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, 2000
[ ] 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.)
911 W. Parker Road, Suite 306
Plano, Texas 75023
(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: 6,168,749 shares of Common
Stock, $.001 par value, as of August 31, 2000.
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, 2000 and September 30, 1999
June 30, September 30,
2000 1999
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 28,934 $ 347,046
Accounts receivable, net -- 737,391
Other receivables -- 5,783
Inventory 181,825 1,607,538
Prepaid expenses 18,815 59,066
---------- ----------
Total current assets 229,574 2,756,824
PROPERTY AND EQUIPMENT
Furniture and fixtures 11,543 11,295
Office equipment 218,376 208,513
Computer equipment 46,476 42,134
Automobiles 2,500 2,500
Machinery and equipment 91,865 91,865
Leasehold improvements 15,108 21,674
---------- ----------
385,868 377,981
Less accumulated depreciation
and amortization 82,143 36,216
---------- ----------
303,725 341,765
---------- ----------
OTHER ASSET
Deposits 7,076 7,743
---------- ----------
Total assets $ 540,375 $3,106,332
========== ==========
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 2000 and September 30, 1999
June 30, September 30,
2000 1999
------------ ------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion, long-term debt 29,803 683,001
Line of credit 171,825 1,196,921
Accounts payable and accrued expenses 393,360 822,074
Sales tax payable 1,228,419 641,824
Related party payables 8,700,170 5,129,464
Other current liabilities 197,363 219,077
------------ ------------
Total current liabilities 10,720,940 8,692,361
Long-term debt, net of current portion -- --
Allowance for recourse liability 2,300,000 2,884,000
Related party payable 6,578,485 6,578,485
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, no shares issued and outstanding
at June 30, 2000 and September 30, 1999 -- --
Common stock, par value $.001; 110,000,000
shares authorized, 6,189,971 and 6,137,184
shares issued and outstanding at June 30,
2000 and September 30, 1999, respectively 6,190 6,137
Additional paid-in capital 11,584,425 11,536,718
Accumulated deficit (30,412,165) (26,353,869)
Less shares held in trust (227,500) (227,500)
Less stock subscriptions receivable (10,000) (10,000)
------------ ------------
Total shareholders' deficit (19,059,050) (15,048,514)
------------ ------------
Total liabilities and
shareholders' deficit $ 540,375 $ 3,106,332
============ ============
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three and Nine Months Ended June 30, 2000 and 1999
Three Months Ended Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues $ 579,055 $ 4,570,210 $ 10,735,944 $ 7,591,745
Cost of sales 559,502 3,097,935 9,416,059 5,442,517
------------ ------------ ------------ ------------
Gross profit 19,553 1,472,275 1,319,885 2,149,228
Selling, administrative and
other operating expenses 961,730 1,350,675 3,980,703 2,970,356
Provision for recourse
liability (575,385) 400,000 930,046 120,000
------------ ------------ ------------ ------------
Operating loss (366,792) (278,400) (3,590,864) (941,128)
Other expense:
Interest expense (121,506) (101,426) (436,955) (146,462)
Gain on disposition
of subsidiaries -- -- -- 595,245
------------ ------------ ------------ ------------
Net loss $ (488,298) $ (379,826) $ (4,027,819) $ (492,345)
============ ============ ============ ============
Net loss per share,
basic and diluted $ (.07) $ (.06) $ (.65) $ (.08)
============ ============ ============ ============
Weighted average number
of shares outstanding,
basic and diluted 6,189,971 6,092,953 6,205,819 6,134,063
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three and Nine Months Ended June 30, 2000 and 1999
Three Months Ended Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss $ (488,298) $ (379,826) $(4,027,820) $ (492,345)
Adjustments to reconcile
net loss to net cash
provided by/(used in)
operating activities:
Depreciation and
amortization 14,457 17,175 45,927 39,251
Provision for
recourse liability (1,040,000) 400,000 (584,000) 120,000
Loss on disposal of assets -- -- 6,566 --
Gain on disposition
of subsidiaries -- -- -- (595,245)
Changes in:
Accounts/notes receivable 95,512 (358,056) 737,391 (689,155)
Related party payables 1,705,095 (119,479) 3,570,706 868,822
Inventory 61,459 (718,410) 1,425,713 (1,057,662)
Prepaid expenses 948 (46,937) 40,251 (46,937)
Deposits 3,232 -- 7,163 (1,000)
Accounts payable and
accrued expenses (183,326) 1,279,397 (409,963) 1,904,718
Bank overdrafts (89,031) -- -- --
Sales tax payable 53,983 -- 586,595 --
Line of credit (82,045) 138,880 (1,025,096) 571,866
Other (18,436) (840) (34,379) 2,942
----------- ----------- ----------- -----------
Total adjustments 521,848 591,730 4,366,874 1,117,600
----------- ----------- ----------- -----------
Net cash provided by/(used
in) operating activities 33,550 211,904 339,054 625,255
----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures -- (56,736) (14,453) (277,338)
----------- ----------- ----------- -----------
Net cash used in
investing activities -- (56,736) (14,453) (277,338)
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
For the Three and Nine Months Ended June 30, 2000 and 1999
Three Months Ended Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Principal payments
on long-term debt (32,601) $ (28,333) $(642,713) $(182,410)
Proceeds from issuance of
long-term debt -- -- -- 170,000
--------- --------- --------- ---------
Net cash (used in) provided
by financing activities (32,601) (28,333) (642,713) (12,410)
--------- --------- --------- ---------
Net increase/(decrease) in
cash and cash equivale 949 126,835 (318,112) 335,507
Cash and cash equivalents
at beginning of period 27,985 260,651 347,046 51,979
--------- --------- --------- ---------
Cash and cash equivalents
at end of period $ 28,934 $ 387,486 $ 28,934 $ 387,486
========= ========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest $ -- $ 37,792 $ 164,914 $ 204,295
========= ========= ========= =========
Cash paid for income taxes $ -- $ -- $ -- $ --
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
For the Three and Nine Months Ended June 30, 2000 and 1999
Three Months Ended Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Non-cash transactions
Stock issued for
services $ -- $ -- $ 18,750 $ --
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 $ 476,445 $ 476,445
</TABLE>
During the three months ended December 31, 1998, the Company tendered 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)
March 31, 2000
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 month
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, 1999.
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, 2000 and the year ended
September 30, 1999, the Company's operations were negatively impacted by the
loss of the flooring plan line of credit and the resulting inability of the
Company to purchase additional inventory. The Company has a shareholder
deficit of approximately $19,000,000 at June 30, 2000 and a history of
operating losses. Management is currently assessing new business models in
an effort to make the Company financially self-sufficient. The Company is
also currently looking for alternate capital sources.
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.
8
<PAGE>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2000
NOTE 1. BASIS OF PRESENTATION (continued)
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. LONG-TERM DEBT
Long-term debt at June 30, 2000 and September 30, 1999 consisted of the
following:
June 30, Sept. 30,
2000 1999
---------- ----------
Note payable, unsecured, for
acquisition of car lot, payable in
quarterly installments of $50,000.
No interest is charged on note.
Matured March 2000 $ 24,804 $ 134,000
Note payable, secured by retail
installment notes, payable at
maturity. Interest on matured,
unpaid principal at 12% per annum.
Matured December 1999 -- 473,445
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. 4,999 75,556
---------- ----------
29,803 683,001
Less current portion 29,803 683,001
---------- ----------
$ -- $ --
========== ==========
9
<PAGE>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2000
NOTE 3. LINE OF CREDIT
The Company had two lines of credit totaling $1,000,000 with AutoPrime to
purchase used and repossessed cars for resale on the Company lots. Both
lines of credit, or flooring plans, were secured 100% by the vehicle
inventory. The line to purchase used cars was for $750,000 and bore interest
at a rate 15% per annum. This agreement was renewed on September 9, 1999 and
matured on March 8, 2000. At June 30, 2000, $171,825 was owed on this line
and $0 was available.
The second line is for $250,000 and bears interest at 15.25% per annum. This
agreement matured on June 8, 2000, but AutoPrime has declined to issue any
additional advances on this line. There are certain covenants in the
agreement that allow for an earlier due date. At June 30, 2000, $0 was owed
on this line and $0 was available.
NOTE 4. COMMITMENTS AND CONTINGENCIES
The Company leases office space and auto lots under non-cancelable operating
lease agreements which require monthly payments of $22,666 per month and
expire in June 2005. Future minimum annual payments required under the lease
are as follows:
June 30, 2001 $ 236,692
June 30, 2002 112,826
June 30, 2003 27,500
June 30, 2004 25,000
June 30, 2005 10,500
----------
$ 412,518
==========
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 all principal collections.
10
<PAGE>
AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2000
NOTE 4. COMMITMENTS AND CONTINGENCIES (continued)
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:
June 30, September 30,
2000 1999
----------- ------------
Total liability, including
the contracts sold by
related parties. $ 9,200,000 $ 11,536,000
Recorded liability, estimated
at 25% of total contracts
outstanding $ 2,300,000 $ 2,884,000
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 5. SALES TAX PAYABLE
In the process of selling cars, sales tax is added to the financing
agreement for its customers. The Company currently estimates, and has
recorded, a sales tax liability of approximately $1,228,000 at June 30, 2000
for the remaining balances on the related installment note portfolio. The
Company currently pays sales taxes as proceeds are collected from the
financing agreements. An additional amount has been accrued against any
contingent liabilities which may arise from the sale of its installment
notes and any acceleration of the sales taxes due.
11
<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
Overview
Through the first three quarters and into the fourth quarter of fiscal 2000, the
Company operated "Buy Here - Pay Here" used car dealerships which underwrote,
financed and serviced retail installment contracts generated by sales of used
cars by the Company's dealerships. The installment contracts were sold, at a 30%
to 45% discount, to various lending sources on a full recourse basis.
Beginning in the second fiscal quarter of 2000, as a result of limitations
placed on the use of its floor plan line of credit, the Company is unable to
continue to purchase cars for its used car lots. At the present time the Company
generates revenue from service fees for selling repossessed units relating to
contracts previously sold to AutoPrime as well as from the continued servicing
of retail installment contracts.
The Liquidity section following discusses this at greater length.
General Discussion
Net sales of used cars and repo service fees earned amounted to $9,419,000 for
the nine months ended June 30, 2000 compared to $5,814,000 for the similar
period in 1999. This is attributable to having five used cars lots in 2000
compared to two in the prior year. In the fiscal third quarter of 2000 net sales
of used cars and repo service fees earned were $240,000 while the comparable
number in 1999 was $3,421,000. This quarter reflects the impact of the loss of
the Company's floor plan line of credit mentioned above.
Revenues from servicing retail installment contracts decreased slightly in this
year's third quarter to $339,000, an decrease of approximately$32,000 over last
year's amount of $371,000 as a result of increasing delinquency rates on
serviced notes.
12
<PAGE>
Gross profit for the nine-month period ended June 30, 2000 was approximately
$1,300,000, most of which ($1,069,000) was earned in the first quarter. Gross
profit as a percentage of sales was 12.2%. For the comparable nine-month period
of the prior year, this figure was 28.3%. For the three-month period ended June
30, 1999, gross profit as a percentage of sales was 3.3%. The lower margins
during the current fiscal year were caused primarily by the high proportion of
repossessed cars in the sales mix, exacerbated by the loss of the Company's
floor plan line of credit.
Selling, administrative and other operating expenses were 165.9% of sales for
the third quarter of the 2000 fiscal year, an increase from the second quarter's
rate of 42.8% of sales. The figures for the comparable quarters of the prior
year were 28.7% of sales and 44.2% of sales, respectively. These numbers
primarily reflect the loss of the company's ability to retail used cars during
the their fiscal quarter due to the loss of the line of credit and inability to
obtain new credit during the quarter. These expenses have decreased in the
fourth quarter, however, in line with the Company's reduced level of operations.
The provision for recourse liability amounted to approximately $930,000 during
the nine-month period ended June 30, 2000, a substantial increase from the
comparable period of the prior year. The provision reflects the high level of
loan defaults which occurred during the current fiscal year. The current year's
numbers do show significant improvement during the third fiscal quarter, as
substatiallly all of the aggregate provision made for the nine-month period
ended June 30, 2000 was recorded in the quarter ended December 31, 1999.
Interest expense was incurred by the Company in connection with its line of
credit that was used to floor purchased automobiles and from the outstanding
note payable to AutoPrime. For the nine months ended June 30, 2000, interest
expense amounted to approximately $437,000, a four-fold increase from the
comparable nine-month period of the prior year, due predominantly to the
increased debt level with AutoPrime.
LIQUIDITY & CAPITAL RESOURCES
As a result of the Company's continuing need to improve its cash flow and
overall liquidity, during the first three quarters of fiscal 2000, a thorough
review of the Company's business model was performed in conjunction with
AutoPrime and AutoPrime's U.S. parent company, Pacific USA Holdings, Ltd.
("PUSA"). The conclusion was that the Company's current business model is unable
to generate sufficient cash flow to support the ongoing viability of the
Company.
In connection with this review, further analysis was performed, and is
continuing to be performed, to try to develop a business model for the Company
that would allow the Company to be financially self -sufficient. The Company
needs to obtain additional capital in order to continue business operations.
In the past, the Company has had a floor plan line of credit with AutoPrime.
However, AutoPrime has not made any advances under the line of credit since
December 1999. The line of credit expired on June 8, 2000 and will not be
renewed. Additionally, since the Company has not been able to purchase cars
without a line of credit, there have been no sales of new retail contracts to
AutoPrime.
13
<PAGE>
Mr. William O.Merritt, re-joined the Board of Directors in May 2000 and was
appointed Secretary/Treasurer. Mr. Merritt is the second largest individual
shareholder of the Company and was the Chief Executive Officer of the Company on
December 30, 1998, when a previously reported change of control transaction
occurred. He was also serving as a Director at the time and continued as a
Director until April 29, 1999.
With the return of Mr. Merritt, the alternatives being considered for a new
business model for the Company have been expanded to include various
possibilities suggested by Mr. Merritt.
The Company has developed a specific business model and made a proposal to
AutoPrime and PUSA for the recapitalization of the Company. It includes issuing
shares to AutoPrime and/or PUSA in exchange for the debt the company owes
AutoPrime. Implementation of such a plan would provide the Company with the
opportunity to acquire capital from alternate sources.
The Company has had discussions with AutoPrime and PUSA about this proposal and
their response has been encouraging. However, as of September 19, 2000, the
proposal has not been accepted by them, so there is no agreement as of that
date. In addition, there is no assurance the Company will be able to reach any
agreement with them. In addition, if the Company reaches an agreement with them
and it is implemented, there is no assurance it will become profitable for the
Company or its shareholders.
If the Company does not reach an agreement with AutoPrime or PUSA, there can be
no assurance the Company will be able to develop another business model. If one
is developed, there is no assurance Management will be able to obtain the
necessary additional capital to implement it. Further, if a new business model
is developed and adequately capitalized, there is no assurance it will become
profitable for the Company or its shareholders.
Given the Company's financial position, the Company is unable to replace this
line of credit and as a result the Company is no longer able to purchase cars
for its used car lots since December, 1999. Virtually all the cars that the
Company currently has for sale are repossessed units, which are not owned by the
Company but are security for contracts previously sold to AutoPrime. As a
result, when sold, these cars will not generate any revenue for the Company
other than the service fees the Company charges AutoPrime for reselling the
cars.
The Company's revenues declined during the quarter ended June 30, and they have
continued to decline during the first two months of the current quarter. The
Company's only sources of revenue at the present time are fees from re-selling
repossessed vehicles and servicing fees from servicing the contracts previously
sold to AutoPrime.
The Company has been in a negative monthly cash flow situation and has had a
negative working capital position since June 1998. At June 30, 2000, the Company
had a working capital deficit of approximately $10,500,000, as compared to a
working capital deficit of approximately $5,940,000 at September 30, 1999. The
$4,560,000 difference is primarily attributable to the decrease in inventory and
the increase in the payable to its related party, AutoPrime. The Company has
been relying on AutoPrime to supplement internally generated cash flow with
monthly advances to fund its cash operating needs. This situation has worsened
as a result of the Company no longer having a floor plan line of credit and
consequently no ability to purchase cars to sell.
The monthly advances from AutoPrime have been ranging from $10,000 to $289,000.
At June 30, 2000, the advances totaled $830,500 for the third quarter. At
present, the Company does not have the financial resources to repay any of these
advances. There can be no assurance that AutoPrime (or PUSA) will continue to
provide this monthly cash requirement. If AutoPrime discontinues its funding
support and no additional capital can be raised, the Company will not be able to
continue business operations.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, 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 21, 2000 By: /s/ William O. Merritt
---------------------------
William O. Merritt
Secretary/Treasurer
