1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period Commission file number:
ended September 30, 1996 814-186
------------------ -----------------------
ALLIED CAPITAL MORTGAGE CORPORATION
------------------------------------------------------------
(exact name of Registrant as specified in its charter)
MARYLAND 52-1939003
- ----------------------- -----------------------
(State or jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
C/O ALLIED CAPITAL ADVISERS, INC.
1666 K STREET, N.W.
9TH FLOOR
WASHINGTON, DC 20006
-------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (202) 331-1112
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods as 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
--- ------ -- ------
On November 8, 1996 there were 70 shares outstanding of the Registrant's common
stock, $0.0001 par value.
2
ALLIED CAPITAL MORTGAGE CORPORATION
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Assets and Liabilities as of September 30, 1996 and December 31, 1995 . . . . . . . .1
Statement of Operations For the Three and Nine Months Ended September 30, 1996 . . . . . . . . . 2
Statement of Changes in Net Assets For the Nine Months Ended September 30, 1996 . . . . . . . . 3
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3
ALLIED CAPITAL MORTGAGE CORPORATION
STATEMENT OF ASSETS AND LIABILITIES
ASSETS September 30, 1996 December 31, 1995
------------------ -----------------
(unaudited)
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,050 $ 1,050
------ ------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . 1,050 1,050
LIABILITIES
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
------ ------
NET ASSETS
Common stock, $0.0001 par value; 10,000,000 shares authorized; 70
shares issued and outstanding as of September 30, 1996 and December 31,
1995 --- ---
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 1,050 1,050
------ ------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,050 $ 1,050
======= =======
Net asset value per share . . . . . . . . . . . . . . . . . . . . $ 15 $ 15
======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
1
4
ALLIED CAPITAL MORTGAGE CORPORATION
STATEMENT OF OPERATIONS
(unaudited)
For the Three Months For the Nine Months
Ended September 30, 1996 Ended September 30, 1996
------------------------ ------------------------
Investment income:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
---------- ----------
Total investment income -- --
---------- ----------
Expenses:
Operating expenses . . . . . . . . . . . . . . . . . . . . -- --
---------- ----------
Total expenses . . . . . . . . . . . . . . -- --
---------- ----------
Net investment income . . . . . . . . . . . . . . . . . . . . -- --
Net realized gains on investments . . . . . . . . . . . . . . -- --
---------- ----------
Net investment income before net unrealized appreciation
(depreciation) on investments . . . . . . . . . . . . . . . . -- --
Net increase in net assets resulting form operations . . . . $ -- $ --
========== ==========
Earnings per share . . . . . . . . . . . . . . . . . . . . . $ -- $ --
========== ==========
Weighted average number of shares outstanding . . . . . . . . 70 70
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2
5
ALLIED CAPITAL MORTGAGE CORPORATION
STATEMENT OF CHANGES IN NET ASSETS
(unaudited)
For the Nine Months
Ended September 30, 1996
------------------------
Increase in net assets resulting from operations:
Net investment income . . . . . . . . . . . . . . . . . . $ --
Net realized gains on investments . . . . . . . . . . . . --
Net change in unrealized appreciation (depreciation) on
investments . . . . . . . . . . . . . . . . . . . . . . . --
-------
Net increase in net assets resulting from operations --
Distributions to Shareholders . . . . . . . . . . . . . . . . . . . --
Capital Share Transactions . . . . . . . . . . . . . . . . . . . . --
-------
Net Increase in Net Assets . . . . . . . . . . . . . . . . . . . . --
-------
Net assets at beginning of period . . . . . . . . . . . . . . . . . 1,050
-------
Net assets at end of period . . . . . . . . . . . . . . . . . . . . $ 1,050
=======
Net asset value per share . . . . . . . . . . . . . . . . . . . . . $ 15
=======
Shares outstanding at end of period . . . . . . . . . . . . . . . . 70
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
6
ALLIED CAPITAL MORTGAGE CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1996
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial statements
of Allied Capital Mortgage Corporation (the Company) contain all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the
Company's financial position as of September 30, 1996 and the results of
operations and changes in net assets for the periods indicated. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's December 31, 1995 Form 10-K.
4
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Allied Capital Mortgage Corporation (the Company) was incorporated in the state
of Maryland on August 10, 1995 and was organized as a closed-end,
non-diversified, management investment company that has elected to be regulated
as a business development company under Section 54 of the Investment Company
Act of 1940.
The Company has filed with the Securities and Exchange Commission a Form 10
registration statement registering 4,000,000 shares of the Company's common
stock ($0.0001 par value) and 150,000 units, consisting of one share of common
stock and one debt certificate, on August 23, 1995. Amendments were filed on
September 5, 1995 and October 20, 1995 and the registration went effective on
October 23, 1995. No shares of common stock had been sold to investors
pursuant to this registration statement as of September 30, 1996 or as of the
filing of this report on Form 10-Q.
The Company is contemplating offering shares of its common stock directly to
investors in order to adequately capitalize the Company. The proceeds from the
sale of stock will be invested in accordance with the Company's investment
objectives and policies. The Company has recently been organized and currently
has no operations. Once operations begin, its business will consist of
investing in small businesses through the purchase of non-performing loans or
other interests. The Company is part of a group of funds managed by Allied
Capital Advisers, Inc., which specializes in making loans to, and investments
in, small businesses, as well as buying performing and sub-performing loans
from financial institutions and other third parties.
The Company will purchase non-performing loans from financial institutions and
other third parties. It is expected that many of these loans will involve
first mortgages on real estate, as well as first liens of the operating assets
of small businesses. Once a mortgage is purchased, the Company will contact
the small business concern that borrowed the funds secured by the mortgage.
The objective will be to place part of the non-performing mortgage on a
performing basis, and to reduce the remaining part of the loan to an equity
ownership in the business or an equity ownership in the real estate asset
underlying the mortgage.
The Company will enter into an Investment Advisory Agreement (the Agreement)
with Allied Capital Advisers, Inc. (the "Adviser") upon the closing of the sale
of shares to new shareholders pursuant to the registration statement. The
Agreement would remain in effect for two years from its effective date and from
year to year thereafter, subject to annual approval by the Board of Directors
or by vote of the holders of a majority of the outstanding shares of the
Company. The Agreement can be terminated at any time on sixty days notice,
without the payment of penalty, by the Board of Directors or by vote of the
holders of a majority of the Company's outstanding shares and will terminate
automatically in the event of its assignment. Under the Agreement, the Adviser
will manage the investments of the Company, subject to the supervision and
control of the Company's Board of Directors. Specifically, the Adviser will
identify, evaluate, structure, close and follow the investments made by the
Company. The Company will not make any investments that have not been
recommended by the Adviser. Except as to those investment decisions that
require specific Board approval, the Adviser will have the authority to effect
purchases and sales of assets for the Company's account.
5
8
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not a defendant in any legal proceeding.
Item 2. CHANGES IN SECURITIES
No material changes have occurred in the securities of the Registrant.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarterly period ended September 30, 1996.
6
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
ALLIED CAPITAL MORTGAGE CORPORATION
-----------------------------------
(Registrant)
/s/Jon A. DeLuca
-----------------------------------
Date: November 13, 1996 Jon A. DeLuca
-----------------
Executive Vice President and
Chief Financial Officer
7