| FILED PURSUANT TO RULE 424(b)(3) |
FOUNDATION CAPITAL RESOURCES, INC.
UP TO $55,000,000
CERTIFICATES OF INDEBTEDNESS
(2003 Series A, B, C and D)
PROSPECTUS SUPPLEMENT DATED NOVEMBER 21, 2003
TO
PROSPECTUS DATED OCTOBER 16, 2003
This Prospectus Supplement updates and supplements the Prospectus of Foundation Capital Resources, Inc. dated October 16, 2003 (the "Prospectus"). Capitalized terms not otherwise defined in this Prospectus Supplement have the meanings given to them in the Prospectus.
THIS PROSPECTUS SUPPLEMENT CONTAINS MODIFICATIONS TO THE INFORMATION CONTAINED IN THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT MUST BE READ TOGETHER WITH THE PROSPECTUS AND CONSTITUTES A PART OF THE PROSPECTUS. PROSPECTIVE INVESTORS SHOULD CONSIDER AN INVESTMENT IN FOUNDATION CAPITAL'S DEBT CERTIFICATES ONLY AFTER CAREFULLY REVIEWING BOTH THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT.
Updated Financial Statements
Annex A to this Prospectus Supplement contains the following financial statements of Foundation Capital, Foundation Capital Partners I, LLLP ("FCPI") and Foundation Capital Partners II, LLLP ("FCPII"):
• for Foundation Capital: Consolidated Balance Sheets as of September 30, 2003 (unaudited) and December 31, 2002; Consolidated Statements of Operations for the three-month and nine-month periods ended September 30, 2003 and September 30, 2002 (unaudited); Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2003 and September 30, 2002 (unaudited); and Notes to Consolidated Financial Statements (unaudited);
• for FCPI: Balance Sheets as of September 30, 2003 (unaudited) and December 31, 2002; Statements of Operations for the three-month and nine-month periods ended September 30, 2003 and September 30, 2002 (unaudited); Statements of Cash Flows for the nine-month periods ended September 30, 2003 and September 30, 2002 (unaudited); and Notes to Financial Statements (unaudited); and
• for FCPII: Balance Sheets as of September 30, 2003 (unaudited) and December 31, 2002; Statements of Operations for the three-month and nine-month periods ended September 30, 2003 and September 30, 2002 (unaudited); Statements of Cash Flows for the nine-month periods ended September 30, 2003 and September 30, 2002 (unaudited); and Notes to Financial Statements (unaudited).
Election to be Recognized as a REIT for Tax Purposes
On October 1, 2003, Foundation Capital received a favorable ruling from the Internal Revenue Service ("IRS") in response to a Private Letter Ruling request that was made in April 2003. In this matter, Foundation Capital requested the IRS to determine that Foundation Capital's stock that is held by certain tax-exempt organizations not be treated as stock held by an individual. The IRS ruling was limited to a single matter possibly affecting Foundation Capital's treatment as a REIT. The IRS will not issue a ruling that Foundation Capital currently qualifies or will qualify in all respects to be taxed as a REIT, since there are multiple factors that will determine the qualification of Foundation Capital to be taxed as a REIT in any year. There can be no assurance, therefore, as to whether or when Foundation Capital will qualify to be taxed as a REIT. For more information, see
"Federal Income Tax Considerations--Taxation as a REIT" and "--Tax Classification of Foundation Capital" in the Prospectus.
Based upon current expectations of its income for 2003, Foundation Capital is planning to make a formal election with the IRS to be recognized as a REIT for tax purposes for the year ending December 31, 2003. This election is expected to be made when Foundation Capital files its corporate income tax return in early 2004.
Proposed Mergers of FCPI and FCPII With and Into Foundation Capital
General. The Prospectus states that Foundation Capital has asked its legal and accounting advisors to explore a transaction that would result in the consolidation of FCPI and FCPII with and into Foundation Capital by merger or other type of transaction. The Prospectus further states that, as of the date of the Prospectus, the terms and timing of such a transaction had not yet been determined.
As of November 19, 2003, Foundation Capital, FCPI and FCPII entered into an Agreement and Plan of Merger (the "Merger Agreement") whereby both FCPI and FCPII will be merged with and into Foundation Capital, with Foundation Capital surviving the transaction. Completion of the transactions contemplated by the Merger Agreement is subject to the further approval of Foundation Capital's shareholders, the limited partners of FCPI and the limited partners of FCPII. To this end, meetings of Foundation Capital's shareholders, the limited partners of FCPI and the limited partners of FCPII have been scheduled for December 3, 2003. It is expected that approvals of the transactions contemplated by the Merger Agreement will occur at these meetings. If such approvals are obtained, it is expected that the mergers will become effective as of December 31, 2003.
Effects of Proposed Mergers.If the Merger Agreement is approved and adopted by Foundation Capital's shareholders, the limited partners of FCPI and the limited partners of FCPII, and the transactions contemplated by the Merger Agreement are completed:
• FCPI will merge with and into Foundation Capital.
• FCPII will merge with and into Foundation Capital.
• The separate existence of each of FCPI and FCPII will cease.
• Foundation Capital will continue in existence as the surviving entity in the mergers.
• Each limited partnership Unit of FCPI and each limited partnership Unit of FCPII outstanding immediately before the mergers will automatically be converted into one share of Foundation Capital Common Stock and each general partnership Unit in FCPI and FCPII will be cancelled.
• The persons who are the Directors and officers of Foundation Capital immediately before the effective time of the mergers will continue to be the surviving corporation's Directors and officers, until changed in accordance with Foundation Capital's Bylaws and applicable law.
• Similarly, Foundation Capital's Restated Articles of Incorporation and Bylaws, as in effect immediately before the effective time of the mergers, will continue to be the surviving corporation's articles of incorporation and bylaws, until thereafter amended in accordance with their terms and applicable law.
• Each of the Guaranties of the Debt Certificates will be unnecessary and will cease to exist since the guarantors (FCPI and FCPII) will have merged with and into Foundation Capital.
The mergers are anticipated to be effective on December 31, 2003. However, completion of the mergers is subject to the conditions described in the Merger Agreement, as well as approval by Foundation Capital's shareholders, the limited partners of FCPI and the limited partners of FCPII. In addition, the Merger Agreement may be modified or terminated at any time before the mergers are completed.
Reasons for the Mergers.As limited partnerships, FCPI and FCPII are not subject to federal corporate income taxation. Similarly, if Foundation Capital qualifies for taxation as a REIT and distributes to its shareholders at least 90% of its REIT taxable income (excluding net capital gains), Foundation Capital generally will not be subject to federal corporate income tax on the portion of its ordinary income or capital gain that is timely distributed to shareholders. Since Foundation Capital now plans to make a formal election to be taxed as a REIT for 2003, Foundation Capital believes that merging FCPI and FCPII with and into Foundation Capital will be beneficial since it will streamline the day-to-day operations and reporting processes and will add efficiency to business operations.
Pro FormaFinancial Information.Annex B to this Prospectus Supplement contains certain unauditedpro forma financial information of Foundation Capital as of September 30, 2003 and for the year ended December 31, 2002 as if the proposed mergers of FCPI and FCPII with and into Foundation Capital had occurred as of January 1, 2002.
Pro FormaPrincipal Shareholder Information.The following table provides information concerning beneficial ownership of Foundation Capital's Common Stock as of September 30, 2003, by:
| • | each shareholder that we know owns more than 5% of our outstanding Common Stock; |
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| • | each of our named executive officers; |
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| • | each of our Directors; and |
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| • | all of our Directors and executive officers as a group. |
The table also contains additional columns that reflect the expected conversion of limited partnership Units of FCPI and FCPII into Foundation Capital Common Stock on a one-for-one basis in the above-described mergers:
|
| Before the Mergers |
| After the Mergers | ||||||
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| Percentage |
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| Percentage | ||
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| ||
A.J. Braswell |
| 673.86 | (2) |
| * |
| 3,231.17 | (2) |
| * |
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|
|
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|
James LeRoy Roberts |
| 3,058.96 | (3) |
| 2.07% |
| 3,058.96 | (3) |
| * |
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|
|
|
|
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|
Wayne Shirley |
| 11.21 | (4) |
| * |
| 11.21 | (4) |
| * |
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|
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|
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|
|
|
|
|
|
Kenneth C. Bray |
| 121.67 | (5) |
| * |
| 121.67 | (5) |
| * |
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|
Dr. K. Milton Higgins |
| 2,724.31 | (6) |
| 1.85% |
| 2,724.31 | (6) |
| * |
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| Before the Mergers |
| After the Mergers | ||||||
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| Percentage |
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| Percentage | ||
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Susan Eames |
| -- |
|
| -- |
| -- |
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| -- |
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Clay Corvin |
| -- |
|
| -- |
| -- |
|
| -- |
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|
|
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|
Douglas H. Veazey |
| 587.53 | (7) |
| * |
| 587.53 | (7) |
| * |
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|
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|
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|
|
|
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| |
Bobby D. Ray |
| 587.53 | (7) |
| * |
| 587.53 | (7) |
| * |
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Barry S. Winford |
| 615.66 | (7),(8) |
| * |
| 615.66 | (7), (8) |
| * |
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David B. Parker |
| -- |
|
| -- |
| -- |
|
| -- |
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|
|
| |
Assemblies of God Loan |
| 31,335.93 |
|
| 21.24% |
| 31,335.93 |
|
| 0.18% |
|
|
|
|
|
|
|
|
|
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|
Assemblies of God Financial |
| 31,335.93 |
|
| 21.24%(10) |
| 8,589,750.65 | (10) |
| 49.46% |
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Assemblies of God |
| 31,335.93 |
|
| 21.24% |
| 31,335.93 |
|
| 0.18% |
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Ministers Benefit |
| 31,335.93 |
|
| 21.24% |
| 31,335.93 |
|
| 0.18% |
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Foundation Ministries Loan |
| -- |
|
| -- |
| 8,610,327.48 | (11) |
| 49.58% |
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All Officers and Board of |
| 8,380.73 |
|
| 5.68% |
| 10,938.04 |
|
| 0.06% |
_____________________
* | Indicates less than 1% ownership. |
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|
(1) | For purposes of calculating the percentage beneficially owned, the number of shares of Common Stock outstanding as of September 30, 2003 was 147,543.08. Beneficial ownership is determined in accordance with the rules of the SEC that deem shares to be beneficially owned by any person or group who has or shares voting or investment power with respect to such shares. As of September 30, 2003, there were 110 record |
| holders of Foundation Capital's Common Stock. There is no established trading market for Foundation Capital's Common Stock. |
(2) | Includes 86.33 shares of Foundation Capital's Common Stock owned by Mr. Braswell and 587.53 shares of Foundation Capital's Common Stock held by the Manager. Mr. Braswell, as an officer of the Manager, may be deemed to beneficially own the Manager's shares. Also includes 2,557.31 shares held by Partners III, a partnership in which Mr. Braswell is one of three partners. Does not include 22.46 shares of Foundation Capital's Common Stock held by Mr. Braswell's wife, Phyllis Braswell. |
(3) | Does not include 3,058.96 shares of Foundation Capital's Common Stock held by Mr. Roberts' wife, Jeanine Roberts. |
(4) | Does not include 11.21 shares of Foundation Capital's Common Stock held by Mr. Shirley's wife, Sheri Shirley. |
(5) | Does not include 121.67 shares of Foundation Capital's Common Stock held by Mr. Bray's wife, Cynthia B. Bray. |
(6) | Includes 224.31 shares of Foundation Capital's Common Stock owned by Dr. Higgins and 2,500 shares of Foundation Capital's Common Stock held by California Baptist Foundation. Dr. Higgins, as an officer of the California Baptist Foundation, may be deemed to beneficially own California Baptist's shares. Does not include 224.31 shares of Foundation Capital's Common Stock held by Dr. Higgins' wife, Jarrene Higgins. |
(7) | Includes 587.53 shares of Foundation Capital's Common Stock held by the Manager. Mr. Veazey, Mr. Ray and Mr. Winford, as officers of the Manager, may be deemed to beneficially own the Manager's shares. |
(8) | Includes 28.13 shares of Foundation Capital's Common Stock owned by Mr. Winford. Does not include 28.03 shares of Foundation Capital's Common Stock held by Mr. Winford's wife, Christine Winford, or 28.03shares of Foundation Capital's Common Stock held by each of Mr. Winford's daughters, Aiden Winford and Brittan Winford. |
(9) | The address for all of these entities is 1661 North Boonville Ave. Suite B, Springfield, MO 65803. |
(10) | Consists of shares of Common Stock that were converted from Class II Preferred Stock. The "After the Mergers" column also includes 8,558,414.72 shares of Common Stock that would have been converted from limited partnership Units in FCPII had the mergers occurred as of September 30, 2003. Following the mergers, AGFSG would directly and indirectly own 99.59% of Foundation Capital's Common Stock. |
(11) | The "After the Mergers" column includes 8,610,327.48 shares of Common Stock that would have been converted from limited partnership Units in FCPI had the mergers occurred as of September 30, 2003. |
Further Information
For further information regarding Foundation Capital or the matters described in the Prospectus or this Prospectus Supplement, contact the Underwriter at Rives, Leavell & Co., Inc., 1430 Lelia Drive, P.O. Box 4900, Jackson, Mississippi 39296, telephone (800) 748-8877.
The date of this Prospectus Supplement is November 21, 2003
ANNEX A
Foundation Capital Resources, Inc.
Consolidated Balance Sheets
September 30, 2003 and December 31, 2002
| September 30, 2003 |
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| ||
Assets |
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Cash and cash equivalents | $ | 2,388,058 |
| $ | 6,406,403 |
|
Accounts receivable |
| 57,554 |
|
| 11,017 |
|
Due from affiliates |
| 224,500 |
|
| 124,292 |
|
Interest receivable |
| 2,324,450 |
|
| 1,480,693 |
|
Loans receivable, net of allowance for loan losses and |
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|
|
|
Foreclosed assets held for sale, net |
| 2,712,597 |
|
| - |
|
Held-to-maturity securities |
| 3,705,099 |
|
| 2,940,917 |
|
Deferred debt offering costs |
| 631,062 |
|
| 273,858 |
|
Other |
| 11,508 |
|
| 59,587 |
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|
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Total assets | $ | 171,481,196 |
| $ | 132,856,529 |
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Liabilities and Stockholders' Equity |
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Liabilities |
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Accounts payable and accrued expenses | $ | 181,519 |
| $ | 172,599 |
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Total liabilities |
| 181,519 |
|
| 172,599 |
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Limited Partnership Minority Interest |
| 170,091,865 |
|
| 131,652,895 |
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Stockholders' Equity |
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Class I preferred stock, 7.25% cumulative; $10 par value; |
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Common stock; $10 par value; authorized 20,000,000 shares; |
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Excess Stock; $10 par value; authorized 20,000,000 shares; |
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Additional paid-in capital (deficit) |
| (160,000 | ) |
| (160,000 | ) |
Retained earnings (deficit) |
| (107,618 | ) |
| (219,138 | ) |
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Total stockholders' equity |
| 1,207,812 |
|
| 1,031,035 |
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Total liabilities and stockholders' equity | $ | 171,481,196 |
| $ | 132,856,529 |
|
See Notes to Consolidated Financial Statements
Foundation Capital Resources, Inc.
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2003 and 2002
(Unaudited)
| Three Months |
| Three Months |
| Nine Months |
| Nine Months |
| ||||
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Interest Income |
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Loans | $ | 3,235,920 |
| $ | 2,256,146 |
| $ | 8,433,272 |
| $ | 5,598,713 |
|
Held-to-maturity securities |
| 81,526 |
|
| 50,600 |
|
| 261,733 |
|
| 150,711 |
|
Deposits with banks |
| 17,722 |
|
| 98,835 |
|
| 52,386 |
|
| 290,045 |
|
Total interest income |
| 3,335,168 |
|
| 2,405,581 |
|
| 8,747,391 |
|
| 6,039,469 |
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Provision for Loan Losses |
| 26,843 |
|
| - |
|
| 68,985 |
|
| - |
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Interest Income After |
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Other Income |
| 37,144 |
|
| - |
|
| 66,997 |
|
| - |
|
|
| 3,345,469 |
|
| 2,405,581 |
|
| 8,745,403 |
|
| 6,039,469 |
|
Other Expenses |
| 593,826 |
|
| 407,042 |
|
| 1,419,607 |
|
| 839,330 |
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Income Before Income Taxes |
| 2,751,643 |
|
| 1,998,539 |
|
| 7,325,796 |
|
| 5,200,139 |
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Provision (Credit) for Income | | |
| | | | | |
| | |
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Income Before Preferred |
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Preferred Payments to |
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Income (Loss) Before |
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Minority Interest |
| 2,631,179 |
|
| (158,043 | ) |
| 7,144,565 |
|
| (659,391 | ) |
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Net Income (Loss) | $ | 120,464 |
| $ | 12,135 |
| $ | 181,231 |
| $ | (472 | ) |
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Basic and Diluted Earnings |
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Dividends Declared and Paid |
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See Notes to Consolidated Financial Statements
Foundation Capital Resources, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2003 and 2002
(Unaudited)
| 2003 |
| 2002 |
| ||
Net income (loss) | $ | 181,231 |
| $ | (472 | ) |
Items not requiring (providing) cash |
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Provision for loan losses |
| 68,985 |
|
| - |
|
Accretion of discounts on loans and held-to-maturity securities |
| (361,551 | ) |
| (53,254 | ) |
Amortization of deferred loan origination fees |
| 215,765 |
|
| - |
|
Changes in |
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|
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|
Interest receivable |
| (843,757 | ) |
| (816,719 | ) |
Other assets |
| (455,870 | ) |
| (159,615 | ) |
Accounts payable and accrued expenses |
| 8,920 |
|
| 150,653 |
|
Income taxes payable |
| - |
|
| (11,500 | ) |
|
|
|
|
|
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|
Net cash used in operating activities |
| (1,186,277 | ) |
| (890,907 | ) |
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Investing Activities |
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Origination of loans |
| (78,574,581 | ) |
| (34,369,580 | ) |
Proceeds from principal payments on loans |
| 33,609,391 |
|
| 5,911,884 |
|
Proceeds from sale of loans |
| 4,458,738 |
|
| - |
|
Purchases of held-to-maturity securities |
| (912,288 | ) |
| - |
|
Maturities of held-to-maturity securities |
| 152,156 |
|
| - |
|
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|
|
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|
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Net cash used in investing activities |
| (41,266,584 | ) |
| (28,457,696 | ) |
|
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Financing Activities |
|
|
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|
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Proceeds from issuance of common stock |
| 67,257 |
|
| 175,589 |
|
Redemption of preferred stock |
| (2,000 | ) |
| - |
|
Dividends paid |
| (69,711 | ) |
| (89,759 | ) |
Increase in minority interest |
| 38,438,970 |
|
| 36,871,042 |
|
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Net cash provided by financing activities |
| 38,434,516 |
|
| 36,956,872 |
|
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Increase (Decrease) in Cash and Cash Equivalents |
| (4,018,345 | ) |
| 7,608,269 |
|
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Cash and Cash Equivalents, Beginning of Period |
| 6,406,403 |
|
| 7,046,063 |
|
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Cash and Cash Equivalents, End of Period | $ | 2,388,058 |
| $ | 14,654,332 |
|
See Notes to Consolidated Financial Statements
Foundation Capital Resources, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Foundation Capital Resources, Inc. ("Foundation Capital") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. The financial statements presented herein reflect all adjustments which are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows of Foundation Capital for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three months ended September 30, 2003 and 2002, and the nine months ended September 30, 2003 and 2002, are not necessarily indicative of the results that may be expected for the full year.
Certain information and note disclosures normally included in Foundation Capital's annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Foundation Capital's Annual Report on Form 10-KSB for the year ended December 31, 2002 filed with the Securities and Exchange Commission.
Nature of Operations
Foundation Capital was formed as a Georgia corporation to invest primarily in the work of churches and other nonprofit organizations by making mortgage loans to such entities and to acquire indebtedness secured by mortgages issued by them. Foundation Capital plans to qualify as an infinite life real estate investment trust (a "REIT") for its fiscal year ending December 31, 2003, in accordance with the requirements of the Internal Revenue Code of 1986, as amended. Foundation Capital will be taxed as a "C" corporation until REIT status is attained.
Principles of Consolidation
The consolidated financial statements include the accounts of Foundation Capital and two Georgia limited liability limited partnerships, Foundation Capital Partners I, LLLP and Foundation Capital Partners II, LLLP, (collectively, the "Limited Partnerships"), which are controlled by Foundation Capital in its capacity as the sole general partner. All significant inter-entity accounts and transactions have been eliminated in consolidation.
Minority Interest
The Limited Partnerships are recorded as minority interest on Foundation Capital's balance sheet because, as the sole general partner, Foundation Capital effectively controls the Limited Partnerships.
Note 2: Changes in Accounting Standards
The Financial Accounting Standards Board ("FASB") recently issued Statement of Financial Accounting Standards No. 149 ("SFAS No. 149"), "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts. Foundation Capital adopted SFAS No. 149 on July 1, 2003, with no impact to the financial statements of Foundation Capital.
The FASB recently issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity". This statement established standards on the classification and measurement of certain financial instruments with characteristics of both debt and equity. Foundation Capital adopted SFAS No. 150 on July 1, 2003, with no impact to the financial statements of Foundation Capital. In accordance with SFAS No. 150, the limited partnership minority interest on the consolidated balance sheet is recorded at estimated fair value.
Note 3: Earnings Per Share
Earnings (loss) per share (EPS) were computed as follows:
Nine Months Ended September 30, 2003 |
| ||||||||
|
|
| Weighted |
|
|
|
| ||
|
|
|
|
|
|
|
|
| |
Net income | $ | 181,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
|
|
|
|
|
|
|
|
|
Income allocable to common |
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2002 |
| |||||||||
|
| Weighted |
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||
Net income/(loss) | $ | (472 | ) |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
Basic and diluted earnings per share |
|
|
|
|
|
|
|
|
| |
Loss allocable to common stockholders | $ | (472 | ) |
| 151,373 |
| $ | (.00 | ) |
Three Months Ended September 30, 2003 |
| ||||||||
|
|
| Weighted |
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
Net income | $ | 120,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
|
|
|
|
|
|
|
|
|
Income allocable to common |
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, 2002 |
| |||||||
|
|
| Weighted |
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
Net income | $ | 12,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
|
|
|
|
|
|
|
|
|
Income allocable to common |
|
|
|
|
|
|
|
|
|
Note 4: Debt Offering
Foundation Capital has filed a Form S-11 Registration Statement with the Securities and Exchange Commission to register $55,000,000 of unsecured debt obligations with terms varying from three to ten years with interest rates currently ranging from 4.35% to 6.20% ("Debt Certificates"). The Form S-11 Registration Statement was declared effective by the Securities and Exchange Commission on October 16, 2003. As of the date of this Form 10-QSB, Foundation Capital has also received clearance to offer and sell the Debt Certificates in several states. As of November 7, 2003, no Debt Certificates had been sold.
Note 5: Limited Partnership Agreement Revisions
During the first quarter of 2003, the limited partnership agreements of the Limited Partnerships were revised so that payments to the limited partners are no longer considered guaranteed payments and expensed on the income statement, but rather are treated as distributions to the limited partners, payable if and when dividends are declared on Foundation Capital's common stock.
Foundation Capital Partners I, LLLP
Consolidated Balance Sheets
September 30, 2003 and December 31, 2002
| September 30, 2003 |
|
|
| ||
Assets |
|
|
|
|
|
|
Cash and cash equivalents | $ | 1,796,814 |
| $ | 1,918,383 |
|
Accounts receivable |
| 44,554 |
|
| 4,005 |
|
Due from affiliates |
| (69,154 | ) |
| 575,434 |
|
Interest receivable |
| 1,074,821 |
|
| 674,600 |
|
Loans receivable, net of allowance for loan losses and |
|
|
|
|
|
|
Held-to-maturity securities |
| 3,642,461 |
|
| 2,879,923 |
|
Foreclosed assets held for sale, net |
| 2,712,597 |
|
| - |
|
Other |
| 5,502 |
|
| - |
|
|
|
|
|
|
|
|
Total assets | $ | 84,065,021 |
| $ | 60,110,593 |
|
|
|
|
|
|
|
|
Liabilities and Partners' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Accounts payable and accrued expenses | $ | 12,876 |
| $ | 19,457 |
|
|
|
|
|
|
|
|
Total liabilities |
| 12,876 |
|
| 19,457 |
|
|
|
|
|
|
|
|
Partners' Equity |
| 84,052,145 |
|
| 60,091,136 |
|
|
|
|
|
|
|
|
Total liabilities and partners' equity | $ | 84,065,021 |
| $ | 60,110,593 |
|
See Notes to Consolidated Financial Statements
Foundation Capital Partners I, LLLP
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2003 and 2002
(Unaudited)
| Three Months |
| Three Months |
| Nine Months |
| Nine Months |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Loans | $ | 1,489,492 |
| $ | 1,353,470 |
| $ | 3,612,362 |
| $ | 3,264,444 |
|
Held-to-maturity securities |
| 80,350 |
|
| 50,018 |
|
| 237,100 |
|
| 150,129 |
|
Deposits with banks |
| 11,729 |
|
| 20,868 |
|
| 26,406 |
|
| 94,520 |
|
Total interest income |
| 1,581,571 |
|
| 1,424,356 |
|
| 3,875,868 |
|
| 3,509,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses |
| 10,953 |
|
| - |
|
| 43,700 |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income After Provision for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income |
| 40,954 |
|
| - |
|
| 66,987 |
|
| - |
|
|
| 1,611,572 |
|
| 1,424,356 |
|
| 3,899,155 |
|
| 3,509,093 |
|
Other Expenses |
| 247,718 |
|
| 252,835 |
|
| 570,162 |
|
| 538,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Preferred Payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Payments to Limited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) | $ | 1,363,854 |
| $ | 52,248 |
| $ | 3,328,993 |
| $ | (147,942 | ) |
See Notes to Consolidated Financial Statements
Foundation Capital Partners I, LLLP
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2003 and 2002
(Unaudited)
| 2003 |
| 2002 |
| ||
Net income (loss) | $ | 3,328,993 |
| $ | (147,942 | ) |
Items not requiring (providing) cash |
|
|
|
|
|
|
Provision for loan losses |
| 43,700 |
|
| - |
|
Accretion of discounts on loans and held-to-maturity securities |
| (253,649 | ) |
| (168,970 | ) |
Amortization of deferred loan origination fees |
| 116,585 |
|
| 150,436 |
|
Changes in |
|
|
|
|
|
|
Interest receivable |
| (400,221 | ) |
| (594,258 | ) |
Other assets |
| 598,537 |
|
| 46,422 |
|
Accounts payable and accrued expenses |
| (6,581 | ) |
| 87,625 |
|
Net cash provided by (used in) operating activities |
| 3,427,364 |
|
| (626,687 | ) |
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
Origination of loans |
| (49,812,090 | ) |
| (32,149,505 | ) |
Proceeds from principal payments on loans |
| 26,393,679 |
|
| 18,272,370 |
|
Purchases of held-to-maturity securities |
| (762,538 | ) |
| - |
|
Net cash used in investing activities |
| (24,180,949 | ) |
| (13,877,135 | ) |
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
Partner contributions |
| 23,975,473 |
|
| 14,789,477 |
|
Distribution to partners |
| (3,343,457 | ) |
| - |
|
Net cash provided by financing activities |
| 20,632,016 |
|
| 14,789,477 |
|
|
|
|
|
|
|
|
Increase (Decrease) in Cash and Cash Equivalents |
| (121,569 | ) |
| 285,655 |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of Period |
| 1,918,383 |
|
| 4,522,177 |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period | $ | 1,796,814 |
| $ | 4,807,832 |
|
See Notes to Consolidated Financial Statements
Foundation Capital Partners I, LLLP
Notes to Consolidated Financial Statements
(Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Foundation Capital Partners I, LLLP ("FCPI") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting. The financial statements presented herein reflect all adjustments which are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows of FCPI for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three months ended September 30, 2003 and 2002, and the nine months ended September 30, 2003 and 2002 are not necessarily indicative of the results that may be expected for the full year.
Certain information and note disclosures normally included in FCPI's annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2002 and notes thereto which are contained in the Form S-11 Registration Statement of FCPI, Foundation Capital Resources, Inc. ("Foundation Capital") and Foundation Capital Partners II, LLLP ("FCPII") filed with the Securities and Exchange Commission on October 14, 2003.
Nature of Operations
FCPI was formed as a Georgia limited liability partnership to invest primarily in the work of churches and other nonprofit organizations by making mortgage loans to such entities and to acquire indebtedness secured by mortgages issued by such entities. FCPI's general partner, Foundation Capital Resources, Inc., plans to qualify as an infinite life real estate investment trust (a "REIT") for its fiscal year ending December 31, 2003, in accordance with the requirements of the Internal Revenue Code of 1986, as amended.
FCPI will be operated as what is commonly referred to as a Down REIT, once Foundation Capital attains REIT status. FCPI and FCPII (collectively, the "Limited Partnerships") are recorded as minority interest on Foundation Capital's consolidated balance sheet, since, as the sole general partner, Foundation Capital effectively controls the Limited Partnerships.
Principles of Consolidation
The consolidated financial statements include the accounts of FCPI and its wholly owned subsidiary, Prattville DS, LLC. All significant inter-entity accounts and transactions have been eliminated.
Note 2: Limited Partnership Agreement Revisions
During the first quarter of 2003, FCPI revised its limited partnership agreement. Payments to the limited partners are no longer considered guaranteed payments and expensed on the statements of operations, but rather are treated as distributions to the limited partners, payable if and when dividends are declared on common stock of Foundation Capital.
Foundation Capital Partners II, LLLP
Balance Sheets
September 30, 2003 and December 31, 2002
September 30, 2003 |
| |||||
Assets | ||||||
Cash and cash equivalents | $ | 404,660 | $ | 4,390,206 | ||
Accounts receivable | 13,000 | 7,012 | ||||
Due from affiliates | 318,469 | 1,275,542 | ||||
Interest receivable | 1,248,470 | 776,230 | ||||
Loans receivable, net of allowance for loan losses and |
|
| ||||
Held-to-maturity securities | 62,637 | 60,994 | ||||
Other |
| 5,911 |
| - | ||
Total assets | $ | 86,377,996 | $ | 71,574,032 | ||
Liabilities and Partners' Equity | ||||||
Liabilities | ||||||
Accounts payable and accrued expenses | $ | 55,752 | $ | 23,460 | ||
Total liabilities | 55,752 | 23,460 | ||||
Partners' Equity |
| 86,322,244 |
| 71,550,572 | ||
Total liabilities and partners' equity | $ | 86,377,996 | $ | 71,574,032 |
See Notes to Financial Statements
Foundation Capital Partners II, LLLP
Statements of Operations
For the Three and Nine Months Ended September 30, 2003 and 2002
(Unaudited)
| Three Months |
| Three Months |
| Nine Months |
| Nine Months |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Loans | $ | 1,740,081 |
| $ | 845,363 |
| $ | 4,780,864 |
| $ | 2,220,391 |
|
Held-to-maturity securities |
| 1,176 |
|
| 582 |
|
| 24,632 |
|
| 582 |
|
Deposits with banks |
| 5,063 |
|
| 77,218 |
|
| 22,601 |
|
| 194,133 |
|
Total interest income |
| 1,746,320 |
|
| 923,163 |
|
| 4,828,097 |
|
| 2,415,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses |
| 15,890 |
|
| - |
|
| 26,811 |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income After Provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income |
| - |
|
| - |
|
| - |
|
| - |
|
|
| 1,730,430 |
|
| 923,163 |
|
| 4,801,286 |
|
| 2,415,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses |
| 262,100 |
|
| 104,280 |
|
| 674,712 |
|
| 192,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Preferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Payments to Limited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) | $ | 1,468,330 |
| $ | (210,291 | ) | $ | 4,126,574 |
| $ | (518,212 | ) |
See Notes to Financial Statements
Foundation Capital Partners II, LLLP
Statements of Cash Flows
For the Nine Months Ended September 30, 2003 and 2002
(Unaudited)
Operating Activities | 2003 | 2002 | ||||
Net income (loss) | $ | 4,126,574 | $ | (518,212 | ) | |
Items not requiring (providing) cash | ||||||
Provision for loan losses | 26,811 | - | ||||
Accretion of discounts on loans and held-to-maturity securities | (103,317 | ) | (178,331 | ) | ||
Amortization of deferred origination fees | 99,635 | 211,110 | ||||
Changes in | ||||||
Interest receivable | (472,240 | ) | (232,208 | ) | ||
Other assets | 945,176 | (350,563 | ) | |||
Accounts payable and accrued expenses | 32,291 | - | ||||
|
|
|
| |||
Net cash provided by (used in) operating activities |
| 4,654,930 |
| (1,068,204 | ) | |
Investing Activities | ||||||
Origination of loans | (33,708,022 | ) | (21,286,255 | ) | ||
Proceeds from principal payments on loans | 9,965,353 | 6,369,757 | ||||
Proceeds from sale of loans | 4,458,738 | - | ||||
Purchases of held-to-maturity securities | (1,643 | ) | (46,750 | ) | ||
|
|
|
| |||
Net cash used in investing activities |
| (19,285,574 | ) |
| (14,963,249 | ) |
Financing Activities | ||||||
Partner contributions | 14,446,205 | 22,997,041 | ||||
Distribution to partners | (3,801,107 | ) | - | |||
|
|
|
| |||
Net cash provided by financing activities |
| 10,645,098 |
| 22,997,041 | ||
Increase (Decrease) in Cash and Cash Equivalents | (3,985,546 | ) | 6,965,589 | |||
Cash and Cash Equivalents, Beginning of Period |
| 4,390,206 |
| 2,292,140 | ||
Cash and Cash Equivalents, End of Period | $ | 404,660 | $ | 9,257,729 |
See Notes to Financial Statements
Foundation Capital Partners II, LLLP
Notes to Financial Statements
(Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited interim financial statements of Foundation Capital Partners II, LLLP ("FCPII") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting. The financial statements presented herein reflect all adjustments which are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows of FCPII for the periods presented. Those adjustments consist only of normal recurring adjustments. Operating results for the three months ended September 30, 2003 and 2002, and the nine months ended September 30, 2003 and 2002 are not necessarily indicative of the results that may be expected for the full year.
Certain information and note disclosures normally included in FCPII's annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2002 and notes thereto which are contained in the Form S-11 Registration Statement of FCPII, Foundation Capital Resources, Inc. ("Foundation Capital") and Foundation Capital Partners I, LLLP ("FCPI") filed with the Securities and Exchange Commission on October 14, 2003.
Nature of Operations
FCPII was formed as a Georgia limited liability partnership to invest primarily in the work of churches and other nonprofit organizations by making mortgage loans to such entities and to acquire indebtedness secured by mortgages issued by such entities. FCPII's general partner, Foundation Capital, plans to qualify as an infinite life real estate investment trust (a "REIT") for its fiscal year ending December 31, 2003, in accordance with the requirements of the Internal Revenue Code of 1986, as amended.
FCPII will be operated as what is commonly referred to as a Down REIT, once Foundation Capital attains REIT status. FCPII and FCPI (collectively, the "Limited Partnerships") are recorded as minority interest on Foundation Capital's consolidated balance sheet since, as the sole general partner, Foundation Capital effectively controls the Limited Partnerships.
Note 2: Limited Partnership Agreement Revisions
During the first quarter of 2003, FCPII revised its limited partnership agreement. Payments to the limited partners are no longer considered guaranteed payments and expensed on the statements of operations, but rather are treated as distributions to the limited partners, payable if and when dividends are declared on Foundation Capital's common stock.
ANNEX B
Foundation Capital Resources, Inc.
Pro Forma Financial Statements
The following tables contain unaudited pro forma combined financial information for Foundation Capital as if the mergers of FCPI and FCPII with and into Foundation Capital had been completed as described under "Proposed Mergers of FCPI and FCPII With and Into Foundation Capital" in this Prospectus Supplement. The following unaudited pro forma combined balance sheet as of September 30, 2003 gives effect to the mergers as if they had occurred on January 1, 2003. The following unaudited pro forma combined statements of earnings for the year to date period ended September 30, 2003 and for the year ended December 31, 2002 give effect to the mergers as if they had occurred at the beginning of the periods presented. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma combined financial statements.
It is important that when you read this information, you read it along with the separate financial statements and accompanying notes of Foundation Capital, FCPI and FCPII included in this Prospectus Supplement and in the Prospectus. You should not rely on the following selected unaudited pro forma combined financial information as indicating the results of operations or financial condition that would have been achieved if the mergers had taken place earlier or that will be achieved after completion of the mergers.
Foundation Capital Resources, Inc.
Pro Forma Consolidated Balance Sheet
September 30, 2003
(Unaudited)
|
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents | $ | 2,388,058 |
| $ | -- |
| $ | 2,388,058 |
|
Accounts receivable |
| 57,554 |
|
| -- |
|
| 57,554 |
|
Due from affiliates |
| 224,500 |
|
| -- |
|
| 224,500 |
|
Interest receivable |
| 2,324,450 |
|
| -- |
|
| 2,324,450 |
|
Loans receivable, net of allowance for loan losses |
| |
|
| |
|
| |
|
Foreclosed assets held for sale, net |
| 2,712,597 |
|
| -- |
|
| 2,712,597 |
|
Held-to-maturity securities |
| 3,705,099 |
|
| -- |
|
| 3,705,099 |
|
Deferred debt offering costs |
| 631,062 |
|
| -- |
|
| 631,062 |
|
Other |
| 11,508 |
|
| -- |
|
| 11,508 |
|
|
|
|
|
|
|
|
|
|
|
Total assets | $ | 171,481,196 |
| $ | -- |
| $ | 171,481,196 |
|
|
|
|
|
|
|
|
|
| |
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses | $ | 181,519 |
| $ | -- |
| $ | 181,519 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
| 181,519 |
|
| -- |
|
| 181,519 |
|
|
|
|
|
|
|
|
|
| |
Limited Partnership Minority Interest (Note 1) | $ | 170,091,865 |
| $ | (170,091,865 | ) | $ | -- |
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
|
|
|
|
Class I preferred stock, 7.25% cumulative; $10 par | | | | ||||||
|
|
|
|
|
|
|
|
|
|
Common stock; $10 par value (Note 1) |
| 1,475,430 |
|
| 170,091,865 |
| 171,567,295 |
| |
Excess stock; $10 par value |
| |
|
| |
|
| |
|
Additional paid-in capital (deficit) |
| (160,000 | ) |
| -- |
|
| (160,000 | ) |
Retained earnings (deficit) |
| (107,618 | ) |
| -- |
|
| (107,618 | ) |
|
|
|
|
|
|
|
|
| |
Total stockholders' equity (Note 1) |
| 1,207,812 |
|
| 170,091,865 |
|
| 171,299,677 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity | $ | 171,481,196 |
| $ | -- |
| $ | 171,481,196 |
|
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Foundation Capital Resources, Inc.
Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 2003
(Unaudited)
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |
Interest Income |
|
|
|
|
|
|
|
|
|
|
Loans | $ | 8,433,272 |
| $ | -- |
| $ | 8,433,272 |
|
|
Held-to-maturity securities |
| 261,733 |
|
| -- |
|
| 261,733 |
|
|
Deposits with banks |
| 52,386 |
|
| -- |
|
| 52,386 |
|
|
Total interest income |
| 8,747,391 |
|
| -- |
|
| 8,747,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses |
| 68,985 |
|
| -- |
|
| 68,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income After |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Other Income |
| 66,997 |
|
| -- |
|
| 66,997 |
|
|
8,745,403 | -- | 8,745,403 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
Other Expenses |
| 1,419,607 |
|
| -- |
|
| 1,419,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
| 7,325,796 |
|
| -- |
|
| 7,325,796 |
|
|
|
|
|
|
|
|
|
|
|
| |
Provision for Income Taxes |
| -- |
|
| -- |
|
| -- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Payments to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments to Limited Partnership |
| -- |
|
| -- |
|
| -- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before |
|
|
|
|
|
|
|
|
|
|
Minority Interest (Note 2) |
| 7,144,565 |
|
| (7,144,565 | ) |
| -- |
|
|
Net Income (Loss) (Note 2) | $ | 181,231 |
| $ | 7,144,565 |
| $ | 7,325,796 |
|
|
Basic and Diluted Earnings |
|
|
|
|
|
|
|
|
|
|
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Foundation Capital Resources, Inc.
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2002
(Unaudited)
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
|
|
|
|
|
|
|
|
Loans | $ | 7,545,411 |
|
| -- |
|
| 7,545,411 |
|
Held-to-maturity securities |
| 207,861 |
|
| -- |
|
| 207,861 |
|
Deposits with banks |
| 336,029 |
|
| -- |
|
| 336,029 |
|
Total interest income |
| 8,089,301 |
|
| -- |
|
| 8,089,301 |
|
|
|
|
|
|
|
|
|
| |
Provision for Loan Losses |
| -- |
|
| -- |
|
| -- |
|
|
|
|
|
|
|
|
|
| |
Interest Income After |
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Other Income |
| 13,495 |
|
| -- |
|
| 13,495 |
|
8,102,796 | -- | 8,102,796 | |||||||
|
|
|
|
|
|
|
|
|
|
Other Expenses |
| 1,184,851 |
|
| -- |
|
| 1,184,851 |
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
| 6,917,945 |
|
| -- |
|
| 6,917,945 |
|
|
|
|
|
|
|
|
|
| |
Provision for Income Taxes |
| -- |
|
| -- |
|
| -- |
|
|
|
|
|
|
|
|
|
|
|
Income Before Payments to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments to Limited Partnership |
| 8,017,346 |
|
| (8,017,346 | ) |
| -- |
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before |
|
|
|
|
|
|
|
|
|
Minority Interest (Note 2) |
| (1,079,329 | ) |
| 1,079,329 |
|
| -- |
|
Net Income (Loss) (Note 2) | $ | (20,072 | ) |
| (6,938,017 | ) |
| 6,917,945 |
|
Basic and Diluted Earnings |
|
|
|
|
|
|
|
|
|
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Foundation Capital Resources, Inc.
Notes to Pro Forma Financial Statements
Note 1: Pro Forma Adjustments For Conversion of Limited Partnership Units into Common Stock
The pro forma adjustments for these line items reflect the conversion of limited partnership Units in FCPI and FCPII into shares of Foundation Capital Common Stock in the proposed mergers. Following that conversion, there would no longer be a Limited Partnership Minority Interest line item on the balance sheet, the number of shares of Foundation Capital Common Stock outstanding would increase, and Stockholders' Equity would correspondingly increase.
Note 2: Pro Forma Adjustments to Minority Interest and Net Income
The pro forma adjustments for these line items also reflect the conversion of limited partnership Units in FCPI and FCPII into shares of Foundation Capital Common Stock in the proposed mergers. Following that conversion, there would no longer be a Minority Interest line item on the statement of operations. As a result, Net Income would increase.