-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KxXqTKrqVBWR2pGoxADrjkdnc5nhuvBHOeeXVStShb2qMe92xsNuICLEhRqoerxR 1BQBb14sQ5FVIeps2DzRYg== 0001014108-99-000032.txt : 19990217 0001014108-99-000032.hdr.sgml : 19990217 ACCESSION NUMBER: 0001014108-99-000032 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED FINANCIAL INC CENTRAL INDEX KEY: 0000823314 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 841069416 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-11838 FILM NUMBER: 99542824 BUSINESS ADDRESS: STREET 1: 5425 MARTINDALE CITY: SHAWNEE STATE: KS ZIP: 66218 BUSINESS PHONE: 9134412466 MAIL ADDRESS: STREET 1: 5425 MARTINDALE CITY: SHAWNEE STATE: KS ZIP: 66218 FORMER COMPANY: FORMER CONFORMED NAME: ADVANCED MEDICAL DYNAMICS INC DATE OF NAME CHANGE: 19910617 FORMER COMPANY: FORMER CONFORMED NAME: WEINCOR FINANCIAL CORP DATE OF NAME CHANGE: 19890406 10QSB 1 FORM 10-QSB Conformed _________________________________________________________ --------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the Quarter ended: Commission file number September 30, 1998 0-19485 ADVANCED FINANCIAL, INC. (Name of small business issuer in its charter) DELAWARE 84-1069416 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5425 Martindale, Shawnee, KS 66218 (Address of principal executive offices) (Zip Code) (913) 441-2466 Issuer's telephone number ------------------- Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities and 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 ___ No X State the number of shares outstanding of each of the issuer's classes of common equity as of January 25, 1999: 5,836,476 Check whether the issuer has filed all documents and reports to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes___ No___ Transactional Small Business Disclosure Format Yes___ No X Advanced Financial, Inc. ADVANCE FINANCIAL, INC. AND SUBSIDIARY TABLE OF CONTENTS Page No. ________ PART I. FINANCIAL INFORMATION ITEM 1. - Financial Statements.................................. 1-5 ITEM 2. - Management's Discussion and Analysis or Plan of Operation..................................... 7 PART II. OTHER INFORMATION ITEM 1. - Legal Proceedings..................................... 9 ITEM 2. - Changes in Securities and Use of Proceeds............. 9 ITEM 3. - Default Upon Senior Securities........................ 9 ITEM 4. - Submission of Matters to a Vote of Security Holders... 9 ITEM 5. - Other Information..................................... 9 ITEM 6. - Exhibits and Reports on Form 8-K...................... 10 i Advanced Financial, Inc. PART I - FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS Page - 1 Advanced Financial, Inc. ADVANCED FINANCIAL, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets September 30, 1998 and March 31, 1997 Assets September 30, 1998 March 31, 1998 ------------------ -------------- Cash and investments $ 60,124 $ 58,759 Mortgage servicing advances and accounts receivable 3,264 151,097 Mortgage loans held for investment 5,860 5,997 Property and equipment, net 1,055,447 1,070,553 Other 4,045 14,083 ------------- ----------- Total assets $ 1,128,741 $ 1,300,490 ============= =========== Liabilities Accounts payable and accrued expenses $ 12,760 $ 24,292 Notes payable 717,156 717,357 ------------- ----------- 729,916 741,649 Liabilities Subject to Compromise Accounts payable and accrued 3,061,068 3,024,595 expenses Notes payable 644,837 659,837 Notes payable on stock recission 200,000 200,000 Capitalized lease obligations 65,426 65,426 ------------- ----------- 3,971,331 3,949,858 ------------- ----------- Total Liabilities $ 4,701,247 $ 4,691,507 Stockholders' Equity Preferred stock, Series B, $.005 par value; 100,000,00 shares authorized; 363,000 issued and outstanding 1,815 1,815 Common Stock, $.001 par value; 25,000,000 shares authorized; 5,836,476 issued and outstanding 5,836 5,836 Paid-in capital 9,959,840 9,959,840 Deficit (13,098,652) (12,917,163) ------------- ----------- (3,131,161) (2,949,672) Treasury stock, 99,869 shares of Common Stock, at cost (441,345) (441,345) ------------- ----------- Total stockholders' equity (3,572,506) (3,391,017) Total liabilities and stockholders' equity $ 1,128,741 $ 1,300,490 ============= =+========== See accompanying notes to condensed consolidated financial statements. Page - 2 Advanced Financial, Inc. ADVANCED FINANCIAL, INC. AND SUBSIDIARY Condensed Consolidated Statement of Operations For the three month period ended September 30, 1998 and September 30, 1997 Three Months Ended September 30, 1998 September 30, 1997 ------------------ ------------------ (Unaudited) (Unaudited) Revenues: Servicing fee income $ - $ 1,584 Other fee income - 515 Gain/(Loss) on sale of mortgage loans (95) (30,549) Interest - 1,729 Other 37,125 40,806 ---------- -------- Total operating revenues $ 37,030 14,085 ---------- -------- Expenses: Servicing expense (586) (842) Personal 16,425 18,700 General and administrative 101,851 35,551 Interest 27,147 45,948 Depreciation and amortization 7,553 12,373 Other 105 (40,645) ----------- -------- Total operating expenses 152,495 71,085 ----------- -------- Loss before income taxes (115,465) (57,000) Income tax expense - - ----------- -------- Net loss (115,465) (57,000) =========== ======== Weighted average shares outstanding 5,736,607 5,736,607 Loss per common share $ (0.03) $ (0.02) =========== ========== See accompanying notes to condensed consolidated financial statements. Page - 3 Advanced Financial, Inc. ADVANCED FINANCIAL, INC. AND SUBSIDIARY Condensed Consolidated Statement of Operations For the six month period ended September 30, 1998 and September 30, 1997 Six Months Ended September 30, 1998 September 30, 1997 ------------------ ------------------ (Unaudited) (Unaudited) Revenues: Servicing fee income $ - $ 55,222 Other fee income - 21,141 Gain/(Loss) on sale of mortgage loans (95) (45,157) Gain on sale of servicing rights 25,344 - Interest 3,316 10,803 Other 79,211 99,204 ---------- ----------- Total operating revenues 107,776 141,213 Expenses: Servicing expense 268 81,147 Personal 33,982 136,545 General and administrative 196,890 91,743 Interest 56,045 100,802 Depreciation and amortization 15,107 49,298 Other (15,600) (1,892) ---------- ----------- Total operating expenses 286,692 457,643 ---------- ----------- Loss before income taxes (178,916) (316,430) Income tax expense - - ----------- ----------- Net loss $ (178,916) $ (316,430) =========== =========== Weighted average shares outstanding 5,736,607 5,736,607 Loss per share of Common Stock $ (0.04) (0.07) =========== =========== See accompanying notes to condensed consolidated financial statements Page - 4 Advanced Financial, Inc. ADVANCED FINANCIAL, INC. AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows For the six month period ended September 30, 1998 and September 30, 1997 Six Months Ended September 30, 1998 September 30, 1997 ------------------ ------------------ (Unaudited) (Unaudited) Net cash (used in) provided by operating activities $ 16,428 450,913 Cash flows from investing activities: Acquisition of property and equipment - 168,844 Acquisition/Principal payments on mortgage loans held for investment, net 137 372 ----------- ----------- Net cash provided by (used in) investing activities 137 169,216 Cash flows from financing activities: Notes payable, net (15,200) (398,312) Checks outstanding in excess of bank balance - (106,676) Payments on capitalized lease obligations - (113,460) ----------- ----------- Net cash provided by (used in) financing activities (15,200) (618,448) Net increase/(decrease) in cash 1,365 (1,681) Cash at beginning of period 58,759 0 ----------- ----------- Cash at end of period $ 60,124 1,681 =========== =========== Supplemental disclosure of cash flow: Cash paid for interest $ 27,147 27,920 See accompanying notes to condensed consolidated financial statements Page - 5 Advanced Financial, Inc. ADVANCED FINANCIAL, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements September 30, 1998 and September 30, 1997 (1) Organization and Summary of Significant Accounting Policies ----------------------------------------------------------- The Company's financial statements include the accounts of Advanced Financial, Inc. (the "Company" or "AFI") and its wholly-owned subsidiary AFI Mortgage, Corp. ("AFIM"). The condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB. To the extent that information and footnotes required by generally accepted accounting principles for complete financial statements are contained in or consistent with the audited financial statements incorporated by reference in the Company's Annual Report on Form 10-KSB for the year ended March 31, 1998, such information and footnotes have not been duplicated herein. In the opinion of management, all adjustments considered necessary for fair presentation of financial statements have been reflected herein. The March 31, 1998 condensed consolidated balance sheet has been derived from the audited balance sheet as of that date. Page - 6 Advanced Financial, Inc. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION --------------------------------------------------------- GENERAL - ------- The Company and AFIM continued to suffer losses for the quarters ended September 30, 1997 and 1998. In April 1997, the Company and its wholly-owned subsidiary, AFI Mortgage, Corp. ("AFIM"), decided that it would be in the best interest of the continuity of the Company's business enterprise to temporarily suspend its active mortgage operations. On November 7, 1997, AFIM filed for relief under Chapter 11 of the United States Bankruptcy Code ("Bankruptcy Code") in the United States Bankruptcy Court, District of Kansas, Topeka Division, Case No 97-43122. On May 8, 1998, the Company also filed for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court, District of Kansas, Topeka Division, Case No. 98-41228. The two cases were consolidated on July 2, 1998. On November 13, 1998, the United States Bankruptcy Court for the District of Kansas entered an order (the "Confirmation Order") confirming the First Amended Joint Plan of Reorganization dated July 29,1998 of the Company and AFIM ("Plan of Reorganization"). The confirmation of the Plan of Reorganization was reported in a Current Report on Form 8-K filed with the Securities and Exchange Commission on November 25, 1998. A copy of the Plan was filed as Exhibit 2.1 to the Form 8-K and a copy of the Confirmation Order was filed as Exhibit 99.1 to the Form 8-K. See also the Company's Annual Report on Form 10-KSB Item 1: "Description of Business" and Item 7: "Note B to the Consolidated Financial Statement of the Company." Under the Plan of Reorganization, and subject to the terms and conditions set forth in the Plan of Reorganization, the Company will sell its office building to First Mortgage Investment Co. ("FMIC") for $1,030,000 and FMIC's release of its FMIC's second mortgage. The net proceeds will satisfy the first mortgage. The remaining net proceeds received by AFIM will be used to satisfy the claims of creditors in accordance with the Plan of Reorganization. The following discussion of the Company's financial condition as of September 30, 1998 and the Company's results of operations for the quarter ended September 30, 1998 should be read in conjunction with the discussion of events subsequent to June 30, 1997 set forth in Item 1: "Description of Business" contained in the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1998 and set forth in the Current Report on Form 8-K filed November 25, 1998, as described above. RESULTS OF OPERATIONS - --------------------- Quarter and Six Months Ended September 30, 1998 - ----------------------------------------------- Compared To The Quarter and Six Months Ended September 30, 1997 - --------------------------------------------------------------- Liquidity and Capital Resources ------------------------------- The Company's cash and short-term investments increased from $58,759 at March 31, 1998 to $60,124 at September 30, 1998. The increase in cash and short-term investments is attributable to the fact that the Company suspended its active mortgage operations and reduced its staff, to the limited extent necessary to operate under protection of Chapter 11 of the Bankruptcy Code, sold its remaining assets, other than its office building, and collected various receivables due the Company. Also see Item 1: "Description of Business" contained in the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1998. Losses ------ Consolidated operating results for the three months ended September 30, 1998 reflect a net loss of $115,465 as compared to a net loss of $57,000 for the three months ended September 30, 1997. The increase in losses for the three months ended September 30, 1998 were due to expenses associated with the preparation and solicitation of the Company's Plan of Reorganization. Consolidated operating results for the six months ended September 30, 1998 reflect a net loss of $178,916 as compared to a net loss of $316,430 for the six months ended September 30, 1997. The decrease in losses for the six months is attributable to the Company's suspension of its active mortgage operations and sale of its remaining assets, other than its office building, thereby reducing the quarterly depreciation expense, and the Company's reduction of staff from 20 full time employees to 1 full time employee and debt, thereby reducing its interest expense, to the limited extent necessary to operate under protection of Chapter 11 Page - 7 Advanced Financial, Inc. of the Bankruptcy Code. Also see Item 1: "Description of Business" of the Company's Annual Report contained in Form 10-KSB for the fiscal year ended March 31, 1998. FINANCIAL POSITION - ------------------ During the six months ended September 30, 1998, the Company saw a continued decrease in the Company's assets and stockholder(s') equity. The Company's total assets were $1,128,741 at September 30, 1998 compared to $1,300,490 at March 31, 1998. Stockholder(s') equity was ($3,572,506) at September 30, 1998 compared to ($3,391,017) at March 31, 1998. These decreases were due to the fact that the Company suspended its active mortgage operations and had limited revenues, causing the Company to continue to operate at a loss during the six months ended September 30, 1998. The Company had total liabilities of $4,701,247 of which $3,971,331 are subject to compromise pursuant to the Company's Plan of Reorganization. At September 30, 1998, the Company had a cash position of $60,124 compared to a cash position of $58,759 at March 31, 1998. During the six months ended September 30, 1998, the Company continued to operate under the protection of Chapter 11 of the Bankruptcy Code and was able to fund its limited operations from the sale of various assets and the collection of various receivables. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - ---------------------------------------------- None Page - 8 Advanced Financial, Inc. PART II ------- ITEM - 1 Legal Proceedings Various lenders initiated lawsuits against the Company and AFIM as a result of the Company's inability to make required payments on various debt. As a result of AFIM and the Company filing for relief under Chapter 11 of the Bankruptcy Code, all pending litigation was suspended pending the final outcome of the Chapter 11 proceeding. See Item 2: "Management Discussion and Analysis or Plan of Operation - General." Pursuant to the Plan of Reorganization, claims of creditors, including persons asserting claims against the Company in litigation, will be deemed satisfied and, upon discharge of the Company and AFIM from bankruptcy, all litigation will have been dismissed. ITEM - 2 Change in Securities. See Item 3 (b) Below ITEM - 3 Defaults upon Senior Securities. (a) The following table sets forth any indebtedness which exceeds 5% of the Company's assets, for which the Company was in default at the time of this filing. Interest accrued on such indebtedness until November 7, 1997, the date on which AFIM filed for protection under Chapter 11 of the Bankruptcy Code. Default Default Default Lender Principal Principal Principal ------ --------- --------- --------- Commercial Federal Bank $364,393 $41,653 $406,046 Argo Federal Savings $75,148 $8,022 $83,170 (b) The Company suspended payment of its regular quarterly dividend on its Series "B" Cumulative Convertible Preferred Stock in January 1996. The unpaid cumulative dividends at the time of this filing were $499,275. Pursuant to the Plan of Reorganization all preferred stock will be converted to common and each shareholder shall receive such shareholder's pro rata share of new common stock as defined in the Plan of Reorganization. No unpaid dividends will be paid pursuant to the Plan of Reorganization. ITEM - 4 Submission of Matters to a Vote of Securities Holders. No matters were submitted to a vote of security holders during the quarter ended September 30, 1998, either through the solicitation of proxies or otherwise. ITEM - 5 Other Information. See Item 2: "Management's Discussion and Analysis or Plan of Operation -- General" and the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1998 Item 1: "Description of Business." Page - 9 Advanced Financial, Inc. ITEM - 6 Exhibits and Reports on Form 8-K. (a) Exhibits - ------------ *2.1 First Amended Joint Plan of Reorganization dated July 29, 1998 of Advanced Financial, Inc. and AFI Mortgage Corp. (Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 25, 1998). *3.1 Articles of incorporation and by-laws (Exhibit 3.2 to Registration Statement on Form S-2 of Advanced Financial, Inc. filed with the Securities and Exchange Commission on January 31, 1993(No. 33-45406)). *4.1 Instruments Defining Rights of Holders (Exhibit 4.0 to Registration Statement on Form S-2 of Advanced Financial, Inc. filed with the Securities and Exchange Commission on January 31, 1993 (No. 33-45406)). *4.2 Variable Rate Commercial Note Secured With Loan Servicing Rights dated July 27, 1994 made by AFI Mortgage Corp., successor to Continental Mortgage, Inc. ("AFIM"), to the order of Commercial Federal Bank, successor to Railroad Savings Bank, FSB ("Lender") and Agreement dated October 11, 1996 between Advanced Financial, Inc. and AFIM, as Borrower, and Lender and Matrix Financial Servicers Corporation (Exhibit 4.2 to Advanced Financial, Inc.'s Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997 filed with the Securities and Exchange Commission on February 16, 1999). (Exhibit 4.3 to Advance Financial Inc.'s Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997 filed with the Securities and Exchange Commission on February 16, 1999). *4.3 Variable Rate Commercial Balloon Note For Purchase of Loan Servicing Rights dated December 31, 1993 made by AFI Mortgage Corp., successor to Continental Mortgage, Inc. ("Borrower"), to the order of Argo Federal Savings Bank, FSB ("Lender") and Security Agreement For Sale of Mortgage Loan Servicing Rights dated December 31, 1993 between Borrower and Lender (Exhibit 4.3 to Advanced Financial, Inc.'s Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997 filed with the Securities and Exchange Commission on February 16, 1999). (Exhibit 4.3 to Advance Financial Inc.'s Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997 filed with the Securities and Exchange Commission on February 16, 1999). *10.1 Commercial Real Estate Contract with Standard Builders (Exhibit 10.1 to Registration Statement on Form S-2 of Advanced Financial, Inc. filed with the Securities and Exchange Commission on February 11, 1993 (No. 33-58186)). *10.2 Contract for Services between the Company and Rollie C. Johnson (Exhibit 10.1 to Registration Statement on Form S-2 of Advanced Financial, Inc. filed with the Securities and Exchange Commission on February 11, 1993 (No. 33-58186)). *10.3 Real Estate Mortgage to Secure a Loan from Citizen's National Bank of Fort Scott ("Bank") dated February 3, 1997 made by AFI Mortgage Corp., as Mortgagee, to Bank and accompanying notes as amended (Exhibit 10.3 to Advance Financial Inc.'s Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997 filed with the Securities and Exchange Commission on February 16, 1999). *10.4 Second Mortgage dated March 29, 1996 made by Advance Financial, Inc. and AFI Mortgage Corp., as Mortgagor, to First Mortgage Investment Co., as Mortgagee (Exhibit 10.4 to Advance Financial Inc.'s Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997 filed with the Securities and Exchange Commission on February 16, 1999). 27.1 Financial Data Schedule * Asterisk indicates exhibits incorporated by reference as indicated, all other exhibits are filed herewith. (b) Reports on Form 8-K - ----------------------- None Page - 10 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ADVANCED FINANCIAL, INC. (Registrant) Dated: February 16, 1999 By: /s/William B. Morris -------------------- William B. Morris Chairman In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ William B. Morris Chairman, Secretary, February 16, 1999 - --------------------- Principal Accounting William B. Morris Officer Page - 11 EX-27 2 ARTICLE 5 FDS FOR SECOND QUARTER 1998
5 This Schedule contains summary financial informa- tion extracted from financial statements for the fiscal quarter ended September 30, 1998 and is qualified in its entirety by reference to such financial statements 823314 Advanced Financial, Inc. 1 United States 6-MOS MAR-31-1999 APR-1-1998 MAR-31-1998 1 60,124 0 3,264 0 0 73,294 1,055,447 15,107 1,128,741 3,971,331 0 0 1,815 5,836 (3,138,812) 1,128,741 0 107,776 0 286,692 (15,600) 0 56,045 (178,916) 0 0 0 0 0 (178,916) (0.04) (0.04)
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