<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 0-18270
COMMAND CREDIT CORPORATION
(Exact name of the registrant as specified in its charter)
NEW YORK 11-2857523
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Garden City Plaza
Garden City, New York 11530
(Address of principal executive offices)
(516) 739-8800
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 7, 1996, 15,779,781. This amount reflects a One Hundred Fifty
(150) to One (1) reverse stock split effective October 27, 1995.
Transitional Small Business Disclosure Format (check one):
Yes ___ No X
<PAGE>
PART 1: Financial Information
ITEM 1: Financial Statements
COMMAND CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
(UNAUDITED)
March 31
1996
-----------
Current Assets:
Cash and Cash Equivalents (Note 2) $ 10,425
Accounts Receivable (Note 3) 120,842
Notes Receivable (Note 4) 10,360,000
Prepaid Expenses (Note 5) 1,756,921
Interest Receivable (Note 6) 420,900
Stock Subscriptions Receivable (Note 7) 597,332
-----------
Total Current Assets 13,266,420
-----------
Fixed Assets:
Equipment 574,675
Furniture & Fixtures 158,096
Leasehold Improvements 225,003
-----------
957,774
Less: Accumulated Depreciation
and Amortization 726,727
-----------
Total Net Fixed Assets 231,047
-----------
Other Assets:
Investment in Subsidiaries (Note 8) 366,576
Investments (Note 9) 25,249
Organization Expenses 305
Computer Software 53,302
Goodwill 94,963
Security Deposits 39,241
-----------
Total Other Assets 579,636
-----------
Total Assets $14,077,103
===========
The accompanying notes are an integral part of this report.
F-1
<PAGE>
COMMAND CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
LIABILITIES & SHAREHOLDERS' EQUITY
(UNAUDITED)
March 31
1996
------------
Current Liabilities:
Accounts Payable & Accrued Expenses (Note 10) $ 783,165
Leases Payable 20,888
Taxes Payable (Note 11) 362,253
Notes Payable (Note 12) 211,088
Salaries Payable (Note 13) 113,750
Loans Payable (Note 12) 435,395
------------
Total Current Liabilities 1,926,539
------------
Long Term Liabilities:
Leases Payable 35,038
Notes Payable (Note 12) 811,259
------------
Total Long Term Liabilities 846,297
------------
Total Liabilities 2,772,836
------------
Shareholders' Equity: (Note 14)
Common Stock - Authorized
150 Mill. shares, $.0001 par
value, 14,454,225 issued
and 14,033,941 outstanding at 03/96 1,445
Paid-In-Capital in Excess of
Par Value 48,129,499
Paid-In-Capital from
Treasury Stock 946,434
Paid-In-Capital from Warrants
Exercised 902,389
Translation Adjustment 5,528
Retained Earnings(Deficit) (37,807,823)
------------
Total Shareholders' Equity 12,177,472
Less: Treasury Shares at Cost 873,205
------------
Net Shareholders' Equity 11,304,267
------------
Total Liabilities and
Shareholders' Equity $ 14,077,103
============
The accompanying notes are an integral part of this report.
F-2
<PAGE>
COMMAND CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31 MARCH 31 MARCH 31 MARCH 31
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Operating Revenue $ 244,323 $ 158,787 $ 614,997 $ 570,322
Interest Income 304,165 369 304,165 21,368
------------ ------------ ------------ ------------
Total Revenue 548,488 159,156 919,162 591,690
------------ ------------ ------------ ------------
Operating Expenses:
Selling Expenses (Schedule I) 1,016,882 844,337 8,844,055 1,861,200
Administrative Expenses (Schedule II) 865,052 492,018 2,067,171 1,575,141
Taxes 48,514 28,138 142,764 77,645
------------ ------------ ------------ ------------
Total Operating Expenses 1,930,448 1,364,493 11,053,990 3,513,986
------------ ------------ ------------ ------------
Net (Loss) from Operations ($ 1,381,960) ($ 1,205,337) ($10,134,828) ($ 2,922,296)
Non-Operating & Non-Recurring:
(Loss) on Investment -0- (75,825) (2,095,293) (253,786)
Gain on Investrment 98,831 -0- 98,831 -0-
Bad Debt Expense -0- -0- (671,813) -0-
------------ ------------ ------------ ------------
Net (Loss) ($ 1,283,129) ($ 1,281,162) ($12,803,103) ($ 3,176,082)
============ ============ ============ ============
Net (Loss) per Outstanding
Common Share (Note 15) ($0.43)* ($0.03) ($1.72)* (0.08)
============ ============ ============ ============
</TABLE>
* NOTE: This amount reflects a One Hundred Fifty (150) to One (1) reverse stock
split effective October 27, 1995.
The accompanying notes are an integral part of this report.
F-3
<PAGE>
COMMAND CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 MARCH 31
1996 1995
------------ ------------
<S> <C> <C>
Cash Flow from Operations:
- -------------------------
Net (Loss) ($12,803,103) ($ 3,176,082)
Adjustments to Reconcile Net Loss
to Net Cash Provided by Operations
Depreciation & Amortization (236,059) 274,638
Increase (Decrease) in:
Accounts Payable (546,254) 557,468
Leases Payable (50,946) 48,222
Taxes Payable (130,807) 284,374
Notes Payable 351,273 460,624
Salaries Payable 30,833 -0-
Loans Payable 263,769 -0-
(Increase) Decrease in:
Accounts Receivable 164,272 (148,626)
Notes Receivable (10,000,000) -0-
Prepaid Expenses (1,737,613) 49,504
Interest Receivable (300,000) (20,904)
Stock Subscriptions Receivable -0- 1,495,250
Organization Expenses 30,220 (21,757)
Computer Software (5,890) (50,771)
Security Deposits (5,000) (1,769)
------------ ------------
Net Cash Used (Provided) by Operations (24,975,305) (249,829)
------------ ------------
Cash Flow from Financing Activities:
- -----------------------------------
Proceeds from Issuance of Common Stock 20,988,222 4,560,720
Purchase of Treasury Stock (253,505) (1,750)
Retained Earnings Liquidated Subsidiaries 1,215,564 -0-
Investment in Subsidiaries 1,630,881 (3,712,444)
------------ ------------
Net Cash Flow from Financing Activities 23,581,162 846,526
------------ ------------
Cash Flow from Investing Activities:
- -----------------------------------
Capital Expenditures Paid in Cash 379,191 (354,457)
Translation Adjustment (14,032) 684
Bank/Data Center Acquisition 260,993 -0-
Goodwill 307,428 10,684
Investments 242,890 (174,166)
------------ ------------
Net Cash Provided (Used) by Investing Activities 1,176,470 (517,255)
------------ ------------
Net (Decrease) Increase in Cash and Cash Equivalents (217,673) 79,442
Cash and Cash Equivalents Beginning of Period 228,098 107,561
------------ ------------
Cash and Cash Equivalents End of Period $ 10,425 $ 187,003
============ ============
</TABLE>
The accompanying notes are an integral part of this report.
F-4
<PAGE>
COMMAND CREDIT CORPORATION AND SUBSIDIARIES
SUPPORTING SCHEDULES
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31 MARCH 31 MARCH 31
SCHEDULE I 1996 1995 1996 1995
- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Selling Expenses:
Salaries & Outside Services $ 53,342 $ 129,346 $ 158,459 $ 218,397
Travel & Entertainment 88,076 67,355 190,787 200,301
Telephone 28,119 27,771 69,160 62,190
Advertising 6,512 9,407 10,994 23,980
Consulting 328,726 109,445 2,773,938 678,334
Commissions 82,811 5,049 240,495 22,879
Marketing Expenses 86,458 252,926 1,555,748 378,843
Processing Charges 9,220 -0- 26,941 -0-
Public Relations 327,118 238,932 3,810,933 245,385
Trade Shows 6,500 4,106 6,600 30,891
---------- ---------- ---------- ----------
Total Selling Expenses $1,016,882 $ 844,337 $8,844,055 $1,861,200
========== ========== ========== ==========
<CAPTION>
SCHEDULE II
- -----------
<S> <C> <C> <C> <C>
Administrative Expenses:
Salaries & Outside Services $ 243,498 $ 212,963 $ 748,907 $ 756,355
Professional Fees 413,474 40,651 602,662 276,615
Office Expenses 16,723 2,996 40,214 16,031
Stock Transfer Fees 4,753 19,656 106,095 22,844
Rent 55,643 35,985 148,503 95,085
Stationery, Messenger, Printing & Postage 23,026 20,546 60,696 68,081
Insurance 31,764 33,403 106,298 76,050
Maintenance & Sanitation 8,697 10,164 20,107 19,938
Building & Equipment Leasing 7,688 22,105 29,290 46,631
Depreciation & Amortization 29,910 58,075 95,607 125,886
Utilities & Sundry Expenses 5,625 18,570 34,988 47,074
Interest Expense 24,251 3,143 73,804 4,131
Relocation Expense -0- -0- -0- 466
Meeting Expense -0- 13,761 -0- 19,954
---------- ---------- ---------- ----------
Total Administrative Expenses $ 865,052 $ 492,018 $2,067,171 $1,575,141
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this report.
F-5
<PAGE>
COMMAND CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 1996 & 1995
(UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) Method of Accounting: Command Credit Corporation ("Command") utilizes the
accrual method of accounting in recording all transactions.
B) Consolidation: Command Credit Acceptance Corporation ("Acceptance") was
incorporated in Florida on September 9, 1985. On October 12, 1988, Acceptance
was acquired by Video Plan International Corp. ("VPI"), a New York corporation
with virtually no business activity since 1980. Simultaneously, VPI changed its
name to Command Credit Corporation ("Command"). Results of operations of Command
and its subsidiaries are reported on a consolidated basis.
C) Foreign Currency: Currency fluctuations resulting from the consolidation of
Foreign Offices are accumulated as prescribed by translation of foreign
operations under FASB 52. The resulting translation gains and losses are shown
as a component of Stockholders' Equity.
D) Depreciation & Amortization: Depreciation of fixed assets is being computed
on a straight line basis at rates adequate to allocate the cost of the assets
over their useful lives. Organization expense and Goodwill are being amortized
over five and thirty year periods, respectively.
E) Income taxes: Command recognizes taxes on income as the liability is
incurred. To date, Command has accumulated net operating losses which can be
used to offset future earnings.
NOTE 2: CASH AND CASH EQUIVALENTS
Cash and cash equivalents represents amounts available for current operations
held in cash, checking accounts and interest bearing accounts.
NOTE 3: ACCOUNTS RECEIVABLE
Accounts receivable consists of trade receivables in connection with our credit
card division.
NOTE 4: NOTES RECEIVABLE
In October 1995, Command signed a definitive agreement with Jetlease Finance
Corp., a Florida corporation ("Jetlease"), to acquire 100% of the common stock
of Fidelity Holding Corp., a wholly-owned subsidiary of Jetlease. Jetlease is
primarily engaged in the leasing of small, medium and large aircraft to
corporations and high net worth individuals. This acquisition resulted in two
promissory notes totaling ten million dollars ($10,000,000). Each note carries a
12% per annum interest rate. These notes are interest only for twenty-four (24)
months with the entire principal due at the end of twenty-four (24) months. One
note is collateralized by a 1974 Boeing 727-200F and the other note is
collateralized by a 1971 Boeing 727-100.
In addition, the Company has a note receivable as a result of a guaranteed
investment.
2
<PAGE>
NOTE 5: PREPAID EXPENSES
Prepaid expenses consists primarily of public relation expenses, consulting
expenses and marketing expenses incurred in connection with the continued
promotion and development of the business operations of the Company and its
subsidiaries.
NOTE 6: INTEREST RECEIVABLE
Interest receivable consists primarily of amounts due from Jetlease as payment
on the two promissory notes (see Note 4), as well as interest accrued on
outstanding subscriptions.
NOTE 7: STOCK SUBSCRIPTIONS RECEIVABLE
Stock subscriptions receivable represent subscriptions outstanding at March 31,
1996.
NOTE 8: INVESTMENT IN SUBSIDIARIES
Investment in subsidiaries consists primarily of the acquisition by Command,
through its wholly owned subsidiary, Command America Corp., of 100% of Berwyn
Holdings Inc., a bank card servicing company, located in Wilmington, Delaware.
In June 1995, Command, pursuant to an arbitration agreement contained in a
written contract, entered into a Demand for Arbitration against Prime Source
Managed Total Care, Inc., (Prime). The nature of the dispute is fraud and
misrepresentation, and the relief sought is recision of the transaction and
return of the Company's investment. In addition, Command as the principal
shareholder of Prime, has brought a shareholder's derivative action against the
principal officers of Prime alleging fraud, misrepresentation and abuse of their
fiduciary duties to the Company. In September 1995, Command wrote-off its entire
investment in Prime.
In addition, on September 21, 1995, a wholly-owned subsidiary of Prime filed for
bankruptcy.
NOTE 9: INVESTMENTS
Investments consist of one publicly held corporation.
NOTE 10: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable consists of miscellaneous trade payables and amounts due to
vendors. Accrued expenses consist primarily of expenses incurred during the
period but invoiced after March 31, 1996.
NOTE 11: TAXES PAYABLE
Taxes payable consists of amounts due to Federal, State & Local Agencies for
payroll taxes withheld.
3
<PAGE>
NOTE 12: NOTES AND LOANS PAYABLE
Notes and loans payable consist of amounts lent to the Company by William G.
Lucas, the Chairman of Command as well as amounts due to third party short and
long-term lenders.
NOTE 13: SALARIES PAYABLE
Salaries payable consists of amounts owed to Mr. Lucas, the Chairman of Command.
Mr. Lucas has not drawn a salary for the past several months and will continue
not to draw a salary until such time when significant revenues are generated
from the imminent implementation of the Company's programs. Mr. Lucas has also
forgiven a significant portion of his salary in prior years.
NOTE 14: SHAREHOLDERS' EQUITY
On October 4, 1995, Command's Board of Directors approved a reverse stock split
of its common shares, pursuant to which every One Hundred Fifty (150) shares of
the Company's issued and outstanding common stock was converted to One (1)
share. This reverse split became effective on October 27, 1995. In addition, the
Company has issued to shareholders of record as of the close of business on
Thursday, October 26, 1995, a warrant equivalent to a 300% common stock dividend
(post split), at no cost to the shareholder. Eighteen months from October 27,
1995, the warrants may be exercised and converted into common stock. These
warrants will be callable by the Company on October 28, 1998 at par value.
On March 4, 1996, Command announced its intent, from time to time, to purchase
its own securities in the open market. As of March 31, 1996, Command purchased
420,000 shares of it securities in the open market. Command also has additional
shares held in treasury.
NOTE 15: LOSS PER SHARE
Loss per share was computed by dividing the net loss by the weighted average
number of shares of common stock outstanding during the period. The weighted
average number of common shares outstanding during the three months ended March
31, 1996 and 1995 was 3,006,168 and 46,728,250, respectively. The weighted
average number of common shares outstanding during the nine months ended March
31, 1996 and 1995 was 7,437,284 and 38,705,171, respectively. The amounts for
the 1996 periods reflect a One Hundred Fifty (150) to One (1) reverse stock
split effective October 27, 1995.
NOTE 16: SUBSEQUENT EVENT
On April 12, 1996, the Company filed a Registration Statement on Form SB-2 with
respect to 13,570,000 shares of its common stock, of which 10,000,000 shares are
being offered by the Company and 3,570,000 shares are being offered by a selling
shareholder. The Company will not receive any proceeds from the shares being
sold by the selling shareholder.
4
<PAGE>
On April 21, 1996, an involuntary petition under Chapter 7 (liquidation) of the
United States Bankruptcy Code was filed against Jetlease in the United States
Bankruptcy Court for the Southern District of Florida. Jetlease consented to the
entry of an order for relief, the conversion of the case to a case under Chapter
11 (reorganization) and the appointment of a trustee.
In October 1995, Command signed a definitive agreement with Jetlease Finance
Corporation ("Jetlease") under which Command acquired 100% of the common stock
of Fidelity Holding Corporation ("Fidelity"), a wholly owned subsidiary of
Jetlease (the "Jetlease Transaction"). The Jetlease Transaction provided for
Jetlease to issue promissory notes in the principal amount of $10,000,000 in the
aggregate, at 12% interest payable at $100,000 per month commencing January 18,
1996, secured by two aircraft valued collectively at $10,000,000. As part of the
Jetlease Transaction, Jetlease purchased $12,000,000 worth of Command restricted
common stock.
The first interest payment of $100,000 which was due by Jetlease during the
quarter was not paid. Command notified Jetlease and the Federal Aviation
Administration ("FAA") of the default and commenced an action to foreclose on
its collateral, the aircraft. Command also commenced an action against Jetlease,
its principals and others for damages including, in the event of a deficiency,
upon the notes and other damages.
Subsequent to March 31, 1996, the FAA recorded Command as registered owner
holding full title to the aircraft which served as collateral for the notes
issued in the Jetlease Transaction.
5
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Revenues for the three and nine months ended March 31, 1996 were $548,488 and
$919,162, respectively, compared with $159,156 and $591,690, for the three and
nine months ended March 31, 1995. This increase in revenues is due primarily to
the improved operations of Command's subsidiaries. Specifically, revenues for
the subsidiaries increased as a result of the ability of such subsidiaries to
market and issue a greater number of credit cards, market and issue a greater
number of equipment leases and attract more banking clients for its credit card
servicing business in 1996 than had been the case in the previous year.
Command's credit card division is currently servicing credit cards for European
American Bank (EAB), NatWest Bank and several smaller banks.
Operating expenses for the three and nine months ended March 31, 1996 were
$1,930,448 and $11,053,990, respectively compared with $1,364,493 and
$3,513,986, respectively for the three and nine months ended March 31, 1995. The
increase in operating expenses is due primarily to the increase in consulting,
marketing and public relations expenses incurred in connection with the
continued promotion and development of the business operations of the Company
and its subsidiaries.
For the three and nine months ended March 31, 1996 the Company had net losses of
$1,283,129 and $12,803,103, respectively compared to $1,281,162 and $3,176,082
for the three and nine months ended March 31, 1995. The increase in net losses
is due primarily to expenses incurred in connection with the continued promotion
and development of the business operations of the Company and its subsidiaries,
and the operating losses of its subsidiaries. The increase in operating expenses
is due primarily to the increase in consulting, marketing and public relations
expenses described above as well as an increase in non-operating and
non-recurring expenses. These non-operating and non-recurring expenses were
incurred as a result of the liquidation of two inactive subsidiaries as well as
the write-off of the Company's Investment in Prime.
Capital Resources and Liquidity
As of March 31, 1996 Command held cash and short-term investments of $10,425.
These funds, along with the revenues generated from the improved operations of
Command's subsidiaries, will enable the Company to meet its working capital
needs. Command had total assets of $14,077,103 and total liabilities of
$2,772,836 compared with $5,281,628 and $2,049,625, respectively at March 31,
1995. The increase in assets is due primarily to the acquisition of
subsidiaries. The increase in liabilities is due primarily to an increase in
trade payable, notes payable, taxes payable and salaries payable as a result of
the acquisition of subsidiaries.
The Company continues to explore new means to increase the capital base to
finance current operations and to fund new programs.
6
<PAGE>
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
NONE
(b) Reports on Form 8-K
NONE
7
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: May 7, 1996 COMMAND CREDIT CORPORATION
(Registrant)
By: /s/ William G. Lucas
William G. Lucas, Chairman,
President, Chief Executive
Officer and Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 10,425
<SECURITIES> 0
<RECEIVABLES> 10,480,842
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,266,420
<PP&E> 957,774
<DEPRECIATION> 726,727
<TOTAL-ASSETS> 14,077,103
<CURRENT-LIABILITIES> 1,926,539
<BONDS> 0
0
0
<COMMON> 1,445
<OTHER-SE> 11,302,822
<TOTAL-LIABILITY-AND-EQUITY> 14,077,103
<SALES> 0
<TOTAL-REVENUES> 548,488
<CGS> 0
<TOTAL-COSTS> 1,016,882
<OTHER-EXPENSES> 913,566
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,381,960)
<DISCONTINUED> 0
<EXTRAORDINARY> 98,831
<CHANGES> 0
<NET-INCOME> (1,283,129)
<EPS-PRIMARY> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
