AFTERMARKET ENTERPRISES, INC.
933 S. 4th Street, Unit A
Grover Beach, California 93433
October 5, 2010
Ronald E. Alper, Esq.
United States Securities and Exchange Commission
Division of Corporate Finance
100 F Street
Mail Stop 3561
Washington, D.C. 20549
Re: Aftermarket Enterprises, Inc.
Form 10-K for Fiscal Year Ended December 31, 2009
Filed April 15, 2010
Form 10-Q for the Quarterly Period Ended March 31, 2010
Filed May 17, 2010
File No. 333-141676
Dear Mr. Alper:
To assist the staff of the Commission in completing its review of the
above referenced filing, the comments from your comment letter dated
September 21, 2010, are quoted below and are followed in each case by the
Company's response thereto. Unless otherwise indicated, the reference
immediately preceding the Company's response indicates the corrected or
revised page where the response appears. We are also forwarding via
overnight delivery courtesy copies of this filing along with computer-
redlined copies.
Form 10-K for the Fiscal Year Ended December 31, 2009
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Cover Page
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Comment 1
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We note your response to comment one in our letter dated August 11, 2010 and
we reissue it in part. You state that your "shares trade on the OTCBB with
no bid or ask price. The shares trade very sporadically and the bid price on
any given day may not be indicative of the actual price a stockholder could
receive for their shares." On page 6 you indicate that your common stock has
had no trading activity as of March 25, 2010 Please provide the time period
you refer to within which there was no trading activity considering the table
on page 6 indicates that there was trading activity in 2009.
Response
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The shares trade very sporadically or infrequently. When the shares trade it
is usually only one order that is traded with low volume. As such we were
attempting to provide additional disclosure to potential investors as to the
lack of liquidity and the potential for swings in prices. Although the
shares do not trade frequently, there is a bid and ask price listed by the
market makers. The comment on page 6 regarding no trading activity was left
over from previous filings and should not have appeared. It will not be
presesnt in future filings.
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations, page 7
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Comment 2
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We note your response to comment two in our letter dated August 11, 2010.
Please provide your proposed disclosure.
Ronald E. Alper, Esq.
United States Securities and Exchange Commission
Division of Corporate Finance
August 31, 2010
Page 2
Prior Comment 2:
Please include an overview section to discuss known material trends, demands,
commitments, events, or uncertainties that will have, or are reasonably
likely to have, a material impact on your financial condition, operating
performance, revenues, or income, or result in your liquidity decreasing or
increasing in any material way. See Item 303 of Regulation S-K and Release
No. 33-8350. For example, please elaborate on how you plan to continue to
address "the deteriorating market that has resulted from the current economic
conditions and surge in oil and fuel prices that occurred initially during
2008."
Response
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Although we have reduced our expenses to better reflect anticipate revenue,
we are in need of additional capital to grow the Company and expand into new
product lines. At this time, we are dependent on the continued financial
support of our officer and director to fund any short falls. As market
conditions improve, we would like to expand into offering additional
automobile products and drop ship items in the automobile area. Currently,
we continue to find consumers are reluctant to spend disposable income on
automobile accessories and as such, our suppliers have reduced their product
offering, further hampering our ability to offer product. We are hopeful as
the economy continues to improve that suppliers will expand their product
offering and consumers will start to spend more of their disposable income.
Until conditions improve, we will continue to operate at a loss or break
even. Additionally, our ability to expand and generate additional revenue
sources will be hampered. In the meantime, we are adding products to our
online store and focusing promotional efforts on products that are commonly
purchased and readily available, such as floor mats, cargoliners and roof
racks. In addition, we are seeking out vendors that are manufacturing
accessories for newer model years and attempting to establish relationships
with them. If we are unable to source manufacturers that are making
accessories for current model year vehicles, and if current vendors don't
continue to add items to their product offering for current model years, we
will be unable to provide shoppers with products and our revenues will
suffer. We believe that by focusing on products offered by vendors who are
keeping up with current modely years and by adding new vendors in areas where
old vendors are not keeping up with current model years, our product offering
will remain relevant and in demand and we can stabilize revenue. We hope by
focusing on specific product offerings and establishing promotions for them,
we can increase revenue in the future. In addition, we are currently
establishing "upsell" product offerings in our online store in hopes that we
can increase the revenue potential of each customer.
Results of Operations, page 7
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Comment 3
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We note your response to comment three in our letter dated August 11, 2010.
Please provide your proposed disclosure.
Prior Comment 3:
You have not adequately disclosed the factors that contributed to the
changes in revenues, costs of goods sold, gross profit, operating expenses
and losses from operations between the years presented. Please expand your
discussion and analysis to describe the underlying reasons for the changes
in each of the factors contributing to the overall change in the financial
statement line items to the extent necessary to an understanding of your
operations. This discussion and analysis should also identify and describe
known matters that would have an impact on future operations but have not
had an impact in the past and matters that have had an impact on reported
operations but are not expected to have an impact on future operations.
Refer to Item 303(a)(3)(ii) of Regulations S-K.
Ronald E. Alper, Esq.
United States Securities and Exchange Commission
Division of Corporate Finance
August 31, 2010
Page 3
Response
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During 2009, our sales fell to $95,675 from $143,344 for the year ended
December 31, 2008. The reduction in sales, we believe, were the result of
two factors. Primarily, consumers continued to reduce their overall spending
particularly on disposable items. As we sell automobile accessories, our
overall sales were severely impacted. Additionally, our suppliers, feeling
the overall reduction in consumer spending reduced their product offering
reducing our ability to market many products we previously sold in 2008.
Until consumers start spending more of their disposable income, we will
continue to face a difficult sales environment. As a result of the reduction
in our sales, costs of goods sold also decreased from $121,081 in 2008 to
$73,964 for the year ended December 31, 2009. Our gross margin did improve
to 22.7% for the year ended December 31, 2009, as oppose to 15.5% for the
year ended December 31, 2008. The improvement in gross margin was the result
of consumers buying less expensive items which we have a higher profit margin
on then the larger more expensive accessories which we cannot mark up as
much.
We knew going into 2009, that it was going to be a difficult year for
revenues, and as such, took aggressive steps to reduce our overall expenses.
Our expenses for the year ended December 31, 2009 were $43,985 compared to
$126,287 for the year ended December 31, 2008. The reduction in expenses
reflects a reduction in professional fees and general and administrative
costs. We were able to reduce our general and administrative costs by
$56,666 to $31, 642 for the year ended December 31, 2009. This reduction was
primarily the result of eliminating the use of independent contractors for
order processing and customer service and changing our office to reduce rent
in addition to minimizing all other expenditures. Additionally we reduced
payroll as our CEO agreed to not accept any salary for the year. Although we
were able to reduce expenses, we still operated at a loss of $23,156. This
was an improvement over the year ended December 31, 2008 when we had a net
loss of $106,251. With the loss over the last two years, and the sales
environment only starting to improve, we will continue to face challenges in
our business. Our suppliers have indicated they will not be expanding their
product lines for the foreseeable future until the see consistent improvement
in consumer spending. This will limit our sales for 2010 and the future
until the consumer market stabilizes. We are in the process of looking for
new markets to expand into and possibly open additional web sites. We will
also have to look at additional funding as we have depleted our capital
resources as we have had to fund ongoing losses. We do believe the changes
we have made on the expense side should help stabilize our operations over
the next twelve months and allow us to operate at only a small loss until we
can increase sales.
Management's Annual Report on Internal Control over Financial Reporting,
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page 8
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Comment 5
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We note your response to comment six in our letter dated August 11, 2010 and
the revised disclosure in your Form 10-Q for the period ended June 30, 2010
and we reissue the comment. Please confirm and in future filings, state, if
true, that there have been no changes in internal control over financial
reporting that occurred during your last fiscal quarter (or fourth fiscal
quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, your internal control over financial
reporting. See Item 308T(b) of Regulation S-K.
Response
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There has been no changes in internal control over financial reporting that
occurred during our last fiscal quarter (or fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Additionally, we will add such disclosure to future filings.
Ronald E. Alper, Esq.
United States Securities and Exchange Commission
Division of Corporate Finance
August 31, 2010
Page 4
Signatures, page 14
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Comment 6
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We note your response to comment eight in our letter dated August 11, 2010
and we reissue the comment in part. Your document must be signed in the
second signature block by your principal executive officer, your principal
financial officer, your principal accounting officer or controller, and at
least a majority of your board of directors. See General Instructions D92)
(a) to From 10-K. Therefore, please confirm if true, that Mr. Anthony signed
this Form 10-K in his capacity as your principal financial officer and, in
the future, provide his titles in addition to Director in the second
signature block.
Response
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Mr. Anthony signed the Form 10-K in his capacity as our principal financial
officer and, in the future, we will provide his titles in addition to
Director in the second signature block.
Form 10-Q for the Period Ended June 30, 2010
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Exhibits 32
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Comment 7
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This certification must be signed by your chief executive officer and chief
financial officer. Please confirm, if true, that Mr. Anthony signed in his
capacity as your chief financial officer and include this title in future
certifications. See 18 U.S. C. Section 1350 and Rule 13a-14(b).
Response
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Mr. Anthony signed in his capacity as your chief financial officer and we
will include this title in future certifications.
The company acknowledging that:
o the company is responsible for the adequacy and accuracy and accuracy of
the disclosure in the filing.
o staff comments or changes to disclosure in response to staff comments do
not foreclose the Commission from taking any action with respect to the
filing; and
o the company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
If you have further questions or need additional information, please let me
know.
Sincerely,
AFTERMARKET ENTERPRISES, INC.
/s/ Adam Anthony
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Adam Anthony, CEO