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: September 30, 1998
[ ] 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.)
#11-1861 Beach Avenue, Vancouver, British Columbia V6G 1Z1 Canada
(Address of principal executive offices)
(604) 687-4828
(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 ___ No
_X_
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 November 12, 1998
Transitional Small Business Disclosure Format (check one); Yes___ No _X_
Exhibit index on page 9 Page 1 of 12 pages
<PAGE>
Independent Accountants' Report
Board of Directors
Capital Reserve Corporation
The accompanying consolidated balance sheet of Capital Reserve Corporation as of
September 30, 1998, and the related consolidated statements of operations for
the three months and nine months ended September 30, 1998, and 1997 and cash
flows for the nine months ended September 30, 1998, and 1997 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 reader'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/Miller and McCollom, CPA's
Miller and McCollom, CPA's
Denver, Colorado
November 3, 1998
2
<PAGE>
<TABLE>
<CAPTION>
CAPITAL RESERVE CORPORATION
Consolidated Balance Sheet
September 30, 1998
(Unaudited)
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 293
------------------------
TOTAL ASSETS $ 293
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ -
------------------------
Total current liabilities -
------------------------
STOCKHOLDERS' EQUITY
Class A common stock 3,138,102
Class B preferred stock 50,000
Accumulated deficit (3,187,809)
------------------------
293
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 293
========================
</TABLE>
See accountants' report and notes to financial statements.
3
<PAGE>
<TABLE>
CAPITAL RESERVE CORPORATION
Consolidated statements of operations
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------- -------------------------------------
1998 1997 1998 1997
--------------------- ------------------ ------------------ ---------------
<S> <C> <C> <C> <C>
Revenues
Insurance residuals $ 381 $ 4,759 $ 2,692 $ 13,314
Consulting revenues - - - 2,500
Interest and dividends 22 168 37 1,941
Investment (loss) gains - (12,275) (2,302) 57,083
Loss on sale of assets - - (13,813) (16,168)
Other 450 1,888 9,319 13,838
--------------------- ------------------ ------------------ ---------------
Total revenues 853 (5,460) (4,067) 72,508
Expenses
General and administrative 1,161 13,936 17,440 184,286
--------------------- ------------------ ------------------ ---------------
Net (loss) $ (308) $ (19,396) $ (21,507) $ (111,778)
===================== ================== ================== ===============
Net (loss) per common share $ * $ (.04) $ (.04) $ (.21)
===================== ================== ================== ===============
</TABLE>
* Less than $.01
See accountants' report and notes to financial statements.
4
<PAGE>
<TABLE>
CAPITAL RESERVE CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
------------------------------------------
1998 1997
---------------------- ---------------------
<S> <C> <C>
Operations activities:
Net loss $ (21,507) $ (111,778)
---------------------- ---------------------
Reconciling adjustments:
Depreciation and amortization 964 6,218
Loss (gain) on investments 2,302 (57,083)
Loss on sale of assets 13,813 16,168
Partnership (loss) income 11,175 -
Other 8,047 -
Changes in assets and liabilities:
Other current assets 351 32,511
Accounts payable and accrued liabilities (49,012) (180,451)
---------------------- ---------------------
Total adjustments (12,360) (182,637)
---------------------- ---------------------
Net cash used for operating activities (33,867) (294,415)
---------------------- ---------------------
Investing activities:
Investments in common stock (1,893) (17,767)
Sales of investments in common stock 21,462 99,247
Proceeds from sale of assets 5,843 16,500
Purchase of property - (8,109)
---------------------- ---------------------
Net cash provided by investing activities 25,412 89,871
---------------------- ---------------------
Net change in cash and cash equivalents (8,455) (204,544)
Cash and cash equivalents at beginning of period 8,748 229,375
---------------------- ---------------------
Cash and cash equivalents at end of period $ 293 $ 24,831
====================== =====================
</TABLE>
See accountants' report and notes to financial statements.
5
<PAGE>
CAPITAL RESERVE CORPORATION
Notes to Consolidated Financial Statements
September 30, 1998
(Unaudited)
Note 1 - 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 September 30, 1998, and the results of operations for the
three months and nine months ended September 30, 1998, and 1997 and cash flows
for the nine months ended September 30, 1998, and 1997. The Notes to
Consolidated Financial Statements which are contained in the Company's Form
10-KSB should be read in conjunction with these consolidated financial
statements.
Note 2 - Related Party Transaction
In March 1998, a corporation with which an officer of the Corporation is
affiliated, purchased the Corporation's insurance residual for $15,000. This
amount is included in other revenue in the accompanying financial statements.
6
<PAGE>
Item 2. Management's Discussion And Analysis or Plan of Operation (Item 303)
Liquidity and Capital Resources
Our working capital at September 30, 1998, was $293, as compared to ($9,996) at
December 31, 1997. Since we have no significant source of revenue, working
capital will continue to be depleted by operating expenses. Furthermore, if we
should generate an operating loss for the current year comparable to the loss
incurred for the year ended December 31, 1997, we will have very little, if any,
cash and working capital remaining.
We had no current liabilities at September 30, 1998. At December 31, 1997, our
current liabilities were $49,012.
As of November 12, 1998, we were in the process of conducting a private
placement of up to 5,000,000 shares of the Corporation's Class A Common Stock,
no par value (the "Shares") pursuant to Rule 506 of Regulation D. We are
offering the shares at $0.10 per share, or an aggregate offering price of
$500,000. There is no guaranty that we will be able to sell any or all of the
Shares being offered.
Results of Operations
We have essentially suspended all of the Corporation's operations. We have
disposed of most of our assets and applied the proceeds from the sale of those
assets to decreasing our outstanding liabilities. As of November 12, 1998, we
had no source of income.
We had total revenues of ($4,067) and $72,508 for the nine months ended
September 30, 1998 and 1997, respectively. As the result of the sale of
marketable securities, for the nine months ended September 30, 1998, we recorded
an investment loss of $2,302, as compared to an investment gain of $57,083 for
the same period during 1997. We also generated other revenues of $9,319 for the
nine months ended September 30, 1998, which was largely due to the sale of our
insurance residual to a related party. See "Item 1. Financial Statements - Note
2." During the nine months ended September 30, 1998, we incurred a loss on the
sale of assets, attributable to the sale of the our furniture and fixtures to an
unrelated party, in the amount of $13,183, compared to a loss of $16,168 for the
same period during 1997. See "Item 1. Financial Statements."
General and administrative expenses for the nine months ended September 30,
1998, include legal expenses of $4,257. General and administrative expenses for
the nine months ended September 30, 1998, also include: (i) rent expenses of
$2,806; (ii) accounting and auditing expenses of $5,875, and outside services
expenses of $1,121.
As compared to the nine months ended September 30, 1997, operating expenses for
the current period decreased by 91%. The net loss from continuing operations for
the nine months ended September 30, 1998, decreased by 81% compared to 1997,
generally attributable to a decrease in expenses and total revenues.
7
<PAGE>
We are in the process of seeking a viable company to acquire or with which to
merge. Until such a company can be identified, we have no source of income and
no viable operations. There is no guaranty that we will be able to locate any
such company.
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.
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
10.1 Settlement Agreement(3)<F3> N/A
10.2 Sub-Contracting Agreement with Columbia
Financial Group(6)<F6> N/A
11 Statement re computation of per share earnings(4)<F4> N/A
15 Letter on unaudited financial information(5)<F5> N/A
16.1 Letter from John M. Hanson & Company, P.C.
regarding change in certifying accountants(6)<F6> N/A
18 Letter on change in accounting principles N/A
19 Report furnished to security holders N/A
8
<PAGE>
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
- - --------------------------------
<FN>
<F1>
(1) Incorporated by reference to the Exhibits previously filed with the
Corporation'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
Corporation'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
Corporation'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.
<F6>
(6) Incorporated by reference to the Exhibits previously filed with the
Corporation's Quarterly Report on Form 10-QSB for the period ended
September 30, 1997.
</FN>
</TABLE>
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: November 12, 1998 By:/s/Glen C. Loder
Glen C. Loder
Principal Financial and Accounting
Officer and President
93098.10Q
10
<PAGE>
Exhibit 27
Financial Data Schedule
11
<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 2
THROUGH 6 OF THE COMPANY'S FORM 10-QSB FOR THE PERIOD ENDED SEPTEMBER 30, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 293
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 293
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 293
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
50,000
<COMMON> 3,138,102
<OTHER-SE> (3,187,809)
<TOTAL-LIABILITY-AND-EQUITY> 293
<SALES> 0
<TOTAL-REVENUES> (4,067)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,440
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (21,507)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,507)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,507)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
