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 March 31, 1999
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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 _______________
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
20 East University, Suite 304, Tempe, Arizona 85281
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(Address of principal executive offices)
(602) 967-5800
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(Issuer's telephone number)
14988 North 78th Way, Suite 203, Scottsdale, Arizona 85260
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(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 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 [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 May 12, 1999, the issuer
had outstanding 13,177,826 shares of Common Stock, par value $.005 per share.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Page 1 of 10 Total Pages
Exhibit Index - None
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FBR CAPITAL CORPORATION
BALANCE SHEETS
MARCH 31 JUNE 30
ASSETS 1999 1998
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(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 262,207 $ 15,223
Investment in U.S. Government Treasury Bills -- 275,670
Investment in common stock of Parlux Fragrances,
Inc 1,827 53,541
Other current assets 3,563 4,536
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TOTAL ASSETS $ 267,597 $ 348,970
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 7,776 $ 4,691
Accrued expenses 11,645 9,449
Convertible notes payable 19,500 19,500
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Total current liabilities 38,921 33,640
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SERIES A REDEEMABLE PREFERRED STOCK:
$.01 par value;
529 shares authorized;
no shares and 2 shares issued and outstanding,
respectively; at liquidation value of $5,600
per share -- 11,200
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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 (9,120,753) (8,834,150)
Accumulated other comprehensive loss (11,004) (222,153)
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Total stockholders' equity 228,676 304,130
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 267,597 $ 348,970
=========== ===========
The accompanying notes are an integral part of these balance sheets.
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<PAGE>
FBR CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
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Operating expenses $ (77,254) $ (100,532)
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Loss from operations (77,254) (100,532)
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Other income (expense):
Interest expense (2,196) (2,196)
Interest income 9,106 13,581
Other income -- 1,304
Realized loss on disposal of Parlux
common stock (216,259) --
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Other income (expense), net (209,349) 12,689
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Net loss (286,603) (87,843)
Other comprehensive loss:
Unrealized loss on investment:
Unrealized holding loss arising
during period (790) (14,712)
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Comprehensive loss $ (287,393) $ (102,555)
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Loss per common share and common share equivalents $ (.06) $ (.02)
=========== ===========
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.
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<PAGE>
FBR CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
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Operating expenses $ (25,047) $ (27,605)
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Loss from operations (25,047) (27,605)
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Other income (expense):
Interest expense (721) (721)
Interest income 2,879 4,053
Realized loss on disposal of Parlux common stock (84,403) --
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Other income (expense), net (82,245) 3,332
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Net loss (107,292) (24,273)
Other comprehensive income (loss):
Unrealized gain (loss) on investment:
Unrealized holding gain (loss) arising
during period 325 8,924
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Comprehensive loss $ (106,967) $ (15,349)
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Loss per common share and common share equivalents $ (.02) $ --
=========== ===========
Weighted average common share and common share
equivalents outstanding 4,648,205 4,648,205
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The accompanying notes are an integral part of these statements.
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<PAGE>
FBR CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(286,603) $(87,843)
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Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Realized loss on disposal of Parlux common stock 251,663 --
(Increase) decrease in:
Other current assets 973 235
Increase (decrease) in:
Accounts payable and accrued expenses 5,281 3,111
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Total adjustments 257,917 3,346
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Net cash used in operations activities (28,686) (84,497)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of U.S. Government Treasury Bills 275,670 86,751
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NET INCREASE IN CASH AND CASH EQUIVALENTS 246,984 2,254
CASH AND CASH EQUIVALENTS, beginning of period 15,223 10,238
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CASH AND CASH EQUIVALENTS, end of period $ 262,207 $ 12,492
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The accompanying notes are an integral part of these statements.
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<PAGE>
FBR CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements of FBR Capital Corporation ("FBR" or the
"Company") have been prepared in accordance with generally accepted accounting
principles ("GAAP"), pursuant to the rules and regulations of the Securities and
Exchange Commission, and are unaudited. Accordingly, they do not include all the
information and footnotes required by 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 nine-month and three-month
periods ended March 31, 1999 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, 1998.
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. ("Parlux Common Stock") 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 Parlux Common Stock 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 "Accumulated Other Comprehensive
Loss," in accordance with Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income."
PREFERRED STOCK EXCHANGE
During the quarter ended March 31, 1999, the Company exchanged 1,326 shares of
Parlux Common Stock for the remaining two issued and outstanding shares of the
Company's Preferred Stock.
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 1999
and 1998 as their inclusion would have an anti-dilutive effect on those results.
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<PAGE>
FBR CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES
The Company has a net operating loss carryforward of approximately $6,900,000 at
March 31, 1999. 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 2013. 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.
RECENTLY ISSUED ACCOUNTING STANDARD
During 1998, the Company adopted Financial Accounting Standards Board Statement
No. 130, REPORTING COMPREHENSIVE INCOME (SFAS No. 130). SFAS No. 130 requires
the reporting of comprehensive income in addition to net income from operations.
Comprehensive income is a more inclusive financial reporting methodology that
includes disclosures of certain financial information that historically has not
been recognized in the calculation of net income.
SUBSEQUENT EVENT
Effective April 15, 1999, the Company acquired 90.17% (8,398,834 shares) of the
outstanding capital stock of Vitrix Incorporated ("Vitrix"), a privately held
Arizona corporation (the "Acquisition"). The Acquisition was consummated in
accordance with the terms of an Exchange Agreement, dated April 15, 1999, by and
among FBR, Vitrix and certain of the Vitrix shareholders who agreed to
participate in the Acquisition (the "Exchange Agreement").
Under the terms of the Exchange Agreement, upon consummation of the Acquisition
each outstanding share of Vitrix common stock (held by a participating Vitrix
shareholder) was converted into the right to receive a combination of .9224
shares of FBR common stock ("FBR Common Stock") and 1.0736 shares of Series B
Convertible Preferred Stock of FBR ("Preferred Stock"). Each share of Preferred
Stock is automatically convertible into one share of FBR Common Stock at such
time as FBR has the authorized capital to issue such shares. The aggregate
consideration paid in the Acquisition was 7,747,084 shares of FBR common stock
and 9,016,988 shares of Preferred Stock (collectively, the "Shares"). The
Exchange Agreement also provided for the assumption of outstanding options and
warrants to purchase an aggregate of 1,122,000 shares of Vitrix common stock,
which will be converted into options and warrants to purchase FBR Common Stock,
subject to adjustment for the appropriate exchange ratio.
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<PAGE>
FBR CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SUBSEQUENT EVENT (CONTINUED)
Giving effect to the issuance of the Shares, the participating Vitrix
shareholders own approximately 78.3% of the outstanding shares of FBR Common
Stock (assuming conversion of the Preferred Stock into FBR Common Stock) and the
current FBR shareholders own the remaining 21.7% of the outstanding FBR shares.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATIONS
On April 15, 1999, the Company entered into an Exchange Agreement with Vitrix.
As a result of the merger, Vitrix became a 90.17 percent-owned subsidiary of
FBR.
On June 28, 1996, the Company sold to Parlux, pursuant to the Asset Purchase
Agreement dated January 31, 1996, between the Company and Parlux, substantially
all of the assets, properties and rights owned by the Company for cash, shares
of common stock and other consideration (the "Asset Sale").
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.
Since the Asset Sale in June 1996, the Company's operations have been limited to
the conduct of administrative activities, including 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 SEC
filings, undertaking and completing an exchange offer for preferred shares and
other general corporate activities.
In connection with the Asset Sale in June 1996, all employees of the Company
were terminated and the Company has no employees. The Company's two executive
officers provided certain services to the Company on a part-time contingency
basis. In connection with the Acquisition, the two executive officers have
resigned as of the effective date of the acquisition.
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<PAGE>
FBR CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report on Form 10-QSB, including,
without limitation, information appearing under Part 1, Item 2, "Management's
Discussion and Analysis or Plan of Operation", 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 10-KSB for the fiscal year ended June 30, 1998, 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.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FBR CAPITAL CORPORATION
Dated: May 13, 1999
By /s/ Philip R. Shumway
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Philip R. Shumway
President and Chief Executive Officer
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<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-30-1999
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<CASH> 262,207
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