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 JUNE 30, 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
-----------
ARCA CORP.
----------
(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 2,050,000 shares of common stock, par value $.0001 per share,
outstanding as of June 30, 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
JUNE 30, 1997 and JUNE 30, 1996...............3
CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE SIX MONTHS ENDED JUNE 30, 1997 AND
JUNE 30, 1996.................................4
CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE SIX MONTHS ENDED JUNE 30, 1997 AND
JUNE 30, 1996.................................5
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE PERIOD
COMMENCING DECEMBER 22, 1995 AND ENDING
JUNE 30, 1997.................................6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....7
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
JUNE 30, 1997 AND
JUNE 30, 1996
(UNAUDITED)
ASSETS 1997 1996
---- ----
Rental property, net of accumulated
depreciation of $132,728 and
43,698 respectively $3,493,667 $3,458,607
Cash 41,312 58,153
Cash held in escrow 56,326 83,558
Accounts receivable 11,248 10,953
Prepaid expenses 18,539 44,292
Deposits 0 1,087
Organization Costs, net of accumulated
amortization of $2,250 and
$750, respectively 5,291 6,750
---------- -----------
TOTAL ASSETS $3,626,383 $3,663,400
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgage notes payable $3,154,949 $3,154,949
Note payable 101,081 0
Accrued interest 335,550 400,684
Note payable -stockholder 22,900 10,000
Accounts payable 22,859 26,020
Accrued expenses 62,367 21,964
Security deposits payable 51,252 48,979
---------- ----------
TOTAL LIABILITIES 3,750,958 3,662,596
Stockholders' Equity
Common stock, $.0001 par value
50,000,000 shares authorized,
2,050,000 and 500,000 shares issued
and outstanding, respectively 205 50
Additional paid in capital 333,895 212,450
Accumulated deficit (258,675) (71,696)
Stock subscription receivable (200,000) (140,000)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (124,575) 804
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,626,383 $3,663,400
========== ==========
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
JUNE 30, 1996
(UNAUDITED)
1997 1996
---- ----
Revenues
Rental income $355,111 $358,738
Tenant fees and other income 6,909 6,689
Interest income 743 694
------- ---------
TOTAL REVENUE 362,763 366,121
Operating expenses
Administrative expenses 90,034 48,158
Utilities expense 51,841 59,626
Operating and maintenance 59,672 52,834
Taxes and insurance 69,326 74,842
Depreciation and amortization 44,718 44,718
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TOTAL OPERATING EXPENSES 315,591 280,178
-------- ---------
Operating income 47,172 85,943
Interest expense 166,435 166,301
-------- ---------
Loss before minority interest (119,263) (80,358)
Minority interest 0 (8,662)
-------- ---------
Net loss ($119,263) ($71,696)
========= =========
Net (loss) per share ($.06) ($.14)
Weighted average number of common
shares outstanding 2,050,000 500,000
========= ==========
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<PAGE> ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
JUNE 30, 1996
(UNAUDITED)
Cash flows from operating activities: 1997 1996
---- ----
Net loss ($119,263) ($71,696)
Adjustments to reconcile net loss to net
cash provided by (used in)operating activities:
Minority interest in net loss of
consolidated subsidiary 0 (8,662)
Depreciation and amortization 44,718 44,718
Stock compensation expense 46,600 0
(Increase) decrease in:
Accounts receivable 4,333 (2,993)
Prepaid expenses 35,703 5,522
Cash held in escrow (23,960) (160)
Deposits 0 (1,087)
Increase (decrease) in:
Accounts payable 8,753 6,908
Accrued expenses 3,271 4,096
Accrued interest 80 (1,095)
Security deposits payable (1,449) 2,348
-------- ---------
Net cash provided by (used in)operating activities (1,214) (22,101)
-------- ---------
Cash flows from investing activities:
Increase in organization costs (41) 0
Collection of stock subscription receivable 0 70,000
Purchases of property and equipment (8,179) (3,198)
-------- ---------
Net cash provided by (used in) investing activities (8,220) 66,802
-------- ---------
Cash flows from financing activities:
Proceeds from note payable 2,900 0
Proceeds from issuance of common stock 15,000 0
Repayments of notes payable 0 (41,500)
-------- ---------
Net cash (used in)
provided by financing activities 17,900 (41,500)
-------- ---------
Increase in cash 8,466 3,201
Cash, beginning 32,846 54,952
-------- ---------
Cash, June 30, 1997 $41,312 $58,153
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $166,355 $161,132
======== ========
Cash paid for income taxes $ 0 $305
======== ========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of 1,250,000 and 180,000 shares
of common stock, respectively $75,000 $140,000
Stock subscription promissory note receiveable (60,000) (140,000)
--------- ---------
Proceeds from issuance of common stock $15,000 $ 0
======== ========
Issuance of 300,000 shares of common stock
as partial payment of legal and professional fees $46,600 $ 0
======== ========
Purchases of property and equipment $109,260 0
Debt incurred (101,081) 0
-------- --------
Cash paid for property and equipment $ 8,179 $ 0
======== ========
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<PAGE> ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 22, 1995 TO JUNE 30, 1997
(UNAUDITED)
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
12/31/95 320,000 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
n. 1
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
shares of
common stock 65,000 7 32,493 0 0
32,500
n. 2
Issuance of
shares of
common stock 1,250,000 125 74,875 (60,000) 0
15,000
Issuance of
shares of
common stock 235,000 23 14,077 0 0
14,100
n. 3
Net loss 0 0 0 0 (119,263)
(119,263)
________ _____ ________ ________ _________
________
Balance
6/30/97 2,050,000 $205 $333,895 ($200,000) ($258,675)
($124,785)
========= ===== ======== ======== ===========
=========
n. 1 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.
n. 2 50,000 shares of stock were issued to Stephen M. Robinson, P.A. in
partial payment of legal services rendered during the six months
ending June 30, 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. 15,000 shares of stock were issued to
Harry J. Santoro, President, Treasurer and a director of the Company,
for professional services rendered to the Company during the six
months ended June 30, 1997.
n. 3 235,000 shares of stock were issued to a consultant in connection with
registrant's acquisition program.
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<PAGE>
ARCA CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 which
were audited and appear in the Form 10-KSB previously filed by the Company.
UNAUDITED FINANCIAL STATEMENTS - The consolidated balance sheet as of June 30,
1997 and 1996, the consolidated statement of operations for the six months
ended June 30, 1997 and 1996, the consolidated statement of cash flows for the
six months ended June 30, 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 six months ended June 30, 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
$2,900 to the Company pursuant to a Demand Promissory Note which bears
interest at 8%.
During the six months ended June 30, 1997, 50,000 shares of stock were issued
to Stephen M. Robinson, P.A. in partial payment of legal services rendered
during the six months ending June 30, 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.
During the six months ended June 30, 1997, 15,000 shares of stock were issued
to Harry J. Santoro in payment of professional services rendered during the
six months ended June 30, 1997. Mr. Santoro is President, Treasurer and a
director of the Company.
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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 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 six months ending June 30, 1997 and 1996,
respectively.
The Company reported total revenues of $362,763 and $366,121 in 1997 and 1996
respectively. Occupancy was approximately 92% and 93%, respectively.
Operating expenses exclusive of interest expense increased from $280,178 in
1996 to $315,591 in 1997. Net loss increased from $71,696 in 1996 to $119,263
in 1997. The Company believes that overall, the Company and the industry
will realize modest increases in net rental income and net operating income
in the foreseeable future.
The net loss per share was ($.06) for the first six months in 1997, compared
to a $(.14) net loss for the first six months of 1996.
Included in the 1997 expenses are professional fees of $56,600 related to the
Company's acquisition program.
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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 June 30, 1997, the Company had a working capital deficit of $9,053,
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 $15,000 in proceeds from the issuance of common stock. The
Company used $1,214 in operating activities and purchased $109,260 in
property and equipment, of which 101,081 was debt financed. The Company
borrowed $2,900 from a related party. The net increase in cash was $8,466.
The Company had $41,312 in cash on June 30, 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 are in process.
The Company issued 1,485,000 shares, for a total consideration of $89,100, to
two consultants that provided services in connection with the Company's
acquisition program. All 1,485,000 shares were issued subject to repurchase
by the Company for nominal consideration if certain conditions precedent were
not fulfilled. Additionally, voting rights to 1,250,000 of such shares were
granted to Harry J. Santoro, President of the Company, until such time as the
conditions precedent were fulfilled.
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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: August 13, 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) ($119,263)
Assumed interest expense reduction 0
Assumed interest income increase 0
----------
($119,263)
==========
Calculation of weighted average number of shares
Weighted average shares outstanding 2,050,000
Common stock equivalents 0
----------
2,050,000
==========
Net income (loss) per share
($ 0.06)
==========
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001006762
<NAME> ARCA CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 41,312
<SECURITIES> 0
<RECEIVABLES> 11,248
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 127,425
<PP&E> 3,626,396
<DEPRECIATION> 132,728
<TOTAL-ASSETS> 3,626,383
<CURRENT-LIABILITIES> 159,378
<BONDS> 3,591,580
0
0
<COMMON> 205
<OTHER-SE> (124,780)
<TOTAL-LIABILITY-AND-EQUITY> 3,626,383
<SALES> 0
<TOTAL-REVENUES> 362,763
<CGS> 0
<TOTAL-COSTS> 315,591
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166,435
<INCOME-PRETAX> (119,263)
<INCOME-TAX> 0
<INCOME-CONTINUING> (119,263)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (119,263)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
