UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 2007
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the transition period from ______________ to_______________
Commission File Number: 001-11497
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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |X|
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
YES |_| NO |X|
Number of shares outstanding of the Registrant's common stock as of May 11,
2007: 32,467,000 shares of common stock.
AUTOINFO, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information:
Item 1. Consolidated Financial Statements: Page
Balance Sheets
March 31, 2007 (unaudited) and December 31, 2006 (audited)...... 3
Statements of Income (unaudited)
Three months ended March 31, 2007 and 2006...................... 4
Statements of Cash Flows (unaudited)
Three months ended March 31, 2007 and 2006...................... 5
Notes to Unaudited Consolidated Financial Statements.............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 15
Item 4. Controls and Procedures........................................... 15
Part II. Other Information
Item 6. Exhibits.......................................................... 15
Signatures ......................................................................... 16
2
PART I - FINANCIAL INFORMATION
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2007 2006
------------ ------------
Unaudited Audited
ASSETS
Current assets:
Cash and cash equivalents $ 374,000 $ 146,000
Accounts receivable, net of allowance for doubtful
accounts of $284,000 and $249,000 as of March
31, 2007 and December 31, 2006, respectively 16,125,000 16,967,000
Deferred income taxes (Note 2) 1,445,000 1,445,000
Other current assets 407,000 363,000
------------ ------------
Total current assets 18,351,000 18,921,000
Fixed assets, net of accumulated depreciation 381,000 324,000
Deferred income taxes (Note 2) 2,294,000 2,502,000
Advances and other assets 2,357,000 2,075,000
------------ ------------
$ 23,383,000 $ 23,822,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loan payable $ 2,598,000 $ 3,451,000
Accounts payable and accrued liabilities 8,275,000 8,375,000
------------ ------------
Total current liabilities 10,873,000 11,826,000
------------ ------------
Stockholders' Equity
Preferred stock - authorized 10,000,000 shares
$.001 par value; issued and outstanding
- 0 shares as of March 31, 2007 and
December 31, 2006 -- --
Common stock - authorized 100,000,000 shares
$.001 par value; issued and outstanding -
32,467,000 shares as of March 31, 2007 and
32,102,000 shares as of December 31, 2006 32,000 32,000
Additional paid-in capital 19,608,000 19,420,000
Deficit (7,130,000) (7,456,000)
------------ ------------
Total stockholders' equity 12,510,000 11,996,000
------------ ------------
$ 23,383,000 $ 23,822,000
============ ============
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,
2007 2006
----------- ------------
Gross revenues $22,054,000 $ 18,096,000
Cost of transportation 17,200,000 14,108,000
----------- ------------
Net revenues 4,854,000 3,988,000
----------- ------------
Commissions 3,124,000 2,478,000
Operating expenses 1,115,000 888,000
----------- ------------
4,239,000 3,366,000
----------- ------------
Income from operations 615,000 622,000
Interest expense 46,000 6,000
----------- ------------
Income before income taxes 569,000 616,000
Income taxes (benefit) (Note 2) 243,000 (539,000)
----------- ------------
Net income $ 326,000 $ 1,155,000
=========== ============
Net income per share
Basic $ .01 $ .04
----------- ------------
Diluted $ .01 $ .03
----------- ------------
Weighted average number of common shares
Basic 32,265,000 31,751,000
----------- ------------
Diluted 36,368,000 34,506,000
----------- ------------
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,
2007 2006
----------- -----------
Cash flows from operating activities:
Net income $ 326,000 $ 1,155,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in allowance for doubtful accounts 35,000 46,000
Depreciation and amortization 29,000 25,000
Stock-based compensation expense 77,000 33,000
Deferred income taxes (benefit) 208,000 (574,000)
Changes in assets and liabilities:
Accounts receivable 807,000 262,000
Other current assets (44,000) (124,000)
Advances and other assets (282,000) --
Accounts payable and accrued liabilities (100,000) (227,000)
----------- -----------
Net cash provided by operating activities 1,056,000 596,000
----------- -----------
Cash flows from investing activities:
Capital expenditures (88,000) (34,000)
----------- -----------
Net cash used in investing activities (88,000) (34,000)
----------- -----------
Cash flows from financing activities:
Exercise of stock options 113,000 24,000
Decrease in loan payable, net (853,000) (679,000)
----------- -----------
Net cash used in financing activities (740,000) (655,000)
----------- -----------
Net change in cash and cash equivalents 228,000 (93,000)
Cash and cash equivalents, beginning of period 146,000 419,000
----------- -----------
Cash and cash equivalents, end of period $ 374,000 $ 326,000
=========== ===========
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-K for
the year ended December 31, 2006 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
through 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 $84.1 million, $17.7
million and $3.6 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).
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 months ended March 31, 2007
and 2006 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
6
conjunction with the financial statements and notes included in our Annual
Report on Form 10-K for the year ended December 31, 2006.
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 Carriers, Inc.,
collectively (Sunteck). All significant intercompany balances and transactions
have been eliminated in consolidation.
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 delivery 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 and cash equivalents
Cash and cash equivalents consist of cash in banks. 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, 2007 and December 31, 2006, consisting
predominantly of furniture, fixtures and equipment and computer system
development costs, 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 4,103,000 and 2,755,000, respectively, for the three month
periods ended March 31, 2007 and 2006.
7
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 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
On January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123R, "Share-Based Payment" (SFAS 123R) utilizing the modified
prospective transition method. SFAS 123R requires employee stock options to be
valued at fair value on the date of grant and charged to expense over the
applicable vesting period. Under the modified prospective method, compensation
expense is recognized for all share based payments issued on or after January 1,
2006 and for all share payments issued to employees prior to January 1, 2006
that remain unvested.
The Company's results of operations for the three months ended March 31,
2007 and 2006 include an additional $10,000 and $12,000, respectively, in
operating expense related to the adoption of SFAS 123R. In accordance with the
modified prospective method, the consolidated financial statements for prior
periods have not been restated to reflect, and do not include, the impact of
SFAS 123R.
Adoption of SFAS 123R did not change the Company's accounting for share
based payments issued to non-employees.
Note 2- Income Taxes
For the three month periods ended March 31, 2007 and 2006, respectively,
the provision for income taxes consisted of the following:
2007 2006
--------------------------------------------------------
Current Deferred Current Deferred
--------------------------------------------------------
Tax expense before application of
operating loss carryforwards $ 243,000 $ -- $ 244,000 $ --
Tax expense (benefit) of operating
loss carryforwards (208,000) 208,000 (209,000) 209,000
Change in valuation allowance -- (783,000)
--------------------------------------------------------
Income tax expense (benefit) $ 35,000 $ 208,000 $ 35,000 $ (574,000)
--------------------------------------------------------
8
The deferred tax asset $3,739,000 and $3,947,000 at March 31, 2007 and
December 31, 2006, respectively, represents expected future tax savings
resulting from the Company's utilization of its net operating loss
carryforwards. As of December 31, 2006, the Company has net operating loss
carryforwards of approximately $11.6 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. 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 all of the net operating loss
carryforwards before its expiration in 2014.
9
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. We undertake no obligation to revise or update publicly any forward
looking statements for any reason. 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 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 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 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 non-asset based
transportation services business with revenue, net revenue and net income of
approximately $84.1 million, $17.7 million and $3.6 million, respectively,
during our most recently completed fiscal year and approximately $22.1 million,
$4.9 million and $326,000, respectively, during the three months ended March 31,
2007.
During the quarter ended March 31, 2007, the increase in gross revenue and
net revenue is readily measured by the number of transactions we have processed,
which increased for the respective three month periods from 13,750 in 2006 to
17,500 in 2007, an increase of 27%. This is the direct result of the expansion
of our agent network. Both gross revenue and net revenue increased by 22% over
the prior year period as compared to an increase of 27% in the number of
transactions processed. The decrease in revenue dollars per load (4%) is the
result of revenue mix and the competitive environment during the period.
During the next twelve months, we plan to continue to offer our brokerage
and contract carrier transportation services and expand our agent network. We
are presently profitable and have adequate available lines of credit to satisfy
our working capital requirements during the next twelve months.
10
Results of operations
For the three months ended March 31, 2007 and 2006
During the quarter ended March 31, 2007, 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.
The following table represents certain statement of operation data as a
percentage of net revenues:
2007 2006
------ ------
Net revenues 100.0% 100.0%
Commissions 64.4% 62.1%
Operating expenses 23.0% 22.3%
Interest expense .9% .1%
Income taxes (benefit) 5.0% (13.5)%
Net income 6.7% 29.0%
Revenues
Gross revenues, consisting of freight fees and other related services
revenue, totaled $22,054,000 for the quarter ended March 31, 2007, as compared
with $18,096,000 in the prior year period, an increase of 22%. Net revenues were
$4,854,000 for the quarter ended March 31, 2007, as compared with $3,988,000 in
the prior year period, an increase of 22%. This increase is the direct result of
the continued expansion of our agent network and customer base which resulted in
a 27% increase in the number of transactions processed.
Costs and expenses
Commissions totaled $3,124,000 for the quarter ended March 31, 2007, as
compared with $2,478,000 in the prior year period, an increase of 26%. This
increase is the result of the increase in net revenues. As a percentage of net
revenues, commissions were 64% and 62% for the quarters ended March 31, 2007 and
2006, respectively. This increase is the result of agent and revenue mix as well
as agent rate increases based upon achieving revenue and profitability
benchmarks.
Operating expenses totaled $1,115,000 for the quarter ended March 31,
2007, as compared with $888,000 in the prior year period, an increase of 26%. As
a percentage of net revenues, operating expenses were 23.0% for the quarter
ended March 31, 2007, as compared with 22.3% in the prior year period. The
increase is the direct result of the increase in selling, general and
administrative expenses in connection with our business expansion. During 2006,
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 2007 without a significant
increase in overhead.
11
Interest expense was $46,000 for the quarter ended March 31, 2007, as
compared with $6,000 in the prior year period. This increase is primarily the
result of increased borrowings pursuant to our $2.5 million line of credit.
Income tax
Income tax expense for the quarter ended March 31, 2007 of $243,000
consisted of the utilization of the deferred tax benefit of $208,000 and state
income taxes of $35,000 compared to an income tax benefit of $539,000 for the
quarter ended March 31, 2006 which consisted of a benefit of $783,000 resulting
from the anticipated future utilization of available federal tax loss
carryforwards, net of the utilization of the deferred tax benefit of $209,000
and state income taxes of $35,000. The increase in income taxes is because, as
of December 2006, we had fully recognized the anticipated future utilization of
available federal tax loss carryforwards as management believes it is more
likely than not that they will be realized by the end of the carryforward
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 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 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, 2007, our gross revenues increased to
$22.1 million from $18.1 million in the prior year. As of March 31, 2007, we had
an accumulated deficit of $7.1 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 our line of credit.
At March 31, 2007, we had outstanding $2,598,000 under our $4,000,000 line
of credit. The line of credit facility, obtained from a bank in May 2003, is at
an interest rate of LIBOR plus 2% and is subject to the maintenance of certain
financial covenants, is secured by accounts receivable and other operating
assets, and matures in June 2008. 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.
12
At March 31, 2007, we had liquid assets of approximately $374,000.
Available cash is used to reduce borrowings on our line of credit.
The total amount of debt outstanding as of March 31, 2007 and 2006 was
$2,598,000 and $601,000, respectively. The following table presents our debt
instruments and their weighted average interest rates as of March 31, 2007 and
2006, respectively:
Weighted Weighted
Balance Average Rate Balance Average Rate
------------------------------------------------------------------
2007 2006
------------------------------------------------------------------
Line of Credit 2,598,000 7.32% 601,000 8.25%
Inflation and changing prices had no material impact on our revenues or
the results of operations for the period ended March 31, 2007. Higher fuel
prices have had no material impact on our revenues or the results of operations
for the period ended March 31, 2007 because, as a broker, we are able to pass
through to our customers any increased costs incurred. The higher cost of fuel
passed through as a fuel surcharge has become an industry standard and an
acceptable business practice.
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 to the notes to the financial statements
included in this report includes a summary of the significant accounting
policies and methods used in the preparation of our 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. We are the primary obligor in our
transactions, have all credit risk, maintain substantially all risk and rewards,
have discretion in selecting the supplier, and have latitude in pricing
decisions. Accordingly, we record 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 carryforwards. As of December 31, 2006, we had net
operating loss carryforwards of approximately $11.6 million for federal income
tax purposes which expire through 2014. Utilization of this benefit is primarily
subject to the extent of our future earnings,
13
and may be limited by, among other things, stockholder changes, including the
possible issuance of additional shares in one or more financing or acquisition
transactions. As of December 2006, we had fully recognized the anticipated
future utilization of available federal tax loss carryforwards as management
believes it is more likely than not that they will be realized by the end of the
carryforward periods.
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.
14
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
CONTROLS AND PROCEDURES
Our management, with the participation of our chief executive officer and
chief financial officer, has evaluated the effectiveness of our 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, our chief executive officer and chief financial officer have
concluded that, as of the end of such period, our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is: (i)
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms; and (ii) accumulated and communicated to
management, including our chief executive and chief financial officers, as
appropriate to allow timely decisions regarding required disclosure.
There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, our 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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AUTOINFO, INC.
/s/ Harry Wachtel
----------------------------------------
Harry Wachtel
President and Chief Executive Officer
(Principal Executive Officer)
/s/ William Wunderlich
----------------------------------------
William Wunderlich
Chief Financial Officer
(Principal Financial Officer)
Date: May 11, 2007
16