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, 1999
[ ] 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 _X_ No __
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date:
1,411,045 SHARES OF CLASS A COMMON STOCK, NO PAR VALUE, AS OF
MAY 14, 1999
Transitional Small Business Disclosure Format (check one); Yes___ No _X_
Exhibit index on page 11 Page 1 of 14 pages
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Capital Reserve Corporation
The accompanying consolidated balance sheet of Capital Reserve Corporation as of
March 31, 1999, and the related consolidated statements of operations for the
three months ended March 31, 1999, and 1998 and cash flows for the three months
ended March 31, 1999, and 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
May 8, 1999
2
<PAGE>
<TABLE>
CAPITAL RESERVE CORPORATION
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(Unaudited)
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 9,538
Accounts receivable 2,500
Prepaid consulting - related party 25,000
-----------------
Total current assets
TOTAL ASSETS $ 37,038
=================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 7,769
Accounts payable - related party 261
-----------------
Total current liabilities 8,030
-----------------
STOCKHOLDERS' EQUITY
Class A common stock 3,216,012
Class B preferred stock 50,000
Accumulated deficit (3,237,004)
-----------------
29,008
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 37,038
=================
</TABLE>
See accountants' report and notes to financial statements
3
<PAGE>
<TABLE>
<CAPTION>
CAPITAL RESERVE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
-----------------------------------
1999 1998
--------------- -----------------
<S> <C> <C>
Revenues
Insurance residuals $ - $ 1,877
Interest and dividends - 15
Investment (loss) gains - (8,080)
Loss on sale of assets - (13,813)
Other - 15,035
--------------- -----------------
Total revenues - (4,966)
<CAPTION>
Expenses
General and administrative 27,371 12,806
--------------- -----------------
Net (loss) $ (27,371) $ (17,772)
=============== =================
Net (loss) per common share $ (.02) $ (.03)
=============== =================
Weighted average shares outstanding 1,261,045 546,045
=============== =================
</TABLE>
See accountants' report and notes to financial statements
4
<PAGE>
<TABLE>
<CAPTION>
CAPITAL RESERVE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Class A CLASS B
Stock STOCK
Common PREFERRED
------------------------------------- ---------------------------------------
ACCUMULATED
Shares AMOUNT SHARES AMOUNT DEFICIT
<S> <C> <C> <C> <C> <C>
December 31, 1997 546,045 $ 3,138,102 250,000 $ 50,000 $ (3,166,302)
Issuance of common
stock net of offering
cost of $4,940 250,000 20,060 - - -
Net (loss) - - - - (43,331)
---------------- ----------------- --------------- --------------- --------------------
December 31, 1998 796,045 3,158,162 250,000 50,000 (3,209,633)
Issuance of common
stock net of offering
cost of $3,650 615,000 57,850 - - -
Net (loss) - - - - (27,371)
---------------- ----------------- --------------- --------------- --------------------
1,411,045 $ 3,216,012 250,000 $ 50,000 $ (3,237,004)
================ ================= =============== =============== ====================
</TABLE>
See accountants' report and notes to financial statements
5
<PAGE>
<TABLE>
<CAPTION>
CAPITAL RESERVE CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
---------------------------------------
1999 1998
------------------- -----------------
<S> <C> <C>
Operations activities:
Net loss $ (27,371) $ (17,772)
------------------- -----------------
Reconciling adjustments:
Depreciation and amortization - 964
Loss (gain) on investments - 8,080
Loss on sale of assets - 13,813
Other - (4,645)
Changes in assets and liabilities:
Other current assets (27,500) 93
Accounts payable (4,958) (15,839)
------------------- -----------------
Total adjustments (32,458) 2,466
------------------- -----------------
Net cash used for operating activities (59,829) (15,306)
------------------- -----------------
Investing activities:
Investments in common stock - (1,893)
Sales of investments in common stock - 6,232
Proceeds from sale of assets - 5,843
------------------- -----------------
Net cash provided by investing activities - 10,182
------------------- -----------------
Financing activities:
Issuance of common stock 61,500 -
Offering costs (3,650) -
------------------- -----------------
Net cash provided by financing activities 57,850 -
------------------- -----------------
Net change in cash and cash equivalents (1,979) (5,124)
Cash and cash equivalents at beginning of period 11,517 8,748
------------------- -----------------
Cash and cash equivalents at end of period $ 9,538 $ 3,624
=================== =================
</TABLE>
See accountants' report and notes to financial statements
6
<PAGE>
CAPITAL RESERVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(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, 1999, and the results of operations for the three
months ended March 31, 1999, and 1998 and cash flows for the three months ended
March 31, 1999, and 1998. 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
CHANGE IN CONTROL
On October 6, 1998, Glen C. Loder entered into an agreement with Ralph W.
Newton, Jr., the former president and director of the Company, and Patricia L.
Newton, Mr. Newton's wife to purchase their ownership of 140,000 Class B
Preferred Stock for $40,000 plus options to purchase up to 200,000 shares of the
Company's common stock at a price of $.25 per share which Mr. Loder would cause
the Company to issue. The option was issued in 1999. Mr. Loder agreed to cause
the Company to engage in a private placement of its common stock, of which the
first $40,000 raised would be used to pay a management fee to Mr. Loder. Mr.
Loder then used the management fee to pay the purchase price. This amount was
paid in 1999. (See Note 3.)
On October 6, 1998, the Company entered into a management agreement with Mr.
Loder. The agreement provides that Mr. Loder shall serve as Chairman of the
Board of Directors and President of the Company, until terminated by the Company
or Mr. Loder. Under the terms of the agreement, Mr. Loder will receive $5,000
per month plus expenses.
In March 1998, a Corporation which a former 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.
NOTE 3 - PRIVATE PLACEMENT OF COMMON STOCK
The Company offerred for sale up to 5,000,000 shares of its Class A common stock
at $0.10 per share. The offering provided for a $50,000 minimum on a best
efforts basis through its officers and directors on such sales. As of March 31,
1999, the Company had sold 865,000 shares for $86,500 and incurred $8,590 in
commission and offering expense. The Company used the proceeds of the stock
sales prior to meeting the $50,000 minimum as provided for the private placement
summary and therefore certain buyers have the right to rescind their purchase of
stock.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (ITEM 303)
GENERAL
The Company has essentially suspended all of its operations. Management has
disposed of most of the Company's assets and applied the proceeds from the sale
of those assets to decreasing the Company's outstanding liabilities. As of the
date of this report the Company had no source of income. The Company must rely
entirely upon the sale of stock to pay any expenses the Company incurs.
Therefore, the financial statements included in this report for the three months
ended March 31, 1999 and 1998, are not necessarily indicative of the Company's
future operations.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's working capital at March 31, 1999, was $29,008, as compared to
$(1,471) at December 31, 1998. 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,
1998, a substantial portion of the Corporation's remaining cash and working
capital will be depleted.
The Corporation had current liabilities of $8,030 at March 31, 1999, as compared
to $12,988 at December 31, 1998.
RESULTS OF OPERATIONS
The Corporation had no revenues for the three months ended March 31, 1999. For
the three months ended March 31, 1998 the Corporation had total revenues of
$(4,966).
Management is in the process of seeking a viable company to acquire or with
which to merge. Until such a company can be identified, the Corporation has no
source of income and no viable operations. There is no guaranty that management
will be able to locate any such company. If the Corporation is able to find a
suitable merger or acquisition candidate, any such merger or acquisition would
most likely result in the Corporation having to issue a substantial amount of
stock to consummate the transaction.
General and administrative expenses for the three months ended March 31, 1999,
include consulting fees to Mr. Loder, the President and a director of the
Corporation, of $15,000. General and administrative expenses for the nine months
ended March 31, 1999, also include: (i) office expenses of $5,684 and (ii)
accounting and auditing expenses of $3,000.
As compared to the three months ended March 31, 1998, operating expenses for the
current period increased by 114%. The net loss from continuing operations for
the three months ended March 31, 1999, increased by 54% compared to 1998. The
increases in expenses and the Corporation's net loss are
8
<PAGE>
attributable to the consulting fees paid to Mr. Loder, pursuant to the
Management Agreement between the Corporation and Mr. Loder.
During the last quarter of fiscal 1998 and the first quarter of fiscal 1999 the
Corporation conducted a private placement of shares of the Corporation's Class A
Common Stock, no par value pursuant to Rule 506 of Regulation D. A total of
865,000 shares were sold at a price of $0.10 per share, for gross proceeds of
$86,500. The net loss per common share for the three months ended March 31,
1999, decreased by $0.01 per share due to the increase the number of outstanding
shares.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
From November 1998 through February 1999, the Corporation
conducted a private placement of shares of the Corporation's
Class A Common Stock, no par value (the "Shares") pursuant to
Rule 506 of Regulation D. Sales were made to a total of ten
(10) Canadian citizens. A total of 865,000 shares were sold at
a price of $0.10 per share, for gross proceeds of $86,500. The
Company paid commissions of 10% to persons assisting the
Corporation with sales. As of March 31, 1998, Kerry Loder, the
son of Glen C. Loder, an officer and director of the
Corporation, had received commissions of $3,650 in connection
with the sale of shares.
The Company is in the process of offering rescission to the
purchasers of shares in the private placement based upon
statements by the Company that it would not pay commissions on
sales of shares and that the Company would terminate the
offering if it had not received subscriptions for $50,000 by
December 31, 1998.
The Company did not sell the minimum subscription amount of
$50,000 by December 31, 1998, and did not terminate the
offering by such date. The Company continued to offer the
shares and utilized funds from the sale of shares prior to
receiving the minimum subscription amount of $50,000. In
addition, the Company paid commissions of approximately 10% to
persons selling shares in the offering.
Pursuant to the terms of the Stock Purchase Agreement between
Mr. Loder, Ralph W. Newton and Patricia L. Newton, the Company
issued an option to Mr. and Mrs. Newton on February 3, 1999.
The option entitles Mr. and Mrs. Newton to acquire up to
200,000 shares of the Corporation's Class A Common Stock at a
price of $0.25 per share at any time on or before February 3,
2001. The option was issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
9
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
10
<PAGE>
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<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
10.3 Management Agreement with Mr. Loder(7)<F7> 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 ___
- --------------------------------
<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>
11
<PAGE>
<F7>
(7) 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, 1998.
B) REPORTS ON FORM 8-K:
1. Form 8-K dated February 3, 1999, reporting the
closing of the stock purchase transaction between Mr.
Loder, Mr. Newton and Mrs. Newton, under Item 1.
Changes in Control of the Registrant.
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 17, 1999 By:/S/GLEN C. LODER
President
33199.10Q
12
<PAGE>
Exhibit 27
Financial Data Schedule
13
<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 7 OF THE COMPANY'S FORM 10-QSB FOR THE PERIOD ENDED MARCH 31, 1999, 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 9,538
<SECURITIES> 0
<RECEIVABLES> 2,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,038
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,038
<CURRENT-LIABILITIES> 8,030
<BONDS> 0
0
50,000
<COMMON> 3,216,012
<OTHER-SE> (3,237,004)
<TOTAL-LIABILITY-AND-EQUITY> 37,038
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 27,371
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (27,371)
<INCOME-TAX> 0
<INCOME-CONTINUING> (27,371)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,371)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
