Mail Stop 0305
April 29, 2005
Harry Wachtel
Chief Executive Officer
6413 Congress Avenue, Suite 260
Boca Ranton, Florida 33487
Re: AutoInfo, Inc
Form S-2 filed March 31, 2005
File No. 333-123710
Form 10-K for the year ended December 31, 2004
File No. 1-11497
Dear Mr. Wachtel:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We look forward to working
with you in these respects and welcome any questions you may have
about our comments or on any other aspect of our review. Feel
free
to call us at the telephone numbers listed at the end of this
letter.
General
1. Please incorporate all comments issued below where applicable
to
the company`s Form 10-KSB in future filings.
Form S-2
General
2. In an appropriate place in the prospectus, please disclose the
material terms of the stock purchase agreement between Kinderhook
Partners, LP and AutoInfo Inc. and the registration rights
agreement
between Kinderhook Partners, LP, Vinodray Shah and/or their
affiliates and AutoInfo, Inc. In addition, supplementally tell us
whether the Purchasers under the registration rights agreement
have
completed the purchase of all 750,000 shares of AutoInfo common
stock.
3. Please provide the information required under Item 10 of Form
S-2.
In this regard we note the disclosure in Exhibit 5.1.
Cover Page
4. Please identify the selling stockholders here and in the
summary,
or otherwise, provide a cross-reference to this information in the
prospectus.
5. It is not clear from your disclosure the formula or method
selling
shareholders will use to calculate the price offered for their
shares
of AutoInfo common stock. Please revise to briefly clarify how
the
prices will be determined at the time of each sale and who will
determine the price.
6. Supplementally advise what you mean by "volume limitations
imposed
under the Securities Act."
Prospectus Summary, page 3
7. Please revise to disclose your net income for the last fiscal
year.
8. It appears that the disclosure under the subheadings "Business
overview" and "Strategy" merely repeats information that appears
later in the prospectus. The summary should be a concise and
straightforward discussion of the most material aspects of your
company and your offering. We suggest that you revise these
sections
for brevity and balance.
9. Consider revising your disclosure to define "non-asset based."
The meaning of this phrase is not immediately clear from the
context.
10. We note on page 4 that you provided both the web address of
your
company and your wholly-owned subsidiary. However, we also note
on
page 27 that you provided only the web address of your subsidiary.
Please revise to clarify the web addresses that provide investors
company information or advise why no revision is necessary.
11. Please advise us of the reason for "unless otherwise stated"
when
disclosing your assumption of not exercising the outstanding
options
immediately before the offering, as indicated in footnote 1 on
page
4.
Risk Factors, Page 6
12. Please revise the risk factor headings so that they are more
prominent than the rest of the text.
Continued expansion of our business operations is uncertain, page
6
13. The first bullet point in this risk factor seems to suggest
that
the success of Sunteck`s continued expansion could adversely
affect
your future operating results. Revise to clarify the specific
risk
that uncertain continued expansion may have on your business
operations or advise why no revision is necessary.
Control of customer accounts, page 6
14. Please revise the heading to clearly state the risk.
We have limited marketing and sales capabilities, page 7
15. It is not clear from your disclosure why you currently have
limited sales and marketing capabilities. Please briefly explain
the
reason in this risk factor. In addition, disclose your current
sales
and marketing capabilities here or other appropriate section in
your
prospectus.
Liquidity on the OTC bulletin board is limited, page 9
16. Briefly explain why AutoInfo does not meet the requirements to
have its common stock listed on a stock exchange or an automated
quotation system.
Management`s Discussion and Analysis of Financial . . ., page 14
General
17. Describe your plan of operation for the next twelve months.
Specifically address how long you can satisfy your cash
requirements
and indicate whether you will have to raise additional funds in
the
next twelve months. See Item 303(a) of Regulation S-B.
Cautionary statement identifying important factors, page 14
18. Since the safe harbor for forward-looking information does not
apply to penny stock companies like yours, either remove the
statutory references or revise to clarify that it does not apply
to
your company and this prospectus. Refer to Section 27A of the
Securities Act.
Results of Operations, page 16
19. Pursuant to FRR-72, please revise MD&A disclosures to include
a
discussion where changes in your results of operations are
attributed
to more than one factor, please revise to quantify the impact of
each
factor where practicable. For example, you state that the increase
in
revenues is the direct result of the continued expansion of your
agent network and customer base. Additionally, regarding
disclosure
of known trends, events, demands, commitments, and uncertainties
that
are reasonably likely to have a material effect on financial
condition or operating performance, expand your discussion in
future
filings on the reasons for the increase including noting whether
the
increase is due to an increase in the volume of
shipments/contracts,
the dollar amount of the shipments/contracts, and/or contract
type,
and whether this is a trend that is expected to continue.
Business, page 22
Strategy, page 22
20. To the extent practicable, revise this section to disclose how
this strategy is working. For example, consider disclosing how
you
have been able to expand your affiliations with independent sales
agents. In addition, please explain the type of "internal
expansion"
you have made to your business operations.
The industry, page 22
21. We note on page 23 the various experience of sales
representatives in your industry. Consider disclosing the
experience
of the sales representatives that you are affiliated with in an
appropriate place in the Business section. In addition, quantify
the
number of your sales representatives with limited experience, if
material.
Risk and liability, page 26
22. We note your disclosure that you are liable for loss or damage
to
customer`s freight in your contract carrier services line of
business. Please tell us how you account for such losses and
quantify
any significant charges recorded to date.
Company background, page 26
23. Consider moving this section to the front of the Business
section.
Properties, page 27
24. We note you have leases for your executive offices in Florida
and
operating office in North Carolina. However, we also note on page
22
that you have 12 regional operating centers providing brokerage
services and 7 regional operating centers providing contract
carrier
services. Supplementally explain why these regional operating
centers are not discussed here. Refer to Item 102 of Regulation
S-B.
Executive Compensation, page 32
25. Please revise the table so that it includes any options
granted
during 2002 and 2003, if any. We note your disclosure that there
were not options granted to executives during 2004. See Item
402(c)
of Regulation S-B.
Certain Relationships and Related Transactions, page 34
26. Please disclose the identity of the related parties that
provided
the $575,000 financing in December 2000.
Security Ownership of Certain Beneficial Owners and Management,
page
35
27. We note that Mr. Wachtel has been granted voting rights
pursuant
to voting proxy agreements with Mr. Weiss and Mr. Wunderlich.
Please
describe the material terms of the voting proxy agreements in an
appropriate place in the prospectus and file the voting proxy
agreements as a material contract to this registration statement.
Selling Stockholders, page 38
28. Please add disclosure that each of the selling shareholders
may
be deemed an underwriter.
29. Consider including a discussion of how the shares were
acquired
by selling shareholders in this section.
30. For each selling stockholder, please distinguish between the
amount of common stock currently held, and the number of shares
that
may be purchased upon exercise of warrants or options, preferably
in
a footnote.
31. Please disclose the address of the selling shareholder.
32. Supplementally advise us as to whether any selling
stockholders
are broker-dealers or affiliates of broker-dealers.
Plan of Distribution
33. Please revise the first full paragraph on page 39 to clarify
that
any broker-dealers who participate in the sale of shares "are"
underwriters.
Where You Can Find More Information, page 40
34. We note that statements contained in this prospectus regarding
the contents of any contract or any other document are not
necessarily complete and are qualified in all respects by the
actual
contents of the contract or other documents. You may refer
readers
to the related documents for a more complete reading or
understanding, but should not infer that the prospectus does not
contain all material information from those documents, even if
summarized, or that the statements made in the prospectus are in
any
way inaccurate. Please revise accordingly.
35. Please revise to disclose you have filed a Form S-2 relating
to
the offering of common stock. The current disclosure states that
you
have filed a Form S-1 in connection with the offering of units.
36. Consider consolidating this section with "Available
information"
on page 27, as it is duplicative of the information disclosed
there
under.
Consolidated Financial Statements
Consolidated Balance Sheets, page F-3
37. We note that your accounts receivable balance nearly doubled,
from $4.8 million to $9.6 million during the year ended December
31,
2004. We also note that the reserve for uncollectible accounts did
not change over the prior two years. Please supplementally provide
us
with a rollforward of the activity in the reserve account for each
period for which an income statement has been presented and
provide
an explanation which evaluates your assessment of the adequacy of
the
accounts receivable reserve at December 31, 2004.
Consolidated Statements of Stockholder`s Equity, page F-5
38. We note that you granted certain shares of common stock to
non-
employees in return for services rendered during 2004. Please tell
us
why the caption "Other Capital" was used to present this issuance
when it appears that these are issuances of common stock.
Additionally, consider the guidance of FAS 123, paragraphs 46 - 48
when preparing disclosures related to this issuance of stock to
non-
employees in this filing. It is unclear as to:
* the nature of the arrangement for which the stock was issued,
* the exercise price,
* terms under which the shares vest,
* and how the shares were valued for inclusion in the financial
statements.
Consolidated Statements of Cash Flows, page F-6
39. Please state separately the non-cash changes in accounts
receivable due to changes in the allowance for doubtful accounts,
if
any. See paragraph 132 of FAS 95 for guidance.
40. We note from your disclosure on page 19 that certain
convertible
debentures were converted into 2.3 million shares of common stock.
We
also note that you have included an increase to cash from
financing
activities related to this conversion of $575,000. It does not
appear
that you received cash from this conversion and therefore, no
amounts
should be shown as received in the cash flow statement. Rather it
would appear that this conversion should be presented as a non-
cash
item in the supplemental schedule supporting the cash flow
statement.
Please clarify the nature of the conversion and if our
understanding
is correct, please revise this presentation. Alternatively, tell
us
clearly how you received $575,000 in cash from this conversion.
Notes to the Consolidated Financial Statements
Revenue Recognition, page F-8
41. We note your disclosure of some of the gross vs. net
indicators
of EITF Issue 99-19 and your conclusion that revenue should be
reported on a gross basis. We also note in your MD&A, under the
Results of Operations subheading, that you consider your net
revenues
as the primary indicator of your ability to source, add value, and
resell services and are considered to be the measurement of growth
for your company. Please describe for us, supplementally and in
detail, your analysis of all of the gross vs. net indicators of
EITF
Issue 99-19 and how you determined that your revenues should be
reported on a gross basis. The indicators considered most
important
in determining this method of revenue recognition should be noted
in
your response. Address your contract carrier activities separately
in
your response.
Note 4 - Income taxes, page F-11
42. The reduction in the valuation allowance is material and
represents approximately 60% of your net income for each of the
two
years presented. Please describe for us, supplementally and in
detail, how you determined that the reductions in the deferred tax
valuation allowance are reasonable and the quantitative changes in
your forecasts that support these amounts.
Note 6 - Stockholders` Equity , pages F-12 and F-13
43. For options outstanding as of the latest balance sheet date,
please also disclose the range of exercise prices and the weighted
average contractual life as required by paragraph 48 of SFAS 123.
In
addition, revise to comply with the disclosure requirements of
paragraph 47d of the statement.
Undertakings
44. We note that you have furnished the undertakings under Item
512(f). Supplementally tell us what information you are omitting
in
reliance on Rule 430A.
*****
Closing
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as defense in any
proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rule 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Robert Perdue at (202) 551-3303 or Margery
Reich, at (202) 551-3347, if you have questions regarding comments
on
the financial statements and related matters. Please contact
Messeret Nega at (202) 551-3316 or me at (202) 551-3348 with any
other questions.
Sincerely,
Jennifer G. Williams
Special Counsel
cc: Via Facsimile (212) 838-9190
Kenneth S. Rose, Esq.
Morse, Zelnick, Rose & Lander, LLP
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AutoInfo, Inc.
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