UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended: November 30, 2008
Or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File Number: 333-150419
H & H IMPORTS, INC.
-------------------
(Exact name of Registrant as specified in its charter)
Florida 80-0149096
------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or organization)
7220 NW 7th Street
Plantation, FL 33317 (954) 792-0067
-------------------- --------------
(Address of Principal Executive Offices) (Registrant's telephone number)
Indicate by check mark whether the Registrant (1) filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Act 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. _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). Yes [ ] No [X]
On December 19, 2008 the Company had 5,150,500 shares of common stock
outstanding.
H & H IMPORTS, INC
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
Page
No.
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Part I. Unaudited Financial Information
Item 1. Unaudited Balance Sheet as of November 30, 2008 and
February 29, 2008 ............................................ 3
Unaudited Statements of Operations -
Three and Nine Months Ended November 30, 2008 and 2007,
and for the period from November 20, 2006 (inception)
through November 30, 2008 .................................... 4
Unaudited Statements of Cash Flows -
Nine Months Ended November 30, 2008 and 2007,
and for the period from November 20, 2006 (inception)
through November 30, 2008 .................................... 5
Notes to Financial Statements - .............................. 6-9
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations .................................... 10-11
Item 3. Quantatitive and Qualitative Disclosures About Market Risk ... 11
Item 4T. Controls and procedures ...................................... 11
Part II. Other Information
Item 1. Risk Factors ................................................. 11
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds ... 12
Item 6. Exhibits ..................................................... 12
2
H & H IMPORTS, INC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET (UNAUDITED)
November 30, February 29,
2008 2008 (1)
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents ...................... $ 64,363 $ 32,000
Prepaid expenses ............................... 1,500 -
-------- --------
Total current assets ............................. 65,863 32,000
-------- --------
Total assets ..................................... $ 65,863 $ 32,000
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ............................... $ 3,681 $ 300
-------- --------
Total current liabilities ........................ 3,681 300
STOCKHOLDERS' EQUITY
Preferred stock, no par value authorized 40,000
shares; issued and outstanding 4,125 shares;
liquidation preference $61,875 ................ 61,875 -
Common stock, $.0001 par value; authorized
200,000,000 shares; issued and outstanding
5,150,000 shares .............................. 515 431
Additional paid-in capital ..................... 44,299 37,383
Deficit accumulated during the development stage (44,507) (6,114)
-------- --------
Total stockholders' equity ....................... 62,182 31,700
-------- --------
Total liabilities and stockholders' equity ....... $ 65,863 $ 32,000
======== ========
(1) Derived from audited financial statement
See accompanying notes to unaudited financial statements.
3
H & H IMPORTS, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND NINE MONTHS ENDED NOVEMBER 30, 2008 AND 2007, AND
PERIOD FROM NOVEMBER 20, 2006 (INCEPTION) THROUGH NOVEMBER 30, 2008
THREE MONTHS ENDED NINE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 20, 2006
----------------------- ------------------------ (INCEPTION) THROUGH
2008 2007 2008 2007 NOVEMBER 30, 2008
----------- -------- ----------- --------- -------------------
NET SALES ................ $ 15,000 $ - $ 15,000 $ - $ 15,000
Cost of sales ............ 10,300 - 10,300 - 10,300
----------- -------- ----------- --------- ---------
Gross profit ............. 4,700 - 4,700 - 4,700
COSTS AND EXPENSES:
Selling, general and
administrative expenses 7,612 - 43,406 2,064 49,521
----------- -------- ----------- --------- ---------
7,612 - 43,406 2,064 49,521
----------- -------- ----------- --------- ---------
Loss from operations ..... (2,912) - (38,706) (2,064) (44,821)
Interest income .......... 1 - 313 - 314
----------- -------- ----------- --------- ---------
LOSS BEFORE INCOME TAXES . (2,911) - (38,393) (2,064) (44,507)
INCOME TAXES ............. - - - - -
----------- -------- ----------- --------- ---------
NET LOSS ................. $ (2,911) $ - $ (38,393) $ (2,064) $ (44,507)
=========== ======== =========== ========= =========
BASIC AND DILUTED NET LOSS
PER SHARE ............... $ (0.00) $ - $ (0.01) $ (0.00)
=========== ======== =========== =========
WEIGHTED AVERAGE SHARES
OUTSTANDING BASIC AND
DILUTED ................. 5,150,000 900,000 5,120,764 900,000
=========== ======== =========== =========
See accompanying notes to unaudited financial statements.
4
H & H IMPORTS, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED NOVEMBER 30, 2008 AND 2007, AND
PERIOD FROM NOVEMBER 20, 2006 (INCEPTION) THROUGH NOVEMBER 30, 2008
NINE MONTHS ENDED
NOVEMBER 30, NOVEMBER 20, 2006
-------------------- (INCEPTION) THROUGH
2008 2007 NOVEMBER 30, 2008
-------- -------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .......................................... $(38,393) $ (2,064) $ (44,507)
Adjustments to reconcile net (loss) to net
cash provided by (used in) operating activities:
Issuance of common stock for services ........... - 2,064 5,814
Change in assets and liabilities
Prepaid Expenses .............................. (1,500) - (1,500)
Accounts payable .............................. 3,381 - 3,681
-------- -------- ---------
Net cash used in operating activities ............. (36,512) - (36,512)
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Preferred stock issued for cash ................. 61,875 - 61,875
Common stock issued for cash, net of costs ...... 7,000 - 39,000
-------- -------- ---------
Net cash provided by financing activities ........ 68,875 - 100,875
-------- -------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ......... 32,363 - 64,363
CASH AND CASH EQUIVALENTS, beginning of fiscal year 32,000 - -
-------- -------- ---------
CASH AND CASH EQUIVALENTS, end of period .......... $ 64,363 $ - $ 64,363
======== ======== =========
Supplementary information:
Cash paid for:
Interest ...................................... $ - $ - $ -
======== ======== =========
Income taxes .................................. $ - $ - $ -
======== ======== =========
See accompanying notes to unaudited financial statements.
5
H & H IMPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOVEMBER 30, 2008
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND DEVELOPMENT STAGE RISK
- -----------------------------------------------------------
H & H Imports, Inc. (The Company) was formed to import leather goods from Asia.
The Company had sales of $15,000 in the quarter ended November 30, 2008. Since
its inception, the Company has been dependent upon the receipt of capital
investment to fund its continuing activities. In addition to the normal risks
associated with a new business venture, there can be no assurance that the
Company's business plan will be successfully executed. Our ability to execute
our business model will depend on our ability to obtain additional financing and
achieve a profitable level of operations. There can be no assurance that
sufficient financing will be obtained, or can we give any assurance that we will
generate substantial revenues or that our business operations will prove to be
profitable.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
BASIS OF PRESENTATION
- ---------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and article 8-03 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the management of the Company, all adjustments, consisting of
a normal and recurring nature, considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
November 30, 2008 are not necessarily indicative of the results that may be
expected for the year ending February 28, 2009. These financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Registration Statement on Form S-1.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. The Company has no
cash equivalents.
PREFERRED STOCK
At November 30, 2008, the Company had 4,125 shares outstanding of its Series A
Convertible Preferred Stock ("Series A"). Series A has a stated liquidation
preference value of $15 per share, and each preferred share is convertible to
100 shares of the Company's common stock upon written notice of the record
holder to the Company.
6
H & H IMPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOVEMBER 30, 2008
NOTES TO UNAUDITED FINANCIAL STATEMENTS
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
INCOME TAXES
Income taxes are accounted for in accordance with SFAS No. 109, Accounting for
Income Taxes. SFAS No. 109 requires the recognition of deferred tax assets and
liabilities to reflect the future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. Measurement of
the deferred items is based on enacted tax laws. In the event the future
consequences of differences between financial reporting bases and tax bases of
the Company's assets and liabilities result in a deferred tax asset, SFAS No.
109 requires an evaluation of the probability of being able to realize the
future benefits indicated by such assets. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some or the
entire deferred tax asset will not be realized.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or market, and
include finished goods, components and raw materials.
REVENUE RECOGNITION
The Company will recognize revenue when:
o Persuasive evidence of an arrangement exists;
o Shipment has occurred;
o Price is fixed or determinable; and
o Collectability is reasonably assured
The Company closely follows the provisions of Staff Accounting Bulletin No. 104
as described above. For the three month periods ended November 30, 2008 and 2007
and the period from November 20, 2006 (inception) through August 31, 2008 the
Company has recognized minimal revenues.
7
H & H IMPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOVEMBER 30, 2008
NOTES TO UNAUDITED FINANCIAL STATEMENTS
EARNINGS (LOSS) PER SHARE
The financial statements are presented in accordance with Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share". Basic earnings
per share is computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflect the potential
dilution from the exercise or conversion of securities into common stock.
NOTE 3 - EQUITY TRANSACTIONS
- ----------------------------
During the year ended February 29, 2008, the Company issued 900,000 shares of
common stock for services rendered at a value of $2,064.
During the year ended February 29, 2008, the Company issued 2,180,000 shares of
common stock to an initial investor for cash of $5,000.
During the year ended February 29, 2008, the Company issued 150,000 shares of
common stock to directors for services rendered at a value of $3,750.
During the year ended February 29, 2008, the Company issued 1,080,000 shares of
common stock at $.025 per share, for a total of $27,000.
During the three months ended May 31, 2008 the Company issued 840,000 shares of
common stock at $.025 per share, for a total of $21,000.
During the three months ended May 31, 2008 the Company incurred costs to file
its registration statement of $14,000. These costs are offset against additional
paid in capital.
During the three months ended August 31, 2008 the Company issued 2,375 shares of
Series A Convertible Preferred Stock at $15.00 per share, for a total of
$35,625.
During the three months ended November 30, 2008 the Company issued 1,750 shares
of Series A Convertible Preferred Stock at $15.00 per share, for a total of
$26,250.
NOTE 4 - INCOME TAXES
- ---------------------
For income tax purposes, the Company has elected to capitalize start-up costs
incurred during the period from November 20, 2006 (inception) through November
30, 2008 totaling $44,507. The start-up costs are being amortized over sixty
months beginning in the year of initial operations.
8
H & H IMPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOVEMBER 30, 2008
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 5 - CONCENTRATION OF CREDIT RISK
- -------------------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash deposits. Accounts at each institution
are insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000.
At November 30, 2008, the Company had no amounts in excess of FDIC insured
limit.
NOTE 6 - NET LOSS PER SHARE
- ---------------------------
The Company's basic and diluted net loss per share amounts have been computed by
dividing the results by the weighted average number of outstanding common
shares. The Company currently has 412,500 common shares equivalents.
The following reconciles amounts reported in the financial statements:
Nine Month Nine Month
Period ended Period ended
November 30, November 30,
2008 2007
------------ ------------
Net loss ............................... $ (38,393) $ (2,064)
=========== ===========
Denominator for basic loss per share -
Basic Weighted average shares .......... 5,120,764 900,000
Denominator for diluted loss per share -
Diluted Weighted average shares ........ 5,219,309 900,000
Basic and diluted loss per common share
$ (.01) $ (.00)
=========== ===========
NOTE 7 - GOING CONCERN
- ----------------------
As reflected in the accompanying financial statements, the Company had a net
loss for the nine months ended November 30, 2008 of $38,393, and a deficit
accumulated from inception to November 30, 2008 of $44,507. At November 30,
2008, the Company has minimal operating revenues. The ability of the Company to
continue as a going concern is dependent on the Company's ability to further
implement its business plan and raise capital. The financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
The Company is currently a development stage company and its continued existence
is dependent upon the Company's ability to resolve its liquidity problems,
principally by obtaining additional debt financing and/or equity capital. The
Company has yet to generate a significant internal cash flow, and until sales of
products commence, the Company is highly dependent upon debt and equity funding,
should continuing debt and equity funding requirements not be met the Company's
operations may cease to exist.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD LOOKING INFORMATION
The following discussion and analysis of the Company's financial
condition and results of operations should be read with the condensed financial
statements and related notes contained in this quarterly report on Form 10-Q
("Form 10-Q"). All statements other than statements of historical fact included
in this Form 10-Q are, or may be deemed to be, forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements involve known and unknown
risks, uncertainties and other factors that may cause the Company's actual
results, levels of activity, performance or achievements to be materially
different than any expressed or implied by these forward-looking statements. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," "continue," or the negative of these terms
or other comparable terminology. Important factors that could cause actual
results to differ materially from those discussed in such forward-looking
statements include: 1. General economic factors including, but not limited to,
changes in interest rates and trends in disposable income; 2. Information and
technological advances; 3. Cost of products sold; 4. Competition; and 5. Success
of marketing, advertising and promotional campaigns. The Company is subject to
specific risks and uncertainties related to its business model, strategies,
markets and legal and regulatory environment. You should carefully review the
risks described in this Form 10-Q and in other documents the Company files from
time to time with the SEC. You are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date of this Form 10-Q.
The Company undertakes no obligation to publicly release any revisions to the
forward-looking statements to reflect events or circumstances after the date of
this document.
OVERVIEW
We were formed in November 2006 to purchase and sell at wholesale
women's handbags. The objective of our company is to successfully operate a
wholesale handbag company for a profit. However, since we are in the
developmental stage and have recently introduced products into the marketplace,
we can not assure you that we will achieve this objective.
To date substantially all of our activities have been related to our
formation of our business, formulation of our business plan and initial start-up
operations such as investigating sources of supply for product, investigating
potential distribution channels for our products and development of our proposed
financing. Our ability to proceed with our plan to enter the commercial
marketplace with our initial product depends upon our obtaining adequate
financial resources. As of November 30, 2008, we had not incurred any material
costs or expenses other than those associated with these activities.
On September 22, 2008 the Company made its first purchase of
merchandise for $10, 300. As of November 30, 2008 all of this merchandise has
been sold.
10
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended November 30, 2008, working capital
increased $23,339 to a surplus of $62,182 from a surplus of $38,843. The primary
reason for the increase was the increase in cash of 32,363 offset by an increase
in accounts payable of $3,381. During this same period, stockholders' equity
increased $30,482 to $62,182 from $31,700. The increase in stockholders' equity
is primarily due to the net loss for the period of ($38,393) and the costs of
the registration statement of $14,000, offset by the common stock issued for
cash of $21,000 and the preferred stock issued for cash of $61,875.
There are no assurances that the Company will be successful in
achieving profitable operations or continue as a going concern.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Due to the nature of our short-term investments, we believe that we are
not subject to any material market risk exposure. We do not have any foreign
currency or other derivative financial instruments.
ITEM 4T. CONTROLS AND PROCEDURES.
An evaluation was carried out under the supervision and with the
participation of our management, including our Chief Executive Officer ("CEO")
and our Chief Financial Officer ("CFO"), of the effectiveness of our disclosure
controls and procedures as of November 30, 2008. Based on this evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of November 30, 2008.
No change in internal control over financial reporting occurred during
the quarter ended November 30, 2008 that has materially affected, or is
reasonably likely to materially affect, internal control over financial
reporting.
PART II - OTHER INFORMATION
ITEM 1A. RISK FACTORS
An investment in our securities involves a high degree of risk. There
have been no material changes to the risk factors previously disclosed in the
registration statements on Form S-1 (File No. 333-150419) filed in connection
with our public offering. You should consider carefully all of the material
risks described in such registration statement before making a decision to
invest in our securities. If any of the events described therein occur, our
business, financial conditions and results of operations may be materially
adversely affected. In that event, the trading price of our securities could
decline, and you could lose all or part of your investment.
11
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS.
Unregistered sale of equity securities.
None
Use of proceeds from initial public offering.
Our Registration Statement on Form S-1 (Commission File No. 333-150419)
became effective on June 6, 2008. We registered 40,000 shares of Series A
Convertible Preferred Stock for sale by the Company for the aggregate price of
$600,000 and also registered the 4,000,000 shares of our Common Stock into which
the shares of our Series A Convertible Preferred Stock may be converted. Each
share of Series A Convertible Preferred Stock may be converted into 100 shares
of our common stock. The shares were offered by our President. There were no
fees, commissions or expenses paid to underwriters or finders' in connection
with the offering. The offering was commenced on June 6, 2008 and terminated on
December 22, 2008. We sold 4,125 of the 4,000,000 shares of Series A Convertible
Preferred Stock registered in the offering and received the offering price of
$61,875. We paid other expenses in connection with the offering of $14,000 and
the net proceeds to us were $47,875. As of November 30, 2008 the net proceeds
were used as follows:
Temporary Investments $10,275
Working capital $37,600
$4,500 of the net proceeds was paid directly or indirectly, to our
officers, directors or their associates or to persons owning 10% or more of any
class of our equity securities or to any of our affiliates.
ITEM 6. EXHIBITS
The following exhibits are furnished with this report:
31.1 Certification of President, Principal Financial and Accounting
Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1 Certification of President, Principal Financial and Accounting
Office Pursuant to Section 906 of the Sarbanes-Oxley Act
12
SIGNATURES
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, thereunto duly authorized.
H & H IMPORTS, INC.
January 5, 2009 By: /s/ Francis A. Rebello
--------------------------
Francis A. Rebello, President
(Chief Executive Officer and Chief Financial Officer)
13