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 September 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 September 30, 2004 was 14,824,830.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Intelligent Motor Cars Group, Inc. and Subsidary
Consolidated Balance Sheets
September December
2004 2003
----------- -----------
Current Assets:
Cash $ 4,425 $ 58,693
Accounts receivable, net 149,186 148,446
Current portion of notes receivable 101,959 347,489
Inventories 179,832 361,565
----------- -----------
Total current assets 435,402 916,193
Notes receivable, net of current portion -- 424,709
Property and equipment, net 188,279 181,921
Other assets 20,704 14,862
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Total assets $ 644,385 $ 1,537,685
=========== ===========
Liabilities and stockholders' deficiency
Current liabilities
Notes payable:
Floor plan notes - related party $ 78,506 $ 1,102,025
Floor plan notes - finance companies 74,711 122,656
Line of credit - related party 49,854 49,854
Accounts payable and accrued liabilities 353,522 251,713
Accounts payable - related party 781,415 519,739
Accrued officer compensation 325,000 300,000
Current portion of long term debt 291,151 284,507
----------- -----------
Total current liabilities 1,954,159 2,630,494
Long-term debt, net of current portion 22,116 26,176
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Total liTotaltliabilities 1,976,275 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 September 30, 2004 and December 31, 2003 respectively 14,825 14,815
Additional paid - in capital 2,964,446 2,956,956
Accumulated deficit (4,311,161) (4,090,756)
----------- -----------
Total stockholders; deficiency (1,331,890) (1,118,985)
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Total liTotaltliabilitiescandlstockholders;ndeficiency $ 644,385 $ 1,537,685
=========== ===========
See accompanying notes to consolidated condensed financial statements
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Intelllegent Motor Cars Group, Inc. and Subsidary
Consolidated Statements of Operations
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net Sales $ 4,493,197 $ 5,290,113 $ 1,060,067 $ 1,170,316
------------ ------------ ------------ ------------
Cost of sales
Cost of sales - purchase of automobiles 3,473,941 5,286,599 902,440 1,197,823
Cost of sales - other 785,278 -- 159,664 --
------------ ------------ ------------ ------------
Total cost of sales 4,259,219 5,286,599 1,062,104 1,197,823
------------ ------------ ------------ ------------
Gross profit 233,978 3,514 (2,037) (27,507)
General and administrative expense
Stock based compensation 7,500 131,441 -- --
Officers' compensation 55,997 98,288 2,213 25,000
Corporate reorganization costs -- 527,375 -- 88,632
Selling, general and administrative 412,564 321,577 79,770 111,178
------------ ------------ ------------ ------------
General and administrative expense 476,061 1,078,681 81,983 224,810
Loss from operations (242,083) (1,075,167) (84,020) (252,317)
Other income (expense)
Interest income 175,903 (57,230) 36,734 --
Sale of loan receivable (154,225) (154,225) --
------------ ------------ ------------ ------------
Other income (expense), Net 21,678 (57,230) (117,491) --
Loss before taxes $ (220,405) $ (1,132,397) $ (201,511) $ (252,317)
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (220,405) $ (1,132,397) $ (201,511) $ (252,317)
============ ============ ============ ============
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 15,423,080 14,820,625 15,047,987
============ ============ ============ ============
See accompanying notes to consolidated condensed financial statements.
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Intelligent Motor Cars Group, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Nine Months Nine Months
Ended Ended
September 30, September 30,
Cash Flows from Operating Activities: 2004 2003
----------- -----------
Net income (loss) $ (220,405) $(1,132,397)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
- Depreciation 28,509 11,250
- Provision for doubtful accounts (37,390) 39,500
- Stock issued as payment for compensation and services 7,500 131,441
- Stock issued to delay interest payment -- --
Changes in operating assets and liabilities
Accounts receivable 36,650 (226,265)
Inventory 181,732 (87,898)
Other assets (5,842) (11,154)
Accounts payable and accrued expenses 363,317 237,748
Changes in deferred compensation 25,000 (75,000)
----------- -----------
Net cash provided by (used in) operating activities 379,071 (1,112,775)
Cash Flows from Investing Activities:
Acquisitions of property and equipment (34,868) (134,375)
Security deposit on new location -- (10,600)
----------- -----------
Net cash used in investing activities (34,868) (144,975)
Cash Flows from Financing Activities:
Deposit received on stock issuance -- 18,605
Proceeds from floor plan loans (47,945) --
Payments from notes 4,976 97,942
Payments on stockholder loans payable -- (27,124)
Payments on notes (2,391) (3,595)
Payments on floor plan loans - related party -- (122,181)
Proceeds from notes payable - related parties 670,240 973,185
Payments to notes payable - related parties (1,023,351) --
Proceeds from issuance of common stock -- 286,995
----------- -----------
Net cash (used in) provided by financing activities (398,471) 1,223,827
Net decrease in cash (54,268) (33,923)
Cash, beginning 58,693 50,186
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Cash, Ending $ 4,425 $ 16,263
=========== ===========
Non cash activity:
Payments to notes payable - related parties $ 670,240 $ --
----------- -----------
Total non cash activity $ 670,240 $ --
=========== ===========
Supplemental information
Interest paid $ 38,381 $ 74,484
=========== ===========
See accompanying notes to consolidated condensed financial statements.
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INTELLIGENT MOTOR CARS GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NOTE 1. BASIS OF PRESENTATION
The accompanying un-audited 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 September 30, 2004
and the results of operations for three months and nine months ended September
30, 2004. 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. INCOME (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 nine months ended September 30, 2004 the Company reported net
losses of approximately $220,000. The Company's consolidated balance sheet at
September 30, 2004 reflects negative working capital and a stockholders'
deficiency of approximately $1.3 million. 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 its operations and become profitable by
increasing cash transactions and focusing additional resources on wholesale
sales. 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.
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.
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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. At September 30, 2004, the
Company owes its affiliates $860,000 for goods and services and has a balance of
approximately $50,000 on a note payable to another related party.
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.
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.
Much of the first three quarters of fiscal year 2003 was spent
migrating the business model from dealer-to-dealer wholesale sales to
buy-here/pay-here retail sales and consumer 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. As of the third quarter of 2004, the
Company has moved away from its buy-here/pay-here consumer finance business to
focus on its profitable and growing cash business. It is the Company's plan to
continue building its profitable cash business as well as its wholesale
division.
The Company intends to release its 2005 business plan during the fourth
quarter of 2004. Included in the plan will be information pertaining to the
Company's fund raising efforts and plans to develop several business divisions.
The Company also plans to renegotiate its agreements and relationships with key
management and the Company's board during the upcoming fourth quarter.
RESULTS OF OPERATION FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
For the three months ended September 30, 2004, the Company reported a
net loss of $201,511 or $0.01 per share on approximately $1.1 million in
revenues compared to a loss of $252,317 or $0.03 per share on approximately $1.2
million in revenues for the same period in 2003. The Company spent much of the
first nine months of 2003 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. The Company's cost of goods sold was
approximately $1.1 million during the third 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 $1.2 million.
Selling, general and administrative expenses for the three months ended
September 30, 2004 was approximately $79,770 as compared to approximately
$111,000 for the same period in 2003.
Page 6
As of August 24, 2004, Dealer Financial Services, a related party,
bought all of the remaining Notes Receivable on the consumer Buy-here/Pay-here
business from the Company. These Notes were purchased at full value with no
discount for $1,482,890. Traditionally, lenders who purchase loans discount them
from 35% to 48%. The balance on the Company's books as of September 30, 2004
represents short-term loans of ninety (90) days or less and loans submitted to
other finance companies and will be funded within thirty (30) days or less. In
accordance with these sales, the Company is drastically reducing all of the
Notes Receivable it is currently (and has been) financing. It is the Company's
plan to only finance short-term loans of one year or less. The Company sold off
loans to Wells Fargo in the third quarter due to cash flow needs. The loss the
Company suffered in this transaction during this quarter is $154,225.
RESULTS OF OPERATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
For the nine months ended September 30, 2004, the Company reported a
net loss of $220,405 or $0.01 per share on approximately $4.5 million in
revenues compared to a loss of $1,132,397 or $0.06 per share on approximately
$5.3 million in revenues for the same period in 2003. The Company spent much of
the first nine months of 2003 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. The Company's cost of goods sold was
approximately $4.3 million during the third 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 $5.3 million.
Selling, general and administrative expenses for the nine months ended
September 30, 2004 was approximately $413,000 as compared to approximately
$321,600 for the same period in 2003.
Total assets at September 30, 2004 were approximately $644,000 as
compared to approximately $1.5 million at December 31, 2003. A key-contributing
factor to the decrease in assets is the decrease in the Company's consumer
financing business and the sale of the Notes Receivable
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 and continue as a going concern.
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.
Page 7
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 September 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: November 17, 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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