SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 2054
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997 Commission File Number 2-94117-D
------------------ ---------
ECLIPSE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-0867911
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2 North Cascade Avenue, Suite 330, Colorado Springs, Colorado 80903
-------------------------------------------------------------- -------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (719) 520-1800
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- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) Yes X
-------
of the Securities Exchange Act of 1934 during the pre-
ceding 12 months (or for such shorter period that the No
registrant was required to file such reports), and (2) -------
has been subject to such filing requirements for the
past 90 days.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares outstanding
Class at September 30, 1997
----- ---------------------
Common stock, $.0005 par value 87,349,400 shares
------------------------------
<PAGE>
FORM 10-Q
3rd QUARTER
INDEX
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PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements *
Balance Sheets - September 30, 1997 (Unaudited) ................ 3
Statements of Operations - Three months ended
September 30, 1997 and
September 30, 1996 and nine months ended
September 30, 1997 and September 30, 1996 (Unaudited) .......... 4
Statement of Cash Flows - Nine months ended
September 30, 1997 and September 30, 1996 (Unaudited) ........ 5
Notes to Financial Statements (Unaudited) ...................... 6
Item 2. Management's Discussion and Analysis (Unaudited) ...... 8
PART II - OTHER INFORMATION
Items 1 through 6 ............................................. 8
SIGNATURES ..................................................... 9
* The accompanying financial statements are not covered by an independent
certified public accountant's report.
2
<PAGE>
Part 1. Item 1. Financial Information
- ------- ------- ---------------------
ECLIPSE CORPORATION
<TABLE>
<CAPTION>
Condensed Balance Sheet
September 30, 1997
ASSETS
<S> <C>
Cash & equivalents ................................................... $ 56,609
Trade receivables, net of allowance of $5,080 ........................ 20,697
Trade receivables, related party ..................................... 67,719
Notes receivable, related party, net of discount $8,133 .............. 200,000
Allowance for doubtful note ........................................ (200,000)
Other current assets ................................................. 36,875
Inventory, at cost ................................................... 1,002,033
Notes receivable, net ................................................ 665,269
Land held for sale ................................................... 754,403
Property & Equipment ................................................. 144,630
Accumulated depreciation ............................................. (7,830)
Deferred charges ..................................................... 13,200
Accumulated amortization ............................................. (8,800)
Other ................................................................ 1,476
-----
$ 2,746,281
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses ....................... $ 99,252
Flooring lines .............................................. 815,698
Notes payable ............................................... 674,113
Other current liabilities-related parties ................... 455,923
Customer deposits ........................................... 168,256
Deferred revenue ............................................ 131,328
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TOTAL LIABILITIES 2,344,570
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SHAREHOLDERS' EQUITY
Common stock ................................................ 37,578
Additional paid in capital .................................. 1,179,731
Retained earnings ........................................... 11,522
Current earning (loss) ...................................... (827,120)
--------
TOTAL SHAREHOLDERS EQUITY ........ 401,711
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$ 2,746,281
===========
</TABLE>
See accompanying notes to condensed financial statements
3
<PAGE>
ECLIPSE CORPORATION
<TABLE>
<CAPTION>
Condensed Statements of Operations
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES .......................................... $ 384,396 $ 499,011 $ 666,976 $ 499,011
COST OF SALES ...................................... 353,025 412,698 574,464 412,698
------- ------- ------- -------
GROSS PROFIT ....................................... 31,371 86,313 92,512 86,313
OPERATING EXPENSES
Management fees-related party ................. 120,000 150,000 360,000 150,000
Selling, general & administrative ............. 82,845 144,409 256,130 144,409
------ ------- ------- -------
202,845 294,409 616,130 294,409
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS ...................... (171,474) (208,096) (523,618) (208,096)
OTHER INCOME (EXPENSE)
Interest and dividend income .................. 8,794 32,947 44,509 32,947
Interest expense .............................. (51,057) -- (122,719) --
Allowance for doubtful notes receivable ....... (208,133) -- (208,133) --
Other income (expense), net ................... (7,098) (5,466) (17,158) (5,466)
------ ------ ------- ------
TOTAL OTHER INCOME (EXPENSE) ....................... (257,494) 27,481 (303,501) 27,481
INCOME (LOSS) BEFORE INCOME TAXES .................. (428,968) (180,615) (827,119) (180,615)
INCOME TAX (EXPENSE) BENEFIT ....................... -- -- -- --
INCOME (LOSS) - CONTINUING OPERATIONS .............. (428,968) (180,615) (827,119) (180,615)
DISCONTINUED OPERATIONS
Net income from medical product development
operations, net of income taxes ............... -- (32,605) -- 436,174
Gain on sale of operations, net of income taxes -- 43,773 -- 43,773
NET INCOME (LOSS) .................................. $ (428,968) $ (104,237) $ (827,119) $ (299,332)
============ ============ ============ ============
NET INCOME (LOSS ) PER SHARE
CONTINUING OPERATIONS .................... $ * $ * $ (.01) $ *
NET INCOME (LOSS) PER SHARE ........................ $ * $ * $ (.01) $ *
WEIGHTED AVERAGE SHARES OUTSTANDING ................ 87,349,400 70,514,233 87,349,400 70,514,233
</TABLE>
* Less than $.01 per share
See accompanying notes to condensed financial statements
4
<PAGE>
ECLIPSE CORPORATION
<TABLE>
<CAPTION>
Condensed Statements of Cash Flow
Nine Months Ended
September 30,
-------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS (USED IN) OPERATING ACTIVITIES .......... (130,258) (65,042)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayments, former president .................. -- 532,437
Purchase notes receivable, net ................ -- (674,792)
Purchase land for resale ...................... -- (713,183)
Proceeds from sale of fixed assets ............ -- 251,000
Proceeds notes receivable, net ................ 20,000 --
(Purchase)redemption certificate of deposit ... 6,250 (50,000)
Purchase of property & equipment .............. (600) (34,163)
---- -------
NET CASH FROM (USED IN) INVESTING ......... 25,650 (688,701)
------ --------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised ........................ -- 16,501
Proceeds from issuance of debt ................. 105,320 303,954
------- -------
NET CASH PROVIDED BY INVESTING ............ 105,320 320,455
NET (DECREASE) INCREASE IN CASH .................... 712 (433,288)
CASH, BEGINNING OF YEAR ............................ 55,897 506,519
------ -------
CASH, END OF PERIOD ................................ $ 56,609 $ 73,231
========= =========
</TABLE>
See accompanying notes to condensed financial statements
5
<PAGE>
ECLIPSE CORPORATION
-------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1997
Note A: Basis of presentation
- ------------------------------
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its annual 10-KSB report dated
December 31, 1996 and should be read in conjunction with the notes thereto.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
Interim financial data presented herein are unaudited.
Certain 1996 financial information has been restated to conform with
presentation in the annual 10-KSB report dated December 31, 1996.
Note B: Income taxes
- ---------------------
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Income tax benefit
due to continuing net operating losses during the quarter ended September 30,
1997 were offset by an increase to the valuation allowance, bringing the net
deferred tax asset balance to $0.
Note C: Sale of Former Officers' Common Stock
- ----------------------------------------------
On June 27, 1996, the Company's former president, (Kilgore) sold 26,835,000
shares of his common stock, representing 40.3% of the Company's outstanding
common stock, to a new control group for approximately $562,000 in cash. Kilgore
used $498,346 of the proceeds to repay a then outstanding note receivable and
related interest from the Company to him. This note receivable had been
previously fully reserved, which along with other prior payments by Kilgore
resulted in other income of $532,000 being recorded in the financial statements.
In connection with the sale agreement, the two prior members of the Company's
Board of Directors resigned and four new Board members and three new officers
affiliated with the new control group were appointed. The prior directors and
Kilgore retained their currently outstanding options to purchase an aggregate of
7,000,000 share of common stock (4,000,000 options exercisable at $.001 and
3,000,000 options exercisable at $.02).
6
<PAGE>
ECLIPSE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1997
Note D: Land held for sale
- ----------------------------
The Company acquired land to be developed and sold in conjunction with its
manufactured home sales activities. At December 31, 1996, the Company recorded
the land on its books as part of inventory. At September 30, 1997, the Company
has reclassified the land separate from inventory and is recorded as a long-term
asset to be sold as it
is developed.
Note E: Related party transactions
- -----------------------------------
The Company purchased a note receivable during 1996 at a discount due from a
company that is managed and partially owned by a board member. The note is
secured by property held by the related party. As of September 30, 1997, the
note has not performed and interest payments due for the nine months ended
September 30, 1997 total $11,700. The Company has not recorded an accrual for
the past due interest. The note becomes due and payable November 1997. (See
subsequent event Note - H)
The Company's management agreement with Innercircle Group, Inc. ("IGI") was
amended on September 15, 1997, retroactive to January 1, 1997, whereby the
monthly management fee of $40,000 is to be paid in cash of $20,000 each month
and $60,000 paid quarterly in the Company's common stock. The number of shares
to be issued will be determined on a monthly basis on the last closing price as
of each month. As of September 30, 1997 no common stock had been issued to IGI
as part of this amendment.
Note F: Notes Payable
- ----------------------
The Company has two notes payable $60,000 and $165,000 which became due on
December 2, 1996 and June 4, 1997, respectively. At September 30, 1997, the
Company is negotiating the extension of the $60,000 note. (See subsequent event
Note - H).
Note G: Change in management
- -----------------------------
On September 1, 1997, J. Royce Renfrow resigned as Secretary and Director of the
Company. He has been replaced as Secretary by James Humpal, who also serves as a
Director and Treasurer of the Company.
7
<PAGE>
ECLIPSE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1997
Note H: Subsequent event
- -------------------------
Due to the Company's default on its promissory note of $165,000, the holder of
the note has made a claim against the collateral securing the note. The
collateral was a note receivable in the amount of $500,000 that the Company had
purchased in 1996 for $450,000. In the event that the Company is not successful
in its efforts to retain ownership of the note receivable, assets will decrease
approximately $450,000.
The Company purchased a note receivable, in 1996, from an affiliated entity in
the amount of $208,133 for $200,000 cash. The collateral securing the note was
also encumbered by promissory notes held by other creditors. Subsequent to
September 30, 1997, the property was foreclosed upon by a creditor. Accordingly,
at September 30, 1997, the Company recorded an allowance for doubtful notes
receivable and a corresponding charge to third quarter income in the amount of
$200, 000.
Note I: Going concern
- ----------------------
As shown in the accompanying financial statements, the Company has incurred
recurring losses from operations and has a deficit in working capital. As a
result, the Company has experienced severe liquidity problems. These factors
raise substantial doubt about its ability to continue as a going concern.
Management is working with its primary lenders to monitor the status of its
indebtedness and further restructuring of its debt is expected. In addition,
management is in the process of making certain acquisitions that would improve
profitability.
There can be no assurance that management will be successful in its efforts to
restructure debt, operate profitably, or collect amounts due. If the Company is
unsuccessful in its efforts, it may be necessary to undertake such other actions
as may be appropriate to preserve asset value. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
8
<PAGE>
ECLIPSE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
GENERAL
- -------
The Company's financial condition and results of operations are directly
affected by the following transactions:
The Company has redesigned and re-engineered portions of platted and unplatted
lots acquired by the Company on September 30, 1996, when it purchased a portion
of the Community at Bear Creek modular home subdivision located in Colorado
Springs, Colorado. The platted lots number approximately 30, and the unplatted
lots approximately 25. During revision of its development plan, the Company has
negotiated with the City of Colorado Springs a reconfiguration of the Company's
subdivision. The Company initially expected this reconfiguration to be finalized
in June 1997. The Company now expects it to be finalized in September or
October, 1997. The Company has increased its sales of lots to retail customers,
together with manufactured houses to be constructed thereon, within the Bear
Creek Subdivision. During the third quarter the Company closed on 2 such
transactions and is under contract for 3 more lots/manufactured home sales in
the Bear Creek Subdivision.
With respect to the Company's manufactured housing dealership, it sold 2 units
in the third quarter of 1997, and is currently under contract with retail
customers for the sale of 5 more manufactured housing units.
Additionally, the Company, in order to assist a sub-dealer, has entered into
negotiations to purchase multiple lots located in Walsenburg, Colorado, which
management feels will increase its sales through its Walsenburg sub-dealer.
J. Royce Renfrow resigned as an officer and Director of the Company on September
1, 1997, which resignation was accepted by the Board of Directors at its regular
Board meeting on October 1, 1997.
The Company extended its definitive purchase agreement with Technology Learning
Systems of Northglen, Colorado, in order to enable it to expand and finalize its
due diligence. Management anticipates receipt of a due diligence report from a
third-party consultant during the month of October, after which time management
anticipates a closing date will be scheduled.
FINANCIAL CONDITION
- -------------------
As of September 30, 1997, the Company's working capital was approximately
($1,029,309), a decrease of approximately $293,293 from June 30, 1997. The
decrease is primarily attributable to the $200,000 write-down of a note
receivable expected to mature in 1997.
Further, the Company is engaged in a dispute with one of its creditors, Michael
Dean Chaussee, concerning his treatment of a promissory note secured by a deed
of trust owned by the Company, which was utilized to secure a loan by Mr.
Chaussee to the Company. Although management has been in negotiations with Mr.
Chaussee in order to resolve the matter, it appears that it will be necessary
for the Company to file suit in order to protect its interest in said note and
deed of trust. Accordingly, management has instituted a search for counsel to
represent the Company with respect to this matter.
RESULT OF OPERATIONS
- --------------------
The Company incurred net (losses) profits of ($428,968), and $104,237 for the
three months ended September 30, 1997 and 1996, respectively. Losses for both
periods are primarily from the start-up of the manufactured home sales
dealership operations.
9
<PAGE>
PART II - OTHER INFORMATION
Item 1 Through 5 - No response required.
Item 6 - Exhibits and reports on Form 8-K.
(a) Exhibits
27* Financial Data Schedule.
(b) Reports on Form 8-K
None.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECLIPSE CORPORATION
(Registrant)
DATE: _______________________ BY: /s/ Kenneth M. Cahill
-----------------------
KENNETH M. CAHILL, PRESIDENT
DATE: _______________________ BY: /s/ Darel A. Tiegs
-----------------------
DAREL A. TIEGS, VICE PRESIDENT
DATE: _______________________ BY: /s/ James A. Humpal
-----------------------------
JAMES A. HUMPAL, VICE PRESIDENT/
SECRETARY / TREASURER
Principal Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ECLIPSE CORPORATION UNAUDITED BALANCE SHEET
AS OF SEPTEMBER 30, 1997 AND THE RELATED STATEMENT OF INCOME
FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 56,609
<SECURITIES> 0
<RECEIVABLES> 93,493
<ALLOWANCES> 5,080
<INVENTORY> 1,002,033
<CURRENT-ASSETS> 1,183,933
<PP&E> 144,630
<DEPRECIATION> 7,830
<TOTAL-ASSETS> 2,746,281
<CURRENT-LIABILITIES> 2,213,242
<BONDS> 0
0
0
<COMMON> 37,578
<OTHER-SE> 364,133
<TOTAL-LIABILITY-AND-EQUITY> 2,746,281
<SALES> 384,396
<TOTAL-REVENUES> 384,396
<CGS> 353,025
<TOTAL-COSTS> 555,870
<OTHER-EXPENSES> 7,098
<LOSS-PROVISION> 208,133
<INTEREST-EXPENSE> 51,057
<INCOME-PRETAX> (428,968)
<INCOME-TAX> 0
<INCOME-CONTINUING> (428,968)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (428,968)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
