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 March 31, 2000 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.
3,600,793 shares of common stock par value $.001 - March 31, 2000
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 6
Notes to Condensed Unaudited
Financial Statements 7
2. Management's Discussion of Analysis of
Financial Condition and Results of Operations 10
Part II OTHER INFORMATION
1. Exhibits and Reports on Form 8-K 12
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CAPLAN CORPORATION
Balance Sheets
(Unaudited)
March 31, June 30,
ASSETS 2000 1999
- ---------------------------------------- ------------- -------------
Current Assets:
Cash $ 25,029 $ 7,423
Current portion of note receivable 0 2,167
Total current assets 25,029 9,590
Property and Equipment - At Cost:
Office equipment 0 403
Less - Accumulated depletion, depreciation
& amortization and valuation allowances 0 (322)
0 81
Mineral leasehold interests 0 63,862
Total property and equipment 0 63,943
Note receivable - net of current portion 0 8,122
Total Assets $ 25,029 $ 81,655
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------
Current Liabilities:
Accounts payable - trade $ 0 $ 0
Accounts payable - affiliate 0 10,573
Accounts payable - others 0 0
Accrued professional fees 0 14,311
Other accrued liabilities 0 4,560
Total current liabilities 0 29,444
Stockholders' Equity:
Series A preferred stock, $.001 par value,
10,000,000 shares authorized; zero and
1,500,000 shares issued & outstanding,
respectively 0 1,500
Common stock, $.001 par value, 100,000,000
shares authorized, 3,600,793 and 1,300,793
shares issued and outstanding, respectively 3,600 1,300
Additional paid-in capital 1,382,878 1,387,149
Accumulated deficit (1,361,449) (1,337,738)
------------- -------------
Total stockholders' equity 25,029 52,211
Total liabilities and stockholders' equity $ 25,029 $ 81,655
============= =============
See accompanying notes to financial statements
CAPLAN CORPORATION
Statements of Operations
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
------------- -------------
Interest Income $ 62 $ 253
Costs & Expenses:
Professional fees 1,081 0
General and administrative 3,046 2,914
General and administrative-affiliate 2,500 0
Total costs and expenses 6,627 2,914
Loss from continuing operations
before federal income taxes (6,565) (2,661)
Federal income tax provision 0 0
Loss from continuing operations (6,565) (2,661)
Discontinued Operations:
Results of operations from discontinued
segment, net of income taxes 0 0
Gain on disposal of discontinued segment
to affiliate, net of income taxes 0 0
Income from discontinued operations 0 0
Net Income (Loss) (6,565) (2,661)
============= =============
Weighted average number of
common shares outstanding 3,600,793 1,300,792
============= =============
Basic Diluted Net Income (Loss)
Per Common Share:
Continuing Operations $ (.01) $ (.01)
============= =============
Net Income (Loss) $ (.01) $ (.01)
============= =============
See accompanying notes to financial statements
CAPLAN CORPORATION
Statements of Operations
(Unaudited)
Nine Months Nine Months
Ended Ended
March 31, March 31,
2000 1999
------------- -------------
Interest Income $ 456 $ 817
Costs & Expenses:
Professional fees 8,685 14,311
General and administrative 7,982 6,649
General and administrative-affiliate 7,500 10,000
Total costs and expenses 24,167 30,960
Loss from continuing operations
before federal income taxes (23,711) (30,143)
Federal income tax provision 0 0
Loss from continuing operations (23,711) (30,143)
Discontinued Operations:
Results of operations from discontinued
segment, net of income taxes 0 864
Gain on disposal of discontinued segment
to affiliate, net of income taxes 0 0
Income from discontinued operations 0 864
Net Income (Loss) (23,711) (29,279)
============= =============
Weighted average number of
common shares outstanding 3,600,793 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)
Nine Months Nine Months
Ended Ended
March 31, March 31,
2000 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (23,711) $ (29,279)
Adjustments to reconcile net income(loss)
to net cash provided by (used in) operating
activities:
Depletion, depreciation and amortization
and valuation provisions 80 60
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) (29,444) (4,984)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (53,075) (4,640)
CASH FLOWS FROM INVESTING ACTIVITIES
Collections on note receivable 1,243 1,486
Cash paid for mineral leasehold interests 0 (1,821)
NET CASH USED IN INVESTING ACTIVITIES 1,243 (335)
OTHER ADJUSTMENTS -
FINANCIAL ACTIVITY 0 0
Proceeds of private placement 95,000 0
Acquisition cost of position (21,027) 0
Treasury stock acquisition (15,000) 0
Preferred shares retired 1,500 0
Note receivable write off 9,046 0
Net asset value retired (81) 0
69,438 0
NET DECREASE OF CASH 17,606 (4,975)
CASH, beginning of period 7,423 12,300
CASH, end of period $ 25,029 $ 7,325
============= =============
See accompanying notes to financial statements
CAPLAN CORPORATION
Notes to Financial Statements
March 31, 2000
(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 nine month periods ended March 31, 2000 and
1999, 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. As a result of a private placement of
common stock in March, 2000 the number of issued and outstanding shares
increased to 3,600,793 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.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
During the year ended June 30, 1997, the Company entered into a joint project
with an affiliated entity to acquire leasehold interests in acreage located
in West Texas for future mineral extraction. Those leasehold interests are
reflected as Assets on the Balance Sheet for June 30, 1999, as "Mineral
Leasehold Interests" in the amount of $63,862, and as Liabilities under
"Current Liabilities: Accounts Payable - Affiliate" in the amount of $10,573.
Effective March 31, 2000, the Company elected not to participate in the joint
leasehold project. Accordingly, both the corresponding Asset column and the
Liability column reflect the amount of $0 as of March 31, 2000. After giving
effect to the foregoing, the Company's only remaining assets are in the form
of cash. Correspondingly, the Company currently has no source of revenue
other than interest on its limited assets. The properties disposed of did
not generate revenue or earnings during any of the periods being reported and
as a result no pro forma financial information is deemed to be material and
therefore not presented.
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 March 31, 2000 and 1999 amounted
to $7,500 and $5,000 respectively. At March 31, 2000 and 1999, accounts
payable-affiliate totaled zero and $16,937, 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 zero and $1,105
has been classified as current at March 31, 2000 and 1999, respectively.
Interest received during the periods ended March 31, 2000 and 1999 amounted
to $456 and $394, 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 March 31, 1999, the carrying
amount of this instrument approximates its fair value. As of March 31, 2000
the note receivable with a principal balance of $9,045 was assigned to Dix R.
Turnbow in lieu of debt from the Company.
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 March 31, 1999, 1,500,000 preferred
shares and 825,100 common shares were restricted. At March 31, 2000,
1,500,000 preferred shares and 3,060,398 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 March 31, 2000 and
1999, no preferred shares had been converted. All preferred shares are held
in the treasury as of March 31, 2000.
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 March 31, 2000 and 1999, the
Company has leasehold interests on approximately zero 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 zero 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. As of March 31,
2000 the Company elected not to participate in the joint leasehold project
and the financial statements reflect no mineral leasehold interests.
Current Status of Operations
With its March 31, 2000, election not to participate in the joint leasehold
project, the Company no longer holds any mineral leasehold interests.
Accordingly, as of March 31, 2000, the Company is conducting no business and
the Company's only source of revenue is the interest income on its limited
cash assets.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) During the quarter ended March 31, 2000, the Company did file a report
on Form 8-K.
Date of Report: March 1, 2000
Item Reported: Item 1. Changes in control of Registrant
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: May 11, 2000 By Ronnie Hinze
Ronnie Hinze, President
