Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - AFH ACQUISITION VII, INC. | ex32-1.htm |
| EX-31.1 - EXHIBIT 31.1 - AFH ACQUISITION VII, INC. | ex31-1.htm |
| EXCEL - IDEA: XBRL DOCUMENT - AFH ACQUISITION VII, INC. | Financial_Report.xls |
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2013
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission File No. 000-53076
AFH ACQUISITION VII, INC.
(Name of registrant in its charter)
| Delaware | 32-0217153 | |
(State or other jurisdiction of incorporation or formation) |
(I.R.S. employer identification number) |
9595 Wilshire Blvd.
Suite 700
Beverly Hills, CA90212
(Address of principal executive offices)
Issuer’s telephone number: (310) 492-9898
N/A
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 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 [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
| Non-accelerated filer | [ ] | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer’s classes of common equity, as of March 18, 2013: 5,000,000 shares of common stock.
EXPLANATORY NOTE:
This Form 10-Q/A, Amendment No. 1 is being filed by AFH Acquisition VII, Inc. (the “Company”), to amend its Quarterly Report on Form 10-Q for the quarter ended January 31, 2013, filed with the Securities and Exchange Commission on March 18, 2013, to (i) revise Item 1 of Part I Financial Statements and the notes thereto in order to correctly record due from parent as deferred expenses, (ii) to make appropriate revisions to Item 2 of Part I the Management’s Discussion and Analysis related to cash flows to reflect the foregoing, (iii) to update the shares of common stock issued and outstanding as of January 31, 2013, and (iv) to make appropriate revisions to Item 4 of Part I Control and Procedures related to the amendments described above.
This Form 10-Q/A does not reflect events occurring after the filing of the Form 10-Q or modify or update any related disclosures and any information not affected by the amendments contained in this Form 10-Q/A is unchanged and reflects the disclosure made at the time of the filing of the Form 10-Q with the SEC.
New certifications of our principal executive and financial officer are included as exhibits to this amendment.
| 2 |
AFH ACQUISITION VII, Inc.
- INDEX -
| 3 |
PART I – FINANCIAL INFORMATION
AFH ACQUISITION VII, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
| FINANCIAL REPORTS |
| AT |
| JANUARY 31, 2013 (Restated) |
| 4 |
AFH ACQUISITION VII, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
TABLE OF CONTENTS
| 5 |
AFH ACQUISITION VII, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
| BALANCE SHEETS |
| (Unaudited) | ||||||||
| January 31, 2013 | October 31, 2012 | |||||||
| (Restated) | ||||||||
| ASSETS | ||||||||
| Cash and Cash Equivalents | 2,653 | 50,489 | ||||||
| Deferred Expense | 729,163 | 45,000 | ||||||
| Total Assets | $ | 731,816 | $ | 95,489 | ||||
| LIABILITIES AND STOCKHOLDER’S DEFICIT | ||||||||
| Liabilities | ||||||||
| Accrued Expenses | $ | 9,992 | $ | 3,038 | ||||
| Due to Parent | — | 23,337 | ||||||
| Total Liabilities | 9,992 | 26,375 | ||||||
| Stockholder’s Deficit | ||||||||
| Preferred Stock: $.001 Par; 20,000,000 Shares Authorized, -0- Issued and Outstanding | — | — | ||||||
| Common Stock: $.001 Par; 100,000,000 Shares Authorized; 5,000,000 and 5,000,000 Issued and Outstanding at January 31, 2013 and October 31, 2012, respectively | 5,000 | 5,000 | ||||||
| Common Stock to be Issued | 1,526,736 | 966,736 | ||||||
| Common Stock Subscription Receivable | — | (100,000 | ) | |||||
| Additional Paid-In-Capital | 20,000 | 20,000 | ||||||
| Deficit Accumulated During Development Stage | (829,912 | ) | (822,622 | ) | ||||
| Total Stockholder’s Deficit | 721,824 | 69,114 | ||||||
| Total Liabilities and Stockholder’s Deficit | $ | 731,816 | $ | 95,489 | ||||
The accompanying notes are an integral part of these condensed financial statements.
| F-1 |
AFH ACQUISITION VII, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
The accompanying notes are an integral part of these condensed financial statements.
| F-2 |
AFH ACQUISITION VII, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
The accompanying notes are an integral part of these condensed financial statements.
| F-3 |
AFH ACQUISITION VII, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
| STATEMENTS OF CASH FLOWS |
| Period From | ||||||||||||
| Date of Inception | ||||||||||||
| For the Three Months Ended | (September 24, 2007) | |||||||||||
| January 31, | Through | |||||||||||
| 2013 | 2012 | January 31, 2013 | ||||||||||
| (Restated) | (Restated) | |||||||||||
| Cash Flows from Operating Activities | ||||||||||||
| Net Loss for the Period | $ | (7,290 | ) | $ | (1,356 | ) | $ | (829,912 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||
| Issuance of Stock for Services | — | — | 771,736 | |||||||||
| Changes in Operating Assets and Liabilities | ||||||||||||
| Deferred Expense | (684,163 | ) | — | (639,163 | ) | |||||||
| Accrued Expenses | 6,954 | 1,356 | 9,992 | |||||||||
| Net Cash Flows from Operating Activities | (684,499 | ) | — | (687,347 | ) | |||||||
| Net Cash Flows from Investing Activities | — | — | — | |||||||||
| Cash Flows from Financing Activities | ||||||||||||
| Cash Advance by (Repayment to) Parent | (23,337 | ) | — | (45,000 | ) | |||||||
| Cash Proceeds from Issuance of Stock | 660,000 | — | 735,000 | |||||||||
| Net Cash Flows from Financing Activities | 636,663 | — | 690,000 | |||||||||
| Net Change in Cash and Cash Equivalents | (47,836 | ) | — | 2,653 | ||||||||
| Cash and Cash Equivalents - Beginning of Period | 50,489 | — | — | |||||||||
| Cash and Cash Equivalents - End of Period | $ | 2,653 | $ | — | $ | 2,653 | ||||||
| Cash Paid During the Period for: | ||||||||||||
| Interest | $ | — | $ | — | $ | — | ||||||
| Income Taxes | $ | — | $ | — | $ | — | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||||||
| Proceeds Held by Parent | $ | — | $ | — | $ | 45,000 | ||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-4 |
AFH ACQUISITION VII, INC.
(A Development Stage Company)
(A DELAWARE Corporation)
Beverly Hills, CA
NOTES TO FINANCIAL STATEMENTS
- continued-
| F-5 |
AFH ACQUISITION VII, INC.
(A Development Stage Company)
(A DELAWARE Corporation)
Beverly Hills, CA
NOTES TO FINANCIAL STATEMENTS
| Note B - | Summary of Significant Accounting Policies – continued |
| Development Stage | |
| The Company has operated as a development stage enterprise since its inception by devoting substantially all of its efforts to financial planning, raising capital, research and development, and developing markets for its services. The Company prepares its financial statements in accordance with the requirements of FASB ASC 915. | |
| Cash and Cash Equivalents | |
| Cash and cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. The Company maintains cash and cash equivalents at financial institutions, which periodically may exceed federally insured amounts. | |
| Loss Per Common Share | |
| Loss per common share is computed in accordance with FASB ASC 260-10, by dividing income (loss) available to common stockholders by weighted average number of common shares outstanding for each period | |
| Use of Estimates | |
| The preparation of financial statements 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 period. Actual results can differ from those estimates. | |
| Organizational Costs | |
| Organizational costs represent management, consulting, legal, accounting, and filing fees incurred to date in the formation of the company. Organizational costs are expensed as incurred in accordance with FASB ASC 720-15. | |
| Income Taxes | |
| The Company accounts for income taxes in accordance with FASB ASC 740-10, using the asset and liability approach, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of such assets and liabilities. This method utilizes enacted statutory tax rates in effect for the year in which the temporary differences are expected to reverse and gives immediate effect to changes in income tax rates upon enactment. Deferred tax assets are recognized, net of any valuation allowance, for temporary differences and net operating loss and tax credit carry forwards. Deferred income tax expense represents the change in net deferred assets and liability balances. |
| F-6 |
AFH ACQUISITION VII, INC.
(A Development Stage Company)
(A DELAWARE Corporation)
Beverly Hills, CA
NOTES TO FINANCIAL STATEMENTS
| Note B - | Summary of Significant Accounting Policies – continued |
| Financial Instruments | |
| The Company’s financial instruments consist of cash and due to parent. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying value, unless otherwise noted. | |
| Recent Pronouncements | |
| The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position, or cash flow. | |
| Note C - | Equity Securities |
| Holders of shares of common stock shall be entitled to cast one vote for each common share held at all stockholder’s meetings for all purposes, including the election of directors. The common stock does not have cumulative voting rights. | |
| The preferred stock of the Company shall be issued by the Board of Directors of the Company in one or more classes or one or more series within any class and such classes or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations or restrictions as the Board of Directors of the Company may determine, from time to time. | |
| No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock or any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend. | |
| Note D - | Going Concern |
| The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reported recurring losses from operations. As a result, there is an accumulated deficit of $829,912 at January 31, 2013. | |
| The Company’s continued existence is dependent upon its ability to raise capital or acquire a marketable company. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. |
| F-7 |
AFH ACQUISITION VII, INC.
(A Development Stage Company)
(A DELAWARE Corporation)
Beverly Hills, CA
NOTES TO FINANCIAL STATEMENTS
| Note E - | Deferred Expenses | |
| Deferred expenses represents funds received by the Company for reverse merger expenses which have not yet been allocated to fees incurred with the transaction described in note A. It is expected that all funds will be used for expenses in the third quarter. | ||
| Note F - | Due to Parent | |
| Due to parent represents cash advances from AFH Holding & Advisory, LLC. There are no repayment terms. | ||
| Note G - | Stock Transactions | |
| In October 2012, the Company commenced a private placement offering, as amended, (the “Offering”) to several accredited investors (the “Purchasers”) for up to 1,300,000 Shares (the “Maximum Offering”) for aggregate proceeds equal to $2,600,000 (the “Maximum Offering Amount”). The Company may increase the Maximum Offering to 1,560,000 Shares and the Maximum Offering Amount to $3,120,000 to cover over-allotments. There is no minimum number of Shares that may be purchased in the Offering. No warrants were issued to investors in the Offering. The Offering was conducted pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Regulation D, Section 4(2) and Rule 506 thereunder. | ||
| Note H - | Restatements | |
| The reviewed financial statements as of and for the three months ended January 31, 2013 have been restated to correct the following errors: | ||
| 1) | Update Issued and Outstanding stock for proceeds held for shares to be issued and restate due from parent as a deferred expense. The effects of the restatement on the accompanying financial statements are as follows: | |
| As initially reported | As Restated | |||||||||
| Balance Sheet: | ||||||||||
| Deferred Expense | — | 729,163 | ||||||||
| Due From Parent | 684,163 | — | ||||||||
| Total assets | 686,163 | 731,816 | ||||||||
| Common Stock | 5,355 | 5,000 | ||||||||
| Additional Paid-In Capital | 729,645 | 20,000 | ||||||||
| Common Stock to be Issued | — | 1,526,736 | ||||||||
| Statement of Cash Flows: | ||||||||||
| Deferred Expenses | — | 684,163 | ||||||||
| Net Cash Flows from Operating Activities | (336 | ) | (684,499 | ) | ||||||
| Cash Advance by (Repayment to) Parent | (707,500 | ) | (23,337 | ) | ||||||
| Net Cash Flows from Financing Activities | (47,500 | ) | 636,663 | |||||||
| Note I - | Subsequent Events |
| As of March 18, 2013, the Company has received additional proceeds in an aggregate amount of $105,700 and issued 52,850 shares of its Common Stock in connection with the Private Placement. See note G. |
| F-8 |
| Item 2. | Management’s Discussion and Analysis or Plan of Operation. |
Plan of Operation
Letter of Intent with Eurocar and Park Place
On October 5, 2012, AFH Holding & Advisory, LLC (“AFH Advisory”) entered into a letter of intent (the “LOI”) with two target companies, Eurocar, Inc. (“Eurocar”) and Park Place Motor Ltd. (“Park Place”, together with Eurocar, the “Target Companies”), pursuant to which the Company intends to acquire the Target Companies through a series of transactions including a merger or other business combination (the “Reverse Merger”) pursuant to which AFH would cease to be a shell company, as defined in the rules of the Securities and Exchange Commission (the “SEC”) and Eurocar and Park Place will become a public company (“Pubco”). On October 26, 2012, AFH, Eurocar and Park Place entered into an amendment to the LOI, pursuant to which the parties to the LOI agreed to revise the provision with respect to the beneficial ownership of Pubco. On January 28, 2013, the parties to the LOI entered into a second amendment to the LOI, pursuant to which the parties to the LOI agreed to revise the provision with respect to the beneficial ownership of Pubco, provided for certain acknowledgments regarding the proceeds of the Private Placement (hereinafter defined), amended a provision regarding a potential subsequent financing and amended certain financial representations made by each of Eurocar and Park Place.
Eurocar, formerly known as Tilos European Autosales, Inc., is a privately held California corporation incorporated on July 24, 1992. Eurocar is an independent automotive retailer specializing in pre-owned luxury and exotic vehicles with an operating history of approximately 30 years. Park Place Motor Ltd. (“Park Place”) was formed in 1987 and is a specialty dealership primarily serving high net worth individuals with a wide range of automotive vehicles and services.
Pursuant to the LOI, as amended, upon consummation of the Reverse Merger, the existing stockholders of the Company and AFH Advisory and its affiliates will collectively own 30.5% of the issued and outstanding common shares of Pubco, the stockholders of EuroCar will own 22.225% of the issued and outstanding common shares of PubCo, the stockholders of Park Place will own 41.275% of the issued and outstanding common shares of PubCo, Brady Schmidt will own 3% of the issued and outstanding common shares of PubCo and Gary Mull will own 3% of the issued and outstanding common shares of PubCo.
In connection with the Reverse Merger, AFH Advisory is entitled to $750,000 for providing AFH Acquisition VII, Inc. as a public reporting vehicle in connection with the sale of Business Combination Shares, $300,000 of which was paid simultaneously with the execution of the LOI. The LOI, as amended, includes certain termination provisions in the event the LOI is terminated by any party pursuant to a breach by another party.
However, circumstances may arise that will result in AFH not acquiring the Target Companies and there is no assurance that the Reverse Merger will be consummated. If AFH does not acquire the Target Companies, AFH will continue to pursue another target to acquire.
In addition to the efforts described above, the Company has not restricted its search for any specific kind of businesses, and it may acquire a business which is in its preliminary or development stage, which is already in operation, or in essentially any stage of its business life. It is impossible to predict the status of any business in which the Company may become engaged, in that such business may need to seek additional capital, may desire to have its shares publicly traded, or may seek other perceived advantages which the Company may offer.
In implementing a structure for a particular business acquisition, the Company may become a party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another corporation or entity.
It is anticipated that any securities issued in any such business combination would be issued in reliance upon exemption from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of its transaction, the Company may agree to register all or a part of such securities immediately after the transaction is consummated or at specified times thereafter. If such registration occurs, it will be undertaken by the surviving entity after the Company has entered into an agreement for a business combination or has consummated a business combination. The issuance of additional securities and their potential sale into any trading market which may develop in the Company’s securities may depress the market value of the Company’s securities in the future if such a market develops, of which there is no assurance. However, if the Company cannot effect a non-cash acquisition, the Company may have to raise funds from a private offering of its securities under Rule 506 of Regulation D. There is no assurance the Company would obtain any such equity funding.
| 6 |
The Company will participate in a business combination only after the negotiation and execution of appropriate agreements. Negotiations with a target company will likely focus on the percentage of the Company which the target company shareholders would acquire in exchange for their shareholdings.
Although the terms of such agreements cannot be predicted, generally such agreements will require certain representations and warranties of the parties thereto, will specify certain events of default, will detail the terms of closing and the conditions which must be satisfied by the parties prior to and after such closing and will include miscellaneous other terms. Any merger or acquisition effected by the Company can be expected to have a significant dilutive effect on the percentage of shares held by the Company’s shareholders at such time.
Private Placement Commencing from October 2012
In October 2012, the Company commenced a private placement offering, as amended, (the “Offering”) to several accredited investors (the “Purchasers”) for up to 1,300,000 Shares (the “Maximum Offering”) for aggregate proceeds equal to $2,600,000 (the “Maximum Offering Amount”). The Company may increase the Maximum Offering to 1,560,000 Shares and the Maximum Offering Amount to $3,120,000 to cover over-allotments. There is no minimum number of Shares that may be purchased in the Offering. No warrants were issued to investors in the Offering. The Offering was conducted pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Regulation D, Section 4(2) and Rule 506 thereunder.
Proceeds from the Offering are expected to be used as working capital or as cash which may be utilized to pay fees and expenses incurred in connection with the Reverse Merger with the Target Companies as indicated in the LOI.
The Offering was undertaken pursuant to a definitive Subscription Agreement between the Company and the Purchasers (the “Subscription Agreement”), which contains customary representations, warranties and covenants of the parties.
As of the date of this Quarterly Report, the Company has received proceeds in an aggregate amount of $1,815,700 and issued 907,850 shares of its Common Stock in connection with the Offering. It is expected that the Offering will be consummated in the second quarter of 2013.
Results of Operations
The Company has not conducted any active operations since inception, except for its efforts to locate suitable acquisition candidates and raise funds to pay fees and expenses incurred in connection therewith. No revenue has been generated by the Company from September 24, 2007 (inception) to January 31, 2013. It is unlikely the Company will have any other revenues unless it is able to effect an acquisition or merger with an operating company, of which there can be no assurance.
Expenses incurred since inception are primarily due to legal, accounting, and other professional service fees.
Liquidity and Capital Resources
Other than the proceeds from the Offering described above, at January 31, 2013 the Company had no capital resources and will rely upon the issuance of common stock and additional capital contributions from shareholders to fund administrative expenses pending acquisition of an operating company.
Management anticipates seeking out a target company through solicitation. Such solicitation may include newspaper or magazine advertisements, mailings and other distributions to law firms, accounting firms, investment bankers, financial advisors and similar persons, the use of one or more World Wide Web sites and similar methods. No estimate can be made as to the number of persons who will be contacted or solicited. Management may engage in such solicitation directly or may employ one or more other entities to conduct or assist in such solicitation.
| 7 |
Management and its affiliates will pay referral fees to consultants and others who refer target businesses for mergers into public companies in which management and its affiliates have an interest. Payments are made if a business combination occurs, and may consist of cash or a portion of the stock in the Company retained by management and its affiliates, or both.
The Company and/or shareholders will supervise the search for target companies as potential candidates for a business combination. The Company and/or shareholders may pay as their own expenses any costs incurred in supervising the search for a target company. The Company and/or shareholders may enter into agreements with other consultants to assist in locating a target company and may share stock received by it or cash resulting from the sale of its securities with such other consultants.
The following is a summary of the Company’s cash flows provided by (used in) operating, investing and financing activities for the quarters ended January 31, 2013, January 31, 2012 and for the cumulative period from September 24, 2007 (Inception) to January 31, 2013.
| Fiscal
Quarter Ended January 31, 2013 | Fiscal
Quarter Ended January 31, 2012 | For
the Cumulative Period from September 24, 2007 (Inception) to January 31, 2013 | ||||||||||
| Net Cash (Used in) Operating Activities | $ | (684,499 | ) | - | (687,347 | ) | ||||||
| Net Cash (Used in) Investing Activities | - | - | - | |||||||||
| Net Cash Provided by Financing Activities | $ | 636,663 | - | 690,000 | ||||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | $ | (47,836 | ) | - | 2,653 | |||||||
Due to the uncertainty of our ability to meet our operational expenses, in their report on our audited financial statements as of and for the years ended October 31, 2012 and 2011, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our independent auditors. There is substantial doubt about our ability to continue as a going concern as we have losses for the three months ended January 31, 2013 totaling $7,290 as well as an accumulated deficit since inception amounting to $829,912.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable.
| Item 4. | Controls and Procedures. |
Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures designed for the purpose of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
In the Company’s original filing of the Form 10-Q, management concluded that the Company maintained effective internal control and procedures as of January 31, 2013. However, in connection with this Amendment No. 1 to Form 10-Q, management, including our Chief Executive Officer and Chief Financial Officer, reassessed the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of January 31, 2013 and has subsequently determined that a significant deficiency existed as of January 31, 2013 related to the valuation of liability associated with stock issued in connection with services provided in September 2012. As a result of such material weakness, management has revised its previous assessment to conclude that our disclosure controls and procedures were not effective as of January 31, 2013.
The Company did not maintain effective control over the preparation, review, presentation and disclosure of amounts related to the stock issued in connection with the September 2012 services that were included in our consolidated balance sheets and consolidated statements of income. This material weakness resulted in a material misstatement of our liabilities, non-cash expense relating to the issuance of stock for services and equity accounts and related financial disclosures that was not prevented or detected on a timely basis.
As a result of such material weakness, on June 18, 2013, our management, after consultation with our independent public accountants, concluded that our amended financial statements for the fiscal year ended October 31, 2012 and the quarter ended January 31, 2013 should no longer be relied upon. We amended our Annual Report on Form 10-K for the fiscal year ended October 31, 2012 on June 20, 2013. By filings this Amendment No. 1 to Form 10-Q, we are amending the financials for the quarter ended January 31, 2013.
To remediate this deficiency, we are in the process of evaluating our risk assessment and any related deficiencies specifically in maintaining effective control over our accounting for liability associated with the stock in addition to maintaining sufficient documentation concerning our existing financial processes, risk assessment and internal controls.
We believe the remediation measures we are taking, if effectively implemented and maintained, will remediate the material weakness discussed above. However, no assurance can be given that the remedial measures being undertaken will be fully effectuated or will be sufficient to address the significant deficiencies we identified, and there can be no assurance that significant deficiencies or material weaknesses in our internal controls over financial reporting will not be identified or occur in the future. If additional significant deficiencies (or if material weaknesses) in our internal controls are discovered or occur in the future, among other similar or related effects: (i) the Company may fail to meet future reporting obligations on a timely basis, (ii) the Company’s consolidated financial statements may contain material misstatements, (iii) the Company may be required to again restate prior period financial results, (iv) the Company may be subject to litigation or regulatory proceedings, and (v) the Company’s business and operating results may be harmed.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting except for the above corrective actions with regard to significant deficiencies or material weaknesses that occurred during the fiscal quarter ended January 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 8 |
| Item 1. | Legal Proceedings. |
None
| Item 1A. | Risk Factors. |
As a smaller reporting company we are not required to provide this information
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
In October 2012, the Company commenced a private placement offering, as amended, (the “Offering”) to several accredited investors (the “Purchasers”) for up to 1,300,000 Shares (the “Maximum Offering”) for aggregate proceeds equal to $2,600,000 (the “Maximum Offering Amount”)The Company may increase the Maximum Offering to 1,560,000 Shares and the Maximum Offering Amount to $3,120,000 to cover over-allotments. There is no minimum number of Shares that may be purchased in the Offering. No warrants were issued to investors in the Offering. The Offering was conducted pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Regulation D, Section 4(2) and Rule 506 thereunder.
Proceeds from the Offering are expected to be used as working capital or as cash which may be utilized to pay fees and expenses incurred in connection with the Reverse Merger with the Target Companies as indicated in the LOI.
The Offering was undertaken pursuant to a definitive Subscription Agreement between the Company and the Purchasers (the “Subscription Agreement”), which contains customary representations, warranties and covenants of the parties.
As of the date of this Quarterly Report, the Company has received proceeds in an aggregate amount of $710,000 and received subscription agreements to issue 355,000 shares of its Common Stock in connection with the Offering. It is expected that the Offering will be consummated in the second quarter of 2013.
| Item 3. | Defaults Upon Senior Securities. |
None
| Item 4. | Mine Safety Disclosures |
Not Applicable
| Item 5. | Other Information. |
None
| Item 6. | Exhibits. |
(a) Exhibits required by Item 601 of Regulation S-K.
| Exhibit | Description | |
| 31.1* | Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Report on Form 10-Q for the quarter ended January 31, 2013. | |
| 32.1* | Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS* | XBRL Instance Document | |
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed Herewith
| 9 |
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
Dated: June 21, 2013
| AFH ACQUISITION VII, INC. | |
| (Registrant) | |
| /s/ Amir F. Heshmatpour | |
| Amir F. Heshmatpour, | |
| President, CEO and Principal Financial Officer |
| 10 |