<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
or
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 0-24690
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CLARION HOUSE, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 91-1407411
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1901 North Roselle Road, Suite 1030, Schaumburg, Illinois 60195
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(Address of principal executive offices)
(847) 490-5977
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report)
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 No X
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of July 1, 1998, the
Company had 8,888,418 shares of common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one);
Yes No X
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DOCUMENTS INCORPORATED BY REFERENCE: NONE
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CLARION HOUSE, INC.
FORM 10-QSB INDEX
This report contains "forward looking statements" within the meaning of Section
27A of the Securities Act of 1933 and is subject to the safe harbor created by
that section. Statements regarding future operating performance, new programs
expected to be launched and other future prospects and developments are based
upon current expectations and involve certain risks and uncertainties that could
cause actual results and developments to differ materially. Potential risks and
uncertainties include such factors as demand for the company's products,
pricing, the company's growth strategy, including its ability to consummate and
successfully integrate future acquisitions, industry cyclicality and
seasonality, the company's ability to continuously improve production
technologies, activities of competitors and other risks detailed in the
company's Annual Report on Form 10-K for the year ended December 31, 1997 and
other filings with the Securities and Exchange Commission.
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998
(unaudited) and December 31, 1997..........................1
Consolidated Statements of Operations and Accumulated
Deficit (unaudited) for the Three Months Periods
Ended March 31, 1998 and 1997..............................3
Consolidated Statements of Cash Flows (unaudited) for the
Three Month Periods Ended March 31, 1998 and 1997..........4
Notes to Consolidated Interim Financial Statements.........5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................6
PART II -OTHER INFORMATION
Item 1. Legal Proceedings............................................7
Item 2. Changes in Securities and Use of Proceeds....................7
Item 3. Defaults Upon Senior Securities..............................7
Item 4. Submission of Matters to a Vote of Security Holders..........7
Item 5. Other Information............................................7
Item 6. Exhibits and Reports on Form 8-K.............................7
(i)
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<TABLE>
PART I - FINANCIAL INFORMATION
CLARION HOUSE, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
ASSETS
DECEMBER 31, MARCH 31,
1997 1998
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 10,265 $ 144,588
Accounts receivable, net 327,768 385,018
Inventories 259,663 236,465
Prepaid tooling 47,797 -
Refundable federal tax 1,048 1,098
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Total Current Assets 598,744 814,966
PROPERTY, PLANT AND EQUIPMENT
Machinery & equipment 1,253,122 1,244,002
Vehicles 25,955 25,955
Furniture & fixtures 47,359 57,762
Leasehold improvements 17,021 17,021
Construction in progress 0 $ 23,880
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1,343,456 1,368,620
Less accumulated depreciation 919,267 958,017
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424,189 410,603
OTHER ASSETS
Deposits 1,000 1,000
Deferred tax credit 35,200 35,200
Goodwill 230,849 227,001
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$ 1,289,982 $ 1,488,770
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LIABILITIES AND EQUITY
CURRENT LIABILITIES
Line of credit 213,728 265,850
Current portion of long term debt 90,443 90,443
Current portion of obligations under capital leases 17,379 17,379
Accounts payable - trade 398,423 627,478
Accrued expenses 41,825 9,534
Officers' Loan 3,338 -
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Total Current Liabilities 765,136 1,010,684
DEFERRED TAX LIABILITY 1,300 1,300
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES 419,391 391,723
CAPITAL LEASE OBLIGATIONS 51,211 46,979
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1,237,038 1,450,685
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value
10,000,000 shares authorized,
5,465,000 shares outstanding and
5,165,000 shares issued in 1997 and
5,897,704 shares oustanding and
5,597,704 shares issued in 1998 51,650 55,977
Additional paid in capital 1,512,661 1,825,334
Accumulated deficit (1,511,367) (1,843,226)
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Total Stockholders' Equity 52,944 38,085
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$ 1,289,982 $ 1,488,770
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<TABLE>
CLARION HOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
<CAPTION>
March 31, March 31,
1997 1998
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<S> <C> <C>
Sales $ - $ 623,572
Cost of goods sold - 643,905
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Gross profit $ - $ (20,332)
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Selling, general and administrative expenses 123,895 288,641
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Operating profit (loss) $ ( 123,895) $ (308,973)
Other income (expense)
Interest expense - (22,886)
Earnings (loss) before income taxes (123,895) (331,859)
Income tax expense - -
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Net earnings (loss) $ (123,895) $ (331,859)
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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<TABLE>
CLARION HOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
MARCH 31,
<CAPTION>
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1997 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (123,895) $ (331,859)
Adjustments to reconcile net earnings to
net cash provided by (used in) operations
Depreciation and amortization 330 42,597
Changes in operating assets and liabilities
Increase in accounts receivable - (57,250)
Decrease in inventories - 23,198
Increase in prepaid tooling - (47,797)
Decrease (increase) in other assets - (50)
Increase (decrease) in accounts payable (4,861) 229,053
Increase (decrease) in accrued liabilities - (35,629)
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Net cash (used in) provided by operating activities (128,426) (177,734)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment - (25,164)
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Net cash used in investing activities - (25,164)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in line of credit - 52,122
Payments on long-term debt - (27,668)
Capital lease payments - (4,232)
Sale of company stock 128,426 279,500
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Net cash (used in) provided by financing activities - 299,721
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Net increase (decrease) in cash - 96,823
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Cash at beginning of period 19 10,265
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Cash at end of period $ 19 $ 10,265
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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CLARION HOUSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Rule 310(b)
of Regulation S-B. Accordingly, the financial statement do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments have been included and all adjustments considered necessary for a
fair presentation have been included and such adjustments are of a normal
recurring nature.
Results for interim periods should not be considered indicative of results for a
full year. The year-end consolidated balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended December 31, 1997.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" SHOULD BE
READ IN CONJUNCTION WITH THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS, THE NOTES
THERETO AND THE OTHER FINANCIAL DATA INCLUDED ELSEWHERE HEREIN AND INCLUDES
FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES WHICH ARE BASED
UPON THE COMPANY'S BELIEFS, AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION
CURRENTLY AVAILABLE TO THE COMPANY. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THE RESULTS PREDICTED BY SUCH FORWARD-LOOKING STATEMENTS DUE TO
VARIOUS FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE RISKS AND UNCERTAINTIES
WHICH ARE DISCUSSED BELOW.
On December 31, 1997, the Company completed the acquisition of Triangle
Plastics, Inc., an Ohio corporation, and subsequently changed Triangle's name to
Clarion Plastics Technologies, Inc. ("Clarion Plastics"). Clarion Plastics is a
manufacturer of various injection molded thermo plastic products.
As of December 31, 1997, the Company had a deficit in its working capital of
$166,392. For the three month period ended March 31, 1998, the Company had
revenues of $623,572 with a net loss of $324,933. As of March 31, 1998, the
Company had a deficit in its working capital of $195,718.
The Company has generated revenues from the sale of Clarion Plastics
products. The Company expects to increase its revenues in the near future as it
acquires or establishes additional businesses which are compatible with those of
Clarion Plastics. The Company also expects to incur substantial administrative
expenses in the future.
The Company believes that additional funding of approximately $1,000,000, in
addition to expected revenues from operations, will be required to satisfy its
capital requirements through the remainder of the 1998 fiscal year. During the
second quarter of 1998, the Company received an aggregate of $1,935,000 from the
exercise of stock purchase options.
The Company is seeking to raise additional funds to meet its working capital
needs through the sale of its securities. However, there is no assurance that
the Company will be able to obtain sufficient additional funds when needed, or
that such funds, if available, will be obtainable on terms satisfactory to the
Company.
During the next twelve months, the Company anticipates incurring
approximately $6,500,000 in expenditures for the acquisition of capital
equipment. It is anticipated that $275,000 of these capital expenditures will be
met from the net proceeds of the Company's offering of its securities and the
remainder will be financed through long term debt.
During the next twelve months, general and administrative expenses are also
expected to increase due to legal and accounting fees related to maintaining the
Company's reporting status with the Securities and Exchange Commission.
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YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, in less than two years, computer systems and
software used by many companies will need to be upgraded to comply with such
"Year 2000" requirements. The Company believes that its internal systems are
either already Year 2000 compliant or can be upgraded without significant
expenditures.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Inapplicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Inapplicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
ITEM 5. OTHER INFORMATION
Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits and Index of Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Inapplicable.
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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.
CLARION HOUSE, INC.
Dated: August 18, 1998 By:/S/ Troy D. Wiseman
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Troy D. Wiseman,
Chief Executive Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 144588
<SECURITIES> 0
<RECEIVABLES> 385018
<ALLOWANCES> 0
<INVENTORY> 236465
<CURRENT-ASSETS> 814966
<PP&E> 1368620
<DEPRECIATION> 958017
<TOTAL-ASSETS> 1488770
<CURRENT-LIABILITIES> 1010684
<BONDS> 0
0
0
<COMMON> 55977
<OTHER-SE> (17892)
<TOTAL-LIABILITY-AND-EQUITY> 1488770
<SALES> 623572
<TOTAL-REVENUES> 623572
<CGS> 643905
<TOTAL-COSTS> 643905
<OTHER-EXPENSES> 20332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (22886)
<INCOME-PRETAX> (308973)
<INCOME-TAX> 0
<INCOME-CONTINUING> (331859)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (331859)
<EPS-PRIMARY> (0.059)
<EPS-DILUTED> (0.059)
</TABLE>
