FORM 10-Q
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: MARCH 31, 2005
|_| 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 number)
incorporation or organization)
6413 Congress Ave., Suite 260, 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 |_|
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES |_| NO |X|
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 |_|
Number of shares outstanding of the Registrant's common stock as of April 30,
2005: 31,367,189 shares of common stock.
1
AUTOINFO, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information:
Item 1. Consolidated Financial Statements: Page
Balance Sheets
March 31, 2005 (unaudited) and December 31, 2004 (audited)................... 3
Statements of Income (unaudited)
Three months ended March 31, 2005 and 2004................................... 4
Statements of Cash Flows (unaudited)
Three months ended March 31, 2005 and 2004................................... 5
Notes to Unaudited Consolidated Financial Statements........................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ Not applicable
Item 4. Controls and Procedures........................................................ 14
Part II. Other Information.................................................................. 14
Signatures ............................................................................... 15
2
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2005 2004
------------ ------------
Unaudited Audited
ASSETS
Current assets:
Cash $ 51,000 $ 38,000
Accounts receivable 9,557,000 9,658,000
Other current assets 331,000 679,000
Deferred income taxes (Note 2) 391,000 369,000
------------ ------------
Total current assets 10,330,000 10,744,000
Fixed assets, net of accumulated depreciation 106,000 69,000
Deferred income taxes (Note 2) 986,000 952,000
Other assets 90,000 30,000
------------ ------------
$ 11,512,000 $ 11,795,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loan payable $ 1,753,000 $ 1,998,000
Accounts payable and accrued liabilities 4,914,000 5,385,000
------------ ------------
Total current liabilities 6,667,000 7,383,000
------------ ------------
Stockholders' Equity
Preferred stock - authorized 10,000,000 shares
$.001 par value; issued and outstanding - 0 shares
as of March 31, 2005 and December 31, 2004 -- --
Common stock - authorized 100,000,000 shares
$.001 par value; issued and outstanding -
31,367,000 shares as of March 31, 2005 and
31,218,000 shares as of December 31, 2004 31,000 31,000
Other capital 324,000 324,000
Deferred compensation (260,000) (277,000)
Additional paid-in capital 19,049,000 19,026,000
Deficit (14,299,000) (14,692,000)
------------ ------------
Total stockholders' equity 4,845,000 4,412,000
------------ ------------
$ 11,512,000 $ 11,795,000
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
3
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
2005 2004
------------ ------------
Gross revenues $ 14,915,000 $ 8,159,000
Cost of transportation 11,848,000 6,681,000
------------ ------------
Net revenues 3,067,000 1,478,000
------------ ------------
Commissions 1,900,000 840,000
Operating expenses 760,000 449,000
------------ ------------
2,660,000 1,289,000
------------ ------------
Income from operations 407,000 189,000
Interest expense 48,000 14,000
------------ ------------
Income before income taxes 359,000 175,000
Income taxes (benefit) (Note 2) (34,000) (1,000)
------------ ------------
Net income $ 393,000 $ 176,000
============ ============
Basic and diluted net income per share $ .01 $ .01
============ ============
Weighted average number of common shares (basic) 31,338,000 30,172,000
------------ ------------
Weighted average number of common shares (diluted) 34,177,000 32,611,000
------------ ------------
The accompanying notes are an integral part of these
consolidated financial statements.
4
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2005 2004
---------- ----------
Cash flows from operating activities:
Net income $ 393,000 $ 176,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in allowance for doubtful accounts 45,000 13,000
Depreciation and amortization 10,000 8,000
Deferred compensation expense 17,000 8,000
Deferred income taxes (56,000) (11,000)
Changes in assets and liabilities:
Accounts receivable 56,000 (243,000)
Other current assets 348,000 32,000
Loan receivable -- 100,000
Other assets (60,000) (23,000)
Accounts payable and accrued liabilities (471,000) 59,000
---------- ----------
Net cash provided by operating activities 282,000 119,000
---------- ----------
Cash flows from investing activities:
Capital expenditures (47,000) (1,000)
---------- ----------
Net cash used in investing activities (47,000) (1,000)
---------- ----------
Cash flows from financing activities:
Exercise of stock options 23,000 5,000
Decrease in loan payable, net (245,000) (677,000)
Sale of common stock 442,000
---------- ----------
Net cash used in financing activities (222,000) (230,000)
---------- ----------
Net change in cash 13,000 (112,000)
Cash at beginning of period 38,000 133,000
---------- ----------
Cash at end of period $ 51,000 $ 21,000
========== ==========
The accompanying notes are an integral part of these
consolidated 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-Q are
"forward-looking statements 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 "Risk Factors" in our Annual Report on Form 10-KSB for
the year ended December 31, 2004 as filed with the Securities and Exchange
Commission.
Note 1. - Business and Summary of Significant Accounting Policies
Business
The Company, through its wholly-owned subsidiary, Sunteck Transport Co.,
Inc. (Sunteck), is a non-asset based transportation services company. As a
non-asset based provider of brokerage and contract carrier transportation
services, the Company does not own any equipment and its services are provided
through its strategic alliances with less than truckload, truckload, air, rail,
ocean common carriers and independent owner-operators to service customers'
needs. The Company's brokerage and contract carrier services are provided though
a network of independent sales agents throughout the United States and Canada.
During its most recently completed fiscal year, the Company generated revenue,
net revenue and net income of approximately $46.5 million, $8.7 million and $1.5
million, respectively.
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).
Principles of Consolidation
The consolidated financial statements include the accounts of the
AutoInfo, Inc. (the Company), its wholly-owned subsidiary Sunteck Transport Co.,
Inc. and its wholly-owned subsidiary Sunteck Transport & Logistics, Inc.,
collectively (Sunteck). All significant intercompany balances and transactions
have been eliminated in consolidation.
6
Revenue Recognition
As a third party transportation logistics provider, the Company acts as
the shippers' agent and arranges for a carrier to handle the freight. Gross
revenues consist of the total dollar value of services purchased by shippers.
Revenue is recognized upon the pick up of freight, at which time the related
transportation cost, including commission, is also recognized. At that time, the
Company's obligations are completed and collection of receivables is reasonably
assured.
Emerging Issues Task Force No. 99-19, "Reporting Revenues Gross as a
Principal Versus Net as an Agent" (EITF 99-19), establishes criteria for
recognizing revenues on a gross or net basis. The Company is the primary obligor
in its transactions, has all credit risk, maintains substantially all risk and
rewards, has discretion in selecting the supplier, and has latitude in pricing
decisions. Accordingly, the Company records all transactions at the gross
amount, consistent with the provisions of EITF 99-19.
Provision For Doubtful Accounts
The Company continuously monitors the creditworthiness of its customers
and has established an allowance for amounts that may become uncollectible in
the future based on current economic trends, its historical payment and bad debt
write-off experience, and any specific customer related collection issues.
Cash
From time to time, the Company has on deposit at financial institutions
cash balances which exceed federal deposit insurance limitations. The Company
has not experienced any losses in such accounts and believes it is not exposed
to any significant credit risk on cash.
Fixed Assets
Fixed assets as of March 31, 2005 and December 31, 2004, consisting
predominantly of furniture, fixtures and 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.
Income Per Share
Basic income per share is based on net income divided by the weighted
average number of common shares outstanding. Common stock equivalents
outstanding were 2,839,000 and 2,439,000, respectively, for the periods ended
March 31, 2005 and 2004.
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
7
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and future benefits to be recognized
upon the utilization of certain operating loss carryforwards. 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 applies 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 issued to employees in
the financial statements.
The pro-forma effect of options issued to employees on net income and
earnings per share, utilizing the Black-Scholes option-pricing model, consistent
with the method stipulated by SFAS 123, was not material to the Company's
results of operations.
The Company accounts for stock options issued to non-employees using the
fair value method in accordance with SFAS 123. Deferred compensation,
representing the fair market value of the options issued utilizing the
Black-Scholes option-pricing model, is charged to earnings over the vesting
period.
Note 2- Income Taxes
For the periods ended March 31, 2005 and 2004, the provision for income
taxes consisted of the following:
2005 2004
---------------------------------------------------
Current Deferred Current Deferred
---------------------------------------------------
Tax expense before application of
operating loss carryforwards $ 143,000 $ -- $ 69,000 $ --
Tax expense (benefit) of operating
loss carryforwards (121,000) 121,000 (59,000) 59,000
Change in valuation allowance -- (177,000) -- (70,000)
---------------------------------------------------
Income tax expense (benefit) $ 22,000 $ (56,000) $ 10,000 $ (11,000)
---------------------------------------------------
8
Deferred taxes are comprised of the following at March 31, 2005 and
December 31, 2004:
March 31, December 31,
2005 2004
----------- ------------
Deferred tax assets:
Net operating loss carryforward $ 5,469,000 $ 5,590,000
----------- -----------
Gross deferred tax assets 5,469,000 5,590,000
Less: valuation allowance (4,092,000) (4,269,000)
----------- -----------
Deferred tax asset $ 1,377,000 $ 1,321,000
=========== ===========
The deferred tax asset represents expected future tax savings resulting
from the Company's net operating loss carryforward. As of December 31, 2004, the
Company has a net operating loss carryforward of approximately $16.5 million for
federal income tax purposes which expire through 2014. Utilization of this
benefit is primarily subject to the extent of future earning of the Company, and
may be limited by, among other things, shareholder changes, including the
possible issuance by the Company of additional shares in one or more financing
or acquisition transactions. The Company has established a valuation allowance
for the portion of the possible tax savings not likely to be realized by the end
of the carryforward period.
Based upon available objective evidence, including the Company's
post-merger history of profitability, management believes it is more likely than
not that forecasted taxable income will be sufficient to utilize a portion of
the net operating loss carryforward before its expiration in 2014. However,
there can be no assurance that the Company will meet its expectations of future
income.
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.
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 financial
statements and the notes thereto appearing elsewhere in this report.
Overview
Through our wholly-owned subsidiary, Sunteck Transport Co., Inc.
(Sunteck), we are a non-asset based transportation services company, providing
transportation capacity and related transportation services to shippers
throughout the United States, and to a lesser extent, Canada. As a non-asset
based provider of brokerage and contract
9
carrier transportation services, we do not own any equipment and our services
are provided through our strategic alliances with less than truckload,
truckload, air, rail, ocean common carriers and independent owner-operators to
service our customers' needs. Our non-asset based services include ground
transportation coast to coast, local pick up and delivery, air freight and ocean
freight. We have strategic alliances with less than truckload, truckload, air,
rail and ocean common carriers to service our customers' needs. Our business
services emphasize safety, information coordination and customer service and are
delivered through a network of independent commissioned sales agents and third
party capacity providers coordinated by us. The independent commissioned sales
agents typically enter into non-exclusive contractual arrangements with Sunteck
and are responsible for locating freight and coordinating the transportation of
the freight with customers and capacity providers. The third party capacity
providers consist of independent contractors who provide truck capacity to us,
including owner-operators who operate under our contract carrier license, air
cargo carriers and railroads. Through this network of agents and capacity
providers, Sunteck operates a transportation services business with revenue, net
revenue and net income of approximately $46.5 million, $8.7 million and $1.5
million, respectively, during our most recently completed fiscal year.
Our brokerage services are provided though a network of independent sales
agents throughout the United 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.
Our contract carrier services, which commenced in 2003, are also provided
through a network of independent sales agents and independent owner-operators
throughout the United States. We do no own any trucking equipment; our
independent owner-operators lease onto our operating authority and transport
freight under the Sunteck name.
The most significant factor in our growth during the past two years has
been the expansion of our brokerage services agent network and, in 2003, the
introduction and expansion of our contract carrier services agent and owner
operator network. This growth is readily measured by the number of transactions
we have processed, which increased for the respective three month periods from
8,300 in 2004 to 13,300 is 2005, an increase of 60%. The average revenue dollars
per load in our brokerage division increased by 20% in 2005 as compared to 2004.
This is the result of several factors including an increase in truckload
business versus less than truckload at higher per load revenues, the addition of
sales agents hauling heavy equipment at higher per load revenues and, to a
lesser degree, a general increase in prices. The net revenue percentage in our
brokerage division increased by 18% in 2005 as compared to 2004. This is
primarily the result of revenue mix and, to a lesser degree, a general increase
in prices.
Results of operations
For the three months ended March 31, 2005 and 2004
During the quarter ended March 31, 2005, we continued 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 providing brokerage and
contract carrier services. 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
the 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.
10
The following table represents certain statement of operation data as a
percentage of net revenues:
2005 2004
---------- ----------
Net revenues 100.0% 100.0%
Commissions 61.9% 56.8%
Operating expenses 24.8% 30.4%
Interest expense 1.6% .9%
Income taxes (benefit) (1.1)% (.1)%
Net income 12.8% 11.9%
Revenues
Gross revenues, consisting of freight fees and other related services
revenue, totaled $14,915,000 for the quarter ended March 31, 2005, as compared
with $8,159,000 in the prior year period, an increase of 83%. Net revenues were
$3,067,000 for the quarter ended March 31, 2005, as compared with $1,478,000 in
the prior year period, an increase of 108%. Gross revenues from brokerage
services increased to $12,372,000 from $6,848,000 and net revenues increased to
$2,581,000 from $1,216,000 in the prior year period. This increase is the direct
result of the continued expansion of our agent network and customer base which
resulted in a 51% increase in the number of transactions processed and an
increase of 19% in the average dollars per load. Gross revenues from contract
carrier services increased to $2,543,000 from $1,311,000 and net revenues
increased to $486,000 from $262,000 which is a direct result of a 93% increase
in the number of transactions processed.
Costs and expenses
Commissions totaled $1,900,000 for the quarter ended March 31, 2005, as
compared with $840,000 in the prior year period, an increase of 126%. As a
percentage of net revenues, commissions were 62% for the quarter ended March 31,
2005 as compared with 57% in the prior year period. This increase is the result
of the higher commission rates associated with the expansion of the sales agent
base in our brokerage services.
Operating expenses totaled $760,000 for the quarter ended March 31, 2005,
as compared with $449,000 in the prior year period, an increase of 69%. As a
percentage of net revenues, operating expenses were 25% for the quarter ended
March 31, 2005, as compared with 30% in the prior year period. During 2005, we
moved our headquarters increasing our space to 5,300 square feet. We have
increased administrative staff commensurate with the increase in transaction
volume. We presently have adequate facilities and management to handle the
present and anticipated transaction volume in 2005 without significant increase
in overhead.
Interest expense, which includes fees and other bank charges, was $48,000
for the quarter ended March 31, 2005, as compared with $14,000 in the prior year
period. This increase is primarily the result of increased borrowings pursuant
to our $2.5 million line of credit at an interest rate of prime + 1/2% and an
increase in bank fees as a result of increased transaction volume.
Income tax
The income tax benefit of $34,000 for the quarter ended March 31, 2005
consisted of $177,000 resulting from the anticipated future utilization of an
available federal tax loss carryforward, net of the amortization of deferred tax
benefit of $121,000 and state income taxes of $22,000. The income tax benefit of
$1,000 for the quarter ended March 31, 2004 consisted of $70,000 resulting from
the anticipated future utilization of an available federal tax loss
carryforward, net of
11
the amortization of deferred tax benefit of $59,000 and state income taxes of
$10,000. Based upon available objective evidence, including the Company's
post-merger history of profitability, management believes it is more likely than
not that forecasted taxable income will be sufficient to utilize a portion of
the net operating loss carryforward before its expiration in 2014. Accordingly,
as of March 31, 2005, the valuation allowance was reduced by an additional
$177,000.
Net income
Net income totaled $393,000 for the quarter ended March 31, 2005, as
compared with $176,000 in the prior year period. This increase is the direct
result of the increase in revenues due to the continuing expansion of our
operations and the additional recognition on the deferred tax asset of $177,000.
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 customers' and shippers' internal
traffic and transportation 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. The most
significant trend contributing to our growth during the past four years has been
the expansion of our brokerage services agent network and, in 2003, the
introduction and expansion of our contract carrier agent and owner operator
network. Sales agents are independent contractors and, as such, there are no
assurances that we can either maintain our existing agent network or continue to
expand this network.
For the quarter ended March 31, 2005, we increased gross revenues from
$8.2 million to $14.9 million and had net income of $393,000 as compared with
$176,000 in the prior year. As of March 31, 2005, we had an accumulated deficit
of $14.3 million. 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.
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 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.
Liquidity and capital resources
During the past two years, our sources for cash have been the cash flow
generated from operations and available borrowings under lines of credit.
At March 31, 2005, we had outstanding $1,753,000 pursuant to our
$2,500,000 line of credit. The line of credit, obtained from a bank in May 2003,
is subject to the maintenance of certain financial covenants, is secured by
accounts receivable and other operating assets, and matures in June 2005. We
believe that we have sufficient working capital to meet our short-term operating
needs and that we will be able to increase, extend or replace the line of credit
on terms acceptable to us.
At March 31, 2005, we had liquid assets of approximately $51,000.
Available cash is used to reduce borrowings on our line of credit.
12
The total amount of debt outstanding as of March 31, 2005 and 2004 was
$1,753,000 and $369,000, respectively. The following table presents our debt
instruments and their weighted average interest rates as of March 31, 2005 and
2004, respectively:
Weighted Weighted
Balance Average Rate Balance Average Rate
-------------------------------------------------------
2005 2004
-------------------------------------------------------
Line of Credit $1,753,000 6.0% $ 369,000 4.5%
Inflation and changing prices had no material impact on our revenues or
the results of operations for the period ended March 31, 2005.
Critical accounting policies
Preparation of our financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Note 1 of the Notes to Financial Statements
includes a summary of the significant accounting policies and methods used in
the preparation of the Company's financial statements. The most significant
areas involving management estimates and assumptions are described below. Actual
results could differ materially from management's estimates under different
assumptions or conditions.
Revenue Recognition
As a third party transportation logistics provider, we act as the
shippers' agent and arrange for a carrier to handle the freight. Gross revenues
consist of the total dollar value of services purchased by shippers. Revenue is
recognized upon the delivery of freight, at which time the related
transportation cost, including commission, is also recognized. At that time, our
obligations are completed and collection of receivables is reasonably assured.
Emerging Issues Task Force No. 99-19, "Reporting Revenues Gross as a
Principal Versus Net as an Agent" (EITF 99-19), establishes criteria for
recognizing revenues on a gross or net basis. The Company is the primary obligor
in its transactions, has all credit risk, maintains substantially all risk and
rewards, has discretion in selecting the supplier, and has latitude in pricing
decisions. Accordingly, the Company records all transactions at the gross
amount, consistent with the provisions of EITF 99-19.
Income Taxes
The deferred tax asset represents expected future tax savings resulting
from our net operating loss carryforward. As of December 31, 2004, we had a net
operating loss carryforward of approximately $16.5 million for federal income
tax purposes which expire through 2014. Utilization of this benefit is primarily
subject to the extent of our future earnings, and may be limited by, among other
things, shareholder changes, including the possible issuance of additional
shares in one or more financing or acquisition transactions. We have established
a valuation allowance for the portion of possible tax savings not likely to be
realized by the end of the carryforward period.
13
Provision For Doubtful Accounts
We continuously monitor the creditworthiness of our customers and have
established an allowance for amounts that may become uncollectible in the future
based on current economic trends, our historical payment and bad debt write-off
experience, and any specific customer related collection issues.
Off-balance sheet arrangements
We do not have any off-balance sheet arrangements.
CONTROLS AND PROCEDURES
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Company's disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) as of the end of the period covered by this
report. Based on that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer have concluded that, as of the end of such period, the
Company's disclosure controls and procedures are effective.
There have not been any changes in the Company's internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the Company's fiscal first quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
Part II
OTHER INFORMATION
Item 1 - 5: Inapplicable
Item 6: Exhibits
--------
31A Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
31B Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
32A Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
32B Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
----------
* Filed as an exhibit hereto.
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.
By: /s/ William Wunderlich
--------------------------------
William Wunderlich
Executive Vice President and
Principal Financial Officer
Date: May 11, 2005
15