U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number: 333-49388
I-TRACK, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 91-1966948
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3031 COMMERCE DRIVE, BUILDING B, FORT GRATIOT, MICHIGAN 48059
(Address of principal executive offices)
(810) 385-2061
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
23,696,900 SHARES OF COMMON STOCK, $0.001 PAR VALUE,
AS OF SEPTEMBER 30, 2002
Transitional Small Business Disclosure Format (check one); Yes No X
----- -----
I-TRACK, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1.- Financial Statements
- Balance Sheet (unaudited)
September 30, 2002 ..........................................4
- Statements of Operations (unaudited)
Three and Nine Months Ended September 30, 2002
and 2001, and Period from Inception (March 8, 1999)
through September 30, 2002 ..................................5
- Statements of Cash Flows (unaudited)
Nine Months Ended September 30, 2002 and 2001,
and Period from Inception (March 8, 1999) through
September 30, 2002 ..........................................6
- Notes to Financial Statements ...............................7
Item 2.- Management's Discussion and Analysis or Plan of
Operations ..................................................9
Item 3.- Controls and Procedures.....................................11
PART II. OTHER INFORMATION
Item 1.- Legal Proceedings ..........................................12
Item 2.- Changes in Securities.......................................12
Item 3.- Defaults Upon Senior Securities ............................12
Item 4.- Submission of Matters to a Vote of Security Holders ........12
Item 5.- Other Information ..........................................12
Item 6.- Exhibits and Reports on Form 8-K ...........................12
SIGNATURES ...................................................................14
2
i-TRACK, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
3
i-Track Inc.
F/K/A AVL Sys International
(A development Stage Company)
Balance Sheet
September 30, 2002
(Unaudited)
ASSETS
Current Assets
Cash $ 1,273
Accounts Receivable - trade net of an allowance
for doubtful accounts of $35,000 13,371
Accrued Interest receivable from related parties 59,286
-------------------
Total Current Assets 73,930
Notes Receivable from related parties 1,283,977
-------------------
$ 1,357,907
===================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable $ 34,737
-------------------
Total Current Liabilities 34,737
Stockholders Equity
Preferred stock, 1,000,000 shares -
authorized, $.01 par value, none
issued or outstanding
Common Stock, 50,000,000 shares
authorized, $0.001 par value,
23,696,900 issued and outstanding 23,697
Additional Paid in Capital 1,493,453
Stock Issuance Costs (148,355)
Deficit Accumulated during the development stage (45,625)
-------------------
1,323,170
-------------------
$ 1,357,907
===================
The accompanying notes are an integral part of the financial statements.
4
i-Track Inc.
F/K/A AVL Sys International
(A development Stage Company)
Statement of Operations
(Unaudited)
For the period
March 8, 1999
For the three For the three For the nine For the nine (inception)
Months ended Months ended Months ended Months ended through
September 30, September 30, September 30, September 30, September 30,
2002 2001 2002 2001 2002
-------------- -------------- -------------- -------------- --------------
Revenue $ 86,438 $ - $ 301,750 $ - $ 376,109
Operating expenses:
Cost of Goods Sold 69,335 - 250,635 - 313,995
General and Administrative Expenses 12,166 1,624 67,744 5,748 137,025
Management Fees to Related Party 7,500 - 22,500 - 30,000
-------------- -------------- -------------- -------------- --------------
Total Costs and Expenses 89,001 1,624 340,879 5,748 481,020
-------------- -------------- -------------- -------------- --------------
Operating Profit (Loss) (2,563) (1,624) (39,129) (5,748) (104,911)
Other income(expense):
Interest Income from Related Parties 9,630 - 44,871 - 59,286
-------------- -------------- -------------- -------------- --------------
Net Income (Loss) $ 7,067 $ (1,624) $ 5,742 $ (5,748) $ (45,625)
============== ============== ============== ============== ==============
Weighted Average Number of Common
Shares Outstanding 23,696,900 21,200,000 23,696,900 19,808,059 20,011,366
============== ============== ============== ============== ==============
Net Income (Loss) per Common Share - - - - -
============== ============== ============== ============== ==============
The accompanying notes are an integral part of the financial statements.
5
i-Track Inc.
F/K/A AVL Sys International
(A development Stage Company)
Statement of Cash Flow
(Unaudited)
For the period
For the Nine For the Nine March 8, 1999
Months ended Months ended (inception) through
September 30, September 30, September 30,
2002 2001 2002
---------------- ---------------- --------------------
Cash Flows from Operating Activities
Net Income (Loss) $ 5,742 $ (5,748) $ (45,625)
Adjustments to reconcile Net Income (Loss)
to net cash used in operating activities:
(Increase) Decrease in Assets:
Accounts Receivable (11,827) - (26,186)
Accrued Interest Receivable (44,871) - (59,286)
Increase (Decrease) in Liabilities:
Accounts Payable 30,959 1,042 34,738
Issuance of stock for services - 1,200
---------------- ---------------- --------------------
(25,739) (1,042) (49,534)
---------------- ---------------- --------------------
Net Cash used in Operating Activities (19,997) (4,706) (95,159)
Cash Flows from Investing Activities - - -
Cash Flows from Financing Activities:
Proceeds (repayments) of operating
advance-related party - 17,284 15,000
Proceeds from Stock Issuance - 250,000 400,950
Stock Issuance Costs - (28,005) (148,355)
Proceeds from (advances to) related party 18,598 (209,000) (171,163)
---------------- ---------------- --------------------
Net Cash provided by Financing Activities 18,598 30,279 96,432
---------------- ---------------- --------------------
Net increase (decrease) in cash (1,399) 25,573 1,273
Beginning Cash 2,672 4,479 -
---------------- ---------------- --------------------
Ending Cash $ 1,273 $ 30,052 $ 1,273
================ ================ ====================
The accompanying notes are an integral part of the financial statements.
6
i-TRACK, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") for interim financial
information and Item 310(b) of Regulation S-B. They do not include all of the
information and footnotes required by GAAP for complete financial statements. In
he opinion of management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. For further
information refer to the audited financial statements of the Company as of
December 31, 2001, including notes thereto, included in the Company's Annual
Report on Form 10-KSB.
NOTE 2: EARNINGS PER SHARE
The Company calculates net income (loss) per share as required by SFAS No. 128,
"Earnings per Share." Basic earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share is calculated by dividing net
income (loss) by the weighted average number of common shares and dilutive
common stock equivalents outstanding. During the periods presented, common stock
equivalents were not considered, as their effect would be anti-dilutive.
NOTE 3: ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts was set by management to $35,000 to provide
for uncollectable accounts receivable and notes receivable at September 30,
2002.
NOTE 4: GOING CONCERN
The Company has been a development stage company since its inception on March 8,
1999. The Company is dependent upon AVL Information Systems, Ltd. and its
subsidiary to provide all of its products sold and to supply management
services. Because of the uncertainty of AVL Information Systems, Ltd. to
continue as a going concern to supply these products and services and to
generate sufficient cash flow to repay the $1,283,977 notes receivable, there is
substantial doubt about the Company's ability to continue as a going concern.
Management is investigating the acquisition of the U.S. subsidiary, AVL
Information Systems, Inc. from AVL Information Systems, Ltd.
The accompanying financial statements do not include an adjustment that might
result from the outcome of this uncertainty.
7
i-TRACK, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
NOTE 5: SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES
For the nine For the nine For the period
Months ended Months ended March 8, 1999
September 30, September 30, (inception) through
2002 2001 September 30, 2002
---------------- ----------------- ---------------------
Issuance of 15,000,000 shares of
stock to satisfy debt $ - $ - $ 15,000
================ ================= =====================
Issuance of 1,200,000 shares of
stock for services rendered $ - $ - $ 1,200
================ ================= =====================
Net Cash from Stock Proceeds
received by a related corporation
in exchange for note receivable
from that related corporation $ - $ - $ 1,100,000
================= ================= =====================
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Unless the context otherwise requires, the terms "we", "our" and "us" refers to
i-Track, Inc.
CAUTION
Certain statements in this Quarterly Report on Form 10-QSB, our audited
financial statements for the fiscal year ended December 31, 2001 as filed in our
annual report on Form 10-KSB, as well as statements made by us in periodic press
releases, oral statements made by our officials to analysts and shareholders in
the course of presentations about ourselves, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause the actual results, performance
or achievements of us to be materially different from any future results,
performance or achievements expressed or implied by the forward looking
statements. Such factors include, among other things, (1) general economic and
business conditions; (2) interest rate changes; (3) the relative stability of
the debt and equity markets; (4) competition; (5) the availability and cost of
our products; (6) demographic changes; (7) government regulations particularly
those related to automatic vehicle location industry; (8) required accounting
changes; (9) equipment failures, power outages, or other events that may
interrupt Internet communications; (10) disputes or claims regarding our
proprietary rights to our software and intellectual property; and (11) other
factors over which we have little or no control.
OVERVIEW
We were incorporated in the state of Nevada on March 8, 1999 by AVL Information
Systems Ltd. and its principal officer and directors. AVL Information Systems
Ltd. is a Canadian public company that owns and licenses certain technology and
automatic vehicle location systems. Effective September 30, 2001, we entered
into an exclusive worldwide distribution agreement with AVL Information Systems
Ltd. Under the agreement, we are licensed to market and distribute all of the
products manufactured by AVL Information Systems Ltd.
We are in the development stage and have generated minimal revenues. We have a
deficit accumulated during the development stage of $45,625 as of September 30,
2002. We have suffered losses from operations and require additional financing.
Moreover, we are dependent upon AVL Information Systems Ltd. and its subsidiary
to provide all of our products and management services. Because of the
uncertainty of AVL Information Systems Ltd. to continue as a going concern to
supply these products and services, and to generate sufficient cash flow to
repay the $1,283,977 of notes receivable, there is substantial doubt about our
ability to continue as a going concern. While we are investigating the
acquisition of the U.S. subsidiary of AVL Information Systems in partial
satisfaction of the debt, we cannot assure you that this acquisition will occur
or that it will eliminate this doubt about our ability to continue.
9
RESULTS FROM OPERATIONS
We generated our first revenues during the last quarter of fiscal 2001. For the
three and nine months ended September 30, 2002, we generated revenues of $86,438
and $301,750, respectively. Cost of goods sold, as a percentage of revenues, was
80.2% and 83.1% for these periods, respectively. General and administrative
expenses increased from $5,748 during the first nine months of 2001 to $67,744
in 2002, an increase of 1079%. In addition, we incurred management fees of
$22,500 in 2002 that were not incurred in 2001. As a result, we incurred an
operating loss of $39,129 for the nine months ended September 30, 2002, as
compared to $5,748 for the nine months ended September 30, 2001. The operating
loss for the three months ended September 30, 2002 was $2,563, as compared to
$1,624 for the three months ended September 30, 2001.
However, due to interest income of $9,630 and $44,871 for the three and nine
months ended September 30, 2002, on the notes receivable from related parties,
we recognized net income for the three and nine month periods of $7,067 and
$5,742, respectively.
LIQUIDITY AND FINANCIAL CONDITION
For the nine months ended September 30, 2002, the statement of cash flows
reflects net cash used in operating activities of $19,997, and net cash provided
by financing activities of $18,598. For the nine months ended September 30,
2001, operating activities used cash of $4,706 and financing activities,
primarily the sale of stock described below, provided cash of $30,279.
On November 6, 2000, we filed a registration statement on Form SB-1 with the SEC
(file number 333-49388) for the offer and sale of 2,500,000 units, at a price
$0.10 per unit, with each unit consisting of one share of common stock and one
warrant to purchase one share of common stock. Our registration statement was
declared effective on April 10, 2001. We completed the offering on April 30,
2001, selling 2,500,000 Units for gross proceeds in the amount of $250,000. The
total amount of offering expenses was $28,005, with net proceeds of $221,995.
In August and September, 2001, we advanced a total of $209,000 to our affiliate,
AVL Information Systems Ltd., toward the purchase of 600 Chaperone tracking
units and marketing materials. This advance depleted most of our cash, leaving
$30,052 at September 30, 2001.
In October 2001, warrants for the purchase of 2,146,900 shares of our common
stock were exercised for $1,073,450. Theses funds have also been advanced to AVL
Information Systems Ltd. toward the purchase of tracking units. An additional
346,900 warrants were exercised in November 2001.
At September 30, 2002, we had cash of $1,273 and working capital of $39,193.
This compares to cash of $2,672, and working capital of $31,446 at December 31,
2001. However, $59,286 of our current assets at September 30, 2002 was accrued
interest receivable from related parties. As described in Note 4 of the Notes to
Financial Statements, $1,283,977 is owed by AVL Information Systems Ltd. and its
subsidiary. Each of these entities received a going concern opinion on the audit
of its financial statements.
10
We loaned funds to AVL Information Systems and its subsidiary to enable those
entities to get the Chaperone units to market more quickly. Through December 31,
2001, we had orders for approximately 5,000 units of the Chaperone unit. We
have had to work closely with the original orders since the market has slowed
and delivery has not been requested for all of the units manufactured as of now.
While we had revenues of $301,750 for the nine months ended September 30, 2002,
sales at this level are not sufficient to cover our operating expenses or to
engage in the type of marketing campaign that we need to pursue. We are not
expecting significant repayment from AVL during the current fiscal year.
Accordingly, we will have to pursue funding from external sources through a line
of credit arrangement and/or the sale of debt and/or equity securities. We
cannot assure you that we will be successful in these pursuits.
PLAN OF OPERATION
At this time, we intend to establish relationships with a number of other
companies to accelerate the implementation of the distribution agreement and the
sale of the Spryte and Chaperone Systems(TM). We believe that our status as a
U.S. publicly traded company will assist us in establishing strategic alliances
because of our perceived level of credibility and access to capital in the U.S.
markets. We intend to establish relationships with existing companies engaged in
the automatic vehicle location industry, wireless carriers, manufacturers,
distributors, and Internet companies. We intend to create relationships and to
retain consultants and contractors with established connections in the
telecommunication and application service provider industries. We foresee that
the compensation would be commission based. Depending upon the market acceptance
of the Spryte and Chaperone Systems(TM), we may hire employees in the
foreseeable future.
We believe that establishing a network of alliances, while not a small task, can
be accomplished in a shorter period of time and at less cost than building a
comparable direct sales infrastructure. It is our priority to establish a
channel partner network in the U.S. and Canada, and recruit international
channel partners as opportunities present themselves.
We expect to generate revenues by selling the Spryte and Chaperone Systems(TM)
at cost plus margin. We believe the amount of margin will vary depending on the
time, expense, and size of sale.
We do not expect to purchase any significant equipment during the next twelve
months, nor do we expect to hire a significant number of employees during that
time period.
ITEM 3. CONTROLS AND PROCEDURES
We have recently evaluated our internal controls. As of November 13, 2002, there
were no significant corrective actions taken by us or other changes made to
these internal controls. Our management does not believe there were changes in
other factors that could significantly affect these controls subsequent to the
date of the evaluation.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
REGULATION CONSECUTIVE
S-B NUMBER EXHIBIT PAGE NUMBER
2.1 Articles of Incorporation (1) N/A
2.2 Bylaws (1) N/A
2.3 Certificate of Amendment of Articles of N/A
Incorporation (1)
10.1 Promissory Note dated August 20, 2000, in the N/A
amount of $15,000, payable to Peter Fisher (1)
10.2 International Distribution Agreement dated N/A
January 7, 2001 (2)
10.3 Worldwide Exclusive Distribution Agreement dated N/A
September 30, 2001 (3)
10.4 Management Services Agreement dated January 1, 2002 (4) N/A
10.5 2002 Stock Plan (4) N/A
--------------------
12
(1) Incorporated by reference from the exhibits to the Registration
Statement on Form SB-1 filed on November 6, 2000, File No. 333-49388.
(2) Incorporated by reference from the exhibits to the Registration
Statements on Form SB-1/A-1 filed on January 17, 2001, File No.
333-49388.
(3) Incorporated by reference from the exhibits to the Quarterly Report on
Form 10-QSB filed on December 6, 2001, File No. 333-49388.
(4) Incorporated by reference from the exhibits to the Annual on Form
10-KSB for the fiscal year ended December 31, 2001, File No. 333-49388.
b) Reports on Form 8-K: None.
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
I-TRACK, INC.
(Registrant)
Date: November 14, 2002 By: /s/ PETER FISHER
----------------------------------------
Peter Fisher, Chairman
(Principal Executive, Financial and
Accounting Officer)
14
CERTIFICATION
I, Peter Fisher, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of i-Track, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 14, 2002
/s/ PETER FISHER
----------------------------------------
Peter Fisher, Principal Executive and
Financial Officer
15