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, 1997
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Transition report pursuant to Section 13 or 15(d) of the Securities
- ------- Exchange Act of 1934
For the transition period from to
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Commission File number 33-58694
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FBR Capital Corporation
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(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
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(Address of Principal Executive Offices)
(602)483-1466
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(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 4, 1998, Issuer
had outstanding 4,648,205 shares of Common Stock, par value $.005 per share.
Transitional Small Business Disclosure Format: Yes No X
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Page 1 of 8 Total Pages
Exhibit Index - None
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FBR CAPITAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 June 30
ASSETS 1997 1997
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 12,470 $ 10,238
Investment in U.S. Government Treasury Bills 330,811 388,089
Investment in common stock of Parlux Fragrances, Inc. 39,263 62,967
Other current assets 4,124 5,818
----------- -----------
TOTAL ASSETS $ 386,668 $ 467,112
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 15,048 $ 9,694
Accrued expenses 7,999 6,524
Convertible notes payable 19,500 19,500
----------- -----------
Total current liabilities 42,547 35,718
----------- -----------
SERIES A REDEEMABLE PREFERRED STOCK:
$.01 par value;
529 shares authorized;
2 shares issued and outstanding;
at liquidation value of $5,600 per share 11,200 11,200
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value;
10,000,000 shares authorized;
no shares outstanding except 2 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 23,241
Additional paid-in capital 9,337,192 9,337,192
Accumulated deficit (8,791,081) (8,727,512)
Unrealized loss on investment (236,431) (212,727)
----------- -----------
Total stockholders' equity 332,921 420,194
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 386,668 $ 467,112
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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<PAGE>
FBR CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Unaudited)
1997 1996
---- ----
Operating expenses $ (72,927) $ (82,467)
----------- -----------
Loss from operations (72,927) (82,467)
----------- -----------
Other income (expense):
Interest expense (1,474) (6,002)
Interest income 9,528 10,708
Other income 1,304 --
Gain on extinguishment of debt -- 53,385
----------- -----------
Other income (expense), net 9,358 58,091
----------- -----------
Net loss $ (63,569) $ (24,376)
=========== ===========
Loss per common share and common share equivalents $ (.01) $ (.01)
=========== ===========
Weighted average common share and common share
equivalents outstanding 4,648,205 4,648,205
=========== ===========
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
FBR CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Unaudited)
1997 1996
---- ----
Operating expenses $ (32,384) $ (39,218)
----------- -----------
Loss from operations (32,384) (39,218)
----------- -----------
Other income (expense):
Interest expense (737) (1,579)
Interest income 4,640 6,425
Gain on extinguishment of debt -- 53,385
----------- -----------
Other income (expense), net 3,903 58,231
----------- -----------
Net income (loss) $ (28,481) $ 19,013
=========== ===========
Loss per common share and common share equivalents $ (.01) $ --
=========== ===========
Weighted average common share and common share
equivalents outstanding 4,648,205 4,648,205
=========== ===========
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
FBR CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (63,569) $ (24,376)
--------- ---------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Gain on extinguishment of debt -- (53,385)
(Increase) decrease in:
Other assets 1,694 (8,238)
Increase (decrease) in:
Accounts payable and accrued expenses 6,829 (220,280)
--------- ---------
Total adjustments 8,523 (281,903)
--------- ---------
Net cash used in operations activities (55,046) (306,279)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts of amount due from acquiror of discontinued operations -- 750,000
Investment in U.S. Government Treasury Bills -- (399,559)
Proceeds from sale of U.S. Government Treasury Bills 57,278 --
--------- ---------
Net cash provided by investing activities 57,278 350,441
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of convertible notes payable -- (62,500)
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Net cash used in financing activities -- (62,500)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,232 (18,338)
CASH AND CASH EQUIVALENTS, beginning of period 10,238 61,871
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CASH AND CASH EQUIVALENTS, end of period $ 12,470 $ 43,533
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
FBR CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1997
(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,
1997 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, 1997.
Cash and Cash Equivalents and Investments
The Company's policy is to invest cash in excess of operating 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".
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 1997
and 1996 as their inclusion would have an anti-dilutive effect on those results.
Income Taxes
The Company has a net operating loss carryforward of approximately $6,500,000 at
December 31, 1997. 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
2012. 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.
-6-
<PAGE>
FBR CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1997
(Unaudited)
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 June 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 for cash, shares of the common stock of Parlux (Parlux stock) and
other consideration.
The Company has not conducted any operations since the Asset Sale. Accordingly,
the results of its operations prior to the Asset Sale are not material. The
reasons for and terms of 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.
On December 31, 1997, the Company had approximately $12,000 in cash and
approximately $330,000 in U.S. Government Treasury Bills. The Company expects
that it will earn approximately $18,000 from interest during the current fiscal
year ending June 30, 1998.
Corporate and administrative expenses for the current fiscal year are expected
to be approximately $115,000 including $70,000 in fees and expense reimbursement
to the directors, $15,000 for accounting fees for audit and tax returns, $6,000
for legal fees, $12,000 for liability insurance and approximately $4,000 for
miscellaneous expenses. 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.
Since the Asset Sale of June 1996, the Company's operations have been limited to
the conduct of administrative activities such as paying indebtedness remaining
after the Asset Sale, acquiring outstanding notes, settling a claim for prior
services, preparing and filing federal and state tax returns and quarterly SEC
filings, undertaking and completing an exchange offer for preferred shares and
other general corporate activities. Also, 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 conducted only limited market studies
with respect to any business, property or industry, the directors of the Company
-7-
<PAGE>
FBR CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1997
(Unaudited)
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 in the judgment of the Board of
Directors 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.
The Company continues to hold 27,229 shares of Parlux Stock and on December 31,
1997, it had approximately $12,000 in cash in banks and $330,000 in U.S.
Government Treasury Bills maturing in February 1998. 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. Management believes
that the Company's reserves in cash and treasury bills are adequate to support
its current activities for the year ended June 30, 1998. However, if management
decides to merge with or acquire a business, this may require additional
capital. There can be no assurance that the Company will be able to raise such
capital when and if it is needed.
In connection with the Asset Sale on June 28, 1996, all employees of the Company
were terminated and the Company has no employees. The Company's two executive
officers provide certain services to the Company on a part-time contingency
basis. There are no present plans to hire any employees.
Forward-Looking Statements
Certain information contained in this first 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, 1997, 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.
-8-
<PAGE>
FBR CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1997
(Unaudited)
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 4, 1998
By: /s/ Charles D. Snead, Jr.
-------------------------
Charles D. Snead, Jr., President
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 12,470
<SECURITIES> 370,074
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 386,668
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 386,668
<CURRENT-LIABILITIES> 42,547
<BONDS> 0
11,200
0
<COMMON> 23,241
<OTHER-SE> 309,680
<TOTAL-LIABILITY-AND-EQUITY> 386,668
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 72,927
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,474
<INCOME-PRETAX> (63,569)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63,569)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
