Attached files
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| EX-99.2 - AFH HOLDING II, INC. | v186448_ex99-2.htm |
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UNITED
STATES
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SECURITIES
AND EXCHANGE COMMISSION
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WASHINGTON,
DC 20549
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FORM
8-K/A
Amendment
No. 1
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CURRENT
REPORT
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Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
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Date
of report (Date of earliest event reported):
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May
12, 2010
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AFH
Holding II, Inc.
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(Exact
Name of Registrant as Specified in
Charter)
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Delaware
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000-52682
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26-1364883
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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9595 Wilshire Blvd., Suite
900
Beverly Hills, CA
90212
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(Address
of Principal Executive Offices)
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Registrant's
telephone number, including area code:
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(310)
717-8942
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9595
Wilshire Blvd, Suite 700
Beverly
Hills, CA 90212
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(Former
Name or Former Address, if Changed Since Last
Report)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Explanatory
Note
This Amendment No. 1 (this “Amendment”)
to Current Report on Form 8-K amends the Current Report on Form 8-K filed by AFH
Holding II, Inc. (the “Company”) on May 13, 2010 (the “Initial
8-K). This Amendment amends and supplements the Initial 8-K by
including interim financial information of First Blush, Inc. for the quarter
ended March 31, 2010 pursuant to Item 9.01(a) of Form 8-K and the related
Management’s Discussion and Analysis pursuant to Item 2.10(f) of Form 8-K and
Item 2 of Form 10. Except as set forth herein, no other amendments to the
Initial 8-K are made by this Amendment.
Item
201. Completion
of Acquisition or Disposition of Assets.
Forward-Looking
Statements
This
Current Report on Form 8-K contains forward-looking statements. To the extent
that any statements made in this Report contain information that is not
historical, these statements are essentially forward-looking. Forward-looking
statements can be identified by the use of words such as “expects,” “plans,”
“will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates,” and
other words of similar meaning. These statements are subject to risks and
uncertainties that cannot be predicted or quantified and, consequently, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Such risks and uncertainties are outlined in “Risk
Factors.”
Information
regarding market and industry statistics contained in this Current Report on
Form 8-K is included based on information available to the Company that it
believes is accurate. It is generally based on industry and other publications
that are not produced for purposes of securities offerings or economic analysis.
The Company has not reviewed or included data from all sources, and cannot
assure investors of the accuracy or completeness of the data included in this
Form 8-K. Forecasts and other forward-looking information obtained from these
sources are subject to the same qualifications and the additional uncertainties
accompanying any estimates of future market size, revenue and market acceptance
of products and services. The Company does not undertake any obligation to
publicly update any forward-looking statements. As a result, investors should
not place undue reliance on these forward-looking statements.
Management’s
Discussion and Analysis or Plan of Operations
This
discussion should be read in conjunction with the other sections of the Initial
8-K, including “Risk Factors,” “Description of the Company’s Business” and the
Financial Statements attached hereto and to the Initial 8-K as Item 9.01 and the
related exhibits. The various sections of this discussion contain a number of
forward-looking statements, all of which are based on the Company’s current
expectations and could be affected by the uncertainties and risk factors
described throughout this Form 8-K. See “Forward-Looking Statements.” The
Company’s actual results may differ materially.
Critical
Accounting Policies
We
believe that the application of the following accounting policies, which are
important to our financial position and results of operations, require us to
make significant judgments and estimates. For a summary of all our accounting
policies, including the accounting policies discussed below, see Note 4,
Summary of Significant
Accounting Policies in our financial statements included this
filing.
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·
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Promotional
allowance
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- 2
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Many of
our promotional programs are based on discounts given to the ultimate consumer
at the point of purchase. For these programs we generally reduce our
cost to the retailer for all product sold under promotion so there is no, or
limited, impact on the retailer’s gross profit. Because we do not
know the ultimate amount of product that will be sold under promotional programs
and because retailers pay us 100% of the purchase price upon purchase of our
product, we accrue an estimated liability for the amount we expect we will have
to refund to the retailers due to these programs. As a result we have
an accrual for promotional programs of $22,970 and $27,194 at March 31, 2010 and
December 31, 2009, respectively.
We treat
promotional allowance as contra revenue and recorded promotional allowance of
$73,208 and $8,983 for the quarters ended March 31, 2010 and 2009,
respectively.
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·
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Income
Taxes
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We
account for income taxes under the Financial Accounting Standards Board’s, FASB,
accounting guidance for income taxes. In accordance with FASB’s accounting
guidance, we recorded a deferred tax asset for the net operating loss, NOL,
carry forward resulting from losses in our year ended December 31,
2009. The asset is a result of our ability to utilize the NOL in
future periods to offset future taxable income and therefore reduce our taxes
payable in the future. At March 31, 2010 and December 31, 2009 we had
an asset for the NOL of $408,674 and $390,687, respectively. However, given our
current going concern issues we determined that this asset may not be realized
as it is dependent on us generating sufficient future operating income and
accordingly we created a valuation allowance of $388,240 and $371,153 at the
respective dates based on our judgment and estimates. In the future,
we may determine that we will be able to realize all or most of this asset and
we will adjust our valuation allowance accordingly, which will result in a
reduction in income tax expense we report in our financial statements in the
period of change.
Results
of Operations – Quarter ended March 31, 2010 compared to quarter ended March 31,
2009
The
following table sets forth our statement of results of operation data
as a percentage of net sales from continuing operations for the years
indicated:
| For the quarters ended March 31, | ||||||||||||||||||||
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2010
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2009
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%
of Gross
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% Change
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% of Gross
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$
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Revenue
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from 2009
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$
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Revenue
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Revenue:
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Gross
revenue
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$ | 211,246 | 54.2 | % | $ | 137,025 | ||||||||||||||
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Promotion
allowance
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(73,208 | ) | -34.7 | % | 715.0 | % | $ | (8,983 | ) | -6.6 | % | |||||||||
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Net
revenue
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$ | 138,038 | $ | 128,042 | ||||||||||||||||
| For the quarters ended March 31, | ||||||||||||||||||||
| 2010 |
2009
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% of
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% Change
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%
of
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$
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Net Revenue
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from 2009
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$
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Net Revenue
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Gross
Profit:
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Net revenue
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$ | 138,038 | 7.8 | % | $ | 128,042 | ||||||||||||||
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Cost of goods
sold
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84,262 | 61.0 | % | 7.2 | % | 78,618 | 61.4 | % | ||||||||||||
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Gross profit
(loss)
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$ | 53,776 | 39.0 | % | $ | 49,424 | 38.6 | % | ||||||||||||
The
increase in net revenue for 2010 relative to 2009 was due to increased sales
with one of our key accounts offset by the increase in promotional allowance
used to keep our product moving as we move out of the economic
crisis.
- 3
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Cost of
goods sold as a percentage of net revenue remained consistent for 2010 relative
to 2009 despite the increase in promotional allowance as a result of several
additional expenses incurred during the quarter ended March 31, 2009 that were
not incurred in the comparable quarter 2010.
| For the quarters ended March 31, | ||||||||||||||||||||
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2010
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2009
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% of
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% Change
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% of
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$
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Net Revenue
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from 2009
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$
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Net Revenue
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Gross
profit
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$ | 53,776 | $ | 49,424 | ||||||||||||||||
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Selling, general and
administrative
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61,132 | 44.3 | % | -70.1 | % | 204,632 | 159.8 | % | ||||||||||||
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Abnormal production
losses
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- | 28,415 | ||||||||||||||||||
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Operating
loss
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$ | (7,356 | ) | -5 | % | -96.0 | % | $ | (183,623 | ) | -143 | % | ||||||||
Our
operating loss decreased in 2010 relative to 2009 as a result of reduced
selling, general and administrative costs reflective of our plan to curtail
expenses by terminating consultants and paring down operations in response to
the economic crisis. In addition, in 2009, we had abnormal production
losses in excess of the 5% industry norm equating to $28,415 due to issues with
one of our bottlers.
Liquidity
and Capital Resources
Our cash
flow used by operating activities is as follows:
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For the Quarters
Ended
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March 31,
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2010
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2009
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Cash collected from
customers
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$ | 152,577 | $ | 36,682 | ||||
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Cash paid to
suppliers
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(8,222 | ) | (34,301 | ) | ||||
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Cash paid for management
services
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- | (163,237 | ) | |||||
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Cash paid for other selling,
general & administrative costs
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(113,448 | ) | (201,208 | ) | ||||
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Net cash used by operating
activities
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$ | 30,907 | $ | (362,064 | ) | |||
Activity
for the quarter ended March 31, 2010 relative to the quarter ended March 31,
2009 is as follows:
Cash
collected from customers – We collected more cash from customers in 2010 because
of the increase in sales to one of our key accounts.
Cash paid
to suppliers – We paid less to suppliers in 2010 as we used inventory on hand
for sales.
- 4
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Cash paid
for management services – We paid no cash for management services as we
terminated consultants in response to the economic crisis and paid for other
management and administrative services by increasing our notes
payable.
Cash paid
for other selling, general & administrative costs – We paid less in 2010 as
we pared down operations in response to the economic crisis.
As of
March 31, 2010, we had approximately $245,000 of current assets,
approximately $32,000 of which was cash and the rest of which was
receivables and inventory. On average, our receivables are
collected in approximately 30 days. Total current liabilities at
March 31, 2010 totaled approximately $1,515,000 of
which approximately $487,000 are trade and operating payables. At
March 31, 2010, we had a net working capital deficiency of
approximately $1,270,000. Our need for cash during
the quarter ended March 31, 2010 was primarily
funded through operations.
As of
March 31, 2010 we had outstanding borrowings on our note payable to our parent
of approximately $928,000 and under that note have unused availability of
$72,000. The note and all unpaid and accrued interest is due on the
sooner of 30 days demand notice or December 31, 2010. In addition we
have $100,000 note payable to a related party that is due on
demand. Both notes are secured by substantially all of our
assets.
Going
Concern
As
reflected in the financial statements included in this
filing, we had a working capital deficiency of approximately $1,270,000 at March
31, 2010. Historically we have had material operating losses
and have not yet created positive cash flows. These factors raise
substantial doubt about our ability to continue as a going concern. We
cannot provide any assurance that profits from operations will generate
sufficient cash flow to meet our working capital needs and service our
existing debt.
Off
– Balance Sheet Arrangements
As of
March 31, 2010, we have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future material effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital
resources.
Item
9.01. Financial
Statements and Exhibits
(a) Financial
Statements of Businesses Acquired.
Unaudited
financial statements for the three month period ended March 31, 2010 are
attached as Exhibit 99.2 hereto.
(d) Exhibits.
The
exhibits listed in the following Exhibit Index are filed as part of this
Amendment.
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Exhibit
No.
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Description
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99.2
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Financial
Statements for the three months ended March 31, 2010
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- 5
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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AFH
Holding II, Inc.
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(Registrant)
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Date:
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May
25, 2010
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By:
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/s/
Anthony G. Roth
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Anthony
G. Roth
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President
and Chief Executive Officer
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- 6
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