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Quarterly Report For Small Business Issuers Subject
to the 1934 Act Reporting Requirements
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
( ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(X) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from November 1, 1996 to December 31, 1996
Commission File No. 0-21417
CAPITAL TITLE GROUP, INC.
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(Name of Small Business Issuer in its charter)
Delaware 87-0399785
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4808 N. 22nd Street, Phoenix, Arizona 85016
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (602) 954-0022
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Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 / / No /X/.
Number of shares outstanding for each of the issuer's classes of common
stock, as of the latest practicable date.
$.001 par value common stock 10,316,029 shares as of December 31, 1996.
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<PAGE>
FORM 10-QSB
TRANSITION REPORT
For the transition period from November 1, 1996 to December 31, 1996
TABLE OF CONTENTS
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Part I: FINANCIAL INFORMATION Page Number
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Item 1. Condensed Consolidated Financial Statements
A. Consolidated Balance Sheets as of
December 31, 1996 and October 31, 1996 3
B. Consolidated Statements of Operations
for the two month periods ended
December 31, 1996 and 1995 4
C. Consolidated Statements of Cash Flows
for the two month periods ended
December 31, 1996 and 1995 5
D. Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
Part II: OTHER INFORMATION
Items 1.- 5. of Part II have been omitted because
they are not applicable with respect to the current
reporting period.
Item 6. Exhibits and Reports on Form 8-K 8
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 by the
undersigned thereunto duly authorized.
CAPITAL TITLE GROUP, INC.
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(Registrant)
By: /s/ Donald R. Head
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Donald R. Head
Chairman of the Board,
Chief Executive Officer
Date: February 7, 1997
By: /s/ Michael J. Benjamin
------------------------------
Michael J. Benjamin
Vice President
(Principal Finance and Accounting Officer)
2
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, October 31,
1996 1995
----------------- -----------------
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 76,363 $ 24,664
Accounts receivable, net 18,709 24,723
Income taxes receivable 25,796 16,358
Prepaid expenses 56,493 17,659
----------------- -----------------
Total Current Assets 177,361 83,404
Property and Equipment, net 953,403 914,632
Other Assets:
Investment in title plant 175,000 175,000
Deposits 58,699 58,699
----------------- -----------------
Total Assets $ 1,364,463 $ 1,231,735
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - current portion 106,080 6,538
Notes payable to related parties - current portion 34,667 109,228
Obligation under capitalized leases - current portion 33,179 28,638
Accounts payable 549,566 435,730
Accrued expenses 71,210 69,900
----------------- -----------------
Total Current Liabilities 794,702 650,034
Long-Term Liabilities:
Notes payable - long-term portion 238,894 6,658
Notes payable to related party - long-term portion 101,115 105,746
Obligation under capitalized leases - long-term portion 64,641 62,830
----------------- -----------------
Total Long-Term Liabilities 404,650 175,234
----------------- -----------------
Stockholders' Equity:
Common stock, $.001 par value, 50,000,000 shares authorized,
10,316,029 and 10,028,029 shares issued and outstanding,
respectively 10,316 10,286
Paid-in capital 1,757,346 1,727,376
Accumulated deficit (1,602,551) (1,331,195)
----------------- -----------------
Total Stockholders' Equity 165,111 406,467
Total Liabilities and Stockholders' Equity $ 1,364,463 $ 1,231,735
================= =================
</TABLE>
See Notes to
Consolidated Financial Statements
3
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the two month period ended
December 31,
------------
1996 1995
------------------ -----------------
REVENUE:
<S> <C> <C>
Title insurance premiums $ 485,840 $ 188,919
Escrow fees 204,776 91,138
Account servicing 49,710 49,046
Other fees and revenue 4,400 2,298
Interest income 24,790 17,594
------------------ -----------------
769,516 348,995
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EXPENSES
Personnel costs 585,501 211,349
Other operating expenses 426,910 170,098
Escrow commissions 27,086 1,551
Interest expense 10,813 767
------------------ -----------------
1,050,310 383,765
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Loss before provision for income taxes (280,794) (34,770)
Income tax benefit 9,438 -
================== =================
Net Loss $ (271,356) $ (34,770)
================== =================
Loss per share
$ (.03) N/A
================== =================
Weighted average shares outstanding 10,311,029 N/A
================== =================
</TABLE>
See Notes to
Consolidated Financial Statements
4
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the two months ended
December 31,
------------
1996 1995
---------------- ---------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (271,356) $ (34,770)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation 32,560 8,121
Changes in Assets and Liabilities:
Accounts receivable 6,014 (5,466)
Income taxes receivable (9,438) -
Prepaid expenses (38,834) (7,956)
Accounts payable 113,836 (44,675)
Accrued expenses 1,309 2,567
Income taxes payable - (4,736)
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105,447 (52,145)
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Net Cash used by
Operating Activities (165,909) (86,915)
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Cash flows from investing activities:
Purchase of property and equipment (55,332) (14,313)
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Net cash used by investing activities (55,332) (14,313)
-------------- ------------
Cash flows from financing activities:
Proceeds from notes payable 350,000 -
Proceeds from notes payable to related parties - 150,000
Proceeds from issuance of common stock, net 30,000 -
Repayment of notes payable (18,222) (29,988)
Repayment of notes to related party (79,192) -
Repayment of obligations under capital leases (9,646) (1,582)
-------------- ------------
Net cash provided by financing activities 272,940 118,430
-------------- ------------
Net increase in cash and cash equivalents 51,699 17,202
Cash and cash equivalents at beginning of year 24,664 17,354
-------------- ------------
Cash and cash equivalents at end of year $ 76,363 $ 34,556
============== ============
</TABLE>
See Notes to
Consolidated Financial Statements
5
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL INFORMATION
The unaudited consolidated financial information included in this
report has been prepared in conformity with the accounting principles and
practices reflected in the Consolidated Financial Statements included in the
Form 10-KSB for the year ended October 31, 1996 filed with the Commission under
the Securities Exchange Act of 1934. This report should be read in conjunction
with the aforementioned Form 10-KSB. In the opinion of management, all
adjustments consisting of normal recurring accruals, necessary for a fair
presentation of this information have been made. The results of operations for
the interim periods are not necessarily indicative of results for a full year.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company paid a note payable due to a Director of the company for
$75,000 in November, 1996.
NOTE 3 - NOTES PAYABLE
On November 15, 1996, the Company entered into an installment loan
agreement with Imperial Bank for $350,000. Security for the loan consists of all
the Company's personal property. Payments of $11,000 a month began on December
15, 1996 and will continue until November 15, 1999.
NOTE 4 - PRIVATE PLACEMENT OF COMMON STOCK
On December 15, 1996, the Company's Board of Directors authorized an
additional private placement of 555,000 shares at $1.00 per share. As of
February 5, 1997, the Company has sold an additional 555,000 shares of common
stock for approximately $538,000, net of offering costs.
6
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
The 1996 Form 10-KSB and the Annual Report should be read in
conjunction with the following discussion since they contain important
information for evaluating the Company's operating results and financial
condition.
Operating Revenues
Operating revenues increased by $420,521 or 120.4% for the two month
period ended December 31, 1996 compared to the same period ended December 31,
1995. The revenue increase is attributable to the expansion into Maricopa County
Arizona, and increased market share in Yavapai County Arizona.
The Company began operations in Maricopa County on August 1, 1996. The
following table presents information regarding the approximate monthly revenue,
escrows opened, and escrows closed from Maricopa operations:
Escrows Escrows
For the Month Ended Revenue Opened Closed
------------------- ------- ------ ------
August 31, 1996 $54,000 244 20
September 30, 1996 99,000 211 81
October 31, 1996 108,000 333 111
November 30, 1996 163,000 305 154
December 31, 1996 215,000 335 186
January 31, 1997 $230,000 386 224
Revenues from Maricopa operations have been growing at a constant rate
since Maricopa operations began in August, 1996. Management expects revenues
will continue to grow as the percent of closures for open escrows in inventory
increases, and escrow offices reach their full revenue potential.
Revenues from Yavapai operations increased approximately $21,000 or 6%
for the two month period ended December 31, 1996 compared to the same period
ended December 31, 1995. The increase in revenue is due to an increase in the
Company's market share which went from 20.16% in December, 1995 to 23.01% in
December, 1996. The increase in market share occurred while the overall market
in Yavapai declined in the two months ended December 31, 1996 compared to the
same period in 1995. There were 1,468 closings in the entire Yavapai County
market in December, 1995 compared to 1,043 in December, 1996. With the
recruitment of three (3) escrow officers and the anticipated opening of two new
offices, the Company expects to further increase its Yavapai market share in
1997.
7
<PAGE>
Operating Revenues
Expenses increased from $383,765 to $1,050,310 for the two month period
ended December 31, 1995, and 1996, respectively. Expenses for Yavapai operations
increased from $383,765 to $442,700. The increase in Yavapai County is due to
increased personnel costs, an increase of approximately $52,000 from the
comparitive period. The remaining increase is due to the Company expanding into
Maricopa County, Arizona, the expenses from that operation, and moving the
Corporate Headquarters to Phoenix, Arizona.
Liquidity and Capital Resources
As the Company expanded into Maricopa County, Arizona, the Company's
liquidity requirements have also increased as a result of working capital needs.
The Company generated $272,940 in cash from financing activities in the two
month period ended December 31, 1996 compared to $118,430 in the same period of
1995. The cash generated was used to pay for operations and purchase equipment.
During February, 1996, the Company sold an additional 525,000 shares of common
stock for net proceeds of approximately $508,000.
The short and long term liquidity requirements of the Company and its
subsidiary are monitored regularly. Management believes the Company can meet
both its short and long-term capital needs as of December 31, 1996.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
On December 12, 1996, the Registrant filed a Form 8-K reporting its
decision to change the Company's year end from October 31 to December 31.
8
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<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 76363
<SECURITIES> 0
<RECEIVABLES> 18709
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 177361
<PP&E> 1402587
<DEPRECIATION> 449184
<TOTAL-ASSETS> 1364463
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0
0
<COMMON> 1767662
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 165112
<SALES> 0
<TOTAL-REVENUES> 769516
<CGS> 0
<TOTAL-COSTS> 1050310
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (280794)
<INCOME-TAX> (9438)
<INCOME-CONTINUING> (271356)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (271356)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
