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, 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.)
6732 WEST COAL MINE AVENUE, #504, LITTLETON, COLORADO 80128
(Address of principal executive offices)
(303) 794-3155
(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. YesNo _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
AUGUST 14, 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
June 30, 1998, and the related consolidated statements of operations for the
three months and six months ended June 30, 1998, and cash flows for the six
months ended June 30, 1998, 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/Miller and McCollom, CPA's
Miller and McCollom, CPA's
Denver, Colorado
August 5, 1998
2
<PAGE>
<TABLE>
<CAPTION>
CAPITAL RESERVE CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(Unaudited)
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,476
Accounts receivable 5,000
----------------
Total currents assets 6,476
-
----------------
Investments
TOTAL ASSETS $ 6,476
================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 5,875
Total current liabilities 5,875
----------------
STOCKHOLDERS' EQUITY
Class A common stock 3,138,102
Class B preferred stock 50,000
Accumulated deficit (3,187,501)
----------------
601
----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,476
================
</TABLE>
See accountants' report and notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
CAPITAL RESERVE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ----------------------------
1998 1997 1998 1997
--------------- ------------ -------------- -------------
Revenues
<S> <C> <C> <C> <C>
Insurance residuals $ 434 $ 4,519 $ 2,311 $ 8,555
Consulting revenues - - - 2,500
Interest and dividends - 526 15 1,773
Investment (loss) gains 5,778 (10,498) (2,302) 69,358
Loss on sale of assets - (16,168) (13,813) (16,168)
Other (6,166) 2,000 8,869 11,950
--------------- ------------ -------------- -------------
Total revenues 46 (19,621) (4,920) 77,968
Expenses
General and administrative 3,473 45,574 16,279 170,350
--------------- ------------ -------------- -------------
Net (loss) $ (3,427) $ (65,195) $ (21,199) $ (92,382)
=============== ============ ============== =============
Net (loss) per common share $ (.01) $ (.12) $ (.04) $ (.17)
=============== ============ ============== =============
</TABLE>
See accountants' report and notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CAPITAL RESERVE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
---------------------------------
1998 1997
--------------- -------------
<S> <C> <C>
Operations activities:
Net loss $ (21,199) $ (92,382)
--------------- -------------
Reconciling adjustments:
Depreciation and amortization 964 5,313
Loss (gain) on investments 2,302 (69,358)
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 (4,649) 8,927
Accounts payable and accrued liabilities (43,137) (155,504)
--------------- -------------
Total adjustments (11,485) (194,454)
--------------- -------------
Net cash used for operating activities (32,684) (286,836)
--------------- -------------
Investing activities:
Investments in common stock (1,893) (38,674)
Sales of investments in common stock 21,462 143,382
Proceeds from sale of assets 5,843 16,500
Purchase of property - (8,109)
--------------- -------------
Net cash provided by investing activities 25,412 113,099
--------------- -------------
Net change in cash and cash equivalents (7,272) (173,737)
Cash and cash equivalents at beginning of period 8,748 229,375
--------------- -------------
Cash and cash equivalents at end of period $ 1,476 $ 55,638
=============== =============
</TABLE>
See accountants' report and notes to financial statements.
5
<PAGE>
CAPITAL RESERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 June 30, 1998, and the results of operations for the three
months and six months ended June 30, 1998, and 1997 and cash flows for the six
months ended June 30, 1998, and 1997. The Notes to Consolidated Financial
Statements which are contained in the 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. At
June 30, 1998, the Corporation had received $10,000 in cash and the remaining
balance is included in accounts receivable in the accompanying financial
statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (ITEM 303)
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 1998, was $601, as compared to ($9,996) at December
31, 1997. Since the Corporation has no significant source of revenue, working
capital will continue to be depleted by operating expenses. Furthermore, if the
Corporation should generate an operating loss for the current year comparable to
the loss incurred for the year ended December 31, 1997, a substantial portion of
the Corporation's remaining cash and working capital will be depleted.
Current liabilities were $8,875 at June 30, 1998 as compared to $49,012 at
December 31, 1997.
5
<PAGE>
RESULTS OF OPERATIONS
The Corporation is in the process of suspending its operations. As such, the
Corporation has disposed of most of its assets and applied the proceeds from the
sale of those assets to decreasing the Corporation's outstanding liabilities.
While the Corporation 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 Corporation's operating
expenses.
The Corporation had total revenues of ($4,920) and $77,968 for the six months
ended June 30, 1998 and 1997, respectively. As the result of the sale of
marketable securities, for the six months ended June 30, 1998, the Corporation
recorded an investment loss of $2,302, as compared to an investment gain of
$69,358 for the same period during 1997. The Corporation also generated other
revenues of $8,869 for the six months ended June 30, 1998, which was largely due
to the sale of the Corporation's insurance residual to a related party. See
"Item 1. Financial Statements - Note 2." During the six months ended June 30,
1998, the Corporation incurred a loss on the sale of assets, attributable to the
sale of the Corporation's furniture and fixtures to an unrelated party, in the
amount of $13,813, compared to a loss of $16,168 for the same period during
1997. See "Item 1. Financial Statements."
General and administrative expenses for the six months ended June 30, 1998,
include legal expenses of $3,732. General and administrative expenses for the
six months ended June 30, 1998, also include: (i) rent expenses of $2,806; (ii)
accounting and auditing expenses of $5,875, entertainment and development
expenses of $697, and insurance expenses of $836.
As compared to the six months ended June 30, 1997, operating expenses for the
current period decreased by 91%. The net loss from continuing operations for the
six months ended June 30, 1998, decreased by 77% compared to 1997, generally
attributable to a decrease in expenses and total revenues.
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
6
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable.
7
<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>
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
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
8
<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, 1998 By: /S/RALPH W. NEWTON, JR.
--------------- -----------------------
Ralph W. Newton, Jr.
Principal Financial and Accounting
Officer and President
63098.10Q
9
<PAGE>
Exhibit 27
Financial Data Schedule
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,479
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,476
<PP&E> 0
<DEPRECIATION> 964
<TOTAL-ASSETS> 6,476
<CURRENT-LIABILITIES> 5,875
<BONDS> 0
0
50,000
<COMMON> 3,138,102
<OTHER-SE> (3,187,501)
<TOTAL-LIABILITY-AND-EQUITY> 6,476
<SALES> 0
<TOTAL-REVENUES> (4,920)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (21,199)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,199)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,199)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
