-----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, SRPBqgVUCsaqPtKk4pU0v7kvqdW48d4gwjSQ2DvxbhpPskcduD80sEnR1YdCUCRV jsFL2MxJASSp0fRNjGZGgA== 0000944209-97-001497.txt : 19971114 0000944209-97-001497.hdr.sgml : 19971114 ACCESSION NUMBER: 0000944209-97-001497 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 000-24940 FILM NUMBER: 97712736 BUSINESS ADDRESS: STREET 1: 6660 RESODA BLVD STREET 2: C/O OHRENSTEIN & BROWN 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 FOR PERIOD ENDED SEPTEMBER 30, 1997 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 September 30, 1997 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) 6650 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 5,442,272 shares outstanding of the registrant's common stock outstanding as of November 11, 1997 Part I Financial Information Item 1 - Financial Statements PIONEER COMMERCIAL FUNDING CORP. BALANCE SHEETS
September 30 March 31 1997 1997 (unaudited) ----------- ----------- ASSETS Cash and cash equivalents $ 1,963,919 $2,704,078 Mortgage warehouse, loan receivables 42,384,167 2,456,154 Accrued interest and fees receivable 559,721 27,824 Prepaid and other assets 61,227 33,798 ----------- ---------- Total Current Assets 44,969,034 5,221,854 Fixed Assets Furniture and equipment 118,767 106,640 Proprietary computer software 510,693 483,410 Leasehold improvement 38,801 10,846 ----------- ---------- 668,261 600,896 Less accumulated depreciation and amortization 473,425 414,100 ----------- ---------- Net Fixed Assets 194,836 186,796 ----------- ---------- Investment securities available for sale 787,500 - Other assets 159,035 25,000 ----------- ---------- Total Assets $46,110,405 $5,433,650 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Loans payable, mortgage warehouse $38,670,842 $ - Loan payable - other 750,000 - Accounts payable & accrued expenses 210,217 235,360 Accrued interest & fees payable 243,038 - Due to mortgage banking companies 369,465 85,546 Deferred legal fees 59,505 57,149 ----------- ---------- Total Current Liabilities 40,303,067 378,055 ----------- ---------- Convertible note payable - 1,800,000 ----------- ---------- Total Liabilities 40,303,067 2,178,055 ----------- ---------- Commitments and Contingencies Stockholders' Equity: Common stock-$.01 par value; authorized 20,000,000 shares; 5,442,272 and 3,642,272 shares issued and outstanding at September 30 and March 31, 1997, respectively 54,423 36,423 Additional paid-in capital 14,307,952 12,525,952 Accumulated deficit (9,117,537) (9,306,780) Unrealized gain on investment securities available for sale 562,500 - ----------- ---------- Total stockholders' equity 5,807,338 3,255,595 ----------- ---------- Total liabilities and stockholders' equity $46,110,405 $5,433,650 =========== ==========
The accompanying notes are an integral part of these statements. PIONEER COMMERCIAL FUNDING CORP. STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 1997 & 1996 (UNAUDITED)
Three Months Ended Six Months Ended September 30 September 30 ------------------------ ------------------------ 1997 1996 1997 1996 --------- --------- --------- --------- INCOME Interest income 614,901 $ 42,713 $ 902,257 $ 103,280 Facility fees 28,244 1,500 53,452 1,500 Processing fees 306,719 12,275 410,034 24,943 --------- --------- --------- --------- Total income 949,864 56,488 1,365,743 129,723 --------- --------- --------- --------- DIRECT COSTS Interest expense - warehouse & revolving lines of credit 467,355 42,282 639,689 108,682 Interest expense - bridge financing - 25,355 - 42,385 Bank charges & fees 4,591 2,289 7,878 5,905 Bank processing fees 20,532 3,300 29,370 6,300 --------- --------- --------- --------- Total direct costs 492,478 73,226 676,937 163,272 --------- --------- --------- --------- INCOME(LOSS) BEFORE OPERATING EXPENSES 457,386 (16,738) 688,806 (33,549) OPERATING EXPENSES 327,782 121,913 540,663 218,379 --------- --------- --------- --------- Income(Loss) from operations 129,604 (138,651) 148,143 (251,928) --------- --------- --------- --------- OTHER INCOME (EXPENSE) Interest income - other 38,271 9,037 44,605 9,307 Interest expense - other (1,178) (1,178) (2,356) (2,356) --------- --------- --------- --------- Total other income(expense) 37,093 7,859 42,249 6,951 --------- --------- --------- --------- INCOME(LOSS) BEFORE INCOME TAXES 166,697 (130,792) 190,392 (244,977) PROVISION FOR INCOME TAXES 1,149 - 1,149 1,392 --------- --------- --------- --------- Net Income(loss) $ 165,548 $(130,792) $ 189,243 $(246,369) ========= ========= ========= ========= INCOME(LOSS) PER SHARE OF COMMON STOCK $ 0.03 $ (0.11) $ 0.04 $ (0.25) ========= ========= ========= ========= WEIGHTED AVERAGE NUMBER OF SHARES 5,442,272 1,155,315 5,068,502 996,629 ========= ========= ========= =========
The accompanying notes are an integral part of these statements. PIONEER COMMERCIAL FUNDING CORP. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1997 (UNAUDITED)
Additional Unrealized Total Common Paid-in Accumulated Gain on Stockholders' Stock Capital Deficit Securities Equity ------- ------------ ----------- ---------- ------------- BALANCE March 31, 1997 $36,423 $12,525,952 $(9,306,780) $ $3,255,595 Issuance of 1,800,000 of shares of the Company's common stock in connection the with the conversion of the convertible note to shares as of May 9, 1997 18,000 1,782,000 1,800,000 Unrealized gain on securities available for sale 562,500 562,500 Net profit for the period 189,243 189,243 ------- ----------- ----------- -------- ---------- BALANCE September 30, 1997 $54,423 $14,307,952 $(9,117,537) $562,500 $5,807,338 ======= =========== =========== ========= ==========
The accompanying notes are an integral part of this statement. PIONEER COMMERCIAL FUNDING CORP. STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED SEPTEMBER 30, (UNAUDITED)
1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 189,243 $ (246,369) ------------- ------------ Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 59,325 110,936 (Increase) decrease in -- Mortgage warehouse loan receivables (39,928,013) 426,233 Accrued interest and fees receivable (531,897) 5,803 Prepaid expenses and other assets (27,429) - Other assets (94,035) (191,900) Increase (decrease) in -- Accrued interest and fees payable 243,038 (37,671) Due to mortgage banking companies 283,919 15,186 Accounts payable & accrued expenses (25,143) (150,277) ------------- ------------ (40,020,235) 178,310 ------------- ------------ Net cash used in operating activities (39,830,992) (68,059) ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Fixed Assets (67,365) (7,750) Investment in Fidelity First Mortgage Corp. (225,000) - Investment in Pioneer Home Funding, LLC (40,000) ------------- ------------ Net cash used in investing activities (332,365) (7,750) ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in borrowings used in operations, net of issuance costs 38,670,842 (1,672,630) Increase in short term debt 750,000 - Decrease in revolving line of credit and bridge financing - (179,400) Decrease in deferred costs of equity offering - 445,731 Increase in deferred costs 2,356 - Proceeds from issuance of stock - 1,970,466 ------------- ------------ Net cash provided by financing activities 39,423,198 564,167 ------------- ------------ Net increase (decrease) in cash and cash equivalents (740,159) 488,358 CASH AND CASH EQUIVALENTS - at the beginning of the period 2,704,078 98,349 ------------- ------------ CASH AND CASH EQUIVALENTS - at the end of the period $ 1,963,919 $ 586,707 ============= ============= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 412,866 $ 130,468 ============= =============
The accompanying notes are an integral part of these statements. PIONEER COMMERCIAL FUNDING CORP. NOTES TO FINANCIAL STATEMENTS 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 September 30, 1997 and the results of operations for the three and six month periods ended September 30, 1997 and 1996 and its cash flows for the six months ended September 30, 1997 and 1996. The results of operations for the six month and three periods ended September 30, 1997 and 1996 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-QSB 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, 1997 audited financial statements and notes thereto, together with the Managements Discussion and Analysis of Financial Condition and Results of Operations as of March 31, 1997 and for the year then ended included in the Company's filing with the SEC on Form 10-KSB. 2. - OPERATING EXPENSES ------------------ Operating expenses consisted of the following for the three and six month periods ended September 30, 1997 and 1996:
Three Month Period Ended Six Month Period Ended September 30 September 30 ------------------------ ---------------------- 1997 1996 1997 1996 --------- --------- -------- -------- Salaries and benefits $113,269 $33,488 $201,567 $52,821 Depreciation and amortization 29,662 25,325 59,325 50,650 Professional fees 33,146 13,140 50,646 26,196 Utilities 9,878 5,599 17,704 11,144 Temporary staff services 23,547 13,165 33,676 23,849 Rent 10,644 2,903 17,178 5,805 Repairs and maintenance 5,034 1,969 7,927 2,851 Other 102,602 26,324 152,640 45,063 -------- -------- -------- -------- $327,782 $121,913 $540,663 $218,379 ======== ======== ======== ========
3. CONVERTIBLE NOTE ---------------- On May 9, 1997, the Company increased its authorized shares of common stock by 15 million to 20 million shares. With these newly available shares, the company immediately converted its outstanding Convertible Notes into 1.8 million shares of common stock. 4. INVESTMENT IN PIONEER HOME FUNDING, LLC --------------------------------------- On April 16, 1997 the Company entered into a joint venture agreement with Maryland Financial Corporation ("MFC") to form Pioneer Home Funding, LLC, a California Limited Liability Company, ("PHF"). The Company and MFC will maintain 80% and 20% ownership interests, respectively, in PHF. The Company and MFC have made capital contributions of $40,000 and $50,000, respectively, as of September 30, 1997. The Company's capital contribution is anticipated to increase up to $200,000. In addition the Company has advanced as a loan receivable $89,476 as of September 30, 1997 to PHF. PHF is a mortgage banking company organized for the primary purpose of originating, acquiring, marketing and selling mortgage loans on residential properties. PHF will focus on various lending markets including the subprime market. All loans originated or acquired by PHF will be sold servicing released. PHF is expected to commence operations in December 1997. 5. INVESTMENT IN FIDELITY FIRST MORTGAGE CORP. (FFIR) -------------------------------------------------- On July 7 , 1997 the Company purchased 300,000 shares at $.75 per share of Fidelity First Mortgage Corp., NASDAQ (FFIR) for a total investment of $225,000. FFIR shares closed on September 30, 1997 at $2.625 per share. The stock is restricted for a period of one year. Fidelity First Mortgage is based in Columbia Maryland and funds conforming and non-conforming single family residential mortgages in Maryland, Virginia, Delaware, Florida, North and South Carolina. 6. NOTE PAYABLE ------------ On September 23, 1997 JANON HOLDINGS, B.V. advanced $750,000 to the Company. The maximum principal amount that can be advanced under this note is $1,500,000. The Loan is due on December 29, 1997 and accrues interest at the rate of 10.00% per annum. 7. SUBSEQUENT EVENTS ----------------- On November 5, 1997 JANON HOLDINGS, B.V. advanced an additional $250,000 under the terms and conditions as stated in Note 6. On October 23, 1997, Pioneer signed a 10 year lease agreement for 6,856 sq. ft., in Woodland Hills, Ca. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL In August 1996, the Company consummated its initial public offering (the "IPO") pursuant to which the Company issued and sold 600,000 shares of its common stock, par value $.01 per share (the "Common Stock"), and 690,000 warrants (including warrants sold upon exercise of the underwriters' over- allotment option) exercisable into 690,000 shares of Common Stock at a price to the public of $5.00 per share and $.10 per warrant, which yielded to the Company net proceeds of approximately $2 million. The exercise price of the warrants is $5.50 per share exercisable during the four year period commencing August 13, 1996 and ending August 12, 2000. On January 9, 1997, Messrs. Arthur Goldberg and Elie Housman, the Company's Chief Executive Officer and Chief Operating Officer, respectively, were removed from their respective offices by the Board of Directors following disagreements between the Board of Directors and those two officers with respect to the Company's financing efforts and investment strategies. On January 20, 1997, Messrs. Goldberg and Housman resigned from their positions as directors of the Company. On January 9, 1997 the Company appointed M. Albert Nissim, President for an interim period of six months. The term was extended indefinitely by the Board of Directors. On February 28, 1997, the Company completed a private placement of securities with eight investors who invested an aggregate of $4 million in the Company in consideration for 2.2 million shares of Common Stock and $1.8 million principal amount of convertible promissory notes of the Company (the "Convertible Notes"). The Convertible Notes were converted into 1.8 million shares of Common Stock on May 9, 1997. During the fiscal year 1996, the Company utilized a $4 million revolving line of credit provided by United Mizrahi Bank ("UMB") under a revolving line of credit and security agreement between the Company and UMB, as collateral security for its indebtedness to UMB under the UMB Agreement, the Company granted to UMB a security interest in various assets including, but not limited to, all promissory notes acquired by the Company with respect to any loan funded by it with proceeds of the UMB credit line and all mortgages or other forms of collateral securing the funding of such loans. The UMB credit line was paid in full by the Company in February 1997. On March 31, 1997 the UMB credit line was discontinued. As of March 31, 1997, the Company entered into a one year credit agreement with Bank One, Texas, N.A. ("Bank One"). Pursuant to the Credit Agreement, Bank One provides the Company with a $25,000,000 revolving line of credit. As collateral security for its indebtedness to Bank One under the Credit Agreement, the Company has granted to Bank One a security interest in various assets including, but not limited to, all promissory notes acquired by the Company with respect to any loan funded by the Company with proceeds of the Bank One credit line and all mortgages or other forms of collateral securing the funding of such loans. The Bank One credit line was increased on August 25, 1997 to $35,0000,000 and on September 26, 1997 to $50,000,000. RESULTS OF OPERATIONS SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996 COMPARED WITH THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1997 REVENUES: During the six month period ended September 30, 1997 revenues increased to $1,365,743 compared to $129,723 for the six month period ended September 30, 1996. Such revenue was generated from the addition of 24 customers. 2,481 loans totaling $167,010,252 were funded during this period which represented 650% and 523% increase, respectively, of the total number of loans and fundings reported for the six months ended September 30, 1996. The interest and fee component of such revenues reported for the six months ended September 30, 1997 amounted to $902,257 and $463,486 respectively, compared to $103,280 in interest and $26,443 in processing fees for the six months ended September 30, 1996. During the six month period ended September 30, 1997, the Company financed a total of 2,481 loans totaling $167,010,252 in the weighted average principal amounts of $67,316 for an average duration of 26 days per borrowing, which amounts include 2,150 loans funded through bank borrowings aggregating $150,011,353 in weighted average principal amounts of $69,773. During the six month period ended September 30, 1996, the Company financed a total of 277 loans totaling $22,348,554, in the weighted average principal amount of $80,681 for an average duration of 26 days per borrowing. Such increase for the six month period ended September 30, 1997 in loan activity was due to the addition of the Bank One Credit Facility, and a substantial increase in the Company's customer base. 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 in connection with the initial public offering of securities which the Company completed in August 1996. During the six month period ended September 30, 1997 and 1996, the Company's interest expense and other bank charges paid to revolving line of credit providers amounted to $676,937 and $120,887, 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 six month period ended September 30, 1996 and 1997 amounted to $4,885 and -0- respectively and debt discount amortization of $37,500 and -0-, respectively. Upon the closing of the public offering the Bridge Financing obligation of $128,356 (which includes $28,356 in accrued interest) was retired in full. OPERATING EXPENSES: Operating expenses increased from $218,379 for the six month period ended September 30,1996 to $540,663 for the six month period ended September 30, 1997. Operating expenses included $76,670 of salaries and benefits paid to executives, temporary and other staff, and $50,650 of depreciation and amortization, the primary component of which is $46,156 attributable to the Company's Collateral Tracking System ("CTS"),for the six months ended September 30, 1996 compared to $235,243 of salaries and benefits to executives, temporary and other staff, and $59,325 in depreciation and amortization expense, the primary component of which is $47,421 attributable to the CTS for the six month period ended September 30, 1997. Accounting and legal fees amounted to $26,196 compared to $50,646 for the six month periods ended September 30, 1996 and 1997, respectively. The increase in operating expenses is due to the expanded operations of the Company during the six month period ended September 30, 1997, including the addition of staff, advertising and the normal costs associated with expansion. It is anticipated that aggregate operating expenses will increase as staff and office space are increased to manage the greater number of mortgage warehouse loan transactions that management believes the Company will be processing as a result of the recent increase of credit lines available to the Company. SEPTEMBER 30, 1996 NET LOSS VERSUS SEPTEMBER 30, 1997 NET INCOME: During the six month period ended September 30, 1996, the Company incurred a net loss of $246,369. Such loss was primarily due to the Company's inability during this period, to attract additional warehouse lines of credit and attract additional customer which it required in order to operate profitably. During the six month period ended September 30, 1997, the Company had net income of $189,243. Such income was a direct result of the addition of the Bank One warehouse credit facility and the increase in its' customer base. The combination of these two factors in conjunction with revised pricing allowed the Company to generate revenues to show a profit for the period. CASH FLOWS FROM OPERATIONS: The Company generated a negative cash flow from operations of approximately $68,059 for the six month period ended September 30, 1996. The negative cash flow was generated primarily from the net loss from operations of $246,369, an increase in prepaid expenses and a decrease in accounts payable. For the six month period ended September 30, 1997 the Company generated a negative cash flow of approximately $39,830,992. Such negative cash flow from operations was generated primarily by an increase in mortgage loans receivable of $39,928,013. LIQUIDITY AND CAPITAL RESOURCES. As of March 31, 1997, Bank One made available to the Company a $25 million revolving line of credit. The Bank One revolving credit line was increased to $35,000,000 on August 25,1997 and to $50,000,000 on September 26,1997. The Company's primary sources of capital which it employs in its warehouse lending operations are borrowings under its Bank One revolving line of credit and its net equity capital funds of approximately $5.2 million (after giving effect to $4 million of funds received by the Company in February 1997 as proceeds of the Private Placement). Management believes that such capital enables the Company to maintain its customer base and thereby generate sufficient revenue that allows it to maintain liquidity and generate positive cash flow. Management anticipates that its borrowing base will increase, which will enable the Company to expand its customer base and generate increased revenue. Although management believes that it will obtain additional credit lines, expand its customer base and thereby generate higher revenues. No assurances can be given that the Company will be able to accomplish these goals. NET OPERATING LOSS CARRYFORWARDS: As of September 30,1997, 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 carryforwards 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 PCF Acquisition Corp. 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. THREE MONTH PERIOD ENDED SEPTEMBER 30, 1996 COMPARED WITH THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997 REVENUES: During the three month period ended September 30, 1997 revenues increased to $949,864 compared to $56,488 for the three month period ended September 30, 1996. Such revenue was generated from funding 1,754 loans totaling $112,328,965 during this period which represented 1000% and 834% increase, respectively, of the total number of loans and fundings reported for the three months ended September 30, 1996. The interest and fee component of such revenues reported for the three months ended September 30, 1997 amounted to $614,901 and $334,963 respectively, compared to $42,713 in interest and $13,775 in fees for the three months ended September 30, 1996. During the three month period ended September 30, 1997, the Company financed a total of 1,754 loans totaling $112,328,965 in the weighted average principal amounts of $64,042 for an average duration of 27 days per borrowing, which amounts include 1,606 loans funded through bank borrowings aggregating $104,153,352 in weighted average principal amounts of $64,853. During the three month period ended September 30, 1996, the Company financed a total of 159 loans totaling $12,021,271, in the weighted average principal amount of $75,805 for an average duration of 15 days per borrowing, which amounts include 100 loans funded through bank borrowings aggregating $8,408,727 in weighted average principal amounts of $77,066. Such increase for the three month period ended September 30, 1997 in loan activity was due to the addition of the Bank One Credit Facility, and a substantial increase in the Company's customer base. 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 in connection with the initial public offering of securities which the Company completed in August 1996. During the three month period ended September 30, 1996 and 1997, the Company's interest expense and other bank charges paid to revolving line of credit providers amounted to $47,871 and $492,478, 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 three month period ended September 30, 1996 and 1997 amounted to $1,534 and -0- respectively and debt discount amortization of $23,821 and -0-, respectively. Upon the closing of the public offering the Bridge Financing obligation of $128,356 (which includes $28,356 in accrued interest) was retired in full. OPERATING EXPENSES: Operating expenses increased from $121,913 for the three month period ended September 30,1996 to $327,782 for the three month period ended September 30, 1997. Operating expenses included $46,653 of salaries and benefits paid to executives, temporary and other staff, and $25,325 of depreciation and amortization, the primary component of which is $23,078 attributable to the CTS for the three month period ended September 30, 1996, compared to $136,816 of salaries and benefits to executives, temporary and other staff, and $29,662 in depreciation and amortization expense, the primary component of which is $23,765 attributable to the CTS for the three month period ended September 30, 1997. Accounting and legal fees amounted to $13,140 compared to $23,547 for the three month periods ended September 30, 1996 and 1997, respectively. The increase in operating expenses is due to the expanded operations of the Company during the three month period ended September 30, 1997, including the addition of staff, advertising and the normal costs associated with expansion. It is anticipated that aggregate operating expenses will increase as staff and office space are increased to manage the greater number of mortgage warehouse loan transactions that management believes the Company will be processing as a result of the recent increase of credit lines available to the Company. SEPTEMBER 30, 1996 NET LOSS VERSUS SEPTEMBER 30, 1997 NET INCOME: During the three month period ended September 30, 1996, the Company incurred a net loss of $102,518. Such loss was primarily due to the Company's inability during this period, to attract additional warehouse lines of credit and attract additional customers which it required in order to operate profitably. During the three month period ended September 30, 1997, the Company had net income of $165,548. Such income was a direct result of the addition of the Bank One warehouse credit facility and the increase in its' customer base. The combination of these two factors in conjunction with revised pricing allowed the Company to generate revenues to show a profit for the period. PART II OTHER INFORMATION ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following documents have been filed with the Securities and Exchange Commission. EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule (b) Reports on Form 8-K During the first two quarters of the 1997 fiscal year, the company filed three reports on Form-8K as set forth below: 1. On May 8, 1997 in response to "Item 5-Other Events" in connection with a Special meeting of shareholders held May 8, 1997 the shareholders approved an amendment to the Certificate of Incorporation increasing the authorized capital stock of the Company from 5,000,000 shares of common stock, par value $.01 per share, to 20,000,000 shares of common stock. 2. On September 4, 1997 in response to "Item 4- Change in Registrant's Certifying Accountants", as of August 14, 1997 the Company changed accounting firms from Arthur Andersen LLP to Grant Thornton LLP. There were no disagreements with Arthur Andersen LLP on any matter of accounting principles or practices, financial statement disclosures, or auditing scope of procedure during the Registrant's two most recent fiscal years. 3. On September 25, 1997 in response to "Item 7 - Change in Fiscal Year", as of September 12, 1997 the company determined to change its fiscal year from that used through fiscal year ended March 31, 1997 and to change the fiscal year to be a calendar year beginning January 1 and ending December 31. The next annual report will be filed on Form 10- KSB for the transition period of nine months commencing on April 1, 1997 and ending December 31, 1997. 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, Sr. Vice President And Chief Financial Officer Dated: November 11, 1997 EX-27 2 FINANCIAL DATA SCHEDULE
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 6-MOS MAR-31-1997 APR-01-1997 SEP-30-1997 1,963,919 0 42,943,888 0 0 44,969,034 668,261 473,425 46,110,405 40,303,067 0 0 0 54,423 14,307,952 46,110,405 0 1,365,743 0 676,937 540,663 0 2,356 190,392 1,149 189,243 0 0 0 189,243 .04 .04
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