-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DPnmThQlFF1kvBnQ1NvPoz1xE39FiWuj8cdVWLc9K15We/PU2f/WftayJ6+3ijuz vqfBdRwf+aQcM8TA5+Ovjg== 0001169232-06-004359.txt : 20061109 0001169232-06-004359.hdr.sgml : 20061109 20061108184001 ACCESSION NUMBER: 0001169232-06-004359 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060930 FILED AS OF DATE: 20061109 DATE AS OF CHANGE: 20061108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOINFO INC CENTRAL INDEX KEY: 0000351017 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING & COURIER SERVICES (NO AIR) [4210] IRS NUMBER: 132867481 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11497 FILM NUMBER: 061199009 BUSINESS ADDRESS: STREET 1: PO BOX 4383 CITY: STAMFORD STATE: CT ZIP: 06907-0383 BUSINESS PHONE: 2019301800 MAIL ADDRESS: STREET 1: PO BOX 4383 CITY: STAMFORD STATE: CT ZIP: 06907-0383 10-Q 1 d69797_10-q.txt QUARTERLY REPORT 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: SEPTEMBER 30, 2006 |_| 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 October 31, 2006: 32,096,000 shares of common stock. AUTOINFO, INC. AND SUBSIDIARIES INDEX Part I. Financial Information: Item 1. Consolidated Financial Statements: Page Balance Sheets September 30, 2006 (unaudited) and December 31, 2005 (audited) .. 3 Statements of Income (unaudited) Three and nine months ended September 30, 2006 and 2005 ......... 4 Statements of Cash Flows (unaudited) Nine months ended September 30, 2006 and 2005 ................... 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 ................................................ 15 Signatures ................................................................ 17 2 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2006 2005 ------------- ------------ Unaudited Audited ASSETS Current assets: Cash $ 1,050,000 $ 419,000 Accounts receivable, net of allowance for doubtful accounts of $323,000 and $201,000 as of September 30, 2006 and December 31, 2005, respectively 15,480,000 12,735,000 Deferred income taxes (Note 2) 980,000 860,000 Other current assets 488,000 255,000 ------------ ------------ Total current assets 17,998,000 14,269,000 Fixed assets, net of accumulated depreciation 281,000 292,000 Deferred income taxes (Note 2) 3,073,000 2,047,000 Other assets 1,269,000 38,000 ------------ ------------ $ 22,621,000 $ 16,646,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Loan payable $ 2,114,000 $ 1,280,000 Accounts payable and accrued liabilities 8,994,000 7,235,000 ------------ ------------ Total current liabilities 11,108,000 8,515,000 ------------ ------------ Stockholders' Equity Preferred stock - authorized 10,000,000 shares $.001 par value; issued and outstanding - 0 shares as of September 30, 2006 and December 31, 2005 -- -- Common stock - authorized 100,000,000 shares $.001 par value; issued and outstanding - 32,052,000 shares as of September 30, 2006 and 31,624,000 shares as of December 31, 2005 32,000 32,000 Other capital 1,219,000 549,000 Deferred compensation (982,000) (413,000) Additional paid-in capital 19,143,000 19,047,000 Deficit (7,899,000) (11,084,000) ------------ ------------ Total stockholders' equity 11,513,000 8,131,000 ------------ ------------ $ 22,621,000 $ 16,646,000 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 3 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Nine Months Ended Three Months Ended September 30, September 30, --------------------------------- --------------------------------- 2006 2005 2006 2005 ------------ ------------ ------------ ------------ Gross revenues $ 61,395,000 $ 47,728,000 $ 22,441,000 $ 17,336,000 Cost of transportation 48,384,000 38,350,000 17,877,000 13,940,000 ------------ ------------ ------------ ------------ Net revenues 13,011,000 9,378,000 4,564,000 3,396,000 ------------ ------------ ------------ ------------ Commissions 8,025,000 5,720,000 2,818,000 2,081,000 Operating expenses 2,759,000 2,286,000 960,000 749,000 ------------ ------------ ------------ ------------ 10,784,000 8,006,000 3,778,000 2,830,000 ------------ ------------ ------------ ------------ Income from operations 2,227,000 1,372,000 786,000 566,000 Interest expense 63,000 42,000 39,000 3,000 ------------ ------------ ------------ ------------ Income before income taxes 2,164,000 1,330,000 747,000 563,000 Income taxes (benefit) (Note 2) (1,021,000) (84,000) (239,000) (17,000) ------------ ------------ ------------ ------------ Net income $ 3,185,000 $ 1,414,000 $ 986,000 $ 580,000 ============ ============ ============ ============ Net income per share: Basic $ .10 $ .04 $ .03 $ .02 Diluted $ .09 $ .04 $ .03 $ .02 Weighted average number of common shares: Basic 31,856,000 31,475,000 31,997,000 31,609,000 Diluted 35,876,000 33,924,000 36,732,000 33,722,000
The accompanying notes are an integral part of these consolidated financial statements. 4 AUTOINFO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 2006 2005 ----------- ----------- Cash flows from operating activities: Net income $ 3,185,000 $ 1,414,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Change in allowance for doubtful accounts 122,000 75,000 Depreciation and amortization 75,000 40,000 Deferred compensation expense 102,000 77,000 Deferred income taxes (1,146,000) (161,000) Changes in assets and liabilities: Accounts receivable (2,867,000) (2,017,000) Other current assets (233,000) 389,000 Other assets (1,231,000) 30,000 Accounts payable and accrued liabilities 1,759,000 2,050,000 ----------- ----------- Net cash provided by (used in) operating activities (234,000) 1,897,000 ----------- ----------- Cash flows from investing activities: Capital expenditures (66,000) (286,000) ----------- ----------- Net cash used in investing activities (66,000) (286,000) ----------- ----------- Cash flows from financing activities: Exercise of stock options 97,000 21,000 Increase (decrease) in loan payable, net 834,000 (1,251,000) ----------- ----------- Net cash used in financing activities 931,000 (1,230,000) ----------- ----------- Net change in cash 631,000 381,000 Cash at beginning of period 419,000 38,000 ----------- ----------- Cash at end of period $ 1,050,000 $ 419,000 =========== ===========
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, 2005 as filed with the Securities and Exchange Commission. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. 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, rail, contract carriers, 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 $68.0 million, $13.6 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 and nine months ended September 30, 2006 and 2005 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 6 with GAAP have been omitted from these statements. The consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2005. 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. 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 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 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 September 30, 2006 and December 31, 2005, consisting predominantly of furniture, fixtures, 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 4,735,000 and 2,113,000, and 4,020,000 and 2,449,000, for the three and nine month periods ended September 30, 2006 and 2005, respectively. 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 nine months ended September 30, 2006 include an additional $8,000 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 and nine month periods ended September 30, 2006 and 2005, the provision for income taxes consisted of the following:
Nine Months Ended September 30, ----------------------------------------------------------- 2006 2005 ----------------------------------------------------------- Current Deferred Current Deferred ----------------------------------------------------------- Tax expense before application of operating loss carryforwards $ 855,000 $ -- $ 529,000 $ -- Tax expense (benefit) of operating loss carryforwards (730,000) 730,000 (452,000) 452,000 Change in valuation allowance -- (1,876,000) -- (613,000) ----------------------------------------------------------- Income tax expense (benefit) $ 125,000 $(1,146,000) $ 77,000 $(161,000) -----------------------------------------------------------
8
Three Months Ended September 30, --------------------------------------------------------- 2006 2005 --------------------------------------------------------- Current Deferred Current Deferred --------------------------------------------------------- Tax expense before application of operating loss carryforwards $ 299,000 $ -- $ 222,000 $ -- Tax expense (benefit) of operating loss carryforwards (255,000) 255,000 (190,000) 190,000 Change in valuation allowance -- (538,000) -- (239,000) --------------------------------------------------------- Income tax expense (benefit) $ 44,000 $(283,000) $ 32,000 $ (49,000) ---------------------------------------------------------
Deferred taxes are comprised of the following at September 30, 2006 and December 31, 2005:
September 30, December 31, 2006 2005 ------------- ------------ Deferred tax assets: Net operating loss carryforward $ 4,142,000 $ 4,872,000 ----------- ----------- Gross deferred tax assets 4,142,000 4,872,000 Less: valuation allowance (89,000) (1,965,000) ----------- ----------- Deferred tax asset $ 4,053,000 $ 2,907,000 =========== ===========
The deferred tax asset represents expected future tax savings resulting from the Company's net operating loss carryforward. As of December 31, 2005, the Company has a net operating loss carryforward of approximately $14.3 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 continuing profitability, management believes it is more likely than not that forecasted taxable income will be sufficient to utilize the majority 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. 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, rail, contract carriers common carriers and independent owner-operators to service our customers' needs. Our non-asset based services include ground transportation coast to coast, and local pick up and delivery. 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 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 $68.0 million, $13.6 million and $3.6 million, respectively, during our most recently completed fiscal year and approximately $61.4 million, $13.0 million and $3.2 million, respectively, during the nine months ended September 30, 2006. Our brokerage services are provided through 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 are also provided through a network of independent sales agents and independent owner-operators throughout the United States. We do not own any trucking equipment; our independent owner-operators lease onto our operating authority and transport freight under the Sunteck name. During the nine months ended September 30, 2006 compared to 2005, the growth of our business is readily measured by (i) the number of transactions we have processed, which increased for the respective nine month periods from 39,600 in 2005 to 44,350 in 2006, an increase of 12%, and (ii) the average revenue dollars per load, which increased by 15% in 2006 as compared to 2005. This is the result of several factors including an increase in truckload business 10 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 increased by 8% in 2006 as compared to 2005. This is primarily the result of revenue mix and, to a lesser degree, a general increase in prices. During the three months ended September 30, 2006 compared to 2005, the growth of our business is readily measured by (i) the number of transactions we have processed, which increased for the respective three month periods from 13,300 in 2005 to 15,750 in 2006, an increase of 18%, and (ii) the average revenue dollars per load, which increased by 9% in 2006 as compared to 2005. 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 increased by 4% in 2006 as compared to 2005. This is primarily the result of revenue mix and, to a lesser degree, a general increase in prices. 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. Results of operations For the three and nine months ended September 30, 2006 and 2005 During the three and nine month periods ended September 30, 2006, 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:
Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 ------- ------- ------- ------- Net revenues 100.0% 100.0% 100.0% 100.0% ------- ------- ------- ------- Commissions 61.7% 61.3% 61.7% 61.0% Operating expenses 21.0% 22.0% 21.2% 24.4% Interest expense .9% .1% .5% .4% Income taxes (5.2%) (.5%) (7.9%) (.9%) ------- ------- ------- ------- Net income 21.6% 17.1% 24.5% 15.1% ======= ======= ======= =======
11 Revenues Three Months Ended September 30, 2006 Compared to 2005 For the three months ended September 30, 2006, gross revenues, consisting of freight fees and other related services revenue, totaled $22,441,000 as compared with $17,336,000 in the prior year period, an increase of 29%. Net revenues were $4,564,000 as compared with $3,396,000 in the prior year period, an increase of 34%. Gross revenues from brokerage services increased to $19,351,000 from $14,911,000 and net revenues increased to $4,108,000 from $3,013,000 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 17% increase in the number of transactions processed and an increase of 11% in the average dollars per load. Gross revenues from contract carrier services increased to $3,090,000 from $2,425,000 and net revenues increased to $456,000 from $383,000 which is a direct result of a 23% increase in the number of transactions processed and an increase of 4% in the average dollars per load. Nine Months Ended September 30, 2006 Compared to 2005 For the nine months ended September 30, 2006, gross revenues, consisting of freight fees and other related services revenue, totaled $61,395,000 as compared with $47,728,000 in the prior year period, an increase of 29%. Net revenues were $13,011,000 as compared with $9,378,000 in the prior year period, an increase of 39%. Gross revenues from brokerage services increased to $52,200,000 from $40,422,000 and net revenues increased to $11,572,000 from $8,097,000 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 12% increase in the number of transactions processed and an increase of 15% in the average dollars per load. Gross revenues from contract carrier services increased to $9,195,000 from $7,306,000 and net revenues increased to $1,439,000 from $1,281,000 which is a direct result of a 11% increase in the number of transactions processed and an increase of 13% in the average dollars per load. Costs and expenses Commissions For the three months ended September 30, 2006, commissions totaled $2,818,000 as compared with $2,081,000 in the prior year period. As a percentage of net revenues, commissions were 62% as compared with 61% in the prior year period. For the nine months ended September 30, 2006, commissions totaled $8,025,000 as compared with $5,720,000 in the prior year period. As a percentage of net revenues, commissions were 62% as compared with 61% in the prior year period. These increases are the result of the higher commission rates associated with the expansion of the sales agent base in our brokerage services. Operating expenses For the three months ended September 30, 2006, operating expenses totaled $960,000 as compared with $749,000 in the prior year period. As a percentage of net revenues, operating expenses were 21% as compared with 22% in the prior year period. For the nine months ended September 30, 2006, operating expenses totaled $2,759,000 as compared with $2,286,000 in the prior year period. As a percentage of net revenues, operating expenses were 21% as compared with 24% in the prior year period. These decreases are the direct result of management's ability to leverage selling, 12 general and administrative expenses in connection with 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 2006 and 2007 without a significant increase in overhead. Interest Expense For the three months ended September 30, 2006, interest expense totaled $39,000 as compared with $3,000 in the prior year period. For the nine months ended September 30, 2006, interest expense totaled $63,000 as compared with $42,000 in the prior year period. These increases are primarily the result of increased borrowings pursuant to our line of credit and an increase in the average interest rate during the periods. Income tax The income tax benefit of $239,000 for the three months ended September 30, 2006 consisted of $538,000 resulting from the anticipated future utilization of an available federal tax loss carryforward, net of the amortization of deferred tax benefit of $255,000 and state income taxes of $44,000. The income tax benefit of $17,000 for the three months ended September 30, 2005 consisted of $239,000 resulting from the anticipated future utilization of an available federal tax loss carryforward, net of the amortization of deferred tax benefit of $190,000 and state income taxes of $32,000. The income tax benefit of $1,021,000 for the nine months ended September 30, 2006 consisted of $1,876,000 resulting from the anticipated future utilization of an available federal tax loss carryforward, net of the amortization of deferred tax benefit of $730,000 and state income taxes of $125,000. The income tax benefit of $84,000 for the nine months ended September 30, 2005 consisted of $613,000 resulting from the anticipated future utilization of an available federal tax loss carryforward, net of the amortization of deferred tax benefit of $452,000 and state income taxes of $77,000. Based upon available objective evidence, including our continuing profitability, management believes it is more likely than not that forecasted taxable income will be sufficient to utilize the majority of the net operating loss carryforward before its expiration in 2014. Accordingly, the valuation allowance was reduced by an additional $538,000 and $1,876,000 for the three and nine months ended September 30, 2006, respectively. 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 nine months ended September 30, 2006, we increased gross revenues from $47.7 million to $61.4 million and had net income of $3,185,000 as compared with $1,414,000 in the prior year. As of September 30, 2006, we had an accumulated deficit of $8.0 million. Factors that could adversely affect our operating results include: 13 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 September 30, 2006, we had borrowings of $2,114,000 outstanding pursuant to our $4,000,000 line of credit. The line of credit, obtained from a bank in May 2003 and which was increased from $2,500,000 in September 2006, is subject to the maintenance of certain financial covenants, is secured by accounts receivable and other operating assets, and matures in September 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. At September 30, 2006, we had liquid assets of approximately $1,050,000. Available cash is used to reduce borrowings on our line of credit. The total amount of debt outstanding as of September 30, 2006 and 2005 was $2,114,000 and $747,000, respectively. The following table presents our debt instruments and their weighted average interest rates as of September 30, 2006 and 2005, respectively: Weighted Weighted Average Average Balance Rate Balance Rate ------------------------------------------------------- 2006 2005 ------------------------------------------------------- Line of Credit $ 2,114,000 7.32% $ 747,000 7.25% Inflation and changing prices had no material impact on our revenues or the results of operations for the period ended September 30, 2006. Higher fuel prices have had no material impact on our revenues or the results of operations for the period ended September 30, 2006 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 of the Notes to Financial Statements includes a summary of the significant accounting policies and methods used in the preparation of our 14 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 carryforward. As of December 31, 2005, 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. 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. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None. 15 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 recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal 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. 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. By: /s/ Harry Wachtel ------------------------------------- Harry Wachtel President and Chief Executive Officer By: /s/ William Wunderlich ------------------------------------- William Wunderlich Executive Vice President and Principal Financial Officer Date: November 8, 2006 17 EX-31.A 2 d69797_ex31a.txt CERTIFICATION Exhibit 31A AUTOINFO, INC. CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION I, Harry Wachtel, certify that: 1. I have reviewed this quarterly report on Form 10-Q of AutoInfo, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Harry Wachtel -------------------------------- Harry Wachtel Chief Executive Officer Date: November 8 2006 18 EX-31.B 3 d69797_ex31b.txt CERTIFICATION Exhibit 31B AUTOINFO, INC. CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION I, William Wunderlich, certify that: 1. I have reviewed this quarterly report on Form 10-Q of AutoInfo, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ William Wunderlich -------------------------------- William Wunderlich Chief Financial Officer Date: November 8 2006 19 EX-32.A 4 d69797_ex32a.txt CERTIFICATION Exhibit 32A CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of AutoInfo, Inc. (the "Company") on Form 10-Q for the quarter ending September 30, 2006 as filed with the Securities and Exchange Commission (SEC) on the date hereof (the "Report"), I, Harry Wachtel, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request. /s/ Harry Wachtel - ----------------- Harry Wachtel Chief Executive Officer November 8 2006 20 EX-32.B 5 d69797_ex32b.txt CERTIFICATION Exhibit 32B CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of AutoInfo, Inc. (the "Company") on Form 10-Q for the quarter ending September 30, 2006 as filed with the Securities and Exchange Commission (SEC) on the date hereof (the "Report"), I, William Wunderlich, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request. /s/ William Wunderlich - ---------------------- William Wunderlich Chief Financial Officer November 8 2006 21 -----END PRIVACY-ENHANCED MESSAGE-----