<PAGE>
FORM 10-Q
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 January 31, 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
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(State of jurisdiction of incorporation or (I.R.S. Employer
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 No X
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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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January 31, 1996
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The Exhibit Index is on Page 12.
This document contains 13 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 January 31, 1996 and October 31, 1995 3
Statement of Operations for the Three Months Ended January 31, 1996 and 1995 4
Statement of Cash Flows for the Three Months Ended January 31, 1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10-11
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
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CONTINENTAL CAPITAL CORPORATION
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
January 31, October 31,
ASSETS 1996 1995
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Current Assets:
Cash on hand and in bank $ 82,271 $ 159,052
Inventory 49,824 49,824
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Total current assets 132,095 208,876
Investment in Unconsolidated Subsidiary 400,000 -
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Total assets $ 532,095 $ 208,876
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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 2,217,046 1,811,546
Deficit (1,897,162) (1,814,381)
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Total shareholders' equity 328,884 5,665
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Total liabilities and shareholders' equity $ 532,095 $ 208,876
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</TABLE>
See notes to financial statements.
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CONTINENTAL CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
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1996 1995
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Revenues $ - $ -
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Costs and Expenses:
Selling, general and administrative 56,990 -
Management services 18,000 -
Rent 6,000 -
Interest 1,791 -
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Total costs and expenses 82,781 -
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(Loss) before Income Taxes (82,781) -
Provision for Income Taxes - -
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Net (Loss) $ (82,781) $ -
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Earnings (Loss) per Common Share $ (.01) $ -
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Weighted Average Number of Common Shares 8,833,333 831,309
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</TABLE>
See notes to financial statements.
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CONTINENTAL CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
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1996 1995
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Cash Flows from Operating Activities:
Net (loss) $(82,781) $ -
Adjustments to reconcile net (loss) to net cash used in
operating activities:
Contributed rent 6,000 -
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Net cash (used in) operating activities (76,781) -
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Net Decrease in Cash (76,781 -
Cash at Beginning of Period 159,052 -
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Cash at End of Period $ 82,271 $ -
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Supplemental Cash Flow Information:
Cash paid during the period for interest $ 1,791 $ -
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</TABLE>
See notes to financial statements.
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<PAGE>
CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 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 three months ended January 31,
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.
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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 all 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 Company has accounted for this acquisition by 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.
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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 is not resumed or the $250,000 is not transferred by
June 17, 1996, the former shareholder has 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 such time as the period in which the
former shareholder's option to cancel has expired, the Company is
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.
Costs and expenses incurred by the Company in connection with the
operations of CarroSELL have been charged to expense. Such costs
aggregated approximately $37,000 for the three months ended January
31, 1996.
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.
Delivery of equipment under this lease was expected to begin in early
1996. Financing for this transaction is expected to be provided by NAB
Bank in Chicago, Illinois.
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CONTINENTAL CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
(UNAUDITED)
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 during the
three months ended January 31, 1996 amounted to $18,000.
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 $6,000 for the three months ended January 31,
1996, and has charged this amount to expense, with a corresponding
credit to Additional Paid-In Capital.
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CONTINENTAL CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's results of operations reflect a net loss of $82,781 (or $.01 per
share) for the quarter ended January 31, 1996, compared to a net loss of -0- for
the same period in 1995.
The Company realized no revenue in the first quarter of 1996 or 1995.
Cost and expenses for the first quarter of 1996 totalled $82,781. 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 this first quarter of 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.
No costs or expenses were incurred by the Company in the comparable period of
1995, inasmuch as the Company was inactive at that time.
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended January 31, 1996, the Company experienced a net decrease
in cash of $76,781. This decrease resulted from net cash used in operating
activities of $76,781. There were no cash flows resulting from investing
activities or financing activities during the first quarter of 1996.
At January 31, 1996, the Company had a cash balance of $82,271.
For the comparable period of 1995, there were no cash flows because the Company
was inactive at that time.
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, Darrien, Illinois. This
line of credit is for a total amount of $380,000. As of January 31, 1996, the
Company had drawn down on this line in the amount of $175,000.
CAPITAL EXPENDITURES
The Company did not make any major capital expenditures during the quarter ended
January 31, 1996.
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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 January 31, 1996.
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<PAGE>
CONTINENTAL CAPITAL CORPORATION
FORM 10-Q
FOR THE THREE MONTHS ENDED JANUARY 31, 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
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DATE: June 24, 1996 By: Milton J. Wilpon
Chairman of the Board
Chief Executive Officer
/s/ Ronald L. Wilpon
-------------------------------
DATE: June 24, 1996 By: Ronald L. Wilpon
Treasurer and Chief Accounting Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 82,271
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 49,824
<CURRENT-ASSETS> 132,095
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 532,095
<CURRENT-LIABILITIES> 203,211
<BONDS> 0
0
0
<COMMON> 9,000
<OTHER-SE> 319,884
<TOTAL-LIABILITY-AND-EQUITY> 532,095
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 80,990
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,791
<INCOME-PRETAX> (82,781)
<INCOME-TAX> 0
<INCOME-CONTINUING> (82,781)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,781)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
