10-Q 1 0001.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 |X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: JUNE 30, 2000 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) P.O. Box 4383, Stamford, CT 06907-0383 -------------------------------------------------------------------------------- (Address of principal executive office) (203) 595-0005 -------------------------------------------------------------------------------- (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 11, 2000 7,756,953 shares of common stock, $.01 par value. AUTOINFO, INC. AND SUBSIDIARIES INDEX Part I. Financial Information: Item 1. Financial Statements: Page Balance Sheets - June 30, 2000 (unaudited) and December 31, 1999.............. 3 Statements of Discontinued Operations (unaudited)- Three and Six months ended June 30, 2000 and 1999............ 4 Statements of Cash Flows from Discontinued Operations (unaudited)-Three and Six months ended June 30, 2000 and 1999................................................ 5 Notes to Unaudited Financial Statements...................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................... 11 Part II. Other Information ................................................ 16 Signatures ................................................................ 17 2 AUTOINFO, INC. AND SUBSIDIARIES BALANCE SHEETS June 30, December 31, 2000 1999 --------- ------------ Unaudited Audited ASSETS Cash $ 390,936 $ 584,949 Short-term investments 389,692 399,000 Other assets 12,924 16,520 ------------ ------------ $ 793,552 $ 1,000,469 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities subject to compromise (See Note 3) Subordinated notes and other debt $ 9,393,572 $ 9,393,572 Accounts payable and accrued liabilities 1,782,559 1,265,159 ------------ ------------ Total liabilities 11,176,131 10,658,731 ------------ ------------ Stockholders' Equity Common stock - authorized 20,000,000 shares $.01 par value; issued and outstanding - 7,756,953 shares as of June 30, 2000 and December 31, 1999 77,570 77,570 Additional paid-in capital 17,772,431 17,772,431 Deferred compensation under stock bonus plan (264,284) (271,889) Retained deficit (27,968,296) (27,236,374) ------------ ------------ Total stockholders' equity (10,382,579) (9,658,262) ------------ ------------ $ 793,552 $ 1,000,469 ============ ============ See notes to condensed unaudited financial statements 3 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS (Unaudited)
Six Months Ended Three Months Ended June 30, June 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Investment income $ 32,446 $ 50,192 $ 14,109 $ 14,690 ----------- ----------- ----------- ----------- Costs and expenses: Interest expense 467,400 484,561 233,700 238,073 Operating expenses 242,568 567,029 119,521 317,663 Reorganization expenses 91,777 -- 20,850 -- Depreciation & amortization -- 19,266 -- -- Loss on disposition of securities 2,116 -- 2,116 -- Net unrealized holding gain (39,493) -- (39,493) -- ----------- ----------- ----------- ----------- Total operating expenses 764,368 1,070,856 336,694 555,736 ----------- ----------- ----------- ----------- Net loss $ (731,922) $(1,020,664) $ (322,585) $ (541,046) =========== =========== =========== =========== Basic and diluted net loss per share: ($ .09) ($ .13) ($ .04) ($ .07) =========== =========== =========== =========== Weighted average number of common and common equivalent shares 7,756,953 7,756,953 7,756,953 7,756,953 ----------- ----------- ----------- -----------
See notes to condensed unaudited financial statements 4 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FROM DISCONTINUED OPERATIONS (Unaudited) Six Months Ended June 30, 2000 1999 ----------- ----------- Cash flows from operating activities: Net loss $ (731,922) $(1,020,664) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization -- 19,266 Amortization of deferred compensation 7,605 7,604 Loss on disposition of securities 2,116 Net unrealized holding gain (39,493) Changes in assets and liabilities: Other assets 3,596 316,550 Accounts payable and accrued liabilities 517,400 66,140 ----------- ----------- Net cash used in operating activities (240,698) (611,104) ----------- ----------- Cash flows from investing activities: Proceeds from sale of short-term investments 46,685 1,184,756 ----------- ----------- Net cash provided by investing activities 46,685 1,184,756 ----------- ----------- Cash flows from financing activities: Decrease in borrowings, net -- (638,002) ----------- ----------- Net cash used in financing activities -- (638,002) ----------- ----------- Net decrease in cash (194,013) (64,350) Cash at beginning of period 584,949 116,570 ----------- ----------- Cash at end of period $ 390,936 $ 52,220 =========== =========== See notes to condensed unaudited financial statements 5 AUTOINFO, INC. AND SUBSIDIARIES NOTES TO UNAUDITED FINANCIAL STATEMENTS Forward Looking Statements Certain statements made in this Quarterly Report on Form 10-Q 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 uncertainties relating to the proposed merger with Sunteck Transport Co., Inc., final confirmation of the Company's Reorganization Plan and the factors set forth in "Certain Factors That May Affect Future Growth," under Part I, Item 1, of the Company's Annual Report on Form 10-K for the year ended December 31, 1999 as filed with the Securities and Exchange Commission. Note 1. - Business and Summary of Significant Accounting Policies Business During 1998, AutoInfo, Inc. (the "Company") ceased to operate as an automobile finance company. On January 29, 1999, the Company's wholly-owned subsidiary, CarLoanCo., Inc. ("CLC"), filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code. During 1999, the Company negotiated the termination of its lease in Montvale, New Jersey and relocated to temporary space in Stamford, Connecticut as part of its continuing effort to reduce operating expenses and preserve corporate capital. The Company's main business focus became the challenge to seek out business opportunities in furtherance of its plan to rebuild and create shareholder value. These efforts were inhibited by a negative net worth and remaining subordinated debt of $9.3 million. Therefore, the Company commenced discussions with its noteholders regarding the restructuring of this debt to enhance the possibility of consummating a transaction to return to an operating status and create shareholder value. On February 2, 2000, the Company filed a disclosure statement and reorganization plan (the "Plan") pursuant to Chapter 11 of Title 11 of the United States Bankruptcy Code. The Plan provides for the issuance of one share of its common stock and a cash payment of $ 0.03 for each dollar of approximately $9.5 million of unsecured debt. At the time of filing, the requisite number and dollar amount of the unsecured creditor group had voted to support the Plan. Preliminary hearings were held to consider compliance with the disclosure requirements. On August 1, 2000, the Company received the conditional confirmation of the Plan, as amended, from the Bankruptcy Court. Accordingly, the Plan will become effective without further action by the Court upon the closing of AutoInfo's merger with Sunteck 6 Transport Co., Inc. ("Sunteck"). Such closing is subject to the fulfillment (or waiver by Sunteck) of certain conditions, including AutoInfo's obligation to secure a commitment for $2 million in debt or equity financing prior to closing. There is no assurance that the Company's merger transaction with Sunteck will be consummated or that the Plan will receive final confirmation. All documents on file in our bankruptcy proceeding, case no. 00-10368, can be viewed on the Bankruptcy Court's Internet site at: http://ecf.nysb.uscourts.gov/index.html On June 22, 2000, the Company entered into a Merger Agreement with Sunteck Transport Co., Inc., a full service third party transportation logistics provider. Pursuant to the Merger Agreement, at closing, Sunteck will merge into a wholly-owned subsidiary of AutoInfo in exchange for 10 million shares of AutoInfo Common Stock (the "Sunteck Merger"). The consummation of the transaction is contingent upon, among other things, the securing of a firm commitment on or before October 20, 2000, for a financing resulting in gross proceeds to AutoInfo of at least $2.0 million. The proceeds of the financing are intended for the development and implementation of- Ubidfreight.com - an e-commerce business-to-business application which will provide an interactive freight auction matching available freight (shippers) and available cargo space (truckers and other carriers). The proceeds will be used to complete site development, fund start-up expenses, commence marketing and provide for administrative costs. The transition of Sunteck's existing customer and common carriers relationships as well as its industry experience and expertise will be key elements in the development and success of the Ubidfreight.com business. Ubidfreight.com will offer an e-commerce real time freight auction market place - where shippers will offer their freight for bid directly to carriers/truckers for transport. This live interactive environment will benefit shippers and carriers by reducing the cost of handling their freight through the competitive auction process. Ubidfreight.com's e-commerce site will eliminate the expensive intermediaries and the inefficiencies inherent in today's transportation industry. Sunteck, which was formed in 1997, is a full service third party transportation logistics provider. Its 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. Sunteck's personnel have in excess of forty years of freight industry experience. Harry Wachtel, Sunteck's President and sole shareholder, will, upon the consummation of the merger, become Chairman of the Board, CEO and President of AutoInfo. Assuming the consummation of the merger with Sunteck on or before October 20, 2000, and without giving effect to any further financing , the Company anticipates having cash and short-term investments of approximately $400,000 and no debt. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The foregoing factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Accordingly, the carrying amounts of our assets and liabilities do not purport to represent realizable or settlement amounts. The Company has discontinued its operations. Therefore, the accompanying financial statements present the results of operations of the Company as the Statement of Discontinued Operations. The ongoing expenses of the Company consists of the salary and related expenses of its sole remaining employee, Mr. Wunderlich, President and administrative expenses. Summary of Significant Accounting Policies Basis of Presentation The financial statements of the Company have been prepared using the accrual basis of accounting under generally accepted accounting principles ("GAAP"). The accounting policies of the Company conform with GAAP. Principles of Consolidation 7 The 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. Short-term Investments Short-term investments, consisting of marketable securities as of June 30, 2000 and December 31, 1999, are carried at market value. Gains and losses on disposition of securities are recognized on the specific identification method in the period in which they occur. Unrealized holding gains and losses on trading securities based upon the fair market value as of the balance sheet date, if material, would be included in earnings in the period in which they occur. Losses on dispositions of securities amounted to $2,116 for the six and three month periods ended June 30, 2000. Unrealized holding gains amounted to $39,493 for the six and three month periods ended June 30, 2000. There were no losses on dispositions of securities or unrealized holding losses for the six and three month periods ended June 30, 1999. Fixed Assets Fixed assets are carried at cost less accumulated depreciation. Depreciation of fixed assets is provided on the straight-line method over the estimated useful lives of the related assets which range from three to five years. As of December 31, 1998, fixed assets consisted predominantly of furniture, fixtures and equipment at the Company's Montvale, New Jersey headquarters facility. During the quarter ended June 30, 1999, the Company terminated its lease and vacated the premises. Accordingly, the remaining fixed assets were written-off. Loss Per Share In 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is similar to the previously reported fully diluted earnings per share. All earnings per share amounts for prior periods have been restated to conform to the new requirements. Basic loss per share is based on net loss divided by the weighted average number of common shares outstanding. Common stock equivalents outstanding were antidilutive for the three month periods ended June 30, 2000 and 1999. Use of Estimates The preparation of these financial statements in conformity with generally accepted accounting principles 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. 8 As of June 30, 2000, the Company has a net operating loss carryforward of approximately $27 million for federal income tax purposes which expires in 2014. Any benefit from the utilization of these net operating loss carryforwards has been fully reserved for in the accompanying financial statements. Note 2 - General The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2000 and 1999 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the financial statement and footnotes thereto included in the Company's report on Form 10-K for the year ended December 31, 1999. Note 3 - Liquidity and capital resources and filing pursuant to Chapter 11 of the United States Bankruptcy Code The Company has outstanding $9.3 million of notes due in 2007 and 2008, comprised of $8.2 million of 12% notes, included with the liabilities assumed with the acquisition of FALK Finance Company, Inc. ("FFC") in December 1995, plus accrued interest of $1.1 million through December 31, 1998. Interest on these notes is due quarterly at the option of the Company at the rate of 10% if paid in cash and 12% if paid in common shares of the Company. Interest on the notes from January 1, 1999 through June 30, 2000 has been accrued but not paid. Representatives of these note holders designated three members of the Company's Board of Directors, one of whom subsequently resigned. The Company's liquid assets amounted to approximately $ 781,000 as of June 30, 2000. On February 2, 2000, the Company filed a disclosure statement and reorganization plan (the "Plan") pursuant to Chapter 11 of Title 11 of the United States Bankruptcy Code. The Plan provides for the issuance of one share of its common stock and a cash payment of $ 0.03 for each dollar of approximately $9.5 million of unsecured debt. At the time of filing, the requisite number and dollar amount of the unsecured creditor group had voted to support the Plan. Preliminary hearings were held to consider compliance with the disclosure requirements. On August 1, 2000, the Company received the conditional confirmation of the Plan, as amended, from the Bankruptcy Court. Accordingly, the Plan will become effective without further action by the Court upon the closing of AutoInfo's merger with Sunteck Transport Co., Inc. ("Sunteck"). Such closing is subject to the fulfillment (or waiver by Sunteck) of certain conditions, including AutoInfo's obligation to secure a commitment for $2 million in debt or equity financing prior to closing. There is no assurance that the Company's merger transaction with Sunteck will be consummated or that the Plan will receive final confirmation. On June 22, 2000, the Company entered into a Merger Agreement with Sunteck Transport, Inc., a full service third party transportation logistics provider. Pursuant to the Merger Agreement, at closing, Sunteck will merge into a wholly-owned subsidiary of AutoInfo in exchange for 10 million shares of AutoInfo Common Stock (the "Sunteck Merger"). The consummation of the transaction is contingent upon, among other things, the securing of a firm commitment on or before October 20, 2000, for a financing resulting in gross proceeds to AutoInfo of at least $2.0 million. The proceeds of the financing are intended for the development and implementation of- Ubidfreight.com - an e-commerce business-to-business application which will provide an interactive freight auction matching available freight (shippers) and available cargo space (truckers and other carriers). The proceeds will be used to complete site development, fund start-up expenses, commence marketing and provide for administrative costs. The transition of Sunteck's existing customer and common carriers relationships as well as its industry experience and expertise will be key elements in the development and success of the Ubidfreight.com business. Ubidfreight.com will offer an e-commerce real 9 time freight auction market place - where shippers will offer their freight for bid directly to carriers/truckers for transport. This live interactive environment will benefit shippers and carriers by reducing the cost of handling their freight through the competitive auction process. Ubidfreight.com's e-commerce site will eliminate the expensive intermediaries and the inefficiencies inherent in today's transportation industry. Sunteck, which was formed in 1997, is a full service third party transportation logistics provider. Its 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. Sunteck's personnel have in excess of forty years of freight industry experience. Harry Wachtel, Sunteck's President and sole shareholder, will, upon the consummation of the merger, become Chairman of the Board, CEO and President of AutoInfo. Pursuant to the Plan, the 7,756,953 shares of the Company's Common Stock outstanding at the time of filing will be deemed New Common Shares, approximately 9.5 million additional New Common Shares will be issued to the unsecured creditor class and 10,000,000 shares will be issued in consummation of the merger with Sunteck. Upon confirmation as currently contemplated, the Company will have approximately 27.3 million shares of Common Stock outstanding. Assuming the consummation of the merger with Sunteck, substantially all of the liabilities of the Company as of June 30, 2000 are subject to compromise. The following pro-forma balance sheet as of June 30, 2000 gives effect to the adjustments resulting from the assumed confirmation of the Plan:
Reorganization Sunteck Merger As Stated Adjustments Adjustments As Adjusted ------------ ------------ ------------ ------------ Total assets $ 794,000 $ (285,000) $ 300,000 $ 809,000 ------------ ------------ ------------ ------------ Liabilities $ 11,176,000 $(10,944,000) $ 300,000 $ 532,000 Equity (10,382,000) 10,659,000 -- 277,000 ------------ ------------ ------------ ------------ Total liabilities and equity $ 794,000 $ (285,000) $ 300 000 $ 809,000 ------------ ------------ ------------ ------------
If the merger is not consummated and the Plan is not confirmed, and the Company is unsuccessful in identifying and consummating another transaction in furtherance of its plan to rebuild the Company and create shareholder value, the Company does not have sufficient liquid assets and available lines of credit to meet its short and long-term capital requirements. Note 4 - Debt Settlement On March 23, 1999, the Company paid $585,000 representing full payment, net of a $25,000 discount, of principal and accrued interest on a note which had been previously declared in default by the lender. 10 AUTOINFO, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition And Results of Operations General In December 1995, we acquired the operating assets of Falk Finance Company ("FFC"), a Norfolk, Virginia based specialty financial services company for $5,125,000 in cash and the assumption of liabilities and debt approximating $34,000,000. As a result, we became a specialized consumer finance company that acquired and serviced automobile receivables from automobile dealers selling new and used vehicles to non-prime customers. In July 1996, we commenced operations of our northeast regional center in Norwalk, Connecticut to provide a complete range of services to dealers in the Northeast. During 1997 and 1998, several non-prime automobile finance companies, including the Company, experienced poor loan performance, higher delinquency rates and increased credit losses on their portfolio assets. In addition, during this period, a number of non-prime automobile finance companies made strategic decisions to exit the market-place. This trend was the direct result of several factors including: (a) the impact of increased levels of competition on loan acquisition discounts; (b) the heightened demand created by the increased supply of capital and used automobile inventories; (c) the need to attract consumers with lower credit qualifications to meet this additional demand; (d) economic uncertainties and financial difficulties within the non-prime automobile industry as well as management upheavals at certain industry leaders; and (e) the increased levels of outstanding consumer debt and personal bankruptcies. These factors contributed to a significant reduction in available warehouse lines of credit and a material decline in financial markets investments into the non-prime automobile industry through the sale of equity securities, subordinated debt instruments and securitized notes. We experienced material operating losses during 1996, 1997 and 1998. As a result of these losses, the adverse changes in the non-prime automobile finance industry and the deterioration in the our financial condition, we determined to discontinue the operation of our non-prime automotive finance business. As a result of these factors, we were unable to maintain adequate levels of net worth to satisfy the loan covenant requirement under our warehouse facility agreement and similar covenants pursuant to securitized notes issued in October 1996. As of December 31, 1997, our warehouse lender was no longer funding the acquisition of non-prime automobile receivables we generated. Accordingly among other actions, we restructured operations and significantly reduced overhead and successfully completed the sale of approximately $58 million of automobile receivables and repaid $47 million under our warehouse line. Additionally, in conjunction with a July 1998 sale of approximately $8 million of automobile receivables which collateralized our securitized notes, the remaining balance outstanding on these notes of approximately $7 million was paid in full. During the fourth quarter of 1997, we closed our northeast regional center in Norwalk, Connecticut. During the fourth quarter of 1998, we sold all remaining repossessed vehicles, closed our Norfolk, Virginia operating facility, further reduced overhead and completed the restructuring of outstanding debt under our warehouse facility and with our subordinated note holders. After the sale of all of our automobile receivables, we owed the warehouse lender approximately $4.5 million which agreed to a reduction of $2.25 million and we paid the remaining balance of approximately $2.3 million in cash. We also granted the warehouse lender a five year warrant to purchase 1,357,467 common shares at $ .03 per share. Further, the holders of our $8.2 million of 12% subordinated notes, due in 1999 and 2000, exchanged such notes for new notes totaling approximately $9.35 million due in 2007 and 2008 (the 11 "New Notes"). The New Notes include the capitalization of interest of approximately $1.15 million through December 31, 1998 to principal. Interest on these new notes is due quarterly at our option at the rate of 10% if paid in cash and 12% if paid in our common shares. In addition, representatives of these note holders have designated three members of our board of directors, one of whom subsequently resigned. On January 29, 1999, our wholly-owned subsidiary, CarLoanCo., Inc. ("CLC"), filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code. CLC's carrying amount in the December 31, 1998 consolidated financial statements has been written off in 1999 as a result of the bankruptcy filing. During 1999, we continued to reduce operating overhead by negotiating the termination of its lease in Montvale, New Jersey and vacating the premises. On February 2, 2000, the Company filed a disclosure statement and reorganization plan (the "Plan") pursuant to Chapter 11 of Title 11 of the United States Bankruptcy Code. The Plan provides for the issuance of one share of its common stock and a cash payment of $ 0.03 for each dollar of approximately $9.5 million of unsecured debt. At the time of filing, the requisite number and dollar amount of the unsecured creditor group had voted to support the Plan. Preliminary hearings were held to consider compliance with the disclosure requirements. On August 1, 2000, the Company received the conditional confirmation of the Plan, as amended, from the Bankruptcy Court. Accordingly, the Plan will become effective without further action by the Court upon the closing of AutoInfo's merger with Sunteck Transport Co., Inc. ("Sunteck"). Such closing is subject to the fulfillment (or waiver by Sunteck) of certain conditions, including AutoInfo's obligation to secure a commitment for $2 million in debt or equity financing prior to closing. There is no assurance that the Company's merger transaction with Sunteck will be consummated or that the Plan will receive final confirmation. On June 22, 2000, the Company entered into a Merger Agreement with Sunteck Transport, Inc., a full service third party transportation logistics provider. Pursuant to the Merger Agreement, at closing, Sunteck will merge into a wholly-owned subsidiary of AutoInfo in exchange for 10 million shares of AutoInfo Common Stock (the "Sunteck Merger"). The consummation of the transaction is contingent upon, among other things, the securing of a firm commitment on or before October 20, 2000, for a financing resulting in gross proceeds to AutoInfo of at least $2.0 million. The proceeds of the financing are intended for the development and implementation of- Ubidfreight.com - an e-commerce business-to-business application which will provide an interactive freight auction matching available freight (shippers) and available cargo space (truckers and other carriers). The proceeds will be used to complete site development, fund start-up expenses, commence marketing and provide for administrative costs. The transition of Sunteck's existing customer and common carriers relationships as well as its industry experience and expertise will be key elements in the development and success of the Ubidfreight.com business. Ubidfreight.com will offer an e-commerce real time freight auction market place - where shippers will offer their freight for bid directly to carriers/truckers for transport. This live interactive environment will benefit shippers and carriers by reducing the cost of handling their freight through the competitive auction process. Ubidfreight.com's e-commerce site will eliminate the expensive intermediaries and the inefficiencies inherent in today's transportation industry. Sunteck, which was formed in 1997, is a full service third party transportation logistics provider. Its 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. Sunteck's personnel have in excess of forty years of freight industry experience. Harry Wachtel, Sunteck's President and sole shareholder, will, upon the consummation of the merger, become Chairman of the Board, CEO and President of AutoInfo. The foregoing factors raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. Accordingly, the carrying amounts of our assets and liabilities do not purport to represent realizable or settlement amounts. 12 Results of Operations Three and Six Months Ended June 30, 2000 and 1999 Revenues Revenues for the six month periods ended June 30, 2000 and 1999 of $28,000 and $50,000, respectively, consisted of interest and dividends on short-term investments. The decline is directly related to the decrease in short-term investments. Revenues for the three month periods ended June 30, 2000 and 1999 of $10,000 and $15,000, respectively, consisted of interest and dividends on short-term investments. The decline is directly related to the decrease in short-term investments. Costs and Expenses Interest expense for the six and three month periods ended June 30, 2000 ($467,000 and $234,000, respectively) and 1999 ($485,000 and $238,000, respectively) was related to subordinated debt and other bank debt. The decrease is directly related to the repayment of debt during the three month period ended June 30, 1999. Operating expenses for the six and three months ended June 30, 2000 ($243,000 and $120,000, respectively) and 1999 ($567,000 and $318,000, respectively) consisted primarily of corporate overhead. The decrease is directly related to reduction in corporate staff and the cost reduction plan implemented by the Company. Reorganization expenses for the six and three month period ended June 30, 2000 of $71,000 consists of legal and other costs related to the February 2, 2000 filing pursuant to Chapter 11 of the United States Bankruptcy Code. Depreciation and amortization expense for the three months ended June 30, 1999 of $19,000 consisted of the depreciation of fixed assets. Loss on disposition of securities of $2,000 for the six and three month period ended June 30, 2000 represents the loss on disposition of securities recognized on the specific identification method in the period in which they occur. Unrealized holding gain of $40,000 for the six and three month period ended June 30, 2000 represents the reduction of unrealized losses on trading securities based upon the fair market value as of the balance sheet date. Loss from Operations Loss from operations for the six month period ended June 30, 2000 was ($736,000) compared with ($1,021,000) in the prior year period. Loss from operations for the three month period ended June 30, 2000 was ($327,000) compared with ($541,000) in the prior year period. The decrease is primarily the result of the reduction in operating expenses. There is no income tax benefit for the six and three month periods ended June 30, 2000 and 1999 as the Company has recorded the utilization of its available income tax carrybacks as of December 31, 1997. Liquidity and Capital Resources Trends and Uncertainties 13 During 1998, we ceased to operate as an automobile finance company. On January 29, 1999, our wholly-owned subsidiary, CarLoanCo., Inc. ("CLC"), filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code. During 1999, we negotiated the termination of our lease in Montvale, New Jersey and relocated to temporary space in Stamford, Connecticut as part of our continuing effort to reduce operating expenses and preserve corporate capital. Our main business focus became the challenge to seek out business opportunities in furtherance of our plan to rebuild the company and create shareholder value. These efforts were inhibited by the negative net worth and remaining subordinated debt of $9.3 million. Therefore, we commenced discussions with our noteholders regarding the restructuring of this debt to enhance the possibility of consummating a transaction to return us to an operating status and create value. On February 2, 2000, the Company filed a disclosure statement and reorganization plan (the "Plan") pursuant to Chapter 11 of Title 11 of the United States Bankruptcy Code. The Plan provides for the issuance of one share of its common stock and a cash payment of $ 0.03 for each dollar of approximately $9.5 million of unsecured debt. At the time of filing, the requisite number and dollar amount of the unsecured creditor group had voted to support the Plan. Preliminary hearings were held to consider compliance with the disclosure requirements. On August 1, 2000, the Company received the conditional confirmation of the Plan, as amended, from the Bankruptcy Court. Accordingly, the Plan will become effective without further action by the Court upon the closing of AutoInfo's merger with Sunteck Transport Co., Inc. ("Sunteck"). Such closing is subject to the fulfillment (or waiver by Sunteck) of certain conditions, including AutoInfo's obligation to secure a commitment for $2 million in debt or equity financing prior to closing. There is no assurance that the Company's merger transaction with Sunteck will be consummated or that the Plan will receive final confirmation. On June 22, 2000, the Company entered into a Merger Agreement with Sunteck Transport, Inc., a full service third party transportation logistics provider. Pursuant to the Merger Agreement, at closing, Sunteck will merge into a wholly-owned subsidiary of AutoInfo in exchange for 10 million shares of AutoInfo Common Stock (the "Sunteck Merger"). The consummation of the transaction is contingent upon, among other things, the securing of a firm commitment on or before October 20, 2000, for a financing resulting in gross proceeds to AutoInfo of at least $2.0 million. The proceeds of the financing are intended for the development and implementation of- Ubidfreight.com - an e-commerce business-to-business application which will provide an interactive freight auction matching available freight (shippers) and available cargo space (truckers and other carriers). The proceeds will be used to complete site development, fund start-up expenses, commence marketing and provide for administrative costs. The transition of Sunteck's existing customer and common carriers relationships as well as its industry experience and expertise will be key elements in the development and success of the Ubidfreight.com business. Ubidfreight.com will offer an e-commerce real time freight auction market place - where shippers will offer their freight for bid directly to carriers/truckers for transport. This live interactive environment will benefit shippers and carriers by reducing the cost of handling their freight through the competitive auction process. Ubidfreight.com's e-commerce site will eliminate the expensive intermediaries and the inefficiencies inherent in today's transportation industry. Sunteck, which was formed in 1997, is a full service third party transportation logistics provider. Its 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. Sunteck's personnel have in excess of forty years of freight industry experience. Harry Wachtel, Sunteck's President and sole shareholder, will, upon the consummation of the merger, become Chairman of the Board, CEO and President of AutoInfo. The foregoing factors raise substantial doubt about our ability to continue as a going concern. Liquidity and Capital Resources At June 30, 2000, we had outstanding $9.3 million of subordinated debt. The Company's cash and short-term investments amounted to approximately $781,000 as of June 30, 2000. 14 The total amount of debt outstanding as of June 30, 2000 and December 31, 1999 was $9.4 million. This following table presents the Company's debt instruments and weighted average interest rates on such instruments as of June 30, 2000 and December 31, 1999: Weighted Average Balance Rate ---------------------------- Subordinated debt $9.3 12.0% Other debt $ .1 8.5% Inflation and changing prices had no material impact on revenues or the results of operations for the period ended June 30, 2000. 15 AUTOINFO, INC. AND SUBSIDIARIES Part II - OTHER INFORMATION Item 1 - 3: Inapplicable Item 4: Submission of Matters to a Vote of Security Holders: None Item 5: Inapplicable Item 6 (a): None Item 6 (b): During the quarter ending March 31, 2000, the Company filed a report on Form 8-K pursuant to Item 4 thereof reporting the retention of independent auditors. 16 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 President and Principal Financial Officer Date: August 11, 2000 17