<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 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 __________
Commission File Number 0-4179
CAPITAL INVESTMENT OF HAWAII, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Hawaii 99-0065664
- ------------------------------ ------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 1700, Makai Tower, 733 Bishop Street
Honolulu, Hawaii 96813
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (808) 537-3981
No Change
- -------------------------------------------------------------------------------
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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
There were 1,032,692 shares outstanding of common stock, no par value,
as of October 31, 1999.
<PAGE> 2
PART I - FINANCIAL INFORMATION
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
October 31, 1999 and July 31, 1999
ASSETS
<TABLE>
<CAPTION>
October 31, July 31,
1999 1999
(Unaudited)
----------- -----------
<S> <C> <C>
Cash $ 113,190 360,769
----------- -----------
Receivables:
Trade accounts and notes, less allowance
for doubtful receivables of $1,000 at
October 31, 1999 and July 31, 1999 60,790 67,421
Accrued interest 89,248 55,417
Other 66,483 66,483
----------- -----------
Total receivables 216,521 189,321
----------- -----------
Developed real estate, less accumulated depre-
ciation of $280,188 at October 31, 1999
and $274,759 at July 31, 1999 1,378,415 1,383,745
Undeveloped land held for sale 232,006 226,797
Other investments:
Real estate 1,208,017 1,246,608
Securities 618,102 681,006
----------- -----------
1,826,119 1,927,614
----------- -----------
Property and equipment, at cost:
Leasehold improvements 63,740 63,740
Furniture and equipment 330,538 329,394
----------- -----------
394,278 393,134
Less accumulated depreciation and amortization (363,502) (360,944)
----------- -----------
Net property and equipment 30,776 32,190
----------- -----------
Deferred charges and other assets 26,673 11,627
----------- -----------
$ 3,823,700 4,132,063
=========== ===========
</TABLE>
<PAGE> 3
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, cont'd.
October 31, 1999 and July 31, 1999
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
October 31, July 31,
1999 1999
(Unaudited)
----------- -----------
<S> <C> <C>
Indebtedness (current installments of $3,970,745
at October 31, 1999 and $3,971,798 at
July 31, 1999):
Debentures $ 1,897,505 1,897,505
Mortgage notes 1,822,694 1,826,566
Other notes, secured 383,403 515,031
Other notes, unsecured 534,373 530,748
----------- -----------
Total indebtedness 4,637,975 4,769,850
----------- -----------
Accounts payable, trade 158,951 105,048
Accrued expenses 601,805 776,932
Other payables:
Loans under participation agreement:
Related parties 474,101 442,900
Other 420,365 357,973
Other 202,376 193,660
----------- -----------
1,096,842 994,533
----------- -----------
Stockholders' deficiency:
Common stock, no par value, stated value
$1 per share:
Authorized 2,531,765 shares; issued
1,723,774 shares. (No shares
reserved for conversion, warrants,
options or other rights) 1,723,774 1,723,774
Additional paid-in capital 469,312 469,312
Accumulated deficit (807,472) (649,899)
----------- -----------
1,385,614 1,543,187
Deduct cost of 691,082 common shares in
treasury (4,057,487) (4,057,487)
----------- -----------
Stockholders' deficiency (2,671,873) (2,514,300)
----------- -----------
$ 3,823,700 4,132,063
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three months ended October 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Revenues:
Income from investments $ 166,070 195,416
Other 5,585 5,187
----------- ----------
171,655 200,603
----------- ----------
Cost and expenses:
Direct operating expenses and general
and administrative expenses 246,859 374,917
Interest 120,666 151,370
----------- ----------
367,525 526,287
----------- ----------
Loss from continuing operations (195,870) (325,684)
Earnings from discontinued operations 38,297 45,653
----------- ----------
Net loss (157,573) (280,031)
Retained earnings (accumulated deficit)
at beginning of period (649,899) 436,668
----------- ----------
Retained earnings at end of period $ (807,472) 156,637
=========== ==========
Loss per common share:
Loss from continuing operations (.19) (.31)
Gain from discontinued operations .04 .04
----------- ----------
Net loss per common share $ (.15) (.27)
=========== ==========
Dividends per common share NONE NONE
----------- ----------
Weighted average number of common shares
outstanding during the period 1,032,692 1,032,692
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three months ended October 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net cash used in operating activities $(289,780) (745,988)
---------- ----------
Cash flows from investing activities:
Capital expenditures (1,144) (1,483)
Proceeds from sales of securities 81,627 28,714
---------- ----------
Net cash provided by investing
activities 80,483 27,231
---------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 9,936 9,568
Principal payments on indebtedness (141,811) (250,049)
Proceeds received under loan participa-
tion agreements 115,873 521,874
Payments made under loan participation
agreements (22,280) (258,450)
---------- ----------
Net cash provided by (used in)
financing activities (38,282) 22,943
---------- ----------
Net decrease in cash (247,579) (695,814)
Cash at beginning of period 360,769 752,493
---------- ----------
Cash at end of period $ 113,190 56,679
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
CAPITAL INVESTMENT OF HAWAII, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Information
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial information have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The accompanying unaudited
consolidated financial statements should be read in conjunction with the
report on SEC Form 10-K for the fiscal year ended July 31, 1999 and the
consolidated financial statements and the notes thereto in the Company's
Quarterly Report on SEC Form 10-Q for the quarter ended October 31, 1998.
In the opinion of the Company's management, the accompanying unaudited
financial information contains all material adjustments required by
generally accepted accounting principles to present fairly the Company's
financial position as of October 31, 1999 and July 31, 1999, the results of
its operations for the three months ended October 31, 1999 and 1998, and its
cash flows for the three months ended October 31, 1999 and 1998. All such
adjustments are of a normal recurring nature, unless otherwise disclosed in
this Form 10-Q or other referenced material. Results of operations for
interim periods are not necessarily indicative of results for the full year.
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company and its subsidiaries are engaged principally in the
business of acquiring, developing, leasing and dealing in real
estate, investing in securities which are subject to various factors
which cause fluctuations between periods. Accordingly, the results of
operations for the three months ended October 31, 1999 are not
necessarily indicative of results to be expected for the year and are
not necessarily comparable to the results of operations for the three
months ended October 31, 1998.
ADC Lending Activities
As of October 31, 1999, the Company had approximately $1,208,000 in
real estate investments. Those investments consist primarily of three
acquisition, development and construction (ADC) loans to developers
in Nevada and Utah.
The Company has engaged in making ADC loans for more than nine years.
As Nevada, particularly Las Vegas has seen strong economic growth,
the Company will continue to focus on ADC lending activities for the
remainder of fiscal 2000. Capital requirements to finance such
activities will continue to be satisfied from institutional
borrowings and participating loans to small groups of investors.
Direct Operating and General and Administrative Expenses
The decrease of direct operating and general and administrative
expenses for the three months ended October 31, 1999 as compared to
the same period in 1998 of $128,058 is primarily due to the reduction
of the corporate office space and administrative personnel. The
Company will continue its efforts to reduce general and
administrative expenses in order to meet its obligations and improve
operating results.
DISCONTINUED PROPERTY MANAGEMENT DIVISION
In October 1999, the Company entered into an agreement to sell
certain assets of its property management division. The sale
transaction has been finalized in December 1999 and the Company will
receive approximately $480,000 in cash in second quarter of fiscal
2000.
The Company has recorded earnings from discontinued operations of
$38,297 and $45, 653 for the three months ended October 31, 1999 and
1998, respectively which represent the net operating income of the
property management division. The Company expects a decline of
approximately $160,000 in net cash flows from the absence of the
property management division in fiscal 2000.
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1999, the Company held cash of $113,190. The decrease
in cash of $247,579 for the three months ended October 31, 1999 is
primarily due to cash used in operating activities.
Included in cash used in operating activities for the three months
ended October 31, 1999 was approximately $134,500 of advances for the
construction of residential developments in Nevada and Utah. The
Company's net loss $157,573 is also included in cash used in
operating activities.
The Company met its operating cash requirements for the three months
ended October 31, 1999 by using cash on hand at July 31, 1999 and
proceeds from loan participation agreements. Cash inflows and
outflows from ADC loans in Hearthstone Homes, Inc., Hearthstone
Homebuilders, Inc. and Martin Development, Inc. will continue
throughout fiscal year 2000.
The Company has several notes payable to individuals, a corporation
and a financial institution. Approximately $1,900,000 of these notes
are payable on or before July 1, 2001. The Company has had long
standing good relationships with these individuals and companies and
has been successful in the past in obtaining extensions on these
notes as they become due. Management will continue to work with these
lenders in order to achieve future extensions beyond fiscal 2000.
The Company is contemplating a plan for going private (the Plan). The
Plan is to restructure the share ownership of the Company to reduce
the number of shareholders below 300, thus allowing the Company to
terminate its reporting obligations under the Securities Exchange Act
of 1934 (the Act). This will allow the Company to eliminate the
substantial time and expense of compliance with the Act.
Cash requirements for the remainder of fiscal 2000 are expected to be
satisfied by the cash proceeds from the sale of the Company's
property management division, institutional borrowings, loan
participation agreements and net collections on ADC loans. The
Company anticipates that it will sell certain of its security and
real estate holdings to meet cash requirements, if deemed necessary.
Currently, the Company has certain condominium apartments in Makaha,
Hawaii being actively listed for sale.
YEAR 2000
The Company has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the Year
2000 issue and has developed an implementation plan to resolve the
issue. The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the applicable
year. Any of the Company's programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather then the year
2000. This could result in a major system failure or miscalculations.
<PAGE> 9
The Company presently believes that the Year 2000 problem will not
pose significant operational problems for the Company's computer
systems.
<PAGE> 10
PART II - OTHER INFORMATION
Items 1,2,3,4,5,6. None
<PAGE> 11
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.
CAPITAL INVESTMENT OF HAWAII, INC.
Dated: December 13, 1999 /s/ STUART T.K. HO
-----------------------------------
Chairman of the Board and President
Dated: December 13, 1999 /s/ DONALD M. WONG
-----------------------------------
Senior Vice President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT OCTOBER 31, 1999 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 113,190
<SECURITIES> 0
<RECEIVABLES> 217,521
<ALLOWANCES> 1,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 394,278
<DEPRECIATION> 363,502
<TOTAL-ASSETS> 3,823,7000
<CURRENT-LIABILITIES> 0
<BONDS> 4,637,975
0
0
<COMMON> 1,723,774
<OTHER-SE> (4,395,647)
<TOTAL-LIABILITY-AND-EQUITY> 3,823,700
<SALES> 0
<TOTAL-REVENUES> 171,655
<CGS> 0
<TOTAL-COSTS> 367,525
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120,666
<INCOME-PRETAX> (195,870)
<INCOME-TAX> 0
<INCOME-CONTINUING> (195,870)
<DISCONTINUED> 38,297
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (157,573)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
