SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1998
Commission file number 0-15216
AUTOCORP EQUITIES, INC.
Exact name of registrant as specified in its charter
NEVADA 86-0892913
(State of Incorporation) (I.R.S. Employer ID#)
2980 E. Northern Ave Suite A1
Phoenix, Arizona 85028
(Address of principal office and Zip Code)
2980 E. Northern Ave Suite B1
Phoenix, Arizona 85028
(Former address)
(602) 569-0202
(Registrant's telephone number including area code)
(602) 482-5737
(Former telephone number)
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 and Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filings
requirements for the past 90 days. Yes No X
----- -----
Common Stock, $0.001 5,978,587
(Title of class) (Number of shares outstanding 6/30/98)
<PAGE>
AUTOCORP EQUITIES, INC.
and its wholly owned subsidiaries
Lenders Liquidation Centers, Inc.
Consumer Investment Corporation,
Consumer Insurance Services, Inc.
Consolidated Condensed Balance Sheet
as of June 30, 1998 and September 30, 1997
6/30/98 9/30/97
------- -------
Assets
Cash 110,000 87,813
Trade Financed Receivables 551,890 750,432
Inventory 685,000 1,125,894
Prepaid Expenses 3,185
---------- ----------
Total Current Assets 1,346,890 1,967,324
Property and Equipment 785,174 122,712
Note Receivable CIC Fund V 3,364,390
Prepaid Advertising 400,000 400,000
Deposits 23,555 49,449
---------- ----------
Total Assets 5,920,009 2,539,485
========== ==========
Liabilities
Trade Accounts Payable 331,796 47,896
Vehicle Financing Debt 854,874 650,010
Insurance Company Purchase 165,000
Notes Payable 182,507 182,507
Sales Taxes Payable 49,677 23,766
---------- ----------
Total Current Liabilities 1,583,854 904,179
Due to Finance Company 3,364,390
Investor Notes Payable 2,663,147 3,390,528
Mortgages Payable 434,634
---------- ----------
Total Liabilities 8,046,025 4,294,707
---------- ----------
Stockholders' Equity
Preferred Stock, authorized 10,000 shares no
shares outstanding. Par value $0.001
Common Stock, authorized 110,000,000 shares
5,978,587 and 5,080,018 shares outstanding,
par value $0.001 5,979 5,080
Paid in Capital 2,216,062 579,570
Common Stock Subscribed (12,000) (12,000)
Treasury Stock (20)
Retained Earnings (Loss) (4,336,037) (2,327,872)
---------- ----------
Total Stockholders' Equity (2,126,016) (1,755,222)
Total Liabilities and Stockholders' Equity 5,920,009 2,539,485
========== ==========
The accompanying notes are an integral part of these statements
The above statement is unaudited and is prepared by management
<PAGE>
AUTOCORP EQUITIES, INC.
Statement of Stockholders' Equity
(Unaudited)
for the nine months ended June 30, 1998
<TABLE>
<CAPTION>
Common Stock Paid in Stock Treasury Retained Total
Shares Amount Capital Subscribed Stock Earnings Equity
------ ------ ------- ---------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1997 5,080,018 5,080 579,570 (12,000) -- (2,327,872) (1,755,222)
Conversion of Debt to Equity 435,674 436 1,298,304 -- -- -- 1,298,740
Stock Sales 66,667 67 49,933 -- -- -- 50,000
Stock for Compensation 376,228 376 288,255 -- -- -- 288,631
Treasury Stock Transferred 20,000 20 -- -- (20) -- --
Retained Earnings -- -- -- -- -- (2,008,165) (2,008,165)
--------- ----- --------- ------- --- ---------- ----------
Balance, June 30, 1998 5,978,587 5,979 2,216,062 (12,000) (20) (4,336,037) (2,126,016)
========= ===== ========= ======= === ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
The above statement is unaudited and is prepared by management
<PAGE>
AUTOCORP EQUITIES, INC.
Consolidated Condensed Statement of Operations
(Unaudited)
for the three month periods ended June 30, 1998 and 1997
and the nine month periods ended June 30, 1998 and 1997
3 mths 3 mths 9 mths 9 mths
6/30/98 6/30/97 6/30/98 6/30/97
------- ------- ------- -------
Sales of Vehicles 1,068,596 299,017 3,746,474 637,209
Interest Income 5,942 5,942
Service Income 42,717 12,521 439,031 69,905
--------- --------- ---------- ---------
Total Revenue 1,117,255 311,538 4,191,447 707,114
--------- --------- ---------- ---------
Cost of Vehicles Sold 716,206 301,739 3,008,651 779,370
--------- --------- ---------- ---------
Gross Profit 401,049 9,799 1,182,796 (72,256)
--------- --------- ---------- ---------
Expenses
Consulting 297,212 36,733 405,723 236,940
General and Administrative 133,657 117,486 696,469 263,915
Rent 39,388 7,970 226,986 12,271
Salaries and Wages 435,539 19,875 1,370,907 25,639
Advertising 9,627 4,280 113,641 4,890
Interest Expense 82,322 39,872 377,235 39,872
--------- --------- ---------- ---------
997,745 226,216 3,190,961 583,527
--------- --------- ---------- ---------
Income before Income Taxes (596,696) (216,417) (2,008,165) (655,783)
Provision for Income Taxes -- -- -- --
--------- --------- ---------- ---------
Net Income (Loss) (596,696) (216,417) (2,008,165) (655,783)
========= ========= ========== =========
Earnings (Loss) per Common Share (0.11) (0.05) (0.36) (0.15)
--------- --------- ---------- ---------
Weighted Average Number of
Common Shares 5,529,303 4,331,000 5,529,303 4,331,000
--------- --------- ---------- ---------
The accompanying notes are an integral part of these statements
The above statement is unaudited and is prepared by management
<PAGE>
AUTOCORP EQUITIES, INC.
Statement of Cash Flow
(Unaudited)
for the nine months ended June 30, 1998 and 1997
6/30/98 6/30/97
------- -------
Cash Provided by Operations
Net Income (Loss) (2,108,165) (655,783)
Net Change in Receivables 98,542 (419,357)
Net Change in Inventory 640,894 (1,429,324)
Prepaid Expenses 3,185
Deposits 25,894 (16,132)
Payables (366,110) 509,714
Vehicle Financing 854,874
Taxes Payable 25,911
Deferred Costs 149,714
---------- ----------
Cash from Operations (824,975) (1,861,168)
---------- ----------
Cash Used in Investing
Fixed Asset Purchased 662,462 166,766
---------- ----------
Cash Used in Investing 662,462 166,766
---------- ----------
Cash Provided by Financing
Stock Sales 1,637,371
Note Sales/conversions (727,381) 2,344,939
Mortgages on Land 434,634
Deposit on Insurance Company 165,000
---------- ----------
Cash from Financing 1,509,624 2,344,939
---------- ----------
Net Change in Cash Balance 22,187 317,005
Beginning Cash Balance 87,813 74,273
---------- ----------
Ending Cash Balance 110,000 391,278
========== ==========
The accompanying notes are an integral part of these statements
The above statement is unaudited and is prepared by management
<PAGE>
Autocorp Equities, Inc.
Notes to Condensed Consolidated Financial Statements
NOTE 1. BUSINESS AND ACCOUNTING POLICIES
Autocorp Equities, Inc. (the Company and its wholly owned subsidiaries,
Lenders Liquidation Centers, Consumer Investment Corporation and Consumer
Insurance Corporation) operated sales lots for pre-owned vehicles and financed
the contracts generated by the sale of the vehicle.
The condensed consolidated balance sheet as of June 30, 1998 and
September 30, 1997, the consolidated statements of operations and the
consolidated statements of cash flows for the quarters and periods shown were
prepared by the Company without audit. In the opinion of management all
adjustments necessary to present fairly the financial position at June 30, 1998
and September 30, 1997 and the results of operations and changes in cash flow
and for the periods shown have been made.
INVENTORY
Inventory includes the original costs of the vehicle on an historic
basis plus any reconditioning costs and flooring costs associated with that
vehicle. Inventory is maintained on a specific identification basis for
accounting purposes. The company has entered into agreements made in June 1998,
effective in the fourth quarter, generating sufficient inventory credit lines to
continue its business plan.
NET EARNINGS (LOSS)
Net loss per share is computed upon the weight of the average number of
shares outstanding during the period.
NOTE 2. PREPAID ADVERTISING
The prepaid advertising consists of $800,000 of media due bills that
were exchanged for prepaid rent in 1994. The credits expire on July 2004 and are
usable on the American Independent Network. A valuation allowance of $400,000
has been recorded as an offset to this asset as of September 30, 1997.
NOTE 3. AUSTIN NOTE RECEIVABLE/PAYABLE
In January 1998, the Company sold its car lots in Austin, Texas to a
company owned by company officers William Merritt and Dennis Miller, who had
left the employment of the Company as of December 31, 1997. The Company received
back its own stock from the two principals plus the assumption, by Merritt and
Miller, of a note related to the loan portfolio of the Austin, Texas car lots.
In June of this year, the same
<PAGE>
two former officers repurchased shares owned by management and re-assumed
control of the Company. This transaction reversed the $470,000 equity
enhancement mentioned for the quarter ending March 31, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company operates used motor vehicle and finance businesses. At the
beginning of the quarter the Company had six used motor vehicle dealerships
through its wholly owned subsidiary Lenders Liquidation Centers, Inc., d.b.a.
Lenders Auto Resale Centers. Through its wholly owned subsidiary, Consumer
Investment Corporation, the Company underwrites, finances and services
installment sales contracts generated by its own financing and vehicle sales
operations. The Company's insurance subsidiary Consumer Insurance Services, Inc.
was inactive during the quarter. The company is currently negotiating for the
sale of this subsidiary.
This Quarterly Report on form 10-QSB along with other reports and
announcements by the Company may contain forward-looking statements.
Forward-looking statements are inherently subject to risk and uncertainties,
some of which cannot be predicted or quantified. Future events and actual
results could differ materially from those projected. The Company undertakes no
obligation to publicly update or revised any forward looking statements whether
as a result of new information, future events, or otherwise. Statements in the
Quarterly Report describes factors, among others, that could contribute to or
cause such differences.
Investing in securities of the Company involves certain risk. Risk
factors may affect the results of the company and its stock prices, therefore
affecting the return that an investor would receive. Some of these risk factors
are the following: dependence upon external financing, non-assurance of ever
being profitable, dependence on new and as of yet unproven management, poor
credit worthiness of clientele, year 2000 technology problems, highly
competitive industry, general economic conditions, current state usury laws,
sensitivity to interest rates, volatility of stock price and stock market in
general.
The following discussion of the operations and financial condition
should be read in conjunction with the unaudited financial statements and notes
there to appearing elsewhere in the form 10-QSB.
LIQUIDITY AND CAPITAL RESOURCES:
At June 30, 1998 the company had total assets of $5,920,009 and total
stockholders' equity of ($2,276,016) At September 30, 1997 the Company had total
assets of $2,539,485 and stockholders equity of $(1,755,222). The Company
experienced
<PAGE>
liquidity problems in the quarter ending June 30, 1998. During this last quarter
the Company was not able to sell enough of its securities or conduct enough
business to cover its cash needs. At June 30, 1998 the Company had a limited
amount of cash, most of which was in the insurance company and not available for
use in current operations.
The Company anticipates meeting its working capital needs by borrowing
on existing credit lines, selling automobiles and then selling the sales
contracts to finance companies and securing funds through the private placements
of the company securities. The company is in the process of obtaining additional
flooring credit lines to be used for its future expansion. The Company is
currently negotiating a new agreement with its vehicle sales contracts
underwriter. This agreement is could enhance management's ability to acquire
exsisting businesses and loan portfolios as well as expand their own current
dealer network.
RESULTS OF OPERATIONS
Included herein are the unaudited financial statements of the Company
covering the three-month and nine-month periods ending June 30, 1998 and June
30, 1997, respectively. By the end of the March 31, 1998 quarter the Company was
exceeding its retail sales projections. The previous management made plans that
relied on the level of sales achieved during this record quarter. The Company,
as well as the entire industry, experienced a major decrease in retail sales
during the following quarter, leaving it far short of its projected goals. In
May of 1998, the lender providing the flooring credit line for the Company's
inventory was not repaid in a timely manner. This delinquency resulted in a
suspension of the credit line. During the period of suspension the Company was
unable to replenish its inventories. This circumstance was also a major
contributor to the Company's lack of retail sales for the quarter.
The collection of both the Company's portfolio and the contracts it
manages for its outside financing affiliate was affected during this period. The
Company sells most of its contracts to an outside finance company. The Company
has a loan servicing agreement with this sales contract purchaser, which
requires it to maintain the outside company's portfolio at certain levels of
performance. The Company's cash situation prevented it from upgrading its
contract collection software. The software could not accommodate the additional
workload created by the loan servicing agreement. The Company's risk management,
collection policies and procedures also contributed to the loan servicing
problems. These circumstances caused a temporary default in its contractual
obligation to the outside finance company. The Company has since purchased new
software and changed its risk management team, collection policies and
procedures. The Company is now in the position of becoming current with its
obligation relating to its contract servicing agreement and is anticipating
rapid growth for its collection division.
<PAGE>
The New Management closed some of its vehicle retail outlets that were
owned and operated by Lenders Liquidation Centers, Inc. effective June 30, 1998.
Some of the closed Lenders Liquidation Centers locations were transferred for
assumption of lease costs to a former officer of AutoCorp Equities during July
1998. The Company is operating its new dealerships from subsidiaries acquired
during the recent management change. This gives the Company eight dealerships
currently under its control. The Company does not intend to reactivate its
Lenders Liquidation Centers, Inc. subsidiary.
COMPARISONS
Although revenues were down from the previous quarter they were up
substantially from last year's quarterly report. Revenues of $1,117,255, third
period ending 6/30/98 compares to $311,538 for the period ending 6/30/97. The
increase can be attributed to the increase in vehicle sales for the quarter just
ended.
Gross profits increased from $9,799 to $401,049, an increase of
$391,250. Gross profit as a percentage of revenue increased. The 6/30/97 quarter
percentage was 3.1% while the 6/30/98 quarter percentage was 30%.
Expenses for 6/30/98 were $997,745 compared to $226,216 for the period
ending 6/30/97. Overall profitability for both quarters was negative. The net
loss for 6/30/97 was ($216,417) versus a greater loss for 6/30/98 of ($596,696).
Overall profitability decreased 276%.
The current Management, which assumed control the end of June 1998,
feels that the Company's aggressive approach to its past problems, new credit
lines and a new payment servicing agreement will result in a positive direction
for its future.
<PAGE>
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.
AUTOCORP EQUITIES, INC.
/s/ William O. Merritt
------------------------------------
William O. Merritt, President, Chief
October 12, 1998 Accountant
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 110,000
<SECURITIES> 0
<RECEIVABLES> 551,890
<ALLOWANCES> 0
<INVENTORY> 685,000
<CURRENT-ASSETS> 1,346,890
<PP&E> 785,174
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,920,009
<CURRENT-LIABILITIES> 1,583,854
<BONDS> 0
0
0
<COMMON> 5,979
<OTHER-SE> (2,131,995)
<TOTAL-LIABILITY-AND-EQUITY> 5,920,009
<SALES> 3,746,474
<TOTAL-REVENUES> 4,191,447
<CGS> 3,008,651
<TOTAL-COSTS> 3,008,651
<OTHER-EXPENSES> 2,813,726
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 377,235
<INCOME-PRETAX> (2,008,165)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,008,165)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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<EPS-PRIMARY> (0.36)
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