U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1997
[ ] TRANSITION REPORT PURSUANT SECTION 13 OF 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 215, 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) 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 _X_ No ___
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the last practicable date:
546,045 SHARES OF CLASS A COMMON STOCK, NO PAR VALUE, AS OF
JUNE 30, 1997
Transitional Small Business Disclosure Format (check one); Yes___ No _X_
Exhibit index on page 7 Page 1 of 9 pages
<PAGE>
CAPITAL RESERVE CORPORATION
Consolidated Balance Sheet
June 30, 1997
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 55,638
Accounts receivable 351
Marketable securities 95,447
--------
Total currents assets 151,436
EQUIPMENT - AT COST
Furniture and equipment 34,701
Less accumulated depreciation ( 12,415)
----------
22,286
OTHER ASSETS
TOTAL ASSETS $ 173,722
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 90,386
----------
Total current liabilities 90,386
----------
STOCKHOLDERS' EQUITY
Class A common stock 3,138,102
Class B preferred stock 50,000
Accumulated deficit (3,104,766)
---------
83,336
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 173,722
=========
See accountants report and notes to financial statements
2
<PAGE>
<TABLE>
CAPITAL RESERVE CORPORATION
Consolidated statements of operations
(Unaudited)
<CAPTION>
Three months ended Six months ended
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Insurance residuals $ 4,519 $ 4,370 $ 8,555 $ 9,116
Consulting revenues - - 2,500 -
Interest and dividends 526 1,977 1,773 5,063
Investment gains (Loss) (10,498) 42,132 69,358 49,616
Loss on sales of vehicles (16,168) 126 (16,168) -
Other 2,000 - 11,950 705
------ - ------- ------
Total revenues (19,621) 48,605 77,968 64,500
------ ------ ------- -------
Expenses
General and administrative 45,574 90,664 170,350 186,824
Interest - 1,294 - 1,294
Other - 12,462 - 12,462
------ ------- ------- -------
Total expenses 45,574 104,420 170,350 200,580
------ ------- ------- -------
Net (loss) from continuing operation (65,195) (55,815) (92,382) (136,080)
Loss from discontinued rental
operations - ( 1,571) - ( 1,871)
------ ------- ------ --------
Net (loss) $(65,195) $(57,386) $(92,382) $(137,951)
====== ====== ====== =======
Net (loss) per common share
Continuing operations $ (.12) $ (.10) $ (.17) $ (.24)
Discontinued operations - - - -
----- ----- ------ -----
Net (loss) per common share $ (.12) $ (.10) $ (.17) $ (.24)
====== ===== ====== =====
</TABLE>
3
<PAGE>
<TABLE>
CAPITAL RESERVE CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Six Months Ended June 30, 1997 1996
<S>
Operations activities: <C> <C>
Net loss $(92,382) $ (137,951)
Reconciling adjustments:
Depreciation and amortization 5,313 12,916
Gain on Investment (69,358) (49,616)
Loss on sale of assets 16,168 -
Loss (gain) on extinguishment of debt - 12,462
Changes in assets and liabilities:
Other current assets 8,927 15,815
Accounts payable and accrued liabilities (155,504) (22,277)
------- ----------
Total adjustments (194,454) 30,700
------- ----------
Net cash used for operating activities (286,836) (168,651)
Investing activities:
Investments in common stock 5,461 (103,004)
Sales of investments in common stock 91,138 97,241
Proceeds from sale of assets 16,500 -
Proceeds from other investments - 8,637
Purchase of property - (23,973)
--------- ----------
Net cash provided by investing activities 113,099 (21,099)
------- --------
Financing activities:
Payment on note payable - related party - (73,000)
Purchase of treasury stock - (2,000)
--------- -----------
Net cash used for financing activities - (75,000)
--------- ----------
Net change in cash and cash equivalents (173,737) (264,750)
Cash and cash equivalents at beginning of period 229,375 346,304
------- ------------
Cash and cash equivalents at end of period $ 55,638 $ 81,554
======= ===========
</TABLE>
4
<PAGE>
CAPITAL RESERVE CORPORATION
Notes to Consolidated Financial Statements
June 30, 1997
(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 June 30, 1997, and the results of operations for the three
months and six months ended June 30, 1997 and 1996, and cash flows for the six
months ended June 30, 1997 and 1996. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (ITEM 303)
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 1997, was $61,050, as compared to $102,626 and
$99,254 at June 30, 1996, and December 31, 1996, respectively. Since the Company
has no significant source of revenue, working capital will continue to be
depleted by operating expenses. Furthermore, if the Company should generate an
operating loss for the current year comparable to the loss incurred for the year
ended December 31, 1996, a substantial portion of the Company's remaining cash
and working capital will be depleted.
Current liabilities were $90,386 at June 30, 1997 as compared to $148,584 and
$245,890 at June 30, 1996, and December 31, 1996, respectively. The change in
current liabilities is primarily due to the payment of a note payable to a
shareholder, expenses incurred with the settlement of a lawsuit regarding a
former subsidiary of the Company and the indemnification expenses associated
therewith.
RESULTS OF OPERATIONS
Due to the sale of the Company's rental real estate, the Company no longer
receives rental revenues. Rental operations are reflected as discontinued
operations in the statement of operations. While the Company has continued to
receive income (and losses) from Insurance residuals, Interest and dividends,
and Investments, these items are not a significant source of income compared to
the Company's operating expenses.
The Company had total revenues of $77,968 and $64,500 for the six months ended
June 30, 1997 and 1996, respectively. For the three months ended June 30, 1997,
the Company's revenues were ($19,621). As the result of the sale of marketable
securities, for the six months ended June 30, 1997, the Company recorded
Investment Gains of $69,358, as compared to $49,616 for the same period during
1996. The Company also experienced a $11,245 increase in Other income. This
increase was largely due to the recognition of partnership income received
during 1996 from the Company's 2.25% interest in Andrews Partners I, Ltd.
("Andrews"), a Colorado limited partnership, engaged in real estate
transactions.
5
<PAGE>
General and administrative expenses for the six months ended June 30, 1997,
include legal expenses of $56,646.02 which have been incurred in connection with
a lawsuit regarding a former subsidiary of the Company initiated in September,
1995, which was dismissed on April 10, 1997.
General and administrative expenses for the six months ended June 30, 1997, also
include salaries of $49,500 and related payroll tax expenses of $4,344. Also
included in general and administrative expenses for the six months ended June
30, 1997, are Accounting and auditing expenses of $11,005 and Entertainment and
Development expenses of $5,472.
As compared to the six months ended June 30, 1996, operating expenses for the
current period were 15% lower. The net loss from continuing operations for the
six months ended June 30, 1997, decreased by 52%, generally, attributable to a
decrease in expenses.
The Company's present business operations do not generate sufficient revenues to
cover its operating expenses. The Company, through a subsidiary named Wall
Street Investment Corp., is attempting to start a financial consulting company.
Whether Wall Street Investment Corp. will prove to be viable and a source of
revenue is unknown. For the six months ended June 30, 1997, Wall Street
Investment Corp. contributed $2,500 in revenue to the Company's operations;
however, for the three months ended June 30, 1997, Wall Street Investment Corp.
did not contribute any revenue to the Company's operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (ITEM 103)
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
6
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (ITEM 601)
<TABLE>
A) EXHIBITS
<CAPTION>
REGULATION S-B CONSECUTIVE
NUMBER EXHIBIT PAGE NUMBER
<S> <C> <C>
2 Plan of purchase, sale, reorganization
arrangement, liquidation, succession N/A
3(i) Articles of Incorporation as Amended(1)<F1> N/A
3(ii) Bylaws as Amended(2)<F2> N/A
4 Instruments defining the rights of security
holders, including indentures N/A
10 Settlement Agreement(3)<F3> N/A
11 Statement re computation of per share earnings(4)<F4> N/A
15 Letter on unaudited financial information(5)<F5> N/A
18 Letter on change in accounting principles N/A
19 Report furnished to security holders N/A
22 Published report regarding matters submitted
to vote of security holders N/A
23 Consents of experts and counsel N/A
24 Power of Attorney N/A
27 Financial Data Schedule 9
- --------------------------------
<FN>
<F1>
(1) Incorporated by reference to the Exhibits previously filed with the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1990.
<F2>
(2) Incorporated by reference to the Exhibits previously filed with the
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994.
<F3>
(3) Incorporated by reference to the Exhibits previously filed with the
Company's Annual Report on Form 10-KSB/A Amendment No. 1 for the fiscal
year ended December 31, 1996.
<F4>
(4) See Part I - Financial Statements.
<F5>
(5) See Part I - Financial Statements.
</FN>
</TABLE>
B) REPORTS ON FORM 8-K: NONE
7
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CAPITAL RESERVE CORPORATION
(Registrant)
Date: AUGUST 14, 1997 By: /S/RALPH W. NEWTON, JR.
------------------------- -----------------------
Ralph W. Newton, Jr.
Principal Financial and Accounting
Officer and President
63097.10q
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENTS OF OPERATIONS, CONSOLIDATED
STATEMENTS OF CASH FLOWS, AND THE NOTES THERETO, WHICH MAY BE FOUND ON PAGES 2
THROUGH 5 OF THE COMPANY'S FORM 10-QSB FOR THE PERIOD ENDED JUNE 30, 1997, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 55,638
<SECURITIES> 95,447
<RECEIVABLES> 351
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 151,436
<PP&E> 34,701
<DEPRECIATION> 12,415
<TOTAL-ASSETS> 173,722
<CURRENT-LIABILITIES> 90,386
<BONDS> 0
0
50,000
<COMMON> 3,138,102
<OTHER-SE> (3,104,766)
<TOTAL-LIABILITY-AND-EQUITY> 173,722
<SALES> 0
<TOTAL-REVENUES> 77,968
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 170,350
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (92,382)
<INCOME-TAX> 0
<INCOME-CONTINUING> (92,382)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (92,382)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
