FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- -- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- -- ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ______.
COMMISSION FILE NUMBER 333-5278-NY
-----------
ARCA CORP.
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(Exact name of business issuer as specified in its charter)
New Jersey 22-3417547
---------- ----------
(State or other jurisdiction (IRS Employer Identification
of incorporation) number)
215 West Main Street, Maple Shade, New Jersey 08052
---------------------------------------------- -------
(Address of principal executive offices) (Zip code)
(609) 667-0600
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days)
Yes XX No
---- ----
The Company had 500,000 shares of common stock, par value $.0001 per share,
outstanding as of September 30, 1996.
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<PAGE>
ARCA CORP. AND SUBSIDIARY
INDEX
PAGE
PART 1. FINANCIAL INFORMATION ----
ITEM 1. FINANCIAL STATEMENTS
ARCA CORP. AND SUBSIDIARY
-------------------------
CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 1996............................3
CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996......4
CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996......5
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996......................6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....7
SVG PROPERTIES, L.P. T/A
SPRING VILLAGE APARTMENTS.....................8
-------------------------
STATEMENT OF INCOME BEFORE DEPRECIATION
AND AMORTIZATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996............................9
NOTES TO FINANCIAL STATEMENTS................10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.........11
PART II. OTHER INFORMATION..................................13
SIGNATURES.............................................14
EXHIBIT 1 EARNINGS PER SHARE SCHEDULE.................15
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
ASSETS
<S> <C>
Rental property, net of accumulated
depreciation of $65,951 $3,439,479
Cash 36,253
Cash held in escrow 77,279
Accounts receivable 12,191
Prepaid expenses 17,343
Organization Costs, net of accumulated
amortization of $1,125 6,375
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TOTAL ASSETS $3,588,920
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgage notes payable $3,154,949
Accrued interest 360,656
Note payable -stockholder 10,000
Note payable -other 5,000
Accounts payable 17,273
Accrued expenses 17,785
Security deposits payable 48,366
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TOTAL LIABILITIES 3,614,029
Stockholders' Equity
Common stock, $.0001 par value
50,000,000 shares authorized,
500,000 shares issued and outstanding 50
Additional paid in capital 212,450
Accumulated deficit (97,609)
---------
114,891
Stock subscription promissory note receivable (140,000)
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TOTAL STOCKHOLDERS' EQUITY (25,109)
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,588,920
==========
</TABLE>
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Revenues
Rental income $543,133
Tenant fees and other income 10,187
Interest income 963
-------
TOTAL REVENUE 554,283
Operating expenses
Administrative expenses 76,887
Utilities expense 75,567
Operating and maintenance 78,861
Taxes and insurance 112,845
Depreciation and amortization 67,076
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TOTAL OPERATING EXPENSES 411,236
--------
Operating income 143,047
Interest expense 249,318
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Loss before minority interest (106,271)
Minority interest (8,662)
--------
Net loss ($97,609)
=========
Net (loss) per share ($.20)
Weighted average number of common
shares outstanding 500,000
=========
</TABLE>
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss ($97,609)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Minority interest in net loss of
consolidated subsidiary (8,662)
Depreciation and amortization 67,076
(Increase) decrease in:
Accounts receivable (4,231)
Prepaid expenses 32,471
Cash held in escrow 6,119
(Increase) decrease in:
Accounts payable (1,839)
Accrued expenses (40,111)
Prepaid rent (1,095)
Security deposits payable 1,735
--------
Net cash used in operating activities (46,146)
--------
Cash flows from investing activities:
Collection of stock subscription receivable 70,000
Purchases of property and equipment (6,053)
--------
Net cash provided by investing activities 63,947
--------
Cash flows from financing activities:
Repayments of notes payable (41,500)
Proceeds from note payable 5,000
--------
Net cash used in financing activities (36,500)
--------
Decrease in cash (18,699)
Cash, January 1, 1996 54,952
--------
Cash, September 30, 1996 $36,253
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $284,377
========
Cash paid for income taxes $700
========
Non-cash investing and financing activities:
Issuance of common stock in exchange for
promissory note receivable $140,000
========
</TABLE>
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
Stock
Additional Subscription Total
Common Stock Paid-in Promissory Note Accumulated Stockholder's
Shares Amount Capital Receivable Deficit Equity
<S> <C> <C> <C> <C> <C> <C>
Balance
1/1/96 320,000 $32 $72,468 $ 0 $ 0 $72,000
Issuance of
common stock,
net of related
costs 180,000 18 139,982 (140,000) 0 0
<F1>
Net loss 0 0 0 0 (97,609) (97,609)
________ _____ _______ ________ _________ ________
Balance,
9/30/96 $500,000 $50 $212,450 ($140,000) ($97,609) ($25,109)
</TABLE>
<F1> 16,000 shares of stock were issued to the President of the Company and
24,000 shares were issued to a consultant for services rendered in
connection with the preparation of the registration statement and
prospectus for the 140,000 shares of stock issued on May 31, 1996.
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<PAGE>
ARCA CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. Summary of Significant Accounting Policies
The summary of significant accounting policies is included in the notes to the
consolidated financial statements for the year ended December 31, 1995 were
audited and appear in the Form SB-2 previously filed by the Company.
UNAUDITED FINANCIAL STATEMENTS - The consolidated balance sheet as of
September 30, 1996, the consolidated statement of operations for the nine
months ended September 30, 1996, the consolidated statement of cash flows for
the nine months ended September 30, 1996 for the Company, and the statement of
Income Before Depreciation and Amortization and Interest Expense for the nine
months ended September 30, 1996 and 1995 and the notes thereto for SVG
Properties, L.P., a limited partnership in which the Company holds a 4.5%
general partnership interest and a 75.5% limited partnership interest, and the
related information contained in these notes have been prepared by management
without audit. In the opinion of management, all accruals (consisting of
normal recurring accruals) which are necessary for a fair presentation of
financial position and results of operations for such periods have been made.
Results for an interim period should not be considered as indicative of
results for a full year.
2. Related Party Transactions
During the quarter ended September 30, 1996, a company owned by Harry J.
Santoro, the President of the Company, and Stephen M. Robinson, the Secretary
of the Company, advanced $5,000 to the Company pursuant to a Demand Promissory
Note which bears interest at 8%.
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<PAGE>
SVG PROPERTIES, L.P.
T/A SPRING VILLAGE APARTMENTS
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
-8-
<PAGE>
SVG PROPERTIES, L.P.
T/A SPRING VILLAGE APARTMENTS
STATEMENT OF INCOME BEFORE DEPRECIATION AND AMORTIZATION
AND INTEREST EXPENSE
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<S> <C> <C>
1996 1995
Revenues
Rental income $543,133 $539,751
Tenant fees and other income 10,187 10,088
Interest income 963 991
-------- --------
TOTAL REVENUE 554,283 550,830
Operating expenses
Administrative expenses 65,907 63,566
Utilities expense 75,567 74,325
Operating and maintenance 78,861 79,190
Taxes and insurance 111,398 109,190
-------- --------
TOTAL OPERATING EXPENSES 331,733 326,271
Net income before depreciation and
amortization and interest expense $222,550 $224,559
</TABLE>
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<PAGE>
SVG PROPERTIES, L.P.
T/A SPRING VILLAGE APARTMENTS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
Note 1 -Depreciation and Amortization
Depreciation and amortization expense for the nine months ended September 30,
1996 and 1995 was $64,800 and $82,200.
Note 2 -Interest Expense
Interest expense for the nine months ended September 30, 1996 and 1995 was
$249,352 and $249,182.
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<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
- -------
The Company intends to target its marketing and business activity to renting
apartment units to moderate income people who are not in a position to acquire
a home. The Company believes that well maintained, affordable rental units
will be in great demand as a result of slow wage growth in the future. This
should provide a stable rental income base and allow for future revenue growth
through modest rental increases near the rate of inflation.
The Company's long range plan is to reduce debt to around fifty percent of a
property's value. To accomplish this, the Company plans to raise additional
capital through the sale of its securities in the future. The Company also
plans to refinance its existing property and may need additional capital to
accomplish the refinancing.
The Company advertises its units in local newspapers, by direct mail and
through promotional programs designed to maintain occupancy at or above 95%.
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in
this Form 10-QSB and in the previously filed Form SB-2. The Company was
incorporated on December 22, 1995. The Company is a new enterprise in its
initial promotional and development stages. On December 31, 1995, the Company
acquired from its President an 80% partnership interest in S.V.G. Properties,
L.P. (the "Partnership") which owns a 124 unit apartment complex. The 80%
partnership interest consists of a 4.5% general partnership interest plus a
75.5% limited partnership interest. The financial information contained
herein includes the results of operations of the Partnership.
Results of Operations
- ---------------------
The Company was incorporated on December 22, 1995, and has no operating
history. The Company acquired an 80% interest in the Partnership on December
31, 1995. The following discussion includes references to the operations of
the Partnership and is for the nine months ending September 30, 1996 and 1995,
respectively.
The Partnership reported total revenues of $554,283 and $550,830 in 1996 and
1995 respectively. Occupancy ws approximately 94% and 95%, respectively.
Operating expenses exclusive of interest expense, depreciation and
amortization, increased from $326,271 in 1995 to $331,733 in 1996. Net income
(before depreciation, amortization and financing cost) decreased from $224,559
in 1995 to $222,520 in 1996, a 1% decrease. Depreciation, amortization and
interest expense for the periods up to and including December 31, 1995 have
been omitted because they are for predecessor operations and are not
comparable to the Company's operations going forward. See "SVG Properties
L.P. t/a Spring Village Apartments, Financial Statements". The Company
believes that overall, the Company and the industry will realize modest
increases in net rental income and net operating income in the foreseeable
future.
The Company reported a net loss of ($97,609) for the nine months ending
September 30, 1996. The net loss per share was $.20.
In order to provide comparative information, the operating results discussed
above include the past results of operations of the apartment complex acquired
by the Company on December 31, 1995.
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<PAGE>
The Company is taxed as a C-corporation for federal and state income tax
purposes. As such, the Company will pay taxes on its net income as defined by
the Internal Revenue Code. No tax attributes of the Company flow through to
the shareholders except for the regular taxation of dividends paid, if any.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1996, the Company had working capital of $44,642, including
cash held in escrow for anticipated future expenses. The Company is dependent
upon the proceeds from the stock subscription receivable or other financing
to continue in business and to implement its business plan.
On December 31, 1995, the Company had $54,952 in cash. During the period, the
Company collected $70,000 in stock subscriptions which were receivable as of
December 31, 1995. The Company used $46,146 in operating activities and
purchased $6,053 in property and equipment. The Company also repaid $41,500
in notes payable - stockholder (Harry J. Santoro, President). The Company
borrowed $5,000 from a related party. The net decrease in cash was $18,699.
The Company had $36,253 in cash on September 30, 1996, exclusive of cash held
in the escrow accounts.
The Company's balance sheet is highly leveraged. The Company plans to reduce
this leverage through refinancing and through future equity offerings.
With the net proceeds of the stock subscription receivable, plus
anticipated revenues, the Company believes it can support operations and
planned capital expenditures for at least twelve months. Thereafter, the
Company's continued success will be dependant upon its ability to refinance
its existing property under more favorable terms. In the event that the
Company's plans change or its assumptions change or prove to be inaccurate,
the Company may be required to seek additional financing sooner than
currently anticipated. Thereafter, unless the Company is able to generate
sufficient income from operations to service its existing debt, the Company
will require additional financing. The Company has not identified any
potential sources of debt or equity financing and there can be no assurance
that the Company will be able to obtain additional financing if and when
needed or that, if available, financing will be on terms acceptable to the
Company.
Other
- -----
The Company was notified that HUD sold the mortgage on the Property to
Resource Properties XXIII, Inc. Negotiations to refinance and/or restructure
the debt have commenced.
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<PAGE>
PART II
OTHER INFORMATION
- -----------------
ITEM 1 LEGAL PROCEEDINGS
NONE
ITEM 2 CHANGES IN SECURITIES
NONE
ITEM 3 DEFAULTS ON SENIOR SECURITIES
NONE
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5 OTHER INFORMATION
NONE
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 1 - Earnings Per Share Schedule
Exhibit 27FDS - Financial Data Schedule
(b) Reports on Form 8-K
None
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ARCA CORP.
Dated: November 14, 1996 /s/ Harry J. Santoro
----------------------------------------
Harry J. Santoro
President, Chief Executive Officer and
Chief Financial Officer
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<PAGE>
EXHIBIT 1
EARNINGS PER SHARE SCHEDULE
<TABLE>
<S> <C>
Calculation of net income
Net Income (loss) ($97,609)
Assumed interest expense reduction 0
Assumed interest income increase 0
----------
($97,609)
==========
Calculation of weighted average number of shares
Weighted average shares outstanding 500,000
Common stock equivalents 0
----------
500,000
==========
Net income (loss) per share
($ 0.20)
==========
</TABLE>
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary information extracted
from the Consolidated Statements of Operations and
Consolidated Balance Sheets of ARCA Corp. and is
qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0001006762
<NAME> ARCA CORP
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 36,253
<SECURITIES> 0
<RECEIVABLES> 12,191
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 143,066
<PP&E> 3,505,430
<DEPRECIATION> 65,951
<TOTAL-ASSETS> 3,588,920
<CURRENT-LIABILITIES> 98,424
<BONDS> 3,515,605
0
0
<COMMON> 50
<OTHER-SE> (25,159)
<TOTAL-LIABILITY-AND-EQUITY> 3,588,920
<SALES> 0
<TOTAL-REVENUES> 554,283
<CGS> 0
<TOTAL-COSTS> 411,236
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 249,318
<INCOME-PRETAX> (97,609)
<INCOME-TAX> 0
<INCOME-CONTINUING> (97,609)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (97,609)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
