UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-28168
Strategic Capital Resources, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 11-3289981
(State or other jurisdiction (I.R.S. Identification number)
of incorporation or organization)
2500 Military Trail North, Suite 260, Boca Raton, Florida 33431
(Address of principal executive offices)
(561)995-0043
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve 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 { }
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. The number of shares of
common stock, par value $.001 per share, outstanding as of February 2, 2001
was 15,020,225.
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page Number
Condensed Consolidated Balance Sheets as of 3
December 31, 2000 (unaudited) and June 30, 2000.
Condensed Consolidated Statements of Operations 4
for the three months and six months ended December 31, 2000,
and the three months and six months ended December 31, 1999
(unaudited)
Condensed Consolidated Statements of Cash Flows 5
for the six months ended December 31, 2000,
and the six months ended December 31, 1999
(unaudited)
Notes to Condensed Consolidated Financial Statements 6-8
(unaudited)
Item 2. Management's Discussion and Analysis of Financial 9-14
Condition and Results of Operations.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
ASSETS 2000 2000
----------- -----------
Revenue producing assets:
Net investment in direct financing leases:
Model homes $40,347,540 $42,025,522
Residential real estate 28,460,074 -
Multi-family residential properties 10,227,999 10,227,999
----------- -----------
Total revenue producing assets 79,035,613 52,253,521
----------- -----------
Other assets:
Cash 1,076,365 1,451,548
Net assets realizable on divestiture 1,000,000 1,000,000
Note receivable 650,000 650,000
Deferred charges 892,355 445,810
Other 136,213 345,207
----------- -----------
Total other assets 3,754,933 3,892,565
----------- -----------
Total assets $82,790,546 $56,146,086
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages and notes payable $71,684,129 $45,399,792
Stockholder loans 1,238,600 1,141,920
Accounts payable & accrued expenses 1,029,911 834,869
Unearned income 312,511 356,855
----------- -----------
Total liabilities 74,265,151 47,733,436
----------- -----------
Stockholders' equity:
Convertible preferred stock, $.01 par value
5,000,000 shares authorized
400,000 shares issued and outstanding 4,000 4,000
Common stock, $.001 par value
25,000,000 shares authorized and 17,012,005 issued
15,045,225 shares outstanding at December 31, 2000 17,012 -
15,661,725 shares outstanding at June 30, 2000 - 17,012
Additional paid-in capital 8,346,552 8,346,552
Less treasury stock at cost, 1,966,780 and
1,350,280 shares respectively at
December 31, 2000 and June 30, 2000 (444,028) (343,176)
Retained earnings 601,859 388,262
----------- -----------
Total stockholders' equity 8,525,395 8,412,650
----------- -----------
Total liabilities and stockholders' equity $82,790,546 $56,146,086
=========== ===========
See accompanying notes.
(3)
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months and Six Months Ended December 31, 2000 and
Three Months and Six Months Ended December 31, 1999
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2000 1999 2000 1999
---------- ---------- ----------- -----------
Revenues:
Interest income on direct
financing leases:
Model homes $1,260,806 $1,215,505 $ 2,630,670 $ 2,153,206
Residential real estate 766,445 - 1,005,044 -
Multi-family residential 344,553 344,553 689,106 667,165
Sale of direct financing
leases 3,170,780 4,909,852 10,250,849 12,696,067
Other income 40,939 18,557 69,522 127,625
---------- ---------- ----------- -----------
Total revenues 5,583,523 6,488,467 14,645,191 15,644,063
---------- ---------- ----------- -----------
Operating expenses:
Interest and financing costs 1,573,284 945,146 2,881,406 1,674,858
Multi-family residential costs 91,060 88,344 181,421 176,043
Cost of direct financing
leases sold 3,108,269 4,817,052 10,028,790 12,557,512
Depreciation & amortization 228,035 139,911 406,933 256,631
Corporate 422,009 376,421 763,044 712,176
---------- ---------- ----------- -----------
Total operating expenses 5,422,657 6,366,874 14,261,594 15,377,220
---------- ---------- ----------- -----------
Income before income taxes 160,866 121,593 383,597 266,843
Deferred income tax expense 48,000 36,000 115,000 80,000
---------- ---------- ----------- -----------
Net income 112,866 85,593 268,597 186,843
Preferred stock distributions 25,000 30,000 55,000 60,000
---------- ---------- ----------- -----------
Income applicable to
common shareholders $ 87,866 $ 55,593 $ 213,597 $ 126,843
========== ========== =========== ===========
Income per share
Basic $ 0.01 $ 0.00 $ 0.01 $ 0.01
Diluted $ 0.01 $ 0.00 $ 0.01 $ 0.01
Weighted average number of shares
Basic 15,418,247 15,834,142 15,518,002 15,869,006
Diluted 16,204,780 17,668,463 17,009,945 19,060,040
See accompanying notes.
(4)
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended December 31, 2000 and December 31, 1999
(Unaudited)
Six Months Ended
December 31,
2000 1999
----------- ----------
Net income $ 268,597 $ 186,843
----------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization expense 396,459 248,069
Depreciation expense 10,474 8,561
Gain on sale of direct financing leases (222,059) (138,554)
Changes in assets and liabilities:
Decrease (Increase) in miscellaneous assets 145,520 (40,990)
Increase in accounts payable & accrued expenses 124,535 115,392
Increase (decrease) in unearned income (44,344) 250,606
----------- ----------
Total adjustments 410,585 443,084
----------- ----------
Net cash provided by operating activities 679,182 629,927
----------- ----------
Cash flows from investing activities
Investment in direct financing leases (2,666,942) (5,105,645)
Proceeds from sale of direct financing leases 1,406,016 2,184,904
Loan advanced - (1,000,000)
----------- -----------
Net cash used in investing activities (1,260,926) (3,920,741)
----------- -----------
Cash flows from financing activities:
Proceeds from mortgages payable 1,835,191 4,519,463
Principal payments on mortgages payable (971,080) (347,830)
Deferred financing costs (598,375) (531,353)
Proceeds from stockholder loans 96,680 -
Purchase of treasury stock (100,852) (36,300)
Preferred distributions (55,000) (70,000)
----------- -----------
Net cash provided by
financing activities 206,564 3,533,980
----------- -----------
Net increase (decrease) in cash (375,180) 243,166
Cash at beginning of period 1,451,545 690,719
----------- -----------
Cash at end of period $1,076,365 $ 933,885
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid - $2,729,044 $1,528,688
See accompanying notes.
(5)
STRATEGIC CAPITAL RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
(unaudited)
Note 1. Unaudited Interim Financial Statements
These statements do not contain all information required by generally accepted
accounting principles that are included in a full set of financial statements.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments necessary to present
fairly the financial position of Strategic Capital Resources, Inc. and
subsidiaries collectively called ("the Company") at December 31, 2000 and the
results of its operations and its cash flows for the period then ended and the
period ended December 31, 1999. These unaudited condensed consolidated
financial statements should be read in conjunction with the audited financial
statements and notes contained in the Company's Form 10-K for the year ended
June 30, 2000. Results of operations for this period are not necessarily
indicative of results to be expected for the full year.
Note 2. Lease Accounting Policies
FASB Statement of Financial Accounting Standards No. 13 requires that a lessor
account for each lease by either direct financing, sales-type or operating
method. The Company has historically accounted for all leases under the
operating method.
The Securities and Exchange Commission (SEC) has examined the Company's Annual
Report on Form 10-K for the year ended June 30, 2000, and commented on certain
issues relating to the Company's accounting for lease transactions under the
operating method. After discussions with the SEC, and review of FASB
Statement of Financial Accounting Standards No. 13, the Company concurs with
the SEC's comments and will account for its lease transactions under the
direct financing method.
The financial statements for the three and six months ended December 31, 1999
and December 31, 2000 have been restated to give effect to the change in
lease accounting. While the direct financing method of accounting for lease
transactions has necessitated some change in presentation, there has been no
material cumulative effect on the Company's financial position or results of
operations as of December 31, 2000.
Under the direct finance lease method of accounting, the leased assets are
recorded as an investment in direct finance leases and represent the minimum
net lease payments receivable, and includes third-party guaranteed residuals,
plus the unguaranteed residual value of the leased assets, less unearned
income. Rental payments consist of principal and interest on the lease,
principal payments reduce the investment in the finance lease, and the
interest is recorded as revenue over the term of the lease.
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in
Financial Statements as amended by SAB 101A, which provides guidance on the
recognition, presentation, and disclosure of revenue in financial
statements filed with the SEC. SAB 101 outlines the basic criteria that must
be met to recognize revenue and provides guidance for disclosures related to
revenue recognition policies. In June 2000, the SEC issued SAB 101B which
deferred the effective date of SAB 101 until the last quarter of fiscal years
beginning after December 15, 1999. The Company has adopted SAB 101 and
determined that there is no material effect on its consolidated financial
position or results of operations.
(6)
Note 3. Direct Financing Leases
The components of the net investment in direct financing leases at December 31,
2000 and June 30, 2000, are as follows:
December 31, 2000 June 30, 2000
-------------- -------------
Total minimum lease payments receivable $79,865,333 $52,774,694
Add: Estimated unguaranteed residual
of leased real estate - -
Less: Unearned income 829,720 521,173
-------------- -------------
Net investment in direct financing leases $79,035,613 $52,253,521
============== =============
Note 4. Segment Information
Segment Information - Statement of Financial Accounting Standards No. 131
("FAS 131") "Disclosures About Segments of an Enterprise and Related
Information" established new standards for segment reporting based on the way
management organizes segments within a company for making operating decisions
and assessing performance. The Company has determined that it did not have
any separately reportable operating segments as of December 31, 2000 and
December 31, 1999.
Note 5. Earnings Per Share
Basic and diluted earnings per share are calculated as follows:
Three Months Ended Six Months Ended
December 31, December 31,
2000 1999 2000 1999
--------- ---------- ---------- ----------
Earnings
Net income 112,866 85,593 268,597 186,843
Dividends on preferred shares 25,000 30,000 55,000 60,000
--------- ---------- ---------- ----------
Income(loss) applicable to
common shareholders 87,866 55,593 213,597 126,843
========== ========== =========== ==========
Basic:
Income(loss) applicable to
common shareholders 87,866 55,593 213,597 126,843
Weighted average shares
outstanding during the period 15,418,247 15,834,142 15,518,002 15,869,006
Basic $ 0.01 $ 0.00 $ 0.01 $ 0.01
Diluted:
Income(loss) applicable to
common shareholders 87,866 55,593 213,597 126,843
Weighted average shares
outstanding during the period 15,418,247 15,834,142 15,518,002 15,869,006
Effect of dilutive securities:
Stock Options 81,666 549,793 402,705 1,109,382
Warrants 704,867 1,284,528 1,089,238 2,081,652
--------- ---------- ---------- ----------
(7)
Diluted weighted common
shares outstanding 16,204,780 17,668,463 17,009,945 19,060,040
Diluted $ 0.01 $ 0.00 $ 0.01 $ 0.01
In addition, the Company's 400,000 shares of preferred stock are convertible
into 400,000 shares of common stock. Such conversion has not been assumed
since the effect on earnings per share would be anti-dilutive.
Note 6. Commitments & Contingencies
We make preliminary commitments to acquire revenue producing assets and to
enter into various types of purchase and leaseback transactions as well as
financing arrangements. We disclose these commitments as part of our routine
reporting. Such preliminary commitments are subject to routine changes in
size, dollar amounts, and closing time, prior to finalization. Such changes
arise from a variety of factors, including changes in client needs, economic
conditions, and completion of due diligence and financing agreements.
Legal Proceedings
Reference is made to our annual report on Form 10-K for fiscal year ended
June 30, 2000.
We are not presently involved in any other material litigation nor, to our
knowledge, is any material litigation threatened against us or our properties,
other than routine litigation arising in the ordinary course of business.
Model home sales contracts
Sales contracts are pending on six (6) model homes. The aggregate sales
price for the six homes is $1,468,790, which we originally purchased for
$1,380,573.
Financing Activities
At December 31, 2000, we had approximately $21 million of unused, committed
credit facilities available under existing revolving loan agreements which may
be utilized to acquire revenue producing assets in accordance with the terms
of those agreements.
The following is a summary of new loan agreements and borrowings during the
six months ended December 31, 2000:
New Draw
Date Facilities Amount Use of Proceeds
-------- ------------ ----------- ------------------------------------
07/2000 $45,000,000
08/2000 $19,513,000 Acquisition of residential real estate.
12/2000 3,382,000 Acquisition of residential real estate.
12/2000 2,985,000 Refinance existing credit facility.
07/2000 7,352,000 7,352,000 Purchase of 38 model homes in Iowa,
Minnesota and New Jersey.
12/2000 8,000,000 5,390,000 Refinance existing credit facility.
------------ -----------
Total $60,352,000 $38,622,000
------------ -----------
As a part of our ongoing business, we are in constant discussion with
financial institutions for new credit facilities. It is our policy not to
incur costs from activation of credit facilities unless and until needed.
(8)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
and may be identified by the use of such words as "believe," "expect,"
"anticipate," "should," "planned," "estimated" and "potential." Examples of
forward-looking statements include, but are not limited to, estimates with
respect to our financial condition, results of operations and business that
are subject to various factors which could cause actual results to differ
materially from these estimates. These factors include, but are not limited
to, general economic conditions, changes in interest rates, real estate
values, and competition; changes in accounting principals, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors that may
affect our operations, pricing, products and services.
As used in this Form 10-Q, "we", "us" and "our" refer to Strategic Capital
Resources, Inc. and its consolidated subsidiaries, depending on the context.
OVERVIEW
We are a Delaware corporation organized in 1995. Our principal operations
consist of the following business lines:
1) The purchase and leaseback of fully furnished model homes.
2) The acquisition, development and sale of residential real estate.
3) The purchase and leaseback of multi-family residential real estate.
The following is a summary of revenue producing asset acquisitions
by year since inception:
Fiscal Year Residential Multi-family
Ended Model Homes Real Estate Residential Total
- ------------- ------------ ------------ ------------ ------------
June 30, 1996 $ 11,836,729 $ - $ - $ 11,836,729
June 30, 1997 14,512,772 8,591,956 - 23,104,728
June 30, 1998 26,170,860 - - 26,170,860
June 30, 1999 16,813,539 - - 16,813,539
June 30, 2000 25,725,869 - 10,227,999 35,953,868
June 30, 2001 (*) 7,834,480 28,460,074 - 36,294,554
------------ ------------ ------------ ------------
Total $102,894,249 $ 37,052,030 $ 10,227,999 $150,174,278
============ ============ ============ ============
(*) Six month period ended December 31, 2000.
(9)
Results of Operations
A summary of operating results for the three months ended December 31, 2000,
and December 31, 1999 are presented below.
Three Months Ended
December 31, December 31,
-----------------------------------
2000 % 1999 %
---------- ---- ---------- ----
Revenues:
Interest income on direct
financing leases:
Model homes $1,260,806 22% $1,215,505 19%
Residential real estate 766,445 14% - -%
Multi-family residential income 344,553 6% 344,553 5%
Sale of direct financing leases 3,170,780 57% 4,909,852 76%
Other income 40,939 1% 18,557 -
---------- ---- ---------- ----
Total revenues 5,583,523 100% 6,488,467 100%
---------- ---- ---------- ----
Operating expenses:
Interest and financing costs 1,573,284 28% 945,146 15%
Multi-family residential expenses 91,060 2% 88,344 1%
Cost of direct financing leases sold 3,108,269 56% 4,817,052 74%
Depreciation & amortization 228,035 4% 139,911 2%
Corporate 422,009 7% 376,421 6%
---------- ---- ---------- ----
Total operating expenses 5,422,657 97% 6,366,874 98%
---------- ---- ---------- ----
Income before income taxes 160,866 3% 121,593 2%
Deferred income tax expense 48,000 1% 36,000 1%
---------- ---- ---------- ----
Net income $ 112,866 2% $ 85,593 1%
========== ==== ========== ====
Comparison of Three Months Ended December 31, 2000 to Three Months Ended
December 31, 1999.
Interest income on direct financing leases for the three months ended December
31, 2000 increased $811,746 (or 52%) compared to the prior year period. The
increased revenue was primarily attributable to the interest income on the
residential real estate leases which amounted to $766,445 for the period,
compared to $0 for the prior year period.
Sale of direct financing leases decreased $1,739,072 (or 35%) for the three
months ended December 31, 2000 compared to the prior year period. During the
three months ended December 31, 2000, we sold 16 model homes at an average
price of $198,174, compared to 18 model homes at an average price of $272,770
for the prior year period, resulting in the decreased revenue.
Interest and financing costs increased $628,138 (or 66%) during the three
months ended December 31, 2000 compared to the prior year period, primarily
due to the increase in loans utilized to purchase additional assets under
direct financing leases.
Net income for the three months ended December 31, 2000 was $112,866, compared
to net income of $85,593 for the prior year period. Net income as a percentage
of total revenues was consistent with the prior year period.
(10)
Corporate costs increased $45,588 (a 12% increase), from $376,421 for the
quarter ended December 31, 1999, to $422,009 for the quarter ended December
31, 2000. The increase was primarily attributable to a $47,000 increase in
professional fees.
A summary of operating results for the six months ended December 31, 2000,
and December 31, 1999 are presented below.
Six Months Ended
December 31, December 31,
-----------------------------------
2000 % 1999 %
---------- ---- ---------- ----
Revenues:
Interest income on direct
financing leases:
Model homes $2,630,670 18% $2,153,206 14%
Residential real estate 1,005,044 7% - -%
Multi-family residential income 689,106 5% 667,165 4%
Cost of direct financing leases sold 10,250,849 70% 12,696,067 81%
Other income 69,522 - 127,625 1%
---------- ---- ---------- ----
Total revenues 14,645,191 100% 15,644,063 100%
---------- ---- ---------- ----
Operating expenses:
Interest and financing costs 2,881,406 20% 1,674,858 11%
Multi-family residential expenses 181,421 1% 176,043 1%
Cost of direct financing leases sold 10,028,790 68% 12,557,512 80%
Depreciation & amortization 406,933 3% 256,631 2%
Corporate 763,044 5% 712,176 4%
---------- ---- ---------- ----
Total operating expenses 14,261,594 97% 15,377,220 98%
---------- ---- ---------- ----
Income before income taxes 383,597 3% 266,843 2%
Deferred income tax expense 115,000 1% 80,000 1%
---------- ---- ---------- ----
Net income $ 268,597 2% $ 186,843 1%
========== ==== ========== ====
Comparison of Six Months Ended December 31, 2000 to Six Months Ended
December 31, 1999.
Interest income on direct financing leases for the six months ended December
31, 2000 increased $1,504,449 (or 53%) compared to the prior year period. The
increased revenue was attributable to $1,005,044 in interest income on
residential real estate leases compared to $0 for the prior year period,
and a $477,464 increase in interest income on model home leases.
Sale of direct financing leases decreased $2,445,218 (or 19%) for the six
months ended December 31, 2000 compared to the prior year period. During the
six months ended December 31, 2000, we sold 41 model homes at an average
price of $250,021, compared to 48 model homes at an average price of $264,501
for the prior year period, resulting in the decreased revenue.
Interest and financing costs increased $1,206,548 (or 72%) during the six
months ended December 31, 2000 compared to the prior year period, primarily
due to the increase in loans utilized to purchase additional assets under
direct financing leases.
(11)
Net income for the six months ended December 31, 2000 was $268,597, compared
to net income of $186,843 for the prior year period. Net income as a percentage
of total revenues was consistent with the prior year period.
Corporate costs increased $50,868 (a 7% increase) from $712,176 for the six
months ended December 31, 1999 to $763,044 for the six months ended December
31, 2000. The increase was primarily attributable to a $47,000 increase in
professional fees.
Model Home Sale Leaseback Program
We purchase and leaseback fully furnished model homes complete with options
and upgrades to major publicly traded homebuilders. The model homes are
leased pursuant to a triple-net lease where the lessee is obligated to pay all
maintenance, taxes, insurance, etc., in addition to the required lease payment.
Since inception, we have purchased a total of 463 model homes at an aggregate
purchase price in excess of $102,000,000.
The following is a breakdown of model home units and costs by state:
December 31, 2000 December 31, 1999
------------------------- -----------------------
State Units Amount Units Amount
- ---------------- ------------------------- -----------------------
Arizona 10 $ 1,091,572 19 $ 2,124,640
California 48 12,371,314 62 16,267,394
Colorado - - 3 612,085
Florida 3 836,403 8 1,879,183
Iowa 15 2,622,695 - -
Minnesota 13 3,091,305 - -
Nevada 13 1,667,790 13 1,667,790
New Jersey 33 9,195,691 47 12,715,548
New York 3 883,291 5 2,118,291
North Carolina 7 1,648,741 8 1,875,873
Pennsylvania 12 2,889,311 15 3,709,042
Texas 16 3,553,330 22 4,492,706
Utah 3 496,097 5 837,726
------- ------------- ------- ------------
Total 176 $ 40,347,540 207 $ 48,300,278
======= ============= ======= ============
(12)
The following is a breakdown by state of interest income on model home
direct financing leases:
Three Months Ended Six Months Ended
December 31, December 31,
State 2000 1999 2000 1999
- ------------- ------------------------- ------------------------
Arizona $ 34,052 $ 63,739 $ 78,874 $ 63,447
California 387,036 328,517 828,100 328,517
Colorado - 31,120 - 63,706
Florida 25,092 69,550 52,770 161,033
Iowa 78,681 - 146,363 -
Minnesota 112,223 4,134 221,279 19,744
Nevada 50,034 47,911 100,067 83,846
New Jersey 286,500 409,918 587,587 936,083
New York 25,712 65,083 59,413 141,738
North Carolina 49,462 38,489 105,133 44,811
Pennsylvania 85,691 124,083 193,139 267,386
Texas 111,440 11,612 228,179 20,546
Utah 14,883 21,349 29,766 21,349
---------- ---------- ---------- ----------
Total $1,260,806 $1,215,505 $2,630,670 $2,152,206
========== ========== ========== ==========
Acquisition, Development, and Sale of Residential Real Estate
We purchase parcels of fully entitled residential real estate selected by
homebuilders from non-affiliated third parties. The parcels of land are
acquired at the lower of appraised value or contract price. The parcels of
land may require development or consist of finished lots. If development work
is required, the homebuilder enters into a fixed price development agreement
to develop the parcels of land for us, and is required to provide completion
bonds for all work by a surety company acceptable to us. Reimbursement for
development work performed is determined on a transaction by transactions
basis. A lease and exclusive option to purchase agreement are entered into
with the homebuilder simultaneously with the land acquisition. The terms and
conditions of each transaction are project specific (lease rate, term, option
deposit, takedown schedule, etc.). We obtain various forms of insurance
coverage to insure the payment performance of the homebuilder, as well as the
value of the real estate acquired.
During the six month period ended December 31, 2000, we entered into four (4)
Acquisition, Development and Sale of Residential Real Estate agreements.
The following is a summary of the acquisitions and development costs:
Acquisition Property Purchase Development
Date Location Price Costs Total
- ----------------- ---------- ----------- ----------- -----------
August 2000 California $20,546,010 $ - $20,546,010
November 2000 Arizona 1,680,925 - 1,680,925
November 2000 Utah 2,539,458 - 2,593,458
December 2000 Nevada 3,554,591 139,090 3,693,681
----------- ----------- -----------
Total $28,320,984 $ 139,090 $28,460,074
=========== =========== ===========
(13)
Multi-family Residential Real Estate Sale Leaseback Program
On July 15, 1999 we purchased a 288 unit multi-family residential property in
Jacksonville, Florida for a purchase price of $10,228,000. Simultaneously, we
entered into an operation, maintenance, and management agreement which
provides for payment of a minimum income stream per month. The agreement also
requires the management company to purchase the property at the end of five
years. The performance under the agreement is insured jointly and severally
by two insurance companies one of which is rated "AAA" by Standard & Poors.
Liquidity and Capital Resources
Our uses for cash during the six months ended December 31, 2000 were for
revenue producing asset acquisitions, interest, operating expenses, and
repurchase of common stock. We provided for our cash requirements from
borrowings, the sale of model homes, and other revenues. We believe
that these sources of cash are sufficient to finance our working capital
requirements and other needs.
In November 1999, we announced that our Board of Directors had authorized the
purchase of an additional 1,000,000 shares to its existing Share Repurchase
Program. As of December 31, 2000, 858,645 shares have been repurchased
under this program, of which 616,500 shares were purchased during the six
months ended December 31, 2000.
Cash Flow - Six Months Ended December 31, 2000.
Net cash provided by operating activities comprised net income of $268,597,
plus net adjustments for non-cash items of $184,874, and a net change in
other operating assets and liabilities of $225,711.
Net cash used in investing activities comprised purchases of model homes of
$482,502 plus $2,184,440 in residential real estate asset purchases, offset by
$1,406,016 in proceeds from model home sales.
Net cash provided by financing activities comprised proceeds from mortgages
payable of $1,835,191 plus proceeds from stockholder loans of $96,680, offset
by deferred financing costs of $598,375, purchase of treasury stock of
$100,852, principal payments on mortgages payable of $971,080, and preferred
distributions of $55,000.
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PART II - OTHER INFORMATION
Item 1-3 - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The registrant held its Annual Meeting of Shareholders on December 1, 2000.
At the meeting the shareholders took the following actions:
1) Seven directors were elected by a vote of 14,488,972 for, and 0 against.
2) Approved the appointment of Horton & Company, LLC. as the Corporation's
independent auditors for the current fiscal year ended June 30, 2001.
14,488,972 votes for, 0 against.
Item 5. Other Information
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the reporting period.
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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 of the
undersigned thereunto duly authorized.
Strategic Capital Resources, Inc.
By: /s/John P. Kushay
John P. Kushay, Treasurer
Chief Financial Officer and
Chief Accounting Officer
(Duly Authorized Officer)
Date: May 31, 2001
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