FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: MARCH 31, 2001
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the transition period from ______________ to ___________________
Commission File Number: 0-14786
AUTOINFO, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 13-2867481
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) number)
6401 Congress Ave., Suite 230, Boca Raton, FL 33487
- --------------------------------------------------------------------------------
(Address of principal executive office)
(561) 988-9456
- --------------------------------------------------------------------------------
(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 |_|
Number of shares outstanding of the Registrant's common stock as of May 11,
2001:
27,297,923 shares of common stock, $.001 par value.
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 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 |_|
AUTOINFO, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information:
Item 1. Consolidated Financial Statements: Page
Balance Sheets
March 31, 2001 (unaudited) and December 31, 2000 (audited)..... 3
Statements of Operations (unaudited)
Three months ended March 31, 2001 and 2000..................... 4
Statements of Cash Flows (unaudited)
Three months ended March 31, 2001 and 2000..................... 5
Notes to Unaudited Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 10
Part II. Other Information............................................... 14
Signatures................................................................. 15
2
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2001 2000
------------ -------------
Unaudited Audited
ASSETS
Cash $ 523,000 $ 725,000
Short-term investments 186,000 216,000
Accounts receivable 1,019,000 720,000
Other current assets 96,000 67,000
------------ ------------
1,824,000 1,728,000
Fixed assets, net of depreciation 27,000 12,000
------------ ------------
$ 1,851,000 $ 1,740,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loan payable $ 51,000 $ 101,000
Accounts payable and accrued liabilities 1,054,000 805,000
------------ ------------
Total liabilities 1,105,000 906,000
------------ ------------
Convertible subordinated debentures 575,000 575,000
------------ ------------
Stockholders' Equity
Common stock - authorized 100,000,000
shares
$.001 par value; issued and outstanding -
27,298,000 shares as of March 31, 2001 and
December 31, 2000 27,000 27,000
Additional paid-in capital 18,015,000 18,015,000
Retained deficit (17,871,000) (17,783,000)
------------ ------------
Total stockholders' equity 171,000 259,000
------------ ------------
$ 1,851,000 $ 1,074,000
============ ============
See notes to condensed unaudited financial statements
3
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
2001 2000
------------ ------------
Revenues $ 1,487,000 $ 693,000
------------ ------------
Costs and expenses:
Direct freight 1,201,000 516,000
Commissions 104,000 64,000
Operating expenses 267,000 142,000
Depreciation 3,000 --
------------ ------------
Total operating expenses 1,575,000 722,000
------------ ------------
Loss from continuing operations
before income taxes (88,000) (29,000)
Income tax benefit -- (4,000)
------------ ------------
Loss from continuing operations (88,000) (25,000)
Loss from discontinued operations -- (410,000)
------------ ------------
Net loss $ (88,000) $ (435,000)
============ ============
Basic and diluted net loss per share: ($.00) ($.02)
------------ ------------
Weighted average number of common
and common equivalent shares 27,298,000 18,482,000
------------ ------------
See notes to condensed unaudited financial statements
4
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2001 2000
--------- ---------
Cash flows from operating activities:
Net loss $ (88,000) $(435,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 3,000 3,000
Changes in assets and liabilities:
Accounts receivable (298,000) 107,000
Other assets (30,000) 1,000
Accounts payable and accrued liabilities 249,000 129,000
--------- ---------
Net cash used in operating activities (164,000) (195,000)
--------- ---------
Cash flows from investing activities:
Capital expenditures (18,000)
Proceeds from sale of short-term investments 30,000 --
--------- ---------
Net cash provided by investing activities 12,000 --
--------- ---------
Cash flows from financing activities:
Decrease in borrowings, net (50,000) --
--------- ---------
Net cash used in financing activities (50,000) --
--------- ---------
Net decrease in cash (202,000) (195,000)
Cash at beginning of period 725,000 637,000
--------- ---------
Cash at end of period $ 523,000 $ 442,000
========= =========
See notes to condensed unaudited financial statements
5
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Forward Looking Statements
Certain statements made in this Quarterly Report on Form 10-QSB are
"forward-looking statements"(within the meaning of the Private Securities
Litigation Reform Act of 1995) regarding the plans and objectives of management
for future operations. Such statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. The forward-looking statements included herein are
based on current expectations that involve numerous risks and uncertainties. Our
plans and objectives are based, in part, on assumptions involving judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
Although we believe that our assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this report will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein
particularly in view of the current state of our operations, the inclusion of
such information should not be regarded as a statement by us or any other person
that our objectives and plans will be achieved. Factors that could cause actual
results to differ materially from those expressed or implied by forward-looking
statements include, but are not limited to, the factors set forth under the
headings "Business", and "Certain Factors That May Affect Future Growth," under
Part I, Item 1, of the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 as filed with the Securities and Exchange Commission.
Note 1. - Business and Summary of Significant Accounting Policies
Business
In December 1995, AutoInfo, Inc., (the "Company"), a Delaware corporation,
acquired the operating assets of Falk Finance Company ("FFC"), a Norfolk,
Virginia based specialty financial services company and, as a result, the
Company became a specialized consumer finance company that acquired and serviced
automobile receivables from automobile dealers selling new and used vehicles to
non-prime customers.
The Company experienced material operating losses during 1996, 1997 and
1998. As a result of these losses, the adverse changes in the non-prime
automobile finance industry and the deterioration in the Company's financial
condition, during 1998, the Company discontinued the operation of its non-prime
automotive finance business.
During 1999, the Company continued to reduce operating overhead by
negotiating the termination of its lease in Montvale, New Jersey and vacating
the premises.
On February 2, 2000, the Company filed a disclosure statement and
reorganization plan (the "Reorganization Plan") pursuant to Chapter 11 of Title
11 of the United States Bankruptcy Code.
On June 22, 2000, the Company entered into a Merger Agreement with Sunteck
Transport, Inc. ("Sunteck"), a full service third party transportation logistics
provider, and it's wholly owned subsidiary, Ubidfreight.com, in exchange, upon
closing, for 10 million shares of AutoInfo Common Stock, which constituted
approximately 37% of the proposed outstanding Common Stock of reorganized
AutoInfo under the Reorganization Plan. The consummation of the transaction was
contingent upon, among other things, the approval of the Merger Agreement and
AutoInfo's Disclosure Statement by
6
the Bankruptcy Court, approval of the Disclosure Statement by AutoInfo's
unsecured creditor class, the entry of an order confirming the Reorganization
Plan and the securing of additional financing.
Sunteck, which was formed in 1997, is a full service third party
transportation logistics provider. Its services include ground transportation
coast to coast, local pick up and delivery, warehousing, air freight and ocean
freight. Sunteck has developed strategic alliances with Less than Truckload
(LTL), truckload, air, rail and ocean common carriers to service its customers'
needs. Sunteck's personnel have in excess of forty years of freight industry
experience.
On June 27, 2000, the Company's Amended Disclosure Statement and Amended
Plan of Reorganization (the "Plan") was approved by the Bankruptcy Court. The
Plan provided for the issuance of one share of our common stock and a cash
payment of $ 0.03 for each dollar of approximately $9.5 million of unsecured
debt.
On August 1, 2000, the Company announced that the Reorganization Plan had
been confirmed by the Honorable Adlai S. Hardin, Jr., United States Bankruptcy
Judge to become effective, without further action by the Court, upon the closing
of AutoInfo's merger with Sunteck.
On December 7, 2000, the Company announced that it obtained new financing
totaling $575,000 in the form of ten year 12% Convertible Debentures (the
"Debentures") and had consummated the acquisition of Sunteck pursuant to the
Merger Agreement dated June 22, 2000. As a result, the Reorganization Plan,
conditionally confirmed by the Bankruptcy Court on August 1, 2000, became
effective without further action by the Court. The $575,000 financing was
provided by certain officers, directors and other parties and will be used as
working capital to support planned business expansion. The Debentures are
convertible into common stock at the option of the debenture holder at a
conversion price of $0.25 per share and are redeemable, at the option of the
holder, after December 31, 2003. Harry Wachtel, President of Sunteck, became
President and Chief Executive Officer of AutoInfo and William Wunderlich became
Executive Vice President and Chief Financial Officer. In addition, the Board of
Directors was reconstituted to include Harry M. Wachtel (Chairman), Mark Weiss,
Thomas Robertson and Peter Einselen.
All documents on file in our bankruptcy proceeding, case no. 00-10368,
including the Sunteck merger agreement can be viewed on the Bankruptcy Court's
Internet site at: http://ecf.nysb.uscourts.gov/index.html.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and the instructions
for Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments consisting of normal
recurring accruals considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 2001 and 2000
are not necessarily indicative of the results that may be expected for a full
fiscal year. For further information, refer to the financial statement and
footnotes thereto included in the Company's report on Form 10-K for the year
ended December 31, 2000.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany balances and transactions have been eliminated in consolidation.
7
Revenue Recognition
The Company recognizes revenues at the time goods are picked up at the
customers' location.
Provision for Doubtful Accounts
The Company has established an allowance for doubtful accounts based upon
historical trends.
Short-term Investments
Short-term investments as of March 31, 2001 consist of marketable
securities. Investments were carried at market value as of March 31, 2000.
Fixed Assets
Fixed assets as of March 31, 2001, consisting predominantly of furniture,
fixtures and equipment, were carried at cost net of accumulated depreciation.
Depreciation of fixed assets was provided on the straight-line method over the
estimated useful lives of the related assets which range from three to five
years.
Income (Loss) Per Share
Basic loss per share is based on net loss divided by the weighted average
number of common shares outstanding. Common stock equivalents outstanding were
excluded from the calculation as they were antidilutive for the periods
presented.
Use of Estimates
The preparation of these financial statements in conformity with GAAP
requires management to make certain estimates and assumptions. These estimates
and assumptions affect the reported amounts of assets, liabilities and
contingent liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the periods presented. The Company
believes that all such assumptions are reasonable and that all estimates are
adequate, however, actual results could differ from those estimates.
Income Taxes
The Company utilizes the asset and liability method for accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Note 2 - Business Acquisition
On December 7, 2000, the Company, in a merger transaction, acquired
Sunteck in exchange for 10 million shares of AutoInfo common stock. The
acquisition has been accounted for under the pooling of interest method of
accounting
8
and accordingly, the accompanying financial statements are presented on a
combined basis as if the acquisition occurred on January 1, 2000.
Note 3 - Discontinued Operations
During 1998, the Company ceased to operate as a specialty consumer finance
company and discontinued its operations. On December 7, 2000 based upon the
acquisition of Sunteck, the Company commenced operations as a full service third
party transportation logistics provider. Accordingly, the results of operations
of the Company prior to the date of acquisition of Sunteck have been categorized
as discontinued operations.
Summarized results of operations and financial position data of the discontinued
operations are as follows:
Period from
January 1,
through March
31, 2000
-------------
Results of Operations:
Revenues $ 18,000
---------
Loss before tax benefit (410,000)
Income tax benefit --
---------
Loss from discontinued operations $(410,000)
=========
9
AUTOINFO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition And Results of Operations
Cautionary statement identifying important factors that could cause our actual
results to differ from those projected in forward looking statements.
Pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, readers of this report are advised that this
document contains both statements of historical facts and forward looking
statements. Forward looking statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
indicated by the forward looking statements. Examples of forward looking
statements include, but are not limited to (i) projections of revenues, income
or loss, earnings per share, capital expenditures, dividends, capital structure
and other financial items, (ii) statements of our plans and objectives with
respect to business transactions and enhancement of shareholder value, (iii)
statements of future economic performance, and (iv) statements of assumptions
underlying other statements and statements about our business prospects.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with our financial
statements and the notes thereto appearing elsewhere in this report.
General
In December 1995, AutoInfo, Inc., (the "Company"), a Delaware corporation,
acquired the operating assets of Falk Finance Company ("FFC"), a Norfolk,
Virginia based specialty financial services company and, as a result, the
Company became a specialized consumer finance company that acquired and serviced
automobile receivables from automobile dealers selling new and used vehicles to
non-prime customers.
The Company experienced material operating losses during 1996, 1997 and
1998. As a result of these losses, the adverse changes in the non-prime
automobile finance industry and the deterioration in the Company's financial
condition, during 1998, the Company discontinued the operation of its non-prime
automotive finance business.
During 1999, the Company continued to reduce operating overhead by
negotiating the termination of its lease in Montvale, New Jersey and vacating
the premises.
On February 2, 2000, the Company filed a disclosure statement and
reorganization plan (the "Reorganization Plan") pursuant to Chapter 11 of Title
11 of the United States Bankruptcy Code.
On June 22, 2000, the Company entered into a Merger Agreement with Sunteck
Transport, Inc. ("Sunteck"), a full service third party transportation logistics
provider, and it's wholly owned subsidiary, Ubidfreight.com, in exchange, upon
closing, for 10 million shares of AutoInfo Common Stock, which constituted
approximately 37% of the proposed outstanding Common Stock of reorganized
AutoInfo under the Reorganization Plan. The consummation of the transaction was
contingent upon, among other things, the approval of the Merger Agreement and
AutoInfo's Disclosure Statement by the Bankruptcy Court, approval of the
Disclosure Statement by AutoInfo's unsecured creditor class, the entry of an
order confirming the Reorganization Plan and the securing of additional
financing.
Sunteck, which was formed in 1997, is a full service third party
transportation logistics provider. Its services include ground transportation
coast to coast, local pick up and delivery, warehousing, air freight and ocean
freight.
10
Sunteck has developed strategic alliances with Less than Truckload (LTL),
truckload, air, rail and ocean common carriers to service its customers' needs.
Sunteck's personnel have in excess of forty years of freight industry
experience.
On June 27, 2000, the Company's Amended Disclosure Statement and Amended
Plan of Reorganization (the "Plan") was approved by the Bankruptcy Court. The
Plan provided for the issuance of one share of our common stock and a cash
payment of $ 0.03 for each dollar of approximately $9.5 million of unsecured
debt.
On August 1, 2000, the Company announced that the Reorganization Plan had
been confirmed by the Honorable Adlai S. Hardin, Jr., United States Bankruptcy
Judge to become effective, without further action by the Court, upon the closing
of AutoInfo's merger with Sunteck.
On December 7, 2000, the Company announced that it obtained new financing
totaling $575,000 in the form of ten year 12% Convertible Debentures (the
"Debentures") and had consummated the acquisition of Sunteck pursuant to the
Merger Agreement dated June 22, 2000. As a result, the Reorganization Plan,
conditionally confirmed by the Bankruptcy Court on August 1, 2000, became
effective without further action by the Court. The $575,000 financing was
provided by certain officers, directors and other parties and will be used as
working capital to support planned business expansion. The Debentures are
convertible into common stock at the option of the debenture holder at a
conversion price of $0.25 per share and are redeemable, at the option of the
holder, after December 31, 2003. Harry Wachtel, President of Sunteck, became
President and Chief Executive Officer of AutoInfo and William Wunderlich became
Executive Vice President and Chief Financial Officer. In addition, the Board of
Directors was reconstituted to include Harry M. Wachtel (Chairman), Mark Weiss,
Thomas Robertson and Peter Einselen.
All documents on file in our bankruptcy proceeding, case no. 00-10368,
including the Sunteck merger agreement can be viewed on the Bankruptcy Court's
Internet site at: http://ecf.nysb.uscourts.gov/index.html.
Results of Operations
Three Months Ended March 31, 2001 and 2000
Revenues
Revenues consisting of freight fees and other related services revenue
totaled $1,487,000 for the three month period ended March 31, 2001 as compared
with $693,000 in the prior year period. This increase is directly related to the
expansion of operations resulting from the implementation of the Company's
strategic business growth plan.
Costs and expenses
Direct freight consisting primarily of delivery costs totaled $1,201,000
for the three month period ended March 31, 2001 as compared with $516,000 in the
prior year period. This increase is directly related to the expansion of
operations resulting from the implementation of the Company's strategic business
growth plan and lower gross margins on certain incremental revenue.
Commissions totaled $104,000 for the three month period ended March 31,
2001 as compared with $64,000 in the prior year period. This increase is
directly related to the expansion of operations resulting from the
implementation of the Company's strategic business growth plan.
11
Operating expenses totaled $267,000 for the three month period ended March
31, 2001 as compared with $142,000 in the prior year period. This increase is
directly related to the expansion of operations resulting from the
implementation of the Company's strategic business growth plan.
Depreciation on totaled $3,000 for the three month period ended March 31,
2001. There was no depreciation for the three month period ended March 31, 2000.
Income tax benefit
Income tax benefit of $4,000 for the three month period ended March 31,
2000 relates to the operating results of Sunteck prior to the date of
acquisition.
Loss from continuing operations
The loss from continuing operations totaled $88,000 for the three month
period ended March 31, 2001 as compared with $29,000 in the prior year period.
This increase is the directly related to costs associated with the expansion of
operations in furtherance of the implementation of the Company's strategic
business growth plan, and lower gross margins on certain incremental revenue.
Discontinued operations
The loss from discontinued operations totaled $410,000 for the three month
period ended March 31, 2000, reflecting our operating results prior to the
merger with Sunteck and consisted primarily of interest expense of $233,000 and
general and administrative expenses.
Net income (loss)
Net loss totaled $88,000 for the three month period ended March 31, 2001
as compared with $435,000 in the prior year period. The decrease is primarily
related to the loss from discontinued operations in the prior year period.
Trends and uncertainties
In December 2000, as a result of our acquisition of Sunteck, we became a
full service third party transportation logistics provider. Our services include
ground transportation coast to coast, local pick up and delivery, warehousing,
air freight and ocean freight. We have strategic alliances with less than
truckload (LTL), truckload, air, rail and ocean common carriers to service our
customers' needs. The transportation industry is highly competitive and highly
fragmented. Our primary competitors are other non-asset based as well as asset
based third party logistics companies, freight brokers, carriers offering
logistics services and freight forwarders. We also compete with customers' /
shippers internal traffic / transportation departments as well as carriers
internal sales and marketing departments directly seeking shippers' freight. We
anticipate that competition for our services will continue to increase. Many of
our competitors have substantially greater capital resources, sales and
marketing resources and experience. We cannot assure you that we will be able to
effectively compete with our competitors in effecting our business expansion
plans.
Our operations to date have not been profitable. As of March 31, 2001, we
had an accumulated deficit of $17.9 million. We expect to continue operating at
a loss during the current fiscal year as we implement our new business plan.
These losses are primarily attributable to costs associated with scaling up
Sunteck's business as well as general and administrative expenses. Other factors
that could adversely affect our operating results include:
12
o the success of Sunteck in expanding its business operations; and
o changes in general economic conditions.
We cannot assure you that our revenues will increase sufficiently to
offset our operating costs or that, even if they do, that our operations will
ever be profitable.
Depending on our ability to generate revenues, we may require additional
funds to expand Sunteck's business operations and for working capital and
general corporate purposes. At this time, we do not believe that revenues will
reach the level required to sustain our operations and growth plans in the near
term. Therefore, we are actively pursuing additional financing alternatives.
However, we do not have any commitments for additional financing and we cannot
assure you that any additional financing will be available or, if available,
will be offered on acceptable terms. Any additional equity financing may be
dilutive to stockholders, and debt financings, if available, may involve
restrictive covenants that further limit our ability to make decisions that we
believe will be in our best interests. In the event we cannot obtain additional
financing on terms acceptable to us when required, our ability to expand
Sunteck's operations may be materially adversely affected.
Liquidity and capital resources
At March 31, 2001, we had outstanding $575,000 of subordinated convertible
debentures. The debentures are convertible into common stock at the option of
the debenture holder at a conversion price of $0.25 per share and are
redeemable, at the option of the holder, after December 31, 2003.
At March 31, 2001, we had liquid assets of approximately $709,000.
The total amount of debt outstanding as of March 31, 2001 was $626,000.
This following table presents our debt instruments and their weighted average
interest rates as of March 31, 2001:
Weighted
Average
Balance Rate
Subordinated Debt $575,000 12.0%
Other Debt $ 51,000 25.6%
Inflation and changing prices had no material impact on revenues or the
results of operations for the period ended March 31, 2001.
13
AUTOINFO, INC. AND SUBSIDIARIES
Part II - OTHER INFORMATION
Item 1 - 6: Inapplicable
14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
authorized.
AUTOINFO, INC.
(Registrant)
--------------------------------------
/s/ William I. Wunderlich
--------------------------------------
William I. Wunderlich
Executive Vice President and Principal
Financial Officer
Date: May 11, 2001
15