UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the quarterly period ended: June 30, 2005
[ ] Transition report under Section 13 or 15(d) of the Exchange Act For the
transition period from ____________ to ____________
Commission File Number: 0-27750
FirstPlus Financial Group, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 75-2561085
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5100 North O'Connor Blvd., 6th Floor
Irving, Texas
(Address of principal executive offices)
(214) 496-1266
(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 [ ] No [X]
The number of shares of common stock outstanding as of: October 10, 2005 was
45,340,090.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except where otherwise stated, references in this document to "us,"
"we," "FPFG" or "the Company" refer to FIRSTPLUS Financial Group, Inc.
("FIRSTPLUS"). This Form 10-QSB contains forward-looking statements within the
meaning of the "safe harbor" provisions under Section 21E of the Securities
Exchange Act of 1934, as amended, and the Private Securities Litigation Reform
Act of 1995. The Company uses forward-looking statements in its description of
its plans and objectives for future operations and assumptions underlying these
plans and objectives, as well as in its expectations, assumptions, estimates and
projections about its business and industry. These forward-looking statements
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in such forward-looking statements as a result
of certain factors as more fully described in this Report and other risks and
factors identified from time to time in the Company's reports filed with the
Securities and Exchange Commission.
Forward-looking terminology includes the words "may", "expects",
"believes", "anticipates", "intends", "projects" or similar terms, variations of
such terms or the negative of such terms. These forward-looking statements are
based upon the Company's current expectations and are subject to factors and
uncertainties which could cause actual results to differ materially from those
described in such forward-looking statements. The Company expressly disclaims
any obligation or undertaking to release publicly any updates or revisions to
any forward-looking statements contained in this Report to reflect any change in
the Company's expectations or any changes in events, conditions or circumstances
on which any forward-looking statement is based.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Balance Sheet at June 30, 2005 (unaudited)................................1
Statements of Operations for the
Three Months and Six Months Ended June 30, 2005 and 2004 (unaudited)......2
Statements of Cash Flows for the
Six Months ended June 30, 2005 and 2004 (unaudited).......................3
Notes to Financial Statements (unaudited).................................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................8
Item 3. Controls and Procedures.............................................12
Part II Other Information
Item 1. Legal Proceedings...................................................14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.........18
Item 3. Defaults Upon Senior Securities.....................................18
Item 4. Submission of Matters to a Vote of Security Holders.................18
Item 5. Other Information...................................................18
Item 6. Exhibits............................................................18
FIRSTPLUS Financial Group, Inc.
Balance Sheet
June 30, 2005
-------------
(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 101,784
Prepaid professional services 85,000
----------
Total current assets 186,784
Accounts receivable Capital Lending Strategies, LLC 131,352
Claim from bankruptcy estate (see note 5) 4,990,223
Deferred tax asset 85,000
Investment in Capital Lending Strategies, LLC 71,150
----------
Total assets $5,464,509
==========
LIABILITIES
AND STOCKHOLDERS' EQUITY:
Current liabilities - income taxes payable $ 93,300
Commitments and contingencies --
Stockholders' equity:
Common stock, $.01 par value, 100,000,000 shares
authorized; 45,340,090 shares issued and outstanding 453,401
Additional paid in capital 4,897,270
Retained earnings since December 31, 2002 when a deficit of
$312,527,864 was eliminated in connection with a
quasi-reorganization 20,538
----------
Total stockholders' equity 5,371,209
----------
Total liabilities and stockholders' equity $5,464,509
==========
The accompanying notes are an integral part of these financial statements
1
FIRSTPLUS Financial Group, Inc.
Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenues $ -- $ -- $ -- $ --
Operating expenses:
General and administrative 135,652 10,128 256,256 25,476
------------ ------------ ------------ ------------
Total operating expenses 135,652 10,128 256,256 25,476
------------ ------------ ------------ ------------
Operating income (loss) (135,652) (10,128) (256,256) (25,476)
Non-operating income:
Sale of Capital Lending Strategies -- 697,830 -- 697,730
Interest, net 5,154 2,513 6,129 5,203
------------ ------------ ------------ ------------
Income (loss) before provision
for income taxes (130,498) 690,215 (250,127) 677,457
Provision for income taxes (63,840) 232,220 (81,784) 230,335
------------ ------------ ------------ ------------
Net income (loss) $ (66,658) $ 457,995 $ (168,343) $ 447,122
============ ============ ============ ============
Earnings (loss) per share $ (0.00) $ 0.01 $ (0.00) $ 0.01
============ ============ ============ ============
Weighted average of common shares
outstanding 45,051,201 44,340,090 44,695,646 44,340,037
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements
2
FIRSTPLUS Financial Group, Inc.
Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
2005 2004
--------- ---------
Cash flow from operating activities:
Net income (loss) $(168,343) $ 447,122
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Gain on sale of investment -- (697,730)
Accrued interest income (3,507) (5,103)
Changes in operating assets and liabilities:
Prepaid expenses (85,000) --
Deferred tax asset (85,000) 11,400
Accounts payable (29,282) (47,946)
Income taxes payable (19,600) 218,935
--------- ---------
Net cash provided (used) by operating activities (390,732) (73,322)
Cash flows from investing activities:
Proceeds from sale of Capital Lending Strategies -- 796,580
Loans made (15,000) (15,000)
Receivable Capital Lending Strategies, LLC 47,205 --
--------- ---------
Net cash provided (used) by investing activities 32,205 781,580
Net increase/(decrease) in cash (358,527) 708,258
Cash at the beginning of the period 460,311 16,344
--------- ---------
Cash at the end of the period $ 101,784 $ 724,602
========= =========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 924 $ --
========= =========
Taxes $ 19,600 $ --
========= =========
The accompanying notes are an integral part of these financial statements
3
FIRSTPLUS Financial Group, Inc.
Notes to Financial Statements
Note 1. Basis of Presentation
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. In the
opinion of management, such statements include all adjustments consisting only
of normal, recurring adjustments necessary for a fair presentation of the
Company's financial position, results of operations and cash flows at the dates
and for the periods indicated. Pursuant to accounting requirements of the
Securities and Exchange Commission (the "SEC") applicable to Quarterly Reports
on Form 10-QSB, the accompanying financial statements do not include all
disclosures required by accounting principles generally accepted in the United
States of America for audited financial statements. While the Company believes
that the disclosures presented are adequate to make the information not
misleading, these financial statements should be read in conjunction with the
financial statements and related notes for the year ended December 31, 2004
which are contained in the Company's Annual Report on Form 10-KSB. The results
for the six month period ended June 30, 2005 are not necessarily indicative of
the results to be expected for the full fiscal year.
Note 2. Organization and Business
FIRSTPLUS Financial Group, Inc. ("FPFG") (together with its subsidiaries, the
"Company") was a specialized consumer finance company that originated,
purchased, serviced and sold consumer finance receivables. The Company's
principal loan product was a debt consolidation or home improvement loan secured
by a second lien on real property ("High LTV Loans"). The Company sold
substantially all of its High LTV Loans through its securitization program and
retained rights to service those loans.
The Company's operations required continued access to financing sources. The
Company's primary operating cash requirements included the funding of (i) loan
originations, (ii) reserve accounts, overcollateralization requirements, fees
and expenses incurred in connection with its securitization transactions, (iii)
television, radio and direct mail advertising and other marketing and (iv)
administrative and other operating expenses.
Due to numerous market factors beyond the Company's control during the fourth
quarter of 1998, the Company's access to those financing sources was
unavailable. As a result, the subsidiaries filed a bankruptcy petition under
Chapter 11 of the Bankruptcy Code. As part of the plan of reorganization
accepted by the bankruptcy court on April 7, 2000, certain creditors of the
subsidiaries received a Certificated Interest representing Obligations under the
plan of reorganization. FPFG also retained an unsecured interest in monies that
it had advanced to its subsidiaries. As payments are made from the former
subsidiaries to FPFG, the Obligations to the Certificated Interests are paid.
Note 3. Concentration of Credit Risk
FPFG at times during operations has cash deposits that exceed $100,000 in one
account in individual banks. The Federal Deposit Insurance Corporation (FDIC)
insures only the first $100,000 of funds at member banks. FPFG has not incurred
losses related to its cash.
4
FIRSTPLUS Financial Group, Inc.
Notes to Financial Statements
Note 4. Quasi-reorganization
The Company Board approved a plan to affect a quasi-reorganization effective
December 31, 2002. A quasi-reorganization is an accounting procedure that
eliminates an accumulated deficit in retained earnings and permits a company to
proceed on much the same basis as if it had been legally reorganized. A
quasi-reorganization involves adjusting a company's assets and liabilities to
their fair values. Any remaining deficit in retained earnings is then eliminated
by a transfer of amounts from paid-in capital and capital stock, if necessary,
giving a company a "fresh start" and a zero balance in retained earnings.
Note 5. Other Assets
FPFG retains a claim against the bankruptcy estate of its former subsidiaries
for monies advanced to them. The bankruptcy trustee has set aside $7,880,207
designated for partial payment of that claim. FPFG, nor the bankruptcy trustee,
can estimate the amount or timing of any future payments. FPFG has booked a
valuation reserve of $2,900,000 against the amount set aside for potential
creditor claims against FPFG.
FPFG owns a minority equity interest in Capital Lending Strategies, LLC ("CLS").
During 2004, it sold approximately 60% of its holdings in CLS which provided
FPFG's working capital. The investment is recorded on the books at the cost
basis of $71,150.
Note 6. Contingencies
FPFG has recorded a valuation allowance of $2,900,000 for potential claims
arising from creditors of FPFG and its former subsidiaries. No creditors have
initiated a claim against FPFG. FPFG has recorded an allowance since any claim
would be dependent on the receipt of funds from the bankruptcy estate of FPFG's
former subsidiaries.
Note 7. Stockholders' Equity
Holders of the Company's 7.25% Convertible Subordinated Notes Due 2003
(discharged under a plan of reorganization under Chapter 11 of the Bankruptcy
Code dated April 7, 2000) received a Certificated Interest payable from residual
funds of the subsidiaries after the secured interests have been paid. Two of the
former noteholders received rights to convert a portion of their Certificated
Interests into shares of the FPFG's common stock. At June 30, 2005,
Certificated Interests held conversion rights to 3,079,356 shares of common
stock. (See note 9).
Note 8. Director Stock Option Plan
The Company has stock options outstanding to participants under the 1995
Non-Employee Director Plan to grant options to members of the Board of Directors
who are not employees of the Company or its subsidiaries on the date they become
a director. No options under the 1995 Employee Option Plan may be exercised more
than ten years from the date of grant.
Each of the four directors holds options for the issuance of 300,000 shares of
common stock for an aggregate total of 1,200,000 shares. The options are
exercisable at $0.10 per option.
5
FIRSTPLUS Financial Group, Inc.
Notes to Financial Statements
Note 9. Related Party Transactions
The Company's executive offices are shared with the facilities leased by Capital
Lending Strategies, LLC, which incurs the cost and full responsibility of the
lease. There is no formal agreement between the Company and Capital Lending
Strategies, LLC with respect to the lease arrangement. Daniel T. Phillips,
FPFG's Director, is a Manager and Member of Capital Lending Strategies, LLC.
The Company has issued a revolving line of credit to Capital Lending Strategies,
LLC for $275,000. The balance due under the line of credit at June 30, 2005 was
$131,352. The line of credit bears interest at the prime rate of interest as
established by the Wall Street Journal plus 1% and matures on the second
anniversary of any advance on the line of credit.
In 2003, the Company entered into a "reciprocal swap" with Capital Lending
Strategies, LLC whereby the Company transferred most of its ownership interests
in Capital Lending Strategies, LLC to Capital Lending in exchange for all of the
shares of Series D Convertible Preferred Stock of the Company then owned by
Capital Lending Strategies, LLC, which represented approximately 51% of the
voting stock of the Company. The Company did not transfer back to Capital
Lending Strategies, LLC the ownership interests assigned to the plaintiffs'
co-lead counsel in escrow on behalf of the authorized claimants under the
settlement of the Company's consolidated class action lawsuit styled In re:
FirstPlus Financial Group, Inc. Securities Litigation, Civil Action No.
3:98-CV-2551-M.
Prior to the reciprocal swap, the mutual ownership positions of the Company and
Capital Lending Strategies, LLC resulted in Capital Lending Strategies, LLC
holding a controlling interest in the Company and approximately 12% of the
Company's ownership of Capital Lending Strategies, LLC "attributing back" to
Capital Lending Strategies, LLC. Following the reciprocal swap, the Company
retained the same economic interest in Capital Lending since none of its
ownership interest then "attributed back" to Capital Lending Strategies, LLC via
Capital Lending Strategies, LLC's ownership of Company stock. However, Capital
Lending Strategies, LLC no longer owns any shares of the Company and is no
longer in a position to control the Company through its stock ownership. In May
2004, the Company sold its remaining interest in Capital Lending Strategies,
LLC, other than the interest assigned on behalf of the claimants in the class
action lawsuit, for $796,580.
In August 2004, the Company made a loan of $100,000 to United Lending Partners,
LLC. The original term of the note was for 60 days with an interest rate of 15
percent. The note was renewed twice and became due in February 2005. All of the
outstanding principal amount and accrued interest from December 2004 remains
due. The loan is currently in default. United Lending Partners, LLC is a
subsidiary of Renaissance Acceptance Group, Inc. Daniel T. Phillips, FPFG's
Director, is a director and shareholder of Renaissance Acceptance Group, Inc.
FPFG has an insurance policy with American Financial Services covering its
directors and officers. The total premium for the policy is $59,260. Dexter &
Company was the broker for the policy. John R. Fitzgerald, FPFG's Director, is
Executive Vice President of Dexter & Company.
6
FIRSTPLUS Financial Group, Inc.
Notes to Financial Statements
Note 10. Recent Accounting Pronouncements
In December 2004, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 123 (Revised 2004), "Share-Based Payments". The new pronouncement
replaces the existing requirements under SFAS No. 123 and APB 25. According to
SFAS No. 123(R), all forms of share-based payments to employees, including
employee stock options and employee stock purchase plans, would be treated the
same as any other form of compensation by recognizing the related cost in the
statement of operations. This pronouncement eliminates the ability to account
for stock-based compensation transactions using APB No. 25 and generally would
require that such transactions be accounted for using a fair-value method. SFAS
No. 123(R) is effective for awards and stock options granted, modified or
settled in cash in interim or annual periods beginning after December 15, 2005.
The Company plans to adopt the modified prospective transition method, which
would necessitate the Company to recognize compensation cost for awards that are
not fully vested as of the effective date of the SFAS 123(R) based on the same
estimate that the Company used to previously value its grants under SFAS 123.
The Company will be required to expense the fair value of our stock option
grants rather than disclose the impact on its statement of operations within the
Company's footnotes, as is the current practice. As a result, the Company will
incur stock based compensation expense from December 15, 2005 for options issued
prior to that date but which were not fully vested at the time. The Company will
incur additional compensation expense as new awards are made after that date.
The Company is evaluating the form of share-based compensation arrangements it
will utilize in the future, if any.
In May 2005, the FASB issued SFAS 154, "Accounting Changes and Error
Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3". This
statement provides guidance on the accounting for and reporting of accounting
changes and error corrections. It establishes, unless impracticable,
retrospective application as the required method for reporting a change in
accounting principle in the absence of explicit transition requirements specific
to the newly adopted accounting principle. This statement also provides guidance
for determining whether retrospective application of a change in accounting
principle is impracticable and for reporting a change when retrospective
application is impracticable. SFAS 154 is effective for accounting changes and
correction of errors made in fiscal years beginning after December 15, 2005. The
Company does not anticipate any material impact on its financial statements from
the adoption of SFAS 154 since it currently does not anticipate any voluntary
changes to its accounting policies.
7
Item 2. Management's Discussion and Analysis or Plan of Operation
General
FIRSTPLUS Financial Group, Inc. (the "Company") was a diversified
consumer finance company that originated, serviced, and sold consumer finance
receivables. The Company operated through various subsidiaries until 1998 when
macroeconomic factors adversely affected financial markets and largely destroyed
the industry's access to the capital markets. Without access to working capital,
the Company's ability to provide consumer-based products evaporated and, like
virtually all its competitors, it saw its business liquidated to satisfy
obligations. The Company's principal operating subsidiary, FIRSTPLUS Financial,
Inc. ("FPFI"), engaged in the business of originating, purchasing, marketing and
servicing home equity loans. Prior to the collapse of the financial markets, its
primary loan product was a credit consolidation or home improvement loan, which
was generally secured by a second lien on real property (commonly referred to as
a "high loan to value" or "HLTV" loan). Over the course of many years, FPFI
originated billions of dollars of loans. By 1998, FPFI had attained a market
leadership position in the HLTV loan business.
In March 1999, two of the Company's wholly-owned subsidiaries, FPFI,
and FIRSTPLUS Special Funding Corp., filed for reorganization under Chapter 11
of the United States Bankruptcy Code. FIRSTPLUS Special Funding Corp. was a
special purpose entity formed to facilitate certain borrowings by FPFI. The
filing was made in the United States Bankruptcy Court for the Northern District
of Texas in Dallas. Neither the Company, nor any of its other subsidiaries,
sought bankruptcy protection.
Although the Company was not subject to any bankruptcy proceedings, it
had no income producing activities and was dependent on its subsidiaries to fund
its obligations. FPFI was severely limited in its ability to provide funds to
the Company as a result of the bankruptcy filing. The Company's other
significant operating subsidiary at the time, Western Interstate Bancorp
("WIB"), was limited in its ability to release funds to the Company due to its
debt covenant restrictions. Additionally WIB's main operating company, a
FDIC-insured industrial loan company, FIRSTPLUS Bank, was also limited in the
amount of funds that it could release by way of dividends or intercompany loans
due to regulatory restrictions. These limitations caused the Company and its
other subsidiaries to experience liquidity issues similar to FPFI.
The liquidity issues leading to the FPFI's bankruptcy filing and the
subsequent lack of operations and sources of income of the Company required
significant focus by senior management of the Company. Additionally, senior
management concentrated on related strategic issues such as negotiating with
lenders and creditors, finding new sources of financing, and reorganizing and
recapitalizing the Company. The resources available to the Company have been
limited by the liquidity issues and the downsizing of the Company and its
operations.
Primarily due to lack of funds, the Company has for the most part been
in a dormant capacity for the past several years. Since 1999, the Company has
managed to avoid bankruptcy by negotiating with creditors and utilizing the
anticipated but uncertain cash flow from an allowed unsecured claim against
FPFI, more commonly known as the FPFG Intercompany Claim. The Company's
management has withstood the pressure from creditors and avoided bankruptcy
primarily by assigning portions of the FPFG Intercompany Claim to various
creditors. However, the Company has maintained that one of its strategies has
been to create value in the Company so that its prospects are enhanced for the
future. The Company has been active in seeking a platform for operations and has
pursued several opportunities; however those opportunities were abandoned when
the transactions did not meet the expectations of the Company after further
examination and the Company learned of opposition to those transactions by
certain shareholders.
Strategic Plan
Although the Company is not pursuing any specific opportunities at this
time, it is reviewing the marketplace and its strategic plan. The areas for
opportunity may include buying an existing company, merging with a growing
concern or entering into a joint venture. In 2004, the Company received a
substantial return on its investment in Capital Lending, a startup company which
provides financial and risk services offering insured loan
8
programs to financial institutions. In recent years, the financial services
industry has seen substantial growth and the Company is confident that this
trend will continue. The Company offers strong leadership with the vision and
passion needed to catapult the Company into any sector of the industry.
The Company has not identified a target business
To date, the Company has not selected any target business on which to
concentrate its search for a business combination. Thus, there is no basis to
evaluate the possible merits or risks of any target business or potential
transaction into which the Company may enter. To the extent the Company enters
into a transaction with a financially unstable company or an entity in its early
stage of development or growth, including entities without established records
of sales or earnings, the Company may be affected by numerous risks inherent in
the business and operations of financially unstable and early stage or potential
emerging growth companies. Although the Company's management will endeavor to
evaluate the risks inherent in a particular target business, the Company cannot
assure you that it will properly ascertain or assess all significant risk
factors.
Sources of potential opportunities
The Company anticipates that business opportunities will be brought to
its attention from various sources, including its network relationships, who may
present solicited or unsolicited proposals. The Company's officers and directors
as well as their affiliates may also bring transaction candidates to the
Company's attention. While the Company does not presently anticipate engaging
the services of professional firms that specialize in business acquisitions on
any formal basis, the Company may engage these firms in the future, in which
event the Company may pay a finder's fee or other compensation. In no event,
however, will the Company pay any of its existing officers, directors or
shareholders or any entity with which they are affiliated any finder's fee or
other compensation for services rendered to it prior to or in connection with
the consummation of a transaction.
Selection of a potential business opportunity and structuring of a
transaction
In evaluating a prospective business opportunity or transaction, the
Company will consider, among other factors, the following:
o financial condition and results of operation;
o growth potential;
o experience and skill of management and availability of additional
personnel;
o capital requirements;
o competitive position;
o stage of development of the products, processes or services;
o degree of current or potential market acceptance of the products,
processes or services;
o proprietary features and degree of intellectual property or other
protection of the products, processes or services;
o regulatory environment of the industry; and
o costs associated with effecting the business combination.
These criteria are not intended to be exhaustive. Any evaluation
relating to the merits of a particular business opportunity or transaction will
be based, to the extent relevant, on the above factors as well as other
9
considerations deemed relevant by the Company's management in pursuing the
business opportunity or transaction consistent with the Company's overall
strategy. In evaluating a prospective business opportunity or transaction, the
Company will conduct an extensive due diligence review which will encompass,
among other things, meetings with incumbent management and inspection of
facilities, as well as review of financial and other information which will be
made available to the Company.
The fair market value of such business will be determined by the
Company's Board of Directors based upon standards generally accepted by the
financial community, such as actual and potential sales, earnings and cash flow
and book value. If the Board of Directors is not able to independently determine
that the target business has a sufficient fair market value, the Company will
obtain an opinion or valuation from an unaffiliated, independent investment
banking or business valuation firm with respect to the satisfaction of such
criteria. For example, a valuation was obtained for the Company's proposed
transaction with New Freedom Mortgage Corporation in 2001, although the
transaction was not consummated, and the Company obtained a fairness opinion
with respect to its initial equity investment in Capital Lending in 2002.
The time and costs required to select and evaluate a business
opportunity and to structure and complete a transaction cannot presently be
ascertained with any degree of certainty. Any costs incurred with respect to the
identification and evaluation of a prospective business opportunity or
transaction will result in a loss to the Company and reduce the amount of
capital available to otherwise complete a business combination.
Probable lack of business diversification
While the Company may seek to pursue business opportunities with more
than one target business, it is probable that the Company will have the ability
to pursue only a single business opportunity or transaction. Accordingly, the
prospects for the Company's success may be entirely dependent upon the future
performance of a single business or investment. Unlike other entities that may
have the resources to complete several transactions in multiple industries or
multiple areas of a single industry, it is probable that the Company will not
have the resources to diversify its operations or benefit from the possible
spreading of risks or offsetting of losses. The Company's lack of
diversification may:
o subject the Company to numerous economic, competitive and
regulatory developments, any or all of which may have a
substantial adverse impact upon the particular industry in
which it may operate subsequent to a transaction, and
o result in the Company's dependency upon the development or
market acceptance of a single or limited number of products,
processes or services.
Limited ability to evaluate the target business' management
Although the Company intends to closely scrutinize a prospective
business opportunity or transaction, the Company cannot assure you that its
assessment of the prospective business opportunity or transaction will prove to
be correct. Furthermore, the future role of the Company's officers and
directors, if any, in a prospective business opportunity or transaction cannot
presently be stated with any certainty. While it is possible that one or more of
the Company's current officers and directors will remain associated in some
capacity with the Company following a prospective business opportunity or
transaction, it is unlikely that any of them will devote their full efforts to
the Company's affairs subsequent to prospective business opportunity or
transaction. Moreover, the Company cannot assure you that its officers and
directors will have significant experience or knowledge relating to the
operations of the particular prospective business opportunity or transaction.
Following a transaction, the Company may seek to recruit additional
executive officers or employees to supplement its current management. The
Company cannot assure you that it will have the ability to recruit additional
executive officers or employees, or that additional executive officers or
employees will have the requisite skills, knowledge or experience necessary to
enhance the Company's current management.
10
Competition
In identifying, evaluating and selecting a business opportunity, the
Company expects to encounter intense competition from other entities having
similar business objectives. Many of these entities are well established and
have extensive experience identifying and effecting business opportunities
directly or through affiliates. Many of these competitors possess greater
technical, human and other resources than the Company and its financial
resources will be relatively limited when contrasted with those of many of these
competitors. While the Company believes there are numerous potential business
opportunities or transactions that may be available to it, the Company's ability
to compete in pursuing these opportunities or transactions will be limited by
its available financial resources. This inherent competitive limitation gives
others an advantage in pursuing these business opportunities or transactions.
Any of these obligations may place the Company at a competitive
disadvantage in successfully pursuing a business opportunity or transaction. The
Company believes, however, that its network relationships and the experience of
its management team and Board of Directors may give it a competitive advantage
over other competitors for pursuing business opportunities or transactions.
Financial Reporting Issues
Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
On June 3, 2005, the Company engaged Lightfoot Guest Moore & Co., PC,
as its independent auditor for the year ending December 31, 2004. The Company
had not formally had an independent auditor since September 1999, when Ernst &
Young LLP resigned as the Company's principal accountant. The resignation of
Ernst & Young LLP was discussed in a Current Report on Form 8-K filed with the
Securities and Exchange Commission ("SEC") on October 6, 1999.
The Company disclosed the engagement of Lightfoot Guest Moore & Co., PC
in a Current Report on Form 8-K filed with the SEC on September 22, 2005 (the
"Form 8-K"), which included the following information:
On June 3, FirstPlus Financial Group, Inc. (the "Company") engaged
Lightfoot Guest Moore & Co., PC as its new independent registered public
accounting firm.
During the fiscal years ended December 31, 2004 and 2003 and through
June 3, 2005, the Company had not consulted Lightfoot Guest Moore & Co., PC
regarding either (i) the application of accounting principles to a specific
completed or contemplated transaction, or the type of audit opinion that might
be rendered on the Company's financial statements, and neither written nor oral
advice was provided to the Company nor oral advice that was an important factor
considered by the Company in reaching a decision as to the accounting, auditing
or financial reporting issue; or (ii) any manner that was either the subject of
a disagreement or event identified in response to paragraph (a)(1)(iv) of Item
304 of Regulation S-B.
Status of Financial Reporting
In January 1999, the Company announced that it would be implementing
new accounting guidance regarding the valuation of its retained interests from
securitization transactions which had been recently provided by the Financial
Accounting Standards Board ("FASB"). FASB issued a draft Special Report ("A
Guide to Implementation of Statement 125 on Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, Questions and
Answers, Second Edition") which was finalized during December 1998. In this
Special Report, FASB concluded that the "cash-out" method of valuing retained
interests should be used to estimate fair value. The SEC Staff announced in
December 1998 that the change to the "cash-out" method should be made by
restatement. Based on this guidance, the Company decided to revise its
methodology for estimating the fair value of certain financial instruments for
each of the fiscal years in the three-year period ended September 30, 1997, the
three-month transition period ended December 31, 1997, and the first three
quarters of the fiscal year ended December 31, 1998. As the Company disclosed in
its Form 10-Q for the quarter ended September 1998, it was expected that the
impact would be material to the results of all prior periods.
11
As a result of limited resources and conflicting demands, the Company
has not completed its analysis necessary to complete the restatement. In
addition, the Company has not had the financial resources or personnel to
prepare and file its periodic reports with the SEC. In July 2005, the Company
received a letter from the SEC directing the Company to file all required
reports or become subject to a revocation of registration under the Securities
Exchange Act of 1934. In connection with the shareholders' meeting described
under the heading "Legal Proceedings--Special Meeting Litigation," the Company
has obtained audited financial statements it believes to be sufficient to
distribute a proxy statement and solicit proxies for the shareholders' meeting
and election of directors. However, this information alone will not cure the
Company's reporting delinquencies with the SEC. The Company has initiated
discussions with the SEC regarding its compliance issues and has started the
process to prepare its plan to correct any SEC reporting delinquencies and has
experienced, and expects to continue to experience, an increase in general and
administrative costs due to regulatory filing compliance.
Following the settlement of the Class Action described under "Legal
Proceedings--Class Action Securities Litigation" below, the Company began to
analyze the extent of its liabilities and reporting compliance issues. In 2004,
the Company received a small return on its investment in Capital Lending which
allowed it to pay mounting debts and begin becoming compliant with its charter
requirements in the State of Nevada. This also allowed the Company to organize
its financial records in preparation for an audit of its financial statements
for the year ended December 31, 2004, which is an expensive and time consuming
process. Through changes in management and the nature of FPFI's bankruptcy and
litigation filed against the Company, the business records have been scattered.
As a result, gathering the necessary information to complete audited financial
statements has taken more time than anticipated or would be required under other
circumstances. The Company cannot currently estimate when it will complete the
restatement or the delinquent reports for past time periods.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of
the "safe harbor" provisions under Section 21E of the Securities Exchange Act of
1934, as amended, and the Private Securities Litigation Reform Act of 1995. The
Company uses forward-looking statements in its description of its plans and
objectives for future operations and assumptions underlying these plans and
objectives, as well as in its expectations, assumptions, estimates and
projections about the Company's business and industry. These forward-looking
statements involve risks and uncertainties. The Company's actual results could
differ materially from those anticipated in such forward-looking statements as a
result of certain factors as more fully described in this report.
Forward-looking terminology includes the words "may", "expects",
"believes", "anticipates", "intends", "projects" or similar terms, variations of
such terms or the negative of such terms. These forward-looking statements are
based upon the Company's current expectations and are subject to factors and
uncertainties which could cause actual results to differ materially from those
described in such forward-looking statements. The Company expressly disclaims
any obligation or undertaking to release publicly any updates or revisions to
any forward-looking statements contained in this report to reflect any change in
its expectations or any changes in events, conditions or circumstances on which
any forward-looking statement is based.
Item 3. Controls and Procedures
The Company's management, with the participation of its Principal
Executive Officer and Principal Accounting Officer, has evaluated the
effectiveness of its disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the
"Exchange Act")) as of the end of the period covered by this report. Based on
such evaluation, the Company's Principal Executive Officer and Principal
Accounting Officer have concluded that, as of the end of such period, the
Company's disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act.
The Company has implemented the following changes in internal control
over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fiscal quarter to which this report
relates that have materially affected, or are reasonably likely to materially
affect, its internal control over
12
financial reporting. Since 1999, the Company was essentially a dormant company
without sufficient resources to retain an independent auditor. Prior to 1999,
the Company's main operating entity employed a large accounting staff
responsible for the Company's extensive accounting needs and financial
reporting. Prior to its collapse, FPFI's operations were geographically
dispersed and its accounting records had not been centralized in Dallas. When
FPFI filed for bankruptcy protection in 1999, FPFI employees who maintained the
Company's records were inundated with creditor demands for information.
Following FPFI's bankruptcy, virtually all of FPFI's remaining accounting
personnel were laid off. The Company, with its very limited personnel, attempted
to maintain control over its records, but most of those records remained
fragmented or under the control of the FPFI bankruptcy estate.
In January 2004, the Company attempted to assemble the fragmented
records in an effort to develop a workable set of books and records. The
individuals involved with this endeavor, while not employed by the Company,
volunteered to help and worked diligently to assemble the fragmented records. By
the beginning of 2005, the Company had finally gathered a workable set of books
and records to begin the process of obtaining audited financial statements for
2004 and attempted to gather the books and records necessary to address the
deficiencies in the Company's financial reporting, including its period reports
under the Exchange Act.
13
PART II Other Information
Item 1. Legal Proceedings.
Bankruptcy of FirstPlus Financial, Inc.
Prior to 1998, the Company operated its business through those
subsidiaries with success until 1998 when macroeconomic factors adversely
affected financial markets and largely destroyed the industry's access to the
capital markets. Without access to working capital, the ability of the Company
to provide consumer-based products evaporated and, like virtually all its
competitors, it saw its business liquidated to satisfy obligations. The
Company's largest subsidiary was FPFI, a company that engaged in the business of
originating, purchasing, marketing and servicing home equity loans. Prior to the
collapse of the financial markets, its primary loan product was a credit
consolidation or home improvement loan, which was generally secured by a second
lien on real property (commonly referred to as a "high loan to value" or "HLTV"
loan). Over the course of many years, FPFI originated billions of dollars of
loans.
FPFI's business depended on its ability to securitize or sell the HLTV
loans in the secondary market in order to generate cash proceeds to repay
warehouse lines of credit, fulfill repurchase obligations and for new
originations and loan purchases. The value of and market for FPFI's loans were
dependent upon a number of factors, including general economic conditions,
interest rates and governmental regulations. Starting in mid-1998, a prolonged,
substantial reduction in the size of the secondary market for loans of the type
originated or purchased by FPFI adversely affected its ability to securitize or
sell loans with a consequent adverse impact on its ability to continue to
originate and purchase loans. Due to the disappearance of the secondary market,
which destroyed the HLTV loan market and FPFI's business, FPFI filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code.
FPFI's plan of reorganization was confirmed on April 7, 2000 by the
United States Bankruptcy Court, Northern District of Texas, Dallas Division. The
plan of reorganization provided for the creation of the FPFI Creditor Trust (the
"Creditor Trust") to facilitate implementation of the plan of reorganization, to
hold trust assets for the benefit of the beneficiaries, to resolve claims, to
make distributions in accordance with the plan of reorganization and to provide
various administrative services related to the Creditor Trust and the
implementation of the plan of reorganization. Under the plan of reorganization,
the Company still owns FPFI but may not transfer its interest in FPFI until the
Creditor Trust terminates. However, the Creditor Trust trustee is the sole
officer and director of FPFI. In addition, the stock was to be transferred to a
voting trust whereby the voting trust would have the sole power to hold and vote
the stock. As a result, the Company has very little influence over FPFI or the
Creditor Trust's assets.
In the plan of reorganization, the Company was able to resolve many of
its own creditor claims through the plan of reorganization. In addition, the
Company received the FPFG Intercompany Claim as a general unsecured claim in an
amount that was not to be less than $50 million. By being a holder of the FPFG
Intercompany Claim, the Company became a beneficiary of the Creditor Trust.
Under the plan of reorganization, the Company would only receive distributions
as a beneficiary of the Creditor Trust from payments on the FPFG Intercompany
Claim based on a previous series of securitized loan pools that had been sold in
the marketplace. At that time, the amount and timing of cash flow from residuals
was completely unknown. The Company has no operations with respect to, or any
control over, the securitized loans.
To settle other claims asserted against it, the Company assigned
portions of the FPFG Intercompany Claim to various creditors. Consistent with
the plan of reorganization, in settlement of the claims of the holders of the
Company's 7.25% Convertible Subordinated Notes due 2003, the bondholders
received an instrument representing the right to receive an assignment of 25% of
the FPFG Intercompany Claim, permitting the bondholders to become a direct
beneficiary of the Creditor Trust, and an agreement to instruct the Creditor
Trust to make two payments to the bondholders of $1,428,000 based on certain
conditions. The bondholder settlement was consummated in June 2001. Two of the
bondholders also received agreements allowing them to convert portions of their
new interest into an aggregate of 5,555,000 shares of the Company's common
stock.
14
At the closing of the plan of reorganization, in settlement of claims
of Paine Webber Real Estate Securities Inc. ("Paine Webber"), the Company
assigned a 22% interest in the FPFG Intercompany Claim to Paine Webber allowing
Paine Webber to become a direct beneficiary of the Creditor Trust. The Paine
Webber claim has been settled, and the Company recovered the assignment from
Paine Webber in August 2005.
The Company has agreed to pay 1.86% of the distributions it receives,
up to an aggregate amount of $931,000, on the FPFG Intercompany Claim to Thaxton
Investment Corporation ("Thaxton"). The amounts payable to Thaxton are based on
a settlement of disputes concerning the purchase price paid by Thaxton to
FirstPlus Consumer Finance, Inc. ("Consumer Finance"), then a subsidiary of the
Company, pursuant to the sale of all of the assets of Consumer Finance to
Thaxton in 1999.
The Company has previously discussed with other creditors settlement of
various claims by assignment of portions of the FPFG Intercompany Claim,
including an assigment of a .076 interest in the FPFG Intercompany Claim to the
Company's former landlord. Since the bankruptcy proceedings, the FPFG
Intercompany Claim had been the only substantial asset of the Company and the
only source of potential payment for its obligations. Negotiations with other
parties have been dormant in recent years; however, there is no assurance that
there are no additional parties who may assert claims with respect to the FPFG
Intercompany Claim. The Company has booked a valuation reserve of $2.9 million
against the amount set aside for potential creditors claims.
There can be no assurance as to the ultimate value of the FPFG
Intercompany Claim or the timing of distributions on the FPFG Intercompany
Claim.
Class Action Securities Litigation
In October 1998, several class action lawsuits alleging violations of
federal securities laws were filed in the United States District Court for the
Northern District of Texas. These lawsuits were consolidated as In re: FirstPlus
Financial Group, Inc. Securities Litigation (the "Class Action"). The Class
Action named the Company and certain officers and directors as defendants. The
Class Action alleged, among other things, that the defendants issued false and
misleading financial statements, press releases and other statements regarding
the Company's financial condition during a time period between August 1996 and
November 1998. During the course of the Class Action, the defendants strenuously
denied the allegations asserted by the plaintiffs, and without admitting any
wrongdoing or liability, the defendants entered into a settlement with the
plaintiffs in July 2003.
In October 2003, the United States District Court for the Northern
District of Texas held a fairness hearing regarding the settlement of the Class
Action where the court approved the settlement of the class action as fair,
reasonable and adequate to the members of the class and directed the parties to
consummate the settlement. Following the fairness hearing, the court entered its
Order and Final Judgment and order of dismissal of the actions with prejudice.
Therefore, the Order and Final Judgment should preclude any other lawsuits by
shareholders with respect to the allegations set forth in the class action
securities lawsuit. The Company completed the final steps to consummate the
settlement on November 24, 2003, the effective date of the settlement.
The settlement agreement provided for a cash settlement of $5 million
to be paid into an interest bearing account maintained by the plaintiff's
co-lead counsel in escrow. The settlement agreement also provided for the
Company to assign its rights to distributions of cash and property based on a
portion of its ownership interests in Capital Lending to the plaintiffs' co-lead
counsel in escrow on behalf of the authorized claimants. The Company then owned
approximately 38% of Capital Lending and agreed to make the assignment based on
a 10 percent ownership interest in Capital Lending. In addition, if Capital
Lending files a registration statement with the Securities and Exchange
Commission covering the distribution of the ownership interest to the authorized
claimants, the Company has agreed to transfer the 10% ownership interest in
Capital Lending directly to the plaintiffs' co-lead counsel in escrow on behalf
of the authorized claimants under the Stipulation.
Plaintiffs' co-lead counsel received 30% of the settlement fund, which
may include a portion of the assigned ownership interests in Capital Lending,
excluding interest, plus approximately $394,000 in reimbursement
15
for expenses to be funded by the settlement fund, plus interest at the rate
earned on the cash portion of the settlement fund until paid.
In connection with the Order and Final Judgment, Daniel T. Phillips,
then Chief Executive Officer and Director of the Company, resigned all positions
with the Company and its subsidiaries effective as of the consummation of the
settlement, except as Director of the Company. Mr. Phillips has continued as a
Director of the Company. J.D. Draper assumed the position of President, Chief
Executive Officer and Chief Financial Officer of the Company.
Grantor Trust Litigation
In 2002, the Company as sole settlor and sole beneficiary established
the FirstPlus Financial Group, Inc. Grantor Residual Trust (the "Grantor Trust")
and assigned to the Grantor Trust the Company's remaining interest in the FPFG
Intercompany Claim. The initial trustee of the Grantor Trust was George T. Davis
("Davis").
In November 2004, the Company appointed two additional trustees for the
Grantor Trust. Thereafter, those additional trustees sought to reach agreement
with Davis (who remained as a trustee) concerning the distribution of funds
which were beginning to flow to the Grantor Trust from the FPFI bankruptcy.
Davis challenged the appointment of the additional trustees and refused to agree
to a distribution proposed by the Company. The Company and the additional
trustees filed suit in Texas state court in Dallas (FirstPlus Financial Group,
Inc., Michael Montgomery, Jack Draper and The FirstPlus Financial Group Grantor
Residual Trust v. George T. Davis and The FPFI Creditor Trust; Civil Action No.
05-02962; in the 298th District Court of Dallas County, Texas) (the "Trust
Suit") seeking declaratory relief against Davis and the FPFI creditors' trust to
the effect that the additional trustees had been properly appointed and were
authorized to act.
When the Company selected Davis as the initial trustee upon formation
of the Grantor Trust, the Company had confidence in its appointee and also
appointed Davis as Vice President of Shareholder Relations. He also was
appointed to a vacant seat on the Board of Directors. The Company believed that
Davis would also have the confidence of a group of shareholders with whom the
Company consulted prior to the formation of the Grantor Trust, including a group
of shareholders purportedly represented by Danford L. Martin.
Distributions on the FPFG Intercompany Claim, including distributions
to the Grantor Trust, became available in the fourth quarter of 2004. Prior to
the actual distribution of funds to the Grantor Trust, a dispute arose with
Davis concerning the validity of the Company's appointment of additional
trustees for the Grantor Trust. Because this unresolved issue led to uncertainty
on the part of the Creditor Trust as to who could properly direct the
distribution of funds to the Grantor Trust, the Creditor Trust requested that
the bankruptcy court take custody of the funds and resolve the trustee issue.
The bankruptcy court determined, however, that it did not have jurisdiction to
resolve that dispute and dismissed the Creditor Trust's request. Immediately
thereafter, the Company initiated the Trust Suit in Texas state court. That
action remains pending, and while funds totaling approximately $7.9 million are
currently available for distribution by the Creditor Trust to the Grantor Trust,
no such funds have actually been distributed to the Grantor Trust due to the
dispute over the trustee issue.
When it appeared that payments on the FPFG Intercompany Claim were
about to commence, Davis began making unfounded allegations against the
well-respected trustee of the Creditor Trust, with whom the Company believes it
otherwise has a good relationship. The allegations were unsupported factually
but continued to be lodged by Davis. The Company believes that these accusations
were contrary to the interests of the Grantor Trust in that the trustee of the
Creditors Trust is the person who processes all payments to the Grantor Trust on
account of the FPFG Intercompany Claim.
Further, as the commencement of payments on the FPFG Intercompany Claim
appeared imminent, the Board of Directors sought confirmation from Davis that
creditors holding valid claims against the Company would not be ignored and
would be paid as distributions on the FPFG Intercompany Claim were received as
required by the trust agreement governing the Grantor Trust. Davis refused to
provide that confirmation to the Board of Directors and took no steps to
adequately plan for the payment of creditor claims.
16
In light of Davis' behavior concerning the Grantor Trust's sole source
of revenue and disregarding the need to pay creditors with valid claims, the
Board of Directors believed that appointing two additional trustees to the
Grantor Trust would improve relations with the Creditor Trust and ensure that
provisions for the creditors of FirstPlus would be made. The Company did not
remove Davis as trustee at that time.
Upon the appointment of the two additional trustees, they began to
develop a plan for a distribution to shareholders with adequate provisions for
creditors. In an effort to resolve the dispute between the additional trustees
and Davis, the additional trustees proposed an immediate distribution to the
Grantor Trust, followed by a $3.5 million distribution to the shareholders which
the additional trustees agreed would not affect the determination of the issues
in the Trust Suit. Davis has continued to object to any distribution to
shareholders unless he can be designated as the sole party to have access and
control over the funds held by the Grantor Trust. In this regard, the Grantor
Trust, acting through a majority of the trustees, attempted to reach an
agreement with Davis to make a distribution to shareholders.
While that action was pending, the Company, as settlor of the Grantor
Trust, terminated Davis for cause pursuant to the terms of the trust agreement
governing the Grantor Trust and appointed a successor trustee. Davis has sought
declaratory relief in the Trust Suit to the effect that he has not been
terminated. However, a continuation of litigation by Davis and his refusal to
attempt to resolve the dispute between the trustees has amounted to a veto of
the intended distribution to the shareholders.
Special Meeting Litigation
In March 2005, a group of Company shareholders commenced a court
action, styled Danford L. Martin, et al. v. FirstPlus Financial Group, Inc., et
al., in the Second Judicial District Court for the State of Nevada (the
"Election Suit") to compel a shareholders' meeting and election of directors.
The Company has treated the Election Suit as a valid request for meeting
pursuant to the bylaws. During the hearings in the court and in discussions with
the petitioners in the Election Suit, the Company has at all times insisted that
the meeting and the election be conducted in accordance with all applicable
laws, regulations and procedures.
The petitioners submitted two separate plans of election that the
Company believed would have, if adopted by the court, resulted in a meeting (i)
without providing shareholders with customary and necessary information on the
subject of the election, (ii) that would have failed to convene a quorum, (iii)
that would have failed to yield a valid outcome under the Company's articles of
incorporation and bylaws and applicable law, and (iv) that would have violated
applicable law in numerous respects. In fact, under one of the petitioners'
proposed plans of election, the solicitation of proxies and provision of
information to shareholders regarding the subject of the meeting would have been
expressly forbidden. The Company's position has at all times been that the
shareholders should receive the required disclosures about the Company and about
the persons soliciting votes, including those persons soliciting votes in
opposition to the Company.
The court has directed that a shareholders' meeting and election of
directors, utilizing the proxy process, be held. The meeting is currently
scheduled for November 16, 2005 in Reno, Nevada. The Company has informed the
petitioners that it intends to follow applicable laws, regulations and, except
to the extent otherwise expressly directed by the court, provisions of the
Company's articles of incorporation and bylaws in the conduct of the meeting and
the election.
Although it was not required to do so, the Company has paid attorney's
fees for the petitioners in an aggregate amount of $25,000 and has agreed to pay
printing and distribution fees for petitioners' proxy materials in an amount not
to exceed an aggregate of $20,000, which the parties have stipulated fully
satisfies any and all requests petitioners have made or could have made in the
future concerning reimbursement for petitioners' attorneys' fees and expenses
associated with the Election Suit.
17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In connection with implementing the settlement of the claims of the
holders of the Company's 7.25% Convertible Subordinated Notes due 2003, the
United States Bankruptcy Court, Northern District of Texas, Dallas Division (the
"Court"), approved an exchange of the notes for certificated interests
representing direct obligations under the plan of reorganization. The
bondholders received an instrument representing the right to receive an
assignment of 25% of the FPFG Intercompany Claim, permitting the bondholders to
become a direct beneficiary of the Creditor Trust, and an agreement to instruct
the Creditor Trust to make two payments to the bondholders of $1,428,000 based
on certain conditions. The bondholder settlement was consummated in June 2001.
Two of the bondholders, including Deephaven Capital Management, also received
agreements allowing them to convert portions of their new interest into an
aggregate of 5,555,000 shares of the Company's common stock. In April 2005,
pursuant to Section 3(a)(9) under the Securities Act of 1933, the Company issued
1,000,000 shares of its common stock to Deephaven Capital Management upon
conversion of 20,000 Units of the certificated interests.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits
Number Description
------ -----------
31.1 Certification of Principal Executive Officer pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002
31.2 Certification of Principal Accounting Officer pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer of Periodic
Report Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
32.2 Certification of Principal Accounting Officer of Periodic
Report Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
18
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Issuer caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIRSTPLUS Financial Group, Inc.
Dated: October 21, 2005 Jack (J.D.) Draper
------------------------------------
Jack (J.D.) Draper
President and Chief Executive Officer
(Principal Executive and Accounting Officer)
19