<PAGE>
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended April 30, 1996
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Commission File Number 33-22426-D
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Continental Capital Corporation
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(Exact name of registrant as specified in its charter)
Colorado 95-4047540
- --------------------------------------- ----------------------------
(State of jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
8950 Fullbright Avenue, Chatsworth, California 91311
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(Address of principal executive offices) (Zip Code)
(818) 886-0008
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(Registrant's telephone number, including area code)
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 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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common stock $.001 Par Value - 9,000,000 Shares as of
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April 30, 1996
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The Exhibit Index is on Page 13.
This document contains 14 pages.
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CONTINENTAL CAPITAL CORPORATION
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Balance Sheet as of April 30, 1996 and October 31, 1995 3
Statement of Operations for the Six Months and Three
Months Ended April 30, 1996 and 1995 4
Statement of Cash Flows for the Six Months Ended April 30,
1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-12
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
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2
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CONTINENTAL CAPITAL CORPORATION
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
April 30, October 31,
ASSETS 1996 1995
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<S> <C> <C>
Current Assets:
Cash on hand and in bank $ 33,086 $ 159,052
Inventory 49,754 49,824
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Total current assets 82,840 208,876
Investment in Unconsolidated Subsidiary 400,000 -
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Total assets $ 482,840 $ 208,876
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Line of credit financing $ 175,000 $ 175,000
Accounts payable and accrued expenses 28,211 28,211
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Total current liabilities 203,211 203,211
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Commitments and Other Matters - -
Shareholder's Equity:
Preferred stock, no par value;
authorized 2,000 shares Series A
and 1,000 shares Series B; none issued - -
Common stock, $.001 par value;
authorized 100,000,000 shares issued and
outstanding 9,000,000 shares in 1996 and
8,500,000 in 1995 9,000 8,500
Additional paid-in capital 2,223,046 1,811,546
Deficit (1,952,417) (1,814,381)
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Total shareholders' equity 279,629 5,665
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Total liabilities and shareholders'
equity $ 482,840 $ 208,876
=========== ===========
</TABLE>
See notes to financial statements.
3
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CONTINENTAL CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
April 30, April 30,
------------------------ ------------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Revenues
Sales of aircraft parts and equipment $ 12,411 $ 29,892 $ 12,411 $ 29,892
Brokerage income - 8,638 - 8,638
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12,411 38,530 12,411 38,530
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of sales 70 17,935 70 17,935
Selling, general and administrative 96,026 18,447 39,036 18,447
Management services 36,000 - 18,000 -
Rent 12,000 - 6,000 -
Interest 6,351 - 4,560 -
---------- ---------- ---------- ----------
Total costs and expenses 150,447 36,382 67,666 36,382
---------- ---------- ---------- ----------
Income (Loss) before Income Taxes (138,036) 2,148 (55,255) 2,148
Provision for Income Taxes - - - -
---------- ---------- ---------- ----------
Net Income (Loss) $ (138,036) 2,148 $ (55,255) $ 2,148
========== ========== ========== ==========
Earnings (Loss) per Common Share $ (.02) - $ (.01) $ -
========== ========== ========== ==========
Weighted Average Number of Common Shares 8,916,667 5,912,501 9,000,000 5,912,501
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
4
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CONTINENTAL CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
----------------------
1996 1995
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<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $(138,036) $ 2,148
Adjustments to reconcile net (loss) to
net cash used in operating activities:
Contributed rent 12,000 -
Decrease in inventory 70 (73,698)
Decrease in accounts payable and
accrued liabilities
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Net cash (used in) operating activities (125,966) (71,550)
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Cash Flows from Financing Activities:
Proceeds from common stock and
additional paid-in capital, net - 73,050
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Net Increase (Decrease) in Cash (125,966) 1,500
Cash at Beginning of Period 159,052 -
--------- --------
Cash at End of Period $ 33,086 $ 1,500
========= ========
Supplemental Cash Flow Information:
Cash paid during the period for interest $ 6,351 $ -
========= ========
</TABLE>
See notes to financial statements.
5
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CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 AND 1995
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited financial statements 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. In the opinion of
management, all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation of financial position,
results of operations and cash flows have been included. Operating
results for the six months ended April 30, 1996 and 1995 are not
necessarily indicative of the results that may be expected for a full
year. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K/A
for the year ended October 31, 1995.
ORGANIZATION AND CAPITALIZATION
Continental Capital Corporation (the "Company") was incorporated under the
laws of the State of Colorado on November 8, 1985. The Company's articles
of incorporation, as amended, provide for the issuance of 100,000,000
shares of common stock, with a par value of $.001 per share, and 2,000
shares of Series A and 1,000 shares of Series B preferred stock with no
par value. Series of the preferred stock may be created and issued from
time to time, with such designations, preferences, conversion rights and
other rights, including voting rights, as adopted by the Board of
Directors.
On January 31, 1995, the Board of Directors of the Company approved a one-
for-four reverse stock split of the outstanding common stock, which
resulted in 831,309 shares of common stock outstanding. Retroactive
effect has been given to this reverse stock split in the accompanying
financial statements.
HISTORY
The Company's original name was Lexington Capital Corporation and has
changed a number of times since its incorporation in 1985. The Company
has additionally been known as Club America, Inc. and PlanCapital U.S.A.,
Inc. During 1995, the Company changed its name to its present name,
Continental Capital Corporation.
BUSINESS
The Company has recently entered into the business of marketing and
leasing various types of equipment, mainly in the transportation industry.
The Company intends to specialize specifically in commercial aircraft
parts and equipment, fleet commercial trucks and medical equipment.
6
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CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Although these estimates are based on
management's knowledge of current events and actions it may undertake in
the future, they may ultimately differ from actual results.
INVENTORY
Inventory is comprised of aircraft parts and equipment, and is stated at
the lower of cost or market. Cost is determined using principally the
average method, based upon the allocated historical cost of the
corporation from whom the Company acquired the aircraft parts and
equipment (see Note 2).
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share has been computed based upon the weighted
average number of shares of common stock outstanding during the period.
Retroactive application has been given to the one-for-four reverse stock
split effected in January 1995.
NOTE 2. BUSINESS ACQUISITIONS
JSA
Effective March 31, 1995, the Company merged with J.S.A., Incorporated, a
California corporation ("JSA"). As a result of the merger, the Company
acquired certain of the assets of JSA, which consisted of aircraft parts
and equipment, in exchange for the issuance of 1,700,000 shares of the
Company's common stock. In accordance with the terms of the agreement, the
aircraft parts and equipment had an agreed value of approximately
$8,950,000. In connection with the merger, the Company agreed to retain
Jacman Aircraft, Inc. ("Jacman"), a California based aircraft parts and
equipment marketing firm which is affiliated with the former shareholder,
as a distributor of all aircraft parts and equipment for the Company.
The acquisition of these assets did not constitute a business combination,
and the Company has accounted for the acquisition of these assets in a
manner similar to the purchase method. However, because of the
significance of the ownership of the Company's common stock created by the
issuance of the 1,700,000 shares of common stock to the former shareholder
of JSA, together with the control exercised by the related entity (Jacman)
over the marketing of the inventory of aircraft parts and equipment, the
Company has recorded the inventory of aircraft parts and equipment at the
allocated historical cost of JSA ($50,000), rather than the agreed value
per the agreement. As sales of the aircraft parts and equipment occur, the
proportionate amount of such historical cost will be charged to cost of
sales based upon a relative value calculation.
7
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CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
(UNAUDITED)
NOTE 2. BUSINESS ACQUISITIONS
CARROSELL
On December 10, 1995, the Company entered into an Agreement of Purchase
and Sale of Stock with CarroSELL, Inc. and its sole shareholder whereby
the Company acquired all of the capital stock of CarroSELL in exchange for
500,000 shares of the Company's common stock. CarroSELL is engaged in the
business of advertising on baggage claim carrousels, and with its
proprietary process, converts baggage claim carousel panels into moving
billboards. The Company agreed to transfer $250,000 to CarroSELL on or
before June 17, 1996 to further its business. In the event that public
trading of the Company's common stock had not resumed or the $250,000 was
not transferred by June 17, 1996, the former shareholder had the option to
cancel the agreement.
The required transfer of $250,000 has been completed. On June 7, 1996,
this agreement to purchase CarroSELL, Inc. was amended to eliminate the
requirement of public trading by June 17, 1996 in exchange for the
Company's agreeing to issue to the original owner of CarroSELL, Inc., an
additional 250,000 shares of the Company's common stock.
CarroSELL entered into an employment agreement with the former shareholder
for a period of five years providing for an annual salary of $24,000 plus
certain benefits. CarroSELL also entered into a consulting agreement with
Revolving Media Marketing, Inc., a company owned by the former
shareholder, to provide promotional and marketing services for a term of
five years in exchange for $60,000 per annum plus 1 1/2% of gross sales.
In addition, revolving media is eligible to earn options to purchase a
maximum of 1,000,000 shares of common stock of the Company based upon the
net income of CarroSELL during the next two fiscal years.
The Company anticipates accounting for this acquisition by the purchase
method. However, until the period in which the former shareholder's
option to cancel expired, the Company was accounting for this acquisition
as an investment in unconsolidated subsidiary. This investment has been
recorded at the estimated fair value of the common stock issued by the
Company, taking into consideration various factors affecting the estimated
fair value of such stock. The additional 250,000 shares of the Company's
common stock issued on June 7, 1996 will be recorded as an additional
element of cost of the Company's investment in this subsidiary at the
estimated fair value of such stock, and will be taken into consideration
in the determination of the excess of cost over net assets acquired.
Costs and expenses incurred by the Company in connection with the
operations of CarroSELL have been charged to expense. Such costs
aggregated approximately $69,000 and $42,000 for the six months and three
months ended April 30, 1996, respectively.
8
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CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
(UNAUDITED)
NOTE 3. COMMITMENTS AND OTHER MATTERS
As of June 28, 1995, the Company entered into a Master Lease Agreement with
joint lessees CASC Shanghai and Northern Airlines: Sanya Limited. The term
of the Master Lease commences on the shipping date of the initial amount of
equipment and shall continue for a period of five years with a total of
$5,000,000 in aircraft parts and equipment. Although delivery of equipment
under this lease was expected to begin in early 1996, no equipment has been
shipped as of the date of the accompanying financial statements due to
changes in management of the lessees; accordingly, this lease is presently
pending and in the process of reapproval by appropriate officials of the
lessees. Financing for this transaction is expected to be provided by NAB
Bank in Chicago, Illinois.
NOTE 4. COMMON STOCK
On January 31, 1995, the Board of Directors of the Company approved a one-
for-four reverse stock split of the outstanding common stock, which
resulted in 831,309 shares of common stock then outstanding. Retroactive
effect has been given to this reverse stock split in the accompanying
financial statements.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company has retained Jamesburg Companies, Inc. ("JCI"), the major
shareholder of the Company, to complete the initial phase of the operations
at a cost of $6,000 per month. Fees paid to JCI amounted to $36,000 and
$18,000 for the six months and the three months ended April 30, 1996,
respectively.
From time to time, JCI has loaned the Company funds for operations on an
unsecured basis without interest. In March 1995, indebtedness of $92,145
owing to JCI was converted into 4,703,691 shares of common stock.
The Company's principal offices and warehousing facilities are located in
the premises of Jacman Aircraft (see Note 2) on a month-to-month
arrangement, and are provided rent free. The Company also has shared
office space available in New York, which is provided rent free from a
director/shareholder of the Company. The Company has recognized the
estimated value of the rent provided by these related parties without cost
to be approximately $12,000 for the six months ended April 30, 1996, and
has charged this amount to expense, with a corresponding credit to
Additional Paid-In Capital.
9
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CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
(UNAUDITED)
NOTE 6. BROKERAGE INCOME
During fiscal 1995, the Company was involved in a certain leasing
transaction as an accommodation to the parties directly participating in
the lease. The Company's involvement was limited to facilitating the
transaction as among the lessor and lessee and financial institution; did
not encompass the receipt or payment or guarantee of any rentals under the
lease; and was limited in occurrence to this isolated transaction. As
compensation for this accommodation, the Company received a brokerage fee
of $8,638 which is presented in the accompanying financial statements as
brokerage income.
10
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CONTINENTAL CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1996 COMPARED TO 1995
The Company's results of operations reflect a net loss of $138,036 (or $.02 per
share) for the six months ended April 30, 1996, compared to a net income of
$2,148 for the same period in 1995.
The Company realized revenue of $12,411 for the six months ended April 30,
1996, as compared with $38,530 for 1995.
Cost and expenses for 1996 totalled $150,447 as compared to $36,382 for 1995.
These costs and expenses were primarily comprised of management fees paid to
Jamesburg Companies Inc. ("JCI"), the major shareholder of the Company,
compensation paid to the President of CarroSELL. In addition, the Company also
incurred other general and administrative expenses during 1996, most of which
is attributable to the start-up of operations of CarroSELL, including the
marketing efforts expended by management for this new line of business.
THREE MONTHS ENDED APRIL 30, 1996 COMPARED TO 1995
The Company's results of operations for the second quarter of fiscal 1996
resulted in a net loss of $55,255 ($.01 per share) compared to net income of
$2,148 for the comparable period in 1995.
Revenue for 1996 declined to $12,411 compared to $38,530 for 1995. This
decline was primarily the result of diminished sales of aircraft parts and
equipment. In addition, the Company realized brokerage income of $8,638 in the
1995 quarter, which was an isolated transaction not replicated in 1996.
Costs and expenses increased to $67,666 in 1996 from $36,382 in 1995. This was
primarily attributable to management fees paid to Jamesburg Companies, Inc.,
the major shareholder of the Company, and rent and interest expense incurred,
none of which was incurred in 1995. Additionally, the Company incurred higher
selling, general and administrative expenses in 1996 compared to 1995, most of
which was attributable to the start-up of operations of CarroSELL, including
the marketing efforts expended by management for this new line of business.
These increases were offset by a decrease of cost of sales, which was the
result of decreased sales and the reduced historical cost valuation ascribed to
the aircraft parts and equipment acquired from JSA.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended April 30, 1996, the Company experienced a net decrease
in cash of $125,966. This decrease resulted from net cash used in operating
activities. There were no cash flows resulting from investing activities or
financing activities during 1996.
At April 30, 1996, the Company had a cash balance of $33,086.
For the comparable period of 1995, there was cash used in operating activities
of $71,550 and cash provided by financing activities of $73,050.
11
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CONTINENTAL CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
LIQUIDITY AND CAPITAL RESOURCES
In connection with the purchase of CarroSELL, the Company agreed to transfer
$250,000 to CarroSELL on or before June 17, 1996 to further its business.
The Company has a borrowing arrangement with NAB Bank, Darien, Illinois. This
line of credit is for a total amount of $380,000. As of April 30, 1996, the
Company had drawn down on this line in the amount of $175,000. Subsequent to
April 30, 1996, the Company drew down the remaining available balance on this
line of credit.
CAPITAL EXPENDITURES
The Company did not make any major capital expenditures during the six months
ended April 30, 1996.
The Company does not have any material commitments for capital expenditures.
However, the Company has agreed to transfer $250,000 to CarroSELL on or before
June 17, 1996, which transfer has been completed; funds for this transfer were
obtained in large measure from balances available under the Company's bank line
of credit.
12
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CONTINENTAL CAPITAL CORPORATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the quarter
ended April 30, 1996.
13
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CONTINENTAL CAPITAL CORPORATION
FORM 10-Q/A
FOR THE THREE MONTHS ENDED APRIL 30, 1996
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.
CONTINENTAL CAPITAL CORPORATION
/s/ Milton J. Wilpon
------------------------------------------
DATE: August 22, 1996 By: Milton J. Wilpon
Chairman of the Board
Chief Executive Officer
/s/ Ronald L. Wilpon
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DATE: August 22, 1996 By: Ronald L. Wilpon
Treasurer
Chief Financial and Accounting Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1995
<PERIOD-END> APR-30-1996
<CASH> 33,086
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 49,754
<CURRENT-ASSETS> 82,840
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 482,840
<CURRENT-LIABILITIES> 203,211
<BONDS> 0
0
0
<COMMON> 9,000
<OTHER-SE> 270,629
<TOTAL-LIABILITY-AND-EQUITY> 482,840
<SALES> 12,411
<TOTAL-REVENUES> 12,411
<CGS> 70
<TOTAL-COSTS> 144,026
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,351
<INCOME-PRETAX> (138,036)
<INCOME-TAX> 0
<INCOME-CONTINUING> (138,036)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (138,036)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
