10-Q 1 doc1.txt ================================================================================ 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 DECEMBER 31, 2001 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 1,095,303 at February 18, 2001. ================================================================================

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, such as 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

See accompanying notes to consolidated financial statements. 3

See accompanying notes to consolidated financial statements. 4

See accompanying notes to consolidated financial statements. 5

NON-CASH INVESTING AND FINANCING ACTIVITIES. There were no non-cash investing or financing activities for the nine months ended December 31, 2001. During the nine months ended December 31, 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 nine months ended December 31, 2000. See accompanying notes to consolidated financial statements. 6 AUTOLEND GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED 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, 2001, and the accompanying unaudited consolidated financial statements as of December 31, 2001 and 2000, 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 nine months ended December 31, 2001 and 2000, 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, 2001. 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 December 31, 2001, the Company had net cash of $2,000, and had a negative net equity (i.e., a deficit) of $640,000, which excludes the financial effect of a remaining lease obligation due pursuant to the Albuquerque office lease terms, which totaled approximately $317,000 at December 31, 2001. The Company believes that it presently has insufficient cash necessary to meet its daily operating requirements without regard to its notes payable obligations, through the fiscal year ending March 31, 2002. It now appears that due to reductions in fixed overhead and personnel, the Company may survive into the fourth quarter of this fiscal year. The Company is not likely to be able to secure and install a new, profitable line of business before it runs out of cash. Without either an infusion of capital, negotiation of debt relief, purchase of a going concern, and/or the sale or realization of assets for cash at greater than net book value, the Company will have difficulty in meeting its obligations. 7 AUTOLEND GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The Company is exploring various strategic options and financial opportunities, including the purchase of certain operating assets of Prinova Capital Group, Inc. ("Prinova"). Prinova is a New Mexico corporation. Prinova is a private, closely-held financial services company, headquartered in Albuquerque, New Mexico. Prinova has no past or present ties or affiliations with any former stockholder, director, or officer of the Company. Due to the legal opinion of the Company's former reorganization counsel, the first scheduled annual $0.1 million notes payable payments were not made as originally scheduled, and, as of the date of this filing, have not been made. The second scheduled annual $0.1 million notes payable payments have not yet been made (see Note 3 below). These payments are due primarily to the current majority stockholder. (3) 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 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 $77,000 in amortization of the discount to date at December 31, 2001). These obligations 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 former reorganization counsel, the first payment was not made according to that original schedule. The second annual payment, scheduled for March 5, 2001, was also not made according to the original schedule. The payments are due primarily to the majority stockholder. 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 stockholders while the Company was in the present financial condition would be inappropriate, and that the Company's obligation to its landlord took precedence. If the Company were to liquidate, any such debt repayment would likely be the subject of an adversary proceeding against the recipient stockholders. (4) 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 Company renegotiated this lease in January 2001. The lease terminates on December 31, 2003, with payments of $7,000 per month for the first year, increasing to $12,325 per month for the second year. Each April 1, the lease payments may be adjusted according to any changes in the Consumer Price Index. At December 31, 2001, the remaining obligation under the lease totaled approximately $317,000. The lease grants two options to extend the term of the lease for five years each. Effective February 1, 2001, the Company subleased a portion of its space on a month-to-month basis to Prinova, the controlling stockholder of the Company. The amount of rental income earned by the Company for the six months ended December 31, 2001 was $32,500. 8 AUTOLEND GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (5) RELATED PARTY TRANSACTIONS. Beginning in April 2001 and through August 2001, the Company purchased several fractional assignments of interests held by Prinova Investments, LTD in certain contracts between Prinova Investments, LTD and two other unrelated companies. During the nine months ended December 31, 2001, the Company acquired a total of four assignments of interest from Prinova Investments, LTD for a total of $65,000, of which by December 31, 2001 the Company had received the entire balance of $65,000 of its investment plus a profit of $6,500. The Company regards the purchase of these fractional interest rights as an opportunistic, prudent use of Company funds during a time in which it does not have an established business. The income from this activity is being reported as other investment income. In addition, and as stated above, effective February 1, 2001, the Company subleased a portion of its office space to the Company's majority stockholder, Prinova. In November 2001 the Company entered into a debt arrangement with Prinova for a total of $50,000 that may be drawn on an as needed basis. The terms of the note include interest at 12% and payment on or before December 31, 2002. The note is secured by the first proceeds from the potential sale of the viatical settlements and the property and equipment of the Company. (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. The Company 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 Form 10-K, filed approximately October 13, 2000, stated that "no payments are dueas 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 probably be costly, and may be beyond the Company's means to attain. (7) EMPLOYEES. As of December 31, 2001, the Company and its subsidiaries had two employees. (8) AVAILABLE LOSS CARRYFORWARDS. In the past, the Company accumulated unused operating loss carryforwards and capital loss carryforwards. Due to the uncertainty of the Company's ability to 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 the case of a substantial change in ownership, these tax benefits can be reduced, if not eliminated. (9) CONTINGENCIES. On December 20, 2000, Jeffrey Ovington resigned his position as Executive Vice President and as an employee of the Company. Mr. Ovington voluntarily relinquished his claim to his contractual severance pay contingent upon the future status of the Company. 9 AUTOLEND GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (10) DISCONTINUED OPERATIONS. On April 1, 2000, the Company adopted a plan to sell the consumer used-car loan portfolio business. The assets of the loan portfolio consisted primarily of approximately 3,900 car loans, which were more than six months in arrears and had been written off. The Company sold the portfolio to a third party on April 4, 2001 for $95,000, resulting in net income from discontinued operations of $94,700. The sale resulted in a small increase in net equity to the Company, an immediate increase in the Company's total cash on hand, and a decrease in the Company's subsequent monthly cash inflows. The Consolidated Statements of Operations for the nine-month periods ended December 31, 2001 and 2000 have excluded the revenues and expenses of the discontinued loan portfolio from the captions applicable to the continuing operations, and the net income from the discontinued operation has been reported separately. 10 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 December 31, 2001. The Company maintained a residual portfolio of sub-prime consumer used-car loans. On April 1, 2000, the Company adopted a plan to sell this portfolio and has accounted for the loan portfolio as a discontinued operation since this date. On April 4, 2001, the loan portfolio was sold to an unrelated third party for $95,000. The Company also maintains a residual portfolio of life insurance policies purchased from persons with life-threatening illnesses, a business generically referred to as viatical settlements (the Policies). Policies were no longer purchased after September 1994. For over three years, the Company's activities have concentrated on resolving its (now-concluded) bankruptcy. Additionally, the Company has worked to complete its Registration Statement (as required by the Plan), which was made effective by the SEC in January 2000. Beginning in April 2001 and through December 31, 2001, the Company has purchased several fractional assignments of interests held by Prinova Investments, LTD in certain contracts between Prinova Investments, LTD and two other unrelated companies. During the nine months ended December 31, 2001, the Company acquired a total of four assignments of interest from Prinova Investments, LTD for a total of $65,000, of which by December 31, 2001 the Company had received the entire balance of $65,000 of its investment plus a profit of $6,500. The Company regards the purchase of these fractional interest rights as an opportunistic, prudent use of Company funds during a time in which it does not have an established business. The income from this activity is being reported as other investment income. Results of Operations: Nine-month periods ended December 31, 2001 and 2000 The Company recorded an operating loss of $175,000 for the nine-month period ended December 31, 2001 consisting primarily of professional fees, rent, and salaries. This loss was largely offset by the sale of the sub-prime consumer used-car loan portfolio, resulting in net income from discontinued operations of $94,700. General and administrative expenses were $175,000 during the nine months ended December 31, 2001, as compared to $728,000 during the nine months ended December 31, 2000. The decrease of approximately $553,000 was due primarily to decreases in salaries, professional fees, New Mexico Gaming license expense, and insurance expenses. Additionally, in the nine months ended December 31, 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 11 AUTOLEND GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS in the termination agreement with a cancellation of DeSantis' claim for reimbursement of legal expenses. No such event occurred during the nine months ended December 31, 2001 The impact of non-operating items for the nine months ended December 31, 2001 was a net $46,000 in income, compared to a net non-operating loss of $3,000 for the nine months ended December 31, 2000. The $46,000 in non-operating income for the present period was primarily due to $7,000 in investment income, $21,000 of gain on the State Assessment Settlement, and $32,000 in rental income, partially offset by $15,000 in amortization of the imputed discount on the five-year notes payable obligations outstanding. The $3,000 non-operating loss for the same period last year was primarily due to interest income of $5,000, offset by the amortization of the imputed discount on the five-year notes payable obligations outstanding of $19,000. The net effect of the foregoing was a net loss of $34,000, or ($0.03) per share, for the nine months ended December 31, 2001. The net loss for the same period last year was $807,000, or ($0.74) per share. The $34,000 net loss in the current period was primarily due to the sale of the sub-prime consumer used-car loan portfolio, resulting in income from discontinued operations of approximately $95,000, rental income of $32,000, $21,000 of gain on the State Assessment Settlement, investment income of $7,000, offset by the amortization of the discount on the notes payable obligations of $13,000 and general and administrative expenses of $185,000, consisting primarily of professional fees, rent and salaries. The $807,000 net loss for the prior period was primarily due to $728,000 in general and administrative expenses, $118,000 loss on the termination agreement with a former officer and $10,000 in net other expenses, partially offset by income from discontinued operations of $42,000. Losses per share for the period ended December 31, 2001 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 nine months ended December 31, 2000 were calculated based upon the weighted average number of common and common equivalent shares issued and outstanding, and issuable of 1,094,812. Results of Operations: Three-month periods ended December 31, 2001 and 2000 The Company recorded a net loss of $22,000 for the three-month period ended December 31, 2001. The loss was primarily due to operating losses and negligible revenue. General and administrative expenses were $52,000 during the three months ended December 31, 2001, as compared to $177,000 during the three months ended December 31, 2000. The decrease of approximately $125,000 was primarily due to decreases in legal and professional fees, administrative costs, and salaries. Total operating losses for the three months ended December 31, 2001, were approximately $22,000, compared to operating losses of approximately $154,000 for the three months ended December 31, 2000. The $132,000 reduction in operating losses was primarily due to a decrease of $115,000 in legal and professional fees, administrative costs, and salaries. 12 AUTOLEND GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The impact of non-operating items for the three months ended December 31, 2001 was a net income of $30,000 as compared to a net non-operating income of $7,000 for the three months ended December 31, 2000. The $30,000 net non-operating income for the present period was primarily due to $5,000 in amortization of the imputed discount on the five-year debt obligations outstanding, which was offset by $13,000 of rental income and $21,000 of gain on the State Assessment Settlement. The $7,000 non-operating income for the same period last year was primarily due to the $3,000 amortization of the imputed discount on the five-year debt obligations outstanding, and slightly offset by $1,000 in interest income and $10,000 gain from the ITB Settlement. The Company did not generate income from discontinued operations for the three month period ended December 31, 2001 as compared to $15,000 of income for the same period a year ago. The net effect of all of the foregoing was a loss of $22,000, or ($0.02) per share for the three months ended December 31, 2001. The net loss for the same period last year was $154,000, or ($0.14) per share. The $22,000 loss in the current period was due to an operating loss of $52,000 offset by $30,000 of non-operating income. The $154,000 loss for the three months ended December 31, 2000 was due to an operating loss of $177,000, partially offset by income from discontinued operations of $15,000. Losses per share for the period ended December 31, 2001 and 2000 were calculated based upon the weighted average number of common and common equivalent shares issued and outstanding and issuable of 1,095,303. Liquidity and Capital Resources Cash flow from operations was a negative $105,000 for the nine months ended December 31, 2001, which was primarily due to payment of general and administrative expenses. This compares to cash flow from operations of a negative $398,000 for the nine months ended December 31, 2000. The Company's future depends upon the near-term infusion of capital, and/or the infusion of a positive-cash-flow business. At December 31, 2001, the Company had net cash of approximately $3,000, and a negative net equity (i.e., a deficit) of $610,000. This deficit excludes the impact of remaining amounts due pursuant to the Albuquerque office lease obligation, which totaled approximately $299,000 at December 31, 2001. Without either an infusion of capital, negotiation of debt relief, purchase of a going concern, and/or the sale or realization of assets for cash at greater than net book value, the Company will have difficulty in meeting its obligations. The Company believes that it presently has insufficient cash necessary to meet its daily operating requirements without regard to its notes payable obligations, through the fiscal year ending March 31, 2002. It now appears that due to reductions in fixed overhead and personnel, the Company may survive into the fourth quarter of this fiscal year. The Company will run out of cash before it can secure new capital, negotiate debt relief, or take other appropriate steps toward profitability, and likely will require some form of interim financing or a short term loan. 13 AUTOLEND GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's portfolio of unmatured viatical insurance policies totaled five at December 31, 2001, having a combined face value of $366,000, and a net book value of $52,000. 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. For the nine months ended December 31, 2001, $95,000 was provided by investing activities consisting of proceeds of $95,000 received from the sale of the installment loan portfolio to an unrelated third party. The Company also entered into various agreements with Prinova Investments, LTD, a subsidiary of Prinova Capital Group, LLC, to purchase interests in certain contracts Prinova Investments, LTD has with third parties. The Company entered into the contracts disbursing $65,000 to Prinova Investments, LTD during the nine months ended December 31, 2001. At the end of the contract period $65,000 was returned to the Company with a ten percent profit on its investment of $6,500. By contrast, there were no significant investing activities for the comparable nine-month period ending December 31, 2000. For the nine months ended December 31, 2000, cash used by investing activities was $300 which was primarily the result of the receipt of funds related to the sale of fixed assets. There was no significant cash provided or used by financing activities for the nine months ended December 31, 2001. For the nine months ended December 31, 2000, $80,000 in cash was provided by financing activities from the issuance of stock. In total, the Company decreased its cash by $10,000 during the nine months ended December 31, 2001, to a total of $3,000. The decrease was largely due to cash used in operations offset by cash provided by investing activities during the current period. In comparison, there was a $318,000 decrease in cash during the nine months ended December 31, 2000, primarily due to cash used in operating activities offset by cash provided by financing activities. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable. 14 AUTOLEND GROUP, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. New Mexico Gaming Lawsuit. On May 16, 2001, the Company was served a summons ---------------------------- for monies owed to the New Mexico Gaming Control Board for reimbursement of $31,286 in expenses associated with the Company's failed attempt to enter the gaming industry ("New Mexico Gaming Lawsuit"). The Company was required to file an Answer to the Complaint or a responsive motion within 30 days after the summons was served, with the Clerk of the Second Judicial District, County of Bernalillo, State of New Mexico. 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. None 15 AUTOLEND GROUP, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the Securities Exchange Act of 1934, the Company has caused this report to be signed on its behalf by the following duly authorized persons. AUTOLEND GROUP, INC. (Registrant) SIGNATURE TITLE DATE --------- ----- ---- /s/ Luther Reynolds President February 18, 2002 ----------------------- Luther Reynolds 16

AUTOLEND GROUP INC 10-Q