<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1998.
Commission File Number 0-16631
CRP Holding Corp.
(Exact name of registrant as specified in its charter)
Florida 59-2763089
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 Ocean Avenue, Ronkonkoma, NY 11779
(Address of Principal Executive Offices) (zip code)
516-588-7000
(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 and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------ ------
As of September 30, 1998, there were 10,196,351 shares of the Registrant's
common stock outstanding.
4
<PAGE>
CRP HOLDING CORP. AND SUBSIDIARIES
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION PAGE
------ ----
<S> <C> <C>
Item I Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets (Unaudited) F-2
Consolidated Statements of Operations (Unaudited) F-3
Consolidated Statement of Changes in Stockholders'
(Deficit) (Unaudited) F-4
Consolidated Statements of Cash Flows (Unaudited) F-5
Notes to Consolidated Financial Statements (Unaudited) F-6-F-7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results
of Operations
Part 2 OTHER INFORMATION
Item 6 Other Information
SIGNATURES
</TABLE>
5
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CRP HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1998
(UNAUDITED)
================================================================================
ASSETS
CURRENT ASSETS:
Cash $ 121,748
Accounts receivable, less allowance for doubtful accounts
of $18,000 1,461,498
Inventories 575,721
Prepaid expenses and other 33,166
Deferred income taxes 29,000
----------
TOTAL CURRENT ASSETS 2,221,133
PROPERTY AND EQUIPMENT, less accumulated
depreciation and amortization 1,948,475
DUE FROM STOCKHOLDERS 323,845
DEPOSITS AND OTHER ASSETS 40,813
----------
$4,534,266
==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $2,373,271
Accrued expenses 748,865
Loans payable 960,152
Promissory notes payable-vendors 273,474
Note payable-stockholders 121,833
Billings in excess of costs and estimated earnings on
uncompleted contracts 313,415
Current portion of obligations under capital leases 1,559,398
Employee benefit obligations 43,940
----------
TOTAL CURRENT LIABILITIES 6,394,348
PREFERRED INCOME TAXES PAYABLE 218,000
OBLIGATIONS UNDER CAPITAL LEASES, less current portion 291,033
EMPLOYEE BENEFIT OBLIGATIONS, less current portion 107,253
----------
TOTAL LIABILITIES 7,010,634
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' (DEFICIT):
Preferred stock; $1.00 par value; 5,000,000 shares authorized;
no shares outstanding --
Common stock; $.001 par value; 40,000,000 shares authorized;
10,196,351 shares issued and outstanding 10,196
Additional paid-in capital 984,430
----------
Accumulated deficit (3,470,994)
----------
TOTAL STOCKHOLDERS' (DEFICIT) (2,476,368)
----------
$4,534,266
==========
See Accompanying Notes to Consolidated Financial Statements.
6
<PAGE>
CRP HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
For The Nine Months Ended
September 30,
----------------------------
1998 1997
---------- -----------
NET SALES $8,168,684 $8,684,062
COST OF SALES 6,061,246 7,077,064
---------- ----------
GROSS PROFIT 2,107,438 1,606,998
---------- ----------
OPERATING EXPENSES:
Selling and shipping 948,782 885,973
General and administrative 1,362,033 1,628,165
---------- ----------
TOTAL OPERATING EXPENSES 2,310,815 2,514,138
---------- ----------
OPERATING LOSS (203,377) (907,140)
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (316,061) (356,207)
Interest income 13,638 12,593
Other 53,605 44,426
---------- ----------
TOTAL OTHER INCOME (EXPENSE) (248,818) (299,188)
---------- ----------
NET LOSS $ (452,195) $1,206,328
========== ==========
BASIC AND FULLY DILUTED
NET LOSS PER SHARE ($0.06) ($0.21)
========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,133,347 5,626,350
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
7
<PAGE>
CRP HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
For The Three Months Ended
September 30,
----------------------------
1998 1997
---------- -----------
NET SALES $2,196,106 $2,929,068
COST OF SALES 1,782,902 2,537,807
---------- ----------
GROSS PROFIT 413,204 391,261
---------- ----------
OPERATING EXPENSES:
Selling and shipping 261,054 271,220
General and administrative 391,745 557,318
---------- ----------
TOTAL OPERATING EXPENSES 652,799 828,538
---------- ----------
OPERATING INCOME (LOSS) (239,595) (437,277)
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (97,126) (106,841)
Interest income 4,637 4,281
Other 715 115
---------- ----------
TOTAL OTHER INCOME (EXPENSE) (91,774) (102,445)
---------- ----------
NET INCOME (LOSS) $ (331,369) $ (539,722)
========== ==========
BASIC AND FULLY DILUTED
NET INCOME (LOSS) PER SHARE ($0.03) ($0.10)
========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 10,196,351 5,626,350
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
8
<PAGE>
CRP HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,1998
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Common Stock
-------------------- Additional Accumulated
Shares Amount Paid-in Capital Deficit Total
-------------------- ------------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1997 6,676,351 $ 6,676 $ 767,950 $(3,018,799) $(2,244,173)
Issuance of common stock 3,520,000 3,520 216,480 220,000
Net loss - - - (452,195) (452,195)
---------- ------- --------- ----------- -----------
Balance,
September 30, 1998 10,196,351 $10,196 $ 984,430 $(3,470,994) $(2,476,368)
========== ======= ========= =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
9
<PAGE>
CRP HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
For The Nine Months Ended
September 30,
-----------------------------
1998 1997
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (452,195) $ (1,206,328)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 316,478 358,730
Provision for doubtful accounts 5,981 20,548
Changes in operating assets and liabilities
Decrease (increase) in:
Accounts receivable 290,902 (54,272)
Inventories 95,797 458,273
Prepaid expenses and other 60,452 (64,883)
Accrued interest net from stockholders (6,138) (3,371)
Other assets 856 (18,455)
Increase (decrease) in:
Accounts payable 332,849 552,808
Accrued expenses 41,465 (41,680)
Billings in excess of costs and estimated earnings
on uncompleted contracts (485,519) 284,988
Employee benefit obligations (63,245) 165
---------- ------------
Net cash provided by operating activities 137,683 286,523
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (13,235) (46,552)
---------- ------------
Net cash used in investing activities (13,235) (46,552)
---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) from loans payable (141,515) (418,794)
Repayments on capital lease obligations (153,082) (206,479)
Loans (payments) from stockholders (75,000) 200,000
Proceeds from sales of common stock 131,107 -
Financing costs - (20,000)
---------- ------------
Net cash used in financing activities (238,490) (445,273)
---------- ------------
NET DECREASE IN CASH (114,042) (205,302)
CASH, BEGINNING OF PERIOD 235,790 319,520
---------- ------------
CASH, END OF PERIOD $ 121,748 $ 114,218
========== ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
10
[GRAPHIC OMITTED]
<PAGE>
CRP HOLDING CORP. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Boca Raton Capital Corporation. ("BOCA"), was a non-diversified,
closed-end investment company which had elected and was granted the
status as a Business Development Company ("BDC") under the Investment
Company Act of 1940. During 1995, the Board of Directors of BOCA were
of the opinion that the shareholders' return on assets was not
sufficient to continue operations as a BDC. As such, BOCA's election to
withdraw from its status as a BDC was filed with the Securities and
Exchange Commission and became effective as of December 22, 1995. BOCA
had no substantive operations in 1996 and 1997.
On October 24, 1997, BOCA completed a merger (the "Merger") with Clean
Room Products, Inc.("CRP"), a privately held company incorporated in
the state of New York in 1965. Under the terms of the Merger each
outstanding share of CRP was exchanged for approximately 270,010 shares
of BOCA common stock. In connection with the Merger, BOCA issued
4,501,080 shares of its common stock in exchange for all of the issued
and outstanding shares of CRP. Pursuant to the terms of the Merger, the
CRP shareholders deposited 1,875,750 shares of the BOCA common shares
that they had received, in escrow, until the earlier of; April 24, 1998
or; the consummation of a long term financing which results in at least
$1,500,000 in net proceeds. These shares will be released from escrow
upon consummation of the financing; if such financing has not occurred
by April 24, 1998 the shares held in escrow will be canceled. As of
September 30, 1998, the shares held in escrow have not been canceled.
As a result of the Merger, CRP became a wholly owned subsidiary of
BOCA. Subsequent to the Merger, BOCA changed its name to CRP Holding
Corp. All references to the "Company" shall be deemed to include CRP
and BOCA.
The Merger has been treated for accounting purposes as a capital
transaction of CRP, equivalent to the issuance of common stock by CRP
for the net monetary assets of BOCA, accompanied by recapitalization of
CRP. Accordingly, the results of operations for the nine and three
months ended September 30, 1998 and 1997, reflect those of CRP for the
entire nine and three month periods and the results of operations of
BOCA from the date of the Merger. All share and per share amounts have
bee restated to reflect the Merger.
CRP Holding Corp. and Subsidiaries manufactures and distributes
products for critical environment facilities and designs and constructs
clean rooms throughout the United States.
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company
has experienced recurring losses from operations, has a deficiency in
its working capital, and is in violation of its debt covenants. These
factors raise substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
In May, 1998, the Company reorganized its senior management with the
appointment of a new chief executive officer. The Company has embarked
upon a substantial cost cutting program together with obtaining
additional financing. Additionally, the Company is refocusing its sales
efforts on higher margin products. Management believes that these
actions, will enable the Company to continue as a going concern. The
Company's continued existence is dependent upon its ability to achieve
and maintain positive cash flow and to satisfy its indebtedness when it
becomes due.
11
<PAGE>
CRP HOLDING CORP. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim 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, 1998 and for all period presents 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 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, 1997.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method (FIFO).
Financial Statement Classifications
Certain amounts in the 1997 financial statements have been reclassified
to conform with the current period presentation.
NOTE 2 - INVENTORIES
Inventories consist of the following:
Raw materials $398,085
Work-in-process 47,286
Finished goods 130,350
--------
$575,721
========
NOTE 3 - STOCKHOLDERS' DEFICIT
Common Stock
On June 9, 1998, seven shareholders invested an aggregate of $220,000 for
3,520,000 shares of th Company's $.001 par value common stock. The Company
has agreed to register the shares upon the demand of the shareholders.
12
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere
herein. The following discussion contains predictions, estimates and other
forward-looking statements that involve a number of risks and uncertainties.
While this outlook represents the Company's current judgement on the future
direction of the business, such risks and uncertainties could cause actual
results to differ materially from any future performance suggested herein.
CRP has a stockholders' deficit of approximately $2.48 million as of
September 30, 1998 with net losses of approximately $452,000 and $1,206,000
for the nine months ended September 30, 1998 and 1997, respectively.
Subsequent to September 30, 1998, CRP anticipates no material change in the
results of its operations through the next quarter, compared to the previous
quarter. CRP has experienced negative cash flow, which has prevented it from
meeting normal payment terms on some of its accounts payable. The report of
independent public auditors of CRP on its financial statement for the fiscal
year ended December 31, 1997 contained an explanatory paragraph to the effect
that CRP's recurring losses from operations and its deficiency in working
capital raised substantial doubt about its ability to continue as a going
concern.
Change in Management
Effective May 8, 1997, Charles Chenes Chief Executive Officer and President
resigned and Kenneth Gross Chairman of the Board has assumed the titles and
duties of the Chief Executive Officer and President. Effective May 7, 1998,
Ernest Jurdana resigned his position as Chief Financial Officer and Donald M.
Buysse a Director of the Board has assumed the title and duties of Chief
Financial Officer on an interim basis.
Results of Operations
Nine Months Ended September 30, 1998 and 1997
Net Sales
Net sales of approximately $8.2 million for the nine months ended September
30, 1998 decreased by approximately 6% over the same period 1997. The net
decrease in sales of approximately $515,000 is attributed predominantly to the
planned phasing out of the jobbing division in 1997 which had generated sales
of approximately $327,000 in the first nine months of 1997.
Gross Profit
The gross profit represented 25.8% and 18.5% of net sales for the nine months
ended September 30, 1998 and 1997, respectively. The increase in the gross
profit of $500,000 reflects in part departmental increases in profitability of
approximately $309,000 for the engineering department, $330,000 for the
manufacturing department, and $60,000 for the jobbing department prior to
phasing out. A decrease in gross profit of $202,000 for the film department
resulted from a softening of price structures in the resins market.
Selling and Shipping Expenses
Selling and shipping expenses represented approximately 11.6% and 10.2%
respectively of net sales for the nine months ended September 30, 1998 and
1997, respectively. These expenses include personal, advertising, and other
costs in support of CRP's sales efforts.
General and Administrative Expenses
General and administrative expenses represented approximately 16.7% and 18.7%
of net sales for the nine months ended September 30, 1998 and 1997,
respectively. These expenses include salaries, payroll taxes, professional
fees and corporate expenses. Although many of these expenses are fixed in
nature, management has continued, where possible, instituting cost reductions
throughout the period. The reduction in general and administrative expenses of
approximately $266,000 is primarily due to reduction in administrative
salaries, payroll taxes and depreciation.
13
<PAGE>
Interest Expense
Interest expense decreased in the nine months ended September 30, 1998 by
approximately 11.3% over the nine months ended September 30, 1997. The
decrease was primarily due to lower average borrowings of the Company's credit
facility during 1998 as compared to 1997.
Other Income
Other income primarily represents settlements of accounts receivable credit
balances for the nine months ended September 30, 1998.
Liquidity and Capital Resources
The Company has been able to generate cash to carry on its operations through
a combination of secured borrowings from financial institutions and marginal
cash flow from its operations.
Net Cash Provided by Operating Activities
Net cash provided through operating activities was approximately $138,000 and
$287,000 for the nine months ended September 30, 1998 and 1997, respectively.
The positive cash flow for the 1998 and 1997 period was primarily due to
non-cash expenses for depreciation and amortization, a decrease in accounts
receivable, a decrease in inventories, and an increase in accounts payable
offset in the 1998 period by decreases in billings in excess of costs and
estimated earnings on uncompleted contracts.
Net Cash Used in Financing Activities
Financing activities used approximately $238,000 and $445,000 of cash flow for
the nine months ended September 30, 1998 and 1997, respectively. The net use
of cash for 1998 and 1997 were primarily repayments of loans payable and
capital lease obligations. During the period ending September 30, 1998, the
Company received proceeds of $131,107 for the issuance of common stock and was
repaid a stockholder's loan of $75,000.
Guarantee of Industrial Development Revenue Bond
The Company has guaranteed an Industrial Development Revenue Bond which has an
unpaid balance of approximately $1,039,000 at September 30, 1998. An action
brought against the Company by the holder of the bond to enforce the guarantee
has been resolved without material adverse effect to the Company.
Credit Facility
The Company's credit facility provides for maximum borrowings of $1,500,000
which would be available for advances against eligible accounts receivable, as
defined, at a level of 80%. Advances bear interest at 3.5% above the prime
rate plus an administrative fee of .4% on the average daily outstanding
balance for the immediately preceding month, with a minimum monthly fee of
$10,000. The agreement provides for, among other things, a security interest
in substantially all of the Company's assets, limitations on loans to
officers, stockholders, directors or affiliates, payments of cash dividends,
and is guaranteed by certain of the Company's stockholders. At September 30,
1998 and 1997, the Company was in violation of certain of these covenants.
The same financial institution provides the Company with a $275,000 credit
facility based on eligible inventory, a defined, and $275,000 under an
accommodation note secured by operating equipment. The facility bears interest
at 3.5% above the prime rate plus administrative fees. The note requires
monthly principal payments of $5,500 commencing July 1, 1997, with a balloon
payment for the residual amount in December 1997. The credit facilities and
loans provided by the financial institution expired in December 1997.
The Company and the financial institution extended the credit facility under a
forbearance agreement to September 15, 1998. The agreement includes amendments
that limit the maximum amount of available credit of $1,500,000 and institutes
a net deficit requirement of not more than $2,550,000.
The agreement does not preclude re-negotiation at the end of the current term.
Management and the financial institution have entered into negotiations to
forbear the credit facilities into the fourth quarter, 1998. There can be no
assurance that the existing funds will remain available should the Company
continue to be in violation of its loan covenants. If the Company is unable to
obtain sufficient capital or borrowings this could adversely affect materially
the Company's operations.
14
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly executed this day November 20, 1998.
CRP HOLDING CORP.
By: /s/ Kenneth Gross
--------------------------------------
Kenneth Gross, Secretary
Chairman of the Board and
Principal Financial Officer
<PAGE>
Part 2. OTHER INFORMATION
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
The Registrant has not filed any reports on Form 8-K during
the quarter for which this report is filed.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 122
<SECURITIES> 0
<RECEIVABLES> 1,461
<ALLOWANCES> 18
<INVENTORY> 576
<CURRENT-ASSETS> 2,221
<PP&E> 1,948
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,534
<CURRENT-LIABILITIES> 6,394
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> (2,476)
<TOTAL-LIABILITY-AND-EQUITY> 4,534
<SALES> 8,169
<TOTAL-REVENUES> 8,236
<CGS> 6,061
<TOTAL-COSTS> 8,372
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 316
<INCOME-PRETAX> (452)
<INCOME-TAX> (452)
<INCOME-CONTINUING> (452)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (452)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
