-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BXffsu3hNdXT4dHIdpNmhLM+vZoyjcX/YAiHKSvmtMz4HLUgcOpAtf2Mcxftq5bQ Pnyu18xxfelnpTi17Iwetw== 0000783728-96-000018.txt : 19961202 0000783728-96-000018.hdr.sgml : 19961202 ACCESSION NUMBER: 0000783728-96-000018 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961126 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIDGEWOOD PROPERTIES INC CENTRAL INDEX KEY: 0000783728 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE DEALERS (FOR THEIR OWN ACCOUNT) [6532] IRS NUMBER: 581656330 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14019 FILM NUMBER: 96672556 BUSINESS ADDRESS: STREET 1: 2859 PACES FERRY RD STE 700 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 4044343670 MAIL ADDRESS: STREET 1: 2859 PACES FERRY ROAD STREET 2: SUITE 700 CITY: ATLANTA STATE: GA ZIP: 30339 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended August 31, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission file number 0-14019 Ridgewood Properties, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 58-1656330 - ------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2859 Paces Ferry Road, Suite 700 Atlanta, Georgia 30339 - ---------------------------------------- ----------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (770) 434-3670 -------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value ---------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 __X__ No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. _____ Aggregate market value of voting stock held by non-affiliates on October 31, 1996 - cannot be determined due to an absence of an established public trading market in the common stock. Common shares outstanding on October 31, 1996 - 1,088,480 shares (1) Portions of the registrant's Annual Report to Shareholders for the fiscal year ended August 31, 1996 (the "1996 Annual Report to Shareholders") are incorporated by reference in Part II of this Report. (2) Portions of the registrant's definitive Proxy Statement relating to the 1997 Annual Meeting (the "1997 Proxy Statement") to be filed with the Commission on or about December 1, 1996, are incorporated by reference in Part III of this Report. PART I Item 1. Business Ridgewood Properties, Inc. (the "Company") is primarily engaged in the business of acquiring, developing, operating and selling real estate property in the Southeast and "Sunbelt" areas. Additionally, the Company, through its investment in a limited partnership, is engaged in acquiring and managing hotel properties in the Southeast, as well as managing other hotels throughout the country. The Company also owns and operates a hotel in Longwood, Florida. All of the Company's other properties are land properties held for sale, and no additional development is currently anticipated for the land. The Company was incorporated under the laws of the State of Delaware on October 29, 1985. Prior to December 31, 1985, the Company operated under the name CMEI, Inc. On August 16, 1995, RW Hotel Partners, L.P. was organized as a limited partnership (the "Partnership") under the laws of the State of Delaware. Concurrently, the Company formed Ridgewood Hotels, Inc., a Georgia corporation ("Ridgewood Hotels") which became the sole general partner in the Partnership with RW Hotel Investments, L.L.C. ("Investor") as the limited partner. Ridgewood Hotels has a 1% base distribution percentage versus 99% for the Investor. However, distribution percentages do vary depending on certain defined preferences and priorities pursuant to the Partnership Agreement ("Agreement") which are discussed below. The partnership was originally formed to acquire a hotel property in Louisville, Kentucky. The partnership consists of six hotel properties at August 31, 1996. The terms of this partnership will serve as a guideline for other potential acquisitions with this or other investors. Income and loss are allocated to the Company and the limited partner based upon the formula for allocating distributable cash as described below but subject to an annual limitation which would result in no more than 88% of partnership income or loss (as defined) being allocated to the limited partner. Distributable Cash is defined as the net income from the property before depreciation plus any net sale proceeds and net financing proceeds less capital costs. Distributions of Distributable Cash shall be made as follows: - First, to the Investor until there has been distributed to the Investor an amount equal to a 15% cumulative internal rate of return on the Investor's investment. - Second, to Ridgewood Hotels until the aggregate amount received by Ridgewood Hotels equals the aggregate cash contributions made by Ridgewood Hotels to the Partnership (as of August 31, 1996, Ridgewood Hotels had contributed approximately $748,000). - Third, 12% to Ridgewood Hotels and 88% to the Investor until there has been distributed to the Investor an amount equal to a 25% cumulative internal rate of return on Investor's investment. - Fourth, 75% of the residual to the Investor and 25% to Ridgewood Hotels. A Management Agreement exists between the Partnership and the Company as Manager ("Manager") for the purpose of managing hotels in Kentucky, Georgia and South Carolina. The Manager shall be entitled to the following property management fees: (1) 2.5% of the gross revenues from the hotel property. (2) 1% of the gross revenues from the hotel property as an incentive fee if distributable cash equals or exceeds 13.5% of certain aggregate acquisition costs. No management fees were payable with respect to the first 12-month period of management of the hotel in Kentucky. A Construction Management Agreement exists between the Partnership and the Manager for the purpose of managing future improvements to the properties. The Company currently has approximately $748,000 invested in the Partnership. Also, at August 31, 1996, the Company recorded approximately $209,000 equity in the income of the Partnership, bringing the total investment in the limited Partnership to approximately $957,000. The Partnership purchased a hotel in Louisville, Kentucky for approximately $16,000,000. In December 1995 and January 1996, the Partnership purchased four hotel properties in Georgia for approximately $15,000,000 and a hotel in South Carolina for $4,000,000, respectively. The Company may make future capital contributions to the Partnership. Management expects to fund such capital contributions through available cash or from loans from the Partnership. Additionally, the Company may invest in other partnerships to acquire hotels in the future. In December 1995, the Company acquired the Wesley Hotel Group, a hotel management company located in Atlanta, Georgia. At the time of acquisition, Wesley managed five hotels. In conjunction with the acquisition, the Company issued 125,000 shares of common stock and assumed three promissory notes with a combined outstanding principal of approximately $106,000. The Company owns and operates one hotel and owns a number of land parcels which are held for sale. The success of the Company's operations continues to be dependent upon such unpredictable factors as the general and local economic conditions to which the real estate industry is particularly sensitive: zoning, labor, material and energy availability, weather conditions and the availability of satisfactory financing. The hotel management business has become very competitive. In order to obtain management contracts, owners are frequently requiring management companies to also have ownership in the hotel. The hotel industry has become very attractive to many investors and, in turn, it has become very competitive to purchase hotels. This has also prompted the building of many new hotels in various markets. The Company believes that it is in an attractive position to remain competitive in this industry. The Company has the ability to generate equity to contribute to the acquisitions as well as to provide the expertise to manage the acquisitions, operations and ultimate disposition of properties for both the Company and third-party owners. The annual average occupancy of the Company's only hotel was approximately 65% for the fiscal year 1996. The Company's principal office is located at 2859 Paces Ferry Road, Suite 700, Atlanta, Georgia 30339 (telephone number: (770) 434-3670). The Company employs approximately 90 persons (of which 19 are located at its principal office) at August 31, 1996. Item 2. Properties The Company does not own any real property material to conducting the administrative aspects of its business operations. Its principal office in Atlanta, Georgia is leased until May 1997 and consists of approximately 6,200 square feet. As a result of its operations, the Company is the owner of various other properties, including developed and undeveloped real estate. The Company's operating properties are as follows: Name of Hotel Location # of Rooms Ownership Interest Ramada Inn (a) Longwood, FL 192 Owned Holiday Inn Louisville, KY 267 Owned by Partnership (b) Holiday Inn Orangeburg, SC 160 Owned by Partnership (b) Holiday Inn Gainesville, GA 132 Owned by Partnership (b) Holiday Inn Thomasville, GA 147 Owned by Partnership (b) Holiday Inn Suwanee, GA 120 Owned by Partnership (b) Holiday Inn Express Commerce, GA 96 Owned by Partnership (b) (a) The hotel serves as collateral for the Company's $2,771,000 term loan with a commercial lender. (b) The Company has a 1% ownership in these hotels as the general partner in a partnership. The Company also holds eight land parcels for sale, three of which are located in Florida, two in Georgia and one in Texas, Ohio and Arizona. For further information on such properties, see the accompanying consolidated financial statements and Schedule III, Real Estate and Accumulated Depreciation, contained elsewhere herein. Item 3. Legal Proceedings On May 2, 1995 a complaint was filed in the Court of Chancery of the State of Delaware (New Castle County) entitled William N. Strassburger v. Michael M. Early, Luther A. Henderson, John C. Stiska, N. Russell Walden, and Triton Group, Ltd., defendants, and Ridgewood Properties, Inc., nominal defendant, C.A. No. 14267 (the "Complaint"). The plaintiff is an individual shareholder of the Company who purports to file the Complaint individually, representatively on behalf of all similarly situated shareholders, and derivatively on behalf of the Company. The Complaint challenges the actions of the Company and its directors in consummating the Company's August 1994 repurchases of its common stock held by Triton Group, Ltd. and Hesperus Partners Ltd. in five counts, denominated Waste of Corporate Assets, Breach of Duty of Loyalty to Ridgewood, Breach of Duty of Good Faith, Intentional Misconduct, and Breach of Duty of Loyalty and Good Faith to Class. On July 5, 1995, the Company filed a timely answer generally denying the material allegations of the complaint and asserting several affirmative defenses. This case is in the concluding stages of discovery. No trial date has been set. The Company intends to vigorously contest this matter. On December 22, 1995, the Company and its wholly-owned subsidiary, Cornerstone Management & Development, Inc., a Georgia corporation ("Cornerstone Georgia"), sued Charles S. Taylor ("Taylor"), Deborah L. Cannon ("Cannon"), their affiliated corporations, Cornerstone Management & Development, Inc., a Maryland corporation ("Cornerstone Maryland") and Cornerstone Hospitality Group, Inc. ("Cornerstone Hospitality") in the Superior Court of Cobb County, Georgia (No. 95-1943805), for actions taken by the defendants both before and after Taylor and Cannon were terminated as officers and directors of Cornerstone Georgia. The complaint alleges that in violation of their fiduciary duties and in violation of an Asset Purchase Agreement among the parties, Taylor and Cannon misappropriated assets and business from Cornerstone Georgia; that since their termination by Cornerstone Georgia, Taylor and Cannon have continued to misappropriate assets and to usurp business opportunities and to interfere with business and contractual relationships; and that this wrongful activity has been for the benefit and with the assistance of Cornerstone Maryland and Cornerstone Hospitality. The suit is for money damages, an accounting, the imposition of a constructive trust, expenses of litigation including attorneys' fees, and punitive damages. The defendants have filed an Answer and Counterclaim, alleging that the individual defendants were terminated in violation of the Agreement; that the Company breached the Asset Purchase Agreement; that the Company otherwise interfered with business and contractual relationships; and for conversion. The counterclaim is for money damages, restitution, expenses of litigation including attorneys' fees, and punitive damages. The Company intends to vigorously pursue this matter. On August 23, 1996, Great American Resorts filed a complaint in the Superior Court of Cobb County, State of Georgia, entitled Great American Resorts, Inc. and Great American Casinos, Inc. v. Charles Taylor, Deborah Lynn Cannon, Walter D. Hrab and Ridgewood Properties, Inc., Civil Action File No. 9616398-05, alleging that the Company and the other defendants are liable for breach of contract and breach of fiduciary duty stemming from a contract between Great American and one of the Company's subsidiaries. The complaint seeks damages, attorneys' fees and pre-judgment interest. It also seeks an order requiring that certain books and records be turned over to the plaintiffs. On September 27, 1996, the Company filed a timely answer generally denying the material allegations of the complaint and asserting several affirmative defenses. The Company intends to vigorously contest this matter. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the fourth quarter of the Company's fiscal year ended August 31, 1996. Item 4.5 Executive Officers of the Registrant The following sets forth certain information regarding the executive officers of the Company: Name Age Present Positions N. Russell Walden 58 President and Chief Executive Officer, Director Byron T. Cooper 46 Vice President - Construction and Planning Karen S. Hughes 41 Vice President, Chief Financial Officer and Secretary The officers of the Company, who are appointed by the Board of Directors, hold office until their successors are chosen and qualified, or until their earlier death, resignation or removal. Mr. Walden has been President and Chief Executive Officer of the Company since its formation on October 29, 1985. Mr. Walden was a director of Sunbelt Nursery Group, Inc. ("Sunbelt") from 1983 until 1990. He is the former President, Chief Executive Officer and director of CMEI, Inc. and a former director of Pier 1 Inc. Mr. Cooper has been Vice President - Construction and Planning of the Company since its formation. Ms. Hughes has been Vice President, Chief Financial Officer and Secretary of the Company since its formation. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Information regarding the market for the Company's common stock, the Company's dividend policy and the approximate number of holders of the common stock at October 31, 1996, is included under the caption "Market for Registrant's Common Equity and Related Stockholder Matters" on page 1 of the 1996 Annual Report to Shareholders and is incorporated herein by reference. Item 6. Selected Financial Data A summary of selected financial data for the Company for the fiscal years 1992 through 1996 is included under the caption entitled "Selected Financial Data" on page 1 of the 1996 Annual Report to Shareholders and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information regarding the Company's financial condition, changes in financial condition and results of operations is included under the caption entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 3 through 7 of the 1996 Annual Report to Shareholders and is incorporated herein by reference. Item 8. Financial Statements Consolidated financial statements and notes thereto for the Company, which are included on pages 8 through 31 of the 1996 Annual Report to Shareholders under the following captions listed below, are incorporated herein by reference. Consolidated Balance Sheets at August 31, 1996 and 1995. Consolidated Statements of Loss for the years ended August 31, 1996, 1995 and 1994. Consolidated Statements of Shareholders' Investment for the years ended August 31, 1996, 1995 and 1994. Consolidated Statements of Cash Flows for the years ended August 31, 1996, 1995 and 1994. Notes to Consolidated Financial Statements. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant The information required by this item with respect to directors and with respect to Item 405 of Regulation S-K is incorporated by reference to the Company's Proxy Statement for its 1997 Annual Shareholder Meeting (the "1997 Proxy Statement"). Information concerning the Company's executive officers is included in Item 4.5 in Part I of this report. Item 11. Executive Compensation Information regarding compensation of officers and directors of the Company is set forth under the caption entitled "Executive Compensation" in the Company's 1997 Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information regarding ownership of certain of the Company's securities is set forth under the caption entitled "Beneficial Ownership of the Company's Securities" in the Company's 1997 Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information regarding certain relationships and related transactions with the Company is set forth under the caption entitled "Certain Relationships and Related Transactions" in the Company's 1997 Proxy Statement and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a)(1) The following financial statements, together with the applicable report of independent public accountants, are set forth on pages 8 through 31 of the 1996 Annual Report to Shareholders and are incorporated by reference at Item 8 herein: Report of Independent Accountants Consolidated Balance Sheets at August 31, 1996 and 1995 Consolidated Statements of Loss for the years ended August 31, 1996, 1995 and 1994 Consolidated Statements of Shareholders' Investment for the years ended August 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for the years ended August 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements (a)(2) The following financial statement schedules, together with the applicable report of independent public accountants, are filed as a part of this Report. Page Number in Form 10-K Report of Independent Accountants on Schedules S-1 III - Real Estate and Accumulated Depreciation - August 31, 1996 S-2 thru S-3 IV - Mortgage Loans on Real Estate August 31, 1996 S-4 thru S-5 All other schedules are omitted because they are not applicable or because the required information is given in the financial statements or notes thereto. (a)(3) The exhibits filed herewith or incorporated by reference herein are set forth on the Exhibit Index on pages E-1 through E-9 hereof. Included in those exhibits are the following Executive Compensation Plans and Arrangements: 10(a) Employment Agreement between N. R. Walden and CMEI, Inc., dated March 28, 1985. 10(c) Ridgewood Properties, Inc. Supplemental Retirement and Death Benefit Plan dated January 1, 1987 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1988 and incorporated herein by reference). 10(e) Post-Employment Consulting Agreement between N. R. Walden and Ridgewood Properties, Inc. dated September 4, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991 and incorporated herein by reference). 10(f) Post-Employment Consulting Agreement between Karen S. Hughes and Ridgewood Properties, Inc. dated September 4, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991 and incorporated herein by reference). 10(g) Post-Employment Consulting Agreement between Byron T. Cooper and Ridgewood Properties, Inc. dated September 4, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991 and incorporated herein by reference). 10(h) Post-Employment Consulting Agreement between M. M. McCullough and Ridgewood Properties, Inc. dated September 4, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991 and incorporated herein by reference). 10(p) Ridgewood Properties, Inc. Stock Option Plan dated March 30, 1993 and as amended September 14, 1993 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(q) Stock Option Agreement between Byron T. Cooper and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(r) Stock Option Agreement between Luther A. Henderson and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(s) Stock Option Agreement between Karen S. Hughes and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(t) Stock Option Agreement between M. M. McCullough and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(u) Stock Option Agreement between N. R. Walden and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(v) Stock Option Agreement between Gregory T. Weigle and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(w) Stock Option Agreement between Karen S. Hughes and Ridgewood Properties, Inc. dated January 31, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(x) Stock Option Agreement between N. R. Walden and Ridgewood Properties, Inc. dated January 31, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(bb) Ridgewood Properties, Inc. 1993 Stock Option Plan, as amended on October 26, 1994 (filed as an Exhibit to Registrant's Registration Statement on Form S-8 filed November 8, 1994 (No. 33-86084) and incorporated herein by reference). 10(ii) Agreement and Plan of Merger between and among Ridgewood Properties, Inc., Ridgewood Acquisition Corp., Wesley Hotel Group, Inc., Wayne McAteer and Samuel King dated December 7, 1995 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended November 30, 1995, and incorporated herein by reference). No reports on Form 8-K were filed during the fourth quarter of the Company's fiscal year ended August 31, 1996. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RIDGEWOOD PROPERTIES, INC. By: /s/ N. R. Walden__________ N. Russell Walden, President, Chief Executive Officer Dated: November 22, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated: /s/ N. R. Walden_______________ N. Russell Walden, President, Chief Executive Officer and Director /s/ Karen S. Hughes____________ Karen S. Hughes, Vice President, Chief Accounting and Financial Officer and Secretary /s/ Michael M. Earley__________ Michael M. Earley, Director /s/ Luther A. Henderson________ Luther A. Henderson, Director Dated: November 22, 1996 Report of Independent Accountants on Financial Statement Schedules October 11, 1996 To the Board of Directors of Ridgewood Properties, Inc. Our audits of the consolidated financial statements referred to in our report dated October 11, 1996 appearing in the 1996 Annual Report to Shareholders of Ridgewood Properties, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES SCHEDULE III ------------------------------------------- Page 1 of 2 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION ------------------------------------------------------- AUGUST 31, 1996 --------------- (000'S Omitted)
Cost Capitalized Gross Amount at Which Initial Cost Subsequent to Carried at August 31, 1996 to Company Acquisition (A)(B)(D) ------------------ ------------------ ---------------------------------- Building Building Accumu- and Carry- and lated Date of Encum- Improve- Improve- ing Improve- Deprecia- Construc- Date Description brances Land ments ments Costs Land ments Total tion (C) tion Acquired - ----------- -------- ---- -------- -------- ------ ---- -------- ----- -------- ----------------- LAND - ---- Georgia -- 78 -- 1 -- 78 1 79 -- -- 12/75 Texas -- 5,338 -- 2 -- 5,338 2 5,340 -- -- 12/85 -- Florida -- 475 -- -- -- 475 -- 475 -- -- 3/85 Florida -- 302 -- 6 -- 302 6 308 -- -- 5/77 Florida -- 41 -- -- -- 41 -- 41 -- -- 6/78 Florida -- 80 -- -- -- 80 -- 80 -- -- 11/79 Florida -- 1,184 -- -- -- 1,184 -- 1,184 -- -- 2/85 Arizona -- 978 -- 110 -- 978 110 1,088 -- -- 3/85 Ohio -- 1,006 -- 168 -- 1,006 168 1,174 -- -- 12/77 --------- --------- --------- --------- --------- --------- --------- --------- --------- Total Non- operating properties -- 9,482 -- 287 -- 9,482 287 9,769 -- --------- --------- --------- --------- --------- --------- --------- --------- --------- HOTEL - -------------- Florida 2,771 439 1,921 1,050 -- 439 2,404 2,843 1,460 1973 9/74 -------- -------- -------- -------- -------- -------- -------- -------- -------- Total operating properties 2,771 439 1,921 1,050 -- 439 2,404 2,843 1,460 -------- -------- -------- -------- -------- -------- -------- -------- -------- GRAND TOTAL $ 2,771 $ 9,921 $ 1,921 $ 1,337 $ -- $ 9,921 $ 2,691 $ 12,612 $ 1,460 ========= ========= ========= ========= ========= ========= ========= ========= =========
SCHEDULE III Page 2 of 2 (A) Except as discussed in Note 2 to the "Notes to Consolidated Financial Statements," real estate owned is carried at the lower of cost or estimated net realizable value. At August 31, 1996, the amount of the allowance for possible losses was approximately $4,700,000, which related to real estate properties. (B) Reconciliation of real estate properties:
For the Year Ended (000's omitted) 8/31/96 8/31/95 8/31/94 ------- ------- ------- Balance, beginning of year $12,934 $17,768 $39,911 Additions during the period: Acquisitions -- 830 455 Capitalized costs 49 81 559 Deductions during the period: Real estate sold or assets retired (on which financing was provided by the Company in certain cases) 371 5,745 23,157 ------- ------- ------- Balance, end of year $12,612 $12,934 $17,768 ======= ======= =======
(C) Operating properties and any related improvements are being depreciated by the "straight line" method over the estimated useful lives of such assets, which are generally 30 years for buildings and 5 years for furniture and fixtures. Reconciliation of accumulated depreciation:
For the Year Ended (000's omitted) 8/31/96 8/31/95 8/31/94 ------- ------- ------- Balance, beginning of year $1,369 $2,669 $7,239 Additions during the period 121 326 1,006 Depreciation associated with assets sold or retired (30) (1,626) (5,576) ------ ------ ------ Balance, end of year $1,460 $1,369 $2,669 ====== ====== ======
(D) The aggregate cost for federal income tax purposes is approximately $12,711,000 at August 31, 1996. RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES SCHEDULE IV ------------------------------------------ Page 1 of 2 SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE ----------------------------------------- AUGUST 31, 1996 --------------- (000'S Omitted)
--------------- Principal Amount Periodic Face Carrying of Loan Subject Interest Final Payment Prior Amount of Amount of to Delinquent Rate Maturity Terms Liens Mortgage Mortgage Principal or Description (b) Date (d) (d) (d) (c) Interest - ----------- -------- -------- -------- ----- --------- --------- ---------------- Land - ---- First Mortgage Loan, 10% 1/97 Principal and Interest -- 5 $ 5 -- Texas Payable Monthly TOTALS $ 5 ==========
SCHEDULE IV Page 2 of 2 NOTES: (a) Reconciliation of mortgage loans on real estate: (000's omitted) Balance, August 31, 1993 $ 783 Principal payments received on mortgage loans (60) Reductions to mortgage loans - Amortization of discounts 7 Charge-off of fully reserved loan (227) ------ Balance, August 31, 1994 $ 503 Payment received on sale of mortgage loans (342) Principal payments received on mortgage loans (36) Discount on loans sold, net of amortization of discounts (81) ------ Balance, August 31, 1995 $ 44 Principal received on sale of mortgage loans (37) Principal payments received on mortgage loans (2) ------ Balance, August 31, 1996 5 ====== (b) Interest rates shown include, where applicable, amortization of discounts. (c) Aggregate cost for federal income tax purposes is approximately $5,000 at August 31, 1996. (d) Information is given in these columns only for loans which exceed three percent of the total loans. EXHIBIT INDEX Report on Form 10-K for the fiscal year ended August 31, 1996 Page Number Exhibit in Manually Number Description Signed Original 3(a) Certificate of Incorporation of Registrant.* 3(b) By-Laws of Registrant.* 3(c) Certificate of Amendment to the Certificate of Incorporation (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1987 and incorporated herein by reference). 3(d) Certificate of Amendment to the Certificate of Incorporation of the Registrant (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1989 and incorporated herein by reference). 3(e) Certificate of Amendment of the Certificate of Incorporation of Ridgewood Properties, Inc. dated May 23, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991 and incorporated herein by reference). 3(f) Certificate of Amendment of the Certificate of Incorporation of Ridgewood Properties, Inc. dated March 30, 1993 (filed as Exhibit 3 to Registrant's Form 10-Q for the fiscal quarter ended February 28, 1993 and incorporated herein by reference). 3(g) Certificate of Amendment of the Certificate of Incorporation of Ridgewood Properties, Inc. dated January 26, 1994 (filed as Exhibit 3 to Registrant's Form 10-Q for the fiscal quarter ended February 28, 1994 and incorporated herein by reference). 4(a) Stock Purchase Agreement between Ridgewood Properties, Inc. and Triton Group Ltd., dated as of August 15, 1994 (filed as an Exhibit to Registrant's Form 8-K on August 15, 1994, and incorporated herein by reference). 4(b) August 15, 1994 Press Release issued by Ridgewood Properties, Inc. (filed as an Exhibit to Registrant's Form 8-K on August 15, 1994, and incorporated herein by reference). 4(c) Stock Purchase Agreement between Ridgewood Properties, Inc. and Hesperus Partners Ltd., dated as of August 29, 1994 (filed as an Exhibit to Registrant's Form 8-K on August 15, 1994, and incorporated herein by reference). 4(d) Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of the Registrant (filed as an Exhibit to Registrant's Registration Statement on Form S-8 filed on November 8, 1994 (No. 33-866084) and incorporated herein by reference). 10(a) Employment Agreement between N. R. Walden and CMEI, Inc., dated March 28, 1985.* 10(b) Bill of Sale and Assumption of Liabilities between CMEI, Inc. and Ridgewood Properties, Inc. dated December 9, 1985.* 10(c) Ridgewood Properties, Inc. Supplemental Retirement and Death Benefit Plan dated January 1, 1987 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1988 and incorporated herein by reference). 10(d) $15,000,000 Revolving Line of Credit Agreement from First American Bank of Georgia, N.A. to Ridgewood Properties, Inc. dated November 22, 1989 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1989 and incorporated herein by reference). 10(e) Post-Employment Consulting Agreement between N. R. Walden and Ridgewood Properties, Inc. dated September 4, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991 and incorporated herein by reference). 10(f) Post-Employment Consulting Agreement between Karen S. Hughes and Ridgewood Properties, Inc. dated September 4, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991 and incorporated herein by reference). 10(g) Post-Employment Consulting Agreement between Byron T. Cooper and Ridgewood Properties, Inc. dated September 4, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991 and incorporated herein by reference). 10(h) Post-Employment Consulting Agreement between M. M. McCullough and Ridgewood Properties, Inc. dated September 4, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991 and incorporated herein by reference). 10(i) Modification of $15,000,000 Line of Credit Loan to Ridgewood Properties, Inc. from First American Bank of Georgia, N.A. dated March 1, 1991 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1991 and incorporated herein by reference). 10(j) Second Amendment to $15,000,000 Line of Credit Loan to Ridgewood Properties, Inc. from First American Bank of Georgia, N.A. dated May 8, 1991 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended May 31, 1991 and incorporated herein by reference). 10(k) Consolidated Amendatory Agreement between Ridgewood Properties, Inc. and First American Bank of Georgia, N.A. dated January 31, 1992 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1992 and incorporated herein by reference). 10(l) Amendment to Loan Agreement between Ridgewood Properties, Inc. and First American Bank of Georgia, N.A. dated March 26, 1992 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1992 and incorporated herein by reference). 10(m) Amendment to Loan Agreement between Ridgewood Properties, Inc. and First American Bank of Georgia, N.A. dated April 27, 1992 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended May 31, 1992 and incorporated herein by reference). 10(n) Joint Venture Agreement between Ridgewood Properties, Inc. and Eagle's Lake, Inc. dated December 17, 1993 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended November 30, 1994, and incorporated herein by reference). 10(o) Promissory Note between Ridgewood Properties, Inc. and Triton Group Ltd. dated December 6, 1993 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended November 30, 1994, and incorporated herein by reference.) 10(p) Ridgewood Properties, Inc. Stock Option Plan dated March 30, 1993 and as amended September 14, 1993 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(q) Stock Option Agreement between Byron T. Cooper and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(r) Stock Option Agreement between Luther A. Henderson and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(s) Stock Option Agreement between Karen S. Hughes and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(t) Stock Option Agreement between M. M. McCullough and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(u) Stock Option Agreement between N. R. Walden and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(v) Stock Option Agreement between Gregory T. Weigle and Ridgewood Properties, Inc. dated April 1, 1993 and as approved on January 12, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(w) Stock Option Agreement between Karen S. Hughes and Ridgewood Properties, Inc. dated January 31, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(x) Stock Option Agreement between N. R. Walden and Ridgewood Properties, Inc. dated January 31, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1994, and incorporated herein by reference). 10(y) Promissory Note between Ridgewood Properties, Inc. and Triton Group Ltd. dated May 5, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended May 31, 1994, and incorporated herein by reference). 10(z) Amendment to Loan Agreement between Ridgewood Properties, Inc. and First American Bank of Georgia, N.A. dated June 21, 1994 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended May 31, 1994, and incorporated herein by reference). 10(aa) Real Estate Note executed by Sun Communities Operating Limited Partnership and payable to the order of Ridgewood Properties, Inc. dated June 16, 1994 (filed as an Exhibit to Registrant's Form 8-K on June 29, 1994 and incorporated herein by reference). 10(bb) Ridgewood Properties, Inc. 1993 Stock Option Plan, as amended on October 26, 1994 (filed as an Exhibit to Registrant's Registration Statement on Form S-8 filed on November 8, 1994 (No. 33-86084) and incorporated herein by reference). 10(cc) Amended and Restated Basic Agreement between RW Hotel Investment Partners, L.P. and Ridgewood Hotels, Inc. dated August 14, 1995 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1995, and incorporated herein by reference). 10(dd) Amended and Restated Limited Partnership Agreement of RW Hotel Partners, L.P. dated September 8, 1995 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1995, and incorporated herein by reference). 10(ee) Management Agreement (Holiday Inn Hurstbourne) between RW Hotel Partners, L.P. and Ridgewood Properties, Inc. dated August 16, 1995 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1995, and incorporated herein by reference). 10(ff) Mortgage, Assignment of Leases and Rents and Security Agreement Between Bloomfield Acceptance Company, L.L.C. and Ridgewood Orlando, Inc. dated June 30, 1995 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1995, and incorporated herein by reference). 10(gg) Security Agreement between Ridgewood Orlando, Inc. and Bloomfield Acceptance Company, L.L.C. dated June 30, 1995 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1995, and incorporated herein by reference). 10(hh) Mortgage Note between Bloomfield Acceptance Company and Ridgewood Orlando, Inc. dated June 30, 1995 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1995, and incorporated herein by reference). 10(ii) Agreement and Plan of Merger between and among Ridgewood Properties, Inc., Ridgewood Acquisition Corp., Wesley Hotel Group, Inc., Wayne McAteer and Samuel King dated December 7, 1995 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended November 30, 1995, and incorporated herein by reference). 10(jj) Shareholders' Agreement by and between Samuel King and Ridgewood Properties, Inc. dated December 1995. 13 1996 Annual Report to Shareholders. 22 Subsidiaries of Registrant. 23 Consent of Price Waterhouse LLP 27 Financial Data Schedule. _____________________ * Previously filed as an Exhibit to Registrant's Registration Statement on Form 10 filed on November 19, 1985 (Securities Exchange Act File No. 0-14019), and incorporated herein by reference. EX-10.JJ 2 SHAREHOLDERS' AGREEMENT THIS SHAREHOLDERS' AGREEMENT (the "Agreement") is made and entered into this ____ day of December, 1995 (the "Effective Date") by and between SAMUEL KING ("King") and RIDGEWOOD PROPERTIES, INC., a Delaware corporation (the "Corporation"). W I T N E S S E T H: WHEREAS, as of the date hereof, King owns twenty five thousand (25,000) shares of $0.01 per share par value common stock in the Corporation (the "Subject Stock"); and WHEREAS, as of the date hereof, King has agreed to be employed by the Corporation; and WHEREAS, the parties wish to provide for the mandatory purchase of the Subject Stock by the Corporation in the event of King's election to require the same upon the terms and conditions hereinafter specified. NOW, THEREFORE, in consideration of King's agreement to become employed by the Corporation, the mutual promises of the parties hereto and of the mutual benefits to be gained by the performance thereof, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties and intending to be legally bound hereby the parties agree as follows: 1. Termination of Prior Agreements: The above recitations are true and correct, and the parties hereby cancel and revoke all prior written and oral agreements among them touching upon these presents. 2. Put/Call: If at any time on or after the date which is the two (2) year anniversary of the Effective Date (the "Second Anniversary Date") but on or before the date which is ninety (90) days after the Second Anniversary Date (the "Expiration Date"), King desires to sell and require the Corporation purchase all or any part of the Subject Stock, then King shall deliver written notice (the "Put Notice") of such intention to the Corporation on or before the Expiration Date which Put Notice shall designate both (i) the number of shares of Subject Stock which King desires to sell to the Corporation and (ii) a closing date (the "Closing Date") which is not earlier than five (5) days after the date of the Put Notice nor later than sixty (60) days after the Put Notice. Upon the Corporation's receipt of the Put Notice, the Corporation shall be obligated to purchase that number of shares of the Subject Stock so designated in the Put Notice for a purchase price of Four and 50/100s Dollars ($4.50) per share (i.e. the total purchase price shall equal the product of $4.50 multiplied by the number of shares of the Subject Stock designated in the Put Notice) as of the Closing Date. From and after King's delivery of the Put Notice to the Corporation, King may by written notice terminate both King's and the Corporation's respective obligations under this Agreement whereupon this Agreement shall be of no further force or effect and neither party shall have any continuing rights or obligations arising hereunder or by reason hereof or the existence or delivery of the Put Notice. At 10:00 a.m. Atlanta, Georgia time on the Closing Date, King and the duly authorized representatives of the Corporation shall meet at the principal offices of the Corporation (the "Closing"). At the Closing, the Corporation shall pay to King the purchase price for that number of shares of the Subject Stock designated in the Put Notice in cash. Upon King's receipt of the aforesaid purchase price, King shall execute and deliver to the Corporation such stock certificates, endorsements, affidavits or stock powers as are reasonably necessary and required to transfer that number of shares of the Subject Stock designated in the Put Notice to the Corporation free and clear of all liens and encumbrances other than those restrictions placed thereon as of the date of King's receipt of the same without further representation or warranty. 3. Amendment or Revocation By Mutual Agreement: Except as otherwise provided herein, this Agreement may be amended in whole or in part only by a writing signed by both King (or his legal representative) and the Corporation. 4. Binding Effect: This Agreement shall be binding not only upon the parties hereto, but also upon their heirs, executors, administrators, legal representatives, successors and assigns; and the parties hereby agree for themselves and their heirs, executors, administrators, legal representatives, successors and assigns to execute any instruments and to perform any acts which may be necessary or proper to carry out the purposes of this Agreement. 5. Georgia Law and Invalid Provisions: This Agreement shall be governed by the laws of the State of Georgia and if any term or part of this Agreement shall be determined to be invalid, illegal or unenforceable in whole or in part, the validity of the remaining part of such term or the validity of any other term of this Agreement shall not in any way be affected. 6. Counterparts: This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall comprise but a single instrument. 7. Notices: All notices, communications and deliveries under this Agreement shall be made in writing signed by the party making the same and shall be deemed given on the date delivered if delivered in person, one (1) business day after being deposited with a nationally recognized next day delivery service or on the third (3rd) business day after being deposited with the United States Postal Service, registered mail, return receipt requested (with postage prepaid) as follows: To the Corporation: Ridgewood Properties, Inc. 2859 Paces Ferry Road Suite 700 Atlanta, Georgia 30339 To King: Samuel King 120 Colonade Drive Peachtree City, Georgia 30269 Any party may change any address at which it or he is to receive notice hereunder by written notice to all other parties delivered in accordance with this Item. 8. Representation of the Corporation. The Corporation and those officers executing this Agreement on behalf of the Corporation hereby represent and warrant to King that said officers are duly authorized to execute this Agreement for and on behalf of the Corporation whereupon this Agreement shall serve as a legally binding and enforceable obligation of the Corporation. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. RIDGEWOOD PROPERTIES, INC. By: _______________________ Its: President Attest: __________________ Its: Secretary (CORPORATE SEAL) _____________________(SEAL) SAMUEL KING EX-13 3 EXHIBIT 13 RIDGEWOOD PROPERTIES, INC. ANNUAL REPORT 1996 FINANCIAL STATEMENTS Ridgewood Properties, Inc. (the "Company") is primarily engaged in the business of acquiring, developing, operating and selling real estate property in the Southeast and "Sunbelt" areas. Additionally, the Company, through its investment in a limited partnership, is engaged in acquiring and managing hotel properties in the Southeast. Board of Directors Officers Michael M. Earley N. Russell Walden President - Triton Group Ltd. President Luther A. Henderson Byron T. Cooper President - Pirvest, Inc. Vice President, Construction and Planning N. Russell Walden President - Ridgewood Karen S. Hughes Properties, Inc. Vice President, Chief Financial Officer and Secretary Corporate Offices 2859 Paces Ferry Road, Suite 700 Atlanta, Georgia 30339 Telephone: (770) 434-3670 Market For Registrant's Common Equity and Related Stockholder Matters The common stock, $0.01 par value per share (the "Common Stock"), of the Company is listed in the broker-dealer "Pink Sheets" and trades in the over-the-counter market. Prior to June 12, 1989, the Common Stock was quoted in the automated quotation system of the National Association of Securities Dealers (NASDAQ). Subsequent to the deletion of the Common Stock from the automated quotation system of NASDAQ, there has been an absence of an established public trading market for the Common Stock. Shares outstanding and per share amounts for all periods presented have been retroactively adjusted for the twenty-for-one stock split effected in the form of a stock dividend on December 31, 1992, two-for-one stock split effected in the form of a stock dividend on August 31, 1993, and a three-for-one stock split effected in the form of a stock dividend on October 31, 1994. On October 31, 1996, there were 1,088,480 shares of common stock outstanding held by approximately 222 shareholders of record. The Company paid its first and only cash dividend on the common stock during fiscal year 1990. The dividend paid was approximately $0.06 per share of common stock, which totaled approximately $397,000. The Company may pay future dividends if and when earnings and cash are available. The declaration of dividends on the common stock is within the discretion of the Board of Directors of the Company and is, therefore, subject to many considerations, including operating results, business and capital requirements and other factors. Selected Financial Data
----------------------------------------------------------------- ($000's omitted, except per share data) 1996 1995 1994 1993 1992 - --------------------------------------------------------------------------------------------------------- Balance Sheet Data as of August 31 Total Assets $ 8,724 $ 9,673 $ 14,351 $ 34,655 $ 38,857 Term Loan(s) Payable 2,858 2,796 5,415 12,316 14,620 Shareholders' Investment 4,441 5,612 7,440 20,564 22,424 Income Statement Data Year Ended August 31 Net Revenues 4,314 8,675 30,082 18,619 16,667 Net Loss (1,178) (1,656) (3,631) (1,860) (4,460) Loss Per Common Share (1) $ (1.29) $ (1.90) $ (0.64) $ (0.32) $ (0.76) (1) Retroactively adjusted for the twenty-for-one stock split effected in the form of a stock dividend on December 31, 1992, two-for-one stock split effected in the form of a stock dividend on August 31, 1993, and a three-for-one stock split effected in the form of a stock dividend on October 31, 1994.
Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources - During fiscal year 1996, the Company received net proceeds of approximately $634,000 primarily from the sale of undeveloped land in Ohio and Georgia. The proceeds were used to provide additional working capital to the Company. In June 1995, the Company received a loan from a commercial lender to refinance the Ramada Inn in Longwood, Florida. The loan proceeds were $2,800,000. The loan is for a term of 20 years with an amortization period of 25 years, at the rate of 10.35%. Principal and interest payments will be approximately $26,000 per month beginning August 1, 1995. A portion of the proceeds from the loan was used to repay a term loan, and the remaining proceeds of approximately $1,500,000 were used for working capital. In addition, the Company is required to make a repair escrow payment comprised of 4% of estimated revenues, as well as real estate tax and insurance escrow payments. The total amount for these items will be a payment of approximately $20,000 per month and can be adjusted annually. The escrow funds are used as tax, insurance and repair needs arise. As of August 31, 1996, there was approximately $150,000 of escrowed funds related to this loan agreement. On August 16, 1995, RW Hotel Partners, L.P. was organized as a limited partnership (the "Partnership") under the laws of the State of Delaware. Concurrently, the Company formed Ridgewood Hotels, Inc., a Georgia corporation ("Ridgewood Hotels") which became the sole general partner in the Partnership with RW Hotel Investments, L.L.C. ("Investor") as the limited partner. Ridgewood Hotels has a 1% base distribution percentage versus 99% for the Investor. However, distribution percentages do vary depending on certain defined preferences and priorities pursuant to the Partnership Agreement ("Agreement") which are discussed below. The partnership was originally formed to acquire a hotel property in Louisville, Kentucky. The Partnership consists of six hotel properties at August 31, 1996. The terms of this partnership will serve as a guideline for other potential acquisitions with this or other investors. Income and loss are allocated to the Company and the limited partner based upon the formula for allocating distributable cash as described below but subject to an annual limitation which would result in no more than 88% of partnership income or loss (as defined) being allocated to the limited partner. Distributable Cash is defined as the net income from the property before depreciation plus any net sale proceeds and net financing proceeds less capital costs. Distributions of Distributable Cash shall be made as follows: - First, to the Investor until there has been distributed to the Investor an amount equal to a 15% cumulative internal rate of return on the Investor's investment. - Second, to Ridgewood Hotels until the aggregate amount received by Ridgewood Hotels equals the aggregate cash contributions made by Ridgewood Hotels to the Partnership (as of 8/31/96, Ridgewood Hotels had contributed approximately $748,000). - Third, 12% to Ridgewood Hotels and 88% to the Investor until there has been distributed to the Investor an amount equal to a 25% cumulative internal rate of return on Investor's investment. - Fourth, 75% of the residual to the Investor and 25% to Ridgewood Hotels. A Management Agreement exists between the Partnership and the Company as Manager ("Manager") for the purpose of managing hotels in Kentucky, Georgia and South Carolina. The Manager shall be entitled to the following property management fees: (1) 2.5% of the gross revenues from the hotel property. (2) 1% of the gross revenues from the hotel property as an incentive fee if distributable cash equals or exceeds 13.5% of certain aggregate acquisition costs. No management fees are payable with respect to the first 12-month period of management of the hotel in Kentucky. A Construction Management Agreement exists between the Partnership and the Manager for the purpose of managing future improvements to the properties. The Company currently has approximately $748,000 invested in the Partnership. Also, at August 31, 1996, the Company recorded approximately $209,000 equity in the income of the partnership, bringing the total investment in the limited partnership to approximately $957,000. The Partnership purchased a hotel in Louisville, Kentucky for approximately $16,000,000. In December 1995 and January 1996, the Partnership purchased four hotel properties in Georgia for approximately $15,000,000 and a hotel in South Carolina for $4,000,000, respectively. The Company may make future capital contributions to the Partnership. Management expects to fund such capital contributions through available cash or from loans from the Partnership. Additionally, the Company may invest in other partnerships to acquire hotels in the future. In December 1995, the Company acquired the stock of the Wesley Hotel Group, a hotel management company located in Atlanta, Georgia. At the time of acquisition, Wesley managed five hotels. In conjunction with the acquisition, the Company issued 125,000 shares of common stock and assumed three promissory notes with a combined outstanding principal of approximately $106,000. Since the Company is not currently generating sufficient operating cash to cover overhead and debt service, the Company must continue to sell real estate, seek alternative financing or otherwise recapitalize the Company. Due to the sale of land in Florida and Texas in September and October 1996, respectively, there is available cash of approximately $1.2 million. This available cash will be used to fund operating losses until new sources of income can be generated. The Company also intends to aggressively pursue the acquisition of hotels and hotel management contracts through similar partnerships as described above which would provide additional cash flow. The Company owns one hotel, has 1% ownership in six other hotels which it also manages and currently has five other hotels which it manages but has no ownership. The success of the Company's operations continues to be dependent upon such unpredictable factors as the general and local economic conditions to which the real estate and hotel industry is particularly sensitive: labor, environmental issues, weather conditions, consumer spending or general business conditions and the availability of satisfactory financing. Results of Operations - Sales of real estate properties for the fiscal year ended August 31, 1996 decreased 88% compared to 1995 due to the sale of a hotel and residential lots in 1995. The Company had gains from real estate sales of approximately $281,000, $291,000 and $1,789,000 during fiscal years 1996, 1995 and 1994, respectively. Gains or losses on real estate sales are dependent upon the timing, sales price and the Company's basis in specific assets sold and will vary considerably from period to period. Revenues from real estate properties for fiscal year 1996 decreased $504,000, or 15%, compared to 1995. The decrease was due to the sale of a hotel in 1995. Revenues from real estate properties for fiscal year 1995 decreased $2,158,000, or 40%, compared to 1994. The decrease was primarily due to the sale of the mobile home parks and apartments in 1994. During fiscal year 1996, expenses of hotel management increased $320,000, or 88%, compared to 1995. The increase was primarily due to larger payroll costs associated with the increased staff necessary to manage a larger number of hotels. Revenues from hotel management for fiscal year 1996 increased $410,000, or 143%, compared to 1995. The increase was due to a larger number of hotels under management in 1996. There were no revenues from hotel management in 1994 since the Company had not yet begun this activity. Expenses of real estate properties decreased $498,000, or 17%, compared to 1995. The decrease was due to the sale of a hotel in 1995. Expenses of real estate properties decreased $1,984,000, or 41%, for the fiscal year ended August 31, 1995 compared to 1994 due to the sale of the mobile home parks, apartments and hotel. There were no mobile home sales or expenses during fiscal year ended August 31, 1996 due to the sale of the mobile home parks in prior years. Due to the Company's investment in a limited partnership during fiscal year 1996, the Company recognized equity in the income of the partnership of approximately $209,000. Income from loans and temporary investments decreased $70,000 and $68,000 for the fiscal year 1996 compared to 1995 and 1995 compared to 1994, respectively, due to less cash available for investment. Other income remained relatively insignificant for all three fiscal years ending August 31, 1996, 1995 and 1994. The provision of $50,000 for possible losses in fiscal year 1995 pertains to a land parcel in Atlanta, Georgia which has been sold. The provision of $1,638,000 for possible losses in fiscal year 1994 pertains to land parcels in Dallas, Texas; Phoenix, Arizona and Atlanta, Georgia. It was management's belief that an additional provision in 1995 and 1994 was necessary to properly reflect the current net realizable value of these properties. Interest expense decreased by $65,000 during fiscal year 1996 compared to 1995 and $328,000 during fiscal year 1995 compared to 1994. The decreases are primarily due to lower interest rates pertaining to the Company's term loans. General, administrative and other expenses have increased by $99,000 for fiscal year 1996 compared to 1995 due to an overall increase in costs associated with a larger business entity. General, administrative and other expenses decreased by $323,000 for the fiscal year 1995 compared to 1994. The decrease was due to management's effort to reduce and control overhead in line with a smaller business entity. Due to the Company's continuing aggressive movement into the business of acquiring, developing, operating and selling hotel properties throughout the country, the Company incurred business development costs of $193,000 in fiscal year 1996 compared to $165,000 in fiscal year 1995. In March 1995, the Financial Accounting Standards Board issued Statement of Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of." FAS 121 establishes new standards for determining and measuring impairment of long-lived assets held by an entity for investment purposes or for disposal. According to the provisions of FAS 121, an entity should assess impairment on assets held for investment or disposal whenever events or changes in circumstances, whether economical or otherwise, indicate the recorded amount of the asset may not be recoverable. FAS 121 is effective for fiscal years beginning after December 15, 1995, although early adoption is encouraged. The Company's management has elected to defer early adoption of the effects of FAS 121; however, upon adoption, management does not expect the effects of FAS 121 to have a material adverse impact on the Company's financial statements. Effect of Inflation - Inflation tends to increase the Company's cash flow from income producing properties since rental rates generally increase by a greater amount than associated expenses. Inflation also generally tends to increase the value of the Company's land portfolio. Offsetting these beneficial effects of inflation are the increased cost and decreased supply of investment capital for real estate that generally accompany inflation. RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AUGUST 31, 1996 AND 1995 ($000'S omitted, except per share data)
August 31, August 31, ASSETS 1996 1995 ------ --------- --------- REAL ESTATE INVESTMENTS: Real Estate Properties Operating Properties $ 1,383 $ 1,461 Land Held for Sale 9,769 10,104 ---------- ---------- 11,152 11,565 Mortgage Loans 5 44 ---------- ---------- Total real estate investments 11,157 11,609 Allowance for Possible Losses (4,700) (4,700) ---------- ---------- Net real estate investments 6,457 6,909 INVESTMENT IN LIMITED PARTNERSHIP 957 232 CASH AND CASH EQUIVALENTS 298 1,880 OTHER ASSETS 1,012 652 ---------- ---------- $ 8,724 $ 9,673 ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
August 31, August 31, LIABILITIES AND SHAREHOLDERS' INVESTMENT 1996 1995 ---------------------------------------- ---------- ---------- ACCOUNTS PAYABLE $ 103 $ 102 ACCRUED SALARIES, BONUSES AND OTHER COMPENSATION 782 737 ACCRUED PROPERTY TAX EXPENSE 151 146 ACCRUED INTEREST AND OTHER LIABILITIES 389 280 TERM LOANS 2,858 2,796 ---------- ---------- Total Liabilities 4,283 4,061 ---------- ---------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' INVESTMENT Series A Convertible Preferred Stock, $1 par value, 1,000,000 shares authorized, 450,000 shares issued and outstanding in 1995 and 1996 liquidation preference and callable at $3,600,000. 450 450 Common stock, $0.01 par value, 5,000,000 shares authorized, 963,480 and 1,088,480 shares issued and outstanding in 1995 and 11 10 1996, respectively. Paid-in Surplus 16,202 16,196 Accumulated deficit since December 30, 1985 (12,222) (11,044) ---------- ---------- Total Shareholders' Investment 4,441 5,612 ---------- ---------- $ 8,724 $ 9,673 ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF LOSS FOR THE YEARS ENDED AUGUST 31, 1996, 1995 AND 1994 ($000's Omitted, except per share data)
1996 1995 1994 --------- --------- --------- REVENUES: Revenues from real estate properties............... $ 2,748 $ 3,252 $ 5,410 Revenues from hotel management .................... 697 287 -- Sales of real estate properties ................... 617 5,018 19,848 Equity in net income of partnership ............... 209 -- -- Sales of mobile homes.............................. -- -- 4,594 Income from loans and temporary investments........ 43 113 181 Other.............................................. -- 5 49 ---------- ---------- --------- 4,314 8,675 30,082 ---------- ---------- --------- COSTS AND EXPENSES: Expenses of real estate properties................. 2,364 2,862 4,846 Expenses of hotel management ...................... 682 362 -- Costs of real estate sold ......................... 336 4,727 18,059 Costs of mobile homes sold......................... -- -- 5,757 Depreciation and amortization ..................... 268 512 1,147 Provision for possible losses ..................... -- 50 1,638 Interest expense, net of interest capitalized...... 345 410 738 General, administration and other.................. 1,304 1,205 1,528 Business development .............................. 193 165 -- ---------- ---------- --------- 5,492 10,293 33,713 ---------- ---------- --------- LOSS BEFORE INCOME TAXES (1,178) (1,618) (3,631) INCOME TAXES -- (38) -- ---------- ---------- --------- NET LOSS $ (1,178) $ (1,656) $ (3,631) ---------- ---------- --------- LOSS PER COMMON SHARE (1.29) $ (1.90) (0.64) ========== ========== ========= The accompanying notes are an integral part of these consolidated financial statements.
Ridgewood Properties, Inc. and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended August 31, 1996, 1995 and 1994 ($000's Omitted) 1996 1995 1994 Cash flows from operating activities: --------- --------- ----------- Net loss ................................................... $ (1,178) $ (1,656) $ (3,631) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization .......................... 268 512 1,147 (Decrease) increase in allowance for possible losses.... -- (173) 1,638 Gain from sale of real estate properties ............... (293) (68) (1,788) Equity in net income of partnership ........ ........... (209) -- -- Decrease in mobile home inventory ...................... -- -- 1,355 (Increase) decrease in other assets .................... (214) 134 342 Increase (decrease) in accounts payable and accrued liabilities .............................. 115 (232) (370) ---------- ---------- ------------ Total adjustments ...................................... (333) 173 2,324 ---------- ---------- ------------ Net cash used by operating activities .................. (1,511) (1,483) (1,307) ---------- ---------- ------------ Cash flows from investing activities: Principal payments received on mortgage loans ............ 39 36 60 Investment in limited partnership ........................ (516) (232) -- Proceeds from sale of real estate ........................ 634 4,620 17,867 Additions to real estate properties ...................... (49) (915) (1,015) ---------- ---------- ------------ Net cash provided by investing activities .............. 108 3,509 16,912 ---------- ---------- ------------ Cash flows from financing activities: Dividends on preferred stock ............................. (135) (172) -- Purchase and retirement of common stock .................. -- -- (8,042) Proceeds from issuance of debt ........................... -- 2,800 2,433 Debt financing costs ..................................... -- (159) -- Repayments of debt ....................................... (44) (5,419) (9,334) ---------- ---------- ------------ Net cash used by financing activities .................. (179) (2,950) (14,943) ---------- ---------- ------------ Net (decrease) increase in cash and cash equivalents ......... (1,582) (924) 662 Cash and cash equivalents at beginning of year ............... 1,880 2,804 2,142 ---------- ---------- ------------ Cash and cash equivalents at end of year ..................... $ 298 $ 1,880 $ 2,804 ========== ========== ============ The accompanying notes are an integral part of these consolidated financial statements.
Ridgewood Properties, Inc. and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended August 31, 1996, 1995 and 1994 - ------------------------------------------------------------------------------------------------- Supplemental disclosures of cash flow information: 1996 1995 1994 ------------ ------------ ------------ Interest paid ...................................... $ 345,000 $ 450,000 $ 698,000 Income taxes paid .................................. $ -- $ 38,000 $ -- - ------------------------------------------------------------------------------------------------- Supplemental disclosure of non-cash activity: 1996 1995 1994 ------------ ------------ ------------ Issuance of 125,000 shares of common stock.......... $ 187,500 -- -- Assumption of term notes in conjunction with purchase of hotel management company ..............$ 106,000 -- -- Charge-off of fully-reserved loan ................... -- -- $ 227,000 Issuance of preferred stock in exchange for shares of common stock ........................................ -- -- $ 450,000 Purchase of common stock in exchange for note........ -- -- $ 1,450,000 - ------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT FOR THE YEARS ENDED AUGUST 31, 1996, 1995 AND 1994 ($000's Omitted, except per share data)
Preferred Common Stock Stock Accumulated Total ------------------------- ------------------------ Paid-in Earnings Shareholders' Shares Amount Shares Amount Surplus (Deficit) Investment ---------- ---------- ------------ ---------- ---------- ---------- ---------- Balance, August 31, 1993 -- $ -- 5,868,960 $ 59 $ 26,262 $ (5,757) $ 20,564 Purchase of common stock for cash and issuance of preferred stock 450,000 450 (4,365,840) (44) (8,449) -- (8,043) Purchase of common stock in exchange for note -- -- (539,640) (5) (1,445) -- (1,450) Net Loss -- -- -- -- -- (3,631) (3,631) ----------- ----------- ------------- ----------- ----------- ----------- ----------- Balance, August 31, 1994 450,000 $ 450 963,480 $ 10 $ 16,368 $ (9,388) $ 7,440 Dividends on Preferred Stock -- -- -- -- (172) -- (172) Net Loss -- -- -- -- -- (1,656) (1,656) ----------- ----------- ------------- ----------- ----------- ----------- ----------- Balance, August 31, 1995 450,000 $ 450 963,480 $ 10 $ 16,196 $ (11,044) $ 5,612 Dividends on Preferred Stock -- -- -- -- (180) -- (180) Issuance of Common Stock -- -- 125,000 1 186 -- 187 Net Loss -- -- -- -- -- (1,178) (1,178) ----------- ----------- ------------- ----------- ----------- ----------- ----------- Balance, August 31, 1996 450,000 $ 450 1,088,480 $ 11 $ 16,202 $ (12,222) $ 4,441 =========== =========== ============= =========== =========== =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
Ridgewood Properties, Inc. and Subsidiaries Notes to Consolidated Financial Statements August 31, 1996, 1995 and 1994 1. Significant Accounting Policies General - The Company's common stock is listed in the broker-dealer "Pink Sheets" and traded in the over-the-counter market (see Note 6). During the fourth quarter of fiscal year 1994, the Company purchased and retired all of the shares of common stock ("Triton Shares") owned by the Company's then-majority stockholder, Triton Group, Ltd. ("Triton"). The cash used to purchase the common stock was from the proceeds received by the Company from the sale of its mobile home parks in June 1994. In conjunction with this purchase, the Company issued 450,000 shares of Series A Convertible Preferred Stock (the "preferred stock") to Triton. The preferred stock is redeemable by the Company at $8.00 per share and accrues dividends at a rate of $0.40 per share annually for the first two years and at a rate of $0.80 per share annually thereafter. Dividends are payable quarterly commencing on November 1, 1994. Each share of the preferred stock is convertible into three shares of the Company's common stock effective August 16, 1996 and is subject to certain anti-dilution adjustments. As of August 31, 1996, no shares have been converted. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the shares of preferred stock shall be entitled to receive $8.00 per share of preferred stock plus all dividends accrued and unpaid thereon. So long as a minimum of 50,000 shares of preferred stock is outstanding, Triton shall be entitled to elect one additional director to serve on the Board of Directors of the Company. The Company's President, N. Russell Walden, is the owner of approximately 37% of the Company's outstanding shares of common stock. The Company also purchased and retired all the shares of common stock owned by Hesperus Partners, Ltd. ("Hesperus") (the "Hesperus Shares), formerly known as Harris Associates, L.P. The stock was exchanged for a note the Company received from Sun Communities Operating Limited Partnership in conjunction with the sale of the mobile home parks (the "Note"). In addition to assigning the Note and the mortgage securing the Note, the Company had agreed and did pay Hesperus interest on the outstanding principal balance of the Note from the closing date through June 15, 1995. Since the Company is not currently generating sufficient operating cash to cover overhead and debt service cost, the Company must continue to sell real estate (see Note 12), seek alternative financing, or otherwise, recapitalize the Company. It is currently reviewing the viability of all of these alternatives. Basis of Presentation and Consolidation - The accompanying financial statements of the Company present the historical cost basis amount of assets, liabilities, revenues, costs and expenses and shareholders' investment of the real estate business, formerly known as CMEI, for the periods presented. Certain prior year amounts have been reclassified to conform with the current presentation. In fiscal year 1996, the Company purchased a hotel management company, which is now a wholly-owned subsidiary of the Company. In conjunction with this purchase, five other active corporations were acquired, and all are wholly-owned subsidiaries. These subsidiaries manage and employ the employees at various hotels. For financial reporting purposes, subsidiaries are consolidated. In fiscal year 1995, the Company formed two wholly-owned subsidiaries for the purpose of managing hotels and another for the sole purpose of owning the hotel in Longwood, Florida, which serves as collateral for the Company's term loan. The lender required that a separate subsidiary own the hotel. One other subsidiary remains, but is not operational. The investment in the limited partnership is being accounted for using the equity method of accounting (See Note 8). All significant intercompany balances and transactions have been eliminated. Valuation of Real Estate Properties - The Company carries its real estate properties at the lower of cost or net realizable value. Where estimated net realizable value is lower than cost, an allowance for possible losses is provided (see Note 2). The allowance for possible losses relates to all real estate investments, including mortgage loans and real estate properties. The adequacy of the allowance for possible losses is evaluated by means of periodic reviews of the investment portfolio on an individual asset basis. In March 1995, the Financial Accounting Standards Board issued Statement of Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of." FAS 121 establishes new standards for determining and measuring impairment of long-lived assets held by an entity for investment purposes or for disposal. According to the provisions of FAS 121, an entity should assess impairment on assets held for investment or disposal whenever events or changes in circumstances, whether economical or otherwise, indicate the recorded amount of the asset may not be recoverable. FAS 121 is effective for fiscal years beginning after December 15, 1995, although early adoption is encouraged. The Company's management has elected to defer early adoption of the effects of FAS 121; however, upon adoption, management does not expect the effects of FAS 121 to have a material adverse impact on the Company's financial statements. Depreciation Policies - The Company depreciates operating properties and any related improvements by using the straight-line method over the estimated useful lives of such assets, which are generally 30 years for building and land improvements and 5 years for furniture, fixtures and equipment. Capitalization Policies - The Company capitalizes interest as a cost of properties while they are under construction or development. Costs of planning and development performed by outside contractors and all other direct costs related to properties under construction or development are also capitalized. Capitalization of interest and other costs is discontinued when a project is substantially completed, or if active development ceases. Total interest incurred and paid amounted to approximately $345,000, $450,000, and $698,000 in 1996, 1995 and 1994, respectively. No interest was capitalized; however, the effect on the financial statements from capitalizing amounts permitted would not have been material. Repairs and maintenance costs are expensed in the period incurred. Major improvements to existing properties which increase the usefulness or useful life of the property are capitalized. Sale of Real Estate - All revenue related to the sale of real estate is recognized at the time of closing. The Company allocates costs of real estate sold using the specific identification or relative sales value methods based on the nature of the development. Profit recognition is based upon the Company receiving adequate cash down payments and other criteria specified by existing accounting literature. Cash and Cash Equivalents - For the purpose of the Statement of Cash Flows, cash includes cash equivalents. Cash equivalents include all highly liquid investments with maturities of three months or less. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions 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 the reported grants of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Real Estate Investments The Company's real estate properties by type at August 31, 1996, and 1995 were as follows ($000's omitted): Furniture, August 31, 1996 Land & Fixtures & Type of Project Buildings Equipment Total Hotel $ 2,535 $ 308 $ 2,843 Less -- accumulated depreciation (1,460) ------- Net operating property 1,383 Land 9,769 -- 9,769 ------- Total $11,152 ======= Furniture August 31, 1995 Land & Fixtures & Type of Project Buildings Equipment Total Hotels 2,535 295 2,830 Less -- accumulated depreciation (1,369) Net operating properties 1,461 Land 10,104 -- 10,104 Total $11,565 ======= Changes in the allowance for possible losses for the years ended August 31, 1996, 1995 and 1994 were as follows ($000's omitted): 1996 1995 1994 Allowance, beginning of year $4,700 $4,873 $3,625 Provision for possible losses -- 50 1,638 Chargeoff and reversal of reserves from the sales of real estate assets -- (223) (163) Chargeoff of fully reserved loan -- -- (227) Allowance, end of year $4,700 $4,700 $4,873 ====== ====== ====== 3. Commitments and Contingencies In August 1991, each executive officer was offered a Post-Employment Consulting Agreement (the "Consulting Agreement(s)") whereby the officer agrees that if he or she is terminated by the Company for other than good cause, the officer will be available for consulting at a rate equal to their annual compensation immediately prior to termination. All officers have chosen to enter into Consulting Agreements. In addition, three other employees were offered and have chosen to enter into one year Consulting Agreements. The executive, upon termination, agrees to sign an unconditional release of all claims and liability in exchange for a one year (four employees) or two year (two employees) consulting fee arrangement, depending upon the years of service as an officer or the designation as a senior executive officer. On May 2, 1995 a complaint was filed in the Court of Chancery of the State of Delaware (New Castle County) entitled William N. Strassburger v. Michael M. Early, Luther A. Henderson, John C. Stiska, N. Russell Walden, and Triton Group, Ltd., defendants, and Ridgewood Properties, Inc., nominal defendant, C.A. No. 14267 (the "Complaint"). The plaintiff is an individual shareholder of the Company who purports to file the Complaint individually, representatively on behalf of all similarly situated shareholders, and derivatively on behalf of the Company. The Complaint challenges the actions of the Company and its directors in consummating the Company's August 1994 repurchase of its common stock held by Triton Group, Ltd. and Hesperus Partners Ltd. in five counts, denominated Waste of Corporate Assets, Breach of Duty of Loyalty to Ridgewood, Breach of Duty of Good Faith, Intentional Misconduct, and Breach of Duty of Loyalty and Good Faith to Class. On July 5, 1995, the Company filed a timely answer generally denying the material allegations of the complaint and asserting several affirmative defenses. This case is in the concluding stages of discovery. No trial date has been set. The Company intends to vigorously contest this matter. While the Company cannot predict the outcome, Management believes the ultimate resolution of this matter will not have a material effect on the Company's financial condition. On December 22, 1995, the Company and its wholly-owned subsidiary, Cornerstone Management & Development, Inc., a Georgia corporation ("Cornerstone Georgia"), sued Charles S. Taylor ("Taylor"), Deborah L. Cannon ("Cannon"), their affiliated corporations, Cornerstone Management & Development, Inc., a Maryland corporation ("Cornerstone Maryland") and Cornerstone Hospitality Group, Inc. ("Cornerstone Hospitality") in the Superior Court of Cobb County, Georgia (No. 95-1943805), for actions taken by the defendants both before and after Taylor and Cannon were terminated as officers and directors of Cornerstone Georgia. The complaint alleges that in violation of their fiduciary duties and in violation of an Asset Purchase Agreement among the parties, Taylor and Cannon misappropriated assets and business from Cornerstone Georgia; that since their termination by Cornerstone Georgia, Taylor and Cannon have continued to misappropriate assets and to usurp business opportunities and to interfere with business and contractual relationships; and that this wrongful activity has been for the benefit and with the assistance of Cornerstone Maryland and Cornerstone Hospitality. The suit is for money damages, an accounting, the imposition of a constructive trust, expenses of litigation including attorneys' fees, and punitive damages. The defendants have filed an Answer and Counterclaim, alleging that the individual defendants were terminated in violation of the Agreement; that the Company breached the Asset Purchase Agreement; that the Company otherwise interfered with business and contractual relationships; and for conversion. The counterclaim is for money damages, restitution, expenses of litigation including attorneys' fees, and punitive damages. The Company intends to vigorously pursue this matter. While the Company cannot predict the outcome, Management believes the ultimate resolution of this matter will not have a material effect on the Company's financial condition. On August 23, 1996, Great American Resorts filed a complaint in the Superior Court of Cobb County, State of Georgia, entitled Great American Resorts, Inc. and Great American Casinos, Inc. v. Charles Taylor, Deborah Lynn Cannon, Walter D. Hrab and Ridgewood Properties, Inc., Civil Action File No. 9616398-05, alleging that the Company and the other defendants are liable for breach of contract and breach of fiduciary duty stemming from a contract between Great American and one of the Company's subsidiaries. The complaint seeks damages, attorneys' fees and pre-judgment interest. It also seeks an order requiring that certain books and records be turned over to the plaintiffs. On September 27, 1996, the Company filed a timely answer generally denying the material allegations of the complaint and asserting several affirmative defenses. The Company intends to vigorously contest this matter. While the Company cannot predict the outcome, Management believes the ultimate resolution of this matter will not have a material effect on the Company's financial condition. In conjunction with the acquisition of a hotel management company in December 1995, 25,000 shares of the Company's common stock were issued to the Senior Vice President of the hotel management company. The 25,000 shares are subject to a Put Agreement ("Agreement"). The Agreement states that within ninety days after the two year anniversary of the effective date of the Agreement (which was effective in December 1995), the Company shall be obligated to purchase all or part of the 25,000 shares from the Senior Vice President of Wesley at a purchase price of $4.50 per share. As more fully described in Note 8, the Company is required to fund certain capital contributions to RW Hotel Partners, L.P. as the partnership acquires hotels. 4. Notes Payable In June 1995, the Company entered into a loan with a commercial lender to refinance the Ramada Inn in Longwood, Florida. The loan proceeds are $2,800,000. The loan is for a term of 20 years with an amortization period of 25 years, at the rate of 10.35%. Principal and interest payments are approximately $26,000 per month beginning August 1, 1995. In addition, the Company is required to make a repair escrow payment comprised of 4% of estimated revenues, as well as real estate tax and insurance escrow payments. The total amount for these items will be a payment of approximately $20,000 per month and can be adjusted annually. The escrow funds will be used as tax, insurance and repair needs arise. As of August 31, 1996, there was approximately $150,000 of escrowed funds related to this loan agreement. Also, commitment fees and loan costs of approximately $159,000 are being amortized over 20 years. The approximate average amount of borrowings on the term loan during fiscal year 1996 was $2,784,000, at an average interest rate of 10.35%. The maximum amount of borrowings outstanding under this loan was $2,796,000. The balance of the loan at August 31, 1996 was approximately $2,771,000. In December 1995 and in conjunction with the acquisition of a hotel management company, the Company assumed three promissory notes dated September 22, 1994 and payable to three different Georgia corporations. The total combined outstanding principal was approximately $106,000. All three notes are for a term of five years at a rate of 6.83%. Combined principal and interest payments are approximately $2,667 per month through October 1, 1999. The combined balance of these loans at August 31, 1996 was approximately $87,000. The approximate average amount of borrowings on the combined term loans during fiscal year 1996 was $97,000, at an average interest rate of 6.83%. The maximum amount of combined borrowings outstanding under these loans was $106,000. Maturities of long-term debt during the Company's next five fiscal years are as follows: 1997 - $55,000; 1998 - $59,000; 1999 - $65,000; 2000 - $43,000; 2001 - $42,000; thereafter - $2,594,000. 5. Income Taxes In September 1993, the Company adopted Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes". Upon adoption, the Company changed its method of accounting for income taxes from the deferred method (APB 11) to an asset and liability approach. This approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of other assets and liabilities. The adoption of FAS 109 had no effect on the Company's financial condition or results of operations for the year ended August 31, 1994. The Company's 1995 provision for income taxes is comprised of $38,000 in alternative minimum tax. There was no provision for income taxes for the year ended August 31, 1996 or 1994. Deferred tax assets (liabilities) are comprised of the following at August 31, 1996, and September 1, 1995, respectively:
(000's omitted) 1996 1995 Allowance for possible losses $ 1,598 $ 1,598 Excess of tax over book basis, land held for sale or future development 11 14 Depreciation and amortization 139 105 Other 273 232 Tax loss carryforwards 4,227 3,759 ------- -------- Gross deferred tax assets 6,248 5,708 ------- -------- Excess of book over tax basis, land held for sale or future development (39) (39) Excess of book over tax basis, income from partnership (38) -- ------- -------- Gross deferred tax liabilities (77) (39) ------- -------- Deferred tax assets valuation allowance (6,171) (5,669) ------- -------- $ 0 $ 0 ======= ========
The net change in the valuation allowance for deferred tax assets was an increase of $502,000. This change resulted primarily from an increase in the Company's tax loss carryforward and other deferred tax assets. Approximately $12,434,000 of tax loss carryforwards remain at August 31, 1996 for income tax purposes. The carryforwards expire $2,080,000 in 2005, $4,150,000 in 2006, $1,524,000 in 2007, $1,699,000 in 2008, $1,602,000 in 2010 and $1,379,000 in 2011. As a result of a change in control during fiscal year 1994, the amount of tax loss carryforwards incurred prior to the change in control which may be utilized by the Company in any one year period is limited to approximately $940,000. In certain circumstances because of "built-in" gains on some properties, the actual use of net operating loss carryforwards may exceed this amount. The Company has unused net operating loss carryforwards in certain states in which it operates which are available to offset future state taxable income in those states. No benefit for the remaining loss carryforwards has been recognized in the financial statements. 6. Shareholders' Investment Authorized Shares of Common and Preferred Stock - On January 4, 1995, the shareholders of the Company approved an amendment to the Company's Certificate of Incorporation increasing the authorized number of shares of the Company's common stock from 3,000,000 shares to 5,000,000 shares and to increase the number of authorized shares of the Company's preferred stock, par value $1.00 per share, from 500,000 shares to 1,000,000 shares. In addition, the shareholders approved and adopted a proposal to amend the Ridgewood Properties, Inc. 1993 Stock Option Plan, increasing the number of shares of common stock reserved for issuance or transfer upon the exercise of options to be granted from time to time thereunder, from an aggregate of 900,000 to 1,200,000 shares of common stock. Accordingly, 3,911,520 shares of common stock are available for future issuance, of which 1,200,000 are reserved for the Company's stock option plan. There are currently 1,088,480 shares of common stock outstanding, of which approximately 37% is owned by the Company's President, N. Russell Walden. There are currently 1,000,000 authorized shares of the Company's Series A Convertible Preferred Stock. On August 15, 1994, the Company issued 450,000 shares of the Company's preferred stock (see "Purchase of Common Shares" below), which represent the only outstanding preferred shares. Accordingly, 550,000 shares of preferred stock are available for future issuance. Loss Per Common Share -- Loss per common share is calculated based upon the weighted average number of shares outstanding during the period of approximately 1,055,000, 963,000 and 5,676,000 in 1996, 1995 and 1994, respectively. Purchases of Common Stock by the Company - As described in Note 1, on August 15, 1994, the Company purchased all (4.38 million) of the shares of the Company's common stock, $0.01 par value, held by the Company's then-majority stockholder, Triton Group Ltd. The Triton Shares represented 74.4% of the 5.88 million shares of common stock outstanding prior to the consummation of the transaction. In consideration for the Triton Shares, the Company paid $8.0 million in cash and authorized and issued 450,000 shares of the Company's preferred stock. As of August 15, 1996, Triton's preferred stock may be converted into three shares of the Company's common stock. In addition, on August 29, 1994, the Company acquired all (539,640) of the shares of common stock owned by Hesperus Partners Ltd., formerly known as Harris Associates, L.P., in exchange for a note receivable in the principal amount of $1.45 million executed by Sun Communities Operating Limited Partnership and held by the Company (see Note 1). In addition to assigning the Note and the mortgage securing the Note, the Company had agreed and did pay to Hesperus interest on the outstanding principal balance of the Note from the closing date through June 15, 1995. Issuance of Common Shares and Mandatorily Redeemable Equity Securities -- In December 1995, the Company purchased a hotel management company in part by issuing 125,000 shares of the Company's common stock: 100,000 shares and 25,000 shares to the President and Senior Vice President of Wesley Hotel Group ("Wesley"), respectively. See also Note 11. The 25,000 shares issued to the Senior Vice President of Wesley are subject to a Put Agreement ("Agreement"). The Agreement states that within ninety days after the two year anniversary of the effective date of the Agreement (which was effective in December 1995), the Company shall be obligated to purchase all or part of the 25,000 shares from the Senior Vice President of Wesley at a purchase price of $4.50 per share. 1993 Stock Option Plan -- On March 30, 1993, the Company granted options to purchase 378,000 shares of common stock at a price of approximately $1.83 per share to its key employees and one director under the Ridgewood Properties, Inc. 1993 Stock Option Plan (the "Plan"). The options vested over a four year period in 25% increments. All options expire ten years from the date of grant, unless earlier by reason of death, disability, termination of employment, or for other reasons outlined in the Plan. As of August 31, 1996, all of the options are exercisable. On January 28, 1994, the Company granted options to purchase 375,000 and 75,000 shares of common stock at a price of $1.00 per share to its President and Chief Financial Officer, respectively, under the Plan. The options are exercisable immediately and expire on January 31, 1997. If all vested options are exercised, the President and Chief Financial Officer would hold 49% and 8%, respectively, of the total outstanding shares of common stock. On January 4, 1995, the shareholders approved an increase in the number of authorized shares reserved for the Company's stock option plan from 900,000 to 1,200,000. In October 1995 the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS 123) which establishes financial accounting and reporting for stock based awards issued to employees and certain non-employees. FAS 123 establishes a fair value based method using an option pricing model to value options and determine compensation costs at the date of grant. FAS 123 is effective for fiscal years beginning after December 15, 1995, although early adoption is encouraged. The Company's management has elected to defer early adoption of the effects of FAS 123; however, upon adoption, management does not expect the effects of FAS 123 to have a material adverse impact on the Company's financial statements. 7. Supplemental Retirement and Death Benefit Plan The Company implemented a non-qualified Supplemental Retirement and Death Benefit Plan with an effective date of January 1, 1987. The Plan supplements other retirement plans and also provides pre-retirement death benefits to participants' beneficiaries. Concurrent with the implementation of the Supplemental Retirement and Death Benefit Plan, the Company purchased key-person life insurance contracts on the lives of the Plan participants. The policies are owned by and payable to the Company and are "increasing whole life" insurance. The Company pays level annual premiums, may borrow against cash values earned, and pays interest annually on any loans which may be cumulatively outstanding. In March 1995, the Company borrowed approximately $381,000 against the cash values. The net proceeds to the Company were approximately $358,000 due to the prepayment of interest on the loan. The Company has recorded a total pension liability of approximately $726,000 as of August 31, 1996. At August 31, 1996 the cash surrender value available to settle the outstanding pension liability was approximately $777,000. For the fiscal years ending August 31, 1996, 1995 and 1994, the pension expense was approximately $33,000, $60,000 and $63,000, respectively. 8. Investment in Limited Partnership On August 16, 1995, RW Hotel Partners, L.P. was organized as a limited partnership (the "Partnership") under the laws of the State of Delaware. Concurrently, the Company formed Ridgewood Hotels, Inc., a Georgia corporation ("Ridgewood Hotels") which became the sole general partner in the Partnership with RW Hotel Investments Associates, L.L.C. ("Investor") as the limited partner. Ridgewood Hotels has a 1% base distribution percentage versus 99% for the Investor. However, distribution percentages do vary depending on certain defined preferences and priorities pursuant to the Partnership Agreement ("Agreement") which are discussed below. The partnership was originally formed to acquire a hotel property in Louisville, Kentucky. The partnership consists of six hotel properties at August 31, 1996. The terms of this partnership will serve as a guideline for other potential acquisitions with this or other investors. Income and loss are allocated to the Company and the limited partner based upon the formula for allocating distributable cash as described below but subject to an annual limitation which would result in no more than 88% of partnership income or loss (as defined) being allocated to the limited partner. Distributable Cash is defined as the net income from the property before depreciation plus any net sale proceeds and net financing proceeds less capital costs. Distributions of Distributable Cash shall be made as follows: - First, to the Investor until there has been distributed to the Investor an amount equal to a 15% cumulative internal rate of return on the Investor's investment. - Second, to Ridgewood Hotels until the aggregate amount received by Ridgewood Hotels equals the aggregate cash contributions made by Ridgewood Hotels to the Partnership (as of 8/31/96, Ridgewood Hotels contributed approximately $748,000). - Third, 12% to Ridgewood Hotels and 88% to the Investor until there has been distributed to the Investor an amount equal to a 25% cumulative internal rate of return on Investor's investment. - Fourth, 75% of the residual to the Investor and 25% to Ridgewood Hotels. A Management Agreement exists between the Partnership and the Company as Manager ("Manager") for the purpose of managing hotels in Kentucky, Georgia and South Carolina. The Manager shall be entitled to the following property management fees: (1) 2.5% of the gross revenues from the hotel property. (2) 1% of the gross revenues from the hotel property as an incentive fee if distributable cash equals or exceeds 13.5% of certain aggregate acquisition costs. No management fees were payable with respect to the first 12-month period of management of the hotel in Kentucky. A Construction Management Agreement exists between the Partnership and the Manager for the purpose of managing future improvements to the properties. The Company currently has approximately $748,000 invested in the Partnership. Also, at August 31, 1996, the Company recorded approximately $209,000 equity in the income of the partnership, bringing the total investment in the limited partnership to approximately $957,000. The equity method of accounting is used for accounting for the investment in the Partnership. Also, the investment of $957,000 is after the elimination of intercompany transactions. The Partnership purchased a hotel in Louisville, Kentucky for approximately $16,000,000. In December 1995 and January 1996, the Partnership purchased four hotel properties in Georgia for approximately $15,000,000 and a hotel in South Carolina for $4,000,000, respectively. The Company may make future capital contributions to the Partnership. Management expects to fund such capital contributions through available cash or from loans from the Partnership. Additionally, the Company may invest in other partnerships to acquire hotels in the future. The condensed balance sheet and statement of income of the Partnership as of August 31, 1996 and from inception (August 16, 1995) to August 31, 1996 are as follows: RW HOTEL PARTNERS, L.P. CONDENSED BALANCE SHEET AUGUST 31, 1996
ASSETS ($000'S Omitted) CURRENT ASSETS $ 1,915 PROPERTY AND EQUIPMENT, net (See Note) 36,441 INTANGIBLE ASSETS, net 525 ------------- TOTAL ASSETS $ 38,881 ============= LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES $ 2,405 LONG-TERM DEBT (See Note) 17,895 ------------- TOTAL LIABILITIES 20,300 ------------- PARTNERS' CAPITAL, net 18,581 ------------- TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 38,881 =============
RW HOTEL PARTNERS, L.P. CONDENSED STATEMENT OF INCOME FROM INCEPTION (AUGUST 16, 1995) TO AUGUST 31, 1996 ($000'S Omitted) HOTEL OPERATIONS: Revenues $ 14,971 Operating Expenses 9,941 ------------ Income From Hotel Operations 5,030 ------------ PARTNERSHIP OPERATIONS 3,486 ------------ NET INCOME 1,544 ============ Note: On December 8, 1995, the Partnership entered into a long-term debt agreement with General Electric Capital Corporation ("GECC") in the amount of $9,613,748 (the "Note"). Also, under the Note, the Partnership may borrow up to an additional $386,252 for the purpose of capital improvements at the Louisville property. The capital improvements are subject to approval by GECC. The note bears interest at 3% above the GECC composite commercial paper rate and is due in monthly installments of $20,833 plus interest. In addition, if the ratio of net operating income, as defined, to average outstanding Note balance ("cash-on-cash yield") is less than 18% for the preceding 12 months, as calculated quarterly, 50% of excess cash flow, as defined, must be paid. If the cash-on-cash yield is less than 14%, 100% of the excess cash flow, as defined, must be paid. The outstanding principal balance will be due upon maturity, November 30, 1999. The Note cannot be prepaid until December 1996. The Note is secured by a first mortgage on the Kentucky property and the assignment of any revenues, rentals, and income of the property. The Note also requires the Partnership to establish a reserve for capital improvements. On January 31, 1996, the Partnership and GECC amended and restated the Note (the "Amended Note"). Under the Amended Note, the Partnership obtained additional borrowings of $8,144,000 (the "Additional Borrowings"). Also, under the Amended Note, the Partnership may borrow up to an additional $2,656,000 for the purpose of capital improvements at the Georgia Hotels. The capital improvements are subject to approval by GECC. The Amended Note is secured by Hurstbourne and the Georgia Hotels. The Amended Note provides for a two-year maturity extension option. The Additional Borrowings bear interest at the GECC composite commercial paper rate plus 3.25%. Additional monthly installments of $45,000, plus interest on the Additional Borrowings, commence on March 1, 1996. The Additional Borrowings cannot be prepaid until January 1997. The debt amount is now subject to be increased by $3,042,252, allowing the potential liability under the note agreement to increase to $20,800,000. The additional increase is subject to approval of certain agreed-upon property improvements.
9. Employee Savings Plan The Ridgewood Properties Employee Savings Plan ("Savings Plan") is a savings and salary deferral plan which is intended to qualify for favorable tax treatment under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986. The Savings Plan includes all employees of the Company who have completed one year of service and have attained age twenty-one. Each participant in the Savings Plan may elect to reduce his or her compensation by any percentage, not to exceed 15% of compensation when combined with any Matching Basic or Discretionary Employer Contributions (below) made on behalf of the participant, and have such amount contributed to his or her account under the Savings Plan. Elective employer contributions are made prior to the withholding of income taxes on such amounts. A participant may also elect to contribute to the Plan an amount of cash or property equal to or up to 10% of his or her compensation ("Voluntary Contributions"). Voluntary Contributions are made on an after-tax basis. The Savings Plan provides for an employer matching contribution in an amount equal to 50% of the elective employer contributions, provided that in no event shall such employer matching contributions exceed 3% of the participant's compensation. In addition, the Board of Directors of the Company is authorized to make discretionary contributions to the Savings Plan out of the Company's current or accumulated profits ("Discretionary Contributions"). Discretionary Contributions are allocated among those participants who complete at least 1,000 hours of service during the plan year and are employed by the Company on the last day of the plan year. Employees are subject to a seven year graduated vesting schedule with respect to Basic Employer Contributions, Matching Employer Contributions and Discretionary Contributions. Distributions from the Savings Plan will generally be available upon or shortly following a participant's termination of employment with the Company, with additional withdrawal rights with respect to Voluntary Contributions. For the fiscal years ending August 31, 1996, 1995 and 1994, expense for the Employee Savings Plan was approximately $21,000, $15,000 and $17,000, respectively. 10. Sale of Operating Properties In March 1994, the Company sold its apartments in Dallas, Texas, for $4,100,000, resulting in a gain of approximately $1,227,000. The gross purchase price included a $1,015,000 term loan secured by one of the apartments which is insured by the Department of Housing and Urban Development and which was assumed by the buyer at the time of purchase. An additional $1,710,000 of the proceeds were used to reduce the Company's debt. Net proceeds to the Company were approximately $1,100,000. In June 1994, the Company sold its five mobile home parks for $13,900,000, resulting in a gain of approximately $694,000. Net proceeds to the Company were approximately $12,000,000. Approximately $386,000 was applied to certain selling and operational costs. In addition, the Company accepted a $1,450,000 note which is secured by one of the mobile home parks. The note was subsequently exchanged for common stock of the Company in August 1994 as discussed in Note 1. In April 1995, the Company sold the Ridgewood Lodge, its weekly rental hotel in Orlando, Florida. The net proceeds, after commissions, were approximately $2,700,000. The gain on the sale was approximately $250,000. The proceeds were used to reduce the outstanding balance of the Company's term loan. 11. Acquisition of Hotel Management Company In December 1995, the Company acquired the Wesley Hotel Group, a hotel management company located in Atlanta, Georgia. At the time of acquisition, Wesley managed five hotels. The acquisition has been accounted for using the purchase method of accounting. The results of operations for Wesley are included in the Company's results of operations for the period December 1995 through August 1996. In conjunction with the acquisition, the Company issued 125,000 shares of common stock with a determined market value of $1.50 per share (see Note 6) and assumed three promissory notes with a combined outstanding principal of approximately $106,000, bringing the total investment in Wesley to $293,000. The investment recorded by the Company for the acquisition is being amortized over the useful life of the assets acquired. Since approximately $103,000 of amortization had been recognized, the net investment in Wesley as of August 31, 1996 is approximately $190,000. The consolidated financial statements include the operating results of the Wesley Hotel Group from the date of acquisition. Pro forma results of operations have not been presented because the effects of this acquisition were not significant. 12. Subsequent Events In September 1996, the Company sold a portion of its land in Maitland, Florida for $1,435,000. Net proceeds to the Company were approximately $1,221,000. In October 1996, the Company sold a portion of its land in Dallas, Texas for approximately $510,000. Net proceeds to the Company were approximately $448,000. Report of Independent Accountants To the Board of Directors and Shareholders of Ridgewood Properties, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of loss, of cash flows and of shareholders' investment present fairly, in all material respects, the financial position of Ridgewood Properties, Inc. and its subsidiaries at August 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 1996, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Atlanta, Georgia October 11, 1996 Market Information The Company's common stock is traded in the over-the-counter market and is listed in the broker-dealer "Pink Sheets." Transfer Agent and Registrar Society National Bank, Dallas, Texas is the Company's stock transfer agent and registrar. Society National Bank maintains the Company's shareholder records. To change name, address or ownership of stock, to report lost certificates, or to consolidate accounts, contact: Society National Bank Shareholder Services, Inc. 1201 Elm Street, Suite 5050 Dallas, Texas 75270 (214) 658-0200 General Counsel Rogers & Hardin 2700 Cain Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 Independent Accountants Price Waterhouse LLP 50 Hurt Plaza Suite 1700 Atlanta, Georgia 30303 Shareholder and General Inquiries The Company is required to file an Annual Report on Form 10-K for its fiscal year ended August 31, 1996 with the Securities and Exchange Commission. Copies of this annual report may be obtained without charge upon written request to: Ridgewood Properties, Inc. Shareholder Relations 2859 Paces Ferry Road Suite 700 Atlanta, Georgia 30339 (770) 434-3670 EX-22 4 EXHIBIT 22 RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT Percentage State or of Voting Jurisdiction Securities of Incorporation Owned ---------------- ---------- Florida Communities, Inc. Florida 100% Ridgewood Orlando, Inc. Florida 100% Ridgewood Hotels, Inc. Georgia 100% Cornerstone Management & Development, Inc. Georgia 100% Wesley Hotel Group, Inc. Georgia 100% Florida Beta Hotel Corp. Florida 100% California Zeta Hotel Corp. California 100% Capital Alpha Hotel Corp. Washington, DC 100% California Eta Hotel Corp. California 100% Pennsylvania Alpha Hotel Corp. Pennsylvania 100% The foregoing subsidiaries are included in the consolidated financial statements of the Company. EX-27 5
5 The Schedule contains summary financial information extracted from the Consolidated Balance Sheets, Statements of Consolidated Loss and Consolidated Statement of Cash Flows and is qualified in its entirety by reference to such financial statements. 12-MOS AUG-31-1996 AUG-31-1996 298,000 0 255,000 4,700,000 14,000 0 3,045,000 1,566,000 8,724,000 0 0 0 450,000 11,000 3,980,000 8,724,000 617,000 4,314,000 336,000 3,650,000 1,497,000 0 345,000 (1,178,000) 0 (1,178,000) 0 0 0 (1,178,000) (1.29) (1.29) EX-23 6 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-86084) of Ridgewood Properties, Inc. of our report dated October 11, 1996 appearing in the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules. PRICE WATERHOUSE Atlanta, Georgia November 22, 1996 -----END PRIVACY-ENHANCED MESSAGE-----