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 MARCH 31, 1997
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
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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 515,000 shares of common stock, par value $.0001 per share,
outstanding as of March 31, 1997.
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<PAGE>
ARCA CORP. AND SUBSIDIARY
INDEX
PAGE
PART 1. FINANCIAL INFORMATION ----
ITEM 1. FINANCIAL STATEMENTS
-------------------------
CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 1997 and MARCH 31, 1996................3
CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 1997 AND
MARCH 31, 1996...................................4
CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE THREE MONTHS ENDED MARCH 31, 1997 AND
MARCH 31, 1996...................................5
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE PERIOD
COMMENCING JANUARY 1, 1996 AND ENDING
ENDED MARCH 31, 1997.............................6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.............8
PART II. OTHER INFORMATION.....................................10
SIGNATURES................................................11
EXHIBIT 1 EARNINGS PER SHARE SCHEDULE....................12
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997 AND
MARCH 31, 1996
(UNAUDITED)
ASSETS 1997 1996
---- ----
Rental property, net of accumulated
depreciation of $110,744 and
21,397 respectively $3,409,829 $3,464,092
Cash 39,678 66,077
Cash held in escrow 28,845 103,945
Accounts receivable 10,837 4,214
Deferred offering costs 30,000 0
Prepaid expenses 44,502 24,894
Organization Costs, net of accumulated
amortization of $1,875 and
$375, respectively 5,666 7,125
Cost in excess of net asset acquired,
net of accumulated amortization of $384 0 14,968
---------- -----------
TOTAL ASSETS $3,569,357 $3,685,315
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgage notes payable $3,154,949 $3,154,949
Accrued interest 335,982 398,199
Note payable -stockholder 22,700 10,000
Accounts payable 44,291 26,085
Accrued expenses 54,447 18,774
Security deposits payable 52,178 46,377
---------- ----------
TOTAL LIABILITIES 3,664,547 3,654,384
Stockholders' Equity
Common stock, $.0001 par value
50,000,000 shares authorized,
515,000 and 320,000 shares issued
and outstanding, respectively 52 32
Additional paid in capital 222,448 72,468
Accumulated deficit (177,690) (41,569)
Stock subscription receivable (140,000) 0
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (95,190) 30,931
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,569,357 $3,685,315
========== ==========
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
MARCH 31, 1996
(UNAUDITED)
1997 1996
---- ----
Revenues
Rental income $180,954 $177,325
Tenant fees and other income 3,859 3,491
Interest income 370 374
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TOTAL REVENUE 185,183 181,190
Operating expenses
Administrative expenses 17,020 23,129
Utilities expense 32,090 36,619
Operating and maintenance 33,566 28,254
Taxes and insurance 35,209 34,132
Depreciation and amortization 22,634 22,156
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TOTAL OPERATING EXPENSES 140,519 144,290
-------- ---------
Operating income 44,664 36,900
Interest expense 82,942 87,131
-------- ---------
Loss before minority interest (38,278) (50,231)
Minority interest 0 (8,662)
-------- ---------
Net loss ($38,278) ($41,569)
========= =========
Net (loss) per share ($.07) ($.13)
Weighted average number of common
shares outstanding 515,000 320,000
========= ==========
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
MARCH 31, 1996
(UNAUDITED)
Cash flows from operating activities: 1997 1996
---- ----
Net loss ($38,278) ($41,569)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Minority interest in net loss of
consolidated subsidiary 0 (8,662)
Depreciation and amortization 22,634 22,156
(Increase) decrease in:
Accounts receivable 4,744 3,746
Prepaid expenses 9,740 24,920
Cash held in escrow 3,521 (20,547)
Increase (decrease) in:
Accounts payable 30,185 6,973
Accrued expenses (4,649) (1,579)
Accrued interest 512 (1,095)
Security deposits payable (523) (254)
-------- ---------
Net cash provided by operating activities 27,886 (15,911)
-------- ---------
Cash flows from investing activities:
Deferred offering costs (30,000) 0
Collection of stock subscription receivable 0 70,000
Purchases of property and equipment (3,713) (1,464)
-------- ---------
Net cash provided by investing activities (33,754) 68,536
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Cash flows from financing activities:
Proceeds from note payable 2,700 0
Proceeds from issuance of common stock 10,000 0
Repayments of notes payable 0 (41,500)
-------- ---------
Net cash (used in)
provided by financing activities 12,700 (41,500)
-------- ---------
Increase (decrease) in cash 6,832 11,125
Cash, beginning 32,846 54,952
-------- ---------
Cash, March 31, 1997 $39,678 $66,077
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $82,430 $80,333
======== =========
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 22, 1996 TO MARCH 31, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Stock
Additional Subscription Total
Common Stock Paid-in Promissory Note Accumulated Stockholder's
Shares Amount Capital Receivable Deficit Equity
Balance
12/22/95 0 0 0 0 0 0
Issuance of
Shares of
common stock
to management 250,000 25 2,475 0 0 2,500
Subscription
for shares of
common stock 70,000 7 69,993 (70,000) 0 0
------- ----- ------- -------- ---------- -------
Balance
1/1/97 320,000 32 72,468 (70,000) 0 2,500
Collection
of stock
subscription 0 0 0 70,000 0 70,000
Issuance of
common stock,
net of related
costs 180,000 18 139,982 (140,000) 0 0
<F1>
Net loss 0 0 0 0 (139,412) (139,412)
________ _____ ________ ________ _________ ________
Balance,
12/31/96 500,000 50 212,450 (140,000) (139,412) (66,912)
Issuance of
common stock 15,000 2 9,998 0 0 10,000
<F2>
Net loss 0 0 0 0 (38,278) (38,278)
________ _____ ________ ________ _________ ________
Balance
3/31/97 515,000 $52 $222,448 ($140,000) ($177,690) ($95,190)
======== ===== ======== ======== =========== =========
</TABLE>
<F1>
16,000 shares of stock were issued to Harry J. Santoro, President,
Treasurer and a director 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.
<F2>
15,000 shares of stock were issued to Stephen M. Robinson, P.A. in
partial payment of legal services rendered during the quarter ending
March 31, 1997. Stephen M. Robinson, P.A. is a law firm whose sole
shareholder is Stephen M. Robinson, the Secretary, Vice President and
a director of the Company.
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<PAGE>
ARCA CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(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, 1996 were
audited and appear in the Form 10-KSB previously filed by the Company.
UNAUDITED FINANCIAL STATEMENTS - The consolidated balance sheet as of March
31, 1997 and 1996, the consolidated statement of operations for the three
months ended March 31, 1997 and 1996, the consolidated statement of cash flows
for the three months ended March 31, 1997 and 1996 for the Company, 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 March 31, 1997, a company owned by Harry J. Santoro,
President, Treasurer and a director of the Company, and Stephen M. Robinson,
Secretary, Vice President and a director of the Company, advanced $2,700 to
the Company pursuant to a Demand Promissory Note which bears interest at 8%.
During the quarter ended March 31, 1997, 15,000 shares of stock were issued to
Stephen M. Robinson, P.A. in partial payment of legal services rendered during
the quarter ending March 31, 1997. Stephen M. Robinson, P.A. is a law firm
whose sole shareholder is Stephen M. Robinson, Secretary, Vice President and a
director of the Company.
As of March 31, 1997, an additional $20,000 was owed to Stephen M. Robinson,
P.A. for legal services rendered.
-7-
<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 10-KSB. 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 Harry J. Santoro, President, Treasurer and a director of the
Company, 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 following discussion is for the three months ending March 31, 1997 and
1996, respectively.
The Company reported total revenues of $185,183 and $181,190 in 1997 and 1996
respectively. Occupancy was approximately 94% and 94%, respectively.
Operating expenses exclusive of interest expense decreased from $144,290 in
1996 to $140,519 in 1997. Net loss decreased from $41,569 in 1996 to $38,278
in 1997, an 8% decrease. The Company believes that overall, the Company and
the industry will realize modest increases in net rental income and net
operating income in the foreseeable future.
The net loss per share was ($.07) for the first quarter in 1997, compared to a
$(.13) net loss for the first quarter of 1996.
-8-
<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 March 31, 1997, the Company had a working capital deficit of $19,754,
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, 1996, the Company had $32,846 in cash. During the period, the
Company received $10,000 in proceeds from the issuance of common stock. The
Company generated $27,886 in operating activities, purchased $3,713 in
property and equipment. and incurred $30,000 in deferred offering costs. The
Company borrowed $2,700 from a related party. The net increase in cash was
$6,832. The Company had $39,678 in cash on March 31, 1997, 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.
-9-
<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
-10-
<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: May 15, 1997 /s/ Harry J. Santoro
----------------------------------------
Harry J. Santoro
President, Chief Executive Officer and
Chief Financial Officer
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<PAGE>
EARNINGS PER SHARE SCHEDULE
EXHIBIT 1
Calculation of net income
Net Income (loss) ($38,278)
Assumed interest expense reduction 0
Assumed interest income increase 0
----------
($38,278)
==========
Calculation of weighted average number of shares
Weighted average shares outstanding 515,000
Common stock equivalents 0
----------
515,000
==========
Net income (loss) per share
($ 0.07)
==========
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001006762
<NAME> ARCA CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> 39,678
<SECURITIES> 0
<RECEIVABLES> 10,837
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 153,862
<PP&E> 3,520,573
<DEPRECIATION> 110,744
<TOTAL-ASSETS> 3,569,357
<CURRENT-LIABILITIES> 173,616
<BONDS> 3,490,931
0
0
<COMMON> 52
<OTHER-SE> (95,242)
<TOTAL-LIABILITY-AND-EQUITY> 3,569,357
<SALES> 0
<TOTAL-REVENUES> 180,954
<CGS> 0
<TOTAL-COSTS> 140,519
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,942
<INCOME-PRETAX> (38,278)
<INCOME-TAX> 0
<INCOME-CONTINUING> (38,278)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38,278)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
