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, 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. 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
MAY 11, 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
March 31, 1998, and the related consolidated statements of operations for the
three months ended March 31, 1998, and cash flows for the three months ended
March 31, 1998, were not audited by us, and accordingly, we do not express an
opinion on them. The March 31, 1997, consolidated financial statements of
Capital Reserve Corporation were compiled by other accountants whose report
dated April 24, 1997, stated that they did not express an opinion or any other
form of assurance on those statements.
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/Bradeen, Campbell & Claar, CPA's
Bradeen, Campbell & Claar, CPA's
Denver, Colorado
May 2, 1998
2
<PAGE>
<TABLE>
<CAPTION>
CAPITAL RESERVE CORPORATION
Consolidated Balance Sheet
March 31, 1998
(Unaudited)
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,624
Accounts receivable 5,258
Marketable securities 17,154
-----------------
Total current assets 26,036
Investments 11,166
-----------------
TOTAL ASSETS $ 37,202
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 33,173
Total current liabilities 33,173
-----------------
STOCKHOLDERS' EQUITY
Class A common stock 3,138,102
Class B preferred stock 50,000
Accumulated deficit (3,184,073)
-----------------
4,029
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 37,202
=================
</TABLE>
See accountants' report and notes to financial statements
3
<PAGE>
<TABLE>
CAPITAL RESERVE CORPORATION
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
1998 1997
--------------- -----------------
<S> <C> <C>
Revenues
Insurance residuals $ 1,877 $ 4,036
Consulting revenues - 2,500
Interest and dividends 15 1,247
Investment (loss) gains (8,080) 79,856
Loss on sale of assets (13,813) -
Other 15,035 9,950
--------------- -----------------
Total revenues (4,966) 97,589
Expenses
General and administrative 12,806 124,776
--------------- -----------------
Net (loss) $ (17,772) $ (27,187)
=============== =================
Net (loss) per common share $ (.03) $ (.05)
=============== =================
</TABLE>
See accountants' report and notes to financial statements
4
<PAGE>
<TABLE>
CAPITAL RESERVE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
1998 1997
------------------- -----------------
<S> <C> <C>
Operations activities:
Net loss $ (17,772) $ (27,187)
------------------- -----------------
Reconciling adjustments:
Depreciation and amortization 964 2,636
Loss (gain) on investments 8,080 (79,856)
Loss on sale of assets 13,813 -
Partnership (loss) income 9 (9,144)
Other (4,654) -
Changes in assets and liabilities:
Other current assets 93 3,848
Accounts payable and accrued liabilities (15,839) (104,858)
------------------- -----------------
Total adjustments 2,466 (187,374)
------------------- -----------------
Net cash used for operating activities (15,306) (214,561)
------------------- -----------------
Investing activities:
Investments in common stock (1,893) (38,674)
Sales of investments in common stock 6,232 136,859
Proceeds from sale of assets 5,843 -
Purchase of property - (8,109)
------------------- -----------------
Net cash provided by investing activities 10,182 90,076
------------------- -----------------
Net change in cash and cash equivalents (5,124) (124,485)
Cash and cash equivalents at beginning of period 8,748 229,375
------------------- -----------------
Cash and cash equivalents at end of period $ 3,624 $ 104,890
=================== =================
</TABLE>
See accountants' report and notes to financial statements
5
<PAGE>
CAPITAL RESERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1998, and the results of operations for the three
months ended March 31, 1998, and 1997 and cash flows for the three months ended
March 31, 1998, and 1997. The Notes to Consolidated Financial Statements which
are contained in the Form 10-K should be read in conjunction with these
consolidated financial statements.
NOTE 2 - RELATED PARTY TRANSACTION
In March 1998, a corporation which an officer of the Corporation is affiliated
with purchased the Company's insurance residual for $15,000. This amount is
included in other revenue in the accompanying financial statements. At March 31,
1998, the Company 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 March 31, 1998, was ($7,137), as compared to ($9,996) at
December 31, 1997. 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, 1997, a substantial portion
of the Company's remaining cash and working capital will be depleted.
Current liabilities were $33,173 at March 31, 1998 as compared to $49,012 at
December 31, 1997.
6
<PAGE>
RESULTS OF OPERATIONS
Due to the sale of the Company's rental real estate, the Company no longer
receives rental revenues. 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 ($4,966) and $97,589 for the three months
ended March 31, 1998 and 1997, respectively. As the result of the sale of
marketable securities, for the three months ended March 31, 1998, the Company
recorded an investment loss of $8,080, as compared to an investment gain of
$79,856 for the same period during 1997. The Company also generated other
revenues of $15,035 for the three months ended March 31, 1998, which was largely
due to the sale of the Company's insurance residual to a related party. See
"Item 1. Financial Statements - Note 2." During the three months ended March 31,
1998, the Company incurred a loss on the sale of assets, attributable to the
sale of the Company's furniture and fixtures to an unrelated party, in the
amount of $13,813. See "Item 1. Financial Statements."
General and administrative expenses for the three months ended March 31, 1998,
include legal expenses of $1,990.
General and administrative expenses for the three months ended March 31, 1998,
also include: (i) rent expenses of $2,806; (ii) accounting and auditing expenses
of $5,250, entertainment and development expenses of $697, and insurance
expenses of $658.
As compared to the three months ended March 31, 1997, operating expenses for the
current period decreased by 90%. The net loss from continuing operations for the
three months ended March 31, 1998, decreased by 35%, 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
7
<PAGE>
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.
8
<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
10.1 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 12
- --------------------------------
<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.
<F6>
(6) Incorporated by reference to the Exhibits previously filed with the
Company'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: MAY , 1998 By: /S/RALPH W. NEWTON, JR.
--------------- -----------------------
Ralph W. Newton, Jr.
Principal Financial and Accounting
Officer and President
33198.10Q
10
<PAGE>
Exhibit 27
Financial Data Schedule
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 3,624
<SECURITIES> 17,154
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,036
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,202
<CURRENT-LIABILITIES> 33,173
<BONDS> 0
0
50,000
<COMMON> 3,138,102
<OTHER-SE> (3,184,073)
<TOTAL-LIABILITY-AND-EQUITY> 37,202
<SALES> 0
<TOTAL-REVENUES> (4,966)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,806
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (17,772)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,772)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,772)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
