Effective September 18, 1996, the Company relocated its principal executive offices from Miami Beach, Florida to a 2,000 square foot office in Albuquerque, New Mexico under a twelve-month lease which is currently on a month-to-month basis. The Company pays monthly rent of approximately $1,975.
The Company also leases approximately 17,000 square feet of office space in Miami Beach, Florida, effective May 1994, under a six-year noncancelable lease. In February 1996, the Company moved out of these premises. As of March 31, 1997, forty and one-half months of the lease remained at a cost of $341,250 per year. The Company is currently subleasing part of the space on a short-term basis and is seeking a party to sublease or assume its obligations under the lease; any such sublease or assumption is likely to be at a loss to the Company, given that current local real estate rental rates are lower than that prescribed by the lease. A lease loss accrual of $516,000 was provided during fiscal 1997, and at March 31, 1997, $435,326 of the accrual remained.
The following selected financial data of the Company for the fiscal years ended March 31, 1997, 1996, 1995, 1994 and 1993 has been derived from the audited consolidated financial statements and should be read in conjunction with such consolidated financial statements and the notes thereto. The Company was engaged in the viatical settlements business from April 1991 to September 1994. In May 1994, it commenced its Installment Contracts (consumer car loans) business and in December 1995, ceased to purchase installment contracts. The Inventory Assistance Program was started in March 1995 and was sold pursuant to the Stipulation in September 1996. Accordingly, results of operations are not indicative of future operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations".
Although the Company was organized in May 1989, it did not commence its viatical settlements business until April 1991 when it acquired certain assets of Living Benefits, Inc. ("LBI") and covenants not to compete from the former owners of LBI. In April 1993, the Company acquired certain operating assets of American Life Resources Corporation ("ALRC"), which was also engaged in the viatical settlements business. ALRC retained the Policies it had purchased prior to January 14, 1993. Goodwill and intangibles related to these acquisitions were amortized over the remaining life of the viatical portfolio, extending through the fiscal year ended March 31, 1996, at which time they were fully amortized.
Since the sale of IAP, the Company has been engaged in no active business other than the collection of amounts due under the outstanding Installment Contract Receivables and the collection of proceeds from the Policies. The Company's management currently is engaged in identifying potential acquisition opportunities which are expected to be principally within the gaming and entertainment industries.
Net viatical revenues were $ 0.4 million for the year ended March 31, 1997, which represented a $ 0.1 million decrease compared to the $ 0.5 million realized for the fiscal year ended March 31, 1996. Net viatical revenues are determined by subtracting the policy cost from the relevant face value after a policy "matures" (becomes payable by the insurance company). The decrease in viatical revenues resulted from the reduced size of the Company's viatical policy portfolio. The Company generally ceased to purchase such policies after September 1994 and, in May and July 1995, sold the majority of the Company's portfolio to Viaticus, Inc. for $17.5 million (which represented a total of 225 policies). Future net revenues from the remaining portfolio of approximately nineteen policies will be irregular, depending upon the timing of mortality of the insured. During the year ended March 31, 1997, the aggregate book value of the policies had been written-down by $0.9 million, to estimated current fair market value. The Company's management presently intends to realize cash from these policies in the next twelve to eighteen months.
contracts receivable were $3.6 million for the year ended March 31, 1997, which represents a decrease of $5.2 million compared to the $8.8 million provided for the year ended March 31, 1996. The decrease was primarily the result of the shrinking size of the total portfolio.
The net loss for the year ended March 31, 1997 was $11.5 million or $2.49 per share. The net loss for the year ended March 31, 1996 was $ 0.7 million, or $ 0.16 per share. The change in net loss was attributable primarily to the $12.2 million non-recurring gain on early extinguishment of debt. These offsets to operating losses were not available in the year ended March 31, 1997.
The net loss for the year ended March 31, 1996 was $0.7 million or $.16 per share. The net loss for the year ended March 31, 1995 was $3.0 million or $.65 per share. The change in net loss was attributable primarily to the deterioration in operating income offset by the $7.3 million gain on early extinguishment of debt and the $4.9 million benefit from income taxes during the year ended March 31, 1996.
Cash flows from investing activities for the fiscal year ended March 31, 1997 were a positive $6.2 million, which was due primarily to the consummation of the transactions constituting the Stipulation, including the disposition of IAP. This resulted in the conversion of the IAP dealer loan receivables portfolio of approximately $5.9 million into cash without any loan losses. For the fiscal year ended March 31, 1996, cash flows from investing activities were positive as securities held for resale (i.e., cash invested for higher yields) of $9.0 million were converted into immediately available cash.
There were no cash flows from financing activities during the fiscal year ended March 31, 1997, as compared with a cash flow deficit from financing activities of $15.8 million for the fiscal year ended March 31, 1996. This resulted from the use during fiscal year 1996 of the Company's cash for the early extinguishment of certain of the Company's Debentures.
In summary, the Company increased its cash and cash equivalents by $9.2 million during the year ended March 31, 1997, to a total of $12.4 million. This increase was largely due to the sale of IAP (and the resulting full conversion of the IAP receivables to cash), and was also influenced by the collections on the consumer car loan portfolio (which collections were offset to a degree by operating expenses). In comparison, for the fiscal year ended March 31, 1996, there was a $1.9 million increase in cash and cash equivalents, to a total of $3.2 million. This increase was primarily generated by the sale of the viatical portfolio for $17.8 million, which was offset by the usage of $15.8 million in the Debenture repurchase.
The option granted to the Company is subject to an option which has been granted by NPD to Mr. DeSantis to purchase 50% of the ITB shares from NPD which, if exercised by Mr. DeSantis, would nonetheless permit the Company to acquire the remaining 50% of the ITB shares. Upon exercise of the option by Company, its guarantee would terminate and the $2.0 million cash collateral would be released to the Company. Furthermore, each of the Company's and Mr. DeSantis' option is subject to an option which was granted by NPD to Robert Green at the closing of the ITB share purchase to purchase 50% of the ITB shares. In the event either the Green or DeSantis options are exercised then the $2.3 million note held by NPD in partial payment of the option will be reduced proportionately by the percentage of the ITB shares remaining subject to the option.