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Three and Six Month Renewable Unsecured Subordinated Notes One, Two, Three, Four, Five and Ten Year ... - page 23 / 40

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advances against new purchases of automobile contracts, and in March 2010 we entered into another $50 million delayed draw credit facility, which also allows us advances against new purchases of automobile contracts. More recently, we increased our short-term contract financing resources by entering into a $100 million credit facility in December 2010 and another $100 million credit facility in February 2011. These facilities have provided us the liquidity to increase gradually our automobile contract purchases from dealers. Moreover, since 2009 we have observed an increase in demand for asset-backed securities, including securities backed by sub-prime automobile receivables. Nevertheless, if the current adverse circumstances that have affected the capital markets should wor- sen, we may again curtail or cease our purchases of new automobile contracts, which could lead to a material ad- verse effect on our operations.

Contingent Rescission Liability

We filed a registration statement on Form S-2 with respect to our renewable unsecured subordinated notes on January 7, 2005 and subsequently filed amendments to such registration statement on April 13, May 2, and May 20, 2005 and April 11, 2006 (such registration statement, as so amended, the “Former Registration Statement”). We discovered in July 2010 that, under a rule of the SEC, we were no longer permitted to offer and sell our re- newable unsecured subordinated notes in reliance upon the Former Registration Statement. Consequently, pur- chasers who acquired such notes within the immediately preceding twelve months may have a statutory right to rescind their purchases. As a result, we could be required to repurchase some or all of such notes at the original sale price plus statutory interest, less the amount of any income received by the purchasers. Within the twelve months immediately preceding December 8, 2010 (the latest practicable date prior to the effective date of the reg- istration statement to which this prospectus relates), we sold a total of approximately $11.67 million of such notes, including renewals of previously sold notes, but excluding notes that we have repaid. Within the twelve months immediately preceding June 30, 2011, we sold a total of approximately $3.1 million of such notes, including re- newals of previously sold notes, but excluding notes that we have repaid and excluding notes sold or renewed pur- suant to the registration statement to which this prospectus relates.

Sales of such notes could also subject us to regulatory sanctions by the SEC, which might include the imposition of civil penalties. Although we do not expect any rescissions or regulatory actions to have a material adverse ef- fect on us, we are unable to predict the full consequences of these events and regulatory actions at this time.

Our results of operations, financial condition and cash flows could be materially and adversely affected if a sub- stantial number of purchasers of such notes were to successfully exercise rescission rights, or if we were to be as- sessed substantial penalties by regulatory authorities. The exercise of rescission rights would not have any direct material effect on our results of operations, as any rescission of sales would involve simultaneous and approx- imately equal reductions in our assets and our liabilities. However, if holders of sufficient amounts of such notes were to demand rescission and to prevail in that demand, the adverse effect on our liquidity could be material, which could in turn impair our ability to conduct our business as otherwise planned. In such event, our ability to perform our obligations under the renewable unsecured subordinated notes, including those offered by this Pros- pectus, could also be materially and adversely affected.

Not Presently Profitable

We have incurred net losses every quarter subsequent to the quarter ended June 30, 2008. Our pretax loss for the third quarter of 2010 was $3.5 million, compared to a pretax loss of $4.3 million in the third quarter of 2009. Our net loss for the third quarter of 2010 was $4.5 million, or $0.26 per diluted share, compared to a net loss of $4.3 million, or $0.23 per diluted share, for the year-ago quarter. Net loss for the third quarter of 2010 includes a charge to income tax expense of $1.0 million, or $0.06 per diluted share, related to an addition to the valuation allowance against our deferred tax asset. Our pretax loss for the nine months ended September 30, 2010 was $14.7 million, compared to a pretax loss of $10.8 million, for the nine months ended September 30, 2009. Our net loss for the nine months ended September 30, 2010 was $19.3 million, or $1.10 per diluted share, compared to a net loss of $10.8 million, or $0.57 per diluted share, for the nine months ended September 30, 2009. Net loss for the first nine months of 2010 includes a charge to income tax expense of $4.6 million, or $0.26 per diluted share, related to ad- ditions to the valuation allowance against our deferred tax asset.

For the year ended December 31, 2010, our pretax loss was $16.8 million, compared to a pretax loss of $49.4 million for the year 2009. Our net loss for 2010 was $33.8 million, or $1.94 per diluted share, compared to a net loss of $57.2 million, or $3.07 per diluted share, for 2009. Net loss for 2010 includes a charge to income tax ex-

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