H3 Enterprises, Inc. Financial Statements for the Quarter Ended March 31, 2008

Transcription

1 Financial Statements for the Quarter Ended

2 Table Of Contents Page No. Financial Statements Balance Sheet 3 Statement of Income 4 Statement of Changes In Stockholders' Equity 5 Statement of Cash Flows 6 Notes To Financial Statements 7-9

3 Balance Sheet For the Quarter Ended Assets Current Assets Cash in bank and at hand $ 49,992 Note receivable 120,000 Total Current Assets 169,992 Property and Equipment 142,489 Other Assets Goodwill 980,000 Start-up costs 1,495,966 Note receivable 553,370 Investment in Subsidiary 50,000 3,079,336 Total Assets $ 3,391,817 Liabilities And Stockholders' Equity Current Liabilities Accounts payable and accrued expenses $ 13,700 Notes payable 1,987,961 Total Current Liabilities 2,001,661 Stockholder's Equity Common stock - par value of $ ,850 Additional paid in capital 1,560,650 Preferred stock 63,957 Owners equity (26,914) Net income(loss) (219,387) Total Stockholders' Equity 1,390,156 Total Liabilities And Stockholders' Equity $ 3,391,817 See accompanying notes Page 3

4 Income Statement For the Quarter Ended Quarter Ended Sales - Rent 10,000 Professional fees 71,180 General and administrative expenses 138,207 Total Operation Expenses 219,387 Income (Loss) From Operations (219,387) Net Income $ (219,387) See accompanying notes Page 4

5 Statement of Changes in Stockholders' Equity For the Quarter Ended Common Additional Preferred Owners Stock Paid-In-Capital Stock Equity Total Balance at December 31, 2007 $ 1,185,000 $ 387,500 $ 63,957 $ (26,914) $ 1,609,543 Additional paid in capital (1,173,150) 1,173,150 Net Income (Loss) (219,387) (219,387) Balance at $ 11,850 $ 1,560,650 $ 63,957 $ (246,401) $ 1,390,156 See accompanying notes Page 5

6 Statement of Cash Flows For the Quarter Ended Quarter Ended Cash Flows From Operating Activities Net loss $ (219,387) Adjustments to reconcile net loss to net cash provided by operating activities (Increase) decrease in: Merchandise Inventory Increase in: Notes payable 417,000 Accounts payable and accrued expenses Amounts due to related parties (100) Net Cash Provided By Operating Activities 197,513 Cash Flows From Investing Activities Purchase or sale of fixed assets (4,160) Note receivable (673,370) Purchase of start up costs 470,000 Net Cash Provided By Investing Activities (207,530) Cash Flows From Financing Activities Adjust to additional paid in capital 1,173,150 Issue of common stock (1,173,150) Net Cash Provided By Financing Activities - Net Change In Cash (10,017) Cash At Beginning Of Year 60,009 Cash At End Of Year $ 49,992 Supplemental Disclosures Of Cash Flow Information Interest paid $ - See accompanying notes Page 6

7 Notes To Financial Statements Note A Nature Of Business And Summary Of Significant Accounting Policies H3 Enterprises, Inc ( The Company ) owns, creates, licenses and franchises HipHopSodaShops in the United States. HipHopSodaShops will provide a healthy quick service menu, merchandising, memorabilia, LCD screens and areas dedicated to competitive video gaming. The Company was incorporated in Colorado as HAI, Inc on February 23, After several name changes the issuer was redomiciled in Florida and on May 15 th 2005, the issuer changed its name to H3 Enterprises, Inc. Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all unrestricted highly liquid investments with an initial maturity of six months or less to be cash equivalents. Revenue Recognition The Company is in the start-up phase of its operations. At this time there is no revenue being generated. The Company anticipates revenues to be generated from the sale of the franchises, ongoing franchise fees and from the first HipHopSodaShop that will open in Tampa, FL. Organizational Costs The Company capitalizes organizational and start-up costs as incurred. These costs will be amortized over 15 years. Asset Impairment When the Company has long-lived assets which have a possible impairment indicator, the Company estimates the future cash flows from the operation of these assets. Because events and circumstances frequently do not occur as expected, there will usually be differences between the estimated and actual future cash flow and these differences may be material. If the estimated cash flows recoup the recorded value of the assets, they remain on the books at that value. If the net recorded value cannot be recovered, the assets are written down to their market value if lower than the recorded value. Income Taxes The Company accounts for income taxes under the Statement of Financial Accounting Standards No Accounting for Income Taxes. (FASB Statement 109). Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax asset and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or the entire deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment. Page 7

8 Notes To Financial Statements Income Taxes (continued) The Company had net loss of $219,487 in the quarter ended, and accumulate deficit of $ as of March. 31, 2008, therefore there was no income tax expense in the quarter ended. 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. Advertising The Company expenses all advertising costs as incurred. Property and Equipment Property and equipment are stated at cost. The Company will provide for depreciation once the assets are placed in operation. No depreciation has been provided for during the period. Major classes of property and equipment and their related lives are as follows: Life in Years Major Class Office Furniture/Machines 7 Computer Equipment 5 Machinery & Equipment 7 Leasehold Improvements Various Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized. Segment Reporting The Company operates in one reportable segment under the Statement of Financial Accounting Standards ( SFAS ) No. 131, Disclosures about Segments of an Enterprise and Related Information due to its centralized structure. Fair Value of Financial Instruments The carrying amounts of cash, cash equivalents, accounts receivable and accounts payable approximate their fair values due to the short-term maturities of these instruments. NOTE B - Property and Equipment December 31,2006 Office Furniture/Machines $ 1,947 $ 1,947 Computer Equipment 10,407 10,407 Machinery 37,189 37,189 Leasehold Improvements 93,310 89,150 Less accumulated depreciation (364) (364) $ 142,489 $ 138,329 Page 8

9 Notes To Financial Statements Note C Notes Receivable The Company has a promissory note from one of its franchisees on October 15, 2007 which has addendums for additional amounts that now total $673,370. The Loan shall have a term of two (2) years, and shall be paid in installments as hereinafter set forth, with the balance of any outstanding principal due and payable on October 15, 2009 with an interest rate of 0%, unless interest becomes payable pursuant to section 2.5 of the note. Payments in reduction of the principal shall begin sixty (60) days following the opening of the Restaurant. The Franchisee agrees to repay the Holder the sum of five thousand dollars ($5,000.00) per month during the first six (6) months, following the sixty-first day of the Restaurant s operations; ten thousand dollars ($10,000.00) dollars per month during the second six (6) month period; fifteen thousand dollars ($15,000.00) per month during the third six (6) month period; and twenty thousand dollars ($20,000.00) per month during the fourth six (6) month period. At time of issuing these statements no payments have been received. Note D Notes Payable The Company has issued a convertible promissory note to two major shareholders with the promise to pay each 50% of $750,000 or a higher amount equal to the amount outstanding of the principal of the note. Interest is payable at the rate of 7.5% beginning January 1, At any time prior to full payment, the holder may convert the note into fully paid, unrestricted shares of the Company. The conversion value price will be the lower of a) 50% of the average of the trading price of the Company s stock for the 5 days immediately prior to the date of conversion or b) $0.05. The note is secured on the collateral and accounts receivable from the Company s franchise stores or subsidiaries. Note E Stockholders Equity In July 2006, the Company filed a lawsuit against the Company s prior stock transfer agent, as well as prior management of the Company, due to irregularities regarding the transfer and issuance of the Company s stock in 2005, and the failure to maintain adequate records regarding the same. As a result, numerous shares have been cancelled and adjustments have been made regarding stockholder s equity. The Company continues to examine and adjust shareholders records, including those in 2006 and Note F H3 BizDev LLC In April 2007, the Company established a wholly owned subsidiary, H3 BizDev LLC, to operate the selling of the franchises. At there had been minimal activity in the subsidiary. Note G Shares Outstanding Number of shares outstanding as of December 31, 2007: 187,986,993 Number of shares outstanding as of : 187,986,993 Page 9