UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended June 30, 2011
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: 000-51997
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
NEVADA | 65-0637308 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
2174 HEWLETT AVENUE, SUITE 206
MERRICK, NY 11566
(Address of Principal Executive Offices)
(Zip Code)
(516) 377-6311
(Registrant’s Telephone Number including area code)
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 ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
The number of shares outstanding of the Registrant’s common stock as of August ___, 2011 was 554,017 shares.
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
FORM 10-Q
June 30, 2011
TABLE OF CONTENTS
PART I— FINANCIAL INFORMATION | 1 | ||
Item 1. | Financial Statements | 1 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 6 | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 8 | |
Item 4. | Controls and Procedures | 8 | |
PART II— OTHER INFORMATION | 8 | ||
Item 1. | Legal Proceedings | 8 | |
Item 1A. | Risk Factors | 8 | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 8 | |
Item 3. | Defaults Upon Senior Securities | 8 | |
Item 4. | Submission of Matters to a Vote of Security Holders | 9 | |
Item 5. | Other Information | 9 | |
Item 6. | Exhibits | 9 | |
SIGNATURES | 9 |
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Item 1. Financial Statements
The financial statements of Northeast Automotive Holdings, Inc. (the "Company"), included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company as included in the Company's Form 10-K for the year ended December 31, 2010.
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS | June 30, 2011 | December 31, 2010 | ||||||
Current Assets: | ||||||||
Cash | $ | 80,657 | $ | 417,948 | ||||
Accounts receivable | 123,052 | - | ||||||
Inventory | 64,853 | 480,598 | ||||||
Total Current Assets | 268,562 | 898,546 | ||||||
Equipment, net | 8,080 | 10,804 | ||||||
Other assets | 3,589 | 1,800 | ||||||
TOTAL ASSETS | $ | 280,231 | $ | 911,150 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilities: | ||||||||
Customer deposits payable | $ | - | $ | 48,430 | ||||
Note payable to bank | 100,000 | 100,000 | ||||||
Demand loans payable | - | 263,753 | ||||||
Due to stockholders | 23,105 | 272,640 | ||||||
Accrued expenses | 18,053 | 39,123 | ||||||
Payroll taxes withheld and accrued | 1,957 | 874 | ||||||
Total Current Liabilities | 143,115 | 724,820 | ||||||
Stockholders' equity | ||||||||
Preferred stock, 0.0001 par value, 10,000,000 shares authorized, 10,000,000 issued and outstanding | 1,000 | 1,000 | ||||||
Common stock, .001 par value, 300,000,000 shares authorized, 554,017 shares issued and outstanding June 30, 2011 and December 31, 2010 | ||||||||
554 | 554 | |||||||
Capital Stock to be issued (500,000 Shares) | 20,000 | 20,000 | ||||||
Additional Paid in Capital | 3,957,424 | 3,957,424 | ||||||
Accumulated Deficit | (3,840,686 | ) | (3,791,472 | ) | ||||
138,292 | 187,506 | |||||||
Less: Treasury stock (6,667 common shares) | (1,176 | ) | (1,176 | ) | ||||
Total Stockholders' Equity | 137,116 | 186,330 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 280,231 | $ | 911,150 |
See Notes to Unaudited Financial Statements
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NORTHEAST AUTOMOTIVE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, 2011 | Three Months Ended June 30, 2010 | Six Months Ended June 30, 2011 | Six Months Ended June 30, 2010 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Net sales | $ | 163,664 | 3,464,861 | 579,440 | 7,018,604 | |||||||||||
Cost of sales | 162,376 | 3,136,739 | 524,853 | 6,462,511 | ||||||||||||
Gross profit | 1,288 | 328,122 | 54,587 | 556,093 | ||||||||||||
Operating expenses: | ||||||||||||||||
Officers salaries | - | - | 20,338 | - | ||||||||||||
Interest expense | - | 37,302 | 4,378 | 69,540 | ||||||||||||
Selling, general and administrative | 13,030 | 126,767 | 77,606 | 271,169 | ||||||||||||
Total operating expenses | 13,030 | 164,069 | 102,322 | 340,709 | ||||||||||||
Profit (Loss) from operations | (11,742 | ) | 164,053 | (47,735 | ) | 215,384 | ||||||||||
Income taxes | 110 | - | 1,479 | 12,561 | ||||||||||||
Net profit (loss) | $ | (11,852 | ) | 159,836 | (49,214 | ) | 202,823 | |||||||||
Net profit (loss) per share basic and diluted | $ | (0.02 | ) | 0.29 | (0.09 | ) | 0.37 | |||||||||
Weighted average number of shares outstanding | 554,017 | 554,017 | 554,017 | 554,017 |
See Notes to Unaudited Financial Statements
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NORTHEAST AUTOMOTIVE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2011 (unaudited) | Six Months Ended June 30, 2010 (unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net profit (loss) | $ | ( 49,214 | ) | $ | 202,823 | |||
Adjustments to reconcile net profit (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 2,724 | 2,724 | ||||||
Changes in operating assets and liabilities: | ||||||||
(Increase in accounts receivable | (123,052 | ) | - | |||||
(Increase) in inventory | 415,745 | (59,213 | ) | |||||
(Increase) decrease in other assets | (1,789 | ) | 4,478 | |||||
Decrease in customer deposits payable | (48,430 | ) | - | |||||
Increase in accounts payable | - | 120,539 | ||||||
Decrease in accrued expenses | (21,070 | ) | (11,769 | ) | ||||
Increase (decrease) in payroll taxes | 1,083 | (469 | ) | |||||
Total adjustments | 225,211 | 56,290 | ||||||
CASH PROVIDED BY OPERATING ACTIVITIES | 175,997 | 259,113 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds of line of credit | - | 1,305,493 | ||||||
Repayment of line of credit | - | (1,413,272 | ) | |||||
Repayment of stockholders loan | (249,535 | ) | (547,409 | ) | ||||
Proceeds of demand loans | 45,700 | 550,000 | ||||||
Repayment of demand loans | (309,453 | ) | (366,523 | ) | ||||
CASH USED IN FINANCING ACTIVITIES | (513,288 | ) | (471,711 | ) | ||||
NET DECREASE IN CASH | (337,291 | ) | (212,598 | ) | ||||
CASH | ||||||||
Beginning of year | 417,948 | 341,629 | ||||||
End of period | $ | 80,657 | $ | 129,031 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
Cash paid for: | ||||||||
Income tax payments | $ | 1,479 | $ | 4,217 | ||||
Interest payments | $ | 4,378 | $ | 69,540 |
See Notes to Unaudited Financial Statements.
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NORTHEAST AUTOMOTIVE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
The Company buys used automobiles at auctions, then repairs, cleans, transports and resells them wholesale throughout the United States.
BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis addresses material changes in the results of operations and financial condition of Northeast Automotive Holdings, Inc. and Subsidiaries (the “Company” or “we”) for the periods presented. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements, the related Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Results of Operations and Financial Condition included in the Company’s Form 10-K for the fiscal year ended December 31, 2010, the unaudited interim Condensed Consolidated Financial Statements and related Notes included in Item 1 of this Report on Form 10-Q (“Form 10-Q”) and the Company’s other SEC filings and public disclosures.
This Form 10-Q may contain “forward-looking statements”. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statements about the Company’s market opportunities, strategies, competition and expected activities and expenditures, and at times may be identified by the use of words such as “may”, “will”, “could”, “should”, “would”, “project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “intend”, “continue” and variations of these words or comparable words. Forward-looking statements inherently involve risks and uncertainties. Accordingly, actual results may differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the risks described below under “Risk Factors” in Part II, Item 1A. The Company undertakes no obligation to update any forward-looking statements for revisions or changes after the date of this Form 10-Q.
Overview
We are a wholesale automobile sales company which seeks to exploit the inefficiencies and geographic differences in the used vehicle market by purchasing high quality, late model used vehicles from dealers and institutional sellers in Northeastern states and transporting the vehicles for resale in the Pacific Northwest. We are involved only in the wholesale purchase and sale of vehicles acting as a middleman between various dealer and institutional sellers and dealer purchasers. We generally sell our vehicles only through established third-party auctions which act as a marketplace for used vehicles. We thus help align institutional used vehicle sellers and wholesale buyers over a wide geographic area.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that have a significant impact on our results of operations, financial position or cash flows.
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For the Six months Ended June 30, 2011 and June 30, 2010
The following table sets forth certain data derived from the unaudited consolidated statements of operations, expressed as a percentage of net revenues for each of the six months period ended June 30, 2010 and June 30, 2009.
Six months ended June 30, | ||||||||
2011 | 2010 | |||||||
Percentage of net revenues: | ||||||||
Net revenues | 100 | % | 100 | % | ||||
Cost of revenues | 90.6 | % | 92.1 | % | ||||
Gross profit | 9.4 | % | 7.9 | % | ||||
Sales, general and administrative expenses | 13.4 | % | 3.8 | % | ||||
Other operating expenses | 4.3 | % | 1.0 | % | ||||
Total operating expenses | 17.7 | % | 4.8 | % | ||||
Profit (loss) from operations | (8.2) | % | 2.9 | % |
Revenues
Revenue for the six month periods ended June 30, 2011 were $579,440 a decrease of $6,439,164 or 91.7% as compared to revenues for the six months period ended June 30, 2010 of $7,018,604. The decrease in revenue was a result of a decrease in the number of vehicles we sold in the six months period in 2011 over 2010. Specifically, in the six months period ended June 30, 2011 we sold 30 vehicles at an average sales price of $19,315 as compared to 417 vehicles at an average sales price of $16,831 during the comparable period in 2010.
Cost of Sales and Gross Profit Margin
The Company's cost of sales is composed primarily of the cost of purchasing vehicles for resale. Cost of revenues was $524,853 or 90.6% of net revenues during the six months period ended June 30, 2011 as compared to $6,462,511 or 92.1% for the comparable period in 2010, a decrease of $5,937,658 or 91.9%. Thus, our gross margin was 9.4% for the six months period ended June 30, 2011 as compared to 7.9% for the comparable period in 2010. The decrease in our cost of revenue as a percent of revenue is attributable to a decrease in the cost of the vehicles sold during the six months period ended June 30, 2011 as compared to the comparable period in 2010.
Operating Expenses
Our operating expenses are comprised primarily of salaries, consulting fees and sales, general and administrative expenses.
Sale, General and Administrative
Sale, general and administrative expenses are composed principally of commission, salaries of administrative personnel, fees for professional services and facilities expenses. These expenses were $77,606 for the six months period ended June 30, 2011 or 13.4% of net revenue as compared to $271,169 or 3.9% of net revenue for the comparable period in 2010, a decrease in such expenses of $193,563 or 71.4% The decrease in the ratio of SGA expenses to net revenue was primarily due to a decrease in operating expenses.
Other Expenses
Our combined expenses for officers salaries and interest was $24,716 for the six months period ended June 30, 2011 or 4.3% of net revenue compared to the comparable period in 2010 when such expenses were $69,540 or 1.0% of net revenue. The decrease in such expenses is attributable to increased officers’ salaries in 2011 as well as a decrease in interest expense. The following table shows the changes in the components of these expenses during the comparable periods.
Six months Period Ended June 30 2011 | Six months Period Ended June 30, 2010 | Change | Percent Change | |||||||||||||
Officers Salaries | $ | 20,338 | $ | - | $ | 20,338 | (100.0 | %) | ||||||||
Interest Expense | $ | 4,378 | $ | 69,540 | $ | 65,162 | (93.7 | %) |
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Operating Gain (Loss)
Operating gain or loss is calculated as our revenues less all of our operating expenses. Our operating (loss) for the six months period ended June 30, 2011 was ($49,215) or (8.5%) of net revenue as compared to an operating gain of $202,823 or 2.9% of net revenue for comparable period in 2010, an decrease of $252,038. This decrease in operating gain was primarily as a result of a decrease in gross profits as well as a decrease of operating expense.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2011, we had cash and cash equivalents of $80,657 invested in standard bank checking accounts and highly liquid money market instruments. Such investments are subject to interest rate and credit risk. Such risks and a change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operations. As of June 30, 2011, we had no outstanding balance on our revolving credit facility with Manheim Auto Financial Services, Inc. Borrowings under such revolving credit facility would bear interest at a variable rate equal to prime plus 2.0%. In addition, as of June 30, 2011, we had an outstanding balance of $100,000 on a bank revolving credit facility which bears interest at a variable rate equal to prime plus 1.0%.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) of our disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the CEO concluded that our disclosure controls and procedures were not effective as of March 31, 2011 due to a lack of segregation of duties and an over reliance on consultants in the accounting and financial reporting process.
(b) Changes in Internal Controls Over Financial Reporting
There were no changes that occurred during the quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
ITEM 1A. RISK FACTORS
Not required for smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer |
32.1 | Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NORTHEAST AUTOMOTIVE HOLDINGS, INC. | |||
Date: August 22, 2011 | By: | /s/ William Solko | |
William Solko, Chief Executive | |||
Officer and Chief Financial Officer | |||
9