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 December 31, 1998
[ ] 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 February 2, 1999
Class of Securities Outstanding Shares
Common Stock, $.001 par value, 15,904,085 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
December 31, 1998 (unaudited) and June 30, 1998.
Condensed Consolidated Statement of Operations 4
for the three months and six months ended December 31, 1998,
and the three months and six months ended December 31, 1997
(unaudited)
Condensed Consolidated Statement of Cash Flows 5
for the six months ended December 31, 1998,
and the six months ended December 31, 1997
(unaudited)
Notes to Condensed Consolidated Financial Statements 6-9
(unaudited)
Item 2. Management's Discussion and Analysis of Financial 10-15
Condition and Results of Operations.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31 June 30
ASSETS 1998 1998
----------- -----------
Revenue producing assets:
Model homes on lease $39,043,518 $38,687,731
Less: accumulated depreciation (546,845) (906,679)
----------- -----------
Model homes on lease, net 38,496,673 37,781,052
----------- -----------
Total revenue producing assets 38,496,673 37,781,052
----------- -----------
Other assets:
Cash 323,482 365,227
Net assets realizable on divestiture 1,100,000 1,100,000
Deferred charges and other assets 982,253 939,797
----------- -----------
Total other assets 2,405,735 2,405,024
----------- -----------
Total assets $40,902,408 $40,186,076
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable $31,043,881 $30,512,635
Notes payable 1,175,907 1,025,907
Accounts payable & accrued expenses 454,383 481,763
Unearned rental revenue 204,739 203,367
Preferred Distribution Payable 30,000 -
----------- -----------
Total liabilities 32,908,910 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
15,904,085 outstanding 17,012
16,934,085 outstanding 17,012
Additional paid-in capital 8,316,552 8,346,552
Less treasury stock at cost, 1,107,920
and 77,920 shares respectively at
December 31, 1998 and June 30, 1998 (282,732) (20,354)
Accumulated deficit (61,334) (384,806)
----------- -----------
Total stockholders' equity 7,993,498 7,962,404
----------- -----------
Total liabilities and stockholders' equity $40,902,408 $40,186,076
=========== ===========
See accompanying notes.
(3)
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months and Six Months Ended December 31, 1998 and
Three Months and Six Months Ended December 31, 1997
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1998 1997 1998 1997
--------- ---------- ---------- ----------
Revenues:
Lease revenue $1,167,033 $ 811,917 $ 2,387,894 $1,523,705
Real Estate option fees - - - 8,771
Model Home sales 3,930,800 2,893,455 10,349,588 4,311,371
Land sales - - - 8,591,956
Interest Income 30,011 28,911 59,621 70,567
--------- ---------- ---------- ----------
Total Revenues 5,127,844 3,734,283 12,797,103 14,506,370
--------- ---------- ---------- ----------
Costs and expenses:
Interest expense 699,061 472,859 1,470,297 893,361
Cost of model homes sold 3,735,829 2,790,894 9,864,924 4,162,859
Land sales - - - 8,591,956
Corporate 352,261 289,669 716,972 579,695
--------- ---------- ---------- ----------
Total Operating Expenses 4,787,151 3,553,422 12,052,193 14,227,871
--------- ---------- ---------- ----------
Income before depreciation
and amortization 340,693 180,861 744,910 278,499
Depreciation and amortization 135,561 301,294 282,438 554,688
--------- ---------- ---------- ----------
Income(loss) before income taxes 205,132 (120,433) 462,472 (276,189)
--------- ---------- ---------- ----------
Deferred income tax expense 61,862 - 139,000 -
--------- ---------- ---------- ----------
Net income (loss) 143,270 (120,433) 323,472 (276,189)
Preferred stock distribution 30,000 - 30,000 -
--------- ---------- ---------- ----------
Income(loss) applicable to
common shareholders 113,730 (120,433) 293,472 (276,189)
========== ========== =========== ==========
Net income (loss) per share
Basic $ 0.01 (0.01) 0.02 (0.02)
Diluted $ 0.01 (0.01) 0.02 (0.02)
Weighted average number of shares
Basic 15,904,085 16,814,179 16,381,096 16,813,085
Diluted 18,079,734 16,814,179 18,556,745 16,813,085
See accompanying notes.
(4)
STRATEGIC CAPITAL RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended December 31, 1998 and December 31, 1997
(Unaudited)
Six Months Six Months
Ended Ended
12/31/98 12/31/97
----------- ----------
Net income (loss) $ 323,472 $ (276,189)
----------- ----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization expense 221,640 213,153
Depreciation expense 60,798 341,534
Gain on sale of model homes (484,664) (148,512)
Changes in assets and liabilities:
Decrease(increase) in miscellaneous assets (33,215) 55,180
Decrease in accounts payable / accrued expenses (27,383) (107,096)
Increase in unearned rental revenue 1,372 88,108
----------- ----------
Total adjustments (261,452) 442,367
----------- ----------
Net cash provided by operating activities 62,020 166,178
----------- ----------
Cash flows from investing activities
Purchase of model homes (2,018,015) (5,673,205)
Proceeds from sale of model homes 2,486,928 4,229,601
Proceeds from sale of land - 1,716,956
Capital expenditures (14,594) (264)
Proceeds from note receivable of
divested segment - 212,500
----------- ----------
Net cash provided by
investing activities 454,319 485,588
----------- ----------
Cash flows from financing activities:
Proceeds from mortgages payable 635,100 2,322,710
Principal payments on mortgages payable (930,770) (3,664,605)
Deferred financing costs (150,036) (174,364)
Proceeds from stockholder loans 150,000 385,000
Purchase of treasury stock (262,378) -
----------- -----------
Net cash (used in)
financing activities (558,084) (1,131,259)
----------- -----------
Net decrease in cash (41,745) (479,493)
Cash at beginning of period 365,227 831,266
----------- -----------
Cash at end of period $323,482 $ 351,773
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid - $1,407,496 $916,114
See accompanying notes.
(5)
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(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
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.
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.
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 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
--------- ----------- ---- ------------
Total 69 $18,284,088 7 $ 1,655,773
--------- ----------- ---- ------------
Model Homes on Lease at December 31, 1998 - 62 $16,628,315
(6)
Model Funding II, LLC
As of December 31, 1998, 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. It is anticipated that this transaction will close prior
to the end of February 1999. 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 Six Months Ended
December 31, December 31,
1998 1997 1998 1997
--------- ---------- ---------- ----------
Earnings
Net income 143,270 (120,433) 323,472 (276,189)
Dividends on preferred shares 30,000 - 30,000 -
--------- ---------- ---------- ----------
Income(loss) applicable to
common shareholders 113,730 (120,433) 293,472 (276,189)
========== ========== =========== ==========
Basic:
Income(loss) applicable to
common shareholders 113,730 (120,433) 293,472 (276,189)
Weighted average shares
outstanding during the period 15,904,085 16,814,179 16,381,096 16,813,085
Basic $ 0.01 (0.01) 0.02 (0.02)
Diluted:
Income(loss) applicable to
common shareholders 113,730 (120,433) 293,472 (276,189)
Plus:
Dividends on preferred shares 30,000 - 30,000 -
--------- ---------- ---------- ----------
Net income applicable to
common shareholders 143,270 (120,433) 323,472 (276,189)
--------- ---------- ---------- ----------
Weighted average shares
outstanding during the period 15,904,085 16,814,179 16,381,096 16,813,085
Effect of dilutive securities:
Stock Options 547,379 - 547,379 -
Warrants 1,228,270 - 1,228,270 -
Assumed conversion of
Preferred stock 400,000 - 400,000 -
--------- ---------- ---------- ----------
Diluted weighted common
shares outstanding 18,079,734 16,814,179 18,556,745 16,813,085
Diluted $ 0.01 (0.01) 0.02 (0.02)
(7)
Note 4. Commitments & Contingencies
In the ordinary course of business, the Company commits to purchase model
homes 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; land
acquisitions are typically subject to numerous conditions including, but not
limited to, the ability to obtain necessary government approvals for the
communities; and other factors affecting the homebuilding industry.
Legal Proceedings
The Company filed suit against BANKATLANTIC BANCORP., INC. 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 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.
In reliance upon the advice of outside counsel, management is of the opinion
that its claim has merit and will have a positive financial impact upon the
Company in that the Company expects to recover substantial damages in excess of
the cost of litigation.
Model home sales contracts
The Company has sale contracts pending on twenty-five (25) model homes. The
aggregate sales price for the twenty-five homes is $7,106,350, which the Company
originally purchased for $6,576,513.
Financing Activities
In order to finance its expansion, the Company conducts ongoing negotiations
with financial institutions to raise funds through debt and/or equity, and
is in various stages of negotiations relating to the following:
During August 1998, the Company engaged a major investment banking firm to act
as exclusive placement agent in connection with two specific offers and
proposed sale by the Company of the Company's lease backed notes or similar
securities. The Company is in final negotiations and expects to complete the
two private placement transactions prior to the end of February 1999, through
its wholly-owned subsidiaries, Model Funding I, LLC and Model Funding II, LLC.
The transactions involve the sale of approximately $40,000,000 in securities,
which will be privately placed under rule 144A.
The transactions will be supported by an Additional Surety Bond issued by a
"AAA" rated U.S. subsidiary of a major international insurer. The surety bonds
insure the timely payment by the lessee of the lease payments. In the event of
default by the lessee, the surety has an obligation to continue to make the
lease payments on a timely basis.
(8)
These debt offerings provide financing at more favorable fixed rates compared
to existing credit facilities, which will increase the Company's margins over
the life of the leases. The proceeds from the offering will be utilized to
pay-off existing first mortgage liens on properties currently owned by the
Company as well as the acquisition of $11.7 million in new model home
properties. In addition, $2-4 million in equity previously invested in the
properties will become available to the Company, which it will utilize to
acquire new revenue producing assets.
(9)
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.
Since its inception, the Company and its special purpose bankruptcy remote
subsidiary have purchased a total of 280 model homes and sold 123, resulting in
a portfolio of 157 model homes owned at December 31, 1998. All of the Company's
clients are major publicly traded homebuilders. 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 23.5
6/30/97 75 14,512,772 23 4,437,087 16.6
6/30/98 110 26,170,860 49 8,892,378 11.1
6/30/99 34 10,454,782 48 10,098,995 4.0
--------- ----------- ---- ------------ -------------
Total 280 $62,975,143 123 $23,931,625 14.4
--------- ----------- ---- ------------ -------------
Model Homes on Lease at December 31, 1998 - 157 $39,043,518
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.
(10)
A summary of the operating results of Strategic Capital Resources, Inc. and
subsidiaries for the three months ended December 31, 1998, and December 31,
1997 are presented below.
Three Months Three Months
Ended Ended
December 31 December 31
1998 % 1997 %
--------------------------------
Revenues:
Lease revenue $1,167,033 22% $811,917 21%
Model home sales 3,930,800 77% 2,893,455 78
Interest income 30,011 1% 28,911 1%
---------------------------------
Total revenues $5,127,844 100% 3,734,283 100%
Costs and expenses:
Interest expense 699,061 13% 472,859 13%
Cost of model home sales 3,735,829 74% 2,790,894 75%
Corporate 352,261 7% 289,669 7%
---------------------------------
Total costs and expenses 4,787,151 94% 3,553,422 95%
---------------------------------
Income before depreciation & amortization 340,693 6% 180,861 5%
Depreciation & amortization 135,561 2% 301,294 8%
---------------------------------
Income (loss) before income taxes 205,132 4% (120,433) (3%)
---------------------------------
Deferred income tax expense 61,862 1% - -
---------------------------------
Net income (loss) $143,270 3% (120,433) (3%)
=================================
Results of Operations:
Three Months Ended December 31, 1998 compared to December 31, 1997.
For the period from October 1, 1998 through December 31, 1998, the Company had
revenues of $5,127,844 of which lease revenues on model homes totaled
$1,167,033 and revenues from the sale of model homes were $3,930,800. Net
income for the period was $143,270 compared to a net loss of $120,433 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 $355,000 (a 44% increase)
during the three months ended December 31, 1998 as compared to the three
months ended December 31, 1997. This increase is due to additional lease
revenues generated from the purchase of $23,600,000 in model homes in the
twelve months ended December 31, 1998.
Corporate costs increased from $290,000 for the quarter ended December 31,
1997 to $352,000 for the quarter ended December 31, 1998, representing a 22%
increase. This increase was attributable to the hiring of additional personnel
and increases in selling and marketing expenses.
(11)
A summary of the operating results of Strategic Capital Resources, Inc. and
subsidiaries for the six months ended December 31, 1998, and December 31, 1997
are presented below.
Six Months Six Months
Ended Ended
December 31 December 31
1998 % 1997 %
--------------------------------
Revenues:
Lease revenue $2,387,894 19% $1,523,705 10%
Model home sales 10,349,588 80% 4,311,371 30%
Interest income 59,621 1% 70,567 1%
Real Estate option fees - - 8,771 -
Land Sales - - 8,591,956 59%
---------------------------------
Total revenues $12,797,103 100% 14,506,370 100%
Costs and expenses:
Interest expense 1,470,297 11% 893,361 6%
Cost of model home sales 9,864,924 77% 4,162,859 29%
Corporate 716,972 6% 579,695 4%
Land Sales - - 8,591,956 59%
---------------------------------
Total costs and expenses 12,052,193 94% 14,227,871 98%
---------------------------------
Income before depreciation & amortization 744,910 6% 278,499 2%
Depreciation & amortization 282,438 2% 554,688 4%
---------------------------------
Income (loss) before income taxes 462,472 4% (276,189) (2%)
---------------------------------
Deferred income tax expense 139,000 1% - -
---------------------------------
Net income (loss) $323,472 3% (276,189) (2%)
=================================
Results of Operations:
Six Months Ended December 31, 1998 compared to December 31, 1997.
For the period from July 1, 1998 through December 31, 1998, the Company had
revenues of $12,797,103 of which lease revenues on model homes totaled
$2,387,894 and revenues from the sale of model homes were $10,349,588. Net
income for the period was $323,472 compared to a net loss of $276,189 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 $864,000 (a 57% increase)
during the three months ended December 31, 1998 as compared to the three
months ended December 31, 1997. This increase is due to additional lease
revenues generated from the purchase of $23,600,000 in model homes in the
twelve months ended December 31, 1998.
Corporate costs increased from $580,000 for the six months ended December 31,
1997 to $717,000 for the quarter ended December 31, 1998, representing a 24%
increase. This increase was attributable to the hiring of additional personnel
and increases in selling and marketing expenses.
(12)
Model Homes
Model homes on lease have increased to $39,043,518 at December 31, 1998 from
$30,214,036 at December 31, 1997, an increase of 29%.
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 12/31/98 12/31/98 12/31/97 12/31/97
- ------------------------------------------------------------------------------
Colorado 9 $ 1,997,393 18 $ 3,786,644
Florida 36 8,108,301 64 12,898,340
Minnesota 2 564,570 0 0
New Jersey 78 20,262,602 40 8,556,947
New York 5 2,150,000 0 0
North Carolina 3 694,372 4 882,381
Pennsylvania 21 4,698,939 10 2,230,500
Texas 2 342,430 5 910,481
Virginia 1 224,911 4 948,743
------- ------------- ------- ------------
Total 157 $ 39,043,518 145 $ 30,214,036
======= ============= ======= ============
A breakdown of lease rental revenues by state is as follows:
Lease Revenues Lease Revenues
From 7/1/98 From 7/1/97
State to 12/31/98 to 12/31/97
- ------------------------------------------------------------------------------
Colorado $ 170,709 $ 245,404
Florida 550,886 803,407
Minnesota 182 -
New Jersey 1,127,082 179,218
New York 139,139 -
North Carolina 41,662 48,638
Pennsylvania 307,555 112,245
Texas 26,456 54,628
Virginia 24,222 80,165
----------- -----------
Total $2,387,894 $1,523,705
=========== ===========
The average purchase price of model homes acquired by the Company since
inception was approximately $225,000. For the quarter ended December 31,
1998, the Company sold seventeen (17) model homes for total sales price of
$3,930,800 less costs of sales of $3,735,829 for a net gain of $194,971.
(13)
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 fiscal 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 - Six Months Ended December 31, 1998.
Net cash provided by operating activities comprised net income of $323,472,
offset by net adjustments for non-cash items of $202,226, and a net change in
other operating assets and liabilities of $59,226.
Net cash provided by investing activities comprised proceeds from sale of
model homes of $2,486,928, offset by $2,018,015 in model home purchases and
$14,594 in capital expenditures.
Net cash used in financing activities comprised principal payments on
mortgages payable of $930,770, deferred financing costs of $150,036,
and purchase of treasury stock of $262,378, offset by proceeds from mortgages
payable of $635,100, and proceeds from stockholder loans of $150,000.
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 six months ended December 31, 1998, purchases of model homes totaled
approximately $10,500,000, increasing total model homes on lease at December
31, 1998 to approximately $39,000,000.
(14)
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.
(15)
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The registrant held an Annual Meeting of Shareholders on December 15, 1998.
At the meeting the shareholders took the following actions:
1) Nine directors were elected by a vote of 10,734,233 for, and -0- against.
2) Approved the appointment of Horton & Company, LLC. as the Corporation's
independent auditors for the current fiscal year ended June 30, 1998.
10,734,223 votes for, -0- against.
3) Ratified the amendment to the Certificate of Incorporation changing the
name of the Corporation to Strategic Capital Resources, Inc. and reducing
the authorized but unissued common and preferred stock. 10,734,233 for,
-0- against.
4) Ratified the Corporation's Equity Incentive Plans. 10,734,233 for, -0-
against.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K: A report on form 8-K dated December 23, 1998 was
filed with the Securities and Exchange Commission relating to shareholders
actions taken at the Annual Meeting of Shareholders on December 15, 1998. (See
Item 4. above)
(16)
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: February 2, 1999
(17)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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[TYPE] EX-27
[TEXT]
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 323,482
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 481,712
<PP&E> 39,129,132
<DEPRECIATION> 583,198
<TOTAL-ASSETS> 40,902,408
<CURRENT-LIABILITIES> 1,865,029
<BONDS> 31,043,881
0
4,000
<COMMON> 17,012
<OTHER-SE> 7,972,486
<TOTAL-LIABILITY-AND-EQUITY> 40,902,408
<SALES> 12,737,482
<TOTAL-REVENUES> 12,797,103
<CGS> 11,617,659
<TOTAL-COSTS> 12,334,631
<OTHER-EXPENSES> 716,972
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 462,472
<INCOME-TAX> 139,000
<INCOME-CONTINUING> 323,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 323,472
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
