UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended August 31, 2003
AUTO DATA NETWORK INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3944580
---------------------- ------------------
State of Incorporation IRS Employer ID No.
The Forsythe Centre, Lamberts Road
Tunbridge Wells, Kent, UK
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Address of principal Executive Offices Zip Code
REGISTRANT'S TELEPHONE NUMBER 011 44 1892 511 566
Check here whether the issuer (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
YES __X____ NO_______
As of October 20, 2003, the following shares of the Registrant's common stock
were issued and outstanding:
Voting common stock 14,389,850
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . .3
CONDENSED CONSOLIDATED BALANCE SHEET . . . . . . . . .3
CONDENSED CONSOLIDATED INCOME STATEMENT. . . . . . . .4
STATEMENT OF CASH FLOWS. . . . . . . . . . . . . . . .5
Notes to the Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion And Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . 11
Item 2. Changes in Securities. . . . . . . . . . . . . . . . 11
Item 3. Defaults upon Senior Securities. . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . 11
Item 5. Controls and Procedures . . . . . . . . . . . . . . 11
Item 5. Other information. . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 12
Signatures 12
Certificate of Chief Executive Officer 12
Certificate of Chief Financial Officer 13
PART I - FINANCIAL INFORMATION
AUTO DATA NETWORK INC.
CONSOLIDATED BALANCE SHEET
As Of As Of
August 31,2003 February 28,2003
(Unaudited) (Audited)
--------------- --------------
ASSETS
Current Assets
Cash and equivalents $2,990,399 $722,961
Accounts Receivable 5,543,536 867,106
Accounts Receivable - sundry 1,460,932 0
Prepaid expenses 8,817 1,194
Inventories 309,944 0
---------- ----------
Total Current Assets 10,313,628 $1,591,261
Accounts receivable due after
More than 1 year 2,002,889 0
Fixed Assets less accumulated
depreciation $ 425,803 $ 54,159
Intangibles 6,936,863 7,498,181
Goodwill 6,071,688 0
----------- ----------
TOTAL ASSETS $25,750,871 $9,143,601
LIABILITIES
Current Liabilities
Accounts Payable 4,312,385 $1,451,366
Accrued Expenses and sundry
accounts payable 550,046 279,683
Short-Term Loans 19,582 22,583
Short Bank Borrowing 505,267 289,744
----------- ----------
Total Current Liabilities $5,387,280 $2,043,376
Other Liabilities
Accrued Tax 1,014,105 488,000
Value added tax 434,993 0
Long Term Liabilities & Deferred
Income 1,093,929 0
----------- ----------
Total Liabilities $ 7,930,307 $2,531,376
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value,
Authorized 50,000.000 Shares;
Issued and Outstanding
14,389,850 Shares 14,390 11,590
Preferred Stock 2,030,300 $.001
Par value issued and outstanding 2030
Additional Paid in Capital 17,483,881 7,214,749
Accumulated Other Income (86,625) (30,838)
Accumulated Surplus/Deficit 406,888 (675,941)
----------- ----------
Total Stockholders' Equity $17,820,564 $6,612,225
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $25,750,871 $9,143,601
=========== ==========
The accompanying notes and accountant's report are an integral part of these
financial statements.
AUTO DATA NETWORK INC.
CONDENSED CONSOLIDATED INCOME STATEMENT
Three months Ending Six months Ending
August 31, August 31,
(Unaudited) (Unaudited)
2003 2002 2003 2002
------------------- ------------------------
Revenue $ 5,612,053 422,903 $ 9,006,104 551,385
Cost of Revenue 1,038,626 30,760 2,731,548 159,784
----------------------- ----------------------
Gross Margin 4,573,428 392,143 6,274,555 391,601
Operating Expenses
- ------------------
Personnel 1,344,724 0 1,826,869 0
Sales & Marketing 72,860 8,839 143,576 20,028
General & Administrative 1,798,348 144,176 2,336,289 351,259
Depreciation and Amortization 201,974 3,872 220,725 9,707
------------------------- -----------------------
Total Operating Expenses 3,417,906 156,887 4,527,459 380,994
Net Operating Profit/Loss 1,155,522 235,256 1,692,130 10,607
Interest Expense (40,762) (3,188) ( 54,967) (6,247)
------------------------- -----------------------
NET PROFIT/LOSS FROM
TRADING 1,114,760 232,068 1,637,163 4,359
Net Profit/Loss before tax 1,114,760 232,068 1,637,163 4,359
Provision for Taxation 386,336 104,577 592,246 1,656
------------------------- -----------------------
Net Profit after Tax 728,424 127,491 1,099,885 2,703
Net Profit Per Share 0.05 0.01104 0.076 0.0002
Weighted average
Number of Shares
Outstanding 14,389,850 11,552,289 14,389,850 11,552,289
The accompanying notes and accountant's report are an integral part of these
financial statements.
AUTO DATA NETWORK INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
August 31, 2003
For the 3 mos For the 3 mos
Ended Ended
August 31, 2003 August 31, 2002
(Unaudited) (Unaudited)
------------------- -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income Profit $728,424 $(127,491)
Adjustments to Reconcile Net Loss
To Cash Used in Operating
Activities:
Depreciation and other non-cash
charges 201,974 3,928
Other Non cash changes
Changes in Assets, Liabilities
Accounts receivable (2,786,684) (543,236)
Other current assets 140,864 5,780
Tangible assets (6,519) 0
Accounts Payable (1,936,565) (284,978)
Accrued Expenses 611,830 95,117
Other Non current liabilities 73,942 115,552
Net Cash Provided/(Used in)
Operations (2,972,734) (480,402)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of subsidiaries 0 (170,741)
Investing Activities 0 0
Net cash used in investing
Activities 0 (170,741)
CASH FLOWS FROM FINANCING
ACTIVITIES:
New Share issue 2,868 0
Additional Paid-in Capital 6,294,819 0
Effect of Exchange rates on cash (45,093) 65,681
Other non cash changes 0 0
---------- ---------
6,252,594 65,681
Net Change in Cash and
Equivalents 3,279,860 (1,176)
Cash and Cash Equivalents at
Beginning of Period (289,461) 494
---------- ---------
Cash and Cash Equivalents at
End of Period $2,990,399 1,670
Bank overdraft (505,267)
Supplemental disclosure of cash flow
Information
Interest paid 40,762 3,188
The accompanying notes and accountants report are an integral part of these
financial statements
AUTO DATA NETWORK INC.
Notes to Financial Statements
August 31, 2003
NOTE 1. BASIS OF PRESENTATION
The financial statements are prepared on the accrual basis of accounting.
Accordingly, revenue is recognized when earned and expenses when incurred.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended August, 31, 2003 compared with the
same period in the previous year are not necessarily indicative of the results
that may be expected for the year ending February 28, 2004. These Condensed
Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and notes thereto contained in the Company's
Form 10-KSB for the year ended February 28, 2003.
NOTE 2. LIQUIDITY
The Company made post tax profit of $514,648 in the year ended February 28, 2003
compared to $1,099,885in the six months to August 31,2003 and it is anticipated
that the Company will be able to meet its financial obligations through internal
net revenue in the foreseeable future
As a result, the Company has from time of inception to August 31, 2003 made a
net profit from operations of $406,888.
NOTE 3. STOCK TRANSACTIONS
On April 23, 2003 the company issued 2,000,000 (two million) shares of
restricted Common stock in part satisfaction of the purchase consideration of
MAM Software Limited. The balance of the consideration is by a deferred cash and
stock payment.
NOTE 4. ISSUED SHARE CAPITAL
Shares Value
Issued Common Stock, $0.001 par value, at fiscal year end February 28, 2003 11,589,850 11,590
Stock issued for acquisition of Automatrix 190,000 190
Stock issued for the acquisition of MAM Software Limited 2,000,000 $ 2,000
Stock issued to consultants August 11,2003 610,000 610
Total Issued common stock as of August 31, 2003 14,389,850 $ 14,389
Preferred stock issued as of August 31, 2003 2,030,300 2,030
Total Stock issued 16,420,150 $ 16,420
ADDITIONAL CONTRIBUTED CAPITAL
Additional contributed capital at fiscal year end February 28 2003 $ 7,214,749
Acquisition of MAM Software Limited 3,998,000
Acquisition of Automatrix Limited 341,810
Shares issued to consultants 855,602
Preferred stock issued 5,073,720
Total 17,483,881
The company lists its Common Stock on the OTC Bulletin Board market (OTCBB -
ADNW). Authorised Common stock is 50,000,000 at $0.001 par value and authorized
Preferred stock is 25,000,000 at $0.001 par value
NOTE 5. CONSOLIDATION
The company owns 100% of the equity of all its subsidiaries and the Financial
Statements incorporate consolidation of all companies in the group.
NOTE 6. DEPRECIATION POLICY AND ACCOUNTING FOR GOODWILL ADN INTANGIBLE ASSETS
The Company depreciates all its fixed assets over their useful lives on the
following basis :
Tangible Assets at the rate of 25% per annum on the reducing balance of the
asset value.
Intangible Assets at the rate of 3% per annum commencing one year after the
asset was acquired but subject to the provisions of SFAS 141
SFAS No. 142, "Goodwill and Other Intangible Assets," changes the current
accounting model that requires amortization of goodwill, supplemented by
impairment tests, to an accounting model that is based solely upon impairment
tests. SFAS No. 142 also provides guidance on accounting for identifiable
intangible assets that may or may not require amortization. The provisions of
SFAS No. 142 related to accounting for goodwill and intangible assets will be
generally effective for the Company at the beginning of 2002, except that
certain provisions related to goodwill and other intangible assets are effective
for business combinations completed after July 1, 2001. The Company does not
believe this statement has any impact to the Company as of December 31, 2002.
In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations." SFAS No.143 addresses financial accounting and reporting for
obligations associated with the retirement of intangible long-lived assets and
associated asset retirement costs. SFAS No. 143 requires that the fair value of
a liability for an asset retirement obligation be recognized in the period in
which it has occurred. The asset retirement obligations will be capitalized as a
part of the carrying amount of the long-lived asset. SFAS No. 143 applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and normal operation of
long- lived assets. SFAS No. 143 is effective for years beginning after June 15,
2002, with earlier adoption permitted. Currently, the Company does not believe
this statement has any impact on the Company.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 establishes a single accounting
model for long-lived assets to be disposed of by sale and the recognition of
impairment of long-lived assets to be held and used. SFAS No. 144 is effective
for fiscal years beginning after December 15, 2001, with an earlier adoption
encouraged. The Company is evaluating the impact of adopting SFAS No. 144 but
believes it will not have a material effect on the Company's results of
operations or financial position.
Long Lived Assets - The company has completed a number of business combinations
over the years. These business combinations result in the acquisition of
intangible assets and the recognition of goodwill on the company's consolidated
balance sheet. The company accounts for these assets under the provisions of
SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 requires that goodwill not be amortized, but
instead tested for impairment at least annually. The statement also requires
recognized intangible assets with finite useful lives to be amortized over their
useful lives. Long-lived assets, goodwill and intangible assets are reviewed for
impairment annually or whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable from future cash flows.
Future cash flows are forecasted based on management's estimates of future
events and could be materially different from actual cash flows. If the carrying
value of an asset is considered impaired, an impairment charge is recorded for
the amount by which the carrying value of the asset exceeds its fair value.
NOTE 7. REVENUE RECOGNITION
The company recognizes income when services are rendered and licence fees are
normally agreed on an annual basis and invoiced monthly in arrears. Invoices for
sales of goods such as computer hardware products are issued on dispatch and
revenue is recognized on invoice date.
NOTE 8. FOREIGN CURRENCY
The company's foreign subsidiaries use the local currency as their functioning
currency. Accordingly Assets and liabilities are translated into US dollars at
year end exchange rates, and revenues and expenses are translated at the average
prevailing during the accounting period.
NOTE 9 - NEW ACCOUNTING PRONOUNCEMENTS
In December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 148, "Accounting for Stock-Based Compensation
- -Transition and Disclosure." The new statement, which becomes effective December
2002, requires all entities with stock-based employee compensation arrangements
to provide additional disclosures in their summary of significant accounting
policies note; permits entities changing to the fair value method of accounting
for employee stock compensation to choose from one of three transition methods;
and requires interim-period pro forma disclosures if stock-based compensation is
accounted for under the intrinsic value method in any period presented. The
Company is still assessing this new standard but does not believe that it will
have a material effect on its results of operations or financial condition upon
adoption.
- ---------------------------------------.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ADN RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The information set forth in this Report on Form 10-QSB including, without
limitation, that contained in this Item 2, Management's Discussion and Analysis
and Plan of Operation, contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results may differ
materially from those projected in the forward-looking statements as a result of
certain risks and uncertainties set forth in this report. Although management
believes that the assumptions made and expectations reflected in the
forward-looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual future
results will not be different from the expectations expressed in this report.
Except for the historical information contained herein, certain matters
discussed in this report may be considered "forward-looking statements" within
the meaning of The Securities Act of 1933 and The Securities Exchange Act of
1934, as amended by The Private Securities Litigation Reform Act of 1995. Those
statements include statements regarding the intent, belief or current
expectations of the Company and members of its management as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties and that actual results may
differ materially from those contemplated by such forward-looking statements.
Important factors currently known to management that could cause actual results
to differ materially from those in forward-looking statements. These and
additional important factors to be considered are set forth in the Safe Harbor
compliance Statement for forward-looking statements. The Company undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results.
The following discussion should be read in conjunction with the information
contained in the financial statements of the Company and the notes thereto
appearing elsewhere herein.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Reporting Release No. 60, which was released by the Securities and
Exchange Commission, requires all companies to include a discussion of critical
accounting policies or methods used in the preparation of the consolidated
financial statements. In addition, Financial Reporting Release No. 61 was
released by the SEC, which requires all companies to include a discussion to
address, among other things, liquidity, off-balance sheet arrangements,
contractual obligations and commercial commitments. The following discussion is
intended to supplement the summary of significant accounting policies as
described in Note 1 of the Notes To Condensed Consolidated Financial Statements
for the year ended February 28, 2003 included in the Company's annual report on
Form 10-KSB for the period then ended.
These policies were selected because they represent the more significant
accounting policies and methods that are broadly applied in the preparation of
the consolidated financial statements.
Revenue recognition
Sales of computer hardware products are recorded upon shipment to customers.
Revenues from software license fees are accounted for in accordance with
American Institute of Certified Public Accountants (AICPA) Statement of Position
(SOP) 97-2, "Software Revenue Recognition." The company recognizes revenue when
(i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or
services have been rendered; (iii) the sales price is fixed or determinable; and
(iv) collectibility is reasonably assured. Service revenues, which include
computer hardware maintenance, software support, training, consulting and Web
hosting are recorded rateably over the contract period or as services are
performed. The application of SOP 97-2 requires judgment, including whether a
software arrangement includes multiple elements, and if so, whether
vendor-specific objective evidence of fair value exists for those elements.
Software revenues which do not meet the criteria set forth in Emerging Issues
Task Force (EITF) Issue No. 00-3, "Application of AICPA SOP 97-2 to Arrangements
That Include the Right to Use Software Stored on Another Entity's Hardware," are
recorded rateably over the contract period as services are provided.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles of the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates, and such differences may be material to the
financial statements.
OVERVIEW OF AUTO DATA NETWORK
We are a group of established companies which provide software products and
services to the automotive industry. The company's main customers are auto
dealership in a marketplace of approximately 78,000 dealers in North America and
92,000 dealers in Europe. The company estimates that this represents a $15
billion market for Software and Services specifically for auto dealerships. The
company supplies a suite of software solutions and services that enable
dealerships to run their businesses more efficiently and achieve considerable
cost savings. The majority of the company's current solutions is focused on
serving the aftermarket and finance areas of dealerships. These areas are of
particular importance since the aftermarket business is responsible for 48% of a
dealership's profits from 12% of their overall revenue. The second most
profitable area is vehicle finance and insurance this area contributes 35% of
profits from 2% of revenues.
Our open business automation and distribution channel eCommerce products and
services are designed for industry participants interested in relevant,
real-time data related to the purchase and sale of motor vehicles and automotive
parts and related services in specific markets Our operations are conducted
through our four subsidiaries and using our solutions, many companies now
generate new sales, operate more cost efficiently, accelerate inventory turns
and maintain stronger relationships with suppliers and customers. The Group
generates sales from its two divisions, aftermarket service products and
information services. These divisions supply real time and transactional
services to manufacturers, retailers and consumers producing industry-wide
revenue generation, communication and information collection.
On April 23, 2003 the company completed the acquisition of MAM Software Limited.
MAM Software is the leading European supplier of automotive aftermarket of
computer software and systems within the automotive aftermarket and marine
trade. It provides a complete range of products covering all aspects of sales,
stock and purchase control linked to a full range of accounting systems. These
systems apply to Motor Factors and Distributors, Parts Retailers and Garages.
MAM Software offers a service that covers installation of new computer systems
followed by comprehensive support and maintenance. Its range of software
products are known as "Auto Part", a complete system for wholesalers and
retailers, "Auto Work", a computer system for garages and workshops, "Autocat",
a stand alone electronic catalogue, and "Autonet" a service for establishing and
maintaining a presence on the world wide web. MAM Software currently maintains
four sites in the United Kingdom and Republic of Ireland. It is considered a
pre-eminent system supplier to the Automotive Parts Aftermarket.
We market our products to vehicle and parts manufacturers, dealers, consumers
and related industry participants, including financial institutions, insurance
providers and fleet owners. Our core product offering revolves around three
functions: (1) our ability to link the often incompatible systems and data
structures of the various participants in the industry into one unified
information platform, (2) our ability to assemble and provide relevant,
actionable data in real-time to our subscribers, and (3) our breadth of services
and product offering designed to facilitate and increase efficiencies using the
data we provide to facilitate sales of new and used vehicles, parts and
accessories, and various services such as finance, insurance and vehicle
servicing.
Our product suite includes applications we have developed internally and
applications developed by businesses through acquisition. The platform
propositions are integrated as a communications channel that allows all
automotive sector participants to transact within a single environment, in which
transactional data is added and modified on the network. This process creates a
unique source of "Intelligent Information(TM)" that can be accessed by
subscribing companies to analyze and react to changes in market conditions.
We believe that we have the opportunity to become a leading technology company
servicing the automotive industry in the next five years if we successfully
execute our balanced growth strategy. We anticipate that revenues derived from
our current software portfolio will permit us to further develop new products in
our development portfolio. We intend to commence marketing our software offering
in a combined package, and to continue developing our existing platform
technologies with a primary business focus on automotive dealerships. A key
element of our business strategy is to continue to acquire, obtain licenses for,
and develop new technologies and products that we believe offer unique market
opportunities and/or complement our existing product lines.
RESULTS OF OPERATIONS
Revenues for the three month period ending August 31, 2003 were $5,612,053, and
for the six months of the year to date $9,006,104 compared to $422,903 and
$551,385 for the comparable periods in 2002 with the main growth coming from
acquisitions in the Data management and aftermarket parts of the business. The
revenues were derived from our two operating divisions. We expect that revenues
will increase over the coming quarter both organically and from additional
acquisitions which we expect to undertake. Our prior history is not indicative
or reflective of future revenue performance.
Cost of revenues for the three month period ending were August 31, 2003
$1,038,626 and for the six months year to date $2,731,548 as compared to $30,760
and $ 158,784 for the corresponding periods of fiscal 2002. Our cost of revenues
has increased as a result of the increased trading activity and further
marketing and developing our products.
Operating expenses for the three month period ending August 31, 2003 were
$3,417,906, 60.9% of revenue and for the six months year to date $4,527,459,
50.2% compared to $156,887, 37.1% of revenue and $380,995 , 69.1% of revenue,
for the corresponding periods for fiscal 2002. The relative decrease in our
operating expenses is attributable to increased revenues and our efforts to
implement cost reduction measures to increase profitability, including
downsizing administrative personnel and introducing centralized buying for our
subsidiaries. We expect that our operating expenses will increase in line with
revenue growth in the coming quarter.
Post tax profit for the three month period ending August 31, 2003 was $728,424
and for the six months year to date $1,099,885 compared to $ 127,491 and $2,703
for the corresponding periods in fiscal 2002
LIQUIDITY AND CAPITAL RESOURCES
The company commenced private placement of 6% Convertible Preferred Stock on
July 18, 2003. As at 31st August 2003, $5,073,720 had been raised. The company
does not currently have a working capital line of credit with any financial
institution. Future sources of liquidity will be limited by the Company's
ability to close planned acquisitions and obtain additional debt or equity
funding. At the present, we believe that our liquidity requirements will be met
by the revenues drawn through our operations and Private Placement referred to
above. Our liquidity may be negatively affected in the event we are not able to
continue to be profitable as a result of any sudden or unexpected increases in
expenses or sudden or unexpected decreases in revenues.
We also intend to attempt to raise additional capital from public or private
placements to investors of our common stock and/or convertible debentures.
However, there can be no assurance that we will be able to obtain capital from a
placement of our common stock or whether the funds required by the Company will
enable us to further develop our operations. Additionally, there is no guarantee
that we will be able to raise capital on terms and conditions which are
acceptable to us. The inability to raise additional capital may limit our
growth.
INFLATION
Inflation has not had a material effect on our operations. Inflation may affect
our ability to generate profit as increased costs may be associated with
development of our products and services. In the opinion of management,
inflation at this time has not and will not have a material effect on the
operations of our company and our subsidiaries. Any increase in inflation or
jump in costs may result in an immediate increase in our prices to our clients
and subscribers. However, we will evaluate the possible effects of inflation on
our Company as it relates to our business and operations and proceed
accordingly.
ABILITY TO RAISE CAPITAL
Our ability to further develop our business and operations is dependent on our
ability to raise capital. We will seek to raise capital through equity funding
and private placement of our common stock as well as securing lines of credit
with credit institutions. There is no guarantee that we will be able to raise
capital to further develop its business and operations. Additionally, we may
encounter significant costs or unfavorable terms in its efforts to raise
capital. Investors are further alerted that any efforts to raise capital through
a private placement of our common stock will result in dilution to shareholders
of the company. We intend on utilizing any capital raised to undertake
additional acquisitions which shall complement our existing products and
contribute to further growth of our company.
MARKET RISKS
INTEREST RATES
Because of the company's debt profile, management believes that a one percentage
point move in interest rates would not have a material effect on the company's
financial statements.
FOREIGN CURRENCY EXCHANGE RATES
The company has foreign-based operations, located primarily in the UK, which
accounted for approximately 100% of net sales and revenues for the three months
ended August 31, 2003. In the conduct of its foreign operations the company has
inter-company sales, charges and loans between the U.S. parent and its foreign
subsidiaries and may receive dividends denominated in different currencies.
These transactions expose the company to changes in foreign currency exchange
rates. At October 20, 2003, the company had no foreign currency exchange
contracts outstanding. Based on the company's overall foreign currency exchange
rate exposure at October 20, 2003, management believes that a change in currency
rates could have an effect on the company's future financial statements.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain statements in this Management's Discussion and Analysis of the Financial
Condition and Results of Operations constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements are based on current expectations, estimates,
forecasts and projections of future company or industry performance based on
management's judgment, beliefs, current trends and market conditions.
Forward-looking statements made by the company may be identified by the use of
words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and similar expressions. Forward-looking statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions, which are difficult to predict. Actual outcomes and results may
differ materially from what is expressed, forecasted or implied in any
forward-looking statement. The company undertakes no obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise.
CONTROLS AND PROCEDURES
The company's management, including the Chief Executive Officer and Chief
Financial Officer, conducted an evaluation of the effectiveness of disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14 within 90 days
prior to the filing date of this quarterly report. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the
disclosure controls and procedures are effective in ensuring that all material
information required to be filed in this quarterly report has been made known to
them in a timely fashion. There have been no significant changes in internal
controls, or in factors that could significantly affect internal controls,
subsequent to the date the Chief Executive Officer and Chief Financial Officer
completed their evaluation.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are currently no pending legal proceedings against the company.
ITEM 2. CHANGES IN SECURITIES
The instruments defining the rights of the holders of any class of common stock
have been modified by the issue of 6% Convertible Preferred Stock - Series A-1
and A-2 which has a dividend and liquidation preference ahead of the holders of
Common Stock. See 8K exhibit filed August 21, 2003 which is hereby incorporated
by reference.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There has been no default in the payment of any principal, interest, sinking or
purchase fund installment.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the last
quarter.
ITEM 5 - CONTROLS AND PROCEDURES
A review and evaluation was performed by the Company's management, including the
Company's Chief Executive Officer (the "CEO") and Chief Financial Officer (the
"CFO"), of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rule 13a-14 under the
Securities Exchange Act of 1934) as of a date within 90 days prior to the filing
of this quarterly report. Based on that review and evaluation, the CEO and CFO
have concluded that the Company's current disclosure controls and procedures, as
designed and implemented, were effective to ensure that information the Company
is required to disclose in this quarterly report is recorded, processed,
summarized and reported in the time period required by the rules of the
Securities and Exchange Commission. There have been no significant changes in
the Company's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation. There were no
significant material weaknesses identified in the course of such review and
evaluation and, therefore, no corrective measures were taken by the Company.
ITEM 6. OTHER INFORMATION
There is no other information to report, which is material to the company's
financial condition not previously reported.
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K
(a) Form 8K/A filed August 11, 2003 Form 8K filed August 11, 2003 Form 8K
filed August 21, 2003
(b) Exhibits 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbannes- Oxley Act of 2002
99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbannes-Oxley Act of 2002
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
/s/ Auto Data Network Inc.
Christopher Glover, President
Dated: October 20, 2003
/s/ Auto Data Network Inc.
Lee Cole, Principal Accounting Officer
Dated: October 20, 2003
CERTIFICATIONS
CERTIFICATE OF CHIEF EXECUTIVE OFFICER.
I, Christopher R Glover, certify that:
1.I have reviewed this quarterly report on Form 10-QSB of Auto Data Network,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; 3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report; 4.The
registrant's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14 for the registrant and have: a. designed such disclosure
controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
quarterly report is being prepared; b. evaluated the effectiveness of the
registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; 5.The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons performing
the equivalent functions): a. all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal
controls; and b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and 6.The registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: October 20, 2003 /s/Christopher R Glover
----------------------------
Christopher R Glover
President and Chief Executive Officer
(Principal Executive Officer)
2
CERTIFICATE OF CHIEF ACCOUNTING OFFICER.
I, Lee J Cole, certify that:
1.I have reviewed this quarterly report on Form 10-QSB of Auto Data Network,
Inc.;
2.Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; 3.Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report; 4.
The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14 for the registrant and have: a. designed
such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in
which this quarterly report is being prepared b. evaluated the effectiveness of
the registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; 5.The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons performing
the equivalent functions): a. all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal
controls; and b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and 6. The registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: October 20, 2003 /s/ Lee J Cole
----------------------------
Lee J Cole
(Principal Accounting Officer)