UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange
Act Of 1934
For the quarterly period ended March 31, 2007
[ ] Transition Report Under Section 13 Or 15(d) Of The Securities Exchange
Act Of 1934
For the transition period ________ to ________
Commission file number 000-21753
LASALLE BRANDS CORPORATION
Name of Small Business Issuer in Its Charter
NEVADA 88-0263701
State of Incorporation I.R.S. Employer
Identification No.
7702 E Doubletree Ranch Suite 300
SCOTTSDALE, AZ 85258
Address of Principal Executive Offices Zip code
480-905-5550
Issuer's Telephone Number
Securities registered under Section 12(b) of the Act:
NONE
Securities registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE Title of class
Check whether the issuer: (1) filed all reports required to be filed by
Section13 or 15(d) of the Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation SB is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-QSB
or any amendments to this Form 10-QSB [ ]
The number of shares outstanding of the issuer's only class of Common Stock
$0.001 par value was 1,399,293 on July 9, 2007
INDEX
Part I FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet as of March 31, 2007 (unaudited) 3
Consolidated Statements of Operations accumulated from date
of inception and the three month periods ended March 31, 2007
and 2006 (unaudited) 4
Consolidated Statements of Cash Flows accumulated from date
of inception and the three-month periods ended March 31, 2007
and 2006 (unaudited) 5
Notes to the Consolidated Financial Statements 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITIONS 15
Item 3. CONTROL AND PROCEDURES 18
Part II OTHER INFORMATION
1. LEGAL PROCEEDINGS 18
2. CHANGES IN SECURITIES 18
3. DEFAULT UPON SENIOR SECURITIES 18
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
5. OTHER INFORMATION 18
6. EXHIBITS AND REPORTS ON FORM 8K 18
Signatures 19
2
LaSalle Brands Corporation
(A Development Stage Company)
Consolidated Balance Sheet
(Unaudited)
March 31, 07
------------
ASSETS
Current Assets
Cash $ 986
-----------
Total Cash 986
Accounts receivable --
Deposits 450
-----------
Total Current Assets 1,436
Property and Equipment 2,137
-----------
Total Assets $ 3,573
===========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities
Accounts Payable $ 568,572
Accrued Liabilities 221,208
Notes Payable (current) 361,635
-----------
Total Current Liabilities 1,151,415
Total Liabilities 1,151,415
Stockholder's Deficit
Common stock, 10,000,000 shares authorized, par
value of $0.001, 1,369,293 issued and
outstanding 1,369
Additional paid-in-capital 7,357,608
Deficit Accumulated in the Development Stage (8,506,819)
-----------
Total Stockholder's Deficit (1,147,842)
-----------
Total Liabilities and Stockholder's Deficit $ 3,573
===========
See accompanying notes to unaudited consolidated financial statements
3
LaSalle Brands Corporation
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
Accumulated from
date of
inception to Three Months Ended Three Months Ended
March 31, 2007 March 31, 2007 March 31, 2006
-------------- -------------- --------------
$ $ $
Revenue 60,505 0 50,000
Cost of sales -- -- --
---------- ---------- ----------
Total Gross Profit 60,505 0 50,000
---------- ---------- ----------
Expenses
General and administrative 8,407,261 11,723 853,190
Interest 160,064 6,668 20,600
---------- ---------- ----------
Total Expenses 8, 567,325 18,391 873,790
---------- ---------- ----------
Net Loss from Operations (8,506,820) (18,391) (823,790)
---------- ---------- ----------
Net Loss for the Period (8,506,820) (18,391) (823,790)
========== ========== ==========
Net Loss Per Share - Basic and Diluted $ (15.118) $ (0.013) $ (2.113)
========== ========== ==========
Weighted Average Number of Shares
Outstanding 562,680 1,369,293 389,951
========== ========== ==========
See accompanying notes to unaudited consolidated financial statements
4
LaSalle Brands Corporation
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
Accumulated from
date of Three months Three months
inception to ended ended
March 31, 2007 March 31, 2007 March 31, 2006
-------------- -------------- --------------
$ $ $
Cash Flows Used In Operating Activities
Net loss (8,506,820) (18,391) (823,790)
Depreciation and amortization 1,019 140 140
Shares issued as compensation for services 5,896,901 -- 628,000
Shares issued for employee compensation 10,000 -- --
Expense for employee stock options 168,000 -- --
Debt conversion cost 707,283 -- --
Amount of beneficial conversion feature of
convertible debt 50,000 -- --
Bad debt expense 50,087 -- --
Write off of pre-acquisition payables (44,815) -- --
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (116,787) -- (3,060)
(Increase) decrease in notes receivable -- -- --
(Increase) decrease in prepaid expenses and
deposits (182) -- 268
Increase (decrease) in accounts payable and
accrued liabilities 1,141,244 (66,307) 113,005
Increase (decrease) in deferred revenue -- -- (10,000)
---------- ---------- ----------
Net Cash Provided by (Used in) Operating Activities (644,070) (84,558) (95,437)
---------- ---------- ----------
Cash Flows Used in Investing Activities
Acquisition of computer equipment (3,156) -- --
Restricted cash (2,990) -- --
Cash from acquisition of UltraGuard 5,678 -- --
---------- ---------- ----------
Net Cash Provided by (Used) in Investing Activities (468) -- 0
---------- ---------- ----------
Cash Flows From Financing Activities
Proceeds from subscribed shares 194,400 -- 10,000
Increase (decrease) in loans/notes from unrelated
parties 361,644 85,000 (17,900)
Proceeds from exercise of stock options 89,480 -- 89,480
---------- ---------- ----------
Net Cash Provided by (Used in) Financing Activities 645,524 85,000 81,580
---------- ---------- ----------
Increase (Decrease) in Cash 986 442 (13,857)
Cash - Beginning of the Period -- 544 14,037
---------- ---------- ----------
Cash - End of the Period 986 986 180
========== ========== ==========
See accompanying notes to unaudited consolidated financial statements
5
LaSalle Brands Corporation
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation, Nature of Operations and Continuance of Business
The accompanying interim financial statements have been prepared in accordance
with the rules and regulations of the Securities and Exchange Commission for
interim reporting. Accounting policies utilized in the preparation of financial
information herein presented are the same as set forth in the annual financial
statements of LaSalle Brands Corporation (the "Company"). Certain disclosures
and information normally included in financial statements have been condensed or
omitted. In the opinion of the Company, these financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the interim financial statements. Interim results of
operations are not indicative of the results of operations for the full year.
These consolidated financial statements have been prepared in accordance with
United States generally accepted accounting principles, on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. As at June 30,
2005, the UltraGuard Water Systems Corp has not recognized significant revenue,
had a working capital deficit of $863,409, and had accumulated operating losses
of $7,051,421 since inception. The combined company has yet to generate
significant revenue and will require additional capital to do so. As of December
31, 2006, the Company had a working capital deficit of $1,131,728 and
accumulated operating losses of $8,488,428. The continuation of the Company is
dependent upon the continuing financial support of creditors and stockholders
and obtaining short-term and long-term financing, the completion of product
development and achieving profitability. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. These
financial statements do not include any adjustments that might arise from this
uncertainty. Management is attempting to raise debt and equity capital and use
the proceeds to develop restaurant concepts and explore acquisitions of other
existing restaurant concepts. However, there is no assurance that the Company
will be successful in executing its business plan.
On September 21, 2006, the Company's Board of Directors approved a one for five
(1:5) reverse split of the Company's common stock, an increase in the Company's
authorized shares from 100 million to 200 million, to change the Company's name
to LaSalle Brands Corp., and authorized 10 million shares of a new class of
Preferred Series stock at $10 per shares having a conversion rate of one
preferred share into four common shares and each share paying a dividend of 10%
APR. Shareholders representing a majority of 84.5% of the shares outstanding
have voted in favor of the Boards decision.
On June 18, 2007, the Company's Board of Directors approved a one for twenty
(1:20) reverse split of the Company's common stock. Shareholders representing a
majority of the shares outstanding have voted in favor of the Boards decision.
The Company is negotiating with several ice cream distribution companies with
the intent to acquire them. The reverse split and name change is a result of
these negotiations as the company moves closer to definitive purchase agreements
with the distribution companies. On August 10, 2007 the Company executed a
purchase agreement with LaSalle Brands, Inc.
2. Significant Accounting Policies
CONSOLIDATED FINANCIAL STATEMENTS
These financial statements include the accounts of the Company and RCI. All
significant inter-company transactions and balances of the subsidiaries, Q's
Franchise Company and Fit `N Healthy Franchise Company, have been eliminated.
On July 11, 2005 ("the acquisition date"), LaSalle Brands Corporation
("LaSalle") acquired all of the outstanding stock of Restaurant Companies
International, Inc ("RCI"). For accounting purposes, the acquisition was treated
as the acquisition of LaSalle by RCI with RCI as the accounting acquirer
(reverse acquisition). As a result, the historical financial statements prior to
the acquisition date are those of RCI from July 1, 2005 (date of inception of
RCI).
6
LaSalle Brands Corporation
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, in banks and all highly liquid
investments with maturity of three months or less when purchased.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed on a
straight-line method using an estimated useful life of five years for furniture
and three years for computer equipment.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 104, "Revenue Recognition." Revenue
will be recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, the service is performed, and collectibility
is reasonably assured. Deferred revenue represents deposits received for the
development of restaurants sites. Those deposits are recognized as revenue when
the respective stores open.
ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles used in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and accompanying notes. Actual results
could differ from these estimates.
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
The Company computes net income (loss) per share in accordance with SFAS No.
128, "Earnings per Share". This statement requires presentation of both basic
and diluted earnings per share (EPS) on the face of the income statement. Basic
EPS is computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of common shares outstanding
(denominator) during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period including stock options,
using the treasury stock method, and convertible preferred stock, using the
if-converted method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from
the exercise of stock options or warrants. The Company had no convertible debt
as of March 31, 2007.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock based compensation in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation." This statement requires that
stock awards granted subsequent to January 1, 1995, be recognized as
compensation expense based on their fair value at the date of grant.
Alternatively, a company may account for granted stock awards under Accounting
Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to
Employees," and disclose pro forma income amounts which would have resulted from
recognizing such awards at their fair value. Prior to January 1, 2006 the
Company elected to account for stock-based compensation for employees under APB
No. 25 and make the required pro forma disclosures for compensation expense in
accordance with SFAS No. 123. The Company accounts for stock issued for services
to non-employees in accordance with SFAS No. 123. Compensation expense is based
on the fair market value of the stock award or fair market value of the goods
and services received whichever is more reliably measurable.
Effective January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based Payment ("SFAS 123R"), which
requires the Company to measure the cost of employee services received in
exchange for all equity awards granted including stock options based on the fair
market value of the award as of the grant date. SFAS 123R supersedes Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123") and Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"). The Company has adopted
SFAS 123R using the modified prospective method. Accordingly, prior period
amounts have not been restated. Under the modified prospective method, stock
options awards that are granted, modified or settled after December 31, 2005
will be valued at fair value in accordance with provisions of SFAS 123R and
recognized on a straight line basis over the service period of the entire award.
At December 31, 2005, all outstanding stock options were fully vested.
The Company issued 8,000 options to one employee who was fully vested during the
year ending December 31 2006. No shares have been issued in 2007. In accordance
with SFAS No. 123 (revised 2004), the Black Scholes Method was used in valuing
the options that were granted. Through the Black Scholes Method, it was
determined that the 8,000 options were valued at $88,000. The following table
indicates the input values used. All options were fully vested when granted.
7
Weighted
Average
Stock Price Option Shares Exercise Price
----------- ------------- --------------
Balance, December 31, 2005 0 $ 0.00
Granted $11.00 8,000 $11.00
Exercised $22.00 8,000 $11.00
Expired, or Terminated 0 $ 0.00
Balance, December 31, 2006 0 $ 0.00
Balance, March 31, 2007 0 $ 0.00
2006 2007
------- ------
Exercisable at the end of the year 0 0
Weighted average fair value of
each option granted during the year $ 21.00 $ 0.00
Intrinsic value of the options
when exercised $88,000 $ 0.00
There are no options outstanding and exercisable as of March 31, 2007.
LONG-LIVED ASSETS
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
establishes a single accounting model for long-lived assets to be disposed of by
sale including discontinued operations. SFAS 144 requires that these long-lived
assets be measured at the lower of the carrying amount or fair value less cost
to sell, whether reported in continuing operations or discontinued operations.
FINANCIAL INSTRUMENTS
The fair value of cash, accounts receivable, accounts payable, accrued
liabilities and amounts owing to related parties approximates their carrying
value due to the immediate or short-term maturity of these financial
instruments. The Company is not exposed to significant interest, currency or
credit risks arising from these financial instruments.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit risk
consist principally of cash. Cash was deposited with a high credit quality
institution.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN
48"), which clarifies the accounting for uncertainty in income taxes recognized
in an enterprise's financial statements in accordance with SFAS No. 109,
"Accounting for Income Taxes." FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. FIN 48, which is
effective for fiscal years beginning after December 15, 2006, also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. Based on the Company's evaluation,
there are no significant uncertain tax positions requiring recognition in our
financial statements or adjustments to deferred tax assets and related valuation
allowance. There was no cumulative effect of the change in accounting principle
resulting in an adjustment to accumulated deficit at January 1, 2007. The
Company does not expect any significant changes in unrecognized tax benefits
during the next twelve months.
The Company recognizes interest and penalties related to uncertain tax positions
as part of income tax expense. For the three months ended March 31, 2007, the
Company did not accrue any interest or penalties into income tax expense.
The tax years 2005 through 2006 remain open to examination by the major federal
and state taxing jurisdictions to which the Company is subject.
In September 2006, the FASB issued Statement No. 157, "Fair Value Measurements"
("FASB No. 157"). FASB No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP), and
expands disclosures about fair value measurements. FASB No. 157 applies under
other accounting pronouncements that require or permit fair value measurements,
8
the FASB having previously concluded in those accounting pronouncements that
fair value is the relevant measurement attribute. Accordingly, this Statement
does not require any new fair value measurements.
In December 2006, the FASB issued FASB Staff Position EITF 00-19-2, Accounting
for Registration Payment Arrangements ("FSP EITF 00-19-2"). FSP EITF 00-19-2
specifies that the contingent obligation to make future payments or otherwise
transfer consideration under a registration payment arrangement, whether issued
as a separate agreement or included as a provision of a financial instrument or
other agreement, should be separately recognized and measured in accordance with
FASB Statement No. 5, Accounting for Contingencies. A registration payment
arrangement is defined in FSP EITF 00-19-2 as an arrangement with both of the
following characteristics: (1) the arrangement specifies that the issuer will
endeavor (a) to file a registration statement for the resale of specified
financial instruments and/or for the resale of equity shares that are issuable
upon exercise or conversion of specified financial instruments and for that
registration statement to be declared effective by the US SEC within a specified
grace period, and/or (b) to maintain the effectiveness of the registration
statement for a specified period of time (or in perpetuity); and (2) the
arrangement requires the issuer to transfer consideration to the counterparty if
the registration statement for the resale of the financial instrument or
instruments subject to the arrangement is not declared effective or if
effectiveness of the registration statement is not maintained. FSP EITF 00-19-2
is effective for registration payment arrangements and the financial instruments
subject to those arrangements that are entered into or modified subsequent to
December 21, 2006. For registration payment arrangements and financial
instruments subject to those arrangements that were entered into prior to the
issuance of FSP EITF 00-19-2, this guidance is effective for financial
statements issued for fiscal years beginning after December 15, 2006, and
interim periods within those fiscal years. We do not expect the adoption of FSP
EITF 00-19-2 to have a material impact on our consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities ("SFAS 159") which permits entities
to choose to measure many financial instruments and certain other items at fair
value that are not currently required to be measured at fair value. SFAS 159
will be effective for us on January 1, 2008. We are currently evaluating the
impact of adopting SFAS 159 on our financial position, cash flows, and results
of operations.
LOSS CONTINGENCIES
The Company estimates a loss contingency in accordance with Statement of
Financial Accounting Standards ("SFAS" No. 5 "Accounting for Contingencies". The
Company accrues the loss by a charge to income when there is information
available that it is probable that an asset has been impaired or a liability has
been incurred and the amount of the loss can be reasonably estimated.
GOODWILL AND OTHER INTANGIBLES
In July 2001, the Financial Accounting Standards Board ("FASB") issued statement
of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets," which is effective for fiscal years beginning after December
15, 2001. SFAS 142 prohibits the amortization of goodwill and intangible assets
with indefinite useful lives but requires that these assets be reviewed for
impairment at least annually or on an interim basis if an event occurs or
circumstances change that could indicate that their value has diminished or been
impaired. Other intangible assets will continue to be amortized over their
estimated useful lives. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments of goodwill.
INCOME TAXES
Potential benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted SFAS No. 109
"Accounting for Income Taxes" as of its inception. Pursuant to SFAS No. 109, the
Company is required to compute tax asset benefits for net operating losses
carried forward. Potential benefit of net operating losses have not been
recognized in these financial statements because the Company cannot be assured
it is more likely than not it will utilize the net operating losses carried
forward in future years.
9
LaSalle Brands Corporation
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)
3. Property and Equipment
Property and equipment is stated at cost less accumulated depreciation.
March 31, March 31,
2007 2006
Accumulated Net Book Net Book
Cost Depreciation Value Value
$ $ $ $
Property and equipment 3,156 1,019 2,137 2,695
===== ===== ===== =====
4. Notes Payable
a) Prior to the merger with Restaurant Companies International, Inc. in June
2005, Restaurant Companies International, Inc. entered into a note payable
agreement totaling $100,000 signed on April 2, 2005, for $100,000 principal
with 8% interest per annum and matures in one year. Interest is accrued and
payable quarterly. Additional terms included the issuance of 5% of the
issued and outstanding shares of the membership interest of Q's Franchise
Company, LLC with an option to convert the sums due to an additional 5% of
the issued and outstanding shares of the membership interest. The holder
shall also receive 13,333 shares of the common stock of the Company.
b) On August 15, 2005, a debenture payable totaling $50,000 was acquired with
the purchase of Fit & Healthy, a restaurant concept with no operations with
quarterly interest of $1,250. Principal was due on December 1, 2005. The
holder has the option to convert all or part of the principal amount and
accrued interest into common stock, par value$0.001 per share at a price
per share equal to 50% of the closing bid price of the common stock on the
date that the company receives notice of conversion. The Company recognized
the value of the beneficial conversion feature as $50,000. Since the
obligation matured in 2005, the full amount of the discount was amortized
as interest expense in the year ended December 31, 2005. The Company is
currently in default of this debenture as no payments of interest or
principal have been made. Interest will continue to accrue until the
debenture is paid or converted into common stock.
c) On November 8, 2005, a note payable totaling $100,000 and bearing 12%
interest per annum was received. Principal is due on November 6, 2006.
Interest is accrued and payable on November 6, 2006. The Company is
currently in default of this note as no payments of interest or principal
have been made. Interest will continue to accrue until the note is settled.
d) On December 1, 2005, a cash advance totaling $25,000 bearing no interest
was received. The principal of $25,000 was due in January 2006. The
principal was repaid by a related party on behalf of LaSalle and converted
to a cash advance owing to the related party. The cash advance has now been
settled by the issuance of stock for the debt.
e) In January 2006, three notes payable totaling $6,900 and in March 2006, one
note payable of $200 was received bearing 10% interest per annum. Principal
and interest are payable on demand.
f) In June 2006, a note payable totaling $8,000 and bearing 12% interest per
annum was received. Principal and interest are payable on demand.
g) In December 2006, amounts owing to a former employee were converted to a
non-interest bearing note payable for $11,535. The note is payable on
demand.
h) In March 2007, accounts payable owing to American Restaurant Development
Company were transferred to a note payable to Jon Payne totaling $85,000
and bearing 8% interest per anum. Principal and interest are due March
2008.
10
LaSalle Brands Corporation
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)
Type Description Date Principal Interest Due Date
- ---- ----------- ---- --------- -------- --------
Note Payable Dr. Jeffrey Martin 4/2/2005 $100,000 8%/Annum 7/2/2006
Debenture Jon Payne 8/15/2005 $ 50,000 10%/Annum 12/1/2005
Note Payable TH & TW LLC 11/8/2005 $100,000 12%/Annum 11/8/2006
Note Payable Kenneth Fielding 1/26/2006 $ 7,100 10%/Annum On demand
Note Payable Roger Enfield 6/26/2006 $ 8,000 12%/Annum On demand
Note Payable Curtis Patterson 12/31/2006 $ 11,535 None On demand
Note Payable Jon Payne 3/31/2007 $ 85,000 8%/Annum 3/31/2008
5. Common Stock
a) Stock Split
On June 13, 2005, the Board of Directors approved a one for one hundred
reverse stock split of common shares. The Company issued one share for each
one hundred common shares outstanding effective June 13, 2005. All per
share amounts have been retroactively adjusted to reflect the reverse stock
split. The number of shares outstanding pre-reverse split was 60,891,806.
After giving effect to the reverse split the outstanding shares totalled
609,021.
On September 21, 2006, the Board of Directors approved a one for five
reverse stock split of common shares. The Company issued one share for each
five common shares outstanding effective September 21, 2006. All per share
amounts have been retroactively adjusted to reflect the reverse stock
split. The number of shares outstanding pre-reverse split was 93,974,913.
After giving effect to the reverse split the outstanding shares totalled
18,795,136.
On June 18, 2007, the Board of Directors approved a one for twenty reverse
stock split of common shares. The Company issued one share for each twenty
common shares outstanding effective June 18, 2007. All per share amounts
have been retroactively adjusted to reflect the reverse stock split. The
number of shares outstanding pre-reverse split was 27,385,853. After giving
effect to the reverse split the outstanding shares totalled 1,369,293.
b) On November 26, 2003, the Company adopted The Incentive Plan ("the Plan")
that was registered with the Securities Exchange Commission on December 1,
2003 on Form S-8. Under the Plan, the Company may issue 5,000,000 shares of
common stock or grant options. During the year ended December 31, 2004, the
Company issued all remaining shares pursuant to the Plan.
c) Independents Contractors/Consulting Plan
On July 27, 2005 the Company adopted the Independent Contractors/Consulting
Plan (the "Plan"). Under the Plan, the Company may issue 5,000,000 common
shares or grant options. The Company issued all remaining shares pursuant
to the Plan.
On February 9, 2006 the Company adopted the Qualified Stock Option Plan
(the "Plan"). Under the Plan, the Company may issue 5,000,000 common shares
or grant options. The value of the shares granted is determined based on
the trading price of the company's common stock at the date of grant. The
Company issued 8,000 options to one employee during the quarter ending
March 31, 2006. The Company expensed the fair value of the options of
$168,000 in the quarter ended March 31, 2006. The options vested
immediately and were exercised within the period. There are no options
outstanding at December 31, 2006.
On July 18, 2006 the Company adopted the 2006 Incentive Plan allowing the
Company to issue 10,000,000 common shares or grant options.
11
LaSalle Brands Corporation
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)
6. Legal Proceedings/Contingency Accrual
a) The Company has made a provision for a loss of $27,000 in a claim filed
with the British Columbia Labor Relations (LRB) Board, made by a former
employee for wrongful dismissal. The loss amount was the amount determined
by the LRB. This amount represented the total probable loss of the lawsuit
and has been recorded as an accrued liability as of December 31, 2004 and
2003. On October 20, 2005 the employee filed a lawsuit in the Supreme Court
of British Columbia against the Company and a former subsidiary; UV Systems
Technology Inc whom the former employee was employed by, claiming wrongful
dismissal. UV Systems Technology Inc has filed a Statement of Defense.
Counsel for the former employee informed the Company that counsel would be
filing an amended Statement of Claim. The amount of the claim is for one
year of salary, which would represent CAN$90,000 (US$77,193) including the
$27,000 determined for the LRB. Subsequent to the year-end, on February 28,
2006, the Company appeared in BC Supreme Court at a Rule 18A hearing at
which the lawyers for the plaintiff and the Company each presented evidence
to the Court. The Judge reserved his decision on the matter until April
2006. In April 2006 the Judge found in favour of the Company. The plaintiff
appealed and lost in May of 2007. The plaintiff has since re-appealed.
b) On October 4, 2005, the Company completed a Purchase Agreement with
Franchise Capital Corporation. LaSalle purchased from Franchise Capital its
interest in Kokopelli Sonoran Grill, Comstock Jakes, Cousin Vinnie's
Italian Diner, and Kirby Foo's Asian Grill. As per the Agreement, LaSalle
will pay $200,000 cash and 3,583,667 shares of LaSalle common stock. The
Company has not paid the cash, but has funded approximately $150,000 of the
Kokopelli and Comstock Jake's operations. Within the three months ending
September 30, 2006 the Company received 80,000 shares of restricted common
stock in Great American Food Chain in exchange for its investment in
Kokopelli. The Company is seeking to acquire Comstock Jake's from its
creditors.
12
LaSalle Brands Corporation
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)
c) On December 29, 2005, the Company and Franchise Capital Corporation agreed
to rescind the October Purchase Agreement and entered into a Funding
Agreement. The Company intended to provide Franchise Capital Corporation
with a total $600,000 in funding for the operation of Kokopelli and
Comstock. The Company had funded approximately $150,000 and had agreed to
fund the balance of approximately $450,000 with monthly payments of
$100,000 beginning January 25, 2006. In return for the funding of operation
for Kokopelli and Comstock Jake's, Franchise Capital Corporation was to pay
the Company an amount equal to 50% of the profits Franchise Capital
Corporation receives from its ownership in Kokopelli and Comstock Jake's
for the periods commencing on July 1, 2006 and ending on June 30, 2011. If
the Company failed to provide the full amount of funding but at least
$300,000, the profit payments will be reduced to 25%. If the Company failed
to provide at least $300,000 of funding, then the Franchise Capital
Corporation will have no obligation to pay any profit payments to the
Company. The Company did fail on its obligation. As a result of the
default, the Company has released all claims it may have related to
Kokopelli Franchise Company, and Franchise Capital Corporation. However,
the Company did receive 80,000 shares of restricted common stock in Great
American Food Chain for its investment in Kokopelli. Great American Food
Chain acquired Kokopelli from Franchise Capital Corporation.
d) On November 1, 2005 the Company's board of directors approved a purchase
agreement with Pasta Pranzo, LLC. The members of Pasta Pranzo, LLC approved
the purchase agreement on the same date. The date to close the purchase was
set for January 1, 2006. The property to be acquired was the Pasta Pranzo
System including, without limitation, the Marks and Recipes of their
California operation. Pursuant to the terms of the purchase agreement,
$300,000 in common shares of the Company and a note for $300,000 was to be
exchanged for the aforementioned assets. Said shares shall be restricted.
The principal followed in determining the amount of consideration given was
based upon the current value and future revenue streams and the market
exposure in relation to the Company's current position and the restrictive
nature of the stock.
On December 28, 2005, the Company rescinded the agreement, cancelled the
issuance for $300,000 common shares, and cancelled the promissory note for
$300,000, effective the same day. The Company was unable to secure the
required financing to close on the purchase agreement.
13
LaSalle Brands Corporation
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)
7. Subsequent Events
On June 18, 2007, the Company's Board of Directors approved a one for twenty
(1:20) reverse split of the Company's common stock, and changed the Company's
name to LaSalle Brands Corporation. Shareholders representing a majority of the
shares outstanding have voted in favor of the Board's decision. The Company is
negotiating with several ice cream distribution companies with the intent to
acquire them. The reverse split and name change is a result of these
negotiations as the company moves closer to definitive purchase agreements with
the distribution companies. On August 10, 2007 the Company executed a purchase
agreement with LaSalle Brands, Inc.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITIONS
CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and notes and the information included under
the caption "Risk Factors" included elsewhere in this document. Except for
historical information, the following discussion contains forward-looking
statements that involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions and our current beliefs regarding
revenues we might earn if we are successful in implementing our business
strategies. See "Special Note Regarding Forward-Looking Statements" for further
information regarding forward-looking statements. Our actual results may differ
materially from the results discussed in the forward-looking statements as a
result of a number of factors, many of which are beyond our control, including
those factors discussed under "Risk Factors" and other headings in this
document, which could, among other things, cause the price of our common stock
to fluctuate substantially.
OVERVIEW
Consolidated balance sheets of LaSalle Brands Corporation and the related
consolidated statements of operations and cash flows and stockholders' equity,
include operations for the three month period ending March 31, 2007. We
generated no revenue for the three month period ending March 31, 2007.
We incurred aggregate net losses of approximately $18,391 for the period ending
March 31, 2007. We will likely continue to incur significant additional
operating losses as marketing efforts continue. Operating losses may fluctuate
from quarter to quarter as a result of differences in the timing of expenses
incurred and when revenue is recognized.
Total general and administrative operating expenses for the three months ending
March 31, 2007 were $11,723. This was primarily for consulting fees and
administrative cost.
We recorded a net loss for the three months ending March 31, 2007 of $18,391.
This loss was primarily due to administrative operating expenses and expense
related to various consultants. The consultants provide such services and advice
to the Company in business development, business strategy and corporate image
PLAN OF OPERATION
During fiscal year 2007, we plan to identify and acquire concepts. On August 10,
2007 we executed a Purchase Agreement to acquire 100% of the outstanding shares
of LaSalle Brands, Inc. We will have to raise additional funds in 2007 to
satisfy cash requirements and fund future acquisitions. As the Company grows,
additional employees will need to be added to support the business. In addition,
employees may be added through the acquisitions.
BASIS OF PRESENTATION
The financial statements include accounts of LaSalle Brands Corporation.
LIQUIDITY AND CAPITAL RESOURCES
The nature of our business may be expected to include a normal lag time between
the incurring of operating expenses and the collection of receivables. Currently
we are dependent on fund raising for working capital. In addition the Company
will need to raise funds to complete the LaSalle Brands, Inc. transaction.
In addition, we will require financing over and above our current resources to
sustain our operations and expand our marketing efforts. We cannot assure that
the additional financing can be obtained on a timely basis, on terms that are
acceptable or if at all.
We had cash and cash equivalents of $986 as of March 31, 2007. The Company
experienced a cash outflow of $84,558 from operating activities during the three
months ending March 31, 2007.
We expect that during 2007 we will continue to depend on receipt of additional
funds through public or private equity or debt sales or other lender financing
to fund the purchase of concepts, and general operational and sales expenses. We
actively continue to raise funds and seek sources of capital. Failure to receive
these funds may be expected to have a material adverse effect on our company.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America requires our
management to make certain 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. As such, in accordance with
the use of accounting principles generally accepted in the United States of
America, our actual realized results may differ from management's initial
estimates as reported. A summary of our significant accounting policies are
detailed in the notes to the financial statements, which are an integral
component of this filing.
15
CERTAIN RISK FACTORS AFFECTING OUR BUSINESS
Our business involves a high degree of risk. Potential investors should
carefully consider the risks and uncertainties described below and the other
information in this report before deciding whether to invest in shares of our
common stock. If any of the following risks actually occur, our business,
financial condition, and results of operations could be materially and adversely
affected. This could cause the trading price of our common stock to decline,
with the loss of part or all of an investment in the common stock.
WE HAVE A LIMITED OPERATING HISTORY AND THERE IS NO ASSURANCE THAT OUR COMPANY
WILL ACHIEVE PROFITABILITY. Until recently, we have had no significant
operations with which to generate profits or greater liquidity. We have not
generated a meaningful amount of operating revenue and we have a very limited
current operating history on which investors can evaluate our potential for
future success. Our ability to generate revenue is uncertain and we may never
achieve profitability. Potential investors should evaluate our company in light
of the expenses, delays, uncertainties, and complications typically encountered
by early-stage businesses, many of which will be beyond our control. These risks
include the following:
* lack of sufficient capital,
* unanticipated problems, delays, and expenses relating to acquisitions
of other businesses, concepts, or product development and
implementation,
* licensing and marketing difficulties,
* competition, and
* uncertain market acceptance of our products and services.
As a result of our limited operating history, our plan for growth, and the
competitive nature of the markets in which we may compete, our company's
historical financial data are of limited value in anticipating future revenue,
capital requirements, and operating expenses. Our planned capital requirements
and expense levels will be based in part on our expectations concerning
potential acquisitions, capital investments, and future revenue, which are
difficult to forecast accurately due to our company's current stage of
development. We may be unable to adjust spending in a timely manner to
compensate for any unexpected shortfall in revenue. Once we acquire new
restaurant concepts, product development and marketing expenses may increase
significantly as we expand operations. To the extent that these expenses precede
or are not rapidly followed by a corresponding increase in revenue or additional
sources of financing, our business, operating results, and financial condition
may be materially and adversely affected.
WE MAY NEED SIGNIFICANT INFUSIONS OF ADDITIONAL CAPITAL. Based upon our current
cash reserves and forecasted operations, we believe that we will need to obtain
outside funding. We may require significant additional financing in the future
in order to further satisfy our cash requirements. Our need for additional
capital to finance our business strategy, operations, and growth will be greater
should, among other things, revenue or expense estimates prove to be incorrect.
If we fail to arrange for sufficient capital in the future, we may be required
to reduce the scope of our business activities until we can obtain adequate
financing. We cannot predict the timing or amount of our capital requirements at
this time. We may not be able to obtain additional financing in sufficient
amounts or on acceptable terms, when needed, which could adversely affect our
operating results and prospects. Debt financing must be repaid regardless of
whether or not we generate profits or cash flows from our business activities.
Equity financing may result in dilution to existing shareholders and may involve
securities that have rights, preferences, or privileges that are senior to our
common stock.
WE WILL FACE A VARIETY OF RISKS ASSOCIATED WITH ESTABLISHING AND INTEGRATING NEW
JOINT VENTURES. The growth and success of our company's business will depend to
a great extent on our ability to find and attract appropriate restaurant
concepts with which to form joint ventures in the future. We cannot provide
assurance that we will be able to
* identity suitable restaurant concepts,
* form joint ventures on commercially acceptable terms,
* effectively integrate the operations of any joint ventures with our
existing operations,
* manage effectively the combined operations of the businesses,
* achieve our operating and growth strategies with respect to the new
joint ventures, or
* reduce our overall selling, general, and administrative expenses
associated with the new joint ventures.
16
The integration of the management, personnel, operations, products, services,
technologies, and facilities of any businesses that we associate ourselves with
in the future could involve unforeseen difficulties. These difficulties could
disrupt our ongoing businesses, distract our management and employees, and
increase our expenses, which could have a material adverse affect on our
company's business, financial condition, and operating results.
WE DEPEND ON OUR CURRENT MANAGEMENT TEAM. Our company's success will depend to a
large degree upon the skills of our current management team and advisors and
upon our ability to identify, hire, and retain additional senior management,
sales, marketing, technical, and financial personnel. We may not be able to
retain our existing key personnel or to attract and retain additional key
personnel. The loss of any of our current executives, employees, or advisors or
the failure to attract, integrate, motivate, and retain additional key employees
could have a material adverse effect on our company's business. We do not have
"key person" insurance on the lives of any of our management team.
OUR COMPANY MAY NOT BE ABLE TO MANAGE ITS GROWTH. We anticipate a period of
significant growth. This growth could cause significant strain on our company's
managerial, operational, financial, and other resources. Success in managing
this expansion and growth will depend, in part, upon the ability of our senior
management to manage effectively the growth of our company. Any failure to
manage the proposed growth and expansion of our company could have a material
adverse effect on our company's business.
THERE IS NO ASSURANCE THAT OUR FUTURE PRODUCTS AND SERVICES WILL BE ACCEPTED IN
THE MARKETPLACE. Our products and services may not experience broad market
acceptance. Any market acceptance for our company's products and services may
not develop in a timely manner or may not be sustainable. New or increased
competition may result in market saturation, more competitive pricing, or lower
margins. Further, overall performance and user satisfaction may be affected by a
variety of factors, many of which will be beyond our company's control. Our
company's business, operating results, and financial condition would be
materially and adversely affected if the market for our products and services
fails to develop or grow, develops or grows more slowly than anticipated, or
becomes more competitive or if our products and services are not accepted by
targeted customers even if a substantial market develops.
WE MAY FACE STIFF COMPETITION. There are existing companies that offer or have
the ability to develop products and services that will compete with those that
our company may offer in the future. These include large, well-recognized
companies with substantial resources and established relationships in their
respective industries. Their greater financial, technical, marketing, and sales
resources may permit them to react more quickly to emerging technologies and
changes in customer requirements or to devote greater resources to the
development, promotion, and sale of competing products and services. Emerging
companies also may develop and offer products and services that compete with
those offered by our company.
OUR COMMON STOCK MAY BE SUBJECT TO THE "PENNY STOCK" RULES AS PROMULGATED UNDER
THE EXCHANGE ACT. In the event that no exclusion from the definition of "penny
stock" under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") is available, then any broker engaging in a transaction in our company's
common stock will be required to provide its customers with a risk disclosure
document, disclosure of market quotations, if any, disclosure of the
compensation of the broker-dealer and its sales person in the transaction, and
monthly account statements showing the market values of our company's securities
held in the customer's accounts. The bid and offer quotation and compensation
information must be provided prior to effecting the transaction and must be
contained on the customer's confirmation of sale. Certain brokers are less
willing to engage in transactions involving "penny stocks" as a result of the
additional disclosure requirements described above, which may make it more
difficult for holders of our company's common stock to dispose of their shares.
THREE-MONTH PERIOD - MARCH 31, 2007
REVENUES. For the three months ending March 31, 2007, we reported no revenues as
compared to the three months ending March 31, 2006, where we reported revenues
of $50,000.
GENERAL AND ADMINISTRATIVE EXPENSE. For the three months ending March 31, 2007,
we reported G&A expenses of $11,723. This was primarily for consulting fees and
administrative cost as compared to the three months ending March 31, 2006 where
we reported G&A expenses of $853,190.
NET LOSS FOR THE PERIOD. For the three months ending March 31, 2007, we reported
a net loss of $18,391. This loss was primarily due to the expense related to,
administrative cost, interest, and various consultants. The consultants provide
such services and advice to the Company in business development, business
strategy, and corporate image as compared to the three months ending March 31,
2006 where we reported a net loss of $823,790.
NET LOSS PER SHARE. For the three months ending March 31, 2007, we reported a
net loss per share of ($0.013) as compared to the three months ending March 31,
2006 where we reported a net loss per share of ($3.180).
17
OFF-BALANCE SHEET ARRANGEMENTS AND AGGREGATE CONTRACTUAL OBLIGATIONS
None
ITEM 3. CONTROL AND PROCEDURES
Evaluation of disclosure controls and procedures
As at the end of the period covered by this report, the Company's Chief
Executive Officer and Chief Financial Officer carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure. Based on
the evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that, as at the end of the period covered by this report, the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed in the reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission's rules and forms and to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding
disclosure
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has made a provision for a loss of $27,000 in a claim filed with the
British Columbia Labor Relations (LRB) Board, made by a former employee for
wrongful dismissal. The loss amount was the amount determined by the LRB. This
amount represented the total probable loss of the lawsuit and has been recorded
as an accrued liability as of December 31, 2004 and 2003. On October 20, 2005
the employee filed a lawsuit in the Supreme Court of British Columbia against
the Company and a former subsidiary; UV Systems Technology Inc whom the former
employee was employed by, claiming wrongful dismissal. UV Systems Technology Inc
has filed a Statement of Defense. Counsel for the former employee informed the
Company that counsel would be filing an amended Statement of Claim. The amount
of the claim is for one year of salary, which would represent CAN$90,000
(US$77,193) including the $27,000 determined for the LRB. Subsequent to the
year-end, on February 28, 2006, the Company appeared in BC Supreme Court at a
Rule 18A hearing at which the lawyers for the plaintiff and the Company each
presented evidence to the Court. The Judge reserved his decision on the matter
until April 2006. In April 2006 the Judge found in favour of the Company. The
plaintiff had appealed and lost in May, 2007. The plaintiff has since
re-appealed.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are either attached hereto or incorporated herein by
reference as indicated:
Exhibit
Number Description
- ------ -----------
31.1 Certification pursuant to SEC Release No. 33-8238, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to SEC Release No. 33-8238, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
18
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
LASALLE BRANDS CORPORATION
Date: August 28, 2007 By: /s/ Frank Holdraker
--------------------------------
Title: Frank Holdraker, Chairman
Date: August 28, 2007 By: /s/ Scott Campbell
--------------------------------
Title: Scott Campbell, President & CFO
19
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
31.1 Certification pursuant to SEC Release No. 33-8238, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to SEC Release No. 33-8238, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002