-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KpUdvx3f86B3JlkZ/oX2BCFHSqhvh0vi6LvGsm1RL4tF70V8uYEw4beO5/LL2tJx rTlh9bkVD9sS4mJ0b1WG4w== 0000909012-02-000833.txt : 20021114 0000909012-02-000833.hdr.sgml : 20021114 20021114130301 ACCESSION NUMBER: 0000909012-02-000833 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST CONNECTICUT CAPITAL CORP/NEW/ CENTRAL INDEX KEY: 0000730669 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS BUSINESS CREDIT INSTITUTION [6159] IRS NUMBER: 060759497 STATE OF INCORPORATION: CT FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-08589 FILM NUMBER: 02823485 BUSINESS ADDRESS: STREET 1: 1000 LAFAYETTE BLVD STE 805 CITY: BRIDGEPORT STATE: CT ZIP: 06604 BUSINESS PHONE: 2033664726 MAIL ADDRESS: STREET 1: 1000 LAFAYETTE BLVD STREET 2: SUITE 805 CITY: BRIDGEPORT STATE: CT ZIP: 06604 10QSB 1 t24969.txt QUARTERLY REPORT 9/30/02 U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 2002 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT For the transition period from _____________ to ______________ Commission file number 811-0969 THE FIRST CONNECTICUT CAPITAL CORPORATION (EXACT NAME OF SMALL BUSINESS ISSUER AS) (SPECIFIED IN ITS CHARTER) CONNECTICUT 06-0759497 - -------------------------------------------------------------------------------- (STATE OR OTHER JURISDICTION (IRS EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1000 BRIDGEPORT AVENUE, SHELTON, CONNECTICUT 06484 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (203) 944-5400 (ISSUER'S TELEPHONE NUMBER) (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court. Yes _____ No _____ APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 1,173,382 Transitional Small Business Format: Yes _____ No X ----- THE FIRST CONNECTICUT CAPITAL CORPORATION
THE FIRST CONNECTICUT CAPITAL CORPORATION BALANCE SHEETS, SEPTEMBER 30, 2002 and MARCH 31, 2002 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) September 30, March 31, ASSETS 2002 2002 - ------ ---- ---- UNAUDITED AUDITED --------- ------- Cash and cash equivalents $ 702 $ 437 Loans - net of allowance for loan losses of $634 at September 30, 2002 and $594 at March 31, 2002 2,672 2,172 Loans due from related parties -- 225 Loans held for sale 1,185 1,355 Due from partnerships 87 92 Accrued interest receivable 63 50 Servicing rights 81 69 Fixed assets 15 16 Deferred income taxes 130 250 Other assets 107 75 ------- ------- TOTAL ASSETS $ 5,042 $ 4,741 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Line of credit $ 2,735 $ 2,441 Accounts payable to related parties -- 203 Accounts payable and other accrued expenses 83 94 ------- ------- TOTAL LIABILITIES 2,818 2,738 ------- ------- Commitments and contingencies STOCKHOLDERS' EQUITY Common stock, no par value, stated value $.50 per share, authorized 3,000,000 shares, issued and outstanding 1,173,382 shares 587 587 Additional paid in capital 9,253 9,253 Accumulated deficit (7,616) (7,837) ------- ------- TOTAL STOCKHOLDERS' EQUITY 2,224 2,003 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,042 $ 4,741 ======= ======= See notes to financial statements.
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THE FIRST CONNECTICUT CAPITAL CORPORATION STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) THREE MONTHS SIX MONTHS THREE MONTHS SIX MONTHS ENDED ENDED ENDED ENDED SEP 30, 2002 SEP 30, 2002 SEP 30, 2001 SEP 30, 2001 ------------ ------------ ------------ ------------ UNAUDITED UNAUDITED UNAUDITED UNAUDITED INTEREST INCOME: Interest and fees on loans $ 229 $ 491 $ 196 $ 387 Interest expense on line of credit 36 78 62 123 Other interest expense 1 9 4 7 ---------- ---------- ---------- ---------- TOTAL INTEREST EXPENSE 37 87 66 130 ---------- ---------- ---------- ---------- NET INTEREST INCOME 192 404 130 257 Reserve for loan losses 84 80 13 12 ---------- ---------- ---------- ---------- NET INTEREST INCOME AFTER LOAN LOSSES AND REDUCTION OF ALLOWANCE FOR LOANS 108 324 117 245 ---------- ---------- ---------- ---------- OTHER OPERATING INCOME: Servicing fees 41 64 32 45 Net gains on sales of loans held for sale 175 305 85 170 Other fees 4 21 9 17 ---------- ---------- ---------- ---------- TOTAL OTHER OPERATING INCOME 220 390 126 232 ---------- ---------- ---------- ---------- TOTAL INCOME 328 714 243 477 ---------- ---------- ---------- ---------- OTHER OPERATING EXPENSES: Officers' salaries 46 95 35 87 Other salaries 13 29 12 25 Directors' fees -- -- -- 1 Professional services 51 60 5 10 Miscellaneous taxes 4 10 5 10 Employee and general insurance 13 25 10 21 Rent 8 16 8 16 Amortization of servicing rights 17 34 18 36 Corporate insurance expenses 7 14 5 10 Licenses, dues and subscriptions expenses 6 7 2 3 Communications 1 4 1 5 Advertising and promotions 2 4 1 2 Stock record and other financial expenses 3 7 2 6 Depreciation 1 2 1 2 Equipment and auto rental 3 10 3 7 Postage, office and other expenses 9 18 7 24 ---------- ---------- ---------- ---------- TOTAL OTHER OPERATING EXPENSES 184 335 115 265 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 144 379 128 212 INCOME TAX PROVISION 57 158 5 10 ---------- ---------- ---------- ---------- NET INCOME $ 87 $ 221 $ 123 $ 202 ========== ========== ========== ========== INCOME PER COMMON SHARE (BASIC AND DILUTED) $ 0.07 $ 0.19 $ 0.10 $ 0.17 ========== ========== ========== ========== Weighted average number of Common shares outstanding: (basic) 1,173,382 1,173,382 1,173,382 1,173,382 ========== ========== ========== ========== Common shares outstanding: (diluted) 1,183,241 1,177,860 1,185,711 1,178,857 ========== ========== ========== ========== See notes to financial statements.
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THE FIRST CONNECTICUT CAPITAL CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2002 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) COMMON STOCK ADDITIONAL NUMBER OF PAID-IN ACCUMULATED STOCKHOLDERS' SHARES AMOUNT CAPITAL DEFICIT EQUITY BALANCE, April 1, 2002 1,173,382 $ 587 $ 9,253 ($ 7,837) $ 2,003 Net Income -- -- -- 221 221 --------- --------- --------- --------- --------- BALANCE, September 30, 2002 1,173,382 $ 587 $ 9,253 ($ 7,616) $ 2,224 ========= ========= ========= ========= ========= See notes to financial statements.
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THE FIRST CONNECTICUT CAPITAL CORPORATION STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (DOLLARS IN THOUSANDS) SEPTEMBER SEPTEMBER 2002 2001 ---------- --------- UNAUDITED UNAUDITED OPERATING ACTIVITIES Net income $ 221 $ 202 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2 2 Provision of allowance for loan losses 80 12 Amortization of servicing rights 34 36 Decrease in deferred tax asset 120 -- Origination of loans held for sale (8,414) (6,462) Proceeds from sales of loans held for sale 8,584 6,447 Changes in asset and liabilities: Increase in accrued interest receivable (13) (2) Increase in servicing rights (46) (36) Increase in other assets (32) (4) Decrease in accounts payable to related parties (203) -- Decrease in accounts payable and other accrued expenses (11) (9) ------- ------- Net cash provided by operating activities 322 186 ------- ------- INVESTING ACTIVITIES Originations of loans (2,006) (1,658) Principal collected on loans 1,651 1,734 Purchase of fixed assets (1) -- ------- ------- Net cash (used in) provided by investing activities (356) 76 FINANCING ACTIVITIES Increase (decrease) in line of credit borrowings 294 (74) Amounts due from Partnership loans 5 -- ------- ------- Net cash provided by (used in) financing activities 299 (74) ------- ------- INCREASE IN CASH AND CASH EQUIVALENTS 265 188 CASH AND CASH EQUIVALENTS, BEGINNING 437 232 ------- ------- CASH AND CASH EQUIVALENTS, ENDING $ 702 $ 420 ======= ======= Supplemental disclosure of cash flow information: Cash paid for interest $ 80 $ 130 Cash paid for taxes $ 17 $ 3 See notes to financial statements
5 NOTES TO CONDENSED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION The accompanying condensed financial statements of The First Connecticut Capital Corporation (the "Corporation or Company"), formerly known as The First Connecticut Small Business Investment Company, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-QSB and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair representation have been included. Operating results are not necessarily indicative of the results that may be expected for the year ending March 31, 2003. For further information, refer to the financial statements and notes thereto included in the Corporation's Annual Report on Form 10-KSB for the year ended March 31, 2002. Forward-looking statements made in this document are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties including without limitation risks in technology developments, risks in product development and market acceptance of and demand for the Company's products, risks associated with foreign sales and other risks detailed in the Company's filings with the Securities and Exchange Commission. NOTE B - PROPOSED SALE OF CORPORATION'S BUSINESS AND ASSETS The Corporation has entered into a definitive agreement with respect to the sale by the Corporation of all or substantially all of its assets to, and the assumption of all of the Corporation's liabilities by, members of management and the board of directors. Management (which is included in the group that comprises the prospective purchaser) will submit the proposed transaction to the stockholders for their consideration and approval. This sale if approved by the stockholders may impair the deferred income tax asset recorded on the Corporation's balance sheet. For further details see "Subsequent Events; Recent Developments" page nine. 6 THE FIRST CONNECTICUT CAPITAL CORPORATION NOTE C - RECLASSIFICATIONS Certain reclassifications were made to the September 30, 2001 financial statements to conform to the September 30, 2002 presentation. The September 30, 2001 financial statements reflect a $206,000 reclassification from servicing fees to interest and fees on loans because the Company had previously recorded interest earned from loans held for investment purposes and loans held for sale as servicing fees. In addition, the September 30, 2001 financial statements reflect a $134,000 reclassification from interest and fees on loans to net gains on sales of loans held for sale because the Company had previously recorded the origination fees on loans that were sold as interest and fees on loans and not as a component of the actual gain on sale of loans held for sale. In addition, the Corporation has presented the amortization of the servicing right asset of $36,000 gross within the statement of operations for the quarter ended September 30, 2001 to conform to the presentation for the quarter ended September 30, 2002. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Corporation is currently licensed in the state of Connecticut to operate as a First and Second Mortgage Lender/Broker. The Corporation had net income of $221,000 for the six months ended September 30, 2002 as compared to the net income of $202,000 for the six months ended September 30, 2001. This increase of $19,000 is primarily due to the increase of $104,000 in interest and fees on loans, and the increase of $135,000 in net gains on sales of loans. The increase of $239,000 listed above is offset by an increase in the income tax provision of $148,000, the increase of $68,000 in the reserve for loan losses and the increase of $50,000 in professional fees. INTEREST INCOME AND OTHER OPERATING INCOME Total income, before other operating expenses increased by $237,000 for the six months ended September 30, 2002, as compared to the six months ended September 30, 2001, this increase is due primarily to the increase of $104,000 in the net interest income, the increase of $135,000 in net gains on sales held for loans, and the decrease of $45,000 in interest expenses paid on the Corporation's line of credit, offset by an increase of $68,000 on the reserve for loan losses. These increases were primarily due to an increase in the number of mortgage loans originated and funded by the Corporation. Management attributes the increase in its net interest income and other operating income to its successful marketing of its knowledge of construction and real estate lending, its ability to service loan demand from homebuilders, remodelers and developers and the generally favorable climate for the construction industries. The Corporation continued to provide construction financing to a segment of the market whose price range is believed to be less affected by negative economic conditions. 7 THE FIRST CONNECTICUT CAPITAL CORPORATION Servicing fees increased by $19,000 for the six months ended September 30, 2002, as compared to the same period in the prior year. This increase is due to an increase in servicing fees earned on the Corporation's short-term construction and remodeling mortgage loans and the increase in the Limited Partnership portfolios. OTHER OPERATING EXPENSE Total other operating expenses increased by $70,000 during the six months ended September 30, 2002, as compared to the comparable period of the prior year. The Corporation's professional services has increased by $50,000 as a result of increased legal and accounting fees related to the proposed sale of the Corporation's operating assets, liabilities and business (see note B) and officer and other salaries have increased by $12,000. INCOME TAX PROVISION An income tax provision of $158,000 was recorded for the six months ended September 30, 2002, as compared to a $10,000 tax provision for the six months ended September 30, 2001. The increase of $148,000 is primarily due to a) a reduction of the federal deferred tax asset of approximately $120,000 for the six months ended September 30, 2002 and b) an increase in state income taxes of approximately $28,000 for the quarter ended September 30, 2002. All state net operating losses expired as of March 31, 2002. If management had elected to make no change in its deferred tax asset for the six months ended September 30, 2002, then the Corporation's stated earnings would have been $120,000 greater than as reported herein, resulting in net income of approximately $341,000. In light of the pending transaction described in "Subsequent Events" below, the Corporation deemed it more appropriate under GAAP to utilize $120,000 of previously recorded federal deferred tax assets for the six months ended September 30, 2002. PROVISION FOR LOAN LOSSES The Corporation for the six months ended September 30, 2002 recorded a provision of $80,000 for the allowance for potential loan losses and has written off a $40,000 loan which was previously reserved at March 31, 2002. The Corporation for the six months ended September 30, 2001 had recorded a provision of $12,000 for the allowance for loan losses. 8 THE FIRST CONNECTICUT CAPITAL CORPORATION PLAN OF OPERATION The Corporation is engaged in the mortgage banking business, which involves the origination, purchase, sale and servicing of mortgage loans collateralized by residential properties and commercial real estate. These loans are predominately collateralized by first mortgage liens on residential properties and are sold to qualified investors, with origination and servicing fees retained by the Corporation. The Corporation's revenues consist of loan servicing fees, loan origination fees, interest on mortgage loans, gains from sales of loans and mortgage servicing rights. The Corporation continues to seek ways to reduce expenses while at the same time increase market activity of its products and services. SUBSEQUENT EVENTS; RECENT DEVELOPMENTS The Corporation announced the execution of definitive agreements for the sale of its mortgage business (the "Asset Sale") to a company to be organized by members of the Board of Directors, including Lawrence Yurdin (the current President of the Corporation). The Asset Sale would include all of the assets (excluding cash and deferred income taxes) of the Corporation's mortgage business, subject to the assumption of all liabilities and other obligations, including contingent liabilities. The sale price, currently estimated to be the net book value of the assets to be sold, will be an amount determined, in part, in accordance with an independent appraisal of the assets by a nationally recognized portfolio valuation company. The form of the Asset Sale will be reviewed and determined to be fair pursuant to an opinion to be delivered by an NASD registered broker-dealer. If the shareholders of the Corporation approve the Asset Sale, then the purchaser will pay at least book value for the net assets which will be valued at the time of closing. Simultaneously with the proposed Asset Sale, the Company will issue and sell to Bernard Zimmerman, of Weston, Connecticut, and Martin Cohen, of New York City, New York or their affiliates, for a purchase price of $252,000 in cash, a total of 250,000 Common shares of the Company, together with Five Year Warrants to purchase an additional 200,000 Common shares, exercisable at a price of $1.00 per share (collectively, the "Securities Sale"). Messrs. Zimmerman and Cohen also intend to purchase additional Common shares from other sources at the same price. Upon completion of the Securities Sale, Messrs. Zimmerman and Cohen will each own approximately 185,000 shares. Assuming consummation of the Asset Sale and the Securities Sale and after payment of expenses, the Company would have 1,423,382 shares outstanding, excluding shares reserved for outstanding options and warrants and total cash on hand of not less than $1,500,000. Pursuant to the terms of the proposed transactions, the Company will declare a dividend to stockholders, pro rata of all cash on hand after the closing of the Asset Sale and the Securities Sale in excess of $1,500,000, after payment and accruals of all liabilities, fees and expenses provided such dividend equals or exceeds $.15 per share. 9 THE FIRST CONNECTICUT CAPITAL CORPORATION Pursuant to the terms of the Asset Sale and Security Sale agreements, Messrs Zimmerman and Cohen will designate three of the five seats on the Company's board of directors. Mr. Zimmerman and Mr. Cohen will supervise the day-to-day operations of the Company subsequent to the closing. In the event that the Company is unable to consummate a suitable merger or business combination transaction or series of transactions (defined as having an aggregate value in excess of $750,000) within thirty-six months of the closing of the asset sale (subject to a three month extension under certain circumstances), then, upon the request by the holders of 20% or more of the issued and outstanding common stock of the Company held by non-affiliates of management, the Company shall schedule a meeting of shareholders and will issue a proxy solicitation pursuant to which the shareholders will vote on whether to liquidate the Company. In such vote, all shares held by management and their affiliates shall be voted in the same proportion as those shares voted by non-affiliates of management. The Company has filed a Preliminary Proxy Statement with the Securities and Exchange Commission (the "SEC") for its review and approval. Pending the resolution of any questions or comments from the SEC with respect thereto, the Company will send final proxy materials to stockholders of record and schedule a Stockholders Meeting during which they may vote on the approval of these transactions. LINE OF CREDIT The Corporation has a Commercial Line of Credit with Hudson United Bank. This $3,500,000 line of credit is for a term of one year at an interest rate of 2.5% over the Wall Street Prime Rate and will expire on June 30, 2003. This line is collateralized by an assignment of notes and mortgages equal to the amount of the loan. At September 30, 2002, and September 30, 2001 $2,735,000 and $2,441,000 respectively, was advanced on this line of credit. FINANCIAL RESOURCES As of September 30, 2002, the Corporation had $702,000 of unrestricted cash and cash equivalents and approximately $2,274,000 of Stockholders' Equity. The Corporation currently anticipates that during the year ending March 31, 2003, its principal financing needs will consist of funding its mortgage loans held for sale and the ongoing net cost of mortgage loan originations. The Corporation believes that cash on hand, internally generated funds and availability of its line of credit should be sufficient to meet its corporate, general and administrative working capital and other cash requirements during the year ending March 31, 2003. Future cash flow requirements will depend primarily on the level of the Corporation's activities in originating and selling mortgage loans, as well as cash flow required by its operations. If construction loan demand increases, the Corporation will require additional cash to service those requirements. The Corporation continues to monitor its cash flow requirements. Due to the aforementioned line of credit, the Corporation feels it should be able to meet these cash requirements. The Corporation also continues to decrease its cash flow requirements by monitoring all expenses. 10 THE FIRST CONNECTICUT CAPITAL CORPORATION PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Form 8K filed July 17, 2002 Certification of Officers SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized. THE FIRST CONNECTICUT CAPITAL CORPORATION (Registrant) /S/ LAWRENCE R. YURDIN Date: November 14, 2002 By: _________________________________ Lawrence R. Yurdin President 11 EX-99 3 exh99-1.txt CERTIFICATION OF CEO AND CFO THE FIRST CONNECTICUT CAPITAL CORPORATION Exhibit CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the filing of the Quarterly Report on Form 10-QSB for the Quarter ended September 30, 2002 (the "Report") by The First Connecticut Capital Corporation (the "Registrant"), each of the undersigned hereby certifies that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and 2. The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of Registrant. - -------------------------------------------------------------------------------- /S/ LAURENCE R. YURDIN - ------------------------------ ------------------------------- Laurence R. Yurdin President and Chief Executive Officer Chief Financial Officer - ------------------------------------------------ ------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----