<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997 or
-------------------------------------
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------------- ------------------
Commission File Number 1-6844
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CALPROP CORPORATION
(Exact name of registrant as specified in its charter)
California 95-4044835
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13160 Mindanao Way, Suite 180, Marina Del Rey, California 90292
- --------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (310) 306-4314
------------------
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (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 X NO
--- ---
Number of shares outstanding of each of Registrant's classes of common stock, as
of October 20,1997:
Number of Shares
Title of Each Class Outstanding
- ------------------- ----------------
Common Stock, no par value 9,304,785
<PAGE>
CALPROP CORPORATION
PART I
ITEM I - FINANCIAL INFORMATION
Set forth is the unaudited quarterly report for the quarters ended
September 30, 1997 and 1996, for Calprop Corporation. The information set forth
reflects all adjustments which were, in the opinion of management, necessary for
a fair presentation.
2
<PAGE>
CALPROP CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
September 30, December 31,
1997 1996
------------- ------------
Real estate development (notes 1 and 5) 21,056,258 21,908,164
Investment in land (notes 1 and 5) 2,979,658 4,037,187
---------- ----------
Total investment in real estate 24,035,916 25,945,351
Other assets:
Cash and cash equivalents 3,465,537 1,224,780
Prepaid expenses 34,723 29,587
Deferred and other assets 338,334 333,660
---------- ----------
Total other assets 3,838,594 1,588,027
---------- ----------
Total assets 27,874,510 27,533,378
---------- ----------
---------- ----------
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
CALPROP CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
September 30, December 31,
1997 1996
------------- ------------
Trust deeds and notes payable 5,973,695 5,011,866
Related party notes 12,948,879 12,528,550
----------- -----------
Total trust deeds and notes payable 18,922,574 17,540,416
Community facilities district special tax bonds 2,336,544 2,336,544
Accounts payable and accrued liabilities 3,343,952 3,025,783
Warranty reserves 236,543 261,401
----------- -----------
Total liabilities 24,839,613 23,164,144
Minority interest (note 4) 10,883 10,000
Stockholders' equity:
Common stock, no par value
Authorized - 20,000,000 shares
Issued and outstanding - 9,222,785 and
9,224,585 shares at September 30, 1997 and
December 31, 1996, respectively 9,222,785 9,224,585
Additional paid-in capital 25,912,531 25,911,579
Deferred compensation (67,807) (68,655)
Accumulated deficit (32,043,495) (30,708,275)
----------- -----------
Total stockholders' equity 3,024,014 4,359,234
----------- -----------
Total liabilities and stockholders' equity 27,874,510 27,533,378
----------- -----------
----------- -----------
The accompanying notes are an integral
part of these financial statements.
4
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CALPROP CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Development operations:
Real estate sales 5,114,792 2,626,505 19,345,274 7,020,876
Cost of real estate sales 5,082,721 2,711,160 19,279,534 7,248,129
----------- ----------- ------------ -----------
32,071 (84,655) 65,740 (227,253)
Recognition of impairment of real estate under
development and land held for investment (note 1) -- (4,326,848) -- (4,326,848)
----------- ----------- ------------ -----------
Income (loss) from development operations 32,071 (4,411,503) 65,740 (4,554,101)
Other income 27,080 29,334 62,412 40,406
Other expenses:
General and administrative expenses 222,040 326,253 1,025,882 1,641,798
Interest expense 122,677 217,854 250,769 217,854
Investment property holding costs 34,638 75,600 185,838 229,759
----------- ----------- ------------ -----------
Total other expenses 379,355 619,707 1,462,489 2,089,411
----------- ----------- ------------ -----------
Minority interests (note 4) 5,140 -- 883 --
Net loss $ (325,344) $(5,001,876) $ (1,335,220) $(6,603,106)
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Net loss per share (note 3) $(0.04) $(0.54) $(0.14) $(1.01)
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
<PAGE>
CALPROP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<C> <S> <S> <S> <S>
Net loss $ (325,344) $(5,001,876) (1,335,220) (6,603,106)
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Minority interests 5,140 -- 883 --
Depreciation and amortization 8,235 7,875 24,266 20,952
Recognition of impairment of real estate under
development and land held for investment -- 4,326,848 -- 4,326,848
Provision for warranty reserves 43,316 75,578 175,469 182,087
Change in assets and liabilities:
Increase in deferred and other assets (17,351) (9,532) (19,854) (49,844)
Increase in investments in land -- (2,580) -- (4,453)
(Increase) decrease in prepaid expenses (34,723) (80,985) (5,136) 248,329
(Decrease) increase in accounts payable and accrued
liabilities and warranty reserves (327,755) (847,235) 117,842 39,506
Additions to real estate development in process (5,698,077) (3,563,752) (17,370,099) (9,534,298)
Cost of real estate sales 5,082,721 2,711,160 19,279,534 7,248,129
----------- ----------- ------------ -----------
Net cash (used in) provided by operating
activities (1,263,838) (2,384,499) 867,685 (4,125,850)
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures (866) -- (9,086) (73,875)
----------- ----------- ------------ -----------
Net cash used in investing activities (866) -- (9,086) (73,875)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under construction loans-related parties 2,000,000 2,270,029 6,628,078 4,185,029
Payments under construction loans-related parties (500,998) (1,077,241) (6,087,749) (2,698,041)
Borrowings under construction loans 3,582,534 2,638,846 10,497,656 6,811,648
Payments under construction loans (2,204,201) (1,184,088) (9,535,827) (3,183,657)
Contributions from joint venture partner -- -- 287,980 --
Distribution to joint venture partner (120,000) -- (407,980) --
Payments of preferred stock dividends -- (77,351) -- (77,351)
Redemption of convertible preferred stock -- -- -- (242,116)
----------- ----------- ------------ -----------
Net cash provided by financing activities 2,757,335 2,570,195 1,382,158 4,795,512
----------- ----------- ------------ -----------
Net increase in cash and cash equivalents 1,492,631 185,696 2,240,757 595,787
Cash and cash equivalents at beginning of periods 1,972,906 1,168,415 1,224,780 758,324
----------- ----------- ------------ -----------
Cash and cash equivalents at end of periods $ 3,465,537 $ 1,354,111 $ 3,465,537 $ 1,354,111
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
The accompanying notes are an integral
part of these financial statements
6
<PAGE>
CALPROP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for -
Interest (net of amount capitalized) 122,677 213,398 250,769 217,854
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrual of preferred dividend -- -- -- 202,247
Conversion of preferred stock to common stock -- -- -- 4,329,235
Conversion of accrued preferred dividends to notes payable -- -- -- 1,054,158
Exchange of loan from related party to minority interest -- -- 120,000 --
Exchange of real estate under development and loan payable
for fifty percent interest in a joint venture 2,000,000 -- 2,000,000 --
</TABLE>
The accompanying notes are an integral
part of these financial statements
7
<PAGE>
CALPROP CORPORATION
NOTES TO FINANCIAL STATEMENTS
PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
Note 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The unaudited, condensed, financial statements included herein have
been prepared by the registrant pursuant to the instructions to Quarterly Report
on Form 10-Q required to be filed with the Securities and Exchange Commission
and do not include all information and footnote disclosure required by generally
accepted accounting principles. The accompanying financial statements have not
been examined by independent accountants in accordance with generally accepted
auditing standards, but in the opinion of management, such financial statements
include all adjustments, consisting only of normal recurring adjustments
necessary to summarize fairly the Company's financial position and results of
operations. The condensed financial statements should be read in conjunction
with the financial statements and the notes thereto included in the registrant's
latest Annual Report on Form 10-K, particularly with regard to disclosures
relating to major accounting policies.
The Company regularly reviews the carrying value of its real estate
developments for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. If
the sum of the expected future cash flows is less than the carrying amount of
the asset, the Company recognizes an impairment loss. During the third
quarter of 1996, the Company recorded an impairment loss associated with the
Victorville property, which was included as land held for investment, of
$1,626,198. In addition, the Company recorded an impairment loss on its
Pleasant Oaks Estates project and the Summertree Park, Elk Grove project of
$925,545 and $1,775,105, respectively.
The results of operations for the nine months ended September 30, 1997
may not be indicative of the operating results for the year ending December 31,
1997.
Note 2: INCOME TAXES
As of September 30, 1997, the Company had net operating carryforwards
for federal and state tax purposes of approximately $13,100,000 and $16,800,000,
respectively. For federal and state tax purposes the net operating
carryforwards expire from 2007 through 2011, and from 1998 through 2007,
respectively.
8
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Note 3: NET INCOME PER SHARE
Net income per share has been computed based upon the weighted average
number of shares outstanding.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Weighted average number of common
shares and common stock equivalents
adjusted for stock dividends 9,222,785 9,228,265 9,223,761 6,716,053
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Net loss $ (325,344) $(5,001,876) $(1,335,220) $(6,603,106)
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Loss per share (after giving effect
of preferred stock dividend in 1996): $(0.04) $(0.54) $(0.14) $(1.01)
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
Note 4: MINORITY INTEREST
The Company has consolidated the financial statements of DMM
Development, LLC ("DMM"), a joint-venture formed for the development of the
Cierra del Lago and Antares projects, and Montserrat Development Co., LLC
("MDC"), a joint-venture formed for the development of certain lots in the
Montserrat project. Calprop Corporation is entitled to receive two-thirds of
the profits of DMM, and the other owner, RGC Courthomes, Inc. ("RGC"), is
entitled to receive the remaining one-third of the profits. On February 10,
1997, the Company and an officer of the Company formed MDC. As part of the
formation, the Company contributed 24 partially developed lots of its
Montserrat project, in Murrieta, California, for a basis of $550,000, and the
officer exchanged a $120,000 note due from the Company for a basis of
$120,000. Ninety-nine percent of the profits or losses from the development
of the 24 lots is to be received by Calprop Corporation, and the remaining 1
percent of the profits or losses is to be received by the officer. In July
of 1997, the Company contributed an additional 29 partially developed lots to
MDC to facilitate construction financing and based on the Company's agreement
with the officer, the Company is to receive one hundred percent of the
profits or losses from the development of these additional lots. During the
third quarter of 1997, all of the initial 24 lots were sold, the officer was
paid his equity and his share of the profits, and the Company became the sole
owner of MDC. As of September 30, 1997, RGC's ownership percentage in DMM
was fifty percent. As a result of the consolidations, the Company has
recorded minority interest of $10,883 and $10,000 as of September 30, 1997,
and December 31, 1996, respectively.
Note 5: INVESTMENT IN LAND
During the third quarter of 1997, the Company transferred $1,057,529,
the value of the Mockingbird Canyon property in Riverside County, California,
from Investment in Land to Real Estate Under Development because development
activities commenced in the project.
9
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's sales revenue during the third quarters of the last two
years increased from $2,626,505 in 1996 to $5,114,792 in 1997. During the
first nine months of the last two years, sales revenues increased from
$7,020,876 in 1996 to $19,345,274 in 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had remaining loan commitments
from financial institutions of approximately $2,300,000, which may be drawn
down by the Company upon the satisfaction of certain conditions. The Company
continues to seek joint venture partners and additional financing to fund its
operations.
During September of 1997, the Curci-Turner Company, a related party,
made a $2,025,000 loan commitment to the company for the purchase, which
occurred in October of 1997, of 115 entitled lots in Healdsburg, California.
The loan provides for interest at 12% and provides that the Curci-Turner
Company receive 50% of "Net Proceeds" as defined in the agreement, which is
comparable to gross profit. All principal and interest is due no later than
October 1, 2000. As of September 30, 1997, the outstanding balance on the
loan was $2,000,000.
During July of 1997, Imperial Bank made a $4,226,170 construction loan
to the Company for the construction of 24 units in the Montserrat project in
Murrieta, California. The note provides for interest at the prime rate plus
1.25% and a loan service charge of 1.25 points. The loan provides for
paydowns with each closing, however, all principal and interest is due no
later than July 23, 1998. As of September 30, 1997, the outstanding
balance on the loan was $1,730,404.
As of September 30, 1997, the Company had nine projects in various
stages of development with two producing revenues from completed homes:
Summertree Park and Montserrat. Additionally, during the third quarter of
1997, the Company sold the final home in the Cypress Cove project. The
remaining four projects, Cierra del Lago, Antares, Montserrat Estates and
Mockingbird Canyon, were in the initial stages of development. As of
September 30 , 1997, the Company controlled 1,244 lots, of which, 944 were
owned by the company and in various stages of development, and 300 were in
escrow. Of the 944 owned lots, the Company had 27 homes completed (6 were in
escrow, 14 were available for sale and 7 were models not yet released for
sale), 65 homes under construction (30 were in escrow and 35 were available
for sale), 304 improved lots and 548 unimproved entitled lots.
The Company believes that, based on agreements with its existing
institutional lenders and the Curci-Turner Company, it will have sufficient
liquidity to finance its construction projects in 1997 through funds
generated from operations and funds available under its existing loan
commitments. In addition, the Company believes that if necessary, additional
funds could be obtained by using its unencumbered real estate developments as
collateral for additional loans.
RESULTS OF OPERATIONS
Net loss decreased from $5,001,876 in the third quarter of 1996 to
$325,344 in the third quarter of 1997. Net loss for the first nine months
decreased from $6,603,106 in 1996 to $1,335,220 in 1997. The decrease in net
loss for the three month and the nine month periods is primarily due to the
write down of real estate under development and land held for investment of
$4,326,848 in the third quarter of 1996.
10
<PAGE>
Gross profit/loss changed from a loss of $84,655 for the third quarter
of 1996 to a profit of $32,071 for the third quarter of 1997. For the nine
month period ended September 30, gross profit/loss changed from loss of
$227,253 in 1996 to a profit of $65,740 in 1997. The change in gross profit
in both periods is primarily a result of an increase in total revenue.
During the third quarters of the last two years, gross revenues
increased from $2,626,505 in 1996 to $5,114,792 in 1997. During the first
nine months of the year, gross revenues increased from $7,020,876 in 1996 to
$19,345,274 in 1997. In the third quarter of 1996 the Company sold 14 homes
with average sales prices of $187,608, and in the third quarter of 1997 the
Company sold 24 homes with an average sales price of $213,116. In the first
nine months of 1996 and 1997, the Company sold 36 and 84 homes, respectively,
with average sales prices of $195,024 and $230,301, respectively. The
increase in the number of sales and gross revenue between the first nine
months of 1996 and 1997, is primarily due to an increase in available units
for sale. The increase in average sales price from the first nine months of
1996 to the first nine months of 1997 is mainly a result of an increase in
the number of homes sold in the Cypress Cove project as these homes have
higher sales prices than those of the Company's other projects.
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
27 Financial data schedule
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.
CALPROP CORPORATION
By: /s/ Mark F. Spiro
----------------------------------
Mark F. Spiro
Vice President/Secretary/Treasurer
(Chief Financial and Accounting Officer)
November 13, 1997
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,465,537
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 24,035,916
<CURRENT-ASSETS> 3,838,594
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,874,510
<CURRENT-LIABILITIES> 3,580,495
<BONDS> 0
0
0
<COMMON> 9,222,785
<OTHER-SE> (6,198,771)
<TOTAL-LIABILITY-AND-EQUITY> 27,874,510
<SALES> 19,345,274
<TOTAL-REVENUES> 19,407,686
<CGS> 19,279,534
<TOTAL-COSTS> 19,279,534
<OTHER-EXPENSES> 1,462,489
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 250,769
<INCOME-PRETAX> (1,335,220)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,335,220)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,335,220)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> 0
</TABLE>
