SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
COMMISSION FILE NUMBER: 0-27229
AUTEO MEDIA, INC. fka
FLINTROCK FINANCIAL SERVICES, INC.
----------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 88-0409163
---------------------- -----------------------------------
(STATE OF ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
22125 17th Avenue S.E., Suite 105
Bothell, WA 98021
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(425) 415-1694
--------------------------------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X
THERE ARE 5,395,000 SHARES OF COMMON STOCK OUTSTANDING AS OF OCTOBER 31,
2000.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Balance Sheets at September 30,
2000 (unaudited) and December 31, 1999 1
Condensed Statements of Operations for the
three and nine months ended September 30, 2000 and 1999
(unaudited) 2
Condensed Statements of Cash Flows for the
three and nine months ended September 30, 2000 and 1999
(unaudited) 3
Notes to Condensed Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II OTHER INFORMATION
Item 6 Exhibits 7
SIGNATURES 9
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited financial statements for the quarter ended September
30, 2000, prepared by management, and expressed in U.S. Dollars, are
as follows:
<TABLE>
<CAPTION>
AUTEO MEDIA, INC.
CONDENSED BALANCE SHEETS
ASSETS
September 30,
2000 December 31,
(unaudited) 1999
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 20,206 $ 11,008
Accounts receivable - net 81,018 48,596
Inventories 27,000 9,000
Prepaid expenses - 500
--------- --------
Total current assets 128,224 69,104
EQUIPMENT AND FURNITURE - net 126,422 58,072
OTHER ASSETS - net 33,218 43,836
--------- --------
$ 287,864 $171,012
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 44,231 $ 45,693
Accrued liabilities 54,830 12,430
Shareholder note payable - 84,134
--------- --------
Total current liabilities 99,061 142,257
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock authorized, 25,000,000 shares $.001 par value 10,440 10,500
Additional contributed (distributed) capital (590,245) 38,201
Stock subscriptions 1,180,000 -
Accumulated deficit (411,392) (19,946)
--------- --------
Total stockholders' equity 188,803 28,755
--------- --------
$ 287,864 $171,012
========= ========
The accompanying notes are an integral part of these statements.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
AUTEO MEDIA, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------------- ------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues $ 223,270 $ 168,216 $ 659,985 $ 455,231
Cost of revenues 3,461 14,895 56,193 31,550
--------- --------- --------- ---------
Gross profit 219,809 153,321 603,792 423,681
Operating expenses
Selling, general and administrative 418,403 75,203 935,303 228,001
Depreciation and amortization 17,807 10,449 55,423 30,475
--------- --------- --------- ---------
436,210 85,652 990,726 258,476
--------- --------- --------- ---------
Operating (loss) earnings (216,401) 67,669 (386,934) 165,205
Other expenses
Interest expense - (1,789) (965) (5,154)
Other (5,902) (3,102) (3,547) (3,102)
--------- --------- --------- ---------
(5,902) (4,891) (4,512) (8,256)
--------- --------- --------- ---------
NET (LOSS) EARNINGS $(222,303) $ 62,778 $(391,446) $156,949
========= ========= ========= ========
Net (loss) earnings per share $ (0.018) $ 0.006 $ (0.032) $ 0.015
========= ========= ========= ========
Net (loss) earnings per share assuming dilution $ (0.018) $ 0.006 $ (0.032) $ 0.015
========= ========= ========= ========
The accompanying notes are an integral part of these statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AUTEO MEDIA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Nine months ended
September 30,
------------------------------
2000 1999
---------- --------
<S> <C> <C>
Increase (Decrease) in Cash
Cash flows from operating activities:
Net (loss) earnings $ (391,446) $156,949
Adjustments to reconcile net (loss) earnings to net
cash provided by (used in) operating activities
Depreciation and amortization 55,423 30,475
Loss on sale of equipment 330 -
Issuance of common stock for services 104,070 -
Changes in assets and liabilities
Accounts receivable (32,422) (26,864)
Inventories (18,000) -
Prepaid expenses and other assets (8,855) -
Accounts payable 18,884 13,066
Accrued liabilities 42,400 (13,722)
---------- --------
Net cash (used in) provided by operating activities (229,616) 159,904
---------- --------
Cash flows from investing activities:
Purchase of equipment (108,147) (23,186)
Proceeds from sale of equipment 4,017 -
---------- --------
Net cash used in investing activities (104,130) (23,186)
---------- --------
Cash flows from financing activities:
Payments on shareholder note payable (2,056) (8,440)
Proceeds from common stock subscribed 1,180,000 -
Distributions to shareholder (835,000) (88,870)
---------- --------
Net cash provided by (used in) financing activities 342,944 (97,310)
---------- --------
Net increase in cash 9,198 39,408
---------- --------
Cash at beginning of period 11,008 30,854
---------- --------
Cash at end of period $ 20,206 $ 70,262
========== ========
Non cash investing and financing activities:
Issuance of common stock for TYSA common stock $ 2,100
==========
Distribution of common stock to TYSA shareholder $ (2,100)
==========
Additional contributed capital through forgiveness of
shareholder note payable $ 102,424
==========
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
AUTEO MEDIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. FINANCIAL STATEMENTS
The unaudited condensed financial statements of Auteo Media, Inc. fka Flintrock
Financial Services, Inc. (the Company) have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 2000. The accompanying unaudited condensed financial
statements and related notes should be read in conjunction with the audited
financial statements and the Form 8-K/A of the Company, filed on May 9, 2000.
NOTE 2. STOCK DIVIDEND
On January 20, 2000, the Company declared a dividend of 4 shares of common stock
for each 1 share held by the shareholders of record as January 19, 2000. Shares
totaling 8,400,000 were distributed to the shareholders on January 21, 2000. The
par value of the common stock remained the same. All per share earnings and
references to common stock have been retroactively restated to reflect the
increase in common shares outstanding.
NOTE 3. NET (LOSS) EARNINGS PER SHARE
Basic (loss) earnings per share are based on the weighted average number of
shares outstanding during each quarter. The weighted average shares for
computing the Company's basic (loss) earnings per share were 12,488,043 and
10,500,000 for the three months ended September 30, 2000 and 1999, respectively,
and 12,102,555 and 10,500,000 for the nine months ended September 30, 2000 and
1999, respectively. The Company did not have any dilutive common stock
equivalents for the three and nine months ended September 30, 1999.
Because of the net loss for the three and nine months ended September 30, 2000,
common stock equivalent shares were not included in the calculation of diluted
earnings per share as their inclusion would be anti-dilutive.
NOTE 4. ACQUISTION
On February 29, 2000, the Company entered into an agreement with TYSA
Corporation (TYSA) whereby the Company purchased 82.5% of the outstanding common
stock of TYSA for cash consideration of $835,000 and 2,100,000 shares of the
Company's common stock. In conjunction with the acquisition, the majority
shareholders of TYSA were appointed to the Board of Directors and assumed
control of the operations of the resulting company, Auteo Media, Inc. This
transaction
4
<PAGE>
resulted in TYSA being the accounting acquirer in the transaction. The
acquisition has been accounted for as a reverse acquisition whereby the
historical financial statements of TYSA become those of Auteo Media, Inc.
In conjunction with the acquisition, certain stockholders surrendered 2,200,000
shares of issued and outstanding common stock of the Company. On September 25,
2000, the Company cancelled the 2,200,000 shares of common stock, which became
authorized for future issuance.
NOTE 5. ABSTRACT MERGER
On April 21, 2000, the Company entered into a letter of intent with Abstract
Enterprises Corp. (Abstract) whereby Abstract would merge with the Company based
on a share exchange between the Abstract Shareholders and the Company. The
agreement calls for the Abstract Shareholders to exchange four common shares of
Abstract for every one share of Auteo Media's common shares. A condition of the
agreement calls for the completion of financing by the Company of not less than
$3 million on or before September 30, 2000. As of September 30, 2000, the
conditions of the agreement had not been met.
NOTE 6. STOCK SUBSCRIPTIONS
As of September 30, 2000, the Company has raised $1,180,000 through a private
placement offering of its common stock. Each Unit consists of one share of
common stock and one warrant to purchase one share of common stock for $8 per
share for a period of one year. A majority of the monies received were used to
purchase the commonstock of TYSA. The offering is still in process however do to
market conditions the Company is marketing restricted shares at a discount to
market as an alternative; therefore, the Company has not issued the shares as of
September 30, 2000. The Company has recorded stock subscriptions totaling
$1,180,000 as of September 30, 2000.
During the three months ended September 30, 2000, the Company issued 40,000
shares of common stock to consultants for services totaling $104,070.
NOTE 7. FUTURE EFFECT OF RECENTLY ISSUED ACCOUNTING PROUNOUNCEMENTS
In December 1999, the SEC staff issued Staff Accounting Bulletin 101, Revenue
Recognition in Financial Statements (SAB 101), which outlines four basic
criteria that must be met before registrants can record revenue (a) persuasive
evidence that on arrangement exists; (b) delivery has occurred or services have
been rendered; (c) the seller's price to the buyer is fixed and determinable;
and (d) collectibility is reasonably assured. The SEC staff originally deferred
the implementation date of SAB 101 (through SAB 101A and SAB 101B) until no
later than the fourth quarter of fiscal years beginning after December 15, 1999.
The Company believes the adoption of SAB 101 will have no significant impact on
the Company's financial statements.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion of our results of operations and
financial condition in conjunction with our financial statements and related
notes included elsewhere in this Quarterly Report on Form 10-QSB. This
discussion contains forward-looking statements based on current expectations
that involve risks and uncertainties. Actual results and the timing of certain
events may differ significantly from those projected in such forward-looking
statements due to a number of factors, including those discussed in the section
entitled "Risk Factors" below.
OVERVIEW
We are an online and point-of-purchase automotive communications and commerce
company that connects buyers and sellers of autos, vans and trucks and
aftermarket accessories, capturing revenue at multiple stages. Our California
and Northwest Dealer Specialties business collects automotive data and digital
pictures and prints customized window labels on behalf of car dealerships. The
data is sent to multiple automotive internet sites including the dealership in
some cases. Through our PC based Web site, www.autoloco.com, and our wireless
website www.pocketauto.com, consumers can view the window labels of over 300,000
used vehicles and access an estimated five million new vehicles from dealerships
across the United States. They can research pricing, receive insurance and loan
rates and other information. The Company promotes and creates verbal and e-mail
based communications between consumers and sellers of autos.
Dealerships can track and manage these communications with its customer
relationship management system ContactAuto. This software is Internet based and
accessed through certain wireless, Internet ready devices. Additionally, the
Company will offer aftermarket auto accessories through its e-commerce site
www.partcart.com, currently in development.
We derive the majority of our revenues from dealerships paying us for our
data collection and window label services. This revenue is collected at the time
the service is provided and is not dependant upon the sale of the vehicle. For
the three months ended September 30, 2000 and 1999, revenues from related
products and services were $232 thousand and $168 thousand, respectively. We
believe our ability to increase our revenues is directly related to the number
of subscribing dealers in our networks and geographic areas and the services,
existing and new, we are able to market to them.
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES
Revenues increased to $660.0 thousand from $455.2 thousand for the nine months
ended September 30, 2000 and 1999, respectively, and increased to $223.3
thousand from $168.2 thousand for the three months ended September 30, 2000 and
1999, respectively. This represents an increase of $204.8 thousand or 45% for
the nine months ended and $55.1 thousand or 33% for the three months ended. This
growth can be attributed to market penetration in Washington and in California
of its Dealer Specialties business unit.
GROSS PROFIT
Gross profit increased to $603.8 thousand from $423.7 thousand for the nine
months ended September 30, 2000 and 1999, respectively, and increased to $219.8
thousand from $153.3 thousand for the three months ended September 30, 2000 and
1999, respectively. This represents an increase of $180.1 thousand or 43% for
the nine months ended and $66.5 thousand or 43% for the three months ended. This
increase is attributed to the increase in sales and cost cutting measures by the
Company.
6
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased to $935.3 thousand from
$228.0 thousand for the nine months ended September 30, 2000 and 1999,
respectively, and increased to $418.4 thousand from $75.2 thousand for the three
months ended September 30, 2000 and 1999, respectively. This represents an
increase of $707.3 thousand or 310% for the nine months ended and $343.2
thousand or 456% for the three months ended. This increase can be attributed to
increased costs associated with the acquisition of TYSA, entering into an new
lease agreement for corporate office space, increased accounting, legal and
other consulting fees, additional labor costs to handle the increased demand for
the Company's products and services in existing and new areas and cash and stock
incentives to further and complete research and development of the company's new
business units.
DEPRECIATION, LAND AND AMORTIZATION
Depreciation and amortization expenses increased to $55.4 thousand from $30.5
thousand for the nine months ended September 30, 2000 and 1999, respectively,
and increased to $17.8 thousand from $10.4 thousand for the three months ended
September 30, 2000 and 1999, respectively. This represents an increase of $24.9
thousand or 82% for the nine months ended and $7.4 thousand or 71% for the three
months ended. This increase can be attributed to the addition of equipment to
support the Company's growth and accelerated depreciation taken on certain
equipment during the six months ended June 30, 2000.
NET EARNINGS (LOSS)
Net earnings decreased from $156.9 thousand for the nine months ended September
30, 1999 to a net loss of $391.4 thousand for the nine months ended September
30, 2000. Net earnings also decreased from $62.8 thousand for the three months
ended September 30, 1999 to a net loss of $222.3 for the three months ended
September 30, 2000. The decrease in earnings is the result of the Company
investing in its expansion into the California market, software development and
improvements to existing services. The Company also began a program to pay
certain vendors with restricted shares of the Company stock in exchange for
services in the amount of $104,070.
RESEARCH AND DEVELOPMENT
The Company completed work on its new web site www.autoloco.com,
www.pocketauto.com and began beta site testing on its ContactAuto software. It
completed its development of placing automotive content and customer emails onto
the new Internet ready, cellular phone platform. The Company also completed its
work toward expansion of its regional website presence into automotive websites
offering new and used car buying services on a national basis.
STOCK-OPTIONS GRANTED IN 2000
The Company implemented an employee stock option program in September of 2000.
During that month we granted stock options to purchase 256,000 shares of common
stock under the 2000 Stock Incentive Plan. The stock options were granted at the
fair market value on the date of grant. These options vest over a four-year
period as defined under the plan.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 2000, the Company incurred negative
cash flow from operations of $229.6 thousand compared to positive cash generated
from operations of $159.9 thousand for the nine months ended September 30, 1999.
The net cash used in operating activities was primarily attributed to increased
costs related to the expanding of the business as noted in the results of
operations. Net cash used in investing activities for the nine months ended
September 30, increased from $23.2 thousand in 1999 to $104.1 thousand in 2000.
The increase is attribute to the Company purchasing additional equipment to
support its growth. Net cash used in financing activities for the nine months
ended September 30, was $97.3 thousand in 1999 compared to net cash provided by
financing activities of $342.9 thousand in 2000. The Company commenced a private
placement of its common stock for $6.00 per unit during the first quarter of
2000, which resulted in receipt of $950,000 for stock subscriptions. Subsequent
to March
7
<PAGE>
31, 2000, the Company received additional subscriptions of $230,000, together
with a commitment for a further and final subscription of $170,000 for a total
financing of $1,350,000.
Capital requirements vary materially from those currently planned. The
Company currently requires additional financing and is seeking such commitments.
We have no commitments for any additional financing, and there can be no
assurance that any such commitments can be obtained on favorable terms, if at
all. Any additional equity financing may be dilutive to our stockholders. If we
are unable to obtain additional financing as needed, we may be required to
reduce the scope of our operations or our anticipated expansion, which could
have a material adverse effect on our business, results of operations and
financial condition.
LEASE AND LEASEHOLD IMPROVEMENTS
On April 15, 2000, Auteo Media, Inc. entered into a Lease Agreement with
Teachers Insurance & Annuity Association of America, Inc. Terms of the Lease are
for a period of five years at a monthly rate of $6,508 for years one and two,
increasing approximately 10% thereafter. The premises are for 5,446 square feet
of which approximately 500 is warehouse space. The space is required to house
development, administrative and marketing personnel.
RISK FACTORS
In addition to the factors discussed in the "Overview" and "Liquidity and
Capital Resources" sections of Item 2 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in this Quarterly Report on Form
10-QSB, the following additional factors may affect our future results. These
risk factors are not considered all inclusive since other significant events can
occur and negatively impact the revenues, earnings and price of the Company's
common stock.
1. We are operating at a loss and cannot assure that we will be profitable. If
we continue to lose money our operations will not be financially viable. Our
potential for future profitability must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
the early stages of development, particularly companies in new and rapidly
evolving markets.
2. Competition could reduce our market share harm our financial performance. Our
market is competitive not only because certain business activities are Internet
related with minimal barriers to entry, but also because we compete directly
with other companies in the offline environment
3. If we lose key personnel or are unable to train and retain additional highly
qualified sales, marketing, managerial and technical personnel our business may
suffer.
4. We need to manage our growth and our entry into the new Internet business
areas in order to avoid increased expenses without corresponding revenues.
5. Our success is dependant on keeping pace with advances in technology. If we
are unable to keep such pace consumers may stop using our services and revenues
will decrease.
6. Our current revenues are strongly dependant upon our contractual relationship
with Dealer Specialties International, a Trader Publishing company. If our
relationship were to discontinue we would suffer from loss of revenues and
earnings.
7. Internet commerce is new and evolving with few profitable business models.
We cannot assure that our business models will be profitable.
8. The public market for our common stock may continue to be volatile,
especially since market prices for Internet-related and technology stocks have
often been unrelated to operating performance.
8
<PAGE>
9. Our founders, officers and Directors and their affiliates have substantial
control of our voting stock and the ability to significantly influence and in
all likelihood make decisions that could adversely affect stockholders. Such
decisions could adversely affect our stock price.
10. Sales or the perception of future sales of our common stock may depress our
stock price. Since the market prices for Internet-related stocks are likely to
remain volatile, our stock price may be more adversely affected than other
companies by such future sales.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated this 14th day of November, 2000.
AUTEO MEDIA, INC.
By: /s/ STEVE VAN LEEUWEN
---------------------
Steve Van Leeuwen
President
Dated: November 14, 2000
10
<PAGE>
EXHIBITS
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
11
