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 March 31, 2005
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
of incorporation) Identification No.)
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 March 31, 2005 is 177,640,000.
TABLE OF CONTENTS
PART I
Item 1. Description of Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 6A. Risks Associated With the Auto Industry
Item 7. Financial Statements
Item 8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure
PART III
Item 9. Directors and Executive Officers, Promoters and
Control Persons
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Item 12. Certain Relationships and Related Transactions
Item 13. Controls and Procedures
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
Item 15. Principal Accountant Fees and Services
SIGNATURES
CERTIFICATION
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Intelligent Motor Cars Group, Inc.
Consolidated Balance Sheet
(Unaudited)
As of
March 31, 2005
--------------
Assets
Current Assets:
Cash and cash equivalents $ 13,012
Notes and accounts receivable, net 204,007
Inventories 237,014
-----------
Total current assets 454,033
Property and equipment, net 153,498
Other assets 20,178
-----------
Total assets $ 627,709
===========
Liabilities and Stockholders' Deficiency
Current liabilities
Notes payable:
Related party $ 1,008,469
Floor plan notes - finance companies 142,735
Accounts payable and accrued liabilities 174,095
Accrued officer compensation 185,000
Current portion of long term debt 5,876
-----------
Total current liabilities 1,516,175
-----------
Long-term debt, net of current portion 15,950
-----------
Total liabilities 1,532,125
-----------
Stockholders' Deficiency
Common stock - $.001 par value 200,000,000 shares
authorized, 184,323,837 shares issued and outstanding 177,640
Additional paid - in capital 3,417,160
Accumulated deficit (4,499,216)
-----------
Total stockholders' deficiency (904,416)
-----------
Total liabilities and stockholders' deficiency $ 627,709
===========
See accompanying notes to consolidated condensed financial statements
Intelllegent Motor Cars Group, Inc. and Subsidary
Consolidated Statements of Operations
(Unaudited)
Three months ended Three months ended
March 31,2005 March 31,2004
------------- -------------
Revenues
Net sales of vehicles $ 1,007,842 $ 2,109,512
Finance Income, net 8,271 84,387
------------- -------------
Total revenues 1,016,113 2,193,899
Cost of sales
Cost of sales - purchase of automobiles 812,326 1,495,744
Cost of sales - other 127,048 352,276
------------- -------------
Total cost of sales 939,374 1,848,020
------------- -------------
Gross profit 76,739 345,879
General and administrative expenses:
Stock based compensation -- 7,500
Officers' compensation -- 29,000
Selling, general and administrative 135,363 187,922
Depreciation expense 10,785 9,503
------------- -------------
Total general and administrative expenses 146,148 233,925
Income (loss) from operations (69,409) 111,954
Other (expense) (1,448) (16,729)
------------- -------------
Net income (loss) (70,857) 95,225
============= =============
Net income (loss) per common share - basic and diluted $ (0.0006) $ 0.001
============= =============
Weighted average number of shares outstanding 123,080,871 94,283,252
============= =============
See accompanying notes to consolidated condensed financial statements
Intelligent Motor Cars Group, Inc.
Statements of Cash Flows
(Unaudited)
Three months Three months
ended March 31, ended March 31,
2005 2004
--------- ---------
Cash Flow From Operating Activities:
Net income (loss) $ (70,857) $ 95,225
Adjustments to reconcile income loss to net cash
(used in) operating activities:
- Depreciation 10,785 9,503
- Provisions for doubtful accounts -- (9,356)
- Stock based compensation 7,500
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 19,905 100,693
Notes receivable (62,520) (656,374)
Inventories (16,760) 7,747
Other assets 76 (4,422)
Increase (decrease) in:
Accounts payable and accrued liabilities (74,605) 707,238
Changes in accrued officer compensation -- 25,000
--------- ---------
Net cash provided by (used in)
operating activities (193,976) 282,754
--------- ---------
Cash Flows from Investing Activities:
Acquisitions of Property and Equipment -- (3,914)
--------- ---------
Net cash used in investing activities -- (3,914)
--------- ---------
Cash Flows from Financing Activities:
Advances (payments) of notes payable - related parties 105,085 (292,845)
Proceeds from notes payable - related parties 7,020 29,780
Proceeds from notes -- 2,922
Payment on notes (1,201) --
Proceeds from Issuance of Common Stock 81,637 --
--------- ---------
Net cash provided by (used in)
financing activities 192,541 (260,143)
--------- ---------
Change in cash (1,435) 18,697
Cash, beginning of period 14,447 58,693
--------- ---------
Cash, end of period $ 13,012 $ 77,390
========= =========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest $ 1,448 $ 16,729
========= =========
Supplemental Disclosure of Non Cash Activities
Accrued officer compensation converted to stock $ 140,000 $ --
========= =========
See accompanying notes to consolidated condensed financial statements
INTELLIGENT MOTOR CARS GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements and
cash flows have been prepared in accordance with accounting principles generally
accepted in the United States for the 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
March 31, 2005 and the results of operations for three months ended March 31,
2005 and 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, 2004 included
in the Company's Annual Report on Form 10-KSB filed on April 15, 2005 and
amended on April 20, 2005. 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 three months ended March 31, 2005 the
Company reported net losses of approximately $71,000. The Company's consolidated
balance sheet at March 31,2005 reflects negative working capital and a
stockholders' deficiency of approximately $904,000. These factors amongst others
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 and re-launch of its internal financing division in 2005. Management
believes this would allow the Company to execute its business plan, although no
assurance can be given that this will occur due to the Company's continuing lack
of funding to achieve its business goals including expansion plans.
Management believes that the actions presently being taken on 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 2005 and in 2004, 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 March 31, 2005, the Company
owes its affiliates approximately $1,008,000 for goods and services.
On March 3, the Board of Directors authorized and approved the
conversion of all debt owed at December 31, 2004 by the Company to Gerald
Scalzo, the Company's Chief Executive Officer, Chairman of the Board of
Directors and a major shareholder, into 14,000,000 post-split shares of
restricted common stock at a conversion price of $.01 per share based upon a
percentage value of the sale price of a share of common stock on March 2, 2005,
the trading day immediately preceding the date of the Board's action. As of
December 31, 2004, the Company was indebted to Gerald Scalzo for the past due
compensation of $325,000. With the issuance, Mr. Scalzo retired $140,000 of the
past due compensation owed to him, leaving a balance due of $185,000.
NOTE 5. COMMON STOCK
In January 2005, the Company amended its Certificate of
Incorporation to increase its authorized common stock from 100,000,000 to
200,000,000 shares.
On January 13, 2005. the Company issued 350,000 post-split shares
of restricted common stock to Harvey Judkowitz as compensation for serving as a
Director and as Chairman of Board's Audit Committee services rendered in 2004.
On January 18, 2005 the Company affected a 7:1 forward split of its
common stock resulting in the increase of its issued and outstanding shares of
common stock to 156,189,810 as of December 31, 2004.
In February 2005, The Company entered into a one-year renewable
agreement with Cross Capital Fund, LLC (the "Fund") to fund $2,500,000 over the
next year beginning in the second quarter of 2005. The Company will issue
2,500,000 shares of its Series A 6% Cumulative Convertible Preferred Stock
("Preferred Stock") for the funds advanced. In addition, The Company will pay a
monthly management fee of $10,000 dollars in cash or free trading shares and
will issue a warrant to the Fund for 500,000 post-split shares of common stock,
the final terms of the agreement have not been determined. In exchange for
equity funding, The Company will receive an Investor Membership Interest in the
Fund. The Fund has "piggyback" registration rights for the shares of common
stock that may be issued upon a conversion of Preferred Stock as set forth in
the agreement and is expected to have the same registration rights upon the
exercise of the warrant No funding has been received during the quarter ended
March 31, 2005, no shares of Preferred Stock issued and no warrant has been
issued to the Fund.
On March 3, the Board of Directors authorized and approved the
conversion of all debt owed at December 31, 2004 by the Company to Gerald
Scalzo, the Company's Chief Executive Officer, Chairman of the Board of
Directors and a major shareholder, into 14,000,000 post-split shares of
restricted common stock at a conversion price of $.01 per share based upon a
percentage value of the sale price of a share of common stock on March 2, 2005,
the trading day immediately preceding the date of the Board's action. As of
December 31, 2004, the Company was indebted to Gerald Scalzo for the past due
compensation of $325,000. With the issuance, Mr. Scalzo retired $140,000 of the
past due compensation owed to him, leaving a balance due of $185,000.
Also on March 3, 2005, the Board of Directors authorized and approved
(i)the issuance of 2,500,000 shares of restricted common stock to Michael
Magolnick in lieu of cash compensation for services as Chief Operating Officer
for the fiscal year ended December 31, 2004, and (ii) 350,000 shares of
restricted common stock to Harvey Judkowitz as compensation for serving as a
Director and as Chairman of Board's Audit Committee for the 2005 fiscal year.
On March 3, 2005, the Board of Directors authorized and approved the
sale of 3,269,000 shares through a private transaction. Total proceeds received
from this issuance were $21,172.50.
On March 17, 2005, the Board of Directors authorized and approved the
sale of 981,000 shares through a private transaction. Total proceeds received
from this issuance amounted to $3,964.50
NOTE 6. SUBSEQUENT EVENTS
In April 2005, the Company amended its Certificate of Incorporation to
increase its authorized Common Stock from 200,000,000 to 500,000,000 shares.
In the third quarter 2005 the Company is changing it business model
from retail sale to wholesale sale. .
As of September 14, 2005 the Company has received from Cross Capital
Fund, LLC three distribution checks in six months totaling $52,000. The fund has
failed to perform for the last three months in the manner expected to sustain
the company's growth.
Due to the lack of funds and non-profitable quarters the Company has
made the decision to close its existing location and move its corporate
headquarters to a less expensive office/warehouse location, 750 E Prospect Road,
Oakland Park FL 33309. Wall Street Properties (the former lessor) has released
the Company from its existing lease with no penalties.
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.
The following discussion and analysis contains forward-looking
statements, which involve risks and uncertainties. Our actual results may differ
significantly from the results, expectations and plans discussed in these
forward-looking statements.
In September 2003, the Company launched its first retail buy here/pay
here dealership at 1600 West Sunrise Blvd., Fort Lauderdale, Florida. .In the
third quarter of 2004, the Company discontinued its buy here/pay here program.
The company focuses on cash sales and financing through third party finance
companies. Because of this business migration and uncertainties surrounding
efforts to obtain financing for the Company throughout 2004, we continue to
anticipate incurring losses in the foreseeable future, possibly through fiscal
year end 2005. Our ability to continue as a going concern 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. It
is the Company's plan to continue building its profitable cash business as well
as its wholesale division. These conditions amongst others raise substantial
doubt about the Company's ability to continue as a going concern.
In February 2005, the Company entered into a one-year renewable
agreement with Cross Capital Fund, LLC (the "Fund") to fund $2,500,000 over the
next year beginning in the second quarter of 2005. The Company will issue
2,500,000 shares of its Series A 6% Cumulative Convertible Preferred Stock
("Preferred Stock") for the funds advanced. In addition, the Company will pay a
monthly management fee of $10,000 dollars in cash or free trading shares and
will issue a warrant to the Fund for 500,000 post-split shares of common stock,
the final terms of the which have not been determined. In exchange for equity
funding, the Company will receive an Investor Membership Interest in the Fund.
The Fund has "piggyback" registration rights for the shares of common stock that
may be issued upon a conversion of Preferred Stock as set forth in the agreement
and is expected to have the same registration rights upon the exercise of the
warrant No funding has been received for the first quarter. There have been no
transactions between the Company and Cross Capital Fund, LLC during the quarter
ended March 31, 2005.
As of September 14, 2005 the Company has received from Cross Capital
Fund, LLC three distribution checks in six months totaling $52,000. The fund has
failed to perform for the last three months in the manner expected to sustain
the company's growth.
Due to the lack of funds and non-profitable quarters the Company has
made the decision to close its existing location and move its corporate
headquarters to a less expensive office/warehouse location, 750 E Prospect Road,
Oakland Park FL 33309. Wall Street Properties (the former lessor) has released
the Company from its existing lease with no penalties.
RESULTS OF OPERATION FOR THE THREE MONTHS ENDED MARCH 31, 2005
For the first quarter ended March 31, 2005, the Company's total assets
reported are at just over $627,700 compared to just over $580,630 for the for
the year ended December 31,2004.
For the first quarter ended March 31, 2005, the Company's current
liabilities are $1,516,175 compared to $1,643,676 for the year ended December
31, 2004 2004.
For the three months ended March 31, 2005, the Company reported a net
loss of $70,857 or $0.0006 compared to income of $95,000 or $0.001 per
share.
Sales for the first quarter ended March 31, 2005 were approximately
$1.0 million in revenues versus $2.2 million for the quarter ended March 31,
2004. During the first quarter of 2004, the Company was conducting its
business as a buy here/pay here operation. Buy here/pay here business model was
suspended in 2004 due to lack of funding. The Company focused on more cash sales
and selling financed sales to third party finance companies which resulted in
the sale of fewer units.
Cost of Goods Sold for the first quarter ended March 31, 2005 is
approximately $939,000 versus approximately $1,848,000 for the same period in
2004. The decrease is due to less sales for the quarter and cost cutting
measures.
General and administrative expenses for the three months ended March
31, 2005 was approximately $146,148 as compared to approximately $233,925 not
including depreciation for the same period in 2004. The reduction was due to
cost cutting measures including health insurance benefits, reduced officer's
compensation of $29,000 and stock based compensation of $7,500.
Other expenses for the first quarter ended March 31, 2005 were lower
due to the payoff of interest bearing notes payable in 2004. Interest expense
for the first quarter ended March 31, 2005 is $1,448 versus quarter ended March
31, 2004 of $16,279.
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.
PART II. OTHER INFORMATION
ITEM 1. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
31.1 Certifications of the Chief Executive Officer and pursuant to Section
302 of The Sarbanes-Oxley Act of 2002.
31.2 Certifications of the Chief Financial Officer and pursuant to Section
302 of The Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of The Sarbanes-Oxley
Act of 2002.
32.2 Certification of the 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 March 31, 2005.
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: September 13, 2005
INTELLIGENT MOTOR CARS GROUP, INC.
(Registrant)
By: /s/ Gerald Scalzo
-------------------------------
Gerald Scalzo
Chief Executive Officer
By: /s/ Thomas L. Jacobs
-------------------------------
Thomas L. Jacobs
Chief Financial Officer