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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: September 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
--------- ----------
(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 170,238,655 shares of the Registrant's Common Stock outstanding as of
September 30, 2000
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INDEX
Part I: Financial Information
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheet - as of September 30, 2000 2
Unaudited Consolidated Statements of Operations, Nine Months Ended
September 30, 2000 and September 30, 1999 and the three months
ending September 30, 2000 and September 30, 1999 3
Unaudited Consolidated Statement of Cash Flows, Nine Months Ended
September 30, 2000 and September 30, 1999 4
Notes to Consolidated Financial Statements 5-6
Item 2.
Management's Discussion and Analysis or
Plan of Operations 7-8
Part II:
Other Information 9
Item 1. Legal Proceedings 9
Item 2. Change in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of matters to a vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
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NEW YORK RAIL CORPORATION AND AFFILIATES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 87,255
Accounts receivable 847,308
Other current assets 108,742
-------------------
TOTAL CURRENT ASSETS 1,043,305
PROPERTY AND EQUIPMENT, net 4,358,438
OTHER ASSETS 87,011
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$ 5,488,754
===================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 3,282,207
Notes payable and current maturities of long term debt 1,972,693
Payroll and payroll taxes payable 745,088
-------------------
TOTAL CURRENT LIABILITIES 5,999,988
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LONG TERM DEBT, NET OF CURRENT MATURITIES 624,974
MINORTY INTEREST 487,324
STOCKHOLDERS' DEFICIIT:
Common stock, $ .0001 par value;
authorized 200,000,000 shares;
issued and outstanding 170,238,655 shares 17,024
Preferred stock series C convertible 500,000
Additional paid-in capital 15,283,912
Accumulated deficit (17,424,468)
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TOTAL STOCKHOLDERS' DEFICIT (1,623,532)
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$ 5,488,754
===================
The accompanying notes are an integral part of
the financial statements.
2
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NEW YORK RAIL CORPORATION AND AFFILIATES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------------------------- ---------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 1,907,424 $ 1,733,182 $ 6,781,199 $ 3,033,486
OPERATING EXPENSES 1,617,485 1,597,330 5,801,277 2,665,541
------------- ------------- ------------- ------------
INCOME FROM OPERATIONS 289,939 135,852 979,922 367,945
------------- ------------- ------------- ------------
ADMINISTRATIVE EXPENSES 102,760 111,523 918,144 1,124,782
------------- ------------- ------------- ------------
INCOME (LOSS) FROM
OPERATIONS 187,179 24,329 61,778 (756,837)
INTEREST EXPENSE (48,104) (53,395) (184,081) (160,288)
BENEFICIAL CONVERSION
FEATURE - (6,023,699) - (6,023,699)
------------- ------------- ------------- ------------
NET INCOME (LOSS) BEFORE
MINORITY INTEREST 139,075 (6,052,765) (122,303) (6,940,824)
MINORITY INTEREST IN
INCOME OF SUBSIDIARY (66,190) (22,160) (145,989) (63,479)
-------------- ------------- ------------- -------------
NET INCOME (LOSS) $ 72,885 $ (6,074,925) $ (268,292) $ (7,004,303)
============== ============= ============= =============
INCOME (LOSS PER COMMON
SHARE-BASIC AND DILUTED $ 0.00 $ (0.04) $ 0.00 $ (0.05)
============== ============= ============= =============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 161,500,000 151,284,460 161,500,000 151,284,460
============== ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the
financial statements.
3
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NEW YORK RAIL CORPORATION AND AFFILIATES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
--------------------------------
2000 1999
--------------------------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (268,292) $ (7,004,303)
------------ ------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 158,300 205,000
Amortization - 35,000
Minority interest in subsidiary earnings 145,989 80,629
Beneficial conversion feature - 6,023,699
Changes in assets and liabilities:
Increase in accounts receivable (206,064) (413,396)
Increase in prepaid expenses (18,000) -
(Increase) decrease in other current assets 21,273 (182,435)
Increase (decrease) in accounts payable (1,047,494) 309,792
Decrease in accrued expenses 361,787 228,477
Inrease (decrease) in payroll taxes payable 179,081 (341,469)
Increase in deferred rent 3,625 10,000
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(401,503) 5,955,297
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NET CASH USED IN OPERATING ACTIVITIES (669,795) (1,049,006)
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (386,827) (261,117)
Proceeds from sale of property and equipment 92,823 -
Increase in due to affiliates 20,000 -
Decrease in other assets 5,114 -
Increase in investment in subsidiary (18,000) -
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NET CASH USED IN INVESTING ACTIVITIES (286,890) (261,117)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 475,000 -
Long term debt 117,538 (73,544)
Convertible notes - other (232,896) 662,740
Convertible notes - related party (813,362) 654,532
Other current debt - related party - (73,414)
Other current debt (34,545) (50,000)
Proceeds from issuance of capital stock 2,079,833 198,889
Preferred stock (750,000) -
--------------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 841,568 1,319,203
--------------- ------------
NET DECREASE IN CASH (115,117) 9,080
CASH - BEGINNING OF PERIOD 202,372 8,291
--------------- ------------
CASH - END OF PERIOD $ 87,255 $ 17,371
=============== ============
The accompanying notes are an integral
part of the financial statements.
4
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
disclosures required for annual financial statements. These financial statements
should be read in conjunction with the consolidated financial statements and
related footnotes for the year ended December 31, 1999, included in the Form
10-KSB for the year then ended.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of September 30, 2000, and the results of operations and cash flows
for the nine-month period ending September 30, 2000 and 1999 have been included.
The results of operations for the nine - month period ended September 30, 2000
are not necessarily indicative of the results to be expected for the full year.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-KSB as filed with the
Securities and Exchange Commission for the year ended December 31, 1999.
2. CAPITAL STOCK
Number of Shares
Issued and
Authorized Outstanding Amount
Preferred C 500,000 500,000 500,000
Common $.0001 par value 200,000,000 170,238,655 17,024
The company has amended its Articles of Incorporation to increase the authorized
common stock to 200,000,000
a. Changes in Securities:
The Company issued 302,086 shares of its common stock in satisfaction
of bills for legal services in the amount of $63,480.
In July 2000, the Company issued to two un-related parties 25,000
shares each of the Company's common stock in settlement of additional
interest owed as a result of previous notes payable.
In satisfaction of $63,000 dollars of the Company's convertible notes
and the interest due thereon the Company issued 377,920 shares.
5
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3. LEGAL MATTERS AND OTHER CONTINGENCIES
In 1993 and again in 1995, the Port Authority of New York and
New Jersey ("PANYNJ") obtained judgments against NYCH or approximately $440,000.
The judgments 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 judgments. The Company has reflected the full amount of the judgment as a
current liability. In addition, statutory interest at a rate of 9% has been
accrued annually. Therefore the effect of recording these judgments is to
increase current liabilities and decrease stockholders' deficit by approximately
$658,000 (including accrued interest of ($218,000).
In January 2000, the PANYNJ enforced its judgments by placing
a lien on the Company's accounts receivables with Norfolk Southern ("NS"). In
February 2000 the Company and PANYNJ reached a temporary repayment agreement
whereby, NS would remit 20% of all accounts receivable due the Company to 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 $25,000 has been remitted to the PANYNJ in partial
satisfaction of the judgment. Management is currently negotiating with PANYNJ in
an attempt to arrive at a settlement amount and structure a long-term repayment
schedule.
In researching the judgment with the PA, we discovered that a
deal had previously been reached regarding this dispute, whereby NYCH (our
subsidiary), agreed not to contest the judgment. Along with other terms and
conditions, the PA agreed to settle the issue for $100,000. One of the reasons
for such a reduction was that the tugboat in question was not in the condition
agreed upon its charter. In continuing negotiations with the PA, they agreed
that the Cross Harbor Floating Operations were vital to the region, and
therefore the PA released the lien on a month-to-month basis. During fiscal year
2000 the company received 100 % of all revenues. Recently, upon further meetings
with the PA, they agreed to release the lien until further notice. They also
suggested that we submit to their Board for approval the benefits of our company
to interstate commerce for both NY & NJ. It was felt that a compelling argument
would greatly reduce, if not totally eliminate, the necessity for future
payments.
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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 judgment 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.
6
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RESULTS OF OPERATIONS
During the nine months ending September 30, 2000, the company
had $6,781,199 in revenue compared to $3,033,406 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 nine months ending September 30, 2000 were
$5,801,277 compared to $2,665,541 for the corresponding year. This increase in
expense is due to an increase in operations, wages, personnel and maintenance
costs.
The company presently has no material commitments for capital
expenditures.
The company is currently reviewing certain transactions by
former management. The has approved this action.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficit at September 30, 2000
was $4,956,683 compared to a deficiency of $5,147,857 at December 31, 1999. The
increase in working capital was primarily due to the conversion of approximately
$500,000 of convertible notes into shares of common and preferred stock. In
addition, the Company recognized profits from operations for the nine months
ended September 30, 2000 of $61,777 versus a loss from operations for the nine
months ended September 30, 1999 of $756,837.
The Company's dramatic improvement in operating income was due
to increased revenues and expense reductions at both JST and NYCH. Management
anticipates continued growth and increased profitability in both its rail/barge
and trucking operations. The acquisition of JST was a significant contributor
to the overall profits from operations. Management intends on acquiring the
remaining 49% of the outstanding shares of JST. The terms of the acquisition are
still under negotiation. Management anticipates completion of this transaction
in the near future.
Although during fiscal 2001 the Company expects that its
operations will begin to generate net income, the Company nevertheless
anticipates that it will suffer losses of approximately $100,000 until the
Company becomes profitable.
As of September 30, 2000 the Company had the following liabilities;
Accounts payable and accrued expenses $ 2,512,207
Notes payable and current maturities
of long-term debt 1,972,693
Accrued real estate taxes 770,000
Payroll taxes payable 745,088
7
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Accounts payable and accrued liabilities include $508,000 owed
for accrued interest on convertible notes and for accrued legal fees. A majority
of the legal fees are payable through options granted to the respective law
firms. The Company anticipates that most of the accrued interest and legal fees
will be satisfied through the exercise of said conversion features.
Accounts payable and accrued expenses include a perfected
judgement by the Port Authority of New York and New Jersey ("PANYNJ") in the
amount of approximately $440,000. The Company is currently negotiating with the
PANYNJ for a long-term payout. Management is confident such an agreement will be
reached in the near future.
Accounts payable and accrued expenses include $345,000 to a
former customer for advances and accrued tug boat charges. Management has been
negotiating a settlement in exchange for shares of common stock and anticipates
a resolution in the near future.
The notes payable are convertible in nature. The Company is
of the opinion that all or substantially all of these notes will be converted
into shares of the Company's commons tock.
Based upon discussions the Company has had with local taxing
authorities, the Company believes that its liability for real estate taxes can
be settled for approximately $150,000.
The Company is currently negotiating with the Internal Revenue
Service in an effort to settle all past payroll tax liabilities. At this point
in the negotiation, it is impossible for management to determine if the
liability can be settled for any amount less than the amount that has been
statutorily assessed to the Company. Said amount is reflected as a current
liability in the company's financial statement.
Based upon the foregoing, the Company's anticipated capital needs for the next
twelve months are as follows;
Operating Losses $100,000
Payment of trade payables and accrued liabilities $100,000
Repairs to Bush and Greenville terminals $100,000
Repairs to locomotives and car floats $100,000
Payroll taxes, real estate taxes, and
related interest and penalties $750,000
The Company does not have any available credit, bank financing
or other external sources of liquidity. Due to historical operating losses, the
Company's operations have not been a source of liquidity. Based upon recent
operating trends, Management feels that Company operations will be able to
contribute to the satisfaction of a portion of these obligations. In order to
fund its operating losses and satisfy aged liabilities, the Company intends on
warrant holders to exercise current outstanding warrants. In addition,
Management is currently negotiating with several federal and state government
agencies that oversee the awarding of transportation infrastructure grants of
which NYCHRR is qualified for.
Until such time as the Company becomes profitable, the
Company's continued operations will depend upon the availability of additional
funding. In order to obtain capital, the Company may need to sell additional
shares of its common stock or borrow funds from private lenders. There can be no
assurance that the Company will be able to obtain additional funding, if needed,
or, if available, on terms satisfactory to the Company. There can be no
assurance that the Company will be able to generate sufficient revenues and
become profitable.
8
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Part II: Other Information
Item: 1. Legal Proceedings:
Fraser, McIntyre and Spartz v NYCH. Supreme Court of the State
of New York, County of Kings, Index no. 45966/99 action commenced November 23,
1999. This is a recently filed lawsuit by three individuals alleging ownership
in NYCH. One of the individuals, Stephen H. Fraser is a shareholder of NYCH. The
other two individuals sold their interest to Robert R. Crawford in or about
1993. These two individuals claim that they were not paid by Crawford. They
allege that NYCH has guaranteed the performance of Mr. Crawford. Because of the
recent nature of this lawsuit we have not conducted an extensive review of this
matter and at this time cannot comment on the viability of the allegation.
Murphy, Marseilles, Smith & Nammack, Inc. Chapter 7 Case No. 98 B
42104 (SMB)Richard E. O'Connell v NYRR Adversary Proceeding No. 00-02413. This
is an action brought by the trustee for the Murphy, Marseilles, Smith & Nammack,
Inc. Estate. The trustee claims that Murphy, Marseilles, Smith & Nammack, Inc.
made a loan to Best Sellers in the amount of $50,000. The Trustee has produced a
copy of a Note dated April 11, 1996. NYRR has no record of having ever received
the money nor did Best Sellers disclose this obligation in the merger documents.
Further, we have been informed that a certification was executed by Martin Weber
whereby he affirms that Best Sellers never authorized the note nor did the
Company receive the proceeds. We are attempting to locate this document. The
Company is currently assessing the merits of the claim and has consulted
counsel.
Item 2. Changes in Securities:
a. The Company issued 302,086 shares of its common stock in satisfaction of
bills for legal services in the amount of $63,480.
b. In July 2000, the Company issued to two un-related parties 25,000 shares each
of the Company's common stock in settlement of additional interest owed
as aresult of previous notes payable.
c. In satisfaction of $63,000 dollars of the Company's convertible notes and the
interest due thereon the Company issued 377,920 shares.
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
None
9
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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: November 14, 2000 /s/RONALD W. BRIDGES
____________________________
RONALD W. BRIDGES, PRESIDENT
Date: November 14, 2000
/s/JOEL MARCUS
_____________________________________
JOEL MARCUS , CHIEF FINANCIAL OFFICER
10
