FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: JUNE 30, 2002
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the transition period from ______________ to __________________
Commission File Number: 0-14786
AUTOINFO, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-2867481
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) number)
6401 Congress Ave., Suite 230, Boca Raton, FL 33487
(Address of principal executive office)
(561) 988-9456
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 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 | |
Number of shares outstanding of the Registrant's common stock as of August 13,
2002:
27,297,923 shares of common stock, $.001 par value.
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES |X| NO | |
Transitional Small Business Format
YES | | NO |X|
AUTOINFO, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information:
Item 1. Consolidated Financial Statements: Page
Balance Sheets
June 30, 2002 (unaudited) and December 31, 2001 (audited)....... 3
Statements of Operations (unaudited)
Three and six months ended June 30, 2002 and 2001.............. 4
Statements of Cash Flows (unaudited)
Three and six months ended June 30, 2002 and 2001.............. 5
Notes to Unaudited Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 10
Part II. Other Information .............................................. 14
Signatures............................................................... 15
2
June 30, December 31,
2002 2001
------------ ------------
Unaudited Audited
ASSETS
Cash and cash equivalents $ 634,000 $ 885,000
Short-term investments -- 13,000
Accounts receivable 2,836,000 1,358,000
Other current assets 66,000 65,000
------------ ------------
3,536,000 2,321,000
Fixed assets, net of depreciation 38,000 37,000
Loan receivable 100,000 100,000
------------ ------------
$ 3,674,000 $ 2,458,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loan payable $ 500,000 $ 500,000
Accounts payable and accrued liabilities 2,209,000 1,140,000
------------ ------------
Total liabilities 2,709,000 1,640,000
------------ ------------
Convertible subordinated debentures 575,000 575,000
------------ ------------
Stockholders' Equity
Common stock - authorized 100,000,000 shares
$.001 par value; issued and outstanding -
27,298,000 shares as of June 30, 2002 and
December 31, 2001 27,000 27,000
Additional paid-in capital 18,014,000 18,014,000
Retained deficit (17,651,000) (17,798,000)
------------ ------------
Total stockholders' equity 390,000 243,000
------------ ------------
$ 3,674,000 $ 2,458,000
============ ============
See notes to condensed unaudited financial statements
3
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------ ------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Gross revenues $ 8,303,000 $ 3,267,000 $ 4,743,000 $ 1,791,000
Cost of transportation 6,830,000 2,629,000 3,952,000 1,428,000
------------ ------------ ------------ ------------
Net revenues 1,473,000 638,000 791,000 363,000
------------ ------------ ------------ ------------
Commissions 797,000 243,000 449,000 139,000
Operating expenses 454,000 428,000 219,000 207,000
------------ ------------ ------------ ------------
1,251,000 671,000 668,000 346,000
------------ ------------ ------------ ------------
Income (loss) from operations 222,000 (33,000) 123,000 17,000
------------ ------------ ------------ ------------
Other charges (credits):
Investment income (10,000) (30,000) (3,000) (20,000)
Interest expense 77,000 41,000 39,000 18,000
------------ ------------ ------------ ------------
67,000 11,000 36,000 (2,000)
------------ ------------ ------------ ------------
Income (loss) before income taxes 155,000 (44,000) 87,000 19,000
Income taxes 7,000 -- 4,000 --
------------ ------------ ------------ ------------
Net (loss) income $ 148,000 $ (44,000) $ 83,000 $ 19,000
============ ============ ============ ============
Basic and diluted net (loss)
income per share: $ .01 ($ .00) $ .00 $ .00
============ ============ ============ ============
Weighted average number of
common and common
equivalent shares 27,815,000 27,298,000 27,942,000 27,298,000
------------ ------------ ------------ ------------
See notes to condensed unaudited financial statements
4
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2002 2001
----------- ---------
Cash flows from operating activities:
Net income (loss) $ 148,000 $ (44,000)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 9,000 5,000
Gain on sales of securities (1,000) (10,000)
Net unrealized holding gain -- (4,000)
Changes in assets and liabilities:
Accounts receivable (1,478,000) (256,000)
Other assets (1,000) (59,000)
Accounts payable and accrued liabilities 1,068,000 64,000
----------- ---------
Net cash used in operating activities (255,000) (304,000)
----------- ---------
Cash flows from investing activities:
Capital expenditures (10,000) (22,000)
Proceeds from sale of short-term investments 14,000 175,000
----------- ---------
Net cash provided by investing activities 4,000 153,000
----------- ---------
Cash flows from financing activities:
Decrease in borrowings, net -- (101,000)
----------- ---------
Net cash used in financing activities -- (101,000)
----------- ---------
Net decrease in cash and cash equivalents (251,000) (252,000)
Cash and cash equivalents, beginning of period 885,000 725,000
----------- ---------
Cash and cash equivalents, end of period $ 634,000 $ 473,000
=========== =========
See notes to condensed unaudited financial statements
5
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Forward Looking Statements
Certain statements made in this Quarterly Report on Form 10-QSB are
"forward-looking statements"(within the meaning of the Private Securities
Litigation Reform Act of 1995) regarding the plans and objectives of management
for future operations. Such statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. The forward-looking statements included herein are
based on current expectations that involve numerous risks and uncertainties. Our
plans and objectives are based, in part, on assumptions involving judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
Although we believe that our assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this report will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein
particularly in view of the current state of our operations, the inclusion of
such information should not be regarded as a statement by us or any other person
that our objectives and plans will be achieved. Factors that could cause actual
results to differ materially from those expressed or implied by forward-looking
statements include, but are not limited to, the factors set forth under the
headings "Business", and "Certain Factors That May Affect Future Growth," under
Part I, Item 1, of our Annual Report on Form 10-KSB for the year ended December
31, 2001 as filed with the Securities and Exchange Commission.
Note 1. - Business and Summary of Significant Accounting Policies
Business
As a result of our acquisition of Sunteck Transport, Inc. ("Sunteck") in
December 2000, we are a full service third party transportation logistics
provider. Our services include ground transportation coast to coast, local pick
up and delivery, warehousing, air freight and ocean freight. We have strategic
alliances with less than truckload (LTL), truckload, air, rail and ocean common
carriers to service our customers' needs.
We have full service offices in Florida, New Jersey, Missouri, North
Carolina and Georgia and independent sales agents in twelve states and Canada.
Our services include arranging for the transport of customers' freight from the
shippers location to the designated destination. We do not own any trucking
equipment and rely on independent carriers for the movement of customers'
freight. We seek to establish long-term relationships with our customers and
provide a variety of logistics services and solutions to eliminate
inefficiencies in our customers' supply chain management.
Sunteck, which was formed in 1997, is a full service third party
transportation logistics provider. Its supply chain services include ground
transportation coast to coast, local pick up and delivery, warehousing, air
freight and ocean freight. Sunteck has developed strategic alliances with Less
than Truckload (LTL), truckload, air, rail and ocean common carriers to service
its customers' needs.
6
Summary of Significant Accounting Policies
Basis of Presentation
The financial statements of the Company have been prepared using the
accrual basis of accounting under accounting principles generally accepted in
the United States of America ("GAAP").
The consolidated financial statements, which are unaudited, have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). In management's opinion, these financial statements include
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the results of operations for the interim periods
presented. The results of operations for the three and six months ended June 30,
2002 and 2001 are not necessarily indicative of results to be expected for the
entire year. Pursuant to SEC rules and regulations, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with GAAP have been omitted from these statements. The consolidated
financial statements and notes thereto should be read in conjunction with the
financial statements and notes included in our Annual Report on Form 10-KSB for
the year ended December 31, 2001 as filed with the Securities and Exchange
Commission.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany balances and transactions have been eliminated in consolidation.
Revenue Recognition
Gross revenues consist of the total dollar value of services purchased by
customers. We act primarily as the service provider for these transactions and
recognize revenue as these services are rendered.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101, as amended, summarizes some of the SEC's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The adoption of SAB 101 did not have a material effect on the
financial statements.
Provision for Doubtful Accounts
The Company has established an allowance for doubtful accounts based upon
historical trends.
Short-term Investments
Short-term investments as of December 31, 2001 consisted of marketable
securities and were carried at market value. There were no short-term
investments as of June 30, 2002.
Fixed Assets
Fixed assets as of June 30, 2002 and December 31, 2001, consisting
primarily of furniture, fixtures and office equipment, were carried at cost net
of accumulated depreciation. Depreciation of fixed assets was provided on the
straight-line method over the estimated useful lives of the related assets which
range from three to five years.
7
Income (Loss) Per Share
Basic income (loss) per share is based on net income (loss) divided by the
weighted average number of common shares outstanding. Common stock equivalents
outstanding were 644,000 and 517,000 for the three and six month periods ended
June 30, 2002 and were antidilutive in the prior year periods.
Use of Estimates
The preparation of these financial statements in conformity with GAAP
requires management to make certain estimates and assumptions. These estimates
and assumptions affect the reported amounts of assets, liabilities and
contingent liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the periods presented. The Company
believes that all such assumptions are reasonable and that all estimates are
adequate, however, actual results could differ from those estimates.
Income Taxes
The Company utilizes the asset and liability method for accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Stock-Based Compensation
The Company has adopted Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation" ("SFAS 123"). As permitted by
SFAS 123, the Company has chosen to continue to apply Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and,
accordingly, no compensation cost has been recognized for stock options in the
financial statements.
8
Note 2 Income Tax Expense
Components of income taxes follow:
Three Months Ended Six Months Ended
June 30, 2002 June 30, 2002
---------------------- ----------------------
Current Deferred Current Deferred
-------- -------- -------- --------
Tax expense before application of
operating loss carryforwards $ 32,000 $ -- $ 57,000 $ --
Tax expense (benefit) of operating
loss carryforwards (28,000) 28,000 (50,000) 50,000
Change in valuation allowance -- (28,000) -- (50,000)
-------- -------- -------- --------
Tax expense $ 4,000 $ -- $ 7,000 $ --
======== ======== ======== ========
June
30, December 31,
2002 2001
----------- ------------
Deferred tax assets:
Net operating loss
carryforward $ 6,166,000 $ 6,216,000
----------- -----------
Gross deferred tax assets 6,166,000 6,216,000
Less: valuation allowance (6,166,000) (6,216,000)
----------- -----------
Deferred tax asset $ -- $ --
=========== ===========
9
AUTOINFO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition And Results of Operations
Cautionary statement identifying important factors that could cause our actual
results to differ from those projected in forward looking statements.
Pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, readers of this report are advised that this
document contains both statements of historical facts and forward looking
statements. Forward looking statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
indicated by the forward looking statements. Examples of forward looking
statements include, but are not limited to (i) projections of revenues, income
or loss, earnings per share, capital expenditures, dividends, capital structure
and other financial items, (ii) statements of our plans and objectives with
respect to business transactions and enhancement of shareholder value, (iii)
statements of future economic performance, and (iv) statements of assumptions
underlying other statements and statements about our business prospects.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with our unaudited
consolidated financial statements and the notes thereto appearing elsewhere in
this report.
General
As a result of our acquisition of Sunteck Transport, Inc. ("Sunteck") in
December 2000, we are a full service third party transportation logistics
provider. Our services include ground transportation coast to coast, local pick
up and delivery, warehousing, air freight and ocean freight. We have strategic
alliances with less than truckload (LTL), truckload, air, rail and ocean common
carriers to service our customers' needs.
We have full service offices in Florida, New Jersey, Missouri, North
Carolina and Georgia and independent sales agents in twelve states and Canada.
Our services include arranging for the transport of customers' freight from the
shippers location to designated destinations. We do not own any trucking
equipment and we rely on independent carriers for the movement of customers'
freight. We seek to establish long-term relationships with our customers and
provide a variety of logistics services and solutions to eliminate
inefficiencies in our customers' supply chain management.
Sunteck, which was formed in 1997, is a full service third party
transportation logistics provider. Its supply chain services include ground
transportation coast to coast, local pick up and delivery, warehousing, air
freight and ocean freight. Sunteck has developed strategic alliances with Less
than Truckload (LTL), truckload, air, rail and ocean common carriers to service
its customers' needs.
Results of Operations
In the transportation industry, results of operations generally show a
seasonal pattern as customers reduce shipments during and after the winter
months. This industry trend has not had a significant impact on our results of
operations or our cash flows in recent years. Also, inflation has not materially
affected our operations due to the short-term transactional basis of our
business. However, we cannot fully predict the impact seasonality and inflation
may have in the future.
10
Three and six months ended June 30, 2002 and 2001
During the year ended December 31, 2001, we began to implement our
strategic growth business plan consisting primarily of the expansion of client
services, the opening of regional operations centers in key geographical markets
and the addition of independent sales agents. As a result, as of June 30, 2002
we had five full service offices and independent sales agents in twelve states
and Canada as compared with three full service full service offices and
independent sales agents in five states as of June 30, 2001. Our net revenues
(gross revenues less cost of transportation) are the primary indicator of our
ability to source, add value and resell service that are provided by third
parties and are considered to be our primary measurement of growth. Therefore,
the discussion of the results of operations below focuses on the changes in our
net revenues. The increases in net revenues and all related cost and expense
categories are the direct result of our business expansion.
The following table represents certain statement of operation data as a
percentage of net revenues:
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
------ ------ ------ -----
Net revenues 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Commissions 56.7% 38.3% 54.1% 38.1%
Operating expenses 27.7% 57.0% 30.8% 67.1%
Other charges 4.6% (0.5%) 4.6% 1.7%
----- ----- ----- -----
Income (loss) before income taxes 11.0% 5.2% 10.5% (6.9%)
----- ----- ----- -----
Revenues
Gross revenues consisting of freight fees and other related services
revenue totaled $4,743,000 and $8,303,000 for the three and six month periods
ended June 30, 2002, as compared with $1,791,000 and $3,267,000 in the prior
year periods. Net revenues were $791,000 and $1,473,000 for the three and six
month periods ended June 30, 2002, as compared with $363,000 and $638,000 in the
prior year periods.
Costs and expenses
Commissions totaled $449,000 and $797,000 for the three and six month
periods ended June 30, 2002, as compared with $139,000 and $243,000 in the prior
year periods. As a percentage of net revenues, commissions were 54% and 57% for
the three and six periods ended June 30, 2002 as compared with 38% and 38% in
the prior year periods. This increase is the direct result of higher commission
rates related to the Company's business expansion and the addition of
independent sales agents at higher commission rates than historical averages.
Operating expenses totaled $219,000 and $454,000 for the three and six
month periods ended June 30, 2002, as compared with $207,000 and $428,000 in the
prior year periods. As a percentage of net revenues, operating expenses were 31%
and 28% for the three and six month periods ended June 30, 2002 as compared with
67% and 57% in the
11
prior year periods. This decrease in percentage terms is the direct result of
management's ability to leverage selling, general and administrative expenses in
connection with the Company's business expansion.
Investment income, primarily consisting of the gain on the sale of
marketable securities and dividend and interest income, was $3,000 and $10,000
for the three and six month periods ended June 30, 2002, as compared with
$20,000 and $30,000 in the prior year periods. Substantially all marketable
securities were sold during 2001.
Interest expense totaled $39,000 and $77,000 for the three and six month
periods ended June 30, 2002, as compared with $18,000 and $41,000 in the prior
year periods. This increase is primarily the result of increased borrowings in
August 2001.
Income taxes
Income taxes were $4,000 and $7,000 for the three and six month periods
ended June 30, 2002 and consist of state taxes as the Company has a net
operating loss carryforward for Federal Tax purposes.
Net income (loss)
Net income totaled $83,000 and $148,000 for the three and six month
periods ended June 30, 2002, as compared with $19,000 and a loss of ($44,000) in
the prior year periods.
Trends and uncertainties
The transportation industry is highly competitive and highly fragmented.
Our primary competitors are other non-asset based as well as asset based third
party logistics companies, freight brokers, carriers offering logistics services
and freight forwarders. We also compete with shippers internal traffic
departments as well as carriers internal sales and marketing departments
directly seeking shippers' freight. We anticipate that competition for our
services will continue to increase. Many of our competitors have substantially
greater capital resources, sales and marketing resources and experience. We
cannot assure you that we will be able to effectively compete with our
competitors in effecting our business expansion plans.
Our operations were profitable for the three and six months period ended
June 30, 2002. However, as of June 30, 2002, we had an accumulated deficit of
$17.7 million. Other factors that could adversely affect our operating results
include:
o the success of Sunteck in expanding its business operations; and
o changes in general economic conditions.
We cannot assure you that our revenues will continue to increase.
Depending on our ability to generate revenues, we may require additional
funds to expand Sunteck's business operations and for working capital and
general corporate purposes. Any additional equity financing may be dilutive to
stockholders, and debt financings, if available, may involve restrictive
covenants that further limit our ability to make decisions that we believe will
be in our best interests. In the event we cannot obtain additional financing on
terms acceptable to us when required, our ability to expand Sunteck's operations
may be materially adversely affected.
12
Liquidity and capital resources
At June 30, 2002, we had outstanding $575,000 of subordinated convertible
debentures and $500,000 under a Line of Credit. The debentures are convertible
into common stock at the option of the debenture holder at a conversion price of
$0.25 per share and are redeemable, at the option of the holder, after December
31, 2003. The Line of Credit, obtained from a related party in August 2001, is
secured by accounts receivable and has been extended on similar terms to mature
in August 2003. We believe that we have sufficient working capital to meet our
short-term operating needs and that we will be able to extend or replace the
Line of Credit on terms acceptable to us.
At June 30, 2002, we had liquid assets of approximately $634,000.
The total amount of debt outstanding as of June 30, 2002 was $1,075,000.
This following table presents our debt instruments and their weighted average
interest rates as of June 30, 2002:
Weighted
Average
Balance Rate
------------ ------------
Subordinated Debt $ 575,000 12.0%
Line of Credit $ 500,000 17.0%
Inflation and changing prices had no material impact on revenues or the
results of operations for the period ended June 30, 2002.
13
AUTOINFO, INC. AND SUBSIDIARIES
Part II - OTHER INFORMATION
Item 1 - 5: Inapplicable
Item 6 - Exhibits:
99.1 Chief Executive Officer Certification
99.2 Chief Financial Officer Certification
14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
authorized.
AUTOINFO, INC.
(Registrant)
/s/ William I. Wunderlich
------------------------------
William I. Wunderlich
Executive Vice President and
Principal Financial Officer
Date: August 12, 2002
15