UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] 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 0-14888
PRIME CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3347311
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
10275 West Higgins Road, Suite 200, Rosemont, Illinois 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 294-6000
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 ___
As of June 30, 1995, there were 4,280,165 shares of common stock outstanding.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Consolidated Statements of Operations --
Three and Six Months Ended
June 30, 1995 and 1994 . . . . . . . . . . . . . 3
Consolidated Balance Sheets --
June 30, 1995 and December 31, 1994. . . . . . . 4
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1995 and 1994. . . . . 5
Notes to Consolidated Financial Statements . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . 7-9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . 9
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . .10
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
Revenues:
Rentals on leased
equipment $ 155,021 $ 183,692 $ 371,280 $ 265,735
Direct financing leases 124,172 194,878 540,334 274,080
Fee income 1,139,230 162,848 3,765,454 450,980
Gain on sale of leased
equipment 6,657 40,777 21,273 237,928
Interest 252,038 126,348 522,083 175,999
Other income 74,127 41,736 105,751 63,746
Total revenues 1,751,245 750,279 5,326,175 1,468,468
Expenses:
Amortization of deferred
finance costs -- 746 -- 3,791
Depreciation of leased
equipment 40,709 126,495 170,498 164,927
Selling, general and
administrative 1,624,120 1,202,642 3,840,356 2,258,664
Interest 108,797 144,058 562,752 159,515
Net capitalized initial
direct costs (20,814) (83,963) (56,028) (154,434)
Total expenses 1,752,812 1,389,978 4,517,578 2,432,463
Income (loss) before
income tax expense (1,567) (639,699) 808,597 (963,995)
Income tax expense --- --- --- ---
Net income (loss) $ (1,567) $ (639,699) $ 808,597 $ (963,995)
Net income (loss) per common
and common equivalent share: $0.00 $(0.15) $0.19 $(0.23)
See accompanying notes to consolidated financial statements
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
June 30, December 31,
ASSETS 1995 1994
Cash and cash equivalents $ 958,921 $ 1,945,353
Receivables:
Rentals on leased equipment 53,389 59,329
Due from equipment trusts 37,117 68,609
Other 3,033,247 2,107,271
Net investment in direct financing leases 6,649,973 16,846,541
Leased equipment, net of accumulated
depreciation of $17,860 and $73,254
at June 30, 1995 and December 31, 1994
respectively 448,049 1,924,634
Deposits on equipment 553,265 755,354
Property and equipment, net of accumulated
depreciation of $999,296 and $942,890
at June 30, 1995 and December 31, 1994,
respectively 294,873 272,134
Other assets 3,675,995 2,962,224
Total assets $15,704,829 $26,941,449
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable to bank $4,567,794 $7,889,502
Accounts payable for equipment 3,001,945 11,919,579
Accrued expenses and other liabilities 2,367,998 1,996,002
Deposits and advances 335,354 513,225
Total liabilities 10,273,091 22,318,308
Stockholders' equity
Common stock, $0.05 par value:
authorized 10,000,000 shares; issued and
outstanding 4,374,365 shares at June 30, 1995
and December 31, 1994 218,718 218,718
Additional paid-in capital 9,681,225 9,681,225
Accumulated deficit (4,168,405) (4,977,002)
Treasury stock, at cost; 94,200 shares
at June 30, 1995 and December 31, 1994 (299,800) (299,800)
Total stockholders' equity 5,431,738 4,623,141
Total liabilities and stockholders' equity $15,704,829 $26,941,449
See accompanying notes to consolidated financial statements.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 808,597 $ (963,995)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities:
Depreciation 226,904 223,490
Amortization of unearned income (540,334) (274,326)
Amortization of deferred finance costs on
direct finance leases -- 3,791
Gain on securitization (2,531,830) --
Changes in assets and liabilities:
Rentals on leased equipment and
other receivables 210,249 517,309
Deferred charges 223,113 152,766
Other assets (1,015,712) (233,280)
Accrued expenses and other liabilities 371,997 (641,140)
Due from equipment trusts 31,492 (150,934)
Net cash used by operating activities (2,215,524) (1,366,319)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of equipment acquired for lease (50,195,268) (20,164,937)
Proceeds from sale of assets -- 475,994
Net cash used in investing activities (50,195,268) (19,688,943)
CASH FLOWS FROM FINANCING ACTIVITIES:
Discounted lease proceeds and proceeds from
sale of fully leveraged finance leases 23,501,406 5,922,981
Proceeds from notes payable to banks (3,321,708) 13,076,838
Proceeds from securitization, net of expenses 31,244,662 --
Net cash provided by financing activities 51,424,360 18,999,819
Decrease in cash and cash equivalents (986,432) (2,055,443)
Cash and equivalents:
Beginning of period 1,945,353 4,060,079
End of period $ 958,921 $ 2,004,636
Cash paid during the period for:
Interest $ 562,752 $ 159,515
Income taxes $ -- $ --
Supplemental schedule of noncash financing activities:
Discounted lease rentals on direct finance leases
collected by financial institutions $ -- $ 142,522
See accompanying notes to consolidated financial statements.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. 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 presentation have been included.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The financial results of 1994 and the first half of 1995 were influenced by a
number of economic and strategic issues including: (i) over the past several
years the Company's healthcare market has changed in both size and the type of
financing required by the marketplace, (ii) in 1994 the Company invested in and
expanded operations in several areas to diversify its origination
capabilities, (iii) the Company completed a securitization in September of
1994 totaling $39,424,940, but elected not to securitize its remaining
portfolio of leases as of year end, and (iv) a securitization totaling
$56,725,781 was completed in March 1995.
In fiscal year 1994 the Company invested in expanding its origination
capabilities in its wholesale originations such as vendor and structured
finance. The Company acquired Financial Alliance Corporation in July 1994
to expand its vendor originations. Further, the Company expanded its
staffing and efforts in the structured finance group to develop new products
and industry expertise. The focus of the structured finance group is to
broaden the Company's wholesale origination capabilities.
The Company conducts its business in a manner designed to conserve its
working capital and minimize its credit exposure. The Company does not
purchase equipment until; (i) it has received a noncancelable lease from its
customer, and (ii) it has determined that the lease (a) can be discounted
with a bank or financial institution on a non-recourse basis, or (b)
meets the lease origination standards established for a
securitized pool. The Company intends to continue to pursue a diversified
strategy of funding which will include; (i) periodically securitizing
aggregated pools of transactions, (ii) specific program financing agreements,
(iii) portfolio sales, and (iv) financing selected transactions on an
individual basis (i.e. non-pooled).
On March 16, 1995, the Company issued and sold equipment lease-backed
pay-through notes in an aggregate initial principal amount of
$56,725,781. Through this issuance the Company permanently financed
certain assets and liabilities carried on the Company's balance sheet as
of December 31, 1994. Pursuant to FASB Statement No. 77, these assets and
liabilities were removed from the balance sheet and the resulting gain was
recognized on the Company's statement of operations in the first quarter of
1995.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1995
Net Income (Loss)
Net loss for the three months ended June 30, 1995 was approximately $1,600 as
compared to a net loss of approximately $640,000 or $(0.15) per share for the
same quarter of 1994. In general, the breakeven performance was a result of
revenues offsetting increased expenses in accordance with Management's
expectations. In particular, the improved performance resulted primarily
from the permanent financing of individual transactions resulting in
reportable fee income to the Company.
Revenues
Revenues for the three months ended June 30, 1995 were approximately
$1,751,000 as compared to revenues of approximately $750,000 for the same
period last year. The increase was largely attributable to an increase in fee
income.
Fee income increased approximately $976,000 in the second quarter of 1995 as
compared to the same period in 1994 mainly as a result of Management's decision
to engage in the permanent financing of individual transactions which
resulted in a greater level of immediately reportable fee income for the
Company.
<PAGE>
Expenses
Expenses for the three months ended June 30, 1995 were approximately
$1,753,000 compared to expenses of approximately $1,390,000 during the same
period of 1994, an increase of approximately 26%. This is the result of
increased selling, general and administrative expenses associated with
expanded marketing efforts.
Selling, general and administrative expenses increased approximately $421,000
in the second quarter of 1995 compared to the same period in 1994. The second
quarter of 1994 does not include comparable expenses resulting from the
Company's investment in expanding its operations to increase its ability to
originate new business in vendor and other wholesale origination. This
investment took place in the third quarter of 1994.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1995
Net Income (Loss)
Net income for the six months ended June 30, 1995 was approximately $809,000
or $0.19 per share compared to a net loss of approximately $964,000 or $(0.23)
per share for the same period last year. The increase in net income resulted
primarily from (i) the securitization completed in March 1995 which included
assets capitalized as of December 31, 1994 of approximately $17,325,000,
(ii) the permanent financing of individual transactions in the
second quarter of 1995, and (iii) increased volume of activated business
for the the six months ended June 30, 1995 of approximately $66,394,000 as
compared to approximately $21,446,000 for the first half of 1994.
Revenues
Revenues for the six months ended June 30, 1995 were approximately $5,326,000
versus approximately $1,468,000 for the same six months of last year. The
increase was largely attributable to: (i) increases in all revenue categories
relative to the March securitization (with the exception of gain on sale of
leased equipment), (ii) the permanent financing of individual
transactions, and (iii) an increase in the volume of transactions activated
in the first half of 1995 versus 1994.
Expenses
Expenses for the first six months of 1995 were approximately $4,518,000
compared to approximately $2,432,000 during the same period of 1994. This
increase is a result of (i) increased selling, general and administrative
expenses associated with expanded marketing, (ii) writing off prepaid
expenses, (iii) establishing reserves for potential tax liabilities, and
(iv) the Company incurring higher interest expense as a result of warehousing
a higher volume of business throughout the first quarter of 1995.
Selling, general and administrative expenses increased approximately $1,582,000
in the first half of 1995 compared to the same period of 1994. The first
half of 1994 does not include comparable expenses resulting from the Company's
investment in expanding operations to increase its ability to originate new
business in vendor and other wholesale origination. This investment took place
in the third quarter of 1994.
<PAGE>
Also, in the first quarter of 1995, the Company wrote off prepaid expenses
totaling approximately $253,000 and established a reserve related to certain
pending tax audits totaling approximately $418,000. These expenses are non-
recurring in nature. Management believes that had it not been for the
aforementioned items, year-to-year selling, general and administrative
expenses would have been more comparable.
Interest expense increased approximately $403,000 in the first half of 1995
compared to the same period of 1994 due to the Company's decision to
warehouse its originations pending securitization in the first quarter of
1995.
Financial Condition
The Company's financial condition will continue to be dependent upon certain
critical elements. First, the Company must be able to obtain recourse and
nonrecourse financing to fund future acquisitions of leases. Second, the
Company must originate a sufficient volume of new business which is
structured and priced in such a way that the Company covers its costs and
realizes profits from its lease originations.
In 1994 the Company's healthcare leasing business was affected by uncertainty
in the healthcare market as a result of the national debate on healthcare
reform. The debate concluded in late 1994 and healthcare providers appear to
have a renewed interest in acquiring equipment. The new marketing efforts,
initiated in the second half of 1994, resulted in the Company originating a
much higher volume of business in the first quarter of 1995 compared to
1994. Finally, much of this increased volume is expected to continue as
vendor agreements tend to result in a continuing stream of transactions
with the vendor's customers.
Liquidity and Capital Resources
Based upon the Company's estimates of volume of transactions, the Company
believes that existing cash balances, cash flows from its activities, available
warehouse and permanent non-recourse borrowing, and securitized asset sales will
be sufficient to meet its foreseeable financing needs.
PART II - OTHER INFORMATION
Items omitted in Part II are either not applicable or the answer to the
items is no.
<PAGE>
SIGNATURE
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 thereunto duly authorized.
PRIME CAPITAL CORPORATION
(Registrant)
August 14, 1995 /s/ Robert C. Benson_____________________
Robert C. Benson, Chief Financial Officer
Robert C. Benson is the Principal
Financial and Accounting
Officer and has been duly
authorized to sign
on behalf of the Registrant
August 14, 1995 /s/ James A. Friedman
James A. Friedman, Chief Executive Officer
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<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 958,921
<SECURITIES> 0
<RECEIVABLES> 3,123,753
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,230,054
<PP&E> 1,294,169
<DEPRECIATION> 999,296
<TOTAL-ASSETS> 15,704,829
<CURRENT-LIABILITIES> 10,273,091
<BONDS> 0
<COMMON> 218,718
0
0
<OTHER-SE> 5,213,020
<TOTAL-LIABILITY-AND-EQUITY> 15,704,829
<SALES> 4,698,341
<TOTAL-REVENUES> 5,326,175
<CGS> 0
<TOTAL-COSTS> 3,536,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 418,000
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<INCOME-PRETAX> 808,597
<INCOME-TAX> 0
<INCOME-CONTINUING> 808,597
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 808,597
<EPS-PRIMARY> .19
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