U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended August 31, 1997 FEDERAL AFFORDABLE HOUSING CORPORATION -------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) Minnesota 59-3169033 --------- ---------- (state or other Jurisdiction (IRS Employer of incorporation or organization) Identification No.) 1616 Gulf-to-Bay Boulevard Clearwater, Florida 34615 - ---------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (727) 446-7981 Check whether the Issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [ X ] As of August 31, 1997, there were 164,500 shares of Common Stock outstanding and 7,450 Investor's Stock Purchase Warrants outstanding. Transitional Small Business Disclosure Format: Yes [X] No [ ] INFORMATION REQUIRED IN QUARTERLY REPORT OF TRANSITIONAL SMALL BUSINESS ISSUERS. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The information required by Item 310(b) of Regulation S-B is attached. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION [The Registrant is a transitional small business issuer which relied upon Alternative 2 under "Information Required in Annual Report of Transitional Small Business Issuers" in its most recent 10-KSB, and accordingly, chooses here to update the response to Item 6(a) (3) (i) to Model B of Form 1-A. ] The Company completed its public offering on June 6, 1995 and received net proceeds of $359,336. The Company's plan of operation for the 12 month period ended May 31, 1998 calls for continued development of infrastructure scaled according to the net proceeds of its offering and aggressive marketing. Management believes that the balance remaining of its net proceeds of $359,336 from its offering is sufficient to carry out its plan of operation for the twelve months through May 31, 1998, without revenues from operations. 1 The Company anticipates that its major expense during the twelve month period ending May 31, 1998 will be infrastructure development. Upon completion of infrastructure development, the company anticipates that its only expenses will be executive compensation, real estate taxes, general corporate purposes (including marketing and sales) and perhaps model home construction. In addition, the Company plans to limit additional property acquisitions and infrastructure development until purchase agreements have been executed for approximately half of the developed lots. The Company believes that its plan of scaled infrastructure development and limitation on acquisition and development will enable it to operate with the net proceeds of its public offering, without revenues from operations, for the twelve month period ending May 31, 1998. The Company anticipates that it will hire additional commissioned sales persons prior to June, 1998. However, such sales persons will be paid only on a straight commission basis and will be entitled to payment only upon revenue generation. Accordingly, the Company does not expect that hiring such commissioned sales persons will have a significant impact on the Company's ability to operate without revenues from operations. The company does not intend to conduct any product research or development or to purchase or sell any plant or equipment prior to June, 1998. Information concerning the comparable interim period for the preceding year is not included. PART II. ITEM 1. LEGAL PROCEEDINGS Not Applicable. ITEM 2. CHANGES IN SECURITIES Not Applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS Not Applicable. ITEM 5. OTHER INFORMATION Not Applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. See the Indexes to Exhibits, below. (b) Reports on Form 8-K. Not Applicable. INDEX TO EXHIBITS. All of the items below are incorporated by reference to the Registrant's Registration Statement on Form SB-2, File No. 33-67536-A, effective March 10, 1995, except for Item 27.1, which is included with this filing. Number Description 4.1 Form of Common Stock Certificate (Exhibit 4.A of Form SB-2) 4.2 Form of Investor's Stock Purchase Warrant Certificate (Exhibit 4.B of Form SB-2) 2 10.1 Option Agreement between Registrant, RemProp, Inc. and Key Management, Inc. (Exhibit 10.A. of Form SB-2) 10.2 First Amendment to Option Agreement (Exhibit 10.B. to Form SB-2) 10.3 Second Amendment to Option Agreement (Exhibit 10.C. to Form SB-2) 10.4 Lease Agreement between Registrant and RemProp, Inc. (Exhibit 10.D. to Form SB-2) 27.1 Financial Data Schedule* 99.1 Registrant's Registration Statement on Form SB-2, as amended. 99.2 Registrant's Final Prospectus, dated March 10, 1995, filed under Rule 424(b) of the 1933 Act. * Included with this report. All other items are incorporated by reference to the Registrant's Form SB-2, File No. 33-67536-A, effective March 10, 1995. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FEDERAL AFFORDABLE HOUSING CORPORATION Date: December 15, 1997 By: /s/ Richard E. Metz ------------------------------------ Richard E. Metz, President, CEO By: /s/ Wayne A. Weyrauch ------------------------------------ Wayne A. Weyrauch Vice President of Finance, CFO (Principal Financial officer, Principal Accounting officer) 3 FEDERAL AFFORDABLE HOUSING CORPORATION TABLE OF CONTENTS PAGE ------- ACCOUNTANT'S REPORT PAGE 5 BALANCE SHEETS 6 STATEMENTS OF OPERATIONS 7 STATEMENTS OF CASH FLOWS 8 4 J. MICHAEL DAILY & ASSOCIATES Certified Public Accountants 1822 Drew Street, Suite 1 Clearwater, Florida 34625 727-447-6860 Fax 727-441-1840 Members American Institute of Certified Public Accountants Florida Institute of Certified Public Accountants January 16, 1998 Board of Directors Federal Affordable Housing Corporation 1616 Gulf-to-Bay Blvd. Clearwater, Florida 34615 Gentlemen: We have compiled the accompanying balance sheet of FEDERAL AFFORDABLE HOUSING as of August 31, 1997, and the related statement of revenues and expenses for the three months then ended, and the comparative statement of income for the three months ended August 31, 1997 and 1996, and the statement of cash flows for the three months then ended in accordance with Statements on Standards for Accounting and Review services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. Management has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the disclosures were included in the financial statements, they might influence the user's conclusions about the Company's financial position, results of operations and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters. /s/ J. Michael Daily - ------------------------------- J. Michael Daily, CPA Clearwater, Florida January 16,1998 5 FEDERAL AFFORDABLE HOUSING CORPORATION Balance Sheets Assets August 31, May 31, 1997 1997 ------------------ ------------------ Current assets Operating cash in bank $ 1,449 $ 3,845 Certificate of deposit, Suntrust 300,000 300,000 Due from Suncoast Food Services, Inc. 67,271 67,271 Construction in process: Land costs/site development 237,964 237,964 Houses 146,604 146,604 ------------------ ------------------ Total current assets 753,288 755,684 ------------------ ------------------ Other assets Incorporation fees, legal expenses and registration statement costs - unamortized 51,390 51,390 Utility deposits 424 424 ------------------ ------------------ 51,814 51,814 ------------------ ------------------ Total assets 805,102 807,498 ================== ================== Liabilities and Stockholders' Equity Current liabilities Due to RemProp, Inc. 19,509 19,509 Commercial loan payable, SunTrust 281,895 281,074 Construction Loans, SunTrust houses 95,400 95,400 Note payable, R. Metz, demand, bearing interest at 7% 8,931 8,931 ------------------ ------------------ Total current liabilities 405,735 404,914 ------------------ ------------------ Stockholders' equity Common stock, no par value Authorized 5,000,000 shares, 164,500 issued and outstanding 486,887 486,887 Accumulated deficit (87,521) (84,303) ------------------ ------------------ Total stockholders' equity 399,367 402,584 ------------------ ------------------ Total liabilities and stockholders' equity $ 805,102 $ 807,498 ================== ================== 6 FEDERAL AFFORDABLE HOUSING CORPORATION Statements of Operations For the Three Months Ended August 31, ----------------------------------- 1997 1996 --------------- ------------- Income Interest Earned $ - $ - Selling, general and administrative expenses 3,218 8,825 --------------- ------------- Net loss $ (3,218) $ (8,825) =============== ============= Basic loss per common share $ (0.02) $ (0.05) =============== ============= Weighted average number of common shares outstanding 164,500 164,500 =============== ============= 7 FEDERAL AFFORDABLE HOUSING CORPORATION Statements of Cash Flows For the Three Months Ended August 31, ---------------------------------- 1997 1996 --------------- --------------- Cash flows from operating activities: Reconciliation of net loss to net cash used in operating activities Net loss $ (3,218) $ (8,825) Adjustments to reconcile net loss to net cash used in operating activities Amortization of fees and costs Changes in assets and liabilities Net decrease in intercompany loans, Construction in process, fees and costs, and deposits (41,086) --------------- --------------- (3,218) (49,911) --------------- --------------- Cash flows from investing activities Addition to certificate of deposit - - --------------- --------------- Net cash used in investing activities - - --------------- --------------- Cash flows from financing activities Proceeds from issuance of common stock - - Proceeds from issuance of notes payable 821 50,000 --------------- --------------- Net cash provided by financing activities 821 50,000 --------------- --------------- Net increase (decrease) in cash (2,396) 89 Cash beginning 3,845 1,219 --------------- --------------- Cash ending $ 1,449 $ 1,308 =============== =============== 8