<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, 1999 or
--------------
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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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 April 11, 1999:
Number of Shares
Title of Each Class Outstanding
- -------------------------- ------------------------
Common Stock, no par value 10,274,935
<PAGE>
CALPROP CORPORATION
PART I
ITEM I - FINANCIAL INFORMATION
Set forth is the unaudited quarterly report for the quarters ended
March 31, 1999 and 1998, for Calprop Corporation. The information set forth
reflects all adjustments which were, in the opinion of management, necessary for
a fair presentation.
2
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CALPROP CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(Unaudited) 1998
----------------- -----------------
<S> <C> <C>
Real estate development $72,266,868 $65,282,197
Other assets:
Cash and cash equivalents 1,212,285 1,590,403
Prepaid expenses 75,378 88,775
Deferred tax asset 4,800,000 4,800,000
Other assets 664,836 760,514
----------------- -----------------
Total other assets 6,752,499 7,239,692
----------------- -----------------
Total assets $79,019,367 $72,521,889
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
CALPROP CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(Unaudited) 1998
----------------- -----------------
<S> <C> <C>
Trust deeds and notes payable $43,723,942 $37,524,507
Related party notes 21,838,291 20,870,286
----------------- -----------------
Total trust deeds and notes payable 65,562,233 58,394,793
Accounts payable and accrued liabilities 3,961,171 5,056,010
Warranty reserves 321,028 284,624
----------------- -----------------
Total liabilities 69,844,432 63,735,427
Minority interest (note 4) 392,828 326,941
Stockholders' equity:
Common stock, no par value
Authorized - 20,000,000 shares
Issued and outstanding - 10,274,935 and
10,284,135 shares at March 31, 1999 and
December 31, 1998, respectively 10,274,935 10,284,135
Additional paid-in capital 25,851,130 25,851,130
Deferred compensation (231,930) (241,130)
Stock purchase loans (479,741) (474,134)
Accumulated deficit (26,632,287) (26,960,480)
----------------- -----------------
Total stockholders' equity 8,782,107 8,459,521
----------------- -----------------
Total liabilities and stockholders' equity $79,019,367 $72,521,889
----------------- -----------------
----------------- -----------------
</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,
---------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Development operations:
Real estate sales $7,782,859 $2,805,786
Cost of real estate sales 7,046,406 2,888,289
--------------- ---------------
Income (loss) from development operations 736,453 (82,503)
Other income 25,203 35,981
Other expenses:
General and administrative expenses 359,560 385,976
Interest expense 8,016 68,567
--------------- ---------------
Total other expenses 367,576 454,543
Minority interests (note 4) 65,887 (6,902)
Income (loss) before benefit for income taxes 328,193 (494,163)
--------------- ---------------
Net income (loss) $328,193 ($494,163)
--------------- ---------------
--------------- ---------------
Basic and diluted net income (loss) per share (note 3) $0.03 ($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,
------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $328,193 $(494,163)
Adjustments to reconcile net income (loss) to net cash
used in provided by operating activities:
Minority interests 65,887 (6,902)
Depreciation and amortization 13,762 9,585
Provision for warranty reserves 66,006 17,000
Change in assets and liabilities:
Decrease in other assets 95,682 239,450
Decrease in prepaid expenses 13,397 11,575
(Decrease) increase in accounts payable and (1,124,441) 1,943,945
accruedliabilities and warranty reserves
Additions to real estate development in process (14,031,077) (6,319,809)
Cost of real estate sales 7,046,406 2,888,289
--------------- --------------
Net cash used in provided by operating activities (7,526,185) (1,711,030)
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures (13,766) (20,617)
--------------- --------------
Net cash used in investing activities (13,766) (20,617)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under construction loans-related parties 1,595,119 2,050,000
Payments under construction loans-related parties (627,114) (1,604,092)
Borrowings under construction loans 12,405,592 6,069,342
Payments under construction loans (6,206,157) (2,760,653)
Contributions from joint venture partner -- 291,638
Proceeds from issuance of common stock -- 306,639
Accrue interest for executive stock purchase loans (5,607) --
--------------- --------------
Net cash provided by financing activities 7,161,833 4,352,874
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Net (decrease) increase in cash and cash equivalents (378,118) 2,621,227
Cash and cash equivalents at beginning of periods 1,590,403 1,100,028
--------------- --------------
Cash and cash equivalents at end of periods 1,212,285 3,721,255
--------------- --------------
--------------- --------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for -
Interest (net of amount capitalized) 8,016 68,567
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Receipt of executive loan from issuance of shares -- 447,813
</TABLE>
The accompanying notes are an integral
part of these financial statements
6
<PAGE>
CALPROP CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED MARCH 31, 1999 AND 1998
(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 three months ended March 31, 1999 may
not be indicative of the operating results for the year ending December
31, 1999.
Note 2: INCOME TAXES
At March 31, 1999, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $24,700,000 and
$14,500,000, respectively. For federal and state tax purposes the net
operating loss carryforwards expire from 2007 through 2019, and from
1999 through 2003, respectively.
Note 3: NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income
(loss) per share:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1999 1998
----------------------------
<S> <C> <C>
Numerator for basic and diluted net income
(loss) per share $328,193 $(494,163)
----------------------------
----------------------------
Denominator for basic net income (loss) per share 10,281,447 9,531,639
Effect of dilutive stock options 301,298 --
----------------------------
Denominator for dilutive net income (loss) per share 10,582,745 9,531,639
(weighted average outstanding shares)
----------------------------
----------------------------
Basic net income (loss) per share $0.03 $(0.05)
----------------------------
----------------------------
Diluted net income per share $0.03 $(0.05)
----------------------------
----------------------------
</TABLE>
7
<PAGE>
Options and warrants to purchase 859,250 and 789,000 shares of common
stock were outstanding as of March 31, 1999 and 1998, respectively. For
the three months ended March 31, 1998, options and warrants were not
included in the computation of diluted net loss per common share
because the effect would be antidilutive due to the net loss. However,
for the three months ended March 31, 1999, 320,650 options and warrants
were not included in the computation of diluted net income because
their exercise prices were higher than the average market price per
share of common stock.
Note 4: MINORITY INTEREST
The Company has consolidated the financial statements of Colorado
Pacific Homes, Inc. ("CPH"), a corporation formed for the purpose of
developing real estate in the state of Colorado; DMM Development, LLC
("DMM"), a joint-venture formed for the development of the Cierra del
Lago and Antares projects; Montserrat II, LLC ("Mont II"), a
joint-venture formed for the development of 119 lots adjacent to the
Company's original Montserrat project; Parkland Farms Development Co.,
LLC ("Parkland"), a joint-venture formed for the development of 115
lots in Healdsburg, California; and RGCCLPO Development Co., LLC
("RGCCLPO"), a joint venture formed for the development of 382 lots in
Milpitas, California.
Colorado Pacific Homes, Inc. is owned eighty percent by Calprop
Corporation ("Calprop") and twenty percent by the President of CPH.
Calprop is entitled to receive two-thirds of the profits of DMM, and
the other member, RGC Courthomes, Inc. ("RGC"), is entitled to receive
the remaining one-third of the profits. As of March 31, 1999, RGC's
ownership percentage in DMM was fifty percent.
Pursuant to the operating agreement of Montserrat II, LLC, Calprop is
entitled to receive ninety nine percent of the profits of Montserrat
II, LLC, and the other member, an officer of the Company, is entitled
to receive the remaining one percent of the profits. As of March 31,
1999, the officer of the Company's ownership percentage is Montserrat
II, LLC was one percent.
Pursuant to the operating agreement of Parkland Farms Development Co.,
LLC, Calprop is entitled to receive ninety nine percent of profits of
Parkland, and the other member, an officer of the Company, is entitled
to receive the remaining one percent of the profits. As of March 31,
1999, the officer of the Company's ownership percentage in Parkland was
one percent.
Calprop is entitled to receive fifty percent of the profits of RGCCPLO,
and the other member, RGC, is entitled to receive the remaining fifty
percent of the profits. As of March 31, 1999, RGC's ownership
percentage in RGCCPLO was fifty percent.
As a result of the consolidations, the Company has recorded minority
interest of $392,828 and $326,941 as of March 31, 1999 and December 31,
1999, respectively.
8
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the Company had remaining loan commitments from
financial institutions of approximately $17,950,000, 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.
As of March 31, 1999, the Company had ten residential housing projects
in various stages of development, with three producing revenues from completed
homes: Summertree Park, Montserrat Estates, and Antares. The remaining seven
projects, Mockingbird Canyon, Parkland Farms, Parc Metropolitan, Parcwest
Apartments, High Ridge Court, Saddlerock, and Templeton Heights, are in the
initial stages of development. As of March 31, 1999, the Company controlled
1,438 lots, of which, 1,081 were owned by the company and in various stages of
development, and 357 were in escrow to be purchased by the Company. Of the 1,081
owned lots, the Company had 24 homes completed (all consisting of models not yet
released for sale), 176 homes under construction (145 were in escrow and 31 were
available for sale), and 881 lots under development.
The increase in real estate development from $65,282,197 to $72,266,868
and trust deeds and notes payable from $37,524,507 to $43,723,942 as of December
31, 1998 and March 31, 1999, respectively, was due to the increase construction
activity of the Company's projects started in 1998. The projects consist of Parc
Metropolitan, High Ridge Court, Saddlerock, and Parkland Farms.
As of March 31, 1999, the Company had 145 units in escrow ("backlog")
compared with a backlog of 144 units as of March 31, 1998. The gross revenues of
such backlog was $32,750,000 and $29,800,000 as of March 31, 1999 and 1998,
respectively. The increase in backlog is a result of both a shift in product mix
offered and price increases of 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 1999 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.
YEAR 2000 READINESS
The Company utilizes computer technologies throughout its business to
effectively carry out its day to day operations. Similar to most companies, the
Company must determine whether its systems are capable of recognizing and
processing date sensitive information properly as the year 2000 approaches. The
Company has reviewed each of its systems and programs and has determined that it
is Year 2000 compliant. No material costs have been or will be incurred related
to the Year 2000 compliance issue.
The Company has initiated evaluation of its significant suppliers,
customers, and critical business partners to determine the extent to which the
Company may be vulnerable in the event that those parties fail to properly
remediate their own year 2000 issues. The Company will develop appropriate
contingency plans in the event that a significant exposure is identified
relative to the dependencies on third-party systems. While the Company is not
presently aware of any such significant exposure, there can be no guarantee that
the systems of third-parties on which the Company relies will be converted in a
timely manner, or that a failure to properly convert by another company would
not have a material adverse effect on the Company.
9
<PAGE>
RESULTS OF OPERATIONS
Income of $328,193 changed from a loss of $494,163 for the first
quarters of 1999 and 1998, respectively. The change for the noted period is a
result of an increase in profit from operations as the Company began selling
homes in its Antares and Montserrat Estates projects.
Income from development operations of $736,453 changed from a loss from
development operations of $82,503 in the first quarters of 1999 and 1998,
respectively. The increase in gross profit for the noted period is a result of
the Company beginning to sell homes in its Antares and Montserrat Estates
projects with higher gross profit percentages.
Gross revenues increased to $7,782,859 in the first quarter of 1999
from $2,805,786 in the first quarter of 1998. In the first quarter of 1999 the
Company sold 33 homes with an average sales price of $235,900, and in the first
quarter of 1998 the Company sold 17 homes with an average sales price of
$165,000. The higher average sales prices in 1999 is due to the strength and
stability of the economy. Starting in 1998 the real estate market has
experienced increases in sale price and the number of home buyers reflecting
higher revenues for the Company.
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
27 Financial data schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K dated March 31, 1999 was filed
with the Securities and Exchange Commission (the "Commission") and included
under item 7(a) its audited consolidated financial statements for the year ended
December 31, 1998 and unaudited consolidated financial statements for the
quarter ended December 31, 1998, and under item 7(c) a press release announcing
Calprop Corporations' 1999 annual and fourth quarter results.
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)
April 30, 1999
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-30-1999
<CASH> 1,212,285
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 79,019,367
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,019,367
<CURRENT-LIABILITIES> 69,844,432
<BONDS> 0
0
0
<COMMON> 10,274,935
<OTHER-SE> (1,492,828)
<TOTAL-LIABILITY-AND-EQUITY> 79,019,367
<SALES> 7,782,859
<TOTAL-REVENUES> 0
<CGS> 7,046,406
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 367,576
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,016
<INCOME-PRETAX> 328,193
<INCOME-TAX> 0
<INCOME-CONTINUING> 328,193
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 328,193
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
