<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): MAY 13, 1998
----------------------
MEGO MORTGAGE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-21689 88-0286042
- -------------------------------- ----------------------------------------
(Commission File Number) (IRS Employer Identification No.)
MEGO MORTGAGE CORPORATION
1000 PARKWOOD CIRCLE, SUITE 500
ATLANTA, GEORGIA 30339
- --------------------------------------------------------------------------------
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (770) 952-6700
------------------------
<PAGE> 2
ITEM 5. OTHER EVENTS
(a) This Form 8-K is being filed pursuant to Rule 135c(d) of the
Securities Act of 1933, as amended, with respect to the press
release issued by Mego Mortgage Corporation (the "Registrant")
on May 13, 1998, a copy of which is being filed as exhibit 99
hereto.
(b) This Form 8-K is also being filed to report that in connection
with the preparation of a private placement offering
memorandum, the Registrant has reissued its financial
statements as of August 31, 1996 and 1997 and for each of the
three years in the period ended August 31, 1997 and, as a
result of events occurring subsequent to August 31, 1997
discussed below, the Registrant's independent auditors,
Deloitte & Touche LLP, have reissued their report thereon to
include an explanatory paragraph related to the Registrant's
ability to continue as a going concern.
Subsequent to August 31, 1997, the Company adjusted the
valuation of its mortgage related securities and mortgage
servicing rights and incurred a net loss for the six months
ended February 28, 1998 in the amount of $32.5 million. The
Company is not in compliance with certain covenants on its
warehouse line of credit with outstanding balances in the
amount of $8.5 million and $40.0 million at August 31, 1997
and February 28, 1998, respectively, and its revolving line of
credit with outstanding balances in the amount $25.0 million
and $10.0 million at August 31, 1997 and February 28, 1998,
respectively, and there is no assurance that the lines of
credit will be renewed. Certain mortgage servicing rights
aggregating $3.1 million at February 28, 1998, are subject to
termination due to loan default rates in excess of the
permitted limit set forth in the related pooling and servicing
agreements. Also, a class action was filed against the Company
and the Company's Chief Executive Officer that alleges, among
other things, that the Company violated the federal securities
laws in connection with the preparation and issuance of the
Company's financial statements. The Company is not in
compliance with certain covenants in the indenture governing
its outstanding 12 1/2% Senior Subordinated Notes (the
"Existing Notes") which prohibits the Company from obtaining
additional financing subject to certain limited exceptions.
The Company has operated on a negative cash flow basis since
inception and due to cash flow restrictions, the Company has
substantially curtailed loan originations and subsequently
reduced its work force.
The Company proposes to engage in a series of transactions to
recapitalize the Company. The Company proposes to raise
$40.0 to $60.0 million through a private placement of equity
securities. The Company is also proposing to offer to
exchange new subordinated notes and convertible preferred
stock for all of the outstanding Existing Notes. Offers will
be made only by means of an offering memorandum. The
securities proposed to be issued pursuant to the private
placement and the exchange offer will not be registered under
the Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable
exemption from such registration.
If the Company is unable to obtain additional equity or
financing as a result of the proposed recapitalization the
alternatives available to the Company are limited and the
Company may be forced to consider bankruptcy proceedings.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Not Applicable
(b) Pro Forma Financial Information
Not Applicable
(c) Exhibits
99.1 Press Release of the Company dated May 13, 1998.
2
<PAGE> 3
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 hereunto duly authorized.
MEGO MORTGAGE CORPORATION
Dated: May 20, 1998 By: /s/ James L. Belter
----------------------------------
James L. Belter
Executive Vice President and Chief
Financial Officer
3
<PAGE> 4
EXHIBIT INDEX
99.1 Press release of the Company dated May 13, 1998.
4
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
MEGO MORTGAGE CORPORATION ANNOUNCES
PROPOSED RECAPITALIZATION
ATLANTA, GEORGIA...MAY 13, 1998 - Mego Mortgage Corporation
(Nasdaq:MMGC) today announced that it proposes to engage in a series of
transactions to recapitalize the Company. While no definitive agreements have
been executed and no terms have been determined, the Company proposes to raise
$40.0 to $60.0 million through a private placement of equity securities at an
anticipated price of between $1.50 and $2.00. The Company is also proposing to
offer to exchange new subordinated notes and convertible preferred stock,
subject to certain limitations, for all of the outstanding $80.0 million of
12-1/2% Senior Subordinated Notes due 2001. Consummation of the private
placement is expected to be contingent upon holders of substantially all of the
outstanding Notes accepting the exchange offer. The Company expects to commence
the private placement and the exchange offer promptly. Offers will be made only
by means of an offering memorandum. The securities proposed to be issued
pursuant to the private placement and the exchange offer will not be registered
under the Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an applicable exemption from such registration.
The Company contemplates that following consummation of the private placement
and the exchange offer it will issue to common stock holders of record on May
13, 1998, rights to purchase additional shares of common stock at the same price
as common stock is sold in the private placement. Due to pressing cash
requirements, the Company has curtailed its loan originations and proposes to
use the net proceeds of the private placement and the rights offering to provide
capital to originate loans and for general corporate purposes. The securities
proposed to be issued pursuant to the rights offering will be registered under
the Securities Act of 1933 and the offering will be made only by means of a
prospectus.
This press release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties or other factors which
may cause actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. For more complete
information concerning factors which could affect the Company's results,
reference is made to the Company's periodic reports on Forms 8-K, 10-K and 10-Q,
as well as other documents filed with the Securities and Exchange Commission.
