<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 March 31, 1998 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
--------
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 April 27, 1998:
Number of Shares
Title of Each Class Outstanding
- ---------------------- ---------------
Common Stock, no par value 10,154,785
<PAGE>
CALPROP CORPORATION
PART I
ITEM I - FINANCIAL INFORMATION
Set forth is the unaudited quarterly report for the quarters ended
March 31, 1998 and 1997, 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)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Real estate development 29,757,498 26,325,978
Investment in land 2,975,982 2,975,982
------------- -------------
Total investment in real estate 32,733,480 29,301,960
Other assets:
Cash and cash equivalents 3,721,255 1,100,028
Prepaid expenses 11,574 23,149
Deferred and other assets 303,247 531,665
------------- -------------
Total other assets 4,036,076 1,654,842
------------- -------------
Total assets 36,769,556 30,956,802
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
CALPROP CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Trust deeds and notes payable 10,022,498 6,713,809
Related party notes 13,164,737 12,718,829
------------- -------------
Total trust deeds and notes payable 23,187,235 19,432,638
Community facilities district special tax bonds 2,336,544 2,336,544
Accounts payable and accrued liabilities 5,944,913 3,954,885
Warranty reserves 259,195 288,278
------------- -------------
Total liabilities 31,727,887 26,012,345
Minority interest (note 4) 2,472,583 2,187,847
Stockholders' equity:
Common stock, no par value
Authorized - 20,000,000 shares
Issued and outstanding - 10,154,785 and
9,304,785 shares at March 31, 1998 and
December 31, 1997, respectively 10,154,785 9,304,785
Additional paid-in capital 25,791,358 25,886,906
Deferred compensation (106,595) (106,595)
Notes receivable from common stock sale (note 3) (447,813) --
Accumulated deficit (32,822,649) (32,328,486)
------------- -------------
Total stockholders' equity 2,569,086 2,756,610
------------- -------------
Total liabilities and stockholders' equity 36,769,556 30,956,802
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
CALPROP CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1998 1997
------------- --------------
<S> <C> <C>
Development operations:
Real estate sales 2,805,786 5,144,495
Cost of real estate sales 2,888,289 5,143,288
------------- --------------
(Loss) income from development operations (82,503) 1,207
Other income 35,981 7,386
Other expenses:
General and administrative expenses 385,976 338,543
Interest expense 68,567 87,176
Investment property holding costs -- 75,600
------------- --------------
Total other expenses 454,543 501,319
Minority interests (note 4) (6,902) --
Net loss $(494,163) $(492,726)
------------- --------------
------------- --------------
Basic and diluted net loss per share (note 3) $(0.05) $(0.05)
------------- --------------
------------- --------------
</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
MARCH 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(494,163) $(492,726)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Minority interests (6,902) --
Depreciation and amortization 9,585 7,932
Provision for warranty reserves 17,000 47,389
Change in assets and liabilities:
Increase (decrease) in deferred and other assets 239,450 (21,874)
Increase in prepaid expenses 11,575 10,294
Increase in accounts payable and accrued liabilities
and warranty reserves 1,943,945 537,038
Additions to real estate development in process (6,319,809) (5,397,226)
Cost of real estate sales 2,888,289 5,143,288
-------------- --------------
Net cash used in operating activities (1,711,030) (165,885)
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures (20,617) (4,099)
-------------- --------------
Net cash used in investing activities (20,617) (4,099)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under construction loans-related parties 2,050,000 520,818
Payments under construction loans-related parties (1,604,092) (739,058)
Borrowings under construction loans 6,069,342 3,594,816
Payments under construction loans (2,760,653) (3,769,748)
Contributions from joint venture partner 291,638 287,980
Proceeds from issuance of common stock 306,639 --
-------------- --------------
Net cash provided by (used in) financing activities 4,352,874 (105,192)
-------------- --------------
Net increase (decrease) in cash and cash equivalents 2,621,227 (275,176)
Cash and cash equivalents at beginning of periods 1,100,028 1,224,780
-------------- --------------
Cash and cash equivalents at end of periods $3,721,255 $949,604
-------------- --------------
-------------- --------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for -
Interest (net of amount capitalized) 68,567 87,176
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Loans made to certain officers and a director for the purchase
of common shares upon exercise of stock options 447,813 --
</TABLE>
The accompanying notes are an integral
part of these financial statements.
6
<PAGE>
CALPROP CORPORATION
NOTES TO FINANCIAL STATEMENTS
PERIODS ENDED MARCH 31, 1998 AND 1997
(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 results of operations for the nine months ended March 31, 1998
may not be indicative of the operating results for the year ending
December 31, 1998.
Note 2: INCOME TAXES
As of March 31, 1998, the Company had net operating carryforwards for
federal and state tax purposes of approximately $16,000,000 and
$18,500,000, respectively. For federal and state tax purposes the
net operating carryforwards expire from 2007 through 2013, and from
1998 through 2007, respectively.
Note 3: NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted
net loss per share:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
---------------------------
<S> <C> <C>
Numerator for basic and diluted net
loss per share $(494,163) $(492,726)
---------------------------
---------------------------
Denominator for basic and diluted net loss per
share -- weighted-average shares 9,531,639 9,224,585
---------------------------
---------------------------
Basic and diluted net loss per share $(0.05) $(0.05)
---------------------------
---------------------------
</TABLE>
Options and warrants to purchase 789,000 and 1,269,250 shares of
common stock were outstanding during the three months ending March 31,
1998 and 1997, respectively, but were not included in the computation
of diluted net loss per common share because the effect would be
antidilutive due to the net loss in both periods.
7
<PAGE>
Note 3: NET INCOME PER SHARE (continued)
On February 20, 1998, an officer of the company exercised options to
purchase 130,000 shares of common stock with an exercise price of
$0.825 per share. The Company received $107,250 cash as a result of
the exercise of these options.
On March 10, 1998, three officers and a director of the Company
exercised options to purchase a total of 720,000 shares of common
stock with a weighted-average exercise price of $0.8989 per share.
The Company received $199,389 cash from an officer and received
$447,813 in notes receivable from the remaining two officers and the
director as a result of the exercise of these options. The notes
receivable are secured by 520,000 shares of the Companys common
stock, accrue interest at 4.987% and mature on March 10, 2001.
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, Montserrat Development Co.,
LLC ("MDC"), a joint-venture formed for the development of certain lots
in the Montserrat project, and Montserrat II, LLC, a joint-venture
formed for the development of 117 lots adjacent to Company's original
Montserrat project.
Calprop Corporation ("Calprop") 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. As of
December 31, 1997, RGC's ownership percentage in DMM was fifty percent.
Calprop is entitled to receive all profits from MDC as Calprop became
the sole owner of MDC during 1997.
Pursuant to the operating agreement of Montserrat II, LLC, losses are
allocated 100% first to Calprop until its capital account is zero,
then to PICal. Income is allocated first to reverse losses, then to
PICal to attain a return on its capital, then to the Calprop. As of
December 31, 1997, PICal's ownership interest in Montserrat II, LLC
was eight-four percent.
As a result of the consolidations, the Company has recorded minority
interest of $2,472,583 and $2,187,847 as of March 31, 1998 and
December 31, 1997, respectively.
Note 5: SUBSEQUENT EVENTS
In April of 1998 the Company become a majority shareholder of a newly
formed Colorado corporation, Colorado Pacific Homes, Inc. ("CPH").
CPH is owned eighty percent by the Company and twenty percent by the
President of CPH. Additionally, in April of 1998 CPH acquired the
Hunters Chase project, a 170 lot development in Thornton, Colorado.
8
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had remaining loan commitments
from financial institutions of approximately $9,500,000, 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 March of 1998, the Curci-Turner Company, a related party,
made a $500,000 loan commitment to the company for the development of 19 lots
in phase 3 of the Summertree Park project in Elk Grove, California. The loan
provides for interest at 12% and matures on June 19, 1998. As of March 31,
1998, the outstanding balance on the loan was $500,000.
As of March 31, 1998, the Company had seven projects in various
stages of development, with two producing revenues from completed homes:
Summertree Park and Montserrat. The remaining five projects, Cierra Del
Lago, Antares, Montserrat Estates, Mockingbird Canyon and Parkland Hills, are
in the initial stages of development. As of March 31, 1998, the Company
controlled 1,888 lots, of which, 977 were owned by the company and in various
stages of development, and 911 were in escrow. Of the 977 owned lots, the
Company had 19 homes completed (8 were in escrow, 2 were available for sale
and 9 were models not yet released for sale), 166 homes under construction
(136 were in escrow and 30 were available for sale), 275 lots under
development and 517 lots held for investment.
As of March 31, 1998, the Company had 144 units in escrow (backlog)
compared with a backlog of 50 units as of March 31, 1997. The gross revenues
of such backlog was $29,800,000 and $12,100,000 as of March 31, 1998 and
1997, respectively. The increase in backlog is a result of an increase in
the number of total units available for sale.
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 1998 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.
9
<PAGE>
RESULTS OF OPERATIONS
Net loss of $494,163 in the first quarter of 1998 was consistent
with a net loss of $492,726 in the first quarter of 1997.
Gross loss of $82,503 changed from a profit of $1,207 for the first
quarters of 1998 and 1997, respectively. The gross loss in 1998 is primarily
a result of marketing expenses incurred in the Montserrat Estates, Cierra Del
Lago and Antares projects. The Company anticipates selling its first homes
in these projects in the second quarter of 1998.
During the first quarters of the last two years, gross revenues
decreased to $2,805,786 in 1998 from $5,144,495 in 1997. In the first
quarter of 1998 the Company sold 17 homes with an average sales price of
$165,046, and in the first quarter of 1997 the Company sold 23 homes with an
average sales price of $223,674. The decrease in the number of sales and
gross revenue between the first quarter of 1998 and 1997 is primarily due to
an decrease in the number of completed units available for sale. The higher
average sales price in 1997 is due to the Company selling homes in its higher
priced Cypress Cove project during that period. The Cypress Cove project was
completely sold out during 1997.
10
<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)
May 14, 1998
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,721,255
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 32,733,480
<CURRENT-ASSETS> 4,036,076
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,769,556
<CURRENT-LIABILITIES> 6,204,108
<BONDS> 0
0
0
<COMMON> 10,154,785
<OTHER-SE> (7,585,699)
<TOTAL-LIABILITY-AND-EQUITY> 36,769,556
<SALES> 2,805,786
<TOTAL-REVENUES> 2,841,767
<CGS> 2,888,289
<TOTAL-COSTS> 2,888,289
<OTHER-EXPENSES> 454,543
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,567
<INCOME-PRETAX> (494,163)
<INCOME-TAX> 0
<INCOME-CONTINUING> (494,163)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (494,163)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
