United States


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-KSB





[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934





For the fiscal year ended February 28, 2003





Commission File Number: 000-31759





Dated: May 16, 2003





**First Auto, Inc**.


(Exact name of the small business issuer as specified in its charter)




******Nevada**
**88-0423037**(Jurisdiction of Incorporation)
(I.R.S. Employer Identification No.)**3131 Southwest Freeway, Number 46, Houston TX**
**77098**(Address of principal executive offices)
(Zip Code)**713-522-7550**Registrant's telephone number, including area code








Securities registered pursuant to Section 12(b) of the Act:  :   None





Securities registered pursuant to Section 12(g) of the Act:  :   Common Stock





As of 2/28/03, 8,281,500 Common shares were issued and outstanding.





As of 2/28/03 , 1,481,500 shares of shares of Common Stock were held by non-affiliates. There is currently no public trading or market value for our common equity voting stock.





Yesx Noo (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.)





o (Indicate by check mark whether if disclosure of delinquent filers (Section 229.405) is not and will not to the best of Registrant's knowledge be contained herein, in definitive proxy or information statements incorporated herein by reference or any amendment hereto.)





Transitional Small Business Disclosure Format (check one): yes o no x





Page - 1




**CONTENTS**




**Description**
**Page**INTRODUCTION
3**PART I**ITEM 1. Description of Business
3(a) Organization
3(b) Issuance of Common Stock
3(c) Our Business Plan
3(d) Reverse Acquisition Contingency
3(e) Voluntary Reporting Contingency
4(f) Financing Plans
4(g) Planned Acquisition
4ITEM 2. Description of Property
4ITEM 3. Legal Proceedings
4ITEM 4. Submission of Matters to a Vote of Security Holders
4**PART II**
5ITEM 5. Market for Common Equity and Stockholder Matters
5(a) Market Information
5(b) Holders
5(c) Dividends
5(d) Sales of Unregistered Common Stock
5ITEM 6. Management's Discussion and Analysis or Plan of Operation
5(a) Plan of Operation
5(b) Discussion and Analysis of Financial Condition and Results of Operations
6ITEM 7. Financial Statements
8(a) Audit Committee
8(b) Financial Statements
8ITEM 8. Changes In and Disagreements With Accountantson Accounting and Financial Disclosure
9**PART III**
9ITEM 9. Directors and Executive Officers, Promoters and Control Persons
9ITEM 10. Executive Compensation
10ITEM 11. Security Ownership of Certain Beneficial Owners and Management
10ITEM 12. Certain Relationships and Related Transactions
11ITEM 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
11(a) Exhibits
11(b) Form 8-K Reports
11(c) Financial Statements
11






Page - 2










INTRODUCTION





Current market conditions have been and remain extremely hostile to development stage companies. We are such a company. Not only has investment capital become unavailable, but short-sellers are enjoying a free reign and successful opportunity to exploit the current depressed market, and have been forcing down the market value of many OTCBB (Over-The-Counter Bulletin Board) companies, upon any announcement of progress by them. As a result, we, like many others, are virtually disabled, for the present term, in developing the funding to pursue actively our business plan.





PART I





ITEM 1. Description of Business.





(a) Organization. This Corporation First Auto, Inc. was duly incorporated in Nevada on March 24, 1999, with the intention of initiating a wholesale consumer finance company that will be engaged in purchasing automobile loans from third-party loan generation sources.





(b) Issuance of Common Stock.





On March 29, 1999, we issued 6,816,500 Founders Shares, pursuant to Section 4(2) of the Securities Act of 1933, at par value for organizational services, valued at $6,816 to three founders.
6,816,500On that same day, the Officers were empowered and directed to conduct a private placement/limited offering of up to 1,250,000 shares of common stock, at $0.10 per share, to accredited purchasers, and not more than 35 unaccredited purchasers. On June 14, 1999, the offering closed, 1,165,000 shares having been placed and sold to 13 investors, pursuant to Section 4(2) of the Act, at $0.10 per share, for a total of $165,000.
1,165,000On or about September 4, 2001, we issued 300,000 shares, pursuant to registration under the Act, for services, of which 250,000 shares were for legal services to our attorneys, and 50,000 to our sole remaining officer.
300,000As a result, we have 8,281,500 shares of common stock issued and outstanding.
8,281,500





(c) Our Business Plan. We intend to become an Internet information destination in the United States for first-time buyers of new and used vehicles and for consumers seeking information on automotive products and services, such as insurance, financing and warranties. Our business plan is unchanged from our previous Annual Report on Form 10-KSB. We have not launched operations pursuant to our plan. We have deferred progress for the present, in response to current market conditions. Currently our only employee is the sole officer and director.





(d) Reverse Acquisition Contingency. We are not a candidate for a reverse acquisition transaction. We are committed to the development of our business plan. A mature and businesslike evaluation of our affairs require the consideration of the foreseeable possibility of business failure. Accordingly, this report will include a discussion of that contingency. While we have no present plans to engage in Reverse Acquisition transactions, such transactions are possible and foreseeable, and for the reason that we are thinly capitalized, and have ambitious plans for a capital intensive business, with no assurance that our capital need will be realized. We feel that additional disclosure regarding such a contingency is appropriate and we provide a discussion and disclosure. This subject is further discussed in Item 2 of this Part, Management's Discussion and Analysis .






Page - 3





(e) Voluntary Reporting Contingency. We do not anticipate any contingency upon which we would voluntarily cease filing reports with the SEC, even though we may cease to be required to do so. It is in our compelling interest to report our affairs quarterly, annually and currently, as the case may be, generally to provide accessible public information to interested parties, and also specifically to maintain its qualification for the OTCBB, if and when the Issuer's intended application for submission be effective.





(f) Financing Plans. For more information, please see Item 6 of Part II, Management's Discussion and Analysis.





(g) Planned Acquisitions. There are no planned acquisitions.








ITEM 2. Description of Property.





We have no property at the present time.








ITEM 3. Legal Proceedings.





There are no legal proceedings pending, threatened or suspected, by or against our Corporation, as of the preparation of this Report.








ITEM 4. Submission of Matters to a Vote of Security Holders.





None.





The Remainder of this Page is Intentionally left Blank






Page - 4













PART II








ITEM 5. Market for Common Equity and Stockholder Matters.





(a) Market Information. We have one class of securities, Common Voting Equity Shares ("Common Stock"). Our Common Stock is not presently quoted Over-the-Counter on the Bulletin Board ("OTCBB") or the NQB Pink Sheets or otherwise. To the best of our knowledge and belief, our shares have never traded in brokerage transaction. Our application for OTCBB submission is pending.





(b) Holders. Management calculates that the approximate number of holders of the Company's Common Stock, as of February 28, 2002, was 37.





(c) Dividends. We have not paid any cash dividends on our Common Stock, and do not anticipate paying cash dividends on its Common Stock in the next year. We anticipate that any income generated in the foreseeable future will be retained for the development and expansion of our business. Future dividend policy is subject to the discretion of the Board of Directors and will depend upon a number of factors, including future earnings, debt service, capital requirements, business conditions, the financial condition of the Company and other factors that the Board of Directors may deem relevant.





(d) Sales of Unregistered Common Stock. None.








ITEM 6. Management's Discussion and Analysis or Plan of Operation.





(a) Plan of Operation. The plan of operation for the next approximate twelve months is to sit out the year, until economic conditions become more clear and favorable. Current market conditions are extremely hostile to development stage companies. We are such a company. Not only has investment capital become unavailable, but short-sellers are enjoying a free reign and successful opportunity to exploit the current depressed market, and are forcing down the market value of many OTCBB (Over-The-Counter Bulletin Board) companies, upon any announcement of progress by them.





As a result, we, like many others, are virtually disabled, for the present term, in developing the funding to pursue actively our business plan. We do none-the-less pursue submission for quotation on the OTCBB (Over-The-Counter Bulletin Board). We are not presently accepted for quotation on OTCBB or NQB Pink Sheets. Our submission is pending. We have no expectation for any substantial market value or trading volume, if any trading, if and when our common stock may be quoted.





We have not abandoned and do not intend to abandon our business plan. Our plan for operations, when we are able to proceed is unchanged from our previous reports. Upon raising sufficient capital we will launch operations.





The first stage of operations will be to develop the details and structure of our projected web site and how the services will be provided to the target audience and the dealers, vendors and advertisers. The second stage will be to establish e-commerce partners for links to automotive service providers such as insurance, warranties, and financing and to create a database of vehicle information, contact information for dealers, and links to auto manufacturer sights for further vehicle descriptions. The third stage is to obtain initial web advertising on various search engines and other high traffic Internet sites. Within six to eight months after receipt of capital from the registered offering, we will be able to roll-out the web site and advertising campaign and begin full operation.






Page - 5





(1) Cash Requirements and of Need for additional funds, twelve months. We do not require additional capital to wait out the year 2002. We expect to require substantial capital formation during the first twelve months of our operations. We cannot state at this time when our operations would launch. Realistically, we would require $1,000,000 to launch. We would expect to require an additional $1,000,000 to sustain us in operations during the first twelve months.





Accordingly, we expect to require a total of $2,000,000 for the first twelve months of operation. We would need to interest knowledgeable investors to fund our initial launch, and would expect to raise this first $2,000,000 by the sale of common stock. It is possible that with a successful first funding and launch of operations, we would be able to secure interim loan financing to enable us to expand our business sufficiently to make further capital formation more attractive to investors.





There is no assurance that our funding plans will be realized or that our requirements will be met. If we are not able to achieve this requirement, we may not be able to become or continue as a going concern.





In this connection we refer to Note 2 of our audited financial statements: "The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is dependent upon raising capital to continue operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management's plan to raise capital in order to define their operations, thus creating operating revenues."





We further refer to Note 3: "The Company is a development stage company as defined in Financial Accounting Standards Board Statement 7. It is concentrating substantially all its efforts in raising capital and developing its business operations in order to generate significant revenues.





We do not anticipate any contingency upon which we would voluntarily cease filing reports with the SEC, even though we may cease to be required to do so. It is in our compelling interest to report our affairs quarterly, annually and currently, as the case may be, generally to provide accessible public information to interested parties, and also specifically to maintain its qualification for the OTCBB, if and when the Issuer's intended application for submission be effective.





(2) Summary of Product Research and Development. None.





(3) Expected purchase or sale of plant and significant equipment. None.





(4) Expected significant change in the number of employees. None for the present. Following launch of operations, we would expect to require a staff of employees. The number required would grow as our operations might grow.





(b) Discussion and Analysis of Financial Condition and Results of Operations.








The Remainder of this Page is Intentionally left Blank




Page - 6




(1) Financial condition. Our balance sheet is substantially unchanged.
 Our independent auditor has indicated the following material information in notes to our financial statements:
 
 (Note 2-Going Concern) The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is dependent upon raising capital to continue operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management's plan to raise capital in order to define their business operations, thus creating necessary operating revenues.
 
 (Note 3-Development Stage Company) The Company is a development stage company as defined in Financial Accounting Standards Board Statement 7. It is concentrating substantially all of its efforts in raising capital and developing its business operations in order to generate operating revenues.
 
 The present environment is not favorable to our arranging for funding or capital formation. Accordingly, we do not expect to enjoy revenues in the next twelve months.
 
 (2) Operations and Results for the past two fiscal years. We have not launched operations since our inception on March 24, 1999, and have no operating history. Our activities have been organizational, and have focused on seeing our corporation audited and reporting pursuant to Section 13(g) of the 1934 Act, and most recently, submission for quotation over the counter. We have enjoyed no revenues since inception, with the exception of a one time, non-recurring revenue of 20,000.00. This one time event is not deemed indicative of furture results or expectations.
 
 Our expenses consist principally of legal and professional expenses which were less this year than last year.
 
 
 Future Prospects/Cautionary Statements. We have disclosed an ambitious business plan. There can be no assurance that our plan will succeed in whole or in part. We may not be able to achieve our funding requirements. Even if substantial funding proves available, there is no assurance that our business will prove competitive or profitable. Our business may fail for any number of possible unforeseen contingencies. Start-up ventures such as ours are inherently speculative and fraught with risks of business failure. While management believes that its plan contains the strategy for success, the road to failure is filled with good intentions and missed opportunities. Caution must be expressed at this early stage of our development, that we may be disappointed in our expectations.
 
 We have a long road to travel to achieve profitable operations. We do not project profitability at any time in the next twelve to twenty-four months, even if we succeed in launching operations.







Page - 7










ITEM 7. Financial Statements.





(a) Audit Committee. The Audit Committee of this Corporation for this fiscal year consists of our Board of Directors. Management is responsible for our internal controls and the financial reporting process. Our independent auditors are responsible for performing an independent audit of our financial statements in accordance with generally accepted accounting standards and to issue a report thereon. It is the responsibility of our Board of Directors to monitor and oversee these processes. In this context the Committee has met and held discussions with management and the independent accountants. Management recommended to the Committee that our financial statements were prepared in accordance with generally accepted accounting principles, and the Committee has reviewed and discussed the financial statements with Management and such independent accountants, matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees). Our independent accountants also provided to the Committee the written disclosures required by Independence Board Standard No. 1 (Independent Discussions with Audit Committees), and the Committee discussed with the independent accountants that firm's independence.





Based upon the Committee's discussions, and review, of the foregoing, the Committee recommended that our audited financial statements in our Annual Report on Form 10-KSB for the year ended February 28, 2002 be included and filed with the Securities and Exchange Commission.





(b) Financial Statements. Audited Financial Statements for years ended February 28, 2003, February 29, 2002, and from inception, are provided as Exhibit FK-02, attached hereto, filed herewith and incorporated herein by this reference as though fully set forth herein. Our Balance Sheet and Statement of Operations have been selectively reproduced in the preceding Item 6 and discussed therein.







Page - 8





ITEM 8. Changes In and Disagreements With Accountants


on Accounting and Financial Disclosure.





None.





PART III








ITEM 9. Directors and Executive Officers, Promoters and Control Persons.





The following persons are or were our Directors during the currently ended fiscal year. Mr. Sifford will serve until his successors may be elected or appointed. The time of the next meeting of shareholders has not been determined.





Current Officer/Director serving during this fiscal year.





J. Dan Sifford, Jr. , age 63, our Secretary/Director appointed August 2001, grew up in Coral Gables, Florida, where he attended Coral Gables High School and the University of Miami. After leaving the University of Miami, Mr. Sifford formed a wholesale consumer goods distribution company which operated throughout the southeastern United States and all of Latin America. In 1965, as an extension of the operations of the original company, he founded Indiasa Corporation (Indiasa), a Panamanian company which was involved in supply and financing arrangements with many of the Latin American Governments, in particular, their air forces and their national airlines. As customer requirements dictated, separate subsidiaries were established to handle specific activities. During each of the past five years he has served as President of Indiasa, which serves only as a holding company owning: 100% of Indiasa Aviation Corp. (a company which owns aircraft but has no operations); 100% of Overseas Aviation Corporation (a company which owns Air Carrier Certificates but has no operations); 50% of Robmar International, S.A. (a company operates a manufacturing plant in Argentina and Brazil, but in which Mr. Sifford holds no office). In addition to his general aviation experience, Mr. Sifford, an Airline Transport rated pilot, has twenty two years experience in the airline business, and is currently the President of Airline of the Virgin Islands, Ltd. a commuter passenger airline operating in the Caribbean, and has been our president continuously during each of the past five years.





Mr. Sifford is currently an officer and director of GYK Ventures, Inc. , a reporting public company, entering the travel industry. He has served as Officer and Director of other development stage companies.






Page - 9












ITEM 10. Executive Compensation.





Long Term CompensationAnnual Compensation
Awards
Payoutsa



Name
and
Principal
Position
b





Year
ended
c





Salary
($)
d





Bonus
($)
e



Other
Annual
Compen-sation ($)
f



Restric-ted
Stock
Awards
($)
g


Securi-ties
Under-
lying
Options
SARs (#)
h




LTIP
Payouts
($)
i



All Other
Compen-sation
($)J. Dan Sifford, Jr.
2003
0
0
0
0
0
0
0President/CEO
2002
0
0
0
5,000 (1)
0
0
02001
0
0
0
0
0
0
02000
0
0
0
0
0
0
0





Notes to Table:





(1) 50,000 shares at $0.10 per share








ITEM 11. Security Ownership of Certain Beneficial Owners and Management.





To the best of our knowledge and belief the following disclosure presents the total security ownership of all persons, entities and groups, known to or discoverable by us, to be the beneficial owner or owners of more than five percent of any voting class of our common stock, as well as the total beneficial security ownership of all Directors and Nominees, naming them, and by all Officers and Directors as a group, without naming them, of Registrant, known to or discoverable by Registrant. More than one person, entity or group could be beneficially interested in the same securities, so that the total of all percentages may accordingly exceed the one hundred percent shown for reference only. Please refer to explanatory notes if any, for clarification or additional information. Please refer to explanatory notes if any, for clarification or additional information. We have only one class of stock; namely Common Stock. The following disclosure includes disclosure of former affiliates for coordination with our previously filed reports.





Name and Address of Beneficial Owner
Actual
Ownership
%J. Dan SiffordSole Officer/Director
3131 Southwest Freeway, Suite 48
Houston TX 77098
6,800,000
82.11Reference: Total Issued/Outstanding
8,281,500
100.00







Page - 10





ITEM 12. Certain Relationships and Related Transactions.





None.








ITEM 13. Controls and Procedures.





Evaluation of Disclosure Controls and Procedures. Based upon an evaluation under supervision and with the participation of our management, as of a date within 90 days of the filing date of this Annual Report on form 10-KSB, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)) under the Securities Exchange Act of 1934, are effective to ensure that information required to be disclosed (in reports that we file or submit under that Exchange Act) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.





Changes in Internal Accounting. There were no significant changes in our internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation. There wee no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken. However, the design of any system of controls is based in part upon the assumptions about the likelihood of future events, and there is no certainty that any design will succeed in achieving its stated goal under all potential future considerations, regardless of how remote.








ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.





(a) Exhibits. The following exhibits may be found as exhibits to our Form 10-SB, as exhibit number as listed.





Table Category  Exhibit Table #  Description of Exhibit





[3] Articles/Certificates of Incorporation, and By-Laws





(3.1) Articles of Incorporation





(3.2) By-Laws





(b) Form 8-K Reports. None.





(c) Financial Statements. Audited Financial Statements for the years ended February 28, 2003, and February 28, 2002, and from inception. Please see Attachment FK-03.





Page - 11













SIGNATURES






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 individual capacities and on the date indicated.





Dated: May 14, 2003.





First Auto, Inc.





by





/s/J. Dan Sifford


J. Dan Sifford


Sole Officer/Director






Page - 12















CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,


AS ADOPTED PURSUANT TO SECTION 906


OF THE SARBANES-OXLEY ACT OF 2002
















Page - 13




CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002











CERTIFICATION OF SOLE OFFICER





In connection with the Annual Report of First Auto, Inc. a Nevada corporation (the "Company"), on 10-KSB for the February 28, 2003 as filed with the Securities and Exchange Commission (the "Report"), I, Dan Sifford, Chief Operating Officer of the Company, certify, pursuant to 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that to my knowledge:





(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and





(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.





/s/ Dan Sifford


Dan Sifford


Chief Operating Officer


May 22, 2003














Page - 14











Certification


Section 302 of the


Sarbanes Oxley Act of 2002










Page - 15












CERTIFICATIONS Pursuant to Section 302





I, Dan Sifford certify that:





1. I have reviewed this annual report on Form 10-KSB of First Auto, Inc. ;





2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;





3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;





4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:





a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;





b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and





c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;





5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):





a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and





b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and





6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.





Date: May 22, 2003


/s/Dan Sifford


Dan Sifford


Sole Officer / Director









Page - 16
















Attachment FK-03





Audited Financial Statements


for the years ended





February 28, 2003, February 28, 2002,


and from inception













Page - 17




C O N T E N T S
  Independent Auditors Report
19Balance Sheets
20Statements of Operations
21Statements of Stockholders Equity
22Statements of Cash Flows
23Notes to the Financial Statements
24
 
  Page - 18 
 
 
 
 INDEPENDENT AUDITORS REPORT
 
 
 
 To the Board of Directors
 and Stockholders of
 First Auto, Inc.
 
 We have audited the accompanying balance sheets of First Auto, Inc. (a development stage company) (a Nevada corporation) as of February 28, 2003 and 2002 and the related statements of operations, stockholders equity and cash flows for the years then ended and from inception on March 24, 1999 through February 28, 2003. 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 audits.
 
 We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 audits 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 First Auto, Inc. as of February 28, 2003 and 2002 and the results of its operations and cash flows for the years then ended and from inception on March 24, 1999 through February 28, 2003 in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has little operating capital, no revenues and is dependent on financing to continue operations. These factors raise substantial doubt about its ability to continue as a going concern. Managements plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
 Chisholm & Associates
 Chisholm & Associates
 North salt Lake, UT
 May 22, 2003
 
 
 Page - 19 
 FIRST AUTO, INC.
 (A Development Stage Company)
 Balance Sheets
  February 28,2003


2002ASSETSCURRENT ASSETSCash

$
601


607Total Current Assets


601


607TOTAL ASSETS


601


607LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable - related party

$
144,539


93,350Note payable - related party


1,700


1700Total Current Liabilities


146,239


95,350STOCKHOLDERS EQUITYCommon stock, par value $0.001; 100,000,000shares authorized, 8,281,500 shares issued and outstanding


8,282


8,282Additional paid-in capital


145,035Deficit accumulated during the development stage


(298,955
)

(247,760
)Total Stockholders Equity


(145,638
)

(94,443
)TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
601

$
607
 
  
 
 Page - 20 
 
 FIRST AUTO, INC.
 (A Development Stage Company)
 Statements of Operations
  FromInception onMarch 24,For the Year Ended

1999 toFebruary 28,

February 28,2003


2002


2003REVENUE

$
20,000


0

$
20,000EXPENSESGeneral and administrative


71,195


104,640


318,955NET INCOME (LOSS)

$
(51,195
)
$
(104,640
)
$
(298,955
)NET INCOME (LOSS) PER SHARE

$
(0.00
)
$
(0.02
)
$
(0.03
)WEIGHTED AVERAGE SHARESOUTSTANDING


8,281,500


8,106,500


8,091,312
 
 
 
 
 
 
 Page - 21 
 FIRST AUTO, INC.
 (A Development Stage Company)
 Statement of Stockholders Equity
 
 DeficitAccumulatedAdditional


During theCommon Stock

Paid-In


DevelopmentShares


Amount


Capital


StageBalance at inception onMarch 24, 1999


0

$
0

$
0

$
0Common stock issued forservices at $0.001 per share


6,816,500


6,817


0


0Common stock issued forcash at $0.10 per share


1,165,000


1,165


115,335


0Net loss for the year endedFebruary 29, 2000


0


0


0


(119,988
)Balance, February 29, 2000


7,981,500


7,982


115,335


(119,988
)Net loss for the year endedFebruary 28, 2001


0


0


0


(23,132
)Balance, February 28, 2001


7,981,500


7,982


115,335


(143,120
)Common stock issued forservices at $0.10 per share


300,000


300


29,700


0Net loss for the year endedFebruary 28, 2002


0


0


0


(104,640
)Balance, February 28, 2002


8,281,500


8,282


145,035


(247,760
)Net loss for the year endedFebruary 28, 2003


0


0


0


(51,195
)Balance, February 28, 2003


8,281,500

$
8,282

$
1145,035

$
(298,955
)
 
 The accompanying notes are an integral part of these financial statements.
 
 Page - 22 
 FIRST AUTO, INC.
 (A Development Stage Company)
 Statements of Cash Flows
 
  FromInceptiononMarch 24,For the Year Ended

1999 toFebruary 28,

February 28,2003


2002


2003CASH FLOWS USED BY OPERATIONSNet loss

$
(51,195
)
$
(104,640
)
$
(298,955
)Adjustment to reconcile net loss tonet cash used by operations:Stock issued for services


0


30,000


36,817Increase in payables - related party


51,189


70,218


144,539Net Cash Flows Used in OperatingActivities


(6
)

(4,422
)

(117,599
)CASH FLOW USED FOR INVESTINGACTIVITIES


0


0


0CASH FLOWS FROM FINANCINGACTIVITIESProceeds from note payable


0


1,700


1,700Shares issued for cash


0


0


116,500Net Cash Flows from FinancingActivities





1,700


118,200INCREASE (DECREASE) IN CASH


(6
)

(2,722
)

601CASH - BEGINNING OF PERIOD


607


3,329


0CASH - END OF PERIOD

$
601

$
607

$
601SUPPLEMENTAL CASH FLOW INFORMATION:Cash Paid for:Interest

$
0

$
0

$
0Taxes

$
0

$
0

$
0
  
 Non-Cash Financing Activities:
 
 The Company issued 6,816,500 shares of common stock for organization costs. These costs were valued at $6,817 and expensed in 1999.
 
 The Company issued 300,0000 shares of common stock for services. These services were valued at $30,000 and expensed in September 2001.
  Page - 23 
 FIRST AUTO, INC.
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2003 and 2002
 
 
 NOTE 1 -  SIGNIFICANT ACCOUNTING POLICIES
 
 a. Organization
 
 First Auto, Inc. (the Company) was incorporated under the laws of the State of Nevada on March 24, 1999. The Company intends to establish a wholesale consumer finance company that will be engaged in the business of purchasing automobile loans from third party loan generation sources, then bundling, in traunches, of one million dollars, and then reselling the bundles (without recourse), secured primarily by first liens on the automobiles.
 
 b. Accounting Method
 
 The Company recognizes income and expenses on the accrual basis of accounting.
 
 c. Earnings (Loss) Per Share
 
 The computation of earnings per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements.
  Income (Loss)


Shares


Per-Share(Numerator)


Denominator


AmountFor the year endedFebruary 28, 2003:Basic EPSIncome (loss) to commonStockholders

$
(51,195
)

8,281,500

$
(0.00
)For the year endedFebruary 28, 2002:Basic EPSIncome (loss) to commonStockholders

$
(104,640
)

8,106,500

$
(0.02
)From inception on March 24,1999 to February 28, 2003:Basic EPSIncome (loss) to commonStockholders

$
(298,955
)

8,091,312

$
(0.03
)
 
 
 
 
 
 
 
 
 d. Cash and Cash Equivalents
 
 The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents.
  Page - 24
  
 FIRST AUTO, INC.
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2003 and 2002
 
 
 NOTE 1 -  SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 e. Provision for Income Taxes
 
 No provision for income taxes has been recorded due to net operating loss carryforwards totaling approximately $298,955 that will be offset against future taxable income. These NOL carryforwards begin to expire in the year 2021. No tax benefit has been reported in the financial statements because the Company believes there is a 50% or greater change the carryforward will expire unused.
 
 Deferred tax assets and the valuation account is as follows at February 28, 2003 and 2002:
  February 28,2003


2002Deferred tax asset:NOL carryforward

$
89,600

$
74,300Valuation allowance


(89,600
)

(74,300
)Total

$
0

$
0
  
 f. Organization Cost
 
 The Company incurred $6,817 or organization costs in 1999. These costs, which were paid by shareholders of the Company, were exchanged for 6,816,500 shares of common stock. These costs were expenses in 1999 and will be recovered only if the Company is able to generate positive cash flow from operations.
 
 NOTE 2 -  GOING CONCERN
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is dependent upon raising capital to continue operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is managements plan to raise capital in order to define their business operations, thus creating necessary operating revenue.
 
 NOTE 3 -  DEVELOPMENT STAGE COMPANY
 
 The Company is a development stage company as defined in Financial Accounting Standards Board Statement No. 7. It is concentrating substantially all of its efforts in raising capital and developing its business operations in order to generate significant revenues.
 
 
 Page - 25 
 FIRST AUTO, INC.
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2003 and 2002
 
 
 NOTE 4 -  RELATED PARTY
 
 During 2003 and 2002, the Company accrued $71,189 and $70,218 for professional fees to a corporation affiliated with a major shareholder, Paladin Global Group. At February 28, 2003 and 2002, the Company made payments in the amount of $19,900 and $-0- respectively. Balances due to this related party for 2003 and 2002 was $144,539 and $93,350 respectively.
 
 During 2001, the Company received $1,700 from a corporation affiliated with a major shareholder, Polyandrous Trading Group. The balance payable at February 28, 2003 is $1,700. The note is non-interest bearing and payable upon demand.
   Page - 26