U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- -------- Exchange Act of 1934
For the quarterly period ended December 31, 1996
------------------
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File number 1-10320
---------
FBR Capital Corporation
-----------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada 13-3465289
- ------------------------------ -------------------
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
14988 North 78th Way, Suite 203, Scottsdale, Arizona 85260
----------------------------------------------------------
(Address of Principal Executive Offices)
(602)483-1466
----------------------------------------------------------
(Issuer's Telephone Number Including Area Code
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 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: At February 12, 1997,
Issuer had outstanding 4,648,205 shares of Common Stock, par value $.005 per
share.
Transitional Small Business Disclosure Format: Yes No X
----- -----
Page 1 of 12 Total Pages
Exhibit Index - None
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FBR CAPITAL CORPORATION
(Formerly Richard Barrie Fragrances, Inc.)
BALANCE SHEETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
December 31 June 30
ASSETS 1996 1996
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 43,533 $ 61,871
Investment in U.S. Government Treasury Bills 399,559 -
Investment in common stock of Parlux Fragrances, Inc. 1,526,250 3,746,250
Receivable from acquiror of discontinued operations - 750,000
Other current assets 15,229 6,991
------------ -------------
TOTAL ASSETS $ 1,984,571 $ 4,565,112
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 6,577 $ 121,789
Accrued expenses 52,824 180,417
Convertible notes payable 19,500 117,000
------------ -------------
Total current liabilities 78,901 419,206
------------ -------------
SERIES A REDEEMABLE PREFERRED STOCK:
$.01 par value;
529 shares authorized;
517 shares issued and outstanding;
at liquidation value of $5,600 per share 2,895,200 2,895,200
------------ -------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value;
10,000,000 shares authorized;
no shares outstanding except 517 shares issued as
Series A Redeemable Preferred Stock - -
Common stock, $.005 par value;
16,777,667 shares authorized;
4,648,205 shares issued and outstanding 23,241 23,183
Additional paid-in capital 7,245,850 7,241,768
Accumulated deficit (6,038,621) (6,014,245)
Unrealized loss on investment (2,220,000) -
------------ -------------
Total stockholders' equity (deficit) (989,530) 1,250,706
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 1,984,571 $ 4,565,112
============ =============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-2-
<PAGE>
FBR CAPITAL CORPORATION
(Formerly Richard Barrie Fragrances, Inc.)
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Operating expenses $ (82,467) $ -
----------- -----------
Loss from operations (82,467) -
----------- -----------
Other income (expense):
Interest expense (6,002) -
Gain on extinguishment of debt 53,385 -
Interest income 10,708 -
----------- -----------
Other income (expense), net 58,091 -
Loss from discontinued operations - (737,007)
----------- -----------
Net loss $ (24,376) $ (737,007)
=========== ===========
Earnings per common share and common share equivalents:
Loss per share from continuing operations $ (.01) $ -
Loss per share from discontinued operations - (.17)
----------- -----------
Net loss per share $ (.01) $ (.17)
=========== ===========
Weighted average common share and common share
equivalents outstanding 4,648,205 4,419,548
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
FBR CAPITAL CORPORATION
(Formerly Richard Barrie Fragrances, Inc.)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Operating expenses $ (39,218) $ -
----------- -----------
Loss from operations (39,218) -
----------- -----------
Other income (expense):
Interest expense (1,579) -
Gain on extinguishment of debt 53,385 -
Interest income 6,425
----------- -----------
Other income (expense), net 58,231 -
Loss from discontinued operations - (780,161)
----------- -----------
Net income (loss) $ 19,013 $ (780,161)
=========== ===========
Earnings per common share and common share equivalents:
Income per share from continuing operations $ - $ -
Loss per share from discontinued operations - (.18)
----------- -----------
Net income (loss) per share $ - $ (.18)
=========== ===========
Weighted average common share and common share
equivalents outstanding 4,648,205 4,419,548
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
FBR CAPITAL CORPORATION
(Formerly Richard Barrie Fragrances, Inc.)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (24,376) $ -
----------- -----------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation - 248,385
Discontinued operations - (737,007)
Gain on extinguishment of debt (53,385) -
(Increase) decrease in:
Accounts receivable - 249,041
Inventories - 415,991
Other assets (8,238) 154,071
Increase (decrease) in:
Accounts payable and accrued expenses (220,280) (165,171)
----------- -----------
Total adjustments (281,903) 165,310
----------- -----------
Net cash provided by (used in) continuing operations (306,279) 902,317
Net cash used in discontinued operations - (737,007)
----------- -----------
Net cash provided by (used in) operating activities (306,279) 165,310
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipt of amount due from acquiror of discontinued operations 750,000 -
Investment in U.S. Government Treasury Bills (399,559) -
Purchase of property and equipment - (39,011)
----------- ------------
Net cash provided by (used in) investing activities 350,441 (39,011)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of convertible notes payable (62,500) -
----------- -----------
Net cash used in financing activities (62,500) -
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,338) 126,299
CASH AND CASH EQUIVALENTS, beginning of period 61,871 339,715
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 43,533 $ 466,014
=========== ===========
</TABLE>
Non-cash financing activities:
On October 21, 1996, the Company completed extinguishment of $97,500 of
Convertible Notes in exchange for an aggregate of $62,500 in cash, 11,500
shares of the Company's Common Stock, and five three-year Warrants (the
Warrants) each to purchase up to 2,500 shares of the Company's Common Stock
at $2 per share. The total amount of debt (including principal and accrued
but unpaid interest of $22,525) extinguished pursuant to the exchange
aggregated $120,025. This amount, less the cash paid, value of the common
stock and the Warrants issued in the exchange offer, resulted in an
extraordinary gain on the extinguishment of debt in the amount of $53,385.
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
FBR CAPITAL CORPORATION
(Formerly Richard Barrie Fragrances, Inc.)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and the instructions to Form 10-QSB. Accordingly, they do not include all the
information and footnotes required by Generally Accepted Accounting Principles
("GAAP") for complete financial statements. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation of the results for the interim periods presented have been
made. The results for the six month and three month periods ended December 31,
1996 may not be indicative of the results for the entire year. These financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1996.
Cash and Cash Equivalents and Investments
The Company's policy is to invest cash in excess of expenditure requirements in
income-producing investments. Temporary cash investments are all highly liquid
investments with maturity of three months or less when purchased and are
considered to be cash equivalents for cash flow purposes. Investments in the
common stock of Parlux Fragrances, Inc. and U.S. Government Treasury Bills are
accounted for in accordance with Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities".
The Company's investment in common stock of Parlux Fragrances, Inc. is
classified as "available for sale". Changes in the market value are reflected in
the stockholders' equity section of the Company's balance sheet under the
caption "Unrealized loss on investment".
Earnings (Loss) Per Common Share
Earnings (loss) per common share is computed by dividing net income (loss) by
the weighted average number of common share and common share equivalents
outstanding during the period. Primary and fully diluted earnings per share are
considered to be the same in all periods. The impact of outstanding warrants and
stock options were not included in the calculation of net loss per share in 1996
and net income per share in 1995, as their inclusion would have an anti-dilutive
effect on those results.
-6-
<PAGE>
FBR CAPITAL CORPORATION
(Formerly Richard Barrie Fragrances, Inc.)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
Income Taxes
The Company has a net operating loss carryforward of approximately $6,300,000 at
December 31, 1996. Historically, no federal tax benefit has been recorded due to
the uncertainty of the Company's ability to realize benefits by generating
taxable income in the future. These carryforwards expire through fiscal year
2011. Due to a greater than 50% change in the ownership of the Company, as
defined in the Internal Revenue Code, resulting from various equity offerings,
certain restrictions exist as to the use of net operating loss carryforwards to
offset future taxable income.
Although the Company has significant net operating loss carryforwards available
to offset future taxable income, due to the uncertainty as to the Company's
future earnings, a full valuation allowance has been provided to offset all
deferred tax assets. No income taxes have been provided for either of the
interim periods based on the Company's ability to utilize its net operating loss
to offset taxable income, if any, during the periods.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND PLAN OF OPERATIONS
Plan of Operations
On July 28, 1996, the Company sold to Parlux Fragrances, Inc. (Parlux) virtually
all of the assets, properties and rights owned by the Company in connection with
its business (the "Asset Sale").
The Company has not conducted any operations since the Asset Sale. Accordingly,
the results of its previous operations are not material. The reasons for the
Asset Sale and the discontinuance of the Company's business were previously
reported in the Company's Proxy Statement, dated April 22, 1996 and Form 10 KSB
for the fiscal year ended June 30, 1996.
Upon the consummation of the Asset Sale and Exchange Offer and payment of
certain expenses, the Company had approximately $630,000 in cash. Of that
amount, approximately $56,000 was applied to discharge certain accounts payable,
including legal, accounting and consulting fees for the fiscal year ended June
30, 1996. On December 31, 1996, the Company had approximately $43,000 in cash
and approximately $400,000 in U.S. Government Treasury Bills. The Company
expects that it will earn approximately $20,000 from interest during the current
fiscal year ending June 30, 1997.
-7-
<PAGE>
FBR CAPITAL CORPORATION
(Formerly Richard Barrie Fragrances, Inc.)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
Corporate and administrative expenses for the current fiscal year are expected
to be approximately $130,000 including $82,000 in fees and expense reimbursement
to the directors, $18,000 for accounting fees for audit and tax returns, $3,000
for office and telephone expenses, $17,000 for liability insurance, $6,000 for
stock transfer services and approximately $4,000 for miscellaneous expenses.
Expenditures for liability insurance are primarily to cover exposure that may
arise from products previously sold by the Company that are still in the market.
Administrative expense relates primarily to resolution of matters arising from
the Company's prior business. Funds to pay the expenses are expected to be
derived from interest income earned during the year and from the Company's cash
on hand.
The Company has been identifying and conducting discussions with respect to a
possible business combination with one or more entities interested in acquiring
or being acquired by the Company. The Company is free to investigate businesses
of essentially any kind or nature including but not limited to, finance,
technology, manufacturing, service, research and development, healthcare,
communications, insurance or transportation. While the Company has not chosen
any particular area of business in which it may propose to engage and has not
conducted any market studies with respect to any business, property or industry,
the directors of the Company have considered the strengths and weaknesses of the
Company and established certain initial criteria for its search. The Company
will first seek a business combination with a company having a business or line
of products with good prospects for future profits and growth. In view of the
Company's small size and book value, the appropriate candidate is expected to be
an emerging or developing company. Other priority candidates may be those
desiring to become a public company and those which have an interest in
acquiring the company's cash and net operating loss carryforwards.
A number of companies have been identified which appear to meet the criteria set
forth above and discussions have been held with several of them. There is no
assurance of the availability, viability or success of any acquisition or the
results of operations of the Company in connection with any acquisition or
business venture. Even if a suitable candidate for a business combination is
found and negotiations are successfully completed, there is no assurance of
successful operations after the combination has been effected or that existing
stockholders of the Company will not suffer substantial dilution of their equity
position, either upon the business combination itself or upon the completion of
any additional financing which may be necessary.
-8-
<PAGE>
FBR CAPITAL CORPORATION
(Formerly Richard Barrie Fragrances, Inc.)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
The Company does not believe that it is an investment company required to
register as such under the Investment Company Act of 1940, as amended. If the
Company has not concluded a business combination before June 28, 1997, that is,
one year after the Asset Sale, and if, because of its continued ownership of the
Parlux Stock or other securities, it would be required to register or seek an
exemption from such registration, the Company anticipates that it will sell,
transfer or otherwise divest itself of its ownership thereof, redeem any
outstanding Preferred Stock and make a determination as to whether to liquidate
and distribute its assets or to continue to seek out viable business
combinations.
The Company continues to hold the Parlux Stock and on December 31, 1996, had
approximately $43,000 in cash in banks and $400,000 in U.S. Government Treasury
Bills maturing in February 1997. The Parlux Stock may be sold to the public
pursuant to a currently effective Registration Statement under the Securities
Act of 1933, covering those shares. Under the terms of the Company's outstanding
Preferred Shares, however, no sale of the Company's assets having a fair market
value of $250,000 or more, either alone or in the aggregate with all other sales
of the Company assets, may be sold without the prior consent of the holders of a
majority of the Preferred Stock unless the net proceeds of the sale are applied
to the payment of the Redemption Price ($5,600 per share) of the Preferred
Stock. The aggregate Redemption Price of the 517 shares of Preferred Stock
outstanding is $2,895,200 and the holders of the Preferred Stock have a
liquidation preference in that amount. The Company is obligated to redeem all of
the Preferred Stock by June 27, 1997. If such redemption is not effected, the
holders of the majority of the Preferred Stock have the right to demand the
liquidation of the Company and the application of its assets to satisfy their
liquidation preference.
On June 28, 1996, the market value of the Parlux Stock was $10.125 per share,
and the aggregate value would have been sufficient to pay the aggregate
Redemption Price. At that time, however, the Parlux Stock had not been
registered for resale under the Securities Act if 1933 and, accordingly,
transfer thereof was restricted. The Parlux Stock was registered on August 12,
1996, on which date the last sale price had declined to $7.625 per share. On
December 31, 1996, the last sale price was $4.125 per share. On February 12,
1997, the last sale price was $3.50 per share. If, by June 27, 1997, the
mandatory redemption date for the Preferred Shares, the market price of the
Parlux Stock has not substantially recovered, or if some accommodation cannot be
reached between the Company and the holders of the Preferred Stock, the Company
will probably be required to pay substantially all of its cash, in addition to
the proceeds of any sale of the Parlux Stock, to fulfill its obligation to pay
the Redemption Price. Any significant reduction in the amount of its available
cash will probably
-9-
<PAGE>
FBR CAPITAL CORPORATION
(Formerly Richard Barrie Fragrances, Inc.)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
reduce the Company's value as an acquisition candidate for other businesses and
the Company's opportunities to effect a favorable acquisition transaction will
be substantially reduced.
The Company has cash available to fund current expenditures but will be required
to raise additional capital for future acquisitions or other business
opportunities.
On January 13, 1994, the Company entered into a series of 10% convertible
subordinated promissory notes due January 15, 1996 (the Convertible Notes),
totalling $5,157,750. On June 30, 1996, simultaneously with the closing of the
Asset Sale, the Company completed an exchange offer with certain holders of the
Convertible Notes in the aggregate principal amount of $5,040,750. The remaining
$117,000 of Convertible Notes, held by three note holders, were recorded as a
current liability on the September 30, 1996 and June 30, 1996, balance sheets.
On October 21, 1996, the Company completed extinguishment of $97,500 of
Convertible Notes in exchange for an aggregate of $62,500 in cash, 11,500 shares
of the Company's Common Stock (market value of $.36 per share), and five
three-year Warrants (the Warrants) each to purchase up to 2,500 shares of the
Company's Common Stock at $2 per share. The total amount of debt (including
principal and accrued but unpaid interest of $22,525) extinguished pursuant to
the exchange aggregated $120,025. This amount, less the cash paid, value of the
common stock and the Warrants issued in the exchange offer, resulted in an
extraordinary gain on the extinguishment of debt in the amount of $53,385.
The Company believes that the remaining holder of the last Convertible Note, in
the principal amount of $19,500, will also accept a settlement of the Company's
obligations on terms not requiring the full cash payment of the amount due on
the Convertible Note. Funds for this settlement are expected to come from the
Company's cash on hand.
During November 1996, the Company received a request for payment of claimed
amounts totaling approximately $137,000 purported to be owed to Muelhens GMBH
with whom the Company had a distribution agreement from December 1993 to June
30, 1995. As set forth in the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1996, distribution agreements with Muelhens GMBH and
affiliated parties were terminated effective June 30, 1995 on a basis that
relieved the Company of obligations to Muelhens - affiliated companies. The
Company is attempting to determine whether the claimed amounts were included in
the numerous transactions resolved in the termination arrangements in June 1995.
-10-
<PAGE>
FBR CAPITAL CORPORATION
(Formerly Richard Barrie Fragrances, Inc.)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
The Company is not presently able to determine whether this request for payment
is valid and what amount, if any, may be due and owing thereon.
Forward-Looking Statements
Certain information contained in third Quarterly Report on Form 10-QSB,
including, without limitation, information appearing under Part 1, Item 2,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", are forward-looking statements (within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934). Factors set forth in the Company's Annual Report on Form 10K for the
fiscal year ended June 30, 1996, under Item 1, "Business" and Item 6
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" together with other factors that appear with the forward-looking
statements, or in the Company's other Securities and Exchange Commission filings
could affect the Company's actual results and could cause the Company's actual
results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company in this Quarterly Report on
Form 10-QSB.
PART 2. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) See Management's Discussions and Analysis of Financial Condition
and Plan of Operations with respect to issuance of common stock
and warrants in exchange for certain convertible notes.
-11-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FBR CAPITAL CORPORATION
(Registrant)
Dated: February 12, 1997
By: /s/ Charles D. Snead, Jr.
-----------------------------
Charles D. Snead, Jr., President
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 43,533
<SECURITIES> 1,925,809
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,984,571
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,984,571
<CURRENT-LIABILITIES> 78,901
<BONDS> 0
2,895,200
0
<COMMON> 23,241
<OTHER-SE> (1,012,771)
<TOTAL-LIABILITY-AND-EQUITY> 1,984,571
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 82,467
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6002
<INCOME-PRETAX> (24,376)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,376)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
