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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (C) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ X ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period April 1, 2001 to December 31, 2001
Commission File Number 0-24282
Monmouth Capital Corporation
(Exact name of registrant as specified in its charter)
New Jersey 21-0740878
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Juniper Business Plaza, 3499 Route 9 North, Freehold, NJ 07728
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(732) 577-9993
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $1.00 par value
Indicate by check mark whether the registrant (1) has filed all
reports required 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 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. ____
The aggregate market value of voting stock held by non-affiliates
of the Registrant was $3,985,883 (based on 1,383,987 shares of
common stock at $2.88 per share, the closing price on March 14,
2002).
The number of shares outstanding of issuer's common stock as of
March 14, 2002 was 1,767,213 shares.
PART I
ITEM 1. BUSINESS
General Development of Business
Monmouth Capital Corporation (the Company) is a corporation
organized in the State of New Jersey. The Company commenced
operations in 1961.
Prior to fiscal 1994, the Company operated as a small
business investment company under the Small Business Investment
Company Act of 1958 and as an investment company under the
Investment Company Act of 1940. As such, the Company was able to
distribute its income prior to income taxes as dividends to
shareholders. The Company was allowed a deduction from taxable
income for these distributions.
With shareholder approval, the Company surrendered its
license to operate as a small business investment company and
deregistered as an investment company. On January 15, 1993, the
Small Business Administration approved the surrender of the
Company's license. On July 20, 1993, the Securities and Exchange
Commission entered an Order that the Company had ceased to be an
investment company.
Certain members of the Company's Board of Directors manage
two real estate investment trusts. In 1995, the Company success
fully completed a Rights Offering to its shareholders. The
Company raised approximately $1,600,000 after expenses bringing
total equity to approximately $4,500,000.
Change in Year End to Calendar Year
On September 26, 2001 Monmouth Capital Corporation (the
Company) adopted a change from a fiscal year end of March 31 to a
calendar year end, effective for the short year ended December
31, 2001. Form 8-K was filed with the Securities and Exchange
Commission.
For purposes of this Annual Report, the Company has
furnished consolidated financial statements for the preceding
fiscal year ended March 31, 2001. The Company does not believe
that seasonality has a material adverse effect on the
comparability of information or trends reflected by the
consolidated financial statements. The Company has also
furnished Pro Forma financial information for the corresponding
period of the prior year (See Note 14). Certain amounts in the
consolidated financial statements for the prior periods have
been reclassified to conform to the statement presentation
for the current year. These reclassifications have no effect on
net income.
Page 2
Narrative Description of the Business
During fiscal 1994, the Company formed a wholly-owned
subsidiary, The Mobile Home Store, Inc., to finance and sell
manufactured homes. This sales operation was conducted at
manufactured home communities owned by United Mobile Homes, Inc.
(United), a related REIT. On March 30, 2001, the Company sold
all of its existing inventory to United at the Company's carrying
value. The Company exited the manufactured home sales business
since it proved to be unprofitable.
On March 31, 1994, the Company purchased a net leased
industrial building in Bethlehem, Pennsylvania. During fiscal
2000, this building was sold at a gain of $245,419. As an
interim measure, the Company is investing in securities of REITs.
The Company has also invested in mortgage backed securities
issued by the Federal National Mortgage Association. The Company
has purchased these securities on margin since the interest and
dividend yields exceed the cost of funds. Such securities are
subject to risk arising from adverse changes in market rates and
prices, primarily interest rate risk relating to debt securities
and equity price risk relating to equity securities.
On July 20, 2001, Palmer Terrace Realty Associates, LLC
(Palmer Terrace), a 51% owned subsidiary of the Company,
purchased a 59,400 square foot warehouse facility in Carlstadt,
New Jersey from WXIII/MWL Real Estate Limited Partnership, an
unrelated entity. On December 20, 2001, the Company purchased a
59,425 square foot warehouse facility in White Bear Lake,
Minnesota from Jones Development Company, LLC, an unrelated
entity.
The Company is currently operating as a hybrid REIT
investing in (a) real estate equities; (b) mortgages; (c)
mortgage backed securities; and (d) other REIT securities. The
Company's capital is limited, and there is no assurance the
Company can or will operate as a hybrid REIT. The Company will
consider alternative plans or proposals.
Management
The management of the Company currently operates Monmouth
Real Estate Investment Corporation (MREIC) and United, two REITs.
MREIC is now specializing in net leased industrial properties to
rated tenants on medium term leases. United specializes in
investments in manufactured home communities. It is intended
that the Company will invest in real estate ventures that do not
qualify under the investment objectives of MREIC and United. To
the extent that there may be conflicts of interest as to
prospective investments, the Company may be deprived of
investment opportunities.
Risk Factors
Real Estate Industry Risks - The Company may be adversely
affected by general economic conditions and local real estate
conditions. When a lease expires, a tenant may elect not to
renew it. The Company may not be able to relet the property on
similar terms, or even at all.
Page 3
Governmental Regulations - Local zoning and use laws,
environmental statutes and other governmental requirements may
restrict expansion, rehabilitation and reconstruction activities.
These regulations may prevent the Company from taking advantage
of economic opportunities. Legislation such as the Americans
with Disabilities Act may require the Company to modify its
properties. Future legislation may impose additional
requirements. No prediction can be made as to what requirements
may be enacted or what changes may be implemented to existing
legislation.
Environmental Liability Risks - Current and former real
estate owners and operators may be required by law to investigate
and clean up hazardous substances released at the properties they
own or operate or have owned or operated. They may be liable to
the government or to third parties for property damage,
investigation costs and cleanup costs. Contamination may
adversely affect the owner's ability to sell or lease real estate
or to borrow using the real estate as collateral. There is no
way of determining at this time the magnitude of any potential
liability to which the Company may be subject arising out of
unknown environmental conditions or violations with respect to
the properties it owns. Environmental laws today can impose
liability on a previous owner or operator of a property that
owned or operated the property at a time when hazardous or toxic
substances were disposed of, or released from, the property. A
conveyance of the property, therefore, does not relieve the owner
or operator from liability. The Company is not aware of any
environmental liabilities relating to its properties which would
have a material adverse effect on its business, assets, or
results of operations. However, no assurance can be given that
environmental liabilities will not arise in the future.
Insurance Considerations - The Company generally maintains
insurance policies related to its business, including casualty,
general liability and other policies covering business
operations, employees and assets. The Company may be required to
bear all losses that are not adequately covered by insurance.
Although management believes that the Company's insurance
programs are adequate, no assurance can be given that the Company
will not incur losses in excess of its insurance coverage, or
that the Company will be able to obtain insurance in the future
at acceptable levels and reasonable cost.
Financing Risks - The Company finances a portion of its
investments through debt. This debt creates risks, including
a) rising interest rates on floating rate debt; b) failure to
repay or refinance existing debt as it matures, which may result
in forced disposition of assets on disadvantageous terms; c)
refinancing terms less favorable than the terms of the existing
debt; and d) failure to meet required payments of principal
and/or interest.
Amendment of Business Policies - The Board of Directors
determines the growth, investment, financing, capitalization,
borrowing, REIT status, operating and distribution policies.
Although the Board of Directors has no present intention to amend
or revise any of these policies, these policies may be amended or
revised without notice to shareholders. Accordingly,
shareholders may not have control over changes in Company
policies.
Qualification as a REIT - The Company intends to qualify as
a REIT. If it fails to do so, it will not be allowed to deduct
distributions to shareholders in computing taxable income and
will be subject to Federal and state income taxes, including any
applicable alternative minimum tax, at regular corporate rates.
Page 4
In addition, the Company may be barred from qualification
as a REIT for the four years following disqualification. The
additional tax incurred at regular corporate rates would reduce
significantly the cash flow available for distribution to
shareholders and for debt service. Furthermore, the Company
would no longer be required to make any distributions to
shareholders as a condition to REIT qualification. Any
distributions to shareholders that otherwise would have been
subject to tax as a capital gain dividend would be taxable as
ordinary income to the extent of the Company's current and
accumulated earnings and profits. Corporate distributees,
however, may be eligible for the dividends received deduction on
the distributions, subject to limitations under the Internal
Revenue Code. To qualify as a REIT, the Company must comply with
certain highly technical and complex requirements. Management
cannot be certain that the Company have complied with these
requirements since there are few judicial and administrative
interpretations of these provisions. In addition, facts and
circumstances that may be beyond the Company's control may affect
the Company's ability to qualify as a REIT. No assurance can be
given that new legislation, regulations, administrative
interpretations or court decisions will not change the tax laws
significantly with respect to qualification as a REIT or with
respect to the Federal income tax consequences of qualification.
The Company intend to qualify as a REIT. However, no assurance
can be given that the Company qualifies as a REIT or will remain
qualified as a REIT. Notwithstanding the Company's status as a
REIT, the Company is subject to various Federal, state and local
taxes on income and property. The Company will be taxed at
regular corporate rates on any undistributed taxable income,
including undistributed net capital gains. The Company
may also have to pay some state income or franchise taxes because
not all states treat REITS in the same manner as they are treated
for Federal income tax purposes.
Number of Employees
At March 31, 2002, the Company had five full-time employees.
A Board of Directors consisting of eight directors is
responsible for the general policies of the Company.
ITEM 2. PROPERTIES
On July 20, 2001, Palmer Terrace Realty Associates, LLC
(Palmer Terrace), a 51% owned subsidiary of the Company,
purchased a 59,400 square foot warehouse facility in Carlstadt,
New Jersey from WXIII/MWL Real Estate Limited Partnership, an
unrelated entity. This warehouse facility is 100% net leased to
Macy's East, Inc., an Ohio corporation. The purchase price was
approximately $3,100,000. The average monthly rental over the
term of the lease is $29,082. This lease expires on April 5,
2009.
On December 20, 2001, the Company purchased a 59,425 square
foot warehouse facility in White Bear Lake, Minnesota from Jones
Development Company, LLC, an unrelated entity. This warehouse
facility is 100% net leased to Federal Express Corporation. The
purchase price was approximately $4,800,000. The monthly rental
over the term of the lease is $36,100. This lease expires on
April 1, 2011.
Page 5
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Prior to October 19, 1995, the shares of the Company were
traded on the over-the-counter market. As of October 19, 1995,
the Company's shares are traded on the National Association of
Securities Dealers Automatic Quotations (NASDAQ) Small
Capitalization market under the symbol "MONM". The per share
range of high and low market during each quarter of the last
three fiscal years were as follows:
2001 2001-2000 2000-1999
Market Price Market Price Market Price
Low Low Low
High High High
Apr-Jun 2.65 3.05 2-7/16 3 2-3/4 2-3/8
Jul-Sept 2.66 3.45 2-3/8 2-3/4 2-3/4 2-1/8
Oct-Dec 2.70 3.25 2-7/16 2-7/8 2-5/8 2-1/4
Jan-Mar N/A N/A 2-7/16 3-1/2 2-5/8 2-5/16
The over-the-counter market quotations reflect the inter-
dealer prices, without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.
As of December 31, 2001, there were approximately 400
holders of the Company's common stock based on the number of
record owners.
For the short year ended December 31, 2001, and the years
ended March 31, 2001 and 2000, total dividends paid by the
Company amounted to $413,627 or $.25 per share, $76,123 or $.05
per share, and $75,710 or $.05 per share.
Future dividend policy will depend on the Company's
earnings, capital requirements, financial condition, availability
and cost of bank financing and other factors considered relevant
by the Board of Directors.
Page 6
ITEM 6. SELECTED FINANCIAL DATA
For the
Years Ended
March 31,
For the
Short Year
Ended
December
31, 2001 2001 2000 1999 1998
Income
Statement
Data:
Total Income $1,444,163 $5,831,320 $5,453,916 $5,965,265 $4,288,031
Total
Expenses 1,026,564 5,906,020 5,685,135 6,178,666 4,242,531
Gain on Sale
of Real
Estate
Investments -0- -0- 245,419 -0- -0-
Income Taxes -0- -0- -0- -0- 34,239
Net Income
(Loss) 398,205 (74,700) 14,200 (213,401) 11,261
Net Income
(Loss)
Per Share .25 (0.05) 0.01 (0.14) 0.01
=======================================================================
Balance Sheet Data:
Total Assets $23,037,800 $15,494,536 $9,068,788 $7,760,765 $6,855,686
Mortgages
Payable 5,719,724 -0- -0- -0- -0-
Shareholders'
Equity 7,325,722 6,463,842 5,273,879 5,348,223 5,518,321
=======================================================================
Cash
Dividends
Per Share $0.25 $0.05 $0.05 $0.05 $0.05
Average
Number of
Shares
Outstanding:
Basic 1,597,213 1,534,759 1,516,528 1,496,727 1,458,811
Diluted 1,602,787 1,534,759 1,516,528 1,496,727 1,458,811
PAGE 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Liquidity and Capital Resources
The Company's ability to generate cash adequate to meet its
needs is dependent primarily on income from its real estate
investments and its securities portfolio, the sale of real estate
investments and securities, refinancing of mortgage debt,
leveraging of real estate investments, availability of bank
borrowings, proceeds from the Dividend Reinvestment and Stock
Purchase Plan, and access to the capital markets. Purchases of
new properties, purchases of securities, payments of expenses
related to real estate operations, capital improvements programs,
debt service, management and professional fees, and dividend
requirements place demands on the Company's liquidity.
The Company intends to operate its existing properties from
the cash flows generated by the properties. However, the
Company's expenses are affected by various factors, including
inflation. Increases in operating expenses raise the breakeven
point for a property and, to the extent that they cannot be
passed on through higher rents, reduce the amount of available
cash flow which can adversely affect the market value of the
property.
Net cash provided by operating activities for the Short year
ended December 31, 2001 and the years ended March 31, 2001 and
2000 amounted to $287,493, $178,452 and $553,657, respectively.
The increase at December 31, 2001 was due primarily to profitable
operations. The decrease at March 31, 2001 was due primarily to
the decrease in accounts payable and accrued expenses.
Total real estate investments increased by $7,803,971 during
the Short year ended December 31, 2001. This was due primarily
to the purchase of two warehouse facilities. The Company expects
to make additional real estate investments from time to time.
Loans receivable decreased by $651,010 during the short year
ended December 31, 2001. This decrease was the primarily the
result of collections of $263,206 and a provision for losses of
$134,400. The Company also repossessed the collateral for loans
receivable of $253,404 and placed it into inventory.
Securities available for sale decreased by $620,528
primarily as a result of sales of $1,348,273 offset by purchases
of $204,907 and an increase in the unrealized gain of $522,838.
The securities portfolio at December 31, 2001 has experienced an
approximate 17% increase in value from cost.
Unamortized financing costs and mortgages payable increased
due to the new acquisitions.
Loans payable increased by $576,368 primarily as a result of
new loans of $900,000 offset by a net decrease in the margin loan
payable. The Company purchased securities on margin since the
interest and dividend yields exceeded the cost of funds.
Page 8
Results of Operations
Short Year Ended December 31, 2001 vs. Year Ended March 31, 2001
Income is comprised primarily of interest and dividend
income and rental income. On March 30, 2001, the Company exited
the manufactured home sales business since it proved to be
unprofitable. Sales of manufactured homes, cost of sales of
manufactured home, selling expense, other expenses and salaries
and employee benefits decreased during the Short year ended
December 31, 2001 as compared to the year ended March 31, 2001.
These changes are directly attributable to the exiting of the
manufactured home sales business.
Interest and dividend income increased by $71,713 during the
short year ended December 31, 2001 as compared to the year ended
March 31, 2001 primarily due to the purchases of securities
available for sale.
Rental income increased by $195,560 during the short year
ended December 31, 2001 as compared to the year ended March 31,
2001 primarily due to the purchase of two warehouse facilities
during the nine months ended December 31, 2001.
Other income increased by $100,763 during the short year
ended December 31, 2001 as compared to the year ended March 31,
2001 primarily due an increase in the gain on sales of securities
available for sale.
Professional fees, annualized, remained relatively stable.
Interest expense increased due primarily to the mortgages on
the new acquisitions.
Page 9
Fiscal 2001 vs. 2000
Income is comprised primarily of sales of manufactured homes
by The Mobile Home Store, Inc. (MHS), the Company's wholly owned
subsidiary, interest income and rental income. Sales of
manufactured homes remained relatively stable during fiscal 2001.
Interest and dividend income increased by $487,069 during
fiscal 2001 primarily due to the purchases of securities
available for sale.
Rental income decreased by $173,937 in fiscal 2001,
primarily due to the sale of the Bethlehem, Pennsylvania net-
leased industrial building.
Other income increased from $121,012 in fiscal 2000 to
$154,239 in fiscal 2001 due primarily to an increase in the gain
on sales of securities available for sale. Gain on sales of
securities available for sale increase from $16,841 in fiscal
2000 to $31,598 in fiscal 2001.
Cost of manufactured home sales increased from $3,974,912 in
fiscal 2000 to $4,192,175 in fiscal 2001. Selling expense
decreased from $474,134 in fiscal 2000 to $425,620 in fiscal
2001. These changes are directly attributable to the change in
sales of manufactured homes.
Salaries and employee benefits decreased from $315,290 in
fiscal 2000 to $254,518 in fiscal 2001. This was due primarily
to fewer employees as a result of the exiting of the manufactured
home sales business.
Professional fees remained relatively stable during fiscal
2001.
Interest expense increased from $152,509 in fiscal 2000 to
$364,690 in fiscal 2001. This increase was due to the purchase
of securities for sale on margin.
Other expenses decreased from $641,991 in fiscal 2000 to
$539,427 in fiscal 2001 due primarily to MHS exiting the
manufactured home sales business.
The gain on sale of real estate investment of $245,419 in
fiscal 2000 was due to the sale of the Bethlehem, Pennsylvania
net-leased industrial building on March 1, 2000.
Safe Harbor Statement
This Form 10-K contains various "forward-looking statements"
within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, and the Company intends that
such forward-looking statements be subject to the safe harbors
created thereby. The words "may", "will", "expect", "believe",
"anticipate", "should", "estimate", and similar expressions
identify forward-looking statements. These forward looking
statements reflect the Company's current views with respect to
future events and finance performance, but are based upon current
assumptions regarding the Company's operations, future results
and prospects, and are subject to many uncertainties and factors
relating to the Company's operations and business environment
which may cause the actual results of the Company to be
materially different from any future results expressed or implied
by such forward-looking statements.
Page 10
Such factors include, but are not limited to, the following:
(i) changes in the general economic climate, including interest
rates; (ii) increased competition in the geographic areas in
which the Company operates; and (iii) changes in government laws.
The Company undertakes no obligation to publicly update or revise
any forward-looking statements whether as a result of new
information, future events, or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company is exposed to interest rate changes primarily as
a result of its line of credit and long-term debt used to
maintain liquidity and fund capital expenditures and expansion of
the Company's real estate investment portfolio and operations.
The Company's interest rate risk management objectives are to
limit the impact of interest rate changes on earnings and cash
flows and to lower its overall borrowing costs. To achieve its
objectives, the Company borrows primarily at fixed rates. At
December 31, 2001, the Company had $5,719,724 of fixed rate
mortgages payable, of which $3,400,000 matures in 2011 and
$2,319,724 matures in 2021. The average interest rate on these
mortgages is 7.3%. At December 31, 2001, the carrying value of
these mortgages approximates fair value.
The Company also has approximately $3.5 million in variable
rate debt due on demand. This debt is primarily a margin loan
secured by marketable securities. The interest rate on this
margin loan was 3.875% at December 31, 2001. The carrying value
of the Company's variable rate debt approximates fair value at
December 31, 2001.
The Company also invests in both debt and equity securities
of other REITs and is primarily exposed to equity price risk from
adverse changes in market rates and conditions. All securities
are classified as available for sale and are carried at fair
value. The Company has no significant interest rate risk
relating to debt securities as they are short-term in nature.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in
Part IV, Item 14 (a)(1) are incorporated herein by reference and
filed as a part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 11
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATED ENTITY OF
THE REGISTRANT
Several of the Directors and Officers of the Company also
serve as directors of Monmouth Real Estate Investment Corporation
(MREIC) and United Mobile Homes, Inc. (United), both publicly-
owned real estate investment trusts.
Director
Since/
Principal Occupation Shares Owned
and
Name, Age and Title Past Five Years % of Total
Ernest V. Bencivenga Treasurer and 1961
(83) Director of MREIC; Owns 7,155 shs
Secretary/Treasurer Secretary/Treasurer .42% (1)
And Director and Director of
United.
Anna T. Chew Certified Public 1994
(43) Accountant; Owns 13,129
Vice President Vice President, Chief shs
and Director Financial .77 % (2)
Officer and Director
of United;
Controller and
Director of
MREIC.
Charles P. Kaempffer Self-employed 1970
(64) investor; Owns 15,331
Director Director of MREIC, shs
United and .90 % (3)
Community Bank of New
Jersey.
Eugene W. Landy Attorney; President 1961
(68) of MREIC; Owns 224,725
President Chairman of the Board shs
and Director of United. 13.24 % (4)
Michael Landy President (1998 to 2001
(40) present) of Siam Owns 36,176
Director Records, L.L.C.; shs
Chief Engineer and 2.13% (5)
Technical Director
(1987 to 1998) of GRP
Recording Company.
Samuel A. Landy Attorney; President 1994
(41) and Director Owns 65,416
Director of United; Director shs
of MREIC. 3.86 % (6)
Page 12
Director
Since/
Principal Occupation Shares Owned
and
Name, Age and Title Past Five Years % of Total
Eugene Rothenberg Obstetrician and 2001
(69) Gynecologist; Owns 4,308 shs
Director Investor .26 %
Robert G. Sampson Self-employed investor; 1963
(75) Director of MREIC and Owns 16,986
Director United; shs
General Partner for 1.00 %
Sampco, Ltd.
383,226 shs
TOTAL 22.58%
(1) Includes 5,653 shares held by Mr. Bencivenga's wife.
(2) Held jointly with Ms. Chew's husband.
(3) Includes (a) 726 shares in joint name with Mrs.
Kaempffer;(b) 270 shares held by Mr. Kaempffer's wife; and
(c) 7,000 shares in joint name with Mrs. Kaempffer held as
Trustees for Defined Benefit Pension Plan.
(4) Includes (a) 8,019 shares held by Mr. Landy's wife; (b)
32,835 shares held in the Landy & Landy Employees' Pension
Plan, of which Mr. Landy is a Trustee with power to vote;
(c) 69,051 shares held in the Landy & Landy Employees'
Profit Sharing Plan, of which Mr. Landy is Trustee with
power to vote; and (d) 14,545 shares held by Landy
Investments, Ltd. of which Mr. Landy has power to vote.
(5) Includes 9,653 shares in custodial accounts for Mr. Landy's
children under the Uniform Gift to Minor's Act in which he
disclaims any beneficial interest, but has power to vote.
(6) Includes (a) 13,443 shares held by Mr. Landy's wife; (b)
14,687 shares in custodial accounts for Mr. Landy's
children under the Uniform Gift to Minor's Act in which he
disclaims any beneficial interest, but has power to vote;
and (c) 25,658 shares in the Samuel Landy Family Limited
Partnership.
Page 13
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table shows compensation
paid by the Company to its chief executive officer for services
rendered during the short year ended December 31, 2001 and the
fiscal years ended March 31, 2001 and 2000. Because no executive
officers received total annual salary and bonus exceeding
$100,000, only the compensation paid to the chief executive
officer is to be disclosed under the Securities and Exchange
Commission disclosure requirements.
Name and Principal Compensation
Position Salary Bonus Other (1)
Eugene W. Landy 12/31/01 $37,500 None $1,600
Chief Executive 3/31/01 $50,000 None $3,200
Officer
3/31/00 $50,000 None $3,200
(1) Represents base compensation and directors' fees.
Report of the Compensation Committee
Overview and Philosophy
The Company has a Compensation Committee consisting of three
independent outside Directors. This Committee is responsible for
making recommendations to the Board of Directors concerning
executive compensation. The Compensation Committee takes into
consideration three major factors in setting compensation.
The first consideration is the overall performance of the
Company. The Committee believes that the financial interests of
the executive officers should be aligned with the success of the
Company and the financial interests of its shareholders.
The second consideration is the individual achievements made
by each officer. The Company is relatively small. The Committee
is aware of the contributions made by each officer and makes an
evaluation of individual performance based on their own
familiarity with the officer.
The final criteria in setting compensation is comparable
wages in the industry.
Page 14
Evaluation
The Committee reviewed the progress made by Eugene W. Landy,
Chief Executive Officer, in locating alternative business and
investment opportunities. The Committee decided to continue Mr.
Landy's annual compensation of $50,000.
Other Information
Except for specific agreements, the Company has no
retirement plan in effect for officers, directors or employees
and, at present, has no intention of instituting such a plan.
Comparative Performance
The following line graph compares the total return of the
Company's Common Stock for the last five fiscal years to the
NASDAQ Total Return Index and the NASDAQ Financial Stocks Total
Return Index. The total return reflects stock price appreciation
and dividend reinvestment for all three comparative indices. The
information herein has been obtained from sources believed to be
reliable, but neither its accuracy nor its completeness is
guaranteed.
Year Monmouth
Ended Capital NASDAQ NASDAQ
December 31, Corporation Total Financial
1996 100 100 100
1997 117 122 117
1998 144 173 172
1999 106 321 337
2000 107 193 196
2001 127 153 150
Page 15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of December 31, 2001, no person owned of record or was
known by the Company to beneficially own more than 5% of the
shares, except as follows:
Name and Address Shares Owned Percent of
Of Beneficial Beneficially Class
Owner
Eugene W. Landy
20 Tuxedo Road
Rumson, NJ 07760 224,725 13.24%
The Company believes that during 2001, all persons required
to report ownership and changes in ownership of common stock
pursuant to Section 16(a) of the Securities Exchange Act of 1934
have complied.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain relationships and related party transactions are
incorporated herein by reference to part IV, Item 14(a)(1)(vi),
Note 10 of the Notes to Consolidated Financial Statements-
Payments to Affiliated Persons and Related Party Transactions.
Page 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1) The following Financial Statements are filed as part of
this report:
Page
(i) Auditors' Report 19
(ii) Consolidated Balance Sheets 20-21
(iii) Consolidated Statements of Income 22
(iv) Consolidated Statements of
Shareholders' Equity 23
(v) Consolidated Statements of Cash Flows 24
(vi) Notes to Consolidated Financial Statements 25-39
Page 17
(a) (2) Financial Statement schedules are omitted for the
reason that they are not required, are not applicable, or the
required information is set forth in the financial statements or
notes thereto.
(a) (3) The Exhibits set forth in the following index of
Exhibits are filed as a part of this Report.
Exhibit No. Description
(3) Articles of Incorporation and By-Laws - Reference is hereby
made to that filed with the Securities and Exchange Commission
with the Company's Form 10-K/A No. 2 for the year ended March 31,
1994.
(21) Subsidiaries of the Registrant - During fiscal 1994, the
Registrant formed a wholly-owned subsidiary, The Mobile Home
Store, Inc. to finance and sell manufactured homes. This
subsidiary merged into the Registrant during 2001. During 2001,
the Registrant formed a subsidiary, Palmer Terrace Realty
Associates, LLC to purchases a warehouse facility in Carlstadt,
New Jersey.
(a)(3)(b) Reports on Form 8-K
Form 8-K dated December 20, 2001 was filed to report the
purchase of a warehouse facility in White Bear Lake, Minnesota.
Page 18
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Monmouth Capital Corporation
Freehold, New Jersey
We have audited the accompanying consolidated balance sheets
of Monmouth Capital Corporation as of December 31, 2001 and March
31, 2001, and the related consolidated statements of income,
shareholders' equity and cash flows for the short year ended
December 31, 2001 and the years ended March 31, 2001 and 2000.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Monmouth Capital Corporation at December
31, 2001 and March 31, 2001, and the consolidated results of
their operations and their cash flows for the short year ended
December 31, 2001 and the years ended March 31, 2001 and 2000 in
conformity with accounting principles generally accepted in the
United States of America.
/s/ Cowan, Gunteski & Co.
March 21, 2002
Toms River, New Jersey
Page 19
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, March 31,
ASSETS 2001 2001
Real Estate Investments:
Land $1,659,065 $11,065
Buildings, Improvements and
Equipment, net of
accumulated depreciation of
$80,000 and -0-,
respectively 6,155,971 -0-
________ ________
Total Real Estate Investments 7,815,036 11,065
Loans Receivable, net of
allowance for losses of
$58,770 and -0-,
respectively 2,397,698 3,048,708
Cash and Cash Equivalents 607,443 92,450
Accounts Receivable 157,292 47,705
Securities Available for Sale,
at Fair Value:
Federal National Mortgage
Association 5,327,937 5,967,189
Government National Mortgage
Association 205,533 250,125
Other Securities Available
for Sale 6,123,300 6,059,984
Inventory 253,404 -0-
Prepaid Expenses and Other
Current Assets 35,283 17,310
Unamortized Financing Costs 114,874 -0-
__________ __________
TOTAL ASSETS $23,037,800 $15,494,536
========== ==========
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
Page 20
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS (CONT.)
December 31, March 31,
2001 2001
LIABILITIES AND SHAREHOLDERS'
EQUITY
Mortgages Payable $5,719,724 $ -0-
Accounts Payable and Accrued Expenses 158,711 129,615
Loans Payable 9,449,933 8,873,565
Other Liabilities 34,657 27,514
__________ _________
Total Liabilities 15,363,025 9,030,694
__________ _________
Minority Interest 349,053 -0-
__________ _________
Shareholders' Equity:
Common Stock (par value $1.00
per share; Authorized
10,000,000 shares; issued
and outstanding 1,697,014
and 1,573,790 shares
respectively 1,697,014 1,573,790
Additional Paid-In Capital 3,640,737 3,409,497
Accumulated Other
Comprehensive
Income 1,689,134 1,166,296
Retained Earnings 298,837 314,259
_________ _________
Total Shareholders' Equity 7,325,722 6,463,842
_________ _________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $23,037,800 $15,494,536
=========== ===========
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
Page 21
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended
March 31,
For the Short
Year Ended
December 31, 2001 2001 2000
Income:
Sales of Manufactured
Homes $35,500 $4,790,693 $4,759,648
Interest and Dividend
Income 947,491 875,778 388,709
Rental Income 206,170 10,610 184,547
Other Income 255,002 154,239 121,012
_________ _________ _________
Total Income 1,444,163 5,831,320 5,453,916
_________ _________ _________
Expenses:
Cost of Sales of
Manufactured Homes 33,836 4,192,175 3,974,912
Selling Expense -0- 425,620 474,134
Salaries and Employee
Benefits 136,346 254,518 315,290
Professional Fees 86,201 129,590 126,299
Interest Expense 373,159 364,690 152,509
Other Expenses 397,022 539,427 641,991
_________ _________ _________
Total Expenses 1,026,564 5,906,020 5,685,135
_________ _________ _________
Gain (Loss) Before Gain on
Sale of Real Estate 417,598 (74,700) (231,219)
Investment and Minority
Interest
Minority Interest 19,393 -0- -0-
Gain on Sale of Real
Estate Investment -0- -0- 245,419
__________ _________ _________
NET INCOME (LOSS) $398,205 $(74,700) $14,200
========== ========= =========
NET INCOME (LOSS) PER
SHARE-BASIC AND DILUTED $ .025 $ (0.05) $ 0.01
========== ========= =========
WEIGHTED AVERAGE
SHARES OUTSTANDING:
BASIC 1,597,213 1,534,759 1,516,528
========== ========= =========
DILUTED 1,602,787 1,534,759 1,516,528
========== ========= =========
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
Page 22
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Additional
Common Stock Paid-In
Number Amount Capital
Balance March 31,1999 1,513,891 $1,513,891 $3,304,657
Common Stock Issued
with the DRIP* 8,389 8,389 14,689
Net Income -0- -0- -0-
Distributions -0- -0- -0-
Unrealized Net Holding
Losses on Securities
Available for Sale -0- -0- -0-
_________ _________ _________
Balance March 31,2000 1,522,280 1,522,280 3,319,346
Common Stock Issued
with the DRIP* 51,510 51,510 90,151
Net Loss -0- -0- -0-
Distributions -0- -0- -0-
Unrealized Net Holding
Losses on Securities
Available for Sale -0- -0- -0-
_________ _________ _________
Balance March 31,2001 1,573,790 1,573,790 3,409,597
Common Stock Issued
with DRIP 123,224 123,224 231,240
Net Income -0- -0- -0-
Distributions -0- -0- -0-
Unrealized Net Holding
Losses on Securities
Available for Sale -0- -0- -0-
_________ __________ _________
Balance December 31,
2001 1,697,014 $1,697,014 $3,640,737
========= ========== =========
*Dividend Reinvestment and Stock Purchase Plan
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
Page 23A
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
Other Com- Compre-
prehensive Retained hensive
Income Earnings Income
Balance March 31,1999 $3,083 $526,592
Common Stock Issued with
the DRIP* -0- -0-
Net Income -0- 14,200 $14,200
Distributions -0- (75,710)
Unrealized Net Holding
Losses on Securities
Available for Sale
(35,912) -0- (35,912)
_________ ________ ________
Balance March 31,2000 (32,829) 465,082 $(21,712)
========
Common Stock Issued
with the DRIP* -0- -0-
Net Loss -0- (74,700) (74,700)
Distributions -0- (76,123)
Unrealized Net Holding
Losses on Securities
Available for Sale 1,199,125 -0- 1,199,125
_________ ________ _________
Balance March 31, 2001 1,166,296 314,259 $1,124,425
=========
Common Stock Issued with
DRIP -0- -0-
Net Income -0- 398,205 $398,205
Distributions -0- (413,627)
Unrealized Net Holding
Losses on Securities
Available for Sale 522,838 -0- 522,838
_________ _________ ________
Balance December 31,
2001 $1,689,134 $298,837 $921,043
========= ========= ========
*Dividend Reinvestment and Stock Purchase Plan
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
Page 23B
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
For the Short March 31,
Year Ended
December 31,
2001 2001 2000
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income $398,205 $(74,700) $14,200
Adjustments to reconcile net
income to net cash provided by
operating activities:
Income Allocated to Minority 19,393 -0- -0-
Interest
Depreciation and Amortization 81,500 60,519 79,908
Provision for Loan Losses 134,400 -0- -0-
Gain on Sale of Securities (254,684) (31,598) (16,841)
Available for Sale
Gain on Sale of Real Estate
Investments -0- -0- (245,419)
Changes In Operating Assets and
Liabilities:
Accounts Receivable (109,587) 82,893 15,472
Inventory -0- 489,317 391,761
Prepaid Expenses and Other
Current Assets (17,973) 25,297 3,370
Accounts Payable and Accrued
Expenses 29,096 (330,397) 320,056
Other Liabilities 7,143 (42,879) (8,850)
_________ ________ _________
Net Cash Provided by Operating
Activities 287,493 178,452 553,657
_________ ________ _________
CASH FLOWS FROM INVESTING
ACTIVITIES
Loans Made -0- (1,291,195) (609,962)
Collections and Other
Decreases in Loans
Receivable 263,206 747,291 793,403
Purchase of Securities
Available for Sale (204,907) (8,198,342) (2,852,770)
Proceeds from Sales and
Other Decreases in
Securities Available for
Sale 1,602,957 225,674 116,581
Additions to Real Estate
Investments (7,883,971) (103,430) (171,437)
Proceeds from Sale of Real
Estate Investments -0- 389,834 1,257,343
Disposition of Inventory -0- 2,261,624 -0-
_________ _________ _________
Net Cash Used by Investing
Activities (6,222,715) (5,968,544) (1,466,842)
_________ _________ _________
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from Mortgages 5,736,250 -0- -0-
Proceeds from Loans 900,000 -0- -0-
Net Increase (Decrease) in
Margin Loans Payable and
Inventory Financing (323,632) 5,609,061 1,071,161
Principal Payments of
Mortgages (16,526) -0- -0-
Financing Costs on Debt (116,374) -0- -0-
Increase in Minority
Interest 329,660 -0- -0-
Dividends Paid (320,264) (54,973) (54,142)
Proceeds from the Issuance
of Class A Common Stock 261,101 120,511 1,510
_________ _________ _________
Net Cash Provided by Financing
Activities 6,450,215 5,674,599 1,018,529
_________ _________ _________
Net Increase (Decrease) in Cash and
Cash Equivalents 514,993 (115,493) 105,344
Cash and Cash Equivalents at
Beginning of Year 92,450 207,943 102,599
_________ __________ _________
Cash and Cash Equivalents at End
of Year $607,443 $92,450 $207,943
========= ========== =========
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
Page 24
MONMOUTH CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 1 - CHANGE IN YEAR END TO CALENDAR YEAR
On September 26, 2001 Monmouth Capital Corporation (the
Company) adopted a change from a fiscal year end of March 31 to a
calendar year end, effective for the short year ended December
31, 2001. Form 8-K was filed with the Securities and Exchange
Commission.
For purposes of this Annual Report, the Company has
furnished consolidated financial statements for the preceding
fiscal year ended March 31, 2001. The Company does not believe
that seasonality has a material adverse effect on the
comparability of information or trends reflected by the
consolidated financial statements. The Company has also
furnished Pro Forma financial information for the corresponding
period of the prior year (See Note 14).
In conjunction with the change in year end, the Company
intends to elect to be taxed as a real estate investment trust
(REIT) effective for the transition period ended December 31,
2001.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principals of Consolidation and Minority Interests
The Company formed a wholly-owned subsidiary, The Mobile
Home Store, Inc. (MHS), to finance and sell manufactured homes.
MHS was incorporated in the State of New Jersey on July 28, 1993.
MHS was merged into the Company on December 6, 2001. The Company
consolidates the results of certain operations that have minority
interest. All inter-company transactions and balances have been
eliminated in consolidation.
Description of the Business
The Company is a corporation organized in New Jersey which
commenced operations in 1961. Prior to fiscal 1994, the Company
was an investment company under the Investment Company Act of
1940 and a small business investment company licensed under the
Small Business Investment Company Act of 1958.
During fiscal 1994, the Company formed MHS to finance and
sell manufactured homes at manufactured home communities owned by
United Mobile Homes, Inc. (United), a related real estate
investment trust (REIT). On March 30, 2001, the Company sold all
of its existing inventory to United at the Company's carrying
value. The Company exited the manufactured home sales business
since it proved to be unprofitable.
Page 25
On March 31, 1994, the Company purchased a net leased
industrial building in Bethlehem, Pennsylvania. During fiscal
2000, this building was sold at a gain of $245,419. As an
interim measure, the Company is investing in securities of REITs.
The Company has also invested in mortgage backed securities
issued by the Federal National Mortgage Association. The Company
has purchased these securities on margin since the interest and
dividend yields exceed the cost of funds. Such securities are
subject to risk arising from adverse changes in market rates and
prices, primarily interest rate risk relating to debt securities
and equity price risk relating to equity securities.
On July 20, 2001, Palmer Terrace Realty Associates, LLC
(Palmer Terrace), a 51% owned subsidiary of the Company,
purchased a 59,400 square foot warehouse facility in Carlstadt,
New Jersey from WXIII/MWL Real Estate Limited Partnership, an
unrelated entity.
On December 20, 2001, the Company purchased a 59,425 square
foot warehouse facility in White Bear Lake, Minnesota from Jones
Development Company, LLC, an unrelated entity.
Revenue Recognition
Sale of manufactured homes is recognized on the full accrual
basis when certain criteria are met. Interest income on loans
receivable is not accrued when, in the opinion of management,
the collection of such interest appears doubtful. Rental income
is recognized on the straight-line basis over the term of the
lease.
Use of Estimates
The preparation of the financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Buildings, Improvements and Equipment
Buildings, Improvements and Equipment are stated at the
lower of depreciated cost or net realizable value. Depreciation
is computed based on the straight-line method over the estimated
useful life of the assets (39 years). If there is an event or
change in circumstances that indicates that the basis of an
investment property may not be recoverable, management assesses
the possible impairment of value through evaluation of the
estimated future cash flows of the property, on an undiscounted
basis, as compared to the property's current carrying value. A
property's carrying value would be adjusted, if necessary, to
reflect an impairment in the value of the property.
Page 26
Securities Available for Sale
The Company's securities are classified as Available-for-
Sale, and are carried at fair value. Gains or losses on the sale
of securities are based on identifiable cost and are accounted
for on a trade date basis. Unrealized holding gains and losses
are excluded from earnings and reported as a separate component
of Shareholders' Equity until realized. A decline in the market
value of any security below cost that is deemed to be other than
temporary results in a reduction in the carrying amount to fair
value. Any impairment is charged to earnings and a new cost
basis for the security is established.
Inventories
Inventories, consisting of manufactured homes for sale, are
valued at the lower of cost, which includes costs associated with
the repossession of a home, or market value and are determined
by the specific identification method. All inventories were
considered finished goods.
Income Taxes
The Company will elect to be taxed as a REIT under Sections
856-858 of the Internal Revenue Code. The Company will not be
taxed on the portion of its income which is distributed to
shareholders, provided it distributes at least 90% of its taxable
income, has at least 75% of its assets in real estate investments
and meets certain other requirements for qualification as a REIT.
Additionally, at April 1, 2001, the Company had certain assets
with built-in gains. If these assets are sold within a ten-year
period, any gain may be taxable.
The Company previously accounted for income taxes in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes". Income taxes were
accounted for by the asset/liability method.
Net Income Per Share
Basic net income per share is calculated by dividing net
income by the weighted-average number of common shares
outstanding during the period (1,597,213, 1,534,759 and
1,516,528, respectively). Diluted net income per share is
calculated by dividing net income by the weighted-average number
of common shares outstanding plus the weighted-average number of
net shares that would be issued upon exercise of stock options
pursuant to the treasury stock method (See Note 7). Options in
the amount of 5,574, -0- and -0- are included in the diluted
weighted average shares outstanding for December 31, 2001, March
31, 2001, and March 31, 2000, respectively.
Reclassifications
Certain amounts in the consolidated financial statements for
the prior periods have been reclassified to conform to the
statement presentation for the current year. These
reclassifications have no effect on net income.
Page 27
Stock Option Plan
The Company's stock option plan is accounted for under the
intrinsic value based method as prescribed by Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees". As such, compensation expense would be
recorded on the date of grant only if the current market price on
the underlying stock exceeds the exercise price. Included in
these Notes to Consolidated Financial Statements are the pro
forma disclosures required by SFAS No. 123, "Accounting for Stock-
Based Compensation," which assumes the fair value based method of
accounting has been adopted.
Other Comprehensive Income
Comprehensive income consists of net income and net
unrealized gains or losses on securities available for sale and
is presented in the consolidated statements of shareholders'
equity.
NOTE 3 - REAL ESTATE INVESTMENTS
On July 20, 2001, Palmer Terrace Realty Associates, LLC
(Palmer Terrace), a 51% owned subsidiary of the Company,
purchased a 59,400 square foot warehouse facility in Carlstadt,
New Jersey from WXIII/MWL Real Estate Limited Partnership, an
unrelated entity. This warehouse facility is 100% net leased to
Macy's East, Inc., an Ohio corporation. The purchase price,
including closing costs, was approximately $3,200,000. Palmer
Terrace paid approximately $860,000 in cash and obtained a
mortgage of approximately $2,340,000. This mortgage payable is
at an interest rate of 7.75% and is due August 15, 2021.
On December 20, 2001, the Company purchased a 59,425 square
foot warehouse facility in White Bear Lake, Minnesota from Jones
Development Company, LLC, an unrelated entity. This warehouse
facility is 100% net leased to Federal Express Corporation. The
purchase price, including closing costs, was approximately
$4,800,000. The Company paid approximately $300,000 in cash,
borrowed approximately $1,100,000 against its securities
portfolio and obtained a mortgage of approximately $3,400,000.
This mortgage is at an interest rate of 7.04% and is due January
1, 2012.
The following is a summary of the cost and accumulated
depreciation of the Company's land, buildings, improvements and
equipment at December 31, 2001:
Building,
Improvements,
December 31, and Accumulated
2001 Land Equipment Depreciation
Tennessee Vacant Land $ $ -0- $ -0-
11,065
New Jersey Industrial 623,000 2,491,971 32,000
Building
Minnesota Industrial 1,025,000 3,744,000 48,000
Building
_________ _________ _________
TOTAL $1,659,065 $6,235,971 $ 80,000
========= ========= ========
Page 28
At March 31, 2001, the Company's real estate investments
consisted of the vacant land in Tennessee at a cost of $11,065.
NOTE 4 - LOANS RECEIVABLE
The following is a summary of the loans held by the Company
at December 31, 2001 and March 31, 2001:
Balance
Rate Date 12/31/01 3/31/01
Financed
Manufactured Homes 10%-15% various $2,409,734 $3,021,188
Other various various 46,734 27,520
_________ _________
Total Loans
Receivable 2,456,468 3,048,708
Allowance for
Losses 58,770 -0-
_________ _________
Net Loans
Receivable $2,397,698 $3,048,708
========= =========
During 1994, MHS began selling manufactured home units and
financing these sales. At December 31, 2001 and March 31, 2001,
financed manufactured homes consist of 112 and 138 loans,
respectively. These loans range from approximately $300 to
approximately $60,000. Loans receivable for financed
manufactured homes are secured by the property financed.
Generally, the terms of the loans do not exceed 20 years.
Page 29
NOTE 5 - SECURITIES AVAILABLE FOR SALE
The following is a summary of investments in debt and equity
securities at December 31, 2001:
Description Shares Cost Fair Value
Equity Securities-Preferred
Stock:
Apartment Inv and Management
Co 10% 1,000 $ 26,220 $ 25,900
Associated Estates Realty
Corp 9.75% Class A 19,500 310,459 485,550
Crescent Real Estate
Equities Co 6.75% 2000 27,266 38,700
Crown American Realty Trust 11% 20,200 730,605 1,045,277
Equity Inns Inc 9.5% Series A 12,400 201,783 275,776
Equity Office Properties Trust
8.98% Series A 1,000 21,995 25,500
Felcor Lodging Trust Inc 1.95% 16,000 281,072 374,240
Felcor Lodging Trust Inc. 9% 4,000 66,520 81,600
Series B
G&L Realty Corp 10.25% Series A 1,000 15,683 17,650
Glenborough Realty Trust 7.75%
Series A 6,000 87,823 126,600
Glimcher Realty Trust 9.25%
Series B 4,000 62,418 98,000
Healthcare Property Investors
7.875% Series A 3,000 50,860 75,450
Healthcare Property Investors
8.7% Series B 8,000 133,417 196,800
Highwoods Properties Inc 8%
Series D 1,000 17,170 23,340
Hospitality Properties Trust
9.5% Series A 6,400 127,413 163,968
Innkeepers USA Trust 8.625%
Series A 10,000 182,513 232,500
Instar Financial Inc. 8%
Series D 4,500 80,915 96,075
JDN Realty Corp 9-3/8% Series A 14,000 253,484 346,780
Kramont Realty Trust 9.5% 22,700 382,548 544,800
Series D
Mid America Apartment
Communities Inc. 9.5% Series A 12,500 219,501 314,375
Mid America Apartment
Communities Inc 8.825%
Series B 1,200 24,525 29,976
Page 30
Description Shares Cost Fair Value
New Plan Excel Realty Trust
8.5% Series A 1,000 20,558 25,500
New Plan Excel Realty Trust
8.625% Series B 2,000 38,990 49,800
Prime Retail Inc. Series B 1,000 5,185 3,000
Sovran Self Storage Inc
9.85% Series B 1,000 19,245 26,500
Thornburg Mortgage Asset
Corp 9.68% Series A 1,700 33,423 44,880
Vornado Realty Trust 8.5% 1,000 19,683 25,050
Series C
_________ _________
Total Equity Securities -
Preferred Stock 3,441,274 4,793,587
_________ _________
Equity Securities-Common Stock:
Annaly Mortgage Management Inc. 7,500 66,115 120,000
HRPT Properties Trust 4,000 28,150 34,640
LaSalle Hotel Properties 1,000 12,308 11,740
New Plan Excel Realty Trust Inc 5,000 70,188 95,250
Sizeler Properties Investors
Inc 102,000 789,217 920,040
Tork Time Control Inc 1,500 10,125 14,063
United Mobile Homes, Inc.
(a related entity) 11,000 84,826 133,980
_________ _________
Total Equity Securities-
Common Stock 1,060,929 1,329,713
_________ _________
Total Equity Securities 4,502,203 6,123,300
_________ _________
Debt Securities:
Federal National Mortgage
Association 6.09% 7/1/39 4,512,639 4,579,156
Federal National Mortgage
Association 6.86% 11/1/30 743,188 748,781
Government National Mortgage
Association 6.5% 2/20/14 209,606 205,533
_________ _________
Total Debt Securities 5,465,433 5,533,470
_________ _________
Total Securities Available $9,967,636 $11,656,770
for Sale
========= ==========
Page 31
The following is a summary of investments in debt and equity
securities at March 31, 2001:
Description Shares Cost Fair Value
Equity Securities-Preferred
Stock:
Associated Estates Realty Corp
9.75% Class A 19,500 $ 310,459 $ 413,400
Camden Property Trust $2.25 1,000 22,000 25,850
Series A
Crescent Real Estate Equities 2,000 27,266 34,200
Co 6.75%
Crown American Realty Trust 11% 20,200 731,032 896,791
Equity Inns Inc 9.5% Series A 12,400 201,783 250,852
Equity Office Properties Trust
8.98% Series A 1,000 21,995 25,230
Felcor Lodging Trust Inc 1.95% 4,000 281,072 358,400
Felcor Lodging Trust Inc. 9% 16,000 66,520 78,800
Series B
First Industrial Rlty Trust 2,000 44,925 50,040
9.5% Series A
G&L Realty Corp 10.25% Series A 1,000 15,683 17,000
Glenborough Realty Trust 7.75% 6,000 87,823 116,100
Series A
Glimcher Realty Trust 9.25% 4,000 62,418 78,800
Series B
Healthcare Property Investors
7.875% Series A 8,000 133,417 176,000
Healthcare Property Investors
8.7% Series B 3,000 50,860 70,800
Highwoods Properties Inc 8%
Series D 1,000 17,170 21,980
Hospitality Properties Trust
9.5% Series A 6,400 127,413 157,504
Innkeepers USA Trust 8.625%
Series A 8,000 145,273 156,400
Instar Financial Inc. 9 3/8
Series B 17,000 267,504 369,750
Instar Financial Inc. 9.2%
Series C 1,000 15,245 21,750
Instar Financial Inc. 8%
Series D 2,000 32,115 37,800
JDN Realty Corp 9-3/8% Series A 13,600 244,989 290,632
Kramont Realty Trust 9.5%
Series D 22,700 382,548 463,080
Mid America Apartment
Communities Inc. 9.5% Series A 1,200 24,525 27,180
Mid America Apartment
Communities Inc 8.825%
Series B 12,500 219,501 267,500
Page 32
Description Shares Cost Fair Value
New Plan Excel Rlty Trust 8.5%
Series A 1,000 20,558 24,250
New Plan Excel Rlty Trust
8.625% Series B 2,000 38,990 46,400
Prime Group Realty Trust 9%
Series B 3,000 48,040 55,500
Prime Retail Inc. Series B 1,000 5,185 4,240
Sovran Self Storage Inc 9.85%
Series B 1,000 19,245 24,800
Thornburg Mortgage Asset Corp
9.68% Series A 1,700 33,423 40,460
United Dominion Realty Trust
9.25% Series A 4,000 75,497 98,400
United Dominion Realty Trust
8.6% Series B 2,000 35,646 49,640
Vornado Realty Trust 8.5%
Series C 1,000 19,683 24,500
__________ __________
Total Equity Securities -
Preferred Stock 3,829,803 4,774,029
__________ __________
Equity Securities-Common Stock:
Annaly Mortgage Management Inc. 7,500 66,115 84,450
HRPT Properties Trust 4,000 28,150 33,120
LaSalle Hotel Properties 1,000 12,308 16,190
New Plan Excel Realty Trust Inc 5,000 70,188 80,000
Pennsylvania Real Estate
Investment Trust 5,000 82,300 105,000
Sizeler Properties Investors
Inc 92,600 706,057 816,732
Tork Time Control Inc 1,500 10,125 14,063
United Mobile Homes, Inc.
(a related entity) 11,000 84,826 136,400
__________ __________
Total Equity Securities-
Common Stock 1,060,069 1,285,955
__________ __________
Total Equity Securities 4,889,872 6,059,984
__________ __________
Debt Securities:
Federal National Mortgage
Association 6.09% 7/1/39 4,968,079 4,968,079
Federal National Mortgage
Association 6.86% 11/1/30 999,110 999,110
Government National Mortgage
Association 6.5% 2/20/14 253,941 250,125
__________ __________
Total Debt Securities 6,221,130 6,217,314
__________ __________
Total Securities Available $11,111,002 $12,277,298
for Sale
========== ==========
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NOTE 6 - MORTGAGES PAYABLE AND LOANS PAYABLE
Mortgages Payable
The following is a summary of mortgages payable at December
31, 2001:
Balance
Property Rate Maturity 12/31/01
New Jersey 7.75% 2021 $2,319,724
Minnesota 7.04% 2011 3,400,000
__________
Total Mortgages
Payable $5,719,724
=========
Principal on the foregoing debt is scheduled to be paid as
follows:
2002 $173,306
2003 197,705
2004 212,509
2005 228,425
2006 245,536
Thereafter 4,662,243
__________
$5,719,724
=========
Loans Payable
The Company purchases securities on margin. At December 31,
2001 and March 31, 2001, the margin loans amounted to $8,549,933
and $8,873,565, respectively. The interest rate was 3.875% at
December 31, 2001 and ranged from 5.05% to 6.75% at March 31,
2001. These loans were secured by investment securities with a
market value of $11,656,770 and $12,277,298, respectively. These
margin loans are due on demand.
On August 31, 2001 the Company received a $500,000 loan
from Two Rivers Bank. This loan is at an interest rate of based
on five-year Treasury note plus 2.75% and is due on August 31,
2003. This loan is personally guaranteed by Eugene W. Landy,
Chairman and President.
On December 18, 2001, the Company received a $400,000 loan
from United, secured by loans receivable of approximately
$600,000. This loan is at an interest rate of 10% and is due on
December 18, 2006.
Page 34
NOTE 7 - EMPLOYEE STOCK OPTION PLAN
On July 14, 1994, the shareholders approved and ratified the
Company's 1994 Stock Option Plan authorizing the grant to
officers and key employees of options to purchase up to 300,000
shares of common stock. Options may be granted any time up to
December 31, 2003. No option shall be available for exercise
beyond ten years. All options are exercisable after one year
from the date of grant. The option price shall not be below the
fair market value at date of grant. Canceled or expired options
are added back to the "pool" of shares available under the plan.
The Company elected to continue following APB Opinion No. 25
in accounting for its stock option plans and, accordingly, no
compensation cost has been recognized. Had compensation cost
been determined consistent with SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro
forma amounts as follows:
12/31/01 3/31/01 3/31/00
Net Income (Loss) As Reported $398,205 $(74,700) $14,200
Pro forma 369,916 (91,281) (498)
Net Income (Loss) As Reported .25 (.05) .01
Per Share Pro forma .22 (.06) -0-
The fair value of each option grant is estimated on the date
of the grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants;
dividend yield of .3 percent; expected volatility of 25 percent;
risk-free interest rates of 6.5 percent; and expected lives of
eight years for the short year ended December 31, 2001 and five
years ended March 31, 2001 and 2000.
Page 35
A summary of the status of the Company's stock option plans
as of December 31, 2001, March 31, 2001 and March 31, 2000, and
changes during the periods then ended are as follows:
12/31/01 3/31/01 3/31/00
Weighted Weighted Weighted
Average Average Average
Exercise Exercise
Shares Price Shares Price Shares Exercise
Price
Outstanding at
beginning of
period 90,000 $2.86 70,000 $2.93 115,000 $2.96
Issued 50,000 3.30 20,000 2.62 -0- -0-
Expired/
Cancelled -0- -0- -0- -0- (45,000) 3.00
_______ ______ _______
Outstanding at
end of period 140,000 3.02 90,000 2.86 70,000 2.93
======= ====== =======
Weighted-
average fair
value of
options
granted
during the
year 1.57 .94 -0-
===== ===== =====
The following is a summary of stock options outstanding as
of December 31, 2001:
Number
Date of Number of of Option Expiration
Grant Employees Shares Price Date
4/8/98 2 20,000 2.75 4/8/03
9/28/98 1 50,000 3.00 9/28/03
10/4/00 2 20,000 2.625 10/4/05
10/4/01 1 50,000 3.30 10/4/09
_______
140,000
=======
As of December 31, 2001, there were 160,000 shares
available for grant under the Plan.
NOTE 8 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Effective August 28, 1995, the Company implemented a
Dividend Reinvestment and Stock Purchase Plan (DRIP). Under the
terms of the DRIP, shareholders who participate may reinvest all
Page 36
or part of their dividends in additional shares of the Company at
approximately 95% of the market price.
Shareholders may also purchase additional shares at
approximately 95% of its market price by making optional cash
payments. For the short year ended December 31, 2001 and for the
years ended March 31, 2001 and 2000, the Company received
$354,464, $141,661 and $23,078 from the DRIP, respectively.
There were 123,224, 51,510 and 8,389 new shares issued,
respectively.
On December 17, 2001, the Company paid $413,627 as a
dividend of $.25 per share to shareholders of record November 15,
2001.
NOTE 9 - INCOME TAXES
The Company has elected to be taxed as a REIT. As the
Company has not distributed all of its income currently, a
provision for federal excise and other taxes of $35,193 has been
made for the short year ended December 31, 2001.
NOTE 10 - PAYMENTS TO AFFILIATED PERSONS AND RELATED PARTY
TRANSACTIONS
Management currently operates Monmouth Real Estate Invest-
ment Corporation and United Mobile Homes, Inc., two REITs.
Certain overhead expenses are shared among these companies.
Payments to Affiliated Persons
Total payments to all officers, directors and affiliated
persons during the short year ended December 31, 2001 and the
fiscal years ended March 31, 2001, and 2000 amounted to $50,300,
$98,000, $98,800, respectively. Eugene W. Landy, President of
the Company, received $39,100, $53,200 and $53,200 in salary,
management and director fees.
Transactions with United Mobile Homes, Inc.
MHS had rental expenses to United. United owns and operates
manufactured home communities. Seven Directors of the Company
are also Directors and shareholders of United. MHS paid United
market rent on sites where MHS had a home for sale. Total site
rental expense to United amounted to $22,690, $82,087, and
$161,377, respectively, for the short year ended December 31,
2001 and for the years ended March 31, 2001 and 2000. MHS also
leased space from United to be used as sales lots, at market
rates, at most of United's communities. Total rental expense
relating to these sales lots amounted to $-0-, $153,480, and
$145,670 for the short year ended December 31, 2001 and for the
years ended March 31, 2001 and 2000, respectively.
During the years ended March 31, 2001 and 2000, MHS
acquired certain inventory from United. These purchases amounted
to $124,890 and $64,984, representing 3% and 2%, respectively,
of total purchases made by MHS during fiscal 2001 and 2000. This
inventory was available through United, but could have been
acquired from a third-party at approximately the same cost.
Page 37
During fiscal 2001 and 2000, MHS sold to United 10 and 21
homes, respectively, for a total sales price of $161,487 and
$437,137 respectively, at MHS's cost. These sales represented
3% and 9%, respectively, of total sales made by MHS. These
manufactured homes were available through MHS, but could have
been acquired by United from a third party at approximately the
same price.
In addition to the above sales, on March 30, 2001, United
purchased at carrying value all of the remaining inventory of
MHS. This amounted to $2,261,624. United also assumed the
inventory financing of $ 1,833,871.
NOTE 11 - GROUP CONCENTRATIONS OF CREDIT RISK
The Company's loan portfolio is diversified. Generally,
loans are collateralized by the manufactured homes. At December
31, 2001 and March 31, 2001, all loans were secured.
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose certain information
about fair values of financial instruments, as defined in
Statement of Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments".
Limitations
Estimates of fair value are made at a specific point in time
based upon where available, relevant market prices and
information about the financial instrument. Such estimates do not
include any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a
particular financial instrument. For a portion of the Company's
financial instruments, no quoted market value exists. Therefore,
estimates of fair value are necessarily based on a number of
significant assumptions (many of which involve events outside the
control of management). Such assumptions include assessments of
current economic conditions, perceived risks associated with
these financial instruments and their counterparties, future
expected loss experience and other factors. Given the
uncertainties surrounding these assumptions, the reported fair
values represent estimates only, and, therefore, cannot be
compared to the historical accounting model. Use of different
assumptions or methodologies is likely to result in significantly
different fair value estimates.
The fair value of cash and cash equivalents and loans
receivable approximates their current carrying amounts since all
such items are short-term in nature. The fair value of securities
available for sale is based upon quoted market values (See Note
5). The fair value of mortgages payable and loans payable
approximates their current carrying amounts since such amounts
payable are at a current market rate of interest.
Page 38
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the short year ended December 31, 2001 and
the years ended March 31, 2001 and 2000 for interest and taxes
are as follows:
12/31/01 3/31/01 3/31/00
Interest $373,159 $364,690 $152,509
Taxes $8,193 $13,071 $5,643
During the short year ended December 31, 2001 and the years
ended March 31, 2001 and 2000 the Company had dividend
reinvestments of $93,363, $21,150 and $21,568, respectively,
which required no cash transfers.
During the year ended March 31, 2000, the Company wrote off
$65,000 of a non-performing loan against the Allowance for Losses
and transferred the remaining balance of $110,231 to Building,
Improvements and Equipment.
During the short year ended December 31, 2001, the
collateral for loans receivable of $253,404 was repossessed and
placed in inventory.
NOTE 14 - PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following is the unaudited pro forma financial
information for the comparable prior year period ended December
31, 2000:
Total Income $4,274,921
Total Expenses 4,289,491
_________
Net Loss $ (14,570)
=========
Page 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MONMOUTH CAPITAL CORPORATION
BY: /s/ Eugene W. Landy
EUGENE W. LANDY
President
Dated: March 16, 2002
Pursuant to the requirements of the Securities and Exchange
Act of 1934, this report has been duly signed below by the
following persons on behalf of the registrant and in the
capacities and on the date indicated.
Title Date
/s/ Eugene W. Landy President and
EUGENE W. LANDY Director March 16, 2002
Secretary/
/s/ Ernest V. Bencivenga Treasurer
ERNEST V. BENCIVENGA and Director March 16, 2002
/s/ Anna T. Chew Controller and
ANNA T. CHEW Director March 16, 2002
/s/ Charles P. Kaempffer
CHARLES P. KAEMPFFER Director March 16, 2002
/s/ Michael P. Landy
MICHAEL P. LANDY Director March 16, 2002
/s/ Samuel A. Landy
SAMUEL A. LANDY Director March 16, 2002
/s/ Robert G. Sampson
ROBERT G. SAMPSON Director March 16, 2002
/s/ Eugene Rothenberg
EUGENE ROTHENBERG Director March 16, 2002
Page 40