<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one:)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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.
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(Exact name of registrant as specified in its charter)
Delaware 22-3137244
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
600 Central SW, Third Floor, Albuquerque, New Mexico 87102
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(505) 768-1000
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(Registrant's telephone number, including area code)
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 .
--- ---
Applicable only to Registrants involved in bankruptcy proceedings during the
preceding five years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
--- ---
Applicable only to corporate issuers:
The number of shares outstanding of the Registrant's common stock was 1,088,803
at August 8, 2000.
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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PART I -- FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements...................................................................... 3
Consolidated Balance Sheets as of June 30, 2000, and March 31, 2000.............................. 3
Consolidated Statements of Operations for the three-month periods
ended June 30, 2000, and 1999................................................................. 4
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
for the three-month period ended June 30, 2000................................................ 5
Consolidated Statements of Cash Flow for the three-month periods
ended June 30, 2000, and 1999................................................................. 6
Notes to Consolidated Financial Statements....................................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................... 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk................................. 13
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings......................................................................... 14
Item 2. Changes in Securities and Use of Proceeds................................................. 15
Item 3. Defaults Upon Senior Securities........................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders....................................... 15
Item 5. Other Information......................................................................... 15
Item 6. Exhibits and Reports on Form 8-K.......................................................... 15
SIGNATURES........................................................................................ 16
</TABLE>
FORWARD-LOOKING INFORMATION
The following discussions include "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are not historical
facts; they involve risks and uncertainties that could cause the Company's
results to differ materially from those in the forward-looking statements. The
risks and uncertainties that may affect the operations, performance,
development, and results of the Company's business include significant risk
factors, including the real and perceived difficulties from the Company's past
bankruptcy (which could adversely affect its existing and proposed operations);
and, the Company's present financial condition. From time to time, the Company
may publish or otherwise make available forward-looking statements. All
subsequent forward-looking statements, whether written or oral and whether made
by or on behalf of the Company, are also expressly qualified by these cautionary
statements.
2
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AUTOLEND GROUP, INC. AND SUBSIDIARIES
Part 1 - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
Consolidated Balance Sheets
June 30, 2000 March 31, 2000
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(unaudited) (audited)
<S> <C> <C>
Assets:
Cash (before Overdraft, below) $ 270,330 $ 373,184
Stock issuance proceeds receivable - 78,678
Receivable from officer 150,000 150,000
Installment contracts (Loans) recoveries receivable 4,162 35,390
Other receivables 2,916 40,955
Prepaid expenses 11,091 21,456
Purchased insurance policies at estimated market value;
face value of $366,044 at June 30, 2000 and March 31, 2000 35,881 35,678
Fixed assets, less accumulated depreciation of $23,469 at
June 30, 2000 and $21,057 at March 31, 2000 33,770 36,840
----------- ------------
Total assets $ 508,150 $ 772,181
=========== ============
Liabilities:
Bank cash overdraft $ 25,967 $ -
Accounts payable 65,891 12,073
Accrued liabilities 19,992 31,888
Contingent liabilities 31,286 -
Unsecured, non-interest-bearing Notes payable - discounted 510,733 510,733
Unsecured, non-interest-bearing Notes payable - imputed interest 39,375 31,501
----------- ------------
Total liabilities $ 693,244 $ 586,195
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Stockholders' Equity:
Preferred stock, $.002 par value. Authorized 5,000,000 shares; - -
no shares issued or outstanding at June 30, 2000 or March 31, 2000
Common stock, $.002 par value. Authorized 40,000,000 shares;
issued and outstanding 1,088,803 shares at June 30, 2000 and
March 31, 2000 $ 2,177 $ 2,177
issuable 6,500 shares at June 30, 2000, and 4,875 shares at
March 31, 2000 13 10
Additional paid-in capital 675,068 673,446
Accumulated deficit (862,352) (489,647)
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Total stockholders' equity $ (185,094) $ 185,986
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Total liabilities and stockholders' equity $ 508,150 $ 772,181
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Month Period Ended
June 30,
--------------------------------
2000 1999
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<S> <C> <C>
Revenues:
Finance charges on installment contracts (Loans) $ - $ 6,917
Revenues from matured insurance policies - 85,421
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Gross revenues - 92,338
Cost of matured insurance policies - (31,980)
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Total net revenues $ - $ 60,358
General and administrative expenses (373,736) (437,940)
Loan loss recovery, net - 60,091
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Operating loss $ (373,736) $ (317,491)
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Other income/(expense):
Interest income on cash $ 3,530 $ 48,721
Notes payable, discount amortization (7,874) (8,069)
Net miscellaneous other income (expense) 310 27,950
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Total net other income (expense) $ (4,034) $ 68,602
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Loss before reorganization costs (377,770) (248,889)
Reorganization costs incurred during Chapter 11 proceedings - (89,007)
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Net loss from continuing operations (377,770) (337,896)
Income from discontinued operations 5,065 -
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Net loss $ (372,705) $ (337,896)
========== ==========
Per Share:
----------
Operating loss $ (0.34) $ (0.31)
Total net other income (expense) (0.00) 0.07
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Loss before reorganization costs $ (0.35) $ (0.24)
Reorganization costs incurred during Chapter 11 proceedings - (0.08)
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Net loss from continuing operations $ (0.35) $ (0.32)
Income from discontinued operations 0.00 -
---------- ----------
Net loss $ (0.34) $ (0.32)
========== ==========
Weighted average number of common and common
equivalent shares issued and outstanding 1,088,803 -
Weighted average number of common and common
equivalent shares issuable 5,017 1,040,000
---------- ----------
Total weighted average number of common and common
equivalent shares issued and outstanding, and issuable 1,093,820 1,040,000
========== ==========
</TABLE>
See accompany notes to consolidated financial statements.
4
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AUTOLEND GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Preferred Stock Common Stock
---------------------- ---------------------- Additional
# of $ # of $ Paid-in Accumulated
Shares Amount Shares Amount Capital Equity/(Deficit) Total
---------- ---------- ---------- ---------- ---------- ---------------- ----------
Balance at March 31, 2000 - $ - 1,093,678 $ 2,187 $ 673,446 $ (489,647) $ 185,986
Purchase of 1,625 shares of
issuable common stock - - 1,625 3 1,622 1,625
Net loss for three months ended
June 30, 2000 - - - - - (372,705) (372,705)
---------- ---------- ---------- ---------- ---------- ---------------- ----------
Balance at June 30, 2000 - $ - 1,095,303 $ 2,190 $ 675,068 $ (862,352) $ (185,094)
========== ========== ========== ========== ========== ================ ==========
</TABLE>
5
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flow
(unaudited)
<TABLE>
<CAPTION>
Three Month Period Ended
June 30,
--------------------------------
2000 1999
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<S> <C> <C>
Cash flow from operating activities:
Net loss $ (372,705) $ (337,896)
Adjustments to reconcile net loss to net cash flow from
operating activities:
Depreciation expense 3,070 4,678
Amortization of Notes payable discount 7,874 8,069
Gain on relief of liability - (27,950)
Changes in assets and liabilities:
(Increase) decrease in assets:
Other receivables 38,039 40,697
Prepaid expenses 10,365 8,057
Installment contracts receivable (Loans) and Loss recovery 31,228 15,026
Purchased insurance policies (203) 31,980
Other assets - (54,437)
Increase (decrease) in liabilities:
Accounts payable - trade, and accrued liabilities 41,922 (152,457)
Other liabilities - contingent 31,286 -
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Cash (used) by operating activities $ (209,124) $ (464,233)
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Cash provided by investing activities $ - $ -
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Cash flow from financing activities:
Proceeds received from stock issuance $ 80,303 $ -
Increase in bank overdraft 25,967 -
Payments to debenture holders - (1,877,750)
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Cash provided (used) by financing activities $ 106,270 $ (1,877,750)
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Net (decrease) in cash $ (102,854) $ (2,341,983)
Cash at beginning of period 373,184 4,937,937
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Cash at end of period (before bank overdraft) $ 270,330 $ 2,595,954
------------ -------------
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES
There were no non-cash investing and financing activities for the three months
ended June 30, 2000 or June 30, 1999.
See accompanying notes to consolidated financial statements.
6
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statement
(unaudited)
(1) Summary of Significant Accounting Policies: Basis of Presentation.
The accompanying consolidated financial statements of AutoLend Group, Inc. and
its wholly owned subsidiaries AutoLend Corporation, LB NM, Inc., and American
Life Resources Group, Inc. (collectively, the "Company") have been prepared on a
going-concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business. As
a result of the Company's inability to make repayment on, and resultant default
on, its Convertible Subordinated Debentures due September 19, 1997 (the
"Debentures"), the Company filed for voluntary reorganization under Chapter 11
of the United States Bankruptcy Code in the United States Bankruptcy Court for
the District of New Mexico (the "Bankruptcy Court") on September 22, 1997. The
Bankruptcy Court confirmed a Plan of Reorganization (the "Plan"), which became
effective on March 5, 1999, at which time the Company attained a positive net
equity, and was no longer classified as a "debtor-in-possession." On January 13,
2000, the Bankruptcy Court entered its final decree, thereby closing the
Company's Chapter 11 case.
The Company's audited consolidated Balance Sheet as of March 31, 2000, and the
accompanying unaudited consolidated financial statements as of June 30, 2000 and
1999, have been presented in conformity with the American Institute of Certified
Public Accountants' Statement of Position 90-7. While it was in Chapter 11, the
Company adopted "fresh-start" reporting and gave effect to its emergence as of
March 5, 1999. Under fresh-start accounting, all assets and liabilities are
restated to reflect their reorganized value, which approximates fair value.
With respect to the unaudited consolidated financial statements for the three
months ended June 30, 2000 and 1999, it is the Company's opinion that all
necessary adjustments (consisting of normal and recurring adjustments) have been
included to present a fair statement of results for the interim periods. These
statements should be read in conjunction with the Company's consolidated
financial statements in its Annual Report on Form 10-K for the fiscal year ended
March 31, 2000. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, pursuant to the general
rules and regulations promulgated by the Securities and Exchange Commission (the
"SEC").
(2) Going Concern.
At June 30, 2000, the Company had net cash (after the financial effect of a
temporary bank overdraft) of $244,000, which is before the impact of payables
immediately due in July 2000 of approximately $71,000. At June 30, 2000, the
Company had a negative net equity (i.e., a deficit) of $185,000, which excludes
the financial effect of a remaining lease obligation due pursuant to the
Albuquerque office lease terms, which totaled approximately $245,000 at August
9, 2000. Without either an infusion of capital, and / or the sale or realization
of assets for cash at greater than net book value, the Company will not be able
to meet all its presently outstanding obligations. The net equity deficit of
$185,000 at June 30, 2000 includes an unreserved asset consisting of a past-due
receivable of $150,000, which was due to the Company pursuant to Court order no
later than July 11, 2000 from the Company's present Chief Executive Officer; as
of August 9, 2000, no payment against this officer's debt had been received by
the Company.
7
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statement
(unaudited)
The Company believes that it presently has insufficient cash necessary (even if
obligations currently due under the five-year unsecured Notes payable are
excluded) to continue operating through the current fiscal year (ending March
31, 2001). The Company is not likely to be able to secure and install a new,
profitable line of business in this time frame. Thus, the Company will likely
have to either be acquired, merge, or liquidate.
The Company is temporarily without a Chairman of the Board, and temporarily has
less than the minimum of three Directors as required by the Company's Bylaws.
Due to the legal opinion of the Company's reorganization counsel, the first
scheduled annual $0.1 million Notes payable payment to former Debenture holders
who became note holders was not made as originally scheduled, and as of the date
of this filing, has not been made (see Note 4 below). These payments are due
primarily to current controlling shareholders (but not to management).
(3) Potential Change in Control
The Company is aware that an independent third party has had discussions with
persons representing the majority of shares outstanding, regarding the possible
purchase of a controlling interest in the Company. The Company has been informed
that a verbal agreement between the parties has been reached, which is not
binding at this point. The Company is not a party to the negotiations, and has
no knowledge of whether any such transaction may occur, or if it did occur, what
its impact might be.
(4) Five-year Notes Payable.
As a result of the Debenture debt forgiveness, unsecured, non-interest-bearing
notes aggregating $609,000 (undiscounted) were received by former Debenture
holders who elected Option A under the Reorganization Plan. For financial
statement presentation, these notes have been discounted based on an imputed
interest rate of 6%; thus, these notes have been recorded at their discounted
value of $510,733 (plus $39,000 in amortization of the discount to date at June
30, 2000).
These notes are payable in five equal annual payments of $121,800. The first
annual payment was originally scheduled for March 5, 2000; however, on advice of
reorganization counsel, the first scheduled payment was not made according to
that original schedule. The payments are due primarily to controlling
shareholders (but not to management). The Company's management presently plans
to put the issue forth to the Company's new shareholders and directors for
resolution. The Company's reorganization counsel has indicated that a payment of
this magnitude to controlling shareholders while the Company is in its present
financial condition would be inappropriate, and that the Company's obligation to
its landlord takes precedence. If the Company were to liquidate, any such note
payment would likely be the subject of an adversary proceeding against the
recipient controlling shareholders. Management is seeking appropriate guidance
with respect to this issue.
8
<PAGE>
(5) Office Lease.
In February 1999, the Company assumed a lease from International Thoroughbred
Breeders, Inc. ("ITB"), pursuant to a legal settlement involving the return of
substantial funds to the Company. This lease covers the office space at 600
Central SW in Albuquerque, where the Company has had its offices since August
1997. The lease terminates on July 31, 2002, and the lease payments are (as of
August 1, 2000) presently $10,441 per month. Each August 1, the lease payments
may be adjusted according to any changes in the Consumer Price Index. The
Company has in the past subleased a portion of its space on a month-to-month. At
August 9, 2000, the remaining obligation under the lease totaled approximately
$245,000.
(6) Contingent Rights -- El Rancho Property
In connection with NPD, Inc.'s participation in the Delaware Chancery Court
litigation with respect to ITB (which was settled effective November 6, 1998),
and in connection with the Company's adversary proceeding against NPD, Inc. (the
terms of which were finalized as part of the NM Bankruptcy Court ITB settlement
approved in September 1998, consummated in January 1999, and administratively
closed by Court order on June 26, 2000), and furthermore in connection with the
Company's adversary proceeding against Nunzio DeSantis (which was settled
effective January 7, 2000), the Company received certain contingent rights. The
contingent rights which the Company received are with respect to possible
proceeds receivable in the event that ITB's real estate holding in Las Vegas,
Nevada sold above a certain threshold amount, under certain conditions. The
Company's rights thereunder may be up to $2.0 million. According to a Form 8-K
filed with the SEC by ITB on June 7, 2000, the former El Rancho Hotel property
sold on May 22, 2000. The Company is presently investigating its legal options,
and what actions may be necessary in order to realize any potential benefit
which may be due from this sale as disclosed by the ITB Form 8-K filing.
(7) Employees
As of August 9, 2000, the Company and its subsidiaries had three employees. Of
these, the Chief Executive Officer is working without cash salary, and the other
two are temporarily receiving half or partial salary (which is not intended to
constitute a waiver under any written contract). The Company believes that it
will be unable to retain its current employees much longer under these
conditions, and may not be able to replace employees where needed.
(8) Attempted New Business
The New Mexico Gaming Control Board has been processing the Company's
application for licensure as a distributor of gaming machines for fraternal
organizations in New Mexico. In connection with this review, the Company
received correspondence from the Gaming Control Board, indicating that the
licensure process was significantly lengthened due to, and dependant upon the
outcome of, the SEC investigation. (On February 16, 1999, the Company was
notified
9
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statement
(unaudited)
by its counsel that it was subject to an investigation by the SEC; see "Part 2,
Item 1., Legal Proceedings" below.)
On June 13, 2000, the Company was informed by the Enforcement Staff of the SEC
(the "Staff") that the Staff intends to recommend that the SEC bring a civil
injunctive action against the Company and an officer for alleged violations of
securities laws. The Company believes it has defenses against this Staff
recommendation, and on July 14, 2000 the Company made a responding formal
submission to the SEC, under SEC procedures. Nonetheless, on or about June 15,
2000, the Company decided to terminate its attempt to become licensed by the
Gaming Control Board. Thus, the Company must now find some other business to
enter, or, more likely, be acquired, merge, or possibly liquidate and close.
(9) Available "Loss Carryforwards"
The Company currently has unused operating loss carryforwards ("OLC's") and
capital loss carryforwards ("CLC's") which expire at various times. Federal
OLC's total $11.0 million, and expire between the years 2012 and 2021. State
OLC's total $11.0 million, and expire between the years 2002 and 2021 (with
almost half expiring in 2002). CLC's total $1.3 million, and expire primarily in
the year 2002, with some available until 2005. At a combined federal and state
corporate statutory tax rate of 38.6 percent, the present OLC's can, in a valid
situation, result in the cancellation of a requirement to pay approximately $4.2
million in federal and state income taxes, either immediately in one year or
spread out over many years. Due to the uncertainty of the Company's ability to
ever utilize these tax benefits, their financial benefits have not been
recognized.
The requirements to utilize such loss carryforwards are strict, and the
possibilities for usage are extremely limited. In general, OLC's can be used to
offset future operating profits, thus negating the necessity to pay
corresponding future income taxes (until the loss carryforwards become used up
or expire). Any such future operating profits (which might realize these tax
benefits) could be derived internally, or could be derived from acquiring
additional assets, or from the purchase of another qualified business entity
through the acquisition of its stock; however, if there is a substantial change
in ownership, these tax benefits could be reduced, if not eliminated. CLC's may
be used to offset future capital gains associated with the disposal of capital
assets (but may not be used to offset ordinary income).
10
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General.
The Company is winding down its two businesses, one of which is classified
as a discontinued operation (see below). For approximately two and a half
years, the Company's activities have concentrated on resolving its (now-
concluded) bankruptcy and attempting to develop a gaming business and
obtain licensure as a distributor in connection with that business. The
gaming business attempt was terminated in June, 2000. Additionally, the
Company has worked to complete its Registration Statement (as required by
the Plan of Reorganization), which was made effective by the SEC in
January, 2000. The Company has also continued to collect amounts due from
the residual Loan portfolio and the residual Policy portfolio. The
Company's new stock ticker symbol is "ALEN," which trades Over-The-Counter.
The Company is not affiliated with the website www.autolend.com, nor is the
---
company affiliated with the Miami-based business, AutoLend IAP.
Results of Operations: Three-month periods ended June 30, 2000, and 1999
The Company recorded a net loss of $373,000 for the three-month period
ended June 30, 2000. The loss was primarily due to operating losses and
negligible revenue.
Net revenues realized from viatical insurance policies (the "Policies") in
the three months ended June 30, 2000 were zero, as compared to $53,000 in
the three months ended June 30, 1999.
On April 1, 2000, the Company adopted a plan to sell the used car loan
portion of the Company's business (the "Loans"), and henceforth this
particular business activity will be considered a discontinued operation.
Thus any future Loan collections will not be recorded as Loan revenues or
Loan loss recoveries, and likewise, collection expenses will no longer be
recorded as part of general and administrative expenses; instead, the
total net result of any remaining Loan activity will be recorded as either
a net income or loss from discontinued operations. Thus, there were no
revenues from Loans recognized during the three months ended June 30, 2000,
compared to the $7,000 realized during the three months ended June 30,
1999. Similarly, there was no Loan loss recovery recognized for the three
months ended June 30, 2000, compared to a recovery of $60,000 for the three
months ended June 30, 1999 related to previously charged-off Loans. (The
recoveries were the result of collections on old Loans, which had, in the
past, been more than six months in arrears and had therefore been written
off, in accordance with the Company's long-standing procedures.) The net
result of discontinued (Loan) operations for the three months ended June
30, 2000, was a net income of $5,000.
General and administrative expenses were $374,000 during the three months
ended June 30, 2000, and $438,000 during the three months ended June 30,
1999. The decrease of approximately $64,000 was due primarily to decreases
in legal and professional fees, car Loan portfolio administration costs,
travel expenses, and salaries.
11
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Operating losses for the three months ended June 30, 2000, were
approximately $374,000, compared to operating losses of approximately
$318,000 for the three months ended June 30, 1999. The $56,000 increase in
operating losses was primarily due to a $60,000 decrease in net revenue and
a decrease of $60,000 in loan loss recoveries, which were partially offset
by a $64,000 decrease in general and administrative expense.
The impact of non-operating items for the three months ended June 30, 2000
was a net $4,000 expense, compared to a net non-operating income of $69,000
for the three months ended June 30, 1999. The $4,000 in non-operating
expense for the present period was primarily due to $8,000 in amortization
of the imputed discount on the five-year notes outstanding, which was
partially offset by $4,000 in interest income. The $69,000 non-operating
income for the same period last year was primarily due to interest income
of $49,000 and a $28,000 gain on relief from liability, which was partially
offset by amortization of the imputed discount on the five-year notes
outstanding of $8,000.
In addition to the above, for the three months ended June 30, 2000 and
1999, the Company incurred zero and $89,000, respectively, in the periods
then ended, in reorganization costs related to the bankruptcy proceedings.
The net effect of all of the foregoing was a net loss of $373,000, or $0.34
per share, for the three months ended June 30, 2000. The net loss for the
same period last year was $338,000, or $0.32 per share. The $373,000 loss
in the current period was due primarily to an operating loss of $374,000.
Losses per share for the period ended June 30, 2000 were calculated based
upon the weighted average number of common and common equivalent shares
issued and outstanding and issuable, of 1,093,820 shares. Losses per share
for the period ended June 30, 1999 were calculated based upon the weighted
average number of common and common equivalent shares then issuable per the
Plan of Reorganization, of 1,040,000.
Liquidity and Capital Resources
Cash flow from operations was a negative $209,000 for the three months
ended June 30, 2000, which was primarily due to current period net losses,
which are essentially general and administrative expenses in the absence of
any significant revenues. This compares to cash flow from operations of a
negative $464,000 for the three months ended June 30, 1999.
The Company's immediate viability as a going concern depends upon the near-
term infusion of capital, and the ultimate successful installation of a new
line of business and the resultant attainment of profitability. At June
30, 2000, the Company had had net cash (after the financial effect of a
temporary bank overdraft) of $244,000, which is before the impact of
payables immediately due in July of approximately $71,000. At June 30,
2000, the Company had a negative net equity (i.e., a deficit) of $185,000,
which excludes the impact of remaining amounts due pursuant to the
Albuquerque office lease obligation, which obligation totaled approximately
$245,000 at August 9, 2000.
12
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Without either an infusion of capital, and / or the sale or realization of
assets for cash at greater than net book value, the Company will not be
able to meet all its presently outstanding obligations. The Company
believes that it presently has insufficient cash necessary (even if
obligations currently due under the five-year Notes payable are excluded)
to continue operating through the current fiscal year (ending March 31,
2001). The Company is not likely to be able to secure and install a new,
profitable line of business in this time frame. Thus, the Company will
likely have to either be acquired, merge, or liquidate.
The Company's portfolio of used-car consumer installment Loans receivable
at June 30, 2000, was approximately $4,000, and consisted of approximately
3,900 inactive (written-off) Loans, having a combined face value of
approximately $15 million. This Loan portfolio provides a small and
declining monthly stream of net cash receipts. The Company ceased
purchasing these Loans in December 1995, and presently plans to sell the
portfolio; the business is considered discontinued as of April 1, 2000.
The Company's portfolio of unmatured viatical insurance Policies totaled 5
at June 30, 2000, having a combined face value of $366,000 and a net book
value of $36,000. The Company generally ceased purchasing Policies in
September 1994. Future revenues from the Policy portfolio will be
irregular, if any. Some of these Policies may be sellable.
There was no cash provided or used by investing activities for the three
months ended June 30, 2000 or 1999. $106,000 in cash was provided by
financing activities for the three months ended June 30, 2000, resulting
from proceeds received from the issuance of stock and the temporary
utilization of a bank overdraft. $1.9 million was used by financing
activities for payments to qualified former debenture holders under the
Plan of Reorganization during the three months ended June 30, 1999.
In total, the Company decreased its cash by $103,000 during the three
months ended June 30, 2000, to a total of $244,000 after the effect of a
temporary bank overdraft. The decrease was largely due to net use of cash
from operations during the current period. In comparison, there was a $2.3
million decrease in cash during the three months ended June 30, 1999,
primarily due to the $1.9 million in payments to qualified former debenture
holders under the Plan of Reorganization.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
13
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
Part II: Other Information
Item 1. Legal Proceedings.
SEC Investigation. On February 16, 1999, the Company was notified by its
counsel that it was subject to an investigation by the SEC. The Company
cooperated fully with the staff of the SEC to aid their understanding of the
matters of concern. Management believes that the investigation is now complete.
SEC Recommendation. On June 13, 2000, the Company was informed by the
Enforcement Staff of the SEC (the "Staff") that the Staff intends to recommend
that the SEC bring a civil injunctive action against the Company, as well as one
against its chief executive officer, for alleged violations of federal
securities laws. The Staff has informed the Company that it does not intend to
recommend civil penalties, fines, or disgorgement from the Company, but does
intend to recommend civil penalties against the officer as an individual.
Management believes that the Staff recommendations are based on activities that
took place prior to October 1997 in connection with the Company's tender offer
for the Company's Debentures, the adequacy of the Company's disclosure related
to the tender offer, the purchase of Debentures at a discount from face value,
and previously reported transactions in connection with International
Thoroughbred Breeders, Inc.
Under SEC procedures, the Company responded on July 14, 2000 to the Staff's
recommendation in a formal written submission to the SEC, and plans to enter
into discussion with the SEC. Thereafter, the SEC may follow the Staff
recommendations, or decline to follow them, or take other action. If the SEC
follows the Staff recommendations, an extensive legal process could proceed in
Federal Court. Should an injunction ultimately be issued against the Company,
the Company would be prohibited from engaging in acts similar to the ones that
led to the recommendation for the injunction, and from violations of federal
securities laws. Such an injunction against the Company would have to be
disclosed in any future filings or registrations of Company securities, and may
have other ramifications as well. The Company believes that it has defenses
with respect to the Staff allegations against it, but is unable to predict the
outcome of the process.
AutoLend Group, Inc. v. Vincent Villanueva. On July 14, 1998, the Company filed
an adversary claim against Vincent Villanueva, a former director of the Company,
to recover certain pre-petition payments made to him, including the possible
return of up to $39,647. On April 21, 1999, a motion to dismiss this claim was
filed, and on July 6, 1999, a Court order approving dismissal of the claim
against Mr. Villanueva was entered. After the bankruptcy case was closed
effective January 13, 2000, Mr. Villanueva's attorney filed a motion for payment
by the Company to Mr. Villanueva of associated legal fees estimated at between
$7,000 and $15,000. A Court hearing was held June 21, 2000 regarding this claim
made by Mr. Villanueva; the Court has taken the matter under advisement.
14
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
Not applicable.
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) Exhibits.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
None
15
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the Securities Exchange Act of 1934, the registrant has caused
this report to be signed on its behalf by the following duly authorized
persons.
AUTOLEND GROUP, INC.
(Registrant)
SIGNATURE TITLE DATE
--------- ----- ----
/s/ NUNZIO P. DESANTIS Chief Executive Officer August 9, 2000
---------------------- (principal executive officer)
Nunzio P. DeSantis
/s/ JEFFREY OVINGTON Executive Vice President August 9, 2000
---------------------- (principal accounting and
Jeffrey Ovington financial officer)
16
