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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED: NOVEMBER 30, 1999
COMMISSION FILE NUMBER: 000-27885
CENTRACK INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
DELAWARE 11-3342926
- ------------------------------- -----------------------------
(State or other jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
21045 Commercial Trail, Boca Raton, Florida 33486
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(Address, including zip code, of principal executive offices)
(561) 362-9444
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Sections 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
filings for the past 90 days.
YES [X] NO [ ]
As of February 10, 2000, the number of the Company's shares of par
value $.0001 common stock outstanding was 24,093,588.
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Table of Contents
Part I - FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements
Balance Sheets as of November 30, 1999 (unaudited)
And May 31, 1999 2
Statements of Operations (unaudited) for the three and
six months ended November 30, 1999 and for the
period from April 4, 1996 (inception) to
November 30, 1999 3
Statements of Cash Flows (unaudited) for the three and
six months ended November 30, 1999 and for the
period from April 4, 1996 (inception) to
November 30, 1999 4
Notes to Financial Statements 5 - 8
Item 2 - Plan of Operation 8 - 9
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings 9
Item 2 - Changes in Securities and Use of Proceeds 9
Item 6 - Index to exhibits 9
Signatures 10
(i)
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Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements
1
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Centrack International, Inc.
(A Company in the Development Stage)
Balance Sheets
<TABLE>
<CAPTION>
November 30,
May 31, 1999
1999 unaudited
----------- ------------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 281,318 $ 929
Accounts Receivable -- 7,242
Loan Receivable - related party 65,028 --
Prepaid and Other Assets 2,138 31,362
----------- -----------
Total Current Assets 348,484 39,533
----------- -----------
Fixed Assets
Web site Development 139,245 244,212
Furniture & Fixtures 48,803 108,818
Leasehold Improvements 3,384 24,573
Computer Hardware 51,882 98,132
Telephone System 4,404 29,751
----------- -----------
247,718 505,486
Less: Accumulated Depreciation & Amortization (21,694) (90,042)
----------- -----------
Fixed Assets, net 226,024 415,444
Other Assets
Deposits 14,100 20,266
----------- -----------
Total Assets $ 588,608 $ 475,243
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses $ 240,318 $ 548,407
Other Current Liabilities -- 5,090
Loan Payable 250,000 --
----------- -----------
Total Current Liabilities 490,318 553,497
Long Term Liabilities
Commitments and Contingencies
----------- -----------
Total Liabilities 490,318 553,497
----------- -----------
Stockholders' Equity
Common Stock, .0001 par, 100,000,000
shares authorized, 21,402,034 issued
and outstanding at 5/31/99, 24,093,588
issued and outstanding at 11/30/99 2,140 2,409
Additional Paid in Capital 831,405 2,151,587
Deficit Accumulated During the
Development Stage (735,255) (2,232,250)
----------- -----------
Total Stockholders' Equity 98,290 (78,254)
----------- -----------
Total Liabilities & Stockholders' Equity $ 588,608 $ 475,243
=========== ===========
</TABLE>
See Notes to Financial Statements
2
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Centrack International, Inc.
(A Company in the Development Stage)
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
---------------------------- ---------------------------- Period From
Ended Ended Ended Ended April 4, 1996
November 30, November 30, November 30, November 30, November 30,
1998 1999 1998 1999 1999
------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues
Listing Fees $ -- -- $ -- $ -- $ 12,961
Value Added Partner Fees -- -- -- -- 1,000
------------ ------------ ------------ ------------ ------------
Total Revenues -- -- -- -- 13,961
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Marketing & Sales 1,981 132,975 1,981 294,821 335,874
General, Administrative and Development 15,834 692,701 30,536 1,189,161 1,890,172
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 17,815 825,676 32,517 1,483,982 2,226,046
------------ ------------ ------------ ------------ ------------
Net Loss Before Other Income (Expense) (17,815) (825,676) (32,517) (1,496,995) (2,212,085)
OTHER INCOME (EXPENSE)
Interest Expense -- -- -- (13,013) (22,906)
Interest Income -- -- -- -- 2,741
------------ ------------ ------------ ------------ ------------
Net Loss $ (17,815) (825,676) $ (32,517) $ (1,496,995) $ (2,232,250)
============ ============ ============ ============ ============
EARNINGS (LOSS ) PER SHARE OF COMMON STOCK
BASIC $ (0.001) (0.036) $ (0.002) $ (0.065) $ (0.132)
============ ============ ============ ============ ============
EARNINGS (LOSS) PER SHARE OF COMMON STOCK -
ASSUMING DILUTION $ (0.001) (0.034) $ (0.002) $ (0.061) $ (0.129)
============ ============ ============ ============ ============
WEIGHTED AVERAGE SHARES 15,699,454 23,226,122 15,699,454 23,097,665 16,965,615
============ ============ ============ ============ ============
FULLY DILUTED WEIGHTED AVERAGE SHARES 15,699,454 24,616,025 15,699,454 24,598,785 17,261,066
============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
3
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Centrack International, Inc.
(A Company in the Development Stage)
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six Months Six Months Period From
Ended Ended April 4, 1996
November 30, November 30, (Inception) to
1998 1999 November 30, 1999
------------ ------------ -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (32,517) $(1,496,995) $(2,232,250)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation & Amortization -- 68,348 90,042
(Increase) Decrease in
Prepaid & Other Assets 200 (36,466) (38,604)
Deposits (50) (6,166) (20,266)
Increase (Decrease) in Accounts
Payable & Accrued Expenses 2,316 313,179 553,497
------------ ----------- -----------
Net Cash Used in Operating Activities (30,051) (1,158,100) (1,647,581)
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan Receivable & Interest (14,582) 65,028 --
Acquisition of Fixed Assets &
Web site Development -- (257,768) (505,486)
------------ ----------- -----------
Net Cash Used in Investing Activities (14,582) (192,740) (505,486)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Reductions in Debt & Interest Income -- -- (24,867)
Proceeds from Debt & Interest Expense -- 312,986 587,853
Conversion of Outstanding Debt to Contributed
Capital -- (562,986) (562,986)
Equity Contributions 39,805 1,320,182 2,151,587
Issuance of Common Stock 27 269 2,409
------------ ----------- -----------
Net Cash Provided by Financing Activities 39,832 1,070,451 2,153,996
------------ ----------- -----------
NET INCREASE (DECREASE) IN CASH (4,801) (280,389) 929
CASH - BEGINNING 4,801 281,318 --
------------ ----------- -----------
CASH - ENDING $ -- $ 929 $ 929
============ =========== ===========
</TABLE>
See Notes to Financial Statements
4
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CENTRACK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Description of Company and Basis of Presentation
THE COMPANY
Centrack International, Inc. (The Company) is a corporation organized
under the laws of the State of Delaware. The Company was incorporated
on October 1, 1996 as Hudson Valley Industries, Inc. (HUVI). On April
2, 1999, the Company, an OTC Bulletin Board publicly traded company,
with no substantial assets or liabilities, merged with Centrack
International, Inc. (the predecessor company), a Florida corporation,
which maintained an internet based business involving listing fees,
advertising, sourcing and information services for the heavy equipment
industry. Shareholders of the predecessor company received 10.561
shares of Hudson Valley stock for each share of the predecessor
company; a total of 16,809,151 shares, in exchange for 100% of the
outstanding stock of the predecessor company and the conversion of a
$500,000 bridge loan to capital. Of the 16,809,151 shares authorized
per the merger agreement, 15,699,454 shares had been issued as of May
31, 1999, the balance of which was issued during the Company's first
fiscal quarter ended August 31, 1999. In connection with the merger
Hudson Valley changed its name to Centrack International, Inc. The
merger was accounted for as a capital transaction with no recognition
of goodwill or other intangible assets. Subsequent to the merger, the
owners of the predecessor company owned 75% of the Company. Since the
transaction was, in substance, a recapitalization of Centrack
International, Inc. (the predecessor company) and not a business
combination, pro forma information is not presented. Accordingly, the
historical data contained in the financial statements is that of the
predecessor company.
The Company's principal operations, comprised of services of listings
on its Web site, advertising, sourcing, information and auctions of
used heavy equipment, have not commenced as of November 30, 1999.
Although some nominal advertising and listing revenues have been earned
as of the date of these financial statements, substantially all the
efforts of the Company have been focused on the establishment of its
Web site, internal infrastructure, and beta testing of the Company's
auction services. Accordingly, the Company is in the Development Stage.
BASIS OF PRESENTATION
The accompanying unaudited financial statements, which are for interim
periods, do not include all disclosures provided in the annual
financial statements. These unaudited financial statements should be
read in conjunction with the financial statements and the footnotes
thereto contained in the Form 10-SB as filed with the
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Securities and Exchange Commission on October 29, 1999 and amended on
November 23, 1999. The May 31,1999 balance sheet was derived from
audited financial statements, but does not include all disclosures
required by generally accepted accounting principles at May 31, 1999.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial statements.
The results for interim periods are not necessarily indicative of
results to be expected for the complete fiscal year.
2. Significant Accounting Policies
REVENUE RECOGNITION
Revenues are derived primarily from listing fees for used heavy
equipment for sale on the Company's Web site, success fees on auction
transactions calculated as a percentage of the final sales value and
advertising revenues. Revenues related to listing fees are recognized
in the period when the item is listed. Revenues related to auction
transactions are recognized at the conclusion of the auction as a
percentage of the auction sales' price. The commission percentage is
contractually set between the Company and the Seller prior to the
auction. Advertising revenues are recognized evenly over the term of
the contract.
EARNINGS PER SHARE
As per Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 128 (SFAS 128), Earnings Per Share, standards
for computing and presenting earnings per share (EPS) applies to
publicly held common stock or potential common stock. It requires dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures. Basic EPS
excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the
entity.
In computing EPS as a result of the reverse acquisition, the number of
shares outstanding for the period from June 1, 1998 until the date of
the reverse acquisition, April 2, 1999, is the number of shares issued
by the Company to the shareholders of the predecessor company. For the
period subsequent to April 2, 1999 the number of shares considered to
be outstanding is computed as actual number of shares of the Company
outstanding during that period. The average number of shares
outstanding for the full year being reported upon has been computed by
averaging these two amounts. Other appropriate adjustments have been
made to deal with changes in numbers of shares issued during the
period.
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Diluted EPS was computed assuming the conversion of all outstanding
warrants to common stock.
ADVERTISING EXPENSE
The Company recognizes advertising expenses in accordance with
Statement of Position ("SOP") 93-7 "Reporting on Advertising Costs." As
such, the company expenses advertising costs as incurred or the first
time the advertising takes place.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed
using the straight-line method based on the estimated useful lives of
the assets, which range from three to five years. Costs for routine
repairs and maintenance are expensed as incurred and gains and losses
on the disposal of assets are recognized in the period such disposals
occur.
SOFTWARE DEVELOPMENT COSTS
Pursuant to SOP 98-1, internal and external costs incurred to develop
internal-use software are capitalized during the application's
development stage and are amortized over three years once operations
begin. The Company has developed the software to support its site,
WWW.CENTRACK.COM, and is developing the software to support its site,
www.centrackauctions.com. Management has concluded the software
developed and the software under development will be used for the
intended purposes. The costs capitalized for the internal-use software
include external costs of materials and services.
INCOME TAXES
The Company files its tax return with the Internal Revenue Service as a
"C" Corporation. The Company accounts for income taxes under Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Under this method, deferred income taxes are recognized by
applying enacted statutory tax rates to future years' differences
between the tax bases and financial reporting amounts of existing
assets and liabilities. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be
realized.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management 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
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amounts of revenues and expenses during the respective reporting
periods. Actual results could vary from these estimates and
assumptions.
3. Going Concern
The Company is in the development stage as defined by Generally
Accepted Accounting Principles. The Company's financing has been
provided by capital contributions from the shareholders and third party
loans. The Company anticipates that during the fiscal year ended May
31, 2000, revenues will begin to increase as a result of full scale
operations and capital will be increased by the continued sale of its
common stock. If either or both of these sources fail to meet the
Company's capital requirements, the Company's ability to continue as a
going concern would be in doubt. The financial statements do not
include any adjustments regarding the going concern and have been
prepared with the assumption that the Company will continue
perpetually.
Please refer to Item 2 - Plan of Operation for further discussion.
Item 2 - Plan of Operation
FINANCIAL POSITION
As of the date of this filing, the Company has not received sufficient
investment nor has it generated sufficient revenues to remain current
with its on-going operating obligations. The Company has not
compensated its employees for work performed since December 31, 1999.
The Company is vigorously seeking investment to support its operations
and to become current with its vendor and employee obligations. On
February 14, 2000, the Company brought in a consultant, who has an
investment banking background, to aid the Company in attracting
capital. As of February 22, 2000, the Company was negotiating with the
consultant to hire him as an interim CEO until such time, if ever, that
the Company's financial position improves. The Company believes the
addition of an interim CEO with investment banking experience will
enhance its opportunity to raise investment funds.
As of the date of this filing, the Company estimates it will need
approximately $5,000,000 to fund its operations for the next twelve
months. The failure to receive significant investment by March 15, 2000
would place the Company's ability to continue as a going concern in
doubt.
ONGOING OPERATIONS
Assuming the Company can raise sufficient capital, as described above,
we intend to execute our business plan over the next 12 months. This
will include a continuing effort to build a qualified buyer base
through direct contact by the
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Company's customer service and sales organization. Further, the Company
will continue to market its websites, WWW.CENTRACK.COM and
WWW.CENTRACKAUCTIONS.COM, and products through print media, banner ads,
trade shows and industry focus groups. The Company intends to develop
and launch additional products such as rental and new equipment quote
systems, attachment and component auctions, value-added partner
programs and a new product database.
To achieve the above, the Company does not expect the number of its
employees, which was approximately 20, at February 22, 2000 to be
significantly different in twelve months. However, the Company does
expect to reduce the number of its employees in the short-term and hire
new personnel as its business requires.
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings
On February 4, 2000, the Company was named as a defendant in a civil
action, Vincam Human Resources, Inc. ("Vincam") vs. Centrack
International, Inc., filed in Miami-Dade Florida Circuit Court. The
complaint alleges that the Company owes Vincam, an employee leasing
organization, approximately sixty-seven thousand dollars ($67,000),
plus late fees, prejudgment interest and reasonable attorney fees. The
Company intends to work with Vincam to satisfy the balance due.
Item 2 - Changes in Securities and Use of Proceeds
On September 29, 1999, the Company issued 529,550 shares to a
sophisticated, accredited investor for consideration of $700,000. The
transaction was a private offering exempt from registration under
section 4(2) of the securities act of 1933.
Item 6 - Index to Exhibits
Page
----
Exhibit 27.1 - Financial Data Schedule E-1
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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.
CENTRACK INTERNATIONAL, INC.
(Registrant)
Dated: February 22, 2000 By: /s/ John Lofquist
-----------------------------------
John Lofquist, President
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 929
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 39,533
<PP&E> 505,486
<DEPRECIATION> 90,042
<TOTAL-ASSETS> 475,243
<CURRENT-LIABILITIES> 553,497
<BONDS> 0
0
0
<COMMON> 2,409
<OTHER-SE> (80,663)
<TOTAL-LIABILITY-AND-EQUITY> 475,243
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,496,995)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,496,995)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,496,995)
<EPS-BASIC> (0.065)
<EPS-DILUTED> (0.061)
</TABLE>
