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, 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 - September 30, 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 5
Notes to Condensed Unaudited
Financial Statements 6
Part II OTHER INFORMATION
1. Exhibits and Reports on Form 8-K 13
<PAGE>
CAPLAN CORPORATION
Balance Sheets
(Unaudited)
September 30, June 30,
ASSETS 2000 2000
---------------------------------------- ------------- -------------
Current Assets:
Cash $ 14,977 $ 20,590
Current portion of note receivable 0 0
Total current assets 14,977 20,590
Property and Equipment - At Cost:
Office equipment 0 0
Less - Accumulated depletion, depreciation
& amortization and valuation allowances 0 0
0 0
Other Assets 0 0
Total Assets $ 14,977 $ 20,590
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------
Current Liabilities:
Accounts payable - trade $ 0 $ 0
Accounts payable - affiliate 0 0
Accounts payable - others 0 0
Accrued professional fees 7,344 0
Other accrued liabilities 0 0
Total current liabilities 7,344 0
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.001 par value, 100,000,000
shares authorized, 3,600,793 and 1,300,793
shares issued and outstanding, respectively 3,600 3,600
Additional paid-in capital 1,479,849 1,479,849
Accumulated deficit (1,475,816) (1,462,859)
Total stockholders' equity 7,633 20,590
Total liabilities and stockholders' equity $ 14,977 $ 20,590
============= =============
See accompanying notes to financial statements
CAPLAN CORPORATION
Statements of Operations
(Unaudited)
Three Months Three Months
Ended Ended
September 30, September 30,
2000 1999
------------- -------------
Interest Income $ 0 $ 220
Costs & Expenses:
Professional fees 12,344 3,923
General and administrative 613 3,426
General and administrative-affiliate 0 2,500
Total costs and expenses 12,957 9,849
Loss from continuing operations
before federal income taxes 0 (9,647)
Federal income tax provision 0 0
Net Income (Loss) (12,957) (9,647)
============= =============
Weighted average number of
common shares outstanding 3,600,793 1,300,793
============= =============
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 Cash Flows
(Unaudited)
Three Months Three Months
Ended Ended
September 30, September 30,
2000 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (12,957) $ (9,647)
Adjustments to reconcile net income(loss)
to net cash provided by (used in) operating
activities:
Depletion, depreciation and amortization
and valuation provisions 0 20
Changes in operating assets and liabilities:
Accounts receivable - trade and affiliate,
decrease (increase) 0 0
Accounts payable - trade and affiliate &
accrued liabilities, increase (decrease) 7,344 8,476
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (5,613) (1,151)
CASH FLOWS FROM INVESTING ACTIVITIES
Collections on note receivable 0 525
NET CASH USED IN INVESTING ACTIVITIES 0 525
NET DECREASE OF CASH (5,613) (626)
CASH, beginning of period 20,590 7,423
CASH, end of period $ 14,977 $ 6,797
============= =============
See accompanying notes to financial statements
<PAGE>
CAPLAN CORPORATION
Notes to Financial Statements
September 30, 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, 2000.
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, 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.
Over the past several years, the Company phased-out its oil and gas
operations and related investments. The Company discontinued operations in
this area during the year ended June 30, 1998. The exploration, development
and production of oil and gas reserves had been the Company's primary source
of revenues. During 1997, the Company initiated its investment in a second
industry segment - mining of extractive minerals. The Company obtained
leasehold interests on acreage in West Texas for future extraction of mineral
substances, including bentonite, zeolite and other associated minerals. The
Company discontinued operations in this business segment during the year
ended June 30, 2000. The mineral extraction segment did not generate income
during its existence. Additionally, in March 2000, the Company issued
restricted common stock in a private placement. The purchasers of the
private placement shares also purchased additional shares from the existing
officers, directors, and stockholders of the Company. Management's immediate
plans for the Company are to investigate business opportunities in activities
other than oil and gas and mineral extraction.
Presently, the Company is inactive as all investments and ongoing business
activities have been disposed of through June 30, 2000. The Company is
currently pursuing business opportunities. It is anticipated that any
investment would require additional capital through a capital placement
offering or other financing resources. There is no guarantee the Company
would be able to raise the necessary resources to fund any investment.
Office and Other Equipment
Office and other equipment is and will be carried at cost. Depreciation is
computed using the straight-line method based on the asset's estimated useful
life of the particular asset.
Oil and Gas Properties
The Company in the past followed the "successful-efforts" method of
accounting for its oil and gas properties. Under this method of accounting,
all property acquisition costs and costs to drill and equip exploratory wells
are capitalized when incurred, pending determination of whether the well has
resulted in the discovery of proved reserves. The costs of drilling and
equipping any exploratory wells which do not find proved reserves, net of any
salvage value, are charged to expense. The costs of development wells are
capitalized, whether the well is productive or nonproductive. The
acquisition costs of unproved properties are assessed at least annually for
impairment of value, and if such impairment is indicated, a loss is
recognized by providing a valuation allowance. Geological and geophysical
costs and the costs of carrying and retaining undeveloped properties
(including delay rentals) are expensed as incurred.
Depletion and depreciation are computed separately on each individual
property. Proved leasehold costs are depleted on the unit-of-production
method over the estimated total proved reserves of the individual properties.
Completed well costs are depreciated on the unit-of-production method over
the estimated proved developed reserves of the individual properties.
Capitalized costs of proved oil and gas properties are limited to an amount
calculated as the sum of deferred taxes (if any) related to the proved oil
and gas properties and the aggregate undiscounted future cash flows from
production of proved oil and gas reserves which includes the effects of
future income taxes arising from production of the proved reserves.
The Company applies Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" to its long-term assets. This SFAS requires that
an impairment loss be recognized whenever the carrying amount of an asset
exceeds the sum of the estimated future cash flows (undiscounted) of the
asset. Since adopting, no impairment losses have been recognized.
Mineral Leasehold Interests
Mineral leasehold interest were in the past years reported and 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
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. 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. 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.
Changes in Control of the Company
In March 2000, the Company issued 2,000,000 shares of restricted common stock
in a private placement at $0.04 per share, for an aggregate of $80,000, as
follows: Clemens F. Walker IRA and family trusts, 1,700,000 shares; Keith A.
Cannon, 100,000 shares; Jerry Spilsbury, 100,000 shares; and Vector Capital,
LLC, 100,000 shares. In addition, the above four purchasers also purchased
an aggregate of 400,000 shares, from Dix Turnbow (247,094 shares), Ronnie
Hinze (129,914 shares), and Scott Turnbow (22,902 shares), officers,
directors and stockholders of the Company. Further, Mr. Walker converted
$15,000 in advances made to the Company in August 1999, in shares of common
stock at $0.05 per share, or an aggregate of 300,000 shares. The purchasers
used personal funds to purchase the securities in the above-referenced
transactions.
Discontinued Segments
On March 6, 2000, the Company agreed to sell the majority of its assets
consisting of a note receivable, nominal office furniture and equipment and
mineral leasehold interests that, after depreciation, depletion and
amortization, had a net book value of approximately $83,000. The directors
of the Company determined to dispose of such properties because of the
significant investment required by the Company to be able to generate
material business activities with these properties that, with the Company's
current principal stockholders, would likely be well in excess of the amounts
of cash currently available to it. These assets were sold to Topo Minerals,
LLC, which is owned by Dix Turnbow, Ronnie Hinze, and Scott E. Turnbow,
directors and/or executive officers of the Company, in consideration of $100
in cash, the release by the owners of Topo Minerals, LLC, of any claim or
liability against the Company whatsoever, and the assumption by Topo
Minerals, LLC of all obligations relating to the property arising from and
after the date of such conveyance.
Effective June 30, 1998, the Company sold its remaining interests in oil and
gas properties with a net book basis of $2,329 for $27,500, resulting in an
affiliate receivable in the amount of $27,500 at June 30, 1998 and a
recognized gain in the amount of $25,171 for the year ended June 30, 1998.
The properties were sold to a company wholly-owned by Dix R. Turnbow, an
officer and former controlling stockholder of the Company. Accordingly, the
operating results of the discontinued segment have been segregated from
continuing operations and reported as a separate line on the statements of
operations.
Operating results for the discontinued oil and gas segment were as follows:
Year Ended June 30,
------------------------------
2000 1999 1998
-------- -------- --------
REVENUES
Oil and gas sales $ - $ 25 $ 15,189
Oil and gas sales - affiliate - 891 22,972
Gain on sale of oil and gas properties - - -
-------- -------- --------
TOTAL REVENUES - 916 38,161
COSTS AND EXPENSES
Production expenses - 1 9,534
Production expenses - affiliate - 51 19,011
Depletion,depreciation and amortization
and valuation provisions - - 1,004
-------- -------- --------
TOTAL COSTS AND EXPENSES - 52 29,549
-------- -------- --------
RESULTS OF OPERATIONS FROM
DISCONTINUED SEGMENT BEFORE
FEDERAL INCOME TAXES - 864 8,612
FEDERAL INCOME TAX PROVISION - - -
-------- -------- --------
RESULTS OF OPERATIONS FROM
DISCONTINUED SEGMENT $ - $ 864 $ 8,612
======== ======== ========
BASIC AND DILUTED RESULTS OF
OPERATIONS PER COMMON SHARE $ - $ .001 $ .006
======== ======== ========
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 years ended June 30, 2000 and 1999, amounted
to $7,500 and $10,000, respectively. At June 30, 2000 and 1999, accounts
payable-affiliates totaled $0 and $10,573, 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 of $243, including interest at 8%, maturing August 2003,
and secured by an assignment of the deed of trust covering that certain
parcel of land. Interest received during the years ended June 30, 2000 and
1999 amounted to $456 and $911, 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. During the year
ended June 30, 2000, this note was satisfied through the sale of assets.
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 June 30, 2000, 2,834,837 common shares
were restricted. At June 30, 1999, 1,500,000 preferred shares and 825,100
common shares were restricted.
Each share of the Company's Series A preferred stock was 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 June 30, 1999, no
preferred shares had been converted. During March 2000, all of the Company's
Series A preferred stock as repurchased and cancelled as a provision of the
private placement of restricted common shares issued.
Certain related parties participated in costs and revenues of oil and gas
properties in which the Company participated as a working interest owner.
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 extractions. As of June 30, 1999, the Company
had leasehold interests on approximately 3,825 net acres in West Texas and
has capitalized costs, including lease bonus payments and related acquisition
costs, aggregating to $63,862. The Company discontinued operations of this
business segment during the year ended June 30, 2000. This mineral
extraction segment did not generate income during its existence. The
properties were transferred to Topo Minerals, LLC, which is owned by Dix R.
Turnbow, Ronnie Hinze and Scott E. Turnbow, directors and/or officers of the
Company.
Contingencies
The Company is a third party defendant in a legal proceeding involving title
to a tract of land. On the basis of information furnished by counsel,
management believes that the claim against the Company is without merit and
intends to defend its position vigorously. While the ultimate result of this
matter cannot be determined, management does not expect that it will have a
material, adverse effect on the Company's results of operations or financial
position. Additionally, former management of the Company have agreed to
personally pay any judgment against the Company in excess of $5,000 related
to this matter.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) During the quarter ended September 30, 2000, 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 17, 2000 By Ronnie Hinze
Ronnie Hinze, President
