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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarterly period ended Sept 30, 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.)
750 E Prospect RD, Oakland Park FL 33309
(Address of principal executive offices)
(918)584-4463
(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, 2005 is 184,323,837.
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[Client's Letterhead]
December 19, 2005
Berkovits, Lago & Company, LLP
8211 West Broward Boulevard
Suite 340
Fort Lauderdale, Florida 33324
We are providing this letter in connection with your review of the unaudited
interim financial information of Intelligent Motor Cars Group, Inc. as of
September 30, 2005 and for the three month and nine month periods then ended
(interim financial information) for the purpose of determining whether any
material modifications should be made to the interim financial information for
it to conform with accounting principles generally accepted in the United States
of America. We confirm that we are responsible for the fair presentation of the
interim financial information in conformity with generally accepted accounting
principles. We are also responsible for establishing and maintaining effective
internal control over financial reporting.
Certain representations in this letter are described as being limited to matters
that are material. Items are considered material, regardless of size, if they
involve an omission or misstatement of accounting information that, in light of
surrounding circumstances, makes it probable that the judgment of a reasonable
person relying on the information would be changed or influenced by the omission
or misstatement.
We confirm, to the best of our knowledge and belief, as of December 18, 2005,
the following representations made to you during your review.
1. The interim financial information referred to above has been prepared and
presented in conformity with generally accepted accounting principles
applicable to interim financial information and with Item 302(a) of SEC
Regulation S-K. The interim financial information has been prepared on a
basis consistent with prior interim periods and years and includes all
disclosures necessary and required to be included by the laws and
regulations to which the Company is subject.
2. We have designed our internal control over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of interim financial information for external purposes in
accordance with generally accepted accounting principles.
3. We have disclosed to you all deficiencies in the design or operation of
internal control over financial reporting identified as part of our
assessment, including separately disclosing to you all such deficiencies
that we believe to be significant deficiencies or material weaknesses in
internal control over financial reporting.
4. Management's certification regarding internal control over financial
reporting as of September 30, 2005 discloses any changes in the Company's
internal control over financial reporting that occurred during the most
recent quarter that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
5. We have made available to you all--
a. Financial records and related data.
b. Minutes of the meetings of stockholders, directors, and committees of
directors, or summaries of actions of recent meetings for which
minutes have not yet been prepared. All significant board and
committee actions are included in the summaries.
6. There have been no communications from the SEC or other regulatory agencies
regarding noncompliance with, or deficiencies, in financial reporting
practices.
7. There are no material transactions that have not been properly recorded in
the accounting records underlying the interim financial information.
2
8. We acknowledge our responsibility for the design and implementation of
programs and controls to prevent and detect fraud.
9. We have no knowledge of any fraud or suspected fraud affecting the Company
involving:
a. Management;
b. Employees who have significant roles in internal control over
financial reporting; or
c. Others where the fraud could have a material effect on the interim
financial information.
10. We have no knowledge of any allegations of fraud or suspected fraud
affecting the Company received in communications from employees, former
employees, analysts, regulators, short sellers, or others.
11. The Company has no plans or intentions that may materially affect the
carrying value or classification of assets and liabilities.
12. The following have been properly recorded or disclosed in the interim
financial information:
a. Related-party transactions, including sales, purchases, loans, transfers,
leasing arrangements, and guarantees, and amounts receivable from or
payable to related parties.
(1) Particularly compensation payable to the related party was $185,000. The
entire change in deferred compensation was the result of a stock transfer
the amount of which was $140,000.
(2) The Company owes its affiliates approximately $902,495 for goods and
services as of September 30, 2005.
b. Guarantees, whether written or oral, under which the Company is
contingently liable.
c. Significant estimates and material concentrations known to management
that are required to be disclosed in accordance with the AICPA
Statement of Position 94-6, Disclosure of Certain Significant Risks
and Uncertainties.
13. There are no:
a. Violations or possible violations of laws or regulations whose effects
should be considered for disclosure in the interim financial
information or as a basis for recording a loss contingency.
b. Unasserted claims or assessments that are probable of assertion and
must be disclosed in accordance with FASB Statement No. 5, Accounting
for Contingencies.
c. Other liabilities or gain or loss contingencies that are required to
be accrued or disclosed by FASB Statement No. 5.
14. The Company has appropriately reconciled its general ledger accounts to
their related supporting information. All reconciling items considered to
be material were identified and included on the reconciliations and were
appropriately adjusted in the interim financial information. All
intracompany (and intercompany) accounts have been eliminated or
appropriately measured and considered for disclosure in the interim
financial information.
15. The Company has satisfactory title to all owned assets, and there are no
liens or encumbrances on such assets, nor has any asset been pledged as
collateral.
16. We have complied with all aspects of contractual agreements that would have
a material effect on the interim financial information in the event of
noncompliance.
17. All necessary accruals and contingent liabilities as of September 30, 2005
have been fully and properly accounted for on the Company's general ledger.
3
18. The Company has been experiencing a decrease in compensation compared to
this time last year. This can primarily be related to the CEO not taking a
$25,000 of deferred compensation. We also fired the general manager and did
not replace him and the full time COO and did not replace that position. On
August 8, 2005, the CFO resigned. The Company has decided not to fill that
position at this time.
19. Our company has experienced an increase in operating expenses, primarily
due to increased legal consultation fees to retain our public status. There
were no legal proceedings connected to these increased legal fees.
20. The company has entered in an agreement with a Cross Capital Fund LLC in
February, 2005. The Company expects to receive $2,500,000 in funding. As of
June 30, 2005 the Company asserts that this agreement has been executed and
that it expects to the full $2,500,000 in funding throughout the year
ending December 31, 2005.
21. As of September 30, 2005 the company has written off $75,307 of trackers
due to the sale of the loans to BHPH, along with Leasehold improvements of
75,151, due to relocation. Total accumulated depreciation written off
amounts to $29,287
To the best of our knowledge and belief, no events have occurred subsequent to
the balance sheet date and through the date of this letter that would require
adjustment to or disclosure in the interim financial information referred to
above.
/s/ Jon B. Wallis
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Jon B. Wallis, Chief Executive Officer and Acting CFO
4
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statement
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Controls and Procedures
PART II. Other Information
Item 1. Exhibits and Reports On Form 8-K
SIGNATURES
CERTIFICATION
5
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTELLIGENT MOTOR CARS GROUP, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
As of
September 30,
2005
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ASSETS
Current Assets
Cash and cash equivalents $ 339
Notes and Accounts Receivable, Net 4,002
Inventories 9,962
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Total current assets 14,303
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Property and Equipment, Net 43,111
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Total Assets $ 57,414
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Notes Payable:
Floor Plan Notes - Related Party $ 902,495
Accounts Payable and accrued liabilities 143,369
Accrued officer compensation 185,000
Current portion of long term debt 5,876
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Total current liabilities 1,236,740
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Long-term debt, net of current portion 14,750
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Total liabilities 1,251,490
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STOCKHOLDERS' DEFICIT:
Common Stock - $.001 par value 500,000,000 shares
authorized, 184,323,837 shares issued and outstanding 184,325
Additional paid-in-capital 3,469,537
Accumulated deficit (4,847,938)
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TOTAL STOCKHOLDERS' DEFICIT (1,194,076)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 57,414
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See accompanying notes to consolidated finanical statements
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INTELLLEGENT MOTOR CARS GROUP, INC.& SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine months ended Three months ended
September 30, September 30,
------------------------------ ------------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
Revenues
Sales of vehicles $ 2,337,706 $ 4,298,573 $ 413,087 $ 1,044,777
Finance income, net 16,274 194,624 1,166 15,290
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Total revenues 2,353,980 4,493,197 414,253 1,060,067
Cost of sales
Cost of sales - purchase of automobiles 2,037,694 3,473,941 381,644 902,440
Cost of sales - other 306,595 785,278 34,530 159,664
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Total cost of sales 2,344,289 4,259,219 416,174 1,062,104
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Gross profit (loss) 9,691 233,978 (1,921) (2,037)
General and administrative expense
Stock based compensation 59,063 7,500 -- --
Officers' compensation 55,997 -- 2,213
Selling, general and administrative 339,435 384,055 128,406 70,267
Depreciation expense 30,873 28,509 9,303 9,503
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General and administrative expense 429,371 476,061 137,709 81,983
Loss from operations (419,680) (242,083) (139,630) (84,020)
Other income 101 21,678 101 (117,491)
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Net loss $ (419,579) $ (220,405) $ (139,529) $ (201,511)
============= ============= ============= =============
Net loss per common share - basic and diluted $ (0.003) $ (0.015) $ (0.001) $ (0.014)
============= ============= ============= =============
Weighted average number of shares outstanding 161,914,201 14,862,731 161,914,201 14,820,625
============= ============= ============= =============
See accompanying notes to consolidated financial statements
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INTELLLEGENT MOTOR CARS GROUP, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months ended
September 30,
2005 2004
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (419,579) $ (220,405)
Adjustments to reconcile loss to net cash
provided by (used in) operating activities:
- Depreciation (29,287) 28,509
- Provisions for doubtful accounts -- (37,390)
- Conversion of stock for services 140,562 7,500
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts Receivable 17,226 36,650
Notes Receivable 119,494 --
Inventories 210,292 181,732
Other 20,254 (5,842)
Increase (decrease) in :
Accounts payable and accrued liabilities (194,515) 363,317
Changes in accrued officer compensation -- 25,000
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Net cash provided by operating activities (135,553) 379,071
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Acquisitions) Dispositions of Property and Equipment 150,458 (34,868)
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Net cash provided by investing activities 150,458 (34,868)
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CASH FLOWS FROM FINANCING ACTIVITIES :
Payment of notes payable - related parties (91,186) (1,023,351)
Proceeds from notes payable - related parties 56,815 670,240
Payments from floor plan loans - un-related party -- (47,945)
Payments of floor plan loans - un-related party (19,779) --
Proceeds from stockholder loans payable -- --
Proceeds from notes -- --
Proceeds on notes -- 2,585
Proceeds from Issuance of Common Stock 25,137 --
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Net cash used in financing activities (29,013) (398,471)
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Net Decrease in Cash (14,108) (54,268)
Cash, beginning of period 14,447 58,693
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Cash, end of period $ 339 $ 4,425
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Supplemental Disclosure of Non Cash Activities
Accrued officer compensation converted to stock $ 140,000 $ --
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The accompanying notes are an integral part of these financial statements
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INTELLIGENT MOTOR CARS GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
NOTE 1. BASIS OF PRESENTATION
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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
September 30, 2005 and the results of operations for three & nine month periods
ended September 30, 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. LOSS PER SHARE
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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 September 30, 2005 the Company reported net
losses of $139,529. The Company's consolidated balance sheet at September 30,
2005 reflects negative working capital and a stockholders' deficiency of
$1,194,076. 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. 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.
9
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 September 30, 2005, the
Company owes its affiliates $902,495. On ________________the Company relocated
it's offices. In connection with the relocation, the Co., disposed of $xxxxx of
______hold improvements for goods and services received.
NOTE 5. PROPERTY AND EQUIPMENT , NET
- -------------------------------------
NOTE 6. COMMON STOCK
- ---------------------
Stock issuance: The company did not issue any stock during this
quarter.
NOTE 7. SUBSEQUENT EVENTS
- -------------------------
On October 1, 2005 IMC hired Jon Wallis to the position of Chairman and
CEO, Jerry Scalzo resigned from Chairman and CEO to become a Director.
On December 6, 2005 Jerry Scalzo (Director) resigned
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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 its wholesale division. These conditions
amongst others raise substantial doubt about the Company's ability to continue
as a going concern.
The Company suffered a significant loss in the third quarter and feels
it must make substantial changes to its business model.
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.
RESULTS OF OPERATION FOR THE THREE MONTHS ENDED SEPT 30, 2005
For the third quarter ended September 30, 2005, the Company's total
assets reported are $57,414 compared to $580,630 for the for the year ended
December 31, 2004.
For the third quarter ended September 30, 2005, the Company's current
liabilities are $1,236,740 compared to $1,643,676 for the year ended December
31, 2004.
For the three months ended September 30, 2005, the Company reported a
net loss of ($139,529) or ($0.001) per share compared to a loss of ($201,511) or
($0.01) per share for the same period in 2004.
Revenues for the three months ended September 30, 2005 were
$414,253 thousand versus $1,060,067 million for the quarter ended
September 30, 2004. The difference resulted from the lack of funding to buy
adequate amounts of inventory to sell.
Cost of goods sold for the three months ended September 30, 2005 was
$416,174 versus $1,062,104 for the same period in 2004.
General and administrative expenses for the three months ended
September 30, 2005 were $137,709 (this includes a one time $75,151
write off for lease hold improvements and trackers due to the company selling
off their notes receivable and the closing of 1600 W Sunrise location) as
compared to approximately $81,983 not including depreciation for the same period
in 2004.
11
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.
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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.
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.
(b) Reports on Form 8-K:
33.1 Change in Directors or Principal Officers
On October 1, 2005 IMC hired Jon Wallis to the position of Chairman
and CEO, Jerry Scalzo Resigned from Chairman and CEO to become a Director.
On December 6, 2005 Jerry Scalzo (Director) resigned
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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: December 19, 2005
INTELLIGENT MOTOR CARS GROUP, INC.
(Registrant)
By: /s/ Jon Wallis
--------------------------------
Jon Wallis
Chief Executive Officer