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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: March 31, 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
(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 168,220,300 shares of the Registrant's Common Stock outstanding ad of
March 31, 2000
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INDEX
Part I: Financial Information
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheets - as of March 31, 2000 and
December 31, 1999....................................................3
Unaudited Consolidated Statements of Operations, Three Months Ended
March 31, 2000 and March 31, 1999....................................4
Unaudited Consolidated Statement of Cash Flows, Three Months Ended
March 31, 2000 and March 31, 1999....................................5
Notes to Consolidated Financial Statements.........................6-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..............12
Part II: Other Information..........................................13
Item 1. Legal Proceedings..........................................13
Item 2. Change in Securities.......................................13
Item 3. Defaults Upon Senior Securities............................13
Item 4. Submission of matters to a vote
of Security Holders...............................13
Item 5. Other Information..........................................13
Item 6. Exhibits and Reports on Form 8-K...........................13
Signatures...................................................................13
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NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
CONSOLIDATED BALANCE SHEET
ASSETS
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
CURRENT ASSETS:
Cash $ 126,807 $ 211,512
Accounts receivable -
trade, net of allowance
for doubtful accounts of $58,715 633,769 693,506
Other current assets 463,507 413,015
----------- ------------
TOTAL CURRENT ASSETS 1,224,083 1,318,033
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation and amortization 4,144,690 4,147,575
OTHER ASSETS 87,825 90,625
----------- ------------
$ 5,456,598 $ 5,556,233
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
and accrued expenses $ 2,768,319 $ 3,285,386
Notes payable and
current maturities of long term debt 2,179,271 2,615,927
Payroll and payroll taxes payable 665,151 564,577
----------- ------------
TOTAL CURRENT LIABILITIES 5,612,741 6,465,890
----------- ------------
LONG TERM DEBT, NET OF CURRENT MATURITIES 733,172 758,551
MINORTY INTEREST 301,604 276,750
STOCKHOLDERS' EQUITY:
Common stock, $ .0001 par value;
authorized 200,000,000 shares;
issued and outstanding 168,220,300 shares 16,822 16,096
Preferred stock series B convertible 1,250,000 1,250,000
Additional paid-in capital 9,456,282 8,518,890
Accumulated deficit (11,914,023) (11,729,944)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY (1,190,919) (1,944,958)
----------- ------------
$5,456,598 $ 5,556,233
============ ============
The accompanying notes are an integral part of
the financial statements.
3
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NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
----------------------------------
2000 1999
----------------------------------
(Unaudited) (Unaudited)
OPERATING REVENUES $ 2,402,104 $ 191,809
OPERATING EXPENSES 2,147,819 258,795
------------- -----------
INCOME (LOSS)
FROM OPERATIONS 254,285 (66,986)
------------- -----------
ADMINISTRAIVE EXPENSES 322,798 178,393
------------- -----------
LOSS FROM OPERATIONS (68,513) (245,379)
INTEREST EXPENSE (64,710) (23,031)
------------- -----------
NET LOSS BEFORE
MINORITY INTEREST (133,223) (268,410)
MINORITY INTEREST
IN INCOME OF SUBSIDIARY (50,856) (21,618)
------------- -----------
NET LOSS $ (184,079) $ (290,028)
============= ===========
LOSS PER COMMON SHARE
- BASIC AND DILUTED $ (0.001) $ (0.002)
============= ===========
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES 168,220,300 148,028,812
============= ===========
The accompanying notes are an integral part of
the financial statements.
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NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
----------------------------
2000 1999
----------------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (133,223) $(246,792)
--------- ---------
Adjustments to reconcile
net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization 78,550 94,000
Minority interest in subsidiary earnings 50,856 (21,618)
Changes in assets and liabilities:
Increase (decrease) in accounts receivable 59,737 (15,062)
Decrease in current assets (3,397) -
Increase in accounts payable (604,625) (94,749)
Decrease in accrued expenses 7,421 -
Decrease in payroll taxes payable 100,574 -
Increase in deferred rent (1,811) -
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(312,695) (37,429)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (445,918) (284,221)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (72,865) (4,877)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (72,865) (4,877)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long term debt (24,965) 134,495
Payments of convertible notes - other (286,000) -
Payments of convertible notes - related party (300,000) -
Proceeds from other current debt- related party 320,000 -
Payments of other current debt - other (170,656) -
Advances to affiliates - (63,754)
Proceeds from issuance of capital stock 895,700 212,550
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 434,079 283,291
--------- ---------
NET DECREASE IN CASH (84,704) (5,807)
CASH - BEGINNING OF PERIOD 211,511 8,291
--------- ---------
CASH - END OF PERIOD $ 126,807 $ 2,484
========= =========
The accompanying notes are an integral
part of the financial statements.
5
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NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE AND ORGANIZTION OF BUSINESS AND SUMMARY OF SIGNIFIGANT
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 March 31, 1999, the NYRR holds a 95%
interest in CH Proprietary, Inc. and a 90% 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 to 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.
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.
Principles Of Consolidation
The accompanying consolidated financial statements present the
combination of NYRR and the consolidated interests in CHP and NYCHRR,
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.
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Revenue Recognition
The Company recognizes revenue as earned on the date of
freight delivery to the cosignee 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 8).
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.
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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 March 31, 2000
consists of the following:
Marine transportation equipment and dock facilities $ 1,334,092
Railroad locomotive cars and equipment 215,205
Tract and related land improvements 1,210,498
Automobiles and other 256,165
Idle Property and equipment 1,450,000
==========
4,465,960
Less Accumulated depreciation and amortization 321,270
----------
$ 4,144,690
==========
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3. NOTES PAYABLE
Notes Payable $ 2,912,443
Current Portion Due 2,179,271
----------
$ 733,172
==========
Interest Expenses for the period March 31, 2000 amounted to: $ 64,760
Interest Expenses for the period March 31, 1999 amounted to: $ 23,031
4. LEASING ARRANGEMENT
NYCHRR leases, on a month-to-month basis, land and building
from the City of New York. Related rent expense was $6,600 for the
three months ended March 31, 2000.
5. PAYROLL TAXES PAYABLE
The liability for payroll taxes includes delinquent federal,
state and local taxes of $665,151 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. LEASE AND ASSET AGREEMENT
Pursuant to a Lease and Asset Agreement dated January 20, 1993
between Consolidated Rail Corporation ("Conrail"). CRC Properties,
Inc. ("CRCP") and New York Cross Harbor Railroad Terminal Corporation,
Conrail is leasing to NYCHRR for $1.00 certain all real property owned
by CRPC (and granted to Conrail under an operating easement). At the
same time, Conrail sold NYCHRR all of the operating assets located on
the aforementioned real property for $1.00. NYCHRR agrees to remove
these operating assets from real property should the original lease be
canceled or terminated. Based on current appraisals, the valuation of
such assets transferred to NYCHRR is summarized below.
Float Bridges $ 1,525,000
Marine mooring cells (seven) 420,000
Roadbed and tracks (including two bridges
and various other related assets) 985,000
Miscellaneous 93,500
----------
$ 3,023,500
==========
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Land Lease
As noted above, NYCHRR acquired a long-term lease on real
property, expiring January 2023, at a rate that is significantly below
market value (which is estimated to be approximately $12,500 per month,
or $4,500,000 over the entire term of the lease by management). The
transaction has been recorded at its net present value of $1,505,918
using a 9% discount rate to be recognized over the remaining 300 months
of the lease.
The $3,023,500 of transferred assets and the $1,505,918 value
of the favorable land lease were considered additional pain-in-capital.
7. 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 March 31, 2000 were
as follows:
Deferred tax asset $ 2,434,079
Less valuation allowance 2,434,079
----------
Net deferred tax asset $ -
==========
The Comoanues have net operating loss carryforwards of
approximately $6,600,000, which will expire in the years 1999 through
2013. there is no provision for income taxes for the period ended March
31, 2000 because of the availability of net operating loss
carryforwards.
8. CAPITAL STOCK
Number of Shares
Issued and
Authorized Outstanding Amount
---------- ----------- --------
Preferred 15,000 12,680 1,019,000
Common $.0001 par value 160,000,000 168,220,300 16,822
The company has amended its Articles of Incorporation to
increase the authorized common stock to 200,000,000
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9. PRIOR PERIOD ADJUSTMENTS
As a condition of the reverse merger between the Company and
Best Sellers, certain intangible assets were acquired. At the time of the
merger, these intangibles were valued at approximately four million dollars. It
was management's intent to sell these assets for value. The natures of these
assets were not in keeping with the Company's desire to expand the core business
(i.e. regional freight transportation). After several attempts to divest of
these assets, it became clear that said assets were materially overvalued.
Management has taken the position that these intangible assets should be deemed
of no value as of the date of the merger (March 1996). Therefore, opening
retained earnings of the consolidated entity has been restated to reflect thus
revaluation of asset value.
10. 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.
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ITEM 2. 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 MARCH 31, 2000 VERSUS THREE MONTHS ENDED MARCH 31,
1999.
DURING THE THREE MONTHS ENDED MARCH 31, 2000, THE COMPANY HAD
$2,402,104 IN REVENUE COMPARED TO $191,804 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 NO TRUCKING OPERATING
REVENUES DURING THE CORRESPONDING PERIOD LAST YEAR.
EXPENSES FOR THE THREE MONTHS ENDING MARCH 31, 2000 WERE APPROXIMATELY
$322,798 COMPARED TO APPROXIMATELY $ 178,393 FOR THE CORRESPONDING YEAR . THIS
INCREASE IN EXPENSE IS DUE IN THE MOST PART OF AN INCREASE IN WAGES AND
PERSONNEL.
AS OF MARCH 31, 2000 THE HAD A WORKING CAPITAL DEFICIT OF APPROXIMATELY
($4,388,658) COMPARED TO APPROXIMATELY ($5,147,857) AT DECEMBER 31, 1999. THE
DECREASE IS DUE TO THE CONVERSION OF NOTES TO COMMON STOCK.
THE COMPANY PRESENTLY HAS NO MATERIAL COMMITMENTS FOR CAPITAL
EXPENDITURES.
THE COMPANY IS CURRENTLY REVIEWING CERTAIN TRANSACTIONS BY FORMER
MANAGEMENT. THE BOARD HAS APPROVED AND THE COMPANY HAS ENLISTED THE AIDE OF
SPECIAL CORPORATE COUNCIL.
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Part II: Other Information
Item: 1. Legal Proceedings:
None
Item 2. Changes in Securities:
None
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 Filed herewith
Electronically
(b) Reports on Form 8-K:
None
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: May 30,2000 By:/s/ W. Robert Bentley
____________________________
W. Robert Bentley, President
Date: May 30,2000 By:/s/ Ira Levy
_________________________________
Ira Levy, Chief Financial Officer
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