UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2001
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number: 000-30554
Future Carz, Inc.
(Exact name of registrant as specified in its charter)
Nevada 88-0431029
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8930 East Raintree, Suite 300, Scottsdale, AZ 85260
(Address of principal executive offices) (Zip Code)
(480) 444-0080
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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 filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as September 30 2001: 14,879,087
FUTURE CARZ, INC.
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of September 30, 2001 (Unaudited) 3
Statements of Operations For the Three and Nine Months
Ended September 30, 2001 and 2000 (Unaudited) 4
Statements of Cash Flows For the Nine Months Ended
September 30, 2001 and 2000 (Unaudited) 5
Notes to Financial Statements (Unaudited) 6-8
Item 2. Management's Discussion and Plan of Operation 9-11
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 13
2
FUTURE CARZ, INC.
BALANCE SHEET
SEPTEMBER 30, 2001
(UNAUDITED AND RESTATED)
ASSETS
Current assets:
Cash $ 4,510
Accounts receivable 29,502
Note receivable 1,009
Prepaid expenses 62,967
-----------
Total current assets 99,088
-----------
Fixed assets, net 51,121
-----------
$ 150,209
===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 247,676
Accrued interest 1,500
Accrued interest - related parties 19,279
Notes payable 50,000
Notes payable - related parties 178,696
-----------
Total current liabilities 513,830
-----------
Long term liabilities:
Notes payable - related party 20,000
-----------
Stockholders' (Deficit):
Preferred stock, $0.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding --
Common stock, $0.001 par value, 20,000,000 shares
authorized, 14,879,087 shares issued and outstanding 14,879
Additional paid-in capital 4,823,810
Deferred compensation (456,041)
Accumulated (deficit) (4,766,269)
-----------
(383,621)
-----------
$ 150,209
===========
The accompanying notes are an integral part of these financial statements.
3
FUTURE CARZ, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months For the nine months
ended September 30, ended September 30,
2001 2000 2001 2000
----------- ---------- ----------- ----------
(Restated) (Restated)
Revenue $ 87,523 $ -- $ 168,954 $ --
----------- ---------- ----------- ----------
Expenses:
Non-cash stock compensation 165,652 -- 488,869 --
Write off of assets acquired by
issuance of stock 1,568,400 -- 3,134,340 --
General and administrative 164,554 10,838 604,205 17,700
Depreciation and amortization 2,718 1,424 7,267 4,271
----------- ---------- ----------- ----------
1,901,324 12,262 4,234,681 21,971
----------- ---------- ----------- ----------
Net operating (loss) (1,813,801) (12,262) (4,065,727) (21,971)
----------- ---------- ----------- ----------
Other income (expenses):
Interest income -- -- 1,017 --
Interest expense (7,623) -- (16,890) --
Loss on disposal of assets (55,450) -- (98,697) --
Loss on writedown of assets (146,973) -- (379,735) --
----------- ---------- ----------- ----------
Net (loss) $(2,023,847) $ (12,262) $(4,560,032) $ (21,971)
=========== ========== =========== ==========
Weighted average number of common shares
outstanding - basic and fully diluted 14,128,779 5,328,087 10,839,719 5,328,087
=========== ========== =========== ==========
Net (loss) per share - basic and fully diluted $ (0.14) $ (0.00) $ (0.42) $ (0.00)
=========== ========== =========== ==========
The accompanying notes are an integral part of these financial statements.
4
FUTURE CARZ, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months
ended September 30,
2001 2000
--------- ---------
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) operating activities $(303,169) $ (17,700)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances on notes receivable (1,000) --
Purchase of fixed assets (25,087) --
Proceeds from sale of assets held for sale 67,813 --
--------- ---------
Net cash provided by investing activities 41,726 --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 50,000 --
Proceeds from notes payable - related parties 144,696 62,000
Payments on note payable - related parties (6,000) --
--------- ---------
Net cash provided by financing activities 188,696 62,000
--------- ---------
Net (decrease) in cash (72,747) 44,300
Cash - beginning 77,257 5,082
--------- ---------
Cash - ending $ 4,510 $ 49,382
========= =========
The accompanying notes are an integral part of these financial statements.
5
FUTURE CARZ, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(UNAUDITED AND RESTATED)
Note 1: Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and Item 310(b) of Regulation S-B. They do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America 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. These financial
statements should be read in conjunction with the audited financial statements
of the Company as of December 31, 2000 and for the year then ended and from
inception to December 31, 2000, including notes thereto, included in the
Company's 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: Asset Purchase Agreement
On February 23, 2001, the Company entered into an Asset Purchase Agreement
(Agreement) with Auto Central Discount, Inc. (Auto Central), whereby the Company
issued 2,000,000 shares of its $0.001 par value common stock valued at
$1,750,000 in exchange for automobiles valued at $184,060, the assumption of
three Auto Central operating leases, and a consulting agreement (see Note 4).
Pursuant to the Agreement, the holders of the shares have piggyback registration
rights. During the period ended June 30, 2001 the Company determined that the
value of the assets acquired other than the automobiles was impaired and charged
$1,565,940 to operations related to the impairment.
On July 12, 2001, the Company entered into an Asset Purchase Agreement
(Agreement) with American Automotive Group, Inc. (American), whereby the Company
acquired automobiles valued at $171,600 from American in exchange for 3,000,000
shares of its $0.001 par value common stock valued at $1,740,000. Pursuant to
the Agreement, the holders of the shares have piggyback registration rights.
During the period ended September 30, 2001 the Company determined that the value
of the assets acquired other than the automobiles was impaired and charged
$1,568,400 to operations related to the impairment.
6
Note 4: Stockholders' (Deficit)
During January 2001, the Company issued 50,000 shares of its $0.001 par value
common stock at $0.97 per share to a shareholder in exchange for services. These
shares were valued at their fair market value on the date the Company agreed to
issue the shares.
On February 23, 2001 the Company issued 2,000,000 shares of its $0.001 par value
common stock at a price of $0.875 per share related to the Asset Purchase of
Auto Central (See Note 3). These shares were valued at their fair market value
on the date the Company agreed to issue the shares.
On March 6, 2001, the Company commenced a Regulation D offering pursuant to Rule
506 of the Securities and Exchange Commission Act of 1933, as amended. The
Private Placement Memorandum offers investment units consisting of $10,000 notes
at 15% interest plus 10,000 shares of the Company's $0.001 par value common
stock as an inducement. On March 16, 2001, the Company issued 30,000 shares of
its $0.001 par value common stock at a price of $0.52 per share and a $30,000
note to two individuals. Also, on July 20, 2001, the Company issued 30,000
shares of its $0.001 par value common stock at a price of $0.82 per share and a
$30,000 note to an individual. These shares were valued at their fair market
value on the date the Company agreed to issue the shares.
During the quarter ended March 31, 2001, the Company issued 100,000 shares of
its $0.001 par value common stock to two shareholders at a price of $0.30 per
share in exchange for services performed. These shares were valued at their fair
market value on the date the Company agreed to issue the shares.
On April 1, 2001, the Company issued 1,000,000 shares of its $0.001 par value
common stock to the President of the Company for services to be performed valued
at $220,000. At September 30, 2001, the Company had deferred stock compensation
aggregating $110,000 for the services that have not been performed. These shares
were valued at their fair market value on the date the Company agreed to issue
the shares.
On April 12, 2001, the Company issued 1,010,000 shares of its $0.001 par value
common stock to certain individuals as bonuses valued at $182,200. These shares
were valued at their fair market value on the date the Company agreed to issue
the shares.
On July 12, 2001, the Company issued 3,000,000 shares of its $0.001 par value
common stock at a price of $0.58 per share, which approximates the fair market
value of the shares, related to the Asset Purchase of American Automotive Group
(See Note 3).
During the quarter ended September 30, 2001, the Company issued 1,007,000 shares
of its $0.001 par value common stock to various shareholders in exchange for
services to be performed valued at $424,010. These shares were valued at their
fair market value on the date the Company agreed to issue the shares. At
September 30, 2001, the Company had deferred stock compensation of $346,041 for
the services that have not been performed.
7
Note 5: Notes Payable
During the nine months ended September 30, 2001, the Company received $144,696,
including $60,000 from the Private Placement Memorandum described above, from
related parties as evidenced with promissory notes. The promissory notes are all
due within one year except for $36,000, and bear interest ranging from 8% to
20%. Of this amount, $6,000 was repaid during the nine months ended September
30, 2001.
During the nine months ended September 30, 2001, the Company entered into two
notes with third parties for $50,000 with interest at 8% and various due dates
and terms.
Note 6: Going Concern
The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. For the nine months ended September 30, 2001 the
Company incurred a net loss of $4,560,032 and has a working capital deficit of
$414,742 and a stockholders' deficits of $383,621 at September 30, 2001.
The Company's ability to continue as a going concern is contingent upon its
ability to expand its operations and secure additional financing. The Company is
pursuing financing for its operations and seeking to expand its operations.
Failure to secure such financing or expand its operations may result in the
Company not being able to continue as a going concern.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
Note 7: Correction of an Error
The accompanying financial statements for the period ended September 30, 2001
have been restated to correct errors relating primarily to non-cash stock
compensation. The effect of the restatement was to increase net (loss) for the
three and nine months ended September 30, 2001 by $128,927 and $352,335, or
$0.01 and $0.03 per share, respectively.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATION
FORWARD LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements about our business,
financial condition and prospects that reflect our assumptions and beliefs based
on information currently available. We can give no assurance that the
expectations indicated by such forward-looking statements will be realized. If
any of our assumptions should prove incorrect, or if any of the risks and
uncertainties underlying such expectations should materialize, our actual
results may differ materially from those indicated by the forward-looking
statements.
The key factors that are not within our control and that may have a direct
bearing on operating results include, but are not limited to, the acceptance of
our services, our ability to close auto loans, our ability to raise capital in
the future, the retention of key employees and changes in the regulation of our
industry.
There may be other risks and circumstances that we are unable to predict. When
used in this Quarterly Report, words such as, "BELIEVES," "EXPECTS," "INTENDS,"
"PLANS," "ANTICIPATES," "ESTIMATES" and similar expressions are intended to
identify forward-looking statements, although there may be certain
forward-looking statements not accompanied by such expressions. All
forward-looking statements are intended to be covered by the safe harbor created
by Section 21E of the Securities Exchange Act of 1934.
GENERAL
Future Carz, Inc. ("Future Carz" or the "Company"), a Nevada corporation
incorporated on July 13, 1999 is in the used automobile leasing industry with a
principal business objective to offer financial alternatives to qualified
individuals who do not meet traditional financing terms. Through our division
formed in February 2001, AutoCarz, Inc. ("AutoCarz"), we have launched a dealer
network positioned to service the sub-prime credit segment of the auto leasing
market. AutoCarz applies a proven formula with rigorous controls to qualify
potential borrowers. The result is a new type of leasing organization capable of
building highly profitable brand-name stores in a largely untapped market within
the used automobile industry.
The AutoCarz system is aimed at providing individuals with an affordable lease
on a quality pre-owned vehicle. While consumers are using the AutoCarz system,
they work towards building back good credit, as the Company reports regularly to
credit bureaus.
RESULTS OF OPERATIONS
In February 2001, we completed the acquisition of certain assets of Auto Central
Discount, Inc. of San Diego, CA. During July 2001, we completed the acquisition
of certain assets of American Automotive Group, Inc. We currently have
operations in San Diego, California, and Glendale and Scottsdale, Arizona.
Additionally, our web site (www.futurecarz.com) has been remodeled to offer an
array of features aimed at informing and educating interested parties about
Future Carz, our products and services, corporate concept and potential for
success. Key features of the site include an overview of auto leasing, common
terminology, detailed corporate information on the operations of Future Carz and
useful links such as a link to the AutoCarz web site (www.autocarz.net) that
allows potential customers to obtain information on leasing operations, or to
access qualifications for leasing through AutoCarz.
9
We depend on the growing use and acceptance of the Internet as an effective
medium of commerce by merchants and customers. Decreased levels of e-commerce
transactions and the lack of acceptance of the Internet as a medium of commerce
could have a material adverse effect on our operations.
COMPARATIVE
Revenue for the three and nine months ended September 30, 2001 was $87,523, and
$168,954, respectively, as compared to the three and nine-month periods ended
September 30, 2000 in which no revenue was generated. The company is generating
automobile lease revenues of approximately $28,000 per month due mainly to the
asset purchases mentioned above.
Operating expenses for the three months ended September 30, 2001 were
$1,901,324. This represents an increase of $1,889,062 in total operating
expenses from the comparable three month period ended September 30, 2000, when
we reported total operating expenses of $12,262. Total operating expenses for
the nine months ended September 30, 2001 were $4,234,681. This represents an
increase of $4,212,710 in total operating expenses from the comparable nine
month period ended September 30, 2000, when we reported total operating expenses
of $21,971. This increase was due to two factors; the first was a write off of
assets acquired from Auto Central Discount, Inc. and American Automotive Group,
Inc. The second is stock compensation for investor relations and investment
banking services. Our general and administrative expenses have increased as we
have increased our operations.
The Company decided to sell certain assets that were acquired during the year.
For the nine months ended September 30, 2001 we sold assets for gross proceeds
of $67,813. Additionally, we assessed that certain assets were impaired. To this
end we recognized an impairment loss of $379,735 for the nine months ending
September 30, 2001.
Due to the high level of operating expenses relative to revenue we incurred a
net loss for the nine months ended September 30, 2001 of $4,560,032 as compared
to the loss of $21,971 reported in the comparable period of 2000.
The net cash used in operating activities for the nine months ended September
30, 2001 was $303,169 as compared to net cash used in operational activities of
$17,700 reported in the comparable period of 2000. The large increase in cash
used in operations is attributed to our overall increase in general and
administrative expenses.
Cash flow provided by investing activities for the nine months ending September
30, 2001 was $41,726. This amount was made up primarily of proceeds from sale of
assets held for sale of $67,813 and purchases of fixed assets of $25,087.
Cash flow for financing activities for the nine months ending September 30, 2001
was $188,696. This amount was made of proceeds from notes payable of $194,696,
of which $144,696 was from related parties. Additionally the company made a
payment of $6,000 on a note payable to a related party.
10
FUTURE BUSINESS
Over the next six to nine months we plan to solidify the overall structure of
the business plan. This will include keeping the key employee's obtained in the
acquisitions as well as marketing our Auto Carz, Inc. brand through various ad
campaign's i.e. news paper, internet, etc. Our goal is to become one of the
leading alternative pre-owned auto-leasing sources in the nation.
For various reasons, there will always be people with credit problems. We
believe that an opportunity exists to capitalize on this built in segment of the
automotive leasing industry. As we attempt to capture the market for leased used
vehicles in a target price range of $2,000 to $4,000, we face the uncertainty of
the availability of these vehicles. Our focus will be on developing and
maintaining a consistent inventory of used vehicles both in terms of cost and
quality.
LIQUIDITY AND CAPITAL RESOURCES
NET LOSS. Due to the significant administrative expense related to the asset
purchase of Auto Central Discount and American Automotive Group, we experienced
a net loss of $4,560,032 for the nine months ended September 30, 2001, as
compared to a net loss of $21,971 in the nine month period ended September 30,
2000. Our business is very capital intensive. Our return on investment is
greater than in most other industries; however, we do need to close a much
larger number of leases before we become profitable.
We estimate our capital requirements to total approximately $68,000 per month
for the next 12 to 24 months. The Company anticipates that short-term
operational loans will be available from shareholders.
GOING CONCERN. Since its inception, the Company has been engaged substantially
in financing activities and developing its product line, incurring substantial
costs and expenses. As a result, the Company incurred net losses during the
period ended September 30, 2001of $4,560,032. The Company also had a working
capital and stockholders deficits of $414,742 and $383,621, respectively at
September 30, 2001. In addition, the Company's development activities since
inception have been financially sustained by debt and capital contributions from
its affiliates and others. The Company's management has made plans to alleviate
the debt by issuing shares of common stock. The Company is pursuing new lines of
business and increasing equity through the issuance of stock. The ability of the
Company to continue as a going concern is dependent upon its ability to raise
additional capital from the sale of common stock and, ultimately, the
achievement of significant operating revenues. The accompanying financial
statements do not include any adjustments that might be required should the
Company be unable to recover the value of its assets or satisfy its liabilities.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Articles of Incorporation of the Company filed July 13, 1999.
Incorporated by reference to the exhibits to the Company's General
Form For Registration Of Securities Of Small Business Issuers on
Form 10-SB, previously filed with the Commission.
(b) By-Laws of the Company adopted July 16, 1999. Incorporated by
reference to the exhibits to the Company's General Form For
Registration Of Securities Of Small Business Issuers on Form 10-SB,
previously filed with the Commission.
99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
12
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
FUTURE CARZ, INC.
(Registrant)
Date: November 19, 2002
By: /s/ Ethel Merriman
--------------------------
Ethel Merriman
President
13
CERTIFICATIONS
I, Ethel Merriman, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of FutureCarz, 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; and
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. I am responsible for, establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to me
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 my conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent function):
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. I have indicated in this quarterly report whether or not 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 19, 2002
By: /s/ Ethel Merriman
--------------------------
Ethel Merriman
President
14