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, 2001
[ ] 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 48058
(Address of principal executive offices)
(810) 469-3500
(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 NOVEMBER 30, 2001
Transitional Small Business Disclosure Format (check one); Yes No X
----- -----
I-TRACK, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. - Financial Statements
- Independent Accountant's Report...............................4
- Balance Sheet (unaudited)
September 30, 2001 ...........................................5
- Statements of Operations (unaudited)
Three and Nine Months Ended September 30, 2001
and 2000, and Period from Inception (March 8, 1999)
through September 30, 2001 ...................................6
- Statements of Cash Flows (unaudited)
Nine Months Ended September 30, 2001 and 2000, and Period
from Inception (March 8, 1999) through September 30, 2001 ....7
- Notes to Financial Statements ................................8
Item 2. - Management's Discussion and Analysis or Plan of Operations ....9
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 ......................13
SIGNATURES ...................................................................14
2
i-TRACK, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(UNAUDITED)
3
INDEPENDENT ACCOUNTANT'S REPORT
We have reviewed the accompanying balance sheet of i-Track, Inc. as of
September 30, 2001, and the statements of operations for the three month and
nine month periods ended September 30, 2001 and September 30, 2000 and for the
period from inception to September 30, 2001 and statements of cash flows for the
nine month periods ended September 30, 2001 and 2000 and the period from
inception to September 30, 2001. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
/s/ Edwards, Melton, Ellis, Koshiw and Company, P.C.
EDWARDS, MELTON, ELLIS, KOSHIW AND COMPANY, P.C.
Troy, Michigan
November 6, 2001
4
i-TRACK, INC.
F/K/A/ AVL SYS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
September 30, 2001
(Unaudited)
ASSETS
Current assets:
Cash $ 30,052
Note receivable 209,000
---------
$ 239,052
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,937
Operating advances-related parties 37,284
---------
Total current liabilities 39,221
Stockholders' equity:
Preferred stock, 1,000,000 shares
authorized, $0.01 par value, none -
issued or outstanding
Common stock, 50,000,000 shares
authorized, $0.001 par value,
21,200,000 issued and outstanding 21,200
Additional paid-in capital 219,495
Deficit accumulated during the
development stage (40,864)
---------
199,831
---------
$ 239,052
=========
The accompanying notes are an integral part of the financial statements.
5
i-TRACK, INC.
F/K/A AVL SYS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
For the three For the three For the nine For the nine For the period
months ended months ended months ended months ended March 8, 1999
September 30, September 30, September 30, September 30, (inception) through
2001 2000 2001 2000 SEPTEMBER 30, 2001
------------- ------------- ------------- ------------- ------------------
Revenue $ - $ - $ - $ - $ -
Cost and expenses:
General and administrative expenses 1,624 1,152 5,748 5,629 40,864
------------- ------------- ------------ ------------ --------------
Total costs and expenses 1,624 1,152 5,748 5,629 40,864
------------- ------------- ------------ ------------ --------------
Net (loss) $ (1,624) $ (1,152) $ (5,748) $ (5,629) $ (40,864)
============= ============= ============ ============ ==============
Weighted average number of common
shares outstanding 21,200,000 18,700,000 19,808,059 18,700,000 19,022,839
============= ============= ============ ============ ==============
Net (loss) per common share $ - $ - $ - $ - $ -
============= ============= ============ ============ ==============
The accompanying notes are an integral part of the financial statements.
6
i-TRACK, INC.
F/K/A AVL SYS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine For the nine For the period
months ended months ended March 8, 1999
September 30, September 30, (inception) through
2001 2000 SEPTEMBER 30, 2001
------------- ------------- ------------------
Cash flows from operating activities $ (4,706) $ (4,429) $ (37,727)
Cash flows from investing activities - - -
Cash flows from financing activities:
Proceeds from operating advance-
related party 17,284 14,996 52,284
Proceeds from stock issuance 250,000 17,500 252,500
Offering costs (28,005) - (28,005)
Advances to related party (209,000) - (209,000)
------------- ------------- ------------------
Net cash used in financing activities 30,279 32,496 67,779
------------- ------------- ------------------
Net increase (decrease) in cash 25,573 28,067 30,052
Beginning cash 4,479 471 -
------------- ------------- -----------------
Ending cash $ 30,052 $ 28,538 $ 30,052
============= ============= =================
The accompanying notes are an integral part of the financial statements.
7
i-TRACK, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(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 the 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, 2000, including notes thereto, included in the Company's
Registration Statement on Form SB-1.
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: STOCKHOLDERS' EQUITY
During the nine months ended September 30, 2001, the Company completed its
Form SB-1 offering raising $250,000 net of $28,005 in offering expenses.
NOTE 4: ADVANCES TO RELATED PARTY
The Company advanced $209,000 to a corporation related to its controlling
shareholder. The advance is non-interest bearing and management indicated the
advance will be used for the purchase of Chaperone advertising material and
tracking units.
NOTE 5: SUBSEQUENT EVENTS
In October and November, 2001 there were 2,493,800 stock warrants exercised
for the purchase of common stock at $.50 per share. Management indicated that
the proceeds of approximately $1,000,000 had been deposited into an affiliated
company's bank accounts for use in the development and marketing of products to
be purchased by the Company.
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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, 2000 as filed in our
registration statement on Form SB-1, 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.
SELECTED FINANCIAL DATA
Our selected financial data for the nine months ended September 30, 2001 shown
below is derived from our financial statements. The financial data derived from
the statements should be read in conjunction with our financial statements and
the notes included elsewhere in this report.
BALANCE SHEET DATA: SEPTEMBER 30, 2001 DECEMBER 31, 2000
Current Assets............. $ 239,052 $ 4,479
Total Assets............... $ 239,052 $ 4,479
Current Liabilities........ $ 39,221 $ 20,895
Stockholders' Equity
(Deficiency)............ $ 199,831 $ (16,416)
Working Capital............ $ 199,831 $ (16,416)
STATEMENT OF LOSS DATA: NINE MONTHS ENDED SEPTEMBER 30,
2001 2000
Revenues................... $ 0 $ 0
Net Loss................... $ (5,748) $ (5,629)
Net Loss per Share......... $ (0) $ 0
9
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. We have entered into two distribution
agreements with AVL Information Systems Ltd.
We have two separate distribution agreements with AVL Information Systems Ltd.
On January 7, 2001, we entered into a non-exclusive worldwide International
Distribution Agreement which licensed us to market and distribute an automatic
vehicle location system called the Spryte System(TM). On September 30, 2001, we
entered into a World Wide Exclusive Distribution Agreement which made us the
exclusive distributor for all of the products development and manufactured by
AVL Information Systems Ltd, including the Chaperone System(TM).
The Spryte System(TM) and Chaperone System(TM) integrate Global Positioning
System technology, cellular-wireless communications and the Internet to enable
companies to efficiently manage their mobile resources with location-relevant
and time-sensitive information. While there are several ways to transmit
information from a vehicle to a central location, we believe that the Spryte
System(TM) and the Chaperone System(TM) provide significant value to customers
by reducing their costs of doing business and increasing the productivity of
their mobile resources.
We are in the development stage and have not generated any revenues. We have an
accumulated deficit of $40,864 through September 30, 2001. We have suffered
losses from operations and require additional financing. Our current financing
needs have been met by the recently completed public offering. Ultimately we
need to generate revenues and successfully attain profitable operations. The
marketing and distribution of the Spryte System(TM) and Chaperone System(TM) may
take years to complete and the amount of resulting revenues, if any, is
difficult to determine. Our previous capital needs have been met by equity
offerings, and we have issued common stock in exchange for services rendered and
funds advanced by related parties. These factors raise substantial doubt about
our ability to continue as a going concern. There can be no assurance that we
will be able to market and distribute the Spryte System(TM) and Chaperone
System(TM). Even if we are able to market and distribute the systems, there is
no assurance that we will be able to generate revenues and attain profitable
operations.
RESULTS FROM OPERATIONS
We have a limited operating history. We incurred a net loss of $32,087 for the
year ended December 31, 2000, and had a net loss of $3,029 for the period ended
December 31, 1999. For the nine months ended September 30, 2001, we had a net
loss of $5,748, as compared to $5,629 for the comparable 2000 period.
LIQUIDITY AND FINANCIAL CONDITION
For the nine months ended September 30, 2001, the statement of cash flows
reflects net cash used in operating activities of $4,706, and net cash provided
by financing activities of $30,279. While
10
we received net offering proceeds of $221,995, $209,000 was advanced to AVL
Information Systems Ltd. For the nine months ended September 30, 2000, net cash
used in operating activities was $4,429, which was offset by related party loans
of $14,996 and proceeds from equity offerings of $17,500.
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 were $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.
Effective September 30, 2001, we entered into a Worldwide Exclusive Distribution
Agreement with AVL Information Systems Ltd., covering all of the products
manufactured by AVL. We decided to advance funding to AVL to assist with the
completion and testing of the Chaperone tracking unit to get it to the market
more quickly. By doing so, we believe that we will be able to generate revenues
more quickly. Through November 30, 2001, we have obtained orders of 7,000 units
of the Chaperone System.
PLAN OF OPERATION
At this time, we will continue our efforts to implement the distribution
agreements and the sale of the Spryte System(TM) and Chaperone System(TM). While
we have received orders of approximately 7,000 units of the Chaperone
System(TM), we still need to establish relationships with other companies to
accelerate the implementation of the distribution agreements. These companies
could include existing companies engaged in the automatic vehicle location
industry, wireless carriers, manufacturers, distributors, and Internet
companies. We also intend to create relationships and to retain consultants and
contractors with established connections in the telecommunication and
application service provider industries. We foresee that compensation will be
commission based. Depending upon the market acceptance of the Spryte System(TM)
and Chaperone System(TM), we may hire employees in the foreseeable future. We
expect to realize revenues within the next three months.
We do not expect to purchase any significant equipment during the foreseeable
future, nor do we expect to hire a significant number of employees. We expect to
finance our objectives through the proceeds derived from the exercise of
warrants.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
On November 6, 2000, the registrant 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. This registration statement was declared
effective on April 10, 2001. The registrant completed the offering
on April 30, 2001, selling 2,500,000 Units for gross proceeds in the
amount of $250,000. No expenses in connection with underwriting
discounts and commissions, or finder's fees were incurred. Total
offering expenses were $28,005, with net proceeds of $221,995.
Through September 30, 2001, the registrant has used the net proceeds
as follows: $209,000 has been advanced to an affiliate, AVL
Information Systems Ltd., toward the purchase of Chaperone tracking
units and marketing materials. The remainder has been used for
general and administrative expenses.
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.
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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 Incorporation (1) N/A
10.1 Promissory Note dated August 20, 2000, in the amount of
$15,000, payable to Peter Fisher (1) N/A
10.2 International Distribution Agreement dated January
7, 2001 (2) N/A
10.3 Worldwide Exclusive Distribution Agreement dated
September 30, 2001 16
------------------------
(1) Incorporated by reference from our Registration Statement on Form SB-1
filed on November 6, 2000, File No. 333-49388.
(2) Incorporated by reference from our Registration Statement on Form SB-1/A-1
filed on January 17, 2001, File No. 333-49388.
b) Reports on Form 8-K: On August 28, 2001, the registrant filed
a current report on Form 8-K dated August 27, 2001, reporting
under Item 5, Other Events, the separation of warrants from
units. No financial statements were required to be filed.
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: December 6, 2001 By: /s/ Barbara M. Castanon, President
-------------------------------------------
Barbara M. Castanon, President
(Principal Financial Officer)
14