General Automotive 10Q 2010 Q0 Quarterly report

General Automotive Inactive 10-Q2010 Q0 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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, 2009

¨	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 333-137755

LOGO

General Automotive Company

(Exact name of small business issuer as specified in its charter)

Nevada

20-3893833

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

5422 Carrier Drive, Suite 309 Orlando, FL 32819

(Address of principal executive offices)

407-363-5633

(Issuer’s telephone number)

(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. x Yes ¨ 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 ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 15,854,417 common shares as of November 20, 2009.

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Balance Sheets at September 30, 2009 (unaudited) and December 31, 2008	3
	Consolidated Statements of Operations – Three and nine months ended September 30, 2009 and 2008 (unaudited)	4
	Consolidated Statement of Shareholder’s Deficit – Nine months ended September 30, 2009 (unaudited)	5
	Consolidated Statements of Cash Flows – Nine months ended September 30, 2009 and 2008 (unaudited)	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 4T.	Controls and Procedures	17

PART II. OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 6.	Exhibits	18
	Signatures	19

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

GENERAL AUTOMOTIVE COMPANY AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS


	September 30, 2009 (Unaudited)			December 31, 2008
Assets
Current assets:
Cash	$	29,388		$	151,482
Accounts receivable, net		1,141,599			1,046,837
Inventories		536,100			785,310
Other current assets		26,713			160,711

Total current assets		1,733,800			2,144,340
Property and equipment, net		0			5,434
Other assets, net		159,584			19,526

	$	1,893,384		$	2,169,300


Liabilities and Shareholders’ Deficit

Current liabilities:
Accounts payable	$	1,454,294		$	1,884,334
Line of credit		932,164			795,785
Accrued expenses		406,606			283,309
Notes payable to related parties		460,000			160,000

Total current liabilities		3,253,064			3,123,428


Commitments and contingencies		-			-

Shareholders’ deficit:

Preferred stock, $0.001 par value; 10,000,000 shares authorized, none issued and outstanding		-			-
Common stock; $0.001 par value; 90,000,000 shares authorized, 15,854,417 issued and outstanding at September 30, 2009 and 15,764,417 issued and outstanding at December 31, 2008		15,854			15,764
Additional paid-in capital		9,635,374			9,334,964

Accumulated deficit		(11,010,908	)		(10,304,856	)


Total shareholders’ deficit		(1,359,680	)		(954,128	)

	$	1,893,384		$	2,169,300

See accompanying notes to consolidated financial statements

ITEM 1.

Financial Statements (continued)

GENERAL AUTOMOTIVE COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2009			2008			2009			2008
Revenues	$	2,549,479		$	3,600,926		$	9,006,344		$	10,216,808
Costs of goods sold		2,275,710			3,279,739			7,880,887			9,330,142

Gross profit		273,769			321,187			1,125,457			886,666

Expenses:
Selling, general and administrative		444,930			523,880			1,504,169			1,548,712
Stock-based compensation		-			12,375			-			61,125

Total expenses		444,930			536,255			1,504,169			1,609,837

Loss from operations		(171,161	)		(215,068	)		(378,712	)		(723,171	)
Other income (expense):
Interest expense		(29,014	)		(13,550	)		(333,176	)		(141,590	)
Other, net		-			-			5,836			-

Total other expense, net		(29,014	)		(13,550	)		(327,340	)		(141,590	)

Net loss from continuing operations		(200,175	)		(228,618	)		(706,052	)		(864,761	)

Net loss from discontinued operations (Including loss on disposal of $1,228,899 in 2008)		-			(1,263,462	)		-			(1,551,263	)


Net loss	$	(200,175	)	$	(1,492,080	)	$	(706,052	)	$	(2,416,024	)


Loss per share
Basic and diluted:
Continuing operations	$	(0.01	)	$	(0.02	)	$	(0.04	)	$	(0.07	)
Discontinued operations		-			(0.08	)		-			(0.13	)

	$	(0.01	)	$	(0.10	)	$	(0.04	)	$	(0.20	)


Weighted average number of common shares outstanding:
Basic and diluted		15,854,417			15,086,355			15,845,528			11,981,754

See accompanying notes to consolidated financial statements

ITEM 1.

Financial Statements (continued)

GENERAL AUTOMOTIVE COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIT (Unaudited)


	Common Stock			Additional Paid in Capital		Accumulated Deficit			Total
	Shares	Amount		Additional Paid in Capital		Accumulated Deficit			Total
Balance, December 31, 2008	15,764,417	$	15,764	$	9,334,964	$	(10,304,856	)	$	(954,128	)


Common stock issued for services	90,000		90		40,410		-			40,500

Warrants issued in connection with debt	-		-		260,000		-			260,000

Net loss							(706,052	)		(706,052	)


Balance, September 30, 2009	15,854,417	$	15,854	$	9,635,374	$	(11,010,908	)	$	(1,359,680	)

See accompanying notes to consolidated financial statements

ITEM 1.

Financial Statements (continued)

GENERAL AUTOMOTIVE COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended September 30,
	2009			2008
Cash flows from operating activities:
Net loss	$	(706,052	)	$	(2,416,024	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		5,434			6,810
Stock-based compensation		-			61,125
Loss from discontinued operations		-			1,228,899
Warrants issued for conversion/issuance of debt		260,000			72,000
Change in assets and liabilities from discontinued operations		-			192,057
Change in assets and liabilities of continuing operations:
Decrease (increase) in assets:
Accounts receivable		(94,762	)		(471,805	)
Inventories		249,210			836,657
Other current assets		174,498			(28,158	)
Increase (decrease) in liabilities:
Accounts payable		(430,040	)		(66,846	)
Accrued expenses		123,297			139,622

Net cash used in operating activities		(418,415	)		(445,663	)


Cash flows from investing activities:
Purchase of property, plant and equipment		-			(12,093	)
Increase in other assets		(140,058	)		-

Net cash used in investing activities		(140,058	)		(12,093	)


Cash flows from financing activities:
Net borrowings under lines of credit		136,379			36,373
Sale of common stock		-			1,465,957
Borrowings (payments) on notes payable to related parties		300,000			(718,000	)

Net cash provided by financing activities		436,379			784,330


Net increase (decrease) in cash		(122,094	)		326,574
Cash, beginning of year		151,482			600

Cash, end of period	$	29,388		$	327,174


Supplemental disclosure of cash flow information:
Interest paid	$	73,176		$	69,590

Supplemental schedule of noncash financing activities:
Common stock issued for conversion of debt	$	-		$	6,698,831
Common stock issued for services		40,500			214,600

See accompanying notes to consolidated financial statements

ITEM 1.

Financial Statements (continued)

GENERAL AUTOMOTIVE COMPANY AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	Summary of Significant Accounting Policies

Consolidated Financial Statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position of General Automotive Company and its subsidiary (collectively, the “Company”) at September 30, 2009 and the results of its (i) operations for the three and nine month periods ended September 30, 2009 and 2008 and (ii) cash flows for the nine month periods ended September 30, 2009 and 2008. The financial information included herein is taken from the books and records of the Company and is unaudited.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2008. The results of operations for the three and nine month period ended September 30, 2009 are not necessarily indicative of the operating results for the full year.

Merger and Offering. The Company completed a reverse merger into a publicly traded shell company on February 22, 2008 (the “Merger”) and reported the Merger and the related transactions on a current report on Form 8-K, filed February 28, 2008. See Note 5 for further discussion.

Going Concern. The Company incurred losses in the current quarter of $200,175 and has an accumulated deficit of $11,010,908 at September 30, 2009. The Company’s current liabilities exceeded its current assets by $1,519,264 as of September 30, 2009. Additionally the Company is reporting a shareholders’ deficit of $1,359,680 as of September 30, 2009 as compared to a shareholders’ deficit of $954,128 at December 31, 2008. The loss from continuing operations for the current nine month period is less than the loss for the same period in 2008. The Company is attributing this improvement to its effort to eliminate current operating losses by focusing on increasing margins through a combination of meeting the growing demand for automotive engine management replacement parts, larger scheduled customer orders, new domestic dealer and Asian product sourcing and reductions of operating expenses. New Asian suppliers are being identified and qualified to accomplish significant cost savings that is allowing the Company to offer reduced prices to its current customer base for larger quantity orders while increasing gross profit margins. Additionally the Company decided to eliminate the continuing losses from one of its subsidiaries, Global Parts Direct, Inc. (“GPD”), by the sale of its assets which occurred on November 14, 2008. Management believes that it will be successful in its plans for the Company to become profitable; however there can be no assurances that we will be able to obtain additional private equity or other loan facility financing, increase revenues and improve gross margins in order to be able to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. The financial statements do not include any adjustments that might result if the Company was forced to discontinue its entire operations.

Revenue. Revenue from product sales is recognized when the product is shipped and title to the product passes.

Allowance for Uncollectable Accounts. The Company maintains current receivable amounts and regularly monitors and assesses its risk of not collecting amounts owed to it by customers. This evaluation is based upon an analysis of amounts currently and past due along with relevant history and facts particular to the customer. Based upon the results of this analysis, the Company records an allowance for uncollectible accounts. This analysis requires the Company to make significant estimates and as such, changes in facts and circumstances could result in material changes in the allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

Inventories. Inventories consisting of primarily finished automotive parts are stated at the lower of cost or market, with cost being determined by the first-in, first-out (FIFO) method.

Property, Plant and Equipment. Property, plant and equipment is stated at cost, less accumulated depreciation. Expenditures for additions and improvements, which extend the life of the assets, are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Major replacements and improvements are capitalized. Gains and losses resulting from sales or retirements are recorded as incurred, at which time the cost and accumulated depreciation are removed from the accounts. Depreciation is provided using the straight-line method over the following average estimated useful lives of the assets: Electronic data processing equipment – 5 years and Furniture and Fixtures - 7 years.

Stock-based compensation. Stock-based compensation represents the cost related to common stock granted to employees and related parties of the Company. The Company measures stock-based compensation cost at the date the common stock was issued, based on the quoted market price of the Company’s common stock and recognizes the cost as expense over the requisite service period. The expense is recorded in selling, general and administrative expenses in the Consolidated Statement of Operations.

The Company records deferred tax assets for awards that result in deductions on the Company’s income tax returns, based on the amount of compensation cost recognized and the Company’s statutory tax rate in the jurisdiction in which it will receive a deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company’s income tax return are recorded in Additional Paid-In Capital.

Income Taxes. Deferred income taxes are recognized for the tax consequences in future years for differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the period in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Concentration of Credit Risk. The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash.

Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Subsequent Events.In May 2009, the FASB established general accounting standards and disclosure for subsequent events. The Company adopted FASB ASC 855,Subsequent Events (formerly referenced as SFAS No. 165,Subsequent events) (“ASC 855”), during the third quarter ended September 30, 2009. The Company has evaluated subsequent events through the date and time the financial statements were issued on November 20, 2009.

Financial Instruments.During the first quarter of fiscal 2009, the Company adopted FASB ASC 820,Fair Value Measurements andDisclosures (“ASC 820”) (formerly referenced as SFAS No. 157,Fair Value Measurements) to value its financial assets and liabilities. The adoption of ASC 820 did not have a significant impact on the Company’s results of operations, financial position or cash flows. ASC 820 defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be paid by an external party for an asset or liability (exit price). ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs may be used to measure fair value:

•

Level 1 – Active market provides quoted prices for identical assets or liabilities;

•

Level 2 – Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable with market data; and

•

Level 3 – Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2009. The Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities. The market approach uses prices and other relevant

information generated by market transactions involving identical or comparable assets or liabilities. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments which include cash, accounts receivables, inventories, related party notes payable, accounts payable and accrued expenses are valued using Level 1 inputs and are immediately available without market risk to principal. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the Company’s line of credit and notes payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value. The Company does not have any Level 2 or Level 3 assets and liabilities.

ASC 820 is effective for fiscal years beginning after November 15, 2007, except for non-financial assets and liabilities recognized or disclosed at fair value on a non-recurring basis, for which the effective date is fiscal years beginning after November 15, 2008. The Company adopted ASC 820 for non-financial assets that are recognized or disclosed on a non-recurring basis on July 1, 2009 in accordance with FASB Staff Position 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”). The adoption of ASC 820 for non-financial assets that are recognized or disclosed on a non-recurring did not have a significant impact on the Company’s results of operations, financial position or cash flows.

Recent accounting pronouncements.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46r,” (SFAS 167). SFAS 167 amends FASB Interpretation No. 46 (Revised December 2003), “Consolidation of Variable Interest Entities-an interpretation of ARB No. 51,” (FIN 46r) to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity; to add an additional reconsideration event for determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. SFAS 167 becomes effective for the Company on January 1, 2010. Management is currently evaluating the potential impact of SFAS 167 on the financial statements.

Discontinued Operations. During the third quarter of 2008, the board of directors decided to discontinue the operations of GPD and sell selected assets of this operation. A continuing reduction in the demand for the type of electronic products that were provided by GPD during the prior year combined with customer pricing pressures and the inability to source low product quantities at favorable pricing resulted in this decision. The sale of selected assets of GPD was consummated on November 14, 2008, fundamentally at liquidation value resulting in a loss on disposal of $946,790 during the year ended December 31, 2008. The consolidated statement of operations for all prior periods has been reclassified to reflect the results of operations of this divested business as a discontinued operation.

Loss per Common Share. Common share equivalents of 6,122,451 at September 30, 2009 and 1,958,166 at September 30, 2008 representing outstanding warrants and options were not included in the computation of diluted earnings per share for the three and nine month periods ended September 30, 2009 and September 30, 2008 as their effect would have been anti-dilutive.

Debt. The Company’s wholly owned subsidiary, OES, operates under a revolving line of credit with a bank. The maximum borrowing under this OES Line is $2,000,000 and carries an interest rate of prime plus 1.0% (4.25% at September 30, 2009). The accounts receivable, inventory and other non-secured assets of OES secure the line. In addition, the OES Line, a note payable on demand, is subject to certain financial covenant ratios and was guaranteed by the Company. At September 30, 2009, the Company was not in default of the covenants. At September 30, 2009, the outstanding balance of the OES Line was $932,164. Draws under these lines are limited to 85% of eligible accounts receivable and 50% of inventory. The amount available under the OES line was $0 as of September 30, 2009.

On April 20, 2009 the Company secured a $300,000 loan from a related party. The principal was due and payable in full on May 5, 2009. The principal amount remains outstanding as of September 30, 2009 and accrues interest at an annual rate of 20% that is calculated based upon a 360-day year. As of September 30, 2009 interest in the amount of $26,667 has been recorded associated with the outstanding principal of the loan referenced above; of which $15,000 of interest payable remains outstanding as of the end of the current quarter.

Common Stock and Equity Securities. On February 22, 2008, Global Automotive Supply, Inc. (“GAS”), merged with and into Utility Investment Recovery, Inc. (“UIR”), a public shell company. In connection with the Merger, UIR was the surviving corporation although GAS was the surviving operating entity. As a result of the Merger, UIR changed its name to General Automotive Company. The stockholders of GAS received the right to receive two (2) shares of the Company’s common stock for each ninety-one (91) issued and outstanding shares of GAS common stock. As a result, at closing, in exchange for 100% of the outstanding capital stock of GAS, including 333,333 shares issued in connection with the conversion of a bridge loan, and 7,423,814 shares in connection with the conversion of related parties notes payable and accrued interest; the former shareholders of GAS received 8,778,112 shares of the Company’s common stock. Such holdings represented 55.7% of the outstanding common stock as of December 31, 2008.

At the time of the Merger, there were 3,919,789 shares of common stock outstanding in UIR, the shell company, after the cancellation of certain shares by several of the UIR shareholders. The certificates evidencing outstanding UIR shares were reissued as certificates for Company shares. Per board approved merger agreement each ninety-one (91) shares of GAS common stock issued and outstanding immediately prior to the closing of the merger was converted into the right to receive two (2) shares of the Company’s common stock.

Additionally, at the time of the Merger 266,667 warrants were issued to certain related parties that held $400,000 of GAS notes payable, which notes payable were converted into 533,333 shares of common stock. The warrants have a strike price of $2.00 per common share and expire three years from the date of issuance. The warrants also have a call feature, by which we can compel holders of the warrants to either exercise or surrender their warrants if our common stock trades at or above $3.50 for twenty (20) consecutive trading days. The fair market value of these warrants totaling $72,000 has been recorded as additional interest expense valued at the time of the grant using the Black-Scholes fair value estimation model during the nine months ended September 30, 2008.

During the twelve months ended December 31, 2008 the Company issued a total of 2,355,334 shares of common stock and 1,177,677 warrants to investors for net proceeds of $1,456,757 as a result of its private offerings which were exempt from registration under Rule 506 of Regulation D of the Securities Act of 1933, as amended. Each warrant has a strike price of $2.00 per common share and will expire three years from the date of issuance. The warrants also have a call feature, by which we can compel holders of the warrants to either exercise or surrender their warrants if our common stock trades at or above $3.50 for twenty (20) consecutive trading days. On July 30, 2008, the Company completed and closed an offering as reported on Form 8-K filed August 6, 2008. Pursuant to the Registration Rights Agreement executed in connection with this private placement, the Company was required to file a Registration Statement within 90 days of the closing date of the of the offering. The Company did not file this Registration Statement, and pursuant to the Registration Rights Agreement, the Company is required to pay to the stockholders party thereto liquidated damages in an amount equal to 0.5% of the stockholders’ investment, payable in cash or common stock valued at the original purchase price for the common stock, at the discretion of the Company, up to a maximum of 6% of the stockholders’ investment, for each month the Company continues to be in violation of this provision. As of November 20, 2009 the Company has not filed the Registration Statement and therefore has accrued penalties of approximately $106,000, of which approximately $97,000 was included in accrued expenses on the consolidated balance sheet at September 30, 2009.

The Company also issued warrants to purchase 135,640 shares of common stock as commissions to the broker-dealer responsible for placing the shares and warrants in connection with this private offering. Each warrant has a strike price of $2.00 per common share and is exercisable for a period of five years from the date of issuance. Also in relation to the private offering, the Company issued options to a consultant to purchase 300,000 shares of common stock at an exercise price of $0.75 per share for a period of five years from the date of issuance.

On September 9, 2008 the Company issued a total of 18,182 shares of common stock and 18,182 warrants to investors for net proceeds of $9,200 as a result of its private offerings which were exempt from registration under Rule 506 of Regulation D of the Securities Act of 1933, as amended. Each warrant has a strike price of $0.50 per common share and will expire three years from the date of issuance. The warrants also have a call feature, by which we can compel holders of the warrants to either exercise or surrender their warrants if our common stock trades at or above $3.50 for twenty (20) consecutive trading days.

On December 11, 2008, the Company issued a total of 428,571 shares of common stock and 214,285 warrants to a related party in settlement of a $150,000 outstanding note payable. The warrants carry a strike price of $2.00 and expire three years from date of grant. The fair market value of these warrants totaling $15,000 has been recorded as additional interest expense valued at the time of the grant using the Black-Scholes fair value estimation model.

In addition to the warrants described above, during the year ended December 31, 2007 the Company also granted a lender warrants to purchase 60,000 shares of the Company’s common stock at an exercise price of $0.75 per share for a period of three years. This warrant also contains a “cashless” exercise provisions under which the holder of the warrant can exercise it using shares of the Company’s common stock. In accordance with EITF 00-19, “Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled in the Company’s Own Stock,” and the terms of the lender warrants, the fair value of these warrants was accounted for as a liability, with an offsetting reduction to the carrying value of the Company’s common stock. The warrant liability will be reclassified to equity upon exercise or expiration of the related warrants. The fair value of the lender warrants on the grant date was estimated at $16,800. On September 30, 2009, the fair value of the warrants was re-measured and estimated at $0.

Stock-Based Compensation. During the three months ended March 31, 2008, the Company recognized the issuance of 37,500 shares of common stock to its president in connection with an employment agreement wherein the president would receive quarterly stock grants over a five year period for a total of 5% of the issued and outstanding common stock of the Company as of the closing of the merger and the currently ongoing private placement of securities. The total grant was estimated to be 750,000 shares, which would have vested at a rate of 5% per quarter. The compensation costs charged as operating expense for grants under the plan was $28,125 for the three months ended March 31, 2008. During the fourth quarter of 2008, the employment agreement with the Company’s president was amended and the stock grant was replaced with stock options. Accordingly the 37,500 shares issued were returned to the company and the $28,125, expense was reversed.

Stock Warrants and Options. As of September 30, 2009, there were outstanding warrants, consultant options and officer and director options for the purchase of 6,122,451 shares, with a weighted average strike price of $0.84. No options were granted, forfeited or exercised during the three months ended September 30, 2009.

The Company estimated the fair value of all warrants and options issued during the year ended December 31, 2008 using the Black-Scholes option-pricing model with the following assumptions: no dividend yield, 90%, 129% and 113% volatility, risk-free interest rates of 1.55% to 3.34% and expected lives of 3 and 5 years.

On April 20, 2009 the Company issued warrants to purchase 1,000,000 shares of common stock in connection with $300,000 of bridge loan financing from a related party. Each warrant had a strike price of $.41 per common share and was exercisable for a period of three years from the date of issuance. On May 28, 2009 the Company modified the warrants issued on April 20, 2009 to reduce the exercise price of each warrant $.15 per common share. The assumptions used in the Black-Scholes option-pricing model were consistent with the assumptions noted above. Accordingly, the Company recorded $260,000 of interest expense during the three months ended June 30, 2009.

Stock issued for services.During the three months ended March 31, 2009 the Company issued 90,000 shares of common stock in connection with investor relations and financial consulting services which were exempt from registration under Rule 506 of Regulation D of the Securities Act of 1933, as amended. These services are to be performed over various terms ranging from one to nine months and have been valued at a total of $40,500 representing the quoted market price of the Company’s common stock on the date of the grant.

Joint Venture. On July 22, 2008, as reported on Form 8-K filed, July 25, 2008, the Company and SenCer Inc., a New York corporation (“SenCer”), formed General Automotive Advanced Technology Group, LLC (the “Joint Venture”). In connection therewith, the Company and SenCer entered into an Operating Agreement which sets forth the regulations, terms and conditions under which the Joint Venture will be operated.

The Operating Agreement provides that the Company and SenCer shall initially hold 50% membership interests in the Joint Venture. Initially, the Company shall contribute such services and incur such costs and expenses as it shall deem necessary to determine the commercial viability of the Joint Venture’s business, which services have an agreed-upon value of $200,000. In the event the Company becomes satisfied that the business is commercially viable, the Company shall make additional capital contributions of up to an aggregate of $750,000, in cash, to fund the operations of the Joint Venture and SenCer shall contribute to the Joint Venture a license to use SenCer’s ceramic composite technology for any and all transportation applications, all pursuant to an exclusive license agreement by and between the Joint Venture and SenCer also dated July 22, 2008. The license has an agreed-upon value of $2,000,000. If commercial viability has not been achieved by July 15, 2009 (originally January 15, 2009), the Joint Venture will be dissolved unless the Company elects to continue its existence. At present, commercial viability has been established but financing has not been secured. While financing is being obtained, SenCer and the Company have elected to proceed with the Joint Venture on a month to month basis.

The Company shall be the sole managing member of the Joint Venture, responsible for the day-to-day operations of the Joint Venture as well as certain marketing activities of the Joint Venture. SenCer shall design and develop applications and prototype products for clients of the Joint Venture. Certain major decisions, such as entering into a change of control transaction, amending the Operating Agreement, admitting new members to the Joint Venture and dissolving the Joint Venture shall require member approval.

The Company is in the process of determining whether consolidating the joint venture is necessary; however as of September 30, 2009 there was no activity in the Joint Venture to consolidate.

Acquisition Event. On May 5, 2009 the Company announced that it had signed a non-binding letter of intent to acquire privately held Europacific Parts International, Inc. (EPI) for four million restricted shares of its common stock. On May 5, 2008 the Company advanced EPI $150,000 of working capital against a $250,000 Secured Demand Promissory Note. Closing of the EPI transaction was subject to completion of due diligence and other considerations. On May 15, 2009 the Company announced the termination of the non-binding letter of intent to acquire Europacific Parts International. The $150,000 advance is refundable and is recorded in other assets, net on the consolidated balance sheets at September 30, 2009.

Subsequent Events. As reported on Form 8-K filed October 21, 2009, effective October 19, 2009, Joe DeFrancisci has resigned his positions as President and CEO of General Automotive Company (GNAU). Dan Valladao, current Chairman and Founder, has been appointed by the Board of Directors as interim President and CEO effective immediately. There was no known disagreement with Mr. DeFrancisci on any matter relating to the Company’s operations, policies or practices.

As reported on Form 8-K filed November 4, 2009, effective October 30, 2009, the Board of Directors ratified the employment agreements, naming Dan Valladao as CEO and President, Tim Alford as Chief Operating Officer, and Shawn Powell Joseph as Chief Financial Officer.

As reported on Form 8-K filed November 6, 2009, effective October 30, 2009, General Automotive Company (GNAU) entered into twelve month business consultant agreement each with Byrd Financial Group and LLC and Emerging Markets Consulting, each referred to as “the Consultant”. The Consulting Agreements expire on October 30, 2010 and have the following provisions:

The Byrd Consulting Agreement provides that the Consultant will spend up to 15 hours per week in the fulfillment of the obligations under the Consulting Agreement. According to the terms of the agreement in lieu of cash compensation, the Company shall pay for the services of the Consultant through the issuance of 4,000,000 shares of restricted common stock of General Automotive Company (GNAU). The Shares, collectively referred to as “the Securities”, shall be issued immediately, and are deemed to be fully vested and earned upon the execution hereof. The Consulting Agreement can be terminated at any time, for any reason, by the Company; however, termination shall not effect the Securities that have been issued to the Consultant.

The Emerging Markets Consulting Agreement provides that the Consultant will fulfill the obligations under the Consulting Agreement during the term of the agreement. According to the terms of the agreement, in lieu of cash compensation, the Company shall pay for the services of the Consultant through the issuance of 4,000,000 shares of restricted common stock of General Automotive Company (GNAU). The Shares, collectively referred to as “the Securities”, shall be issued immediately, and are deemed to be fully vested and earned upon the execution hereof. The Consulting Agreement can be terminated at any time, for any reason, by the Company; however, termination shall not effect the Securities that have been issued to the consultant.

As reported on Form 8-K filed November 6, 2009, effective October 30, 2009, General Automotive Company (GNAU) entered into thirty-six month business consultant agreement with Douglas J. Nagel. The consulting agreement expires on October 30, 2012 and has the following provisions:

The Nagel Consulting Agreement provides that the Consultant will spend up to 20 hours per week in fulfillment of the obligations under the Consulting Agreement. According to the terms of the agreement, in lieu of cash compensation, the Company shall pay for the Consultant through the issuance of a options to purchase 13,500,000 shares of restricted common stock of General Automotive Company (GNAU), at an exercise price of 4 cents per share. The Options, collectively referred to as “the Securities”, shall be issued immediately, and

are deemed to be fully vested and earned upon the execution hereof. The Consulting Agreement can be terminated at any time, for any reason, by the Company, however, termination shall not effect the Securities that have been issued to the consultant.

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements:

Forward-looking statements in this Form 10-Q including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements made in this report, other than statements of historical fact, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements — our ability to successfully develop, market, and sell our brands and products in a timely manner, and the outcomes of our efforts related to mergers and acquisitions. Additional factors include, but are not limited to, the size and growth of the market for our products, competition, pricing pressures, market acceptance of our products, the effect of economic conditions, the value and exploitation of our intellectual property rights, the results of financing efforts, risks in new product development, and other risks including but not limited to those identified in this report and our other periodic filings with the Securities and Exchange Commission.

Results of Operations:

As discussed in greater detail on a current report on our Form 8-K filed February 28, 2008, and our Form 10-KSB filed April, 14, 2008 we entered into a Merger Agreement on February 22, 2008 (the “Merger”), with Global Automotive Supply, Inc. (“GAS”) whereby GAS merged with and into a wholly owned subsidiary, and we subsequently merged with that subsidiary in a short-form merger transaction under Nevada law and, in connection with this short-form merger, changed our name to General Automotive Company, effective February 22, 2008. As a result of the Merger, in exchange for 100% of the outstanding capital stock of GAS, the former stockholders of GAS had the right to receive 8,149,595 shares of our common stock, which represented approximately 58.7% of our outstanding common stock at the closing of the private placement on July 30, 2008. Thus, GAS is considered the accounting acquirer in the Merger, and all references to our financial and other history in this Form 10-Q, and in particular in the Management’s Discussion and Analysis section, refer to the history of GAS unless the context specifically indicates that we are referencing a predecessor business.

Through the Merger, we also acquired 100% interest in the two wholly-owned subsidiaries of GAS, Global Parts Direct, Inc. (“GPD”) and OE Source, LLC (“OES”). In November 2008, the Company’s board of directors agreed to sell the assets of GPD, which has been accounted for as a discontinued operation for the three and nine months ended September 30, 2008. OES is now our sole wholly-owned subsidiary with all of our business operations conducted through this subsidiary.

Three Months Ended September 30, 2009 Compared With Three Months Ended September 30, 2008

We generated $2,549,479 in revenues from our continuing operations during the three months ended September 30, 2009, compared to $3,600,926 during the three months ended September 30, 2008. The decrease of 1,051,447 (29.20%) in revenues was due in overall contraction in the automotive aftermarket parts industry in general and specifically to a decrease in sales to a key customer.

Our cost of goods sold during the three months ended September 30, 2009 was $2,275,710 compared to $3,279,739 for the three months ended September 30, 2008. The gross profit was $47,418 lower in the three months ended September 30, 2009 as compared to the three months ended September 30, 2008. However our gross profit margin increased for the three months ended September 30, 2009 to 10.74% compared to 8.92% for the same period of 2008. Our more effective purchasing practices were responsible for the higher gross profit margin in the three months ended September 30, 2009. Currently, OES is continuing its program to increase the number of domestic and international sources for its products.

Our selling, general and administrative expenses were $78,950 lower for the three months ended September 30, 2009 as compared to the three months ended September 30, 2008. This decrease in expenses was due primarily to decrease in professional services and legal fees during the quarter ended September 30, 2009. There were no stock-based compensation awards during the three months ended September 30, 2009.

Interest expense in the three months ended September 30, 2009 is approximately $15,464 higher than the three months ended September 30, 2008. This increase resulted from the expense incurred as a consequence of the Bridge Loan financing received from a related party on April 20, 2009.

The result of the above was a net loss from operations of $200,175 for the three months ended September 30, 2009, a decrease of $28,443 from the $228,618 net loss from operations for the three months ended September 30, 2008.

The Company has active programs to increase revenues and reduce costs for the remainder of fiscal 2009. We intend to further increase our margins by enhancing our sourcing efforts in Asia during the remainder of 2009. Additionally public company costs continue to be monitored and where possible either eliminated or replaced with stock based compensation in order to reduce the cash required for these expenses.

During the three months ended September 30, 2008 we recorded a net loss from discontinued operations of $1,263,462. As these operations were disposed of in the fourth quarter of 2008, we have incurred no further losses in the three months ended September 30, 2009. During the three months ended September 30, 2009 we recorded a net loss from continuing operations of $200,175 compared to a loss of $228,618 for the three months ended September 30, 2008.

Nine months Ended September 30, 2009 Compared with the Nine months Ended September 30, 2008

We generated $9,006,344 in revenues during the nine months ended September 30, 2009, compared to $10,216,808 during the nine months ended September 30, 2008. The overall contraction of the aftermarket automotive parts industry in general and specifically to a decrease in sales to a key customer contributed to the reduction in revenue for the nine months ending September 30, 2009.

Our cost of goods sold during the nine months ended September 30, 2009 decreased $1,449,255 compared to the nine months ended September 30, 2008. Our total gross profits were $238,791 higher in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. Our gross profit margin was 12.50% for the nine months ended September 30, 2009 compared to 8.68% for the same period of 2008. OES is continuing its program to increase the number of domestic and international sources for its products. Our more effective purchasing practices were responsible for the higher gross profit margin during the nine months ended September 30, 2009.

Our selling, general and administrative expenses were $44,543 lower for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. The decrease in selling, general and administrative costs is the result of sustained cost containment measures that the Company instituted at the beginning of 2009 and includes reductions in executive compensation and professional fees. There were no stock-based compensation awards during the nine months ended September 30, 2009; as a result, the Company realized a decrease of $61,125 in stock-based compensation when compared to the nine months ended September 30, 2008.

The Company benefited from the increase in gross profit during the nine month ended September 30, 2009 compared to the nine months ended September 30, 2008. Our net loss for the nine months of 2009 decreased from the same period of 2008 by $1,709,972, which included the impact of the $1,551,263 loss from discontinued operations for the nine months ended September 30, 2008. Other contributing factors to the decrease in the net loss for the nine months ended September 30, 2009 include a net reduction professional service fees and executive compensation. Interest expense in the nine months ended September 30, 2009 includes $260,000 for the fair value of lender warrants issued in connection with the bridge loan of $300,000. The cumulative decrease in interest expense correlates to the net decrease the outstanding balance on the line of credit (LOC) in addition to the decrease in the effective interest rate associated with the LOC facility.

Liquidity and Capital Resources

As of September 30, 2009, we had current assets in the amount of $1,733,800, consisting primarily of accounts receivable and inventory. On the same date, we had current liabilities of $3,253,064, consisting primarily of accounts payable and a line of credit. Thus, as of September 30, 2009, we had a working capital deficit of $1,519,264 as compared to a working capital deficit of $979,088 at December 31, 2008. This increase in our working capital deficit during the three months ended September 30, 2009 is related to decrease in revenues during the quarter.

Parallel to expanding the customer base of our wholly-owned subsidiary, OES, through expansion of product offerings and identification of new customers, we plan to continue our search for companies involved in the sale and

distribution of automotive parts that would be acquisition candidates. It is management’s belief that the return to profitability is dependent upon our ability to increase revenue volume. If we determine that we do not presently have sufficient capital to fully fund our growth and development, we will seek additional capital through the financial markets. In connection with raising this additional capital, we will incur appropriate accounting and legal fees. Management believes that it will be successful in its plans to realize Company profitability; however there can be no assurances that we will be able to obtain additional financing, increase revenues and improve gross margins in order to be able to continue as a going concern.

On May 5, 2009 the Company advanced Europacfic Parts International, Inc. (EPI) $150,000 under a Secured Demand Promissory Note Agreement. EPI is no longer an operating company, its inventory has been liquidated and all that it retains are accounts receivables. Bank of America is in first position with respect to the proceeds from collection of accounts receivable. The Company cannot collect any proceeds from the collection of EPIs accounts receivables until Bank of America has been paid in full, and thus there is a risk that the Company will not collect any or all of the amounts due it under the Secured Demand Promissory Note Agreement. The Company anticipates repayment of the EPI obligation within the first quarter of 2010.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon the Company’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to our allowance for accounts receivable and stock-based compensation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates given a change in conditions or assumptions that have been consistently applied.

The Company’s significant accounting policies are described in Note 1 of our financial statements included herein and Note 1 to our financial statements included in Form 10-K for the year ended December 31, 2008. The methodology for its estimates and assumptions are as follows:

Stock-based compensation. Stock-based compensation represents the cost related to common stock grants and options to employees and related parties of the Company. The Company measures stock-based compensation cost at the date the common stock was issued, based on the quoted market price of the Company’s common stock and recognizes the cost as expense over the requisite service period. The Company estimates the fair value of all warrants and options issued using the Black-Scholes option-pricing model which includes assumptions for dividend yield, volatility, risk-free interest rates and expected lives of the securities being issued.

Recent Accounting Pronouncements

Off Balance Sheet Arrangements

As of September 30, 2009, there were no off balance sheet arrangements.

ITEM 4T.

CONTROLS AND PROCEDURES

Management’s Report On Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, 2009, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2009 in reporting on a timely basis information required to be disclosed by us in the reports we file or submit under the Exchange Act because of material weaknesses relating to internal controls as described in Item 9A (T) of the Company’s Form 10-K for the year ended December 31, 2008.

During the fiscal quarter ended September 30, 2009, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management has concluded that the material weaknesses in internal control as described in Item 9A(T) of the Company’s Form 10-K for the year ended December 31, 2008, have not been fully remediated. We are committed to finalizing our remediation action plan and implementing the necessary enhancements to our policies and procedures to fully remediate the material weaknesses discussed above.

PART II – OTHER INFORMATION

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 6.

Exhibits


Exhibit Number		Description of Exhibit
31.1		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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 there under duly authorized.


GENERAL AUTOMOTIVE COMPANY

By:		/S/ DAN VALLADAO
		Dan Valladao
		Chief Executive Officer

November 20, 2009

By:		/S/ SHAWN POWELL JOSEPH
		Shawn Powell Joseph
		Chief Financial Officer

November 20, 2009

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company