U. S. Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number 811-0969
The First Connecticut Capital Corporation
- --------------------------------------------------------------------------------
(Exact name of small business issuer as)
(specified in its charter)
Connecticut 06-0759497
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1000 Bridgeport Avenue, Shelton, Connecticut 06484
(Address of principal executive offices)
(203) 944-5400
(Issuer's telephone number)
1000 Lafayette Boulevard, Bridgeport, Connecticut 06604
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 1,173,382
Transitional Small Business Format: Yes [ ] No [ X ]
<PAGE>
Item 1. Financial Statements
<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
BALANCE SHEET, SEPTEMBER 30, 1997
(Dollars in thousands,except per share data)
(Unaudited)
<S> <C>
ASSETS
Investments:
Loans - net .................................................. $ 463
-------
Investments-net ........................................ 463
-------
Cash and cash equivalents .................................... 364
Restricted cash .............................................. 45
Loans held for sale .......................................... 116
Accrued interest ............................................. 37
Servicing rights ............................................. 337
Fixed assets ................................................. 40
Other assets ................................................. 246
-------
TOTAL ASSETS ................................................. $ 1,648
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Warehouse line of credit ..................................... 9
Accounts payable and other accrued expenses .................. 578
-------
TOTAL LIABILITIES ............................................ 587
-------
Commitments and contingencies (Note B)
STOCKHOLDERS' EQUITY:
Common stock, no par value, stated value $.50
per share, authorized 3,000,000 shares,
issued and outstanding 1,173,382 shares ................... 587
Paid-in surplus .............................................. 9,253
Accumulated deficit .......................................... (8,779)
-------
TOTAL STOCKHOLDERS' EQUITY ................................... 1,061
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................... $ 1,648
=======
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
Sep. 30, 1997 Sep. 30, 1997 Sep. 30, 1996 Sep. 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 26 $ 51 $ 24 $ 49
------------- ------------ ------------- -------------
RECOVER OF INVESTMENT LOSSES 205 205 0 0
------------- ------------ ------------- -------------
NET INTEREST INCOME AFTER
RECOVERY OF INVESTMENT LOSSES 231 256 24 49
------------- ------------ ------------- -------------
OTHER OPERATING INCOME:
Servicing fees 32 74 40 81
Loan Orgination fees 20 51 36 113
Other fees 1 3 3 4
------------- ------------ ------------- -------------
Total Other Operating Income 53 128 79 198
------------- ------------ ------------- -------------
TOTAL INCOME 284 384 103 247
------------- ------------ ------------- -------------
OTHER OPERATING EXPENSES:
Amortization of servicing rights 10 10 0 37
Collection expenses (1) (1) (8) (1)
Officers' salaries 46 77 47 88
Other salaries (1) 9 37 70
Directors' fees 4 9 4 9
Professional services 6 19 6 (1)
Miscellaneous taxes 7 12 12 18
Employee and general insurance 6 17 17 34
Rent 7 14 12 22
Communications 3 6 4 8
Advertising and promotions 1 3 0 3
Stock record and other financial expenses 2 3 1 3
Employees' pension plan 1 2 1 2
Depreciation expense 3 7 5 11
Other operating expenses 10 26 36 59
------------- ------------ ------------- -------------
Total Other Operating Expenses 104 213 174 362
------------- ------------ ------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Dollars in thousands, except per share data)
(Unaudited) (continued)
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
Sep. 30, 1997 Sep. 30, 1997 Sep. 30, 1996 Sep. 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET PROFIT (LOSS) BEFORE LOAN LOSSES 180 171 (71) (115)
------------- ------------ ------------- -------------
Loan Losses 156 156 5 5
------------- ------------ ------------- -------------
NET PROFIT (LOSS) $ 24 $ 15 $ (76) $ (120)
============= ============ ============= =============
LOSS PER COMMON SHARE $ 0.02 $ 0.01 $ (0.06) $ (0.10)
============= ============ ============= =============
Weighted average number of
common shares outstanding 1,173,382 1,173,382 1,173,382 1,173,382
============= ============ ============= =============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
Common Stock Total
Number Of Paid-In Accumulated Stockholders'
Shares Amount Surplus Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 31,1996......... 1,173,382 $587 $9,253 ($8,569) $1,271
Net Loss....................... (120) (120)
--------- ----- ------ ------- ------
BALANCE, SEPTEMBER 30, 1996.... 1,173,382 $587 $9,253 ($8,689) $1,151
========= ==== ====== ======= ======
BALANCE, MARCH 31, 1997........ 1,173,382 $587 $9,253 ($8,794) $1,046
Net Profit..................... 15 15
--------- ----- ------ ------- ------
BALANCE, SEPTEMBER 30, 1997.... 1,173,382 $587 $9,253 ($8,779) $1,061
========= ==== ====== ======= ======
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE FIRST CONNECTICUT CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
Six Months Six Months
Ended Ended
Sep 30, 1997 Sep 30, 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss .................................................... $ 15 ($ 120)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Investment (gains) losses ............................... (49) 5
Depreciation ............................................ 7 12
Amortization of servicing rights ........................ 10 38
Orgination of loans held for sale ....................... (2,241) (682)
Proceeds from sale of loans held for sale ............... 2,505 688
Decrease( Increase) in accrued interest receivable ...... 4 (6)
Decrease (Increase) in other assets ..................... 2 (24)
Increase in accounts payable / other accrued expenses ... 140 13
------- -------
Net cash provided by (used in) operating activities 393 (76)
------- -------
INVESTING ACTIVITIES
Principal collected on investments .......................... 68 8
------- -------
Net cash (used in) provided by investing activities 68 8
------- -------
FINANCING ACTIVITIES
Decrease in warehouse line of credit ........................ (308) (169)
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............... 153 (237)
CASH AND CASH EQUIVALENTS, BEGINNING ........................... 211 430
------- -------
CASH AND CASH EQUIVALENTS, ENDING .............................. $ 364 $ 193
======= =======
</TABLE>
See notes to financial statements.
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of The First
Connecticut Capital Corporation (the "Corporation"), formerly The First
Connecticut Small Business Investment Company, have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair representation have been included.
Operating results are not necessarily indicative of the results that may be
expected for the year ending March 31, 1998. For further information, refer to
the financial statements and footnotes thereto included in the Corporation's
annual report filed on Form 10-KSB for the year ended March 31, 1997.
NOTE B - COMMITMENTS AND CONTINGENCIES
The Corporation is involved in litigation and administrative
proceedings primarily arising in the normal course of its business. In the
opinion of management, the Corporation's liability, if any, under any pending
litigation or administrative proceeding would not materially affect its
financial condition or results of operations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Corporation had a net profit for the six months ended September 30,
1997 of $15,000 compared to a net loss of $120,000 for the comparable period of
the prior year.
The Corporation is currently licensed in the States of Connecticut and
Massachusetts to operate as Mortgage Lender/Broker.
Interest Income and Other Operating Income
Loan origination fees decreased $62,000 for the six months ended
September 30, 1997 as compared with the comparable period of the prior year.
This decrease was due to the reduction of mortgage loans originated and sold in
the secondary market. Total other operating income decreased by $70,000 from the
prior year due to the decrease in loan originations.
Other Operating Expense
Other operating expenses declined $149,000 during the six months ended
September 30, 1997 as compared to the comparable period of the prior year due
primarily to decreases in officers and clerical salaries, amortization of
servicing rights and an overall reduction in all operating expenses.
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
Plan of Operation
The Corporation is engaged in the mortgage banking business, which
involves the origination, purchase, sale and servicing of mortgage loans secured
by residential properties and other real estate. Since January 1996, the
Corporation has expanded its portfolio Loan Program to include short-term
mortgages for construction, remodeling and additions. These loans are
predominately secured by first mortgage liens on residential properties and are
sold to qualified investors with fees retained for servicing.
It is anticipated that the Corporation will continue to increase its
level of activities in these areas creating servicing fees and interest income.
It is too early to evaluate the results as the Corporation is in a period of
strong competition and the real estate market remains in a state of flux.
LIQUIDITY AND FINANCIAL CONDITION
The Corporation has approximately $364,000 of unrestricted cash and
cash equivalents and approximately $1.061 million of Stockholders' Equity at
September 30, 1997.
The Corporation currently anticipates that during the year ending March
31, 1998, its principal financing needs will consist of funding its mortgage
loans held for sale and the ongoing net cost of mortgage loan originations and
cash flow used in operations. Although the Corporation anticipates increased
activities in originating mortgage loans, the difficulties experienced within
the relevant economic markets still exist and there are no assurances that
increased activity will occur. Consequently, as a means to provide further cash
flow, the Corporation has expressed a willingness to liquidate certain assets in
its portfolio and believes that a market exists for those assets. Future cash
flow requirements will depend primarily on the level of the Corporation's
activities in originating and selling mortgage loans, as well as cash flow
required by its operations
The Corporation continues to investigate and pursue alternative and
supplementary methods to finance its operations and to support the growth of the
Corporation
The Corporation believes that the cash on hand and internally generated
funds will be sufficient to meet its corporate, general and administrative
working capital and other cash requirements during the year ending March 31,
1998. The Corporation took certain steps during the year ended March 31, 1997
and continues to decrease its cash flow requirements. These steps included a
management salary reduction and a restatement and termination of the pension
plan. Management also believes additional steps can be taken if necessary.
<PAGE>
THE FIRST CONNECTICUT CAPITAL CORPORATION
NEW OFFERING
The Corporation has formed a Limited Partnership known as First Connecticut
Capital Mortgage Fund A, Limited Partnership as to which the Corporation is the
General Partner. The intent of this new entity is to sell units in the Limited
Partnership to investors in a private placement, up to a maximum of $5 million
in $50,000 units for the purpose of funding a short-term Portfolio Loan Program
for the Limited Partnership. The limited partners will be limited to investors
who qualify as "Accredited Investors" as defined in Regulation D, promulgated
under the Securities Act of 1933. This program would generate income to the
Corporation in the form of loan origination fees and servicing fees in excess of
a guaranteed income return to the limited partners in connection with mortgage
loans that would be made by the Limited Partnership from the funds invested by
the limited partner. A copy of the offering memo is available upon request.
PART II. OTHER INFORMATION
ELECTION OF DIRECTOR
On September 16, 1997 Alan Rosen was elected to the Board of Directors of the
corporation. Alan Rosen a former Director of the company also acts as legal
counsel.
Item 6. Exhibits and Reports on Form 8-K
NONE
<PAGE>
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 duly authorized.
THE FIRST CONNECTICUT CAPITAL
CORPORATION
(Registrant)
Date: October 27, 1997 By: /s/ David Engelson
------------------
David Engelson
President and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 409
<SECURITIES> 0
<RECEIVABLES> 1,690
<ALLOWANCES> (491)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 244
<DEPRECIATION> (204)
<TOTAL-ASSETS> 1,648
<CURRENT-LIABILITIES> 587
<BONDS> 0
0
0
<COMMON> 587
<OTHER-SE> 474
<TOTAL-LIABILITY-AND-EQUITY> 1,648
<SALES> 384
<TOTAL-REVENUES> 384
<CGS> 0
<TOTAL-COSTS> 54
<OTHER-EXPENSES> 159
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 171
<INCOME-TAX> 0
<INCOME-CONTINUING> (156)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
