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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q

x 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the quarterly period ended September 30, 2013
 
or
 
¨ 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ______________ to ______________
 
Commission file number: 000-51997

NORTHEAST AUTOMOTIVE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
 
NEVADA
 
65-0637308
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification Number)

2174 HEWLETT AVENUE, SUITE 206
MERRICK, NY 11566
(Address of Principal Executive Offices)
(Zip Code)

(516) 377-6311
(Registrant’s Telephone Number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
x
(Do not check if a smaller reporting company)
 
 

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

The number of shares outstanding of the Registrant’s common stock as of January 7, 2014 was 10,554,017 shares.
 


 
 

 
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
 
FORM 10-Q

September 30, 2013
 
TABLE OF CONTENTS
 
PART I— FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
Item 1.
Financial Statements
    3  
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    9  
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
    10  
Item 4.
Controls and Procedures
    10  
 
 
       
PART II— OTHER INFORMATION
       
 
 
       
Item 1.
Legal Proceedings
    11  
Item 1A.
Risk Factors
    11  
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
    11  
Item 3.
Defaults Upon Senior Securities
    11  
Item 4.
Removed and Reserved
    11  
Item 5.
Other Information
    11  
Item 6.
Exhibits
    12  
 
 
       
SIGNATURES
    13  
 
 
2

 
 
PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements
 
The financial statements of Northeast Automotive Holdings, Inc. (the "Company"), included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company as included in the Company's Form 10-K for the year ended December 31, 2012.
 
 
3

 
 
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
   
September 30,
   
December 31,
 
 
 
2013
   
2012
 
ASSETS
Current Assets:
       
 
 
Cash
  $ 1,528     $ 304  
                 
Total Current Assets
    1,528       304  
                 
Equipment, net
    85       336  
Other assets
    5,510       3,967  
                 
TOTAL ASSETS
  $ 7,123     $ 4,607  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
               
Note payable to bank
    100,000       100,000  
Due to stockholders
    69,838       64,938  
Accrued expenses
    27,450       14,200  
      -          
Total Current Liabilities
    197,288       179,138  
                 
Stockholders' Deficit
               
Preferred stock, 0.0001 par value, 10,000,000 shares authorized, 10,000,000 issued and outstanding
    -       1,000  
Common stock, .001 par value, 300,000,000 shares authorized, 10,554,017 and 554,017 shares issued and outstanding September 30, 2013 and December 31, 2012, respectively
    10,554       554  
Capital Stock to be issued (500,000 Shares)
    20,000       20,000  
Additional Paid in Capital
    3,547,363       3,556,363  
Accumulated Deficit
    (3,766,906 )     (3,751,272 )
      (188,989 )     (173,355 )
Less: Treasury stock (6,667 common shares)
    (1,176 )     (1,176 )
Total Stockholders' Deficit
    (190,165 )     (174,531 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 7,123     $ 4,607  
 
See Notes to Financial Statements
 
 
4

 
 
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
   
Three Months
   
Three Months
   
Nine Months
   
Nine Months
 
   
Ended
   
Ended
   
Ended
   
Ended
 
   
September 30,
   
September 30,
   
September 30,
   
September 30,
 
   
2013
   
2012
   
2013
   
2012
 
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
 
                         
Net sales
  $ -       -       -       -  
                                 
Cost of sales
    -       -       -       -  
                                 
Gross profit
    -       -       -       -  
                                 
Operating expenses:
                               
Selling, general and administrative
    3,442       5,710       16,322       141,271  
Other expenses
    3,150       2,800       3,150       2,800  
Total operating expenses
    6,492       8,510       19,472       144,071  
                                 
Profit (Loss) from operations
    (6,492 )     (8,510 )     (19,472 )     (144,071 )
                                 
Income taxes
    (3,838 )     -       (3,838 )     -  
                                 
Net profit (loss)
  $ (2,654 )     (8,510 )     (15,634 )     (144,071 )
                                 
Net profit (loss) per share basic and diluted
  $ (0.00 )     (0.01 )     (0.02 )     (0.26 )
                                 
Weighted average number of shares outstanding
    10,554,017       554,017       10,554,017       554,017  
 
See Notes to Financial Statements
 
 
5

 
 
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
 
   
Nine Months
   
Nine Months
 
   
Ended
   
Ended
 
   
September 30,
2013
   
September 30,
2012
 
   
(unaudited)
   
(unaudited)
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net profit (loss)
  $ (15,634 )   $ (144,071 )
Adjustments to reconcile net profit to net cash used by operating activities:
               
Depreciation and amortization
    252       3,765  
Changes in operating assets and liabilities:
    -       -  
(Increase) decrease in accounts receivable
    -       123,052  
(Increase) decrease in inventory
    -       -  
(Increase) decrease in other assets
    (1,544 )     (1,100 )
Increase (decrease) in customer deposits payable
    -       -  
Increase (decrease) in accrued expenses
    13,250       1,450  
Increase (decrease) in payroll taxes
    -       (1,273 )
Total adjustments
    11,958       125,894  
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
    (3,676 )     (18,177 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
            -  
Purchase of fixed assets
    -       -  
CASH USED BY INVESTING ACTIVITIES
    -          
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds of stockholders loans
    4,900       12,954  
Repayment of stockholders loan
    -          
Repayment of demand loans
    -          
CASH PROVIDED (USED) BY FINANCING ACTIVITIES
    4,900       12,954  
                 
NET INCREASE (DECREASE) IN CASH
    1,224       (5,223 )
                 
CASH
               
Beginning of year
    304       5,395  
                 
End of period
  $ 1,528     $ 172  
                 
SUPPLEMENTAL CASH FLOW INFORMATION
               
Cash paid for:
               
Income tax payments
  $ -     $ -  
Interest payments
  $ 3,150     $ 2,800  
 
See Notes to Financial Statements.
 
 
6

 
 
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

The Company buys used automobiles at auctions, then repairs, cleans, transports and resells them wholesale throughout the United States.

BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

The accompanying interim financial statements of Northeast Automotive Holdings, Inc. are unaudited. However, in the opinion of management, the interim data includes all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results for the interim period. The results of operations for the period ended September 30, 2013 are not necessarily indicative of the operating results for the entire year.

NOTE 2 – NOTES AND LOANS PAYABLE
 
   
September 30,
   
December 31,
 
   
2013
   
2012
 
             
Line of credit - On October 4, 2004, the Company was approved for a line of credit of $975,000, as an inventory financing ("Floor Plan") loan with interest set at 2% above the Wall Street Journal Prime rate. The agreement requires any advances to be repaid for a vehicle on the earliest of forty eight (48) hours from the time of sale or within twenty four (24) hours from the time the Company receives payment by or on behalf of the purchase of such vehicle or demand. The agreement is personally guaranteed by the officers and their respective spouses. The collateral for the loan is any vehicle owned by the Company.
  $ -       -  
                 
Note payable bank - note payable to bank due February 2007, is an open line of credit interest payable monthly at 1% over the prime rate, secured by a lien on all of the Company's assets and personally guaranteed by the officers. Interest is paid monthly on account.
    100,000       100,000  
                 
Due to stockholders - The stockholder loans are unsecured, pay interest at 9% per annum, are subordinated to the bank loan and have no specific terms of repayment.
    69,838       64,938  
    $ 169,838     $ 164,938  
 
 
7

 
 
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 3 - CONVERSION OF SERIES A PREFERRED STOCK
 
As of January 1, 2013, pursuant to the terms of the Certificate of Designation of the Company’s Series A Preferred Stock, all 10,000,000 issued and outstanding shares of Series A Preferred Stock were automatically converted into 10,000,000 shares of the Company’s common stock.

NOTE 4 – SUBSEQUENT EVENTS

On December 31, 2013, pursuant to a Securities Purchase Agreement entered into with 13 investors, the Company sold an aggregate of 7,142,857 newly issued shares of our common stock at $0.28 per share, for aggregate gross proceeds of approximately $2.0 million (the “Private Placement”). The investors also received warrants to purchase up to 1,428,571 shares at a price of $0.32 per share. Also, on December 31, 2013, in anticipation of the closing of the acquisition by the Company of Kogeto, Inc., a Delaware corporation, the Company advanced the entire net proceeds of the Private Placement in the amount of $1,387,250 to Kogeto, Inc.

On January 6, 2014, pursuant to an Agreement and Plan of Merger between the Company, our wholly-owned subsidiary Kogeto Acquisition Corp., a Delaware corporation and Kogeto, Inc., we acquired Kogeto, Inc (the “Acquisition Transaction”). In consideration for the purchase of 100% of the issued and outstanding shares in Kogeto. Inc., we issued a total of 24,357,088 newly issued shares of our common stock, on a pro rata basis, to the stockholders of Kogeto, Inc.

In addition, on January 6, 2014, pursuant to a Membership Interest Purchase Agreement between Northeast Automotive and Jeff Glasse, Mr. Glasse sold 100% of the membership interests in Kogeto Lucy, LLC to the Company in exchange for 1,000 newly issued shares of the Company’s common stock.

On January 31, 2014, William Solko retired 6,061,960 shares of the Company’s common stock in connection with the purchase of the Company’s Northeast Automotive Acceptance Corp. subsidiary.
 
 
8

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

The following discussion and analysis addresses material changes in the results of operations and financial condition of Northeast Automotive Holdings, Inc. and Subsidiaries (the “Company” or “we”) for the periods presented. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements, the related Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Results of Operations and Financial Condition included in the Company’s Form 10-K for the fiscal year ended December 31, 2012, the unaudited interim Condensed Consolidated Financial Statements and related Notes included in Item 1 of this Report on Form 10-Q (“Form 10-Q”) and the Company’s other SEC filings and public disclosures.

This Form 10-Q may contain “forward-looking statements”. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statements about the Company’s market opportunities, strategies, competition and expected activities and expenditures, and at times may be identified by the use of words such as “may”, “will”, “could”, “should”, “would”, “project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “intend”, “continue” and variations of these words or comparable words. Forward-looking statements inherently involve risks and uncertainties. Accordingly, actual results may differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the risks described below under “Risk Factors” in Part II, Item 1A. The Company undertakes no obligation to update any forward-looking statements for revisions or changes after the date of this Form 10-Q.

Overview

We are a wholesale automobile sales company which seeks to exploit the inefficiencies and geographic differences in the used vehicle market by purchasing high quality, late model used vehicles from dealers and institutional sellers in Northeastern states and transporting the vehicles for resale in the Pacific Northwest. We are involved only in the wholesale purchase and sale of vehicles acting as a middleman between various dealer and institutional sellers and dealer purchasers. We generally sell our vehicles only through established third-party auctions which act as a marketplace for used vehicles. We thus help align institutional used vehicle sellers and wholesale buyers over a wide geographic area.
 
For the Nine Months Ended September 30, 2013 and September 30, 2012

Revenues
Revenue for the nine month periods ended September 30, 2013 and September 30, 2012 was $0 as a result of no vehicles being sold in the nine month period in 2013 and 2012.

Cost of Sales and Gross Profit Margin
The Company's cost of sales is composed primarily of the cost of purchasing vehicles for resale. Cost of revenues was $0 or 100% of net revenues during the nine months periods ended September 30, 2013 and September 30, 2012. Thus, our gross margin was 0.0% for the nine month periods ended September 30, 2013 and September 30, 2012.
 
 
9

 
 
Operating Expenses
Our operating expenses are comprised primarily of salaries, interest expense, consulting fees and sales, general and administrative expenses.

Sale, General and Administrative
Sale, general and administrative (“SGA”) expenses are composed principally of commission, interest expense, salaries of administrative personnel, fees for professional services and facilities expenses. These expenses were $19,472 for the nine months period ended September 30, 2013 or 100% of net revenue as compared to $144,071 or 100% of net revenue for the comparable period in 2012, a decrease in such expenses of $124,599 or 88.4% The decrease in the ratio of SGA expenses to net revenue was primarily due to a decrease in operating expenses.

Operating Gain (Loss)

Operating gain or loss is calculated as our revenues less all of our operating expenses. Our operating (loss) for the nine months period ended September 30, 2013 was ($15,634) or (100%) of net revenue as compared to an operating loss of ($144,071) or (100%) of net revenue for comparable period in 2012, a decrease of $128,437. This decrease in operating loss was primarily as a result of a decrease selling, general and administrative expenses.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2013, we had cash and cash equivalents of $1,528 invested in standard bank checking accounts and highly liquid money market instruments. Such investments are subject to interest rate and credit risk. Such risks and a change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operations. As of September 30, 2013, we had no outstanding balance on our revolving credit facility with Manheim Auto Financial Services, Inc. Borrowings under such revolving credit facility would bear interest at a variable rate equal to prime plus 2.0%. In addition, as of September 30, 2013, we had an outstanding balance of $100,000 on a bank revolving credit facility which bears interest at a variable rate equal to prime plus 1.0%.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) of our disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the CEO concluded that our disclosure controls and procedures were not effective as of September 30, 2013 due to a lack of segregation of duties and an over reliance on consultants in the accounting and financial reporting process.
 
(b) Changes in Internal Controls Over Financial Reporting

There were no changes that occurred during the quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over.
 
 
10

 
 
PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

ITEM 1A. RISK FACTORS

Not required for Smaller Reporting Companies.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. REMOVED AND RESERVED

Not applicable.

ITEM 5. OTHER INFORMATION

None
 
 
11

 

ITEM 6. EXHIBITS

31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer

32.1
Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer
 
101.INS **
XBRL Instance Document
   
101.SCH **
XBRL Taxonomy Extension Schema Document
   
101.CAL **
XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF **
XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB **
XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE **
XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
12

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
NORTHEAST AUTOMOTIVE HOLDINGS, INC.
 
     
Date: February 21, 2014
By:
/s/ William Solko
 
   
William Solko, Chief Executive
 
   
Officer and Chief Financial Officer
 
 
 
 
 
 
13