UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended September 30, 2015
Or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ______________ to ______________
Commission
file number: 333-184682
AVANGARD
CAPITAL GROUP INC. |
(Exact
name of registrant as specified in its charter) |
Nevada |
|
45-5507359 |
(State
or other jurisdiction |
|
(IRS
Employer |
of
incorporation) |
|
Identification
No.) |
2708
Commerce Way Suite 300, Philadelphia PA |
|
19154 |
(Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code: (215) 464-7300 |
|
Not
Applicable. |
(Former
name or former address, if changed since last report) |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. 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 files). 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 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]
As
of November 11, 2015 there were 10,781,466 shares issued and outstanding of Registrant’s Common Stock.
TABLE
OF CONTENTS
PART
1 - FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
AVANGARD
CAPITAL GROUP, INC.
CONDENSED
BALANCE SHEETS
(unaudited)
| |
September 30, 2015 | | |
June 30, 2015 | |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 1,305 | | |
$ | 784 | |
Due from related parties | |
| 5,024 | | |
| 5,024 | |
Total current assets | |
| 6,329 | | |
| 5,808 | |
Property and equipment, net | |
| 2,667 | | |
| 2,799 | |
Total assets | |
$ | 8,996 | | |
$ | 8,607 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 35,166 | | |
$ | 25,350 | |
Due to related party | |
$ | 35,000 | | |
$ | 25,000 | |
Total current liabilities | |
$ | 70,166 | | |
$ | 50,350 | |
| |
| | | |
| | |
Stockholders’ deficit | |
| | | |
| | |
Convertible Preferred Stock Series A, $0.0001 par value, 300,000,000 authorized, 585,000 issued and outstanding; | |
| 58 | | |
| 58 | |
Common stock, $0.0001 par value, 100,000,000 authorized; Class A, 10,781,466 shares issued and outstanding | |
| 1,078 | | |
| 1,078 | |
Additional paid in capital | |
| 787,837 | | |
| 787,837 | |
Accumulated deficit | |
| (850,143 | ) | |
| (830,716 | ) |
Total stockholders’ deficit | |
| (61,170 | ) | |
| (41,743 | ) |
Total liabilities and stockholders’ deficit | |
$ | 8,996 | | |
$ | 8,607 | |
The
accompanying notes are an integral part of these condensed financial statements.
AVANGARD
CAPITAL GROUP, INC.
CONDENSED
STATEMENTS OF OPERATIONS
(unaudited)
| |
For the three months ended
September 30, | |
| |
2015 | | |
2014 | |
REVENUE | |
| | | |
| | |
Fee revenue | |
$ | - | | |
$ | - | |
Total revenue | |
| - | | |
| - | |
| |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | |
Selling, general and administrative | |
| 19,428 | | |
| 42,089 | |
Total operating expenses | |
| 19,428 | | |
| 42,089 | |
| |
| | | |
| | |
Loss from operations | |
| (19,428 | ) | |
| (42,089 | ) |
| |
| | | |
| | |
Other income | |
| | | |
| | |
Interest and dividend income | |
| - | | |
| 12 | |
Total other income | |
| - | | |
| 12 | |
| |
| | | |
| | |
Net loss | |
$ | (19,428 | ) | |
$ | (42,077 | ) |
| |
| | | |
| | |
Net loss per share attributable to common shareholders - basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
Weighted average number of common shares used in computation - basic and diluted | |
| 10,781,466 | | |
| 9,719,727 | |
The
accompanying notes are an integral part of these condensed financial statements.
AVANGARD
CAPITAL GROUP, INC.
CONDENSED
STATEMENTS OF CASH FLOWS
(unaudited)
| |
For the Three Months Ended
September 30, | |
| |
2015 | | |
2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | | |
| | |
Net loss | |
$ | (19,428 | ) | |
$ | (42,077 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation | |
| 133 | | |
| 133 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Floor plan financing receivable | |
| - | | |
| (704 | ) |
Due from related party | |
| - | | |
| 7,000 | |
Accounts payable and accrued expenses | |
| 9,816 | | |
| (3,176 | ) |
NET CASH USED IN OPERATING ACTIVITIES | |
| (9,479 | ) | |
| (38,794 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
NET CASH USED IN INVESTING ACTIVITIES | |
| - | | |
| - | |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Due to related party | |
| 10,000 | | |
| - | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | |
| 10,000 | | |
| - | |
| |
| | | |
| | |
Net increase (decrease) in cash | |
| 521 | | |
| (38,824 | ) |
| |
| | | |
| | |
Cash, beginning of the period | |
| 784 | | |
| 424,272 | |
Cash, at end of the period | |
$ | 1,305 | | |
$ | 385,448 | |
The
accompanying notes are an integral part of these condensed financial statements.
AVANGARD
CAPITAL GROUP, INC.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September
30, 2015
NOTE
1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
and Description of Business Avangard Capital Group, Inc., a Nevada corporation is referred to in this report as “we”,
“us”, “our”, “ACG”, the “Company” or “Avangard Capital Group.”
We
were incorporated June 13, 2012 under the laws of the State of Nevada. Our executive offices are located at 2708 Commerce Way,
Suite 300, Philadelphia, PA 19154.
We
were an independent auto sales finance company that provides floor plan financing for independent used car dealers based on the
value of collateral (the car) as determined by us using the automobile industry’s nationally-recognized valuation sources.
We currently maintain licenses to operate in the states of New Jersey, Pennsylvania and Florida. We commenced business June 22,
2012 with the purchase of all floor plan receivables from Avangard Auto Finance, Inc. (“AAF”), an affiliate. Pursuant
to an Assignment Agreement with AAF dated June 13, 2012, we acquired AAF’s floor plan financing portfolio for $151,979,
the face value of the contracts plus accrued interest and fees at that time.
In
January 2013 we received approval and were licensed by the States of Florida and New Jersey as a Sales Finance Company. In February
2013, we were licensed in the Commonwealth of Pennsylvania as a Sales Finance Company. These licenses permitted us to expand our
operations to providing financing for auto sales by dealers. We have not commenced operations in Florida or New Jersey as we are
evaluating the feasibility of expanding into these markets. In addition, we have suspended financing new loans as we explore alternative
opportunities for our future growth.
On
March 26, 2013 we acquired certain retail installment contract receivables from AAF and Avangard Financial Group, Inc., a related
party (“AFG”) for $102,250. The receivables consisted of an aggregate principal balance of approximately $141,868
for current loans receivables and approximately $323,449 for non-current loans receivables. We recovered our initial investment
and earned approximately 20% in interest on the investment.
On
February 19, 2014 we transferred all remaining loans receivable to AAF as we determined that the outstanding balances were either
uncollectible or difficult to collect and the Company did not believe that pursuing further collection efforts was a good use
of the Company’s resources.
During
the year ended June 30, 2015 we had repossessed 18 of 21 vehicles subject to the floor plan security arrangement. We recovered
$123,425 of floor plan receivables through the sale of repossessed autos.
At
September 30, 2015 we have no inventory of repossessed autos.
Interim
Financial Statements
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) and in conformity with the instructions to Form 10-Q and Rule 8-03 of Regulation
S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain
information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed
or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these financial statements
are adequate to make the information presented not misleading. The unaudited condensed financial statements included in this document
have been prepared on the same basis as the annual financial statements, and in our opinion reflect all adjustments, which include
normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial
statements. The results for the quarter ended September 30, 2015 are not necessarily indicative of the results expected for the
full year or for any subsequent interim periods. These unaudited condensed financial statements should be read in conjunction
with the audited financial statements and the notes to those statements included in our Annual Report on Form 10-K for the period
ended June 30, 2015 filed with the SEC on October 13, 2015.
Use
of Estimates
We
use estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results
could differ from those estimates.
Cash
and Cash Equivalents
Cash
and cash equivalents include highly liquid investments with an original maturity of three months or less when purchased.
Revenue
Recognition
Interest
income from floor plan financing receivable is recognized using the interest method. Accrual of income on finance receivables
is suspended when a contract is contractually delinquent for ninety (90) days or more. The accrual is resumed when the contract
becomes contractually current and past due interest is recognized at that time.
Origination
Fees are recognized for services provided during the loan origination process at the point in time the loan is funded.
The
Company accounts for its investment in floor plan financing receivables using the interest method, under ASC 310 pools of accounts
are established based on certain common risk criteria. Each pool is recorded at cost and is accounted for as a single unit for
the recognition of income, principal payments and loss provision.
During
the quarter ended September 30, 2015 the Company had no revenue.
Floor
Plan Financing Receivable
Floor
plan financing receivable consists of purchased automobiles, which were assigned to us upon acquisition. The titles to the automobiles,
which serve as security for the payment of the purchased contracts, are held by us.
As
of September 30, 2015 there are no floor plan financing receivables.
We
perform periodic evaluations of the adequacy of the allowance for losses taking into consideration the past loss experience, known
and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value
of any underlying collateral, as well as recovery potential of any underlying collateral, personal guarantees and current economic
conditions. Any increases in the allowance for losses subsequent to the acquisition of the contract are charged to earnings.
Our
primary floor plan customer defaulted on their agreement in February 2014. The floor plan agreement carried personal guarantees
and confessions of judgment, in addition to first lien on all vehicles subject to the floor plan agreement. In March 2014, the
customer filed for bankruptcy protection under Chapter 11 of the Federal Bankruptcy Code. We repossessed 18 of the 21 vehicles
subject to the floor plan agreement from the debtor prior to its Chapter 11 filing. As of September 30, 2015 we recovered $123,425
of floor plan receivables through the sale of repossessed autos. We continue to pursue guarantors of the agreement through the
Federal bankruptcy Courts. However, we are unable to determine the amount, if any, that we may recover.
Inventory
As
of September 30, 2015 the Company has no inventory.
Concentrations
of Credit Risk
The
Company’s assets exposed to credit risk are cash and finance and interest receivables, of which there was none as of September
30, 2015.
For
the quarter ended September 30, 2015, the company had no revenue.
The
Company maintains its cash balances in Federal Deposit Insurance Corporation (“FDIC”) insured financial institutions.
Property
and Equipment
Fixed
assets are recorded at their historical cost upon acquisition or cost of construction. The assets are depreciated using the straight-line
method over their statutory lives. The fixed asset categories and their estimated lives are as follows:
Office
Equipment 5 years
Income
Taxes
We
account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred
tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred a
net operating loss for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes,
the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred
tax asset for the quarter ended September 30, 2015.
NOTE
2 - GOING CONCERN
The
Company’s financial statements are prepared using generally accepted accounting principles in the United States of America
applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course
of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow
it to continue as a going concern. During the quarter ended September 30, 2015 the Company recognized sales revenue of $-0- and
incurred a net loss of $19,428. As of September 30, 2015 the Company had an accumulated deficit of $850,143. The continuation
of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise
equity or debt financing, and the attainment of profitable operations from the Company’s planned business. If the Company
is unable to obtain adequate capital, it could be forced to cease operations. These financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. In order to continue as a going concern, the Company will need, among other
things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital
from significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing from third parties.
However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
3 - INCOME TAXES
The
net deferred tax asset consists of the following:
| |
September
30, 2015 | | |
June 30, 2015 | |
Deferred Tax Asset | |
$ | 345,102 | | |
$ | 314,841 | |
Less: Valuation Allowance | |
| (345,102 | ) | |
| (314,841 | ) |
Net Deferred Tax Assets | |
$ | - | | |
$ | - | |
As
of September 30, 2015, the Company has net operating loss carry forwards of $850,143 that can be utilized to offset future taxable
income for Federal and State income tax purposes through 2025, generating a maximum deferred tax benefit of $345,102 by applying
Federal and State statutory tax rates. The Company applied a 100% valuation reserve against the deferred tax benefit, as the realization
of the benefit is not certain.
The
following tax years remain subject to examination by the respective tax jurisdictions.
|
Fiscal
Years ending
June 30, |
Internal
Revenue Service |
2012
- 2015 |
Commonwealth
of Pennsylvania |
2012
- 2015 |
NOTE
4 - LOAN FROM SHAREHOLDER
On
May 1, 2015, the Company entered into a loan agreement with a major shareholder to obtain financing up to $50,000. Advances under
the agreement are non-interest bearing and due on demand. At September 30, 2015, the amount due to the shareholder was $35,000,
and unused amount representing availability to borrow was $15,000. Debt is secured by common stock of Avangard Capital Group,
Inc.
NOTE
5 - COMMON AND PREFERRED STOCK
On
June 20, 2014 the Board of Directors authorized the completion of the Reverse Stock Split, and effective as of June 30, 2014,
the Company completed a reverse stock split of our issued and outstanding common stock on a 1 for 10 basis (the “Reverse
Stock Split”) .
On
July 10, 2014, the Board of Directors issued 9,768,000 unregistered shares of common stock to related parties and majority shareholder,
Friedman Financial Group, in exchange for $977.
As
of September 30, 2015 the Company is authorized to issue 100,000,000 shares of $0.0001 par value common stock.
The
Company is authorized to issue 300,000,000 shares of $0.0001 par value Convertible Preferred Stock Series A. On December 29, 2014
the Board of Directors approved the redemption of 320,000 shares of Convertible Preferred Stock Series A at $1.00 per share.
Common
Stock Purchase Warrants
A
summary of the status of our outstanding common stock purchase warrants granted as of September 30, 2015 and changes during the
period is as follows:
| |
Shares | | |
Weighted | |
| |
Underlying | | |
Average | |
| |
| Warrants
| | |
| exercise price | |
Outstanding and exercisable at June 30, 2015 | |
| 2,867 | | |
$ | 2.00 | |
Additions | |
| - | | |
| - | |
Outstanding and exercisable at September 30, 2015 | |
| 2,867 | | |
$ | 2.00 | |
The
following information applies to all warrants outstanding and exercisable at September 30, 2015
Number of Warrants | | |
| | | |
|
outstanding and | | |
| | | |
Remaining contractual |
exercisable | | |
| Exercise Price | | |
life (Years) |
2,867 | | |
$ | 2.00 | | |
0.33 |
NOTE
6 - LOSS PER SHARE
Basic
net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period.
The Company’s potential dilutive shares, which include convertible preferred shares and shares issuable upon exercise of
the Warrants, have not been included in the computation of diluted net loss per share as the result would be antidilutive. Such
potentially dilutive shares are excluded when the effect would be to reduce net loss per share. All potential common shares have
been excluded from the computation of the dilutive net loss per share for the period presented because the effect would have been
antidilutive. Such potential common shares consist of the following:
| |
September
30, 2015 | | |
September 30, 2014 | |
Convertible preferred stock | |
| 1,755,000 | | |
| 2,715,000 | |
Warrants attached to units sold | |
| 2,867 | | |
| 2,867 | |
NOTE
7 - RELATED PARTY TRANSACTIONS
We
entered into a lease agreement for office space with Commerce Way, LLC (“CWL”). CWL is owned by DJS Investments, LLC
and SELF, LP. SELF, LP is a shareholder of Friedman Financial Group, who is a principal shareholder of our Company. The lease
requires monthly payments, commencing August 1, 2012, of $2,500 on a month to month basis. No security deposit was required. The
Company suspended operations and terminated the lease with Commerce Way, LLC. Effective January 2015 the company resumed paying
$2,500 per month rent on a month to month basis. For the quarter ended September 30, 2015 CWL did not charge the Company for use
of the facilities. No rent was accrued or paid during the first quarter ended September 30, 2015. Rent expense for the quarter
ended September 30, 2015 and 2014 was $0 and $0 respectively.
Friedman
Financial Group, a related party, entered into a financial agreement with the Company to provide $50,000 for operating expenses.
The advances bear no interest and is payable on demand. Friedman Financial Group has agreed to provide additional financing as
required to pay necessary operating expenses. At September 30, 2015, the amount due to the shareholder was $35,000, and unused
amount representing availability to borrow was $15,000. Debt is secured by common stock of Avangard Capital Group, Inc.
On
July 22, 2015, in a matter before the courts of Pennsylvania unrelated to Avangard Capital Group, Mr. Gulko, former officer and
director of the Company agreed to a Stipulation and Consent Order with Avangard Auto Finance, Inc., a related party. The order
settled claims by Avangard Auto Finance, Inc. against Mr. Gulko and his companies. In settlement of all claims Mr. Gulko agreed
to relinquish all ownership of 490,000 shares of Common and 48,237 shares of Series A Convertible Preferred Stock. Avangard Auto
Finance assigned the shares received in settlement to Friedman Financial Group, LLC on August 21, 2015.
Amounts
due from related parties of $5,024 represent legal expenses paid by the Company that are related to cases involving Avangard Auto
Finance, Inc. and Commerce Way LLC.
Officers
and related parties of our Company provide certain administrative duties at no charge. At September 30, 2015, the Company had
accounts payable to Friedman Financial Group of $11,758 for reimbursable expenses incurred on behalf of the Company.
NOTE
8 - COMMITMENTS AND CONTINGENCIES
From
time to time, the Company is a defendant in various lawsuits incident to the ordinary course of business. It is not possible to
determine, with any precision, the probable outcome of the amount of any liability not covered by commercial insurance policies.
Additionally, on September 1, 2015, the major shareholder entered into an indemnity agreement with the Company to indemnity the
Company of any liability arising from judgments related to repossessed vehicles.
NOTE
9 - SUBSEQUENT EVENTS
There
are no subsequent events.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary
Note Regarding Forward-Looking Information and Factors That May Affect Future Results
This
report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. The
Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand
a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q and other written
and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based
on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify
such statements by using words such as “anticipate,” “estimate,” “expect,” “project,”
“intend,” “plan,” “believe,” “will” and similar expressions in connection with
any discussion of future operating or financial performance. In particular, these include statements relating to future actions,
future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal
proceedings, and financial results. A list of factors that could cause our actual results of operations and financial condition
to differ materially is set forth below, and these factors are discussed in greater detail under the “Risk Factors”
section of our Annual Report on Form 10-K as filed with the SEC on October 13, 2015:
● |
Our
limited operating history and ability to achieve profitability. |
|
|
● |
Our
ability to assure that related party transactions are fair to our company. |
|
|
● |
Our
ability to manage growth in our business. |
|
|
● |
Our
dependence on one floor plan financing agreement. |
|
|
● |
The
impact of the volatility in the worldwide credit and equity markets. |
|
|
● |
The
departure of our CEO, director and principal financial officer has increased our dependence on the services provided by Simon
Friedman, Chairman of the Board of Directors and interim CEO, who can exercise disproportionate voting control over corporate
decisions. |
|
|
● |
The
super voting power of our interim CEO and director who holds shares of the Series A Convertible Preferred Stock. |
|
|
● |
Write-Offs
for losses and defaults on our floor plan receivables. |
|
|
● |
The
impact of changes in interest rates. |
|
|
● |
Increased
costs as a result of becoming a reporting company. |
|
|
● |
Our
ability to maintain an effective system of internal controls over financial reporting. |
|
|
● |
The
affects on our stock price as a result of sales of our common stock by existing shareholders pursuant to Rule 144. |
We
caution that the factors described herein and other factors could cause our actual results of operations and financial condition
to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue
reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such
statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess
the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any forward-looking statements.
OVERVIEW
We
were an independent auto sales finance company that provided floor plan financing and auto financing for independent used car
dealers. The loans made were based on the value of collateral (the car) as determined by us using the automobile industry’s
nationally-recognized valuation sources. We maintain our licenses to operate in Pennsylvania, New Jersey and Florida. The Company
has suspended financing new loans while Management and the Board of Directors explore alternative opportunities for our future
growth.
Recent
Developments
Effective
June 30, 2014, we amended and restated our articles of incorporation in order to effectuate a 1-for-10 Reverse Stock Split of
our issued and outstanding common stock. As a result of the Reverse Stock Split, every 10 shares of our pre-Reverse Stock Split
common stock was combined and reclassified into one share of our common stock. No fractional shares of common stock were issued
as a result of the Reverse Stock Split. Throughout this quarterly report on Form 10-Q, each instance that refers to a number of
shares of our common stock, refers to the number of shares of common stock after giving effect to the Reverse Stock Split, unless
otherwise indicated.
We
define our accounting periods as follows:
|
● |
“fiscal
2013” - July 1, 2012 through June 30, 2013 |
|
|
|
|
● |
“fiscal
2014” - July 1, 2013 through June 30, 2014 |
|
|
|
|
● |
“fiscal
2015” - July 1, 2014 through June 30, 2015 |
|
|
|
|
● |
“fiscal
2016” - July 1, 2015 through June 30, 2016 |
RESULTS
OF OPERATIONS
Revenue
Since
the Company has suspended operations in June 2014 it has $0 revenue for the quarters ended September 30, 2015 and 2014
Operating
Expenses
Total
selling, general and administrative expenses decreased $22,661 to $19,428 for the three months ended September 30, 2015 compared
to the three months ended September 30, 2014. This decrease is primarily a result of temporary suspension of activities.
For
the three months ended September 30, 2015 our expenses were comprised primarily of $17,596 related to legal, accounting and SEC
compliance costs, and $1,832 for office expenses. For the quarter ended September 30, 2014 our expenses were comprised primarily
of $17,799 related to legal, accounting and SEC compliance costs, $12,766, for office expenses, $3,800 for auto repossession services,
$3,000 for temporary help, and $3,018 for travel.
LIQUIDITY
AND CAPITAL RESOURCES
Liquidity
is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of September
30, 2015 our working capital deficit amounted to $63,837. The Company has entered into a financing agreement with Friedman Financial
Group, a related party, to provide a line of credit sufficient to finance corporate expenses while the Company pursues new business
opportunities. The line of credit has a current limit of $50,000, payable on demand at no interest.
Cash
Requirements
Our
future capital requirements will depend on management’s ability to develop new lines of business.
We
do not currently have any contractual restrictions on our ability to incur debt and, accordingly we could incur significant amounts
of indebtedness to finance operations. Any such indebtedness could contain covenants that would restrict our operations.
Although
we experienced a reduction in revenues as a result of the default and bankruptcy of our primary floor plan customer, we have adequate
resources committed by current shareholders to operate at a minimal level while we pursue and explore new opportunities.
Off-Balance
Sheet Arrangements
Under
SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current
or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to investors. As of September 30, 2015 we have no off-balance
sheet arrangements.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not
applicable to smaller reporting companies.
ITEM
4. CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange
Act”) that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange
Act is recorded, processed, summarized and reported as specified in the SEC’s rules and forms and that such information
required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management,
including our Chief Executive Officer, or CEO, who is also our Principal Financial and Accounting Officer, to allow timely decisions
regarding required disclosure. Management, with the participation of our CEO who is also our Principal Financial and Accounting
Officer performed an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2015. Based
on that evaluation, our management, including our CEO who is also our Principal Financial and Accounting Officer concluded that
our disclosure controls and procedures were ineffective as of September 30, 2015.
In
addition, management identified the following material weakness and significant deficiencies in its assessment of the effectiveness
of internal control over financial reporting as of September 30, 2015:
● |
Material
Weakness - The Company did not maintain effective controls over certain aspects of the financial reporting process because
we lacked a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure
that is commensurate with the Company’s financial reporting requirements. |
|
|
● |
Significant
Deficiencies - Inadequate segregation of duties. |
We
expect to be materially dependent upon a third party to provide us with accounting consulting services for the foreseeable future.
Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the
material weaknesses and significant deficiencies in our disclosure controls and procedures and internal control over financial
reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.
Our
management, including our Chief Executive Officer and our Principal Financial and Accounting Officer, does not expect that our
disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of
controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
Changes
in Internal Control
There
were no changes identified in connection with our internal control over financial reporting during the three months ended September
30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
The
Company is pursuing all legal remedies to collect floor plan receivables and interest and penalties from our principal customer
who is under the protection of the Federal Bankruptcy Court. We have instituted collection subject to personal guarantees issued
by principal owners of the bankrupt party.
ITEM
1A. RISK FACTORS
Not
applicable to smaller reporting companies.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM
4. MINE SAFETY DISCLOSURES.
Not
applicable
ITEM
5. OTHER INFORMATION.
None
ITEM
6. EXHIBITS.
Exhibit
No. |
|
Description |
|
|
|
31.1 |
|
Section
302 Certificate of Chief Executive Officer.* |
|
|
|
31.2 |
|
Section
302 Certificate of Principal Financial and Accounting Officer.* |
|
|
|
32.1 |
|
Section
906 Certificate of Chief Executive Officer and Principal Financial and Accounting Officer.* |
|
|
|
101.INS |
|
XBRL
INSTANCE DOCUMENT ** |
|
|
|
101.SCH |
|
XBRL
TAXONOMY EXTENSION SCHEMA ** |
|
|
|
101.CAL |
|
XBRL
TAXONOMY EXTENSION CALCULATION LINKBASE ** |
|
|
|
101.DEF |
|
XBRL
TAXONOMY EXTENSION DEFINITION LINKBASE ** |
|
|
|
101.LAB |
|
XBRL
TAXONOMY EXTENSION LABEL LINKBASE ** |
|
|
|
101.PRE |
|
XBRL
TAXONOMY EXTENSION PRESENTATION LINKBASE ** |
* |
Filed
herewith. |
|
|
** |
In
accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this 1 in this Quarterly
Report on Form 10-Q shall be deemed “furnished” and not “filed”. |
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.
|
AVANGARD CAPITAL GROUP, INC. |
|
|
|
Date:
November 16, 2015 |
By: |
/s/
Simon Friedman |
|
|
Simon
Friedman |
|
|
Chairman
and Chief Executive Officer |
|
|
(Principal
Executive Officer and Principal Financial |
|
|
and
Accounting Officer) |
Exhibit
31.1
Rule
13a-14(a)/15d-14(a) Certification
I,
Simon Friedman, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015 of Avangard Capital Group,
Inc. (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors
(or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date:
November 16, 2015 |
/s/
Simon Friedman |
|
Simon
Friedman |
|
Chief
Executive Officer |
|
(Principal
Executive Officer) |
Exhibit
31.2
Rule
13a-14(a)/15d-14(a) Certification
I,
Simon Friedman, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015 of Avangard Capital Group,
Inc. (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors
(or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date:
November 16, 2015 |
/s/
Simon Friedman |
|
Simon
Friedman |
|
Principal
Financial and Accounting Officer |
Exhibit
32.1
Section
1350 Certification
In
connection with the Quarterly Report on Form 10-Q of Avangard Capital Group, Inc., (the “Company”) for the quarterly
period ended September 30, 2015 as filed with the Securities and Exchange Commission (the “Report”), I, Simon Friedman,
Chief Executive Officer of the Company and Principal Financial and Accounting Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations
of the Company.
Date:
November 16, 2015 |
/s/
Simon Friedman |
|
Simon
Friedman |
|
Chairman,
President, Chief Executive Officer |
|
and
Principal Financial and Accounting Officer |
This
certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall
not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically
incorporates it by reference.
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