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SPMI > SEC Filings for SPMI > Form 10-Q on 13-Aug-2013All Recent SEC Filings

Show all filings for SPEEDEMISSIONS INC

Form 10-Q for SPEEDEMISSIONS INC


13-Aug-2013

Quarterly Report


ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Three Months Ended June 30, 2013 and 2012

Our revenue, cost of emission certificates, store operating expenses, general
and administrative expenses, gain from disposal of non-strategic assets and
operating loss for the three months ended June 30, 2013 as compared to the three
months ended June 30, 2012 were as follows:

                                                          Three Months Ended
                                                               June 30                 Percentage
                                                        2013             2012            Change
Revenue                                              $ 1,770,709      $ 1,986,864            (10.9 %)
Cost of emission certificates                            357,662          443,750            (19.4 %)
Store operating expenses                               1,229,521        1,281,780             (4.1 %)
General and administrative expenses                      299,965          333,005             (9.9 %)
Gain (loss) from sale of non-strategic assets            (72,267 )              -                 N/A
Operating loss                                       $   (44,172 )    $   (71,671 )          (38.4 %)

Revenue. Revenue decreased $216,155, or (10.9%), to $1,770,709 in the three-month period ended June 30, 2013 compared to $1,986,864 in the three month period ended June 30, 2012. The decrease in revenue over the comparable period was primarily due to a net loss in revenues of $350,646 related to six Texas stores permanently closed during late 2012 and early 2013 plus temporary closings of three other stores due to non-renewal of leases in 2013. Additionally, same store revenue decreased by $8,329, or (0.5%). The decrease in same store revenue is mainly attributable to fewer emission tests being performed during the three month period ended June 30, 2013 compared to the prior comparable period. The combined $358,975 decrease in store revenue during the three month period ended June 30, 2013 was partially mitigated by a $142,820 increase in revenue resulting from revenue from five Georgia stores acquired in November 2012.


Cost of emission certificates. Cost of emission certificates decreased $86,088, or (19.4%), in the three month period ended June 30, 2013 and was $357,662, or 20.2% of revenues, compared to $443,750, or 22.3% of revenues, in the three month period ended June 30, 2012. The decrease in cost of emission certificates over the comparable period was primarily due to the previously discussed store closings and decrease in same store sales partially offset by increased cost of sales from the five stores acquired in November 2012. The decrease in cost of emissions certificates as a percent of sales is due to the majority of the store closings occurring in Texas where emission certificates cost approximately 35% of sales.

Store operating expenses. Store operating expenses decreased $52,259, or (4.1%), in the three-month period ended June 30, 2013 and was $1,229,521, or 69.4% of revenues, compared to $1,281,780, or 64.5% of revenues, in the three month period ended June 30, 2012. The decrease in store operating expenses over the comparable period was primarily due to the previously discussed store closings and decrease in same store sales partially offset by increased store operating expenses from the five stores acquired in November 2012.

General and administrative expenses. Our general and administrative expenses decreased $33,040, or (9.9%), to $299,965 in the three month period ended June 30, 2013 from $333,005 in the three month period ended June 30, 2012. The decrease in general and administrative expenses during the three month period June 30, 2012 was mainly due to lower legal and accounting fees.

Gain from disposal of non-strategic assets. On April 11, 2013, the Company sold the assets comprising three of its Texas stores for $110,000. The Company received $50,000 cash at closing and a note receivable for $60,000. The net book value of the assets sold was $37,733 resulting in a recorded gain of $72,267 on the asset sale. We recorded no sales of non-strategic assets in the three month period ended June 30, 2012.

Operating loss. Our operating loss decreased by $27,498 in the three-month period ended June 30, 2013 and was ($44,172) compared to an operating loss of ($71,671) in the three month period ended June 30, 2012. The decrease in our operating loss was primarily due to the $72,267 gain from disposal of non-strategic assets. Without the asset sale, our loss increased by $44,768 due primarily to the previously discussed decrease in revenues.

Interest income, interest expense, net loss and basic and diluted net loss per share. Our interest income, interest expense, net loss and basic and diluted net loss per share for the three-month period ended June 30, 2013 as compared to the three month period ended June 30, 2012 is as follows:

                                                                Three Months Ended
                                                                     June 30,
                                                               2013             2012
Operating loss                                             $    (44,172 )   $    (71,671 )
Interest income                                                   1,255              755
Interest expense                                                (68,573 )         (5,051 )
Net loss                                                   $   (111,490 )   $    (75,967 )
Basic and diluted net loss per share                       $      (0.00 )   $      (0.00 )
Weighted average shares outstanding, basic and diluted       34,688,166       34,688,166

The Company incurred net interest expense of $67,318 and $4,296 during the three month periods ended June 30, 2013 and 2012, respectively. The net increase of $63,022 in interest expense during the quarter ended June 30, 2013, compared to 2012, was primarily the result of the amortization of $39,942 loan origination costs associated with the second loan taken under the new line of credit acquired during October 2012 plus increased interest costs on our line of credit, which had a balance of $720,000 as of June 30, 2013 compared to a balance of $350,000 as of June 30, 2012.

Net loss and basic and diluted loss per share. Net loss was ($111,490) and ($75,967) in the three month period ended June 30, 2013 and 2012, respectively. Basic and diluted net loss per share was ($0.00) and ($0.00), respectively in the three month periods ended June 30, 2013 and 2012, respectively.

Six Months Ended June 30, 2013 and 2012

Our revenue, cost of emission certificates, store operating expenses, general and administrative expenses, gain from disposal of non-strategic assets and operating loss for the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 were as follows:


                                              Six Months Ended
                                                   June 30                Percentage
                                            2013            2012            Change
Revenue                                  $ 3,659,721     $ 3,907,869           (6.3%)
Cost of emission certificates                780,603         869,496          (10.2%)
Store operating expenses                   2,587,729       2,594,332           (0.3%)
General and administrative expenses          591,460         632,047           (6.4%)
Gain from sale of non-strategic assets       (72,267 )        (2,458 )            n/a
Operating loss                           $  (227,804 )   $  (185,548 )        (22.8%)

Revenue. Revenue decreased $248,148 or (6.3%), to $3,659,721 in the six month period ended June 30, 2013 compared to $3,907,869 in the six month period ended June 30, 2012. The decrease in revenue over the comparable period was primarily due a net loss in revenues of $486,808 related to six Texas stores permanently closed during late 2012 and early 2013 plus temporary closings of three other stores due to non-renewal of leases in 2013. Additionally, same store revenue decreased by $38,118, or (1.2%). The decrease in same store revenue is mainly attributable to fewer emission tests being performed during the six month period ended June 30, 2013 compared to the prior comparable period. The combined $524,526 decrease in store revenue during the six months ended June 30, 2013 was partially mitigated by a $276,378 increase in revenue resulting from five Georgia stores acquired in November 2012.

Cost of emission certificates. Cost of emission certificates decreased $88,893, or (10.2%), in the six month period ended June 30, 2013 and was $780,603, or 21.3% of revenues, compared to $869,496, or 22.2% of revenues, in the six month period ended June 30, 2012. The decrease in cost of emission certificates over the comparable period was primarily due to the previously discussed store closings and decrease in same store sales partially offset by increased cost of sales from the five stores acquired in November 2012. The decrease in cost of emission certificates as a percentage of sales is due to the majority of the store closings occurring in Texas where emission certificates cost approximately 35% of sales.

Store operating expenses. Store operating expenses decreased $6,603, or (0.3%), in the six month period ended June 30, 2013 and was $2,587,729, or 70.7% of revenues, compared to $2,594,332, or 66.4% of revenues, in the six month period ended June 30, 2012. The decrease in store operating expenses over the comparable period was primarily due to the previously discussed store closings and decrease in same store sales partially offset by increased store operating expenses from the five stores acquired November 2012.

General and administrative expenses. Our general and administrative expenses decreased $40,587, or (6.4%), to $591,460 in the six month period ended June 30, 2013 from $632,047 in the six month period ended June 30, 2012. The decrease in general and administrative expenses during the six month period June 30, 2012 was mainly due to lower legal and accounting fees.

Gain from sale of non-strategic assets. On April 11, 2013, the Company sold the assets comprising three of its Texas stores for $110,000. The Company received $50,000 cash at closing and a note receivable for $60,000. The net book value of the assets sold was $37,733 resulting in a recorded gain of $72,267 on the asset sale. We recognized a gain of $2,458 from the sale of non-strategic assets in the six month period ended June 30, 2012.

Operating loss. Our operating loss increased by $42,256 in the six month period ended June 30, 2013 and was ($227,804) compared to an operating loss of ($185,548) in the six month period ended June 30, 2012. The increase in our operating loss was primarily due to the $248,148 decrease in sales, partially offset by a net $69,806 gain from disposal of non-strategic assets. Without the asset sale, our loss actually increased by $112,065.

Interest income, interest expense, net loss and basic and diluted net loss per share. Our interest income, interest expense, net loss and basic and diluted net loss per share for the six month period ended June 30, 2013 as compared to the six month period ended June 30, 2012 is as follows:

                                                                 Six Months Ended
                                                                     June 30,
                                                               2013             2012
Operating loss                                             $   (227,804 )   $   (185,548 )
Interest income                                                   2,010            1,510
Interest expense                                               (156,469 )         (8,711 )
Net loss                                                   $   (382,263 )   $   (192,749 )
Basic and diluted net loss per share                       $      (0.01 )   $      (0.01 )
Weighted average shares outstanding, basic and diluted       34,688,166       34,688,166

The Company incurred net interest expense of $154,459 and $7,201 during the six month periods ended June 30, 2013 and 2012, respectively. The net increase of $147,258 in interest expense during the six months ended June 30, 2013 compared to 2012 was primarily the result of the amortization of $99,856 loan origination costs associated with the second loan taken under the new line of credit acquired during October 2012 plus increased interest costs on our line of credit, which had a balance of $720,000 as of June 30, 2013 compared to a balance of $350,000 as of June 30, 2012.


Net loss and basic and diluted net loss per share. Net loss was ($382,263) and ($192,749) in the six month periods ended June 30, 2013 and 2012, respectively. Basic and diluted net loss per share was ($0.01) and ($0.01), respectively, in the six month periods ended June 30, 2013, and 2012, respectively.

Liquidity and Capital Resources

Introduction

Our net cash position increased by $16,487 during the six months ended June 30, 2013 primarily resulting from cash provided from asset sales, while our total liabilities increased by $241,754, primarily as a result a $282,805 increase in accounts payable. We hope to achieve an increase in our net operating cash flows on a long-term basis, but we will not achieve positive operating cash flows during 2013.

Cash Requirements

For the six months ended June 30, 2013, our net cash provided by operating activities was $9,802 compared to net cash used in operations of $176,694 in the six months ended June 30, 2012. Positive operating cash flows during the six months ended June 30, 2013 were primarily created by an increase of $258,575 in accounts payable and accrued liabilities plus depreciation and amortization of $190,781 reduced by a net loss of $382,263 and a $72,267 gain on sale of non-strategic assets.

Negative operating cash flows during the six months ended June 30, 2012 were primarily created by a net loss of $192,749, an increase in other current assets of $55,169, a decrease in accounts payable and accrued liabilities of $14,968 offset by depreciation and amortization of $91,278.

Sources and Uses of Cash

Net cash provided by investing activities was $46,156 for the six months ended June 30, 2013 compared to net cash provided by investing activities of $13,645 for the six months ended June 30, 2012. The net cash provided by investing activities during the six months ended June 30, 2013 was related to proceeds from a note receivable of $16,000 and proceeds from non-strategic asset sales of $50,000, offset by capital expenditures of $19,844. The net cash provided by investing activities during the six months ended June 30, 2012 was related to proceeds from a note receivable of $13,615 and proceeds from asset sales of $3,100, offset by capital expenditures of $3,070.

Net cash used in financing activities for the six months ended June 30, 2013 was $39,471 compared to net cash provided by financing activities of $223,543 for the six months ended June 30, 2012. During the six months ended June 30, 2013, we made a net reduction of $23,600 in our line of credit and made principal payments of $1,466 and $14,405 on equipment financing obligations and capital leases, respectively. During the six months ended June 30, 2012, we received a net $260,000 from our line of credit and made principal payments of $12,127 and $24,330 on equipment financing obligations and capital leases, respectively.

Critical Accounting Policies

The discussion and analysis of the Company's financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our Board of Directors, the Company has identified accounting policies related to valuation of our equity instruments, valuation of goodwill created as the result of business acquisitions, as key to an understanding of our consolidated financial statements. These are important accounting policies that require management's most difficult, subjective judgments.

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