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, 1999
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 1,000,000 shares of common stock, par value $.0001 per share,
outstanding as of April 15, 1999.
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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
MARCH 31, 1999 AND 1998.............................3
CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998......4
CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998......5
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE PERIOD FROM
JANUARY 1, 1998 TO MARCH 31, 1999 ..................6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..........7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS................9
PART II. OTHER INFORMATION.........................................12
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K...........12
SIGNATURES....................................................13
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999 AND 1998
(UNAUDITED)
ASSETS
1999 1998
---- ----
Rental property, net of
accumulated depreciation of
$308,661 and $205,249, respectively $3,299,233 $3,366,402
Cash 55,609 45,895
Cash held in escrow 68,707 94,468
Accounts receivable 745 5,411
Notes receivable 122,518 0
Prepaid expenses 35,282 34,139
Organization Costs, net of accumulated
amortization of $7,500 and $3,375, respectively 0 4,125
Deferred financing costs, net of
accumulated amortization of $14,879
and $4,320 84,244 82,011
---------- ----------
TOTAL ASSETS $3,666,338 $3,632,451
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgage notes payable $3,381,974 $3,414,779
Note payable -stockholder 150,000 150,000
Note payable -other 80,000 32,500
Accounts payable 26,798 24,260
Accrued interest 41,876 31,294
Accrued expenses 27,381 75,731
Security deposits payable 56,147 55,987
---------- ----------
TOTAL LIABILITIES 3,764,176 3,784,551
Minority Interest 24,874 0
Stockholders' Deficit
Common stock, $.0001 par value
50,000,000 shares authorized, 2,472,500 and
2,085,000 shares issued
and outstanding, respectively 247 209
Additional paid in capital 505,186 368,891
Accumulated deficit (428,122) (321,200)
--------- ---------
77,311 47,900
Less 1,475,000 shares of treasury stock, at cost ( 60,023) 0
Less stock subscription promissory note receivable (140,000) (200,000)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (122,712) (152,100)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $3,666,338 $3,632,451
========== ==========
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND MARCH 31, 1998
(UNAUDITED)
1999 1998
---- ----
Revenues
Rental real estate $200,671 $196,166
Financial Services 3,618 0
-------- -------
TOTAL REVENUE 204,289 196,166
Operating expenses
Administrative expenses 39,437 26,517
Utilities expense 32,243 30,807
Operating and maintenance 28,200 27,115
Taxes and insurance 32,372 30,720
Depreciation and amortization 27,832 26,019
-------- --------
TOTAL OPERATING EXPENSES 160,084 141,178
-------- --------
Operating income 44,205 54,988
Interest income 528 251
Interest expense (76,184) (74,460)
--------- --------
Loss before minority interest (31,451) (19,221)
--------- --------
Minority interest 145 0
-------- --------
Net loss ($31,306) ($19,221)
========= =========
Net loss per common share - basic ($.032) ($.009)
Average number of common
shares outstanding - basic 983,750 2,076,667
========= =========
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND MARCH 31, 1998
(UNAUDITED)
1999 1998
---- ----
Cash flows from operating activities
Net loss ($31,306) ($19,221)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Minority interest in net loss
of subsidiary (145) 0
Depreciation and amortization 27,832 26,019
(Increase) decrease in:
Accounts receivable 9,784 3,329
Prepaid expenses 18,146 17,396
Cash held in escrow (15,908) (16,799)
Increase (decrease) in:
Accounts payable 1,935 5,032
Accrued expenses 1,727 (21,571)
Accrued interest (3,860) 4,097
Security deposits payable (259) 503
Other liabilities (3,571) (3,701)
-------- ---------
Net cash provided by (used in)
operating activities 4,375 (4,916)
-------- ---------
Cash flows from investing activities:
Loans made (52,675) 0
Collection of loans 3,510 0
Purchases of property and equipment (912) (13,450)
------- -------
Net cash provided by (used in)
investing activities (50,077) (13,450)
Cash flows from financing activities
Repayment of mortgage notes payable (8,456) (7,789)
Repayment of notes payable (7,000) (14,500)
Proceeds from issuance of common stock 20,625 25,000
Minority interest 15,000 0
------- -------
Net cash provided by (used in)
financing activities 20,169 2,711
Decrease in cash (25,533) (15,655)
Cash, January 1 81,142 61,550
------- -------
Cash, March 31 $55,609 $45,895
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $80,044 $70,363
======= =======
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<PAGE>
ARCA CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1998 TO MARCH 31, 1999
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Stock
Additional Subscription Treasury Total
Common Stock Paid-in Promissory Note Accumulated Stock Stockholder's
Shares Amount Capital Receivable Deficit Shares Amount Equity
Balance,
01/01/98 2,060,000 206 343,894 (200,000) (301,979) 0 0 (157,879)
Issuance of
shares of
common stock
25,000 3 24,997 0 0 0 0 25,000
Issuance of
shares of
common stock
300,000 30 127,886 0 0 0 0 127,916
Acquisition of
shares of
common stock
for reissuance
(25,000) (3) (24,997) 0 0 0 0 (25,000)
Issuance of
shares of
common stock 30,000 3 12,789 0 0 0 0 12,792
Acquisition of
shares of
common stock 0 0 0 0 0 235,000 (23) (23)
Acquisition of
shares of
common stock 0 0 0 60,000 0 1,240,000 (60,000) -0-
Net loss 0 0 0 0 (94,837) 0 0 (94,837)
--------- ----- -------- -------- ----------- ______ ______ ________
Balance
12/31/98 2,390,000 $239 $484,569 ($140,000) ($396,816) 1,475,000 (60,023) $(112,031)
Issuance of
shares of
common stock 82,500 8 20,617 0 0 0 0 20,625
Net loss 0 0 0 0 (31,306) 0 0 (31,306)
--------- ----- -------- -------- ----------- ______ ______ ________
Balance
03/31/99 2,472,500 $247 $505,186 ($140,000) ($428,122) 1,475,000 (60,023) $(122,712)
========= ===== ======== ======== =========== ========= ====== =======
</TABLE>
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<PAGE>
ARCA CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(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 years ended December 31, 1998 and
1997 which were audited and appear in the Form 10-KSB previously filed by the
Company.
UNAUDITED FINANCIAL STATEMENTS - The consolidated balance sheets as of March
31, 1999 and 1998, the consolidated statements of operations for the three
months ended March 31, 1999 and 1998, the consolidated statement of cash flows
for the three months ended March 31, 1999 and 1998 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 three months ended March 31, 1999, 82,500 shares of stock were
issued for $26,625 in cash to officers of the Company at the bid price for the
Company's stock as of the date of issuance.
A summary of related party transactions for the year ended December 31, 1998
appears in the Form 10-KSB previously filed by the Company and is hereby
incorporated by reference.
-7-
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 for the period
ending December 31, 1998.
General
- -------
ARCA CORP. ("ARCA" or the "Company") was incorporated on December 22, 1995 in
the State of New Jersey for the purpose of acquiring, developing and selling
residential real estate. The Company simultaneously formed Spring Village
Holdings, Inc. a New Jersey corporation, as a wholly owned subsidiary. The
discussion of the business of the Company set forth herein includes the
business of Spring Village Holdings, Inc.
The Company is currently engaged in two lines of business; owning and
operating income producing real estate, and the originating and
servicing of loans to businesses, generally secured by real estate or other
business assets ("business lending"), and to individuals, generally secured by
vehicles or other personal property ("consumer lending").
On December 31, 1995, the Company acquired through a subsidiary an 80%
controlling interest in a 124 unit apartment complex. ARCA secured bridge
financing to make certain improvements needed to refinance the property.
Upon completion of the improvements, rents, occupancy and net cash flow
increased and the property was successfully refinanced on September 19, 1997.
Subsequent to the refinancing, the Company has used its positive operating
cash flow to reduce debt.
On March 31, 1998, ARCA formed Beran Corp. and on May 28, 1998, entered into
business lending through the acquisition of the business lending operations
of a real estate development company.
On November 24, 1998, Beran became a licensed lender in the State of New
Jersey. Beran entered into secured consumer lending in the first
quarter of 1999.
The Company intends to utilize its contacts and business expertise to locate
and acquire additional properties, primarily apartments, preferably those
that are undervalued or which can be acquired at less than fair value due to
the financial difficulties of their owners. There is no assurance that such
properties can be obtained under terms and conditions that are favorable to
the Company. The Company is in the process of expanding Beran Corp., its
subsidiary finance company. The Company is also pursuing the acquisition of
other businesses.
-8-<PAGE>
Results of Operations
- ----------------------
The following discussion is for the three months ending March 31, 1999 and
1998, respectively.
The Company reported rental real estate revenues of $200,671 and $196,166 in
1999 and 1998 respectively. Occupancy was approximately 95% and 96%,
respectively. The small decrease in occupancy was offset by a higher average
rental rate. The Company's finance company subsidiary contributed $3,618 and
is in its initial start-up phase. Total revenue increased from $196,166 in
1998 to $204,289 in 1999.
Operating expenses exclusive of interest expense increased from $141,178 in
1998 to $160,084 in 1999, primarily due to an increase in administrative
expenses. Interest expense increased from $74,460 in 1998 to $76,184 in 1999
due to a small increase in total debt.
The Company believes that overall, the Company and the industry will realize
modest increases in net rental income and net operating income before
depreciation in the foreseeable future.
Net loss increased from $19,221 in 1998 to $31,306 in 1999.
The net loss per share was ($.032) for the first three months in 1999,
compared to a $(.009) net loss for the first three months of 1998.
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, 1999, the Company had working capital of $50,659, 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
expand its business and carry out its business plan.
On January 1, 1999, the Company had $81,142 in cash. During the quarter
ending March 31, 1999, the Company received $20,625 in proceeds from the
issuance of common stock. The Company received $15,000 from the sale of stock
in Beran Corp., its finance company subsidiary (minority interest). The
Company generated $4,375 in operating activities and purchased $912 in
property and equipment, of which $0 was debt financed. The Company repaid
$15,456 on notes payable. The Company collected $3,510 on loans outstanding
and made new loans totaling $52,675. The net decrease in cash was $25,533.
The Company had $55,609 in cash on March 31, 1999, exclusive of cash held in
the escrow accounts.
-9-
<PAGE>
The Company's balance sheet is highly leveraged. The Company plans to reduce
this leverage 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. 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, if
the Company is unable 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.
Impact of the Year 2000 Issue
- ------------------------------
The Company's State of Readiness
- ---------------------------------
The Company has reviewed its critical information systems for Year 2000
compliance. The compliance review revealed that the Company's critical
accounting information systems are Year 2000 compliant due to the fact that
the Company's hardware and operating system are "off-the-shelf" products from
third parties with Year 2000 compliant versions. The Company does not rely
on to any significant degree on any other computerized information systems.
As part of the Company's Year 2000 compliance review, the Company is in the
process of contacting its primary vendors to determine the extent to which
the Company is vulnerable to those third parties' failure to remediate their
Year 2000 compliance issues.
The Cost to Address the Company's Year 2000 Issues
- ---------------------------------------------------
The Company estimates that the cost of its Year 2000 compliance issues will
be less than $1,000 and is not expected to be material to the Company's
financial position, cash flow, or results of operations.
-10-
<PAGE>
The Risks Associated with the Company's Year 2000 Issues
- ---------------------------------------------------------
The Company believes that the risks associated with Year 2000 issues
primarily relate to the failure of third parties, particularly banks and
utilities, upon whom the Company's business relies to timely remediate their
Year 2000 issues. Failure by third parties to timely remediate their Year
2000 issues could result in disruptions in the Company's supply of parts and
materials, late, missed, or unapplied payments, temporary disruptions, and
other general problems related to the Company's daily operations. While the
Company believes its Year 2000 compliance review procedures will adequately
address the Company's internal Year 2000 issues, until the Company receives
responses from its significant vendors, the overall risks associated with the
Year 2000 issue will remain difficult to accurately describe and quantify,
and there can be no guarantee that the Year 2000 issue will not have a
material adverse effect on the Company's business, operating results and
financial position.
The Company's Contingency Plan
- -------------------------------
The Company has implemented a Year 2000 contingency plan. The Company is
prepared to run manually and without automated systems in the event of a Year
2000 system failure. The Company is however dependent on certain suppliers,
particularly two banks where the Company maintains its operating accounts,
and suppliers of utilities. Except for utilities, the Company has arranged
for the use of multiple suppliers, including banks, to provide alternatives
should one or more suppliers experience difficulties.
Forward Looking Statements
- ---------------------------
The Company is making this statement in order to satisfy the "safe harbor"
provisions contained in the Private Securities Litigation Reform Act of 1995.
The foregoing discussion includes forward-looking statements relating to the
business of the Company. Forward-looking statements contained herein or in
other statements made by the Company are made based on management's
expectations and beliefs concerning future events impacting the Company and
are subject to uncertainties and factors relating to the Company's operations
and business environment, all of which are difficult to predict and many of
which are beyond the control of the Company, that could cause actual results
of the Company to differ materially from those matters expressed in or implied
by forward-looking statements. The Company believes that the following
factors, among others, could affect its future performance and cause actual
results of the Company to differ materially from those expressed in or implied
by forward-looking statements made by or on behalf of the Company: (a) the
effect of changes in interest rates; (b) the rental rate and demand for
apartment rental units; (c) fluctuations in the costs to operate the
properties owned by the Company; (d) uninsurable risks; and (e) general
economic conditions.
-11-
<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
Report on Form 8-K was filed 01/05/99 with respect to the
termination of the acquisition agreement between the Company and
Allied American Capital Corporation.
-12-
<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 10, 1999 /s/ Harry J. Santoro
----------------------------------------
Harry J. Santoro
President, Chief Executive Officer and
Chief Financial Officer
-13-
EARNINGS PER SHARE SCHEDULE
Calculation of net income
Net Income (loss) ($31,306)
Assumed interest expense reduction 0
Assumed interest income increase 0
---------
($31,306)
=========
Calculation of weighted average number of shares
Weighted average shares outstanding 983,750
Common stock equivalents 0
----------
983,750
==========
Net income (loss) per share
($0.032)
==========
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001006762
<NAME> ARCA CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 55,609
<SECURITIES> 0
<RECEIVABLES> 123,263
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 282,861
<PP&E> 3,607,894
<DEPRECIATION> 308,661
<TOTAL-ASSETS> 3,666,338
<CURRENT-LIABILITIES> 232,202
<BONDS> 3,531,974
0
0
<COMMON> 247
<OTHER-SE> (122,959)
<TOTAL-LIABILITY-AND-EQUITY> 3,666,338
<SALES> 0
<TOTAL-REVENUES> 204,289
<CGS> 0
<TOTAL-COSTS> 160,084
<OTHER-EXPENSES> (673)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,184
<INCOME-PRETAX> (31,306)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,306)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,306)
<EPS-PRIMARY> (.032)
<EPS-DILUTED> (.032)
</TABLE>
