SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number 1-10569
AUTOLEND GROUP, INC.
(Exact name of registrant as specified in the charter)
DELAWARE 22-3137244
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
930 WASHINGTON AVENUE
MIAMI BEACH, FLORIDA 33139
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(305) 673-2700
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 [X] NO [ ]
Indicate number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Common Stock, $.002 par value 4,634,530 shares
Class Outstanding at August 15, 1996
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Three month periods ended June 30, 1996 and 1995.
During the three months ended June 30, 1996, revenues from Installment
Contracts Receivable decreased by $1,056,496 to $616,639 from $1,673,135 during
the three months ended June 30, 1995. This decrease resulted from the reduced
size of the Company's portfolio of Installment Contracts Receivable during the
three months ended June 30, 1996 as compared with the three months ended June
30, 1995. The Company has ceased to purchase Installment Contracts Receivable
since December 1995.
During the three months ended June 30, 1996, there were no viatical
revenues as compared to $575,078, reflecting the maturity of 12 Policies during
the three months ended June 30, 1995. The cost of a Policy includes the initial
purchase price, insurance premiums, and other direct expenditures, if any, by
the Company in connection with the purchase and maintenance of a Policy. The
decrease in policy maturities and net viatical revenues resulted from the
Company's decision not to purchase new Policies after September 1994, and the
sale in May and July 1995 of a total of 225 policies for approximately $17.5
million to Viaticus, Inc.
During the three months ended June 30, 1996, revenues from the
Inventory Assistance Program increased by $456,595 to $475,674, reflecting the
financing of 3,359 cars, from $19,079, reflecting the financing of 154 cars
financed, during the three months ended June 30, 1995. During the three months
ended June 30, 1996, income from operations of IAP was $43,488, net of income
tax of $26,237, as compared to operating loss of $23,124, net of income tax
benefit of $14,784 for the three months ended June 30, 1995. These increases
reflect the growth and development of the IAP program since it was initiated in
March 1995.
General and administrative expenses decreased by $1,111,331 to $
1,625,995 during the three months ended June 30, 1996, from $ 2,737,326 during
the three months ended June 30, 1995. This decrease resulted from the effect of
the Company's downsizing during the third quarter of the Company's fiscal year
ended March 31, 1996 and was comprised primarily of decreases of approximately
$504,000 in salary expense, $316,000 in direct program costs for Installment
Contracts, $117,000 in travel and entertainment expenses, $126,000 in
amortization expenses and $116,000 in office expenses, offset by an increase of
$288,000 in legal and professional fees.
Provision for credit losses in connection with the Company's
Installment Contracts Receivable increased by $1,612,232 to $1,921,292 for the
three months ended June 30, 1996, from $309,060 for the three months ended June
30, 1995. In addition, chargeoffs and adjustments for credit losses in
connection with the Company's Installment Contracts Receivable increased to
$2,895,812 during the three months ended June 30, 1996 from $97,443 during the
three months ended June 30, 1995. These increases reflected increased loan
delinquencies and writeoffs in the Company's portfolio of consumer finance
receivables and were a factor in the Company's decision to discontinue its
purchases of Installment Contracts Receivable.
Certain fixed assets related to the Installment Contracts operation,
primarily computer software and hardware, as well as leasehold improvements on
office space have been recorded at net realizable value at June 30, 1996. The
result of this valuation is a charge to income of $568,649 at June 30, 1996.
During the period ended June 30, 1995 the Company sold certain policies
in the viatical portfolio to Viaticus. As a result, the Company recognized a
loss on sale of $570,377, net of writeoff of intangible assets and goodwill of
$1,844,259.
For the three months ended June 30, 1996, the Company had a net loss of
$3,818,153 or $0.82 per share as compared with net earnings of $2,367,691 or
$0.51 per share for the three months ended June 30, 1995. The change in net
earnings/loss was attributable primarily to the developments described above,
coupled with a decrease of approximately $3.85 million in gain on early
extinguishment of debt, reflecting the Company's having repurchased at a
substantial discount certain of its outstanding debentures during the three
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<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
months ended June 30, 1995, which repurchases were not matched during the three
months ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's immediate viability as a going concern is dependent upon
the successful closing of the Settlement, the restructuring of its obligations
and asset base, and ultimately, a return to profitability. The Company has been
operating at a loss and has incurred operating losses in the last three years.
Management has initiated a plan to terminate certain of its operations and to
improve the profitability of the Company. The Company has ceased since December
22, 1995 to purchase Installment Contracts Receivable and since September 29,
1994 to purchase Policies. During the third quarter of the year ended March 31,
1996 the Company significantly downsized its operations resulting in significant
reductions in salary expense. See "-- Results of Operations." In June 1996, the
Company entered into a settlement of the Derivative Suit. In connection with the
closing of the Settlement, the Company will enter into various agreements,
providing for, among other things, the disposition of certain operations, and
the replacement of current management. See " Note 2 - Discontinued Operations."
In September 1996 the Company is obligated to make an interest payment
on the remaining outstanding Debentures of approximately $2.1 million. The
outstanding principal amount of the Debentures, which is due in September 1997,
will become a current liability in September 1996, and without a capital
infusion, refinancing or amendment of the Debentures, such current debt will
render the Company insolvent on a balance sheet basis. See Note 4 to the
Consolidated Financial Statements for information relating to the Company's
Debenture obligations. There was positive cash flow from operations of
$1,394,446 for the three months ended June 30, 1996. Although the Company
currently has sufficient liquidity to meet its September 1996 interest
obligations under the Debentures, intervening operating losses may prevent the
Company from meeting its obligations to make interest payments, and in September
1997 to repay the principal under the Debentures as such payments become due. If
the Company is unsuccessful in its efforts to obtain capital or to refinance or
amend the Debentures, it may be necessary for the Company to seek the protection
of the bankruptcy laws or to undertake such other actions as may be appropriate
to preserve its business.
During the three months ended June 30, 1996 the Company funded a total
volume of 3,359 IAP purchases totalling approximately $16.2 million. At June 30,
1996 the Company's IAP receivable portfolio consisted of 1,102 loans totalling
approximately $5.1 million.
The Company commenced its purchases of Installment Contracts Receivable
in May 1994 and ceased purchases of Installment Contracts Receivable on December
22, 1995.
The Company's portfolio of Installment Contracts Receivable at June 30,
1996, excluding Installment Contracts Receivable with respect to which there has
been a repossession of the underlying collateral, a charge-off or the creation
of a reserve, consisted of approximately 2,197 active loans purchased at a cost
of approximately $7.5 million.
During the three months ended June 30, 1996 and June 30, 1995, the
Company's viatical settlement business did not purchase any new Policies. The
Company's portfolio of unmatured Policies at June 30, 1996 totaled 20 Policies
with a face value of approximately $ 2.1 million, which Policies were purchased
at a cost of approximately $1.5 million. Policies are recorded on the Company's
balance sheet at cost, with the difference between the face value and costs
associated with the Policies recognized as net revenues as Policies mature.
On May 8, 1995 and July 18, 1995, ALRG and LB NM, Inc. entered into
Purchase and Sale Agreements (the "Agreements") providing for the assignment of
certain Policies held by the Company to
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<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Viaticus, Inc. ("Viaticus"), a subsidiary of the CNA Companies. Under the
Agreements, ALRG and LB NM received consideration for each of the assigned
policies when Viaticus received an acknowledgement from the insurer of the
assignment of the policy. There were no outstanding amounts receivable under the
agreements at March 31, 1996, and accordingly no activity with respect to this
transaction occurred during the three months ended June 30, 1996.
During the three months ended June 30, 1996, the Company had cash flows
from operations of $ 1,394,446 compared to $13,342,246 during the three months
ended June 30, 1995. Cash flows from operations during the three months ended
June 30, 1996 decreased primarily as a result of decreased maturity of Policies,
reflecting the sale to Viaticus in 1995, which decrease was only partially
offset by decreased cash used to purchase Installment Contracts Receivable. For
the three months ended June 30, 1995, cash flow from operations resulted
primarily from proceeds from the assignment of viatical insurance policies to
Viaticus and from maturities of policies, offset by funds used for the purchase
of Installment Contracts Receivable.
The Company believes it has sufficient funds to finance its current
operations for at least the next 12 months but will require additional funds, if
not generated from operations, to finance future growth, the entering into new
businesses and the payment of interest on and repayment of the Debentures.
Auction fundings until the closing of the Settlement are expected to be through
proceeds from maturities of reserves and Securities Available for Sale. Since
the receipt of such funds is not completely predictable, the Company may need to
acquire additional financing to fund its anticipated operations beyond such
period. Furthermore, in the event that a closing of the Settlement has not taken
place by the interest payment date in September 1996, the Company may require
additional funds to continue funding its IAP operations. The ability of
management to return the Company to profitable operations and a capacity to meet
its obligations on demand is uncertain. There can be no assurance that
management will be able to accomplish its objectives or that it will enable the
Company to become profitable on an ongoing basis and to continue as a going
concern.
During the three months ended June 30, 1996, the Company had a deficit
in cash flows from investing activities of $1,777 as compared with cash flows
from investing activities of $2,832,936 during the three months ended June 30,
1995. During the three months ended June 30, 1996, there was limited investing
activity. Funds not immediately required for operation of the businesses are
invested in securities available for sale. These investments consist of short
term money market instruments and the underlying cash, immediately available to
the Company.
At June 30, 1996 the Company had cash, cash equivalents and securities
available for sale of approximately $4.7 million. A portion of the Company's
available funds may be applied to fund acquisitions of companies or assets of
companies in complementary or related fields or fields in which incoming
management has particular expertise. Although the Company from time to time
engages in discussions and negotiations of potential acquisitions, it currently
has no agreements or understandings with respect to any particular acquisition.
During the three months ended June 30, 1996 the Company had no cash
flows from financing activities as compared with a cash flow deficit from
financing activities of $8.3 million for the three months ended June 30, 1995
resulting from the early extinguishment certain of the Company's Debentures.
The Company's primary sources of capital have been sales of equity and
debt securities, including the Company's initial equity offering in July 1990,
which resulted in net proceeds of approximately $7.6 million, and a September
1991 sale of $55 million 9.5% Convertible Subordinated Debentures maturing on
September 19, 1997, which resulted in net proceeds of $51.4 million. At March
31, 1996, as a result of prepayments during fiscal 1996 without penalty of $28.9
million, the outstanding principal balance of Debentures was $22.1 million. No
additional amounts were prepaid during the three months ended June 30, 1996 and
the outstanding principal balance remains unchanged at June 30, 1996. The
Debentures are convertible into Common Stock at
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<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
the rate of one share of Common Stock per $12.25 principal amount. Annual
interest payments of approximately $2.1 million are required under the
Debentures outstanding as of June 30, 1996. Annual interest payments were made
in accordance with the terms of the Indenture in September 1992, 1993, 1994 and
1995. As of June 30, 1996, the Company had accrued $1,635,057 as interest
payable.
At June 30, 1996 the Company had approximately $1,436,771 in net
operating loss carryforwards available to offset future taxable income for
federal and state income tax purposes. The utilization of the net operating
losses to reduce future income taxes will depend on the Company's ability to
generate sufficient taxable income prior to the expiration of the net operating
loss carryforwards. The loss carryforwards expire at various times between the
present and 2011.
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<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following discussion is a supplement to the description of
certain administrative and legal proceedings in which the
Company is involved set forth in the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1996, and
should be read in conjunction with such description.
In July 1996, Living Benefits, Inc. ("LBI") commenced an
action in the U.S. District Court for the District of New
Mexico against the Company. In its complaint, LBI claims
breach of contract relating to certain terms under a 1991
contract pursuant to which the Company purchased certain
assets from LBI. The plaintiff seeks actual damages of
$1,660,000, prejudgment interest, attorneys' fees and
unspecified punitive damages. The Company believes that LBI's
calculation significantly overstates the amounts due under the
contract, and is engaging in discussions with LBI in the hopes
of settling the dispute amicably.
As of March 31, 1996, the Company's stockholder's equity was
below the $500,000 required by the Boston Stock Exchange (the
"BSE") for continued listing. On July 18, 1996, the Company
received a request from the BSE for information relating to
the Company's plans to comply with the requirement or
acquiesce to its delisting. On August 15, 1996, the Company
provided the BSE with its plan of compliance, which included
closing the Settlement and utilizing the liquidity provided by
the Settlement to take advantage of business opportunities in
which incoming management has expertise. In connection with
its plan of compliance, the Company requested to remain listed
without interruption for 45 days, during which it would to
provide the BSE with conclusive evidence that the deficiency
had been rectified. On August 20, 1996 the Company received a
notice from the BSE denying the Company's request and
notifying the Company that trading of its securities would be
suspended as of the close of business on August 20, 1996 and
that the BSE would file for delisting with the Securities and
Exchange Commission.
ITEM 2. CHANGES IN SECURITIES
In July, 1996, the Company extended the expiration of its
outstanding Class A Warrants and Class B Warrants through June
30, 1997.
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 AND REPORTS ON FORM 8-K
(a) EXHIBIT TABLE.
Exhibit No. Description
3.4 Certificate of Incorporation of AutoLend Group, Inc.
3.5 By-laws of AutoLend Group, Inc.
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<PAGE>
4.1 Form of 9.5% Convertible Subordinated Debenture
4.2 Warrant Agreement
4.3 Unit Purchase Option
4.4 Stock Purchase Warrant granted to Banque Degroof
Luxembourg, S.A.
4.5 Stock Purchase Warrant granted to Till A. Petrocchi
4.6 Stock Purchase Warrant granted to Steve Simon and Helen
Porter
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended June
30, 1996.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
AUTOLEND GROUP, INC.
(Registrant)
SIGNATURE TITLE DATE
/s/ Steve Simon Chairman of the Board, August 21, 1996
- -------------------------- Chief Executive Officer
Steve Simon
/s/ Helen Porter Chief Accounting Officer August 21, 1996
- --------------------------
Helen Porter
- 8 -
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(a) Exhibits
3.4 Certificate of Incorporation of AutoLend Group, Inc.(1)
3.5 By-laws of AutoLend Group, Inc. (1)
4.1 Form of 9.5% Convertible Subordinated Debenture (2)
4.2 Warrant Agreement (3)
4.3 Unit Purchase Option (3)
4.4 Stock Purchase Warrant granted to Banque Degroof
Luxembourg, S.A. (2)
4.5 Stock Purchase Warrant granted to Till A. Petrocchi (2)
4.6 Stock Purchase Warrant granted to Steve Simon and
Helen Porter (4)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended June 30, 1996.
(1) Filed on July 16, 1996 as an exhibit to the Registrant's Annual Report on
Form 10-K for the year ended March 31, 1996 and incorporated herein by
reference.
(2) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended March 31, 1991 and incorporated herein by reference.
(3) Filed as an exhibit to the Registrant's Registration Statement on Form F-1
(Registration No. 33-29251) and incorporated herein by reference.
(4) Filed as an exhibit to the Registrant's Current Report on Form 8-K, filed
with the Commission on April 21, 1993 and incorporated herein by reference.
- 9 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's Unaudited Consolidated Balance Sheets and Unaudited Consolidated
Statements of Operations for the three month period ended June 30, 1996, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4561399
<SECURITIES> 175000
<RECEIVABLES> 10216551
<ALLOWANCES> 3020776
<INVENTORY> 0
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<BONDS> 22050000
0
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<COMMON> 9269
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