UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] Quarterly report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2013

 

[ ] Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________________to ________________

 

Commission file number 333-175212

 

AUTOVATIVE PRODUCTS INC.
(Exact name of small business issuer as specified in its charter)

Nevada	26-4574088
(State of Incorporation)	(I.R.S. Employer Identification No.)

 

167 Penn Street, Washington Boro, Pennsylvania 17582

Telephone 607-765-0967

(Address and telephone number of registrant’s principal executive offices and principal place of business)

 

 

502 N. Santa Fe Avenue, Ste. D, Vista, CA 92083

Telephone 760-732-5868

and

3077 E. Warm Springs Road, Ste. 300, Las Vegas, Nevada 89120

(Former address and telephone number of registrant’s principal executive offices and principal place of business)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]      No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such filing). Yes [X]   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.

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [X]
(Do not check if a smaller reporting company)

 

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

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding at May 15, 2013
Common Stock, $0.001 par value per share	8,557,977 shares

 

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Our unaudited interim consolidated financial statements for the three month period ended March, 31, 2013 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

 

 

 

AUTOVATIVE PRODUCTS INC.
(A Development Stage Company)

INTERIM FINANCIAL STATEMENTS
MARCH 31, 2013

(Unaudited – Prepared by Management)

 

PART 1: FINANCIAL INFORMATION

 

Item 1. Condensed Balance Sheets	2
Condensed Statements Of Operations	3
Condensed Statements Of Cash Flows	4
Notes To Condensed Financial Statements	5
Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	10
Item 3. Quantitative And Qualitative Disclosures About Market Risk	13
Item 4. Controls And Procedures	13
Part II. Other Information	14
Item 1. Legal Proceedings	14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3. Quantitative and Qualitative Disclosures about Market Risk	14
Item 4. Mine Safety Disclosures	14
Item 5. Other Information	14
Item 6. Exhibits	14
Signatures	14

 

 

 

 

AUTOVATIVE PRODUCTS, INC

CONDENSED BALANCE SHEETS

 

		March 31, 2013				December 31, 2012
		(Unaudited)
Assets
Current Assets
Cash		$	3,283			$	1,774
Accounts Receivable			2,393				13,883
Total Current Assets			5,676				15,657
Total Assets		$	5,676			$	15,657
Liabilities And Stockholders’ Equity (Deficit)
Current Liabilities
Accounts Payable		$	5,331			$	22,158
Accrued Income Tax Payable			—				13,357
Accrued Interest and Penalties			—				14,049
Total Current Liabilities			5,331				49,564
Total Liabilities			5,331				49,564
Stockholders’ Equity (Deficit)
Common Stock $.001 Par Value 25,000,000 Shares Authorized 8,557,977 shares issued and outstanding			8,558				8,558
Paid in Capital			58,858				24,583
Retained Earnings			(67,071	)			(67,048	)
Total Stockholders’ Equity (Deficit)			345				(33,907	)
Total Liabilities And
Stockholders’ Equity (Deficit)		$	5,676			$	15,567

See accompanying notes to condensed financial statements.

3

 

AUTOVATIVE PRODUCTS, INC

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the Three Months Ended March 31, 2013				For the Three Months Ended March 31, 2012
Revenue
Sales		$	8,396			$	5,583
Service Income			—				6,000
Total Revenue			8,396				11,583
Cost of Goods Sold			6,400				4,256
Gross Income			1,996				7,327
Ordinary Income\Expenses
Commissions			1,996				1,327
Advertising and Marketing			—				9,000
General & Administrative			23				2,525
Professional Fees			—				15,750
Total Expenses			2,019				28,602
Net Operating Loss			(23	)			(21,275	)
Interest Expense			—				227
Net Loss		$	(23	)		$	(21,502	)
Net Loss Per Share		$	(0.00	)		$	(0.00	)
Weighted Average Shares Outstanding			8,558,977				8,585,977

 

See accompanying notes to condensed

financial statements.

4

 

 

AUTOVATIVE PRODUCTS, INC

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the Three Months Ended March 31, 2013				For the Three Months Ended March 31, 2012
Cash Flows from Operating Activities
Net Loss		$	(23	)		$	(21,502	)
Adjustments to Reconcile Net Loss To Net Cash (Used In) Operating Activities:
Accounts Payable			(16,827	)			(15,209	)
Accounts Receivable			11,490				16,523
Accrued Tax Expense			(13,357	)			—
Accrued Interest and Penalties			(14,049	)			227
Net Cash (Used In) Operating Activities			(32,766	)			(19,961	)
Cash Flows From Investing Activities
Net Cash Provided by (Used In) Investing Activities			—				—
Cash Flows from Financing Activities
Additional Paid In Capital			34,275				—
Net Cash Provided by Financing Activities			34,275				—
Increase (Decrease) in Cash			1,509				(19,961	)
Cash at Beginning of the Period			1,774				28,343
Cash at End of the Period		$	3,283			$	8,382

 

*For the Quarter at March 31 2013 and 2012, there were no payments for interest or taxes.

 

See accompanying notes to condensed

financial statements.

 

5

 

AUTOVATIVE PRODUCTS INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

For the Three Months Ended March 31, 2013 and 2012

 

 

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

 

The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2013 and for all periods presented herein, have been made.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2012 audited financial statements. The results of operations for the periods ended March 31, 2013 and the same period last year are not necessarily indicative of the operating results for the full years.

 

A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.

 

BUSINESS AND BASIS OF PRESENTATION

 

Autovative Products Inc. ("Company" or "Autovative Products") was formed on December 8, 2004 under the laws of the State of Nevada.

 

Autovative Products is a Specialty distribution company of fleet truck products. Currently the Company has exclusive distribution rights with both Federal Express (FedEx) and United Postal Service (UPS) for its Portable Tow Truck. The Company is currently in the process of marketing its Overhead Door Saver to both FedEx and UPS.

 

REVENUE RECOGNITION

 

We recognize revenue from product sales or services rendered when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. Revenues from design services provided are recorded upon billing of completed services.

 

We evaluate whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions as determined by Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 605-45-45, Overall Considerations of Reporting Revenue Gross as a Principal Versus Net as an Agent. We are primarily obligated in the transaction, subject to credit risk, have latitude in establishing prices and selecting suppliers, and risk of replacing lost shipments, therefore revenue is recorded at the gross sales price.

 

Product sales represent revenue from the sale of products and related shipping fees where we are the seller of record. Product sales and shipping revenues are recorded when the products are shipped and title passes to customers.

 

EARNINGS PER SHARE

 

Earnings per share is calculated in accordance with the FASB ASC Topic 260, Earnings Per Share specifying the computation, presentation and disclosure requirements of earnings per share information. Basic earnings per share have been calculated based upon the weighted average number of common shares outstanding. Stock options and warrants have been excluded as common stock equivalents in the diluted earnings per share because they are either anti-dilutive, or their effect is not material.

 

ADVERTISING

 

The Company follows a policy of charging the costs of advertising to expenses incurred. The Company incurred advertising expenses totaling $0 for the quarter ended March 31, 2013 and $3,000 for the quarter ended March 31, 2012.

  

SEASONAL VARIATIONS

FASB issued ASC 270-10-45-11 which states that revenues of certain entities are subject to material seasonal variations. To avoid the possibility that interim results with material seasonal variations may be taken as fairly indicative of the estimated results for a full fiscal year, such entities shall disclose the seasonal nature of their activities, and consider supplementing their interim reports with information for 12-month periods ended at the interim date for the current and preceding years. The Company’s business is seasonal; as it sells its Portable tow-truck mats almost exclusively to the UPS trucking fleet currently which is heavily used in winter conditions and substantially less in the spring through fall months.

 

GOING CONCERN

 

The Company has had losses since its inception.  There is no assurance that we will become profitable in the future.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the ability of the Company to continue as a going concern on a longer-term basis will be dependent upon the ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, the ability to successfully raise additional financing, and the ability to ultimately attain profitability.

 

NOTE 2. ACCRUED TAXES AND ACCRUED INTEREST AND PENALTIES

 

In January of 2013 the Company’s accrued tax expense of $13,357, accrued interest and penalties expense of $11,951, and professional fees of $8,275 were paid by David Funderburk the company’s previous CEO. The payments are treated as additional paid in capital, as the former officer is not to be repaid for the payments made by him.

 

 

 

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This quarterly report may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "our company believes," "management believes" and similar language. These forward-looking statements are based on our current expectations and are subject to certain risks, uncertainties and assumptions, including those set forth in the following discussion. Our actual results may differ materially from results anticipated in these forward-looking statements. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. In addition, our historical financial performance is not necessarily indicative of the results that may be expected in the future and we believe that such comparisons cannot be relied upon as indicators of future performance. Other important factors that could cause actual results to differ materially include the following: business conditions, the price of precious metals, ability to attract and retain personnel; the price of the Company's stock; and the risk factors set forth from time to time in the Company's SEC reports, including but not limited to its annual report on Form 10-K; its quarterly reports on Forms 10-Q; and any reports on Form 8-K. In addition, the Company disclaims any obligation to update or correct any forward-looking statements in all the Company's annual reports and SEC filings to reflect events or circumstances after the date hereof.

 

GENERAL

 

We were incorporated in Nevada on December 8, 2004 and we have elected December 31 as our fiscal year end.

 

We were formed to develop businesses, assets and opportunities, some acquired and contributed from third parties and our founding shareholders, in the trucking/automobile special parts production and distribution industry and some related fields. We have been, initially, capitalized through the acquisition of Assets from our founding shareholder, outside producers, cash flows from the distribution of products and the proceeds from a Private Placement offering.

 

Products and Technology

 

Portable Tow Truck

 

The Portable Tow Truck was developed and is owned by OTW Enterprises LLC. We have contracted with OTW Enterprises LLC for the marketing and distribution rights. The Portable Tow Truck is made of rigid polypropylene. Each section (there are two sections, one for each rear tire) is 8 inches wide and 36 inches long, and weighs 2.5 pounds. They have two holes on the top portion to provide attachment to the vehicle, and are designed for easily handling and consume very little trunk space. They have been tested to perform at 40 degrees below zero, and are designed to last for a number of years, depending on how much they are used.

 

We have continued to have positive response from both FedEx and UPS regarding the Portable Tow Truck. We have no ongoing contract for the sale of the product to any Company, inclusive of FedEx and UPS yet both Companies combined make up 100% of our sales of The Portable Tow Truck as they continue to return to purchase the Portable Tow Truck.

 

We believe that once we implement our business strategy as defined above we will be able to sell the product to additional large trucking fleets as well as automotive parts stores, and the larger retail outlets such as Wal-Mart, and Target. At this time we do not know how successful we might be at selling to other large trucking fleets or the retail markets.

 

 

Overhead Door Saver

 

The Overhead Door Saver was developed and is owned by OTW Enterprises LLC. We have contracted with OTW Enterprises LLC for the marketing and distribution rights. The Overhead Door Saver is manufactured from various steel parts. The mounting piece (which is bolted to the track of the overhead door) is 3Ó steel flat bar which has three holes punched in it, and then is bent into a U shape. The rod which goes through the U support is made from hot-rolled ½' steel and has a 2'X2 ½' flat steel piece welded on one end. A 10' long engineered steel spring is placed over the rod and then inserted through the holes on the U support. A 2' long engineered steel spring is placed on the back end of the rod, with a bolt behind it welded to the rod. The assembled unit is then painted and baked (plated) to prevent rust and to assure a long-lasting product. Left-hand and right-hand units are produced, and both units are then bolted to the overhead door track, one on each side.

 

We have yet to make sales of the Overhead Door Saver. The unit is currently in a test phase by UPS.

 

Results of Operations

 

Net Sales

For the three months ended March 31, 2013, the Company had $8,396 in sales compared to $5,583 for the three months ended March 31, 2012. The increase in sales resulted from an increase in orders from both FedEx and UPS. There were no consulting fees in 2013 compared to $6,000 for the three months ended March 31, 2012 as the officer that performs the consulting services allocated time to other issues.

 

Gross Profit

Gross profit was $1,996 in the three months ending March 31, 2013 compared to a $7,327 in the three month period ending March 31, 2012, correlating to the loss of consulting revenue.

 

Selling, General and Administrative Expenses

For the three months ended March 31, 2013, the Company had office and general expenses of $2,019 compared with $28,602 in 2012. The changes were primarily a decrease in professional fees (which were incurred in the second quarter of 2013) from $15,750 in 2012 to $0 in 2013 and a reduction of advertising expenses from $9,000 in 2012 to $0 in 2013 as the Company underwent a change in control of a majority of its shares.

 

Net Loss

For the three months ended March 31, 2013, the Company had a net loss of $23 or $(0.00) per share, compared to the net loss for the three months ended March 31, 2012 of $21,502 or $(0.00) per share. The decreased loss was primarily due to decreased marketing and professional fees expenditures for promotion and public reporting during the period ending March 31, 2013.

 

Liquidity and Capital Resources

The Company had current assets including cash on hand of $3,283 and accounts receivable of $2,393 as of March 31, 2013. The Company had a working capital of $345 as of March 31, 2013 compared with a working capital deficit of $33,907 as of December 31, 2012. The revenues and expenses of the Company are highly seasonal and working capital varies throughout the year.

 

At three months ended March 31, 2013 assets declined by $9,981 primarily due to the use of cash and accounts receivables to pay vendors and cost of sales during the three months ended March 31, 2013.

 

Management of the Company has determined that the Company’s ability to continue as a going concern is dependent on raising additional capital and achieving increased sales of its Portable Tow Truck and it Overhead Door Saver.

 

Management can give no assurance that any increase in sales will occur in the future and if they do occur, may not be enough to cover the Company’s operating expenses or any other costs. Should this be the case, we would be forced, unless sufficient working capital can be raised, to suspend operations and possibly liquidate the assets and wind up and dissolve the Company.

 

Significant Accounting Policies and Estimates

 

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's financial statements which have been prepared in accordance with accounting principals generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experiences and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Application of Critical Accounting Policies

 

Revenue recognition 

 

We recognize revenue from product sales or services rendered when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. Revenues from design services provided are recorded upon billing of completed services.

 

We evaluate whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions as determined by Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 605-45-45, Overall Considerations of Reporting Revenue Gross as a Principal Versus Net as an Agent. We are primarily obligated in the transaction, subject to credit risk, have latitude in establishing prices and selecting suppliers, and risk of replacing lost shipments, therefore revenue is recorded at the gross sales price.

 

Product sales represent revenue from the sale of products and related shipping fees where we are the seller of record. Product sales and shipping revenues are recorded when the products are shipped and title passes to customers. 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable

Item 4. Controls and Procedures

 

.   Controls And Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures

 

At the end of the period covered by this Quarterly Report on Form 10-Q, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer believe that:

 

‡	Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

 

‡

Our disclosure controls and procedures operate such that important information flows to appropriate collection and disclosure points in a timely manner and are effective to ensure that such information is accumulated and communicated to our management, and made known to our Chief Executive Officer and Chief Financial Officer, particularly during the period when this Report was prepared, as appropriate to allow timely decisions regarding the required disclosure.

 

Autovative Product's Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures and concluded that these controls and procedures were not effective as of March 31, 2013.

 

Unremediated Material Weakness

 

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies, which result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

 

Subsequent to issuance of the Company’s December 31, 2011 and 2010 financial statements the Company’s management identified an error related to 1) the proper recording of accounts receivable for sales, 2) the proper recording of accounts payable for cost of sales and commission, and 3) the reporting of income taxes, interest and penalties payable for taxes due from a prior year return. As a result, the Company has restated certain amounts in the accompanying financial statements to correct errors in previously reported amounts related to accounts receivables, accounts payables, and accrued expenses. This restatement affected the reported amounts of accounts receivables, current liabilities, and accumulated deficit. See Note (2) – Prior Period Adjustments and Restatement of Reported Net Income.

 

The Company restated the Company’s reviewed financial statements as of March 31, 2012 for the three months then ended (the “Restatement”) to correct errors in previously reported amounts. The Restatement reflects the following adjustments related to the accrual account adjustments for receivables and payables.

 

To initially address this material weakness, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

 

Remediation of Material Weakness

 

To remediate the material weakness in our disclosure controls and procedures identified above, we have done or intend to do the following subsequent to the fiscal year ended December 31, 2011. On December 28, 2012, a consultant to the Company who has expertise in public company financial reporting compliance, was appointed to process proper accrual accounting to the books and records of the Company, in assistance to the President in the financial process of the Company. The process to proper accrual accounting is expected to be complete in the second quarter of 2013.

 

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

None

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

 

Item 3. Defaults upon Senior Securities

None.

 

Item 4. Mine Safety Disclosures

None

 

Item 5. Other Information

None.

 

Item 6. Exhibits and Reports on Form 8-k

 

8-k        1/7/2013            Item 5.01.          Changes in Control of Registrant.

 

(a) Financial Statement Schedules.

 

None.

 

(b) Exhibits

 

Number	Exhibit
31.1**	Certification of the Chief Executive Officer, as the principal executive officer and the principal financial officer, under 18 U.S.C. Section 1350, as adopted in accordance with section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of the Chief Executive Officer, as the principal executive officer and the principal financial officer, under 18 U.S.C. Section 1350, as adopted in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.

** Filed Herewith

 

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	AUTOVATIVE PRODUCTS, INC
Dated: May 15, 2013	By:	/s/ Qasim Husain, MD
		Qasim Husain, MD
		President, Treasurer and Secretary (Principal Executive, Financial and Accounting Officer)