SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2004
Commission File No. 333-88952
INTELLIGENT MOTOR CARS GROUP, INC. AND SUBSIDIARY
(Exact name of small business issuer as specified in its charter)
FLORIDA 74-3022293
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
1600 WEST SUNRISE BLVD, FORT LAUDERDALE, FL 33311
(Address of principal executive offices)
(954) 462-0500
(Issuer's telephone number)
* * * * * * * * * * * * * * * * * * * * * *
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to the filing requirements for the past 90 days: YES [X]. NO [ ].
The number of shares of INTELLIGENT MOTOR CARS GROUP, INC. Common Stock (Par
Value $0.001) outstanding at June 30, 2004 was 14,824,830.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Intelligent Motor Cars Group, Inc. and Subsidary
Consolidated Balance Sheets
June 30, December,
2004 2003
----------- -----------
Current Assets:
Cash $ -- $ 58,693
Accounts receivable, net 67,346 148,446
Current portion of notes receivable 693,454 347,489
Inventories 361,348 361,565
----------- -----------
Total current assets 1,122,148 916,193
Notes receivable, net of current portion 739,302 424,709
Property and equipment, net 197,782 181,921
Other assets 20,279 14,862
----------- -----------
Total assets $ 2,079,511 $ 1,537,685
=========== ===========
Liabilities and stockholders' deficiency
Current liabilities
Bank overdraft $ 5,338 $ --
Notes payable:
Floor plan notes - related party 840,802 1,102,025
Floor plan notes - finance companies 3,138 122,656
Line of credit - related parties 49,854 49,854
Accounts payable and accrued liabilities 939,028 251,713
Accounts payable - related party 732,383 519,739
Accrued officer compensation 325,000 300,000
Current portion of long term debt 288,772 284,507
----------- -----------
Total current liabilities 3,184,315 2,630,494
Long-term debt, net of current portion 25,576 26,176
----------- -----------
Total liabilities 3,209,891 2,656,670
Stockholders' Deficiency
Common stock - $.001 par value 100,000,000 shares
authorized, 14,824,830 and 14,814,830 shares issued and
outstanding June 30, 2004 and December 31, 2003 respectively 14,825 14,815
Additional paid - in capital 2,964,446 2,956,956
Accumulated deficit (4,109,651) (4,090,756)
----------- -----------
Total stockholders; deficiency (1,130,380) (1,118,985)
----------- -----------
Total liabilities and stockholders; deficiency $ 2,079,511 $ 1,537,685
=========== ===========
See accompanying notes to consolidated financial statements.
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Intelllegent Motor Cars Group, Inc. and Subsidary
Consolidated Statements of Operations
Six Months Six Months Three Months Three Months
Ended Ended Ended Ended
June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003
------------ ------------ ------------ ------------
Net Sales $ 3,433,130 $ 4,111,014 $ 1,323,867 $ 1,742,982
------------ ------------ ------------ ------------
Costs of sales
Cost of sales - purchase of automobiles 2,571,501 3,708,755 1,075,757 1,721,259
Cost of sales - other 625,614 371,239 273,338 64,108
------------ ------------ ------------ ------------
Total cost of sales 3,197,115 4,079,994 1,349,095 1,785,367
------------ ------------ ------------ ------------
Gross profit 236,015 31,020 (25,228) (42,385)
General and administrative expense
Stock based compensation 7,500 131,441 -- 131,441
Officers' compensation 53,784 73,288 24,784 35,288
Corporate reorganization costs -- 438,742 -- 130,929
Selling, general and administrative 332,794 210,399 135,617 114,716
------------ ------------ ------------ ------------
General and administrative expense 394,078 853,870 160,401 412,374
Loss from operations (158,063) (822,850) (185,629) (454,759)
Other income (expense), Net 139,169 (57,230) 71,510 (28,091)
------------ ------------ ------------ ------------
Loss before taxes $ (18,894) $ (880,080) $ (114,119) $ (482,850)
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (18,894) $ (880,080) $ (114,119) $ (482,850)
============ ============ ============ ============
Net loss per common share - basic and diluted $ (0.01) $ (0.06) $ (0.01) $ (0.03)
============ ============ ============ ============
Weighted average shares used to calculate net
income per common share 14,862,731 14,792,993 14,862,731 15,047,987
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
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Intelligent Motor Cars Group, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Six months Six months Three Months Three Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
Cash Flows from Operating Activities: 2004 2003 2004 2003
--------- --------- --------- ---------
Net income (loss) $ (18,894) $(880,080) $(114,119) $(482,850)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
- Depreciation 19,006 7,500 9,503 3,750
- Provision for doubtful accounts (17,650) 39,500 (8,294) 39,500
- Stock issued as payment for compensation and services 7,500 131,441 -- 131,441
Changes in operating assets and liabilities
Accounts receivable 102,495 150,117 1,802 234,143
Notes receivable (660,559) (4,185) --
Inventory 217 60,494 (7,530) 52,902
Other assets (9,162) (2,307) (4,741) 501
Bank overdraft 5,338 5,338
Accounts payable and accrued expenses 101,471 (70,052) (605,767) (162,748)
Changes in deferred compensation 25,000 -- -- --
--------- --------- --------- ---------
Net cash (used in) operating activities (445,238) (563,387) (727,993) (183,361)
Cash Flows from Investing Activities:
Acquisitions of property and equipment (34,868) (39,493) (30,954) (2,725)
--------- --------- --------- ---------
Net cash used in investing activities (34,868) (39,493) (30,954) (2,725)
Cash Flows from Financing Activities:
Deposit received on stock issuance -- 18,605 (97,925) (286,995)
Proceeds from floor plan loans (49,571) (92,136) 18,575 (92,136)
Proceeds from notes 3,666 -- 744 (124,038)
Payments on stockholder loans payable -- -- -- 19,208
Payment on notes (599) -- (599) --
Payments on floor plan loans - related party -- (253,122) -- --
Proceeds from notes payable - related parties 467,917 595,849 760,762 342,727
Proceeds from issuance of common stock -- 286,995 -- 286,995
--------- --------- --------- ---------
Net cash provided by financing activities 421,413 556,191 681,557 145,761
Net change in cash (58,693) (46,689) (77,390) (40,325)
Cash, beginning 58,693 50,186 77,390 43,822
--------- --------- --------- ---------
Cash, Ending $ -- $ 3,497 $ -- $ 3,497
========= ========= ========= =========
Interest paid $ 33,002 $ 57,230 $ 16,273 $ 28,091
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
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INTELLIGENT MOTOR CARS GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-QSB and reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of financial position as of June 30, 2004 and
the results of operations for three months and six months ended June 30, 2004
and 2003. All adjustments are of a normal recurring nature. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for a full year. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. The
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto for the year ended December 31, 2003 included
in the Company's Annual Report on Form 10-KSB filed on April 30, 2004 and
amended on May 4, 2004. Certain amounts in prior period financial statements
have been reclassified for comparative purposes and to conform to the
presentation in the current period financial statements.
NOTE 2. LOSS PER SHARE
The Company computes loss per common share in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share" which requires the presentation of both basic and diluted
loss per share. Historical basic net loss per common share has been computed
based upon the weighted average number of shares of common stock outstanding
during the periods. Diluted net loss per common share has not been presented, as
there were no options or warrants granted or convertible preferred stock
outstanding.
NOTE 3. GOING CONCERN
The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
which assume that the Company will continue as a going concern, including the
realization of assets and liquidation of liabilities in the ordinary course of
business. For the six months ended June 30, 2004 and year ended December 31,
2003 the Company reported net losses of approximately $19,000 and $1,000,000
respectively.. The Company's consolidated balance sheet at June 30, 2004
reflects negative working capital and a stockholders' deficiency of
approximately $1,000,000. These factors amongst others raise substantial doubt
about the Company's ability to continue as a going concern.
In February 2003, the Company entered into a share exchange transaction
with an entity, which is subject to the registration and reporting requirements
of the Securities and Exchange Commission. This transaction required significant
management and financial resources on the part of the Company in connection with
the acquisition and subsequent assimilation of the two entities. This caused the
Company to have fewer resources, including working capital and management time,
to commit to operations. These conditions also raise substantial doubt about the
Company's ability to continue as a going concern.
Management's plans to continue expanding its used car operations by
launching several Buy-Here/Pay-Here car lots as well as implementing its floor
planning (dealer-to-dealer financing) service. Management believes this would
allow the Company to execute its business plan, achieve its revenue projections
,and provide working capital for inventory and floor planning activities.
The Company's business strategy will focus on the following key
initiatives:
o Steady Growth. The Company intends to expand its operations by
increasing sales at existing locations and opening new locations as
well as acquiring other dealer locations. It is the Company's
objective, if it is successful in obtaining the necessary financing
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as to which no assurances are given, to open and/or acquire at least
one to two new locations each year beginning in fiscal 2005. In
addition, the Company plans to continue working on wholesale sales
to generate additional revenues although that is not expected to be
its primary business.
o Selling Basic Vehicles. The Company will continue to primarily focus
on selling basic and affordable vehicles to its customers. In
general, the Company does not sell luxury cars, sports cars or
exotic cars. The average sales price of retail and wholesale
vehicles sold by the Company during fiscal 2003 and through the
first two quarters of 2004 averaged $7,000. By selling vehicles in
this price range the Company is able to keep the terms of its
installment sales contracts short (generally less than 24 months),
and the customer is more able to afford his or her payments. In
addition, by keeping the price range under $10,000, the Company has
the ability to create a market niche generally ignored by its larger
competitors.
o Collecting Customer Accounts. Collecting customer accounts is
perhaps the single most important aspect of operating a
buy-here/pay-here used car business and is a focal point for store
level and general office personnel on a daily basis. Periodically,
the Company measures and monitors the collection results of its
stores using internally developed delinquency and repossession
standards. Substantially all associate incentive compensation is
tied directly or indirectly to collection results. The Company has
been very successful with its collection techniques and is
experiencing a very low payment delinquency rate. As of December 31,
2003, the Company's repossession rate was less than 1% and the
payment delinquency rate was less than 2%. Although there is no
assurance that these rates can and will continue at such low levels,
the Company is very focused on its collection efforts to keep these
rates under control.
Management believes that the actions presently being taken by the
Company provide the opportunity for the Company to improve liquidity and sustain
profitability. However, there are no assurances that management's plans will be
achieved. The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NOTE 4. RELATED PARTY TRANSACTIONS
In 2004 and in 2003, the Company has been conducting and is continuing
to conduct certain aspects of its business with several related parties,
including officers and stockholders of the Company, as well as entities owned by
officers and stockholders of the Company. The accompanying financial statements,
and the notes to financial statements, present those transactions that
management, to the best of its knowledge and belief, has identified, accounted
for, and disclosed in these financial statements.
NOTE 5. COMMON STOCK
In January 2004, the Board of Directors authorized the issuance of
10,000 shares of restricted common stock to the Company's new Controller in
accordance with his employment agreement. The Company reported a one-time charge
of $7,500 associated with the issuance.
NOTE 6. LEGAL PROCEEDINGS
A former employee is seeking arbitration over a sales commission. If
the issue is not resolved it may become a legal matter. Management does not
believe that any legal proceedings will have an adverse affect on the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of our
results of operations and financial condition. The discussion should be read in
conjunction with our financial statements and notes thereto appearing in this
prospectus.
Fiscal year 2003 was a big turning point for the Company. Much of the
first three quarters was spent migrating the business model from
dealer-to-dealer wholesale sales to buy-here/pay-here retail sales and consumer
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vehicle financing. In September 2003, the Company launched its first retail
dealership in at 1600 West Sunrise Blvd., Fort Lauderdale, Florida. Because of
this business migration and uncertainties surrounding efforts to obtain
financing for the Company throughout 2003, we continue to anticipate incurring
losses in the foreseeable future, possibly through fiscal year end 2004. Our
ability to achieve our business objectives is contingent upon our success in
raising additional capital until adequate revenues are realized from operations.
There is no assurance that additional capital will be obtained.
Overall, as shown below, the Company has been successful in executing
its business plan for and expects to continue the execution of its business
plan, which includes the expansion of all of its sales and financing divisions.
It is management's projection that this strategic execution will enable the
Company to report gross sales for the year ending December 31, 2004 equal to or
greater than the comparable period in 2003 although no assurance can be given
that this will occur.
RESULTS OF OPERATION FOR THE THREE MONTHS ENDED JUNE 30, 2004
For the three months ended June 30, 2004, the Company reported a net
loss of $114,119 or $0.01 per share on approximately $1.3 million in revenues
compared to a loss of $482,850 or $0.03 per share on approximately $1.7 million
in revenues for the same period in 2003. The Company spent much of the 2003
period migrating its business from wholesale sales to retail sales and consumer
auto financing. The result of this migration was lower gross sales with higher
profit margins. Of the approximately $1.3 million in revenues for the second
quarter of 2004, approximately $668,000 was in retail sales and approximately
$632,000 was in wholesale sales. This is in contrast to the comparable quarter
in 2003, when substantially all of the revenues were attributable to wholesale
sales. The Company's cost of goods sold was approximately $1.3 million during
the second quarter of 2004, most of which was the purchase of vehicles for
resale. In the comparable period in 2003, cost of goods sold was approximately
$1.8 million.
Selling, general and administrative expenses for the three months ended
June 30, 2004 was approximately $136,000 as compared to approximately $115,000
for the same period in 2003, reflecting an increase of approximately 18% in the
second quarter of 2004. The increase in 2004 is due mainly to the increase in
administrative payroll, contract labor for the office and the increase of
professional and consulting fees.
For the three months ended June 30, 2003, the Company reported
corporate reorganization costs of $130,929 associated with the move into the
public market during the second quarter of 2003. Those reorganization costs
included professional service fees and fees associated with the acquisition of
the public shell. The Company did not have any reorganization-related costs in
the second quarter of 2004.
Other income (expense), Net for the quarter ended June 30, 2004
increased to approximately $72,000 due to our new Buy Here, Pay Here financing
for notes receivable. This compares to an expense of $28,000 for the same period
in 2003.
During the second quarter of 2004, the Company sold some Notes
Receivable to Wells Fargo to raise capital for the second quarter, which is
typically slow in the auto sales and finance industry. The short-term negative
effect it will have in the future will be reduced interest income, however the
Company will replace the sold loans with additional financed loans. Management
may find a need to sell additional loans in the future.
RESULTS OF OPERATION FOR THE SIX MONTHS ENDED JUNE 30, 2004
For the six months ended June 30, 2004, the Company reported a net loss
of $18.894 or $0.01 per share on approximately $3.4 million in revenues compared
to a loss of $880,080 or $0.06 per share on approximately $4.1 million in
revenues for the same period in 2003. The Company spent much of the 2003 period
migrating its business from wholesale sales to retail sales and consumer auto
financing. The result of this migration was lower gross sales with higher profit
margins. Of the approximately $3.4 million in revenues for the six months ended
June 30, 2004, approximately $1,944,000 was in retail sales and approximately
$1,458,000 was in wholesale sales. This is in contrast to the comparable quarter
in 2003, when substantially all of the revenues were attributable to wholesale
sales. The Company's cost of goods sold was approximately $3.2 million during
the six months ended June 30, 2004, most of which was the purchase of vehicles
for resale. In the comparable period in 2003, cost of goods sold was
approximately $4.1 million.
Selling, general and administrative expenses for the six months ended
June 30, 2004 was approximately $340,000 as compared to approximately $210,000
for the same period in 2003, reflecting an increase of approximately 61% in the
second quarter of 2004. The increase in 2004 is due mainly to the increase in
administrative payroll, contract labor for the office and the increase of
professional and consulting fees.
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Total assets at June 30, 2004 were approximately $2.1 million as
compared to approximately $1.5 million at December 31, 2003. A key-contributing
factor to the increase in assets is the increase in the Company's consumer
financing business. Overall, the Company's notes receivables from consumer
financing increased by approximately $660,000 during the period ended June 30,
2004.
For the six months ended June 30, 2003, the Company reported corporate
reorganization costs of $437,929 associated with the move into the public market
during the second quarter of 2003. Those reorganization costs included
professional service fees and fees associated with the acquisition of the public
shell. The Company did not have any reorganization-related costs in the second
quarter of 2004.
Other income (expense), Net for the six months ended June 30, 2004
increased to approximately $139,000 due to our new Buy Here, Pay Here financing
for notes receivable. This compares to an expense of $57,000 for the same period
in 2003.
CAPITAL RESOURCES AND LIQUIDITY
On a given business day, the Company has a positive or negative cash
flow of up to $100,000 based on collections and accounts payable. Officers and
key employees of the Company have been taking minimal salary and stock
compensation. Salaries will be increased for the officers and key employees to a
reasonable level upon funding, as to which no assurance can be given that any
financing, whether through conventional financing sources or through the sale of
Company securities on a private placement basis, will be realized or available
to the Company on satisfactory terms. In addition, we believe we will have
sufficient cash to meet our minimum operating costs and very limited expansion
costs for the next 12 months. However, to continue our more aggressive plan
during the next 12 months and beyond, which we will need to raise a minimum of
$2 million in additional financing from the sale of our securities, loans from
investors, shareholders or management, and/or joint venture partners. Management
will use its best efforts to raise the additional funds to carry out these
expansion plans but there is a risk that we may not secure the necessary funding
which will have a material adverse impact on our ability to expand the Company's
business.
ITEM 3. CONTROLS AND PROCEDURES
(a) Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Operating Officer, we conducted
an evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), within 90 days of the filing date of this report.
Based on their evaluation, our Chief Executive Officer and Chief Operating
Officer concluded that the Company's disclosure controls and procedures are
effective.
(b) There have been no significant changes (including corrective
actions with regard to significant deficiencies or material weaknesses) in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation referenced in paragraph (a)
above.
PART II. OTHER INFORMATION
ITEM 1. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
31.1 Certifications of the Chief Executive Officer and Acting Chief
Financial Officer and pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer and Acting Chief
Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter
ended June 30, 2004.
Page 8
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized. The information furnished reflects all
adjustments to the statement of the results for the interim period.
Date: August 14, 2004
INTELLIGENT MOTOR CARS GROUP, INC.
(Registrant)
By: /s/ Gerald Scalzo
----------------------------------------------------------
Gerald Scalzo
Chief Executive Officer and Acting Chief Financial Officer
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