Notes to Condensed Consolidated Financial Statements
March 31, 2020
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2020 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on April 10, 2020.
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 which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has established itself as a stable ongoing business entity with established revenues sufficient to cover its operating costs and allow it to continue as a going concern. However, the ability of the Company to continue as a going concern is also dependent on the Company obtaining adequate Sales so that the Company can liquidate its inventories and continue as a going business.
In order to continue as a going concern, the Company will need, among other things, Sales of its product lines. Management has obtained such sales through Internet sales and marketing companies who specialize in promotion of such businesses. Management is no longer obtaining capital from management and significant shareholders to meet its minimal operating expense and is meeting such expenses from cash flow from sales. However, management cannot provide an assurance that the Company will be continue operating successfully in accomplishing any of its plans, especially in view of un-certain circumstances prevailing due to COVID 19.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually fulfill the secured purchase orders to attain profitable operations. 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 – INCORPORATION OF SUBSIDIARY
In February 2015, the company incorporated a subsidiary, Promedaff, Inc. and purchased a skin care product line and formulations for $2,000,000 against a promissory note. An e commerce platform was set up for sales and marketing. The efforts did not bear any success and the entire inventory was sold through the Seller and the Promissory Note was cancelled and marked “VOID”. The name of this entity has been changed to Motors & Metals, Inc. and has remained inactive but is in good standing. Motors & Metals, Inc. operates as a separate entity to conduct business in refurbishing automotive engines and selling metals recovered from its Auto Parts facility, and have an independent profit center. The company continued its research on the related subjects and has finally come up with a plan to expand its automobile crushing business to shredding automobiles and recover steel to sell to
buyers overseas who have already signed letter of intent to purchase 3,000 metric tons of shredded steel per months. Progress discussed below under “Plan of Operation” in section marked “Item 2”.
As reported in 10Qs for the earlier quarters as well as in 10Ks for the Annual reports, on February 4, 2016 the company incorporated another subsidiary in the State of Virginia under the name JK Sales, Corp. (on December 7, 2017 the name was changed to Accurate Auto Parts, Inc.) and has since remained in the business of buying end of life and salvage vehicles and selling auto parts.
On April 17, 2018 the company incorporated in Virginia, another subsidiary named Accurate Investments, Inc. with the objectives of acquiring real estate property, which plan did not materialize. Accurate Investments, Inc. has pursued other business opportunities that are discussed under subsequent events in note 6 below.
On January 4, 2017 the company incorporated in Virginia another subsidiary named City Autos, Corp. with the objective of operating a auto dealership but this entity remained inactive due to lack of qualified personnel. The company is now in the process of negotiations with a qualified operator and expects to begin the licensing process in very near future.
NOTE 4 – RELATED PARTY
As of December 31, 2019, the Company had notes payable in the amount of $10,343 to Redfield Holdings, Ltd. a related party. During the three months ended the Company the amount owed is unchanged. The note is unsecured and does not bear any interest and has a maturity date of December 30, 2020.
NOTE 5 – CAPITAL STOCK
The Company has authorized 100,000,000 shares of common shares with a par value of $0.0001 per shares and 20,000,000 shares of preferred stock, with a par value of $0.0001 per shares.
Pursuant to the resolution of the shareholders meeting held on March 30, 2015 the Company designated 500,000 shares of the preferred authorized shares as preferred shares – Series “B” shares. The preferred shares – Series “B” were assigned the following preferences:
a)Each share to carry one vote.
b)Each share will be redeemable with a 365 days written notice to the company.
c)Each share will be junior to any debt incurred by the Company.
d)The redemption value will be the par value at which such “preferred shares – series B” are bought by the subscriber.
e)Each share will carry a dividend right at par with the common shares.
On December 31, 2014 the Company had a Note outstanding in the principal amount of $330,000 plus interest payable to GS Pharmaceuticals, Inc. By mutual consent this note and accrued interest was converted to 330,000 preferred shares – Series “B”.
On March 31, 2015 an amount of $58,000 was subscribed by Redfield Holdings, Ltd. by cancellation of a Note against the issuance of 9,700 shares of preferred shares – Series “A”. These shares were issued to Redfield Holding, Ltd. thus making a total of entire designated preferred shares – Series “A” shares to Redfield Holdings, Ltd. Each share of preferred shares – Series “A” carries voting right equal to 10,000 common shares.
On March 31, 2017 total preferred shares issued and outstanding are 10,000 Series “A” and 330,000 Series “B”.
On December 31, 2018 the Company had a Note outstanding in the principal amount of $470,935; by mutual consent this note and accrued interest was converted to 470,935 preferred shares - Series “C”.
On April 2, 2019, the Company accepted subscription in the amount of $14,490 against issuance of 21,000 common shares this bringing the total number of common shares issued and outstanding to 26,221,000.
NOTE 6 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date which the financial statements were available to be issued. Based on the evaluation there occurred a material event that require recognition in or disclosure to the financial statements. The Company has received confirmation from the bank that has made loan against the property and has made available a working line of credit that it will freeze payments of mortgage and interest on both loans for a period of six month beginning April 2020. In addition to this accommodation the bank has also confirmed availability of $27,800 of loan under the Paycheck Payment Program for a period of two years at an annual interest rate of 1%.
The Company is still open for business, but the sales are down by more than 50%.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED FINANCIAL STATEMENT SAND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING CERTAIN FORWARD LOOKING STATEMENTS IN THE FLOWING DISCUSSION AND ELSEWHERE IN THE THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR AN BEHALF, WHETHER OR NOT IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, FORWARD-LOOKING STATEMENTS ARE STATEMENT NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS. FORWARD-LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE, THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FORM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENTS MADE BY, OR ON OUR BEHALF, WE DIS TO UPDATE FORWARD-LOOKING STATEMENTS.
PLAN OF OPERATION
Accurate Auto Parts, Inc. the Company’s used auto parts subsidiary continues its business to purchase end of life and wrecked vehicles and grow its business.
Motors & Metals, Inc. the Company’s subsidiary for processing of scrap metal, upon receiving a revalidation of its zoning from the Town Authorities applied for State license to operate as “Scrap Metal Processor”. This was granted in early January of 2020; it is worth mentioning here that the Company already had such license under its subsidiary namely Accurate Auto Parts, Inc. The State enacted new regulations whereby auto recycling facilities could no longer operate as “scrap metal processor” thus the Company opted to apply for another license independent of Accurate Auto Parts, Inc.
Thereafter, the management began its process to contact machinery manufactures in the USA and abroad, several offers and indication have been received. The CEO made arrangements to visit a few existing plants in the USA through the arrangements made by the leading machinery manufacturers. Also, a few plant manufacturers made physical visit to the company location to evaluate the environment and logistics. The company then retained the services of a qualified consultant/executive with several years of experience in management and production of such facilities in the USA.
Feasibility report has been prepared and comparative analysis has been conducted to arrive at the most practical conclusion. It has thus been determined that the Company will to go ahead and expand its scrap metal processing.
Financial arrangements for capital expenditure are being sought, in view of the positive forecasts of earnings and sales, the Company expects that financing will be available.
RESULTS OF OPERATIONS
The Company did recognize revenue for a sum of $116,379 during the three months ended March 31, 2020 and $58,784 of revenues during the three month ended March 31, 2019. While the net revenues for the period ended March 31, 2020 were higher by $ $57,595 than for the same period during 2019, the Cost of Goods Sold was also higher by $8,850 during the period ended March 31, 2020 as compared to the same period during 2019. The general and administrative expenses for the period ended March 31, 2020 were $121,112 as compared to $68,418 for the same period during 2019. The additional sum of $52,694 is attributed to additional costs and expenses that have been incurred for hiring additional production and management employees.
During the three months ended March 31, 2020 the company recognized a net profit of $25,214 as compared to a loss of $34,405 for the corresponding period in the year 2019, thus recognizing a significant increase in profit as compared to the three months ended March 31, 2019.
The increase in profits is a result of an increase in sales and a reduction in cost of sales due to better controls and improvement in efficiency of dismantling.
LIQUIDITY
ITEM 4. CONTROLS AND PROCEDURES
Management's Report on Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control so as to
(1) maintain the records in reasonable detail, which will accurately and fairly reflect the transactions and dispositions of the Company's assets;
(2) to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are made within the delegated authority ; and
(3) to provide reasonable assurance for the prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on company’s financial statements.
However, the management asserts that the company did not have any accounting staff due to limited financial resources though now has plans to recruit gradually. Also, this company does not have a well written document on accounting policies and procedures, though has plans to have them shortly. Consequently, this can result in possible errors in the presentation and disclosure of financial information in our annual, quarterly, and other filings.
The SIC Code of 1700 as showing in Edgar for this company is no longer valid, since this company is now dealing with the auto parts, as OEM Recycled Auto Parts. Segregation of duties is an important factor in Internal Control. Though it is achieved to a certain extent, the management is committed to strengthen the internal controls effectively in the coming months.
The company promoted two of its senior managers to become executive directors thus taking on greater responsibilities and deserving greater rewards. Both of these individuals have over 25 years’ experience in auto parts industry.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the period ended March 31, 2020, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.