<PAGE> 1
UNITED STATES
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 For the quarterly period ended March 31, 1999
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition period from_______to______
Commission file number 33-5144-D
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U.S. AUTOMOBILE ACCEPTANCE SNP-III, INC.
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(Exact name of small business issuer as specified in its charter)
TEXAS 75-2669147
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1120 NW 63RD, SUITE 250, OKLAHOMA CITY, OKLAHOMA 73116
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(Address of principal executive offices)
(405) 843 -3135
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(Issuer's telephone number)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ] Not Applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 1,000 shares of Common Stock
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Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ ]
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
See index at page F-1.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
U.S. Automobile Acceptance SNP-III, Inc. (the "Company") was incorporated on
June 7, 1996 as a Texas Corporation. The Company was formed to purchase, collect
and service retail installment sale financing contracts created by the sale of
used automobiles and light trucks. The Company filed a Registration Statement in
1996 with the Securities and Exchange Commission and various state security
boards with respect to its offering of up to $24,000,000 of 11 % Promissory
Notes due December 31, 2001. Note Subscriptions, at the completion of the
offering, totaled $23,996,000.
The Company has incurred very high customer defaults in its high interest
yielding used automobile sub-prime finance portfolio. In addition the Company
has experienced a high dealership guarantee default rate for many of the
automobile dealers from which automobile finance contracts were purchased.
Accordingly the Company's operating, collection, repossession and collateral
deposition costs, as well as losses from collateral dispositions, general and
administrative expenses and legal costs attempting to enforce recourse
agreements have been much higher that anticipated. Therefore, the decreased size
of the performing contract portfolio has resulted in substantially decreased
interest revenues. USAA SNP-III has incurred finance contract write offs
substantially in excess of originally anticipated amounts.
Accordingly, the Company believes that adopting a plan of orderly liquidation
and/or plan of reorganization is appropriate. The Company plans to begin
discussion with noteholders and Chase Bank of Texas to begin the process
necessary to implement procedures to allow for early liquidation of assets
and/or plan of reorganization of the Company. The Company plans to use best
efforts to implement and complete the plan (if approved by noteholders) during
2001.
There is no assurance that any proposed early liquidation and/or reorganization
plan will be approved by the noteholders or completed in a timely basis. A
federal bankruptcy or state court receivership action or other legal actions
might ultimately result.
In September 2000, Chase Manhattan Bank, as Indenture Trustee notified to the
Company of its failure to provide certain accounting information to the
Indenture Trustee. The Company was notified its failure to provide to the
Trustee or the Noteholders the reports as required by the Indenture is a default
under the terms of the indenture and various related note agreements. The
Company has ninety days to cure this default, failing which the Trustee may
accelerate the principle and interest due on the Notes. The Company plans to
cure this technical default within the ninety-day grace period.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no legal proceedings pending against the Company. The Company has in
the ordinary course of business filed numerous legal proceedings against various
automobile dealers for breach of contract and failure to honor dealer recourse
agreements.
2
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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
NUMBER EXHIBIT
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3.1 - Articles of Incorporation of U.S. Automobile Acceptance
SNP-III, Inc.(1)
3.2 - Bylaws of U.S. Automobile Acceptance SNP-III, Inc.(1)
4.1 - Indenture Agreement between U.S. Automobile
Acceptance SNP-III, Inc. and Texas Commerce Bank
National Association, as Trustee, with respect to the
11% Automobile Contract Notes due December 31,
2001(1)
4.2 - Form of 11% Automobile Contract Note due December 31,
2001(1)
10.3 - Servicing Agreement between U.S. Automobile Acceptance
SNP-III, Inc. and U.S. Automobile Service Corporation(1)
27 - Financial Data Schedules
(b) Reports on Form 8-K:
No reports on Form 8-K were filed.
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(1) Incorporated by reference to the Company's Form SB-2 Registration Statement
3
<PAGE> 4
SIGNATURES
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.
U. S. Automobile Acceptance SNP-III, Inc.
Date: December 4, 2000 By /s/ MICHAEL R. MARSHALL
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Michael R. Marshall, President and
Chief Financial Officer
<PAGE> 5
U.S. AUTOMOBILE ACCEPTANCE SNP-III, INC.
(a limited purpose corporation)
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Statement of Net Assets (Liabilities)
in Liquidation as of March 31, 1999 F-2
Statement of Changes in Net Assets
in Liquidation for the period ended
March 31, 1999 F-3
Notes to Financial Statements F-4
</TABLE>
All financial statement schedules are omitted because they are not applicable,
not required, or the information required to be set forth therein is included in
the financial statements or the notes thereto.
F-1
<PAGE> 6
U.S. AUTOMOBILE ACCEPTANCE SNP-III, INC.
(a limited purpose corporation)
STATEMENT OF NET ASSETS AND LIABILITIES IN LIQUIDATION
As of March 31, 1999
(Unaudited)
ASSETS
<TABLE>
<S> <C>
Cash and cash equivalents $ 5,100,874
Contracts receivable less allowance for losses
and liquidation costs of $4,200,000 7,003,321
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TOTAL NET ASSETS IN LIQUIDATION $ 12,104,195
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LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Notes payable, includes amounts not ultimately
recoverable by noteholders $ 23,996,000
Accrued interest payable 219,963
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TOTAL LIABILITIES 24,215,963
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Stockholders' equity:
Common Stock
1,000
Additional Paid in Capital 49,000
Accumulated Deficit (12,161,768)
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TOTAL STOCKHOLDERS' (DEFICIT) (12,111,768)
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TOTAL NET LIABILITIES IN LIQUIDATION $ 12,104,195
===============
</TABLE>
See accompanying notes to financial statements
F-2
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U.S. AUTOMOBILE ACCEPTANCE SNP-III, INC.
(a limited purpose corporation)
STATEMENT OF CHANGES IN NET ASSETS IN
LIQUIDATION For the three months
ended March 31, 1999
(Unaudited)
<TABLE>
<S> <C>
Total assets at December 31, 1998 $ 20,622,722
Changes in net assets for the three months ended March 31, 1999:
Write down of assets carrying value as of
January 1, 1999 to reflect the change to the
liquidation basis of accounting; principally
capitalized note offering cost (2,297,340)
Cash collections in excess of expenses 1,183,357
Distributed to noteholders (659,798)
Decrease in contracts receivable (6,744,746)
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TOTAL ASSETS AT MARCH 31, 1999 $ 12,104,195
===============
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE> 8
U.S. AUTOMOBILE ACCEPTANCE SNP-III, INC.
(a limited purpose corporation)
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
GENERAL - U.S. Automobile Acceptance SNP-III, Inc. (herein referred to as
"Company" or "SNP-III") was incorporated on June 1996 as a Texas Corporation.
The company was formed to conduct an asset backed note offering and to use the
proceeds to purchase, collect and service high yield sub-prime credit retail
automobile and light truck financing contacts ("Contracts").
ASSET-BACKED NOTE OFFERING - The Company filed a Registration Statement in 1996
with the Securities and Exchange Commission and various state security boards
with respect to its offering of up to $24,00,000 of 11% Promissory Notes due
December 31, 2001. Note subscription totaled $23,996,000.
The notes were issued under the terms of an Indenture Agreement between the
Company and Chase Bank, formerly Texas Commerce Bank National Association, as
Trustee. The Notes are secured by the contracts and proceeds thereof.
PROPOSED PLAN OF LIQUIDATION AND/OR REORGANIZATION - The Company has incurred
very high customer defaults in its high interest yielding used automobile
sub-prime finance portfolio. In addition the Company has experienced a high
dealership guarantee default rate for many of the automobile dealers from which
automobile finance contracts were purchased. Accordingly the Company's
operating, collection, repossession and collateral deposition costs, as well as
losses from collateral dispositions, general and administrative expenses and
legal costs attempting to enforce recourse agreements have been much higher than
anticipated. Therefore, the decreased size of the performing contract portfolio
has resulted in substantially decreased interest revenues. USAA SNP-III has
incurred finance contract write offs substantially in excess of originally
anticipated amounts.
Accordingly, the Company believes that adopting a plan of orderly liquidation
and/ or plan of reorganization is appropriate. The Company plans to begin
discussion with noteholders and Chase Bank of Texas to begin the process
necessary to implement procedures to allow for early liquidation of assets
and/or plan of reorganization of the Company. The Company plans to use best
efforts to implement and complete the plan (if approved by noteholders) during
2001.
There is no assurance that any proposed early liquidation and/or reorganization
plan will be approved by the noteholders or completed in a timely basis. A
federal bankruptcy or state court receivership action or other legal actions
might ultimately result.
In September 2000, Chase Manhattan Bank, as Indenture Trustee notified to the
Company of its failure to provide certain accounting information to the
Indenture Trustee. The Company was notified its failure to provide to the
Trustee or the Noteholders the reports as required by the Indenture is a default
under the terms of the indenture and various related notes agreements. The
Company has ninety days to cure this default, failing which the Trustee may
accelerate the principle and interest due on the Notes. The Company plans to
cure this technical default within the ninety-day grace period.
F-4
<PAGE> 9
U.S. AUTOMOBILE ACCEPTANCE SNP-III, INC.
(a limited purpose corporation)
NOTES TO FINANCIAL STATEMENTS
Presently it cannot be determined whether the amounts realizable from the
disposition of the remaining assets or the amounts that creditors may agree to
accept in settlement of the obligations due them will differ materially from the
amounts shown in the accompanying financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The Company is adopting a plan of liquidation and/or
reorganization. Accordingly, the Company has adopted the liquidation basis of
accounting in which the assets and liabilities are presented on a net realizable
value basis. Assets are reflected at estimated current value less allowance for
realization costs. Liabilities are reduced to the net assets available for their
payment.
USE OF ESTIMATES - The preparation of financial statements in conformity with
the generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosures regarding contingent assets and liabilities at the
date of the financial statements, and the amounts of revenues and expenses
reported during the period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS - The Company considers all investments with a
maturity of three months or less, when purchased, to be cash equivalents. The
use of cash of the Company is restricted by the terms of the indenture agreement
between the Company and Chase Bank, as Indenture Trustee and by the bankruptcy
court.
FINANCE CONTRACTS - Finance Contracts are stated a Contract balance less an
allowance for collection cost and estimated future losses.
CREDIT LOSSES - The Company has incurred and continues to incur high credit
losses. The Company advises that these credit losses resulted principally from
higher than anticipated repossession rates and failure of automobile dealers to
honor their recourse and contract replacement agreements. The Company has taken
legal action against defaulting dealers which is their policy, but does not
expect any significant future recovery. The Company charges off contracts
receivable as an individual contract is determined to be uncollectible.
INCOME TAXES - The Company has adopted SFAS No. 109, Accounting for Income
Taxes, whereby deferred income taxes reflect the net tax effects of (a)
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax reporting
purposes, and (b) net operating loss carry forwards. The Company has incurred an
aggregate tax and financial reporting loss from incorporation and accordingly
has no income tax liability.
F-5
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U.S. AUTOMOBILE ACCEPTANCE SNP-III, INC.
(a limited purpose corporation)
NOTES TO FINANCIAL STATEMENTS
3. NOTES PAYABLE
The Company had outstanding notes payable of $23,996,000. The Notes bear
interest at 11% payable monthly, and the principal is due December 31, 2001.
The notes have been issued under the terms of an Indenture Agreement between the
Company and Chase Bank, as trustee. The Notes are collateralized by the
Contracts and proceeds thereof. Under the terms of the various agreements Chase
holds a security agreement for the benefit of the noteholders, serves as paying
See note 1 Proposed Plan of Liquidation and/or Reorganization.
4. RELATED PARTY TRANSACTIONS
U.S. Automobile Service Corporation ("USASC") contractually administers,
services and collects Contracts on behalf of SNP-III and is paid for services
provided. U.S. Automobile Acceptance Corporation ("USAAC") is paid a monthly
investor administration fee of 1/12th of 1% of the aggregate principal amount of
the Notes outstanding, and 1/12th of 1% of the aggregate funds held in
investment accounts. All other general and administrative expenses are paid by
SNP-III or reimbursed to USAAC.
F-6
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
3.1 - Articles of Incorporation of U.S. Automobile Acceptance
SNP-III, Inc.(1)
3.2 - Bylaws of U.S. Automobile Acceptance SNP-III, Inc.(1)
4.1 - Indenture Agreement between U.S. Automobile Acceptance
SNP-III, Inc. and Texas Commerce Bank National Association, as
Trustee, with respect to the 11% Automobile Contract Notes due
December 31, 2001(1)
4.2 - Form of 11% Automobile Contract Note due December 31, 2001(1)
10.3 - Servicing Agreement between U.S. Automobile Acceptance
SNP-III, Inc. and U.S. Automobile Service Corporation(1)
27 - Financial Data Schedules
</TABLE>
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(1) Incorporated by reference to the Company's Registration Statement
