I presume you are familiar with LONE's reverse merger subsidiary spin-out strategy to realize some value from the four shell subsidiaries they have. (If not, here are two links to relevant news releases the company has put out touching on their intentions:
biz.yahoo.com
biz.yahoo.com )
LifeOne only became known as LifeOne about a year ago. Previously they had been National Affiliated (NAAC) and you can find a complete history of NAAC's reports since Brent Chapel and the Southerngroup took control of them almost three years ago on Edgar. They stopped reporting after calendar Q3 in 1997 because they were in negotiations to settle several class action lawsuits that had emerged against them shortly after they took control alleging sales abuses in the early years after the company went public 1983-1985 approximately. The management which took them public proved to be incompetent and National Affiliated bled losses all during the eighties and nineties until Mr. Chapel and his crew began their takeover in August 1996, which culminated in the finalization of the change of control on New Years Eve of that year. They gave National Affiliated an equity infusion $6.8 mil. and had planned to begin their acquisition strategy immediately. Brent told me that at that time, NAAC had not had an investor relations dept. for five years. During Q1 and Q2 of '97 they turned NAAC's operations around, primarily through outsourcing back office operations with the attendant head count reductions and also salary reductions. They reduced NAAC's overhead expense 60%. NAAC was sustaining loses on underwriting, which is common for health insurers, but had returned to net profitability on the strength of their investment returns. Conseco Capitol Managemant manages their assets. (I'm a long time CNC shareholder, hence my connection with LONE.) Sometime late in Q1 or early Q2 of 1997, some plaintiffs or their lawyers got wind that Nat'l Affil. had received new funding and had come back from its essentially dormant, near death state, and were motivated to serve management with several class action lawsuits as I described before. I presume they didn't file earlier because for so many years LONE had hardly any assets to take. Brent and his advisors failed to detect the potential for these lawsuits in their due diligence and suddenly found their investment in the company, their own personal fortunes, at risk. They settled the last and most damaging of the lawsuits during Q1 1998 and appear to have financed the settlement by making reg. S issuances; although at the time of the issuances beginning the preceeding October, they told shareholders that the proceeds of the issuances were to be used for a couple of acquisitions that fell through. Unfortunately the reg. S debentures were sold piecemeal to various parties, instead of to a single buyer, who were introduced to them by Vengua Capital Management of the U.K.. LONE management believes that some of the debenture purchasers began shorting the stock the day of the purchase, violating the regulations of such purchases, which resulted in their joining a class action lawsuit filed against the seeming confederation of offshore funds named as defendants. Three of the defendants counter-sued them in an attempt to force involuntary bankruptcy last Sept. LONE has settled with two of the plaintiffs in that case by repurchasing the debentures. The third has been unwilling to negotiate with them and the issue appears to be set aside for the present. Management had hoped to catch up in their reporting once the class action lawsuits against them had all been resolved last year but the process dragged on because of difficulties they encountered while switching accountants, a move I am sure they regret. They finally got settled into a relationship with their current accountants and were, I am told, on the verge of catching up on their reporting, when the invol. bankruptcy suit was filed against them. Once again, their tact was not to make any filings while fighting the lawsuit to gain negotiating leverage against their opponents by keeping them in the dark about their financial position. And so here we are. LONE is not defending itself against any lawsuits at the present although they are in arbitration proceedings with one of their debenture holders (Thomson Kernaghan & Assoc.) regarding the alleged shorting and LONE's subsequent refusal to honor the conversion of the debentures. They are currently free to pursue business as usual and have a window of opportunity to become current in their filings. They have two 10-K's and six 10-Q's to get out before that happens. |
