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 September 30, 2013
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 ¨ No x
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 January 7, 2014 was 10,554,017 shares.
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
FORM 10-Q
September 30, 2013
TABLE OF CONTENTS
PART I— FINANCIAL INFORMATION | |||||
Item 1. | Financial Statements | 3 | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 | |||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 10 | |||
Item 4. | Controls and Procedures | 10 | |||
PART II— OTHER INFORMATION | |||||
Item 1. | Legal Proceedings | 11 | |||
Item 1A. | Risk Factors | 11 | |||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 11 | |||
Item 3. | Defaults Upon Senior Securities | 11 | |||
Item 4. | Removed and Reserved | 11 | |||
Item 5. | Other Information | 11 | |||
Item 6. | Exhibits | 12 | |||
SIGNATURES | 13 |
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PART 1 - FINANCIAL INFORMATION
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, 2012.
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NORTHEAST AUTOMOTIVE HOLDINGS, INC. |
CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 1,528 | $ | 304 | ||||
Total Current Assets | 1,528 | 304 | ||||||
Equipment, net | 85 | 336 | ||||||
Other assets | 5,510 | 3,967 | ||||||
TOTAL ASSETS | $ | 7,123 | $ | 4,607 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities: | ||||||||
Note payable to bank | 100,000 | 100,000 | ||||||
Due to stockholders | 69,838 | 64,938 | ||||||
Accrued expenses | 27,450 | 14,200 | ||||||
- | ||||||||
Total Current Liabilities | 197,288 | 179,138 | ||||||
Stockholders' Deficit | ||||||||
Preferred stock, 0.0001 par value, 10,000,000 shares authorized, 10,000,000 issued and outstanding | - | 1,000 | ||||||
Common stock, .001 par value, 300,000,000 shares authorized, 10,554,017 and 554,017 shares issued and outstanding September 30, 2013 and December 31, 2012, respectively | 10,554 | 554 | ||||||
Capital Stock to be issued (500,000 Shares) | 20,000 | 20,000 | ||||||
Additional Paid in Capital | 3,547,363 | 3,556,363 | ||||||
Accumulated Deficit | (3,766,906 | ) | (3,751,272 | ) | ||||
(188,989 | ) | (173,355 | ) | |||||
Less: Treasury stock (6,667 common shares) | (1,176 | ) | (1,176 | ) | ||||
Total Stockholders' Deficit | (190,165 | ) | (174,531 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 7,123 | $ | 4,607 |
See Notes to Financial Statements
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NORTHEAST AUTOMOTIVE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months | Three Months | Nine Months | Nine Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Net sales | $ | - | - | - | - | |||||||||||
Cost of sales | - | - | - | - | ||||||||||||
Gross profit | - | - | - | - | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 3,442 | 5,710 | 16,322 | 141,271 | ||||||||||||
Other expenses | 3,150 | 2,800 | 3,150 | 2,800 | ||||||||||||
Total operating expenses | 6,492 | 8,510 | 19,472 | 144,071 | ||||||||||||
Profit (Loss) from operations | (6,492 | ) | (8,510 | ) | (19,472 | ) | (144,071 | ) | ||||||||
Income taxes | (3,838 | ) | - | (3,838 | ) | - | ||||||||||
Net profit (loss) | $ | (2,654 | ) | (8,510 | ) | (15,634 | ) | (144,071 | ) | |||||||
Net profit (loss) per share basic and diluted | $ | (0.00 | ) | (0.01 | ) | (0.02 | ) | (0.26 | ) | |||||||
Weighted average number of shares outstanding | 10,554,017 | 554,017 | 10,554,017 | 554,017 |
See Notes to Financial Statements
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NORTHEAST AUTOMOTIVE HOLDINGS, INC. |
STATEMENTS OF CASH FLOWS |
Nine Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2013 | September 30, 2012 | |||||||
(unaudited) | (unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net profit (loss) | $ | (15,634 | ) | $ | (144,071 | ) | ||
Adjustments to reconcile net profit to net cash used by operating activities: | ||||||||
Depreciation and amortization | 252 | 3,765 | ||||||
Changes in operating assets and liabilities: | - | - | ||||||
(Increase) decrease in accounts receivable | - | 123,052 | ||||||
(Increase) decrease in inventory | - | - | ||||||
(Increase) decrease in other assets | (1,544 | ) | (1,100 | ) | ||||
Increase (decrease) in customer deposits payable | - | - | ||||||
Increase (decrease) in accrued expenses | 13,250 | 1,450 | ||||||
Increase (decrease) in payroll taxes | - | (1,273 | ) | |||||
Total adjustments | 11,958 | 125,894 | ||||||
CASH PROVIDED (USED) BY OPERATING ACTIVITIES | (3,676 | ) | (18,177 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | - | |||||||
Purchase of fixed assets | - | - | ||||||
CASH USED BY INVESTING ACTIVITIES | - | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds of stockholders loans | 4,900 | 12,954 | ||||||
Repayment of stockholders loan | - | |||||||
Repayment of demand loans | - | |||||||
CASH PROVIDED (USED) BY FINANCING ACTIVITIES | 4,900 | 12,954 | ||||||
NET INCREASE (DECREASE) IN CASH | 1,224 | (5,223 | ) | |||||
CASH | ||||||||
Beginning of year | 304 | 5,395 | ||||||
End of period | $ | 1,528 | $ | 172 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
Cash paid for: | ||||||||
Income tax payments | $ | - | $ | - | ||||
Interest payments | $ | 3,150 | $ | 2,800 |
See Notes to 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.
The accompanying interim financial statements of Northeast Automotive Holdings, Inc. are unaudited. However, in the opinion of management, the interim data includes all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results for the interim period. The results of operations for the period ended September 30, 2013 are not necessarily indicative of the operating results for the entire year.
NOTE 2 – NOTES AND LOANS PAYABLE
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Line of credit - On October 4, 2004, the Company was approved for a line of credit of $975,000, as an inventory financing ("Floor Plan") loan with interest set at 2% above the Wall Street Journal Prime rate. The agreement requires any advances to be repaid for a vehicle on the earliest of forty eight (48) hours from the time of sale or within twenty four (24) hours from the time the Company receives payment by or on behalf of the purchase of such vehicle or demand. The agreement is personally guaranteed by the officers and their respective spouses. The collateral for the loan is any vehicle owned by the Company. | $ | - | - | |||||
Note payable bank - note payable to bank due February 2007, is an open line of credit interest payable monthly at 1% over the prime rate, secured by a lien on all of the Company's assets and personally guaranteed by the officers. Interest is paid monthly on account. | 100,000 | 100,000 | ||||||
Due to stockholders - The stockholder loans are unsecured, pay interest at 9% per annum, are subordinated to the bank loan and have no specific terms of repayment. | 69,838 | 64,938 | ||||||
$ | 169,838 | $ | 164,938 |
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NORTHEAST AUTOMOTIVE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - CONVERSION OF SERIES A PREFERRED STOCK
As of January 1, 2013, pursuant to the terms of the Certificate of Designation of the Company’s Series A Preferred Stock, all 10,000,000 issued and outstanding shares of Series A Preferred Stock were automatically converted into 10,000,000 shares of the Company’s common stock.
NOTE 4 – SUBSEQUENT EVENTS
On December 31, 2013, pursuant to a Securities Purchase Agreement entered into with 13 investors, the Company sold an aggregate of 7,142,857 newly issued shares of our common stock at $0.28 per share, for aggregate gross proceeds of approximately $2.0 million (the “Private Placement”). The investors also received warrants to purchase up to 1,428,571 shares at a price of $0.32 per share. Also, on December 31, 2013, in anticipation of the closing of the acquisition by the Company of Kogeto, Inc., a Delaware corporation, the Company advanced the entire net proceeds of the Private Placement in the amount of $1,387,250 to Kogeto, Inc.
On January 6, 2014, pursuant to an Agreement and Plan of Merger between the Company, our wholly-owned subsidiary Kogeto Acquisition Corp., a Delaware corporation and Kogeto, Inc., we acquired Kogeto, Inc (the “Acquisition Transaction”). In consideration for the purchase of 100% of the issued and outstanding shares in Kogeto. Inc., we issued a total of 24,357,088 newly issued shares of our common stock, on a pro rata basis, to the stockholders of Kogeto, Inc.
In addition, on January 6, 2014, pursuant to a Membership Interest Purchase Agreement between Northeast Automotive and Jeff Glasse, Mr. Glasse sold 100% of the membership interests in Kogeto Lucy, LLC to the Company in exchange for 1,000 newly issued shares of the Company’s common stock.
On January 31, 2014, William Solko retired 6,061,960 shares of the Company’s common stock in connection with the purchase of the Company’s Northeast Automotive Acceptance Corp. subsidiary.
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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, 2012, 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.
For the Nine Months Ended September 30, 2013 and September 30, 2012
Revenues
Revenue for the nine month periods ended September 30, 2013 and September 30, 2012 was $0 as a result of no vehicles being sold in the nine month period in 2013 and 2012.
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 $0 or 100% of net revenues during the nine months periods ended September 30, 2013 and September 30, 2012. Thus, our gross margin was 0.0% for the nine month periods ended September 30, 2013 and September 30, 2012.
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Operating Expenses
Our operating expenses are comprised primarily of salaries, interest expense, consulting fees and sales, general and administrative expenses.
Sale, General and Administrative
Sale, general and administrative (“SGA”) expenses are composed principally of commission, interest expense, salaries of administrative personnel, fees for professional services and facilities expenses. These expenses were $19,472 for the nine months period ended September 30, 2013 or 100% of net revenue as compared to $144,071 or 100% of net revenue for the comparable period in 2012, a decrease in such expenses of $124,599 or 88.4% The decrease in the ratio of SGA expenses to net revenue was primarily due to a decrease in operating expenses.
Operating Gain (Loss)
Operating gain or loss is calculated as our revenues less all of our operating expenses. Our operating (loss) for the nine months period ended September 30, 2013 was ($15,634) or (100%) of net revenue as compared to an operating loss of ($144,071) or (100%) of net revenue for comparable period in 2012, a decrease of $128,437. This decrease in operating loss was primarily as a result of a decrease selling, general and administrative expenses.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2013, we had cash and cash equivalents of $1,528 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 September 30, 2013, 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 September 30, 2013, 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 September 30, 2013 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.
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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
ITEM 4. REMOVED AND RESERVED
Not applicable.
ITEM 5. OTHER INFORMATION
None
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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 |
101.INS ** | XBRL Instance Document |
101.SCH ** | XBRL Taxonomy Extension Schema Document |
101.CAL ** | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF ** | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB ** | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE ** | XBRL Taxonomy Extension Presentation Linkbase Document |
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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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: February 21, 2014 | By: | /s/ William Solko | |
William Solko, Chief Executive | |||
Officer and Chief Financial Officer |
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