SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 10 OR 15(d) OF THE EXCHANGE
ACT OF 1934
Commission File Number 0-28168
Strategic Capital Resources, Inc.
formerly known as
JJFN Services, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 11-3289981
(State or other jurisdiction (I.R.S. Identification number)
of incorporation or organization)
2500 Military Trail North, Suite 260, Boca Raton, Florida 33431
(Address of principal executive offices)
(561)995-0043
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant(1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such
report(s), and (2) has been subject to such filing requirements for the past
90 days.
Yes __X No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date.
Outstanding Equity Securities at May 10, 1999
Class of Securities Outstanding Shares
Common Stock, $.001 par value, 15,903,870 shares
Preferred Stock, $.01 par value, 400,000 shares
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page Number
Condensed Consolidated Balance Sheets as of 3
March 31, 1999 (unaudited) and June 30, 1998.
Condensed Consolidated Statement of Operations 4
for the three months and nine months ended March 31, 1999,
and the three months and nine months ended March 31, 1998
(unaudited)
Condensed Consolidated Statement of Cash Flows 5
for the nine months ended March 31, 1999,
and the nine months ended March 31, 1998
(unaudited)
Notes to Condensed Consolidated Financial Statements 6-8
(unaudited)
Item 2. Management's Discussion and Analysis of Financial 9-14
Condition and Results of Operations.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended
March 31, 1999.
Signatures 15
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31 June 30
ASSETS 1999 1998
----------- -----------
Revenue producing assets:
Model homes on lease $38,254,256 $38,687,731
Less: accumulated depreciation (294,250) (906,679)
----------- -----------
Model homes on lease, net 37,960,006 37,781,052
----------- -----------
Total revenue producing assets 37,960,006 37,781,052
----------- -----------
Other assets:
Cash 756,976 365,227
Net assets realizable on divestiture 1,100,000 1,100,000
Deferred charges and other assets 824,643 939,797
----------- -----------
Total other assets 2,681,619 2,405,024
----------- -----------
Total assets $40,641,625 $40,186,076
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable $30,252,953 $30,512,635
Notes payable 1,345,907 1,025,907
Accounts payable & accrued expenses 586,972 481,763
Unearned rental revenue 248,245 203,367
Preferred Distribution Payable 20,000 -
----------- -----------
Total liabilities 32,454,077 32,223,672
----------- -----------
Stockholders' equity:
Convertible preferred stock, $.01 par value
5,000,000 shares authorized
400,000 shares issued and outstanding 4,000 4,000
Common stock, $.001 par value
25,000,000 shares authorized and 17,012,005 issued
15,903,870 outstanding 17,012
16,934,085 outstanding 17,012
Additional paid-in capital 8,346,552 8,346,552
Less treasury stock at cost, 1,108,135
and 77,920 shares respectively at
December 31, 1998 and June 30, 1998 (282,732) (20,354)
Retained earnings (deficit) 102,770 (384,806)
----------- -----------
Total stockholders' equity 8,187,548 7,962,404
----------- -----------
Total liabilities and stockholders' equity $40,641,625 $40,186,076
=========== ===========
See accompanying notes.
(3)
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months and Nine Months Ended March 31, 1999 and
Three Months and Nine Months Ended March 31, 1998
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
--------- ---------- ---------- -----------
Revenues:
Lease revenue $1,161,324 $ 883,490 $ 3,549,218 $2,407,195
Real Estate option fees - - - 8,771
Model Home sales 6,179,786 2,536,886 16,529,374 6,848,257
Land sales - - - 8,591,956
Interest Income 27,114 29,037 86,735 99,604
--------- ---------- ---------- -----------
Total Revenues 7,368,224 3,449,413 20,165,327 17,955,783
--------- ---------- ---------- -----------
Costs and expenses:
Interest expense 676,335 529,282 2,146,632 1,422,643
Cost of model homes sold 5,828,064 2,459,922 15,692,988 6,622,781
Land sales - - - 8,591,956
Corporate 400,024 297,778 1,116,996 877,473
--------- ---------- ---------- -----------
Total Operating Expenses 6,904,423 3,286,982 18,956,616 17,514,853
--------- ---------- ---------- -----------
Income before depreciation
and amortization 463,801 162,431 1,208,711 440,930
Depreciation and amortization 144,695 315,284 427,133 869,972
--------- ---------- ---------- -----------
Income(loss) before income taxes 319,106 (152,853) 781,578 (429,042)
--------- ---------- ---------- -----------
Deferred income tax expense 95,000 - 234,000 -
--------- ---------- ---------- -----------
Net income (loss) 224,106 (152,853) 547,578 (429,042)
Preferred stock distribution 30,000 - 60,000 -
--------- ---------- ---------- -----------
Income(loss) applicable to
common shareholders 194,106 (152,853) 487,578 (429,042)
========== ========== =========== ===========
Net income (loss) per share
Basic $ 0.01 (0.01) 0.03 (0.03)
Diluted $ 0.01 (0.01) 0.03 (0.03)
Weighted average number of shares
Basic 15,933,967 17,012,005 16,197,314 16,878,423
Diluted 18,291,633 17,012,005 18,157,126 16,878,423
See accompanying notes.
(4)
STRATEGIC CAPITAL RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended March 31, 1999 and March 31, 1998
(Unaudited)
Nine Months Nine Months
Ended Ended
3/31/99 3/31/98
----------- ----------
Net income (loss) $ 547,578 $ (429,042)
----------- ----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization expense 343,574 332,150
Depreciation expense 83,559 537,822
Gain on sale of model homes (836,386) (225,476)
Changes in assets and liabilities:
Decrease(increase) in miscellaneous assets 216,585 30,308
Decrease(increase)in accounts payable/accrued exp 125,292 (69,243)
Increase in unearned rental revenue 44,878 132,243
----------- ----------
Total adjustments (22,498) 737,804
----------- ----------
Net cash provided by operating activities 525,080 308,762
----------- ----------
Cash flows from investing activities
Purchase of model homes (3,018,824) (6,935,357)
Proceeds from sale of model homes 3,660,983 6,777,273
Proceeds from sale of land - 1,716,956
Capital expenditures (14,594) (606)
Proceeds from note receivable of
divested segment - 212,500
----------- ----------
Net cash provided by
investing activities 627,565 1,770,766
----------- ----------
Cash flows from financing activities:
Proceeds from mortgages payable 765,982 3,929,929
Principal payments on mortgages payable (1,162,952) (5,819,530)
Deferred financing costs (381,494) (256,987)
Proceeds from stockholder loans 320,000 -
Purchase of treasury stock (262,432) -
Preferred distribution payable (40,000) -
----------- -----------
Net cash (used in)
financing activities (760,896) (2,146,588)
----------- -----------
Net increase (decrease) in cash 391,749 (67,060)
Cash at beginning of period 365,227 831,266
----------- -----------
Cash at end of period $756,976 $ 764,206
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid - $2,065,501 $1,417,368
See accompanying notes.
(5)
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(unaudited)
Note 1. Unaudited Interim Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments considered
necessary for a fair presentation, have been included. Operating results for
any quarter are not necessarily indicative of the results for any other
quarter or for the full year.
These statements should be read in conjunction with the financial statements
of Strategic Capital Resources, Inc. and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998.
Note 2. "Bankruptcy-Remote" Special Purpose Subsidiaries
A bankruptcy-remote entity is established in a fashion intended to minimize
the possibility that the entity could become a debtor in a bankruptcy or
insolvency proceeding. A special-purpose entity is established with a limited
purpose. It is generally not authorized under its certificate of
incorporation to incur liabilities or engage in business except in ways that
are necessary or advisable in connection with the securitization in which it
is to be involved.
On July 7, 1997, the Company formed Model Funding I, LLC ("MFI"), and on July
9, 1998, formed Model Funding II, LLC ("MFII"), both wholly-owned "bankruptcy
remote" special purpose subsidiaries.
MFI and MFII were formed for the exclusive purpose of acquiring model homes
and leasing them back to a single major real estate developer and homebuilder
until such time as they are sold to independent third parties.
Model Funding I, LLC
The following is a breakdown of model home acquisitions and sales by MFI.
Quarter Units Amount Units Cost of Model
Ended Purchased Purchased Sold Homes Sold
- ---------- --------- ----------- ---- ------------
3/31/98 29 $ 7,091,507 - $ -
6/30/98 17 4,081,484 - -
9/30/98 20 6,120,097 4 861,040
12/31/98 3 991,000 3 794,733
3/31/99 - - 10 2,508,054
--------- ----------- ---- ------------
Total 69 $18,284,088 17 $ 4,163,827
--------- ----------- ---- ------------
Model Homes on Lease at March 31, 1999 - 52 $14,120,261
(6)
Model Funding II, LLC
As of March 31, 1999, MFII has not acquired any model homes. MFII has
committed to acquire 36 model homes at an approximate cost of $7,200,000 from
an existing client. The closing is subject to completion of due diligence,
receipt of satisfactory appraisals, formal documentation, and successful
completion of financing, for which it has received an oral commitment.
Note 3. Earnings Per Share
During the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". As a
result, all previously reported earnings per share data has been restated to
conform with SFAS No. 128. Basic and diluted earnings per share are calculated
as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
--------- ---------- ---------- ----------
Earnings
Net income 224,106 (152,853) 547,578 (429,042)
Dividends on preferred shares 30,000 - 60,000 -
--------- ---------- ---------- ----------
Income(loss) applicable to
common shareholders 194,106 (152,853) 487,578 (429,042)
========== ========== =========== ==========
Basic:
Income(loss) applicable to
common shareholders 194,106 (152,853) 487,578 (429,042)
Weighted average shares
outstanding during the period 15,933,967 17,012,005 16,197,314 16,878,423
Basic $ 0.01 (0.01) 0.03 (0.03)
Diluted:
Income(loss) applicable to
common shareholders 194,106 (152,853) 487,578 (429,042)
Plus:
Dividends on preferred shares 30,000 - 60,000 -
--------- ---------- ---------- ----------
Net income applicable to
common shareholders 224,106 (152,853) 547,578 (429,042)
--------- ---------- ---------- ----------
Weighted average shares
outstanding during the period 15,933,967 17,012,005 16,197,314 16,878,423
Effect of dilutive securities:
Stock Options 646,279 - 442,486 -
Warrants 1,311,387 - 1,117,326 -
Assumed conversion of
Preferred stock 400,000 - 400,000 -
--------- ---------- ---------- ----------
Diluted weighted common
shares outstanding 18,291,633 17,012,005 18,157,126 16,878,423
Diluted $ 0.01 (0.01) 0.03 (0.03)
(7)
Note 4. Commitments & Contingencies
In the ordinary course of business, the Company commits to purchase model
homes and other asset classes for leaseback to clients and purchase real
estate for development, selling the finished lots to its clients when
development is completed. All commitments are subject to change in size as
well as closing time due to the following; client commitments routinely change
as clients determine their actual needs; changes in economic conditions in a
specific market place; real estate (land) acquisitions are typically subject
to numerous conditions including, but not limited to, the ability to obtain
necessary government regulatory approvals for the communities; and other
factors affecting the homebuilding industry.
Legal Proceedings
The Company filed suit against BANKATLANTIC BANCORP., INC., and BANKATLANTIC,
a federal savings bank, in the Circuit Court of the 15th Judicial Circuit in
and for Palm Beach County, Florida, by complaint dated December 30, 1998. The
complaint charges a breach of fiduciary duty and seeks unspecified damages in
that the defendant, undertook to act as agent or broker in connection with
obtaining a $200 million loan facility, relating to a sale and lease back
program for a major publicly traded national builder. Rather than complete the
financing transaction, the complaint alleges economic opportunity was usurped
by defendant and entered into an agreement directly with the builder,
utilizing inter alia, the terms of the Company's program.
Outside counsel has advised the Company that it has a meritorious claim, and
the Company believes it will have a positive financial impact in that the
Company expects to recover substantial damages in excess of the cost of
litigation.
The Company filed a lawsuit against Monarch Investment Properties, Inc., formerl
known as Iron Holdings Corp.,Iron Eagle Contracting and Mechanical, Inc., Tahoe
Realty Corp., Anthony Gurino, Dennis Sommesso, and "John and Jane Doe 1-15.
Based on information currently available to the Company, it anticipates that it
will collect the outstanding balance, accrued interest, as well as collection
costs. The Company has not accrued interest on the note since March 31, 1999.
Special counsel has advised the Company that it has a meritorious claim and
should prevail.
Model home sales contracts
The Company has sale contracts pending on sixteen (16) model homes. The
aggregate sales price for the $4,328,675, which the Company originally
purchased for $3,952,438.
Financing Activities
In order to finance its expansion, the Company conducts ongoing negotiations
with financial institutions to raise funds through debt and/or equity.
At March 31, 1999, the Company had outstanding $30.2 million in secured loans
by financial institutions and $1.3 million in loans to shareholders. The
Company borrows under various revolving and term loan credit facilities, and
at March 31, 1999, had available additional borrowings of $6.8 million.
(8)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is engaged in two lines of business.
1) The purchase and leaseback on a "triple net" basis of fully furnished
model homes complete with options and upgrades to major publicly traded
homebuilders and real estate developers.
2) The real estate contract acquisition, development and sale program for
major publicly traded homebuilders and real estate developers. The
Company purchases the real estate, simultaneously enters into a bonded (not
to exceed) development contract with the builder supported by a performance
(completion) bond, who then develops the real estate. The builder
purchases the finished lots from the Company on a scheduled basis with
terms ranging from 1-4 years.
The Company constantly explores opportunities to provide financial services
to specific industries that are under served by major financial institutions.
Since its inception, the Company and its special purpose bankruptcy remote
subsidiary have purchased a total of 298 model homes and sold 148, resulting
in a portfolio of 150 model homes owned at March 31, 1999. The following is a
summary of model home purchases and sales by year since inception:
Average
Fiscal Units Amount Units Cost of Model Holding Period
Year Ended Purchased Purchased Sold Homes Sold (In Months)
- ---------- --------- ----------- ---- ------------ -------------
6/30/96 61 $11,836,729 3 $ 503,165 24.2
6/30/97 75 14,512,772 23 4,437,087 17.4
6/30/98 110 26,170,860 49 8,892,378 12.9
6/30/99 52 15,615,709 73 16,049,184 4.9
--------- ----------- ---- ------------ -------------
Total 298 $68,136,070 148 $29,881,814 14.4
--------- ----------- ---- ------------ -------------
Model Homes on Lease at March 31, 1999 - 150 $38,254,256
Since inception, the Company has entered into one land acquisition and
development contract. On July 3, 1997, the developer elected to fully exercise
its option to purchase the approximate 70-acre tract of land. The property was
purchased from the Company for the sum of $8,591,956.
(9)
A summary of the operating results of Strategic Capital Resources, Inc. and
subsidiaries for the three months ended March 31, 1999, and March 31,
1998 are presented below.
Three Months Three Months
Ended Ended
March 31 March 31
1999 % 1998 %
--------------------------------
Revenues:
Lease revenue $1,161,324 16% $883,490 25%
Model home sales 6,179,786 84% 2,536,886 74
Interest income 27,114 -% 29,037 1%
---------------------------------
Total revenues $7,368,224 100% 3,449,413 100%
Costs and expenses:
Interest expense 676,335 9% 529,282 15%
Cost of model home sales 5,828,064 79% 2,459,922 71%
Corporate 400,024 6% 297,778 9%
---------------------------------
Total costs and expenses 6,904,423 94% 3,286,982 95%
---------------------------------
Income before depreciation & amortization 463,801 6% 162,431 5%
Depreciation & amortization 144,695 2% 315,284 9%
---------------------------------
Income (loss) before income taxes 319,106 4% (152,853) (4%)
---------------------------------
Deferred income tax expense 95,000 1% - -
---------------------------------
Net income (loss) $224,106 3% (152,853) (4%)
=================================
Results of Operations:
Three Months Ended March 31, 1999 compared to March 31, 1998.
For the period from January 1, 1999 through March 31, 1999, the Company had
revenues of $7,368,224 of which lease revenues on model homes totaled
$1,161,324 and revenues from the sale of model homes were $6,179,786. Net
income for the period was $224,106 compared to a net loss of $152,853 for
the prior year fiscal period. The increase was primarily attributable to
increased gains on the sale of model homes and reductions in depreciation
expense.
The Company's lease revenues increased approximately $278,000 (a 31% increase)
during the three months ended March 31, 1999 as compared to the three
months ended March 31, 1998. This increase is due to additional lease
revenues generated from the purchase of $21,700,000 in model homes in the
twelve months ended March 31, 1999.
Corporate costs increased from $298,000 for the quarter ended March 31,
1998 to $400,000 for the quarter ended March 31, 1999, representing a 34%
increase. This increase was attributable to the hiring of additional personnel
and increases in selling and marketing expenses.
(10)
A summary of the operating results of Strategic Capital Resources, Inc. and
subsidiaries for the nine months ended March 31, 1999, and March 31, 1998
are presented below.
Nine Months Nine Months
Ended Ended
March 31 March 31
1999 % 1998 %
--------------------------------
Revenues:
Lease revenue $3,549,218 18% $2,407,195 13%
Model home sales 16,529,374 82% 6,848,257 38%
Interest income 86,735 -% 99,604 1%
Real Estate option fees - - 8,771 -%
Land Sales - - 8,591,956 48%
---------------------------------
Total revenues $20,165,327 100% 17,955,783 100%
Costs and expenses:
Interest expense 2,146,632 11% 1,422,643 8%
Cost of model home sales 15,692,988 78% 6,622,781 37%
Corporate 1,116,996 5% 877,473 5%
Land Sales - - 8,591,956 47%
---------------------------------
Total costs and expenses 18,956,616 94% 17,514,853 97%
---------------------------------
Income before depreciation & amortization 1,208,711 6% 440,930 3%
Depreciation & amortization 427,133 2% 869,972 5%
---------------------------------
Income (loss) before income taxes 781,578 4% (429,042) (2%)
---------------------------------
Deferred income tax expense 234,000 1% - -
---------------------------------
Net income (loss) $547,578 3% (429,042) (2%)
=================================
Results of Operations:
Nine Months Ended March 31, 1999 compared to March 31, 1998.
For the period from July 1, 1998 through March 31, 1999, the Company had
revenues of $20,165,327 of which lease revenues on model homes totaled
$3,549,218 and revenues from the sale of model homes were $16,529,374. Net
income for the period was $547,578 compared to a net loss of $429,042 for
the prior year fiscal period. The increase was primarily attributable to
increased gains on the sale of model homes and reductions in depreciation
expense.
The Company's lease revenues increased approximately $1,142,000 (a 47% increase)
during the nine month ended March 31, 1999 as compared to the nine
months ended March 31, 1998. This increase is due to additional lease
revenues generated from the purchase of $21,700,000 in model homes in the
twelve months ended March 31, 1999.
Corporate costs increased from $877,000 for the nine months ended March 31,
1998 to $1,117,000 for the nine months ended March 31, 1999, representing a 27%
increase. This increase was attributable to the hiring of additional personnel
and increases in selling and marketing expenses.
(11)
Model Homes
Model homes on lease have increased to $38,254,256 at March 31, 1999 from
$34,758,659 at March 31, 1998, an increase of 10%.
A breakdown of model home costs and units by state is as follows:
# Model Homes Model Home # Model Homes Model Home
Owned at Cost Owned at Cost
State 3/31/99 3/31/99 3/31/98 3/31/98
- ------------------------------------------------------------------------------
Colorado 8 $ 1,765,605 18 $ 3,786,644
Florida 25 5,644,376 55 11,330,359
Minnesota 2 564,570 0 0
New Jersey 75 19,980,015 54 12,224,844
New York 8 3,047,435 0 0
North Carolina 3 694,372 4 882,382
Pennsylvania 26 5,990,542 22 5,063,979
Texas 2 342,430 4 746,124
Virginia 1 224,911 3 724,327
------- ------------- ------- ------------
Total 150 $ 38,254,256 160 $ 34,758,659
======= ============= ======= ============
A breakdown of lease rental revenues by state is as follows:
Lease Revenues Lease Revenues
From 1/1/99 From 1/1/98
State to 3/31/99 to 3/31/98
- ------------------------------------------------------------------------------
Colorado $ 56,279 $ 113,599
Florida 208,476 375,569
Minnesota 16,937 -
New Jersey 605,367 249,720
New York 76,786 -
North Carolina 20,831 26,471
Pennsylvania 159,627 66,915
Texas 10,273 27,314
Virginia 6,747 23,902
----------- -----------
Total $1,161,324 $ 883,490
=========== ===========
The average purchase price of model homes acquired by the Company since
inception was approximately $228,000. For the quarter ended March 31,
1999, the Company sold twenty-five (25) model homes for total sales price of
$6,179,786 less costs of sales of $5,828,064 for a net gain of $351,722.
(12)
Liquidity and Capital Resources
The Company's principal business, leasing of model homes and real estate
acquisition and contract development, is a capital-intensive operation
requiring constant infusions of cash as the number and size of transactions in
which the Company is involved increases. To date, this business has been
financed by equity capital contributions, loans made by shareholders, and
secured loans from financial institutions.
These capital contributions and loans have been adequate to permit the Company
to carry on operations to date. However, it may be necessary to finance the
expansion of operations over the coming fiscal year with additional funds
raised through the issuance of debt or equity securities. Should the need
arise, the Company will complete a securities offering of debt or equity prior
to the end of 1999. The net proceeds of an offering, together with
existing cash and credit facilities, as well as new facilities obtained on an
"as needed" basis, should enable the Company to finance its growing level of
operations. (See Financing Activities for additional information.)
Cash Flow - Nine Months Ended March 31, 1999.
Net cash provided by operating activities comprised net income of $547,578,
offset by net adjustments for non-cash items of $409,253, plus a net change in
other operating assets and liabilities of $386,755.
Net cash provided by investing activities comprised proceeds from sale of
model homes of $3,660,983, offset by $3,018,824 in model home purchases and
$14,594 in capital expenditures.
Net cash used in financing activities comprised principal payments on
mortgages payable of $1,162,952, deferred financing costs of $381,494,
preferred distributions of $40,000, and purchase of treasury stock of
$262,432, offset by proceeds from mortgages payable of $765,982, and proceeds
from stockholder loans of $320,000.
Trends in Operations
The Company's operations continue to grow at an accelerated rate. Such
growth has resulted from the ongoing acquisition of model homes under lease
and from the implementation of the Company's land acquisition and contract
development program. Both programs have generated significant interest from
national home builders and real estate developers. The Company's successful
implementation of these programs has led to increased credit facilities.
For the nine months ended March 31, 1999, purchases of model homes totaled
approximately $15,600,000, bringing total model homes on lease at March
31, 1999 to approximately $38,200,000.
(13)
Year 2000 Issues
The Company conducts its business primarily with commercial software provided
by third party vendors. After an analysis of the Company's exposure to the
impact of year 2000 issues, management believes that such commercial software
is substantially year 2000 compliant and that completion of the year 2000
compliance is not expected to have a material impact on the Company's
business, operations or financial condition. Management is not in a position
to evaluate the extent, if any, to which any year 2000 issues that may affect
the economy generally or any of its suppliers or vendors in particular would
also be likely to affect the Company.
Forward Looking Statements
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") concerning
the Company's operations, economic performance and financial conditions,
including, in particular, the likelihood of the Company's success in
developing and bringing to market the products which it currently has under
development, as well as procuring the necessary financing to acquire these
products. These statements are based upon a number of assumptions and
estimates which are inherently subject to significant uncertainties, and
contingencies, many of which are beyond the control of the Company and reflect
future business decisions which are subject to change. Some of these
assumptions inevitably will not materialize, and unanticipated events will
occur which will affect the Company's results. Consequently, actual results
will vary from the statements contained herein and such variance may be
material. Prospective investors should not place undue reliance on this
information.
(14)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
Strategic Capital Resources, Inc.
By: /s/John P. Kushay
John P. Kushay, Treasurer
Chief Financial Officer and
Chief Accounting Officer
(Duly Authorized Officer)
Date: May 12, 1999
(15)
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<PERIOD-END> MAR-31-1999
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0
4,000
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</TABLE>
