<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: 03/31/96
--------
[ ] 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: 0-17232
CAPITAL RESERVE CORPORATION
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0888594
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7860 EAST BERRY PLACE, SUITE 120, ENGLEWOOD, COLORADO 80111
(Address of principal executive offices)
(303) 220-5030
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 No X
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
579,378 SHARES OF CLASS A COMMON STOCK, NO PAR VALUE, AS OF
MARCH 31, 1996
Exhibit index on page 8 Page 1 of 9 pages
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Board of Directors
Capital Reserve Corporation
Independent Accountants' Report
The accompanying consolidated balance sheet of Capital Reserve Corporation
as of March 31, 1996, and the related consolidated statements of operations and
cash flows for the three months ended March 31, 1996 and 1995 were not audited
by us, and, accordingly, we do not express an opinion on them.
Consistent with the requirements of Item 310(b) of Regulation S-B manage-
ment has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the omitted disclosures were
included in the financial statements, they might influence the user's conclu-
sions about the Company's financial position, results of operations, and its
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
John M. Hanson & Company, P.C.
Denver, Colorado
April 29, 1996
2
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CAPITAL RESERVE CORPORATION
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 268,285
Accounts receivable 25,861
Marketable securities 81,032
Other current assets 9,156
----------
Total current assets 384,334
RENTAL PROPERTY AND EQUIPMENT
Rental real estate $435,928
Other property 84,209
---------
520,137
Less accumulated depreciation (99,192) 420,945
---------
OTHER ASSETS 35,441
----------
$ 840,720
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - related party $ 183,538
Accounts payable and accrued liabilities 38,795
----------
Total current liabilities 222,333
STOCKHOLDERS' EQUITY
Class A common stock 3,140,102
Class B preferred stock 50,000
Accumulated deficit (2,571,715)
----------
618,387
----------
$ 840,720
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----------
See accountants' report
3
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CAPITAL RESERVE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
---- ----
Revenue
Rental $ 26,980 $ 19,169
Insurance residuals 4,746 4,934
-------- --------
31,726 24,103
Operating expenses
General and administrative 96,160 78,497
Rental 27,280 23,749
-------- --------
123,440 102,246
-------- --------
Net operating loss (91,714) (78,143)
Other income (expense)
Interest and dividends 3,086 12,174
Other 579 10
Gain on sales of equipment - 2,924
Investment gains and losses 7,484 -
-------- --------
11,149 15,108
-------- --------
Net loss $(80,565) $(63,035)
-------- --------
-------- --------
Net loss per common share $ (.14) $ (.10)
-------- --------
-------- --------
See accountants' report
4
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CAPITAL RESERVE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
---------- ----------
Cash flows from operating activities:
Net loss $ (80,565) $ (63,035)
Reconciling adjustments:
Depreciation 6,458 7,571
Gain on sales of equipment - (2,924)
Gains on investments (7,484) -
Changes in assets and liabilities:
Other current assets 6,014 5,958
Accounts payable and accrued liabilities (9,066) (3,252)
---------- ----------
Total adjustments (4,078) 7,353
---------- ----------
Net cash (used for) operating activities (84,643) (55,682)
Cash flows from investing activities:
Proceeds from sale of common stock 22,895 -
Investment in common stock (7,362) (27,386)
Proceeds from sale of furniture and equipment - 3,895
Purchase of rental property and equipment (8,909) (39,590)
---------- ----------
Net cash provided by (used for)
investing activities 6,624 (63,081)
---------- ----------
Net change in cash and cash equivalents (78,019) (118,763)
Cash and cash equivalents at beginning of period 346,304 844,717
---------- ----------
Cash and cash equivalents at end of period $ 268,285 $ 725,954
---------- ----------
---------- ----------
See accountants' report
5
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CAPITAL RESERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE A - MANAGEMENT'S STATEMENT
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (all of which are normal and recurring in
nature) necessary to present fairly the financial position of Capital Reserve
Corporation as of March 31, 1996, and the results of operations and cash flows
for the quarters ended March 31, 1996 and 1995. The Notes to the Consolidated
Financial Statements which are contained in the Form 10-K should be read in
conjunction with these consolidated financial statements.
In March, 1996 the Company entered into an agreement to sell its rental real
estate. The sale has not been closed as of April 29, 1996.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 1996 was $162,001, as compared to $245,017 at
December 31, 1995. The decrease in working capital is attributed to cash used
in operations. If the Company should generate an operating loss for the current
fiscal year comparable to the loss incurred for 1995, a substantial portion of
the Company's remaining cash and working capital will be depleted. The Company
has no external sources of cash.
As indicated in Note A of the Notes to Consolidated Financial Statements, the
Company has entered into an agreement to sell its rental real estate. Should
the sale be completed, the Company would increase its cash and working capital.
Current liabilities at March 31, 1996 included notes payable to a related party
of $183,538, which was being contested by the Company. Subsequent to the
quarter ended March 31, 1996, the Company reached a settlement with the related
party in the amount of $198,000, and the related party returning his 33,333
shares of Class A common stock back to the Company.
RESULTS OF OPERATIONS
The Company's only operations at this time consist of the rental of office
space. Such rental operations are generating positive cash flow; however, the
depreciation attributed to the rental property (which is included in rental
expense) results in a loss.
General and administrative expenses for the three months ended March 31, 1996
include legal fees of $20,082, incurred in connection with the dispute over the
note payable described above and a lawsuit with regard to a former subsidiary of
the Company which was initiated in October 1995. While the dispute over the
note payable is finally resolved, management of the Company expects to incur a
significant amount of legal fees during the current fiscal year while the
lawsuit is pending.
General and administrative expenses for the three months ended March 31, 1996
also include salaries of $40,500, employee benefits expense of $6,922, and
related payroll tax expenses of $3,389.
As compared to the three months ended March 31, 1995, general and administrative
expenses for the current period were 22.5% higher, and the net loss for the
three months ended March 31, 1996 increased by 27.8% over that of the same
period in 1995.
The Company's present business operations do not generate sufficient revenues to
cover its operating expenses. The Company will have to obtain other business
operations or severely reduce its operating expenses to remain viable.
7
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Subsequent to the quarter ended March 31, 1996, the Company reached a
settlement with Joseph T. Flynn in the amount of $198,000, and Mr.
Flynn returning his 33,333 shares of Class A common stock back to the
Company.
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.
REGULATION
S-K NUMBER EXHIBIT
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K. None.
8
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CAPITAL RESERVE CORPORATION
(Registrant)
Date: May , 1996 By: /s/ Ralph W. Newton, Jr.
------------------------------
Ralph W. Newton, Jr.
Principal Financial and Accounting
Officer and President
9
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 268,285
<SECURITIES> 81,032
<RECEIVABLES> 40,419
<ALLOWANCES> (14,558)
<INVENTORY> 0
<CURRENT-ASSETS> 384,334
<PP&E> 520,137
<DEPRECIATION> (99,192)
<TOTAL-ASSETS> 840,720
<CURRENT-LIABILITIES> 222,333
<BONDS> 0
0
50,000
<COMMON> 3,140,102
<OTHER-SE> (2,571,715)
<TOTAL-LIABILITY-AND-EQUITY> 840,720
<SALES> 0
<TOTAL-REVENUES> 31,726
<CGS> 0
<TOTAL-COSTS> 27,280
<OTHER-EXPENSES> 96,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (80,565)
<INCOME-TAX> 0
<INCOME-CONTINUING> (80,565)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (80,565)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> 0.00
</TABLE>
