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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, 1997
COMMISSION FILE NO. 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
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(561) 750-2252
- --------------------------------------------------------------------------------
(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 REPORT(S)), 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: 5,617,768 SHARES AS
OF NOVEMBER 7, 1997.
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BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10 QSB
QUARTER ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I FINANCIAL INFORMATION......................................................3
Item 1 Financial Statements.......................................................3
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996...................................3
Consolidated Statements of Operations
Three and Nine Months Ended September 30, 1997 and 1996....................4
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996..............................6
Item 2 Management's Discussion and Analysis.......................................9
PART II OTHER INFORMATION..........................................................9
Item 4 Submission of Matters to a Vote of Security Holders........................9
Item 5 Other Information.........................................................10
Item 6 Exhibits and Reports on Form 8-K..........................................10
Signatures................................................................11
Exhibit Index.............................................................12
</TABLE>
2
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 229,919 $518,645
Note receivable 376,260 350,000
Prepaid expenses and other 17,500 7,000
------ -----
Total assets $ 623,679 $875,645
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 205,079 $ 84,887
--------- --------
Total liabilities 205,079 84,887
--------- --------
Commitments and contingencies
Stockholders' equity: Common stock,
$.001 par value; authorized 40,000,000
shares; issued and outstanding,
1,125,270 shares at September 30, 1997
and December 31, 1996, respectively 1,125 1,125
Additional paid in capital 4,002,936 4,002,936
Accumulated deficit (3,585,461) (3,213,303)
----------- ----------
Total stockholders' equity 418,600 790,758
------- -------
Total liabilities and
stockholders' equity $ 623,679 $ 875,645
============ ============
</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, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30 Three months ended September 30
-------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment Income:
Interest income $31,450 $32,407 $11,538 $ 4,904
------- ------- ------- -------
Total investment
income 31,450 32,407 11,538 4,904
------- ------- ------- -----
Operating expenses:
General and
administrative 216,408 208,517 109,027 56,846
Legal 182,150 66,577 86,645 37,773
Audit and tax 5,050 15,825 1,600 3,450
Interest 2,937
----- ------
Total operating
expenses 403,608 293,856 197,272 98,069
------- ------- ------- ------
Operating (loss) (372,158) (261,449) (185,734) (93,165)
-------- --------- --------- --------
Realized and
unrealized gain
(loss) on
investments: 1,244,374
Net realized gain
on investments
Net decrease in
unrealized
appreciation of
investments (1,088,750)
-----------
Net realized and
unrealized gain on
investments 155,624
-------
</TABLE>
4
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<TABLE>
<S> <C> <C> <C> <C>
(Loss) before
extraordinary item (372,158) (105,825) (185,734) (93,165)
Extraordinary item
- - gain on
extinguishment of
debt 278,026
Net income (loss) $ (372,158) $ 172,201 $ (185,734) $ (93,165)
=========== ========== =========== ===========
Income (loss) per share:
Income (loss)
before
extraordinary gain $ (0.33) $ (0.09) $ (0.16) (0.08)
Extraordinary gain .25
Net income (loss) $ (0.33) $ 0.16 $ (0.17) $ (0.08)
====== ===== ====== =============
Weighted average
number of shares 1,125,270 1,125,270 1,125,270 1,125,270
========= ========= ========= =============
</TABLE>
See accompanying notes to consolidated financial statements
5
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BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(372,158) $ 172,201
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Decrease in unrealized appreciation of investments 1,088,750
Increase in notes receivable (26,260)
Gain on sale of investment (1,244,374)
Extraordinary gain on
extinguishment of debt (278,026)
Increase in other prepaid
expenses (10,500) (17,500)
-------- -----------
Increase (decrease) in
accounts payable and accrued
expenses 120,192 (72,243)
-------- -----------
Net cash used in operating
activities (288,726) (351,192)
-------- -----------
Cash flows from investing activities:
Proceeds from sale of investment 1,245,625
-----------
Net cash provided by investing activities 1,245,625
-----------
Cash flows from financing activities:
Principal payments on notes payable (310,000)
Dividend paid on common stock (2,531,858)
-----------
Net cash used in financing activities (2,841,858)
-----------
Net decrease in cash (288,726) (1,947,425)
Cash, beginning of period 518,645 2,900,888
-------- -----------
Cash, end of period $229,919 $ 953,463
======== ===========
Supplemental disclosures of cash flow information
Cash paid during the period
for interest $ -- $ 2,937
======== ===========
</TABLE>
See accompanying notes to consolidated financial statements
6
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BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying financial statements have been prepared by Boca Raton
Capital Corporation and Subsidiaries (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, 1997 and
for all periods presented have been made. The results of operations for
the periods presented are not necessarily indicative of the operating
results for a full year.
Certain information and footnote disclosures prepared in accordance with
general accepted accounting principles and normally included in the
financial statements have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
financial statements and notes included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996.
NOTE 2: INCOME TAXES
For income tax purposes, the Company had a change in ownership during
1993 in connection with a 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, 1996, the Company has available for federal income
tax purposes pre-change net operating losses of approximately $1,900,000
and post-change net operating losses of $381,000. The net operating loss
carryforwards expire in years 1998 through 2008. These net operating
losses will be subject to further limitation as a result of the Merger
discussed in Note 3.
NOTE 3: MERGER
On October 24, 1997, the Company, through a wholly-owned subsidiary,
completed a merger ("the Merger") with Clean Room Products, Inc. ("CRP")
whereby CRP became a wholly-owned subsidiary of the Company. Pursuant to
the Merger Agreement, the Company issued 4,501,080 shares of its common
stock for 100% of the issued and outstanding common shares of Clean Room
Products, Inc. ("CRP"). For financial reporting purposes, the Merger was
treated as a recapitalization of CRP or reverse acquisition, whereby CRP
was deemed the acquiror. The purchase price paid by CRP for the Company
was the net monetary assets of the Company.
7
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The Merger resulted in both a change in majority equity ownership and
management of the Company and the cessation of the Company's business
operation as previously conducted. Under this method of accounting and
financial reporting, CRP will reflect in its combined financial
statements the assets and liabilities of the Company at their book value
and will not combine the historical earnings of the Company with those
of CRP.
8
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Item 2 Management's Discussion and Analysis
Results of Operations
The Company reported a net loss of $(372,158) and net income of $172,201
for the nine months ended September 30, 1997 and 1996, respectively. The
net loss in the nine months ended September 30, 1997 consisted of
investment income of $31,450 less operating expenses of $403,608.
Included in net income for the nine months ended September 30, 1996 was
a net unrealized and realized gain of $155,624. The balance of net
income consisted of investment income of $32,407 less operating expenses
of $293,856 for the nine months ended September 30, 1996, and an
extraordinary gain of $278,026 resulting from the extinguishment of debt
in the nine months ended September 30, 1996.
Total investment income of $31,450 and $32,407, consisted of interest
income, for the nine months ended September 30, 1997 and 1996,
respectively.
Operating expenses for the nine months ended September 30, 1997
consisted of general and administrative expenses of $216,408 and
professional fees of $187,150. Such expenses for the comparable period
of 1996 consisted of general and administrative expenses of $208,517,
professional fees of $82,402, and interest expense of $2,937. The
increase in expenses in 1997 is primarily attributable to the Merger
with Clean Room Products, Inc.
Liquidity and Capital Resources
The Company had $229,919 in cash and cash equivalents and total
liabilities of $205,079 at September 30, 1997. The Company had no
liabilities due longer than twelve months.
The Company has no sources of cash flow at present apart from interest
income. The Company has minimal current operating expenses.
At September 30, 1997, the Company did not maintain any lines of credit.
PART II Other Information
Item 4 Submission Of Matters To A Vote Of Security Holders
(a) A special meeting of the shareholders of the Company was held on
October 9, 1997 (the "Special Meeting"). Holders of the Company's common stock,
$.001 par value per share (the BRCC "Common Stock"), of record at the close of
business on August 26, 1997 were entitled to notice of and to vote at the
Special Meeting. 968,359 shares were present at the Special Meeting, in person
or by proxy.
9
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(b) The following proposals were submitted to shareholders for
approval at the Special meeting, receiving the respective number of votes set
forth below:
PROPOSAL I Merger (as defined below) and the issuance of 4,501,080 shares
of BRCC Common Stock to the shareholders of Clean Room Products, Inc. (CRP") in
connection with an Amended and Restated Agreement and Plan of Merger and
Reorganization dated as of March 26, 1997 (the "Merger Agreement") among CRP,
the Company and CRP Acquisition Corp., a wholly-owned subsidiary of the Company
("Merger Sub"), which provides for the merger of Merger Sub with and into CRP
(the "Merger").
<TABLE>
<CAPTION>
In Favor Against Abstained Unvoted
-------- ------- --------- -------
<S> <C> <C> <C>
965,329 2,725 305 -----
</TABLE>
PROPOSAL II Adoption of new articles of incorporation and new by-laws
of the Company in the event the Merger is not consummated for any reason.
<TABLE>
<CAPTION>
In Favor Against Abstained Unvoted
-------- ------- --------- -------
<S> <C> <C> <C>
682,160 274,383 11,816 -----
</TABLE>
Item 5 Other Information
The Merger was consummated on October 24, 1997. In connection with the
Merger, a new board of directors of the Company was appointed immediately
following the Merger, pursuant to the Merger Agreement, consisting of the
following individuals: Edward Nassberg, Robert Witter, Kenneth Gross, Sherwood
Larkin, Paul Gerber, Charles A. Chenes and C. Lawrence Rustein. The new board is
classified into three classes of directors, with terms expiring at the
respective annual meeting of shareholders to be held in each of 1998 (Class I),
1999 (Class II), and 2000 (Class III).
In connection with the Merger, on December 12, 1996, the Company
extended a loan (the "CRP Loan") to CRP. The CRP Loan was in the original
principal amount of $350,000 with an interest rate equal to the prime rate of
Citibank, N.A. plus one present (1%) per annum. The principal, and the accrued
interest thereon, of the CRP Loan was due and payable on April 30, 1997. Each of
the three shareholders of CRP and their respective spouses individually
guaranteed the repayment of the principal and accrued interest thereon. Pursuant
to the terms of the Merger Agreement, the CRP Loan and related guarantees were
canceled upon consummation of the Merger.
Item 6 Exhibits And Reports On Form 8-K
(a) The following exhibits are filed herewith:
10
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2.1 Amended and Restated Agreement and Plan of Merger and
Reorganization, dated as of March 26, 1997, by and among the
Company, CRP Acquisition Corp. and Clean Room Products, Inc.,
incorporated by reference to Exhibit 2.1 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31,
1996 ("the 1996 10-K").
27.6 Financial Data Schedule for the nine months ended
September 30, 1997.
(b) The Company filed a Current Report on Form 8-K with the
Securities and Exchange Commission on November 12, 1997 reporting
the consummation of the Merger on October 24, 1997.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
as amended, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 19, 1997 /s/ Charles A. Chenes
----------------------------
Charles A. Chenes
(Principal Executive Officer)
Date: November 19, 1997 /s/ Ernest J. Jurdana
----------------------------
Ernest J. Jurdana
(Principal Financial Officer)
11
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EXHIBIT INDEX
2.1 Amended and Restated Agreement and Plan of Merger and Reorganization,
dated as of March 26, 1997, by and among the Company, CRP Acquisition
Corp. and Clean Room Products, Inc., incorporated by reference to
Exhibit 2.1 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996 ("the 1996 10-K").
27.6 Financial Data Schedule for the nine months ended September 30, 1997.
12
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 230
<SECURITIES> 0
<RECEIVABLES> 376
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 624
<CURRENT-LIABILITIES> 205
<BONDS> 0
<COMMON> 0
0
1
<OTHER-SE> 418
<TOTAL-LIABILITY-AND-EQUITY> 624
<SALES> 31
<TOTAL-REVENUES> 31
<CGS> 0
<TOTAL-COSTS> 404
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (372)
<INCOME-TAX> 0
<INCOME-CONTINUING> (372)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (372)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
