<PAGE>
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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 SEPTEMBER 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.
(Exact name of registrant as specified in its charter)
Delaware 22-3137244
(State or other jurisdiction (IRS Employer
of incorporation of organization) Identification No.)
600 Central SE, Third Floor, Albuquerque, New Mexico 87102
(Address of principal executive office) (Zip Code)
(505) 768-1000
(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 1,093,678
at November 10, 2000.
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<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C>
PAGE
Item 1. Financial Statements ................................................ 3
Consolidated Balance Sheets as of September 30, 2000, and March 31, 2000... 3
Consolidated Statements of Operation for the three-month and six-month
periods ended September 30, 2000, and 1999 .............................. 4
Consolidated Statement of Changes in Stockholders' Equity / (Deficit) for
the six-month period ended September 30, 2000 ............................ 5
Consolidated Statements of Cash Flow for the six-month periods
ended September 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 ............ 15
</TABLE>
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Item 1. Legal Proceedings .................................................... 16
ITEM 2. Changes in Securities and Use of Proceeds............................. 17
ITEM 3. Defaults Upon Senior Securities ...................................... 17
ITEM 4. Submission of Matters to a Vote of Security Holders .................. 17
ITEM 5. Other Information .................................................... 17
Item 6. Exhibits and Reports on Form 8-K ..................................... 17
SIGNATURES .................................................................... 18
</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 any 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
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September March
30, 2000 31, 2000
----------- ---------
(unaudited) (audited)
<S> <C> <C>
ASSETS:
Cash $ 113,516 $ 373,184
Stock issuance proceeds receivable - 78,678
Receivable from former officer - 150,000
Installment contracts (Loans) recoveries receivable 7,581 35,390
Other receivables 2,736 40,955
Prepaid expenses 2,458 21,456
Purchased insurance policies at estimated market value; face
value of $366,044 at September 30, 2000 and March 31, 2000 35,881 35,678
Fixed assets, less accumulated depreciation of $21,623 at
September 30, 2000, and $21,057 at March 31, 2000 35,689 36,840
----------- ---------
Total assets $ 197,861 $ 772,181
----------- ---------
LIABILITIES:
Accounts payable $ 4,934 $ 12,073
Accrued liabilities 15,967 31,888
Contingent / contested liabilities 83,975 -
Unsecured, non-interest-bearing debt - discounted 510,733 510,733
Unsecured, non-interest-bearing debt - imputed interest 47,248 31,501
----------- ---------
Total liabilities $ 662,857 $ 586,195
----------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $.002 par value. Authorized 5,000,000 shares; no - -
shares issued or outstanding at September 30, 2000 or March 31, 2000
Common stock, $.002 par value. Authorized 40,000,000
shares;
issued and outstanding 1,088,803 shares at September 30,
2000 and March 31, 2000 $ 2,177 $ 2,177
issuable 6,500 shares at September 30, 2000, and 4,875
shares at March 31, 2000 13 10
Additional paid-in capital 675,068 673,446
Accumulated deficit (1,142,254) (489,647)
----------- ---------
Total stockholders' equity $ (464,996) $ 185,986
----------- ---------
Total liabilities and stockholders' equity $ 197,861 $ 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 SIX MONTH PERIOD
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------ -----------------------
2000 1999 2000 1999
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Finance charges on installment contracts (Loans) $ - $ 8,002 $ - $ 14,919
Revenues from matured insurance policies - 92,380 - 177,801
---------- ---------- ---------- ----------
Gross revenues - 100,382 - 192,720
Cost of matured insurance policies - (39,608) - (71,588)
---------- ---------- ---------- ----------
TOTAL NET REVENUES $ - $ 60,774 $ - $ 121,132
General and administrative expenses (177,651) (374,882) (551,387) (812,822)
Loss on termination agreement with former officer (117,500) - (117,500) -
Loan loss recovery, net - 75,674 - 135,765
---------- ---------- ---------- ----------
OPERATING LOSS $ (295,151) $ (238,434) $ (668,887) $ (555,925)
---------- ---------- ---------- ----------
Other income/(expense):
Interest income on cash $ 1,328 $ 18,608 $ 4,858 $ 67,329
5-year debt, discount amortization (7,873) (8,069) (15,747) (16,138)
Gain on adversary settlement - 451,040 - 451,040
Cancellation of Florida tax claim - 162,876 - 162,876
Net miscellaneous other income (expense) 443 - 753 27,950
---------- ---------- ---------- ----------
TOTAL NET OTHER INCOME (EXPENSE) $ (6,102) $ 624,455 $ (10,136) $ 693,057
---------- ---------- ---------- ----------
Income (loss) before reorganization costs $ (301,253) $ 386,021 $ (679,023) $ 137,132
Reorganization costs incurred during Chapter 11 proceedings - (41,742) - (130,749)
---------- ---------- ---------- ----------
Net income (loss) from continuing operations (301,253) 344,279 (679,023) 6,383
Income from discontinued operations 21,351 - 26,416 -
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (279,902) $ 344,279 $ (652,607) $ 6,383
========== ========== ========== ==========
PER SHARE:
Operating loss $ (0.27) $ (0.23) $ (0.61) $ (0.53)
Total net other income (expense) (0.00) 0.60 (0.01) 0.66
---------- ---------- ---------- ----------
Income (loss) before reorganization costs $ (0.27) $ 0.37 $ (0.62) $ 0.13
Reorganization costs incurred during Chapter 11 proceedings - (0.04) - (0.13)
---------- ---------- ---------- ----------
Net income (loss) from continuing operations $ (0.27) $ 0.33 $ (0.62) $ 0.00
Income from discontinued operations 0.02 - 0.02 -
---------- ---------- ---------- ----------
Net income (loss) $ (0.25) $ 0.33 $ (0.60) $ 0.00
========== ========== ========== ==========
Weighted average number of common and common
equivalent shares issued and outstanding 1,088,803 - 1,088,803 -
Weighted average number of common and common
equivalent shares issuable 6,500 1,040,000 5,763 1,040,000
---------- ---------- ---------- ----------
Total weighted average number of common and common
equivalent shares issued and outstanding, and issuable 1,095,303 1,040,000 1,094,566 1,040,000
========== ========== ========== ==========
</TABLE>
See accompanying 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>
Preferred Stock Common Stock
---------------- ----------------- Additional
# of $ # of $ Paid-in Accumulated
Shares Amount Shares Amount Capital Equity/(Deficit) Total
------ ----- ------ ------ --------- ---------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
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 six months
ended September 30, 2000 - - - - - (652,607) (652,607)
------ ----- ---------- ------ -------- ----------- ---------
BALANCE AT SEPTEMBER 30, 2000 - $ - 1,095,303 $2,190 $675,068 $(1,142,254) $(464,996)
------ ----- ---------- ------ -------- ----------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
<TABLE>
<CATPTION>
SIX MONTH PERIOD ENDED
SEPTEMBER 30,
----------------------
2000 1999
------ ------
<S> <C> <C>
Cash flow from operating activities:
NET INCOME / (LOSS) $(652,607) $ 6,383
Adjustments to reconcile net income (loss) to net cash flow
from operating activities:
Depreciation expense 5,410 9,698
Amortization of debt discount 15,747 16,138
(Gain) on adversary settlement - (451,040)
Loss on termination agreement with former officer 117,500 -
(Gain) on relief of liability - (27,950)
(Gain) on sale of fixed assets (793) -
Changes in assets and liabilities:
(Increase) decrease in assets:
Receivable from former officer 27,500 -
Other receivables 38,219 44,340
Prepaid expenses 18,998 (22,030)
Installment contracts receivable (Loans) and Loss recovery 27,809 24,211
Purchased insurance policies (203) 71,587
Other assets - (95,015)
Increase (decrease) in liabilities:
Accounts payable - trade, and accrued liabilities (23,060) (396,521)
Other liabilities - contingent 83,975 -
--------- -----------
CASH (USED) BY OPERATING ACTIVITIES $(341,505) $ (820,199)
--------- -----------
Cash flow from investing activities:
Proceeds from sale of fixed assets $ 1,534 $ -
--------- -----------
CASH PROVIDED BY INVESTING ACTIVITIES $ 1,534 $ -
--------- -----------
Cash flow from financing activities:
Proceeds received from stock issuance $ 80,303 $ -
Payments to debenture holders - (2,724,250)
--------- -----------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES $ 80,303 $(2,724,250)
--------- -----------
NET (DECREASE) IN CASH $(259,668) $(3,544,449)
Cash at beginning of period 373,184 4,937,937
--------- -----------
CASH AT END OF PERIOD $ 113,516 $ 1,393,488
========= ===========
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES.
During the six months ended September 30, 2000, the following non-cash investing
activity occurred: The Company acquired furniture and fixtures with an
estimated market value of $5,000 as a result of the termination agreement with
Nunzio P. DeSantis dated September 28, 2000. There were no non-cash financing
activities for the six months ended September 30, 2000. There were no non-cash
investing or financing activities for the six months ended September 30, 1999.
See accompanying notes to consolidated financial statements.
6
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATD FINANCIAL STATEMENTS
(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" or "AutoLend")
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 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 September 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 market value.
With respect to the unaudited consolidated financial statements for the six
months ended September 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 September 30, 2000, the Company had net cash of $113,000, and had a
negative net equity (i.e., a deficit) of $465,000, which excludes the financial
effect of a remaining lease obligation due pursuant to the Albuquerque office
lease terms, which totaled approximately $214,000 at November 13, 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 Company believes that it presently has insufficient cash necessary
(even if obligations currently due under the five-year unsecured debt are
excluded) to continue operating through the current fiscal year (ending March
31, 2001).
7
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Due to the legal opinion of the Company's former 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 the current majority shareholder.
(3) CHANGE IN CONTROL.
Effective September 28, 2000, through an executed agreement between the
Company and its former CEO, Nunzio P. DeSantis, Mr. DeSantis resigned as an
employee and officer and in all other capacities, and is no longer affiliated
with, or associated in any manner with, the Company. The agreement provided
for, among other things, the settlement of all past, present, and future claims
by Mr. DeSantis against the Company (including the claim with respect to the
reimbursement for legal fees of $123,000 or more); the cancellation of the debt
owed to the Company by Mr. DeSantis of $150,000; the transfer to the Company of
certain items of furniture; and the payment to the Company by Mr. DeSantis of a
certain sum of cash upon execution. Mr. DeSantis had previously resigned from
the Company's Board of Directors effective May 1, 2000, and has held no shares
in the Company since March 5, 1999. The agreement further provides that Mr.
DeSantis henceforth shall not acquire, possess, or assert, directly or
indirectly, any interest of any kind in the Company.
The Company has been informed that, effective October 12, 2000, a block of
634,028 shares of the Company's common stock, equal to approximately 58% of the
total shares outstanding, changed hands in a private sale between two third
parties. The buyer and new majority owner is Prinova Capital Group, LLC, a New
Mexico limited liability company ("Prinova"). Prinova is a private, closely-
held company, headquartered in New Mexico. Prinova has no past or present ties
or affiliations to any recent or former shareholder, director, or officer of the
Company.
Effective October 13, 2000, two new Directors were appointed to the
Company's Board. They are: Mr. John D. Emery, 53, of Albuquerque, NM; and,
Mr. Vincent J. Garcia, 48, also of Albuquerque.
Mr. Emery was also appointed acting Chairman, acting President, and
Secretary of the Company. Mr. Emery has been a business consultant in private
practice for the last ten years, and has previously held executive positions.
Mr. Emery has also developed and sold his own businesses, holds an MBA from the
Harvard Graduate School of Business Administration, and has taught at the
University of New Mexico Graduate School of Business Administration. From 1994
until its sale to American Tower in 1998, Mr. Emery served on the Board of
Directors of Specialty Teleconstructors, Inc. / OmniAmerica, Inc., a Nasdaq-
listed company that had annual revenues of $65 million.
Mr. Garcia is the Managing Member and majority interest-holder in Prinova
Capital Group, LLC, and is Chairman and President of its affiliates, which
includes Prinova Investments, Ltd. Mr. Garcia, together with Prinova
Investments, Ltd., is the lead investor, developer, and majority interest-holder
with respect to the $32 million Renaissance Development project in downtown
Albuquerque.
After the appointment of Mr. Emery and Mr. Garcia to the Board, Philip
Vitale, M.D., tendered his resignation from the Board of Directors and in all
capacities, which the Board accepted.
8
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(4) FIVE-YEAR DEBT OBLIGATION.
As a result of the Debenture debt forgiveness, unsecured, non-interest-
bearing debt obligations aggregating $609,000 (undiscounted) were received by
former Debenture holders who elected Option A under the Reorganization Plan.
For financial statement presentation, this debt has been discounted based on an
imputed interest rate of 6%; thus, these obligations have been recorded at their
discounted value of approximately $511,000 (plus approximately $47,000 in
amortization of the discount to date at September 30, 2000).
These obligations are payable in five equal annual payments of $121,800.
The first annual payment was originally scheduled for approximately March 5,
2000; however, on advice of former reorganization counsel, the first scheduled
payment was not made according to that original schedule. The payments are due
primarily to the majority shareholder. The Company's new directors are presently
researching the company's options for resolution. The Company's former
reorganization counsel 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 debt repayment would
likely be the subject of an adversary proceeding against the recipient
shareholders.
(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 presently $10,441 per month. Each August 1st, 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 basis. At
November 13, 2000, the remaining obligation under the lease totaled
approximately $214,000.
(6) CONTINGENT RIGHTS -- EL RANCHO PROPERTY.
According to a Form 8-K filed with the SEC by ITB on June 7, 2000, the
former El Rancho Hotel property in Las Vegas, Nevada was sold by ITB on May 22,
2000. AutoLend had earlier received certain indirect contingent rights in the
event this ITB property sold above a certain threshold amount, under certain
conditions. The Company's rights thereunder, if any, may be up to $2.0 million.
ITB's most-recent Form 10-K, filed approximately October 13, 2000, has stated
that "... no payments are due ... as a result of the transaction." The Company
is presently investigating its legal options, and what actions may be necessary
in order to realize any potential benefit that may be due from this sale.
Realization of any rights that may exist with regard to this transaction would
likely be costly, and may be beyond the Company's means to attain.
(7) EMPLOYEES.
As of November 13, 2000, the Company and its subsidiaries had three
employees.
9
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(8) AVAILABLE "LOSS CARRYFORWARDS."
The Company has, in the past, accumulated unused operating loss
carryforwards and capital loss carryforwards, which would ordinarily provide for
certain tax benefits. However, the requirements to utilize such loss
carryforwards are strict, and the possibilities for usage are extremely limited.
Due to the substantial change in ownership effective October 12, 2000 (see Note
3 above), these tax benefits have been reduced, if not eliminated.
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 financial results described in this Form 10-Q are as of September 30,
2000. On September 28, 2000, Nunzio P. DeSantis, the Company's founder,
former Chairman of the Board, and until September 28, the Company's Chief
Executive Officer, resigned. On October 12, 2000, a controlling block of the
Company's shares changed hands, and on October 13, 2000, two new Directors
were appointed to the Board, a new principal executive officer was named, and
the last "old" Director resigned.
Effective October 19, 2000, the Company has notified Cozen & O'Connor, PC
that the firm will no longer represent the Company in any capacity for any
matter. Effective October 23, 2000, the Company has notified Davis & Pierce,
PC that it does not represent the Company before the SEC or for general
corporate matters. Effective approximately October 17, 2000, the Company
engaged the Michener Law Firm, LLC, to represent the Company before the SEC.
The Board held discussions with the Company's present auditors, Meyners +
Company LLC, a BDO Seidman LLC Alliance member ("Meyners"), and thereafter
passed a resolution continuing the engagement of Meyners, which Meyners
accepted.
The Company has been winding down its two businesses, one of which is
classified as a discontinued operation (see below). For approximately three
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.
Results of Operations: Six-month periods ended September 30, 2000, and 1999
The Company recorded a net loss of $653,000 for the six-month period ended
September 30, 2000. The loss was primarily due to operating losses and
negligible revenue.
Net revenues realized from viatical insurance policies (the "Policies") in
the six months ended September 30, 2000 were zero, as compared to $106,000 in
the six months ended September 30, 1999.
As of April 1, 2000, the used car loan portion of the Company's business
(the "Loans") has been classified as a discontinued operation. Since that
date, Loan collections are no longer recorded as Loan revenues or Loan loss
recoveries, and likewise, collection expenses are no longer recorded as part
of general and administrative expenses; instead, the total net result of any
11
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
remaining Loan activity are recorded as either a net income or loss from
discontinued operations. Thus, there were no revenues from Loans recognized
during the six months ended September 30, 2000, compared to the $15,000
realized during the six months ended September 30, 1999. Similarly, there was
no Loan loss recovery recognized for the six months ended September 30, 2000,
compared to a recovery of $136,000 for the six months ended September 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 six months ended September 30, 2000, was a net income of $26,000.
General and administrative expenses were $551,000 during the six months
ended September 30, 2000, as compared to $813,000 during the six months ended
September 30, 1999. The decrease of approximately $262,000 was due primarily
to decreases in legal and professional fees, car Loan portfolio administration
costs, and salaries. Additionally, in the six months ended September 30,
2000, there was a non-cash loss on the termination agreement with Nunzio P.
DeSantis, the Company's former CEO, of approximately $117,000, which was
primarily due to the cancellation of an outstanding receivable due under the
adversary settlement which was offset in the termination agreement with a
cancellation of DeSantis' claim for reimbursement of legal expenses; as
compared to no such event during the six months ended September 30, 1999.
Total operating losses for the six months ended September 30, 2000, were
approximately $669,000, compared to operating losses of approximately $556,000
for the six months ended September 30, 1999. The $113,000 increase in
operating losses was primarily due to decreases of $121,000 in net revenues
and $136,000 in loan loss recoveries, and the $117,000 loss on the termination
agreement, which were partially offset by a $262,000 decrease in general and
administrative expense. The current period operating loss was primarily
caused by general and administrative expenditures in the absence of revenues
(as receipts now received from the car Loan portfolio are no longer classified
as revenues), and the termination agreement.
The impact of non-operating items for the six months ended September 30,
2000 was a net $10,000 expense, compared to a net non-operating income of
$693,000 for the six months ended September 30, 1999. The $10,000 in non-
operating expense for the present period was primarily due to the $16,000 in
amortization of the imputed discount on the five-year debt obligations
outstanding, partially offset by $5,000 in interest income. The $693,000 non-
operating income for the same period last year was primarily due to a $451,000
gain on the adversary settlement with the former CEO, $163,000 resulting from
the cancellation of the Florida tax claim, interest income of $67,000 and a
$28,000 gain on relief from liability, which was partially offset by
amortization of the imputed discount on the five- year debt obligations
outstanding of $16,000. The prior year gain of $451,000 on the adversary
settlement included a $150,000 receivable, which receivable was largely
written-off in the present year as part of a comprehensive termination
agreement, wherein the Company received releases from certain future financial
and other claims, including a claim made in August, 2000 by the Company's
former CEO for reimbursement of $123,000 or more in legal expenses. (see
Note 3).
12
<PAGE>
AUTOLEND GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In addition to the above, for the six months ended September 30, 2000 and
1999, the Company incurred zero and $131,000, 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 $653,000, or $0.60
per share, for the six months ended September 30, 2000. The net income for
the same period last year was $6,000, or less than $0.01 per share. The
$653,000 loss in the current period was due to an operating loss of $669,000
and $10,000 in net other expenses, partially offset by income from
discontinued operations of $26,000. The $6,000 net income for the prior
period was primarily due to non-operating income that was almost entirely
offset by operating losses. Losses per share for the period ended September
30, 2000 were calculated based upon the weighted average number of common and
common equivalent shares issued and outstanding and issuable, of 1,094,566
shares. Losses per share for the period ended September 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.
Results of Operations: Three-month periods ended September 30, 2000, and 1999
The Company recorded a net loss of $280,000 for the three-month period ended
September 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 September 30, 2000 were zero, as compared to $53,000 in
the three months ended September 30, 1999.
There were no revenues from Loans recognized during the three months ended
September 30, 2000, compared to the $8,000 realized during the three months
ended September 30, 1999. Similarly, there was no Loan loss recovery
recognized for the three months ended September 30, 2000, compared to a
recovery of $76,000 for the three months ended September 30, 1999 related to
previously charged-off Loans. The net result of discontinued (Loan)
operations for the three months ended September 30, 2000, was a net income of
$21,000.
General and administrative expenses were $178,000 during the three months
ended September 30, 2000, as compared to $375,000 during the three months
ended September 30, 1999. The decrease of approximately $197,000 was due
primarily to decreases in legal and professional fees, car Loan portfolio
administration costs, and salaries. Additionally, in the three months ended
September 30, 2000, there was a non-cash loss on the termination agreement
with the Company's former CEO of approximately $117,000, as compared to no
such event during the three months ended September 30, 1999.
Total operating losses for the three months ended September 30, 2000, were
approximately $295,000, compared to operating losses of approximately $238,000
for the three months ended September 30, 1999. The $57,000 increase in
operating losses was primarily due to decreases of $61,000 in net revenue and
$76,000 in loan loss recoveries, and the $117,000 termination
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AUTOLEND GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
agreement, which were partially offset by a $197,000 decrease in general and
administrative expense.
The impact of non-operating items for the three months ended September 30,
2000 was a net $6,000 expense, compared to a net non-operating income of
$624,000 for the three months ended September 30, 1999. The $6,000 net non-
operating expense for the present period was primarily due to the $8,000 in
amortization of the imputed discount on the five-year debt obligations
outstanding, which were slightly offset by $1,000 in interest income. The
$624,000 non-operating income for the same period last year was primarily due
to a $451,000 gain on the adversary settlement with the former CEO, $163,000
resulting from the cancellation of the Florida tax claim, and interest income
of $19,000, all of which was slightly offset by amortization of the imputed
discount on the five-year debt obligations outstanding of $8,000.
In addition to the above, for the three months ended September 30, 2000 and
1999, the Company incurred zero and $42,000, 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 $280,000, or $0.25
per share, for the three months ended September 30, 2000. The net income for
the same period last year was $344,000, or $0.33 per share. The $280,000 loss
in the current period was due to an operating loss of $295,000 and $6,000 in
net other expenses, partially offset by income from discontinued operations of
$21,000. Losses per share for the period ended September 30, 2000 were
calculated based upon the weighted average number of common and common
equivalent shares issued and outstanding and issuable, of 1,095,303 shares.
Losses per share for the period ended September 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 $342,000 for the six months ended
September 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 $820,000 for the six months ended September 30, 1999.
The Company's immediate viability depends upon the near-term infusion of
capital, and / or the infusion of a positive-cash-flow business. At September
30, 2000, the Company had net cash of $113,000, and had a negative net equity
(i.e., a deficit) of $465,000, which deficit excludes the impact of remaining
amounts due pursuant to the Albuquerque office lease obligation, which
obligation totaled approximately $214,000 at November 13, 2000.
Without the infusion of capital, and / or the infusion of a positive-cash-
flow business, 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
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AUTOLEND GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
insufficient cash necessary (even if obligations currently due under the five-
year debt obligation are excluded) to continue operating through the current
fiscal year (ending March 31, 2001).
The Company's portfolio of used-car consumer installment Loans receivable at
September 30, 2000, was approximately $8,000, and consisted of approximately
4,100 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; the business was discontinued as of April 1, 2000.
The Company's portfolio of unmatured viatical insurance Policies totaled 5 at
September 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.
Cash provided by investing activities during the six months ended September
30, 2000 was $1,500, resulting from proceeds received from the sale of fixed
assets; there was no cash provided or used by investing activities for the
six months ended 1999. For the six months ended September 30, 2000, $80,000
in cash was provided by financing activities, resulting from proceeds received
from the issuance of stock. During the six months ended September 30, 1999,
$2.7 million was used by financing activities for payments to qualified former
debenture holders under the Plan of Reorganization.
In total, the Company decreased its cash by $260,000 during the six months
ended September 30, 2000, to a total of $113,000. The decrease was largely
due to net use of cash from operations during the current period. In
comparison, there was a $3.5 million decrease in cash during the six months
ended September 30, 1999, primarily due to the $2.7 million in payments to
qualified former debenture holders under the Plan of Reorganization and a $0.8
million net use of cash from operations.
The Company has stated in its SEC filings that the Company will not survive
much longer in its present state. Now, and as further described in Note 3
above, effective October 12, 2000, a change in control of the majority
ownership of the Company has occurred. Following this transaction, the new
majority owners filed a Schedule 13D with the SEC on approximately October 31,
2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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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.
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 former chief executive officer (CEO), 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 former 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, on July 14, 2000, the Company's former CEO responded,
on behalf of the Company and himself personally, to the Staff's recommendation
in a formal written submission to the SEC. The Company believes that it has
defenses with respect to the Staff allegations against it. After the change in
control (see Note 3), on November 1, 2000 the new Board of Directors, through
the Company's new legal counsel, sent correspondence to the SEC seeking a
prompt resolution of the matter, with an offer to enter into discussion with
the SEC. Should an injunction issue against the Company, the Company would be
enjoined to obey the federal securities laws.
AutoLend Group, Inc. vs. 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 consulting fees paid to him
independent of his duties as a Director, for 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. On August 14, 2000, the Court released a Memorandum Opinion and an
Order denying the Villanueva claim. On August 23, 2000, a Motion to
Reconsider the Order was filed by Mr. Villanueva, and on August 25, 2000, an
Objection to this Motion to Reconsider was filed by the Company. On August 31,
2000, an additional Objection to the Motion was filed by the U.S. Trustee's
Office. On October 30, 2000, a Request was filed by Mr. Villanueva's attorney,
seeking a hearing on the matter. As of November 10, 2000, there has been no
response from the Court to either the Motion to Reconsider, or to the
Objections, or to the Request for a hearing. Management believes, but cannot
assure, that the Court's August 23, 2000 Order denying the claim will stand.
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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.
The Company's present stock ticker symbol is "ALEN," which trades Over-The-
Counter on the "Pink Sheets."
The Company is not affiliated with the website www.autolend.com, nor is the
Company affiliated with the Miami-based business, AutoLend IAP.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
Form 8-K filed September 6, 2000
FORM 8-K filed October 19, 2000
17
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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/ JOHN D. EMERY Acting President, and November 14, 2000
--------------------- Acting Chairman of the Board
JOHN D. EMERY (principal executive officer)
/s/ JEFFREY OVINGTON Executive Vice President November 14, 2000
--------------------- (principal accounting and
JEFFREY OVINGTON financial officer)
18
