FORM 10-KSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
(x) Annual report under section 13 or 15(d) of the Securities Exchange Act
of 1934
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-14888
PRIME CAPITAL CORPORATION
(Name of small business issuer in its charter)
Delaware 36-3347311
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
O'Hare International Center,
10275 W. Higgins Rd., Rosemont, IL 60018-3890
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 294-6000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.05
par value
Check whether the issuer (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 ( ) .
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. ( )
Issuer's revenues for year ending December 31, 1995 were $7,038,063.
The approximate market value of stock held by non-affiliates was $5,269,478
based upon 1,505,565 shares held by such persons and the average of the bid
and asked prices of the Common Stock on March 29, 1996 ($3.50). The
number of shares outstanding of the Registrant's $0.05 par value common
stock at March 29, 1996 was 4,280,165. Such quotations reflect inter-dealer
prices, without retail mark-up, mark-down on commission and may not necessarily
represent actual transactions. (The officers and directors of the
registrant are considered affiliates only for purposes of this calculation).
Exhibit Index is located on page 33. The total number of pages is 36.<PAGE>
PRIME CAPITAL CORPORATION
FORM 10-KSB
YEAR ENDED DECEMBER 31, 1995
INDEX
PART I
Item
Number Page
1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . .6
PART II
5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . .7
7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . 12
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART III
9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. . . . . . . . . . . . 13
10. EXECUTIVE COMPENSATION AND OTHER INFORMATION . . . . . . . . . . . . . . 15
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . 17
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . 18
13. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . 19
Item 1. BUSINESS
General
The Company is a specialty finance company providing financial services
to clients and customers throughout the United States. The Company's
primary focus is on providing specialty and high value-added financial
products that are targeted to specific markets through its three
Business Units. The target markets of the Company are those that
are underserved, inefficient and/or fragmented, with the intention of
being a market-developer and capital provider to emerging and established
customers and clients that offer the highest growth potential. The Company
utilizes its financial engineering capabilities to structure transactions
which attempt to mitigate risk while achieving relatively attractive spreads.
The Company attempts to employ a fairly disciplined approach that allows
for growth with reasonably attractive spreads or margins and avoids, to the
extent possible, having to compete as either a risk absorber or a pure
low-cost provider of funds.
The Company is primarily engaged in the business of originating (or, in some
cases, purchasing) leases, secured loans or installment purchase
agreements (collectively, "Financial Contracts"), warehousing such Financial
Contracts, and ultimately securitizing (or, in some cases, selling outright)
such Financial Contracts. In most cases, the Company does not, for
accounting purposes, realize the income associated with such Financial
Contracts until the time of sale or securitization; and, accordingly, some
some of the variances in the year-to-year revenue and net income figures
in the income statement of the Company are reflective of that fact.
The ability of the Company to generate net income is dependent on a number
of factors, including the following; (a) the volume of originations of
Financial Contracts ("Financial Contract Volume"), (b) on a short-term
basis, the net interest spread between the cost of the warehouse facilities
available to the Company and the all-inclusive interest rate on the
Financial Contracts (the "Short-Term Interest Spread"); and on a long-term
basis, the difference between the implied rate or yield (after factoring in
various components such as expenses, required reserves, subordination levels
and the like) on the securitizations sponsored by the Company and the
weighted average interest rate on the Financial Contracts sold into such
securitizations (the "Securitization Profit"), (c) the level of delinquencies
and defaults on the Financial Contracts originated or purchased by the
Company, and (d) the expenses incurred by the Company in the operation
of its business, including, without limitation, salaries, commissions and
other selling, general and administrative expenses (collectively, "SG&A").
The ability of the Company to generate acceptable Financial Contract Volume
is, itself, dependent upon a number of factors, including (i) the size,
experience and expertise of its sales staff, (ii) the availability of
sufficient drawable amounts under the Company's warehouse facilities to
finance such Financial Contract Volume, (iii) the reluctance of the Company
to accept unattractive credit risk in respect of a particular borrower or
borrowers, (iv) the necessity of such Financial Contracts to meet the
requirements and criteria of a securitization and (v) the competition in the
financial market-place to provide financing to customers (including
competition from commercial banks, finance companies and other suppliers of
capital).
The ability of the Company to maintain an acceptable level of Short-Term
Interest Spread and to generate an acceptable level of Securitization
Profit is, itself, dependent upon a variety of factors and considerations,
including (i) competition in the financial market-place, (ii) the borrowing
cost to the Company under its warehouse facilities, and (iii) the all-in
cost associated with the securitization of the Financial Contracts
originated and sold into such securitization. To the extent that the
Company is unable to hedge interest-rate risk from the date of origination
of the Financial Contracts to the date on which a securitization of those
Contracts is consummated, the Company assumes the risk of an increase
(and, alternatively, benefits from a decrease) in interest rates, which
increase (or decrease) would have a direct negative (or positive) impact
on the value of the Financial Contracts in the securitization process.
The ability of the Company to decrease or eliminate credit risk (and, thus,
write-offs and write-downs of the assets) is highly dependent on an
effective system (and the employment and retention of adequate personnel
to implement and monitor such system) to review, analyze and assess both
the credit quality of the borrowers and the continuing residual
value of the equipment or other items which form the security for the
Financial Contract. Although the securitization of a particular portfolio
of Financial Contracts generally relieves the Company from any on-going
liability (and, thus, the credit risk with respect to such portfolio is
assumed by the purchasers of the securities issued in the securitization),
any substantial decrease in the credit quality of a previously-securitized
portfolio will impact on the ability of the Company to realize reserve fund
amounts and would probably impact on the ability of the Company to sell all
of the securitization securities in future securitizations.
The ability of the Company to manage its expenses (including its SG&A) is a
major factor in determining profitability. Any increase in such expenses
must be balanced against the risk associated with possible defections of
key personnel and inadequate staffing levels, particularly with respect to
the sales personnel. The Company believes that some portion of the
relatively high level of SG&A is attributable to (i) the re-focusing of
its products lines, and (ii) the functional equivalent of research-and-
development with respect to new products and services offered by the Company.
The Company's credit underwriting and risk management strategies have
historically proven to be effective, and the management of the Company
places a high emphasis on evaluating portfolio and vendor risk and
structuring programs that attempt to mitigate risk. Over the last six
years, credit losses on the Financial Contracts (as defined below) have
consistently been nominal (approximately 0.05% per year, on average,
with no write-offs since 1993) relative to the portfolio average
outstanding balances. In addition, the Company's residual realization
experience has been above-average by industry standards, which is largely
attributable to a focus on equipment that is modular, upgradeable and
manufactured by leading companies. Operational and administrative functions
are centralized through a common corporate support group.
Marketing and Sales Activities
Substantially all of the Financial Contracts are originated by the
Company through its own sales force of 15 persons.
The sales force is divided into three groups: (a) Healthcare Leasing and
Finance ("HLF"), (b) Capital Alliance Corporation ("CAC"), formerly
known as Financial Alliance Corporation, and (c) the Structured Finance Group
("SFG").
HLF provides specialized retail financial services directly to health
providers and other end-users of medical equipment (including hospitals,
doctor groups and outpatient centers) and is responsible for creating
business opportunities within the medical marketplace.
CAC provides private label vendor programs, specialized joint ventures
and captive financing company financial services to national
manufacturers, distributors, franchisors and niche originators, each of
whom directly or indirectly control the distribution of equipment.
While it operates within the multi-billion dollar equipment financing
marketplace, CAC focuses on underserved and inefficient niches within that
market. Such targeted niches include (i) medical equipment
manufacturers and distributors, (ii) telecommunications equipment
manufacturers, (iii) software manufacturers and system integrators,
(iv) franchised concepts and (v) hospitality vendors and operators.
SFG pursues credit-driven project financings and portfolio
acquisitions, and works with other equipment leasing
companies, selected equipment manufacturers, banks and finance
companies. SFG focuses on the following markets:
(i) gaming equipment lease programs, (ii) lease funding and portfolio
acquisition programs, and (iii) energy market financings.
Lease Terms and Conditions
The Financial Contracts generally take the form of finance leases,
true or tax leases, and note and security agreements.
Substantially all of the Financial Contracts are non-cancelable,
"hell or high water", triple-net obligations of the lessee
or borrower. Initial terms generally range from 12 to 120 months
from the date of commencement, with approximately
85% of the Financial Contracts historically having had an initial
term of 60 months. The Financial Contracts are
generally secured by equipment and other tangible and intangible assets.
The Company uses a master lease or loan agreement form, the terms and
conditions of which are sometimes modified
to accommodate a particular lease or loan transaction. In substantially
all cases, the obligations are "triple net" leases or loans under which the
lessee or borrower is obligated to: (i) remit all rents or loan
payments regardless of the performance of the equipment, (ii) operate
the equipment in compliance with the manufacturer's instruction manuals
and governmental rules and regulations, (iii) properly maintain
and service the equipment, (iv) insure the equipment
against casualty loss and provide public liability coverage for
bodily injury and property damage, and (v) pay directly
(or reimburse the Company for) any property, use or similar taxes
associated with the equipment.
Under its master lease and loan agreements, in the event of a default
by a lessee or borrower, the Company can declare the lease or loan in
default and pursue its contractual remedies, including repossession
(or foreclosure of the security interest, in the case of a loan) of the
equipment. The master lease and loan agreements give the lessee or borrower
the right to enforce the warranties made by the equipment manufacturers
and vendors. The Company makes no representation or warranty to the
lessee or borrower regarding marketability, fitness for any purpose,
condition, quality, delivery or installation of the equipment.
The equipment is delivered from the supplier directly to the lessee or
borrower and, following the lessee or borrower's acceptance of the
equipment, the Company pays the purchase price to the supplier. In the case
of leases, the Company maintains title to the equipment throughout
the lease term, while the case of a loan, the Company maintains a lien
and perfected security interest in the equipment throughout the term
of the loan. A lease may or may not provide for the renewal of the lease
and/or the purchase of the equipment at the end of the initial lease term.
Types of Financial Contracts
1) Finance Leases: This classification of a lease is actually used to
refer to three different types of lease structures.
They generally share the essential characteristics whereby the
lease payments are structured to fully amortize
the equipment cost over the term of the lease; and the lessee
effectively obtains ownership of the equipment
at lease maturity.
a) "Dollar Buy-Out Lease"- the most prevalent finance lease is
commonly referred to as a dollar buy-out
lease, for it requires the lessee to purchase the equipment
for $1.00 (or some other nominal amount)
at the end of the original lease term. Title to the equipment
generally resides with a lessor during the
lease term, with the lessee obtaining ownership at lease maturity.
b) "Put" or "Balloon" Lease - This is a common type of finance
lease under which the lessee agrees to
purchase the equipment covered by the lease, at the end of a lease
term, for a predetermined price.
The"put" or "'balloon" may be in an amount ranging from 5% of
the original equipment cost to 40%
or more of the original equipment cost. The "put" or "balloon"
payment is made as the last payment
due under the lease term. Title to the equipment resides with
the lessor during the lease term, with
the lessee obtaining ownership at lease maturity.
c) A lease may call for the lessee to have the option to purchase
the equipment at the then fair market
value from (or return the equipment to) the lessor at the end
of the initial lease term. This type of
lease may at times be categorized, for accounting purposes, as
either a finance lease or a true or tax
lease as described below. The categorization is dependent upon
current accounting regulations relative
to whether or not the mandatory lease payments amortize more or
less than 90% of the original
equipment cost. If 90% or more of the original equipment cost
is amortized by the mandatory lease
payments, then the lease will be categorized as a finance lease
for accounting purposes. Title to the
equipment will rest with the lessor who will have the first
lien and perfected security interest in the
equipment. Title will be conveyed to the lessee only upon
negotiation of a final payment which will
be determined by then fair market value of the equipment.
2) Operating Leases - This is the common version of the lease which
provides the lessee with the option, but
not the obligation, to purchase the equipment at the end of the initial
lease term at its fair market value. As
stated above, the determination of whether a lease is an operating
lease or a finance lease is based upon current
accounting conventions. An operating lease is one where the mandatory
lease payments amortize less than
90% of the original equipment cost. Title to the equipment will
rest with the lessor who will have the first
lien and perfected security interest in the equipment.
Title will be conveyed to the lessee only upon
negotiation of a final payment which will be determined by the then
fair market value of the equipment.
3) Loan or Note and Security Agreement - The Company documents certain
transactions as loans with a note and
security agreement as the underlying documentation. Loan
agreements require the full amortization of the
equipment cost ( generally the loan principal balance) during the
term of the agreement. Loan documentation
requires that the rate of interest be disclosed to the borrower.
Title to the equipment is held by the borrower,
with the lender having a perfected security interest in and lien
upon the equipment.
Type of Equipment Leased
The Company typically originates Financial Contracts that have an
original contract balance ranging from
approximately $50,000 to $5,000,000 or greater. The following table sets
forth the original cost of the equipment by
category that the Company approved for lease for the years ended
December 31, 1993, 1994 and 1995.
Telecom
Health Care And Other Total
1995 $63,872,000 $115,178,000 $179,150,000
1994 $47,746,000 $37,001,000 $84,747,000
1993 $46,248,000 $38,443,000 $84,691,000
In the health care market, the Company specializes in Financial
Contracts secured by diagnostic imaging and laboratory
systems. The Company currently leases to full service radiology
departments "non -invasive" diagnostic equipment,
including conventional x-ray systems, digital subtraction angiography
equipment, computerized tomography (CT)
scanning equipment, ultrasound equipment, nuclear medicine equipment
and magnetic resonance imaging equipment.
The Company originates Financial Contracts secured by automated
hematology and chemistry equipment, such as
blood-cell counters and centrifugal and multi-stat analyzers, and
therapeutic equipment, such as lithotripters, used in
the treatment of kidney stones. The telecommunications equipment securing
Financial Contracts is primarily customer premises equipment, including
voicemail.
Customers
Since its inception, the Company has entered into financing
transactions with over 2,300 customers. There is no
significant credit exposure with any one customer. The Company conducts a
credit review of prospective customers
through an examination of their financial statements and credit history,
and requests audited financials annually in an
effort to keep current on each customer's financial status. The Company
does not believe that the loss of any one
customer would have a material adverse impact on its operations.
Under vendor programs the Company provides financing programs with
vendors, some exclusive some not, where the
Company reviews the strength of the vendor as well as the end user in
relation to making the credit decision. Vendor
programs generate repeat business as the vendor provides financing for
their customers. Most of the vendor agreements
(programs) include some form of recourse to the vendor and/or remarketing
agreements.
Employees
As of December 31, 1995, the Company had 44 employees, none of whom were
represented by a labor union.
Competition
The equipment leasing and related businesses of the Company are highly
competitive. Many firms are engaged in the
same types of businesses as the Company, including (i) finance divisions,
affiliates and subsidiaries of equipment
manufacturers, (ii) banks, their affiliates or subsidiaries, several of
which lend funds to the Company, (iii) other leasing
and finance companies, (iv) companies and state agencies which sponsor
tax-exempt financing or other investor
programs for the acquisition and lease of equipment, and (v) independently
formed partnerships of individuals or
corporations operated for the specific purpose of leasing equipment.
Many of these organizations have greater financial
or other resources than the Company and, therefore, may be able to obtain
funds on terms more favorable than those available to the Company.
The Company believes that its ability to compete effectively depends to a
great extent upon its knowledge of the
marketplace, the education, training and experience of its personnel;
the relationship and reputation it has established
for service and keeping its commitments with customers and vendors; and its
flexibility and adaptability to the special
needs of its institutional and technologically-oriented customers.
Item 2. PROPERTIES
The Company's leased corporate headquarters occupy approximately 14,500
square feet of space in an office building
located in Rosemont, Illinois (a suburb of Chicago) near O'Hare Airport.
Annual rent under the lease is $261,558.
The lease expires on December 31, 1996, which has been extended pursuant
to a seven-year renewal with an option
on additional space contiguous with the existing space. The Company
also leases sales offices in Albany, New York
and Charlotte, North Carolina. Aggregate annual rent for these sales
offices is approximately $24,000.
Item 3. LEGAL PROCEEDINGS
While the Company is subject from time to time in the ordinary course of
its business to legal actions and claims, it
is not now a party to any legal proceeding that could have material
adverse effect on the Company's financial position or results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
(a) Price Range of Common Stock
The Common Stock was traded on the NASDAQ National Market
System until July 23, 1992 at which
time the Common Stock was removed from the National
Market System and began being traded in
the over-the-counter market primarily because it did not
meet the minimum bid price requirement of
one dollar to continue to be traded on the NASDAQ Bulletin Board.
The following table summarizes
the quarterly price range of the Common Stock for 1995 and 1994.
Such quotations reflect inter-dealer
prices, without retail mark-ups, mark- downs or commissions and
may not necessarily represent actual
transactions. Quotations of high and low bid prices after
July 23, 1992 were obtained from Herzog,Heine, Geduld Incorporated.
1995 1994
High Low High Low
First $1-3/8 $5/8 $1-1/2 $1-1/4
Second 1-1/4 5/8 1-3/8 1-1/8
Third 2 5/8 1-1/8 7/8
Fourth 2-1/4 1-1/4 1-1/8 3/4
(b) Holders
There are approximately 315 holders of record of common stock.
c) Dividends
The Company has never paid a dividend on its Common Stock,
and no dividends are contemplated
in the foreseeable future. Payment of dividends is within the
discretion of the Company's Board of Directors.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The financial results of 1995, compared to 1994, were influenced by a number
of economic and strategic issues
including: (i) over the past several years the Company's healthcare market
has changed both in 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,
primarily vendor and structured finance. The Company acquired Financial
Alliance Corporation in July 1994 to expand
its vendor originations. Capital Alliance Corporation, as it is now
called, provides private label vendor programs,
specialized joint ventures and captive financing company financial services
to national manufacturers, distributors,
franchisors and niche originators who directly or indirectly control the
distribution of equipment. 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 attempts to conduct 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 $56,725,781. Through this issuance of such notes,
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.
On January 22, 1996, the Company issued and sold equipment lease-backed
pay-through notes in an aggregate initial
principal amount of $85,273,476. Through this issuance of such
Securitization Notes, the Company permanently
financed certain assets and liabilities carried on the Company's balance
sheet as of December 31, 1995. 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 1996.
The Company has historically profited from the value of the equipment
subject to leases upon termination of such
leases at initial maturity (the amount so realized is referred to herein
as "Residual Amounts"). The Residual Amounts
are typically realized from the sale or "re-lease" of the equipment to
the original lessee or, in some cases, from the sale
of the equipment in the open market or to the supplier or manufacturer.
In respect of a sale of a Financial Contract
to a third party, the Company typically either sells or retains the Residual
Amounts, depending on the particular sale.
If the Residual Amounts are sold with the Financial Contract, the Company
and the purchaser negotiate the price paid
for the assumed Residual Amounts. In the case of a securitization,
the Company in effect sells the Residual Amounts
for a pre-determined price and, to the extent that the actual Residual
Amounts realized from the sale or re-lease of the
equipment exceeds that which was assumed, the excess is deposited in the
reserve fund established in connection with
the securitization; and, subject to the rights of the holders of the
Securitization Notes to be paid from such funds,
remitted to the Company when all of the Securitization Notes
have been paid in full.
Results of Operations
Revenue Trends - Three Years Ended December 31, 1995. Revenues were
$7,038,063 in 1995, $4,678,401 in 1994, and $7,559,411 in 1993.
The increase in revenue of $2,359,662 in 1995 was largely attributable
to (i) the gain on the March 1995 securitization, (ii) the permanent
financing of individual Financial Contracts, and (iii) an increase in the
volume of transactions activated (approximately $150 million was
activated in 1995 versus approximately $76 million which was
activated in 1994). The decrease in revenues of $2,881,010 in 1994
was primarily due to a reduction in "gain on sale of lease equipment" of
$1,855,495 (In prior periods the Company recognized "remarketing" revenues,
related to managed programs, upon the disposition of assets under these
programs. These programs are expiring and the opportunity for these
"remarketing" revenues does not exist any longer). Secondly, the
Company experienced a decrease in fee income of $778,094 which is due to
the Company having financed a lower volume of transactions. In 1993 the
Company concluded a securitization in December and recognized sales
treatment on all transactions through that period. In December of 1994
the Company elected not to complete a securitization and thus did not
recognize comparable sales treatment at year end.
There was a minimal increase of $22,327, or 3%, in rentals on leased
equipment in 1995. Rentals on leased equipment increased
$158,001 or 29% in 1994. These increases were primarily the result of
the Company originating a higher volume of operating leases.
Direct finance lease income increased $663,116 or 87% in 1995. The
increase is largely attributable to the increase in the volume of
direct finance leases. Direct finance lease income decreased insignificantly
in 1994 (less than 1%).
Fee income increased $1,468,850 or 65% in 1995. This increase is largely
attributable to a higher gain on
securitization recognized in 1995 ($2,054,114) versus the gain on
securitization recognized in 1994 ($632,459). Fee income decreased
$778,094 or 26% in 1994. This was largely due to the Company having
financed a lower volume of transactions.
The gain on sale of leased equipment decreased $139,295 or 50% in 1995
and decreased $1,855,495 or 87% from 1993 to 1994. The fluctuations in this
income account is a result of one component of this account, gains
realized from the remarketing of equipment on behalf of managed
investor programs. The company shares in gains on remarketing of
investor owned equipment after the investors have received a predetermined
return. The company reported gains from
these programs of approximately $2,100,000 in 1993, $280,000 in 1994,
and $137,000 in 1995. The reductions in 1994 and 1995 are a result of the
expiration of the remaining leases under these programs.
Interest income increased $310,281 or 75% in 1995 and $74,382 or 22%
in 1994. These increases are largely
attributable to the Company having higher invested cash balances each year.
Other income increased insignificantly in 1995 ($34,383), and decreased
$474,112 in 1994. This change is primarily the result of reserve
adjustments in 1993 based upon Management's revised estimates of the
underlying liability related to these reserves.
Expense Trends - Two Years Ended December 31, 1995
Expenses were $8,874,296 in 1995, an increase of 33% from the expenses
in 1994 of $6,676,405. This increase is a
result of (i) increased selling, general and administrative expenses
associated with expanded marketing efforts (primarily
increased salaries and commissions) and (ii) one-time non-recurring expenses.
Depreciation expense decreased $102,656 or 24% in 1995. This decrease
is largely attributable to the Company having a lower volume of operating
lease originations.
Selling, general and administrative expenses increased $1,745,446 or 30%
in 1995. This increase was largely a result of increased salaries and
commission expense as well as a write-off of prepaid expenses totaling
approximately $632,000 and the establishment of a reserve related to
certain pending tax audits totaling approximately $418,000. These expenses
are non-recurring in nature.
Interest expense increased $450,710 or 60% in 1995. This increase
is largely the result of the company warehousing a greater volume of
transactions for a longer period of time due to the securitization which
closed in January of 1996.
Financial Condition
The Company's financial condition continues to be dependent upon certain
critical elements. First, the Company must be able to obtain recourse
and non-recourse financing to fund future acquisitions and originations
of Financial Contracts. Second, the Company must originate a sufficient
volume of new business which is structured and priced
in such a way so as to permit the Company to finance or sell those Financial
Contracts for an amount which in the
aggregate covers the Company's cost of operations, plus provides a return
on stockholders' equity. The Company intends to utilize a combination of
interim warehouse borrowing and long-term funding methodologies to provide it
with borrowing and funding availability at market competitive rates of
interest. The long-term funding methodologies
will include: (i) the continued issuance of asset-backed securities,
(ii) portfolio sales, (iii) program financings, and (iv)
the discounting of individual Financial Contracts.
In 1993 the Company originated and financed its assets in such a manner
that the Company realized net income from operations. In 1994 the
Company did not recognize comparable gains on the sales of leased
equipment (related to expiring managed programs) and the Company did not
sell and finance the same volume of Financial Contracts. 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 resulted in the Company originating a
much higher volume of business in 1995 compared to 1994.
Liquidity and Capital Resources
The Company utilizes amounts available under its warehouse facilities
to fund the origination of its Financial Contracts
and to carry such Financial Contracts until the date that they are sold
to a third party or securitized. The Company
has a number of credit facilities at its disposal including warehouse
facilities that totaled approximately $66.4 million
as of December 31, 1995. Amounts drawn and outstanding under these
facilities are primarily a function of the
Financial Contract volume generated prior to sale or securitization of
such Financial Contracts. As of December 31, 1995, $57,915,758 was
outstanding under the warehouse facilities.
Permanent, long-term financing for the Company's originated assets is
provided through either non-recourse debt or
securitized asset sales. The Company currently utilizes approximately
twenty institutional lenders to permanently
finance lease rentals on a non-recourse basis. These financings are
collateralized solely by the leased equipment and
related rentals, and the Company has no recourse liability to these
lenders for repayment of debt in the event of a lessee
default. Typically, the proceeds of these borrowings exceed the
Company's investment in the leased equipment. In
the past, the Company has been able to obtain adequate non-recourse
funding commitments, and the Company believes it will be able to do so in
the future.
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)
selling selected transactions on a "one-off" basis. This strategy is
focused upon maintaining funding access, optimizing
the cost of funds and enhancing the Company's ability to be market/client
responsive in specialized transactions.
The Company believes that existing cash balances, cash flows from its
activities, available warehouse and permanent
non-recourse borrowings, and securitized asset sales will be sufficient
to meet its foreseeable financing needs, provided
the Company is able to originate a sufficient volume of transactions
which meet its credit quality and profitability standards.
The Securitization Process
Although the Company has historically sold some its Financial
Contracts outright to a third party, it believes that the
"best execution" for the ultimate disposition of the Financial Contracts
which it originates is the securitization process.
Since December, 1993, the Company has engaged in, and sponsored, four
separate securitizations (one in December,
1993, the second in September, 1994, the third in March, 1995,
and the last in January 1996.) The total approximate
contract balances of the Financial Contracts sold by the Company into
the last four securitizations has been
$56,762,677, $39,424,940, $56,725,721 and $85,273,476, respectively.
Each of these securitizations has received "true
sale" treatment, and is treated as a sale for accounting purposes. Each
securitization has resulted in the issuance by
a special-purpose, wholly-owned subsidiary of the Company of equipment
lease-backed pay-through notes (the
"Securitization Notes"). Securitization Notes have been non-recourse to
the Company. Such Securitization Notes have
generally been issued in various tranches, with various subordination
levels, but in each case, all of the Securitization
Notes (including the tranche which is the most subordinated) have been sold,
and the Company has not been required
to purchase or take back any part of the Securitization Notes. While
this fact is not necessarily unique to the
Company, it is frequently the case that companies in the same business
as, or similar businesses to, that of the
Company have been required, in connection with securitizations of their
lease or loan portfolios, to purchase or take
back the most subordinated tranche of securitization securities issued
in connection with such securitizations, as a result
of the perceived risk of such subordinated tranche. The Company's ability
to avoid this risk is primarily the result of
the credit quality history of their Financial Contract portfolios.
Each issue of Securitization Notes has been privately placed, rather
than sold publicly.
The price at which the Company has historically sold Financial Contracts
into each securitization is a function of a
number of factors and considerations, but - as a general matter - the
profit realized from such sale is the present value
of the future revenue stream on the Financial Contracts, at the weighted
average interest rate applicable to such
Financial Contracts (together with an assumed residual value of the equipment
of other items forming the security for
the Financial Contracts), less (i) the weighted average yield applicable
to the Securitization Notes, (ii) the expenses
(including the private placement fee) of issuance of the Securitization
Notes, (iii) the accrual of the servicing fees, and
(iv) the establishment of certain reserves. Cash reserves of approximately
1% to 2% are established at closing for the
purpose of providing credit support for the Securitization Notes, while
GAAP accounting reserves are established at
.5%. The approximate .5% to 1.5% difference flows through the income
statement and is recognized as current
earnings. Generally, a reserve fund is established in connection with the
securitization, and is funded from proceeds
of the Securitization Notes in an amount equal to 1% to 2% of the aggregate
contract balances of the Financial
Contracts sold into such securitization. Such reserve fund is increased
over the life of the Securitization Notes by
excess interest income on the Financial Contracts over the debt service
applicable to the Securitization Notes, by
residual realizations over those which were assumed at the time of the
issuance of the Securitization Notes, and by
interest income on the reserve fund itself.
Other Intermediation Contracts
While securitizations have been, since 1993, the prime exit strategy for
Financial Contracts originated by the Company,
the Company has in the past sold certain Financial Contracts (or portfolios
of Financial Contracts) directly to third
parties, and will continue to assess the viability of selling to third
parties in the future. A direct sale of Financial
Contracts to third parties generally reduces or eliminates the need for
any substantial representations or warranties from
the Company, and generally may be accomplished without the need to
establish any reserve or similar funds. In
addition, such sales may frequently be effected quickly and may provide a
source of interim working capital funds to
the Company. The market for such outright sales to third parties is
relatively deep and there are a number of financial
institutions (including banks and insurance companies) which are currently
involved in purchasing financial assets
similar to the Financial Contracts. While it may often be the case
that the purchaser(s) of financial assets like the
Financial Contracts are seeking a higher yield or return (and thus a lower
purchase price) than would be the case with
a securitization of those same assets, there may be other reasons to sell
such Financial Contracts to such purchaser(s)
in lieu of a securitization. The Company intends to continue to assess
the third-party sales market as a possible exit strategy for Financial
Contracts.
During the three-year period from January 1, 1993 through December 31, 1995,
the Company sold Financial Contracts
to third parties with an aggregate contract balance of $99,767,360,
broken down as follows: $36,790,616 in 1995;
$26,525,254 in 1994; and $36,451,490 in 1993. Total financings by the
Company were $93,516,337 in 1995, $65,950,194 in 1994 and $93,214,167 in 1993.<PAGE>
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the registrant and the report thereon
of KPMG Peat Marwick LLP are filed as part of this annual report on Form
10-KSB:
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Operations
- Years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity
- Years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows
- Years ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
Not applicable.
<PAGE>
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Registrant
Name Principal Occupation During Past
Five Years and Other Information Age Director Since
James A. Friedman President and Chief Executive Officer
of the Company since November 1978;
Treasurer of the Company from August
1979 to September 1985. Officer and
Director of PLI. 50 1978
Leander W. Jennings President of Jennings & Associates
since September 1986; Managing
Partner, Chicago Office of KPMG
Peat Marwick from January 1977
to February 1985; Director of A.O.
Smith Corporation, Alberto Culver
Corporation, Teppco Partners L.P. 66 1986
Marvin T. Keeling Executive Vice President of the
Company from September 1985 to
August 1993; Secretary of the Company from
November 1978 to September 1993.
Director of PLI. 53 1978
William D. Smithburg Chairman of The Quaker Oats Company
since 1983 and Chief Executive Officer
thereof since 1981; Director of The
Quaker Oats Company, Abbott
Laboratories,The Northern Trust
Corporation and Corning Glass Work. 57 1986
Robert R. Youngquist,
D.D.S. Practicing Orthodontist and owner of
Robert R. Youngquist D.D.S., Ltd.
during the past six years. 47 1978
<PAGE>
Executive Officers of the Registrant
Principal Occupation During
Name of Officer Past Five Years and Other Information Age
James A. Friedman President and Chief Executive
Officer of the Company since November
1978; Treasurer of the Company from
August 1979 to September 1985. 50
Robert C. Benson Senior Vice President of the Company since
August 1995. From 1983 to 1995 Senior Vice
President and Chief Financial Officer of various
financial services divisions of Heller
Financial, Inc. 51
<PAGE>
Item 10. EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows all the cash compensation paid or to be
paid by the Company or any of its subsidiaries, as
well as certain other compensation paid or accrued, during the fiscal years
indicated, to the President and Chief
Executive Officer, and the highest paid executive officer of the Company
whose compensation was at least $100,000 for the last fiscal year in all
capacities in which they served:
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted All
Name and Annual Stock LTIP Other
Principal Salary Bonus Compensa- Awards(s) Options/ Payouts Compensa-
Position Year $ ($) tion ($) ($) SAR ($) tion($)
James A. 1995 288,000
Friedman, 1994 357,000 3,625
President 1993 200,150 156,850
and Chief
Executive
Officer
Options/SAR Grants in Last Fiscal Year
Individual Grants
(a) (b) (c) (d) (e)
Name Number of Securities % of Total Exercise or Expiration
Underlying Options/SARs Base Price Date
Options/SARs Granted Granted to ($/Sh)
(#) Employees in
Fiscal Year
Robert C.
Benson 25,000 29% $1.06 Aug. 9, 2005
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values
(a) (b) (c) (d) (e)
Name Shares Value Number of Value of Unexercised
Acquired Realized Securities In-the-Money
on Exercise ($) Underlying Options/SARs at FY-
(#) Unexercised End ($)
Options/SARs
At FY-End (#)
Exercisable/ Exercisable/
Unexercisable Unexercisable
David L. - - 16,667/8,333 $0/0
Daum
Robert C. - - 0/25,000 $0/0
Benson
Director's Compensation
Each Director of the Company who is not an Executive Officer
receives an annual retainer of $10,000 plus a fee of $500 for attendance
at each meeting of the Board. In addition, members of the Committees of the
Board who are not Executive Officers receive a fee of $300 for each Committee
meeting attended. Directors of the Company who are
also Executive Officers receive no compensation for rendering services as a
Director except for reimbursement of out-of-pocket expenses.
Compensation Pursuant to Plans
The Company has adopted the 1984 Incentive Stock Option Plan (the
"ISO Plan"), the 1986 Non-Qualified Stock
Option Plan (the "Non-Qualified Plan") and the 1987 Stock Option Plan
(the "1987 Plan"). All descriptions of the various plans are qualified
in their entirety by reference to the actual Plan documents which are
available for examination.
The ISO Plan is administered by a committee of not less than two Directors
of the Board (the "Committee"). The
Board must select the members of the Committee from among those Directors
who are ineligible to participate in, and
who have not within the year preceding appointment to the Committee been
eligible to participate in, the ISO Plan or
any other stock option plan of the Company. The ISO Plan empowered the
Committee to grant incentive stock options
to "key employees" of the Company and its subsidiaries to purchase
shares of the Company's Common Stock at any
time prior to the approval of the 1987 Plan. Subject to certain limitations,
the ISO Plan empowered the Committee to determine the persons to whom options
were granted, the number of shares to be covered by each option, the option
price per share (which must have been at least equal to 100% of the fair
market value of the Common Stock of the
Company on the date the option is granted) and all other terms and conditions
of the option and its exercise.
Termination of an optionee's employment with the Company or its subsidiaries
results in the termination of all options
held by such optionee which were not exercisable at the time of such
termination of employment. All options granted
under the ISO Plan are non-assignable and non-transferable other than by
will or the laws of descent and distribution.
The Non-Qualified Plan empowered the Board of Directors for a period of
10 years commencing on March 26, 1986,
to grant non-qualified stock options to purchase shares of the Company's
Common Stock to Directors of the Company
who are not Officers or employees of the Company or its subsidiaries and to
key employees who are not Directors of
the Company. The Non-Qualified Plan provided for the issuance of up to
25,000 shares of Common Stock upon the
exercise of options thereunder at any time prior to the approval of the
1987 Plan. A Director participant could not be
granted options to purchase more than 7,500 shares of Common Stock under the
plan. On March 26, 1986, the Board
of Directors delegated the responsibility for the administration of the
Non-Qualified Plan to the Committee. Subject
to the provisions of the Non-Qualified Plan, the Committee determined the
persons to whom options are granted, the
number of shares subject to each option, the exercise price of each option
and all other terms and conditions of
exercise. Pursuant to an amendment adopted on May 1, 1986, options must
have been granted at not less than 85%
of the current fair market value of the shares of Common Stock. Each option
granted under the Non-Qualified Plan
was and is immediately exercisable in full. A portion of the shares
purchased upon exercise of an option granted under
the Non-Qualified Plan may, however, be subject to repurchase by the Company
at the option price if the optionee
ceases to be an employee or a Director, as the case may be, of the Company
within five years after the date of grant
of the option. Such repurchase option lapses pro-rata over such period
and lapses entirely where certain transactions
involving the Company have occurred. Options are not transferable,
except that options may be exercised by the
executor, administrator or personal representative of a deceased optionee
for a period of not longer than one year after
the death of such optionee at such time and to such extent that the optionee,
had he lived, would have been entitled to exercise such option.
The 1987 Plan was adopted by the Board of Directors on March 24, 1987 and
was approved by the stockholders on
May 27, 1987. An aggregate of 300,000 shares of the Company's Common Stock
is reserved for issuance pursuant
to the exercise of options under the 1987 Plan, 200,000 of which have been
transferred from the ISO Plan and 15,000
of which have been transferred from the Non-Qualified Plan.
The Board of Directors may grant options to purchase shares of the Company's
Common Stock at the times and prices
provided for in the agreements granting the options, subject to the terms of
the 1987 Plan, to key employees (who are
not Directors of the Company) and Directors (who are not Officers or
employees of the Company or its subsidiaries)
of the Company or its subsidiaries. Only key employees are eligible to receive
incentive stock options. Key employees and Directors are eligible to
receive non-qualified options. All options are subject to the specific terms
and conditions evidenced by written agreements between the Company and
the optionee. The maximum number of shares
for which an option may be granted to any one key employee (who is not a
Director of the Company) is not limited
other than in the discretion of the Board. The total number of shares of
Common Stock subject to options granted
under the 1987 Plan to an optionee who is a Director shall not exceed 25,000.
An optionee may exercise options granted under the 1987 Plan for a period
of three months following, in the case of
an optionee who is an employee, termination of the optionee's employment
(12 months if termination of employment
is due to total and permanent disability), or, in the case of an optionee
who is a non-employee Director, the time the
optionee ceases to be a Director of the Company (12 months if he ceases to
be a Director due to total and permanent
disability) to the same extent that the optionee might have exercised
such option at the time of such termination of
employment or the time he ceased to be a Director, as the case may be.
The Company shall have the right to
repurchase certain shares on termination of employment or directorship.
Options shall not be transferable, except that
options may be exercised by the executor, administrator or personal
representative of a deceased optionee for a period
of not longer than one year after the death of such optionee at such time
and to such extent that the optionee, had he
lived, would have been entitled to exercise such option.
On August 31, 1994 the stockholders approved an additional 200,000 shares
of the Company's Common Stock be
reserved for issuance pursuant to the exercise of options under the 1987
Plan.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Current Ownership
The following table sets forth certain information as of December 31, 1995
with respect to the beneficial ownership
of the Company's Common Stock by each stockholder or group known by the
Company to be the beneficial owner
of more than 5% of its outstanding Common Stock, by each Director, and by
all Executive Officers and Directors as
a group. The information is based, in part, on data furnished by such
Executive Officers, Directors and stockholders.
The address of each holder of more than 5% of the Company's Common Stock
other than First Financial Fund, Inc.
and Wellington Management Company is O'Hare International Center, 10275
West Higgins Road, Rosemont, Illinois
60018. The address for Wellington Management Company is 75 State Street,
Boston, Massachusetts 02109. First
Financial Fund, Inc.'s address is One Seaport Plaza, 25th Floor,
New York, New York 10292.
Name of Amount and Nature
Beneficial Owner of Beneficial Ownership Percent of Class
James A. Friedman (1) 2,198,375 48.7%
Leander W. Jennings (2) 27,100 *
Marvin T. Keeling (3) 500,125 11.1%
William D. Smithburg (2)(4) 29,000 *
Robert R. Youngquist, D.D.S. (5) 20,000 *
First Financial Fund, Inc. (6) 330,000 7.3%
All Executive Officers and Directors
as a group (5 persons) (2) 2,774,600 61.4%
_________________________
*Less than 1%
(1) Includes 459,975.67 shares owned by a trust for the benefit of
Mr. Friedman's children for which Mr. Friedman disclaims
beneficial ownership.
(2) Includes outstanding options which are currently exercisable with
respect to the following named individuals or groups:
Messrs. Jennings, 25,000 shares; Smithburg, 25,000 shares; all
Executive Officers and Directors as a group, 50,000
shares.
(3) Includes 22,000 shares owned by trusts for the benefit of Mr. Keeling's
children and 40,000 shares held in a family trust
fund for which Mr. Keeling disclaims beneficial ownership.
(4) Includes 2,000 shares owned by trusts for the benefit of Mr. Smithburg's
children for which Mr. Smithburg disclaims beneficial ownership.
(5) Includes 15,000 shares held in a pension plan of which Dr. Youngquist
is a fiduciary and for which Dr. Youngquist disclaims beneficial ownership.
(6) According to Schedules 13G filed with the Securities and Exchange
Commission on January 31, 1996, First Financial
Fund, Inc., an investment Company, is the beneficial owner of such shares,
and Wellington Management Company, its
investment advisor, may also be deemed to be a beneficial owner of
those shares.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no family relationships among the Directors and Executive Officers
of the Company.
Prior to 1986 Mr. Friedman participated in various investor programs in
which he bought equipment from PLI, and
PLI assigned to him leases executed by various hospitals or other lessees.
These transactions were effected in a period
during which Mr. Friedman was a Director and Executive Officer of the
Company. The transactions were structured
on substantially the same terms as the Company's other investor programs,
except the acquisition fees paid by the
Executive Officer of the Company were 50% of the usual fee. Mr. Friedman
did not purchase any new transactions
in 1993, 1994, or 1995. <PAGE>
The following is a summary of all transactions
entered into prior to fiscal 1986 involving Executive Officers and
Directors which were in effect as of December 31, 1995:
Number Aggregate Aggregate
of Equipment Cash
Investor Leases Cost Proceeds
James A. Friedman 2 $261,036 $81,712
In September 1991, James A. Friedman purchased one lease and the underlying
telecommunications equipment from
the Company for a price of approximately $350,000, made up of cash
and an assumption of the debt secured by those
assets. The transaction was approved by the Company's outside directors
in accordance with the Company's policy
of related party transactions. The Company originally purchased the equipment
for approximately $456,000 and
entered into this lease in February, 1990. At the date of the sale to
Mr. Friedman, the assets were carried on the
Company's books at approximately $373,000. There were no proceeds received by
Mr. Friedman on this lease in 1994.
$27,511 was received by Mr. Friedman in 1995 on this transaction.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
1. Financial Statements Sequential Page No.
The following financial statements of Prime Capital Corporation
and Subsidiaries are filed as part of this annual report on Form
10-KSB:
a) Independent Auditors' Report 20
b) Consolidated Balance Sheets as of December 31, 1995 and 1994 21
c) Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 22
d) Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1995, 1994 and 1993 23
e) Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 24
f) Notes to Consolidated Financial Statements 25
2. Exhibits
The exhibits filed in response to Item 601 of Regulation S-B as part
of this Annual Report on Form 10-KSB are
listed in the Exhibit Index on pages 33 through 34.
3. Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during
the fourth quarter of the Company's fiscal year
ended December 31, 1995. <PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Prime Capital Corporation:
We have audited the accompanying consolidated balance sheets of Prime
Capital Corporation and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated 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.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position
of Prime Capital Corporation and subsidiaries at December 31, 1995 and 1994,
and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31,
1995 in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 6, 1996
<PAGE>
PRIME CAPITAL CORPORATON AND SUBSIDIARIES
Consolidated Balance Sheets
December 31,
ASSETS 1995 1994
Cash and cash equivalents $ 2,001,949 $ 1,945,353
Receivables:
Rentals on leased equipment 100,589 59,329
Due from equipment trusts 38,068 68,609
Other 2,473,095 2,107,271
Net investment in direct financing leases 58,561,185 16,846,541
Leased equipment, net of accumulated
depreciation of $164,542 and $73,254
in 1995 and 1994, respectively 2,581,032 1,924,634
Deposits on equipment 114,836 755,354
Property and equipment, net of accumulated
depreciation of $1,062,527 and $942,890
in 1995 and 1994, respectively 285,599 272,134
Other assets 3,798,073 2,962,224
Total assets $ 69,954,426 $26,941,449
LIABILITIES AND STOCKHOLDERS'EQUITY
Notes payable $ 58,300,252 $ 7,889,502
Accounts payable for equipment 4,057,179 11,919,579
Accrued expenses and other liabilities 4,246,376 1,996,002
Deposits and advances 563,711 513,225
Total liabilities 67,167,518 22,318,308
Stockholders' equity
Common stock, $0.05 par value:
authorized 10,000,000 shares; issued and
outstanding 4,374,365 shares in
1995 and 1994 218,718 218,718
Additional paid-in capital 9,681,225 9,681,225
Accumulated deficit (6,813,235) (4,977,002)
Treasury stock, at cost; 94,200 shares
in 1995 and 1994 (299,800) (299,800)
Total stockholders' equity 2,786,908 4,623,141
Total liabilities and stockholders' equity $69,954,426 $26,941,449
See accompanying notes to consolidated financial
statements.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31,
1995 1994 1993
Revenues:
Rentals on leased equipment $ 723,265 $ 700,938 $ 542,937
Direct financing leases 1,427,943 764,827 770,969
Fee income 3,736,491 2,267,641 3,045,735
Gain on sale of leased equipment 137,553 276,848 2,132,343
Interest 726,701 416,420 341,588
Other income 286,110 251,727 725,839
Total revenues 7,038,063 4,678,401 7,559,411
Expenses:
Amortization of deferred
finance costs -- 4,357 65,368
Depreciation of leased equipment 317,181 419,837 237,488
Selling, general and administrative 7,531,351 5,785,905 4,904,483
Interest 1,200,662 749,952 514,377
Net capitalized initial direct
costs (174,898) (283,646) (170,681)
Total expenses 8,874,296 6,676,405 5,551,035
Net income (loss) $(1,836,233) $(1,998,004) $2,008,376
Income (loss) per common and common
equivalent share: $ (0.43) $ (0.47) $ 0.47
See accompanying notes to consolidated financial statements.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1995, 1994 and 1993
Additional Total
Common Paid-In Accumulated Treasury Stockholders'
Stock Capital Deficit Stock Equity
Balance at
December 31, 1992 218,718 9,681,225 (4,987,374) (299,800) 4,612,769
Net income - -- 2,008,376 -- 2,008,376
Balance at
December 31, 1993 218,718 9,681,225 (2,978,998) (299,800) 6,621,145
Net loss -- -- (1,998,004) -- (1,998,004)
Balance at
December 31, 1994 218,718 9,681,225 (4,977,002) (299,800) 4,623,141
Net loss -- -- (1,836,233) -- (1,836,233)
Balance at
December 31, 1995 $ 218,718 $9,681,225 $(6,813,235) $(299,800) $2,786,908
See accompanying notes to consolidated financial statements.
<PAGE>
PRIMECAPITAL CORPORATION AND SUBSIDIARIES
ConsolidatedStatements of Cash Flows
Years Ended December 31,
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,836,233) $ (1,998,004) $2,008,376
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation 436,818 531,936 320,846
Amortization of unearned income (1,427,943) (756,654) (771,342)
Amortization of deferred finance
costs on direct finance leases -- 4,356 65,368
Gain on securitization (2,054,114) (632,459) (1,874,333)
Changes in assets and liabilities:
Rentals on leased equipment and other
receivables 723,201 1,084,162 2,363,810
Deferred charges 351,236 (261,286) (139,690)
Other assets (1,311,568) (1,864,686) (849,646)
Accrued expenses and other liabilities 2,250,375 (31,646) (210,647)
Due from equipment trusts 30,541 122,366 287,273
Net cash provided (used) by operating
activities (2,837,687) (3,801,915) 1,200,015
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of equipment acquired for lease (114,532,687) (63,753,378) (70,171,172)
Proceeds from sale of assets 317,268 479,954 789,030
Net cash used in investing activities (114,215,419) (63,273,424) (69,382,142)
CASH FLOWS FROM FINANCING ACTIVITIES:
Discounted lease proceeds and proceeds from
sale of fully leveraged finance leases 35,932,007 22,810,629 28,334,734
Proceeds from notes payable, net 50,410,749 6,797,244 1,092,258
Proceeds from securitization,
net of expenses 30,766,946 35,352,740 40,726,344
Net cash provided by financing
activities 117,109,702 64,960,613 70,153,336
Increase (decrease) in cash and
cash equivalents 56,596 (2,114,726) 1,971,209
Cash and cash equivalents:
Beginning of year 1,945,353 4,060,079 2,088,870
End of year $ 2,001,949 $1,945,353 $4,060,079
Cash paid during the year for:
Interest $ 1,225,401 $ 732,618 $ 506,926
Supplemental schedule of noncash
financing activities:
Discounted lease rentals on direct
finance leases collected by financial
institutions $ - $ 168,920 $ 1,095,047
See accompanying notes to consolidated financial statements.
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Prime Capital Corporation, through its wholly-owned subsidiaries,
is engaged principally in providing
financial services to clients and customers throughout the United
States. The Company's primary focus is
on providing specialty and high value-added financial products that
are targeted to specific markets through its three Business Units.
The Company is primarily engaged in the business of originating
(or, in some cases, purchasing) leases, secured loans or installment
purchase agreements (collectively, "Financial Contracts"), warehousing
such Financial Contracts, and ultimately securitizing (or, in some
cases, selling outright) such Financial Contracts. The accompanying
consolidated financial statements include the accounts of Prime
Capital Corporation and its wholly-owned subsidiaries,
Prime Leasing, Inc. (and its
subsidiaries Prime Healthcare, Inc. and Financial Alliance Corp.),
Prime Equities, Ltd., Americom Resources,
Inc., formerly Interstate Telecommunications Corporation, Prime Finance
Corporation 1993-A, and Prime
Finance Corporation 1994-A. All material intercompany transactions
have been eliminated.
(a) 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 and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(b) Revenue Recognition
Completed lease contracts which qualify as direct financing leases,
as defined by Statement of Financial
Accounting Standards (SFAS) No. 13, are accounted for by recording on
the balance sheet the total
minimum lease payments receivable, plus the estimated unguaranteed
residual value of the leased equipment,
less the unearned income. The unearned lease income represents the
excess of the total minimum lease
payments, plus the estimated residual expected to be realized at the
end of the lease term, over the cost of
the related equipment. Unearned lease income is recognized as revenue
over the term of the lease as a
constant percentage interest return on the net investment. The initial
direct costs are capitalized as part of
the net investment in direct financing leases and amortized over the
lease term as a reduction in yield.
The cost of equipment acquired for the Company's lease transactions
that qualify as operating leases, as
defined by SFAS No. 13, is recorded as leased equipment and depreciated
on a straight-line basis to an
estimated residual value at lease termination. Lease revenue consists
of periodic rentals. Initial direct costs
of originating operating leases are capitalized and amortized on a
straight-line basis over the lease term.
Fee income is generated from the sale of equipment and receivables.
The Company records as fee income
from the sale of equipment the difference between the net sales
proceeds received and the book value of
equipment. When the sale of contract receivables occurs, the net
proceeds on the sale less the net book
value of the sold receivables is recorded as fee income.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(c) Cash and Cash Equivalents:
Cash and cash equivalents are generally comprised of highly liquid
instruments with original maturities of 90 days or less.
(d) Income Taxes
As of January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes". The adoption
of this standard changed the Company's method of accounting for
income taxes from APB No. 11 the
deferred method to an asset and liability approach. The adoption of
SFAS No. 109 did not have an impact
on the financial position or results of operations of the Company.
(e) Net Income per Share
Net income per common and common equivalent share is computed based
on the weighted average number
of common and common equivalent shares outstanding during each period.
Stock options are not included
in the number of common and common equivalent shares because they are
not dilutive. The number of
common and common equivalent shares used in the computation of net
income per common and common
equivalent share for the years ended December 31, 1995, 1994, and
1993 were 4,280,165.
(f) Financial Instruments
The carrying value of the Company's financial instruments approximates
their fair value.
(g) Reclassifications
Certain reclassifications have been made to the 1993 and 1994
consolidated financial statements to conform
with the presentation used in 1995.
(2) Subsequent Event
The Company closed a securitization of $85,273,476 of its equipment
loan and lease receivables on
January 22, 1996. Although substantially all of the securitized pool
consists of contracts originated
during 1995, accounting rules require that the gain realized by the
Company from accounting for the
securitization as a sale be recognized in the first quarter of 1996.
The Company reported a net loss for 1995
of $1,836,000, or $(.43) per share, compared to a net loss of
$1,998,000, or $(.47) per share, a year earlier.
On a pro forma basis, for the twelve month period ended December 31,
1995 the Company would have
reported net income of $1,886,000, or $.44 per share, had the
January 22, 1996 sale been included in 1995 results.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidat ed Financial Statements - Continued
(3) Net Investment in Direct Financing Leases
The components of the net investment in direct financing leases as of
December 31 are as follows:
1995 1994
Minimum lease payments receivable $72,778,029 $22,036,563
Estimated unguaranteed residual value of
leased equipment 449,810 154,709
Capitalized initial direct costs 63,784 4,448
Unearned income (14,720,438) (5,339,179)
Allowance for uncollectible accounts (10,000) (10,000)
Net investment in direct financing leases $58,561,185 $16,846,541
The estimated unguaranteed residual value of leased equipment at
December 31, 1995 and 1994 includes
residuals of $83,698 and $127,723, respectively, recorded from residual
sharing agreements with investor programs and other third parties.
Minimum lease payments to be received on direct financing leases in
each of the next five years and beyond are as follows:
Year Ending
December 31,
1996 $18,822,633
1997 17,004,253
1998 14,214,975
1999 10,582,669
2000 6,812,042
Thereafter 5,341,457
Minimum lease payments to be
received $72,778,029
Leased equipment in the Company's portfolio consists primarily of
medical, telecommunication and other
equipment with average 46-month lease terms, for which estimated residual
values of 5% to 25% have been
assigned. The following table summarizes the estimated unguaranteed
residual value on direct financing leases by year of lease termination:
Year Ending
December 31,
1996 $11,310
1997 72,392
1998 15,082
1999 2
2000 351,024
Total $449,810 <PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(4) Notes Payable
Notes payable at December 31, 1995 of $58,300,252 represent amounts
borrowed under three warehouse lines
which were used to finance the Company's purchase of certain equipment
on lease. Outstanding borrowings
under the warehouse lines are typically secured by the related
equipment. The various warehouse lines bear
different interest rates and maturities.
(5) Securitizations
On December 31, 1993, the Company completed an asset securitization
pursuant to which a wholly-owned,
newly-formed, limited-purpose subsidiary of the Company issued three
classes of receivables-backed, pay-
through notes secured by the Company's entire interest in the pooled
assets. The Company realized aggregate
proceeds of $56,762,677 from the transaction. Under the related
indenture, the Company has provided
Noteholders with additional credit enhancement in the form of (i)
a cash reserve fund and (ii) limited recourse
to the Company for losses that exceed amounts held in the cash
reserve fund up to a maximum aggregate
amount equal to 3% of the initial aggregate note proceeds. The Company
has established its own allowance
for expected losses under its recourse obligations to Noteholders
based on its historical loss experience and
management's best estimate of future losses equal to one-half of one
percent (0.5%) of the initial aggregate
note proceeds. For financial reporting purposes, the asset securitization
was treated as a sale and a gain of
$1,874,333 has been included in fee income in the accompanying
consolidated financial statements.
On September 19, 1994, the Company completed another asset securitization
pursuant to which a wholly-
owned, newly-formed, limited-purpose subsidiary of the Company issued
two classes of receivables-backed,
pay-through notes secured by the Company's entire interest in the pooled
assets. The Company realized
aggregate proceeds of $39,424,940 from the transaction. The Company
established its own allowance for
expected losses under its recourse obligations to Noteholder based on
its historical loss experience and Management's best estimate of future
losses equal to one-half of one percent (0.5%) of the initial equipment
cost. For financial reporting purposes,
the asset securitization was treated as a sale and a gain of $632,459
has been included in fee income in the
accompanying consolidated financial statements.
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 of such
notes, 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. The
Company established its own allowance for expected losses under its
recourse obligations to the Noteholder
based on its historical lossexperience and Management's best estimate
of future losses equal to one-half of one
percent (0.5%) of the initial equipment cost. For financial reporting
purposes, the asset securitization was
treated as a sale and a gain of $2,054,114 has been included in fee
income in the accompanying consolidated
financial statements.<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Securitization - Continued
On January 22, 1996, the Company issued and sold equipment lease-backed
pay-through notes in an aggregate
initial principal amount of $85,273,476. Through this issuance of such
notes, the Company permanently
financed certain assets and liabilities carried on the Company's balance
sheet as of December 31, 1995.
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 1996.The
Company established its own allowance for expected losses under its
recourse obligations to the Noteholder
based on its historical loss experience and management's best estimate of
future losses equal to one-half of one
percent (0.5%) of the initial equipment cost.
(6) Income Taxes
The Company's net income tax provision after consideration of the tax
effect from utilization of net
operating loss carryforwards was zero for the years ended December 31,
1995, 1994 and 1993.
The reported income tax expense differs from the "expected" tax expense
(benefit) (computed by applying
the Federal corporate tax rate to the income before income taxes)
as follows:
1995 1994 1993
Computed "expected" tax
expense (benefit) ($624,320) ($679,321) $ 682,848
State income tax expense
(benefit) net
of Federal income tax expense (89,130) (97,550) 100,121
Other - net 12,111 9,282 4,851
Net operating loss (carryforward
utilized) unused benefit 701,339 767,589 (787,820)
Total expense $ --- $ --- $ ---
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Income Taxes - Continued
Deferred tax assets and liabilities at December 31, 1995 and 1994 include:
1995 1994
Deferred Tax Assets:
Net operating and passive activity
loss carryforwards $ 8,407,937 $ 6,394,913
Investment tax credit carryforward 645,307 797,868
Financial statement reserves not currently
deductible for tax purposes 341,779 185,578
Gross deferred tax assets 9,395,023 7,378,359
Less: Valuation allowance (6,901,753) (6,336,027)
Total deferred tax assets 2,493,270 1,042,332
Deferred Tax Liabilities:
Difference in securitization accounting
for tax purposes and financial
statement purposes 2,209,253 912,364
Other, net 284,017 129,968
Total deferred tax liabilities 2,493,270 1,042,332
Net deferred taxes $ -- $ --
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Income Taxes - Continued
Included in the SFAS No. 109 at January 1, 1995 were valuation allowances
of $6,336,027. During fiscal
1995, the valuation allowance increased by $565,726 primarily from the
additional passive activity loss
generated by Prime Finance Corp. 1993-A and Prime Finance Corp. 1994-A.
The Company has $645,307 of unused investment tax credit carryforwards
that are available for consolidated
tax return purposes which expire at various times between 1996 and 2001.
At December 31, 1995, the
Company had a passive activity loss carryforward of approximately
$16,004,000 and a net operating loss
carryforward of approximately $5,555,000 available for tax return
purposes. The passive activity loss
carryforward does not expire, and may be used before the Company's
net operating loss carryforward to offset
income from future business activities of the Company. The net operating
loss carryforward expires in the
following manner: $2,383,000 in 2001, $1,238,000 in 2002, $1,215,000
in 2003, $102,000 in 2004, $5,000 in
2005, $575,000 in 2006, $15,000 in 2007, $8,000 in 2008, $9,000 in 2009,
and $5,000 in 2010.
(7) Commitments and Contingencies
The Company rents office space and equipment under various operating
lease agreements expiring during the
next eight years. The following is a schedule of future minimum rental
payments required under these leases:
Year Ending
December 31, Amount
1996 $261,558
1997 296,868
1998 304,133
1999 311,399
2000 318,664
2001 325,930
2002 340,461
2003 347,726
Rent expense for the years ended December 31, 1995, 1994, and 1993 was
$282,513, $283,777 and $278,458 respectively.
<PAGE>
PRIME CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(8) Stock Option Plans
During 1987, the Company adopted the 1987 Stock Option Plan.
Shares eligible for grant under the
Company's 1984 Incentive Stock Option Plan and the 1986 Non-Qualified
Stock Option Plan of 200,000 and
15,000, respectively, were rolled into the 1987 Stock Option Plan.
An additional 85,000 shares were reserved
for issuance pursuant to the exercise of options under the 1987 Plan.
At the time of adoption of the plan the total shares available for
issuance upon exercise of the options was 300,000 shares. Shares
of stock which
were granted under the 1984 Incentive Stock Option Plan and the 1986
Non-Qualified Stock Option Plan which
are terminated prior to exercise are not available for grant of new
options under the 1987 plan. In August 1994
an additional 200,000 shares were made eligible for grant under the
Company's 1987 Stock Option Plan. The
changes in the number of shares under the option plans during 1994,
1993 and 1992, are as follows:
1995 1994 1993
Number of shares:
Shares under option at
beginning of year 356,162 274,662 290,162
Options granted 85,000 94,500 33,000
Options expired (18,568) --- ---
Options terminated (86,500) (13,000) (48,500)
Shares under option
at end of year 336,094 356,162 274,662
Options exercisable
at end of year 237,428 214,831 181,995
Option price range $0.125 - $12.00 $0.125 - $12.00 $0.125 - $12.00
(9) Employee Benefit Plan
During 1985, the Company established a defined contribution benefit
plan under Internal Revenue Code (the
"Code") section 401(a) with a cash deferred benefit arrangement under
section 401(k) of the Code. The plan
covers all employees. Contributions to the plan are based on
percentages of employee contributions plus
discretionary contributions determined annually by the Board of
Directors. Contributions of approximately
$39,000 and $58,000 were made in 1994 and 1993, respectively, for
participants in the plan. There was no
contribution made in 1995.
<PAGE>
EXHIBIT INDEX
PRIME CAPITAL CORPORATION
Copies of the following documents are filed herewith as exhibits:
Exhibit No. Description Sequential Page No.
3.1 Certificate of Incorporation *
3.2 By-Laws -
10.1 Sublease dated October 8, 1985
between the Dow Chemical
Company and Registrant *
10.2 1984 Incentive Stock Option
Plan of Registrant *
10.3 1986 Non-Qualified Stock Option
Plan of Registrant *
10.13 Master Lease Agreements of Registrant *
10.13(a) Revised Master Lease Agreements of
Registrant ****
10.15 Stock Restriction Agreement dated
July 2, 1985 between
Registrant and Marvin T. Keeling *
10.23 Form of Equipment Bill of Sale and
Assignment contracts used in
equipment sale-lease assignment
transactions between
Registrant and each of James A.
Friedman, Marvin T. Keeling,
Robert Youngquist, Thomas W. Heimsoth
and Allen M. Olinger, III *
10.48 Bill of Sale of Lease to James Friedman *****
21 Subsidiaries of Registrant 35
23 Consent of KPMG PEAT MARWICK LLP 36
* Incorporated by reference to the Company's Registration Statement on
Form S-1, effective May 29, 1986, in which each Exhibit had the same
number as herein.
Exhibit 3.2 is incorporated by reference to the Company's Proxy
Statement, effective April 29, 1987.
**** Incorporated by reference to the Company's Annual Report on Form 10-K
as filed on May 10, 1991.
***** Incorporated by reference to the Company's Annual Report on Form 10-K.
For the years ended December 31, 1991
as filed on August 28, 1992 and amended on Form 8 filed on October 20, 1992.
Exhibits 21 and 23 have been included herein.<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
Date: April 8, 1996 /S/ James A. Friedman
James A. Friedman
Chairman and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on
this 6th day of April, 1996.
Signature Title
/s/ James A. Friedman Chairman, President and Director
James A. Friedman (Principal Executive Officer)
/s/ Robert C. Benson Chief Financial Officer
Robert C. Benson (Principal Financial Officer)
Directors
/s/ James A. Friedman /s/ William D. Smithburg
James A. Friedman William D. Smithburg
/s/ Marvin T. Keeling /s/ Robert R. Youngquist
Marvin T. Keeling Robert R. Youngquist
/s/ Leander W. Jennings
Leander W. Jennings
<PAGE>
EXHIBIT 21
Subsidiaries of Registrant
Name of Subsidiary Jurisdiction of Incorporation
Prime Leasing, Inc.
d/b/a's: Americom Financial, Inc.
ITC Leasing Co. Illinois
Prime Equities, Ltd. Illinois
Americom Resources, Inc.
(formerly Interstate Telecommunications
Corporation) Illinois
Prime Finance Corp. 1993-A Illinois
Prime Finance Corp. 1994-A Illinois
Prime Healthcare, Inc. Illinois
Capital Alliance Corporation Illinois
f/k/a Financial Alliance Corporation
<PAGE>
EXHIBIT 23
PRIME CAPITAL CORPORATION
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors and Stockholders
Prime Capital Corporation:
We consent to incorporation by reference in the Registration Statement No.
33-8386 on Form S-8 of Prime Capital
Corporation of our report dated March 6, 1996 relating to the consolidated
balance sheets of Prime Capital Corporation
andsubsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of operations, stockholders'
equity and cash flows for each of the years in the three-year period
ended December 31, 1995, which report appears
in this December 31, 1995 annual report on Form 10-KSB of Prime
Capital Corporation.
KPMG PEAT MARWICK LLP
Chicago, Illinois
April 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,001,949
<SECURITIES> 0
<RECEIVABLES> 2,611,752
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66,236,835
<PP&E> 1,348,126
<DEPRECIATION> 1,062,527
<TOTAL-ASSETS> 69,954,426
<CURRENT-LIABILITIES> 67,167,518
<BONDS> 0
0
0
<COMMON> 218,718
<OTHER-SE> 2,568,190
<TOTAL-LIABILITY-AND-EQUITY> 69,954,426
<SALES> 3,874,044
<TOTAL-REVENUES> 7,038,063
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,419,401
<LOSS-PROVISION> 418,000
<INTEREST-EXPENSE> 1,200,662
<INCOME-PRETAX> (1,836,233)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,836,233)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,836,233)
<EPS-PRIMARY> (0.43)
<EPS-DILUTED> (0.40)
</TABLE>
