Commission file number: 333-175212

 ____________________________________________________________________________

Autovative Products, Inc.

(Name of small business issuer in its charter)

 ____________________________________________________________________________

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)

______________________________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o   No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o   No x

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  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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). x Yes o  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (¤229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

The market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold of $0.55 as of March 25, 2013. 

Number of shares of common stock outstanding as of December 31, 2011: 8,585,977

Number of shares of common stock outstanding as of December 31, 2012: 8,557,977.

Documents incorporated by reference: None.

TABLE OF CONTENTS

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PART I

ITEM 1. DESCRIPTION OF BUSINESS.

Statements in this Form 10-K Annual Report may be "forward-looking statements." Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by our management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and probably will, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this Form 10-K Annual Report, including the risks described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in other documents which we file with the Securities and Exchange Commission.

In addition, such statements could be affected by risks and uncertainties related to our financial condition, factors that affect our industry, market and customer acceptance, competition, government regulations and requirements and pricing, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-K Annual Report.

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BUSINESS

DESCRIPTION OF BUSINESS

Company Overview

Autovative Products, Inc was incorporated in the state of Nevada on December 8, 2004. Autovative Products, Inc. is a distributor of automotive parts. We have developed and produced two products for both automobile and fleet uses. One product is the Portable Tow Truck, a traction aid which has been successful in helping drivers get their vehicles unstuck from snow, ice, mud and sand. The unit price for the Portable Tow Truck varies and sells in the $20-$30 range. The other product is the Overhead Door Saver, a heavy-duty spring device for use in fleets of trucks with overhead doors. It cushions the shock of constant door openings, and greatly reduces overhead door repairs. The price for the Overhead Door Saver is in the $30 range.

Currently the majority of our products sold are to FEDEX (Federal Express) and UPS (United Postal Service) for use with their trucking fleets. Our products do not have patent protection nor do we have any trademarks or copyrights on our products.

We have contracted for the manufacturing of both products listed above with OTW Enterprises LLC, located in Maryville, Tennessee. The first product, the Portable Tow Truck, has been marketed exclusively by us to the large fleet market for the past seven years, and has had continual sales to UPS (United Postal Service), FEDEX (Federal Express) and others. The Overhead Door Saver has been successfully tested by UPS on some of its vehicles. At this time the Company awaits a contract with UPS, as they are considering installing it on all their vehicles with overhead doors. At this time we do not know with certainty whether they will or will not enter into a contractual arrangement with the Company. We intend to expand our marketing of the Portable Tow Truck to retail outlets worldwide, and expand the marketing of the Overhead Door Saver to companies with large truck fleets with overhead doors.

All products sold by the Company are drop shipped by the manufacturer in Maryville, TN to the customer.

We also are in the business of designing molds for third parties (rights owned by the third party) and own the rights to the design for an auto traction aid mold. Our primary customer for these services has been Wholesale 4 You, Inc.

On December 31, 2012, the majority shareholder and officer of the Company entered into a Securities Purchase Agreement to sell 7,080,555 shares of the Company. This occurred in early 2013 and will effect a change in control of the Company. Depending on the business objectives of the new controlling parties, the business strategy may change.

Business Strategy

To date we have only attempted to sell our products to trucking fleets such as FEDEX and UPS. We believe that with the past sales of our products to two large trucking fleets such as FEDEX and UPS we should have an advantage to selling to additional trucking fleets as well as to the retail markets. However there is no assurance that will happen.

We intend to enter into alliances with other companies with innovative automobile products, especially focusing on products adapted to future trends in the automotive industry. Additionally, we intend to enter into alliances with companies that have domestic and international marketing and distribution outlets. We believe when this is successfully completed, it will provide profitability and self-sustaining growth. We plan to do this by:

• á          á        Establishing manufacturing alliances with manufacturers, both domestically and abroad, to mass produce our products.

 

Finding a manufacturer that can manufacture larger volumes at cheaper prices while maintaining quality control should increase our profit margins. We believe that in order to accomplish this will require a combination of larger orders and additional capital, neither of which are at our disposal currently.

 

In our opinion we would require orders of at least 10,000 units annually of the Portable Tow Truck to have the units manufactured at a different manufacturing plant other than the manufacturing facility we are currently using. Mold costs alone are estimated by management to be $50,000-75,000. In addition we believe would have to order a minimum of 5,000 units per order to be cost effective. We believe the cost per unit savings by changing manufacturing plants could be as much as 30% over the current cost paid per unit for the Portable Tow Truck units. Total cost to make the manufacturing change could be as high as $125,000 (inclusive of the molds and the 5,000 unit minimum order).

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The Company would require additional sales and capital in order to accomplish this projection. There are no plans in place currently to raise additional capital without which we would be unable to consider changing manufacturers.

 

The Overhead Door Saver, in the opinion of management, would require orders of at least 5,000 units annually to be cost effective to have the units manufactured at a different manufacturing plant other than the manufacturing facility we are currently using. We believe the cost per unit savings by changing manufacturing plants could be as much as 20% over the current cost paid per unit for the Overhead Door Saver units. Total cost to make the manufacturing change could be as high as $115,000 (inclusive of the molds and the 5,000 unit minimum order). The Company would require additional sales and capital in order to accomplish this projection. There are no plans in place currently to raise additional capital without which we would be unable to consider changing manufacturers.

 

á       Developing a marketing and sales force to successfully market and sell our products both domestically and globally.

 

We believe that if we become financially able to hire a sales force that our sales would increase; although there is no assurance that would happen. We recognize that to hire a sales force will take additional capital which we have estimated to be $3,000 per month.

 

We have recently hired sales people on a commission only basis in Southern California, Idaho and Arizona to sell both the Portable Tow Truck units and the Overhead Door Saver units to commercial trucking fleets like the trucks used by UPS and FEDEX. Currently all sales people are not contracted by the Company nor are employees of the Company. The Company has no employees with the exception of its President, David Funderburk. When a sale is made and revenue is received from the customer, commissions are paid to the person responsible for the sale.

 

We have projected to add one (1) sales person at some point in the fiscal year 2013 on a full time basis at a salary plus commission's basis of $3,000 each per month, equating to a total of $36,000 annually. However this will require additional capital, which based on our current revenue stream, would have to come from raising additional capital. At this time there is no definitive plan in place to raise additional capital without which we would be unable to hire a full time sales person.

 

We anticipate that the full time sales person would generate revenues through sales of the Overhead Door Saver and the Portable Tow Truck units to trucking fleet markets. There is no assurance that we will be able to hire a sales person in the timeframe we have projected (sometime in 2013), or that we might ever be in a financial position to hire a full time sales person and there is no assurance once hired that person would make any sales.

 

á       Establishing a retail oriented website oriented toward both trucking fleet sales and retail sales of the Portable Tow Truck.

 

We plan to change our website, www.autovativeproducts.com, in the second quarter of 2013 to orient it towards both the trucking fleet market and the retail market. The retail market orientation would focus on individual units sold to car, truck, SUV, and off-road enthusiasts. We believe that the cost of developing a merchant web-site capable of taking credit cards on-line would cost anywhere from $1,000 to $5,000 annually. We are aware that there could be a conflict with our retail sales vs. the retail sales made by the manufacturer's website, www.theportabletowtruck.com. Currently any sales made through the manufacturer's website are sales of the manufacturer. Any sales whether retail, wholesale or fleet sales made by us are our sales.

 

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The trucking fleet part of the web-site would be oriented towards explaining the Portable Tow Truck units and the Overhead Door saver units through textual context as well as photos and videos of the use of the products.

 

 

á       Establishing marketing alliances with companies with worldwide marketing outlets.

 

We are currently seeking marketing alliances. At this time we have none in place. We anticipate that a full time sales representative would increase sales in the future.

 

We anticipate that a full time sales person would generate revenues through sales of the Portable Tow Truck units to the (1) traditional, (2) retail and (3) OES channels. Traditional channels would include brand name distributors, retail channel would include brand name auto retail merchants. and the OES channel would consist primarily of vehicle manufacturers' service departments at new vehicle dealerships. There is no assurance that we will be able to hire a sales person in the timeframe we have projected (sometime in 2013) at a cost of $3,000 a month, or that we might ever be in a financial position to hire a full time sales person and there is no assurance once hired that person would make any sales through the above mentioned channels.

 

 

á       Establishing distribution outlets globally through alliances with companies with those locations established, including capability to establish more outlets.

 

We are currently seeking larger distribution outlets that cater to trucking fleets, at this time we have none in place.

 

We project establishing such distribution outlets would be accomplished through the hiring of additional sales staff as outlined in the paragraph above entitled "Developing a marketing and sales force to successfully market and sell our products both domestically and globally." We recognize that to hire a sales force will take additional capital which we have estimated as previously noted to be at least $3,000 per month.

 

We have projected to add one (1) sales person at some point in the fiscal year 2013 on a full time basis at a salary plus commission's basis of $3,000 each per month, equating to a total of $36,000 annually. However this will require additional capital, which based on our current revenue stream, would have to come from raising additional capital. At this time there is no definitive plan in place to raise additional capital without which we would be unable to hire a full time sales person.

 

We anticipate that the full time sales person would not only generate revenues through sales of the Overhead Door Saver and the Portable Tow Truck units to trucking fleet markets; but also by establishing distribution outlets globally through alliances with companies with those locations established, including capability to establish more outlets. There is no assurance that we will be able to hire a sales person in the timeframe we have projected (sometime in 2013), or that we might ever be in a financial position to hire a full time sales person and there is no assurance once hired that person would make any sales or establish any additional distribution outlets.

 

 

á       Continuing to test and improve our products, including locating additional testing facilities.

 

UPS has been testing our Overhead Door Saver for the last year. We believe that if we can establish other trucking fleets that would test the unit we might increase our revenues. We are currently seeking additional trucking lines for testing purposes.

 

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á       Adding new product lines.

 

Currently we are focused on selling our existing products. However it is our goal to add additional products that we might be able to sell to our existing customers and subsequently expand our markets. We are currently undercapitalized to add new products at this time and there is no assurance that we will be able to add products in the future, nor do we have any specific products in mind currently to add to our existing product line. There is no timeline for seeking new products because the variables in the market, the ability to locate funds, the need to develop a strong and consistent distribution network and public acceptance, just to name a few, are too many and diffuse to reasonably establish a timeline.

 

Although this strategy is our plan for future growth, at this date we have no definitive arrangement with any other manufacturers for any other product lines. Nor do we have any other marketing alliances in place, nor do we have the capital available to fund any of the above mentioned plans. All of these steps will require additional capital.

 

Based on the assumption that we will be able to raise additional capital we have projected that we would need a minimum of $41,000 to reach the goals of our Business Strategy and an optimum of $166,000. To accomplish these goals the Company will need to raise additional capital. At this time there is no plan in place to raise additional capital nor is their any assurance that we will be able to raise additional capital.

 

The addition of the mold design services in 2012 has provided necessary operating capital toward our Business Strategy.

 

Industry Overview

 

According to JD Power, there were a total of one billion light, medium and heavy duty vehicles registered worldwide in 2009. Approximately 259 million, or 25%, of these vehicles were registered in the United States. According to the AAIA, the overall size of the U.S. aftermarket was approximately $274 billion in 2009.

In general, aftermarket industry participants can be categorized into three major groups: (1) manufacturers of parts, (2) distributors of replacement parts (without manufacturing capabilities) and (3) installers, both professional and DIY customers. Distributors purchase products from manufacturers and sell them to wholesale or retail operations, which in turn sell them to installers.

The distribution business is comprised of the (1) traditional, (2) retail and (3) OES channels. Typically, professional installers purchase their products through the traditional channel, and DIY customers purchase products through the retail channel. The traditional channel includes well-known distributors of auto related parts. Through a network of distribution centers, these distributors sell primarily to owned or affiliated stores, which in turn supply professional installers. The retail channel includes well known retail merchants of auto related parts. The OES channel consists primarily of vehicle manufacturers' service departments at new vehicle dealerships.

 

There are numerous tire traction aid devices on the market, most of which are designed to go around the tires and be used continuously while driving in weak traction areas such as snow, ice, mud and sand. These types of devices are designed to prevent a vehicle from getting stuck, and are not designed to get a vehicle unstuck. There are some traction mat devices similar to our Portable Tow Truck, but to our knowledge none that have our cleat design. The major sales of these devices occur during the winter and rainy seasons, with fewer sales during the dry months.

 

To our knowledge there are no similar devices to our Overhead Door Saver currently on the market. Some fleet owners have attempted to place a door stop on the overhead door track in the hopes of reducing door repairs, but these have proven to be of little effect. We believe that the Overhead Door Saver would reduce overhead door repairs.

 

Currently we are selling the Portable Tow Truck directly to two large fleet lines, UPS and FEDEX. Our goal is to sell through means mentioned above: (1) traditional, (2) retail and (3) OES channels; in addition to the sales we are currently making. We recognize that we will need to raise additional capital to accomplish that goal. As of now we have no plan in place for raising additional capital.

 

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Our 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 (See "Exhibit 10.1"). 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 98% 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 (See "Exhibit 10.1").The Overhead Door Saver is manufactured from various steel parts. The mounting piece (which is bolted to the track of the overhead door) is 3" 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.

 

Mold Design Services

 

In 2011, the Company started consulting for designs of molds for various products. Its primary customer to date has been Wholesale 4 You, Inc. The Company continued to consult for mold design in 2012.

 

Competition

 

Portable Tow Truck

 

There are other devices on the market designed to either assist drivers to prevent their vehicles from getting stuck in snow, ice, mud or sand, or to assist in extracting the vehicles when they get stuck. The Portable Tow Truck is designed to assist in the latter category. The devices designed to prevent vehicles from getting stuck must be applied around the tires prior to traveling in weak traction areas. Devices designed to extract vehicles when stuck are not put around the tires, but instead are placed on the ground directly in front of the rear (driving) tires and pushed down against the tires. This is the category of traction-aid product in which we would be in competition, and not the former category.

 

Although we have a contract for the exclusive rights for sales of the Portable Tow Truck and the Overhead Door Saver, there currently is another Company with the website name www.theportabletowtruck.com that sells the Portable Tow Truck on a retail only basis. The Company is owned by the manufacturer of the Portable Tow Truck units that we currently sell for commercial use. They are not affiliated with our company and sell the Portable Tow Truck strictly on a retail basis though their Company website. A verbal agreement was reached between us and the Manufacturer of the products in 2007 whereby the Manufacturer could make retail sales but only through their web site www.theportabletowtruck.com. This agreement could affect our ability to penetrate the retail markets and it could confuse retail buyers that we may generate through our web site or any other means. This could affect our ability to generate revenues through the retail marketplace

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Overhead Door Saver

 

It is management's belief that the Overhead Door Saver would reduce repairs to overhead doors in trucking fleets. Management is unaware of a similar device on the market designed to reduce the repairs on overhead doors.

 

Competitive Advantages

 

The Portable Tow Truck has several competitive advantages over other similar traction-aid devices on the market. Some of the devices designed to extract stuck vehicles are flat and some have ridges to assist with traction. To our knowledge the Portable Tow Truck is the only traction-aid product on the market with many small sharp cleats on the top and bottom that both grab the tire and also dig into and hold on to the ground surface. This is a major advantage in providing a firm grip to the tire as well as the ground surface. The front cleats face the opposite direction, which further aids on the initial connection to the tire. Also, in the opinion of management, the Portable Tow Truck is the only traction-aid product on the market with small holes in front to enable it to be connected to the vehicle so it can be dragged to an area that is safe to stop.

 

The Company has an advantage in its ability to design various molds via computer design at what it believes to be a lower cost and faster turnaround rate than its competition.

 

Customers

 

Portable Tow Truck

 

Currently, and continuously for the past seven years, we have had sales of the Portable Tow Truck to UPS, FEDEX and other fleet owners. These sales have averaged over 5,000 units per year, and those sales are expected to continue. We plan to mass market our product to retail and wholesale outlets throughout the U.S. and Canada, as well as globally. With that we hope to have customers worldwide.

 

Because we are considered a small vendor to FEDEX, our sales to the FEDEX trucking fleet are made through Johnson Industries, Inc. in Norcross, Georgia. Sales to UPS are made directly to UPS.

 

Overhead Door Saver

 

Our Overhead Door Saver has been successfully tested at UPS centers for a number of years, and has proven to reduce overhead door repairs by as much as 75%. Negotiations are underway to have the Overhead Door Saver installed on their entire fleet of trucks with overhead doors. Once that sale is completed, we plan to begin an intensive marketing and sales campaign to other fleet owners with trucks with overhead doors in the U.S., Canada and countries globally. However at this time we do not have a contract with any entity for the sale of our Overhead Door Saver and we do not know whether the Overhead Door Saver will be successfully sold to UPS or other trucking fleets. To date we have sold approximately 100 units of the Overhead Door Saver, primarily for testing purposes.

 

Mold Design

 

The Company's main customer for its design services is Wholesale 4 You, Inc.

 

 

Intellectual Property

 

We do not have patents on either the Portable Tow Truck or the Overhead Door Saver, these products are owned by OTW. They have applied for patents and have been denied patents for both products.

 

We do own intellectual property consisting of mold design for production of an automotive traction device which we have not applied for a patent for. This mold design has been fully impaired as described in Note-2 to the financial statements. Mold designs contracted by Wholesale 4 You, Inc, are the property of Wholesale 4 You, Inc.

 

Government Regulations

 

To our knowledge there are no current government regulations concerning or affecting either of our products.

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Research and Development

 

Portable Tow Truck

 

Our research and development activities have been in the creation and testing of various materials to use in the molds, as well as development of the molds themselves. Live tests we conducted using both cars and trucks in snow, ice, mud and sand conditions, and modifications to the materials and to the mold design were made. After numerous tests, the current product emerged.

 

If our markets expand we intend to search for a manufacturer that will be more cost effective whether it is on or offshore.

 

Automobile Traction Mold

 

We own a mold design that was purchased in 2005 for $70,000 which was specifically for the automobile industry. The mold design was fully amortized in 2011; however we plan to be able to produce a mold from the design and begin production of automobile traction units in the future.

 

Overhead Door Saver

 

Our research and development activities with this product began by creating a design that could be applied to the rails of overhead doors, without causing any conflicts with the use of the doors, or with the use of the cargo space. We then tested various sizes of steel materials and configurations, and finally tested a number of steel spring sizes. After being unsuccessful in procuring ready-made springs that would perform properly, we had special steel springs engineered to meet our specifications. Those springs were tested on various trucks, and have performed perfectly since our first tests almost ten years ago. None of our Overhead Door Savers that have been in use of the UPS trucks have broken or malfunctioned in that time period.

 

  

Our President and Chief Executive Officer, David Funderburk, has worked with the company on a commission only basis, based on sales made. We have two sales people working with the Company who are not contracted by the Company nor are they employed by the Company. They are paid a commission only based on revenues received from sales made by them. We plan to hire additional employees and sales force on an as needed basis and as the Company's growth expands in the areas of sales, administration and product assembly. As we further develop and market our products, we will need to hire additional employees.

 

1A. RISK FACTORS

 

Please carefully consider the following risk factors. If any of the following risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected. In addition, the current global economic climate amplifies many of these risks.

 

RISK FACTORS CONCERNING OUR BUSINESS AND OPERATIONS

 

 

We have a limited operating history that can be used to evaluate the Company.

 

We have limited financial resources and only limited revenues to date. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the highly competitive environment in which we will operate. Since we have a limited operating history, we cannot assure you that our business will be profitable or that we will ever generate sufficient revenues to fully meet our expenses and totally support our anticipated activities.

 

All of our capital and assets have been provided by or acquired from our principal shareholders and third parties and through a Private Placement of the shares being registered as well as from sales of our Portable Tow Truck Product. We cannot assure you, however, that we will be able to sustain the business for the long term nor that we may not need to obtain additional capital in the future. We can also not assure you that we will be able to obtain any required financing on a timely basis, or if obtainable, that the terms will not materially dilute the equity of our current stockholders. If we are unable to obtain financing on a timely basis, we may have to significantly or entirely curtail our business objectives, which could result in our having to discontinue some of our operations and plans.

 

Our auditor's report contains an explanatory statement as to our ability to continue as a going concern.

 

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

 

Our auditor's report on our audited December 31, 2011 and December 31, 2012 financial statements, and Note 1 to such financial statements, reflect a substantial doubt about our ability to continue as a going concern.  We intend to expand our operations through hiring of sales personnel in 2013. However, we can give no assurance that these plans and efforts will be successful.

 

We depend highly on our current President who has limited experience in running a public company and no formal employment agreement.

 

We depend highly on David Funderburk, our President, Treasurer, and Director, who may be difficult to replace. David Funderburk who is also the Chief Executive Officer of Autovative Products, at this point, only devotes approximately 40% of his time per week to our business, has seven years of industry experience and has not previously headed a public Company. Our plan of operations is dependent upon the continuing support and business expertise of Mr. Funderburk.

 

Mr. Funderburk is the Company's President and sole director and sole employee. He has in the past and will continue to determine his commission, salary and perquisites. Mr. Funderburk has received commissions of $9,715 and $6,222 for the years ended December 31, 2011 and 2012, respectively.

 

Loss of Mr. Funderburk could slow the growth of our business, or it may cease to operate at all, which may result in the total loss of investor's investments. Mr. Funderburk is not, presently, receiving a salary from the Company and it is unknown, at this time, if or when the Company may be able to compensate Mr. Funderburk for his management services. The company does not anticipate Mr. Funderburk receiving a salary in the foreseeable future. Mr. Funderburk receives commissions from sales which have over the last three fiscal years averaged approximately 15% of our sales revenue. In addition Mr. Funderburk is key to the mold design services offered by the Company. Without his expertise the Company would lose its ability to offer the service.

 

A large portion of our sales are made by individuals who are not employees and are not contracted by the Company.

 

Besides the commissions paid to Mr. Funderburk, we have engaged the services of two (2) additional sale persons who are paid commissions on sales they make. Neither individual is contracted by the Company nor are they employed by the Company. These sales people are paid a set commission depending on the entity sales are made to. Should the Company lose either of these sales people it would impact the sales revenues generated by the Company.

 

 

There are increased costs and regulations associated with operating a public Company and with only two officers and one director we will have limited internal accounting controls.

 

There are a number of expenses and costs associated with operating a public Company including filing expenses, transfer agent, stock issuance and maintenance costs, accounting, legal and auditing expenses, estimated to be approximately $15,000 annually that will materially increase the Company's operating expenses and make it more difficult for the Company's businesses to produce operating profits. There is no assurance that we can absorb the costs of being a public company. None of our officers has prior experience managing a public company. With only two officers and one director there will be no internal oversight to the Company's financial reporting, initially, except from the Company's outside auditors.

 

 

We are dependent on the popularity of our products.

 

Our ability to generate revenue and be successful in implementing our business plan is dependent on our ability to develop, produce, acquire and distribute products that are popular with audiences and sold via distribution channels that are efficient and cost effective. There is no assurance that we can accomplish that goal. Further our major customers are FEDEX and UPS, should we lose that customer base we would have lost our major revenue source.

 

Our current revenue depends solely on our three major customers.

 

We currently sell the Portable Tow Truck units to Federal Express (FEDEX) which equates to approximately 5% of sales of Portable Tow Truck Units sold (4% of total revenue) and to United Postal Service (UPS) which equates to approximately 95% of Portable Tow Truck Units sold (68% of total revenue). We have no ongoing contract with either entity. Currently, should we lose these customers we would have no revenue and we would have no ability to continue as a going concern.

 

We currently design product molds for Wholesale 4 You Inc. which provided 22% of our 2011 revenue and 28% of our 2012 revenue. Loss of this customer would have a significant impact on the operations of the Company.

 

We may be unable to compete with larger or more established companies.

 

We face a large and growing number of competitors in the automotive specialty product industry. Many of these competitors have substantially greater financial, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition, and more established relationships in the industry than does the Company. As a result, certain of these competitors may be in better positions to compete with us for product and audiences. We cannot be sure that we will be able to compete successfully with existing or new competitors.

 

We may require additional financing in order to implement our business plan. In the event we are unable to acquire additional financing, we may not be able to implement our business plan resulting in a loss of revenues and ultimately the loss of any shareholder's investment.

 

Due to our limited operating history outside of two customers, FEDEx and UPS, we will have to use all our existing resources to expand our business and develop our distribution channels.

 

Following this offering we may need to raise additional funds to expand our operations. We may raise additional funds through private placements, registered offerings, debt financing or other sources to maintain and expand our operations, although at this time there is no plan in effect to do so. Adequate funds for this purpose on terms favorable to us may not be available, and if available, on terms significantly more adverse to us than are manageable. Without new funding, we may be only partially successful or completely unsuccessful in implementing our business plan, and our stockholders will lose part or all of their investment.

 

 

Our products or processes could give rise to claims that our products infringe on the rights of others.

 

We are potentially subject to claims and litigation from third parties claiming that our products or processes infringe their patent or other proprietary rights. If any such actions are successful, in addition to any potential liability for damages, we could be required to obtain a license in order to continue to manufacture, use or sell the affected product or process. Litigation, which could result in substantial costs to us, may also be necessary to enforce our proprietary rights and/or to determine the scope and validity of the proprietary rights of others. Any intellectual property litigation would be costly and could divert the efforts and attention of our management and technical personnel, which could have a material adverse effect on our business, financial condition and results of operations. We cannot assure you that infringement claims will not be asserted in the future or that such assertions, if proven to be true, will not prevent us from selling our products or materially and adversely affect our business, financial condition and results of operations. If any such claims are asserted against us, we may seek to enter into a royalty or licensing arrangement. We cannot assure you that a license will be available on commercially reasonable terms, or at all. Regarding our Overhead Door Saver; there is an existing patent for the basic technology used in the Overhead Door Saver which precludes us from obtaining a patent for the Overhead Door Saver. It is possible that a Company with greater resources could copy our design for the Overhead Door Saver which could potentially affect any future revenues that might be generated from the Overhead Door Saver. It is also possible that we could infringe on an existing patent for the basic technology which was used in the production of the Overhead Door Saver.

 

We may be subject to claims of trademark infringement, which may harm our business.

 

The Company currently has not filed any trademarks or copyrights for its products. However we intend to file in the near future. We may be subject to legal proceedings alleging claims of trademark infringement in the future. If we must re-brand, it may result in significant marketing expenses and additional management time and resources, which may adversely affect our business.

 

Additionally, we cannot guarantee that our trademarks will be completely protected. This could cause harm to our brand and ultimately, to us. We could also spend additional time and resources fighting other entities that might infringe upon our trademarks.

 

We applied for a patent for the Overhead Door Saver and our patent application was declined, which may allow competitors to copy our designs for both the Portable Tow Truck and the Overhead Door Saver. Should a larger Company copy our designs, it is possible that they may be able to manufacture and sell the like kind products at a substantially lower cost than us.

 

Although we have a contract for the exclusive rights for sales of the Portable Tow Truck and the Overhead Door Saver, there currently is another Company with the website name www.theportabletowtruck.com that sells the Portable Tow Truck on a retail only basis. The Company is owned by the manufacturer of the Portable Tow Truck units that we currently sell for commercial use. They are not affiliated with our company and sell the Portable Tow Truck strictly on a retail basis though their Company website. A verbal agreement was reached between us and the Manufacturer of the products in 2007 whereby the Manufacturer could make retail sales but only through their web site. This agreement could affect our ability to penetrate the retail markets and it could confuse retail buyers that we may generate through our web site. This could affect our ability to generate revenues through the retail marketplace.

 

Patent application was denied.

 

A patent was applied for by OTW regarding the Overhead Door Saver which was denied due to the fact that there was an existing patent for the basic technology which was applied for, although for a different use.

 

They (OTW) explored filing a patent for the Portable Tow Truck but did not file a patent for the Portable Tow Truck.

 

As such it is entirely possible that a company with greater resources could copy our designs of both the Overhead Door saver and the Portable Tow Truck and manufacture and sell a similar product.

 

We may be subject to lawsuits from customers who are injured using our products.

 

Although we have what we believe to be clear instructions on how to use our products, it is possible that a customer may get injured form using one of our products and subsequently file a lawsuit against the Company. If we are unable to settle such a lawsuit it could adversely affect our business and shareholders investment in the Company. We have no liability insurance in place at this time.

 

We may be unable to scale our operations successfully.

 

Our plan is to grow rapidly. Our growth will place significant demands on our management and technology development, as well as our financial, administrative and other resources. We cannot guarantee that any of the systems, procedures and controls we put in place will be adequate to support the commercialization of our operations. Our operating results will depend substantially on the ability of our officers and key employees to manage changing business conditions and to implement and improve our financial, administrative and other resources. If we are unable to respond to and manage changing business conditions, or the scale of our products, services and operations, then the quality of our services, our ability to retain key personnel and our business could be harmed.

 

 

RISK FACTORS CONCERNING INVESTMENT IN OUR COMPANY

 

There is no assurance of a public market or that the common stock will ever trade on a recognized exchange. Therefore, you may be unable to liquidate your investment in our stock.

 

There is no established public trading market for our common stock. Our shares are not and have not been listed or quoted on any exchange or quotation system. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading market, an investor may be unable to liquidate their investment.

 

If our shares of common stock are actively traded on a public market, they will in all likelihood be penny stocks.

 

The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. SEC regulations generally define a penny stock to be an equity security that has a market or exercise price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on NASDAQ and any equity security issued by an issuer that has net tangible assets of at least $100,000, if that issuer has been in continuous operation for three years. Unless an exception is available, the regulations require delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, details of the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations and broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to effecting the transaction and must be given in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for securities that become subject to the penny stock rules. Since our securities are highly likely to be subject to the penny stock rules, should a public market ever develop, any market for our shares of common stock may not be liquid.

 

Because our securities may be subject to penny stock rules, you may have difficulty reselling your shares.

 

Since our stock may be subject to penny stock rules, you may have difficulty reselling your shares. Penny stocks are covered by section 15(g) of the Securities Exchange Act of 1934 which imposes additional sales practice requirements on broker/dealers who sell the Company's securities including the delivery of a standardized disclosure document; disclosure and confirmation of quotation prices; disclosure of compensation the broker/dealer receives; and, furnishing monthly account statements. For sales of our securities, the broker/dealer may be required to make a special suitability determination and receive from its customer a written agreement prior to making a sale. The imposition of the foregoing additional sales practices could adversely affect a shareholder's ability to dispose of his stock.

 

We have not paid, and do not intend to pay cash dividends in the foreseeable futures.

 

We have not paid any cash dividends on our common stock and do not intend to pay cash dividends in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business. Dividend payments in the future may also be limited by other loan agreements or covenants contained in other securities that we may issue. Any future determination to pay cash dividends will be at the discretion of our board of directors and depend on our financial condition, results of operations, capital and legal requirements and such other factors as our board of directors deems relevant.

 

Mr. Funderburk has no experience in the growth and expansion of a business and he will be reliant on consultants and others who have greater management experience. The lack of experience in all of the businesses we are entering could impact our return on investment, if any.

 

As a result of our reliance on Mr. Funderburk and his lack of experience in Company expansion growth, our investors are at risk in losing their entire investment. Mr. Funderburk intends to hire personnel in the future who will have the experience required to manage our company, when the Company is sufficiently capitalized. Until such management is in place, we are reliant upon Mr. Funderburk to make the appropriate management decisions.

 

 16

 

ITEM 2. DESCRIPTION OF PROPERTY

CORPORATE INFORMATION

 

Office and Facilities

 

The Company currently utilizes space provided by its Mr. Funderburk, at no charge to the Company.

 

Our executive offices for mailing are located at 502 N. Santa Fe Avenue, Ste. D, Vista, CA 92083. Our telephone number at that address is 760-732-5868, and our facsimile number is 760-301-0005. Our Nevada offices are located at 3077 E. Warm Springs Road, Ste. 300, Las Vegas, Nevada 89120. The manufacturing facilities are located in Maryville, TN, where we currently contract with independent laborers to produce, assemble and package our products.

 

WEBSITE POSTING OF SEC FILINGS

 

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports are available, free of charge, on our website and can be accessed on the SEC's Edgar database. Further, a copy of this annual report on Form 10-K is located at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov.

 

Bankruptcy or Receivership or Similar Proceedings

 

None.

 

ITEM 3. LEGAL PROCEEDINGS

 

Legal Proceedings

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

17

 

PART II

ITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER REPURCHASES OF EQUITY SECURITIES

 

Our common stock is listed on the OTCBB and OTCQB at of December 31, 2012 under the ATVP and has traded with a bid of $0.51 and an Offer of $0.71 since it began trading in 2012.

 

At year end December 31, 2011 we had 8,585,977 shares of our common stock outstanding and the number of stockholders of record of our common stock was 62.

 

At year end December 31, 2012 we had 8,557,977 shares of our common stock outstanding and the number of stockholders of record of our common stock was 36.

 

 

 

DIVIDENDS

 

We have never declared or paid any cash dividends on our common stock.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

None.

 

PURCHASES OF EQUITY SECURITIES BY THE REGISTRANT AND AFFILIATED PURCHASERS

 

None.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable to a "smaller reporting company" as defined in Item 10(f)(1) of SEC Regulation S-K.

 

18

 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Statements included in this Management's Discussion and Analysis or Plan of Operation, and in future filings by us with the Securities and Exchange Commission, in our press releases and in oral statements made with the approval of an authorized executive officer which are not historical or current facts are "forward-looking statements." We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect our actual results and could cause our actual financial performance to differ materially from that expressed in any forward-looking statement: (i) the extremely competitive conditions that currently exist in the market for "blank check" companies similar to us, and (ii) lack of resources to maintain our good standing status and requisite filings with the Securities and Exchange Commission. The foregoing list should not be construed as exhaustive and we disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events

 

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.

 

 

Results of Operations

 

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2012

 

In 2012 we had revenues from operations of $74,300 and cost of sales of $40,368 from the distribution of the Portable Tow Truck units and mold design services, and total operating expenses of $67,907. In 2011 we had revenues from operations of $120,690, cost of sales of $46,544 and total operating expenses of $59,921. In 2011 we had revenues of $57,100 from the sale of mold design, the balance of revenues, $63,253 for the year being from the sale of the Portable Tow Truck units. Net losses for 2012 were ($34,900) and for 2011 ($34,874). It is the intention of the Company to continue to develop and distribute its products; however, there is no assurance the Company will be able to generate net income over the long term.

 

Our sales revenues decreased from $120,690 in 2012 to $74,300 in 2012 a decrease of 42%. Our operating expenses increased from $56,466 in 2011 to $58,863 in 2012. Our advertising and marketing expenses were $23,700 in 2011 as compared to $17,500 in 2012.

 

Liquidity and Capital Resources

 

As of December 31, 2012 the Company had cash on hand of $1,774 total current assets of $15,657 total assets of $15,657, total current liabilities of $49,565 and total stockholders' equity of $(33,907). The Company's cash was generated from revenue from its sales of its Portable Tow Truck units, and sales of its mold design. The Company believes it has sufficient cash resources available to fund its primary operation for the next twelve (12) months based on current cash.

 

As noted above in the Results of Operations, our sales revenues at year end December 31, 2012 had decreased by 38% in the last year. The decrease was attributed to a 63% decrease in design consulting. Sales revenues for the year were attributed to the sales of the Portable Tow Truck Units to FEDEX and UPS for their trucking fleets and sales of mold design. It is likely that sales revenues will continue to either remain at the same level at fiscal year end 2013 or decrease, due to the saturation level of sales of the units within the two trucking fleets; unless the Company increases sales revenues through additional markets outside of the sales of the Portable Tow Truck units to only FEDEX and UPS and/or the Company is able to implement its business plan.

 

In 2012 and 2011 we spent more money on advertising and marketing as noted above; which we believe will result in an increase in sales in 2013 and future years. We are currently attempting to attract additional trucking fleets to use our Portable Tow Truck units as well as our Overhead Door Saver.

 

We believe that in order for the Company's sales revenues to increase it is paramount that the Company engage in sales agreements with additional trucking fleets for both its Portable Tow Truck units and its Overhead Door Saver units. We have engaged additional sales people on a commission only basis in Idaho, Southern California and Arizona to direct sales towards larger trucking fleets like FEDEX and UPS. We believe that 2013 should show positive results due to the increased sales effort. However there is no assurance that any additional sales will be made. Further there is no assurance that our sales revenues will not continue to decrease over the revenues of fiscal year end 2012.

 

The Company has no,current off balance sheet arrangements and does not anticipate entering into any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition. The Company has no agreements in place with its shareholders, officer and director or with any third parties to fund operations beyond the end of the Company's 2012-2013 fiscal years. The Company has not negotiated nor has available to it any other third party sources of liquidity.

 

APPLICATION OF CRITICAL ACCOUNTING POLICIES

 

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated 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. 

 

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. 

 

Forward-Looking Statements

 

This Annual Report includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "will", and variations of such words and similar expressions are intended to identify such forward-looking statements.  These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict.  Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.  We undertake no obligations to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Important factors that could cause results to differ materially from those in the forward-looking statements include (1) the timing and extent of changes in raw material and component prices, (2) the effects of fluctuations in the commercial/industrial new construction market, (3) the timing and extent of changes in interest rates, as well as other competitive factors during the year, and (4) general economic, market or business conditions.

 

Our business is more fully described in Part I of this Annual Report.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable to a "smaller reporting company" as defined in Item 10(f)(1) of SEC Regulation S-K.

 

 

 

 

 

 

 

 

 

 

 

 

ITEM 8. FINANCIAL STATEMENTS.

 

 

AUDITED FINANCIAL STATEMENTS AND SCHEDULES

December 31, 2012 and December 31, 2011

AUTOVATIVE PRODUCTS, INC

 

Index to Financial Statements

 

	Page
Report of Independent Registered Public Accounting Firm	F-2- F-3
Balance Sheets	F-4
Statements of Operations	F-5
Statement of Stockholders' Equity	F-6
Statements of Cash Flows	F-7
Notes to Financial Statements	F8-F13

 

F-1

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

To the Board of Directors and Stockholders

Autovative Products, Inc.

 

 

We have audited the accompanying balance sheets of Autovative Products, Inc. as of December 31, 2012 and 2011 and the related statements of operations, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Autovative Products, Inc. as of December 31, 2012 and 2011 and the results of its operations and cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has limited operations and has limited established sources of revenue. This raises substantial doubt about its ability to continue as a going concern. Management's plan in regard to these matters is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

 /S/ Kyle L. Tingle

Kyle L. Tingle, CPA, LLC

 

 

March 29, 2013

Las Vegas, Nevada 

 

 

   

 

F-2

 

AUTOVATIVE PRODUCTS, INC

BALANCE SHEETS

December 31, 2012 and 2011

 

		2012				2011
							(restated)
Assets
Current Assets
Cash		$	1,774			$	28,343
Accounts receivable			13,883				17,875
Total Current Assets			15,657				46,218
Total Assets		$	15,657			$	46,218
Liabilities And Stockholders' Equity
Current Liabilities
Accounts payable		$	22,159			$	18,744
Accrued interest and penalties			14,049				13,124
Accrued income tax payable			13,357				13,357
Total Current Liabilities			49,565				45,225
Total Liabilities			49,565				45,225
Stockholders' Equity
Common stock $0.001 par value 25,000,000 shares authorized 8,557,977 shares issued and outstanding			8,558				8,586
At December 31, 2012 and 8,585,977 shares issued and outstanding at December 31, 2011
Additional paid in capital			24,583				24,555
(Accumulated deficit) retained earnings			(67,048	)			(32,148	)
Total Stockholders' Equity			(33,907	)			993
Total Liabilities And
Stockholders' Equity		$	15,657			$	46,218

See accompanying notes to financial statements.

F-3

 

 

 

 

 

 

 

 

 

 

 AUTOVATIVE PRODUCTS, INC

STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2012 and 2011

 

		2012				2011
Revenue							(restated)
Sales		$	53,300			$	63,253
Services			21,000				57,100
Total Revenue			74,300				120,690
Cost of goods sold			40,368				46,544
Gross Profit			33,932				74,146
General and Administrative Expenses
Advertising and marketing			17,500				23,700
Commissions			12,932				19,266
Depreciation and amortization			—				8,288
Professional fees			34,927				7,995
Office expenses			2,548				672
Total Expenses			67,907				59,921
Net Operating Income (Loss)			(33,975	)			14,225
Other Expense Interest expense			925				886
Impairment of intangible asset			—				43,214
Loss of disposal of assets			—				5,000
Total Other Expense			925				49,100
Net Loss		$	(34,900	)		$	(34,874	)
Basic and Diluted Loss Per Common Share		$	(0.00	)		$	(0.00	)
Weighted Average Shares Outstanding			8,584,523				8,585,977

 

See accompanying notes to financial statements.

F-4

 

 

 

 

 

 

 

 

 

AUTOVATIVE PRODUCTS, INC

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

For the Years Ended December 31, 2012 and 2011

 

			Common Stock
			Number of								Additional				Accumulated
			Shares				Amount				Paid in Capital				Deficit				Total
Balance, December 31, 2010			8,585,977			$	8,586			$	24,555			$	2,726			$	35,867
Net loss for the year ended December 31, 2011			—				—				—				(34,874	)			(34,874	)
Balance, December 31, 2011			8,585,977			$	8,586			$	24,555			$	(32,148	)		$	993
Net loss for the year ended December 31, 2012			—				—				—				(34,900	)			(34,900	)
Rescission of shares			(28,000	)			(28	)			28				—				—
Balance, December 31, 2012			8,557,977			$	8,557			$	24,583			$	(64,048	)		$	(26,425	)

See accompanying notes to financial statements.

F-5

 

 

 

 

 

 

 

 

 

 

AUTOVATIVE PRODUCTS, INC

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2012 and 2011

 

		2012				2011
Cash Flows from Operating Activities							(Restated)
Net Loss		$	(34,900	)		$	(34,874	)
Depreciation and amortization			—				8,288
Impairment of intellectual property			—				43,214
Loss on disposal of assets			—				5,000
Adjustments to Reconcile Net Loss To Net Cash Provided by (Used In) Operating Activities:
Accounts receivable			3,991				13,250
Accounts payable			3,414				(8,466	)
Accrued interest and penalties			925				886
Net Cash Provided by (Used In) Operating Activities			(26,570	)			27,298
Cash Flows From Investing Activities							—
Cash Flows from Financing Activities
Net Cash Provided by Financing Activities			—				—
Increase (Decrease) in Cash			(26,570	)			27,298
Cash at Beginning of Year			28,343				1,045
Cash at End of Year		$	1,774			$	28,343
Cash paid for Interest		$	—			$	—
Cash paid for income taxes		$	—			$	—

 

See accompanying notes to financial statements.

 

F-6

 

 

 

 

 

 

 

 

 

AUTOVATIVE PRODUCTS INC.

NOTES TO THE FINANCIAL STATEMENTS

For the Years Ended December 31, 2012 and 2011

 

 

 

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

 

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.

 

The Company also provides specialty product designs on a contract basis.

 

ESTIMATES

 

The preparation of the financial statement in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting. Accordingly, actual results could differ from those estimates.

 

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.

 

CONCENTRATIONS

 

Customers:

During 2012 and 2011, three and two customers, respectively, accounted for 100% and 100%, respectively, of our revenue. The loss of these customers could have a material adverse effect on our financial position and results of operations.

 

At December 31, 2012 and 2011, two customers accounted for a total of 100% of our accounts receivable.

 

INCOME TAXES

 

We account for income taxes in accordance with FASB ASC 740, Income Taxes which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between 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. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

 

PROPERTY AND EQUIPMENT

 

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using straight-line methods over the estimated useful lives of the assets, principally three to five years, or the term of the lease, if shorter, for leasehold improvements.

 

IMPAIRMENT OF LONG-LIVED ASSETS

 

In September 2011, the FASB issued ASU 2011-08 Goodwill and Other (Topic 350) which amends the guidance on testing goodwill for impairment. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step 1 of the goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The ASU does not change how goodwill is calculated or assigned to reporting units, nor does it revise the requirement to test goodwill annually for impairment. In addition, the ASU does not amend the requirement to test goodwill for impairment between annual tests if events or circumstances warrant; however, it does revise the examples of events and circumstances that an entity should consider. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Statement requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company uses an estimate of undiscounted future net cash flows of the assets over the remaining useful lives in determining whether the carrying value of the assets is recoverable. If the carrying values of the assets exceed the expected future cash flows of the assets, the Company recognizes an impairment loss equal to the difference between the carrying values of the assets and their estimated fair values. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets. The evaluation of long-lived assets requires the Company to use estimates of future cash flows. However, actual cash flows may differ from the estimated future cash flows used in these impairment tests.

 

The company performed such an impairment review and determined that the future benefits from long-lived assets no longer exceed their carrying and a write down of the carrying value was necessary.

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

 

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosure about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

 

Level 1. Observable inputs such as quoted prices in active markets;

 

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

 

Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

 

The Company does not have any assets or liabilities measured at fair market value on a recurring basis at December 31, 2012 or 2011. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the periods ended December 31, 2012 or 2011.

 

SHARE BASED EXPENSES

 

FASB ASC 718 "Compensation - Stock Compensation" prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity. The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 "Equity - Based Payments to Non-Employees." Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

 

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. There are no shares with a dilutive impact at December 31, 2012 and 2011.

 

CONCENTRATIONS OF CREDIT RISK

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.

 

ADVERTISING

 

The Company follows a policy of charging the costs of advertising to expenses incurred. The Company incurred advertising expenses totaling $17,500 for the year ended December 31, 2012 and $23,700 for the year ended December 31, 2011.

 

NEW ACCOUNTING PRONOUNCEMENTS

 

In June 2012, the Financial Accounting Standards Board ("FASB") issued guidance on the presentation of comprehensive income. The new guidance requires companies to report components of comprehensive income by including comprehensive income on the face of the income statement or in a separate statement of comprehensive income. The new standard has no effective on our reporting at this time.

In February 2013, the FASB issued new guidance requiring additional information about reclassification adjustments out of comprehensive income, including changes in comprehensive income balances by component and significant items reclassified out of comprehensive income. This new standard is effective for our fiscal year ending May 31, 2014 and will have no impact on our financial condition or results of operations.

We believe that no other new accounting guidance was adopted or issued during 2012 that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting.

 

GOING CONCERN

 

The Company has had losses since its initial year of operations.  There is no assurance that we will attain profitability 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 consistently generate sufficient cash flow from operations to meet its obligations on a timely basis, and the ability to successfully raise additional financing to implement its business strategy.

 

NOTE 2 – FIXED ASSETS---

 

The company abandoned or disposed of the furniture and computer assets as of December 31, 2011 recognizing a loss on abandonment of $9,000.

 

The Company's intellectual property consisted of the industrial design for an Auto traction mold and Auto traction mat design which was acquired in 2005. The Company reclassified equipment as intellectual property at year end 2011 and after impairment analysis and amortization, considers it fully impaired recognizing impairment of $43,214 in 2011.

 

NOTE 3 - CAPITAL STOCK

 

The Company is authorized to issue 25,000,000 shares of common stock, par value 0.001 per share. The company has 8,557,977 shares issued at December 31, 2012 and 8,585,977 in 2011.

 

On December 29, 2010 the Company issued 25,000 shares of restricted 144 common stock per a contract with Direct Media Enterprises which were distributed to the shareholders of Direct Media Enterprises for media advertising via Direct Media Enterprise's kiosk technology. The stock was issued for initial video production services at a price of $0.10 per share (services valued at $2,500).

 

On December 13, 2012, the Company rescinded the 25,000 shares for Direct Media Enterprise's kiosk technology, as the project was not completed. An additional 3,000 shares were rescinded from the finder's fee for Direct Media Enterprises.

 

NOTE 4: PRIOR PERIOD ADJUSTMENTS AND RESTATEMENT OF REPORTED NET INCOME

 

The previously issued financial statements for 2011 have been restated for the following departures from generally accepted accounting principles:

a.       Accounts receivable for sales invoiced prior to December 31, 2011 and collected in 2012;

b.      Accounts payable and commissions for product shipped prior to December 31, 2011;

 

The cumulative effect of the corrections are as follows:

 

December 31, 2011		As Previously Stated		As Restated
Accounts Receivable:	$	14,537	$	17,875
Total Current Assets		42,880		46,218
Total Assets:		42,880		46,218
Accounts Payable		7,923		18,744
Total Current Liabilities		34,404		45,225
Accumulated deficit:		(24,665)		(32,148)
Total Liabilities and Retained Earnings:		42,880		46,218
Sales:		117,353		120,690
Cost of Sales		40,064		46,544
Gross Profit		77,289		74,146
General and Administrative Expenses		56,466		60,807
Net Loss		(27,391)		(34,874)
Net Loss Per Share	$	(0.00)		(0.00)

 

 

NOTE 5 - INCOME TAXES

We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating loss carryovers since our second year of operations. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit.  We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carryforwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carryforward period.

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the twelve-months ended December 31, 2012 and 2011, or during the prior three years applicable under FASB ASC 740. We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet. All tax returns have been appropriately filed by the Company.

 

Income tax provision at the federal statutory rate		35%
Effect on operating losses		(35%)
		-

 

Net deferred tax assets consist of the following:

 

		2012			2011
Net operating loss carry forward	$	154,817		$	121,167
Permanent differences		(7,594)			(6,344)
		147,223			114,283
Tax at statutory rate (35%)		51,966			40,188
Valuation allowance		(51,966)			(40,188)
Net deferred tax asset	$	-		$	-

 

A reconciliation of income taxes computed at the statutory rate is as follows:

 

		2012			2011
Tax at statutory rate (35%)	$	11,778		$	12,206
Increase in valuation allowance		(11,778)			(12,206)
Net deferred tax asset	$	-		$	-

 

The Company did not pay any income taxes during the years ended December 31, 2012 or 2011.

 

The net federal operating loss carry forward will expire from 2026 through 2032.  This carry forward may be limited upon the consummation of a business combination under IRC Section 381.

 

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

The Company neither owns nor leases any real or personal property.  An officer of the corporation provides office services without charge.  Such costs are immaterial to the financial statements and accordingly, have not been reflected therein.  The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities.  If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest.  The Company has not formulated a policy for the resolution of such conflicts. 

 

The officer of the Company received commissions of $6,222 and $9,715 for the years ended December 31, 2012 and 2011, respectively.

 

NOTE 7 – SUBSEQUENT EVENTS

 

On December 31, 2012, the majority shareholder and officer of the Company entered into a Securities Purchase Agreement to sell 7,080,555 shares of the Company. This will occur in early 2013 and will effect a change in control of the Company.

 

 

F-12

 

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

On March 7, 2012 we filed an 8-K regarding our change of accountants and on March 12, 2012 we filed an 8-K/A regarding our change of accountants.

 

Malcolm Pollard, Inc. ("Pollard") resigned on November 28, 2011 as the Company's independent registered public accounting firm due to his retirement from his accounting practice. Subsequently the Company engaged Hamilton PC ("Hamilton") as its independent registered public accounting firm to audit its financial statements as of December 31, 2011. The Company does not have an audit committee. Pollard had its registration withdrawn on November 30, 2011 as being an independent registered public accounting firm with the Public Company Accounting Oversight Board. From November 28, 2011 to February 29, 2012 Pollard performed no audit or review services for the Company.

 

During the Company's two most recent fiscal years ended December 31, 2010 and 2009, the Company did not consult Hamilton with respect to any of the matters described in Item 304(a)(2) of Regulation S-K.

 

Pollard's audit reports regarding the Company's financial statements for the fiscal years ended December 31, 2010 and 2009 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to the uncertainty, audit scope or accounting principles, except that its audit reports for such fiscal years contained a going concern qualification.

 

The Company and Pollard have not, during the fiscal years ended December 31, 2010 and 2009 and through the date of February 29, 2012 had any disagreement on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to Pollard's satisfaction, would have caused Pollard to make reference to the subject matter of the disagreement in connection with its reports.

 

During the fiscal years ended December 31, 2010 and 2009, Hamilton had not advised the Company of any of the enumerated items described in Item 304(a)(1)(v) of Regulation S-K.

 

The Company requested that Pollard furnish a letter addressed to the SEC stating whether or not Pollard agrees with the statements made in the 8-K and 8-K/A as Exhibit 16 which was attached as Exhibit 16 in the March 12 8-K/A.  

 

On October 22, 2012 we filed an 8-k regarding our change of accountants.

 

Effective with the re-audit of the December 31, 2011, the audit of the financial statements by Hamilton, P.C. and subsequent reviews have been restated.

 

Hamilton PC ("Hamilton") resigned on October 22, 2012 as the Company's independent registered public accounting firm due to his retirement from his accounting practice. Subsequently the Company engaged Kyle L. Tingle, CPA LLC as its independent registered public accounting firm to audit its financial statements as of December 31, 2012 and 2011. The Company does not have an audit committee.

 

ITEM 9A.   CONTROLS AND PROCEDURES.

 

(a) Evaluation of Disclosure Controls and Procedures

 

At the end of the period covered by this Annual Report on Form 10-K, 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:

 

á	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

 

á

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 Annual 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 December 31, 2012.

 

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, 2012 and 2011 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 (4) – Prior Period Adjustments and Restatement of Reported Net Income.

 

The Company concluded on November 19, 2012, to restate the Company's audited financial statements as of December 31, 2011 and for the year 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, 2012. 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.

 

(b) Management's Annual Report on Internal Control over Financial Reporting

 

The management of Autovative Products, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

 

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

In making our assessment of internal control over financial reporting, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our assessment, we believe that, as of December 31, 2011, our internal control over financial reporting is not effective at the reasonable assurance level based on those criteria. Changes in process of financial information as described in Evaluation of Disclosure Controls and Procedures noted above are being implemented to correct these deficiencies.

 

ITEM 9B. OTHER INFORMATION

 

None. 

 

 

 

PART III

 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

 

Executive Officers and Directors

 

On December 31, 2012 Qasim Husain was appointed President, CEO, Secretary, Treasurer and Director and David Funderburk resigned. David Funderburk serves as the sole officer and director of the Company's subsidiary.

 

The following table and subsequent discussion contains the complete and accurate information concerning our directors and executive officers, their ages, term served and all of our officers and their positions, who will serve in the same capacity with us upon completion of the offering.

 

Name		Age		Term Served		Title / Position(s)
David Funderburk   Qasim Husain		64   31		Since inception (December 8, 2004) to December 31, 2012 Since December 31, 2012		President/CEO, Secretary, Treasurer and Director   President/CEO, Secretary, Treasurer and Director

         

 There are no other persons nominated or chosen to become directors or executive officers nor do we have any employees other than above.

  

David Funderburk (age 64), is the founder and Director of Autovative Products, Inc. Mr. Funderburk has been the President and Chief Executive since its inception. Mr. Funderburk graduated from the University of San Diego with a Master's Degree and began his business career analyzing and developing training programs for the U.S. Government. He then began building custom homes in San Diego County as a general contractor and owner of North County Domes, after which he became an independent real estate consultant and investor. Mr. Funderburk has served as a fiduciary and trustee for numerous trusts, and has served as an Officer of several non-public corporations. Since 1990 he has applied his study of contract and business law towards developing business strategies for clients. 

 

Qasim Husain, MD (age 31) was appointed to serve as the Registrant's Chief Executive Officer and as the Registrant's director as of the Closing Date. Dr. Husain has been involved extensively in research beginning with his undergraduate work at Cornell University, where he published his first paper on glowing fluorescent protein-tagged neuropeptides. Dr. Husain continued to pursue research interests during medical school at the State University of New York at Stony Brook, where he studied the effects of certain medications such as Plavix and aspirin on ischemic preconditioning in cardiac myocyctes. From July 2007 through June 2012, Dr. Husain went on to complete his residency training in Orthopaedic Surgery at the State University of New York at Stony Brook. During his residency he studied extensively the effects of certain anesthetic protocols on patients undergoing spine surgery, and even presented a protocol that was shown to decrease hospital length of stay for postoperative scoliosis patients at the International Meeting on Advanced Spine Techniques. From August 2012 to date, Dr. Husain has served as a fellow at the New York University Hospital for Joint Diseases, specializing in the surgical treatment of spinal disorders. He has published on multiple topics related to spine surgery, ranging from adolescent deformity to a textbook chapter on the surgical management of degenerative spondylolisthesis.

Our directors will hold office until the next annual meeting of shareholders and the election and qualification of their successors. Directors receive no compensation for serving on the board of directors other than reimbursement of reasonable expenses incurred in attending meetings. Officers are appointed by the board of directors and serve at the discretion of the board.

 

No officer, director, or persons nominated for such positions and no promoters or significant employee of AUTOVATIVE PRODUCTS, INC. has been involved in legal proceedings that would be material to an evaluation of officers and directors.

 

Indemnification of Directors and Officers

 

Except as permitted by the Nevada Revised Statutes, the Company's Articles of Incorporation do not provide for any additional or different indemnification procedures. At present, there is no pending litigation or proceeding involving a director, officer or employee of the Company regarding which indemnification is sought, nor is the Company aware of any threatened litigation that may result in claims of indemnification. The Company has not obtained director's and officer's liability insurance, although the board of directors of the Company may determine to investigate and, possibly, acquire such insurance in the future.

 

Conflict of Interest - Management's Fiduciary Duties

 

Our directors and officers may become, in their individual capacity, officers, directors, controlling shareholders and/or partners of other entities engaged in a variety of businesses.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10 percent of a registered class of our equity securities, file with the SEC initial reports of ownership and reports of changes in ownership of our equity securities. Officers, directors and greater than 10 percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that during the year ended December 31, 2011, our executive officers, directors and greater than 10 percent beneficial owners complied on a timely basis with all Section 16(a) filing requirements.

 

COMMITTEES OF THE BOARD OF DIRECTORS

 

Compensation Committee. Our board of directors has a compensation committee. However, no members to the committee have been appointed and the committee has not been formally organized. The compensation committee will make recommendations to the board of directors concerning salaries and compensation for our executive officers and employees. Our board adopted a written charter for the compensation committee. Since the compensation committee has been formed recently, there have been no meetings held or members appointed at the time of this Annual Report.

 

Audit Committee. Our board of directors has an audit committee which will be directly responsible for the appointment, compensation, and oversight of the work of any registered public accounting firm employed by us (including resolution of disagreements between our management and the auditor regarding financial disclosure) for the purpose of preparing or issuing an audit report or related work. Our board adopted a written charter for the audit committee. The audit committee will review and evaluate our internal control functions. Since the audit committee has been formed recently, there have been no meetings held or members appointed at the time of this Annual Report.

 

The members of the audit committee will be independent as defined under Rule 4200(a)(15) of the NASD's listing standards.

 

Executive Committee. We do not have an executive committee, although our board of directors is authorized to create one.

 

Nominating Committee. Our board of directors has a nominating committee. No meetings have been held or members appointed. The functions to be performed by the nominating committee include selecting candidates to fill vacancies on the board of directors, reviewing the structure and composition of the board, and considering qualifications requisite for continuing board service. The nominating committee will consider candidates recommended by any of our stockholders. The policies and procedures with respect to the consideration of such candidates are set forth below.

 

The recommended candidate is to be submitted to us in writing addressed to our principal offices. The recommendation is to be submitted by the date specified in Rule 14a-8 of the Exchange Act for submitting stockholder proposals to be included in our annual stockholders' meeting proxy statement.

 

The recommendation shall be in writing and shall include the following information: name of candidate; address, phone, and fax number of candidate; a statement signed by the candidate certifying that the candidate wishes to be considered for nomination to our board of directors; and information responsive to the requirements of Regulation S-K, Item 401 with respect to the candidate; and state the number of shares of our stock beneficially owned by the candidate.

 

The recommendation shall include a written statement of the candidate as to why the candidate believes that he meets the director qualification criteria and would otherwise be a valuable addition to our board of directors.

 

The nominating committee shall evaluate the recommended candidate and shall, after consideration of the candidate after taking account of the director qualification criteria set forth below, determine whether or not to proceed with the candidate in accordance with the procedures outlined under "Process for Identifying Candidates" below.

 

These procedures do not create a contract between us, on the one hand, and our security holder(s) or a candidate recommended by our security holder(s), on the other hand. We reserve the right to change these procedures at any time, consistent with the requirements of applicable law and rules and regulations.

 

Director Qualifications Criteria. As minimum qualifications, all candidates must have the following characteristics:

 

-

The highest personal and professional ethics, integrity and values;

 

-

Broad-based skills and experience at an executive, policy-making level in business, academia, government or technology areas relevant to our activities;

 

-

A willingness to devote sufficient time to become knowledgeable about our business and to carry out his duties and responsibilities effectively;

 

-

A commitment to serve on the board for two years or more at the time of his initial election; and

 

-

Be between the ages of  30 and 70, at the time of his/her initial election.

 

26

 

Process for Identifying and Evaluating Candidates. The nominating committee's process for identifying and evaluating candidates is:

 

-

The chairman of the board, the nominating committee, or other board members identifies the need to add new members to the board with specific criteria or to fill a vacancy on the board;

 

-

The chair of the nominating committee initiates a search, working with staff support and seeking input from the members of the board and senior management, and hiring a search firm, if necessary;

 

-

The nominating committee identifies an initial slate of candidates, including any recommended by security holders and accepted by the nominating committee, after taking account of the director qualifications criteria set forth above;

 

-

The nominating committee determines if any board members have contacts with identified candidates and if necessary, uses a search firm;

 

The chairman of the board, the chief executive officer and at least one member of the nominating committee interview prospective candidate(s);

 

-

The nominating committee keeps the board informed of the selection progress;

 

-

The nominating committee meets to consider and approve final candidate(s); and

 

-

The nominating committee presents selected candidate(s) to the board and seeks full board endorsement of such candidate(s).

 

COMPENSATION OF DIRECTORS

 

We do not compensate any of our directors for their services as directors other than stock for their time. However, we do reimburse our directors for expenses incurred in attending board meetings and issue stock for their time.

 

CODE OF ETHICS

 

We have adopted a code of ethics that applies to all our employees.

 

-

Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

-

Full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us;

 

-

Compliance with applicable governmental laws, rules and regulations;

 

-

The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

 

-

Accountability for adherence to the code.

 

 

ITEM 11. EXECUTIVE COMPENSATION.

 

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

 

Executive Compensation

 

Summary Compensation Table

 

Name and Principal Position

Year

Salary ($)

Bonus ($)

Stock Awards ($)

Option Awards ($)

Non-Equity Incentive Plan Compensation ($)

Non-Qualified Deferred Compensation Earnings ($)

Commissions ($)

Totals ($)

David Funderburk, CEO, and Chairman of the Board of Directors

2011

$9,715

$9,715

David Funderburk, CEO, and Chairman of the Board of Directors

2012

$6,222

$6,222

 

28

 

Option Grants Table. There were no individual grants of stock options to purchase our common stock made to the executive officer named in the Summary Compensation Table through  December 31, 2012.

  

Compensation of Officers and Directors

 

We have not paid any salaries since the inception of the Company. We do not anticipate beginning to pay salaries until we have adequate funds to do so. There are no stock option plans, retirement, pension, or profit sharing plans for the benefit of our officer and director.

 

David Funderburk has received compensation in the way of commissions on sales to date. In 2012 he received commissions totaling $6,222 and in 2011 he received commissions totaling $9,715.

 

STOCK OPTION AND STOCK APPRECIATION RIGHTS

 

OPTION EXERCISES AND HOLDINGS

 

There were no Option Exercises that were activated or exercised.

 

The compensation program for our executives consists of three key elements:

 

-

A base salary, and expenses

 

-

A performance bonus, insurance and

 

-

Periodic grants and/or options of our common stock.

 

Base Salary. The chief executive officer and all other senior executive officers receive compensation based on such factors as competitive industry salaries, a subjective assessment of the contribution and experience of the officer, and the specific recommendation by the chief executive officer. For fiscal 2011 and 2012, David Funderburk our only officer and director waived any cash compensation as a salary but was compensated with commissions.

 

Performance Bonus. A portion of each officer's total annual compensation is in the form of a bonus. All bonus payments to officers must be approved by the compensation committee based on the individual officer's performance and company performance. For fiscal 2011 and 2012 no bonus compensation was paid to any of our executive officers.

 

Stock Incentive. Stock options are granted to executive officers based on their positions and individual performance. Stock options provide incentive for the creation of stockholder value over the long term and aid significantly in the recruitment and retention of executive officers. The compensation committee considers the recommendations of the chief executive officer for stock option grants to executive officers (other than the chief executive officer) and approves, disapproves or modifies such recommendation. For fiscal 2010 and 2011 no stock option grants where given to any of our executive officers.

 

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EMPLOYMENT AGREEMENTS

 

We have not entered into any employment agreements with any of our employees, and employment arrangements are all subject at the discretion of our sole director, David Funderburk.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

None

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of December 31, 2012, information concerning ownership of our securities by:

 

-

Each person who owns beneficially more than five percent of the outstanding shares of our common stock;

 

-

Each person who owns beneficially more than five percent of the outstanding shares of our preferred stock;

 

-

Each director;

 

-

Each named executive officer; and

 

-

All directors and officers as a group.

 

BENEFICIAL OWNERS AND MANAGEMENT EQUITY POSITION(S)

 

The table below sets forth, as of December 31, 2012, certain information with respect to the beneficial ownership of the common stock of our Company by each person who we know to be beneficial owner of more than 5% of any class or series of our capital stock, each of the directors and executive officers individually, and all directors and executive officers as a group. Unless otherwise indicated, each person named in this table has sole voting and investment power with respect to the shares beneficially owned.

 

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class
Common	David Funderburk – CEO and Operating Manager	7,200,000	84%

 

1) Unless otherwise indicated, the address for each of the stockholder(s) listed herein is c/o Autovative Products, Inc., 502 N. Santa Fe Avenue, Ste. D, Vista, CA 92083.

 

Unless otherwise indicated, each person named in the table above has the sole voting and investment power with respect to his shares of our common and preferred stock beneficially owned.

 

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(2) Beneficial ownership is determined in accordance with the rules of the SEC.

 

(3) Each share of the Series A preferred stock is convertible into three shares of Common Stock. The percentages of voting power prior to conversion are approximately the same.

 

There are no arrangements, known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of Autovative Products, Inc.

 

Transfer Agent

 

We have engaged VStock Transfer LLC to act as our stock registrar and transfer agent. Its address and telephone number is 77 Spruce Street, Suite 201, Cedarhurst, New York, 11516 Phone: (212)828-8436 Fax: (646) 536-3179.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

 

At December 31, 2012, David Funderburk, was the former managing partner of Service International, LLC., which performs advertising and promotional activities for the Company's Portable Tow Truck Product units and its Overhead Door Saver units. Mr. Funderburk's role in the Company was only for its formation. Its operations are performed by the Member in the LLC, Stan Windhorn.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

On October 22, 2012, the Company engaged Kyle L. Tingle, CPA, LLC as principle auditor. On November 19, 2012, Kyle L. Tingle, CPA, LLC was engaged to audit the December 31, 2011 financial statements and amend this Form 10-K.

 

AUDIT FEES

 

The aggregate billed by Malcolm Pollard, Inc. for professional services rendered for the Company's S-1 Registration Statement was $5,000.

 

The aggregate fees in 2012 billed by Hamilton P.C. for professional services rendered for the audit of our annual financial statement for fiscal year ended December 31, 2011 was $10,000.

 

The aggregate fees in 2012 billed by Kyle L. Tingle, CPA, CPA, LLC for professional services rendered for the audit of our annual financial statement for fiscal year ended December 31, 2011 was $6,000.

 

 

AUDIT-RELATED FEES

 

There were no other fees billed by Hamilton P.C. for professional services rendered, other than as stated under the captions Audit Fees.

 

TAX FEES

 

The aggregate fees in 2012 billed by Kyle L. Tingle, CPA, LLC tax services rendered for the filing of our Federal tax returns was $2,275.

 

ALL OTHER FEES

 

There were no other fees billed by accounting firms for professional services rendered, other than as stated under the captions Audit Fees, Audit Related Fees, and Tax Fees.

 

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ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K.

 

The following documents are filed as part of this report:

Financial Statements and Financial Statement Schedules

The financial statements are included in Item 8 of this Form 10-K.

Exhibits Required by Item 601 of Regulation S-K

Exhibit No. Description

3.1 Certificate of Incorporation of Autovative Products, Inc..*

3.2 By-laws of Autovative Products, Inc .*

10.1 Form 8-K/A Item 4.01. Changes in registrant's certifying accountant.**

10.2 Form 8-K Item 4.01. Changes in registrant's certifying accountant.***

5.01 Form 8-K Changes in Control (1-7-13)

23.1 Consent of Certified Public Accountant #

31 Certification of President, Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.#

32 Certification of President, Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.#

 

 

# Filed herewith.

 

* Filed as an exhibit to the Form S-1 dated June 29, 2011

** Filed as an exhibit to the Current Report on Form 8-K, dated March 12, 2012, filed on March 12, 2012 and incorporated herein by reference.

*** Filed as an exhibit to the Current Report on Form 8-K dated October 22, 2012 and filed on October 22, 2012 and incorporated herein by reference.

 

 

 

 

 

 

 

 

 

 

 

SIGNATURES

 

 

 

Pursuant to the requirements of Sections 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: April 15, 2013.	By:	/s/ Qasim Husain
		Qasim Husain,
		President, Treasurer and Secretary (Principal Executive, Financial and Accounting Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. 

SIGNATURE	TITLE	DATE
/S/ Qasim Husain Qasim Husain	Director, President, Treasurer and Secretary (Principal Executive, Financial and Accounting Officer)	4-15-13.

 

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