-----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, Fr4pqb7RB4p/JNFNe2gAOhPcxnRUhlAwtp5ujBljZmWJWu8jYY02jjahtmZoGzfm 3MhV3/PB8i6Ia4XDfgFj7A== 0000944209-97-000150.txt : 19970222 0000944209-97-000150.hdr.sgml : 19970222 ACCESSION NUMBER: 0000944209-97-000150 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER COMMERCIAL FUNDING CORP /NY/ CENTRAL INDEX KEY: 0000867713 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 133763437 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24940 FILM NUMBER: 97530096 BUSINESS ADDRESS: STREET 1: 6660 RESODA BOULEVARD CITY: RESODA STATE: CA ZIP: 91335 BUSINESS PHONE: 8187760590 MAIL ADDRESS: STREET 1: 6660 RESODA BOULEVARD CITY: RESODA STATE: CA ZIP: 91335 FORMER COMPANY: FORMER CONFORMED NAME: PCF ACQUISITION CORP DATE OF NAME CHANGE: 19941017 10QSB 1 FORM 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 31, 1996 Commission File Number 0-24940 PIONEER COMMERCIAL FUNDING CORP. (Exact name of small business issuer as specified in its charter) New York 13-3763437 (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 6660 Reseda Boulevard, Reseda, California 91335 (Address and Zip Code of Principal Executive Offices) Issuer's Telephone Number (818) 776-0590 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 . ----- ----- There were 1,442,272 shares outstanding of the registrant's common stock outstanding as of February 11, 1997. 1 Part I Financial Information Item 1 - Financial Statements PIONEER COMMERCIAL FUNDING CORP. BALANCE SHEETS
December 31, March 31, 1996 1996 (unaudited) ------------ ----------- ASSETS Cash and temporary cash investments $ 355,293 $ 98,349 Loans receivable, mortgage warehouse lending 4,315,237 3,512,775 Accrued interest and fee receivable 33,358 30,007 Deferred cost of equity offering 222,060 445,731 Fixed Assets Furniture and equipment 106,540 50,370 Proprietary computer software 476,215 469,655 Leasehold Improvements 10,632 0 ----------- ----------- 593,387 520,025 Less accumulated depreciation and amortization 378,010 302,035 ----------- ----------- Net Fixed Assets 215,377 217,990 ----------- ----------- Other assets 467,023 26,087 ----------- ----------- Total Assets $ 5,608,348 $ 4,330,939 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Loans payable, mortgage warehouse $ 2,955,681 $ 3,254,235 Revolving lines, of credit - 79,400 Bridge financing (notes totaling $100,000 less unamortizated discount of $37,500) - 62,500 Accrued interest payable 11,895 43,564 Due to mortgage banking companies 60,978 20,917 Accounts payable & accrued expenses 383,398 261,163 Deferred legal fees 55,971 76,743 Other liabilities 200,000 0 ----------- ----------- Total Liabilities 3,667,923 3,798,522 ----------- ----------- Commitments and Contingencies Stockholders' Equity: Common stock-$.01 par value; authorized 5,000,000 shares; 1,442,272 and 835,000 shares issued and outstanding at September 30 and March 31, 1996 respectively 14,423 8,350 Additional paid-in capital 10,570,857 8,598,634 Accumulated deficit (8,644,855) (8,074,567) ----------- ----------- Total stockholders' equity 1,940,425 532,417 ----------- ----------- Total liabilities and stockholders' equity $ 5,608,348 $ 4,330,939 =========== ===========
The accompanying notes are an integral part of these balance sheets. 2 PIONEER COMMERCIAL FUNDING CORP. STATEMENTS OF OPERATIONS FOR THE THREE MONTH & NINE MONTH PERIODS ENDED DECEMBER 31, 1996 & 1995 (Unaudited)
Three Months Ended Nine Months Ended December 31, December 31, ----------------------- ----------------------- 1996 1995 1996 1995 --------- --------- --------- --------- INCOME Interest income $ 74,379 $ 29,375 $ 177,660 $ 35,826 Commissions & fees 2,830 1,500 4,330 4,500 Processing fees 19,470 5,153 44,412 7,093 --------- --------- --------- --------- Total income 96,679 36,028 226,402 47,419 --------- --------- --------- --------- DIRECT COSTS Interest expense- warehouse & revolving lines of credit 50,728 29,806 159,409 36,010 Interest expense -bridge financing 0 6,163 42,385 63,731 Bank charges & fees 5,940 3,491 11,845 6,337 Bank processing fees 4,050 1,473 10,350 1,473 --------- --------- --------- --------- Total direct costs 60,718 40,933 223,989 107,551 --------- --------- --------- --------- INCOME/LOSS BEFORE OPERATING EXPENSES 35,961 (4,905) 2,413 (60,132) OPERATING EXPENSES 209,204 125,660 412,814 319,530 LOSS DUE TO REGISTRATION STATEMENT & IPO COSTS 153,114 - 167,883 - --------- --------- --------- --------- Loss from operations (326,357) (130,565) (578,284) (379,662) --------- --------- --------- --------- OTHER INCOME (EXPENSE) Interest income - other 4,267 1,221 13,574 24,811 Interest expense - other (1,178) (1,178) (3,534) (3,534) --------- --------- --------- --------- Total other income (expense) 3,089 43 10,040 21,277 --------- --------- --------- --------- LOSS BEFORE INCOME TAXES (323,268) (130,522) (568,245) (358,385) PROVISION FOR INCOME TAXES 652 - 2,044 1,180 --------- --------- --------- --------- Net loss $(323,920) $(130,522) $(570,288) $(359,565) ========= ========= ========= ========= LOSS PER SHARE OF COMMON STOCK $ (0.22) $ (0.16) $ (0.50) $ (0.44) ========= ========= ========= ========= WEIGHTED AVERAGE NUMBER OF SHARES 1,442,272 825,000 1,145,717 825,000 ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 3 PIONEER COMMERCIAL FUNDING CORP. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 1996 (Unaudited)
Common Additional Accumulated Total Stock Paid-in Deficit Stockholders' Capital Equity ------- ----------- ----------- ------------- Balances March 31, 1996 $ 8,350 $ 8,598,634 $(8,074,567) $ 532,417 Issuance of 7,272 common shares in connection with bridge financing 73 (73) - - Issuance of 600,000 shares of common stock and 690,000 warrants 6,000 1,972,296 - 1,978,296 Net loss for the period - - (570,288) (570,288) ------- ----------- ----------- ---------- $14,423 $10,570,857 $(8,644,855) $1,940,425 ======= =========== =========== ==========
The accompanying notes are an integral part of this statement. 4 PIONEER COMMERCIAL FUNDING CORP. STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED DECEMBER 31, 1996 and 1995 (Unaudited)
1996 1995 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (570,288) $ (359,565) ---------- ---------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 75,975 75,975 (Increase) decrease in -- Accrued interest receivable (3,351) 5,595 Prepaid expenses (157,734) 1,370 Other assets (283,202) (249) Increase (decrease) in -- Income taxes payable - - Accrued interest payable (31,669) 5,927 Due to mortgage banking companies 40,061 (34,804) Accounts payable & Accrued expenses 122,235 68,577 ---------- ---------- Total adjustments (237,685) 122,391 ---------- ---------- Net cash used in operating activities (807,973) (237,174) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Increase in Mortgage Warehouse Loans Receivable (802,462) (471,263) Purchase of Fixed Assets (73,362) (4,324) ---------- ---------- Net cash provided by investing activities (875,824) (475,587) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Net decrease in borrowings used in operations, net of issuance costs (298,554) 540,147 Decrease in revolving line of credit and bridge financing (141,900) 141,644 Increase (decrease) in deferred expenses 179,228 (Increase) decrease in deferred costs of equity offering 223,671 (118,277) Proceeds from issuance of stock 1,978,296 - ---------- ---------- Net cash provided used in financing activities 1,940,741 563,514 ---------- ---------- Net increase (decrease) in cash 256,944 (149,247) CASH AND TEMPORARY CASH INVESTMENTS - APRIL 1, 1996 and 1995 98,349 437,574 ---------- ---------- CASH AND TEMPORARY CASH INVESTMENTS - DECEMBER 31, 1996 and 1995 $ 355,293 $ 288,327 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest Paid $ 181,195 $ 57,677 ========== ==========
The accompanying notes are an integral part of these statements. 5 PIONEER COMMERCIAL FUNDING CORP. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------- Basis of Presentation - --------------------- In the opinion of management, the accompanying unaudited financial statements for Pioneer Commercial Funding Corp. (the Company) contain all adjustments of a recurring nature considered necessary for a fair presentation of its financial position as of December 31, 1996 and the results of operations for three and nine month periods ended December 31, 1996 and 1995 and its cash flows for the nine months ended December 31, 1996 and 1995. The results of operations for the nine month and three month periods ended December 31, 1996 and 1995 are not necessarily indicative of the Company's results of operations to be expected for the entire year. The accompanying unaudited interim financial statements have been prepared in accordance with instructions to Form 10-Q and, therefore, do not include all information and footnotes required to be in conformity with generally accepted accounting principles. The financial information provided herein, including the information under the heading, "Management's Discussion and Analysis of Financial Condition and Results of Operations," is written with the presumption that the users of the interim financial statements have read, or have access to, the Company's March 31, 1996 audited financial statements and notes thereto, together with the Managements Discussion and Analysis of Financial Condition and Results of Operations as of March 31, 1996 and for the year then ended included in the Company's filing on August 12, 1996 with the SEC on Form SB-2. 6 2. OPERATING EXPENSES - --------------------- Operating expenses consisted of the following:
Three Month Period Nine Month Period Ended December 31, Ended December 31, ------------------ ------------------ 1996 1995 1996 1995 -------- -------- -------- -------- Salaries & benefits $ 77,606 $ 41,018 $130,427 $107,877 Depreciation & amortization 25,325 25,326 75,975 75,975 Professional fees 38,728 13,659 64,924 38,862 Utilities 8,337 5,530 19,481 14,383 Temporary staff services 17,802 20,961 41,651 36,737 Rent 5,323 2,901 11,128 8,707 Other 36,083 16,265 69,228 36,989 -------- -------- -------- -------- Operating expenses 209,204 125,660 412,814 319,530 -------- -------- -------- -------- Costs due to Registration and IPO 153,114 - 167,883 - -------- -------- -------- -------- $362,318 $125,660 $580,697 $319,530 ======== ======== ======== ========
3. INITIAL PUBLIC OFFERING ----------------------- The Company consummated its initial public offering (the"Offering") on August 16,1996, at which time it issued 600,000 shares of common stock (.01 par value) for $5.00 per share and redeemable warrants to purchase 600,000 additional shares of the Company's common stock at a price of $5.50 per share for $.10 per warrant (the "Warrants"). The warrants are exercisable until August 12, 2000. On October 4, 1996, the Company issued an additional 90,000 Warrants pursuant to the over-allotment option granted to its underwriter with respect to the Offering. The Company received net proceeds from the Offering of $2,683,386, which includes, $7,830 derived from the underwriter's exercise of the over- allotment option, and recorded an increase to stockholders' equity in the amount of $1,978,296 which is net of $705,090 in deferred costs of the equity offering which were paid for by the Company prior to the consummation of the transaction. 4. DEFERRED COSTS -------------- The Company filed with the Securities and Exchange Commission a second Form SB-2 Registration Statement on December 27, 1996. The deferred costs associated with the registration statement of $222,809, are primarily comprised of legal, underwriting and accounting fees, of which, $95,846 have been paid as of the date of this statement. It is uncertain at this time whether the Company will use this registration statement. 7 5. INVESTMENT IN TRANS LENDING CORPORATION --------------------------------------- On December 23,1996, prior management of the Company signed a document to acquire 500 shares of Trans Lending Corporation's ("Trans Lending") common stock for $100,000 and 200 shares of Trans Lending's non-voting, non-dividend paying preferred stock for $200,000. Trans Lending originates consumer automobile financing transactions for non-prime borrowers by acquiring contracts from franchised and independent car dealers. As of December 31, 1996, the Company had distributed $100,000 to Trans Lending. 6. SUBSEQUENT EVENTS ----------------- On January 9,1997, the Board of Directors voted to remove Arthur Goldberg as Chief Executive Officer and Elie Housman as the President and elected M. Albert Nissim as President. At the same meeting the Company voted to replace its legal counsel. On January 13,1997, Mr. Goldberg and Mr. Housman resigned from the Board of Directors. The Company entered into a written agreement effective January 29, 1997 between Leedan International Holding an indirect stockholder of the Company, and certain other unaffiliated investors for a $4 million Private Placement of unregistered and restricted common stock and convertible notes at a subscription price of $1.00 per share of common stock and a conversion rate of one share of common stock for each $1.00 of convertible notes. The Company anticipates that the Private Placement will closed by the end of February 1997. Proceeds from the Private Placement will be primarily utilized to fund mortgage warehouse lending transactions. On January 1,1997, United Mizrahi Bank, provider of the Company's primary bank line of credit, merged with Safra National Bank of New York. On January 9, 1997, Safra Bank informed the Company that it would not renew Pioneer's line of credit, however, it would consider temporary extensions until a new line is secured. The Company is conducting ongoing discussions with several lending institutions to secure additional credit facilities. With the infusion of $4 million by the end of February 1997, the Company expects to secure additional financing. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL As of June 14, 1993, when the Company began its first active operations after its emergence from Chapter 11, it had an available credit line of $1 million from one source, United Mizrahi Bank & Trust Company ("UMB"). The Company's lines of available credit were subsequently increased to an aggregate of $2.35 million as of March 31, 1995 and $4.2 million as of June 1996. Substantially all of the business conducted by the Company during the years ended March 31, 1994 and 1995 was with one active mortgage banking company, who had a credit line approved by the Company in the amount of $2 million. In April 1995, the Company discontinued that customer's credit line when it failed to comply with the Company's underwriting requirement to provide audited financial statements for the year ended December 31, 1994. As a result of the death of the Company's former Chairman and Chief Executive, the Company did not engage in any substantial mortgage warehouse lending activities from April 1995 through August 1995. During the period from August 1995 through November 1995, the Company developed customer relationships with three new mortgage banking companies, and from August 1995 through March 1996, the Company generated approximately $20.4 million in mortgage warehouse lending volume from those new customers. During the four month period September 1 through December 31, 1996, the Company added three additional customers that generated $44.34 million in mortgage warehouse lending volume, a 116.3% increase over the fiscal year ended March 31, 1996. The Company is in the process of evaluating the creditworthiness of several other potential customers. Although the Company expects to conduct business in the future with a greater number of mortgage banking customers, and thereby reduce the risks attendant in relying upon a small number of sources to support its business, no assurance can be given that it will receive such applications, or that such applicants will thereafter engage in a large enough volume of mortgage warehouse lending transactions to sustain the Company's operations. The cessation of business of any of the Company's active customers or the inability of its customers to provide the Company with an increased level of loan volume could materially adversely affect the Company's ability to generate sufficient revenues to operate profitably and to continue to meet its cash obligations in future periods. During the nine month periods December 31 1995 and 1996, the Company incurred net losses of $ 359,565 and $570,288 respectively. Such losses were partly attributed to noncash expenses (primarily depreciation, amortization and debt discount expenses) totaling $139,706 and $118,360 during 1995 and 1996, respectively, and the inability of the Company to generate a sufficient volume of loan transactions with its customers. 9 RESULTS OF OPERATIONS NINE MONTH PERIOD ENDED DECEMBER 31, 1995 COMPARED WITH THE NINE MONTH PERIOD ENDED DECEMBER 31, 1996 REVENUES. During the nine month period ended December 31 1996 revenues increased to $226,402 compared to $47,419 for the nine month period ended December 31, 1995. Such revenue was generated from the three customers added during the period August, 1995 through November, 1995, and three additional customers were added between September 20, 1996 and December 24, 1996. 569, loans totaling $44,336,000 were funded during this period which represented 183% and 116.3%, respectively, of the total number of loans and fundings reported for the fiscal year ended March 31, 1996. The interest and processing fee component of such revenues reported for the nine months ended December 31 1996 amounted to $177,660 and $48,742, respectively, compared to $35,826 in interest and $11,593 in processing fees for the nine months ended December 31 1995. Due primarily to the death of the Company's former Chairman and Chief Executive in March, 1995, the shrinkage, and ultimate cessation of mortgage lending operations which took place during the first half of the fiscal year ended March 31, 1996 by reason thereof, and the restructuring of the Company's management and operations which took place during that period, for the nine months ended December 31, 1995, the Company only financed a total of 88 loans totaling $8,543,840, in the weighted average principal amount of $97,089 for an average duration of 17 days per borrowing. During the nine month period ended December 31, 1996, the Company financed a total of 569 loans totaling $44,336,228 in the weighted average principal amounts of $77,920 for an average duration of 16 days per borrowing, which amounts include 412 loans funded through bank borrowings aggregating $33,352,067 in weighted average principal amounts of $80,952. Such increase in loan activity was due to the Company's above mentioned addition of six customers. DIRECT COSTS. The Company's direct costs consist of the interest and other charges which it must pay to its revolving credit line providers and the interest which it paid to the lenders who had provided bridge financing to the Company ("The Bridge Financing") in connection with the initial public offering of securities which the Company completed in August 1996 (the "Offering"). During the nine month period ended December 31, 1995 and 1996, the Company's interest expense and other bank charges paid to revolving line of credit providers amounted to $43,820 and $181,604, Respectively. The increase in interest expense and bank fees was due to the increase in loan funding operations and the use of the Company's bank credit facility. Interest expense on the bridge financing for the nine month period ended December 31, 1995 and 1996 amounted to $20,988 and $4,885 respectively and debt discount amortization of $46,277 and $37,500 respectively. In February, 1996 Company paid the sum of $122,492 in full satisfaction of its indebtedness to two of the Bridge Finance lenders. Upon the closing of the public offering the remaining Bridge Financing obligation of $128,356 (which includes $28,356 in accrued interest) was retired in full. 10 OPERATING EXPENSES. The Company's operating expenses of $319,530 during the nine month period ended December 31, 1995 consisted primarily of depreciation and amortization of $75,975, the primary component of which is the Collateral Tracking System ($69,234); salaries and benefits to the Company's former Chairman & Chief Executive and to its Senior Vice President ($107,877); legal and accounting fees ($38,862); telephone ($14,383); office rent ($8,707); temporary staff ($36,737) and miscellaneous expenses of $36,989. The Company's operating expenses of $580,697 during the nine month period ended December 31, 1996 consisted primarily of depreciation and amortization of ($75,975); the primary component of which is the Collateral Tracking System ($69,234); salary and benefits to the Company's Chief Executive, its President, Its Senior Vice President and office staff ($130,427); accounting and legal fees ($64,924): telephone ($19,481); office rent ($11,128); Temporary staff, including the services of an outside consultant for customer risk analysis, Dr. Teodore E. Reingold, CPA, a professor of management and accounting ($41,651); costs due to registration and IPO ($167,883 including, legal, public relations and printing costs) and miscellaneous of ($69,228). The increase in such expenses during the nine month period ended December 31, 1996 as comparable period during 1995, was due to the increase in lending activity and the increased costs associated with the professional, financial consulting and similar services which the Company has incurred by reason of its change in status from a privately owned to a publicly held company. NET LOSS. During the nine month period ended December 31, 1995 and 1996 the Company incurred a net losses of $359,565 and $570,288, respectively. Such losses were primarily due to the Company's inability during the former period, and its lack of success following the completion of the Offering in August, 1996 during the latter period, to attract additional warehouse loan lines of credit which it needs in order to operate profitably. Expenses attributed to the registration statement including printing costs. Such non-cash expenses as depreciation, amortization and debt discount totaling $139,706 and $118,360 respectively, were also contributing factors to such losses. CASH FLOWS FROM OPERATIONS. The Company generated negative cash flow from operations of $237,174 and $807,973 for the nine month periods ended December 31,1995 and 1996, respectively. The negative cash flow generated for the nine month period ended December 31,1995 was primarily due to a net loss of $359,565 less non-cash expenses of depreciation and amortization of $75,975. The negative cash flow generated for the nine month period ended December 31,1996 was primarily due to a net loss of $570,288 and decreases in prepaid expenses ($157,734) and other assets ($283,202) less depreciation and amortization ($75,975) and increases in accounts payable and accrued expenses ($122,235). In order to operate profitably, the Company needs to increase its warehouse loan lines of credit beyond its current level of $ 4 million. Accordingly, immediately after the closing of its Offering in August, 1996, the Company began to focus its efforts on acquiring such additional credit lines. In that regard the Company has sought warehouse lending lines of credit from numerous financial institutions. Several of such lenders have declined to extend credit to the Company for a variety of reasons including but not limited to, the relatively small size of the Company's asset and equity bases. 11 REALIZABILITY OF LONG-LIVED ASSETS. Management has evaluated the realization of its long-lived assets (primarily furniture and equipment and proprietary computer software) having a net book value of $215,377 at December 31, 1996 in accordance with the provisions of Statement of Financial Accounting Standards No. 121 "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of." Based on such evaluation and taking into consideration the positive cash flows and earnings the Company believes it will be able to generate in future periods, management does not believe that there is an impairment of its long-lived assets at December 31, 1996. LIQUIDITY AND CAPITAL RESOURCES. On September 10, 1996 the company paid UMB a $40,000 renewal fee in connection with the extension of the $4,000,000 credit facility, a pro-rata share of these funds will be returned to the Company when the credit line ceases. Management believes the addition of the $4 million Private Placement of unregistered and restricted common stock and convertible notes will enable it to obtain the warehouse lines of credit necessary for its growth. The Company has been conducting ongoing discussions with several lending institutions to secure additional bank lines of credit. NET OPERATING LOSS CARRYFORWARDS As of December 31, 1996, Pioneer had available, in aggregate, net operating loss Carryforwards of approximately $2.8 million. As a result of changes in common stock ownership, the Company is subject to annual limitations pertaining to the use of such operating loss carryforwards. The Company expects that the amount of net operating loss carryforward which may be utilized in any future period will be limited to an amount not to exceed approximately $100,000 per year. Management believes that the losses that it has incurred since the 1994 merger of Pioneer Commercial Funding Corp, with the Company are not subject to these limitations. The Company's ability to use such net operating loss carryforwards is dependent upon its ability to generate taxable income in the future. RESULTS OF OPERATIONS THREE MONTH PERIOD ENDED DECEMBER 31, 1995 COMPARED WITH THE THREE MONTH PERIOD ENDED DECEMBER 31, 1996 REVENUES. During the three month period ended December 31,1996 revenues increased to $ 96,679 compared to $36,027 for the three month period ended December 31,1995. The volume of loan fundings during the three month periods ended December 31, 1995 and 1996 totaled approximately $7,310,604 and $17,539,958 respectively. Such increases in revenues, loan fundings and interest and processing fees were due to the increase in loan activity experienced by the Company during the latter period. 12 During the three month period ended December 31,1995, the company financed a total of 71 loans totaling $7,310,604 with a weighted average principal amount of $102,966 for an average duration of 17 days per borrowing. During the three month period ended December 31, 1996, the Company financed a total of 238 loans totaling $17,539,958 with a weighted average principal amount of $73,697 for a duration of 18 days per borrowing which amounts included 135 loans funded through bank borrowings aggregating $11,003,512 in weighted average principal amounts of $81,507. DIRECT COSTS. During the three month periods ended December 31,1995 and 1996, interest expense and other bank charges paid to the Company's revolving line of credit providers amounted to $34,770 and $60,718, respectively. The increase in interest expense and bank fees was due to an increase in the use of the Company's bank credit facility engendered by the above-described increase in loan activity. Interest expense on the bridge financing for the three month periods ended December 31, 1995 amounted to $6,163. OPERATING EXPENSES. The Company's operating expenses of $125,660 during the three month period ended December 31, 1995 consisted primarily of depreciation and amortization of $25,326, the primary component of which is the Collateral Tracking System ($23,078); salary and benefits to the company's former Chairman and Chief Executive and to its Senior Vice President ($41,018); Accounting and Legal fees ($13,659); telephone ($5,530); office rent ($2,901); temporary staff, including the services of an outside consultant for customer risk analysis, Dr. Teodore E. Reingold, CPA, a professor of management, ($20,961) and miscellaneous of $16,265. The Company's operating expenses of $362,318 during the three month period ended December 31,1996 consisted primarily of depreciation and amortization of $25,325 the primary component of which is the Collateral Tracking System ($23,078); salaries and benefits to the Company's Chief Executive, its President, Its Senior Vice President and office staff ($77,606); legal and accounting fees ($38,728); telephone ($8,337); office rent ($5,323); temporary staff, including the services of an outside consultant for customer risk analysis, Dr. Teodore E. Reingold, CPA, a professor of management, ($17,802); costs due to registration and IPO ($153,114, including, legal, public relations and printing costs) and miscellaneous of ($36,083). The increase in such expenses for the three month period ended December 31, 1996 are due to the increase in lending activity and the increased costs associated for professional, financial consulting and similar services which the Company has incurred by reason of its change in status from a privately owned to a publicly held company. NET LOSS. During the three month periods ended December 31, 1995 and 1996 the Company incurred a net loss of $130,522 and $323,920, respectively. The Company's lack of sufficient warehouse loan credit availability negatively impacted net income for the above mentioned periods. In addition, increased costs associated with the professional, financial consulting and similar services which the Company has incurred by reason of its change in status from a privately owned to a publicly held company have also negatively impacted net income. 13 PART II OTHER INFORMATION ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following document has been filed exclusively with the Securities and Exchange Commission. EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter for which this report has been filed. 14 Signature In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Pioneer Commercial Funding Corp. By /s/ Glenda S. Klein -------------------------------------- Glenda S. Klein, Sr. Vice President And Principal Financial Officer Dated: February 11, 1997 15 EX-27 2 FINANCIAL DATA SCHEDULE--ARTICLE V
5 This schedule contains summary financial information extracted from the balance sheet and statements of operations filed as part of the Company's quarterly report on Form 10-QSB and is qualified in its entirety by reference to such report. 1 9-MOS MAR-31-1996 APR-01-1996 DEC-31-1996 $355,293 0 $4,315,237 0 0 0 0 $378,010 $5,608,348 0 $2,955,681 0 0 $14,423 $10,570,857 $5,608,348 0 $226,402 0 $223,989 $580,697 0 0 ($568,245) $2,044 ($570,288) 0 0 0 ($570,288) ($0.50) ($0.50)
-----END PRIVACY-ENHANCED MESSAGE-----