<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) - May 2, 1997
General Credit Corporation
----------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 0-28910 13-3895072
- ------------------------- ---------------- -------------------
(State or other juris- (Commission File (IRS Employer
diction of incorporation) Number) Identification No.)
370 Lexington Avenue, Suite 2000
New York, New York 10017
-------------------------------------- --------
(Address or principal executive offices) (zip code)
Registrant's telephone number, including area code: (212) 697-4441
211 East 70th Street, New York, New York 10021
-----------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 1. Changes in Control of Registrant
- ------ --------------------------------
Not Applicable
Item 2. Acquisition or Disposition of Assets
- ------ ------------------------------------
Not Applicable
Item 3. Bankruptcy or Receivership
- ------ --------------------------
Not Applicable
Item 4. Changes in Registrant's Certifying Accountant
- ------- ---------------------------------------------
Not Applicable
Item 5. Other Events
- ------- ------------
Not Applicable
Item 6. Resignations of Registrant's Directors
- ------- --------------------------------------
Not Applicable
Item 7. Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial statements of business acquired.
The audited financial statements of New York Payroll Factors,
Inc. as of and for the year ended December 31, 1996, and the
unaudited financial statements of New York Payroll Factors, Inc.
as of and for the three month period ended March 31, 1997 and
March 31, 1996 are included herein.
(b) Pro forma financial information.
The unaudited proforma financial statements of General Credit
Corporation for the year ended December 31, 1996, and as of and
for the three month period ended March 31, 1997, are included
herein.
(c) Exhibits
2.1 Amended and Restated Asset Purchase Agreement dated as of
February 19, 1996 among New York Payroll Factors, Inc.,
Gerald Schultz, Gerald Nimberg and the Company.*
2.2 Amendment to Amended and Restated Asset Purchase Agreement
dated as of September 6, 1997 between New York Payroll
Factors, Inc. and the Company.*
2.3 Second Amendment to Amended and Restated Asset Purchase
Agreement dated as of January 30, 1997 between New York
Payroll Factors, Inc. and the Company.*
23.1 Consent of Coopers & Lybrand, L.L.P.
* Incorporated by reference to the Company's Registration Statement on Form
SB-2 declared effective by the Securities and Exchange Commission on April
25, 1997, SEC File No. 333-09831.
Item 8. Change in Fiscal Year
- ------- ---------------------
Not Applicable
2
<PAGE> 3
Item 9. Sales of Equity Securities Pursuant to Regulation S
- ------- ---------------------------------------------------
Not Applicable
[THIS SPACE INTENTIONALLY LEFT BLANK]
3
<PAGE> 4
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 hereunto duly authorized.
GENERAL CREDIT CORPORATION
(Registrant)
Dated: July 15, 1997 By:/s/ Irwin Zellermaier
------------------------------------------
Irwin Zellermaier, Chief Executive Officer
4
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
New York Payroll Factors, Inc.:
We have audited the accompanying balance sheet of New York Payroll Factors,
Inc. (the "Company"), as of December 31, 1996, and the related statements of
income, shareholders' equity, and cash flows for each of the two years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As more fully disclosed in Note 6, the Company entered into an agreement to
sell certain of its assets and all of its operations.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of New York Payroll Factors,
Inc. as of December 31, 1996, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Melville, New York
March 14, 1997
F-1
<PAGE> 6
NEW YORK PAYROLL FACTORS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
ASSETS
Current assets:
Cash...................................................... $2,244,928
Restricted cash........................................... 122,320
Accounts receivable, less allowance for doubtful accounts
of $30,000............................................. 137,251
Prepaid expenses and other current assets................. 18,089
----------
Total current assets.............................. 2,522,588
Fixed assets, at cost, less accumulated depreciation and
amortization.............................................. 41,368
Intangibles, net............................................ 376,255
Other assets................................................ 9,560
----------
Total assets...................................... $2,949,771
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable............................................. $ 573,936
Due to related parties.................................... 689,650
Accrued expenses.......................................... 203,123
----------
Total current liabilities......................... 1,466,709
Long-term portion of notes payable.......................... 759,515
Commitments (Note 5)
Shareholders' equity:
Common stock (no par value, 200 shares authorized, 26
shares issued and outstanding)......................... 50,000
Retained earnings......................................... 673,547
----------
Total shareholders' equity........................ 723,547
----------
Total liabilities and shareholders' equity........ $2,949,771
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE> 7
NEW YORK PAYROLL FACTORS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1995 1996
------------- -------------
<S> <C> <C>
Fee income, net............................................. $1,467,620 $2,605,549
Selling, general and administrative expenses................ 941,201 1,799,556
---------- ----------
Income from operations............................ 526,419 805,993
Other income (expenses):
Interest expense.......................................... (210,704) (500,595)
Other income.............................................. 200,000
---------- ----------
Income before provision for income taxes.......... 315,715 505,398
Provision for income taxes.................................. 27,114 40,129
---------- ----------
Net income........................................ $ 288,601 $ 465,269
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 8
NEW YORK PAYROLL FACTORS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------- --------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994............................. 26 $50,000 $ 328,131 $ 378,131
Net income for the year.............................. 288,601 288,601
Distributions to shareholders........................ (159,008) (159,008)
-- ------- --------- ---------
Balance, December 31, 1995............................. 26 50,000 457,724 507,724
Net income for the year.............................. 465,269 465,269
Distributions to shareholders........................ (249,446) (249,446)
-- ------- --------- ---------
Balance, December 31, 1996............................. 26 $50,000 $ 673,547 $ 723,547
== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 9
NEW YORK PAYROLL FACTORS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 288,601 $ 465,269
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation........................................... 8,113 11,048
Amortization........................................... 56,816 56,805
Bad debt expense....................................... 82,196 158,872
Changes in assets and liabilities:
Accounts receivable.................................... (100,312) (255,784)
Prepaid expenses and other current assets.............. (6,649) 1,954
Other assets........................................... (4,375) (5,185)
Accrued expenses....................................... (41,590) 187,676
---------- ----------
Net cash provided by operating activities......... 282,800 620,655
---------- ----------
Cash flows from investing activities:
Capital expenditures...................................... (19,144) (22,520)
---------- ----------
Net cash used in investing activities............. (19,144) (22,520)
---------- ----------
Cash flows from financing activities:
Note payable borrowing.................................... 225,000 675,334
Note payable repayments................................... (359,056) (121,003)
Distributions to shareholders............................. (159,008) (249,446)
Net proceeds from related parties......................... 81,220 216,834
Restricted funds.......................................... (122,320)
---------- ----------
Net cash provided by (used in) financing
activities...................................... (211,844) 399,399
---------- ----------
Net increase in cash........................................ 51,812 997,534
Cash at beginning of period................................. 1,195,582 1,247,394
---------- ----------
Cash at end of period....................................... $1,247,394 $2,244,928
========== ==========
Supplemental information:
Interest paid during the year............................. $ 221,025 $ 487,762
Taxes paid during the year................................ 16,677 44,609
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 10
NEW YORK PAYROLL FACTORS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
The Company was incorporated on January 24, 1989, pursuant to the laws of
New York State. The Company is engaged in providing working capital financing to
its customers through the discounted purchase of checks made payable to the
Company's customers. Gross proceeds from the purchase of these checks were
$253,365,164 and $136,471,119 for the years December 31, 1996 and 1995,
respectively. The Company deals with numerous small and medium sized labor
intensive contracting firms located in New York and New Jersey. Revenues are
recognized at the time the customer is provided cash for the purchase of third
party checks.
FIXED ASSETS
Fixed assets are recorded at cost. Expenditures for additions and
betterments are capitalized and expenditures for maintenance and repairs are
charged to operations as incurred. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets
(leasehold improvements, 5-7 years, equipment, furniture and fixtures, 7 years).
Upon retirement or disposal, the asset cost and related accumulated depreciation
and amortization are eliminated from the respective accounts and the resulting
gain or loss, if any, is included in the results of operations for the period.
INTANGIBLE ASSETS
The net assets of businesses acquired are recorded at their fair value at
the acquisition date and any excess of acquisition costs over the fair value of
identifiable net assets acquired is included in goodwill and is amortized on a
straight-line basis over fifteen years. At December 31, 1996, goodwill was
$352,513, net of amortization of $170,796.
Covenants not to compete are stated at cost and are amortized using the
straight-line method over six years. At December 31, 1996, covenants not to
compete were $23,742, net of amortization of $107,758.
The Company continually evaluates the existence of goodwill impairment on
the basis of whether the goodwill is fully recoverable from projected,
undiscounted net cash flows for each related business. Based upon its most
recent analysis, the Company believes that no impairment of goodwill exists at
December 31, 1996. For the years ended December 31, 1995 and 1996, amortization
of goodwill was $56,816 and $56,805, respectively.
INCOME TAXES
The Company is approved for S corporation status for federal income tax
purposes. Accordingly, taxable income, deductions and tax credits are passed
through to, and included in, the shareholders' respective income tax returns and
no provision for federal income taxes is included in the accompanying statements
of operations. S corporations operating in New York are subject to a corporate
level surcharge on their allocable net income which is calculated using an
effective rate equal to the difference between the subchapter C corporate level
tax rate and the highest personal income tax rate. S corporations operating in
New York City are taxed as C corporations.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments, purchased with
original maturities of three months or less, to be cash equivalents. At December
31, 1996, the Company had $122,320 in restricted cash invested in short-term,
highly liquid investments. These investments collateralize the Company's lines
of credit. (See Note 3.)
F-6
<PAGE> 11
NEW YORK PAYROLL FACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist of accounts receivable and cash deposits.
Cash balances are held principally at one financial institution and may, at
times, exceed insurable amounts.
The Company believes concentration of credit risk with respect to accounts
receivable is limited due to the large number of customers comprising the
Company's customer base and the fact that no single customer represents greater
than 5%. The Company performs ongoing informal background and financial
evaluations of its customers and does not require collateral. Historical losses
of the Company have been immaterial. In February 1996, the Company entered into
an agency agreement (see Note 5), which generated approximately 29% of its net
fee income in 1996. The loss of this arrangement could have a significant impact
on the Company's financial position and results of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents and notes payable are reflected in the
accompanying balance sheets at amounts considered by management to reasonably
approximate fair value.
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, liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and reported amounts of revenues and expenses during the reporting
period. The Company performs ongoing credit evaluations of the entities whose
checks are discounted by customers.
RECLASSIFICATIONS
Certain reclassifications have been made to conform prior year amounts to
the current year presentation.
2. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<S> <C>
Furniture and fixtures...................................... $33,738
Office equipment............................................ 45,348
Leasehold improvements...................................... 9,824
-------
88,910
Less: Accumulated depreciation and amortization... 47,542
-------
$41,368
=======
</TABLE>
Depreciation expense for the years ended December 31, 1995 and 1996 was
$8,113 and $11,048, respectively.
3. NOTES PAYABLE
In connection with the acquisition of the payroll factoring business during
fiscal 1992, the Company issued notes for the remaining unpaid purchase price.
These notes bear interest at 9% per annum and are collateralized by the assets
of the Company. The terms of the note require the Company to pay $7,819 on a
monthly basis through the maturity date of June, 1998. At December 31, 1996,
$98,117 remains outstanding.
F-7
<PAGE> 12
NEW YORK PAYROLL FACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1996, the Company had notes payable to two unrelated
parties totalling $950,000. Of the total outstanding, $200,000 is due during
March 1997 and bears interest at a rate of 20% per annum. The remaining $750,000
note was due at various dates though fiscal 1997. In February 1997, the Company
extended the terms of the note. The new note bears interest at a rate of 21 1/2%
per annum and is due on February 1, 1999. In addition, if the new note is paid
prior to February 1, 1999, the Company is required to pay a $35,000 prepayment
fee. These notes are personally guaranteed by the majority shareholder of the
Company and are payable on demand in the event the Company sells its assets or
stock.
In January, 1996, the Company borrowed $100,000 under a credit facility
with a financial institution bearing interest at the bank's prime (8.25% at
December 31, 1996) plus 1%. The credit facility is renewed by the Company on a
monthly basis.
On June 12, 1996, the Company entered into a line of line of credit
agreement with a financial services firm in the amount of $300,000. This
facility is collateralized by the assets of the Company and bears interest at
the bank's prime rate (8.25% at December 31, 1996) plus 1%. In addition, the
provisions of the agreement require the Company to maintain cash in a separate
trust account with the financial services firm in an amount not less than 66% of
the outstanding line of credit balance (see Note 1). As of December 31, 1996,
the amount borrowed under the credit facility is $185,334.
Required principal payments of long-term debt are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
<S> <C>
1997........................................................ $ 573,936
1998........................................................ 9,515
750,000
----------
1999........................................................ $1,333,451
==========
</TABLE>
4. RELATED PARTY TRANSACTIONS
Due to related parties includes a note payable of $689,650 to one of the
Company's shareholders which bears interest at a rate of 8% per annum and is
payable upon the shareholder's demand.
5. COMMITMENTS AND CONTINGENCIES
The Company is obligated under noncancelable real property operating lease
agreements. Minimum rents under these obligations are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 67,913
1998........................................................ 67,762
1999........................................................ 71,216
2000........................................................ 65,627
2001........................................................ 69,346
Thereafter.................................................. 5,883
--------
$347,747
========
</TABLE>
These leases contain escalation clauses with respect to related operating
costs. The accompanying financial statements reflect rent expense on a
straight-line basis over the terms of the lease as required by generally
accepted accounting principles. Rent expense was $31,743 and $61,260 for fiscal
1995 and 1996, respectively.
During February 1996, the Company entered into an exclusive agency
arrangement with an unrelated entity. This arrangement provides that the entity
will refer certain check factoring customers to the Company
F-8
<PAGE> 13
NEW YORK PAYROLL FACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
for a fee ranging from 40% to 50% of the net fee revenues received. The
arrangement is currently expected to terminate during January 2001.
6. PROPOSED SALE
On February 19, 1996, the Company entered into a definitive agreement to
sell certain assets and all of its operations to General Credit Corporation
("GCC") in exchange for $3,145,000 in cash, 375,000 shares of GCC common stock
and a $300,000 note payable due in 42 monthly installments at an interest rate
of 10.5% per annum. During fiscal 1996, the Company received downpayments of
$200,000 towards the total selling price. Under a provision in the definitive
agreement, the acquisition was to close on or before November 15, 1996, if not,
the deposit would be forfeited. Accordingly, the Company has recognized $200,000
as other income in fiscal 1996. On January 13, 1997, the Company and GCC
modified the terms of the agreement. The new terms require GCC to pay $4,500,000
and issue 125,000 shares of common stock. In February 1997, the Company received
a non-refundable downpayment of $225,000 toward the new purchase price.
F-9
<PAGE> 14
NEW YORK PAYROLL FACTORS, INC.
BALANCE SHEET
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
------
Current assets:
Cash $2,784,280
Restricted cash 595,024
Accounts receivable, less allowance for doubtful accounts of $30,000 83,029
Prepaid expenses and other current assets 27,407
----------
Total current assets 3,489,740
Fixed assets, at cost, less accumulated depreciation and amortization 38,605
Intangibles, net 362,054
Other assets 9,923
----------
Total assets $3,900,322
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $2,078,255
Due to related parties 1,237,513
Accrued expenses 4,312
----------
Total current liabilities 3,320,080
----------
Shareholders' equity:
Common stock (no par value, 200 shares authorized, 26 shares issued and outstanding) 50,000
Retained earnings 530,242
----------
Total shareholders' equity 580,242
----------
Total liabilities and shareholders' equity $3,900,322
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-10
<PAGE> 15
NEW YORK PAYROLL FACTORS, INC.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1996 1997
----------- ----------
<S> <C> <C>
Fee income, net $479,605 $753,525
Selling, general and administrative expenses 189,534 354,937
-------- --------
Income from operations 290,071 398,588
Interest expense 88,229 171,165
-------- --------
Income before provision for income
taxes 201,842 227,423
Provision for income taxes 3,902 10,050
-------- --------
Net income $197,940 $217,373
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-11
<PAGE> 16
NEW YORK PAYROLL FACTORS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 197,940 $ 217,373
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 16,577 16,964
Bad debt expense -- 4,586
Changes in assets and liabilities:
Accounts receivable 4,798 49,636
Prepaid expenses and other current assets (8,453) (9,318)
Other assets (5,185) (363)
Accrued expenses (10,274) (198,811)
----------- -----------
Net cash provided by operating
activities 195,403 80,067
----------- -----------
Cash flows from investing activities:
Capital expenditures (21,746) --
----------- -----------
Net cash used in investing activities (21,746) --
----------- -----------
Cash flows from financing activities:
Notes payable borrowing 490,000 966,217
Note payable repayments (19,575) (221,413)
Distributions to shareholders (249,444) (360,678)
Net proceeds from related parties 334,798 547,863
Restricted funds (25,000) (472,704)
----------- -----------
Net cash provided by financing activities 530,779 459,285
----------- -----------
Net increase in cash 704,436 539,352
Cash at beginning of period 1,247,394 2,244,928
----------- -----------
Cash at end of period $ 1,951,830 $ 2,784,280
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-12
<PAGE> 17
NEW YORK PAYROLL FACTORS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - OPERATIONS
- -------------------
New York Payroll Factors, Inc. ("NYPF") was incorporated on January 24,
1989, pursuant to the laws of New York State. NYPF is engaged in providing
working capital financing to its customers through the discounted purchase of
checks made payable to NYPF's customers. NYPF deals with numerous small
and medium sized labor intensive contracting firms located in New York and New
Jersey. Revenues are recognized at the time the customer is provided cash for
the purchase of third party checks.
NOTE 2 - BASIS OF PRESENTATION
- ------------------------------
The unaudited, condensed financial statements included herein, commencing
at page F-10, have been prepared in accordance with the requirements of
Regulation S-B and supplementary financial information included herein, if any,
has been prepared in accordance with Item 310(b) of Regulation S-B and,
therefore, omit or condense certain footnotes and other information normally
included in financial statements prepared in accordance with generally accepted
accounting principles. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the financial information for the interim periods reported have
been made. The financial statements should be read in conjunction with the
financial statements and notes thereto, together with Management's Discussion
and Analysis of Financial Condition or Plan of Operation, contained in the
General Credit Corporation Registration Statement on Form SB-2 (SEC File No.
333-09831) declared effective by the Securities and Exchange Commission on April
25, 1997. Results of operations for the three months ended March 31, 1997 are
not necessarily indicative of the results for a full year.
NOTE 3 - PROPOSED SALE
- ----------------------
On February 19, 1996, NYPF entered into a definitive agreement to sell
certain assets and all of its operations to General Credit Corporation ("GCC"),
in exchange for $3,145,000 in cash, 375,500 shares of GCC common stock and a
$300,000 note payable due in 42 equal monthly installments at an interest rate
of 10.5% per annum. During 1996, NYPF received down payments of $200,000 towards
the total selling price. As stipulated under the original acquisition agreement,
if the acquisition did not close by November 15, 1996, GCC would forfeit its
deposit. Accordingly, as the acquisition did not close by November 15, 1996 the
deposit of $200,000 was recognized as other income during fiscal 1996. On
January 13, 1997 GCC and NYPF modified the terms of the original agreement. The
new terms required GCC to pay $4,500,000 in cash and 125,000 shares of common
stock (the "Acquisition Shares"). In February 1997, GCC delivered a
non-refundable deposit of $225,000 towards the purchase price. GCC closed the
acquisition of the business of NYPF and delivered to NYPF the remaining balance
of $4,275,000 and the Acquisition Shares on May 2, 1997 (the acquisition date).
F-13
<PAGE> 18
GENERAL CREDIT CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following sets forth the unaudited pro forma balance sheet as of
December 31, 1996 which has been prepared by combining the unaudited balance
sheets of General Credit Corporation (the "Company") and New York Payroll
Factors, Inc. ("NYPF"). The acquisition is being accounted for using the
purchase method as if the acquisition had occurred on December 31, 1996. The
combined balance sheet was based on terms provided in the asset purchase
agreement and reflects the issuance of common stock and receipt of proceeds from
the proposed public offering. The unaudited pro forma statements of operations
for the year ended December 31, 1996, which present the results of operations as
if: (a) NYPF had not elected to be treated as an S corporation during those
periods, (b) The Company had adjusted for a pro forma reduction in interest
expense for the year ended December 31, 1996, associated with the portion of the
Offering proceeds to be used to retire debt at December 31, 1996, (c) The
Company had reflected amortization of the excess purchase price over the net
book value of net assets acquired, which is currently estimated to be amortized
on a straight-line basis over a five-year period for identifiable intangibles
and a twenty-year period for goodwill. In management's opinion, all adjustments
necessary to reflect the effects of the transaction have been made.
The unaudited pro forma results of operations are not necessarily
indicative of the actual results that would have occurred had the transactions
been consummated on such date, nor is it necessarily indicative of future
financial position or operating results of the Company.
F-14
<PAGE> 19
GENERAL CREDIT CORPORATION
PRO FORMA BALANCE SHEET
(UNAUDITED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL GENERAL
GENERAL NEW YORK CREDIT
CREDIT PAYROLL PRO FORMA CORPORATION
CORPORATION FACTORS, INC. ADJUSTMENTS PRO FORMA
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........ $ 650 $2,244,928 $ 217,991(A)(B)(C)(G) $2,463,569
Restricted cash.................. 122,320 (122,320)(C)
Accounts receivable, less
allowance for doubtful
accounts....................... 137,251 (137,251)(C)
Prepaid expenses and other
assets......................... 18,089 (18,089)(C)
--------- ---------- ----------- ----------
Total current assets... 650 2,522,588 (59,669) 2,463,569
Fixed assets, at cost, net of
accumulated depreciation and
amortization................... 41,368 41,368
Goodwill and other intangibles... 376,255 4,458,234(B) 4,834,489
Other assets..................... 4,762 9,560 14,322
--------- ---------- ----------- ----------
Total assets........... $ 5,412 $2,949,771 $ 4,398,565 $7,353,748
========= ========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Notes payable.................... $ 518,000 $ 573,936 $(1,091,936)(C)(F)
Accounts payable and accrued
expenses....................... 270,845 203,123 (448,968)(C)(G) $ 25,000
Due to officer................... 689,650 (689,650)(C)
Long-term portion of notes
payable........................ 759,515 (759,515)(C)
--------- ---------- ----------- ----------
Total liabilities...... 788,845 2,226,224 (2,990,069) 25,000
--------- ---------- ----------- ----------
Shareholders' equity
(deficiency):
Common stock................... 1,758 50,000 (48,373)(A)(B)(C) 3,385
Additional paid-in capital..... 11,176 7,727,092(A)(C) 7,738,268
Retained earnings
(deficiency)................ (412,905) 673,547 (673,547)(C) (412,905)
Less deferred offering
costs..................... (383,462) 383,462(A)
--------- ---------- ----------- ----------
Total shareholders'
equity
(deficiency)......... (783,433) 723,547 7,388,634 7,328,748
--------- ---------- ----------- ----------
Total liabilities and
shareholders'
equity............... $ 5,412 $2,949,771 $ 4,398,565 $7,353,748
========= ========== =========== ==========
</TABLE>
F-15
<PAGE> 20
GENERAL CREDIT CORPORATION
PRO FORMA INCOME STATEMENT
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL GENERAL
GENERAL NEW YORK CREDIT
CREDIT PAYROLL PRO FORMA CORPORATION
CORPORATION FACTORS, INC. ADJUSTMENTS PRO FORMA
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenue............................. $2,605,549 $2,605,549
Operating expenses:
General and administrative............ $ 103,325 1,742,751 1,846,076
Amortization expense.................. 871 56,805 $ 237,419(D)(F) 295,095
--------- ---------- --------- ----------
Income (loss) from
operations.................. (104,196) 805,993 237,419 464,378
Other (income) expense:
Interest expense...................... 108,296 500,595 (608,891)(E)
Other................................. 200,000 (200,000)
--------- ---------- --------- ----------
Income (loss) before provision
for income taxes............ (412,492) 505,398 371,472 464,378
Provision for income taxes.............. -- 40,129 175,512(G) 215,641
--------- ---------- --------- ----------
Net income (loss)............. $(412,492) $ 465,269 $ 195,960 $ 248,737
========= ========== ========= ==========
Pro forma net income per share(H)....... .30
==========
Pro forma weighted average number of
common shares outstanding(H).......... 817,000
==========
Pro forma net income per share including
shares sold in offering(I)............ .07
==========
Pro forma weighted average number of
common shares outstanding, including
shares sold in offering(I)............ 3,517,000
==========
</TABLE>
F-16
<PAGE> 21
GENERAL CREDIT CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(A) To reflect the issuance of 900,000 units at an offering price of $10.00 per
unit of General Credit Corporation and the receipt of the net proceeds from
the offering of $7,344,500 as set forth in the Registration Statement. Each
unit consists of three shares of common stock and six redeemable common
stock warrants. Also reflects the redemption of 1,198,000 shares of common
stock for $1,198.
(B) To reflect cash payment of $4,500,000 and the issuance of 125,000 shares of
common stock of General Credit Corporation at $3.083 per share ($385,417)
to the owners of New York Payroll Factors, Inc. and the excess of purchase
price paid ($4,885,417) over the historical basis of net assets purchased
($50,928). The General Credit Corporation stock is valued at a price of
$3.083 which was determined based on the allocation of the offering price
as set forth in this Registration Statement.
(C) To reflect in the pro forma balance sheet those assets of $2,898,843
including cash of $2,060,714, to be distributed in accordance with the
asset purchase agreement and liabilities of $2,226,224 to be eliminated
prior to the effective date of the Acquisition.
(D) Represents amortization of the excess purchase price over the net book
value of assets acquired of $4,834,489 of which $350,000 has been allocated
to covenant not to compete and customer list to be amortized over a
five-year period and goodwill of $4,484,489 amortized over a twenty-year
period, less amortization reflected in the historical statements.
(E) To reflect a reduction in interest expense of $500,595 for the year ended
December 31, 1996, for interest incurred by New York Payroll Factors, Inc.
on debt that will not be assumed by the General Credit Corp., and an
additional reduction of $108,296 in interest associated with the portion of
the Offering proceeds used to retire General Credit Corporation's debt of
$518,000.
(F) To reflect the payment of the accrued liabilities of General Credit
Corporation relating to accrued interest and deferred registration costs.
(G) To reflect the provision for income taxes based upon pro forma income
before taxes as if New York Payroll Factors, Inc. had been a C corporation
and all the income has been generated within the State of New York and in
New York City. Historically, NYPF has filed its income tax returns as an
"S" corporation which provides for income and deductions to pass through
to, and be included in, the shareholders' respective income tax returns.
(H) Pro forma net income per share, for the year ended December 31, 1996, has
been computed by dividing pro forma net income by the weighted average
number of common shares outstanding (all shares deemed outstanding
throughout the period) and common stock equivalents of 132,000 outstanding
during the period. The pro forma weighted average number of common shares
includes the adjustment for the redemption of the 1,198,000 shares of
common stock, and does not reflect the increase in shares related to the
anticipated public offering.
(I) In addition to (I) above, the weighted average number of common shares
outstanding include shares issued in connection with the anticipated public
offering.
F-17
<PAGE> 22
GENERAL CREDIT CORPORATION
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following sets forth the unaudited pro forma balance sheet as of
March 31, 1997 which has been prepared by combining the unaudited balance sheets
of General Credit Corporation (the "Company") and New York Payroll Factors, Inc.
("NYPF"). The acquisition is being accounted for using the purchase method as if
the acquisition had occurred on March 31, 1997. The combined balance sheet was
based on terms provided in the asset purchase agreement and reflects the
issuance of common stock and receipt of proceeds from the public offering. The
unaudited pro forma statements of operations for the three months ended March
31, 1997, which present the results of operations as if: (a) NYPF had not
elected to be treated as an S corporation during those periods, (b) The Company
had adjusted for a pro forma reduction in interest expense for the three months
ended March 31, 1997, associated with the portion of the Offering proceed that
were used to retire debt at March 31, 1997, (c) The Company had reflected
amortization of the excess purchase price over the net book value of net assets
acquired, which is currently estimated to be amortized on a straight-line basis
over a five-year period for identifiable intangibles and a twenty-year period
for good will. In management's opinion, all adjustments necessary to reflect the
effects of the transaction have been made.
The unaudited pro forma results of operations are not necessarily
indicative of the actual results that would have occurred had the transactions
been consummated on such date, nor is it necessarily indicative of future
financial position or operating results of the Company. The unaudited pro forma
financial statements and accompanying notes should be read in conjunction with
the financial statements and notes thereto together with Management's Discussion
and Analysis of Financial Condition or Plan of Operation, contained in the
General Credit Corporation registration Statement on Form SB-2 (SEC File No.
333-09831) declared effective by the Securities and exchange Commission on April
25, 1997.
F-18
<PAGE> 23
GENERAL CREDIT CORPORATION
PRO FORMA BALANCE SHEET
(UNAUDITED)
MARCH 31, 1997
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL GENERAL
GENERAL NEW YORK CREDIT
CREDIT PAYROLL PRO FORMA CORPORATION
CORPORATION FACTORS, INC. ADJUSTMENTS PRO FORMA
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 11,237 $ 2,784,280 $ (657,651)(A)(B)(C)(G) $ 2,137,866
Restricted cash 595,024 (595,024)(C)
Accounts receivable, less allowance
for doubtful accounts 83,029 (83,029)(C)
Prepaid expenses and other assets 27,407 (27,407)(C)
----------- ----------- ----------- -----------
Total current assets 11,237 3,489,740 (1,363,111) 2,137,866
Fixed assets, at cost, net of accumulated
depreciation and amortization 38,605 38,605
Goodwill and other intangibles 362,054 4,474,793 (B) 4,836,847
Deposit on contract 225,000 (225,000)(B)
Other assets 4,338 9,923 14,261
----------- ----------- ----------- -----------
Total assets $ 240,575 $ 3,900,322 $ 2,886,682 $ 7,027,579
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Notes payable $ 874,390 $ 2,078,255 $(2,952,645)(C)(E)
Accounts payable and accrued expenses 573,686 4,312 (500,293)(C)(G) $ 77,705
Due to officer 1,237,513 (1,237,513)(C)
----------- ----------- ----------- -----------
Total liabilities 1,448,076 3,320,080 (4,690,451) 77,705
----------- ----------- ----------- -----------
Shareholders' equity (deficiency):
Common stock 560 50,000 (47,175 (A)(B)(C) 3,385
Additional paid-in capital 11,176 7,489,096 (A)(C) 7,500,272
Retained earnings (deficiency) (553,783) 530,242 (530,242)(C) (553,783)
Less deferred offering costs (665,454) 665,454 (A)
----------- ----------- ----------- -----------
Total shareholders' equity (deficiency) (1,207,501) 580,242 7,577,133 6,949,874
----------- ----------- ----------- -----------
Total liabilities and shareholders'
equity $ 240,575 $ 3,900,322 $ 2,886,682 $ 7,027,579
=========== =========== =========== ===========
</TABLE>
F-19
<PAGE> 24
GENERAL CREDIT CORPORATION
PRO FORMA INCOME STATEMENT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL GENERAL
GENERAL NEW YORK CREDIT
CREDIT PAYROLL PRO FORMA CORPORATION
CORPORATION FACTORS, INC. ADJUSTMENTS PRO FORMA
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenue $ 753,525 $ 753,525
Operating expenses:
General and administrative $ 37,441 340,736 52,490 (F) 430,667
Amortization expense 424 14,201 59,509 (D) 74,134
--------- --------- --------- ---------
Income (loss) from
operations (37,865) 398,588 111,999 248,724
Interest expense 103,013 171,165 (274,178)(E)
--------- --------- --------- ---------
Income (loss) before
provision for income
taxes (140,878) 227,423 162,179 248,724
Provision for income taxes -- 10,050 (10,050)(H)
--------- --------- --------- ---------
Net income (loss) $(140,878) $ 217,373 $ 172,229 $ 248,724
========= ========= ========= =========
Pro forma net income per share (I) $ .30
=========
Pro forma weighted average number
of common shares outstanding (I) 817,000
=========
Pro forma net income per share
including shares sold in offering (J) $ 07
=========
Pro forma weighted average number
of common shares outstanding,
including shares sold in offering (J) 3,568,777
=========
</TABLE>
F-20
<PAGE> 25
GENERAL CREDIT CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(A) To reflect the issuance of 900,000 units at an offering price of $10.00
per unit of General Credit Corporation and the receipt of the net
proceeds from the offering of $7,344,500 as set forth in the
Registration Statement. Each unit consists of three shares of common
stock and six redeemable common stock purchase warrants.
(B) To reflect cash payment of $4,500.00 and the issuance of 125,000 shares
of common stock of General Credit Corporation at $3.083 per share
($385,417) to the owners of New York Payroll Factors, Inc. and the
excess of purchase price paid ($4,885,417) over the historical basis of
net assets purchased ($38,605). The General Credit Corporation stock is
valued at a price of $3.083 which was determined based on the
allocation of the offering price as set forth in the Registration
Statement.
(C) To reflect in the pro forma balance sheet those assets of $3,861,717
including cash of $3,379,304, to be distributed in accordance with the
asset purchase agreement and liabilities of $3,320,080 to be eliminated
prior to the effective date of the Acquisition.
(D) Represents amortization of the excess purchase price over the net book
value of assets acquired of $4,846,812 of which $350,000 has been
allocated to covenant not to compete and customer list to be amortized
over a five-year period and goodwill of $4,496,812 amortized over a
twenty-year period, less amortization reflected in the historical
statements.
(E) To reflect a reduction in interest expense of $171,165 for the three
months ended March 31, 1997 , for interest incurred by New York Payroll
Factors, Inc. on debt that will not be assumed by General Credit
Corporation, and an additional reduction of $103,013 in interest
associated with the portion of the Offering proceeds used to retire
General Credit Corporation's debt of $874,390.
(F) To reflect increase salaries to be paid to officers after the
acquisition of New York Payroll Factors, Inc.
(G) To reflect the payment of the accrued liabilities of General Credit
Corporation relating to accrued interest and deferred registration
costs.
(H) To reflect the provision for income taxes based upon pro forma income
before taxes as if New York Payroll Factors, Inc. had been a C
corporation and all the income has been generated within the State of
New York and in New York City. Historically, New York Payroll Factors,
Inc. has filed its income tax returns as an "S" corporation which
provides for income and deductions to pass through to, and be included
in, the shareholders' respective income tax returns. Effect is given to
the net operating loss carryforwards of General Credit Corporation
through December 31, 1996.
F-21
<PAGE> 26
GENERAL CREDIT CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(I) Pro forma net income per share, for the year ended December 31, 1996,
has been computed by dividing pro forma net income by the weighted
average number of common shares outstanding (all shares deemed
outstanding throughout the period) and common stock equivalents of
132,000 outstanding during the period. The pro forma weighted average
number of common shares does not reflect the increase in shares related
to the anticipated public offering.
(J) In addition to (I) above, the weighted average number of common shares
outstanding include shares issued in connection with the public
offering and 50,000 shares issued relating to the early retirement of
$300,000 of debt.
F-22
<PAGE> 1
Exhibit 23.1
Consent of Coopers & Lybrand, L.L.P.
We consent to the inclusion in this report on Form 8-K/A of our report dated
March 14, 1997, on our audit of the financial statements of New York Payroll
Factors, Inc. as of December 31, 1996 and for each of the two years in the
period ended December 31, 1996.
/s/ Coopers & Lybrand, L.L.P.
Melville, New York
July 17, 1997
