<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission File Number 0-16631
BOCA RATON CAPITAL CORPORATION
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-2763089
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
6516 Via Rosa, Boca Raton, FL 33433
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(Address of principal executive offices)
(407) 750-2252
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 _
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 1,125,283 shares as of
November 8, 1995.
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BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 1995
Page No.
- ---- ---
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets - 3
September 30, 1995 and December 31, 1994
Consolidated Statements of Operations -
Nine and Three Months Ended September 30, 1995 and 1994 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 5
Notes to Consolidated Financial Statements - 6
Item 2 Management's Discussion and Analysis - 9
PART II OTHER INFORMATION
Item 3 Defaults Upon Senior Securities - 11
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K - 11
Signatures
<PAGE>
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
ASSETS UNAUDITED AUDITED
- ---------- ---------- ---------
<S> <C> <C>
Portfolio investments at fair value $ 1,208,438 $ 2,405,327
Cash 2,912,352 1,331,744
Other 53,087 -
----------- -----------
Total assets $ 4,173,877 $ 3,737,071
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
Liabilities:
Senior indebtedness:
Notes payable and accrued interest $ 405,502 $ 387,500
Accounts payable and accrued expenses 32,273 330,111
----------- -----------
Total senior indebtedness 437,775 717,611
----------- -----------
Total liabilities 437,775 717,611
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Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value; authorized 40,000,000
shares issued and outstanding, 1,125,283 shares
at September 30, 1995 and December 31, 1995, respectively 1,125 1,125
Additional paid-in capital 6,534,795 6,534,795
Accumulated net investment gain (loss) and
net realized gain (loss) (4,007,631) (5,398,105)
Net unrealized appreciation of investments 1,207,813 1,881,645
----------- -----------
Total stockholders' equity (net asset
value per share, $3.32 and $2.68 at September 30,
1995 and December 31, 1994, respectively) 3,736,102 3,019,460
----------- -----------
Total liabilities and
stockholders' equity $ 4,173,877 $ 3,737,071
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
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BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
------------------------ ------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment income:
Interest income $ 87,114 $ - $ 36,801 $ -
Other 29,213 48,424 - 19,092
---------- ---------- ---------- ----------
116,327 48,424 36,801 19,092
---------- ---------- ---------- ----------
Operating expenses:
General and administrative 161,381 94,007 29,765 45,068
Audit and tax 31,100 61,696 5,250 25,446
Discontinued merger costs - 105,556 - 105,556
Interest 18,000 26,143 6,000 7,463
---------- ---------- ---------- ----------
Total operating expenses 210,481 289,402 41,015 183,553
---------- ---------- ---------- ----------
Net investment income (94,154) (240,978) (4,214) (164,461)
---------- ---------- ---------- ----------
Other income:
Proceeds from litigation - 2,624,198 - -
---------- ---------- ---------- ----------
Realized and unrealized gains on investments:
Net increase in realized appreciation of
investments 1,504,928 29,832 705,836 408
Net increase (decrease) in unrealized appreciation of
investments (673,833) 1,074,210 (874,398) 1,118,750
---------- ---------- ---------- ----------
Realized and unrealized gains on investments, net 831,094 1,104,042 (141,563) 1,119,158
---------- ---------- ---------- ----------
Net income before income taxes 736,940 3,487,262 (145,777) 954,697
Provision for income taxes 20,300 - 20,300 -
---------- ---------- ---------- ----------
Net income $ 716,640 $3,487,282 $ (166,077) $ 954,697
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share:
Weighted average number of shares 1,125,283 1,125,283 1,125,283 1,125,283
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income $ 0.64 $ 3.10 $ (0.15) $ 0.65
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 716,640 $ 3,487,262
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Decrease (increase) in appreciated value of investments 673,833 (1,074,210)
Gain on sale of investment (1,504,928) (67,424)
Increase in other assets, net (53,087) (104,000)
Decrease in accounts payable and accrued expenses (279,833) (180,171)
----------- -----------
Net cash provided by (used in) operating activities (447,375) 2,025,457
----------- -----------
Cash flows from investing activities:
Proceeds from sale of investment 2,027,983 67,439
Advances from (to) and additional investments - (511,205)
----------- -----------
Net cash provided by (used in) investing activities 2,027,983 (443,766)
----------- -----------
Cash flows from financing activities:
Principal payments on notes payable - (756,710)
----------- -----------
Net cash provided by (used in) financing activities 0 (756,710)
----------- -----------
Net increase in cash 1,580,608 824,981
Cash, beginning of period 1,331,744 392,896
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Cash, end of period $ 2,912,352 $ 1,217,877
----------- -----------
----------- -----------
Supplemental disclosures of cash flow information
Cash paid during the year for interest $ - $ 34,877
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
5
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BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations.
In the opinion of management, the consolidated financial statements
contain all adjustments which are of a recurring nature, and disclosures
necessary to present fairly the consolidated balance sheets of the Company as
of September 30, 1995 and December 31, 1994, the related consolidated
statements of operations for the six months ended September 30, 1995 and
1994, and the consolidated statements of cash flows for the six months
ended September 30, 1995 and 1994.
The Company is a non-diversified, closed-end investment company which
elected to become a "Business Development Company" ("BDC") as that term is
defined in the Small Business Incentive Act of 1980, which Act is an
amendment to the Investment Company Act of 1940 (the "1940 Act"). The 1940
Act requires that the portfolio investments of the Company be carried at
fair value as determined in good faith by the Board of Directors.
NOTE 2: VALUATION OF PORTFOLIO INVESTMENTS
In determining fair value, the following four basic methods of valuation
are generally used:
- - COST
The cost method is based on the original cost to the Company adjusted for
amortization of original issue discounts and accrued interest for certain
capitalized expenditures of the company. Such method is to be applied in
the early stages of an investee's development until significant positive or
adverse events subsequent to the date of the original investment require a
change to another method.
- - PRIVATE MARKET
The private market method uses actual or proposed third party transactions in
the investee's securities as a basis for valuation, utilizing actual firm
offers as well as historical transactions, provided that any offer used is
seriously considered and welldocumented by the investee.
6
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NOTE 2: VALUATION OF PORTFOLIO INVESTMENTS, CONTINUED
- - PUBLIC MARKET
The public market method is the preferred method of valuation when there
is an established public market for the investee's securities. In
determining whether the public market method is sufficiently established
for valuation purposes, the Company examines the trading volume,
transferability restrictions, the number of shareholders and the number of
market makers in the investee's securities, along with the trend in trading
volume as compared to the Company's proportionate share of the investee's
securities. The Company also considers the effect on fair value where it
exercises control or significant influence over the investee. Typically,
the Board of Directors values the ownership of the securities valued
utilizing this method based upon the average of the bid and asked prices of
the securities for the ten trading days prior to and including the last day
of the Company's accounting period.
- - Appraisal
The appraisal method is used to value an investment position after analysis
of the best available outside information where there is no established public
or private market in the investee's securities.
The Company applied the public market method in its valuation of its
common stock of RailAmerica, Inc. The total investment in the 375,000 shares
of RailAmerica Inc. are available to be sold under Rule 144 of the
Securities Act of 1933, as amended, except the shares are subject to a
contractual restriction on transfer by the underwriter in connection with
RailAmerica Inc.'s 1992 initial public offering. In light of this, at
September 30, 1995 the Board of Directors reduced the fair value of these
shares by twenty percent from the average of the bid and asked prices. No
reduction was taken at September 30, 1994.
The difference between the fair value of the Company's portfolio
investments and their historical cost is reflected as a change in unrealized
appreciation or depreciation in the Consolidated Statements of Operations.
It is the Company's policy to provide deferred income taxes on net unrealized
appreciation in the value of its investment to the extent that such
appreciation exceeds available net operating and capital loss carry forwards.
The historical cost of the RailAmerica shares is $625 and the fair value is
$1,208,438. These shares represents approximately 8% of the outstanding
shares of RailAmerica Inc.
7
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NOTE 3: INCOME TAXES
For income tax purposes, the Company had a change in ownership during 1993
in connection with its private placement offering. The change in ownership
results in an annual limitation on the amount of pre-change ownership net
operating loss carryforwards which can be utilized to offset the Company's
future taxable income. The annual limitation is approximately $128,000 and
will be increased by the Company's pre-change built in gains when recognized.
As of December 31, 1994, the Company has available for federal income tax
reporting purposes pre-change net operating losses of approximately
$4,416,000 and post-change net operating losses of $100,000. The net
operating loss carryforwards expire in years 1998 through 2008.
8
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the nine months ended September 30, 1995, the Company reported net income
of $716,640. Included in net income was a net decrease in the unrealized
appreciation of investments of $673,833 and an increase in the realized
appreciation of investments of $1,504,928 for the nine months ended September
30, 1995 in the Company's investment in RailAmerica. The balance of net
income consisted of a loss of $94,154 on total investment income of $116,327
(consisting of $87,114 of interest income and $29,213 of miscellaneous
income) less operating expenses of $210,481.
For the nine months ended September 30, 1994, the Company reported net income
of $3,487,262. Included in net income was $2,624,198 received in
satisfaction of a previously-obtained judgment in the Company's lawsuit
against a certain accounting firm, which judgment had been appealed
unsuccessfully by the accounting firm. Also included in net income was an
increase in the unrealized appreciation of investments of $1,074,210 and an
increase in the realized appreciation of investments of $67,424 for the nine
months ended September 30, 1994 in the Company's investment in RailAmerica
offset by a loss of $38,000 in Boca Raton Athletic Club, Inc. (a previously
disposed of investee company). The balance of net income consisted of a loss
of $240,978 on total investment income of $48,424 consisting of
miscellaneous income less operating expenses of $289,402.
Operating expenses for the nine months ended September 30, 1995 primarily
consisted of general and administrative expenses of $192,481 (including
$31,000 of audit and tax expenses) and interest expense of $18,000. Such
expenses for the comparable period of 1994 consisted of general and
administrative expenses of $155,703 (including $61,698 of audit and tax
expenses) and $28,143 of interest expense. The increase in general and
administrative expenses is a result of the increased legal fees in the first
quarter in connection with compliance requirements associated with the
examination conducted by the Securities and Exchange Commission in the prior
year. These fees are did not continue beyond the first quarter. The Company's
decrease in interest expense is a result of a reduction in outstanding debt.
During the fourth quarter of 1993, the Company ceased active business
operations and reduced its expenses to a minimum. During the first quarter of
1994, the Company settled two lawsuits regarding unpaid indebtedness and
reduced its outstanding indebtedness as a result. The Company incurred
additional costs in connection with the discontinued merger with Weitzer
Homebuilders, Inc, in the period ending September 30, 1994, in the amount of
$105,556.
For the three months ended September 30, 1995, the Company reported a net
loss of $212,015. Included in the net income was a net decrease in the
unrealized appreciation of investments of $893,336 and an increase in the
realized appreciation of
9
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investments of $705,836 in the Company's investment in RailAmerica. The
balance of net income consisted of a loss of $4,214 on total investment
income of $36,801 consisting of interest income, less operating expenses of
$41,015.
For the three months ended September 30, 1994, the Company reported a net
income of $954,697. Included in the net income was an increase in the
unrealized appreciation of investments of $1,118,750 and an increase in the
realized appreciation of investments of $38,408 for the three months ended
September 30, 1994 in the Company's investment in RailAmerica offset by a
loss of $38,000 in Boca Raton Athletic Club, Inc. (a previously disposed of
investee company). The balance of net income consisted of a loss of $164,461
on total investment income of $19,092 of other income, less operating
expenses of $183,553.
Operating expenses for the three months ended September 30, 1995 primarily
consisted of general and administrative expenses of $35,015 (including $5,250
of audit and tax expenses) and interest expense of $6,000. Such expenses for
the comparable period of 1994 consisted of, general and administrative
expenses of $70,514 (including $25,446 of audit and tax expenses) and $7,483
of interest expense. The decrease in general and administrative expenses is a
result of the inactivity in the Company and the decrease in interest expense
is a result of a reduction in outstanding debt. During the fourth quarter of
1993, the Company ceased active business operations and reduced its expenses
to a minimum. The Company incurred additional costs in connection with the
discontinued merger with Weitzer Homebuilders, Inc, in the period ending
September 30, 1994, in the amount of $105,556.
LIQUIDITY AND CAPITAL RESOURCES
The Company has $2,912,352 in cash and total liabilities of $437,775 at
September 30, 1995. The Company has no liabilities due longer than twelve
months.
The Company's has no sources of cash flow at present apart from interest
income and proceeds from any shares sold of RailAmerica. The Company has
minimal current operating expenses.
At September 30, 1995 the Company did not maintain lines of credit, and
none are anticipated to be procured. The Company's only material assets,
other than cash, consisted of a 375,000 shares of RailAmerica common stock,
with an approximate market value of $1,162,500. These shares are subject to
a restriction on sale imposed by the underwriter in connection with
RailAmerica's 1992 initial public offering. The Company does, however, have
the right to pledge such shares.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
An instrument of indebtedness owed by the Company was in default at
September 30, 1995. The following information identifies the indebtedness,
indicates the nature and amount of the default, and the total arrearage as of
a recent date.
Prime plus 1.5% $315,400 unsecured promissory note dated
April 5, 1990, due April 4, 1992. Principal of $303,300
is in default. Total arrearage was $405,500 as of September 30, 1995.
ITEM 5 - OTHER INFORMATION
On October 16, 1995, the Company's Board of Directors announced that it
had met during the previous week to discuss alternatives for maximizing
shareholder value including seeking an appropriate merger candidate. In order
to enhance the Company's ability to attract potential merger opportunities,
the Board of Directors has decided to hold a special meeting of shareholders
to solicit the approval of the shareholders to withdraw the Company's
election of business development company status under the Investment Company
Act of 1940. Proxy materials relating to the withdrawal of the Company's
election of business development company status will be prepared and mailed
in the fourth quarter of 1995 in order to facilitate a meeting of the
shareholders at the earliest practicable date.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed herewith:
27 Financial Data Schedules
(b) The Company did not file a Form 8-K in the period covered by this
Quarterly Report on Form 10-QSB; however, on June 20, 1995, the Company filed
a report on form 8-K in connection with an order granting the motion of the
Securities and Exchange Commission to dismiss an action, Civil Action No.
94-8517 (Judge Davis presiding), which was brought against the Company in the
third quarter of 1994.
11
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: November 8, 1995 /s/ Alan L. Jacobs
------------------
Alan L. Jacobs, President
(Principal Executive Officer)
Date: November 8, 1995 /s/ Franklyn B. Weichselbaum
------------------------------
Franklyn B. Weichselbaum
Chief Financial Officer & Treasurer
12
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EXHIBIT INDEX
-------------
Exhibit
- -------
27 Financial Data Schedules
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1995
<CASH> 2,912,352
<SECURITIES> 1,208,438
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,173,877
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,173,877
<CURRENT-LIABILITIES> 32,273
<BONDS> 405,502
0
0
<COMMON> 1,125
<OTHER-SE> 3,734,977
<TOTAL-LIABILITY-AND-EQUITY> 4,173,877
<SALES> 0
<TOTAL-REVENUES> 947,421
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 210,481
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 736,940
<INCOME-TAX> 20,300
<INCOME-CONTINUING> 716,640
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 716,640
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
