FORM 10-QSB
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: Commission File Number:
June 30, 1999 033-26344
HARVARD FINANCIAL SERVICES CORP.
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Formerly known as Capital Advisors Acquisition Corporation
(Exact name of registrant as specified in its charter)
Delaware 75-2254748
(State of Incorporation) (I.R.S. Employer Identification No.)
1400 Medford Plaza
Route 70 & Hartford Road
Medford, New Jersey 08055
(Address of principal executive office)
Telephone Number: (609) 953-7985
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 Exchange Act of 1934 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.
X Yes No
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The number of shares outstanding of the registrant's common
stock as of the date of the filing of this report: 11,295,806 shares.
<PAGE>
FORM 10-QSB
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
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HARVARD FINANCIAL SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
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ASSETS
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June 30,
1999 December 31,
(Unaudited) 1998
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Cash $ 4,151 $ 8,083
Receivables:
Loans receivable, net 136,802 151,662
Deferred income taxes 33,387 33,387
Prepaid expenses 15,500 15,500
Property and equipment, net 8,531 10,104
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Total Assets $ 198,371 $218,736
============ ==========
See Accompanying Notes
FORM 10-QSB
HARVARD FINANCIAL SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
June 30,
1999 December 31,
(Unaudited) 1998
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Liabilities:
Stockholders loans payable $273,000 $273,000
Accounts payable and accrued liabilities 136,986 101,254
Holdback to customers 39,754 39,754
Unearned discounts 15,398 18,108
Due to related party 116,812 116,812
-------- --------
Total Liabilities 581,950 548,928
Stockholders' Equity:
Common stock, $.0001 par value,
60,000,000 shares authorized;
issued and outstanding 11,295,806 1,130 1,130
Additional paid-in capital 437,399 437,399
Deficit (822,108) (768,721)
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Total Stockholders' Equity (383,579) (330,192)
--------- ---------
Total Liabilities and
Stockholders' Equity $198,371 $218,736
========= =========
See Accompanying Notes
<PAGE>
FORM 10-QSB
HARVARD FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income for the three and six-month
periods ended June 30, 1999 and June 30, 1998 are unaudited, but the Company
believes that all adjustments (which consist only of normal recurring accruals)
necessary for a fair presentation of the results of operations for the
respective periods have been included. Quarterly results of operations are
not necessarily indicative of results for the full year.
Three months ended Six months ended
June 30, June 30,
------------------ -----------------
(Unaudited) (Unaudited)
1999 1998 1999 1998
Revenues
Interest on loans $ 2,301 $ 3,244 $ 5,245 $ 13,809
Less interest expense 13,500 12,982 30,154 24,482
-------- -------- -------- --------
(11,199) (9,738) (24,909) (10,673)
Discount on loans 398 2,881 2,710 3,509
Loan fees 43 84 350 1,012
-------- -------- -------- --------
Net revenues (10,758) (6,773) (21,849) (6,152)
-------- -------- -------- --------
Expenses
Selling - 181 210 322
General and administrative 12,890 21,330 28,679 42,826
Provision for credit losses 2,650 71 2,650 33,830
-------- ------- -------- -------
Total expenses 15,540 21,582 31,539 76,978
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Income (loss) before
income taxes (26,298) (28,355) (53,388) (83,130)
Income tax (benefit)
expense - (4,253) - (12,470)
-------- ------- -------- -------
Net income (loss) (26,298) (24,102) $ (53,388) $(70,660)
========= ======= ======== =======
Net income (loss) per
common share $(.002) $(.002) $(.005) $ (.005)
========= ======= ======== =======
Weighted average common
shares outstanding:
Basic 11,296,000 14,806,805 11,296,000 14,806,805
========== ========== ========== ==========
See Accompanying Notes
<PAGE>
FORM 10-QSB
HARVARD FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
June 30, June 30,
1999 1998
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Cash flows from operating activities
Net loss $(53,388) $(70,660)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Provision for credit losses 2,650 33,830
Depreciation 1,573 1,573
Changes in operating assets and liabilities
Decrease in receivables 12,210 52,727
Increase in deferred income taxes - (12,470)
Increase in accounts payable and
accrued liabilities 35,733 23,305
Decrease in holdback to customers - (60,208)
Decease in unearned discounts (2,710) (9,720)
Decrease in security deposits - 400
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Net cash used in operating activities (3,932) (41,223)
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Net cash used in investing activities
Purchase of property and equipment - -
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Cash flow from financing activities
Proceeds from notes payable from lenders - 43,000
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Net cash provided by financing activities - 43,000
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Net increase/(decrease) in cash (3,932) 1,777
Cash, beginning 8,083 4,166
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Cash, ending $ 4,151 $ 5,943
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See Accompanying Notes
<PAGE>
HARVARD FINANCIAL SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Operations and Summary of Significant Accounting Policies
Nature of Operations
Harvard Financial Services, Corp. (the Company), formerly known
as Capital Advisors Acquisition Corporation, provides tuition
funding to creditworthy students by purchasing preapproved
installment notes from vocational schools and two year colleges.
These notes were entered into between the schools and their
students. The terms and conditions of the purchase of these
installment notes are based on contracts with educational
institutions in the Northeastern United States. Activities have been
suspended pending funding, if any.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary. Intercompany
transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statement and the
reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
Revenue Recognition
The Company records interest income and loan discounts ratably
over the term of the loans which run for approximately twelve to
eighty-four months. Receivables for consumer loans are recorded
when the contract is purchased. Unearned discount income
represents revenue to be recognized over the term of the loans.
Statement of Cash Flows
For purposes of the Statement of Cash Flows, cash refers solely
to demand deposits with banks and cash on hand.
Depreciation and Amortization
The Company depreciates and amortizes its property and
equipment for financial statement purposes using the
straight-line method over the estimated useful lives of the
property and equipment (useful lives of leases or lives of
leasehold improvements and leased property under capital leases,
whichever is shorter). For income tax purposes, the Company
uses accelerated methods of depreciation.
Income Taxes
The Company uses Statement of Financial Accounting Standards
No. 109 "Accounting For Income Taxes" (SFAS No. 109) in
reporting deferred income taxes. SFAS No. 109 requires a
company to recognize deferred tax liabilities and assets for the
expected future income tax consequences of events that have been
recognized in the company's financial statement. Under this
method, deferred tax assets and liabilities are determined based
on temporary differences between the financial carrying amounts
and the tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the temporary differences
are expected to reverse.
Earnings Per Share
Effective December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share",
which required the Company to change the method used to compute
earnings per share ("EPS") and to restate all prior periods
presented. The presentation of primary and fully diluted EPS
has been replaced with basic and diluted EPS, respectively.
Basic earnings per share is computed using the weighted average
number of common shares outstanding during the period. The
computation of diluted earnings per share includes the diluted
effect of securities that could be exercised or converted into
common stock. There were no dilutive securities outstanding as
of June 30, 1999 or June 30, 1998.
Recent Accounting Pronouncements
The Company has adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") 123, "Accounting for
Stock-Based Compensation." SFAS 123 provides companies with a
choice to follow the provisions of SFAS 123 in determining stock
based compensation expense or to continue with the provisions of
the Accounting Principles Board Opinion ("APB") 25, "Accounting
for Stock Issued to Employees" and provide pro-forma disclosures
of the effects on net income and earnings per share. The
Company has elected to continue to utilize the provisions of APB
25 to account for stock-based compensation. The effect of
applying SFAS 123's fair value method to the Company's stock-based
awards results in net income and earnings per share that
are not materially different from amounts reported.
2. Property and Equipment
Property and equipment are recorded at cost. Depreciation is
provided using the straight line method over the estimated
useful lives of the assets. Depreciation expense for the three-month
period ending June 30, 1999 was $787. Expenditures for
maintenance and repairs are charged against income as incurred.
When assets are sold or retired, the cost and accumulated
depreciation are removed from the accounts and any gain or loss
is included in income.
Property and equipment consisted of the following at June 30, 1999:
Equipment $14,788
Furniture 941
--------
15,729
Less accumulated depreciation (7,198)
--------
Net property and equipment $ 8,531
========
Item 2. Management's Discussion of Financial Condition and Results of
Operations
Liquidity and Capital Resources
The Company is currently in the process of pursuing both equity
and debt financing. As of August, 1999, no such financing has
been secured. If the Company is not successful in this
endeavor, certain liabilities and obligations will continue to
be past due, and the Company will need to seek alternative
measures (i.e. debt restructuring) to allow it to continue
operations. The Company's ability to properly finance the
purchase of installment notes from its school customers is
directly related to results of the pursuit of external capital.
During the past several months, the Company has not purchased
any new loans from its school customers, based on the lack of
external financing. In the meantime, it will continue to
service its existing portfolio of loans.
There was no material commitment for capital expenditures as of
June 30, 1999. Inflation was not a significant factor in the
Company's financial statements.
Year 2000 Compliance
All research indicates that the Company's exposure to this
problem will be minimal. The Company's computers, local area
network servers, software and phone system have all been
purchased within the last three years. The manufacturers of the
Company's systems have provided, or are on track to provide
updates by the end of 1999, if needed.
Results of Operations
Revenues
Net revenues for the six months ended June 30, 1999 decreased
$16,000 over the comparable six-month period in fiscal 1998.
This decrease was due to an increase in interest expense of
$6,000 in 1999 caused by an increase in notes payable coupled
with a $9,000 decrease in interest income due to a reduced
portfolio size.
Costs and Expenses
General and administrative costs for the three-month period
ending June 30, 1999 decreased $8,000 (38%) over the previous
year and for the six-month period costs reduced by $14,000
(33%). The decrease was attributable to the Company reducing
personnel-related costs in 1999. Also, provision for credit
losses was reduced significantly ($34,000) in 1999 versus the
three-month period in 1998, as the Company believes that current
reserve levels are adequate.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
In 1997, the Company instituted claims against the New York
Department of Education in the amount of $348,000 for refunds of
tuition monies advanced to licensed business schools that went
out of business. The claims also call for consequential
damages, interest and costs as a result of the failure by the
New York Department of Education to pay the claims. The Tuition
Reimbursement Fund, created under the Education law, was created
for such instances. In 1998 the claims were denied and the
matter has been appealed to the Supreme Court of the State,
Appellate Division. At this time no estimate can be made as to
the time or the amount, if any, of any ultimate recovery. The Company is
contesting the suit. At this time, however, no estimate can be made as to
the amount of the damages sought.
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits: None
Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
HARVARD FINANCIAL SERVICES CORP.
(Registrant)
By/s/ Louis Kassen
----------------------
Louis Kassen
President, Director
(Chief Executive Officer and duly authorized signer)
By/s/ Kevin J. McAndrew
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Kevin J. McAndrew, C.P.A.
Executive Vice President, Director
(Chief Financial Officer and duly authorized signer)
August 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000844893
<NAME> HARVARD FINANCIAL SERVICES CORP.
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<PERIOD-TYPE> 6-MOS
<CASH> 4,151
<SECURITIES> 0
<RECEIVABLES> 136,802
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 189,840
<PP&E> 15,729
<DEPRECIATION> 7,198
<TOTAL-ASSETS> 198,371
<CURRENT-LIABILITIES> 581,950
<BONDS> 0
0
0
<COMMON> 1,130
<OTHER-SE> (382,449)
<TOTAL-LIABILITY-AND-EQUITY> 198,371
<SALES> (21,849)
<TOTAL-REVENUES> (21,849)
<CGS> 0
<TOTAL-COSTS> 31,539
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (53,388)
<INCOME-TAX> 0
<INCOME-CONTINUING> (53,388)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (53,388)
<EPS-BASIC> (0.005)
<EPS-DILUTED> (0.005)
</TABLE>
