<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarter ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 33-5154
Residential Resources, Inc.
---------------------------
(Exact name of registrant as specified in its charter)
Arizona 86-0544838
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2058 North Mills Avenue, Suite 344, Claremont, California 91711
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(Address of principal executive offices)
714-518-5945
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
None None
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant: (I) 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), an (ii) has been subject to such
filing requirements for the past (90) days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
form 10-K or any amendment to this Form 10-K. [X]
The number of shares outstanding of the registrant's common stock as of
November 20, 1996 was 7,018.
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PART I FINANCIAL INFORMATION
Item 1. Financial
Statements
RESIDENTIAL RESOURCES, INC.
BALANCE SHEETS
1996 1996
September March 31
30
(Unaudited) (Audited)
ASSETS
Cash and Cash Equivalents $2,585 $703
Due From Stockholder $139,600 $140,000
Deferred Registration Costs $229,565 $229,565
Deferred Tax Asset $118,089
Property and Equipment, at cost
Less Accumulated Depreciation of
$35,608 and $30,521. $20,019 $30,519
Valuation Allowance ($118,089) $0
--------- --
TOTAL ASSETS $391,769 $400,787
LIABILITIES AND STOCKHOLDERS DEFICIT
LIABILITIES
Notes and Advances Due to
Related Parties $405,995 $405,995
Note Payable $52,500 $52,500
Accrued Interest $44,856 $32,856
Customer Deposits $140,000 $140,000
-------- --------
TOTAL
LIABILITIES $643,351 $631,351
STOCKHOLDERS DEFICIT
Common Stock, $0.10 par value - $1,000 $1,000
authorized 100,000 shares:
outstanding 7,018 shares
Additional Paid In Capital $109,298 $109,298
Accumulated Deficit ($361,582) ($340,564)
Less Treasury Stock, at
cost ($298) ($298)
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TOTAL STOCKHOLDERS DEFICIT ($251,582) ($230,564)
TOTAL LIABILITIES AND
SHAREHOLDERS DEFICIT $391,769 $400,787
2
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RESIDENTIAL RESOURCES, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1996 1996
September September 30
30
(Unaudited) (Unaudited)
REVENUES
Interest $48 $304
Contract Fees $9,000 $440,000
------ --------
TOTAL REVENUE $9,048 $440,304
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COSTS AND EXPENSES
Operating
Expenses $30,066 $414,970
------- --------
TOTAL EXPENSES $30,066 $414,970
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INCOME (LOSS) BEFORE INCOME
TAXES ($21,018) $25,334
INCOME TAXES - -
------- -------
NET INCOME
(LOSS) ($21,018) $25,334
EARNINGS (LOSS) PER SHARE ($2.97) $3.61
AVERAGE COMMON SHARES OUTSTANDING 7,018 7,018
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3
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RESIDENTIAL RESOURCES, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDING SEPTEMBER 30, 1996 AND 1995
September September 30
30, 1996 1995
(Unaudited) (Unaudited)
Cash Flows From/(Used For)
Operating Activities:
Net Income (Loss) ($21,018) $25,334
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided By/Used
In Operating Activities $10,900 $4,360
Depreciation - -
Increase (Decrease) Resulting
From Changes In:
Contract Receivable $0 $1,109
Accounts Payable $0 ($21,842)
Due to Related
Parties $0 ($18,040)
Accrued $12,000 $1,925
------- ------
Net Cash Provided By (Used
In)
Operating
Activities $1,882 $9,372
------ ------
Net Increase (Decrease) In
Cash $1,882 $9,372
------ ------
Cash, Beginning of Period $703 $11,788
Cash, End of
Period $2,585 $2,416
------ ------
4
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RESIDENTIAL RESOURCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 1. CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at September 30, 1996, and for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principals
have been condensed or omitted. It is suggested that these unaudited, condensed,
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996. The results of operations for the six months
ended September 30, 1996 and 1995 are not necessarily indicative of the
operating results for the full year.
NOTE 2. RELATED PARTY TRANSACTIONS
Notes and amounts due to related parties are as follows:
September 30,1996 March 31, 1996
----------------- --------------
(Unaudited) (Audited)
Settlement agreement to former
stockholder due on demand,
currently non-interest bearing $ 75,500 95,500
Advances from related parties
due on demand, non interest
bearing $ 106,235 106,235
Advances from RRFS, due on
demand, bearing interest of 18% $ 90,000 90,000
Advances from RRFS, due on
demand, non-interest bearing $ 79,260 59,260
Note payable to related
party, due on demand, bearing
interest of 12% $ 55,000 55,000
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$ 405,995 $ 405,995
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5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company was incorporated on April 3, 1986, as a limited purpose financing
corporation to facilitate the issuance and sale of mortgage-collateralized
bonds. The operations of the Company have been confined to this limited purpose.
Because of the limited purpose and operations of the Company, it does not have
and is not expected to have any significant assets, other than assets which may
be acquired and immediately pledged to secure a specific series of bonds issued
by the Company, if any, intangible capitalized costs and deferred registration
costs.
During the year ended March 31, 1996, the Company entered into several contracts
to provide for the rating, securitization and placement of an aggregate of
$132,000,000 in mortgage-backed securities. The contracts call for base fees
earned upon achievement of milestones and commissions at issuances which are
expected to occur at various dates over the next three years. No revenues have
yet been earned on these contracts and as of September 30, 1996, the Company has
retained $140,000 in customer deposits in connection therewith.
Costs and expenses consisted primarily of contract expenses (commissions,
consulting and legal fees) and General and Administrative costs.
The Company has little need for liquidity as it is customary for the Company to
receive advances in connection with its contracts in order to cover contract
costs. However, the Company's major stockholder has provided the Company with
funding in the past, on an as-needed basis and has committed to support the
Company for at least a year. The Company has no commitments for capital
expenditures and no material resources.
The Company has open shelf registration statements on file with the Securities
and Exchange Commission under which the Company or trusts created by the Company
may issue mortgage-collateralized bonds in an aggregate principal amount of up
to $1.1 billion on an expedited basis. The Company actively pursues
opportunities which will allow it to utilize its unused shelf balance and which
are within the confines of the Company's limited purpose.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 16, 1996, the company received a threat of litigation from its
former Director and former Secretary, Clare T. Morse, in connection with various
matters claimed by Mr. Morse, to have been improperly dealt with by the company,
to the detriment of Mr. Morse.
The company shall file a Form 8-K discussing these matters more fully.
6
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ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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.
RESIDENTIAL RESOURCES, INC.
Date: November 20, 1996
/s/ William P. Schlick
----------------------
William P. Schlick,
Chief Executive Officer
Chief Financial Officer
7
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