FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1999 Commission File No. 2-85602-D
Caplan Corporation
(exact name of registrant as specified in its charter)
Delaware 87-0398403
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
111 South Saint Charles, Brenham, Texas 77833
(Address of principal executive offices, including zip)
(409) 836-4576
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
1,300,793 shares of common stock par value $.001 - September 30, 1999
TABLE OF CONTENTS
Item Number and Caption Page No.
Part I FINANCIAL INFORMATION
1. Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Condensed Unaudited
Financial Statements 6
2. Management's Discussion of Analysis of
Financial Condition and Results of Operations 9
Part II OTHER INFORMATION
1. Exhibits and Reports on Form 8-K 11
<PAGE>
CAPLAN CORPORATION
Balance Sheets
(Unaudited)
September 30, June 30,
ASSETS 1999 1999
- ---------------------------------------- ------------- -------------
Current Assets:
Cash $ 6,797 $ 7,423
Current portion of note receivable 1,641 2,167
Total current assets 8,438 9,590
Property and Equipment - At Cost:
Office equipment 403 403
Less - Accumulated depletion, depreciation
& amortization and valuation allowances (342) (322)
61 81
Mineral leasehold interests 63,863 63,862
Total property and equipment 63,924 63,943
Note receivable - net of current portion 8,122 8,122
Total Assets $ 80,484 $ 81,655
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------
Current Liabilities:
Accounts payable - trade $ 0 $ 0
Accounts payable - affiliate 14,437 10,573
Accounts payable - others 15,000 0
Accrued professional fees 8,483 14,311
Other accrued liabilities 0 4,560
Total current liabilities 37,920 29,444
Stockholders' Equity:
Series A preferred stock, $.001 par value,
10,000,000 shares authorized; 1,500,000
shares issued & outstanding 1,500 1,500
Common stock, $.001 par value, 100,000,000
shares authorized, 1,300,792 and 1,300,792
shares issued and outstanding, respectively 1,300 1,300
Additional paid-in capital 1,387,149 1,387,149
Accumulated deficit (1,347,385) (1,337,738)
Total stockholders' equity 42,564 52,211
Total liabilities and stockholders' equity $ 80,484 $ 81,655
============= =============
See accompanying notes to financial statements
CAPLAN CORPORATION
Statements of Operations
(Unaudited)
Three Months Three Months
Ended Ended
September 30, September 30,
1999 1998
------------- -------------
Interest Income $ 202 $ 285
Costs & Expenses:
Professional fees 3,923 13,382
General and administrative 3,426 1,874
General and administrative-affiliate 2,500 10,000
Total costs and expenses 9,849 25,256
Loss from continuing operations
before federal income taxes (9,647) (24,971)
Federal income tax provision 0 0
Loss from continuing operations (9,647) (24,971)
Discontinued Operations:
Results of operations from discontinued
segment, net of income taxes of $-0- 0 864
Gain on disposal of discontinued segment
to affiliate, net of income taxes of $-0- 0 0
Income from discontinued operations 0 864
Net Income (Loss) (9,647) (24,107)
============= =============
Weighted average number of
common shares outstanding 1,300,793 1,300,792
============= =============
Basic Diluted Net Income (Loss)
Per Common Share:
Continuing Operations $ (.01) $ (.02)
============= =============
Net Income (Loss) $ (.01) $ (.02)
============= =============
See accompanying notes to financial statements
CAPLAN CORPORATION
Statements of Cash Flows
(Unaudited)
Three Months Three Months
Ended Ended
September 30, September 30,
1999 1998
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (9,647) $ (24,107)
Adjustments to reconcile net income(loss)
to net cash provided by (used in) operating
activities:
Depletion, depreciation and amortization
and valuation provisions 20 20
Changes in operating assets and liabilities:
Accounts receivable - trade and affiliate,
decrease (increase) 0 29,563
Accounts payable - trade and affiliate &
accrued liabilities, increase (decrease) 8,476 (6,806)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,151) (1,330)
CASH FLOWS FROM INVESTING ACTIVITIES
Collections on note receivable 525 486
Cash paid for mineral leasehold interests 0 (1,821)
NET CASH USED IN INVESTING ACTIVITIES 525 (1,335)
NET DECREASE OF CASH (626) (2,665)
CASH, beginning of period 7,423 12,300
CASH, end of period $ 6,797 $ 9,635
============= =============
See accompanying notes to financial statements
<PAGE>
CAPLAN CORPORATION
Notes to Financial Statements
September 30, 1999
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
General
The financial statements, management's discussion and these notes to
financial statements are condensed and should be read in conjunction with the
financial statements and notes thereto included in the Company's annual
report to shareholders and Form 10-K for the year ended June 30, 1999.
The financial information contained herein is unaudited but, in the opinion
of the management of Caplan Corporation, includes all adjustments necessary
to a fair presentation of the results of operations for the periods
indicated. The results for the three month periods ended September 30, 1999
and 1998, are not necessarily indicative of the results to be expected for
the full year.
The accompanying unaudited condensed financial statements have been prepared
in accordance with the instructions for Form 10-Q and therefore do not
include all information necessary for a fair presentation of financial
position and results of operations in conformity with generally accepted
accounting principles.
Organization
Caplan Corporation (the Company) was incorporated under the laws of the State
of Delaware on July 5, 1983 for the purpose of participating in oil and gas
activities in the United States. In June, 1987, the stockholders approved a
three-to-one reverse split of the issued and outstanding shares of the
Company's common stock and warrants. As a result of the reverse stock split,
the number of issued and outstanding shares decreased to 1,300,793 while the
par value of each share remained $.001.
Office Equipment
Office equipment is carried at cost. Depreciation is computed using the
straight-line method based on the asset's estimated useful life of five
years.
Mineral Leasehold Interests
Mineral leasehold interest are carried at acquisition cost. The acquisition
costs of these unproven interest are assessed at least annually for
impairment of value, and if such impairment is indicated, a loss is
recognized by providing a valuation allowance. No impairment losses have
been recognized by the Company. Delay rental payments are charged to
operations when payment is made to the landowner.
Federal Income Taxes
The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. Valuation
allowances are provided on deferred tax assets when it is more likely than
not that such assets will not be realized.
Net Income (Loss) Per Common Share
During 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share". This SFAS replaces the presentation of
primary earnings per share with a presentation of basic earnings per share.
It also requires dual presentation of basic and diluted earnings per share
and a reconciliation of the numerator and denominator of the basic earnings
per share computation to the numerator and denominator of the diluted
earnings per share computation. The basic earnings per share amounts have
been computed based on the weighted average number of common shares
outstanding at the end of each month in the period and are presented in the
statements of operations. Under SFAS No. 128, inclusion of the Company's
convertible preferred stock in the computation of diluted earnings per share
would have been antidilutive for the periods presented; therefore, these
potential common shares have been excluded from the computation of diluted
earnings per share. As a result, the diluted earnings per share computation
is equivalent to the basic earnings per share computation. Under SFAS No.
128, the computation of diluted earnings per share for the results of
operations from the discontinued segment also excludes the Company's
convertible preferred stock.
Cash Equivalents
For purposes of the Statement of Cash Flows, cash equivalents include all
highly liquid investments with original maturities of three months or less.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Other Accounting Pronouncements
Effective December 15, 1997, the Company adopted SFAS No. 129, "Disclosure of
Information about Capital Structure", which establishes standards for
disclosing information about the Company's capital structure. This statement
does not change any previous disclosures but consolidates them in this
statement for ease of retrieval and for greater visibility.
Furthermore, the Financial Accounting Standards Board (the "FASB") has issued
standards which will modify the current method of accounting utilized by the
Company subsequent to the year ending June 30, 1998.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income". This statement established standards for
reporting and disclosure of comprehensive income and its
components. Comprehensive income is defined as the change in
equity during a period. Comprehensive income includes net income
and other comprehensive income which refers to unrealized gains and
losses that under generally accepted accounting principles are
excluded from net income. Under this statement for 1999, the
Company will include a comprehensive income statement that is
presented as a financial statement.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This statement
establishes standards and requirements for public enterprises
regarding information about operating segments in annual financial
statements. This statement also establishes standards for related
disclosures about products and services, geographic areas, and
major customers. Operating segments are components of an
enterprise that are evaluated regularly by management in deciding
how to allocate resources and in assessing performance. This
statement will be adopted by the Company during the year ending
June 30, 1999.
The adoption of these statements will impact the disclosures in the Company's
financial statements, however, management does not believe that adoption of
these statements will have a material impact on the Company's financial
condition or results of operations.
<PAGE>
CAPLAN CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Related Party Transactions
The Company has engaged in numerous related party transactions with officers,
directors and stockholders which are described below.
The company's headquarters in Brenham, Texas are presently located in office
space which is shared with several entities owned or controlled by Dix R.
Turnbow, an officer and controlling stockholder of the Company. Employees of
these other entities have performed certain general and administrative
services on behalf of the Company. General and administrative services
charged to the Company for the periods ended September 30, 1999 and 1998
amounted to $2,500 and $2,500 respectively. At September 30, 1999 and 1998,
accounts payable-affiliate totaled $14,437 and $8,804, respectively.
In March, 1994, the Company purchased a note receivable held by Dix R.
Turnbow, which was originally issued to a third party to partially finance
the sale of certain land. The Company purchased the note for the amount of
outstanding principal at the time of acquisition. The note is payable in
monthly installments or $243, including interest at 8%, maturing August 2003,
and secured by an assignment of the deed of trust covering that certain
parcel of land. Principal due the Company in the amount of $1,64l and $1,515
has been classified as current at September 30, 1999 and 1998, respectively.
Interest received during the periods ended September 30, 1999 and 1998
amounted to $202 and $243, respectively, which is included with interest
revenue in the statements of operations. The fair value of this instrument
is estimated based on rates which the Company would offer to debtors of
similar credit quality for similar financing arrangements. At September 30,
1999 and 1998, the carrying amount of this instrument approximates its fair
value.
All restricted preferred and common shares issued by the Company are subject
to the conditions of the Securities and Exchange Commission's Rule 144 under
the Securities Exchange Act of 1933. Among other conditions, Rule 144
requires that the restricted securities must be beneficially owned and paid
for by the stockholder for a period of at least two years before the
restricted securities can be sold. At September 30, 1999, 1,500,000
preferred shares and 825,100 common shares are restricted. At September 30,
1998, 1,500,000 preferred shares and 825,100 common shares were restricted.
Each share of the Company's Series A preferred stock is convertible at the
holder's option on any date before January 9, 2011 into one share of the
Company's common stock in exchange for the share of preferred stock plus
$0.625 per share or the adjusted conversion price. As of September, 30, 1999
and 1998, no preferred shares had been converted.
During the year ended June 30, 1997, the Company entered into a joint project
with an affiliated entity owned by Dix R. Turnbow and another stockholder and
President of the Company to acquire leasehold interests in acreage located in
West Texas for future mineral extraction. As of September 30, 1999 and 1998,
the Company has leasehold interests on approximately 3,825 net acres and
3,825 net acres, respectively, in West Texas and has capitalized costs,
including lease bonus payments and related acquisition costs, aggregating to
$63,862 and $63,862, respectively. The lease agreements contain primary
lease terms ranging from four to twenty years, but will terminate if
production has not commenced on or before the first anniversary date of the
lease unless the Company provides delay rental payments to the landowners in
amounts specified in the agreements. The lease agreements contain additional
terms requiring minimum advance royalty and production royalty payments.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) During the quarter ended September 30, 1999, the Company did not file
any report on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPLAN CORPORATION, Registrant
DATE: October 1, 1999 By Ronnie Hinze
Ronnie Hinze, President