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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20459
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19420
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CREDIT DEPOT CORPORATION
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(Exact name of small business issuer as specified in its charter)
Delaware 58-1909265
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
700 Wachovia Center
Gainesville, Georgia
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(Address of principal executive offices)
30501
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(Zip code)
(770) 531-9927
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(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 of 1934 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
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at October 31, 1998
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Common Stock $.001 Par Value 5,748,555
Transitional Small Business Disclosure Format (check one):
YES NO X
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CREDIT DEPOT CORPORATION
Table of Contents
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PART I. FINANCIAL INFORMATION Page
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Item 1 -- Financial Statements (Unaudited)
Condensed Consolidated Balance
Sheets as of June 30, 1998 and
September 30, 1998 3
Condensed Consolidated Statements of Operations
for the Three Months Ended September 30, 1997
and 1998 4
Condensed Consolidated Statements
of Cash Flows for the Three Months
Ended September 30, 1997 and 1998 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2 -- Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
Part II. OTHER INFORMATION
Item 1 -- Legal Proceedings 10
Item 2 -- Changes in Securities 10
Item 5 -- Other Information 11
Item 6 -- Exhibits and Reports on Form 8-K 11
SIGNATURES 11
</TABLE>
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CREDIT DEPOT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, SEPTEMBER 30,
1998 1998
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ASSETS
Loans receivable:
Consumer, collateralized by real estate $ 9,171,205 $ 11,700,808
Allowance for credit losses (267,252) (253,235)
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Net loans receivable 8,903,953 11,447,573
Cash 304,002 175,392
Cash subject to withdrawal restrictions 498,668 524,302
Property and equipment, net 281,046 264,735
Real estate held for resale 76,101 36,084
Other assets:
Receivables due from related parties 15,848 2,650
Prepaid expenses and other assets 415,171 305,621
Servicing asset 22,290 21,351
Interest-only strips receivable 4,118,284 3,673,976
Accrued interest receivable 83,348 85,518
Deferred financing costs 131,131 100,366
Goodwill 607,000 601,417
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Total assets $ 15,456,842 $ 17,238,985
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LIABILITIES AND STOCKHOLDERS' EQUITY
Convertible notes $ 2,070,000 $ 1,970,000
Warehouse lines of credit 8,148,924 10,809,896
Advance on interest-only strips receivable 1,619,553 1,313,054
Other borrowings 450,154 430,065
Accounts payable 310,380 268,231
Accrued liabilities 341,225 491,348
Dividends payable 58,227 58,227
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Total liabilities 12,998,463 15,340,821
Stockholders' Equity:
Series B Preferred Stock, $.001 par value: 60,000
shares authorized, 17,875 and 18,274 shares issued
at June 30, 1998, and September 30, 1998 18 18
Series C Preferred Stock, $.001 par value: 34,000
shares authorized, 21,000 shares issued
at June 30, 1998, and September 30, 1998 21 21
Common stock, $.001 par value: 35,000,000 shares
authorized, 5,748,555 shares issued and outstanding
at June 30, 1998 and September 30, 1998 5,749 5,749
Additional paid-in capital 31,775,980 31,822,015
Accumulated deficit (29,323,389) (29,929,639)
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Total Stockholders' Equity 2,458,379 1,898,164
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Total Liabilities and Stockholders' Equity $ 15,456,842 $ 17,238,985
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</TABLE>
See accompanying notes.
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CREDIT DEPOT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended
September 30, SEPTEMBER 30,
1997 1998
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Revenues:
Finance income and fees earned $ 466,589 $ 641,955
Gain on sale of receivables 1,193,593 1,178,020
Other 26,324 181,698
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1,686,866 2,001,673
Expenses:
Salaries and employee benefits 1,244,324 1,250,461
Legal and professional fees 121,106 101,366
Other operating expenses 673,408 726,609
Provision for credit losses 30,000 18,750
Debt conversion expense -- --
Interest expense and amortization of
financing costs 545,588 464,703
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2,614,426 2,561,889
Loss before provision for income taxes (927,560) (560,216)
Provision for income taxes -- --
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Net loss $ (927,560) $ (560,216)
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Induced conversion of preferred stock -- --
Dividends on preferred stock 187,785 46,035
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Net loss attributable to common stockholders $ (1,115,705) $ (606,251)
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Basic and diluted loss per share $ (1.37) $ (0.11)
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Weighted average shares outstanding 814,573 5,748,555
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</TABLE>
See accompanying notes.
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CREDIT DEPOT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended
September 30, September 30,
1997 1998
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (927,193) $ (560,216)
Adjustments to reconcile net loss
to cash used in operating activities:
Provision for credit losses 30,000 18,750
Depreciation and amortization 74,854 43,912
Changes in operating assets and liabilities:
Cash subject to withdrawal restrictions -- (25,634)
Due from related parties (350) 13,198
Prepaid expenses and other (61,429) 107,380
Deferred financing costs 30,360 30,765
Loans originated (20,710,678) (34,622,071)
Loans repurchased (406,452) --
Servicing asset 8,185 939
Interest-only strips receivable (515,061) 444,308
Proceeds from loans sold 18,667,928 31,717,657
Principal collections on loans not sold 182,826 57,779
Accounts payable and accrued liabilities 176,256 107,974
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Net cash used in operating activities (3,451,121) (2,670,394)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (4,604) (4,298)
Disposal of property and equipment 4,800 5,200
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Net cash provided by investing activities 196 902
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible notes 1,255,000 --
Payments on convertible notes -- (100,000)
Proceeds from warehouse line of credit 19,678,125 35,257,860
Payments on warehouse line of credit (17,950,646) (32,596,888)
Proceeds from other borrowings 553,563 --
Payments on other borrowings (203,671) (20,090)
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Net cash provided by financing activities 3,302,371 2,540,882
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Net decrease in cash (148,554) (128,610)
Cash at beginning of period 1,332,934 304,002
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Cash at end of period $ 1,184,380 $ 175,392
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 212,570 $ 427,294
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Conversion of loans receivable to real estate held for sale $ 212,944 $ 36,032
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</TABLE>
See accompanying notes.
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CREDIT DEPOT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial information includes the accounts of Credit
Depot Corporation (the "Company" or "Registrant") and its wholly owned
subsidiaries. The financial information is unaudited but includes all
adjustments consisting only of normal recurring adjustments which the
Company's management believes to be necessary for fair presentation of the
periods presented. Interim results are not necessarily indicative of
results for a full year. Dollar figures rounded to the nearest $1,000 in
the following discussion are approximate unless otherwise noted. The
interim financial statements should be read in conjunction with the
Company's audited financial statements for the year ended June 30, 1998.
2. NET LOSS PER SHARE
Dividends on preferred stock are added to net loss to arrive at the
numerator for this calculation. The denominator for the earnings per share
calculation is the weighted average number of common shares actually
issued and outstanding during the period indicated. The denominator for
earnings per share- diluted is the total of actual outstanding shares of
common stock plus all common equivalent shares (convertible securities,
warrants and stock options) outstanding during the period. Common share
equivalents are included even if they are not currently exercisable or
even if the exercise price is below the current market value of the common
stock. The loss per share- diluted calculation substitutes the basic
earnings per share denominator if the numerator is negative.
3. GAIN ON SALE OF RECEIVABLES
Gains on the sale of loans to third parties made during the past two
fiscal years wherein the Company retains an interest in the loan are
calculated as the present value of the interest rate differential between
the rate charged to the borrower and the rate earned by the third party
(the "Spread"), after taking into consideration several estimates made by
the Company including early prepayments and loan defaults. The
corresponding asset recorded at the time of the gain on sale of loans with
a retained interest, the "Interest-Only Strip Receivable", is amortized in
proportion to the income received from the rate differential retained by
the Company over the estimated lives of the underlying loans. The
Interest-Only Strip Receivable is analyzed quarterly on a disaggregated
basis to determine whether prepayment and default experience have impacted
the fair value. The Interest-Only Strip Receivable is classified as a
trading security; accordingly, unrealized gains and losses are recorded in
income. In past years the Company, in addition to selling loans with a
retained interest, also retained the servicing rights to the sold loans as
well. The gain on sale was recorded in a similar manner as with the
Interest-Only Strip Receivable, except the corresponding asset is referred
to as a "Servicing Asset". Both types of loans sales are referred to as
"Accrual" sales, since the gain on sale is accrued at the time of sale,
and cash is received over the life of the loans.
Because the gain recognized in the year of sale is equal to the
present value of the estimated future cash flows from the Spread, the
amount of cash actually received over the lives of the loans can exceed
the gain previously recognized at the time the loans were sold. In
subsequent years, the Company would recognize additional income and fees
to the extent actual cash flows from such loans exceed the amortization of
the Interest- Only Strip Receivable or Servicing Asset. If actual
prepayments with respect to sold loans occur faster than were projected at
the time such loans were sold, the carrying value of the Interest-Only
Strip Receivable or Servicing Asset is written down through a charge to
earnings in the period of adjustment. There were no charges to earnings
for anticipated prepayments during the three months ended September 30,
1997 (the "1997 Three Months) or the three months ended September 30, 1998
(the "1998 Three Months).
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Gains on sales of loans wherein the Company does not have any further
interest in the loan and does not retain any servicing rights are
calculated as the difference between the cash price paid by the third
party and the principal balance of the loan. This type of sale is also
referred to as a "Whole" loan sale. The Company has sold loans Whole
exclusively since October 1997.
4. CONVERTIBLE NOTES
At September 30, 1998, the Company had $1,100,000 of convertible notes
that matured on October 31, 1998. These notes have not been repaid.
5. GOING CONCERN
In the audited financial statements filed with the Company's fiscal
1998 annual report on Form 10-KSB, the independent auditors opinion on
those financial statements included an explanatory paragraph stating that
certain conditions raise substantial doubt about the Company's ability to
continue as a going concern. These conditions include significant and
recurring operating losses, operating cash flow deficiencies, significant
debt, maintenance of minimum net worth necessary for continued listing on
the Nasdaq SmallCap Market, and accumulated deficit. Note 13 to those
audited financial statements elaborated on the basis for the explanatory
paragraph and presented management's plans for addressing some of the
issues cited as a basis for the uncertainty. The Company was delisted from
the Nasdaq SmallCap Stock Market in October 1998, and recent economic
changes in the subprime mortgage industry have had a negative effect on
management's plans to address the conditions noted above. See "Liquidity
and Capital Resources" under Item 2 "Management's Discussions and Analysis
of Financial Condition and Results of Operations".
6. RECENT ACCOUNTING PRONOUNCEMENTS
Beginning January 1, 1998, the Company adopted SFAS No. 130 "Reporting
Comprehensive Income," which is effective for the annual and interim
periods beginning after December 15, 1997. SFAS 130 establishes new rules
for the reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's net
loss or shareholders' equity.
Beginning January 1, 1998, the Company adopted the provisions of SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which is effective for annual and interim periods beginning
after December 15, 1997. This statement established standards for the
method that public entities are to use to report information about
operating segments in annual financial statements and required that those
enterprise reports be issued to shareholders, beginning with the annual
financial statements in 1998 and for interim and annual financial
statements thereafter. It also established standards for related
disclosures about products and services, geographical areas and major
customers.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 and 1998
The Company recorded a net loss of $560,000 for the 1998 Three Months,
as compared to a net loss of $928,000 for the 1997 Three Months. Revenues
increased $315,000 while expenses decreased $53,000 from the 1997 Three Months
to the 1998 Three Months.
Finance income and fees earned increased $175,000, from $466,000 in
the 1997 Three Months to $642,000 in the 1998 Three Months. The increase was a
result of improved performance of the Company's telemarketing subsidiary and a
higher dollar average of loans in the Company's portfolio of loans held for
resale.
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Other income increased from $26,000 in the 1997 Three Months to $181,000 in the
1998 Three Months primarily as the result of a reclassification of processing
fee income.
Total expenses decreased 2% from $2,614,000 in the 1997 Three Months
to $2,562,000 in the 1998 Three Months. The largest fluctuation in expenses
occurred in "Interest expense and amortization of financing costs", which
decreased from $546,000 in the 1997 Three Months to $464,000 in the 1998 Three
Months. All of the decrease is attributable to a decrease in the amortization
of deferred financing charges, the balance of which were $1,453,000 at
September 30, 1997, as compared to a balance of $101,000 at September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The business strategy employed by the Company in previous years
required continual access to short-term and long-term sources of debt and
equity capital. By selling loans on an Interest-Only or Service basis, the
Company would have to amass a very large pool of loans wherein the amount of
interest collected and remitted on a monthly basis was greater than the cash
expenditures incurred during the month in order to generate a positive cash
flow. Since this did not occur, the shortfall in working capital was provided
by placements of debt and equity. The Company will always require access to
short-term sources of debt, specifically warehouse lines of credit. The
strategy of exclusively selling loans Whole for a cash premium at time of sale
beginning in November 1997 made a significant improvement in the negative cash
flow that was being incurred under the previous strategy. However, as detailed
in the final paragraph in this section, the Company is currently operating at a
negative cash flow. The Company's capital requirements arise principally from
loan originations and loan repurchases, payments of operating and interest
expenses, capital expenditures, and start-up expenses for expansion into new
geographic markets. The Company has no capacity to repurchase loans, either
from its pool of serviced loans that contain a buyback provision or from the
warehouse lines which generally have a limit of 90 days that a loan can remain
in the line. The Company currently does not have enough resources available
should loans need to be repurchased. To date, in addition to the Company's
capital raising efforts, the sources of cash have been (1) sales into secondary
markets of the loans the Company originates and purchases, (2) borrowings under
a mortgage warehouse line of credit secured by its loans, (3) finance income
earned on Company owned loans and servicing fees generated on the loan
servicing portfolio, (4) borrowings under a repurchase line of credit (5) other
borrowings (discussed below), and (6) the conversion of the Servicing Asset and
Interest-Only Strip Receivable into cash over the lives of the loans in the
servicing portfolio, including an advance against that conversion described
more fully below.
In July 1994, the Company completed the placement of $5,550,000 of 8%
Senior Subordinated Convertible Notes due 2004 (the "8% Notes"). In October
1995, the Company agreed to certain conditions as a prerequisite for obtaining
a waiver for technical covenant violations contained in the indenture relating
to the 8% Notes. When these conditions were not met at December 31, 1995, the
maturity date of 8% Notes was accelerated to March 30, 1996. The Company repaid
$3,250,000 of the 8% Notes in June 1996 ($2,250,000 of which was paid out of
the proceeds of the sale of the 10% Notes described below) and the remaining
$2,300,000 of 8% Notes was exchanged for loans under a secured warehouse
lending facility. The balance of this secured lending facility was $700,000 at
September 30, 1998. The Company has signed an agreement with this lender to
continue to reduce the balance of this facility at the rate of $100,000 per
quarter. The funds necessary to reduce the balance of this facility are
anticipated to come from the proceeds of the sale or payout of the loans
securing the facility.
As part of the retirement of debt originated in February 1995, the
Company signed an agreement with a lender in February 1998 to borrow $250,000
to secure a letter of credit for the Company which matures on December 31,
1998. It is anticipated this debt will be repaid with the restricted cash
securing this letter of credit upon expiration of the letter of credit.
The Company completed the sale of $9,000,000 of 10% Convertible
Secured Notes (the "10% Notes") in August 1996, resulting in net proceeds to
the Company after expenses of approximately $8,000,000. $3,250,000 of the
proceeds were used to repay the 8% Notes described above. The 10% Notes are
partially secured by essentially all otherwise unpledged assets of the Company
and are convertible into Common Stock. During Fiscal 1997, holders of $860,000
of the 10% Notes converted their notes into Common Stock. In October 1997,
holders of $6,970,000 of the 10% Notes converted their notes into Common Stock
in response to the Company's conversion offer. In June 1998, a
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holder of $1,000,000 of the 10% Notes exchanged its note for shares of Series C
Preferred Stock as more fully described below. The balance of 10% Notes at
September 30, 1998 was $170,000. These notes mature in June 2001.
In November 1996, the Company entered into an agreement with the
Securitizer wherein the Company received advances on the Company's portion of
the interest-only strip collected from the borrower over the life of the loan.
The advance was originally being repaid over 36 months, although this term was
accelerated to 30 months by the Securitizer during Fiscal 1998 as permitted by
certain provisions in the advance agreement. Each advance bears an interest
rate set at the time the loans underlying the interest-only strip receivable
were sold to the Securitizer. The advance and the interest charge associated
with it are deducted from the monthly collections of interest due to the
Company by the Securitizer. At September 30, 1998, the balance of these
advances was $1,313,000 net of repayments under this agreement.
In April 1997, the Company sold 16,740 shares of Series B 11%
Redeemable Convertible Preferred Stock (the "Series B Preferred Stock") for
$1,674,000, resulting in net proceeds to the Company of approximately
$1,498,000. Purchasers of the Series B Preferred Stock received warrants to
purchase 669,000 shares of Common Stock at $2.50 per share. The conversion and
exercise prices, respectively, of the Series B Preferred Stock and associated
warrants were changed to $1.80 per share during Fiscal 1998 as a result of
anti-dilution and other provisions. Dividends are payable quarterly in cash or
in additional Series B Preferred Stock. The Company has paid all dividends
to-date in additional stock. Payment of the dividend for the quarter ended June
30, 1998 in additional stock triggered voting rights for the Series B Preferred
Stockholders, and payments of dividends in additional stock after this date
will be calculated at a 20% discount to the market price of the Common Stock.
In February 1998, a warehouse line of credit agreement was executed
with First Bankshares Mortgage. First Bankshares Mortgage was subsequently
purchased by Regions Bank ("Regions"), but this acquisition did not change the
terms of the agreement with the Company. This warehouse line has a $15,000,000
credit limit and may be canceled at the discretion of the lender with 45 days
notice to the Company. At September 30, 1998, the balance in this line was
$10,534,000. The Company also had $276,000 of loans outstanding at September
30, 1998 on a second warehouse line of credit which expires in November 1998
and will not be renewed.
During Fiscal 1998, the Company received a total of $2,200,000 in a
private placement of 10% convertible debt, referred to as the "Bridge Loan".
The holders were issued warrants to purchase 1,100,000 shares of Common Stock
at an exercise price of $2.00 per share, subject to certain anti-dilution
adjustments. In June 1998, the holder of $1,100,000 of the Bridge Loan
exchanged its debt for shares of Series C Preferred Stock as described below.
The maturity date of the outstanding Bridge Loan has been extended several
times, and the balance of $1,100,000 was due on October 31, 1998. This debt has
not been repaid and no settlement has yet been reached with the holders of this
debt regarding repayment.
In June 1998, the Company issued 21,000 shares of 11% Series C
Convertible Redeemable Preferred Stock (the "Series C Preferred Stock") in
exchange for the conversion of $1,000,000 of 10% Notes (described above) and
$1,100,000 of the Bridge Loan (described above). Both debt issuances were held
by a single investor. The Series C Preferred Stock was originally convertible
into Common Stock at the rate of $0.75 per share, but was subsequently adjusted
to $0.50 per share pursuant to a provision related to a decrease in the market
price of the Common Stock. Additionally, the holder of the stock received a
warrant to purchase 2,800,000 shares of Common Stock at an exercise price of
$1.25 per share.
In October 1998, the Company held a Special Meeting of the
Shareholders to approve a reverse stock split and the issuance of additional
securities primarily in an attempt to remain on the Nasdaq Small Cap Market. An
insufficient number of votes were received to approve the proposals, and the
Company's common stock was delisted from that exchange in October 1998.
During the last week of October 1998, the Company received
substantially less premium on loan pool sales than it had been receiving in
prior months. This lower sales premium appears to be consistent with an
industry-wide decline in the demand for subprime mortgage loans. The Company
has recently noted several large securitizers of subprime mortgage paper have
filed for bankruptcy or have stopped buying subprime loans. Those entities who
continued to buy have narrowed their criteria for the types of loans they will
purchase, and are offering less for those
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loans that they do purchase than they had previously offered. The Company now
has several loans in its portfolio that, when originated, could have been sold
for a premium, but under current market conditions will probably be sold at par
or even a discount. The Company is now operating at a significant deficit cash
flow. The Company requires substantial cash investment and/or a significant
restructuring to maintain its operations. Management and the Board of Directors
are seeking investors to acquire the Company.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained in "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations", such as statements
concerning the Company's future cash and financing requirements, the Company's
ability to originate and/or acquire mortgage loans, the Company's ability to
enter into securitization transactions and/or otherwise sell mortgage loans to
the third parties and the returns therefrom, and other statements contained
herein regarding matters that are not historical facts, but are forward looking
statements; actual results may differ materially from those contemplated in the
forward looking statements, which statements involve risks and uncertainties,
including but not limited to, the following: the Company's ability to obtain
future financings and market conditions and other factors relating to the
mortgage lending business. Investors are also directed to the other risks
discussed herein and in other documents filed by the Company with the
Commission.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On February 27, 1998, Terry Lee Flowers and Rosemary Flowers, (the
"Plaintiffs") on behalf of themselves and a purported class of others brought
an action against a wholly-owned subsidiary of the Company in the United States
District Court for the Northern District of Mississippi. The Plaintiffs alleged
that the subsidiary made payments to mortgage brokers which constituted
referral fees, kickbacks and duplicative payments in violation of the Real
Estate Settlement Procedures Act ("RESPA") and certain rules and regulations
thereunder (the "Rules and Regulations") and, as a result, the Plaintiffs and
others were charged higher rates of interest by the subsidiary than would have
otherwise been the case. The Court has not ruled on whether the action will
proceed as a class action. The Plaintiffs are seeking a non-specified amount of
compensatory damages. The Company believes no illegal payments were made and
the subsidiary is defending the action.
Item 2. CHANGES IN SECURITIES
a) During the three months ended September 30, 1998, no instrument defining
the rights of the holders of any class of registered securities was
materially modified.
b) During the three months ended September 30, 1998, no rights evidenced by
any class of registered securities were materially limited or qualified
by the issuance or modification of any other class of securities.
c) During the three months ended September 30, 1998, no additional securities
were issued.
Item 5. OTHER INFORMATION
On October 21, 1998, the Company received a letter from the Nasdaq
Stock Market noting that, beginning October 22, 1998, the Common Stock would no
longer listed on its exchange. On October 22, 1998, the Common Stock began
trading on the Over-The-Counter Bulletin Board under the same ticker symbol,
LEND. The letter cited failure to maintain minimum stock price and net worth
requirements as the reason for delisting.
In October and November 1998, the Company sold several pools of loans
at premium levels substantially less than had been received in previous months.
This decrease in premium levels is consistent with market
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conditions being experienced throughout the subprime mortgage industry. The
Company will be unable to continue its operations in their current form under
these market conditions and is in the process of seeking a potential investor
who can restructure the Company so that it can remain viable in the current
market. Refer to the final paragraph in "Liquidity and Capital Resources" for a
more complete discussion on the viability of the Company.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial data schedule (for SEC use only)
(b) Reports on Form 8-K
On July 7, 1998, the Company reported it had received a
letter received by Nasdaq on July 2, 1998, noting Nasdaq's
intent to delist the Common Stock and the Company's
subsequent appeal to be heard at a hearing in August 1998.
On October 22, 1998, the Company reported it had been
delisted from the Nasdaq SmallCap Stock Market, and that the
Common Stock was now trading on the OTC Bulletin Board.
On October 28, 1998, the Company reported it had experienced
significant deterioration in its gain on sale margins.
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the Registrant
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
CREDIT DEPOT CORPORATION
(Registrant)
Date: November 19, 1998 /s/ Ralph J. DeBee, Jr.
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Ralph J. DeBee, Jr.
(President and Chief Executive Officer)
Date: November 19, 1998 /s/ Charles D. Farrahar
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Charles D. Farrahar
(Vice President and Chief Financial Officer)
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CREDIT DEPOT CORPORATION FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 699,694
<SECURITIES> 0
<RECEIVABLES> 11,700,808
<ALLOWANCES> 253,235
<INVENTORY> 0
<CURRENT-ASSETS> 12,439,236
<PP&E> 264,735
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,238,985
<CURRENT-LIABILITIES> 13,457,767
<BONDS> 2,400,065
0
39
<COMMON> 5,749
<OTHER-SE> 1,898,164
<TOTAL-LIABILITY-AND-EQUITY> 17,238,985
<SALES> 0
<TOTAL-REVENUES> 2,001,673
<CGS> 0
<TOTAL-COSTS> 2,561,889
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,750
<INTEREST-EXPENSE> 464,703
<INCOME-PRETAX> (560,216)
<INCOME-TAX> 0
<INCOME-CONTINUING> (560,216)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (560,216)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
