<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 March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 33-3435 D
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
----------------------------------------------------------
(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 May 24, 1996
- ----------------------------- ---------------------------
Common Stock, $.001 par value 41,283,316 shares
<PAGE> 2
PART 1 - FINANCIAL STATEMENTS
FIRST FIDELITY ACCEPTANCE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
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(Unaudited) (Audited)
<S> <C> <C>
ASSETS:
Cash $ 12,000 $ 14,000
Cash Reserve Accounts, Restricted 3,717,000 3,618,000
Due from Sales and Securitizations of Loans 7,149,000 6,411,000
Prepaid Royalties 289,000 298,000
Other Prepaid Expenses 353,000 341,000
Office Furniture and Equipment, Net 102,000 88,000
Notes Receivable and Other Assets 50,000 85,000
--------------- ----------------
Total Assets $ 11,672,000 $ 10,855,000
=============== ================
LIABILITIES:
Notes Payable and Long-term Debt $ 5,869,000 $ 5,543,000
Accounts Payable and Accrued Expenses 223,000 253,000
Professional Fees Payable 251,000 225,000
Accrued Litigation Settlement 565,000 585,000
Deferred Compensation Payable 475,000 401,000
Deferred Federal Income Taxes 423,000 280,000
--------------- ----------------
Total Liabilities 7,806,000 7,287,000
--------------- ----------------
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; 40,883,316 and 40,531,316 Shares
Issued and Outstanding 41,000 41,000
Capital in Excess of Par Value 3,335,000 3,305,000
Retained Earnings 489,000 221,000
--------------- ----------------
Total Stockholders' Equity 3,866,000 3,568,000
--------------- ----------------
Total Liabilities and Stockholders' Equity $ 11,672,000 $ 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 MARCH 31,
<TABLE>
<CAPTION>
1996 1995
--------------- -------------
<S> <C> <C>
Revenues:
Financial Services Revenues $ 1,423,000 $ 2,626,000
--------------- -------------
Less, Costs and Expenses:
Loan Costs 422,000 918,000
Interest Expense 106,000 154,000
General and Administrative Expenses 474,000 665,000
--------------- -------------
Total Costs and Expenses 1,002,000 1,737,000
--------------- -------------
Income before Income Taxes 421,000 889,000
Provision for Income Taxes:
Deferred (143,000) (242,000)
--------------- -------------
Net Income $ 278,000 $ 647,000
=============== =============
Net Income Per Common Share $ .006 $ .014
=============== =============
Weighted Average Common Shares
Outstanding on a Fully-diluted Basis 47,975,772 46,565,225
=============== =============
</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 THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 278,000 $ 647,000
Adjustments to Reconcile Net Income to
Net Cash (Used in) Operating Activities:
Depreciation and Amortization 10,000 7,000
Change in Assets and Liabilities:
(Increase) Decrease in Assets:
Cash Reserves - Restricted (99,000) (476,000)
Due from Sales and Securitizations of Loans (738,000) (1,263,000)
Prepaid Royalties and Expenses (3,000) 88,000
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses (30,000) 106,000
Professional Fees Payable 26,000 (68,000)
Deferred Compensation 74,000 201,000
Deferred Federal Income Taxes 143,000 242,000
Accrued Litigation Settlement (20,000) -
----------- ----------
Net Cash (Used in) Operating Activities (359,000) (516,000)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (24,000) (1,000)
Notes Receivable and Other Assets 35,000 52,000
----------- ----------
Net Cash (Used in) Investing Activities 11,000 (51,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Stock Issued 30,000 30,000
Common Stock and Cash Dividends (10,000) -
Borrowings on Notes Payable 346,000 1,120,000
Repayment of Notes Payable (20,000) -
----------- ----------
Net Cash Provided by Financing Activities 346,000 1,150,000
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Increase (Decrease) in Cash and Cash Equivalents (2,000) 685,000
BEGINNING BALANCE, CASH AND CASH
EQUIVALENTS 14,000 79,000
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ENDING BALANCE, CASH AND CASH
EQUIVALENTS $ 12,000 $ 764,000
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash Payments for Interest $ 88,000 $ 104,000
=========== ==========
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
MARCH 31, 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 three month period ended March
31, 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 loans" 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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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1996
WITH THE THREE MONTHS ENDED MARCH 31, 1995
The Company's ability to sell and securitize Autoloans has been
impaired by the former legal proceedings. This condition continued through the
first quarter of 1996 until the settlement of the Borlaug legal proceedings at
the end of May 1996.
As the Company's subsidiary was near the top of its warehouse lines of
credit during the first quarter of 1996, financial services revenues from the
sale of Autoloans declined by 46% from $2,626,000 in 1995 to $1,423,000 in
1996. After deducting operating costs and expenses, the majority of which are
directly related to volume, income before income taxes showed a similar decline
from $889,000 to $421,000.
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 guarantee fee portion of the Company's revenue is recorded as income in the
period that the Autoloan is purchased and 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 with no guarantee fee,
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 loan sales and securitizations. In addition, it sells
shares of common and preferred stock through private placements.
During the year ended December 31, 1995, the Company received $291,000
through private placements of shares of common stock (1994 - $388,000, 1993 -
$1,676,000) and $3,106,000 through private placement of secured promissory
notes (1994 - $2,667,000, 1993 - $1,279,000).
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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.
Exhibit 27 Financial Data Schedule.
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: 6-4-96
------------------------------ ---------------
Patti Plunkett,
Vice President
Chief Financial Officer
Chief Accounting Officer
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<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 3,729,000
<SECURITIES> 0
<RECEIVABLES> 7,149,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 202,000
<DEPRECIATION> (100,000)
<TOTAL-ASSETS> 11,672,000
<CURRENT-LIABILITIES> 0
<BONDS> 5,869,000
<COMMON> 41,000
0
1,000
<OTHER-SE> 3,824,000
<TOTAL-LIABILITY-AND-EQUITY> 11,672,000
<SALES> 0
<TOTAL-REVENUES> 1,423,000
<CGS> 0
<TOTAL-COSTS> 422,000
<OTHER-EXPENSES> 474,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 106,000
<INCOME-PRETAX> 421,000
<INCOME-TAX> 143,000
<INCOME-CONTINUING> 278,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 278,000
<EPS-PRIMARY> .007
<EPS-DILUTED> .006
</TABLE>
