SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2008
Commission File Number: 333-147560
FRIENDLY AUTO DEALERS, INC.
(Exact Name of Issuer as Specified in Its Charter)
| Nevada | | 7389 | | 33-1176182 |
| State of Incorporation | | Primary Standard Industrial Employer Classification Code Number # | | I.R.S. Identification No. |
4132 South Rainbow Road, Suite 514, Las Vegas, Nevada 89103
(Address of principal executive offices, including zip code)
(702) 321-6876
(Registrant's telephone number, including area code)
EastBiz.Com, Inc.
5348 Vegas Drive
Las Vegas, Nevada 89108
Telephone: (702) 871-8678
(Name, Address, and Telephone Number of Agent)
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 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. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| | Large Accelerated Filer o | Non-Accelerated Filer o | |
| | | (Do not check if a smaller reporting company) | |
| | | | |
| | Accelerated Filer o | Smaller reporting company x | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES x NO o
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, 15(d) of the Exchange Act after the distribution of the securities under a plan confirmed by a court. YES o NO o
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of common stock at the latest practicable date. As of May 13, 2008, the registrant had 6,725,000 shares of common stock, $0.001 par value, issued and outstanding.
Transitional Small Business Disclosure Format (Check one): YES o NO x
CONTENTS
| PART I - FINANCIAL INFORMATION - UNAUDITED | |
| | | |
| Item 1. | BALANCE SHEET | 1 |
| | STATEMENT OF OPERATIONS | 2 |
| | STATEMENT OF STOCKHOLDERS’ EQUITY | 3 |
| | STATEMENTS OF CASH FLOWS | 4 |
| | NOTES TO FINANCIAL STATEMENTS | 5 |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Plan of Operations. | 11 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 12 |
| Item 4. | Controls and Procedures | 13 |
| | | |
| PART II - OTHER INFORMATION | |
| | | |
| Item 1. | Legal Proceedings | 14 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 14 |
| Item 3. | Defaults Upon Senior Securities | 14 |
| Item 4. | Submission of Matters to a Vote of Security Holders | 14 |
| Item 5. | Other Information | 14 |
| Item 6. | Exhibit and Reports on Form 8-K | 14 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited- Prepared by Management)
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
FINANCIAL REPORTS
MARCH 31, 2008
(UNAUDITED)
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
CONTENTS
| FINANCIAL STATEMENTS | |
| | |
| Balance Sheets | 1 |
| | |
| Statements of Operations | 2 |
| | |
| Statements of Stockholders' Equity | 3 |
| | |
| Statements of Cash Flows | 4 |
| | |
| Notes to Financial Statements | 5-10 |
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
BALANCE SHEETS
(UNAUDITED)
| | | March 31, | | | From Inception on August 6, 2007 to December 31, | |
| | | 2008 | | | 2007 | |
| | | | | | | |
| ASSETS | |
| | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash | | $ | 45,323 | | | $ | 53,799 | |
| | | | | | | | | |
| Total assets | | $ | 45,323 | | | $ | 53,799 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 5,010 | | | $ | 5,010 | |
| | | | | | | | | |
| Total current liabilities | | $ | 5,010 | | | $ | 5,010 | |
| | | | | | | | | |
| STOCKHOLDERS’ EQUITY | | | | | | | | |
| Common stock subscribed | | $ | 0 | | | $ | 65,750 | |
| Common stock: $.001 par value; | | | | | | | | |
| Authorized 70,000,000 shares; Issued and outstanding: 1,000,000 shares at March 31, 2008 | | | 1,000 | | | | | |
| Additional paid-in capital | | | 111,250 | | | | | |
| Accumulated deficit during development stage | | | (72,237 | ) | | | (17,261 | ) |
| | | | | | | | | |
| Total stockholders’ equity | | $ | 40,013 | | | $ | 48,489 | |
| | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 45,323 | | | $ | 53,799 | |
See Accompanying Notes to Financial Statements.
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
STATEMENTS OF OPERATIONS
(UNAUDITED)
| | | Three months Ended March 31, | | | Aug. 6, 2007 (inception) to March 31, | |
| | | 2008 | | | 2008 | |
| | | | | | | |
| REVENUES | | $ | - | | | $ | - | |
| | | | | | | | | |
| GENERAL, SELLING, AND ADMINISTRATIVE EXPENSES | | | | | |
| General, selling and administrative expenses | | $ | 52,536 | | | $ | 69,847 | |
| Office expense | | | 1,706 | | | | 1,706 | |
| Travel | | | 684 | | | | 684 | |
| Income/ (loss) before other expense | | $ | (54,976 | ) | | $ | (72,237 | ) |
| | | | | | | | | |
| Non-Operating Income (expense) | | | - | | | | - | |
| | | | | | | | | |
| Net income/ (loss) | | $ | (54,976 | ) | | $ | (72,237 | ) |
| | | | | | | | | |
| | | | | | | | | |
| Net loss per share, basic and diluted | | $ | (0.00 | ) | | $ | (0.00 | ) |
| | | | | | | | | |
| Average number of shares of common stock outstanding | | | 5,604,167 | | | | | |
See Accompanying Notes to Financial Statements.
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
STATEMENT OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| | | Common Stock | | | Common Stock | | | Accumulated Deficit During Development | | | | |
| | | Shares | | | Amount | | | Subscribed | | | Stage | | | Total | |
| | | | | | | | | | | | | | | | |
| Common stock subscribed at $.001 per share August 10, 2007 | | | 0 | | | | 0 | | | $ | 12,250 | | | $ | 0 | | | $ | 12,250 | |
| Common stock subscribed December 31, 2007 | | | | | | | | | | | 53,500 | | | | 0 | | | | 53,500 | |
| Net loss, December 31, 2007 | | | 0 | | | | 0 | | | | | | | | (17,261 | ) | | | (17,261 | ) |
| Balance, December 31, 2007 | | | 0 | | | | 0 | | | $ | 65,750 | | | $ | (17,261 | ) | | $ | 48,489 | |
| | | Common Stock | | | Additional Paid in | | | Accumulated Deficit During Development | | | | |
| | | Shares | | | Amount | | | Capital | | | Stage | | | Total | |
| | | | | | | | | | | | | | | | |
| Common stock issued at $0.001 per share | | | 5,000,000 | | | | 5,000 | | | | | | | | | | 5,000 | |
| Common stock issued at $0.01 per Share | | | 725,000 | | | | 725 | | | | 6,525 | | | | | | | 7,250 | |
| Common stock issued at $0.10 per share per SB-2 Registration Statement effective Dec. 10, 2007 | | | 1,000,000 | | | | 1,000 | | | | 99,000 | | | | - | | | | 100,000 | |
| Accumulated deficit, December 31, 2007 | | | | | | | | | | | | | | | (17,261 | ) | | | (17,261 | ) |
| Net loss, March 31, 2008 | | | | | | | | | | | | | | | (54,976 | ) | | | (54,976 | ) |
| Balance, March 31, 2008 | | | 6,725,000 | | | $ | 6,725 | | | $ | 105,525 | | | $ | (72,237 | ) | | $ | 40,013 | |
See Accompanying Notes to Financial Statements.
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | Three months Ended March 31,2008 | | | Aug. 6, 2007 (inception) to March 31,2008 | |
| | | | | | | |
| Cash Flows From Operating Activities | | | | | | |
| Net (loss) | | $ | (54,976 | ) | | $ | (72,237 | ) |
| | | | | | | | | |
| Changes in assets and liabilities | | | | | | | | |
| Increase (decrease) in accounts payable and accruals | | | - | | | | 5,310 | |
| Net cash used in operating activities | | $ | (54,796 | ) | | | (66,927 | ) |
| | | | | | | | | |
| Cash Flows From Investing Activities | | | | | | | | |
| Net cash provided used in investing activities | | $ | - | | | | - | |
| | | | | | | | | |
| Cash Flows From Financing Activities | | | | | | | | |
| Issuance of common stock | | $ | 46,500 | | | $ | 112,250 | |
| | | | | | | | | |
| Net cash provided by financing activities | | $ | 46,500 | | | $ | 112,250 | |
| | | | | | | | | |
| Net increase (decrease) in cash | | | (8,476 | ) | | $ | 45,323 | |
| | | | | | | | | |
| Cash, beginning of period | | | 53,799 | | | | - | |
| | | | | | | | | |
| Cash, end of period | | $ | 45,323 | | | $ | 45,323 | |
See Accompanying Notes to Financial Statements.
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
Friendly Auto Dealers, Inc. (“Company”) was organized August 6, 2007 under the laws of the State of Nevada for the purpose of providing promotional items with corporate logos to the automotive industry in China. The Company currently has no operations or realized revenues from its planned principle business purpose and, in accordance with Statement of Financial Accounting Standard (SFAS) No. 7, “Accounting and Reporting by Development Stage Enterprises,” is considered a Development Stage Enterprise.
A summary of the Company’s significant accounting policies is as follows:
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Cash
For the Statements of Cash Flows, all highly liquid investments with maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of December 31, 2007.
Income taxes
Income taxes are provided for using the liability method of accounting in accordance with SFAS No. 109 “Accounting for Income Taxes,” and clarified by FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.” A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
Share Based Expenses
The Company follows Financial Accounting Standards Board (“FASB”) SFAS No. 123R “Share Based Payment.” This statement is a revision to SFAS 123 and supersedes Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash Flows.” This statement requires a public entity to expense the cost of employee services received in exchange for an award of equity instruments. This statement also provides guidance on valuing and expensing these awards, as well as disclosure requirements of these equity arrangements. The Company adopted SFAS No. 123R upon creation of the company and expenses share based costs in the period incurred.
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies (continued)
Going concern
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have cash nor material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan, or merge with an operating company. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company.
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS 157). SFAS 157 provides guidance for using fair value to measure assets and liabilities. SFAS 157 addresses the requests from investors for expanded disclosure about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by the Company in the first quarter of fiscal year 2008. We do not expect that the adoption of SFAS 157 will have a material impact on our financial condition or results of operations.
In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115” (hereinafter “SFAS No. 159”). This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007, although earlier adoption is permitted. Management has not determined the effect that adopting this statement would have on the Company’s financial condition or results of operations.
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies (continued)
In December 2007, the FASB issued SFAS 141(R), “Business Combinations— a replacement of FASB Statement No. 141.” This Statement replaces SFAS 141, “Business Combinations,” and requires an acquirer to recognize the assets acquired, the liabilities assumed, including those arising from contractual contingencies, any contingent consideration, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. SFAS 141(R) also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with SFAS 141(R)). In addition, SFAS 141(R)'s requirement to measure the noncontrolling interest in the acquiree at fair value will result in recognizing the goodwill attributable to the noncontrolling interest in addition to that attributable to the acquirer. SFAS 141(R) amends SFAS No. 109, “Accounting for Income Taxes,” to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. It also amends SFAS 142, “Goodwill and Other Intangible Assets,” to, among other things, provide guidance on the impairment testing of acquired research and development intangible assets and assets that the acquirer intends not to use. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We are currently assessing the potential impact that the adoption of SFAS 141(R) could have on our financial statements.
In December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements.” SFAS 160 amends Accounting Research Bulletin 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 also changes the way the consolidated income statement is presented by requiring consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is effective for fiscal periods, and interim periods within those fiscal years, beginning on or after December 15, 2008. We are currently assessing the potential impact that the adoption of SFAS 141(R) could have on our financial statements.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities”, an amendment of SFAS No. 133. SFAS 161 applies to all derivative instruments and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 37 and 42 of SFAS 133 and related hedged items accounted for under SFAS 133. SFAS 161 requires entities to provide greater transparency through additional disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and how derivative instruments and related hedged items affect an entity’s financial position, results of operations, and cash flows. SFAS 161 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2008. We do not expect that the adoption of SFAS 161 will have a material impact on our financial condition or results of operation.
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
Note 1. Stockholder’s Equity
Common stock
The authorized common stock of the Company consists of 70,000,000 shares with par value of $0.001. On August 7, 2007, the Company authorized the issuance of 5,000,000 shares of its $.001 par value common stock at $0.001 per share in consideration of $5,000 in cash. The Company also authorized the issuance of 725,000 shares at $0.01 per share for $7,250 in legal and business services. As of December 31, 2007, the shares were unissued and considered subscribed.
On November 11, 2007, the Company filed an SB-2 Registration Statement with the Securities and Exchange Commission to register 1,000,000 shares of common stock and offer the shares for sale to the public at $0.10 per share. On December 10, 2007, the Securities and Securities Commission declared the offering effective. On December 31, 2007, the Company sold 107 investors 535,000 shares for $53,500. As of December 31, 2007, the shares were unissued and considered subscribed.
On January 16, 2008, the Company sold 107 investors 535,000 shares for $53,500. As of December 31, 2007, the shares were unissued and considered subscribed. As of March 31, 2008, the Company has 6,275,000 shares of its $0.001 par value common stock issued and outstanding to 190 shareholders.
The authorized preferred stock of the Company consists of 5,000,000 shares with a par value of $.001. The Company has no preferred stock issued or outstanding.
Net loss per common share
Net loss per share is calculated in accordance with SFAS No. 128, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic loss per share. Diluted loss per share is computed using the weighted averaged number of shares and dilutive potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.
Basic net loss per common share is based on the weighted average number of shares of common stock outstanding during 2007 and since inception. As of December 31, 2007 and since inception, the Company had no common shares outstanding. As of December 31, 2007 and since inception, the Company had no dilutive potential common shares.
Note 3. Income Taxes
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Per Statement of Accounting Standard No. 109 – Accounting for Income Tax and FASB Interpretation No. 48 - Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No.109, when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carryforwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carryforward period.
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
Note 3. Income Taxes (continued)
The components of the Company’s deferred tax asset as of December 31, 2007 and March 31, 2008 are as follows:
| | | March 31, 2008 | |
| Net operating loss carry-forward at 35% | | $ | 72,237 | |
| Valuation allowance | | | (72,237 | ) |
| Net deferred tax asset | | $ | 0 | |
A reconciliation of income taxes computed at the statutory rate to the income tax amount recorded is as follows:
| | | Inception August 6, 2007 to December 31, 2007 | | | March 31, 2008 | |
| Tax at statutory rate (35%) | | $ | 17,261 | | | $ | 72,237 | |
| Increase in valuation allowance | | | (17,261 | ) | | | (72,237 | ) |
| Net deferred tax asset | | $ | 0 | | | $ | 0 | |
The net federal operating loss carry forward will expire in 2027. This carry forward may be limited upon the consummation of a business combination under IRC Section 381.
Note 4. Related Party Transactions
The Company neither owns nor leases any real or personal property. An officer or resident agent of the corporation provides office services without charge. Such costs are immaterial to the financial statements and accordingly, have not been reflected therein. The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts. The officer of the Company has advanced $300 for organizational expenses as of December 31, 2007.
Note 5. Warrants and Options
There are no warrants or options outstanding to acquire any additional shares of common stock of the Company.
FRIENDLY AUTO DEALERS, INC.
(An Exploration Stage Enterprise)
NOTES TO THE FINANCIAL STATEMENTS
Note 6. Commitments
On December 15, 2007 the Company signed a contract with Heartland Managed Risk, LLC (Heartland) for the purposes of provided the filing and compliance services necessary to meet the Securities and Exchange Commission requirements for reporting companies. The Company agreed to pay Heartland $20,000 annually for these services to be paid quarterly at the rate of $5,000 per quarter.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES SUCH AS THE DEPENDENCE OF THE COMPANY ON AND THE ADEQUACY OF CASH FLOWS. THESE FORWARD-LOOKING STATEMENTS AND OTHER STATEMENTS MADE ELSEWHERE IN THIS REPORT ARE MADE IN RELIANCE ON THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and Plan of Operations.
Description Of Business
General
Friendly Auto Dealers, Inc. ("Friendly Auto Dealers" or “The Company”) is a development stage enterprise that was incorporated on August 6, 2007, under the laws of the State of Nevada. The principal offices are located at 4132 South Rainbow Boulevard, Suite 514, Las Vegas, Nevada. The telephone number is (702) 321-6876. The fax number is (702) 939-0655. Since becoming incorporated, Friendly Auto Dealers has not made any significant purchases or sale of assets, nor has it been involved in any mergers, acquisitions or consolidations. Friendly Auto Dealers has never declared bankruptcy, it has never been in receivership, and it has never been involved in any legal action or proceedings. Our fiscal year end is December 31st.
Friendly Auto Dealers, Inc. is looking to enter into the promotional branding industry with the objective of adding value to a wide variety of products by endorsing them with the corporate logos of the world’s automobile manufacture’s for use by the company’s employees or as gifts or promotional items. The Company will concentrate its efforts in the People’s Republic of China and its retail automotive industry.
Friendly Auto Dealers intends to establish itself as a specialized brand promotional merchandising company. The Company will identify a range of casual apparel and consumer products that can be manufactured and resold for high mark-ups with the product endorsement of corporate logos.
Friendly Auto Dealers intends to create brand name awareness amongst purchasing managers or decision makers who are able to place its targeted products into its targeted market. The targeted market is large to mid-size companies, who are using logo bearing apparel, essential office products, and leisure products for their employees as well as for gifts for customers.
Friendly Auto Dealers plans to source its raw products (apparel and consumer products with logos) in China. Once the Company has selected a range of apparel and promotional products and negotiated pricing it will purchase a small inventory in order to make promotional samples. The Company intends to hire independent contractors within the Peoples Republic of China and the United States for all graphic design. Embroidery, and screen printing work necessary to place the prospective company logos on the products will be performed in China. The Company will profile and market its product line to the corporate marketplace through online merchandising and an e-catalog on its website. The website will have online catalogs offering apparel, office products and leisure products. The site will allow the consumer to “upload” an electronic version of their company or corporate logo and order products online through a fully functional e-commerce enabled website.
Business Development
As of March 31, 2008, Friendly Auto Dealers raised $105,000 through the sale of common stock. Including the sale of 5,000,000 shares sold to its Sole Officer and Director. In addition, as of March 31, 2008, the Company had sold 1,000,000 shares of its common stock to approximately 185 shareholders for an aggregate investment of $100,000. These shares were registered under a Form SB-2 filing under the Securities Act of 1933 which became effective on December 10, 2007. This was the maximum amount of common shares offered through the Registration Statement by the Company; as such, the offering is fully subscribed and closed as of the date of this report. The Company intends to utilize these funds begin the initial development of its business and cover administrative costs for the next six to nine months.
Liquidity and Capital Resources
As of March 31, 2008, we have $45,323 of cash available. We have current liabilities of $5,010. From the date of inception (August 6, 2007) to March 31, 2008 the Company has recorded a net loss of $72,237 of which were expenses relating to the initial development of the Company, filing its Registration Statement on Form SB-2, and expenses relating to maintaining reporting company status with the Securities and Exchange Commission. As of March 31, 2008, we had 6,275,000 shares issued and outstanding. We will require additional capital investments or borrowed funds to meet cash flow projections and carry forward our business objectives. There can be no guarantee or assurance that we can raise adequate capital from outside sources to fund the proposed business.
To date there is no public market for the Company’s common stock. As of the date of this report, the Company has filed a 15c-211 application, through a broker dealer, with the Financial Industry Regulatory Authority (FINRA). Management plans to continue focusing efforts on obtaining quotation of the Company’s common stock on the Over-The-Counter Bulletin Board (OTCBB). However, there can be no guarantee or assurance that they will be successful in accomplishing this task; moreover, even if the common stock is listed on the OTCBB there can be no guarantee that a market would develop for the Company’s common stock. Failure to create a market for the Company’s common stock would result in business failure and a complete loss of any investment made into the Company.
Off-Balance Sheet Arrangements
As of the date of this Quarterly Report, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
Product Research and Development
The Company does not anticipate any costs or expenses to be incurred for product research and development within the next twelve months.
Employees
There are no employees of the Company, excluding the current President and Director, Tony Lam, of the corporation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 4. Controls and Procedures
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Sarbanes-Oxley (SOX) Section 404 A. The Company's internal control over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
As of March 31, 2008 management assessed the effectiveness of the Company's internal control over financial reporting based on the criteria for effective internal control over financial reporting established in SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that the Company's management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by the Company's Chief Financial Officer in connection with the review of our financial statements as of March 31, 2008 and communicated the matters to our management.
Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an affect on the Company's financial results. However, management believes that the lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures can result in the Company's determination to its financial statements for the future years.
We are committed to improving our financial organization. As part of this commitment, we will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to the Company: i) Appointing one or more outside directors to our board of directors who shall be appointed to the audit committee of the Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and ii) Preparing and implementing sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on the Company's Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support the Company if personnel turn over issues within the department occur. This coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues the company may encounter in the future.
We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Changes In Internal Controls.
There were no significant changes in the Company's internal controls or, to the Company's knowledge, in other factors that could significantly affect these controls subsequent to the date of their evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.
No director, officer, or affiliate of the Company and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
3.1 Articles of Incorporation*
3.2 By-Laws*
31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer and Chief Financial Officer
32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
*Filed previously as an exhibit to the Company’s registration statement with the Commission on November 21, 2007.
Signature
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Friendly Auto Dealers, Inc. | |
| | |
| Dated: May 14, 2008 | /s/ Tony H. Lam |
| | Tony H. Lam |
| | Chief Executive Officer and |
| | Chief Financial Officer |
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