U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2000
Commission file number: 000-28583
NEW YORK REGIONAL RAIL CORPORATION (Exact name of
small business issuer as specified in its charter)
DELAWARE 13-3081571
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4302 First Ave
Brooklyn, NY 11232
(Address of principal executive offices, including zip code)
(718) 788-3690
(Issuer's telephone number)
Indicate by check mark whether the Issuer (1) has filed all reports required to
be filed by Section 14 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 such filing requirements for the past 90
days.
Yes [ X ] No [ ]
There were 169,508,649 shares of the Registrant's Common Stock outstanding as of
June 30, 2000
<PAGE>
NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
CONSOLIDATED BALANCE SHEET
JUNE 30, DECEMBER 31,
2000 1999
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ASSETS
Current assets
Cash $53,118 $211,512
Accounts receivable 722,864 693,506
Other current assets 367,515 413,015
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Total current assets 1,143,497 1,318,033
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Property, plant and equipment 4,301,408 4,147,575
Other assets
Other assets 85,225 90,625
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Total other assets 85,225 90,625
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Total assets $5,530,130 $5,556,233
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities
Accounts payable Accrued Expenses $2,849,515 $3,285,386
Notes Payable and Current Maturities
of Long-Term Debt 1,840,203 2,615,927
Payroll and Payroll Taxes Payable 819,327 564,577
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Total current liabilities 5,509,045 6,465,890
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Long-term debt 1,038,555 758,551
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Total liabilities 6,547,600 7,224,441
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Minority Interest 330,547 276,750
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STOCKHOLDERS' EQUITY
Common stock 16,822 16,096
Preferred stock 1,250,000 1,250,000
Additional paid-in capital 9,456,282 8,518,890
Retained earnings (accumulated deficit) (12,071,121) (11,729,944)
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Total stockholders' equity (1,348,017) (1,944,958)
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Total liabilities and stockholders' equity $5,530,130 $5,556,233
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PLEASE READ THE ACCOMPANYING NOTES AS THEY ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------- --------------
2000 1999 2000 1999
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(U N A U D I T E D)
Operating revenues $2,471,671 $1,108,495 $4,873,775 $1,300,304
Operating expenses 2,035,973 809,416 4,183,792 1,068,211
--------- ------- --------- ---------
Income from operations 435,698 299,079 689,983 232,093
Administrative expenses 492,586 834,866 815,384 1,013,259
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Loss before other income
(expenses) and income taxes (56,888) (535,787) (125,401) (781,166)
Interest expense (71,267) (83,862) (135,977) (106,893)
Net loss before income taxes and _______ _______ ________ ________
minority interest (128,155) (619,649) (261,378) (888,059)
Provision for income taxes
Net loss before income taxes
and minority interest (128,155) (619,649) (261,378) (888,059)
Minority interest in (income)
loss of subsidiary (28,943) (19,701) (79,799) (41,319)
-------- -------- -------- --------
Net loss $(157,098) $(639,350) $(341,177) $(929,378)
========== ========== ========== ==========
PLEASE READ THE ACCOMPANYING NOTES AS THEY ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30,
2000 1999
-------------------
Increase (decrease) in cash and cash
equivalents Cash flows from operating
activities:
Net loss $(341,177) $(929,378)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 229,131 298,000
Amortization of goodwill
Miscellaneous Income
Stock and options issued for
services Beneficial conversion
feature Minority Interest 79,799 41,319
Changes in operating assets and liabilities:
Accounts receivable (29,358) (69,545)
Prepaid expenses 45,500
Other assets 5,400 10,495
Accounts Payable and Accrued Expenses (435,871) (521,579)
Payroll taxes payable 254,750 82,638
Deferred rent _______ ________
Total adjustments 149,351 (158,672)
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Net cash provided by (used in) operating activities (191,826) (1,088,050)
Cash flows from investing activities:
Purchase of property and equipment (72,865) (113,273)
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Net cash provided by (used in) investing activities (72,865) (113,273)
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Cash flows from financing activities:
Long term debt (24,965) 261
Convertible notes - other (681,000) 1,125,000
Convertible notes - related party (300,000)
Other current debt - related party 320,000
Other current debt - other 170,656 61,270
Proceeds from issuance of capital stock 938,118 ________
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Net cash provided by (used in) financing activities 422,809 1,186,531
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Net increase (decrease) in cash and cash equivalents 158,118 (14,792)
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Cash and cash equivalents at beginning of year 211,512 8,291
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Cash and cash equivalents at end of year $53,394 $(6,501)
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PLEASE READ THE ACCOMPANYING NOTES AS THEY ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE AND ORGANIZATION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature and Organization of Business
New York Regional Rail Corporation ("NYRR") is a management company that
was established (effective January 1, 1996) to acquire control of an equipment
company (CH Proprietary, Inc.), and a company that operates an interstate
railroad (New York Cross Harbor Railroad Terminal Corporation). As of June 30,
2000, The NYRR holds a 95% interest in CH Proprietary, Inc., a 51% interest in
JS Transportation Inc, and a 93% interest in New York Cross Harbor Railroad
Terminal Corporation.
New York Cross Harbor Railroad Terminal Corporation ("NYCHRR") is the
operator of an ICC certified railroad. Its business is to transport rail traffic
and to deliver that rail traffic via barges across New York Harbor and the East
River, thus enabling New York City, Long Island, and Southern New England to
connect to the national rail freight system. In addition, it receives and
delivers railcars at certain industrial facilities located on its own trackage
of three and one-half miles plus seven miles of leased track on the Brooklyn,
New York waterfront and two and one-half miles of its own track in Jersey City,
New Jersey.
CH Proprietary, Inc. ("CHP") holds title to railroad, marine, and terminal
equipment, which it leases to NYCHRR.
J S Transportation Inc. is a short haul regional trucking company.
In May 1996, NYRR merged with Best Sellers Group, Inc ("BSLR"), an OTC
publicly traded company.
The Companies grant credit terms in the normal course of business to their
customers. Customers include a wide variety of industries that utilize the
services of a railroad. Concentrations of credit risk with respect to these
trade receivables are considered minimal due the Companies' diverse customer
base. As part of their ongoing control procedures, the Companies monitor the
credit worthiness of their customers. Bad debts have been minimal. The Companies
do not normally require collateral or other security to support credit sales.
<PAGE>
Principles Of Consolidation
The accompanying consolidated financial statements present the combination
of NYRR and the consolidated interests in CHP, NYCHRR, and JST in which NYRR
either holds a majority interest, or which are under common control. All
intercompany balances and transactions have been eliminated in the
consolidation.
Revenue Recognition
The Company recognizes revenue as earned on the date of freight delivery
to the consignee or other commercial carrier.
Inventory
Inventory consists of spare parts, marine gear and spare railroad track,
ties and turnouts. Inventory is stated at cost, using the specific
identification method.
Property, Plant and Equipment And Depreciation and Amortization
Property, plant and equipment are stated at cost except for certain
transferred assets which are based on current appraisals and a favorable land
lease value, which is recorded at its present value (see note 2).
Expenditures for maintenance, repairs and renewals of a minor nature are
charged against earnings as incurred. Major renewals and betterments are
capitalized. Depreciation and amortization is provided using the straight-line
method over the estimated useful lives of the related assets.
Loan Acquisition Costs and Other Intangible Assets
Loan acquisition costs are amortized over the term of the related loan by
the straight-line method.
Other intangibles, including startup costs, are capitalized and amortized
on a straight-line basis over a period of five years.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimated and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
Income Taxes
The Companies have adopted the Statement of Financial Accounting Standards
No. 109. (SFAS No. 109") "Accounting for Income Taxes" which requires the use of
the liability method of accounting for deferred income taxes.
Earnings Per Share
The Consolidated financial statements are presented in accordance with
SFAS No. 128, "Earnings per Share". Basic earnings per common share are computed
using weighted average number of common shares outstanding during the period.
Diluted earnings per common share incorporate the incremental shares issuable
upon the assumed exercise of stock options and warrants.
Goodwill and Other Intangible Assets
Organization expenses are recorded at cost and are amortized on a
straight-line basis over a five-year useful life.
The value of the NYRR's investment in CH Partners, Inc. and New York Cross
Harbor Railroad Terminal Corporation was based on the audited net book value per
share of the contributed equity as of December 31, 1993, which management
estimates to be the market value as of the date of acquisition. This costs is to
be amortized on a straight-line basis over a 40-year life
2. PROPERTY, PLANT AND EQUIPMENT
Combined property, plant and equipment as of June 30, 2000 consists of the
following:
Marine transportation equipment and dock
facilities $1,334,092
Railroad locomotive cars and equipment $ 215,205
Track and related land improvements $1,210,498
Other equipment $ 491,439
Idle Property and equipment $1,450,000
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$4,701,234
Less Accumulated depreciation and amortization $ 399,826
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$ 4,301,408
3. NOTES PAYABLE
Notes Payable $ 2,878,758
Current Portion Due $ 1,840,203
----------
$ 1,038,555
Interest Expenses for the period June 30, 2000
amounted to: $ 138,977
<PAGE>
Interest Expenses for the period June30, 1999
amounted to: $106,893
4. LEASING ARRANGEMENT
NYCHRR leases, on a month-to-month basis, land and building from the City
of New York. Related rent expense was $13,200 for the six months ended June 30,
2000.
5. PAYROLL TAXES PAYABLE
The liability for payroll taxes includes delinquent federal, state and
local taxes of $819,327 including estimated penalty and interest. In June 1999
the Company paid $290,000 on order to settle all federal liabilities through
1997. The Company is currently negotiating with the appropriate taxing
authorities in order to settle all other outstanding claims.
6. INCOME TAXES
As discussed in Note 1, the Companies have adopted SFAS No. 109.
The Companies total deferred tax asset, which results from net operating
loss carryovers that are available to offset future taxable income and deferred
tax valuation allowance as of June 30, 2000 were as follows:
Deferred tax asset $2,591,177
Less valuation allowance $2,591,177
Net deferred tax asset $ 0.00
The Companies have net operating loss carry forwards of approximately
$6,750,000, which will expire in the years 2000 through 2014. there is no
provision for income taxes for the period ended June 30, 2000 because of the
availability of net operating loss carryforwards.
7. CAPITAL STOCK
Number of Shares
Issued and
Authorized Outstanding
Preferred 1,000,000 500,000
Common $.0001 par value 200,000,000 169,508,649
<PAGE>
8. CONTINGENCIES
New York City has assessed NYCHRR approximately $1,500,000 for delinquent
real estate taxes. The taxes were assessed against properties not owned by
NYCHRR. The property rolls have been corrected by the New York State Board of
Equalization and Assessment and agreed to by management. Preliminary
negotiations between management, the New York City Real Estate Tax Assessor and
the New York City Corporate Counsel have begun. It is managements opinion that
based on these negotiations a payment of approximately $300,000 will be required
to settle all past liabilities.
An open trade receivable exists in the amount of $493,064 representing
demurrage charges for use of Conrail freight cars by a trade customer. The
customer claims it is not obligated to pay per diem charges but has not denied
its obligation to pay demurrage charges. As of the report date, the matter is in
arbitration proceedings, but outside counsel believes, based on a review of the
pertinent transportation contract and the demurrage tariff filed by NYCHRR, that
the trade customer is obligated to pay the demurrage charges. NYCHHRR hopes that
the matter can be resolved through negotiation.
9. LEGAL MATTERS AND OTHER CONTINGENCIES
In 1993 and again in 1995, the Port Authority of New York and New Jersey
("PANYNJ") obtained judgements against NYCH or approximately $440,000. The
judgements are for claims involving rent arrearages on property occupied by the
Company at the PANYNJ's Atlantic Terminal facility and for accrued lease
payments and rental payments for Tug Boat owned by PANYNJ.
The financial statements have been restated to account for these
judgements. The Company has reflected the full amount of the judgement as a
current liability. In addition, statutory interest at a rate of 9% has been
accrued annually. Therefore the effect of recording these judgements is to
increase current liabilities and decrease stockholders' deficit by approximately
$658,000 (including accrued interest of ($218,000).
10. SUBSEQUENT EVENTS
In November 1999, the PANYNJ enforced its judgements by placing a lien on
the Company's accounts receivables with Norfolk Southern ("NS"). In November
1999, the Company and the PANYNJ reached a temporary repayment agreement
whereby, NS would remit 20% of all accounts receivable due the Company to the
PANYNJ until such time as a permanent agreement could be reached. The temporary
repayment agreement has been subsequently extended on several occasions. Through
July 2000 approximately $20,000 has been remitted to the PANYNJ in partial
satisfaction of the judgements. Management is currently negotiating with the
PANYNJ in an attempt to arrive at a settlement amount and structure a long-term
repayment schedule. As of August 2000, the Port Authority has agreed not to take
any further action or monies pending negotiations with the Company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
This report contains forward-looking statements that involve a number of
risks and uncertainties. While these statements represent the company's current
judgement in the future direction of the business, such risks and uncertainties
could cause actual results to differ materially from any future performance
suggested herein. Certain factors that could cause results to differ materially
from those projected in the forward-looking statements include timing of orders
and shipments, market acceptance of products, ability to increase level of
production, impact of government requisitions, availability of capital to
finance growth and general economic conditions.
The following should be read in conjunction with the attached financial
statements and notes thereto of the Company.
RESULTS OF OPERATIONS
Three months ended June 30, 2000 versus three months ended June 30, 1999.
During the three months ended June 30,2000, the Company had $2,471,671 in
revenue compared to $1,108,495 in revenue during the corresponding prior year
period. The increase in revenue was the result of increase of rail car movement
and trucking operations. Expenses for the three months ending June 30, 2000 were
approximately $492,586 compared to approximately $834,466 for the corresponding
year. This decrease in expense is due in the most part of a decrease in wages,
personnel, and cost containment measures by management.
As of June 30, 2000 the Company had a working capital deficit of
approximately $4,365,548 compared to approximately ($5,147,857) at December 31,
1999. The decrease is due to the conversion of notes to common stock.
Six months ended June 30, 2000 versus six months ended June 30, 1999.
During the six months ending June 30, 2000, the company had $4,873,775 in
revenue compared to $1,300,304 in revenue during the corresponding prior year
period. The increase in revenue was the result of increase of rail car movement
and trucking operations. The Company had partial period trucking operating
revenues during the corresponding period last year.
Expenses for the six months ending June 30, 2000 were approximately
$815,384 compared to approximately $1,013,259 for the corresponding year. This
decrease in expense is due in the most part of a decrease in wages and
personnel.
The Company presently has no material commitments for capital expenditures.
<PAGE>
Part II:
Other Information
Item: 1. Legal Proceedings:
None
Item 2. Changes in Securities:
12,500 SHARES PREFERRED B RETIRED
500,000 SHARES PREFERRED C CONVERTED FROM NOTES
7,190,094 SHARES CONVERTED FROM NOTES
480,000 SHARES EXCHANGED FOR OSK
200,000 SHARE OPTIONS EXERCISED FOR LEGAL FEES @ .40 PER SHARE
1,475,947 SHARES RETURNED TO TREASURY
Item 3. Defaults Upon 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) Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
None
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: AUGUST 23,2000 /s/ W. Robert Bentley
---------------------
W. Robert Bentley, President
Date: AUGUST 23,2000 /s/ Joel Marcus
Joel Marcus, Chief Financial Officer
