or) normal operations of the long-lived asset. SFAS 143 requires that a liability for an asset retirement obligation be recognized if the obligation meets the definition of a liability in FASB, Concepts Statement 6, Elements of Financial Statements, and if the amount of the liability can be reasonably estimated. SFAS 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002.
In addition, the Financial Accounting Standards Board also issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144 supercedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, as well as the provisions of Opinion 30, Reporting the Results of Operations Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, that address the disposal of a business. SFAS 144 also amended APB 51, Consolidated Financial Statements, to eliminate the exception to consolidate a subsidiary for which control is likely to be temporary. SFAS 144 carries over the recognition and measurement provisions of SFAS 121, but differs from SFAS 121 in that it provides guidance in estimating future cash flows to test recoverability. SFAS 144 also includes criteria that have to be met for an entity to classify a long-lived asset or asset group as held for sale, and extends the presentation of discontinued operations permitted by Opinion 30 to include disposals of a component of an entity. SFAS 144 is effective for financial statements issued for fiscal years after December 15, 2001, except for the disposal provisions which are immediately effective.
The Company does not expect that the adoption of these accounting standards will have a material effect on its financial statements.
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001, 2000 and 1999 (in thousands, except share and per share amounts)
NOTE B - NOTES RECEIVABLE
During 2001, the Company extended a line of credit of up to $1,659 to Westco Community Builders, Inc. for the purpose of building single family homes. The line of credit bears an interest rate of Prime (4.75% at December 31, 2001) plus 2% and matures on December 9, 2002, and is collateralized by a Deed of Trust over the property.
In May 2001, the Company's Principal Financial Officer, received a loan from the Company in the amount of $874. The loan amortizes over a 30-year period and interest is payable at a fixed rate of four percent per annum. This loan was made for the purchase of her residence and is secured by a Deed of Trust. As of December 31, 2001, the outstanding amount of the loan was $866.
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001, 2000 and 1999 (in thousands, except share and per share amounts)
NOTE B - NOTES PAYABLE (continued)
Aggregate principal payments of $6,570 are due through August 12, 2002. All these notes payable are collateralized by Deeds of Trust over property held for development.
Interest in 2001, 2000 and 1999 amounted to $61, $622 and $660, respectively, and is capitalized as part of property held for development.
NOTE D - LEASE COMMITMENT
The Company has an agreement to lease premises that expires on September 30, 2002, with an option to renew for an additional period of five years. On November 15, 2001, the Company extended the term of the lease commencing on October 1, 2002 and expiring as of September 30, 2004. The Company subleases a portion of the premises to a related party. The sublease's share of the lease equals 35% of the total rent and operating costs. Rent and yearly operating cost reimbursements from the sublease were $40 for 2001 compared to $41 for 2000 and $46 for 1999.
A summary of net minimum lease payments is as follows: Years ending December 31,
2002 $ 52 2003 52 2004 39 Total $143
Rent expenses for the years ended December 31, 2001, 2000 and 1999 totaled $92, $76 and $73, respectively.
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001, 2000 and 1999 (in thousands, except share and per share amounts)
NOTE E - INCOME TAXES
Income tax expenses for the year ended December 31, consists of:
Current 2001 2000 1999 Federal $1,053 $3,399 $2,858 State 332 947 750 $1,385 $4,346 $3,608
Deferred Federal $ 212 $ - $ - State 17 - - $ 229 $ - $ -
Total $1,614 $4,346 $3,608
In 1993, the Company underwent a quasi-reorganization resulting in the elimination of its accumulated deficit and a decrease in additional Paid-in Capital. The subsequent tax benefit of utilization of prequasi- reorganization operating losses are credited to Paid-in Capital. A tax benefit for 2001, 2000 and 1999 of $2,804, $2,097 and $2,310, respectively, for prequasi-reorganization net operating losses has been credited to Paid-in Capital. At December 31, 2001 all prequasi- reorganization net operating loss tax benefits had been fully recognized and no further tax benefits are available to be credited to Paid-in Capital after that date.
The following is a reconciliation between the federal statutory rate and the effective rate used for the Company's provision for taxes:
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001, 2000 and1999 (in thousands except share and per share amounts)
NOTE E - INCOME TAXES (continued)
Statement of Financial Accounting Standards ("SFAS") No.109 requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. In 2000 and 1999 the Company recorded a valuation allowance for the total amount of deferred tax assets. The deferred tax asset schedule for 2000 and 1999 did not give effect to any deferred tax asset related to prequasi-reorganization tax loss carry forwards. At December 31, 2001, the Company has determined that it is more likely than not that its deferred tax assets including those related to the remaining prequasi-reorganization tax loss carry forwards, will be realized, and accordingly the valuation allowance has been reduced.
As of December 31, 2001, the Company has Federal net operating loss carry forwards of approximately $2,731 expiring through 2011.
NOTE F - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instrument assets and liabilities consist of cash and cash equivalents, notes receivable and long-term debt. The balance sheet carrying amounts of cash and cash equivalents, notes receivable and debt approximate the estimated fair values.
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE
At December 31, 2001, the Company had three stock-based compensation plans. Two of the plans are primarily for employees and the other is for non-employee Directors. The Company applies APB Opinion 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for the plans, and has adopted the disclosure only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation". Accordingly, since options are issued at fair market value no compensation costs have been recognized for the plans.
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001, 2000 and 1999 (in thousands, except share and per share amounts)
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE(continued)
STOCK OPTION PLAN FOR EMPLOYEES
Under the 1995 Stock Option Plan (the "Plan"), 400,000 shares of Class A Common Stock and 400,000 shares of Class B Common Stock of the Corporation have been reserved for issuance pursuant to the Plan. The aggregate number of shares which may be issued under the Plan shall not exceed 400,000 shares of any combination of shares of Class A Common Stock and Class B Common Stock. Awards may be made under the Plan until January 16, 2005.
The exercise price for shares subject to the options granted under the Plan is the fair market value of the shares at the date of grant. The option price per share of a stock option granted to a person who, on the date of such grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company shall not be less than 110% of the fair market value on the date that the option is granted. Options granted under the Plan become exercisable over two and three years at the rate of approximately 50% and 33.333%, each year on each anniversary of the grant date, with full vesting occurring on the second or third anniversary date. As of December 31, 2001, options for 166,500 shares were outstanding.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The 1990 Stock Option Plan for Non-employee Directors (the "Restated Plan"), was restated and approved by stockholders on May 24, 2000. The exercise price for each option granted is the market price of the shares at the date of grant. Options granted under the Restated Plan are exercisable in 50% increments on each anniversary of the grant date, with full vesting occurring on the second anniversary date. All options terminate upon the earliest of (a) thirty days after an optionee ceases to be a director of the Company for any reason other than death, (b) six months after an optionees death or (c) ten years after the date such options were granted.
DOVER INVESTMENTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2001, 2000 and 1999 (in thousands, except share and per share amounts)
NOTE G - COMMON STOCK OPTION PLANS AND EARNINGS PER SHARE(continued)
The aggregate number of shares which may be issued under the Restated Plan shall not exceed 12,500 shares of Class A Common Stock.
The Restated Plan provides that each director who is not an employee of the Company and has not been an employee of the Company for all or any part of the preceding fiscal year automatically receives options to purchase 1000 shares of Class A Common Stock upon their election or appointment as a director of the Company. Thereafter, every year options to purchase 500 shares of Class A Common Stock (subject to adjustment for recapitalization, stock splits and similar events) will automatically be granted to such director, provided, however, that such automatic option grants will be made only if the director (a) has served on the Board of Directors for the entire two preceding fiscal years, (b) is not otherwise an employee of the Company or any subsidiaries on the date of grant and (c) has not been an employee of the Company or any subsidiaries for all or any part of the preceding fiscal years. As of December 31, 2001, options for 150 shares were outstanding for the directors.
The Board of Directors has proposed to extend the term of the Plan, under which options may be granted, until September 28, 2004. The plan amendment was approved by the stockholders.
Had compensation cost for all the plans been determined based on the fair value of the options at the grant dates consistent with the methodology prescribed by FAS 123, the Company's net income and income per share would be reduced to the pro forma amounts indicated below:
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options pricing model with the following weighted-average assumptions: expected life of five years from the date of grant; stock volatility 47% in 2001, 74% in 2000 and 56% in 1999; risk free interest rates, 5.12% in 2001, 5.12% in 2000 and 6.45% in 1999; no dividends are expected.
EXHIBIT INDEX
Exhibit Description Number
3.1 Restated Certificate of Incorporation and Restated By-Laws of the Company.(1) 10.5 Partnership Agreement, Glenbriar Joint Venture, dated January 7, 1994 between GIC Investment Corporation and Westco Community Builders.(1) 10.7 Form of Nonqualified Stock Option Agreement as of November 16, 1994.(1) 10.9 Form of Incentive Stock Option Agreement.(1) 10.10 Form of Nonqualified Stock Option Agreement.(1) 10.11 Partnership Agreement, Tracy Residential Venture Partners, LLC, dated April 6, 1998 between the Company and Westco Community Builders, Inc.(2) 10.12 $3,350,000 Line of Credit Collateralized by a Deed of Trust dated October 22, 1998.(3) 10.13 $10,500,000 Promissory Note and Loan Agreement Collateralized by a Deed of Trust dated July 22, 1998.(3) 10.14 Lease Agreement, dated October 1, 1997.(4) 10.15 Sublease Agreement, dated October 1, 1997 between the Company and Wilfred, Inc.(4) 10.16 1995 Stock Option Plan, as amended. (5) 10.17 Partnership Agreement, Meadowbrook Ventures, LLC. (6) 10.18 Partnership Agreement, South Tracy Industrial Park, LLC.(7) 10.19 Partnership Agreement, SPM, LLC.(7) 10.20 Stock Option Plan for Non-employee Directors, as amended and restated. (8) 10.21 Partnership Agreement, Halcyon Properties, LLC.(9) 10.12 Partnership Agreement, Woodview Estates, LLC.(10) 21.1 Subsidiaries of the Company. __________
(1) - Incorporated by reference to Exhibits 3.1, 10.5, 10.7, 10.9 and 10.10 in the Company's Annual Report on Form 10-K for the Year Ended December 31, 2000. (2) - Incorporated by reference to Exhibit 10.11 in the Company's Annual Report on Form 10-KSB for the Year Ended December 31, 1999. (3) - Incorporated by reference to Exhibits 10.12 and 10.13 in the Company's Annual Report on Form 10-KSB for the Year Ended December 31, 1998. (4) - Incorporated by reference to Exhibits 10.14 and 10.15 in the Company's Quarterly Report on Form 10-QSB for the Quarter Ended March 31, 1999. (5) - Incorporated by reference to Exhibit 10.16 in the Company's Quarterly Report on Form 10-QSB for the Quarter Ended June 30, 1999. (6) - Incorporated by reference to Exhibit 10.17 in the Company's Quarterly Report on Form 10-QSB for the Quarter Ended September 30, 1999. (7) - Incorporated by reference to Exhibits 10.18 and 10.19 in the Company's Annual Report on Form 10-KSB for the Year Ended December 31, 1999. (8) - Incorporated by reference to Exhibit 10.20 in the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2000. (9) - Incorporated by reference to Exhibit 10.21 in the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2001. (10) - Incorporated by reference to Exhibit 10.22 in the Company's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2001.
(b.) No reports on Form 8-K were filed with the Securities and Exchange Commission during the fourth quarter of the year ended December 31, 2001.