1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to ________________
Commission file number: 000-26815
AUSTIN FUNDING.COM CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 74-2923677
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
823 CONGRESS AVENUE, SUITE 515, AUSTIN, TEXAS 78701
---------------------------------------------------
(Address of principal executive offices)
(512) 481-8000
---------------------------------
(Registrant's telephone number)
At October 31, 1999, 21,333,333 shares of registrant's $.01 par value Common
Stock were outstanding.
Transitional Small Business Issuer Format [ ] Yes [X] No
2
FORM 10-QSB INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements................................................3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.........................................7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................8
Item 2. Changes in Securities...............................................8
Item 3. Defaults Upon Senior Securities.....................................8
Item 4. Submission of Matters to a Vote of Security Holders.................8
Item 5. Other Information...................................................8
Item 6. Exhibits and Reports on Form 8-K....................................8
SIGNATURES...................................................................9
EXHIBIT INDEX................................................................10
SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-QSB contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements involve risks and uncertainties that may cause
the Company's actual results to differ materially from the results discussed in
the forward-looking statements.
2
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AUSTIN FUNDING.COM CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED BALANCE SHEET
September 30,
(unaudited)
Current Assets
Cash $ 152,020
Inventory 7,566,943
Accrued interest receivable 39,524
Advances shareholders (Note 1) 48,560
Federal income tax refund 1,110
-----------
Total Current Assets 7,808,157
-----------
Deposits
Investments 426,712
Investment-Limited partnership interest
(Note 1) 745,284
Investment - Secured note receivable
(Note 1) 500,000
-----------
Total Investments 1,245,284
-----------
Property and Equipment
Furniture, Fixtures & Equipment 45,802
Depreciation (11,535)
-----------
Net Property and Equipment 34,267
-----------
Total Assets $ 9,514,420
===========
Liabilities & Stockholders' Equity
Current Liabilities
Accounts payable and accrued liabilities $ 126,593
Current maturities of long-term debt (Note 2) 9,816
Lines of credit (Note 3) 6,499,389
-----------
Total Current Liabilities 6,635,798
-----------
Long-Term Debt, net of current maturities (Note 2) 12,102
-----------
Total Liabilities 6,647,900
-----------
Stockholders' Equity 2,866,520
-----------
Total Liabilities and Stockholders' Equity $ 9,514,420
===========
3
4
AUSTIN FUNDING.COM CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months ended Six Months ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
Sales $ 4,867,213 $ 4,867,213 $ 8,784,739 $ 16,758,801
Cost of Sales 4,573,539 4,573,539 8,224,824 15,694,538
------------ ------------ ------------ ------------
Gross Profit 293,674 293,674 559,915 1,064,263
------------ ------------ ------------ ------------
Selling and Administrative
Salaries and wages 208,103 208,103 363,145 658,690
Office expense and supplies 25,703 25,703 35,602 56,965
Occupancy 23,726 23,726 40,021 30,066
Travel and entertainment 29,065 29,065 45,083 42,538
Telephone 14,488 14,488 29,407 42,618
Automobile expenses 7,480 7,480 14,489 14,448
Professional fees 134,395 134,395 186,366 19,080
Insurance 11,825 11,825 20,095 22,931
Equipment rental and maintenance 1,167 1,167 9,624 6,592
Advertising and marketing 7,750 7,750 16,948 45,441
Telemarketing 6,260 6,260 5,910 10,026
Other Expenses 48,515 48,515 61,576 33,763
------------ ------------ ------------ ------------
Total Selling and Administrative 518,477 518,477 828,266 983,158
------------ ------------ ------------ ------------
Operating Income (Loss) (224,803) (224,803) (268,351) 81,105
------------ ------------ ------------ ------------
Other Income 818 818 12,939 6,309
------------ ------------ ------------ ------------
Income, before income taxes (223,985) (223,985) (255,412) 87,414
------------ ------------ ------------ ------------
Income Tax Expense 0 0 0 0
------------ ------------ ------------ ------------
Net Income $ (223,985) $ (223,985) $ (255,412) $ 87,414
============ ============ ============ ============
Earnings (Loss) Per Share $ (0.01) $ (.05) $ (0.01) $ 43.71
============ ============ ============ ============
4
5
AUSTIN FUNDING.COM CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
Six months ended
September 30,
----------------------------
1999 1998
------------ ------------
Cash Flow From Operating Activities
Net Income (Loss) $ (255,412) $ 87,414
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
(Increase) decrease in receivables (5,714,006) (1,196,190)
(Increase) decrease in inventories
(Increase) decrease in other receivables (728) (5,200)
(Increase) decrease in deposits (422,153) (1,100)
Increase (decrease) in federal income tax payable (40,966)
Increase (decrease) in accounts payable and
accrued liabilities 10,630 (58,468)
Increase (decrease) in deferred income and other
liabilities (58,203) 71,410
------------ ------------
Net Cash Provided (Used) By Operating Activities (6,439,872) (1,230,514)
------------ ------------
Cash Flow From Investing Activities
Purchase of equipment 0 (17,562)
Investment in Partnership (730,316) 0
------------ ------------
Net Cash Provided (Used) By Investing Activities (730,316) (17,562)
------------ ------------
Cash Flow From Financing Activities
Net increase (decrease) on lines of credit 4,676,078 1,273,783
Principal payments on long-term debt (5,060) 0
Proceeds from issuance of stock 2,676,945 0
------------ ------------
Net Cash Provided (Used) By Financing Activities 7,347,963 1,273,783
------------ ------------
Net Increase (Decrease) In Cash 147,775 25,707
Cash, Beginning of period 4,245 115,482
------------ ------------
Cash, End of period $ 152,020 $ 141,189
============ ============
Taxes Paid $ 0 $ 1,110
Interest Paid $ 127,897 $ 147,721
5
6
AUSTIN FUNDING.COM CORPORATION
AND ITS WHOLLY-OWNED SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. RELATED PARTY TRANSACTIONS
Advances totaling $48,560 have been made to stockholders, $12,000 of this was in
the third quarter of 1999.
A stockholder contributed an investment worth $745,284 in exchange for common
stock in the second quarter of 1999. This investment is a 98% limited
partnership interest. The investment is accounted for using the equity method.
Partnership income is first allocated based on the aggregate of net loss that
has been allocated, and then based on partnership interest percentages.
Partnership losses are allocated 50% to limited partners and 50% to general
partners.
A stockholder contributed an investment worth $500,000 in exchange for common
stock in the second quarter of 1999. This investment is a note receivable
secured by real estate.
Note 2. LONG-TERM DEBT
Austin Funding.com Corporation ("AFCC") has a note with an individual. The
original amount of the note was $36,000 and was dated October 5, 1998. Payments
of $1,000 are due in monthly installments which include interest at 12.5%
beginning November 1, 1998. With this amortization schedule the balance will be
paid in full November 1, 2001. The note is secured by the assets of AFCC.
September 30, 1999 September 30, 2000 September 30, 2001
------------------ ------------------ ------------------
Current Portion $ 9,816
Long-term $ 11,112 $ 990
Note 3. LINES OF CREDIT
AFCC has a $3,000,000 line of credit with a financial institution. The line of
credit expires March 22, 2000. Interest is calculated at prime plus 1%. The debt
is secured by the mortgage inventory. Subsequent to the close of the third
quarter of 1999, this line has increased to $10,000,000.
AFCC has a $5,000,000 line of credit with a financial institution. Interest is
calculated at prime plus 2 on draws up to 60 days, and increases to prime plus 3
after 60 days. The debt is secured by mortgage inventory and is personally
guaranteed by officers of AFCC. An additional $400,000 is pledged in deposits.
6
7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following presentation of management's discussion and analysis of
the Company's financial condition and results of operation should be read in
conjunction with the Company's financial statements and notes contained herein
for the three and six months ended September 30, 1999 and 1998.
RESULTS OF OPERATIONS
Comparison of Operating Results for the Six Months Ended September 30,
1999, and September 30, 1998. Sales decreased from $16.8 million for the six
months ended September 30, 1998 to $8.8 million for the six months ended
September 30, 1999. This percentage decrease of approximately 48% is the result
of decreased liquidity from the investors who purchase the loans underwritten by
the Company.
Gross profit as a percentage of cost of goods sold remained virtually
unchanged over the comparison period from 6.35% for the six months ended
September 30, 1998 to 6.36% for the six months ended September 30, 1999. This
profit percentage demonstrates a consistent cost of sales independent of volume.
Selling and administrative expense decreased $155,000 over the
comparison period. The largest expense, salaries and wages decreased
proportionately by 45% for the six months ended September 30, 1998 to the six
months ended September 30, 1999. The most significant increase came in
professional fees stemming from the legal and accounting fees incurred in
bringing the Company public.
As a result of the foregoing, net income decreased from $87,414 for the
six months ended September 30, 1998 to a loss of $255,412 for the six months
ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $152,019 as of September 30,
1999, compared to $4,245 as of March 31, 1999. This increase in cash and cash
equivalents was due primarily from capital raised in the third quarter from the
issuance of preferred stock.
During the third quarter of 1999, the Company obtained access to cash
totaling $1,433,533 from the issuance of its preferred stock. In addition, the
Company also realized cash totaling $4,559,089 during the quarter from sales of
loans.
7
8
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Previously reported.
ITEM 2 - CHANGES IN SECURITIES
On September 30, 1999, Mr. Bradley G. Farley purchased 1,500,000 shares
of the Company's 1999 Series A Preferred Stock in exchange for $1,433,533 in
advances that he has made to the Company. The Preferred Stock sold to Farley
pays no dividend, nor has any conversion or voting rights. The Company may
redeem the 1999 Series A Preferred Stock for $1.00 per share upon giving Farley
10 days advance notice. Such shares were issued without registration pursuant to
an exemption from registration under Regulation D of the Securities Act of 1933.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 - OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedules
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1999.
8
9
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AUSTIN FUNDING.COM CORPORATION
Dated: November 12, 1999 By: /s/ GLENN A. LAPOINTE
-------------------------------
Glenn A. LaPointe
President
Dated: November 12, 1999 By: /s/ TERRY G. HARTNETT
-------------------------------
Terry G. Hartnett
Chief Financial Officer
9
10
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
27.1 Financial Data Schedules
10