U.S. 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 June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 000-15216
AUTOCORP EQUITIES, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0522501
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2470 N. Dallas Parkway, Suite 110
Plano, Texas 75093
(Address of principal executive offices)
972.378.5355
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 6,087,184 shares of Common
Stock, $.001 par value, as of September 10, 1999.
Transitional Small Business Disclosure Format (check one): Yes____ No X
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 1999 and September 30, 1998
June 30, September 30,
1999 1998
----------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 387,486 $ 51,979
Note receivable, net 1,133,899 --
Other receivables 35,875 468
Inventory 1,167,459 95,297
Prepaid expenses 46,937 -
---------- ----------
Total current assets 2,771,656 147,744
PROPERTY AND EQUIPMENT
Furniture and fixtures 11,914 5,500
Office equipment 198,898 4,220
Computer equipment 24,321 -
Automobiles 15,000 14,500
Machinery and equipment 91,553 10,780
Leasehold improvements 31,152 -
---------- ----------
372,838 35,000
Less accumulated depreciation
and amortization 40,613 1,361
---------- ----------
332,225 33,639
---------- ----------
OTHER ASSETS
Deposits 1,000 -
Other 22,044 -
---------- ----------
Total assets $3,126,925 $ 181,383
========== ==========
See accompanying notes to condensed consolidated financial statements.
2
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AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 1999 and September 30, 1998
June 30, September 30,
1999 1998
----------- -------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion, long-term debt $ 761,334 $ 987,153
Line of credit 1,243,798 -
Accounts payable and accrued expenses 1,111,705 1,489,961
Related party payables 85,101 5,678,208
Note payable, related party 2,189,663 -
Other current liabilities 213,132 188,943
----------- -----------
Total current liabilities 5,604,733 8,344,265
Long-term debt, net of current portion and net
of discounts of $0 and $5,733, respectively - 1,534,606
Provision for recourse liability 3,020,000 2,320,000
Commitments and contingencies - -
SHAREHOLDERS' DEFICIT:
Convertible preferred stock, no par value,
5% non-cumulative; liquidation preference
of $1.00 per share; 10,000,000 shares
authorized, 6,578,485 issued and outstanding
at June 30, 1999 6,578,485 -
Common stock, par value $.001; 110,000,000
shares authorized, 6,162,184 and 6,099,435
shares issued and outstanding at June 30,
1999 and September 30, 1998, respectively 6,162 6,099
Additional paid-in capital 11,561,693 11,469,716
Accumulated deficit (23,406,648) (22,914,303)
Less shares held in trust (227,500) -
Less treasury stock - (569,000)
Less stock subscriptions receivable (10,000) (10,000)
----------- -----------
Total shareholders' deficit (5,497,808) (12,017,488)
----------- -----------
Total liabilities and
shareholders' deficit $ 3,126,925 $ 181,383
=========== ===========
See accompanying notes to condensed consolidated financial statements.
3
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AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three and Nine Months Ended June 30, 1999 and 1998
Three Months Ended Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
---------- ---------- ------------ -----------
Revenues
Sales $3,421,739 $ 188,827 $ 5,814,249 $ 3,838,146
Service fee revenue 371,192 - 865,084 187,112
Discount on notes sold 777,279 - 912,412 -
---------- ---------- ------------ -----------
Net revenues 4,570,210 188,827 7,591,745 4,025,258
Cost of sales 3,097,935 54,370 5,442,517 3,434,690
---------- ---------- ------------ -----------
Gross profit 1,472,275 134,457 2,149,228 590,568
Selling, administrative and
other operating expenses 1,312,237 508,086 2,582,222 2,344,386
Bad debt expense 38,438 - 388,134 -
Provision for recourse
liability 400,000 - 120,000 -
---------- ---------- ------------ -----------
Operating loss (278,400) (373,629) (941,128) (1,753,818)
Other expense:
Interest expense (101,426) (902) (146,462) (86,205)
Gain on disposition
of subsidiaries - - 595,245 -
Other - (157,079) - (157,054)
---------- ---------- ------------ -----------
Net loss $ (379,826)$ (531,610)$ (492,345)$(1,997,077)
========== ========== ============ ===========
Net loss per share,
basic and diluted $ (.06)$ (.09)$ (.08)$ (.37)
========== ========== ============ ===========
Weighted average number
of shares outstanding,
basic and diluted 6,092,953 5,697,283 6,134,063 5,332,714
========== ========== ============ ===========
See accompanying notes to condensed consolidated financial statements.
4
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AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three and Nine Months Ended June 30, 1999 and 1998
Three Months Ended Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
---------- ---------- --------- -----------
Net loss $ (379,826)$ (531,610) $(492,345) $(1,997,077)
Adjustments to reconcile
net loss to net cash
provided by/(used in)
operating activities:
Depreciation and
amortization 17,175 2,873 39,251 25,250
Provision for
recourse liability 400,000 - 120,000 -
Gain on disposition
of subsidiaries - - (595,245) -
Deferred income - - - (74,099)
Changes in:
Notes receivable (358,056) 593,744 (689,155) 263
Related party payables (119,479) - 868,822 (45,709)
Receivables from officers (905) - (905) (30,000)
Inventory (718,410) (46,064)(1,057,662) 818,419
Prepaid expenses (46,937) - (46,937) 3,903
Deposits - - (1,000) (25,773)
Accounts payable and
accrued expenses 1,279,397 (109,941) 1,904,718 1,181,514
Line of credit 138,880 - 571,866 -
Other 65 (81,434) 3,847 (91,484)
---------- ---------- --------- -----------
Total adjustments 591,730 359,178 1,117,600 1,762,284
---------- ---------- --------- -----------
Net cash provided by/(used
in) operating activities 211,904 (172,432) 625,255 (234,793)
---------- ---------- --------- -----------
Cash flows from investing
activities:
Capital expenditures (56,736) - (277,338) (289,459)
---------- ---------- --------- -----------
Net cash used in
investing activities (56,736) - (277,338) (289,459)
---------- ---------- --------- -----------
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
For the Three and Nine Months Ended June 30, 1999 and 1998
Three Months Ended Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
---------- --------- --------- ---------
Cash flows from financing activities:
Principal payments
on long-term debt $ (28,333)$ - $(182,410)$ (16,500)
Proceeds from issuance of
long-term debt - 116,433 170,000 412,270
---------- --------- --------- ---------
Net cash (used in)/provided
by financing activities (28,333) 116,433 (12,410) 395,770
---------- --------- --------- ---------
Net increase/(decrease) in
cash and cash equivalents 126,835 (55,999) 335,507 (128,482)
Cash and cash equivalents
at beginning of period 260,651 81,184 51,979 153,667
---------- --------- --------- ---------
Cash and cash equivalents
at end of period $ 387,486 $ 25,185 $ 387,486 $ 25,185
========== ========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 37,792 $ 902 $ 204,295 $ 86,205
========== ========= ========= =========
Cash paid for income taxes $ - $ - $ - $ -
========== ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
For the Three and Nine Months Ended June 30, 1999 and 1998
Three Months Ended Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
------------ ---------- --------- ---------
Non-cash transactions
Stock issued for
services $ - $ 244,582 $ $ 244,582
Company cars transferred
to inventory 14,500 - 14,500 -
Stock issued to
acquire fixed assets 75,000 - 75,000 -
Debt issued to
acquire notes
receivable 473,445 - 473,445 -
During December 31, 1998, the Company issued preferred shares valued at
$6,578,485 and net other equity of $355,803 in exchange for the extinguishment
of $2,223,159 of debt, $4,278,068 of related party payables and $1,028,306 of
other liabilities resulting in a net gain on disposition of subsidiaries of
$595,245. The other equity consisted of $1,724,775 in treasury stock obtained in
the disposition of the Company's subsidiaries, $227,500 of treasury stock
received into a trust, other treasury stock of $2,293,775 issued in
extinguishment of debt and liabilities and $14,303 for 22,000 shares of common
stock converted from debt at $0.65 per share.
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1999
NOTE 1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly its financial position and the results of its operations
and cash flows for the periods shown.
Certain prior period amounts have been reclassified to conform to the
current period's presentation.
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The results of
operations for the respective three and nine months periods are not
necessarily indicative of the results to be expected for a full year
of operations.
These unaudited condensed consolidated financial statements should be
read in conjunction with the Company's annual report of Form 10-KSB for
the year ended September 30, 1998.
A summary of significant accounting policies is currently on file with
the Securities and Exchange Commission on Form 10-KSB.
During the three and nine months ended June 30, 1999 and the year ended
September 30, 1998, the Company's operations were negatively impacted
by the poor performance of its automobile sales and financing
subsidiaries. The Company has a shareholder deficit of approximately
$5,500,000 at June 30, 1999 and a history of operating losses.
Management's plan to return to profitability are three-fold. First, to
divest itself of the non-productive subsidiaries by exchanging them for
stock held by the Merritt Group, a related party comprised of
individuals who were officers of the Company. Second, to reduce debt
and make arrangements to reduce the Company's exposure to further
liability by tendering equity securities to AutoPrime in satisfaction
of the Company's liability to AutoPrime. Third, to achieve operational
profitability by purchasing and generating higher quality notes
receivable.
8
<PAGE>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1999
NOTE 1 BASIS OF PRESENTATION (continued)
It is not possible to predict the success of management's subsequent
efforts to achieve profitability. If management is unable to achieve
its goals, the Company may find it necessary to undertake other actions
as may be appropriate.
The accompanying condensed consolidated financial statements do not
include any adjustments relating to the recoverability and
classification of the recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the
Company be unable to continue in existence.
NOTE 2. NOTES RECEIVABLE
Notes receivable consist of the following at June 30, 1999 and
September 30, 1998:
June 30, September 30,
1999 1998
------------ -------------
Notes receivable, secured by autos,
interest from 24% to 27% in 36
month terms. Maturing by 2002. $ 1,469,529 $ -
Allowance for doubtful accounts 335,630 -
------------ -------------
$ 1,133,899 $ -
============ =============
The Company expects to sell its notes receivable within a year.
NOTE 3. LONG-TERM DEBT
Long-term debt at June 30, 1999 and September 30, 1998 consisted of
the following:
June 30, September 30,
1999 1998
------------ -------------
Note payable, unsecured, for
acquisition of car lot, payable
in quarterly installments of
$50,000. No interest is charged
on note. Matures March 2000 $ 184,000 $ 284,000
9
<PAGE>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1999
NOTE 3. LONG-TERM DEBT (continued)
June 30, September 30,
1999 1998
------------ -------------
Note payable, unsecured, for
acquisition of finance servicing
facility, payable in monthly
installments of $9,444. No
interest is charged on note.
Matures May 2000 $ 103,889 $ -
Note payable, secured by retail
installment notes, payable at
maturity. Interest on matured,
unpaid principal at 12% per
annum. Matures December 1999 473,445 -
Notes payable, unsecured,
payable at maturity plus
accrued interest at rates from
8% to 24% per annum. Converted
to stock December 1998. - 2,217,884
Capital lease, secured by
equipment, payable in monthly
installments of $1,125 plus
interest at rates of 14% to
16% per annum. Transferred in
disposition of subsidiaries
December 1998. - 25,608
Unamortized discounts - (5,733)
------------ ------------
761,334 2,521,759
Less current portion 761,334 987,153
------------ ------------
$ - $ 1,534,606
============ ============
Maturities of this debt are as follows:
Year ended June 30, 2000 $ 761,334
------------
$ 761,334
============
10
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AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1999
NOTE 4. LINE OF CREDIT
The Company has a $1,000,000 line of credit with AutoPrime to purchase
used cars for resale on the Company lots. This line of credit, or
flooring plan, is secured 100% by the vehicle inventory and interest is
charged at a rate of 6.5% over the reference rate (currently 7.75%)
resulting in an annual rate of 14.25%. The agreement is revolving and
is renewable each year. The current agreement expires November 26,
1999. There are certain covenants in the agreement that allow for an
earlier due date. At June 30, 1999 $1,047,782 had been advanced,
exceeding the line by $47,782.
The Company also had a $300,000 flooring line with the former owner of
one of the Company's lots. At June 30, 1999, the amount outstanding on
this line was $196,016, with $103,984 available on the line.
NOTE 5. COMMITMENTS AND CONTINGENCIES
The Company leases office space and auto lots under noncancellable
operating lease agreements which require monthly payments of $3,000 per
month and expire in August 1999. Future minimum annual payments
required under the lease are $6,000 at June 30, 1999.
The Company sells used automobiles using auto financing contracts. The
Company then sells the contracts to a finance company, generally under
a recourse agreement, whereby the Company guarantees the repayment of
the note. If the note holder defaults, the Company is responsible for
repossessing the automobile and then either paying the amount due the
finance company or substituting a new loan for the one in default.
In October 1997, the Company entered into an agreement with AutoPrime
to provide financing for the Company's automobile transactions. The
agreement allows AutoPrime to buy the notes at a percentage of face
value (averaging approximately 75%) and then to pay the Company an
additional percentage (averaging approximately 15%) on gross
collections. The loss ratios of the notes sold have been much greater
than expected to date. However, with the change in management and a
change in the Company's lending criteria, management expects to have
better loan collection results in future periods. The loan balances and
contingent losses reserved are as follows:
11
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AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1999
NOTE 5. COMMITMENTS AND CONTINGENCIES (continued)
June 30, September 30,
1999 1998
----------- -------------
Total liability, including
the contracts sold by
related parties. $11,000,000 $ 7,700,000
Recorded liability, estimated
at 27% and 30%,respectively,
of total contracts outstanding $ 3,020,000 $ 2,320,000
The Company has issued for tender to AutoPrime 6,578,485 preferred
shares, valued at $1.00 per share, which includes 3,078,485 shares
relating to recourse liability on contracts owned by AutoPrime. The
Company has an obligation to maintain the $1.00 per share value on the
remaining 3,237,956 preferred shares (net of 262,044 shares released
from pledge) issued to AutoPrime (in trust), and is contingently liable
for the issuance of additional preferred shares as may be necessary to
maintain such value.
NOTE 6. PURCHASE AND RESALE OF LOAN PORTFOLIOS
The Company purchased two portfolios as of June 14, 1999 from Angelina
Motor Company in Lufkin, Texas. The first portfolio, with an
outstanding principal of $3,211,466 was purchased for $1,926,874 and
was immediately sold, with recourse, to AutoPrime for $2,408,600. The
second portfolio, with an outstanding principal balance of $789,074,
was purchased for a note of $473,445. The note bears interest at 12%
and is due December 10, 1999. The notes in the portfolio are all
secured by automobiles and bear interest at various rates up to
approximately 27% per annum. This portfolio is currently held by the
Company, but Management expects to sell the portfolio prior to the due
date of the note.
12
<PAGE>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1999
NOTE 6. RELATED PARTY TRANSACTIONS
The Company issued two promissory notes totaling $2,534,666 to
AutoPrime in April 1999, payable in monthly installments of $50,000
each plus accrued interest at 9% per annum. The notes were issued to
restructure the Company's debt, primarily as a result of repurchase
obligations, to AutoPrime. The balance of these notes at June 30, 1999
was $2,189,663.
In June 1999, the Company moved into new office space as a tenant of
AutoPrime. Lease terms have not been finalized.
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operation
(a) Plan of Operation.
Not applicable.
(b) Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Forward looking statements:
This report contains forward looking statements. Additional written or
oral forward looking statements may be made by the Company from time to time in
filings with the Securities and Exchange Commission or otherwise. Such forward
looking statements are within the meaning of that term in Section 27A of the
Securities Act, and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such statements may include, but not be limited
to, projections of revenue, income, or loss, estimates of capital expenditures,
plans for future operations, products or services, financing needs or plans, as
well as assumptions relating to the foregoing. The words "believe", "expect",
"anticipate" "estimate", "project", and similar expressions identify forward
looking statements, which speak only as of the date the statement was made.
Forward looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward looking statements. The Company undertakes no
obligation to publicly update or revise any forward looking statements, whether
as a result of new information, future events, or otherwise. The following
disclosures, as well as other statements in this Report on Form 10-QSB,
including those in the notes to the Company's consolidated financial statements,
describe factors, among others, that could contribute to or cause such
differences, or that could affect the Company's stock price.
RESULTS OF OPERATIONS
Net sales of used automobiles for the nine months ended June 30, 1999
increased 51% to $5,814,000 from $3,838,000 for the comparable period of the
prior year. The company added two additional lots during the quarter ended June
30, 1999, which contributed to the increase in sales compared to the comparable
quarter. Revenues from servicing of notes increased 362% to $865,000 for the
nine months ended June 30, 1999 from $187,112 for the nine months ended June 30,
1998 due to the Company servicing higher quality notes as well as a higher
volume of notes. The Company also had earned discounts of $777,000 for the
quarter ended June 30, 1999 on automobile installment contracts which it
acquired and immediately sold during the period. The Company did not engage in
this activity during the nine months ended June 30, 1998.
Gross profit margin on used automobiles for the nine months ended June
30, 1999 improved to 35% from 22% for the nine months ended June 30, 1998. For
the quarter ended June 30, 1999, gross profit margins improved to 44% from 15%
for the comparable quarter in the previous year. Management believes the margin
increases are attributable to more experienced staff, improved training,
procedural improvements in operations and the acquisition of used cars available
for sale.
General and administrative expenses increased 10% (approximately
$238,000) compared to the nine month period ended June 30, 1998, while for the
quarter ended June 30, 1999, general and administrative expenses increased by
158% (approximately $804,000) when compared to the comparable quarter in the
previous year. These increases are due to the opening of two additional lots
during the most recent quarter and to additional year to date legal and
professional expenses associated with the Company's Annual Form 10-K.
The Company sells certain automobile installment contracts to AutoPrime
with recourse. Management's estimate of the $3,020,000 liability related to
these contracts resulted in a charge to earnings of $400,000 for the three
months ended June 30, 1999 and $120,000 for the nine months ended June 30, 1999.
There is no comparable amount for the prior year.
Operating losses for the nine month ended June 30, 1999 decreased by
more than $812,000 to $941,000, when compared to the nine months ended June 30,
1998. For the quarter ended June 30, 1999 the operating loss was $278,000, a
decrease of $95,000 from the same period in the previous year.
Interest expense increased 70% as compared to the prior year's nine
month period ended June 30, due primarily to increased borrowing to finance the
Company's used car inventory and to service the debt to AutoPrime.
Non-operating income during the nine months ended June 30, 1999
increased approximately $595,000 primarily due to the gain on the disposition of
the Company's subsidiaries in December, 1998.
The Company has absorbed significant writeoffs of notes purchased prior
to December 31, 1998. There is an expectation that the newer notes, originating
with more stringent underwriting criteria, will have a better collection rate.
As such, management has adjusted the reserve ratio for the notes from 30% on all
notes to 30% on notes acquired prior to December 31, 1998 and 25% for notes
acquired after that date. It is expected that this rate will move lower with
improved experience over time.
14
<PAGE>
The purchase and resale of large portfolios has a negative short term
impact on the Company's financial position. Portfolios are purchased at a
substantial discount and then resold to AutoPrime at a smaller discount,
yielding a profit on the resale. However, the Company retains recourse liability
on the notes and is currently setting a reserve against possible defaults at
such a level that the profit on the transaction will be realized as the notes
perform and the recourse liability is reduced as well by the collection of the
note servicing fee.
The purchase and resale of the large Circus Motors portfolio for
approximately $2,000,000 at a 20% discount resulted in approximately $400,000 in
gross margin. However, the Company's reserve at 25%, or $500,000, left the
financial position of the Company $100,000 lower at June 30, 1999. However,
Management believes that the 20% service fee earned on collection and the actual
collection percentage will yield an ultimate profit for the Company.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Company has a working capital deficit of
approximately $2,850,000 as compared to a working capital deficit of
approximately $8,200,000 as of September 30, 1998. The improvement is primarily
due to the disposition of the subsidiaries and the restructure of debt with
AutoPrime offsetting the losses incurred in operations as the Company
re-establishes its auto dealership operations and builds its auto loan servicing
portfolio to a viable operating level. Management believes that the relationship
with AutoPrime will provide the Company with the working capital needed to reach
the sales and service levels required to sustain the Company's operations. The
Company has increased inventory to over $1,000,000 as of June 30, 1999 and has
acquired several portfolios and added car lots in the past nine months which has
created much of the debt the Company is carrying. The need for cash for
significant acquisitions has leveled off and Management believes that the
Company will break even on a cash flow basis in the next few months. The revenue
generated by service fee revenues has now increased, reflecting better
collection procedures and stricter lending guidelines.
The Company currently has only a small amount of unused credit
facilities, but with the addition of the Circus Motors portfolio, Management is
confident of being able to increase the borrowing lines in the near future.
Effect of Inflation
The Company does not expect any negative effect to operations from an
increase in inflation.
Concentration of Risk
The Company has most of its revenues generated from the sale of autos
and collection of notes with individuals in Texas. Management believes that the
risk is commensurate with the interest rates charged.
Year 2000 Compliance
The Company is working to address and prepare for the potential impact
of the year 2000 on the ability of our computerized information systems to
accurately process information that may be date-sensitive. Any of the programs
that recognize a date using "00" as the year 1900 rather than the year 2000
could result in errors or system failures. The Company utilizes a number of
computer programs across our entire operation. Management has not completed the
assessment, but currently believes that the costs of addressing this issue will
not a have a materially adverse impact on the Company's financial position.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Previously reported in Form 10-KSB, filed June 28, 1999.
Item 2. Changes in Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Attached as Exhibits are the following documents:
27. Financial Data Schedule.
(b) Reports on Form 8-K
Not applicable
16
<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.
Registrant
Date: September 13, 1999 By: /s/ Charles W. Norman
-----------------------------------------
Charles W. Norman
President and Chief Executive Officer
(Principal Executive Oficer and
Principal Financial Officer)
17
<PAGE>
INDEX TO EXHIBITS
Attached as Exhibits are the following documents:
27. Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000790066
<NAME> AutoCorp Equities, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 387,486
<SECURITIES> 0
<RECEIVABLES> 1,469,529
<ALLOWANCES> (335,630)
<INVENTORY> 1,167,459
<CURRENT-ASSETS> 2,771,656
<PP&E> 372,838
<DEPRECIATION> (40,613)
<TOTAL-ASSETS> 3,126,925
<CURRENT-LIABILITIES> 5,604,733
<BONDS> 0
0
6,578,485
<COMMON> 6,162
<OTHER-SE> (12,082,455)
<TOTAL-LIABILITY-AND-EQUITY> 3,126,925
<SALES> 3,421,739
<TOTAL-REVENUES> 4,570,210
<CGS> 3,097,935
<TOTAL-COSTS> 4,810,172
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 38,438
<INTEREST-EXPENSE> 101,426
<INCOME-PRETAX> (379,826)
<INCOME-TAX> 0
<INCOME-CONTINUING> (379,826)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (379,826)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
