<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996
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[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-3435 D
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FIRST FIDELITY ACCEPTANCE CORP.
(Exact name of registrant as specified in its charter)
NEVADA 87-0432499
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No)
incorporation or organization)
4975 PRESTON PARK BOULEVARD, SUITE 400, PLANO, TEXAS 75093
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(Address of principal executive offices)
Registrant's telephone number, including area code (214) 985-2150
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X. No .
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable dates.
Title of Each Class Outstanding at August 9, 1996
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Common Stock, $.001 par value 41,284,656 shares
<PAGE> 2
PART 1 - FINANCIAL STATEMENTS
FIRST FIDELITY ACCEPTANCE CORP. AND
SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
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(Unaudited) (Audited)
<S> <C> <C>
ASSETS:
Cash $ 41,000 $ 14,000
Cash Reserve Accounts, Restricted 3,357,000 3,618,000
Due from Sales and Securitizations of Autoloans 7,522,000 6,411,000
Prepaid Royalties 280,000 298,000
Other Prepaid Expenses 369,000 341,000
Office Furniture and Equipment, Net 100,000 88,000
Notes Receivable and Other Assets 96,000 85,000
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Total Assets $ 11,765,000 $ 10,855,000
============= ==============
LIABILITIES:
Notes Payable and Long-term Debt $ 5,625,000 $ 5,543,000
Accounts Payable and Accrued Expenses 201,000 253,000
Professional Fees Payable 213,000 225,000
Accrued Litigation Settlement 489,000 585,000
Deferred Compensation Payable 541,000 401,000
Deferred Federal Income Taxes 551,000 280,000
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Total Liabilities 7,620,000 7,287,000
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Commitments and Contingencies - -
STOCKHOLDERS' EQUITY:
Preferred Stock, $.001 Par Value; 10,000,000 Shares
Authorized; 536,722 Shares Issued and Outstanding 1,000 1,000
Common Stock, $.001 Par Value; 50,000,000 Shares
Authorized; 41,184,656 and 40,531,316 Shares
Issued and Outstanding 41,000 41,000
Capital in Excess of Par Value 3,365,000 3,305,000
Retained Earnings 738,000 221,000
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Total Stockholders' Equity 4,145,000 3,568,000
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Total Liabilities and Stockholders' Equity $ 11,765,000 $ 10,855,000
============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 3
FIRST FIDELITY ACCEPTANCE CORP. AND
SUBSIDIARIES UNAUDITED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30,
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Financial Services Revenues $ 1,325,000 $ 3,349,000 $ 2,748,000 $ 5,975,000
------------ ------------ ------------ ------------
Less Costs and Expenses:
Autoloan Costs 348,000 1,279,000 770,000 2,197,000
Interest Expense 128,000 101,000 234,000 255,000
General and Administrative Expenses 472,000 838,000 946,000 1,503,000
------------ ------------ ------------ ------------
Total Costs and Expenses 948,000 2,218,000 1,950,000 3,955,000
------------ ------------ ------------ ------------
Income before Income Taxes 377,000 1,131,000 798,000 2,020,000
Provision for Income Taxes:
Deferred (128,000) (358,000) (271,000) (600,000)
------------ ------------ ------------ ------------
Net Income $ 249,000 $ 773,000 $ 527,000 $ 1,420,000
============ ============ ============ ============
Net Income Per Common Share $ .005 $ .016 $ .011 $ .030
============ ============ ============ ============
Weighted Average Common Shares
Outstanding on a Fully-diluted Basis 47,899,040 47,908,431 47,715,820 47,595,745
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 4
FIRST FIDELITY ACCEPTANCE CORP. AND
SUBSIDIARIES UNAUDITED CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
1996 1995
--------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 527,000 $ 1,420,000
Adjustments to Reconcile Net Income to
Net Cash (Used in) Operating Activities:
Depreciation and Amortization 21,000 15,000
Change in Assets and Liabilities:
(Increase) Decrease in Assets:
Cash Reserves - Restricted 261,000 (1,321,000)
Due from Sales and Securitizations of Autoloans (1,111,000) (2,940,000)
Prepaid Royalties and Expenses (10,000) 9,000
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses (52,000) 44,000
Professional Fees Payable (12,000) (30,000)
Deferred Compensation 140,000 417,000
Deferred Federal Income Taxes 271,000 600,000
Accrued Litigation Settlement (96,000) -
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Net Cash (Used in) Operating Activities (61,000) (1,786,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (33,000) (43,000)
Notes Receivable and Other Assets (11,000) (25,000)
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Net Cash (Used in) Investing Activities (44,000) (68,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Stock Issued 60,000 95,000
Common Stock and Cash Dividends (10,000) (9,000)
Borrowings on Notes Payable 346,000 2,218,000
Repayment of Notes Payable (264,000) (387,000)
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Net Cash Provided by Financing Activities 132,000 1,917,000
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Increase (Decrease) in Cash and Cash Equivalents 27,000 63,000
BEGINNING BALANCE, CASH AND CASH
EQUIVALENTS $ 14,000 79,000
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ENDING BALANCE, CASH AND CASH
EQUIVALENTS $ 41,000 $ 142,000
=============== ================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash Payments for Interest $ 66,000 $ 120,000
=============== ================
Cash Payments for Taxes $ - $ -
=============== ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 5
FIRST FIDELITY ACCEPTANCE CORP.
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all information and footnotes necessary for
a fair presentation of financial position, results of operations and
cash flows in conformity with generally accepted accounting
principles. Except as disclosed herein, there has been no material
change in the information disclosed in the notes to financial
statements included in the company's Annual Report on Form 10-K for
the year ended December 31, 1995. In the opinion of management, all
adjustments considered necessary for a fair presentation have been
included. Operating results for the six month period ended June 30,
1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996.
B. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of First
Fidelity Acceptance Corp. and its wholly-owned subsidiaries. All
intercompany accounts and transactions have been eliminated upon
consolidation. "Cash reserve accounts, restricted" and "Due from
sales and securitizations of Autoloans" are owned by the subsidiaries
and are not available to creditors of the Company until disbursed by
the appropriate trustee to the subsidiary and then distributed as a
dividend by such subsidiary to the Company.
C. INCOME PER SHARE
Income per share is computed by dividing net income by the weighted
average number of common shares, preferred shares, stock options and
warrants outstanding during the period.
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<PAGE> 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996
WITH THE SIX MONTHS ENDED JUNE 30, 1995
The Company's ability to sell and securitize Autoloans was impaired
during 1996 by the Borlaug legal proceedings until their settlement at the end
of May. The resolution enabled FFAC to enter into a relationship with an
additional financial institution. The new relationship is designed to support
the significant growth which the Company expects to attain in the second half
of 1996 and beyond.
As the Company's subsidiary was near the top of its warehouse lines of
credit during the first quarter of 1996 and during much of the second quarter,
financial services revenues from the sale of Autoloans declined by 54% from the
first six months of 1995. After deducting operating costs and expenses, the
majority of which are directly related to volume, income before income taxes
showed a 60% decline.
LIQUIDITY AND CAPITAL RESOURCES
The vast majority of the Company's expenses are incurred and paid between
the date of the Autoloan's purchase and the time of securitization. However,
the gain on Autoloan sale portion of the Company's revenue is recorded as
income in the period that the Autoloan is sold, but is received in the form of
cash over the life of the related Autoloan.
If the Company sold its Autoloans for up-front cash, it would greatly
impair its profitability. In order to raise capital to fund growth, the
Company borrows from time to time supported by the cash flow from the amounts
due from sales and securitizations of Autoloans. In addition, it sells shares
of common and preferred stock through private placements.
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<PAGE> 7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Not applicable.
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.
FIRST FIDELITY ACCEPTANCE CORP.
BY: /s/ PATTI PLUNKETT Date: August 12, 1996
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Patti Plunkett,
Vice President
Chief Financial Officer
Chief Accounting Officer
-7-
<PAGE> 8
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,398,000
<SECURITIES> 0
<RECEIVABLES> 7,522,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 212,000
<DEPRECIATION> 112,000
<TOTAL-ASSETS> 11,765,000
<CURRENT-LIABILITIES> 0
<BONDS> 5,625,000
<COMMON> 41,000
0
1,000
<OTHER-SE> 4,103,000
<TOTAL-LIABILITY-AND-EQUITY> 11,765,000
<SALES> 0
<TOTAL-REVENUES> 2,748,000
<CGS> 0
<TOTAL-COSTS> 770,000
<OTHER-EXPENSES> 946,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234,000
<INCOME-PRETAX> 798,000
<INCOME-TAX> 271,000
<INCOME-CONTINUING> 527,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 527,000
<EPS-PRIMARY> .013
<EPS-DILUTED> .011
</TABLE>
