UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2005
OR
.. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Nos.: 033-73748
FUND AMERICA INVESTORS CORPORATION II
(Exact name of registrant as specified in its charter)
Delaware 84-1218906 .
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
6400 S. Fiddler's Green Circle, Suite 1200B, Englewood, Colorado 80111
(Address of principal executive offices)
Registrant's telephone number including area code: (303) 290-6025
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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
Indicate by check mark whether the registrant is an accelerated filer.
[ ] Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of May 14, 2005 - 349,000 shares
FUND AMERICA INVESTORS CORPORATION II
FORM 10-Q FOR THE
THREE MONTHS ENDED MARCH 31, 2005
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements 3
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative
Disclosures about Market Risk 8
Item 4. Controls and Procedures 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote
of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports 10
SIGNATURES 11
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- -----------------------------
FUND AMERICA INVESTORS CORPORATION II
Balance Sheets
(Unaudited)
March 31, December 31,
2005 2004
---------- ----------
Assets
Cash and cash equivalents $ 62 $ 71
Deferred offering costs, net 246,861 246,861
Prepaid expenses - -
---------- ----------
Total assets $ 246,923 $ 6,932
========== ==========
Liabilities - accounts payable $ 1,813 $ 1,538
---------- ----------
Commitments and Contingencies
Shareholder's equity
Common stock, par value $.01 per share;
1,000,000 shares authorized; 349,000
shares issued and outstanding 3,490 3,490
Additional paid-in capital 505,410 505,210
Shareholder distributions (1,919,298) (1,919,298)
Retained earnings 1,655,508 1,655,992
---------- ----------
Total shareholder's equity 245,110 245,394
---------- ----------
Total liabilities and shareholder's equity $ 246,923 $ 246,932
========== ==========
See notes to financial statements
3
FUND AMERICA INVESTORS CORPORATION II
Statements of Operations
(Unaudited)
Three months ended
March 31,
----------------------
2005 2004
-------- --------
Revenue
Interest $ - $ -
------- --------
Total revenue - -
------- --------
Expenses
Impairment - deferred offering costs - 9,500
General and administration 484 641
------- --------
Total expenses 484 10,141
------- --------
Net loss $ (484) $(10,141)
======= ========
See notes to financial statements
4
FUND AMERICA INVESTORS CORPORATION II
Statements of Cash Flows
(Unaudited)
Three months ended
March 31,
-----------------------
` 2005 2004
--------- --------
Operating activities:
Net loss $ (484) $(10,141)
Adjustments to reconcile net loss to net
cash from operating activities:
Impairment - deferred offering costs - 9,500
Changes in operating assets and liabilities:
Accounts payable 275 (860)
Prepaid expenses - 219
--------- ---------
Net cash used in operating activities: (209) (1,282)
--------- ---------
Financing activities:
Capital contributions 200 1,000
--------- ---------
Net cash provided by financing activities 200 1,000
--------- ---------
Net decrease in cash and cash equivalents (9) (282)
Cash and cash equivalents at beginning of year 71 466
--------- --------
Cash and cash equivalents at end of year $ 62 $ 184
========= ========
See notes to financial statements
5
FUND AMERICA INVESTORS CORPORATION II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Three months ended March 31, 2005 and 2004
1. Basis of Presentation
- -------------------------
Organization
- ------------
Fund America Investors Corporation II (the "Company") was incorporated in
the State of Delaware on December 14, 1992 as a limited purpose finance
corporation. The Company was established to engage in the issuance and
administration of Collateralized Mortgage Obligations (the "Bonds") and
Asset-Backed Certificates (the "Certificates", and together with the Bonds,
the "Securities"). The Securities are issued in one or more series, from
time to time, by the Company in accordance with the provisions in the
prospectus and series-related prospectus supplement of the Company's latest
effective registration statement.
The Securities of each series can be issued directly by the Company, but
typically the Company forms a separate trust to act as the issuer solely
for the purpose of issuing a series of Securities. A series of Securities
that consist of Bonds will be issued pursuant to an indenture and will
represent indebtedness of the trust or issuer. A series of Securities that
consist of Certificates will represent beneficial ownership in the related
trust or issuer. The sole source of payments to Bondholders or Certificate
holders within each series of Securities is produced from the related trust
property. The trust property is generally comprised of mortgage loans and/or
mortgage-related assets as described in each of the series' related prospectus
supplements.
The Company may not, either directly or indirectly through a beneficially
owned trust, engage in any business or investment activity other than to;
(1) issue and sell Bonds; (2) purchase, own, hold, pledge or sell mortgage
loans or other mortgage-related assets; (3) invest and maintain cash balances
on an interim basis in high quality short-term securities; and (4) engage in
other activities which are necessary or convenient to accomplish the foregoing
and are incidental thereto.
On January 1, 2005, the Company had a total of $561 million registered
and unissued Securities on its Registration Statement No. 333-33823.
During the first quarter of 2005 and the year ending December 31, 2004,
no securities were issued. From inception to date, the Company has
issued nineteen series of Securities, which aggregate $2.4 billion in
original issued principal. The Company does not have any further obligations
in connection with the issuance of these Securities. Under accounting
principles generally accepted in the United States of America,these issuances
are considered to be a direct sale of the collateral.
6
The Company's fifth Registration Statement on Form S-3 was filed on
September 30, 1998 with the Securities and Exchange Commission. The
purpose of this filing was to register an additional amount of Securities
and to merge the Company's Effective Registration Statement No. 333-33823,
thereby increasing the total amount of Securities that can be issued by the
Company. As of March 31, 2005, this Registration Statement was not effective
and was subject to completion or amendment.
2. Unaudited Financial Statements
- ----------------------------------
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the financial position
of the Company at March 31, 2005,and the results of its operations and cash
flows for the periods ended March 31, 2005 and 2004.
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
- ----------------------
Liquidity and Capital Resources
- -------------------------------
The Company expects to fund ongoing operations from its cash balances, revenues
derived from the issuance of Securities, and if necessary, from loans or
capital contributions from its sole shareholder. The current cash position
will not adequately fund overhead costs over the next twelve months without
additional revenues generated during this period. Capital funding has and
will continue to be provided by the sole shareholder to cover operating costs
on a monthly basis until the Company generates sufficient revenue. The funding
source for any additional capital costs relating to the registration of
securities will be determined when the funding is required and will depend on
the cash position at that time.
Results of Operations
- ---------------------
The Company does not have any significant assets other than cash held for
operations and capitalized deferred offering costs. Major operating activity
is initiated from the issuance of Securities or the preparation in registering
Securities to be issued. Costs incurred with registering Securities are
capitalized until such time as the Securities are issued in an offering.
Net income may fluctuate from period to period based on the use of the Company's
registered and unissued Securities. The Company generally charges the issuer of
a series of Securities a flat fee and a proportionate share of deferred costs
associated with its registration statement.
7
The Company reported a net loss for the three months ended March 31, 2005 of
$484 as compared to a net loss for the three months ended March 31, 2004 of
$10,141. The company had no income in the first quarter ended March 31, 2005
and March 31, 2004. The primary difference in the results of operations
between the two reporting periods is due from the write-off of deferred
offering costs related to securities backed by Title One Certificates, which
the Company no longer deals in.
For the years ended 1993 to 2002, the Company paid facilities management fees
to The Chotin Group Corporation (the "Facilities Manager"), a related party,
under a Management Agreement dated January 1, 1993. Under this agreement, a
fixed monthly fee was paid to the Facilities Manager. The Company has
reviewed the fee structure and determined that an income-based fee is more
appropriate to the structure and nature of its business. There were no fees
paid during the three months ended March 31, 2005 or for the three months
ended March 31, 2004.
Pursuant to Rule 3-11 of Regulation S-X, if a registrant is an inactive entity
as defined in this rule, the financial statements required by this regulation
for purposes of reports pursuant to the Securities Exchange Act of 1934 may
be unaudited. The Company meets all the conditions as defined for an inactive
entity under this rule and accordingly had elected to file unaudited financial
statements for the year ended, December 31, 2004.
Forward Looking Statements
- --------------------------
The statements contained in this Item 2 that are not historical facts,
including, but not limited to, statements that can be identified by the use
of forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon
or comparable terminology, are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, and involve a number
of risks and uncertainties. The actual results of the future events described
in such forward-looking statements could differ materially from those stated
in such forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- ------------------------------------------------------------------
Securities issued by the Company are either debt securities or securities which
evidence beneficial ownership interest in designated trusts established to
facilitate the transfer of trust asset payments to the Bondholders who hold
such debt securities or to the Certificateholders who hold such beneficial
ownership interests. Assets securing payments to Bondholders or
Certificateholders are pledged or sold to designated trusts and are not assets
of the Company. Additionally, Bonds and Certificates issued by a trust formed
by the Company do not represent an ownership interest in or an obligation of
the Company.
8
Disclosures required in this Item 3 are intended to clarify a registrant's
exposures to market risk associated with activities in derivative financial
instruments, other financial instruments, and derivative commodity instruments.
The purpose of this section is to disclose the material effects on earnings,
fair values, and cash flows that are inherent to potential market risk
exposure. Potential market risk associated with Securities issued under the
Company's registration statement will not have a material effect on the
Company's earnings or cash flow since the Securities do not represent an
interest in or an obligation of the Company. In addition, the Company has
no public common equity; all common stock of the Company is held by one
shareholder. Therefore, material effects of potential market risk exposure
on Securities issued from the Company will not have any significant impact
on the Company.
Item 4. Controls and Procedures
- --------------------------------
Pursuant to the Securities and Exchange Commission in regards to the
Sarbanes-Oxley Act Section 404, the Company is considered a "non-accelerated
filer" and does not have to comply with the management report on internal
controls until its first fiscal year ending on or after July 15, 2006.
9
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
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. Exhibits
Exhibit 31.1 - Certification by the Chief Executive Officer pursuant
to Rule 13a-14(a) and 15d-14(a) under the Exchange Act
Exhibit 31.2 - Certification by the Chief Financial Officer pursuant
to Rule 13a-14(a) and 15d-14(a) under the Exchange Act
B. Form 8-K
None
10
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 thereunto duly authorized.
FUND AMERICA INVESTORS CORPORATION II
(Registrant)
Date: May 18, 2005 By: /s/ Helen M. Dickens
------------------------
Helen M. Dickens
President
(Duly authorized and
Principal Financial Officer)
11