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, 2002
|_| 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 (I.R.S. Employer Identification number)
incorporation or organization)
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 3, 2002:
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, 2002 (unaudited) and December 31, 2001 (audited) ...... 3
Statements of Operations (unaudited)
Three months ended March 31, 2002 and 2001 ...................... 4
Statements of Cash Flows (unaudited)
Three months ended March 31, 2002 and 2001 ...................... 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,
2002 2001
------------ ------------
Unaudited Audited
ASSETS
Cash $ 720,000 $ 885,000
Short-term investments -- 13,000
Accounts receivable 2,161,000 1,358,000
Other current assets 76,000 65,000
------------ ------------
Total current assets 2,957,000 2,321,000
Fixed assets, net of depreciation 41,000 37,000
Loan receivable 100,000 100,000
------------ ------------
$ 3,098,000 $ 2,458,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loan payable $ 500,000 $ 500,000
Accounts payable and accrued liabilities 1,713,000 1,140,000
------------ ------------
Total current liabilities 2,213,000 1,640,000
------------ ------------
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, 2002 and
December 31, 2001 27,000 27,000
Additional paid-in capital 18,014,000 18,014,000
Retained deficit (17,731,000) (17,798,000)
------------ ------------
Total stockholders' equity 310,000 243,000
------------ ------------
$ 3,098,000 $ 2,458,000
============ ============
See notes to condensed unaudited financial statements
3
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
2002 2001
------------ ------------
Gross revenues $ 3,560,000 $ 1,476,000
Cost of transportation 2,878,000 1,201,000
------------ ------------
Net revenues 682,000 275,000
------------ ------------
Commissions 348,000 104,000
Operating expenses 235,000 221,000
------------ ------------
583,000 325,000
------------ ------------
Income (loss) from operations 99,000 (50,000)
------------ ------------
Other charges (credits):
Investment income (7,000) (10,000)
Interest expense 38,000 23,000
------------ ------------
31,000 13,000
------------ ------------
Income (loss) before income taxes 68,000 (63,000)
Income taxes (Note 2) 3,000 --
------------ ------------
Net income (loss) $ 65,000 $ (63,000)
============ ============
Basic and diluted net income (loss) per share $ .00 $ (.00)
============ ============
Weighted average number of common and
common equivalent shares 27,694,000 27,298,000
------------ ------------
See notes to condensed unaudited financial statements
4
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2002 2001
--------- ---------
Cash flows from operating activities:
Net income (loss) $ 65,000 $ (63,000)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 3,000 3,000
Changes in assets and liabilities:
Accounts receivable (803,000) (298,000)
Other assets (11,000) (30,000)
Accounts payable and accrued liabilities 573,000 224,000
--------- ---------
Net cash used in operating activities (173,000) (164,000)
--------- ---------
Cash flows from investing activities:
Capital expenditures (7,000) (18,000)
Proceeds from sale of short-term investments 15,000 30,000
--------- ---------
Net cash provided by investing activities 8,000 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 (165,000) (202,000)
Cash at beginning of period 885,000 725,000
--------- ---------
Cash at end of period $ 720,000 $ 523,000
========= =========
See notes to condensed unaudited financial statements
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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 our Annual Report on Form 10-KSB for the year ended December
31, 2001 as filed with the Securities and Exchange Commission.
Note 1. - Business and Summary of Significant Accounting Policies
Business
As a result of our acquisition of Sunteck Transport, Inc. ("Sunteck") in
December 2000, we are 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.
We have full service offices in Florida, New Jersey, Missouri and North
Carolina and independent sales agents in New York, Georgia, New Jersey, Ohio,
Illinois, Washington, Oklahoma, Wisconsin, Kansas, Michigan, South Carolina, and
Florida to service our customers' transportation needs. As of March 1, 2002 we
had 35 sales agents. Our services include arranging for the transport of
customers' freight from the shippers location to the designated destination. We
do not own any trucking equipment and rely on independent carriers for the
movement of customers' freight. We seek to establish long-term relationships
with our customers and provide a variety of logistics services and solutions to
eliminate inefficiencies in our customers' supply chain management.
Sunteck, which was formed in 1997, is a full service third party
transportation logistics provider. Its supply chain 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.
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Summary of Significant Accounting Policies
Basis of Presentation
The financial statements of the Company have been prepared using the
accrual basis of accounting under accounting principles generally accepted in
the United States of America ("GAAP").
The consolidated financial statements, which are unaudited, have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). In management's opinion, these financial statements include
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the results of operations for the interim periods
presented. The results of operations for the three months ended March 31, 2002
and 2001 are not necessarily indicative of results to be expected for the entire
year. Pursuant to SEC rules and regulations, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with GAAP have been omitted from these statements. The consolidated financial
statements and notes thereto should be read in conjunction with the financial
statements and notes included in our Annual Report on Form 10-KSB.
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.
Revenue Recognition
Gross revenues consist of the total dollar value of services purchased by
customers. We act primarily as the service provider for these transactions and
recognize revenue as these services are rendered.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101, as amended, summarizes some of the SEC's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The adoption of SAB 101 did not have a material effect on the
financial statements.
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 December 31, 2001 consisted of marketable
securities and were carried at market value.
Fixed Assets
Fixed assets as of March 31, 2002 and December 31, 2001, consisting
predominantly of furniture, fixtures and office 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.
7
Income (Loss) Per Share
Basic income (loss) per share is based on net income (loss) divided by the
weighted average number of common shares outstanding. Common stock equivalents
outstanding were 396,000 for the period ended March 31, 2002 and were
antidilutive for the year ended December 31, 2001.
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.
Stock-Based Compensation
The Company has adopted Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation" ("SFAS 123"). As permitted by
SFAS 123, the Company has chosen to continue to apply Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and,
accordingly, no compensation cost has been recognized for stock options in the
financial statements.
8
Note 2 Income Tax Expense
Components of income taxes follow:
Three Months Ended
March 31, 2002
--------------------
Current Deferred
-------- --------
Tax expense before application of
operating loss carryforwards $ 25,000 $ --
Tax expense (benefit) of operating
loss carryforwards (22,000) 22,000
Change in valuation allowance -- (22,000)
-------- --------
Tax expense $ 3,000 $ --
======== ========
March 31, December 31,
2001 2001
----------- -----------
Deferred tax assets:
Net operating loss
carryforward $ 6,194,000 $ 6,216,000
----------- -----------
Gross deferred tax assets 6,194,000 6,216,000
Less: valuation allowance (6,194,000) (6,216,000)
----------- -----------
Deferred tax asset $ -- $ --
=========== ===========
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 consolidated
financial statements and the notes thereto appearing elsewhere in this report.
General
As a result of our acquisition of Sunteck Transport, Inc. ("Sunteck") in
December 2000, we are 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.
We have full service offices in Florida, New Jersey, Missouri and North
Carolina and independent sales agents in New York, Georgia, New Jersey, Ohio,
Illinois, Washington, Oklahoma, Wisconsin, Kansas, Michigan, South Carolina, and
Florida to service our customers' transportation needs. As of March 31, 2002 we
had 35 sales agents. Our services include arranging for the transport of
customers' freight from the shippers location to the designated destination. We
do not own any trucking equipment and rely on independent carriers for the
movement of customers' freight. We seek to establish long-term relationships
with our customers and provide a variety of logistics services and solutions to
eliminate inefficiencies in our customers' supply chain management.
During 1998, we ceased to operate as an automobile finance company. Our
main business focus became the challenge to seek out business opportunities in
furtherance of our plan to rebuild the company and create shareholder value.
These efforts were inhibited by our negative net worth and subordinated debt of
$9.3 million. Therefore, we commenced discussions with our note holders
regarding the restructuring of this debt to enhance the possibility of
consummating a transaction to return the company to operating status and create
shareholder value.
As a result, on February 2, 2000, we filed a disclosure statement and
reorganization plan pursuant to Chapter 11 of Title 11 of the United States
Bankruptcy Code providing 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
outstanding unsecured debt.
On June 22, 2000, we entered into a Merger Agreement with Sunteck, a full
service third party transportation logistics provider, in exchange for, upon
closing, 10 million shares of our common stock, which constituted approximately
37% of the proposed outstanding common stock of reorganized AutoInfo under our
Chapter 11 reorganization plan. The consummation of the transaction was
contingent upon, among other things, (a) the approval of
10
the Merger Agreement and our Disclosure Statement by the United States
Bankruptcy Court, (b) the approval of the Disclosure Statement by our unsecured
creditor class, (c) the entry of an order confirming the Reorganization Plan and
(d) securing additional financing.
Sunteck, which was formed in 1997, is a full service third party
transportation logistics provider. Its supply chain 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. Harry Wachtel, Sunteck's President and sole shareholder,
became Chairman of the Board, CEO and President of AutoInfo.
On June 27, 2000, our Amended Disclosure Statement and Amended Plan of
Reorganization (the "Reorganization Plan") was approved by the Bankruptcy Court.
On August 1, 2000, we 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
the Sunteck merger which occurred in December 2000.
Results of Operations
In the transportation industry, results of operations generally show a
seasonal pattern as customers reduce shipments during and after the winter
months. This industry trend has not had a significant impact on our results of
operations or our cash flows in recent years. Also, inflation has not materially
affected our operations due to the short-term transactional basis of our
business. However, we cannot fully predict the impact seasonality and inflation
may have in the future.
Three Months Ended March 31, 2002 and 2001
During the year ended December 31, 2001, we began to implement our
strategic growth business plan consisting primarily of the expansion of client
services, the opening of regional operations centers in key geographical markets
and the addition of independent sales agents. As a result of this, our number of
sales agents has increased to thirty five as of March 31, 2002 as compared with
seven as of March 31, 2001. Our net revenues (gross revenues less cost of
transportation) are the primary indicator of our ability to source, add value
and resell service that are provided by third parties and are considered to be
the primary measurement of growth. Therefore, the discussion of the results of
operations below focuses on the changes in our net revenues. The increases in
net revenues and all related cost and expense categories are the direct result
of our business expansion.
The following table represents certain statement of operation data as a
percentage of net revenues:
2002 2001
----- -----
Net revenues 100.0% 100.0%
----- -----
Commissions 51.0% 37.7%
Operating expenses 34.5% 80.4%
Other charges 4.5% 4.7%
----- -----
Income (loss) from operations before
income taxes 10.0% (22.8%)
----- -----
11
Revenues
Gross revenues consisting of freight fees and other related services
revenue totaled $3,560,000 for the period ended March 31, 2002, as compared with
$1,476,000 in the prior year period. Net revenues were $682,000 for the period
ended March 31, 2002, as compared with $275,000 in the prior year period.
Costs and expenses
Commissions totaled $348,000 for the period ended March 31, 2002, as
compared with $104,000 in the prior year period. As a percentage of net
revenues, commissions were 51% for the period ended March 31, 2002 as compared
with 38% in the prior year period. This increase is the direct result of higher
commission rates related to the Company's business expansion and the addition of
independent sales agents are higher commission rates than historical amounts
Operating expenses totaled $235,000 for the period ended March 31, 2002,
as compared with $221,000 in the prior year period. As a percentage of net
revenues, operating expenses were 34% for the period ended March 31, 2002 as
compared with 80% in the prior year period. This decrease is the direct result
of management's ability to leverage selling, general and administrative expenses
in connection with the Company's business expansion.
Investment income, primarily consisting of the gain on the sale of
marketable securities and dividend and interest income, was $7,000 for the
period ended March 31, 2002 as compared with $10,000 in the prior year period.
Interest expense totaled $38,000 for the period ended March 31, 2002, as
compared with $23,000 in the prior year period. This increase is primarily the
result of increased borrowings.
Income taxes
Income taxes were $3,000 for the period ended March 31, 2002.
Net income (loss)
Net income totaled $65,000 for the period ended March 31, 2001, as
compared with a loss of $63,000 in the prior year period.
Trends and uncertainties
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 were profitable for the three month period ended March 31,
2002. However, as of March 31, 2002, we had an accumulated deficit of $17.8
million. Other factors that could adversely affect our operating results
include:
o the success of Sunteck in expanding its business operations; and
12
o changes in general economic conditions.
We cannot assure you that our revenues will continue to increase.
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. 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, 2002, we had outstanding $575,000 of subordinated convertible
debentures and $500,000 pursuant to a Line of Credit. 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. The Line of Credit, obtained from a related
party in August 2001, is secured by accounts receivable and matures in August
2002. We believe that we have sufficient working capital to meet our short-term
operating needs and that we will be able to extend or replace the Line of Credit
on terms acceptable to us.
At March 31, 2002, we had liquid assets of approximately $720,000.
The total amount of debt outstanding as of March 31, 2002 was $1,075,000.
This following table presents our debt instruments and their weighted average
interest rates as of March 31, 2002:
Weighted
Balance Average Rate
----------------- ---------------
Subordinated Debt $ 575,000 12.0%
Line of Credit $ 500,000 17.0%
Inflation and changing prices had no material impact on revenues or the
results of operations for the period ended March 31, 2002.
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 10, 2002
15