TABLE OF CONTENTS
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Accountants' Review Report F-1
Statements of Financial Position of Freshstart
Venture Capital Corp. as of November 30, 1995 and
1994 and May 31, 1995 and 1994 F-3
Statements of Operations for the Six Months Ended
November 30, 1995 and 1994 and the Years Ended
May 31, 1995 and 1994 F-5
Statements of Stockholders' Equity for the
Six Months Ended November 30, 1995 and 1994 and the
Years Ended May 31, 1995 and 1994 F-6
Statements of Cash Flows for the Six Months Ended
November 30, 1995 and 1994 and the Years Ended
May 31, 1995 and 1994 F-7
Notes to the Financial Statements F-8
Supplemental Schedules F-15
Selected Per Share Data and Ratios F-16
Board of Directors
Freshstart Venture Capital Corp.
Accountants' Review Report
We have reviewed the accompanying Statements of Financial Position
of Freshstart Venture Capital Corp. as of November 30, 1995 and 1994,
including the schedule of loans receivable as of November 30, 1995, and
the related statements of operations, stockholders' equity and cash flows
for the six months periods then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial statements consists principally of obtaining an
understanding of the system for the preparation of interim financial
data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an examination
in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
As discussed more fully in Note 1 to the financial statements,
securities amounting to $8,553,304 and $8,153,884 as of November 30, 1995
and 1994 respepctively (266% and 255% of net assets, respectively) have
been valued at fair value as determined by the Board of Directors.
We have reviewed the procedures used by the Board of Directors in
arriving at its estimate of fair value of such securities and have
inspected underlying documentation, and, in the circumstances, we
believe the procedures are reasonable and the documentation appropriate.
However, because of the inherent uncertainty of valuation, those
estimated fair values may differ significantly from the values that
would have been used had a ready market for the securities existed, and
the differences could be material.
Our review was made for the purpose of expressing limited assurance
that there are no material modifications that should be made to the
financial statements in order for them to be in conformity with generally
accepted accounting principles. The information included in the
accompanying supplementary schedules is presented only for supplementary
analytical purposes. Such information has been subjected to the
inquiry and analytical procedures applied in the review of the basic
financial statements and we are not aware of any material modifications
that should be made thereto.
The financial statements presented for the years ended May 31, 1995 and
1994 were audited by us and we expressed unqualified opinions on
them in our audit report dated August 25, 1995, which is included herein,
but we have not performed any auditing procedures since that date.
Michael C. Finkelstein
Certified Public Accountant
New York, New York
December 29, 1995
FRESHSTART VENTURE CAPITAL CORP.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1995 AND 1994
NOTE 1 ORGANIZATION
Freshstart Venture Capital Corp., a New York corporation
(the "Company"), was formed on March 4,1982 for the purpose
of operating as a specialized small business investment
company ("SSBIC"),licensed under the Small Business Investment
Act of 1958 and regulated and financed in part by the U.S.
Small Business Administration ("SBA"). The Company has also
registered as an investment company under the Investment Company
Act of 1940. The Company's business is to provide financing
to persons who qualify under SBA regulations as socially or
economically disadvantaged and to entities which are at least
fifty (50%) percent owned by such individuals.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
applied by the Company in the preparation of its financial
statements. The Company maintains its accounts and prepares its
financial statements on the accrual basis of accounting in
conformity with generally accepted accounting principles for
investment companies.
Valuation of Loans and Investments
The Board of Directors has valued the investment portfolio based
upon the cost of such investments, less a provision for loan
losses. However, because of the inherent uncertainty of
the valuation, the estimated values might otherwise be
significantly higher or lower than values that would exist in
a ready market for such loans, which market has not in the past
and does not now exist. The provision for loan losses represents
a good faith determination by the Board of Directors maintained
at a level that, in its judgment, is adequate to absorb losses.
The balance in the reserve account is adjusted periodically by
the Board of Directors on the basis of the fair value of the
collateral held and past loss experience. Approximately seventy
four (74%) percent of the Company's loan portfolio consists of
loans made for the financing of taxi cab medallions and related
assets. The remaining portion of the loans are made to various
small commercial enterprises. Substantially all loans are
collateralized by either NYC taxi medallions or real estate and
the personal guarantees of the individual owners.
Depreciation and Amortization
Depreciation and amortization of furniture, fixtures and
leasehold improvements is computed on the straight line method
at rates adequate to allocate the costs of applicable assets
over their expected useful lives.
Recognition of Interest Income
It is the Company's policy to record interest on loans and debt
securities only to the extent that management and the Board of
Directors anticipate such amounts may be collected. Interest on
doubtful accounts and accounts which are 180 days past due is
not recorded until actually received.
Income Taxes
The Company has elected to be taxed as a regulated investment
company under the Internal Revenue Code. A regulated investment
company can generally avoid taxation at the corporate level to
the extent that ninety (90%) percent of its income is distributed
to its stockholders. Therefore, no provision for federal income
taxes has been made. The financial statements include provisions
for New York State and local minimum taxes.
F-8
FRESHSTART VENTURE CAPITAL CORP.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1995 AND 1994
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Earnings Per Share
Earnings per share are based on a weighted average number
of shares outstanding during the period, less accrued dividends
on cumulative preferred stock.
Assets Acquired in Liquidation of Portfolio Securities
Assets acquired in liquidation of portfolio securities are
carried at estimated net realizable value. Expenses incurred
at the time of foreclosure are charged against the assets and
adjusted to the estimated net realizable value. Subsequent
reductions in estimated net realizable value
are recorded as losses.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" ("SFAS 114")
was issued in May 1993 and is effective for fiscal years
beginning after December 15, 1994. SFAS 114 generally
requires all creditors to account for impaired loans,
except those loans that are accounted for at fair value or
at the lower of cost or fair value, at the present value
of expected future cash flows discounted at the loans's
effective interest rate. As is expedient, creditors may
account for impaired loans at the fair value of the
collateral or at the observable market price of the loan
if one exists. Due to the nature of the Company's loan
portfolio, SFAS 114 is not expected to have a material
effect on the Company's financial condition or results
of operations.
Other
Certain information from the prior years has been
reclassified to conform its presentation to the
current financial statements.
<TABLE>
NOTE 3 LOANS RECEIVABLE
The Company's loan portfolio includes participations
with other lenders as presented in the following schedule.
The following is a breakdown of the outstanding loans receivable:
<CAPTION>
<S> <C> <C> <C>
<C>
May 31,
November 30,
1994 1995 1994
1995
Outstanding Loans $8,282,961 $8,649,412
$8,658,279 $10,403,402
Loan Participations (375,804) (336,370)
323,837 1,669,540
_________ _________
_________ __________
Net Loans Outstanding $7,907,157 $8,313,042
$8,334,442 $ 8,733,862
========= =========
========= =========
</TABLE>
F-9
FRESHSTART VENTURE CAPITAL CORP.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1995 AND 1994
NOTE 3 LOANS RECEIVABLE
(continued)
Loans on non-accrual status as of May 31, 1995, 1994 and
November 30, 1995 and 1994 were approximately $1,021,419
and $918,706, respectively. Additionally, the total
amount of interest income not accrued was $398,343 and
$417,018 during the years ended May 31, 1995 and 1994, and
$478,847 and $346,982 during the six month periods ended
November 30, 1995 and 1994, respectively.
NOTE 4 ASSETS ACQUIRED IN LIQUIDATION OF PORTFOLIO SECURITIES
The Company foreclosed on two loans during the fiscal years
ended May 31, 1994 and 1993. Both loans are collateralized
by real estate. The Company's cost of the loans plus costs
to obtain title to such properties is included in the
carrying value of the assets acquired in liquidation.
The Board of Directors has determined that the fair market
value of the assets acquired in liquidation is equal to
the cost, and therefore a provision for loss is not required.
NOTE 5 LOANS PAYABLE - LINE OF CREDIT
Effective October 23, 1992, the Company established a $1,500,000
line of credit with Extebank. On January 15, 1995, the Company
entered into a new agreement with Extebank providing for a
$1,100,000 discretionary line of credit without any officer
guarantees, expiring December 15, 1995. Upon maturity, the
Company anticipates extending the line of credit for another
year with the bank. All advances bear interest at .5% above
the prime rate. Pursuant to the terms of the line of credit,
the Company is required to comply with certain terms, covenants
and conditions. The Company pledged its loans receivable as
collateral for the above line of credit and is required to
maintain a minimum of $100,000 non-interest bearing collected
balance with Extebank during the term of the line of credit.
The balance outstanding as of November 30, 1995, 1994 and
May 31, 1995 was $5,000.
F-10
FRESHSTART VENTURE CAPITAL CORP.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1995 AND 1994
<TABLE>
NOTE 6 LONG TERM DEBT
The long term debt to the SBA consisted of the following subordinated
debentures for all periods
presented with interest payable semi-annually:
<CAPTION>
<C> <C> <C> <C> <C> <C>
Interest Rate
Period
Maturity Date First Second Face
Amount
June 1, 2005 6.690% 6.690% $ 520,000
Dec. 5, 1995 7.000% 10.000% 500,000
May 14, 1996 4.375% 7.375% 120,000
May 14, 1996 4.375% 7.375% 120,000
Feb. 6, 1997 4.125% 7.125% 75,000
Feb. 6, 1997 4.125% 7.125% 75,000
March 17, 1998 5.625% 8.625% 75,000
March 17, 1998 5.625% 8.625% 75,000
Sept. 22, 1999 5.000% 8.000% 750,000
June 9, 1999 6.000% 9.000% 750,000
Dec. 16, 2002 4.510% 7.510% 1,300,000
_________
$4,360,000
=========
</TABLE>
Effective June 28, 1995, the Company paid off $500,000
subordinated debenture due June 20, 1995 through the sale of
$520,000 unsubsidized subordinated debenture, due June 1,
2005 with interest at 6.69 percent.
Under the terms of the subordinated debentures, the
Company may not repurchase or retire any of its capital
stock or make any distributions to its stockholders other
than dividends out of retained earnings without the
prior written approval of the SBA.
NOTE 7 PREFERRED STOCK
As of May 31, 1992, the Company was authorized to issue
4,000,000 shares of $1 par value, 3% cumulative preferred
stock. Dividends are not required to be paid to the SBA on
an annual or other periodic basis, so long as cumulative
dividends are paid to the SBA before any other
distributions are made to investors. Effective November 21,
1989, Congress passed legislation which required all
preferred stock sold subsequent to the effective date to
pay a four percent cumulative dividend and to provide for a
mandatory fifteen year redemption. Subsequently, the
Company amended its certificate of incorporation creating a
Class A Preferred Stock, $1 par value, which consisted of the
1,520,000 outstanding shares of preferred stock and to change the
existing 2,480,000 authorized but unissued shares of preferred
stock into a new Class B Preferred Stock, $1 par value, which
will carry a four percent cumulative dividend rate and a mandatory
fifteen year redemption.
F-11
FRESHSTART VENTURE CAPITAL CORP.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1995 AND 1994
NOTE 7 PREFERRED STOCK
(continued)
All preferred shares are restricted solely for issuance to the
SBA. Effective November 1994, the Company amended its
certificate of incorporation authorizing an additional
1,000,000 shares of four percent preferred stock and
reclassifying all 1,520,000 authorized and unissued shares of 3%
preferred stock as 4% preferred stock. The effect of
this amendment authorized 5,000,000 shares of 4% cumulative
preferred stock. Effective October 13, 1994 and July 11, 1992,
the Company sold 760,000 and 650,000 shares, respectively,
of its $1 par value, 4% cumulative, 15 year redeemable
preferred stock to the SBA for $760,000 and $650,000, respectively.
NOTE 8 RESTRICTED CAPITAL - UNREALIZED GAIN ON REDEMPTION
Repurchase of 3% Preferred Stock
The Company and the SBA entered into a repurchase agreement
dated May 10, 1993. Pursuant to the agreement, the Company
repurchased all 1,520,000 shares of its $1 par value, 3% cumulative
preferred stock from the SBA for a purchase price of
$.36225679 per share, or an aggregate of $550,630. The
repurchase price was at a substantial discount to the original
sale price of the 3% preferred stock which was sold to the SBA
at par value or $1.00 per share.
As a condition precedent to the repurchase, the Company granted
the SBA a liquidating interest in a newly created restricted
capital surplus account. The surplus account is equal to the amount
of the repurchase discount less expenses associated with the
repurchase. The initial value of the liquidating interest was
equal to $969,370, the amount of the repurchase discount on the
date of repurchase, less $14,373 of expenses incurred in
connection with the repurchase, and is being amortized over a
sixty (60) month period on a straight-line basis. Should the
Company be in default under the repurchase agreement at any time,
the liquidating interest will become fixed at the level
immediately preceding the event of default and will not decline
further until such time as the default is cured or waived.
The liquidating interest will expire on the later of (i)
sixty (60) months from the date of the repurchase agreement,
or (ii) if any event of default has occurred and such default
has been cured or waived, such later date on which the liquidating
interest is fully amortized. Should the Company voluntarily or
involuntarily liquidate prior to the amortization of the
liquidating interest, any assets which are available, after
the payment of all debts of the Company, shall be distributed
first to the SBA until the amount of the then remaining
liquidating interest has been distributed to the SBA. Such
payment, if any, would be prior in right to any payments made
to the Company's shareholders.
NOTE 9 DIVIDENDS
Dividends paid to the SBA for each of the fiscal years ended
May 31, 1995 and 1994 was $45,092 and $26,000, respectively.
Total dividends paid to common stockholders for the fiscal years
ended May 31, 1995 and 1994 were $296,108 and $263,206,
respectively. The Company is contingently liable to the SBA
for $14,100 in preferred dividends due for the three months ended
November 30, 1995. Effective December 31, 1995, and for the
seven month period then ended, the Board of Directors declared
a three percent dividend to holders of common stock totaling
$98,702. This dividend was paid January 1996.
F-12
FRESHSTART VENTURE CAPITAL CORP.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1995 AND 1994
NOTE 10 MONEY PURCHASE PLAN
Effective for the fiscal year ending May 31, 1989 the Company
initiated a defined contribution pension plan. The eligibility
requirements for participation in the plan are a minimum age of 21
years old and 24 months of continuous employment with the Company.
All employees and officers were covered under the plan for
the fiscal year ended May 31, 1995. Contributions are currently
limited to ten percent of each participant's compensation.
Total contributions made for the fiscal years ended May 31, 1995,
1994 and 1993 were $17,942, $18,073, $18,311, respectively.
Total contributions provided for the six months ended
November 30, 1995 and 1994 were $8,921 and $8,591, respectively.
All contributions to the plan have been funded on a current basis.
NOTE 11 MANAGEMENT FEES
The SBA approved the Company's total compensation of $225,000.
Compensation is inclusive of officers' and staff salaries and
pension contributions.
NOTE 12 STOCKHOLDERS' EQUITY - PRIVATE PLACEMENT
Effective April 21, 1992, pursuant to a private placement,
the Company sold 56,304 shares of common stock at a price of
$12 per share to accredited investors. Total capital raised was
$675,648 less private placement costs of $16,274, including
$9,660 paid during the six months ended November 30, 1992.
Substantially all of the proceeds were used to repurchase the
1,520,000 shares of its $1 par value, 3% Preferred Stock held
by the SBA and to make additional investments. The net
proceeds received also enabled the Company to obtain additional
leverage from the SBA in the form of preferred stock and debentures.
Pursuant to SBA regulations, all SSBIC's issuing debentures
subsequent to April 25, 1994 were required to amend their
certificates of incorporation to indicate that they have consented,
in advance, to the SBA's right to require the removal of
officers or directors and to the appointment of the SBA or its
designee to take such action in the event of the occurrence of
certain events of default. Effective November 1994, the Company
amended its certificate of incorporation in accordance with
the relevant provisions of the SBA regulations.
The Stockholders' Equity section of the financial statements
is presented after giving effect to an amendment to the
certificate of incorporation occurring in November 1994.
NOTE 13 RELATED PARTY TRANSACTION
The Company currently leases office space from a real estate
partnership, whose partners consist of certain officers and
directors of the Company, for $1,500 per month plus certain
extraordinary operating expenses. The lease expires in
November 1997 with a minimum annual rental of $18,000.
Total rental expense under this lease was $18,000, $26,700
and $19,500 for the years ended May 31, 1995, 1994 and 1993,
respectively.
Certain officers and directors of the Company are also
shareholders of the Company. Officers'salaries are set by
the Board of Directors and are also subject to maximum
compensation set by the SBA. For each of the fiscal years
ended May 31, 1995, 1994 and 1993, $159,661 in officers'
salaries, including pension contributions, were paid.
F-13
FRESHSTART VENTURE CAPITAL CORP.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1995 AND 1994
NOTE 14 SIGNIFICANT CONCENTRATION OF CREDIT RISK
Approximately seventy four (74%) percent of the Company's
loan portfolio consists of loans made for the financing and
purchase of New York City taxicab medallions and related assets.
NOTE 15 FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISKS
The Company maintained approximately $96,686 in one bank in
excess of amounts that would be insured by the Federal
Depository Insurance Corporation.
NOTE 16 SUBSEQUENT EVENTS
The Company filed a registration statement with the Securities
and Exchange Commission to sell up to 1,700,000 shares of
common stock, at a public offering price of $7.15 per common
share, for an aggregate offering price of $12,155,000.
The Company intends to file an amendment to its certificate
of incorporation which will increase
the number of authorized shares to 13,000,000 shares of capital
stock consisting of 10,000,000 shares of $1 par value, 4%
cumulative, 15 year redeemable preferred stock and 3,000,000
shares of $.01 par value, common shares. The financial statements
are presented after giving effect to these changes.
The amended certificate of incorporation will also provide for a
2 for 1 stock split with respect to the Company's shares of
common stock, $.01 par value per share, for two shares of common
stock, $.01 par value per share. The effect of the amendment
will be to increase the 274,172 issued and outstanding shares of
common stock to 548,344 shares.
Note 17 COMMITMENTS AND CONTINGENCIES
Legal Proceedings - The Company was named as one of a number of
defendants in a lawsuit seeking $30 million in compensatory
damages and $10 million in punitive damages. The suit alleges
that the defendants unlawfully entered the plaintiffs' business
premises to repossess $80,000 of commercial washing machines
collateralizing loans made to the plaintiffs. The plaintiffs
further allege that the defendants wrongfully removed $16,250
in furniture and various equipment from the premises. The other
defendants named with the Company filed several motions to dismiss
the suit, the most recent of which motions was granted in April 1995
.As a result of the dismissal of the suit as to those defendants,
the Company filed a motion to dismiss the action as to it, which was
granted by the court on July 14, 1995. The order dismissing the
case as to the Company was signed by the court on August 24, 1995.
If the plaintiffs fail to file a Notice of Appeal within
90 days of the Order of Dismissal than the order will terminate
the legal proceedings against the Company. Based upon the opinion
of the Company's counsel if an appeal is filed management
presently believes that the outcome of such proceeding will not
have a material adverse effect on the Company. Accordingly,
no provision has been made in the Company's financial statements
with respect to the assertion against the Company in this claim.
Minimum future lease obligations on the Company's long term
non-cancellable operating lease will total $36,000 over the
remaining twenty-four (24) months of the lease term ending
November, 1997.
F-14
<TABLE>
FRESHSTART VENTURE CAPITAL CORP.
SUPPLEMENTARY INFORMATION
SELECTED PER SHARE DATA AND RATIOS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995 AND
1994
AND THE FIVE YEARS ENDED MAY 31, 1995, 1994, 1993,
1992 AND 1991
<CAPTION>
<S> <C> <C> <C> <C> <C>
<C> <C>
For the Six Months Ended
For the Five Years Ended May 31,
November
1991 1992 1993 1994
1995 1994 1995
Per Share Data
Investment Income $ 3.17 $ 2.55 $ 2.01 $ 1.90 $
1.83 $ .93 $.91
Investment Expenses (2.14) (1.82) (1.20) (1.23)
(1.21) .61 .59
_____ _____ _____ _____
_____ ______
Net Investment Income 1.03 .73 .81 .67
.62 .32 .32
Net Realized and Unrealized Gains
and Losses on Securities (.12) (.29) (.15) (.14)
- - (.02) -
Private Placement Costs - - (.02) -
- - - -
Gain on Preferred Stock Buy Back - - .61 -
- - - -
Dividends - Common Stock (.78) (.35) (.60) (.48)
(.54) (.24) (.18)
Dividends - Preferred Stock (.12) (.05) (.05) (.05)
(.08) (.02) (.05)
Sale of Common Stock - 1.24 - -
- - - -
_____ _____ _____ _____
_____ _____
_____
Net Increase/Decrease
in Net Asset Value .01 1.28 .60
.04 .09
Net Asset Value - Beginning of Period 3.89 3.90 5.18 5.78
5.78 5.78 5 .78
_____ _____ _____ _____
_____ _____ _____
Net Asset Value - End of Year $ 3.90 $ 5.18(1) $ 5.78(1) $ 5.78(1) $
5.78(1) $ 5.82(1) $ 5.87(1)
===== ===== ===== =====
===== ===== =====
Net Asset Value - End of Year
Excluding Retained Earnings (2) $ 3.91 $ 5.75(1) $ 5.75(1) $ 5.75(1) $
5.75(1) $ 5.75(1) $5.75(1)
===== ===== ===== =====
===== ======= ===
Ratios
Ratio of Expenses to
Average Net Assets 54.9% 45.8% 24.3% 21.3%
20.9% 10.5% 10.2%
===== ===== ===== =====
===== ===== =====
Ratio of Net Income to Average
Net Assets 11.7% 5.6% 10.4% 9.3%
10.6% 5.6% 5.6%
===== ===== ===== =====
===== ===== =====
Weighted Average of Common Shares
Outstanding 394,000 428,866 548,344 548,344
548,344 548,344 548,344
(1) The net asset value includes the unamortized portion of the realized gain
from the repurchase of the
three (3%) percent preferred stock and the undistributed retained earnings
at the end of the period.
The unamortized balance remaining in the restricted capital account as of
November 30, 1995 is
$477,499.
(2) Excluded undistributed retained earnings at the end of the period.
</TABLE>
F-16
<TABLE>
<CAPTION>
FRESHSTART VENTURE CAPIATL CORP.
SUPPLEMENTAL SCHEDULES
NOVEMBER 30, 1995
<S> <C> <C> <C> <S>
<C>
SCHEDULE I - LOANS RECEIVABLE
Balance
Type of loans Number of Interest Rate Maturity Date
Outstanding
______________ Loans
November 30, 1995
--------- ------------- --------------
- ---------------------
NYC Taxi Medallions 145 10.00%-15.00% 1-7 years
$6,464,901
Services 1 14.50%-15.00% 1-7 years
95,000
Auto Repair 9 10.00%-15.00% 1-4 years
701,113
Auto Dealership 1 12.00% 1 year
72,434
Renovation and Construction 1 10.50% 5 years
134,852
Retail Establishment 4 11.25%-15.50% 1-4 year
316,757
Restaurant 3 9.00%-15.00% 1 year
250,205
Gasoline Servive Station 3 9.375%-10.00% 1 year
307,317
Manufacturing 1 15.00% 1 year
151,572
Laundromat and Dry Cleaners 3 12.00%-15.00% 1-4 years
100,141
Medical Offices 2 11.63%-15.00% 1-3 years
119,005
Video Rental 1 14.00% 6 years
20,565
---
---------
Total 174
$8,733,862
===
==========
Substantially all of the above loans are collateralized by either NYC Taxi
Medallions
or real estate holdings.
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
SCHEDULE VII- SHORT TERM BORROWINGS
Short term borrowing activities for the periods presented were as follows:
Weighted Maximum Amount Average Amount
Category of Balance End Average Outstanding Outstanding
Borrowing of Period Interest During Period During Period (1)
- ---------- ----------- Rate --------------- -----------------
May 31, 1993 $334,488 7.63% $2,650,000 $ 951,800
May 31, 1994 $ 34,488 7.63% $ 634,489 $ 280,322
May 31, 1995 $ 5,000 9.45% $ 34,489 $ 17,361
Nov 30, 1994 $ 5,000 9.11% $ 34.489 $ 29,574
Nov 30, 1995 $ 5,000 9.31% $ 205,000 $ 25,879
(1) Computed based on weighted average of amount outstanding during the period.
</TABLE>
F-15
<TABLE>
<CAPTION>
FRESHSTART VENTURE CAPITAL CORP.
STATEMENTS OF FINANCIAL POSITION
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
ASSETS
May 31,
November 30,
1994 1994
1994 1995
Loans Receivable - Long-Term Portion (Notes 2 and 3) $7,907,157 $8,313,042
$8,334,442 $8,733,862
Less Unrealized Depreciation On Loans Receivable(Note 3)
(178,159) (180,558)
(180,558) (180,558)
_________ __________
_________ _________
7,728,998 8,132,484
8,153,884 8,553,304
Less: Current Maturities - Loans Receivable 1,183,510 1,140,416
1,250,166 1,282,996
__________ __________
__________ _________
Total Loans Receivable - Net Of Current Maturities 6,545,488 6,992,068
6,903,718 7,270,308
__________ __________
__________ __________
Assets Acquired In Liquidation of Loans Receivable 161,631 13,344
12,631 13,344
---------- ----------
---------- ----------
CURRENT ASSETS
Cash (Note 15) 469,885 745,359
804,280 214,973
Accrued Interest (Notes 2 and 3) 86,512 71,497
71,178 89,913
Current Maturities - Loans Receivable 1,183,510 1,140,416
1,250,166 1,282,996
Prepaid Expenses and Other Assets 44,339 236,088
205,234 273,750
__________ __________
__________ __________
Total Current Assets 1,784,246 2,193,360
2,330,858 1,861,632
__________ __________
__________ ___________
Fixed Assets - Net of Accumulated Depreciation
of $10,852, $11,255 and $14,328, Respectively
(Note 2) 2,906 3,614
4,045 23,599
__________ __________
__________ __________
Total Assets $8,494,271 $9,202,386
$9,251,252 $9,168,883
========== ==========
========== ==========
</TABLE>
See Accompanying Notes to the Financial Statements
F-3
<TABLE>
<CAPTION>
FRESHSTART VENTURE CAPITAL CORP.
STATEMENTS OF FINANCIAL POSITION
LIABILITIES AND STOCKHOLDERS' EQUITY
<C> <C> <S> <C>
<C> <C> <C>
May 31,
November 30,
1994 1995
1994 1995
LONG TERM DEBT:
Debentures Payable to SBA (Note 6) $4,340,000
$4,340,000 $4,340,000 $4,346,000
4% Cumulative, 15 Year Redeemable Preferred Stock 650,000
1,410,000 1,410,000 1,410,000
__________
__________ __________ __________
Total Long Term Debt 4,990,000
5,750,000 5,750,000 5,770,000
__________
__________ __________ __________
CURRENT LIABILITIES
Loans Payable - Line Of Credit (Note 5) 34,488
5,000 5,000 5,000
Accrued Interest 117,666
128,330 128,775 127,631
Other Current Liabilities 36,488
37,512 30,261 31,761
Dividends Payable (Note 9) 144,603
112,802 144,603 14,100
__________
__________ _________ __________
Total Current Liabilities 333,245
283,644 308,639 178,492
__________
__________ _________ __________
Total Liabilities 5,323,245
6,033,644 6,058,639 5,948,492
__________
__________ _________ __________
Commitments and Contingincies (Notes 14, 15, and 17) - -
- -
STOCKHOLDERS' EQUITY
4% Cumulative, 15 year Redeemable Preferred Stock-$1 Par
Value: 5,000,000 Shares Authorized, 650,000 and
1,410,000 Shares Issues and Outstanding, respectively
(See Long Term Debt)(Note 7) - -
- -
3% Cumulative Preferred Stock-$1 Par Value: 1,520,000
Shares Authorized, No Shares issued or Outstanding
(Note 8) - -
- -
Common Stock - $.01 Par Value: 1,000,000 Shares
Authorized, 548,344 Shares Issued and Outstanding
(Note 12) 5,483 5,483
5,483 5,483
Additional Paid In Capital (Note 8) 2,385,601 2,576,601
2,481,101 2,672,102
Retained Earnings 15,944 13,660
37,531 65,307
Restricted Capital - Realized Gain On Redemption
(Note 8) 763,998 572,998
668,498 477,499
_________ _________
_________ __________
Total Stockholders' Equity 3,171,026 3,168,742
3,192,613 3,220,391
_________ _________
__________ __________
Total Liabilities and Stockholders' Equity $8,494,271 $9,202,386
$9,251,252 $9,168,883
========== ==========
========== ==========
Net Assets Per Share $ 5.78 $ 5.78
$ 5.91 $ 5.88
========== ==========
========== ==========
</TABLE>
See Accompanying Notes to the Financial Statements
F-4
<TABLE>
<CAPTION>
FRESHSTART VENTURE CAPITAL CORP.
STATEMENTS OF OPERATIONS
<S> <C> <C>
<C> <C>
Years Ended
Six Months Ended
May 31,
November 30,
1994 1995
1994 1995
REVENUE:
Interest Earned On Outstanding Receivables $1,033,638 $ 996,534
$503,528 $500,412
Interest Income - Idle Funds 9,433 8,750
5,987 3,949
__________ __________
_________ ________
Total Revenue (Note 2) 1,043,071 1,005,284
509,515 504,361
__________ __________
_________ ________
EXPENSES:
Interest 315,213 322,806
156,479 159,411
Professional Fees 62,629 45,415
22,212 23,953
Officers' Salaries (Notes 11 and 13) 145,146 145,146
72,573 72,573
Other Salaries (Note 11) 35,586 35,472
18,074 15,215
Other Operating Expenses 90,958 89,353
48,572 40,282
Pension Expense (Notes 10 and 11) 18,073 17,942
8,921 8,591
Depreciation and Amortization (Note 2) 5,605 5,999
2,871 4,353
__________ ___________
________ ________
Total Expenses 673,210 662,133
329,702 324,378
__________ ___________
________ ________
Net Investment Income 369,861 343,151
179,813 179,983
Unrealized Depreciation in Value of
Investments (Notes 2 and 3) 78,161 2,399
11,880 -
__________ __________
________ _________
291,700 340,752
167,933 179,983
PROVISION FOR TAXES:
Current Income Taxes 985 1,836
1,743 1,433
__________
___________ _________ ________
Net Income $ 290,715 $ 338,916
$166,190 $178,550
==========
=========== ========== =========
Earnings Per Share Of Common Stock (Note 2) $ .48 $ .54
$ .28 $ .28
==========
=========== ========== =========
Dividends Paid Per Share Of Common Stock $ .48 $ .54
$ .24 $ .18
==========
=========== ========== =========
Weighted Average Shares Of Common Stock
Outstanding 548,344 548,344
548,344 548,344
==========
=========== ========== =========
</TABLE>
See Accompanying Notes to the Financial Statements
F-5
<TABLE>
<CAPTION>
FRESHSTART VENTURE CAPITAL CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
<S> <C> <C>
<C> <C>
Years Ended
Six Months Ended
May 31,
November 30,
1994 1995
1994 1995
3% Cumulative Preferred Stock - $1 Par
Value: 1,520,000 Shares Authorized,
None issued or Outstanding $ - $ -
$ - $ -
__________ _________
__________ ___________
4% Cumulative, 15 Year Redeemable Preferred
Stock - $1 Par Value: 5,000,000 Authorized,
650000 and 1,410,000 Shares Issued
and Outstanding (See Long Term Debt) (Note 7) - -
- -
__________ _________
___________ ____________
Common Stock - $.01 Par Value: 1,000,000
Shares Authorized, 548,344 Shares
Issued and Outstanding 5,483 5,483
5,483 5,483
_________ _________
___________ ____________
Additional Paid In Capital-Beginning Of Period 2,194,602 2,385,601
2,385,601 2,576,601
Amortization Of Restricted Capital (Note 8) 190,999 191,000
95,500 95,501
_________ _________
___________ __________
Additional Paid In Capital-End Of Period 2,385,601 2,576,601
2,481,101 2,672,102
__________ _________
___________ __________
Retained Earnings
Balance, Beginning Of Period 14,435 15,944
15,944 13,660
Net Income 290,715 338,916
166,190 178,550
Dividends Paid and Accrued ( 289,206) ( 341,200)
( 144,603) ( 126,903)
__________ _________
__________ _________
Balance, End Of Period 15,944 13,660
37,531 65,307
__________ _________
__________ _________
Restricted Capital
Gain On Redemption of 3% Preferred Stock 954,997 763,998
763,998 572,998
Amortization Of Gain (190,999) (191,000)
( 95,500) ( 95,499)
__________ _________
__________ __________
Balance, End Of Period (Note 8) 763,998 572,998
668,498 477,499
__________ _________
___________ __________
Total Stockholders' Equity $3,171,026 $3,168,742
$3,192,613 $3,220,391
========== ==========
========== ==========
</TABLE>
See Accompanying Notes to the Financial Statements
F-6
<TABLE>
<CAPTION>
FRESHSTART VENTURE CAPITAL CORP.
STATEMENTS OF CASH FLOWS
<S> <C> <C>
<C> <C>
Years Ended
Six Months Ended
May 31,
November 30,
1994 1995
1994 1995
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net Income $290,715 $338,916
$166,190 $178,550
Depreciation and Amortization 5,605 5,999
2,870 4,353
Provision For Losses On Loans Receivable 78,161 2,399
11,880 -
Decrease (Increase) In Accrued Interest 31,540 15,015
15,334 ( 18,416)
Decrease (Increase) In Other Assets ( 8,346) (195,878)
(162,959) ( 40,409)
Increase (Decrease) In Accrued Liabilities (201,386) ( 20,113)
149,485 ( 6,450)
Dividends Paid and Accrued (289,206) (341,200)
(289,206) (225,604)
_________ _________
_________ _________
Net Cash Provided (Used) By Operating Activities ( 92,917) (194,862)
(106,406) (107,976)
_________ _________
_________ _________
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Increase In Loans Receivable (3,179,900) (3,626,250)
(2,178,000) (2,244,750)
Repayment Of LoansReceivable 3,497,946 3,259,799
1,776,116 490,760
Increase In Loan Participations 66,000 125,000
50,000 1,342,500
Repayment Of Loan Participations ( 180,689) ( 164,434) (
101,967) ( 9,330)
Increase In Fixed Assets ( 1,475) ( 2,578) (
1,945) ( 21,592)
Decrease (Increase) In Assets Acquired In
Liquidation ( 167,510) 148,287
166,085 -
__________ __________
_________ ___________
Net Cash Provided (Used) By Investing Activities 34,372 ( 260,176)
(289,711) ( 442,412)
__________ __________
__________ ___________
CASH FLOWS (USED) PROVIDED BY FINANCING ACTIVITIES
Decrease In Line Of Credit ( 300,000) ( 29,488)
(29,488) -
(Decrease) In Restricted Capital ( 190,999) ( 191,000)
(95,500) ( 95,499)
Increase In Debentures Payable TO SBA - -
- 20,000
Sale Of 4% Preferred Stock - 760,000
760,000 -
Increase In Additional Paid In Capital 190,999 191,000
95,500 95,501
_________ __________
________ ___________
Net Cash (Used) Provided by Financing Activities ( 300,000) 730,512
730,512 20,002
_________ __________
_______ ___________
Net Increase (Decrease) In Cash ( 358,545) 275,474
334,395 ( 530,386)
Cash Balance, Beginning Of Period 828,430 469,885
469,885 745,359
_________ __________
_________ __________
Cash Balance, End Of Period $ 469,885 $ 745,359
$804,280 $ 214,973
========= ==========
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid Dring The Period For:
Interest $274,258 $ 312,142
$145,370 $ 160,555
======== =========
======== =========
Taxes $ 935 $ 1,836
$ 1,743 $ 1,433
======== =========
======== =========
</TABLE>
See Accompanying Notes to the Financial Statements
F-7
