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 January 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 0-7633
CONTINENTAL HERITAGE CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 75-1449332
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1020 Macon Street, Ft. Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (817) 429-6261
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 such shorter period that registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [x]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 1,373,860
CONTINENTAL HERITAGE CORPORATION
INDEX
PART I - FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -
October 31, 1997 and January 31, 1998 3
Consolidated Statements of Income-
For the Three Month Periods
Ended January 31, 1998 and 1997 5
Consolidated Statements of Cash Flows -
For the Three Month Periods
Ended January 31, 1998 and 1997 6
Notes to Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
CONTINENTAL HERITAGE CORPORATION
AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
January 31, 1998 October 31, 1997
CURRENT ASSETS
Cash in bank $ 25,842 $ 36,308
Escrow held in trust - 2,874
Prepaid expense 7,060 -
________ ------ ------
Total Current Assets 32,902 39,182
PHYSICAL PROPERTY
Land 115,920 115,920
Buildings 506,223 504,607
Furnishings 4,271 4,271
------- -------
626,414 624,798
Less Accumulated depreciation (192,088) (185,688)
------- -------
Total Physical Property 434,326 439,110
OTHER ASSETS AND INVESTMENTS
Raw land and development costs 271,837 271,837
Future income tax benefit 23,550 24,200
Organization expenses 100 100
------- -------
Total Other Assets and Investments 295,487 296,137
------- -------
TOTAL ASSETS $762,715 $774,429
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
(Unaudited) (Audited)
January 31, 1998 October 31, 1997
CURRENT LIABILITIES
Accounts payable $ 15,958 $ 13,195
Prepaid rent received 12,100 11,962
Current portion of long-term debt 18,219 29,800
------ ------
Total Current Liabilities 46,277 54,957
LONG-TERM DEBT
Related party debt
and accrued interest 771,192 777,908
Rent deposits 5,630 5,630
------- -------
Total Long-Term Debt 776,822 783,538
Total Liabilities 823,099 838,495
STOCKHOLDERS' EQUITY
Common stock - par value $.10 per
share 10,000,000 shares authorized,
1,373,860 issued and outstanding 137,386 137,386
Capital in excess of par value
of common stock 468,425 468,425
Retained earnings (deficit) (666,195) (669,877)
------- -------
Total Stockholders' Equity (Deficit) (60,384) (64,066)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 762,715 $ 774,429
======= =======
CONTINENTAL HERITAGE CORPORATION AND
CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Three Months ended
January 31, 1998 January 31, 1997
INCOME
Rents $ 53,577 $ 44,437
Costs and Expenses
Operating expenses 33,945 38,429
Administrative expenses 2,296 557
Interest expenses 13,003 8,954
------ ------
Total Costs and Expenses 49,244 47,940
NET RENTAL INCOME 4,333 (3,503)
Provision for income tax 651 -
------ ------
Net income $ 3,682 $ (3,503)
====== ======
Earnings (Loss) per share 0.00268004 (0.0025498)
Dividends per share 0 0
==== ====
CONTINENTAL HERITAGE CORPORATION AND
CONSOLDIATED SUBSIDIARIES
STATEMENTS OF CASH FLOW
Three Months ended
January 31, 1998 January 31, 1997
OPERATING ACTIVITIES:
Net Income (loss) $ 3,682 $ (3,503)
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation 6,400 6,257
Increase in prepaid expense (4,186) (1,952)
Increase in payables 2,763 4,388
Increase in accrued interest 11,966 7,031
Increase in prepaid rent 139 -
Decrease in accrued tax benefit 650 -
------ ------
Total Cash Provided by
Operating Activities 21,414 12,221
INVESTING ACTIVITIES:
Purchase of physical property (1,616) -
------- ------
Total Cash Provided (Used)
by Investing Activities (1,616) -
FINANCING ACTIVITIES:
Borrowing from related party 818 -
Repayment on related party debt (19,500) (3,000)
Principal payments on debt (11,582) (10,658)
------ ------
Total Cash Provided (Used)
by Financing Activities (30,264) (13,658)
Increase (Decrease) in cash (10,466) (1,437)
Cash at the beginning of the period 36,308 18,937
------ ------
Cash at the end of the period $ 25,842 $ 17,500
====== ======
Interest paid $ 1,036 $ 1,941
====== ======
CONTINENTAL HERITAGE CORPORATION AND
CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENT
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management all adjustments considered necessary
for a fair presentation have been included. Operating results for the
three-month period ended January 31, 1998 are not necessarily indicative of
results that may be expected for the year ended October 31, 1998. For further
information refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
October 31, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
As was the case during the past five fiscal years of the Company ended October
31, 1997, all of the Company's revenues were from rentals derived from
operation of the Hurst, Texas office building. Such revenues are only
sufficient to pay the expenses and mortgage debt service related to that
building, which mortgage debt was satisfied on April 1, 1998. All other
funding requirements of the Company were provided by advances made to it by
Walter G. Cook, its principal shareholder. Since the Company has suffered
continuing losses from its operations, unless it is able to sell off its
current real estate holdings or find other sources of capital, it will not be
able to pay its debt to Mr. Cook or be able to acquire other properties or
assets to produce revenues. Accordingly, there is substantial doubt as to the
Company's ability to continue as a going concern.
Management of the Company has for the past three years been engaged in a
search for an acquisition that would add a viable business to the Company so as
to place it in a position to be able to continue as a going concern. In that
regard, the Company as of September 3, 1998 entered into a Letter of Intent
with the Encore International, Inc. and its shareholders whereby it is proposed
that the Company acquire the outstanding stock of Encore in exchange for
5,500,000 shares of the Company's common stock with an additional 2,000,000
shares issueable to such shareholders in the event certain levels of net sales
are achieved by the Company on a consolidated basis during the next two years.
Although Encore International has yet to commence its business activities and
is in the process of negotiating a financing to provide it with adequate
working capital needed to start its operations, the Company has been advised by
Encore that it anticipates securing such financing so as to allow Encore to
start its business activities in the near future.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports of Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
caused this Report to be signed on its behalf by the undersigned thereunto duly
authorized.
CONTINENTAL HERIGAGE CORPORATION
(Registrant)
DATE: October 30, 1998 By: /s/ Walter G. Cook
Walter G. Cook
President, Principal Executive Officer and
Principal Financial Officer
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