UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2014
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number:000-55125
AMERICAN HERITAGE INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
| Nevada | 71-1052991 |
| (State or other jurisdiction of incorporation of organization) | (I.R.S. Employer Identification No.) |
Tivoli Village, 410 South Rampart Blvd, Ste 390, Las Vegas, NV 89145
(Address of principal executive offices, including zip code)
(888) 745-4338
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
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 (§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).
YES [X] 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).
YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 99,866,250 shares of common stock, par value $0.001, as of May 15, 2014.
AMERICAN HERITAGE INTERNATIONAL, INC.
FORM 10-Q
INDEX
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this report. Such statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms, variations of such terms or the negative of such terms. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Such statements address future events and conditions concerning, among others, capital expenditures, earnings, litigation, regulatory matters, liquidity and capital resources, and accounting matters. Actual results in each case could differ materially from those anticipated in such statements by reason of factors such as future economic conditions, changes in consumer demand, legislative, regulatory and competitive developments in markets in which we operate, results of litigation, and other circumstances affecting anticipated revenues and costs, and the risk factors set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filed on March 31, 2014.
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS
The forward-looking statements made in this report on Form 10-Q relate only to events or information as of the date on which the statements are made in this report on Form 10-Q. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents that we reference in this report, including documents referenced by incorporation, completely and with the understanding that our actual future results may be materially different from what we anticipate.
Unless otherwise indicated, in this Form 10-Q, references to “we,” “our,” “us,” the “Company,” “American Heritage” or the “Registrant” refer to American Heritage International Inc., a Nevada corporation.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
American Heritage International Inc.
(A Development Stage Company)
Condensed Balance Sheets
| | March 31, 2014
(Unaudited) | | December 31, 2013 |
| ASSETS | |
| Current Assets | | | | | | | | |
| Cash | | $ | 140,387 | | | $ | 15,746 | |
| Accounts receivable | | | 30,465 | | | | — | |
| Inventory | | | 114,339 | | | | 33,220 | |
| Prepaid expense | | | 30,000 | | | | — | |
| Total Current Assets | | | 315,191 | | | | 48,966 | |
| Other Assets | | | | | | | | |
| Intangible assets, net of accumulated amortization of $5,083 and $2,542, respectively (Note 4) | | | 25,417 | | | | 27,959 | |
| Total Other Assets | | | 25,417 | | | | 27,959 | |
| Total Assets | | | 340,608 | | | | 76,925 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |
| Current Liabilities | | | | | | | | |
| Accounts payable | | | 23,355 | | | | 19,307 | |
| Accounts payable - related party (Note 5) | | | 60,000 | | | | 30,000 | |
| Related party loans (Note 5) | | | 13,274 | | | | 73,964 | |
| Total Current Liabilities | | | 66,629 | | | | 123,271 | |
| STOCKHOLDERS' EQUITY (DEFICIT) | |
| Preferred Stock, $0.001 par value, 20,000,000 shares authorized, 15,300 and nil shares issued and outstanding, respectively (Note 4) | | | 15 | | | | 15 | |
| Common Stock, $0.001 par value, 500,000,000 shares authorized, 99,866,250 and 99,000,000 shares issued and outstanding, respectively (Note 6) | | | 99,087 | | | | 99,000 | |
| Additional Paid-in Capital | | | 666,596 | | | | 166,433 | |
| Deficit Accumulated During the Development Stage | | | (521,719 | ) | | | (311,794 | ) |
| Total Stockholders' Equity (Deficit) | | | 243,979 | | | | (46,346 | ) |
| Total Liabilities and Stockholders' Equity (Deficit) | | | 340,608 | | | | 76,925 | |
(See Notes to Financial Statements)
American Heritage International Inc.
(A Development Stage Company)
Condensed Statements of Operations
For the Three Months Ended March 31, 2014 and 2013 and
the Period from January 19, 2010 (Date of Inception) to March 31, 2014
| | | | 2014 | | | | 2013 | | | | From January 19, 2010
(Inception) to
March 31, 2014 | |
| Sales | | $ | 38,561 | | | $ | — | | | $ | 38,576 | |
| Cost of Sales | | | 18,532 | | | | — | | | | 18,534 | |
| Gross Profit | | | 20,029 | | | | — | | | | 20,042 | |
| Operating Expenses | | | | | | | | | | | | |
| Advertising, promotions and marketing | | | 29,362 | | | | — | | | | 40,714 | |
| Amortization | | | 2,542 | | | | — | | | | 5,084 | |
| Consulting | | | 30,000 | | | | — | | | | 53,000 | |
| Consulting – related party | | | 30,000 | | | | — | | | | 60,000 | |
| Investor and public relations | | | 36,924 | | | | — | | | | 36,924 | |
| Office | | | 5,061 | | | | — | | | | 11,110 | |
| Professional fees | | | 25,831 | | | | — | | | | 69,496 | |
| Regulatory fees | | | 10,443 | | | | — | | | | 23,827 | |
| Travel and entertainment | | | 9,790 | | | | — | | | | 19,523 | |
| Total Operating Expenses | | | 179,953 | | | | — | | | | 319,678 | |
| Loss before Other Income (Expenses) | | | (159,924 | ) | | | — | | | | (299,636 | ) |
| Other Income (Expenses) | | | | | | | | | | | | |
| Settlement of legal claim | | | (50,000 | ) | | | — | | | | (50,000 | ) |
| Total Other Income (Expenses) | | | (50,000 | ) | | | — | | | | (50,000 | ) |
| Loss before Discontinued Operations | | | (209,924 | ) | | | — | | | | (349,636 | ) |
| Discontinued Operations | | | — | | | | (23,696 | ) | | | (172,083 | ) |
| Net Loss | | | (209,924 | ) | | | (23,696 | ) | | | (521,719 | ) |
| Net Loss Per Share – Basic and Diluted | | $ | (0.00 | ) | | $ | (0.00 | ) | | | — | |
| Weighted Average Shares Outstanding – Basic and Diluted | | | 99,106,000 | | | | 145,500,000 | | | | | |
(See Notes to Financial Statements)
American Heritage International Inc.
(A Development Stage Company)
Condensed Statements of Cash Flows
For the Three Months Ended March 31, 2014 and 2013 and
the Period from January 19, 2010 (Date of Inception) to March 31, 2014
| | | | 2014 | | | | 2013 | | | | From January 19, 2010
(Inception) to
March 31, 2014 | |
| Operating Activities | | | | | | | | | | | | |
| Net loss | | $ | (209,925 | ) | | $ | (23,696 | ) | | $ | (521,719 | ) |
| Less non-cash items: | | | | | | | | | | | | |
| Discontinued operations - depreciation | | | — | | | | 143 | | | | 857 | |
| Amortization | | | 2,542 | | | | — | | | | 5,084 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| (Increase) in accounts receivable | | | (30,465 | ) | | | — | | | | (30,465 | ) |
| (Increase) in inventory | | | (81,119 | ) | | | — | | | | (114,339 | ) |
| Increase in accounts payable | | | 4,047 | | | | 594 | | | | 26,933 | |
| Increase in accounts payable – related party | | | 30,000 | | | | 12,000 | | | | 111,200 | |
| Net Cash Used in Operating Activities | | | (284,919 | ) | | | (10,959 | ) | | | (522,449 | ) |
| Investing Activities | | | | | | | | | | | | |
| Acquisition of intangible assets | | | — | | | | — | | | | (5,500 | ) |
| Net Cash Used in Investing Activities | | | — | | | | — | | | | (5,500 | ) |
| Financing Activities | | | | | | | | | | | | |
| Proceeds from short-term debt | | | — | | | | — | | | | 28,750 | |
| Proceeds from long-term debt | | | — | | | | — | | | | 50,000 | |
| Proceeds from short-term debt – related party | | | 3,810 | | | | — | | | | 111,566 | |
| Repayment of short-term debt – related party | | | (64,500 | ) | | | — | | | | (64,630 | ) |
| Proceeds from sale of common stock | | | 470,250 | | | | — | | | | 519,750 | |
| Proceeds from contributed capital | | | — | | | | 12,200 | | | | 22,900 | |
| Net Cash Provided by Financing Activities | | | 409,560 | | | | 12,200 | | | | 668,336 | |
| Increase in Cash | | | 124,641 | | | | 1,241 | | | | 140,387 | |
| Cash - Beginning of Period | | | 15,746 | | | | 2,101 | | | | — | |
| Cash - End of Period | | | 140,387 | | | | 3,342 | | | | 140,387 | |
| Non-cash Financing and Investing Activities: | | | | | | | | | | | | |
| Contributed capital | | | — | | | | 12,200 | | | | 139,298 | |
| Capital contributions – forgiveness of debt | | | — | | | | — | | | | 29,600 | |
| Acquisition of equipment for note payable | | | — | | | | — | | | | 4,000 | |
| Short-term loan settled with common shares | | | — | | | | — | | | | 40,750 | |
| Acquisition of intangibles for preferred shares | | | — | | | | — | | | | 25,000 | |
| Supplemental Disclosures: | | | | | | | | | | | | |
| Interest paid | | | — | | | | — | | | | — | |
| Income taxes paid | | | — | | | | — | | | | — | |
(See Notes to Financial Statements)
American Heritage International Inc.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
1. Nature of Business
American Heritage International Inc. manufactures and distributes disposable electronic cigarettes. We offer our products through retail stores, distributors, independent retailers, and grocery and convenience store operators, as well as online in the United States. Our primary operations are based in Las Vegas, Nevada. We intend to take advantage of the rapid growth of the electronic cigarette industry and become one of the market leaders.
2. Summary of Significant Accounting Policies
Unaudited Interim Financial Information
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2014 are not necessarily indicative of the results that can be expected for the full year.
Use of Estimates
The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. We regularly evaluate estimates and assumptions related to the useful life and recoverability of long-lived assets and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Long-Lived Assets
We account for our long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. We assess recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value.
Intangible Assets
Intangible assets are comprised primarily of the cost of certain intellectual property related to the electronic cigarette business including certain trademarks, product design and website. We evaluate our trademarks annually for impairment or earlier if there is an indication of impairment. If there is an indication of impairment of identified intangible assets not subject to amortization, we compare the estimated fair value with the carrying amount of the asset. An impairment loss is recognized to write-down the intangible asset to its fair value if it is less than the carrying amount. The fair value is calculated using the income approach. However, preparation of estimated expected future cash flows is inherently subjective and is based on our best estimate of assumptions concerning expected future conditions. Based on our impairment analysis performed for the year ended December 31, 2013, the estimated fair values of trademarks and other intangible assets exceeded their respective carrying values. We amortize intangible assets on a straight-line basis over a period of three years.
Revenue Recognition
Revenue is recognized in accordance with Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, as revised by SAB No. 104. Revenue is derived from product sales and is recognized upon shipment to the customer, the sales price is fixed or determinable and collectability is reasonably assured. Ownership and title of our products pass to customers upon delivery of the products to customers. Returns are accepted, but are not significant to our overall operations. Net sales have been determined after deduction of discounts, slotting fees and other promotional allowances in accordance with ASC 605-50.
Recent Pronouncements
We continually assess any new accounting pronouncements to determine their applicability to us. Where it is determined that a new accounting pronouncement affects our financial reporting, we undertake a study to determine the consequence of the change to our financial statements and assure that there are proper controls in place to ascertain that our financial statements properly reflect the change.
3. Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have begun operations but have not generated significant revenue to date. These conditions give rise to doubt about our ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to obtain additional financing and to generate profits and positive cash flow. We will require a cash injection of $1,000,000 over the remainder of 2014 to achieve our business goals for fiscal 2014. We need these funds to purchase inventory and support accounts receivable and sustain planned operating losses.
4. Intangible Assets
On August 28, 2013, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with American Heritage LLC and its principals. Under the Purchase Agreement, we acquired certain intellectual property related to the electronic cigarette business in exchange for 15,300 shares of our Series “A” Convertible Preferred Stock. The intellectual property was valued at $25,000 in total. Intellectual property acquired was all design, branding, domains and website associated with the American Heritage™ brand of disposable electronic cigarettes.
5. Related Party Debt and Transactions
We were charged management fees by our former officer/director of $4,000 per month on a month-to-month basis. Total management fees are $nil and $12,000 for the three months ended March 31, 2014 and 2013, respectively.
During the year ended December 31, 2013 our current officers/directors loaned us $61,964. During the three months ended March 31, 2014 we received further loans of $3,810 and we repaid $64,500 of loans outstanding. As at March 31, 2014 we owe our officers/directors a total of $13,274. These loans are unsecured, non-interest bearing and due on demand.
Pursuant to two Executive Services Agreements effective October 1, 2013 with our current officers/directors we have accrued management fees of $5,000 per month for each of our two senior officers. As at March 31, 2014 we owe these senior officers a total of $60,000.
6. Common Stock
| a) | On January 31, 2014 we closed our $0.25 Unit non-brokered private placement and on March 20, 2014 we issued a total of 443,000 Units at $0.25 per Unit for total proceeds of $110,750. Each Unit contained one common share and one common share purchase warrant to acquire one additional common share at $0.40 per share expiring March 20, 2016. |
| b) | On February 1, 2014 we opened a non-brokered private placement offering of 2,000,000 Units at $1.00 per Unit. On March 20, 2014, having received $403,250 towards this offering, we issued a total of 403,250 Units at $1.00 per Unit. Each Unit contained one common share and one common share purchase warrant to acquire one additional common share at $1.50 per share expiring March 20, 2016. This offering closed on March 31, 2014. |
| c) | On March 20, 2014 we issued 20,000 common shares having a fair value of $30,000 pursuant to an Advisory Board Agreement. This amount is included in prepaid expense. |
7. Subsequent Events
We have evaluated all subsequent events through the date these financial statements were issued and determined that there are no subsequent events to record and the following subsequent events to disclose.
Item 2. Management’s Discussion and Analysis or Plan of Operation
THREE MONTHS ENDED MARCH 31, 2014 AND 2013
The discussion that follows is derived from our unaudited interim condensed balance sheet as of March 31, 2014 and our audited balance sheet as at December 31, 2013 and the unaudited interim condensed statements of operations and cash flows for the three months ended March 31, 2014 (‘2014”) and March 31, 2013 (“2013”).
| | | | 2014 | | | | 2013 | | | | From January 19, 2010
(Inception) to
March 31, 2014 | |
| Sales | | $ | 38,561 | | | $ | — | | | $ | 38,576 | |
| Cost of Sales | | | 18,532 | | | | — | | | | 18,534 | |
| Gross Profit | | | 20,029 | | | | — | | | | 20,042 | |
| Operating Expenses | | | | | | | | | | | | |
| Advertising, promotions and marketing | | | 29,362 | | | | — | | | | 40,714 | |
| Amortization | | | 2,542 | | | | — | | | | 5,084 | |
| Consulting | | | 30,000 | | | | — | | | | 53,000 | |
| Consulting – related party | | | 30,000 | | | | — | | | | 60,000 | |
| Investor and public relations | | | 36,924 | | | | — | | | | 36,924 | |
| Office | | | 5,061 | | | | — | | | | 11,110 | |
| Professional fees | | | 25,831 | | | | — | | | | 69,496 | |
| Regulatory fees | | | 10,443 | | | | — | | | | 23,827 | |
| Travel and entertainment | | | 9,790 | | | | — | | | | 19,523 | |
| Total Operating Expenses | | | 179,953 | | | | — | | | | 319,678 | |
| Loss before Other Income (Expenses) | | | (159,924 | ) | | | — | | | | (299,636 | ) |
| Other Income (Expenses) | | | | | | | | | | | | |
| Settlement of legal claim | | | (50,000 | ) | | | — | | | | (50,000 | ) |
| Total Other Income (Expenses) | | | (50,000 | ) | | | — | | | | (60,000 | ) |
| Loss before Discontinued Operations | | | (209,924 | ) | | | — | | | | (349,636 | ) |
| Discontinued Operations | | | — | | | | (23,696 | ) | | | (172,083 | ) |
| Net Loss | | | (209,924 | ) | | | (23,696 | ) | | | (521,719 | ) |
Net loss for the three months ended March 31, 2013 of $23,696 was entirely from our discontinued paper products business.
Net loss for the three months ended March 31, 2014 was $209,924. This loss was due to the operating expenses associated with our new disposable electronic cigarette business and from the settlement of a legal claim.
We generated $38,561 in revenues (2013 - $nil); $6,683 from online sales and $31,878 from sales to retailers/distributors. Our cost of sales was $18,532 (2012 - $nil). Our overall gross profit was 52%.
As of March 31, 2014 our electronic cigarettes are being offered online in the United States, through Mr. Checkout, and at over 500 stores.
During 2014, we incurred $179,953 in operating expenses. Our operating expenses consisted of: $29,632 in advertising, promotions and marketing expenses including $10,000 paid to Mr. Checkout for a marketing promotion to all of their customers, $5,654 for point of sale materials, $1,500 for sponsorships and $6,414 of electronic cigarettes shipped out for samples and brand awareness; $60,000 in consulting fees including $30,000 paid to our two senior executive officers pursuant to Executive Service Agreements executed October 1, 2013; $10,331 paid in legal fees; $15,500 paid in audit fees; 10,443 paid in regulatory fees relating to stock transfer, stock position reports, corporate manual and news releases; $36,924 paid in investor and shareholder relations including investor kits, analyst report and a media consultant; $9,790 in travel, entertainment and automobile; and $5,061 in office expenses which includes supplies, rent and telephone. We also charged $2,542 in amortization of intangibles. We expect that our operating expenses will significantly increase as we are able to raise capital and further our business operations.
During 2014 we incurred a one-time expense of $50,000 associated with settling a legal claim.
Despite our expectation of increased revenues, we believe that we will operate at a net loss for 2014 as we increase our operating expenses in an attempt to further implement our business plan.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2014, we had working capital of $218,562 consisting of: cash - $140,387; accounts receivable - $30,465; inventory - $114,339 (including 4,033 ‘sticks’ on hand and 50,000 ‘sticks’ in transit); prepaid expense - $30,000 and current liabilities of - $106,629 (including related party loans of $13,274 owing to our two senior executive officers, $60,000 of related party accounts payable and $23,355 of accounts payable). During 2014, we increased our cash position by $124,641 to $140,387.
The following table sets forth the major sources and uses of cash for the three months ended March 31, 2014 and 2013:
| | | 2014 | | 2013 |
| Net cash used in operating activities | | $ | (284,919 | ) | | $ | (10,959 | ) |
| Net cash used in investing activities | | | — | | | | — | |
| Net cash provided by financing activities | | | 409,560 | | | | 12,200 | |
| Net increase (decrease) in cash | | | 124,641 | | | | 1,241 | |
Cash Used in Operating Activities
During 2014 our operating activities used cash of $284,919 in operating activities (2013 - $10,959). The use of cash was primarily attributable to funding our net loss of $209,925 offset by a non-cash charge of $2,542 for amortization of intangibles. We used $30,465 due to an increase in accounts receivable; we used $81,119 acquiring inventory from our manufacturer and we financed operations through: supplier financing of $4,048 (2013 - $594) and related party management fees owing of $30,000 (2013 - $12,000).
Cash Used in Investing Activities
We did use any cash in investing activities during 2014 and 2013.
Cash from Financing Investing Activities
During 2014 financing activities provided $409,560 (2013 - $12,200) in cash consisting of $3,810 of non-interest bearing demand loans from related parties and $470,250 received from non-brokered Unit private placements of our equity securities, offset by the repayment of related party debts of $64,500.
Need for Additional Capital
In addition to the cash on hand as at March 31, 2014 of $140,387 we will require a cash injection of an additional $1,000,000 during the remainder of fiscal 2014 to achieve our 2014 operating plan. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
Off-Balance Sheet Arrangements
We have not engaged in any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4: Controls and Procedures
Evaluation of Disclosure Controls
Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our management, with participation of our Chief Executive Officer and Chief Financial Officer as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures have not been effective as a result of a weakness in the design of internal control over financial reporting.
As used herein, “disclosure controls and procedures” mean controls and other procedures of our company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2014, our disclosure controls and procedures were not effective: (i) lack of segregation of incompatible duties; and (ii) insufficient Board of Directors representation.
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2014: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended March 31, 2014 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
PART II- OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pending legal proceeding. Management is not aware of any threatened litigation, claims or assessments.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 31, 2014 we closed our $0.25 Unit non-brokered private placement and on March 20, 2014 we issued a total of 443,000 Units at $0.25 per Unit for total proceeds of $110,750. Each Unit contained one common share and one common share purchase warrant to acquire one additional common share at $0.40 per share expiring March 20, 2016. For the seven US accredited investors we relied on exemptions from registration under the Securities Act provided by Rule 506 (Rule 506 applies to “sophisticated Investors” not “accredited Investors) . For the four foreign accredited investors we relied upon Rule 506 of Regulation D and/or Regulation S of the Securities Act as these securities were issued to foreign investors in offshore transactions (as defined in Rule 902 under Regulation S of the Securities Act), based upon representation made by such investors.
On February 1, 2014 we opened a non-brokered private placement offering of 2,000,000 Units at $1.00 per Unit. On March 20, 2014, having received $403,250 towards this offering, we issued a total of 403,250 Units at $1.00 per Unit. Each Unit contained one common share and one common share purchase warrant to acquire one additional common share at $1.50 per share expiring March 20, 2016. This offering closed on March 31, 2014. For the two US accredited investors we relied on exemptions from registration under the Securities Act provided by Rule 506 (Rule 506 applies to “sophisticated Investors” not “accredited Investors) .. For the one foreign accredited investors we relied upon Rule 506 of Regulation D and/or Regulation S of the Securities Act as these securities were issued to foreign investors in offshore transactions (as defined in Rule 902 under Regulation S of the Securities Act), based upon representation made by such investors.
On March 20, 2014 we issued 20,000 common shares valued at $1.50 per share pursuant to an Advisory Board Agreement. We relied on exemptions from registration under Section 4(2) of the Securities Act and/or by Rule 506 of Regulation D promulgated under the Securities Act.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
**Provided herewith
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 15, 2014
American Heritage International Inc.
By:/s/ Anthony Sarvucci
Name: Anthony Sarvucci
Title: Chief Executive Officer (principal executive officer)
In accordance with the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date |
/s/ Anthony Sarvucci
Anthony Sarvucci | President, Chief Executive Officer and Director | May 15, 2014 |
/s/ Vincent Bonifatto
Vincent Bonifatto | Chief Financial Officer, Treasurer, Secretary and Director | May 15, 2014 |
