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: March 31, 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
MARCH 31, 1997
Transitional Small Business Disclosure Format (check one); Yes____ No __X__
Exhibit index on page 8 Page 1 of 12 pages
<PAGE>
[Letterhead of John M. Hanson & Company, P.C.]
Board of Directors
Capital Reserve Corporation
INDEPENDENT ACCOUNTANTS' REPORT
The accompanying consolidated balance sheet of Capital Reserve
Corporation as of March 31, 1997, and the related consolidated statements of
operations and cash flows for the three months ended March 31, 1997 and 1996
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
management 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
conclusions 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.
/s/John M. Hanson & Company, P.C.
Denver, Colorado
April 24, 1997
2
<PAGE>
<TABLE>
CAPITAL RESERVE CORPORATION
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $104,890
Accounts receivable 1,851
Marketable securities 88,162
Other current assets 2,829
- -------------------------------------------------------------------------------------------------------------------
Total current assets 197,732
EQUIPMENT
Furniture and equipment 34,901
Automobiles 60,242
- -------------------------------------------------------------------------------------------------------------------
Total equipment 95,143
Less accumulated depreciation (37,231)
- -------------------------------------------------------------------------------------------------------------------
Net equipment 57,912
OTHER ASSETS 33,918
- -------------------------------------------------------------------------------------------------------------------
Total assets $289,562
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
Accounts payable and accrued liabilities $141,032
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 141,032
STOCKHOLDERS' EQUITY
Class A common stock 3,138,102
Class B preferred stock 50,000
Accumulated deficit (3,039,572)
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 148,530
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $289,562
</TABLE>
See accountants' report
3
<PAGE>
<TABLE>
CAPITAL RESERVE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended March 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue
Consulting revenue $ 2,500 $ -
Insurance residuals 4,036 4,746
Interest and dividends 1,247 3,086
Investment gains 79,856 7,484
Other 9,950 579
- -------------------------------------------------------------------------------------------------------------------
Total revenues 97,589 15,895
Expenses
General and administrative 124,776 96,160
- -------------------------------------------------------------------------------------------------------------------
Net loss from continuing operations (27,187) (80,265)
Loss from discontinued rental operations - (300)
- -------------------------------------------------------------------------------------------------------------------
Net loss $(27,187) $(80,565)
Continuing operations $ (.05) $ (.14)
Discontinued operations - -
- -------------------------------------------------------------------------------------------------------------------
Net (loss) per common share $ (.05) $ (.14)
</TABLE>
See accountants' report
4
<PAGE>
<TABLE>
CAPITAL RESERVE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended March 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net loss $(27,187) $(80,565)
Reconciling adjustments:
Depreciation 2,636 6,458
Gains on investments (79,856) (7,484)
Partnership income (9,144) -
Changes in operating assets and liabilities:
Other assets 3,848 6,014
Accounts payable and accrued liabilities (104,858) (9,066)
- -------------------------------------------------------------------------------------------------------------------
Total adjustments (187,374) (4,078)
- -------------------------------------------------------------------------------------------------------------------
Net cash (used for) operating activities (214,561) (84,643)
Investing activities:
Proceeds from sale of common stock 136,859 22,895
Investment in common stock (38,674) (7,362)
Purchase of furniture and equipment (8,109) -
Purchase of rental property and equipment - (8,909)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 90,076 6,624
- -------------------------------------------------------------------------------------------------------------------
Change in cash and cash equivalents (124,485) (78,019)
Cash and cash equivalents at beginning of period 229,375 346,304
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $104,890 $268,285
</TABLE>
See accountants' report
5
<PAGE>
CAPITAL RESERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1997, and the results of operations and cash flows
for the quarters ended March 31, 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 March 31, 1997, was $56,700, as compared to $162,001 and
$99,254 at March 31, 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 $141,032 at March 31, 1997 as compared to $222,333 and
$245,890 at March 31, 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 $97,589 and $15,895 for the three months ended
March 31, 1997 and 1996, respectively. As the result of the sale of marketable
securities, for the three months ended March 31, 1997, the Company recorded
Investment Gains of $79,856, as compared to $7,484 for the same period during
1996. The Company also experienced a $9,371 increase in Other income. This
increase was largely due to the recognition of $9,144 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.
General and administrative expenses for the three months ended March 31, 1997,
include legal expenses of $56,412 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.
6
<PAGE>
General and administrative expenses for the three months ended March 31, 1997,
also include salaries of $34,875, employee benefits expense of $5,085, and
related payroll tax expenses of $3,111. Also included in general and
administrative expenses for the three months ended March 31, 1997, are
Accounting and auditing expenses of $9,805 and Entertainment and Development
expenses of $3,231.
As compared to the three months ended March 31, 1996, operating expenses for the
current period were 29.8% higher. The net loss from continuing operations for
the three months ended March 31, 1997, decreased by 66.1%, generally,
attributable to Investment Gains and Other revenue.
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 three months ended March 31, 1997, Wall Street
Investment Corp. contributed $2,500 in revenue to the Company's operations.
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (ITEM 103)
On September 29, 1995, various individuals filed suit in the
United States District Court for the District of Nebraska
against Premier Capital Investment Corporation, Capital
Reserve Corporation, Ralph W. Newton, Jr., Henry W. Hall,
Philip A. Bates, Donald Yee, Linda M. Opfer, and Dennis G.
Haley. The litigation lawsuit was in regard to the offer and
sale of securities of Premier Capital Investment Corporation
("PCIC"), which was formerly a subsidiary of the Company,
during the period of approximately 1988 through 1992. The
complaint generally alleged fraud in connection with the sale
of securities of PCIC and asserted liability under the
Racketeering Influenced and Corrupt Organizations Act
("RICO"), as well as several common law theories. The Company
vigorously defended the suit. The plaintiffs were seeking
damages against all defendants in an aggregate amount up to
$2,400,000 together with interest, costs, and attorneys' fees.
The Company and the other defendants reached a settlement with
the plaintiffs and the lawsuit was dismissed on April 10,
1997.
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
<TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (ITEM 601)
<CAPTION>
A) EXHIBITS
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) N/A
3(ii) Bylaws as Amended(2) N/A
4 Instruments defining the rights of security
holders, including indentures N/A
10 Settlement Agreement(3) N/A
11 Statement re computation of per share earnings(4) N/A
15 Letter on unaudited financial information(5) 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 11
</TABLE>
8
<PAGE>
- --------------------------------
(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.
(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.
(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. (4) See Part I - Financial
Statements. (5) See Part I - Financial Statements.
B) REPORTS ON FORM 8-K: NONE
9
<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:May 14, 1997 By:/s/Ralph W. Newton, Jr.
Ralph W. Newton, Jr.
Principal Financial and Accounting
Officer and President
33197.10Q
10
<PAGE>
Exhibit 27
Financial Data Schedule
<PAGE>
<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 3
THROUGH 6 OF THE COMPANY'S FORM 10-QSB FOR THE PERIOD ENDED MARCH 31, 1997, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 104,890
<SECURITIES> 88,162
<RECEIVABLES> 1,851
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 197,732
<PP&E> 95,143
<DEPRECIATION> 37,231
<TOTAL-ASSETS> 289,562
<CURRENT-LIABILITIES> 141,032
<BONDS> 0
0
50,000
<COMMON> 3,138,102
<OTHER-SE> (3,039,572)
<TOTAL-LIABILITY-AND-EQUITY> 289,562
<SALES> 0
<TOTAL-REVENUES> 97,589
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 124,776
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (27,187)
<INCOME-TAX> 0
<INCOME-CONTINUING> (27,187)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,187)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
