[PRELIMINARY] PROXY STATEMENT
NATIONAL CAPITAL
MANAGEMENT CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
June 28, 1995
Notice is hereby given that the Annual Meeting of
Stockholders of National Capital Management Corporation will be
held at the Bristol Suites Hotel, 7800 Alpha Road, Dallas, TX
75240, on June 28, 1995, at 9:30 a.m., local time, to vote to:
1. Elect five Directors for the ensuing year.
2. Adopt an amendment to the Certificate of Incorporation
to effect a 3-for-1 reverse stock split.
3. Transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
May 19, 1995, as the record date to determine the stockholders
entitled to notice of and to vote at the annual meeting and any
adjournments thereof.
By Order of the Board of Directors
JAMES PINTO
..................................
Chairman of the Board
San Francisco, California
June 1, 1995
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL
MEETING, PLEASE DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED FORM
OF PROXY IN THE ENCLOSED STAMPED AND ADDRESSED ENVELOPE. THE
ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF
THE COMPANY.
<PAGE>
[PRELIMINARY] PROXY STATEMENT
NATIONAL CAPITAL
MANAGEMENT CORPORATION
50 California Street
San Francisco, California 94111
_____________________________
PROXY STATEMENT
_____________________________
The enclosed forms of Proxy and the Proxy Statement have
been mailed to stockholders on or about June 1, 1995, in
connection with the solicitation by the Board of Directors of
National Capital Management Corporation ("NCMC" or the "Company")
of proxies for use at its Annual Meeting of Stockholders to be
held on June 28, 1995, or at any adjournments thereof (the
"Annual Meeting:").
A copy of the Company's 1994 Annual Report to Stockholders,
including financial statements (the "Annual Report"), is being
mailed herewith to each stockholder entitled to vote at the
Annual Meeting.
As of June 1, 1995, the Company had outstanding 5,009,257
shares of common stock, par value $.01 per share (the "Common
Stock"). Holders of shares of Common Stock of record at the
close of business on May 19, 1995 are entitled to vote at the
Annual Meeting. Holders of shares of Common stock are entitled
to one vote per share on each matter to be voted on at the Annual
Meeting. A majority of the outstanding shares will constitute a
quorum at the meeting. The election of directors requires a
plurality of the votes cast and votes may be cast in favor of, or
withheld from, each nominee. Votes that are withheld will be
considered for purposes of determining quorum, but will be
excluded entirely from the vote and will have no effect. The
approval of the proposed amendment to the Certificate of
Incorporation will require the affirmative vote of the majority
of the shares represented in person or by proxy and entitled to
vote on the proposed amendment. Abstentions and broker non-votes
are counted for purposes of determining the presence or absence
of a quorum for the transaction of business. Abstentions are
counted in tabulations of the votes cast on proposals presented
to stockholders (and thus will have the effect of the votes cast
against the proposal), whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
It is the intention of the persons named as proxies to vote
shares of Common Stock represented by duly executed proxies (i)
for the election of the nominees for director selected by the
Board of Directors unless authority to so vote has been withheld
or a contrary specification made, and (ii) for the amendment to
the Certificate of Incorporation unless authority to so vote has
been withheld or a contrary specification made. If any other
business is properly brought before the Annual Meeting, the Proxy
will be voted in accordance with the discretion of the persons
names as proxies. Any such proxy may be revoked by the
stockholder at any time prior to the voting of the proxy by a
written revocation received by the Secretary of the Company, by
properly executing and delivering a later-dated proxy, or by
attending the Annual Meeting and voting in person.
Election of Directors
Five directors are to be elected to hold office until the
next Annual Meeting or until their successors shall have been
elected and qualified. The By-laws of the Company provide that
the Board of Directors shall consist of not less than one nor
more than nine directors and that the number of directors at any
time shall be the number of directors fixed by resolution of the
Board of Directors. The Board of Directors has fixed the number
of directors at five. Each of the nominees is to be elected by
the holders of Common Stock. Each of the nominees has agreed to
serve as a director, if elected. If, at the time of the Annual
Meeting, a nominee is unwilling or unable to serve (which is not
currently anticipated), the Board may fix the number of directors
at less than five, or the persons named as proxies may nominate
and may vote for other persons in their discretion.
<PAGE>
Set forth below is a list of the nominees for the Board of
Directors of the Company. All of the nominees named below are
currently Directors of the Company.
Nominee, Positions Principal Occupations
with Company and Directorships
James Pinto Chairman since 1989 NCMC
Chairman of the Board
Age 43 Director Biscayne Holdings, Inc.
Director since 1988 (apparel manufacturer and
distributor)
Director Anderson Group, Inc.
(dental and electronics)
John C. Shaw Chief Executive Officer NCMC
Director and Chief since 1994
Executive Officer
Age 41 Managing Director since 1983 Resource Holdings, Ltd.
Director since 1988 (investment firm)
1989 to 1992 CO-Chairman NCMC
Trustee Wedgestone Financial
(diversified lender and
truck parts manufacturer)
Herbert J. Jaffe President since 1988 NCMC
Director and
President 1983-93 Chairman NCM Management Ltd.
Age 61 (management company of
Director since 1987 NCMC)
Timothy Graham 1994-1995 Executive Vice WinStar Communications, Inc.
Director President (communications, media,
Age 44 President retail)
Director since 1991-1994 Corporate Secretary NCMC
December 1994 1989-1991 Executive WinStar Services, Inc.
Vice President and (retail, communications)
General Counsel
Director TII Industries, Inc.
(telecommunications and
power line equipment)
David Faulkner 1989-1995 Vice Chairman Memorex Telex Inc.
Director Chief Financial Officer (computer industry)
Age 54
Director since
July 1994
<PAGE>
The Board of Directors held four meetings during 1994.
Each director attended at least 75% of the meetings of the Board
and of the meetings of the committees of the Board on which he
served. The Board of Directors has standing Executive, Audit,
Compensation and Nominating Committees. The Executive Committee
may, to the extent permitted by law, perform such duties and
exercise such powers as may be performed and exercised by the
Board of Directors. The Audit Committee is charged with
receiving reports from the Company's accounting department and
from its independent public accountants, keeping the Board of
Directors informed as to the Company's accounting policies and
the adequacy of internal controls, reviewing the qualifications
of the independent public accountants and making recommendations
to the Board of Directors concerning such accountants'
engagements, the scope of their audit and their fees. The
Compensation Committee determines the compensation of the
Company's officers. The Nominating Committee is charged with the
responsibility of considering candidates to serve on the
Company's Board of Directors, including nominees to fill
vacancies, and recommending to the Board of Directors membership
of committees. Messrs. James J. Pinto, John C. Shaw and Herbert
J. Jaffe serve on the Executive and Nominating Committees.
Messrs.David Faulkner, Herbert J. Jaffe and Timothy Graham serve
on the Audit Committee. Messrs. Herbert J. Jaffe, Timothy Graham
and David Faulkner serve on the Compensation Committee. The
Executive Committee met on four occasions during 1994, the Audit
Committee met twice, and the Compensation Committee met three
times. No other committee held meetings in 1994.
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of NCMC common stock as of March 30, 1995,
by: (i) each person known by the Company to own beneficially more
than 5% of the shares of NCMC common stock (ii) each person who
is a director or executive officer of the Company; and (iii) all
directors and executive officers of the Company as a group.
The Investor Warrants referred to below consist of warrants to
acquire an aggregate of 2,189,285 shares of NCMC common stock, at
any time prior to December 31, 1997. Of the aggregate Investor
Warrants, 1,975,000 permit acquisition of shares of NCMC common
stock at an exercise price of $3.00 per share (the "$3.00
Investor Warrants") and 214,285 permit acquisition of shares of
NCMC common stock at an exercise price of $3.50 per share (the
"$3.50 Investor Warrants"). The Management Warrants, referred to
below, consist of warrants to acquire an aggregate of 400,000
shares of NCMC common stock at any time prior to December 31,
1997 for an exercise price of $3.00 per share. The Management
Warrants and the Investor Warrants are collectively referred to
as the Warrants.
<PAGE>
<TABLE>
<CAPTION>
Beneficial Beneficial
Ownership of Ownership of
NCMC Common NCMC Common
Stock (1) Percent Stock (2) Percent
Name and address of NCMC Number of of Number of of
Beneficial Owner (3) Shares Class Shares Class
<S> <C> <C> <C> <C>
RHEC, L.P. 1,166,044 23.2% 2,273,186(4) 29.7%
10 East 53rd Street
New York, NY 10022
The Hawley Opportunity 428,086(5) 8.5% 603,086(6) 7.9%
Fund, L.P.
c/o Hawley and Wright, Inc.
6053 S. Quebec Creekside 202
Englewood, CO 80111
Larry D. Doskocil 289,435(7) 5.8% 517,940(7) 6.8%
500 North Main Street
South Hutchinson, KS
67504
Herbert J. Jaffe 34,536(8) 0.7% 154,536(9) 2.0%
James Pinto 310,706 6.2% 942,344(10) 12.3%
John C. Shaw 1,216,684(11) 24.2% 2,323,826(11) 30.4%
Timothy R. Graham 62,000 1.2% 91,500(13) 1.2%
Leslie A. Filler 2,500 0.05% 2,500 0.03%
James H. Carey --(14) -- --(14) --
Kenneth M. Klein --(14) -- --(14) --
All executive officers
and directors as a group
(7 persons) 1,626,426(15) 32.4% 3,514,706(16) 45.9%
</TABLE>
<PAGE>
NOTES TO TABLE OF BENEFICIAL OWNERS AND MANAGEMENT
1. This column assumes that none of the Warrants or Options
have been exercised.
2. This column assumes that all of the Warrants and Options
have been exercised.
3. Unless otherwise indicated, each shareholder listed has
the sole power to vote and direct the disposition of the
shares of the Company beneficially owned by such
shareholder.
4. Includes 1,107,142 shares of NCMC common stock which may
be issued upon the exercise of Investor Warrants. Mr.
Shaw, a director of the Company, is a managing director
of Resource Holdings, Ltd., the general partner of RHEC,
L.P.
5. Hawley and Wright, Inc. and Mr. MacDonald Hawley may be
deemed to also beneficially own these shares by virtue
of Hawley and Wright, Inc. being the general partner of
the Hawley Opportunities Fund, L.P. and Mr. MacDonald
Hawley being the president and controlling shareholder
of Hawley and Wright, Inc.
6. Includes 175,000 shares of NCMC common stock issuable
upon exercise of Investor Warrants.
7. Based on information received by the Company from Mr.
Doskocil, his aggregate ownership of NCMC securities
consisted on December 31, 1994, of indirect beneficial
ownership of 289,435 shares of Common Stock and 517,940
Investor Warrants owned by QCP, L.P., a Kansas limited
partnership which Mr. Doskocil may be deemed to control
through his ownership and control of QMC, Inc., the
corporate general partner of QCP, L.P.
8. Includes 34,136 shares owned by NCM Holdings, a general
partnership of which Mr. Jaffe is a general partner, and
400 shares owned directly by Mr. Jaffe.
9. Includes 120,000 shares of NCMC common stock issuable on
exercise of Management Warrants, 34,136 shares owned by
NCM Holdings and 400 shares owned directly by Mr. Jaffe.
10.Includes 310,706 shares owned directly by Mr. Pinto and
631,638 shares upon exercise of Investor Warrants.
11.Mr. Shaw is a managing director of Resource Holdings,
Ltd., the general partner of RHEC, L.P. Except for
50,640 shares owned directly by Mr. Shaw, the shares of
NCMC common stock shown as beneficially owned by Mr.
Shaw are the same shares shown as beneficially owned by
RHEC, L.P.
12.Includes 15,000 Options.
13.Includes 62,000 shares owned directly by Mr. Graham,
25,000 Consultant Options and 4,500 Investor Options.
14.James Carey, an executive officer of National Capital
Benefits Corporation ("NCBC"), owns 5.5% of the
outstanding common shares of NCBC. The VFC Trust, for
which Kenneth Klein, an executive officer of NCBC,
serves as sole Trustee, owns 14.5% of the outstanding
common shares of NCBC. Pursuant to the terms of a
stockholders' agreement among these investors and the
Company, these shares, under certain circumstances, may
be converted into shares of the Company in 1997 at a
then-appraised value.
15.Includes 1,200,180 shares of NCMC common stock owned by
NCM Holdings and RHEC, L.P.
16.Includes 1,200,180 shares of NCMC common stock owned by
NCM Holdings and RHEC, L.P., and 1,897,280 shares of NCMC
common stock issuable on exercise of all the Warrants and
the Options.
<PAGE>
Executive Compensation
The following table sets forth information in respect to the
compensation of the Chief Executive Officer and each of the other
four most highly compensated executive officers of NCMC for
services in all capacities to the Corporation and its
subsidiaries in 1994, 1993 and 1992.
<TABLE>
<CAPTION>
Annual Compensation
Other Annual
Year Salary Bonus Compensation
<S> <C> <C> <C> <C>
John C. Shaw 1994 257,500 -- 4,000
Chief Executive 1993 247,500 -- 9,000
Officer 1992 237,500 142,000 8,750
James Pinto 1994 257,500 -- 4,000
Chairman 1993 247,500 -- 9,000
1992 237,500 142,000 8,750
Herbert J. Jaffe 1994 100,000 10,000 4,000
President and 1993 100,000 -- 9,000
Chief Officer 1992 100,000 60,000 8,750
Operating
James H. Carey 1994 125,000 -- 8,333
Chief Executive
Officer
NCBC
Ken M. Klein 1994 125,000 -- 8,333
President and Chief
Operating Officer
NCBC
</TABLE>
The Company presently provides various non-cash benefits
to its executive officers, but it does not believe, except as
noted, that such benefits exceeds the lesser of $50,000 or 10% of
the cash compensation set forth for each of the executive
officers of the proceeding cash compensation table.
Mr. Pinto is employed as Chairman of the Company under an
amended non-exclusive agreement which was effective January 1,
1994. He was compensated at the base annual rate of $257,500 in
1994. From January 1, 1995 through March 31, 1995 his base
annual compensation was lowered to $195,000, whereby he received
$48,750 for this three month period pursuant to this agreement.
Mr. Shaw, who served as a consultant to the Company
pursuant to a non-exclusive Consulting Agreement until December
31, 1993, entered into an amended non-exclusive agreement to act
in the capacity of Chief Executive Officer of the Company from
January 1, 1994 under the same terms as Mr. Pinto.
Effective April 1, 1995, Messrs. Pinto and Shaw entered into
new agreements with the Company to act in the same capacities
through March 31, 1997, with options to extend these agreements
for one year if certain conditions are met. They will each
receive annual compensation of $125,000 plus Mandatory Incentive
Bonuses equal to 7.5% of the amount by which the Company's
consolidated net income before taxes exceeds the Qualifying
Amount. The Qualifying Amount is $250,000 for the first year of
the agreement and it increases by $150,000 for each subsequent
year. The bonus will decrease by $50,000 for each year that
Jensen Corporation is a subsidiary of the Company and has net
income before taxes of less than $100,000, which amount increases
by 20% per year. The bonuses may not exceed 150% of the salary.
Discretionary Bonuses may also be granted at the option of the
Board of Directors. If these agreements are terminated by the
Company other than for cause, disability or death, Messrs. Pinto
and Shaw shall be entitled to receive their base compensation
through the existing term.
Pursuant to an agreement between the Company and NCM
Management Ltd., Mr. Jaffe is entitled to receive $8,333 per
month plus health benefits. See Item 12 - Certain Relationships
and Related Transactions.
The bylaws of the Company provide for indemnification by
it of its officers and directors to the fullest extent permitted
by law.
During 1994, members of the Board of Directors received
quarterly compensation of $2,000 and $250 for each meeting
attended. Beginning July 1, 1994, however, Directors who are
either employees, officers or consultants of the Company will not
compensated and will not receive meeting fees. Directors are
entitled to be reimbursed for reasonable out of pocket expenses
incurred with respect to meetings of the Board. Since 1989, the
Company has followed a policy of awarding each director, who is
not an employee, officer or consultant of the Company, Options to
purchase 3,000 shares of NCMC Common Stock at $3.50 per share,
for each year in which each such individual is elected to serve
as a director of the Company. No options were awarded in
connection with this policy during 1994.
Certain Relationships and Related Transactions
The Company and NCM Management Ltd. ("NCM") have agreed that
NCM will provide management services through March 1995 and
provide personnel, equipment and facilities for the day to day
management and operations of the Company including supervision of
its real estate properties. As compensation for its services,
NCM is receiving a monthly payment of $8,333 plus management fees
of 4% of revenues from the properties other than Redbird Trails
Apartments and North Oak Apartments for which it receives a
management fee of 6%. In addition, Mr. Jaffe is provided health
insurance benefits. Mr. Jaffe, a director and officer of the
Company, is chairman and owns approximately 33% of the
outstanding capital stock of NCM and may be deemed to have a
material interest in all payments to NCM. During 1994, NCM
received an aggregate of $324,163 for management services
rendered to the Company, including therein Mr. Jaffe's
compensation.
In 1994, Resource Holdings, Ltd. ("Resource") provided office
space and related services at its principal office in New York
City for Mr. John C. Shaw and for use by officers and directors
of NCMC while in New York, including Mr. James Pinto and Mr.
Jaffe. Resource was reimbursed by the Company in an amount equal
to $75,492 for providing such office space and related services
in 1994. In addition, in accordance with its agreement with
Resource, the Company has deposited with Resource's landlord the
amount of $37,746 which will be returned, plus interest, to the
Company on termination of the lease. Mr. Shaw, a director of the
Company, is a managing director and significant shareholder of
Resource, and therefore may be deemed to have an interest in
payments to Resource.
Amendment to Certificate of Incorporation
The following resolution to amend the Certificate of
Incorporation has been approved by the Board of Directors of the
Company:
WHEREAS, it is deemed to be in the best interests of
the Corporation and its shareholders that Article Fourth of the
Certificate of Incorporation be amended to decrease the
authorized number of shares of Common Stock and to split each of
the issued and outstanding shares of Common Stock into one-third
share of Common Stock, it is:
RESOLVED that the first paragraph of Paragraph Fourth
of the Certificate of Incorporation of the Corporation be deleted
and replaced with the following:
"FOURTH. The total number of shares of stock which the
Corporation shall have authority to issue is 9,666,666 shares, of
which 6,666,666 shares shall be Common Stock and 3,000,000 shares
shall be Preferred Stock (the "Preferred Stock"). All such
shares are of the par value of .01. On the effectiveness of this
amendment of the Certificate of Incorporation, each outstanding
share of Common Stock shall be converted, automatically and
without further action on the part of any stockholder, into one-
third of one share of Common Stock; provided that on such
effectiveness, if any fractional shares result from such
conversion, the Corporation shall pay in cash to the respective
holders of such fractions the fair value of such fractions."
The Amendment to the Certificate of Incorporation must be
approved by a vote of the stockholders at the Annual Meeting for
it to become effective. THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMENDS THAT THE PROPOSAL TO AMEND THE CERTIFICATE OF
INCORPORATION BE APPROVED BY THE STOCKHOLDERS.
The Amendment to the Certificate of Incorporation is
designed to effect a reverse stock split. The Board took this
action in order to enable the Company's common stock to remain
trading on the NASDAQ National Market System.
By letter dated April 12, 1995, NASDAQ has informed the
Company that the Company is not in compliance with its minimum
bid requirement of essentially $1 per share, which is necessary
to continue the listing of the Company's stock on the NMS.
NASDAQ has granted the Company a temporary exemption from the
minimum bid requirement. NASDAQ has determined that the Company
must perform a reverse stock split to remain on the NMS. A
reverse stock split is expected to increase the bid price of the
Company's stock while not adding any value to the Company. If
the reverse stock split does not result in a stock price which
meets the NASDAQ minimum bid requirement, the Company's stock
will no longer be traded on the NMS. The Company could then apply
to list the stock for trading in the NASDAQ Small-Cap market or
in the over the counter "pink sheets". There is no assurance
that the stock of the Company will qualify for trading on the
NASDAQ Small-Cap market.
If the reverse stock split is approved by the stockholders,
each stockholder will automatically own one-third as many shares
of the Company's common stock as that shareholder owned before
the reverse stock split. It is expected that the prices of the
shares of common stock on the NMS will be adjusted accordingly.
The Company will not issue fractional shares. Any stockholder
which, as a result of the reverse stock split, has fractional
shares, will receive the fair market value of the fractional
shares in cash, based upon the price of the Company's stock on
the NMS.
As a result of the reverse stock split, the Company will
have 6,666,666 shares of authorized common stock, of which
1,673,085 will be issued and outstanding. The Board of Directors
believes that it is in the interests of the stockholders that the
Company's common stock be traded on the NMS. That will only be
possible if the reverse stock split is approved.
<PAGE>
Certified Public Accountants
The Board of Directors has selected Ernst & Young, the
certified public accountants of the Company in 1994, to continue
in that capacity for 1995. Representatives of Ernst & Young are
expected to be present at the meeting with the opportunity to
make a statement if they so desire and to be available to respond
to appropriate questions from stockholders.
Stockholders Proposals
In order for any proposal that a stockholder intends to
present at the 1996 Annual Meeting of Stockholders of the Company
to be eligible for inclusion in the Company's proxy statement for
that meeting, it must be received by the Secretary of the Company
at the Company's offices in San Francisco, CA no later than
March 1, 1996.
Other Matters
As of the date of this Proxy Statement, the Board of
Directors of the Company does not intend to present, and has not
been informed that any other person intends to present, any
matter for action at the Annual Meeting other than that discussed
in this Proxy Statement. If any other proper matters come before
the Annual Meeting, it is intended that the holders of the
proxies will act in accordance with their best judgment.
<PAGE>
NATIONAL CAPITAL MANAGEMENT CORPORATION
P
R Proxy -- Solicited by the Board of Directors
O
X The undersigned hereby appoints Herbert J. Jaffe and John C.
Y Shaw, and each of them proxies of the undersigned, with power
of substitution, to represent the undersigned and vote all
shares of National Capital Management Corporation which the
undersigned would be entitled to vote at the Annual Meeting of
Stockholders to be held on June 28, 1995, and any adjournment
thereof, on the items set forth on the reverse hereof and on
such other business as may properly come before the meeting.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY (over)
<PAGE>
COMMON UNEXCH 1 UNEXCH 2
The shares represented by this proxy will be voted as directed by
the stockholder. If no direction is given when the duly
authorized proxy is returned, such shares will be voted "FOR All
Nominees" in Item 1 and "FOR" the amendment in Item 2.
1. The Board of Directors Recommends a vote "FOR All Nominees" in Item 1 and
"FOR" the amendment in Item 2.
Item 1. - Election of the following Item 2. - Adopt an Amendment to the
nominees as Directors: Certificate of Incorporation
Herbert J. Jaffe, James
Pinto, John C. Shaw,
David J. Faulkner and
Timothy Graham
WITHHELD FOR THE
WITHHELD FOLLOWING ONLY:
FOR ALL FOR ALL (write the name of the
NOMINEES NOMINEES nominee or the nominees) FOR AGAINST ABSTAIN
Date
Signature
Signature
Please mark, date and sign
as your name(s) appear(s) to
the left and return in the
enclosed envelope. If acting
as an executor, administrator,
trustee, guardian, etc., you
should so indicate when signing.
If the signer is a corporation,
please sign the full corporate
name, by duly authorized
officer, If shares are held
jointly, each stockholder
named should sign.
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 0-16819
National Capital Management Corporation
(Name of small business issuer in its charter)
Delaware 94-3054267
(State or other jurisdiction of (I.R.S.Employer Identification
incorporation or organization) Number)
50 California Street, San Francisco, CA 94111
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (415) 989-2661
Securities registered pursuant to Section 12(b) of the Exchange Act:
NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $0.01 Par
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and will not 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. [ X ]
Issuer's revenues for its most recent fiscal year $10,000,197.
The aggregate market value of voting stock held by nonaffiliates of the
Registrant is approximately $3,074,753 as of March 23, 1995.
5,019,257
(Number of shares of common stock outstanding as of March 23, 1995)
Total number of pages in this document is: 234
The exhibit index is on page 50
PART I
Item 1 - Description of Business
Introduction
National Capital Management Corporation ("NCMC") is a holding
company which currently operates in three divisions through a
number of subsidiaries and controlled entities (collectively with
NCMC, the "Company"): (i) the Viatical Settlement Division which
purchases life insurance policies for cash, on a discounted
basis, from individuals having life threatening illnesses, (ii)
the Real Estate Division which includes the ownership and
management of real estate properties, and (iii) the Industrial
Products Division which is engaged primarily in the production
and distribution of commercial laundry equipment.
Prior to 1992 the Company's activities primarily involved the
management of real property assets and mortgage loan receivables
of National Capital Real Estate Trust, a real estate investment
trust to which the Company was a successor in 1988, and the
pursuit of acquisition opportunities. The Company expanded its
operations during 1992 by purchasing the assets of Jensen
Corporation, a Florida based manufacturer and distributor of
commercial laundry equipment and waste compactors, and
establishing an Industrial Products Division. During March 1994
the Company broadened its operations again when it formed the
Viatical Settlement Division and its 80%-owned subsidiary,
National Capital Benefits Corporation, to purchase life insurance
policies from individuals with life threatening illnesses, a
business generically referred to as viatical settlement.
The Company's predominant focus for the future will be the
continued enhancement of its asset base as well as its growth in
the specialty finance business. To the extent that financial
resources are available, the Company may continue to pursue the
acquisition and development of operating businesses regardless of
whether these businesses involve activities related to current
operations of the Company. The Company competes with entities of
substantially greater size and financial resources in finding and
consummating acquisitions of operating businesses and other
assets.
Viatical Settlement Division
On March 17, 1994, the Company formed the Viatical Settlement
Division to engage in the business of purchasing life insurance
policies which insure the lives of individuals with life
threatening illnesses. The operating entity in this division is
National Capital Benefits Corporation ("NCBC"), eighty percent of
whose common stock, and all of its preferred stock, is owned by
the Company. NCBC generally seeks to purchase policies which
insure individuals having a projected life expectancy of 24
months or less. In March 1994, the Company funded NCBC with
initial cash investments of $1,490,000, consisting of $1,450,000
of preferred stock and $40,000 of common stock, and purchased an
additional $1,000,000 of preferred stock for cash during June
1994. In addition, NCBC has obtained a revolving line of credit
up to $10 million, based on a formula of eligible policies
purchased, from an institutional lender to be used to provide
working capital and funds for the purchase of such policies. The
facility is secured by all of NCBC's assets including the
policies purchased and will bear interest at 2% over a composite
of several large bank prime rates or the rate on 90 day dealer
commercial paper, whichever is higher. NCBC had drawn
approximately $2,184,000 on this line of credit as of December
31, 1994. NCBC has agreed to insure 90% of the net death benefit
of the acquired policies through a newly formed and wholly-owned
Bermuda insurance company which has reinsured the risk with a
consortium of large international insurance companies. There was
approximately $215,000 of cash remaining in NCBC and its wholly-
owned Bermuda insurance company at December 31, 1994, $79,000 of
which is restricted for use in NCBC's operations and $136,000
which is restricted to the Bermuda insurance company pursuant to
the revolving line of credit agreement. The face value of all
policies purchased during 1994 was $3,928,554, and after
maturities of $275,000, the face value of all policies held by
NCBC was $3,653,554 at December 31, 1994. Additionally, NCBC had
approximately $7.8 million of borrowing capacity available at
December 31, 1994 pursuant to its revolving line of credit
agreement. In connection with the acquisition of certain assets
of CAPX Corporation ("CAPX") by NCBC and the issuance of 100,000
shares of Company common stock, the institutional lender
permitted the transfer to NCMC of $175,000 by NCBC during 1994.
Twenty percent of the common stock of NCBC is owned in the
aggregate by an executive officer of NCBC and a trust whose sole
trustee is another executive officer of NCBC ("the Minority
Owners"). The Company has entered into an agreement with the
Minority Owners which prohibits the transfer of the stock held by
them through July 1, 1997 and thereafter permits the Company a
right of first refusal on all other transfers through the tenth
anniversary of the agreement. In addition, during the period May
1, 1997 through June 30, 1997 either the Company or the Minority
Owners can notify the other of a conversion election in which
event the Company may at its option, either (a) issue shares of
its common stock plus, in certain instances, other consideration
in the amount of the appraised value (based on the fair market
value of NCBC after repayment of all preferred stock) for their
NCBC shares, (b) sell NCBC on or before the anniversary date of
receipt of the appraisal or (c) on or before said anniversary
date distribute the shares of NCBC held by NCMC to its
shareholders. If the Company issues to the Minority Owners
shares of its common stock, the Company has agreed to use its
best efforts to promptly effect the registration thereof if
requested by a majority of the Minority Owners.
On July 29, 1994, NCBC acquired from CAPX Corporation
substantially all of its operating assets (other than cash,
securities and purchased insurance policies), including the trade
names of its wholly-owned subsidiaries, Living Benefits Inc. and
American Life Resources, Inc. Management believes these two
subsidiaries were the two most established companies in the
viatical settlement business prior to this transaction, with an
estimated 20% market share and which had purchased policies
totaling approximately $100 million in face value from the
inception of their operations to June 1994. There was no
assumption of liabilities or obligations by NCBC. Consideration
paid consisted of $125,000 in cash, 100,000 shares of common
stock previously held as treasury stock by NCMC and a gross
revenues participation in all proceeds arising from viatical
settlement entered into by NCBC, equal to 1.75% and 1% in the
United States and other countries, respectively, over the next
four years. NCMC has agreed for a period of two years from the
date of closing to repurchase the shares from CAPX for a purchase
price of $1.75 per share and has also agreed to certain
registration rights for a three year period.
Nature of Business
The viatical settlement business makes it possible for people
facing life threatening illnesses to sell their life insurance
policies for cash at a discount from the policies' stated death
benefit. The sales proceeds give them choices that they might
not otherwise have, such as selecting quality health care,
retaining ownership of a residence, retiring indebtedness or
sharing funds with family, friends or favorite charities.
A prospective seller's medical records will be reviewed by
physicians retained by NCBC as consultants who specialize in
treatment of the individual's particular illness or disorder. A
prognosis will then be made by each physician of the life
expectancy of that person, which will be an essential element in
determining NCBC's interest in purchasing the policy and the
terms of such purchase. Other factors to be considered when
purchasing policies are the financial strength of the insurance
company writing the policy, the amount of coverage provided by
the policy, assignment restrictions contained in the policy, the
amount of any loans against the policies, prior assignments, the
beneficiary, the cost of policy premiums, issue date and type of
policy.
NCBC markets its services through advertising in newspapers and
periodicals and in brochures mailed to various organizations and
support groups. In addition, NCBC relies on word-of-mouth, media
reports, referrals from healthcare professionals, life insurance
agents and life insurers as well as appearances before
associations of financial planners, support groups, insurance
groups and actuaries. As a result of privacy and other ethical
and legal considerations, NCBC does not solicit potential
applicants in person, by telephone or by direct mail.
NCBC competes with many other companies and individuals offering
to purchase life insurance policies from qualifying policy
holders. Insurance companies offering to advance a portion of
death benefits on their own life insurance policies to policy
owners who are terminally ill or who have suffered a catastrophic
illness, such as a stroke, heart attack or coronary artery
surgery, also compete with NCBC. NCBC competes with companies
offering similar services on the basis of both service and price.
It is expected that additional competitors may enter the viatical
settlement business and provide similar services in the future.
It is also anticipated that more insurance companies will make
available partial prepayments of death benefits to policyholders
facing life-threatening illnesses.
NCBC only purchases policies from residents of states where it
believes there is no statutory and/or judicial authority
prohibiting the enforcement of assignments of policies to
assignees without an insurable interest in the insured. NCBC
believes that there is no such prohibiting authority existing
today. However, all states have statutes that regulate insurance
businesses and, although NCBC believes there is generally no
existing judicial authority on point, there can be no assurance
that some or all of these statutes will not be interpreted in the
future to include viatical settlement and to preclude NCBC, which
is not an insurance company, from operating in the states
involved. Further, several states, including New York, New
Mexico, California and Kansas, have adopted statutes specifically
applicable to the viatical settlement business and regulations
are pending in a number of other states including Florida,
Illinois, Indiana, Texas and Vermont with respect to this
business. Consequently, there can be no assurance that
additional states will not adopt similar or dissimilar statutes
regulating the industry in a manner that could have an adverse
impact on its profitability. NCBC supports appropriate state
regulation of viatical settlements because it believes that
consumer protection provisions will increase the opportunity to
expand its business.
Under the United States Internal Revenue Code of 1986, as
amended, the net proceeds to a seller from the sale of his or her
life insurance policy while he or she is alive is deemed to
constitute taxable income. Bills previously proposed and
expected to be reintroduced before Congress plan to exempt from
tax the proceeds of viatical settlements as well as the
prepayment by insurance companies of death benefits on life
insurance policies to individuals certified by a physician as
having an illness or physical condition that can reasonably be
expected to result in death in twelve months or less.
NCBC has incurred an operating loss of $1,092,000 since its
inception in 1994, has limited cash at December 31, 1994 for use
in operations and is thus solely dependent on the Company to
provide cash needed for operating expenses and its share of
acquisition costs of purchased policies that are not able to be
fully funded under its revolving line of credit facility. NCBC
had used $2,184,242 of its $10,000,000 revolving line of credit
facility at December 31, 1994. This line of credit is to provide
a portion of the funding for acquisition costs of insurance
policies. However, this line can be used to provide operating
cash to NCBC only to the extent that insurance policy proceeds in
excess of the related loan amounts have been received by the
lender. Given the scientific uncertainty of estimating the
remaining life expectancies of the insured's covered by purchased
policies, there can be no assurance that these policies will
mature in accordance with the projected schedule. As such, until
such time as significant proceeds are in fact received on matured
policies, this line will not be able to provide NCBC a
significant amount of operating cash. This potential lack of
access to cash to meet operating needs, along with the lack of a
formal commitment from the Company to support cash needs, raises
substantial doubt about NCBC's ability to continue as a going
concern. The Company has no contractual or other obligation to
continue the funding of NCBC. However, management believes that
the Company has adequate financial resources, including the
potential for the refinancing or sale of certain assets, or it
may also use other outside sources of financing, if available, to
fund the operational needs of NCBC until such time as NCBC has
obtained a break even level of operations or management of the
Company determines that it is in the Company's best interest not
continue such funding.
Real Estate Division
The Real Estate Division acquires, operates and disposes of
income producing properties through the Company and three wholly-
owned subsidiaries, NCQ Redbird, Inc. ("NCQR"), NCQ North Oak,
Inc. ("NCQN"), successor entities of NCQ Realty, Inc. ("NCQ"),
and Georgia Properties, Inc. ("GPI"). The Company and its
subsidiaries currently own two apartment properties consisting of
422 units, one shopping center, a 2.8 acre parcel of undeveloped
land and .9% general partner interests, plus a contingent
interest of up to $4.5 million, in two real estate partnerships.
The shopping center and two of the apartment properties are the
result of acquisitions made prior to 1988, while the two real
estate partnership interests are the result of acquisitions made
during 1992 from the Resolution Trust Corporation. The
undeveloped land was acquired on a nonrecourse basis in
conjunction with the acquisition of all the assets of Jensen
Corporation ("Jensen") and its parent company in 1992.
NCQ was formed in 1991 to purchase one or more properties through
limited partnerships and to serve as general partner of these
partnerships with the intent of admitting unaffiliated limited
partners interested in participating in Federal low-income
housing tax credits in exchange for a cash investment, or for
outright sale of its interests under acceptable terms. During
1993 NCQ sold all of its interests in one such partnership and
assigned all of its interests in two other partnerships to NCQR
and NCQN during 1994 which subsequently sold 99.1% interests in
each of these partnerships to an unrelated limited partner and
its affiliate (see discussions of Quivira Place Apartments,
Redbird Trails Apartments and North Oak Apartments below). GPI
was formed to acquire, through foreclosure, and renovate two
apartment properties which were previously sold by, and had been
subject to secured indebtedness of, the Company (see discussions
of Appletree Townhouses and Colony Ridge Apartments below).
The Real Estate Division employs no personnel to support the
management of its real properties. Currently, NCM Management
Ltd., a management company affiliated with the president and
chief financial officer of the Company, provides management,
accounting and related managerial services for a monthly fee.
Acquisition and disposition activities with respect to its real
estate interests are conducted primarily by the officers of the
Company.
During 1994, 1993 and 1992 the Real Estate Division generated
$3,614,000, $5,219,000 and $3,385,000, respectively, in revenues
and realized operating income, before depreciation, of $585,115,
$560,243 and $464,327 and depreciation of $895,338, $1,245,619
and $820,141 for the same periods (see Note 13 - Industry Segment
Information of the Notes to Consolidated Financial Statements).
The Real Estate Division also recognized gains of approximately
$2,142,000 and $828,000 in 1994 and 1993 resulting from the sale
of limited partner interests in Redbird Trails Associates, L.P.
and Signature Midwest, L.P. during 1994 and the sale of all its
interests in Quivira Place Associates, L.P. during 1993.
The status of each of the real estate investments owned by the
Company in 1994 and 1993 is described below.
Quivira Place Apartments. On December 30, 1993, the Company sold
all of its interests in Quivira Place Associates, L.P. ("QPA"),
owner of a 289 unit complex located in Lenexa, Kansas. The sales
proceeds included $1,515,000 in cash, a promissory note in the
amount of $938,500 and the buyer's assumption of the $3,659,476
first deed mortgage secured by the property for a total purchase
price of $6,112,976. The sales price less the carrying value of
$4,345,817 generated a total gain of $1,767,159, of which
$828,659 was recognized in 1993, with the balance of $938,500
recognized upon collection of the note on April 15, 1994.
Redbird Trails Apartments and North Oak Apartments. On June 13,
1994 and December 8, 1994, in accordance with previous agreements
dated December 30, 1993, the Company sold limited partnership
interests in Redbird Trails Associates, L.P. ("Redbird") and
Signature Midwest, L.P. ("Signature"), respectively, to two
unrelated entities. These partners, which are related to each
other, obtained a 99.1% interest in the existing equity, profits
or losses and low income housing tax credits of the properties
owned by these partnerships for an investment of approximately
$1,256,000 and $769,000 in each partnership plus a $100,000
expense reimbursement. The Company refinanced the apartment
properties owned by these two partnerships on December 8, 1994 in
connection with these transactions. Pursuant to an agreement
with the newly admitted limited partners, the Company retained
the net proceeds of $483,725 from these refinancings. The funds
from the new limited partners and the refinancings were received
by the Company during 1994 and the first quarter of 1995, net of
$440,000 due to an original limited partner for all its interests
and claims, the total of which is approximately $2,100,000. A
gain of $1,203,358 has been recognized on these transactions in
1994.
The Company retained a contingent interest in the cash flows of
these partnerships. It will receive any cash available from
property operations, to the extent it exceeds approximately
$61,000 annually, and any refinancing proceeds up to a total of
approximately $4.5 million, plus interest at 9.25% per annum on
the outstanding balance of this amount. Any proceeds of sale
will be allocated, first, 99.1% to the new partners until they
have received 135% of their investment, less any prior
distributions. Any remaining proceeds from a sale will be
allocated to the Company up to $6 million, less any distributions
from operations or refinancings pursuant to the discussion above.
These arrangements have not been reflected in the Company's
financial statements since their ultimate realization cannot
reasonably be determined. In addition, at such time as the tax
benefits have been utilized, the Company has the right to
purchase the interests of the newly admitted partners for 135% of
their contributed capital (minus prior cash payments). Should
the Company choose not to exercise such right to purchase the
partners' interests, the newly admitted administrative general
partner has the right to require the Company to sell all of the
assets and liquidate the partnerships.
The Company retained a .9% interest in each partnership through
two wholly-owned subsidiaries serving as the operating general
partners. Such operating general partners are obligated to
provide loans of up to $150,000 and $75,000 to Redbird and
Signature, respectively, to fund any operating deficits, as
defined, for a three year period commencing December 8, 1994.
Redbird Trails Apartments is an apartment complex consisting of
17 two-story buildings containing a total of 252 apartment units
constructed in 1986 in Dallas, Texas. Redbird Trails Apartments
is located on Redbird Lane, which is a four-lane, divided
thoroughfare approximately 1.5 miles from Marvin D. Love Freeway.
The surrounding area is a mix of residential and commercial
buildings. At March 19, 1995, occupancy was approximately 93%.
North Oak Apartments consists of 10 two-story buildings
constructed in 1982 in Irving, Texas and contains a total of 132
apartment units. It is located on a major two-lane street
approximately one mile from State Highway 183 and is surrounded
by single and multi-family dwellings, and several retail
properties. The Company was required to provide certain
improvements to the property which were completed as of December
31, 1993 at a cost of $421,234. At March 19, 1995, occupancy was
approximately 95%.
Appletree Townhouses. Appletree Townhouses is an apartment
complex in Atlanta, Georgia. The Property consists of 29
buildings containing a total of 210 apartments. The complex is
located on Campbellton Road, a major thoroughfare which is
approximately two miles from Interstate 285 and is near Fort
McPherson, home base of the Third Army. At March 19, 1995,
occupancy was 90%. Appletree Townhouses was substantially
rehabilitated by the Company during 1993 at a cost of
approximately $700,000.
Colony Ridge Apartments. Colony Ridge Apartments is an apartment
complex in Decatur, Georgia. Constructed in 1968, the property
consists of 23 two-story buildings containing a total of 212
apartment units. The property is located on Glenwood Avenue, a
major thoroughfare which is approximately one-half mile from
Interstate 285. At March 19, 1995, the occupancy was 83%.
Colony Ridge Apartments was substantially rehabilitated by the
Company during 1993 at a cost of approximately $700,000.
The Mart Shopping Center. The Mart Shopping Center is located on
nine acres in the high technology business area of Hillsboro,
Oregon, a suburb of Portland. The center contains approximately
109,000 square feet of rentable area, and its lighted parking lot
has space for over 500 cars.
The major tenants are Waremart, a supermarket consisting of
44,000 square feet and an additional 16,000 square foot ground
pad for parking, and Bi-Mart, a super drug store which occupies
30,000 square feet. In addition, other tenants include a
veterinary clinic, a restaurant, a fitness center, a pet store
and a book store. As of March 19, 1995, the center was
approximately 98% leased under long-term leases.
Immediately adjacent to The Mart Shopping Center is a 350,000
square foot shopping mall which was completed during 1988. The
major tenants are a supermarket and a department store. Even
though rental rates at the adjacent mall are generally higher
than those at The Mart Shopping Center, the overall increase in
retail space has resulted in increased competition in an already
weak leasing market.
Undeveloped land, 2.8 acres. On September 18, 1992, the Company
acquired all the assets of Jensen Corporation and its parent. In
connection therewith, the Company obtained this undeveloped
parcel of land which is located in Fort Lauderdale, Florida
adjacent to the Jensen facility and is zoned for
commercial/industrial use.
The table below reflects the real estate properties held by the
Company and its controlled entities at December 31, 1994 and the
loan balances related to each property (in thousands).
<TABLE>
<CAPTION>
Loan Balance
Original Original
Acquisition Date at Date December 31,
Properties Description Cost Acquired Acquired 1994
<S> <S> <C> <S> <C> <C>
The Mart Shopping $1,456 December $3,279 $1,246
Shopping Center Center 1978
Hillsboro, 109,000 Sq.
Oregon Ft.
Appletree Apartments 2,926 March 1,610 1,118
Townhouses 210 Units 1992
Atlanta,
Georgia
Colony Ridge Apartments 3,245 July 1,671 1,458
Apartments 212 Units 1992
Decatur,
Georgia
Land Undeveloped, 22 September 200 139
Ft. Lauderdale, Zoned 1992
Florida Commercial
Industrial
2.8 Acres
$7,649 $6,760 $3,961
</TABLE>
Industrial Products Division
The Industrial Products Division currently consists of the
Company's wholly-owned subsidiary Jensen Corporation ("Jensen"),
which manufactures and distributes machinery used primarily by
commercial laundries, large institutions and hotels as well as
commercial compactor products for waste disposal.
Laundry Products
Jensen manufactures laundry flatwork finishing equipment,
consisting of machinery used to feed, iron, fold and stack
towels, napkins, sheets and similar items in large volume.
Jensen's laundry products are generally large pieces of machinery
which are marketed and sold primarily to commercial laundries and
other large users of laundry products such as hospitals, nursing
homes, universities, prisons, hotels, restaurants and military
bases. Jensen's laundry equipment is designed to save labor,
space and energy or to increase productivity of existing
facilities. In addition, Jensen sells service parts to users of
existing equipment.
In 1994, 1993 and 1992 Jensen (including the former owner of
Jensen's assets for a portion of 1992) had approximately
$3,769,000, $4,732,000 and $5,284,000, respectively, of original
equipment sales and $1,837,000, $2,170,000 and $2,519,000,
respectively, in sales of replacement parts. Jensen markets its
equipment and parts and services its customers through a network
of independent domestic and foreign distributors covering the
United States, Canada and other parts of the world. In 1994,
1993 and 1992 Jensen (and the former owner of Jensen's assets for
a portion of 1992) had approximately $666,000, $1,230,000 and
$1,255,000, respectively, of foreign sales, which is included in
equipment and replacement parts sales discussed above. As of
December 31, 1994, Jensen had approximately $528,000 in backlog
of orders for its laundry equipment, which it anticipates will be
substantially completed by June 1995.
Jensen believes it is a leading manufacturer of laundry flatwork
finishing equipment in the United States. There are three other
significant suppliers marketing complete or integrated flatwork
finishing systems in the United States. Competition is based
primarily on cost, quality, availability of financing and terms
of sale as well as certainty of timely delivery. As part of
management's plan to enhance its standing in the market, in the
first quarter of 1995 Jensen began offering three new products
which are technologically advanced and competitively priced.
Jensen maintains support capability, including engineering,
customer service and inventory replacement and service parts.
Most of the components used in Jensen's laundry equipment are
obtained from third party suppliers. Jensen believes that
substantially all of its component parts are readily available
from a number of alternative suppliers at comparable prices.
However, it relies on a domestic sole-source supplier of some
high cost components which are necessary in the manufacture of
certain equipment. Such components are available from foreign
suppliers at prices which are significantly higher than the
domestic manufacturer.
Compactor Products
Jensen also manufactures and distributes waste compactor
equipment at its Fort Lauderdale facility, including nine models
of waste compactors. In 1994, 1993 and 1992, Jensen (and the
former owner of Jensen's assets for a portion of 1992) had
approximately $201,000, $230,000 and $358,000, respectively, of
revenues from the sale of waste compactors, most of which were
sold in the United States. Jensen's compactor equipment is
marketed primarily for commercial applications and is designed to
maximize the utilization of landfills and other disposal methods.
These products are directed at the residential, institutional,
commercial and hospitality markets. Sales are primarily made
through a network of regional distributors. Jensen's compactor
division has at least sixteen competitors nationally and numerous
regional competitors. As of December 31, 1994 Jensen had a
backlog for its compactor products of approximately $58,000,
which it anticipates will be substantially completed by June
1995.
Environmental Matters
The Company is subject to various laws and regulations with
respect to employee health and safety and the protection of the
environment. The Company believes it is in substantial
compliance with such laws and regulations.
Employees
The Company and its subsidiaries employ approximately 56 persons.
None of its employees are members of bargaining units. The
Company considers its relationship with its employees to be good.
Work stoppages have not materially affected the Company's
business.
Item 2 - Description of Property
The Company maintains offices in New York and San Francisco for
use by its executive officers at the premises of Resource
Holdings, Ltd. and NCM Management Ltd. The Company is not a
party to the leases, but there is an understanding that NCMC will
pay the rent for the offices in New York until 1997. In
addition, in accordance with its agreement with Resource, the
Company has deposited with Resource's landlord the amount of
$37,746 which will be returned, plus interest, to the Company on
termination of the lease (see Item 12 - Certain Relationships and
Related Transactions).
National Capital Benefits Corporation maintains an office in New
York. Such premises occupy approximately 1,800 square feet and
are leased to June 30, 1996. See Note 10 of the Notes to
Financial Statements in the Annual Report which provides
information with respect to the obligation.
Jensen maintains plant facilities and offices at 2775 N.W. 63rd
Court, Ft. Lauderdale, Florida. Such premises occupy
approximately 60,000 square feet and are leased to July 1999.
See Note 10 of the Notes to Financial Statements in the Annual
Report which provides information with respect to this
obligation.
The Company considers these properties to be suitable and
adequate for its present needs. The properties are being fully
utilized. See Item 1 "Business" for discussion of real
properties owned in connection with operations of the Real Estate
Division.
Item 3 - Legal Proceedings
Jensen Corporation ("Jensen") is a defendant in a number of
product liability lawsuits and other litigation arising out of
its operations and operations of the former owner of Jensen's
assets. Given the nature of Jensen's products, it anticipates
that it may be party to such lawsuits from time-to-time and
maintains insurance to provide for potential claims in an amount
equal to $1 million per claim with a limit of $2 million in the
aggregate. Jensen also establishes reserves deemed adequate to
cover an estimated amount which it may be required to fund with
respect to the portion of such loss that must be borne by Jensen
prior to the application of the insurance coverage, known as the
deductible, which is a maximum of $100,000 per claim under the
existing policy. In the opinion of management, the resolution of
existing claims and litigation will not have a material adverse
effect on the financial position or results of operations of the
Company.
Item 4 - Submission of Matters to a Vote of Security Holders
None
PART II
Item 5 - Market for Common Equity and Related Stockholder
Matters
a. Market Information
The Company's common stock trades on the NASDAQ National
Market System ("NMS") under the symbol NCMC.
The high and low bid prices of shares of common stock of the
Company for each quarter during the years ended December 31,
1994 and 1993, are as follows:
<TABLE>
<CAPTION>
Bid Price
For the Quarter Ended High Low
<S> <C> <C>
December 31, 1994 $1.1094 $0.8542
September 30, 1994 1.0625 0.9167
June 30, 1994 1.1667 1.0417
March 31, 1994 1.1771 0.9479
December 31, 1993 1.1250 0.8125
September 30, 1993 1.1873 0.8750
June 30, 1993 1.1875 1.0000
March 31, 1993 1.4375 1.2500
</TABLE>
By letter dated April 12, 1995, NASDAQ has informed the
Company that the Company is not in compliance with its minimum
bid requirement of essentially $1 per share, which is
necessary to continue the listing of the Company's stock on
the NMS. NASDAQ has granted the Company a temporary exemption
from the minimum bid requirement. NASDAQ has determined that
the Company must perform a reverse stock split to remain on
the NMS. If a decision is taken to split the stock, the
Company must submit a plan to NASDAQ by May 31, 1995, must
effect the split by June 10, 1995 and maintain compliance with
the minimum bid requirement for ten business days beginning
from June 10, 1995 through June 23, 1995. A reverse stock
split would be expected to increase the bid price of the
Company's stock while not, of course, adding any value to the
Company. If the reverse stock split is not carried out as
required by NASDAQ or, if it is carried out, but does not
result in a stock price which meets the NASDAQ minimum bid
requirement, the Company's stock will no longer be traded on
the NMS. The stock would then be expected to be traded in the
NASDAQ Small-Cap market or in the over the counter "pink
sheets". Since the Company's violation of the NASDAQ's
requirement has been limited to approximately 1% under its
alternate test of a minimum of $3,000,000 in public float, as
defined, on any one trading day during the last 30 days, the
Company may appeal this decision as provided for in NASDAQ's
letter, and is considering other alternatives it may have.
b. Number of Holders of Common Stock
At March 28, 1995, the approximate number of holders of record
of shares of common stock of the Company was 2,824.
c.Dividends on Common Stock
The Company has not declared any dividends on its common stock
during the three year period ended December 31, 1994.
Item 6 - Management's Discussion and Analysis of Plan of
Operations
OVERVIEW
The Company continued to concentrate on existing operations
during 1994 by finishing four significant projects which began in
1993. The Viatical Settlement Division, which was in the
planning stages during 1993, commenced operations during the
first quarter of 1994. The Real Estate Division completed the
sale of limited partner interests in Redbird Trails Associates,
L.P. and Signature Midwest, L.P. during the second quarter and
fourth quarter of 1994, respectively, and collected the note
receivable resulting from the sale of Quivira Place Associates,
L.P. in the second quarter.
In addition, the Industrial Products Division focused on reducing
its overhead and developing new product lines in the face of
declining sales resulting from increased competition.
FINANCIAL CONDITION AND LIQUIDITY
The Company's cash declined from approximately $2.9 million at
December 31, 1993 to $1 million at December 31, 1994 principally
as a result of cash used to finance operating activities, to
enter into the viatical settlement business and to finance Jensen
Corporation operations, offset by the collection of a $938,500
note receivable on April 15, 1994 resulting from the sale of
Quivira Place Associates, L.P. in 1993, the receipt of net
proceeds of $483,725 during December 1994 attributable to the
refinancing of the apartment properties owned by Redbird Trails
Associates, L.P. and Signature Midwest, L.P. and the collection
of $412,921 (net of $146,000 paid to settle the claims of a
limited partner) on June 13, 1994 pursuant to the admission of
two unaffiliated partners into Redbird Trails Associates, L.P.
Of the $1 million in cash at December 31, 1994, $.2 million has
been restricted for use by the Viatical Settlement Division
pursuant to the existing revolving line of credit agreement as
discussed below. The Company's cash position increased to $1.45
million as of March 27, 1995, of which $135,000 is restricted for
use in the Viatical Settlement Division, as a result of the
collection of the balance of the funds due from the new limited
partners of Redbird Trails Associates, L.P. and Signature
Midwest, L.P.
The Company does not have any existing general credit facilities
to fund its ongoing working capital requirements, and additional
financing may be required in connection with the acquisition of
other operating businesses or other assets. The Company may seek
additional financing through the issuance of securities on a
private or public basis, or through long or short-term
borrowings. In addition, the Company periodically reviews its
assets to determine whether disposition thereof may be
appropriate to enhance liquidity or to fund other opportunities.
Management believes that the Company's cash and equivalents are
sufficient to fund its anticipated level of operations during
1995. However, as indicated below with respect to the discussion
of National Capital Benefits Corporation, additional funds may be
required for the Company's viatical settlement business.
In recent years the Company has experienced operating losses and
the Company may be required, from time to time, to provide
additional funding to support the industrial operations of Jensen
Corporation until such time as this subsidiary is operating on a
consistently profitable basis. However, there is no assurance
that such operations will become profitable.
On March 17, 1994, the Company formed the Viatical Settlement
Division to engage in the business of purchasing life insurance
policies which insure the lives of individuals with life
threatening illnesses. The operating entity in this division is
National Capital Benefits Corporation ("NCBC"), eighty percent of
whose common stock, and all of its preferred stock, is owned by
the Company. NCBC generally seeks to purchase policies which
insure individuals having a projected life expectancy of 24
months or less. In March 1994, the Company funded NCBC with
initial cash investments of $1,490,000, consisting of $1,450,000
of preferred stock and $40,000 of common stock, and purchased an
additional $1,000,000 of preferred stock for cash during June
1994. In addition, NCBC has obtained a revolving line of credit
up to $10 million, based on a formula of eligible policies
purchased, from an institutional lender to be used to provide
working capital and funds for the purchase of such policies. The
facility is secured by all of NCBC's assets including the
policies purchased and will bear interest at 2% over a composite
of several large bank prime rates or the rate on 90 day dealer
commercial paper, whichever is higher. NCBC has agreed to insure
90% of the net death benefit of the acquired policies through a
newly formed and wholly-owned Bermuda insurance company which has
reinsured the risk with a consortium of large international
insurance companies. There was approximately $215,000 of cash
remaining in NCBC and its wholly-owned Bermuda insurance company
at December 31, 1994, $79,000 of which is restricted for use in
NCBC's operations and $136,000 which is restricted to the Bermuda
insurance company pursuant to the revolving line of credit
agreement. The face value of all policies purchased during 1994
was $3,928,554, and after maturities of $275,000, the face value
of all policies held by NCBC was $3,653,554 at December 31, 1994.
Additionally, In connection with the acquisition of certain
assets of CAPX Corporation ("CAPX") by NCBC and the issuance of
100,000 shares of Company common stock, the institutional lender
permitted the transfer to NCMC of $175,000 by NCBC during 1994.
NCBC has incurred an operating loss of $1,092,000 since its
inception in 1994, has limited cash at December 31, 1994 for use
in operations and is thus solely dependent on the Company to
provide cash needed for operating expenses and its share of
acquisition costs of purchased policies that are not able to be
fully funded under its revolving line of credit facility. NCBC
had used $2,184,242 of its $10,000,000 revolving line of credit
facility at December 31, 1994. This line of credit is to provide
a portion of the funding for acquisition costs of insurance
policies. However, this line can be used to provide operating
cash to NCBC only to the extent that insurance policy proceeds in
excess of the related loan amounts have been received by the
lender. Given the scientific uncertainty of estimating the
remaining life expectancies of the insured's covered by purchased
policies, there can be no assurance that these policies will
mature in accordance with the projected schedule. As such, until
such time as significant proceeds are in fact received on matured
policies, this line will not be able to provide NCBC a
significant amount of operating cash. This potential lack of
access to cash to meet operating needs, along with the lack of a
formal commitment from the Company to support cash needs, raises
substantial doubt about NCBC's ability to continue as a going
concern. The Company has no contractual or other obligation to
continue the funding of NCBC. However, management believes that
the Company has adequate financial resources, including the
potential for the refinancing or sale of certain assets, or it
may also use other outside sources of financing, if available, to
fund the operational needs of NCBC until such time as NCBC has
obtained a break even level of operations or management of the
Company determines that it is in the Company's best interest not
continue such funding.
On July 29, 1994, NCBC acquired from CAPX Corporation
substantially all of its operating assets (other than cash,
securities and purchased insurance policies), including the trade
names of its wholly-owned subsidiaries, Living Benefits Inc. and
American Life Resources, Inc. Management believes these two
subsidiaries were the two most established companies in the
viatical settlement business prior to this transaction, with an
estimated 20% market share and which had purchased policies
totaling approximately $100 million in face value from the
inception of their operations to June 1994. There was no
assumption of liabilities or obligations by NCBC. Consideration
paid consisted of $125,000 in cash, 100,000 shares of common
stock previously held as treasury stock by NCMC and a gross
revenues participation in all proceeds arising from viatical
settlement entered into by NCBC, equal to 1.75% and 1% in the
United States and other countries, respectively, over the next
four years. NCMC has agreed for a period of two years from the
date of closing to repurchase the shares from CAPX for a purchase
price of $1.75 per share and has also agreed to certain
registration rights for a three year period.
On June 13, 1994 and December 8, 1994, in accordance with its
previous agreement dated December 30, 1993, the Company sold
partnership interests in Redbird Trails Associates, L.P.
("Redbird") and Signature Midwest, L.P. ("Signature"),
respectively, to a new unrelated limited partner and
administrative general partner. These partners, which are
related to each other, obtained a 99.1% interest in the existing
equity, profits or losses and low income housing tax credits of
the properties owned by these partnerships for an investment of
approximately $1,256,000 and $769,000 in each partnership plus a
$100,000 expense reimbursements. The Company refinanced the
apartment properties owned by these two partnerships on December
8, 1994 in connection with these transactions. Pursuant to an
agreement with the newly admitted limited partners, the Company
retained the net proceeds of $483,725 from these refinancings.
The funds from the new limited partners and the refinancings were
received by the Company during 1994 and 1995, net of $440,000 due
to an original limited partner for all its interests and claims,
for a total of approximately $2,100,000. A gain of $1,203,358
has been recognized on these transactions in 1994.
The Company retained a contingent interest in the cash flows of
these partnerships. It will receive any cash available from
property operations, to the extent it exceeds approximately
$61,000 annually, and any refinancing proceeds up to a total of
approximately $4.5 million, plus interest at 9.25% per annum on
the outstanding balance of this amount. Any proceeds of sale
will be allocated, first, 99.1% to the new partners until they
have received 135% of their investment, less any prior
distributions. Any remaining proceeds from a sale will be
allocated to the Company up to $6 million, less any distributions
from operations or refinancings pursuant to the discussion above.
These arrangements have not been reflected in the Company's
financial statements since their ultimate realization cannot
reasonably be determined. In addition, at such time as the tax
benefits have been utilized, the Company has the right to
purchase the interests of the newly admitted partners for 135% of
their contributed capital (minus prior cash payments). Should
the Company choose not to exercise such right to purchase the
partners' interests, the newly admitted administrative general
partner has the right to require the Company to sell all of the
assets and liquidate the partnerships.
The Company retained a .9% interest in each partnership through
two wholly-owned subsidiaries serving as the operating general
partners. Such operating general partners are obligated to
provide loans of up to $150,000 and $75,000 to Redbird and
Signature, respectively, to fund any operating deficits, as
defined, for a three year period commencing December 8, 1994.
The assets, liabilities and operations of Redbird and Signature
have not been included in the condensed consolidated financial
statements of the Company subsequent to closing these
transactions on June 13, 1994 and December 8, 1994, respectively.
The Company has accounted for its investment in and the earnings
of Redbird and Signature using the equity method of accounting
since these dates.
On December 30, 1993, the Company sold all of its interests in
Quivira Place Associates, L.P., owner of a 289 unit apartment
complex located in Lenexa, Kansas. A portion of the sales
proceeds included a promissory note in the amount of $938,500
that was issued from the buyer to the Company and was recorded as
a deferred gain on the Company's balance sheet at December 31,
1993. This note was collected by the Company on April 15, 1994,
and the deferred gain was recognized as revenue in the three
month period ending June 30, 1994.
The note payable secured by The Mart Shopping Center in the
approximate amount of $1,246,000 became due on December 1, 1994.
However, the current lender has extended the loan to December 1,
1997 based on an interest rate of 10% and a 20 year amortization
period.
In February 1995 the Company initiated a plan to repurchase up to
250,000 of its own shares for treasury in the open market or
through isolated transactions to December 31, 1995. No shares
were purchased pursuant to this plan as of April 12, 1995.
RESULTS OF OPERATIONS FOR 1994 COMPARED TO 1993
Consolidated revenues and gains decreased by 9% during 1994
compared to 1993 as a result of the loss of operating revenues
associated with the sale of Quivira Place Associates, L.P.
("Quivira"), the sale of partnership interests in Redbird Trails
Associates, L.P. ("Redbird") and Signature Midwest, L.P.
("Signature") and a significant decline in industrial product
sales, offset by recognizing the deferred portion of the gain on
the sale of the Company's interests in Quivira, the gain on sale
of Redbird and Signature, the addition of the viatical settlement
division and improved real property operating revenues. Total
costs and expenses decreased during this period primarily as a
result of reduced costs and expenses associated with the decline
in industrial product sales, the sale of Quivira at the end of
1993 and the sale of partnership interests in Redbird and
Signature during June and December 1994, respectively, offset by
the costs related to the initial operations of the viatical
settlement division.
VIATICAL SETTLEMENT DIVISION
National Capital Benefits Corp. ("NCBC") commenced operations on
March 17, 1994. As of December 31, 1994 NCBC had purchased
(including those in escrow) at face $3.6 million of policies.
Two policies matured during 1994 having a combined face value of
$275,000, with related direct costs of $226,680 and gross profit
equal to $48,320. Additional gross revenues of $346,101 and
related costs of $332,485 were accrued pursuant to NCBC's policy
to accrete such revenue and costs over the period from the
purchase of the policy to the date on which a reinsurance claim
may first be filed. NCBC incurred operating expenses of
approximately $1.2 million through December 31, 1994 primarily
for wages, advertising, consulting and professional fees, lender
fees, travel and entertainment and office supplies.
Additionally, approximately $300,000 of costs were capitalized
prior to commencement of operations for organization of the
business and obtaining its credit line. NCBC expanded its
operations by acquiring from CAPX Corporation on June 29, 1994
substantially all of its operating assets (other than cash,
securities and purchased insurance policies), including the trade
names of its wholly-owned subsidiaries, Living Benefits Inc. and
American Life Resources, Inc. Management believes these
subsidiaries were the two most established companies in the
viatical settlement business prior to this transaction, with an
estimated 20% market share.
REAL ESTATE DIVISION
Rental property revenue decreased during 1994 principally as a
result of the sale of Quivira on December 30, 1993 and the sale
of partnership interests in Redbird on June 13, 1994 and
Signature on December 8, 1994, offset by an increase in revenue
from the Georgia properties of approximately $282,500. The Mart
Shopping Center continues to maintain average occupancy rates
greater than 90%. Occupancy at Appletree Townhouses has improved
substantially, from an average of approximately 83% for 1993 to
91% for 1994. Average occupancy at Colony Ridge Apartments
increased to 81% in 1994 compared to 75% for 1993. The decrease
in total operating and maintenance expenses of approximately 32%
during 1994 compared to 1993 is principally related to the sale
of Quivira and the sale of partnership interests in Redbird and
Signature, offset by increased expenses at Appletree Townhouses
and Colony Ridge Apartments. Property taxes and interest expense
decreased during the same period as a result of the sale of
Quivira and the sale of partnership interests in Redbird and
Signature. Depreciation and amortization also declined as a
result of the sale of Quivira and the sale of partnership
interests in Redbird and Signature, but was offset by an increase
in depreciation related to rehabilitation costs associated with
other properties. Real estate property operations, as a whole,
produced operating losses of approximately $310,000 for 1994
compared to $685,000 for 1993, after all operating expenses,
including depreciation and interest expense.
INDUSTRIAL PRODUCTS DIVISION
Machine sales for the year ended December 31, 1994 were
approximately $3,769,000. Machine sales during this period
declined by approximately $963,000 from 1993 essentially as a
result of increased competition and price cutting by competitors
which made certain bids economically impractical. Parts sales
were approximately $1,837,000 for the year ended December 31,
1994. Parts sales decreased by approximately $333,000 during
1994 from 1993, due, in part, to better customer training in
maintenance programs preventing product failure. Cost of sales
also was reduced as a result of the decline in sales. The
reduction in selling and administrative expenses from 1993 was
largely the result of a reduction of the labor force.
Jensen incurred a loss of $22,686 before an additional reserve
for inventory obsolescence of $257,609, for a total operating
loss of $280,295 during 1994 compared to a loss of $272,831
before an increase in the inventory reserve of $59,834 for a
total loss of $332,665 in 1993. Although Jensen accomplished
certain expense reductions and increased manufacturing
effectiveness during 1994, operating results were significantly
impacted by the inventory reserve. Jensen continues to maintain
its competitive pricing policy, but sales margins continue to
suffer as a result.
RESULTS OF OPERATIONS FOR 1993 COMPARED TO 1992
Consolidated total revenues and gains increased by 113% during
1993 compared to 1992 as a result of acquisitions of two
apartment properties in Texas, the addition of two apartment
properties in Georgia and the acquisition of Jensen Corporation
("Jensen"), all of which occurred during the first three quarters
of 1992, and the sale of all the Company's interests in Quivira
Place Associates, L.P. ("QPA") on December 30, 1993; offset,
however, by a reduction in interest income as a result of a
decrease in cash reserves utilized in connection with these
acquisitions and Company operations and lower interest rates
earned on remaining cash reserves. Total costs and expenses
increased by 81% during 1993, primarily due to these
acquisitions, offset by a 18% reduction in general and
administrative expenses for the same period, which resulted
primarily from reductions in management compensation from 1992
levels.
Real Estate Division
Rental property revenue and expenses increased as a result of the
acquisition of Redbird Trails Apartments in June 1992, North Oak
Apartments in July 1992 and the foreclosure and addition of
Appletree Townhouses in March 1992 and Colony Ridge Apartments in
July 1992. These additions provided approximately 100% of the
increases in property revenues and 95% of the increases in total
property expenses during 1993 compared to 1992. Occupancy at
Quivira Place Apartments (sold on December 30, 1993), Redbird
Trails Apartments, North Oak Apartments and The Mart Shopping
Center remained in the mid to upper 90 percentiles during 1993.
Occupancy at Appletree Townhouses has improved substantially,
from an average of approximately 49% during 1992 to 93% at
December 31, 1993. Although occupancy at Colony Ridge Apartments
continues to improve, averaging approximately 50% during 1992 and
75% during 1993, it remains below Company objectives. The
Company believes that occupancy will continue to improve at
Colony Ridge Apartments during 1994. The increase in total
operating and maintenance expenses of approximately 78% during
1993 compared to 1992 is principally related to the additions of
properties in 1992. The Company sold all of its interests in QPA
and recognized a gain of $828,659 during 1993. The Real Estate
Division produced operating income, including the sale of its
interests Quivira Place Apartments, of approximately $143,000 in
1993 compared to an operating loss of approximately $356,000 in
1992.
Industrial Products Division
Since it was acquired on September 18, 1992, Jensen's revenues
have continued to be below levels which support break-even
operations and generated a loss from operations of approximately
$333,000 during 1993. Management believes that Jensen's sales
continue to be adversely impacted by disruption in the market
caused by the bankruptcy of the former owner of Jensen's assets
in 1991 and, to a lesser extent, the continued weakness of the
economy in its principal markets. Jensen has also encountered
increased competition from European manufacturers. Jensen
conducted a policy of competitive pricing in order to maintain
its position in the market which has limited profit margins. It
has also reduced its operating capacity to its core components,
but not to a level which management believes would impede an
effective response to more favorable conditions in its market
place.
Item 7 - Financial Statements and Supplementary Data
NATIONAL CAPITAL MANAGEMENT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors 21
Consolidated Balance Sheets at December 31, 1994 and 1993 22
Consolidated Statements of Operations for the years ended 23
December 31, 1994, 1993, and 1992
Consolidated Statements of Shareholders' Equity for the years 24
ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 25
Notes to Consolidated Financial Statements 26-40
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
National Capital Management Corporation
We have audited the accompanying consolidated balance sheets of
National Capital Management Corporation as of December 31, 1994
and 1993, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years
in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 consolidated
financial position of National Capital Management Corporation at
December 31, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
San Francisco, California
March 24, 1995
<PAGE>
NATIONAL CAPITAL MANAGEMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1994 1993
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 749,449 $ 2,872,925
Restricted cash 215,565 --
Accounts receivable, less allowance for doubtful
accounts of $25,000 and $100,485 at December 31,
1994 and 1993, respectively 2,674,606 933,127
Notes receivable -- 938,500
Inventories 1,717,361 1,810,721
Purchased insurance policies (at cost, face value
of $2,610,550) - current portion 1,942,490 --
Other current assets 227,234 312,670
Total current assets 7,526,705 6,867,943
Purchased insurance policies (at cost, face value
of $1,043,004) - long-term portion 761,369 --
Rental properties, less accumulated depreciation of
$3,128,402 and $2,872,392 at December 31, 1994 and
1993, respectively 8,757,784 15,512,469
Property and equipment, less accumulated
depreciation of $51,148 and $28,065 at December
31, 1994 and 1993, respectively 103,582 77,813
Other assets 750,887 550,672
Total assets $ 17,900,327 $ 23,008,897
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,246,543 $ 922,660
Revolving credit facility - current portion 1,569,190 --
Accrued liabilities 647,220 1,105,205
Deferred gain on sale of real property -- 938,500
Current portion of long-term debt 1,419,078 1,745,895
Total current liabilities 4,882,031 4,712,260
Revolving credit facility - long-term portion 615,052 --
Long-term payable 150,000 --
Long-term debt 2,755,155 7,766,382
Total liabilities 8,402,238 12,478,642
Common stock repurchase obligation 175,000 --
Shareholders' equity:
Preferred stock, $0.01 par value, 3,000,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $0.01 par value, 20,000,000 shares
authorized,5,019,257 shares issued and
outstanding 54,289 54,289
Additional paid-in capital 23,516,649 23,673,649
Accumulated deficit (13,604,224) (12,662,183)
Treasury stock (643,625) (535,500)
Total shareholders' equity 9,323,089 10,530,255
Total liabilities and shareholders' equity $ 17,900,327 $ 23,008,897
</TABLE>
See accompanying notes.
22
<PAGE>
NATIONAL CAPITAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C>
Revenues:
Viatical settlement and accrued
revenue $ 621,101 $ -- $ --
Real estate properties 3,613,978 5,219,325 3,385,388
Industrial products sales 5,691,585 7,091,414 2,630,866
Interest 73,533 55,395 238,082
Other income -- 166,365 17,642
Total revenues 10,000,197 12,532,499 6,271,978
Costs and expenses:
Viatical settlement operations:
Cost of policies 559,165 -- --
Selling and administrative 1,044,268 -- --
Depreciation and amortization 99,338 -- --
Interest 28,099 -- --
Total viatical settlement
costs and expenses 1,730,870 -- --
Real estate property operations:
Operations and maintenance 1,916,210 2,803,479 1,576,718
Property taxes and insurance 432,916 667,726 468,393
Depreciation and amortization 895,338 1,245,619 820,141
Interest 679,737 1,187,877 875,950
Total real estate property
costs and expenses 3,924,201 5,904,701 3,741,202
Industrial products operations:
Cost of sales 4,642,611 6,039,478 2,181,218
Selling and administrative 1,053,069 1,365,110 527,060
Reserve for inventory obsolescence 257,609 -- --
Depreciation 18,591 19,491 8,574
Total industrial products
costs and expenses 5,971,880 7,424,079 2,716,852
General and corporate:
General and administrative 1,446,044 1,380,114 1,677,323
Interest expense-other 11,101 23,264 5,544
Total costs and expenses 13,084,096 14,732,158 8,140,921
Gain on sale of real properties 2,141,858 828,659 --
Net loss $ (942,041) $(1,371,000 $(1,868,943
Net loss per share $ (0.19) $ (0.27) $ (0.34)
Average number of shares outstanding 5,026,498 5,131,357 5,427,231
</TABLE>
See accompanying notes.
23
<PAGE>
NATIONAL CAPITAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Accumulated Treasury Shareholders'
Stock Capital Deficit Stock Equity
<S> <C> <C> <C> <C> <C>
Balances at December
31, 1991 $54,289 $23,673,649 $ (9,422,240) $ -- $14,305,698
Acquisition of
treasury stock -- -- -- (535,500) (535,500)
Net loss -- -- (1,868,943) -- (1,868,943)
Balances at December
31, 1992 54,289 23,673,649 (11,291,183) (535,500) 11,901,255
Net loss -- -- (1,371,000) -- (1,371,000)
Balances at December
31, 1993 54,289 23,673,649 (12,662,183) (535,500) 10,530,255
Acquisition of
treasury stock -- -- -- (265,125) (265,125)
Issuance of
treasury stock -- (157,000) -- 157,000 --
Net loss -- -- (942,041) -- (942,041)
Balances at December
31, 1994 $54,289 $23,516,649 $(13,604,224) $(643,625) $9,323,089
</TABLE>
See accompanying notes.
24
<PAGE>
NATIONAL CAPITAL MANAGEMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (942,041) $(1,371,000) $(1,868,943)
Adjustment to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 1,013,267 1,275,782 840,848
Gain on sale of real properties (2,141,858) (828,659) --
Changes in operating assets and
liabilities:
Increase in accounts receivable (1,760,004) (131,495) (126,612)
Decrease in inventories 93,360 100,415 53,409
Decrease (increase) in other
current assets (6,655) 81,005 (287,234)
Increase in purchased insurance
policies (2,703,859) -- --
Increase in accounts payable and
accrued liabilities 388,117 840,864 687,618
Increase in long-term payable 150,000 -- --
Net cash used in operating activities (5,909,673) (33,088) (700,914)
Cash flows from investing activities:
Additions and improvements to
real property (207,870) (1,266,517) (2,122,919)
Proceeds from sale of real property 2,100,420 1,515,000 --
Acquisition of Jensen Corporation -- -- (2,199,106)
Additions to property and equipment (48,852) (20,127) (2,816)
Repayment of note receivable 938,500 -- --
(Increase) decrease in other assets (739,207) 210,640 (728,241)
Net cash provided by (used in)
investing activities 2,042,991 438,996 (5,053,082)
Cash flow from financing activities:
Additions to restricted cash (215,565) -- --
Additions to revolving credit facility 2,184,242 -- --
Additions to long-term debt -- 1,300,000 206,753
Payments on long-term debt (135,346) (1,657,374) (685,223)
Acquisition of treasury stock (265,125) -- (535,500)
Issuance of treasury stock 175,000 -- --
Net cash provided by (used in)
financing activities 1,743,206 (357,374) (1,013,970)
(Decrease) increase in cash
and equivalents (2,123,476) 48,534 (6,767,966)
Cash and equivalents at
beginning of period 2,872,925 2,824,391 9,592,357
Cash and equivalents at end of period $ 749,449 $ 2,872,925 $ 2,824,391
</TABLE>
See accompanying notes.
25
<PAGE>
NATIONAL CAPITAL MANAGEMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared assuming that National
Capital Benefits Corporation ("NCBC"), an 80% owned subsidiary of the Company,
will continue as a going concern. NCBC has incurred an operating loss of
$1,092,000 since its inception in 1994, has limited cash at December 31, 1994
for use in operations and is thus solely dependent on the Company to provide
cash needed for operating expenses and its share of acquisition costs of
purchased policies that are not able to be fully funded under its revolving
line of credit facility. NCBC has available to it a $10,000,000 revolving line
of credit facility, of which $2,184,242 has been drawn at December 31, 1994.
This line of credit is to provide a portion of the funding for acquisition
costs of insurance policies. However, this line can be used to provide
operating cash to NCBC only to the extent that insurance policy proceeds in
excess of the related loan amounts have been received by the lender. Given the
scientific uncertainty of estimating the remaining life expectancies of the
insured's covered by purchased policies, there can be no assurance that these
policies will mature in accordance with the projected schedule. As such, until
such time as significant proceeds are in fact received on matured policies,
this line will not be able to provide NCBC a significant amount of operating
cash. This potential lack of access to cash to meet operating needs, along
with the lack of a formal commitment from the Company to support cash needs,
raises substantial doubt about NCBC's ability to continue as a going concern.
The Company has no contractual or other obligation to continue the funding of
NCBC. However, management believes that the Company has adequate financial
resources, including the potential for the refinancing or sale of certain
assets, or it may also use other outside sources of financing, if available, to
fund the operational needs of NCBC until such time as NCBC has obtained a break
even level of operations or management of the Company determines that it is in
the Company's best interest not continue such funding. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of NCBC's assets or the
amounts and classifications of liabilities that may result from the outcome of
this uncertainty.
Concentration of Credit Risk
The financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
Management normally does not require collateral and has established reserves
which have historically been adequate to cover any credit losses.
Consolidation Principles
The consolidated financial statements include the accounts of the Company and
all of its majority-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Viatical Settlement Division
Revenue and Cost Recognition - Revenue related to expected insurance proceeds
is recognized by accreting amounts based on 90% of the face value of the
individual insurance policy acquired, over the period from the purchase of the
policy to the date on which an insurance claim may first be filed. Should the
policy mature prior to the filing of an insurance claim, the entire proceeds
will be recognized as revenue at that time, less any amounts previously
accrued.
Costs related to the purchase of insurance policies are recognized through the
amortization of such capitalized costs using the same methodology as in the
recognition of revenue. The costs of insurance premiums related to maintaining
the policies in force are charged to expense as incurred
Purchased Insurance Policies - Purchased insurance policies are stated at cost,
which includes the purchase price, direct costs related to the acquisition of
such policies and direct costs anticipated to be incurred through the date they
can first be submitted to a wholly-owned subsidiary of NCBC, NCB Insurance
Limited ("NCB"), pursuant to an abnormal mortality insurance contract. The
contract provides that NCB will pay NCBC 90% of the death benefit (face value)
of a policy purchased in accordance with established underwriting guidelines if
that policy remains in force at the end of twelve months after the expiration
of the maximum confirmed life expectancy provided by the Insured's Medial
Panelists. NCB has reinsured its risks with an outside group of insurers,
which is composed of a group of large international insurance companies, on
identical terms as the contract with NCBC. Through NCB, NCBC will have a
continuing interest in such reinsured policies to the extent that it shares in
50% of the profits and losses of a pool formed pursuant to NCB's reinsurance
contract.
Restricted Cash - Certain cash held by the Company is restricted as to use
under the terms of certain escrow agreements and the revolving credit facility.
Accordingly, this restricted cash has been classified as such in the
accompanying financial statements.
Amortization - Organization costs are amortized using the straight-line method
over five years. Closing costs relating to origination of revolving credit
facility are amortized over three years using the effective interest method.
Property and Equipment - Property and equipment is stated at cost.
Depreciation is computed using the straight-line and accelerated methods over
the estimated useful lives of the assets. Equipment held under capital leases
and leasehold improvements is amortized on the straight-line method over the
shorter of the lease term or estimated useful life of the asset.
Real Estate Division
Rental Properties - Rental properties are recorded at cost. Land improvements
and buildings and improvements are depreciated on a straight-line basis over
useful lives ranging primarily from 12 to 30 years. Appliances and equipment
are depreciated on a straight-line basis over useful lives ranging primarily
from 3 to 8 years. Recorded amounts are written down to net realizable value
when impairment is considered to be other than temporary.
Maintenance and repairs of rental properties are charged to rental expenses
when incurred. Maintenance and repairs amounted to $317,522, $571,962, and
$330,729 for 1994, 1993, and 1992, respectively. Costs of improvements and
replacements to and rehabilitation of such properties are capitalized. The
costs of properties sold or otherwise disposed of are credited to the asset
accounts, the related accumulated depreciation is removed from the accounts,
and any gains or losses are reflected in operations.
Income recognition on sales of rental properties - Income from sales of rental
properties is recognized when required down payments are received and other
recognition criteria as required by generally accepted accounting principles
are satisfied.
Industrial Products Division
Revenues - The division manufactures and sells laundry equipment and waste
compactor equipment through a network of independent distributors, principally
in the United States and Canada. Revenue is recognized when the products are
shipped. The Company performs periodic credit evaluations of its customers'
financial condition and, generally, no collateral is required.
Inventories - Inventories are valued at the lower of cost (first-in, first-out)
or market. Provisions are made in each period for the effect of obsolete and
slow-moving inventories.
Property and Equipment - Property and equipment is stated at cost.
Depreciation is computed using the straight-line and accelerated methods over
the estimated useful lives of the assets.
Statement of Cash Flows
The Company considers all short-term highly liquid investments purchased with a
maturity of three months or less to be cash and equivalents for purposes of the
Consolidated Statement of Cash Flows.
Cash paid for interest was $749,199, $1,188,144 and $839,849 for 1994, 1993,
and 1992, respectively. The Company paid no material amounts for income taxes
during these years.
During 1994, the Company sold 99.1% of its investment in Redbird Trails
Associates, L.P. and Signature Midwest, L.P. whereby the Company accounts for
its investments using the equity method and, accordingly, two first mortgage
obligations of the Company in the amount of $5,202,698 were eliminated from the
Company's books.
During 1993, the Company sold one real estate property in a transaction in
which the purchaser assumed a first mortgage obligation of the Company in the
amount of $3,659,476. The Company also received a promissory note in the
amount of $938,500 and recognized a gain in the same amount in connection with
the collection of this balance during 1994.
During 1992 the Company incurred and assumed mortgage indebtedness of
$6,943,856 in connection with the acquisition of real estate properties.
Income Taxes
The Company follows the asset and liability approach for financial accounting
and reporting for deferred income taxes in accordance with Statement of
Financial Accounting Standards No. 109. Under this method, the Company
provides taxes based on enacted tax rates in effect on the dates temporary
differences between the book and tax bases of assets and liabilities reverse.
Per Share Amounts
Per share information has been computed based on the weighted average number of
common shares outstanding. Outstanding options and warrants to purchase common
shares have not been included in the computation because their effect would be
antidilutive.
Reclassifications
Certain amounts as presented in prior year financial statements have been
reclassified to conform with the current year presentation.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
For the three-year period ended December 31, 1994, the Company had agreements
with NCM Management Ltd., a company affiliated with Mr. Herbert J. Jaffe,
President and a director of the Company, to provide management services to the
Company. The Company also provided the compensation and benefits of the
president and his assistant and the cost of an office during 1992 and 1993.
Costs incurred under these agreements amounted to $324,163, $353,753 and
$375,156 for 1994, 1993 and 1992, respectively.
James J. Pinto served as Chairmen of the Board of Directors through 1994
pursuant to an employment agreement entered into in 1990, and subsequently
modified effective January 1, 1994. Mr. Pinto was compensated $257,500,
$247,500 and $237,500 for 1994, 1993 and 1992, respectively, pursuant to this
agreement. In addition, Mr. Pinto was provided with certain other employee
benefits. Pursuant to a Consulting Agreement dated as of January 1, 1992, Mr.
Shaw provided services as a consultant to the Company on a nonexclusive basis
through December 31, 1993. This agreement was amended effective January 1,
1994 whereby Mr. Shaw acted in the capacity of Chief Executive Officer through
1994. Mr. Shaw received $257,500 as Chief Executive Officer during 1994
pursuant to the amended agreement, and Resource Holdings Associates ("RHA"), an
affiliated entity of Mr. Shaw, received $247,500 and $237,500 during 1993 and
1992, respectively, pursuant to the Consulting Agreement. The cost of these
agreements was $551,550, $529,674 and $788,087 (including bonuses) for 1994,
1993 and 1992, respectively, plus $96,566, $116,138 and 102,116 during the same
years for certain office expenses and related services incurred for Company
business.
Effective April 1, 1995, Messrs. Pinto and Shaw entered into new agreements
with the Company to act in the same capacities through March 31, 1997, with
options to extend these agreements for one year if certain conditions are met.
They will receive compensation of $125,000 each plus Mandatory Incentive
Bonuses which are based on achieving certain Company operating objectives, plus
Discretionary Bonuses which may be granted at the option of the Board of
Directors. If these agreements are terminated by the Company other than for
cause, disability or death, Messrs. Pinto and Shaw shall be entitled to receive
their base compensation through the existing term.
<PAGE>
NOTE 3 - INVENTORIES
Inventories of the Industrial Products Division consist of the following:
<TABLE>
<CAPTION>
December 31
1994 1993
<S> <C> <C>
Raw materials $ 1,181,247 $ 1,223,892
Work-in-process 513,045 414,392
Finished goods 23,069 172,437
$ 1,717,361 $ 1,810,721
</TABLE>
NOTE 4 - PURCHASED INSURANCE POLICIES
Purchased insurance policies as of December 31, 1994 consist of the following:
<TABLE>
<S> <C>
Costs paid to viator $ 2,727,596
Reinsurance premiums 75,151
Other direct acquisition costs 233,597
Less amortized costs (332,485)
2,703,859
Less current portion 1,942,490
$ 761,369
</TABLE>
NOTE 5 - NOTE RECEIVABLE
On December 30, 1993, the Company sold all of its interests in Quivira Place
Associates, L.P. A portion of the sales proceeds included a promissory note in
the amount of $938,500 that was issued from the buyer to the Company and was
recorded as a deferred gain on the Company's balance sheet at December 31,
1993. This note was collected by the Company on April 15, 1994, and the
deferred gain was recognized as revenue.
<PAGE>
NOTE 6 - REAL ESTATE INVESTMENTS
Rental Properties
Rental properties and related accumulated depreciation consist of the
following:
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Land $ 2,366,507 $ 2,907,857
Buildings and improvements 9,322,620 15,320,447
Machinery and equipment 128,006 125,463
Appliances 69,053 31,094
11,886,186 18,384,861
Less accumulated depreciation (3,128,402) (2,872,392)
$ 8,757,784 $15,512,469
</TABLE>
Quivira Place Apartments. On December 30, 1993, the Company sold all of its
interests in Quivira Place Associates, L.P. ("QPA"), owner of a 289 unit
complex located in Lenexa, Kansas. The sales proceeds included $1,515,000 in
cash, a promissory note in the amount of $938,500 and the buyer's assumption of
the $3,659,476 first deed mortgage secured by the property for a total purchase
price of $6,112,976. The sales price less the carrying value of $4,345,817
generated a total gain of $1,767,159, of which $828,659 was recognized in 1993,
with the balance of $938,500 recognized upon collection of the note on April
15, 1994 (See Note 5).
Redbird Trails Apartments and North Oak Apartments. On June 13, 1994 and
December 8, 1994, in accordance with its previous agreement dated December 30,
1993, the Company sold partnership interests in Redbird Trails Associates, L.P.
("Redbird") and Signature Midwest, L.P. ("Signature"), respectively, to a new
unrelated limited partner and administrative general partner. These partners,
which are related to each other, obtained a 99.1% interest in the existing
equity, profits or losses and low income housing tax credits of the properties
owned by these partnerships for an investment of approximately $1,256,000 and
$769,000 in each partnership plus a $100,000 expense reimbursement. The
Company refinanced the apartment properties owned by these two partnerships on
December 8, 1994 in connection with these transactions. Pursuant to an
agreement with the newly admitted limited partners, the Company retained the
net proceeds of $483,725 from these refinancings. The funds from the new
limited partners and the refinancings were received by the Company during 1994
and 1995, net of $440,000 due to an original limited partner for all its
interests and claims, for a total of approximately $2,100,000. A gain of
$1,203,358 has been recognized on these transactions in 1994. Management has
reviewed the transactions and believes it meets the criteria for gain
recognition in accordance with applicable authoritative accounting guidance.
The Company retained a contingent interest in the cash flows of these
partnerships. It will receive any cash available from property operations, to
the extent it exceeds approximately $61,000 annually, and any refinancing
proceeds up to a total of approximately $4.5 million, plus interest at 9.25%
per annum on the outstanding balance of this amount. Any proceeds of sale will
be allocated, first, 99.1% to the new partners until they have received 135% of
their investment, less any prior distributions. Any remaining proceeds from a
sale will be allocated to the Company up to $6 million, less any distributions
from operations or refinancings pursuant to the discussion above. These
arrangements have not been reflected in the Company's financial statements
since their ultimate realization cannot reasonably be determined. In addition,
at such time as the tax benefits have been utilized, the Company has the right
to purchase the interests of the newly admitted partners for 135% of their
contributed capital (minus prior cash payments). Should the Company choose not
to exercise such right to purchase the partners' interests, the newly admitted
administrative general partner has the right to require the Company to sell all
of the assets and liquidate the partnerships.
The Company retained a .9% interest in each partnership through two wholly-
owned subsidiaries serving as the operating general partners. Such operating
general partners are obligated to provide loans of up to $150,000 and $75,000
to Redbird and Signature, respectively, to fund any operating deficits, as
defined, for a three year period commencing December 8, 1994.
The assets, liabilities and operations of Redbird and Signature have not been
included in the condensed consolidated financial statements of the Company
subsequent to closing these transactions on June 13, 1994 and December 8, 1994,
respectively. The Company has accounted for its investment in and the earnings
of Redbird and Signature using the equity method of accounting since these
dates.
<PAGE>
NOTE 6 - REAL ESTATE INVESTMENTS (Continued)
Minimum Future Lease Rental Income
The Company has noncancelable operating leases with initial terms in excess of
one year with tenants for space in its commercial property. In certain
instances, the tenants are obligated to reimburse the Company for certain
rental expenses, such as maintenance costs and property taxes. Minimum rents
from these noncancelable leases included in property revenue for 1994, 1993 and
1992 were approximately $397,637, $405,983 and $387,299, respectively. Future
minimum rents from tenants under noncancelable operating leases at December 31,
1994 are as follows:
<TABLE>
<S> <C>
1995 $ 398,575
1996 402,875
1997 407,575
1998 364,475
1999 240,488
Thereafter 19,875
$ 1,833,863
</TABLE>
A substantial portion of the Company's real estate property revenue is from
residential rentals under short-term leases.
<PAGE>
NOTE 7 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Mortgage note secured by deed of trust on
The Mart Shopping Center, interest at 10%
payable in monthly installments of principal
and interest of $11,945, due December 1,1997 $1,245,532 $1,272,292
Mortgage note secured by deed of trust on
Appletree Townhouses, interest at 9.125%
payable in monthly installments of principal
and interest of $12,907, due October 1,1995 1,118,458 1,168,761
Mortgage note secured by deed of trust on
Colony Ridge Apartments, interest at 8.75%
payable in monthly installments of principal
and interest of $18,550, due November 30,2003 1,458,272 1,549,324
Mortgage note secured by deed of trust on
Redbird Trails Apartments (sold June 13,1994) -- 3,248,387
Mortgage note secured by deed of trust on
North Oak Apartments (sold December 8,1994) -- 1,978,332
Other 351,971 295,181
4,174,233 9,512,277
Current portion of long-term debt 1,419,078 1,745,895
$ 2,755,155 $ 7,766,382
</TABLE>
At December 31, 1994, the principal portion of long-term debt is payable as
follows:
<TABLE>
<S> <C>
1995 $ 1,419,078
1996 181,650
1997 1,457,906
1998 135,639
1999 147,995
Thereafter 831,965
$ 4,174,233
</TABLE>
<PAGE>
NOTE 8 - INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by FASB
Statement No. 109, "Accounting for Income Taxes". The implementation of
Statement 109 did not have a material impact on the Company's financial
statements.
At December 31, 1994, the Company had federal net operating and capital loss
carryforwards of approximately $6,600,000. The net operating losses will
expire in the various years through December 31, 2009. The Company had state
net operating loss carryforwards of various amounts in the states in which it
operates.
At December 31, 1994, the Company had federal alternative minimum credits of
approximately $13,000. The alternative minimum tax may be carried forward
indefinitely.
Federal and state laws impose limitations on the use of the net operating
losses and tax credits following certain changes in ownership. If such an
ownership change occurs, the limitation could reduce the amount of the benefits
of the net operating losses and credit that would be available to offset future
taxable income starting in the year of the ownership change.
A reconciliation of income tax computed at the federal statutory corporate tax
rate to income tax expense is:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Income taxes at federal
statutory rate (313,493) (34.0) (466,150) (34.0) (635,441) (34.0)
Increase (decrease) in
income taxes
resulting from:
State and local income
taxes, net of federal
tax benefit 20,000 2.1 -- -- (74,010) (4.0)
Amortization of
goodwill and
other intangibles 2,913 0.3 1,256 0.1 1,293 0.1
Change in valuation
allowance 303,534 32.9 464,894 33.9 -- --
Net operating loss
carryover -- -- -- -- 708,158 37.9
Other (12,954) (1.3) -- -- -- --
-- -- -- -- -- --
</TABLE>
<PAGE>
NOTE 8 - INCOME TAXES (Continued)
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's net deferred tax assets as of December 31, 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Deferred tax assets:
Net operating and capital
loss carryforwards $ 2,736,000 $ 1,863,000
Note receivable -- 3,677,000
Inventories 127,000 80,000
Reserves 167,000 146,000
Partnership interest 89,000 90,000
Other, net -- 31,000
3,119,000 5,887,000
Deferred tax liabilities:
Depreciation and amortization 578,000 3,700,000
Other, net 166,000 115,000
744,000 3,815,000
Less valuation allowance (2,375,000) (2,072,000)
Net deferred tax assets $ -- $ --
</TABLE>
The change in the valuation allowance for the year ended December 31, 1994 was
an increase of $303,000.
NOTE 9 - OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Viatical Settlement:
CAPX investment, net $ 258,333 $ --
Deferred acquisition expense 150,000 --
Organization costs, net 108,800 --
Loan fees, net 101,935 --
Other:
Escrow account for capital
improvements -- 216,584
Real estate and insurance impounds 56,368 228,250
Deposits 53,445 94,489
Other 22,006 11,349
$ 750,887 $ 550,672
</TABLE>
<PAGE>
NOTE 10 - OPERATING LEASES
Jensen Corporation, the Company's industrial products subsidiary, leases its
manufacturing facility under an operating lease with a monthly rental of
$17,516 subject to future adjustments based on the consumer price index. The
lease expires in 1999 and provides the Company with options to extend for one
successive term of five years. The Company also has an equipment lease
expiring in 1998. Rental expense for 1994 and 1993 was approximately $229,000
and $200,000, respectively.
National Capital Benefits Corporation, the Company's viatical settlement
subsidiary, leases its office under an operating lease with a monthly rental of
$4,299. The lease expires June 30, 1996. Rental expense for 1994 was
approximately $38,000.
Future minimum lease payments under noncancellable operating leases having
initial terms in excess of a year are as follow:
<TABLE>
<CAPTION>
Operating Lease
<S> <C>
1995 $ 283,147
1996 249,166
1997 220,845
1998 212,313
1999 122,612
Thereafter --
$ 1,088,083
</TABLE>
<PAGE>
NOTE 11 - EMPLOYEE BENEFIT PLAN
The Company's industrial products subsidiary sponsors a 401(k) Profit Sharing
Plan and Trust covering all employees 21 years of age and older with at least
one year of service and who work at least 1,000 hours during a year. The
Company has the option of matching 20% to 50% of employee contributions based
on employee's length of service. There were no Company contributions to the
plan during 1994 or 1993.
NOTE 12 - SHAREHOLDERS' EQUITY
Outstanding warrants and options to purchase shares of the Company's common
stock, together with the related grant and expiration dates as of December 31,
1994 are as follows:
<TABLE>
<CAPTION>
Expiration
Grant Date
Description Shares Price Date December 31,
<S> <C> <C> <S> <S>
Investor Warrants 1,975,000 $3.00 1988 1997
Investor Warrants 214,285 3.50 1988 1997
Management Warrants 40,000 3.00 1988 1997
Director Options 6,000 3.50 1991 1995
Director Options 3,000 3.50 1992 1995
Director Options 3,000 3.50 1993 1996
Consultant Options 25,000 3.50 1990 1996
</TABLE>
All warrants and options were exercisable at December 31, 1994. During 1994,
12,000 shares of director options expired. No other warrants or options were
exercised or expired during the three-year period ended December 31, 1994.
On April 22, 1994, the Company repurchased 212,100 shares of its common stock
for treasury shares at a cost of $265,125. On July 29, 1994, the Company
issued 100,000 shares of its common stock to CAPX Corporation in consideration
for certain assets purchased therefrom.
<PAGE>
NOTE 13 - INDUSTRY SEGMENT INFORMATION
The Company operated in four and three industry segments in 1994 and 1993,
respectively. Industry segment information is as follows:
For the Year Ended December 31, 1994:
<TABLE>
<CAPTION>
Industrial Viatical
Real Estate Products Settlement General
Division Division Division Corporate Total
<S> <C> <C> <C> <C> <C>
Revenues $3,613,978 $5,691,585 $ 621,101 $ 73,533 $ 10,000,197
Operating loss (310,223) (280,295) (1,109,769) (1,383,612) (3,083,899)
Depreciation and
amortization 895,338 18,591 99,338 -- 1,013,267
Gain on sale of
properties 2,141,858 -- -- -- 2,141,858
Capital
expenditures 207,870 11,118 37,734 -- 256,722
Identifiable
assets-
December 31,1994 $9,010,158 $2,899,593 $ 3,962,758 $ 2,027,818 $17,900,327
</TABLE>
For the Year Ended December 31, 1993:
<TABLE>
<CAPTION>
Industrial Viatical
Real Estate Products Settlement General
Division Division Division Corporate Total
<S> <C> <C> <C> <C> <C>
Revenues $ 5,219,325 $7,091,414 $ -- $ 221,760 $12,532,499
Operating loss (685,376) (332,665) -- (1,181,618) (2,199,659)
Depreciation and
amortization 1,245,619 19,491 -- 10,672 1,275,782
Gain on sale of
properties 828,659 -- -- -- 828,659
Capital
expenditures 1,265,441 20,127 -- 1,076 1,286,644
Identifiable
assets-
December 31,1993 $16,330,856 $2,755,327 $ -- $ 3,922,714 $23,008,897
</TABLE>
NOTE 14 - LITIGATION
Jensen Corporation ("Jensen") is a defendant in a number of product
liability lawsuits and other litigation arising out of its operations
and operations of the former owner of Jensen's assets. Given the
nature of Jensen's products, it anticipates that it may be party to
such lawsuits from time-to-time and maintains insurance to provide for
potential claims in an amount equal to $1 million per claim with a
limit of $2 million in the aggregate. Jensen also establishes reserves
deemed adequate to cover an estimated amount which it may be required
to fund with respect to the deductible portion of such loss that must
be borne by Jensen prior to the application of the coverage, which is a
maximum of $100,000 per claim under the existing policy. In the
opinion of management, the resolution of existing claims and litigation
will not have a material adverse impact on the financial position of
the Company.
<PAGE>
NOTE 15 - REVOLVING CREDIT FACILITY
On March 17, 1994, NCBC entered into a revolving credit facility
("Facility") with a credit limit of $10,000,000, which expires March
17, 1997. The Facility is secured by all the assets of NCBC. The
Facility bears interest at 2% over a composite of several large bank
prime rates or the rate on 90 day dealer commercial paper, whichever is
higher, (11% at December 31, 1994), and is subject to a commitment fee
of .625% on the average daily unused amount of the line.
Under the terms of the Facility, the lender will loan NCBC an amount
equal to the lesser of 95% of the cost of insurance policies purchased
(defined as the cost paid to the viator (terminally ill insured), two
years of regular insurance premiums, a one-time reinsurance premium
based on the face value of the policy and third party commissions) or
70% of the face value of the policy. Under the Facility, the insurance
policies purchased by NCBC must meet certain underwriting criteria as
established in the Facility. The lender will evaluate each policy to
be purchased by NCBC to verify compliance with the underwriting
criteria. The Facility requires that NCBC pay two years of regular
premiums and the reinsurance premium on the policy in advance. In some
cases, the insurer will only accept one year's premium payment in
advance; consequently, the Facility reduces the a availability of
advances to the extent of any such premiums which are unpaid.
When an insurance policy matures, the total proceeds are received
directly by the collateral agent of the lender and are applied as a
reduction on the financing line.
The Facility contains financial covenants and other restrictions
related to the use of borrowed cash including limitations on
executives' compensation, dividends and payments to affiliates.
<PAGE>
Item 8 - Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure
Not Applicable
<PAGE>
PART III
Item 9 - Directors, Executive Officers, Promoters, and Control Persons;
Compliance With Section 16(a) of the Exchange Act
At March 23, 1995, there were five directors on the Company's Board of
Directors, two of which are also executive officers of the Registrant.
The principal occupations and affiliations during the last five years
of the directors and executive officers are described in the following
table. Each director's term of office expires at the next meeting of
shareholders following his election and upon the election and
qualification of his successor. The executive officers serve at the
pleasure of the Board of Directors.
James Pinto Chairman since NCMC
Chairman of the Board 1989
Age 43
Director since 1988 Director Biscayne Holdings, Inc.
(apparel manufacturer
and distributor)
Director Anderson Group, Inc.
(dental and
electronics)
John C. Shaw Chief Executive NCMC
Director and Officer since 1994
Chief Executive
Officer Managing Director Resource Holdings, Ltd.
Age 41 since 1983 (investment firm)
Director since 1988
1989 to 1992 Co- NCMC
Chairman
Trustee Wedgestone Financial
(diversified lender and
truck parts
manufacturer)
Herbert J. Jaffe President since NCMC
Director and President 1988
Age 60
Director since 1987 1983-93 Chairman NCM Management Ltd.
(management company of
NCMC)
Leslie A. Filler Chief Financial NCMC
Chief Financial Officer
Officer since September
Age 42 1991
Chief Financial NCM Management Ltd.
Officer (management company)
since 1988
Timothy Graham 1994-1995 WinStar Communications,
Director Executive Vice Inc.
Age 44 President (communications, media,
Director since retail)
December 1994
1991-1994 NCMC
Corporate
Secretary
1989-1991 WinStar Services, Inc.
Executive (retail,
Vice President and communications)
General Counsel
Director TII Industries, Inc.,
(telecommunications and
power line equipment)
David Faulkner 1989-1995 Vice Memorex Telex Inc.
Director Chairman/CFO (computer industry)
Age 54
Director since July
1994
James H. Carey Chief Executive NCBC
Chief Executive Officer
Officer since March 1994
NCBC
Age 62 1991 to 1994 Briarcliff Financial
Managing Director Associates
1989 to 1991 The Berkshire Bank
President and
Chief Executive
Officer
1987 to 1989 JFTA Services Corp.
Chairman (financial advisory
firm)
Kenneth M. Klein President and NCBC
President and Chief Chief Operating
Operating Officer Officer since
NCBC March 1994
Age 56
1991 to 1994 Private Practice
Attorney
1988 to 1991 Amivest Corporation
Senior Vice
President
Howard Eglowstein Chief Operating Jensen Corporation
Chief Operating Officer since May
Officer- 1993
Jensen Corporation
Age 60 1989-1993 Jensen Corporation(1)
Executive Vice
President
(1) Mr. Eglowstein was the executive vice president of the former
owner of the assets of Jensen Corporation prior to and during the
former owner's bankruptcy.
<PAGE>
Item 10 - Executive Compensation
The following table sets forth information in respect to the
compensation of the Chief Executive Officer and each of the other
four most highly compensated executive officers of NCMC for
services in all capacities to the Corporation and its
subsidiaries in 1994, 1993 and 1992.
<TABLE>
<CAPTION>
Annual Compensation
Other Annual
Year Salary Bonus Compensation
<S> <S> <C> <C> <C>
John C. Shaw 1994 257,500 -- 4,000
Chief Executive 1993 247,500 -- 9,000
Officer 1992 237,500 142,000 8,750
James Pinto 1994 257,500 -- 4,000
Chairman 1993 247,500 -- 9,000
1992 237,500 142,000 8,750
Herbert J. Jaffe 1994 100,000 10,000 4,000
President and 1993 100,000 -- 9,000
Chief Officer 1992 100,000 60,000 8,750
Operating
James H. Carey 1994 125,000 -- 8,333
Chief Executive
Officer
NCBC
Ken M. Klein 1994 125,000 -- 8,333
President and Chief
Operating Officer
NCBC
</TABLE>
The Company presently provides various non-cash benefits to its
executive officers, but it does not believe, except as noted,
that such benefits exceeds the lesser of $50,000 or 10% of the
cash compensation set forth for each of the executive officers of
the proceeding cash compensation table.
Mr. Pinto is employed as Chairman of the Company under an amended
non-exclusive agreement which was effective January 1, 1994. He
was compensated at the base annual rate of $257,500 in 1994.
From January 1, 1995 through March 31, 1995 his base annual
compensation was lowered to $195,000, whereby he received $48,750
for this three month period pursuant to this agreement.
Mr. Shaw, who served as a consultant to the Company pursuant to a
non-exclusive Consulting Agreement until December 31, 1993,
entered into an amended non-exclusive agreement to act in the
capacity of Chief Executive Officer of the Company from January
1, 1994 under the same terms as Mr. Pinto.
Effective April 1, 1995, Messrs. Pinto and Shaw entered into new
agreements with the Company to act in the same capacities through
March 31, 1997, with options to extend these agreements for one
year if certain conditions are met. They will receive
compensation of $125,000 each plus Mandatory Incentive Bonuses
which are based on certain Company operating objectives, plus
Discretionary Bonuses which may be granted at the option of the
Board of Directors. If these agreements are terminated by the
Company other than for cause, disability or death, Messrs. Pinto
and Shaw shall be entitled to receive their base compensation
through the existing term.
Pursuant to an agreement between the Company and NCM Management
Ltd., Mr. Jaffe is entitled to receive $8,333 per month plus
health benefits. See Item 12 - Certain Relationships and Related
Transactions.
The bylaws of the Company provide for indemnification by it of
its officers and directors to the fullest extent permitted by
law.
During 1994, members of the Board of Directors received quarterly
compensation of $2,000 and $250 for each meeting attended.
Beginning July 1, 1994, however, Directors who are either
employees, officers or consultants of the Company will not
compensated and will not receive meeting fees. Directors are
entitled to be reimbursed for reasonable out of pocket expenses
incurred with respect to meetings of the Board. Since 1989, the
Company has followed a policy of awarding each director, who is
not an employee, officer or consultant of the Company, Options to
purchase 3,000 shares of NCMC Common Stock at $3.50 per share,
for each year in which each such individual is elected to serve
as a director of the Company. No options were awarded in
connection with this policy during 1994.
<PAGE>
Item 11 - Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information regarding the
beneficial ownership of NCMC common stock as of March 30, 1995, by:
(i) each person known by the Company to own beneficially more than 5%
of the shares of NCMC common stock (ii) each person who is a director
or executive officer of the Company; and (iii) all directors and
executive officers of the Company as a group.
The Investor Warrants referred to below consist of warrants to
acquire an aggregate of 2,189,285 shares of NCMC common stock, at any
time prior to December 31, 1997. Of the aggregate Investor Warrants,
1,975,000 permit acquisition of shares of NCMC common stock at an
exercise price of $3.00 per share (the "$3.00 Investor Warrants") and
214,285 permit acquisition of shares of NCMC common stock at an
exercise price of $3.50 per share (the "$3.50 Investor Warrants").
The Management Warrants, referred to below, consist of warrants to
acquire an aggregate of 400,000 shares of NCMC common stock at any
time prior to December 31, 1997 for an exercise price of $3.00 per
share. The Management Warrants and the Investor Warrants are
collectively referred to as the Warrants.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
of NCMC Common Stock(1) of NCMC Common Stock(2)
Name and address of NCMC Number of Percent Number of Percent
Beneficial Owner (3) Shares of Class Shares of Class
<S> <C> <C> <C> <C>
RHEC, L.P. 1,166,044 23.2% 2,273,186(4) 29.7%
10 East 53rd Street
New York, NY 10022
The Hawley Opportunity 428,086(5) 8.5% 603,086(6) 7.9%
Fund, L.P.
c/o Hawley and Wright,Inc.
6053 S. Quebec Creekside 202
Englewood, CO 80111
Larry D. Doskocil 289,435(7) 5.8% 517,940 6.8%
500 North Main Street
South Hutchinson, KS
67504
Herbert J. Jaffe 34,536(8) 0.7% 154,536(9) 2.0%
James Pinto 310,706 6.2% 942,344(10) 12.3%
John C. Shaw 1,216,684(11) 24.2% 2,323,826(11) 30.4%
Timothy R. Graham 62,000 1.2% 91,500(13) 1.2%
Leslie A. Filler 2,500 0.05% 2,500 0.03%
James H. Carey --(14) -- --(14) --
Kenneth M. Klein --(14) -- --(14) --
All executive officers
and directors as a group
(7 persons) 1,626,426(15) 32.4% 3,514,706(16) 45.9%
</TABLE>
NOTES TO TABLE OF BENEFICIAL OWNERS AND MANAGEMENT
1. This column assumes that none of the Warrants or Options
have been exercised.
2. This column assumes that all of the Warrants and Options
have been exercised.
3. Unless otherwise indicated, each shareholder listed has
the sole power to vote and direct the disposition of the
shares of the Company beneficially owned by such
shareholder.
4. Includes 1,107,142 shares of NCMC common stock which may
be issued upon the exercise of Investor Warrants. Mr.
Shaw, a director of the Company, is a managing director of
Resource Holdings, Ltd., the general partner of RHEC, L.P.
5. Hawley and Wright, Inc. and Mr. MacDonald Hawley may be
deemed to also beneficially own these shares by virtue of
Hawley and Wright, Inc. being the general partner of the
Hawley Opportunities Fund, L.P. and Mr. MacDonald Hawley
being the president and controlling shareholder of Hawley
and Wright, Inc.
6. Includes 175,000 shares of NCMC common stock issuable upon
exercise of Investor Warrants.
7. Based on information received by the Company from Mr.
Doskocil, his aggregate ownership of NCMC securities
consisted on December 31, 1994, of indirect beneficial
ownership of 289,435 shares of Common Stock and 517,940
Investor Warrants owned by QCP, L.P., a Kansas limited
partnership which Mr. Doskocil may be deemed to control
through his ownership and control of QMC, Inc., the
corporate general partner of QCP, L.P.
8. Includes 34,136 shares owned by NCM Holdings, a general
partnership of which Mr. Jaffe is a general partner, and
400 shares owned directly by Mr. Jaffe.
9. Includes 120,000 shares of NCMC common stock issuable on
exercise of Management Warrants, 34,136 shares owned by
NCM Holdings and 400 shares owned directly by Mr. Jaffe.
10.Includes 310,706 shares owned directly by Mr. Pinto and
631,638 shares upon exercise of Investor Warrants.
11.Mr. Shaw is a managing director of Resource Holdings,
Ltd., the general partner of RHEC, L.P. Except for 50,640
shares owned directly by Mr. Shaw, the shares of NCMC
common stock shown as beneficially owned by Mr. Shaw are
the same shares shown as beneficially owned by RHEC, L.P.
12.Includes 15,000 Options.
13.Includes 62,000 shares owned directly by Mr. Graham,
25,000 Consultant Options and 4,500 Investor Options.
14.James Carey, an executive officer of National Capital
Benefits Corporation ("NCBC"), owns 5.5% of the
outstanding common shares of NCBC. The VFC Trust, for
which Kenneth Klein, an executive officer of NCBC, serves
as sole Trustee, owns 14.5% of the outstanding common
shares of NCBC. Pursuant to the terms of a stockholders'
agreement among these investors and the Company, these
shares, under certain circumstances, may be converted into
shares of the Company in 1997 at a then-appraised value.
15.Includes 1,200,180 shares of NCMC common stock owned by
NCM Holdings and RHEC, L.P.
16.Includes 1,200,180 shares of NCMC common stock owned by
NCM Holdings and RHEC, L.P., and 1,897,280 shares of NCMC
common stock issuable on exercise of all the Warrants and
the Options.
Item 12 - Certain Relationships and Related Transactions
The Company and NCM Management Ltd. ("NCM") have agreed that NCM
will provide management services through March 1995 and provide
personnel, equipment and facilities for the day to day management
and operations of the Company including supervision of its real
estate properties. As compensation for its services, NCM is
receiving a monthly payment of $8,333 plus management fees of 4% of
revenues from the properties other than Redbird Trails Apartments
and North Oak Apartments for which it receives a management fee of
6%. In addition, Mr. Jaffe is provided health insurance benefits.
Mr. Jaffe, a director and officer of the Company, is chairman and
owns approximately 33% of the outstanding capital stock of NCM and
may be deemed to have a material interest in all payments to NCM.
During 1994, NCM received an aggregate of $324,163 for management
services rendered to the Company, including therein Mr. Jaffe's
compensation.
In 1994, Resource Holdings, Ltd. ("Resource") provided office space
and related services at its principal office in New York City for
Mr. John C. Shaw and for use by officers and directors of NCMC
while in New York, including Mr. James Pinto and Mr. Jaffe.
Resource was reimbursed by the Company in an amount equal to
$75,492 for providing such office space and related services in
1994. In addition, in accordance with its agreement with Resource,
the Company has deposited with Resource's landlord the amount of
$37,746 which will be returned, plus interest, to the Company on
termination of the lease. Mr. Shaw, a director of the Company, is
a managing director and significant shareholder of Resource, and
therefore may be deemed to have an interest in payments to
Resource.
Stock Transaction Reports by Officers, Directors and 10%
Stockholders
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and holders of
more than 10% of the Company' common stock to file with the
Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the
Company. To the Company's knowledge, based solely on copies of
reports furnished to the Company and information furnished by the
reporting persons, each officer, director and 10% stockholder of
the Company, with one exception, was in compliance with all
reporting requirements under Section 16(a) for the year ended
December 31, 1994. Mr. John C. Shaw, a director and officer of the
Company filed in January 1995 on Form 4 with respect to the
purchase of 40,000 shares of the Company's stock at $1.25 per share
during November 1994.
PART IV
Item 13 - Exhibits and Reports on Form 8-K
The following documents are filed as part of this report:
(a) Exhibits:
3. Articles of Incorporation and By-Laws of
National Capital Management Corporation (the "Company"
or "NCMC") (incorporated by reference from Schedule 4
to the Prospectus included in the Registration
Statement on Form S-4 of the Company (No. 33 19149)
filed on December 18, 1987 (the "Registration
Statement")).
3(ii).1 Resolution of Board of Directors amending
NCMC By-Laws dated April 12,1995.
3(ii).2Consent to Action of Directors Without a Meeting
4.1 Form of Warrant for 2,400,000 shares of NCMC
common stock (incorporated by reference from Exhibit
4.1 of the Annual Report on Form 10-K of the Company
filed on March 29, 1988).
4.2 Form of Warrant for 214,285 shares of NCMC common
stock (incorporated by reference from Exhibit 4.2 of
the Annual Report on Form 10-K of the Company filed on
March 29, 1988).
10.1 Registration Agreement dated February 25, 1988
between NCMC and certain other persons (incorporated
by reference from Exhibit 10.3 of the Annual Report on
Form 10-K of the Company filed on March 29, 1988).
10.2 Employment Agreement dated September 1, 1990
between James J. Pinto and NCMC (incorporated by
reference from Exhibit 10.4 of the Annual Report on
Form 10-K of the Company filed on April 1, 1991).
10.3 Amended and Restated Employment Agreement dated
as of June 15, 1994 between James J. Pinto and NCMC.
10.4 Agreement dated as of April 1, 1995 between James
J. Pinto and NCMC.
10.5 Consulting Agreement dated January 1, 1992
between John C. Shaw and NCMC (incorporated by
reference from Exhibit 10.5 of the Annual Report on
Form 10-K of the Company filed on April 15, 1992).
10.6 Amended and Restated Employment Agreement dated
as of June 15, 1994 between John C. Shaw and NCMC.
10.7 Agreement dated as of April 1, 1995 between John
C. Shaw and NCMC.
10.8 Redbird Trails Associates Limited Partnership
Agreement among NCQ Realty, Inc., Kelcor, Inc. and DLJ
Enterprises, Inc. (incorporated by reference from
Exhibit 10.1 of the Current Report on Form 8-K of the
Company filed on June 23, 1992).
10.9 Amended and Restated Agreement of Limited
Partnership among Redbird Trails Associates, L.P., NCQ
Realty, Inc., Kelcor, Inc., National Corporate Tax
Credit Fund and National Corporate Tax Credit, Inc.
dated as of January 1, 1993 (incorporated by reference
from Exhibit 10.12 of the Annual Report on Form 10-KSB
of the Company filed on March 31, 1994).
10.10 First Amendment to Amended and Restated
Agreement of Limited Partnership of Redbird Trails
Associates, L.P. among NCQ Realty, Inc., National
Corporate Tax Credit Fund and National Corporate Tax
Credit, Inc. dated as of January 1, 1993 (incorporated
by reference from Exhibit 10.6 of the Quarterly Report
on Form 10-QSB of the Company filed on August 15,
1994).
10.11 Second Amended and Restated Agreement of
Limited Partnership of Redbird Trails Associates, L.P.
by and among NCQ Redbird, Inc. National Corporate Tax
Credit Fund and National Corporate Tax Credit, Inc.
dated as of November 23, 1994.
10.12 Investment Agreement among Redbird Trails
Associates, L.P., NCQ Realty, Inc., Kelcor, Inc.,
National Corporate Tax Credit Fund and National
Corporate Tax Credit, Inc. dated as of January 1, 1993
(incorporated by reference from Exhibit 10.11 of the
Annual Report on Form 10-KSB of the Company filed on
March 31, 1994).
10.13 Security Agreement between NCQ Realty,
Inc. and National Corporate Tax Credit Fund dated as
of January 1, 1993 (incorporated by reference from
Exhibit 10.2 of the Quarterly Report on Form 10-QSB of
the Company filed on August 15, 1994).
10.14 Indemnity Agreement between Redbird Trails
Associates, L.P. and National Corporate Tax Credit
Fund (incorporated by reference from Exhibit 10.4 of
the Quarterly Report on Form 10-QSB of the Company
filed on August 15, 1994).
10.15 Letter agreement regarding the date
of admission of the Limited Partner among NCQ Realty,
Inc., DLJ Enterprises, Inc., National Capital
Management Corporation, National Corporate Tax Credit
Fund and National Corporate Tax Credit, Inc.
(incorporated by reference from Exhibit 10.5 of the
Quarterly Report on Form 10-QSB of the Company filed
on August 15, 1994).
10.16 Operating Deficit and Rental Achievement
Agreement among Redbird Trails Associates, L.P.,
National Capital Management Corp., National Corporate
Tax Credit Fund and National Corporate Tax Credit,
Inc. dated as of June 6, 1994 (incorporated by
reference from Exhibit 10.7 of the Quarterly Report on
Form 10-QSB of the Company filed on August 15, 1994).
10.17 Letter agreement among NCQ Realty, Inc.,
National Corporate Tax Credit Fund, National Corporate
Tax Credit, Inc. dated June 6, 1994 which amends the
Investment Agreement among Redbird Trails Associates,
L.P., NCQ Realty, Inc., Kelcor, Inc., National
Corporate Tax Credit Fund and National Corporate Tax
Credit, Inc. dated as of January 1, 1993 (incorporated
by reference from Exhibit 10.9 of the Quarterly Report
on Form 10-QSB of the Company filed on August 15,
1994).
10.18 Signature Midwest, L.P., Limited Partnership
Agreement among NCQ Realty, Inc., Kelcor, Inc. and DLJ
Enterprises, Inc. (incorporated by reference from
Exhibit 10.1 of the Current Report on Form 8-K of the
Company filed on July 23, 1992).
10.19 Amended and Restated Agreement of Limited
Partnership among Signature Midwest, L.P., NCQ Realty,
Inc., Kelcor, Inc., National Corporate Tax Credit Fund
and National Corporate Tax Credit, Inc. dated as of
January 1, 1993 (incorporated by reference from
Exhibit 10.9 of the Annual Report on Form 10-KSB of
the Company filed on March 31, 1994).
10.20 Second Amended and Restated Agreement of
Limited Partnership of Signature Midwest, L.P. by
and among NCQ North Oak, Inc. National Corporate Tax
Credit Fund and National Corporate Tax Credit, Inc.
dated as of November 23, 1994.
10.21 Investment Agreement among Signature
Midwest, L.P., NCQ Realty, Inc., Kelcor, Inc.,
National Corporate Tax Credit Fund and National
Corporate Tax Credit, Inc. dated as of January 1, 1993
(incorporated by reference from Exhibit 10.8 of the
Annual Report on Form 10-KSB of the Company filed on
March 31, 1994).
10.22 Operating Deficit and Rental Achievement
Agreement among Signature Midwest, L.P., National
Capital Management Corp., National Corporate Tax
Credit Fund and National Corporate Tax Credit, Inc.
dated as of November 23, 1994.
10.23 Security Agreement between NCQ North Oak,
Inc. and National Corporate Tax Credit Fund dated as
of November 23, 1994.
10.24 Letter agreement among Signature Midwest,
L.P., National Corporate Tax Credit Fund and National
Corporate Tax Credit, Inc. dated November 23, 1994
which amends the Investment Agreement by and among NCQ
Realty, Inc., National Corporate Tax Credit Fund and
National Corporate Tax Credit, Inc. dated as of
January 1, 1993.
10.25 Indemnity Agreement between Signature
Midwest, L.P., NCQ Realty, Inc. and National Corporate
Tax Credit Fund dated December 30, 1993.
10.26 Employment Agreement dated as of March 1,
1994 between NCMC and James H. Carey (incorporated by
reference from Exhibit 10.14 of the Annual Report on
Form 10-KSB of the Company filed on March 31, 1994).
10.27 Employment Agreement dated as of March 1,
1994 between NCMC and Kenneth M. Klein (incorporated
by reference from Exhibit 10.15 of the Annual Report
on Form 10-KSB of the Company filed on March 31,
1994).
10.28 Stockholders' Agreement by and between James
H. Carey, The VFC Trust, NCMC and National Capital
Benefits Corporation ("NCBC") (incorporated by
reference from Exhibit 10.16 of the Annual Report on
Form 10-KSB of the Company filed on March 31, 1994).
10.29 $10 million Revolving Credit Facility by and
between NCBC and Transamerica Lender Finance, a
division of Transamerica Credit Corporation.
(incorporated by reference from Exhibit 10.17 of the
Annual Report on Form 10-KSB of the Company filed on
March 31, 1994).
10.30 Collateral Assignment of Insurance Contract
and Form of Abnormal Mortality Stop Loss Policy by and
between NCBC and NCB Insurance, Ltd. (incorporated by
reference from Exhibit 10.18 of the Annual Report on
Form 10-KSB of the Company filed on March 31, 1994).
10.31 Collateral Assignment of Reinsurance
Contract and Form of Abnormal Mortality Stop Loss
Reinsurance Contract (incorporated by reference from
Exhibit 10.19 of the Annual Report on Form 10-KSB of
the Company filed on March 31, 1994).
10.32 Subordination Agreement by and between NCBC
and NCMC dated as of March 17, 1994 (incorporated by
reference from Exhibit 10.20 of the Annual Report on
Form 10-KSB of the Company filed on March 31, 1994).
10.33 Collateral Agency Agreement by and between
NCBC and Bankers Trust Company as Collateral Agent
(incorporated by reference from Exhibit 10.22 of the
Annual Report on Form 10-KSB of the Company filed on
March 31, 1994).
10.34 Withdrawal, Release and Purchase Agreement
by and among National Tax Credit Investors II,
National Tax Credit, Inc. II, Quivira Place
Associates, L.P., NCQ Realty, Inc., NCMC, DLJ
Enterprises, Inc. and David L. Johnson dated December
30, 1993 (incorporated by reference from Exhibit 10.23
of the Annual Report on Form 10-KSB of the Company
filed on March 31, 1994).
10.35 Secured Promissory Note issued by
National Tax Credit Investors II in favor of NCMC in
the amount of $938,500, dated December 30, 1993
(incorporated by reference from Exhibit 10.24 of the
Annual Report on Form 10-KSB of the Company filed on
March 31, 1994).
10.36 Asset Purchase Agreement between CAPX
Corporation, National Capital Benefits Corp. and
National Capital Management Corporation dated July 29,
1994 (incorporated by reference from Exhibit 10.10 of
the Quarterly Report on Form 10-QSB of the Company
filed on August 15, 1994).
10.37 Registration Rights Agreement by and
between National Capital Management Corporation and
CAPX Corporation dated as of July 29, 1994
(incorporated by reference from Exhibit 10.11 of the
Quarterly Report on Form 10-QSB of the Company filed
on August 15, 1994).
10.38 Services Agreement between CAPX
Corporation and National Capital Benefits Corporation
dated July 29, 1994 (incorporated by reference from
Exhibit 10.12 of the Quarterly Report on Form 10-QSB
of the Company filed on August 15, 1994).
10.39 Letter of Agreement dated April 21,
1994, to repurchase 212,100 shares of common stock of
National Capital Management Corporation ("NCMC"), by
and between Deerfield Ltd., Shoebox Investments, L.P.,
Jonathan Schwartz, Marcella Fischer and NCMC
(incorporated by reference from Exhibit 10.1 of the
Quarterly Report on Form 10-QSB of the Company filed
on May 16, 1994).
10.40 Subsidiaries of NCMC (including controlled
partnerships).
(b) None
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.
NATIONAL CAPITAL MANAGEMENT CORPORATION
By:/s/ Herbert J. Jaffe
Herbert J. Jaffe, President
By:/s/ Leslie A. Filler
Leslie A. Filler
Principal Financial Officer and
Principal Accounting Officer
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 and on the dates
indicated:
By:/s/ Herbert J. Jaffe
Herbert J. Jaffe
President and Director
April 14, 1995
By:/s/ James Pinto
James Pinto, Director
April 14, 1995
By:/s/ John C. Shaw
John C. Shaw, Director
April 14, 1995
By:/s/ Timothy R. Graham
Timothy R. Graham, Director
April 14, 1995
By:/s/ David Faulkner
David Faulkner, Director
April 14, 1995
