UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10SB-12G/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-3479186
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3560 Cypress Gardens Road
Winter Haven, Florida 33884
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (941) 326-1006
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Securities to be registered pursuant to Section 12(g) of the Act:
7,657,000 Shares of Voting Common Stock
Check here whether the issuer (1) has filed all reports required
to be filed by Sections 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
As of September 30, 1999, the following shares of the
Registrant's common stock were issued and outstanding:
25,000,000 shares authorized, $0.001 par value
7,657,000 issued and outstanding
As of September 30, 1999, the following shares of the Registrant's
preferred common stock were issued and outstanding:
200,000 shares authorized, no par value
50,000 issued and outstanding
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Item 1. DESCRIPTION OF THE BUSINESS
HISTORY AND ORGANIZATION
FLORIDINO'S INTERNATIONAL HOLDINGS INC., (the "Company"), was
organized in June 1997 under the laws of the State of Florida,
having the stated purpose of engaging in any lawful act
or activity for which corporations may be organized under the
General Corporation Law of Florida.
The Company designs, develops, owns and operates family style
neighborhood Italian food restaurants featuring freshly prepared,
moderately priced pizza and pasta dishes. Floridino's
restaurants seek to incorporate a self-service upscale casual
dining experience for its customers providing high quality
Italian food. Its operations encompass three segments from which
the Company seeks to generate revenue: operation of restaurants,
production and sale of frozen foods and franchising of the
Company's restaurant concept.
FLORIDINO'S RESTAURANTS
The restaurant segment of the Company produces and provides food
products through restaurant outlets. The products focus on
Italian foods such as pasta, pizza, sandwiches and salads as an
alternative to the quick serve food industry which offer
hamburgers, chicken and fried fish.
Shareholders in late 1998 were dissatisfied with the Company's
progress and results. As a result, they demanded that changes to
management be made and that the Company undertake a fresh and
revised approach to its operations. New management then took
over the Company in early 1999 and assessed the Company's prior
results, its products and its potential for future development.
After an assessment of the Company's past performance, new
management decided to discontinue operations of its restaurants
as they operated in their then present format. Management
determined that the restaurants were not producing enough revenue
for the Company and that the style and concept of these
restaurants were outdated. After discontinuing operations at
these locations, management decided to revamp the Company's image
and concept for the purpose of creating a more modern and higher
quality food product to consumers. Management also decided that
new products should be introduced which would broaden the
Company's product base and potential for revenue growth. It was
then determined that the Company's frozen food production be
further developed, refined and increased and that capital be
raised to develop the Company's infrastructure for the purpose of
funding these plans.
Since then, the Company revamped its Lakeland restaurant and
incorporated a full service upscale concept. This restaurant
operates under the name "Mama Mia" and focuses on providing high
quality Italian food in a casual dining environment. The Company
In September 1999 opened an additional restaurant in New York
operating under the name "Floridino's Cafe" which provides
upscale sandwiches, soups, salads and personal size pizza. The
goal of this new restaurants is to serve authentic Italian
cuisine in a fast food environment. The format at Floridino's
Cafe is express style with customers being served at the counter
for carry out or to dine on premise. The ambience provides for a
casual dining experience in a warm, relaxed setting. The entire
premise behind Floridino's Cafe is to accommodate the lifestyle
of today's consumer demanding quality, nutritious meals on the
run.
The Company intends to open at least two (2) additional
restaurants in the coming months. The location in Delray Beach
is scheduled to open on December 26, 1999 and the additional
restaurant in Lake Wales Florida is scheduled to open on January
15, 2000. These new restaurants will operate under the name
"Floridino's Fast Italian". All of the Company's restaurants
will emphasize the prior success of the Company's calzone which
is marketed by the Company as "The World's Biggest Calzone" and
include the Floridino's fast self-service upscale concept. The
Company has secured a lease for one location in Del Rey Beach
Florida, which is approximately 1,250 square feet. The second
location has been secured by the Company in Lake Wales, Florida
which is approximately 5,000 square feet.
The goal of the Company's new concept is to serve authentic
Italian cuisine in a fast food environment. This format
incorporates express style restaurants with customers being
served at the counter for carry out or on premises dining. An
upscale ambiance is incorporated into the concept to provide for
a casual dining experience in a warm, relaxed setting.
The Company does not focus on either metropolitan or rural areas
in selecting a location for its restaurants. Rather, it chooses
its location targeting areas which possess demographics of
generally 20,000 homes in a 3.25 mile radius. High traffic
locations are also considered meaning that such locations must
have at least 10,000 cars pass by the location per day. This
situates the restaurant in a location where it has public
exposure and which is easily accessible to customers.
The Company's sources of materials and ingredients for its
restaurants are obtained from food suppliers. The major
suppliers of the Company are Coca Cola, Bari Foods, Catilina Food
Ingredients, Sysco Foods, Rockets Red Glare and D & J Tomato Co.
These suppliers provide materials such as beverages, and
perishable goods such as sauces, meats, cheeses and bread
products for the Company's products.
FROZEN FOOD PRODUCT SEGMENT
The Company also operates a frozen foods segment which develops
and produces frozen food products including calzones, pizza and
pazzo rolls. This segment operates from a 6,000 square foot
operating plant in Lakeland, Florida. New management which
assessed the Company in April 1999 decided to temporarily close
the plant after finding that its production facility and capacity
were inadequate to meet any significant demand for the Company's
frozen food product. The frozen foods plant was inadequate as it
was unable to produce enough products to meet the projected
demand and to be capable of handling new management's aggressive
plans for growth and expansion of the frozen foods segment.
Packaging at the plant was also not standardized or efficient.
After a renovation of the plant and acquisition of new machinery
and equipment, the Company reopened the plant in November 1999
with the goal of commencing production of the Company's trademark
frozen food products such as its breakfast calzone, pazzo rolls
and frozen pizzas. The Company seeks to market and sell its
frozen food products through grocery and convenience stores as
well as food service entities such as restaurants, caterers and
institutional accounts. The frozen food manufacturing segment
operates under the name "Floridino's Specialties Inc." which is a
wholly owned subsidiary of the Company.
At the present time the frozen food division has one location in
Lakeland. It includes the production area, offices, and warehouse
area. The Company has increased the original calzone production
facility including all new equipment, installation of a new
26'(W) x 42'(L) x 20'(H) freezer and enclosing the existing dock
area to be environmentally controlled. In addition, the Company
has completed the purchase of a bordering property and warehouse
structure for future expansion. Subject to additional demand for
the Company's products, construction is to begin third quarter of
2000 to convert this newly acquired structure into a state of the
art manufacturing plant. These expansion plans include a
full-scale bakery, four separate production lines, appropriate
support facilities and corporate headquarters. Completion is
scheduled for the beginning of fourth quarter of the year 2000.
Upon completion of the new facility the existing manufacturing
area will be refurbished to strictly manufacture Pazzo rolls and
Pizzas. This project is scheduled for completion by the fourth
quarter of the year 2000. Several locations for a second
manufacturing plant are currently being reviewed. This new
manufacturing plant, replicating the production output of the
Florida facility, will be the "blueprint" for all future
locations. This plant will be designed towards efficient
manufacturing. Completion of the second facility is scheduled,
for the fourth quarter of 2001, subject to funding.
FRANCHISING DIVISION
The franchise segment of the Company operates through the
Company's wholly owned subsidiary, Floridino's International
Inc., which was incorporated in September 1993. Since 1997,
there have been eleven (11) franchise restaurants which have
operated under agreement with the Company. These franchised
restaurants have operated in locations throughout the United
States, including in Iowa, Florida, Colorado, South Dakota,
Arizona and Texas.
The main source of income of this segment is generated through
the sale of franchises and franchise fees. They have distinct
royalty fee schedules which range from payments of two (2%)
percent to four (4%) percent of revenues generates. Of these
eleven (11) restaurants, seven (7) have closed and four (4)
remain operational, two in Arizona and one in Iowa and Oklahoma.
Copies of each separate franchise agreement are not required to
be filed as they are not of the material contracts which must be
filed under Exhibit 10.
The Company intends to implement its new self-service upscale
concept in its franchise stores for the purpose of generating
their additional revenue and uplifting the image and style of all
restaurants bearing its name. Subsequent to the implementation
of its concept, the Company will charge new franchisees a
straight four (4%) percent of the gross revenues generated along
with a royalty fee. The Company also intends on seeking
additional solicitation for franchises under the Company's newer
upscale concept which will include strict quality controls and
adherence to this new concept. The new management also believes
that franchising the Company's name and its products to
individual operators throughout the Company will also benefit the
Company and provide an added source of revenue. The Company is
committed to developing a strong franchise system by seeking
experienced operators, by expanding its system in a controlled
manner and by closely monitoring the performance of each
franchisee to help insure adherence to the Company's standards of
operations.
In November 1998, the Company acquired complete ownership of two
New York entities, named "Zoop Soups Inc." and "Floridino's
Inc.". The purpose of acquiring these entities was to expand the
Company's operations into the New York area and to also allow the
Company to develop a segment which will generate revenue for the
Company beyond the pasta industry. After the acquisition, the
Company merged the two entities and the surviving entity was
called "Floridino's, Inc.". The Company also hopes to gain a
seasonal source of revenue from the Zoop Soups concept which
focuses on the sale of specialized gourmet soups to the public
from its retail outlet stores. A major portion of the revenue of
Zoop Soups is generated during the winter months when the revenue
of the Company seasonally decreases. The Zoop Soup concept is
incorporated into the Company's corporate restaurant
segment.
CONSULTANTS
Any relationship shall be with consultants shall be premised on a
performance based approach whereby the consultant will be allowed
to continue to oversee the daily operations of the Company so
long as it meets specified performance milestones set by the
Company. The consultant group shall also oversee the training of
staff, promotions and advertising. The Company believes this
will induce and inspire an aggressive management approach by a
consultant thereby effectuating positive results for the Company.
Additionally, the consultant will engage in the research and
development of new products and concepts as it relates to the
restaurant segment.
The Company has adopted an approach whereby each segment should
perform on its own. In line with this philosophy, the Company
does not intend to hire any consultant to oversee or advise on
the entire operations of the Company. Rather, management
believes that it is best to retain consultants to advise or
consult on a particular segment of the Company in which the
consultant has expertise.
It is the intent of the Company that consultants hired to advise
on a particular segment of the Company shall be paid, whenever
possible, on a performance based arrangement. Consultants hired
for the frozen food segment currently advise and consult on the
marketing of the segment, to organize and oversee the
manufacturing and engineering of that segment's production
process, to develop an organizational structure, policies and
procedures for the segment's normal operations of business and to
advise on investor relations promotions for that segment.
The Company has retained a separate consulting group, The Ephraim
Group, to oversee the entire production facility and development
of the Company's frozen food line. The terms of the parties
agreement is for five (5) years. In consideration of such
services, The Ephraim Group shall receive One Hundred Thousand
(100,000) shares of restricted common stock in the Company for
the first year of the Agreement. The Company shall each year
thereafter compensate the Consultant in relation to the work
performed by providing the Consultant with One Hundred Thousand
(100,000) warrants each of which will entitle the Consultant to
purchase one share of restricted common stock in the Company for
a price of $2.00 per share during the second year of the
agreement, $3.00 per share during the third year of the agreement
and $4.00 per share during the fourth and fifth year of the
agreement. The relationship with The Ephraim Group rests on a
performance based approach.
The Ephraim Group's has overseen the management of the frozen
foods division, been responsible for employee production and
hiring, conducted research into the Company frozen foods segment
and determined that a modernization of its production plant by
acquiring new machinery which would streamline the production of
the Company's products and increase its capacity. This would
allow the Company to pursue management's aggressive expansion
plans. The Ephraim Group has also consulted the Company on
organizing the manufacturing and engineering of the Company's
production process and has advised on the purchase of additional
equipment and freezers which would be conducive to the
modernization of the plant. The Group has also advised on the
segment's organizational structure, policies and procedures as
well as potential promotions of the Company's frozen food
products.
The Ephraim Group also engages in the research and development
for the Company in regard to the frozen foods segment. The
results of The Ephraim Group's research reflected that the
Company required a modernization of its production plant by
acquiring new machinery which would streamline the production of
the Company's products and increase its capacity. To this end,
the Company has expended approximately $400,000 to acquire new
machinery and modernize its plant.
Management of the Company is intent on spreading, and thereby
limiting, the Company's dependence on a single segment of the
market. It has therefore targeted the three areas mentioned.
Management believes each of these segments represent substantial
growth opportunities for the Company while at the same time
spreading the company's risk and dependence on a single segment.
COMPETITION
The Company recognizes vast competition in both the restaurant
and frozen food industry. In response to this, it has targeted a
niche area specializing in calzones and pazzo rolls which have
limited competition. This niche area will be exploited by
management by commencing a national marketing campaign which will
set the Company's products apart from other nationally marketed
frozen foods. Management will insist on an aggressive and
innovative market approach in order to develop and cultivate long
term growth for the Company with an aim at minimizing reliance on
any particular segment in the food industry.
The Company believes that competition in the frozen food category
is based on price, quality, marketing, sales, publicity, and
distribution. The Company finds competition in the frozen food
pizza market which is extensive and intense. Floridino's is
committed to producing a quality product in order to separate
itself from other competitors. It plans on utilizing only
premium ingredients for all of their products. It also believes
that it has identified a market niche and possesses the ideal
product to fill that void. Additionally, the Company seeks to
establish a pricing schedule which is in line with all of tile
competitive products being targeted. The Company will support and
encourage the advertising efforts of retailers by accruing a
percentage of all sales to be utilized on a cooperative basis.
The sales department has been developed on a regional basis to
support the food brokers representing the product line.
Distribution will be established based on customer preference,
market coverage and strength of each distributor.
The Company's finds that competition in the calzone market is
substantial. The two primary competitors manufacturing calzones
today are Stefanos and Pellegrinos. Both are regional companies
with limited distribution. Stefanos has found a niche in the
southeast region with distribution in a few respectable grocery
chains. The primary retailer for Pellegrinos is the Super
Wal-Mart chain of stores. Stefanos and Pellegrinos offer an
average product with fairly nice packaging. The product of both
these companies is machine made with the ingredients being
injected into the crust. Floridino's seeks to separate itself
from these competitors by providing a products with a homemade
look and with quality ingredients.
In the restaurant segment competition is fierce. There is an over
abundance of restaurants in the industry each offering a wide
array of themes and cuisine to choose from. The Company believes
that all such restaurants are compete for a share of the
incremental dollars consumers spend in dining out. Floridino's
seeks to separate itself by is staking out the upscale end of
this market and thereby separating itself from the current top
competitors in this arena. Floridino's believes that the
upscale self-service market has yet to be exploited. It strives
to do so by maintaining a clean, friendly, open and inviting
environment, appealing to consumers seeking quality food products
and by focusing on the preparation, presentation of its foods and
service.
ADVERTISING AND MARKETING
The Company is currently advertising its restaurants through
newspapers, diner coupon books and through hotels in areas which
are in close proximity to each respective restaurant. The
Company believes that this will be the most cost effective method
to attract interest to the restaurants and first time visitors
for the purpose of gaining their repeat business. The Company
intends on researching the possibility of advertising its stores
on the radio market. In doing so, it will assess the cost of
such advertising with the potential for drawing additional
customers. The Company's frozen food products are currently
being promoted to national food chains and supermarkets on an
individual basis. Additionally, the Company has participate in
various trade and food shows to display its products and attract
purchaser interest. Where the Company is able to identify a
potential purchaser of its frozen foods, it intends on shipping
to such potential purchaser a sample of its products in order to
attract their interest.
SUBSIDIARIES
The Company has seven (7) subsidiaries most of which are wholly
owned by the Company.
There are four subsidiaries in existence which oversee and
independently operate the restaurants owned by the Company. The
names of these subsidiaries are as follows: Floridino's, Inc., a
New York Corporation, which operates the Company's restaurant in
New York City; Floridino's Express Inc., a Florida Corporation,
which operates the Company's Lake Wales restaurant scheduled to
open in January 2000, Floridino's of Delray Beach, Inc., a
Florida Corporation, which operates the Company's Delray Beach
restaurant scheduled to open on December 26, 1999, and
Floridino's of Lakeland, Inc., a Florida Corporation, which
operates the Lakeland restaurant.
The Company's frozen foods segment has the following
subsidiary: "Floridino's Specialties Inc." oversees the
development and production of frozen food products including
calzones, pizza and pazzo rolls.
The Company's franchising segment has the following
subsidiary: "Floridino's International Inc." oversees the
Company's franchising and licensing of the Company's concept,
trademark products and recipes.
The Company's also has another wholly owned subsidiary,"Toho
Holdings, Inc.", which holds the Company's real estate
properties. At the present time, the Company holds ownership to
five parcels of land in the State of Florida. The Company
intends to sell three of these parcels for the purpose of
acquiring additional funds to assist with the expansion and
further development of the Company. The Company has entered into
a Contract of Sale for two of the parcels, located in Winter
Haven Florida, with a purchase price of $400,000. The Contract
contains a provision for a right of first refusal in the event
another offer is received up to $450,000. The closing date on
this contract is scheduled for January 15, 2000. A third parcel
of land, also in Winter Haven, Florida, is currently being listed
in the market however the Company has not entered into any
Contract of Sale for this property. The Company holds an
additional two parcels of land through Toho Holdings.
TRADEMARKS AND SERVICE MARKS
The Company also is the owner of various trademarks and service
marks which are utilized by the Company in the course of its
business. The service mark "Home of the World's Largest Calzone"
is utilized to promote the Company's restaurant division and also
the frozen foods division. The service mark "Floridino's" is
used to promote all three of the Company's divisions which
utilize the Floridino's name. The service mark "Zoop Soups" was
acquired by the Company during the course of its acquisition of
Zoop Soups Inc., and is used to promote the Zoop Soups concept in
the restaurant operated by the Company in New York City. The
trademark "Everything's Going Pazzo at Floridino's" is used to
promote the Company's restaurant division and also by the
franchisees under the terms and conditions of their respective
Franchise Agreements. The Company has also filed an application
for the registration of the service mark "Fast Italian" which is
currently pending.
As of June 30, 1999, there were approximately 55 employees of the
Company. Within the next year, and as the Company opens
additional restaurants and expands its frozen food segment, the
Company will hire additional employees. As the number of
employees increases, any rise in the cost of labor will have a
more significant impact on the Company which may in turn cause
the Company to increase its prices.
The frozen food products which are produced by the Company are
subject to inspection and approval by the U.S. Department of
Agriculture. The Company facilitates inspection by the requisite
government inspector on the premises of the Company's production
plant who insures that all of the goods produced by the Company
are in compliance with the regulations and guidelines of the
Department of Agriculture.
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Item 2. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company designs, develops, owns and operates family style
neighborhood Italian food restaurants featuring freshly prepared,
moderately priced pizza and pasta dishes. Its operations
encompass three segments from which the Company seeks to generate
revenue: operation of restaurants, production and sale of frozen
foods and franchising of the Company's restaurant concept.
During the past two years, the Company's operations failed to
realize net income due to a decrease in revenue and reduction in
patrons to its restaurants. The Company also experienced a
decrease in franchising fees and royalties as the franchise
stores operating under the Company's concept were also
experiencing decreased revenue. This led the Company to believe
that it required a new approach to its operations. The Company's
management was replaced in March 1999 and new management has
sought an aggressive approach to develop and market the Company's
product which management believes is of very high quality. New
management determined that the Company's restaurants required a
fresher, more-upscale image and ambiance to attract customers.
The Company in the past year has raised funding of approximately
$1.4 million which has been used to revamp and reconstruct the
Company's operations. These funds have been used to modernize
the Company's frozen foods development plant by acquiring
equipment to streamline the operation of this segment and also to
construct and develop its New York restaurant. Management's goal
is to have a state of the art processing plant producing the
Company's line of frozen foods. The Company has also expended
the funds it has raised to revamp its restaurant concept. New
management determined that the Company should create restaurants
which were more upscale and esthetically pleasing to customers
than those previously operated. As a result the Company shut all
but one of its restaurants. It then implemented its new concept
at its only full service restaurant in Florida. The Company at
this time intends on opening at least two additional restaurants
in the Florida area and has entered into two (2) leases at
separate sites for the construction of new establishments.
Funding of the Company's reconstruction and revamping has been
undertaken primarily through the private sale of equity in the
Company. The funds were used to repay previous debts of the
Company, acquire new plant and equipment and machinery for the
development of the Company's frozen food concept and for the
allocation of costs associated with the development of the
Company's new restaurants. The Company believes that it has the
capacity to raise additional funds if and when they are required.
Additional funds may be raised through the sale of the parcel of
real estate held by the Company. Additionally, the Company
believes that its newly developed concept and operations will
attract investors in placing additional funds with the Company.
At this time, the Company has no line of credit with any
financial institution. However, the Company believes that its
new operations and developed concept will generate sufficient
revenue during the next twelve months which will enable the
Company to secure a line of credit with a financial institution.
Also, the Company's newly acquired plant, equipment and machinery
enable the Company to utilize these assets as collateral in
securing loans or funding in the event the Company requires
funding.
During the next year, the main source of revenue for the Company
is expected to be that generated through the restaurant segment
and frozen food segment as it is these segments that the Company
has primarily focused on during its revamping and reconstruction
of operations. The primary expenses which the Company has
incurred during the reconstruction of its operations have been
associated with the purchase of new equipment and machinery for
its frozen food segment and for the development of its production
plant in Lakeland, Florida.
Material commitments for capital expenditures include
approximately $100,000 for an upgrading and completion of the
Company's production facilities as it relates to its frozen food
plant. Additionally, there is an expected commitment of $25,000
for expenditures to complete the Company's Delray Beach
restaurant prior to its anticipated date of opening. An
additional $200,000 of expenditures are expected to be needed
towards the Company's Lake Wales restaurant which is scheduled
for completion in January 2000. Sources of funding for these
expenditures include those derived from the Company's sale of the
three parcels which it currently is marketing. Additional
sources of funding include secured loans against the Company's
other real estate properties and equipment. Additionally, the
Company maintains in storage equipment which was retained
subsequent to the closure of the Company's other restaurants.
The Company's estimates the fire sale value of such equipment at
approximately $75,000 and considers these assets as a potential
source of funding if needed.
The Company also has material commitments for long term debt
which remain unpaid from the operation of restaurants which have
discontinued. Most of this long term debt has been negotiated
and repaid at sums less than their outstanding balances. The
remaining long term debt and lease holdings of the Company shall
be repaid through anticipated cash flow generated by the Company
in the Year 2000, private funding and secured and unsecured debt.
The Company believes that it will become self sufficient in
March 2000, not rely on additional funding, and be able to
continue as a going concern based on cash flow which it expects
its restaurants and frozen food plant to generate. Investors
however are warned that there are no guarantees that cash flow
generated will meet the expectations of the Company.
Management intends to hold expenses to a minimum and to obtain
services on a contingency basis when possible. Further, the
Company's directors will forego any compensation until such time
as the Company begins to generate sufficient income in the
Company to cover such expenses. However, if the Company engages
outside advisors or consultants in search for business
opportunities, it may be necessary for the Company to attempt to
raise additional funds. There is no assurance that the Company
will be able to obtain additional funding when and if needed, or
that such funding, if available, can be obtained on terms
acceptable to the Company.
The Company also expects to raise additional funds through the
sale of its real estate properties located at 300 Cypress Gardens
Road, Winter Haven, Florida and 1810 Third Street SE, Winter
Haven, Florida. The sale of both these parcels of land is
expected to provide the Company with approximately $200,000 in
funding after encumbrances and mortgages on these properties are
extinguished. The Company has entered into a Contract of Sale
for two of the parcels, located in Winter Haven Florida, with a
purchase price of $400,000. The Contract contains a provision
for a right of first refusal in the event another offer is
received up to $450,000. The closing date on this contract is
scheduled for January 15, 2000. A third parcel of land, also in
Winter Haven, Florida, is currently been listed in the market
however the Company has not entered into any Contract of Sale for
this property.
In the opinion of management, inflation at this time has not and
will not have a material effect on the operations of the Company.
Management focuses on the long term growth of the Company and
therefore any increase in inflation or jump in the price of raw
goods purchased by the Company will not result in an immediate
increase in prices to the consumer. Management believes that a
increase in its prices may lead to a loss of customers and
therefore hinder the Company's long term growth. At any course
however, management will evaluate the possible effects of
inflation on the Company as it relates to its business and
operations and proceed accordingly.
The Company would consider raising its prices in the event there
is a significant increase in the cost of labor. As of June 30,
1999, there were approximately 55 employees of the Company.
Within the next year, and as the Company opens additional
restaurants and expands its frozen food segment, the Company will
hire additional employees. As the number of employees increases,
any rise in the cost of labor will have a more significant impact
on the Company which may in turn cause the Company to increase
its prices.
The Company's viability to generate revenue and income is
dependent on the successful implementation of its new upscale
restaurant concept and the ability to produce quality frozen food
products at its production plant. The Company's operating
history, including its losses and revenues, primarily reflect its
operations for the past year. The Company had for the year
ending December 31, 1998 $1,705,650 in revenue and a net loss
from operations of $(519,187). As of December 31, 1998 the
Company had a net capital equity of $380,500.
General Statement - Factors that may affect future results
With the exception of historical information, the matters
discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations contain forward looking
statements under the 1995 Private Securities Litigation Reform
Act (the "Reform" Act) that involve various risks and
uncertainties. Typically, these statements are indicated by
words such as "anticipates", "expects", "believes", "plans",
"could", and similar words and phrases. Factors that could cause
the Company's actual results to differ materially from
management's projections, forecasts, estimates and expectations
include but are not limited to the following:
- Ability of the Company to raise additional capital
- Ability of the Company to secure sales agreements
for its processing plant products
- Unexpected economic changes in the United States
- The imposition of new restrictions or guidelines by
the United States Department of Agriculture
To the extent possible, the following discussion will highlight
the relative needs of the Company with respect to its business
activities.
I. Segment Reporting Disclosures
The Company's sales are generated from three business segments:
restaurants, franchising, and food processing. In November 1998,
management decided to close all of its existing restaurants at
that time and to restructure a new restaurant segment that
emphasized a "fast food, self-service" style of food delivery as
opposed to the more traditional type of restaurant that it had in
place at the time. The Company would still concentrate its
marketing efforts in the Italian foods however, its staff was
reorganized and its restaurant space was reconfigured to deliver
its food products according to the new philosophy. During 1999,
the Company opened two restaurants after a period of
reconstruction and staff reorganization, Floridino's, Inc., and
Floridino's of Lakeland, Inc. The food processing plant was
completed in 1999 and is expected to begin operations in January
of 2000. During 1999, the processing plant was being
reconstructed to conform to USDA guidelines and to the
requirements imposed by potential customers. The potential
customers for the Company's processing plant products are large
retail restaurants and fast food outlets. Based upon the
results of the initial testing phase required by the potential
buyers of the Company's product, it became clear that the plant
would not be able to meet the expected demand that was estimated.
In order to meet the anticipated demand that was estimated by the
potential customers, the plant had to be refitted and upgraded.
This period of upgrade was completed and all requirements of the
potential customers regarding the plant had been satisfactorily
met in September 1999. The plant is currently involved in the
"test marketing" phase of negotiations with these large potential
customers and the results are encouraging.
Please see the discussion and analysis that follows.
Restaurant Segment: Results of Operations
Gross sales for the nine months ending September 30, 1999 for the
restaurant division decreased to $388,243 or 67% from gross sales
for the similar period in 1998. Consequently gross profit for
the nine months ending September 30, 1999 decreased to $164,768
or 79% as compared to the similar period in 1998. As expected,
this decrease was due to the closing of the old restaurant
segment and the reopening of the new restaurant segment during
1999. After a period of construction, Floridino's, Inc., was
reopened on November 1, 1999. Floridino's of Lakeland was closed
for about a month in 1999 during a period of reconstruction.
Lakeland was reopened in November 1999. The gross sales figure
includes the operations of the two restaurants for effectively a
one and nine month period. Selling, general, and administrative
costs for this segment decreased to $452,880 through September
30, 1999 as compared to $1,049,695 for the similar period in
1998, a decrease of 57%. During the period of reconstruction for
the New York restaurant, management decided to retain many of its
employees on salary during this period. Management estimated
that the costs of hiring and training new employees at the end of
the reconstruction period would have been greater than the costs
of keeping the employees on salary during the reconstruction
period. Salary expense for the period of reconstruction was
estimated to approximate $120,000.
After selling, general, and administrative costs, the segment
showed a loss from continuing operations of $298,112 as compared
to $296,996 for a similar period in 1998. Management is
encouraged by the results obtained from the reorganization of the
restaurant segment undertaken in late 1998 and through 1999 and
expects that the benefits of this reorganization to be realized
in 2000.
Franchising: Results of Operations
Franchise revenues for the nine months ending September 30, 1999
decreased to $53,065 from $78,467 earned for the similar period
in 1998. This was a result of a decrease in the number of
franchisees of eleven in 1998 to four as of September 30, 1999.
Management feels that fall in franchise sales are directly
related to the restaurant concepts that had proved unsuccessful
in fiscal 1998. In 1999, the Company hired a new Chief Executive
Officer, William Keeler, charged with franchising the Company's
new "fast food, self-service" style of restaurant. The success
of this segment is contingent upon the success the Company
achieves in the new restaurant segment.
The Company experienced net income from continuing operations
from this segment of $47,425, which is 22% higher than that
experienced for a similar period in 1998. This segment was able
to show an increase in net income form continuing operations
despite a decrease in gross sales because the segment has low
overhead. The segment is located at the division headquarters in
Winterhaven and salary costs and lease costs are allocated to the
segment based upon revenues. A decrease or increase in sales
will show a decrease or increase in costs on a proportional
basis. During the nine months ending September 30, 1999, the
segment was allocated $5,640 in overhead costs as compared to
$38,795 of allocated costs for a similar period in 1998.
Processing Plant: Results of Operations
Towards the end of 1998, the Company decided that a significant
profit could be made from the production and marketing of its
unique style of Italian food products, specifically; calzones and
pizza rolls. Based upon the initial response to its products from
large Italian food franchises located in Florida and from large
nationwide retail fast food outlets, the Company decided to open
this segment with the goal of beginning operations in December
1999.
The costs associated with this segment were approximately $62,000
in 1998 and were mainly for equipment leases, property leases,
and initial advertising. In 1999, management became more
committed to the success of this segment. The Company contracted
with a consulting firm to oversee the plant operations and manage
plant personnel. In addition, the Company expended approximately
$456,000 for equipment and construction of its plant facility.
During the nine-month period ending September 30, 1999, the
Company incurred costs of $333, 353 in the operation of the
plant. The significant components of this cost were $178, 247
for plant salaries and consulting fees, $128,123 for supplies and
utilities, and $22,775 in depreciation expenses.
Management feels that the construction and fitting of the plant
is substantially complete and will be open for operations by its
original target date of December 1999.
Discussion of Financial Condition- Liquidity and Capital
Resources
At September 30, 1999, the Company had working capital of a
deficit of $808, 320 as compared to $401,449 at September 30,
1998. On a consolidated basis, the Company had cash balances
totaling $187,480 as compared to $15,502 at December 31, 1998.
This increase is primarily due to the secondary public offering
of 2,000,000 shares of common stock in May 1999 and the issuance
of $500,000 in convertible debentures in September 1999.
Total current liabilities increased to $1,348,881 at September
30, 1999 as compared to $897,464 at December 31, 1998. The
substantial increase in current liabilities is primarily due to
the issuance of the convertible debentures, which mature in
October 2000.
The capitalized costs property, equipment, and lease improvements
increased $1,413,596 from December 31, 1998 to $2,138,864 at
September 30, 1999. The main components of this increase were
approximately $456,121 in the acquisition of plant assets for the
processing segment, $318,475 for construction costs for the
restaurant segment, and $639,000 in three buildings acquired from
an officer of the firm in return for preferred stock. The
Company will sell two of the buildings acquired in this
transaction in order to raise capital for the Company. Management
expects the sale of the two buildings to be completed by January
2000. The third building is expected to be sold in fiscal
year 2000.
During 1999, the Company purchased the land adjacent to the
processing plant in anticipation of future plant expansion needs.
The cost of the land was $320,000.
Long term capital lease financing obligations increased to
$139,499 at September 30, 1999 from $42,710 at December 31, 1998.
This increase is due primarily to the increase in equipment
leases entered into during 1999 on behalf of the processing
segment. Long term notes and mortgages increased to $606,374 at
September 30, 1999 from $71,584 at December 31, 1998 as a result
of the costs of reconstruction and the assumption of real estate
mortgages in the preferred stock transaction noted above.
Reconstruction costs of the restaurant segment and lease
obligations were financed by the Company's chief executive
officer and majority shareholder. The Company has signed
promissory notes totaling $535,277 payable to this shareholder in
August 1999. The notes carry interest of 8.25% and are payable
by a balloon payment January 2000 ($65,388) and October 2000
($469,839).
Stockholders equity increased $966,464 to $585,904 at September
30, 1999 from a deficit of $380,560 at December 31, 1998. The
main source of this increase was $1,000,000 raised in May 1999
through a secondary offering of common stock and $500,000 raised
in September 1999 through an offering of convertible debentures.
Management expects the Company to realize the benefits of its
reorganization efforts in fiscal year 2000. No additional
material capital expenditures are contemplated at this time.
Management feels the processing plant is substantially complete
and expects to begin operations in January 2000. The
reconstruction of the restaurant segment is complete and
operations are underway. Additional restaurants will be added
depending upon the success of the restaurant's new marketing
efforts established in 1999. However, no assurance can be given
as the realizations of management's expectations.
YEAR 2000 DISCLOSURE
The Company is actively addressing the issues related to the date
change in year 2000. This is necessary because many computer
systems were programmed using only two digits to contain the year
in the date fields. On January 1, 2000, many of these programs
will fail to perform date calculations correctly and produce
erroneous results. This could temporarily prevent the Company
from processing business transactions. The Company began efforts
to address this issue.
Currently, all computer systems including both IT and non-IT
systems and work is underway to remedy those systems deemed to be
year 2000 non-compliant. The non-IT systems are primarily
systems with embedded processors such as telephones and security
systems. The remediation of the IT and non-IT systems is
expected to be completed by the end of 1999. The Company has
obtained letters of certification from its mission critical
computer systems and software vendors.
The year 2000 will have a broad impact on the business
environment in which the Company operates due to the possibility
that many computer systems across all industries will be unable
to process information containing dates beginning in the Year
2000.
The company's reliance on computers in its own operations is
minimal and limited to administrative tasks. The Company's
computer operations extend to seven (7) personal computers which
are used for clerical, accounting and administrative tasks.
Management has assessed risk, identify and correct exposures when
possible, and developed contingency plans for Year 2000
compliance issues. The majority of its computers and software
have been purchased in the last year and at the time of purchase
the Company insured that they were Y2K ready.
Questionnaires have been sent to substantially all of the
Company's suppliers to obtain reasonable assurance that plans
have been developed to address the Year 2000. To the extent that
vendors do not provide the Company with satisfactory evidence of
their readiness to handle Year 2000 issues, contingency plans
have been developed to obtain qualified replacement vendors.
There are significant risks associate with the year 2000 issues.
Many of theses risks such as those associated with electrical
power or telecommunications are outside the reasonable control of
the Company. Although the Company believes its remediation and
contingency planning efforts adequately identify and address the
Year 2000 issues that are within the Company's reasonable
control, there can be no assurance that the Company's efforts
will be fully effective. Due to the significant risks, the
Company's management is monitoring these efforts very closely.
The costs associated with the remediation efforts have been
internally generated. Any external costs, projected to be
incurred, to achieve compliance will be funded from the Company's
existing working capital and are not expected to be material in
nature.
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA SCHEDULE
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
FINANCIAL DATA SCHEDULE
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
For the Year From the Year
Ended Ended
Dec. 31, 1998 Dec. 31, 1997
------------- -------------
<S> <C> <C>
Cash and Cash Items $ 15,502 $ 0
Marketable Securities 0 0
Notes and Accounts Receivable 11,826 12,250
Allowances for doubtful accounts 0 0
Inventory 15,083 18,535
Other Current Assets 69,906 8,191
Total Current Assets 112,317 38,976
Property, plant and equipment 725,268 336,379
Accumulated depreciation -213,246 -130,408
Total assets 631,198 258,618
Total current liabilities 897,464 479,053
Bonds, mortgages and debt 71,584 326,459
Preferred stock - redemption 0 0
Common stock 4,959 2,518
Other stockholders' equity (385,519) (549,412)
Total Liabilities and
Stockholders' equity 631,198 258,618
Net Sales of Tangible
Products 1,577,564 1,478,196
Total Revenues 1,705,650 1,618,064
Cost of Tangible Goods Sold 573,966 514,767
Total Costs and Expenses
Applicable to sales
and revenues 1,512,316 1,294,037
Other costs and expenses 0 0
Provision for doubtful accounts 0 0
Interest and amortization of
Debt discount 29,332 31,842
Income before taxes and
and other items (380,632) (190,740)
Income tax expenses 0 0
Income/loss continuing
operations (380,632) (190,740)
Discontinued operations (138,555) (65,502)
Extraordinary items 0 0
Cumulative Effect - changes in
Accounting principles 0 0
Net Income or loss (519,187) (256,342)
</TABLE>
<PAGE>
<PAGE>
Item 3. DESCRIPTION OF PROPERTY
The Company holds ownership to five (5) parcels of land situated
in the State of Florida.
A parcel at 300 Cypress Gardens Road, Winter Haven, Florida,
is valued at $375,000 and possesses encumbrances of $180,000.
Another parcel at 1810 Third Street SE, Winter Haven, Florida is
valued at $125,000 and possesses encumbrances of $140,000. These
two parcels have been Contracted for Sale at $400,000 and are
scheduled to close on January 15, 2000. A parcel at 3560 Cypress
Gardens Road, Winter Haven, Florida, is valued at $139,000 and
possesses encumbrances of $120,000. The parcel at 8135 Highway
33N, Lakeland, Florida is the location of the Company's corporate
offices.
The parcel at 8141 State Road 33 North, in Lakeland, Florida
is the site of the Company's frozen food production plant. The
production plant is approximately 6,000 square feet and its value
is approximately $400,000. An expansion of the Company's
production plant would likely occur once additional funding is
raised. The Company, through its subsidiary, Toho Holdings
Ltd., is also seeking to acquire the parcel of land on which its
principal plant is located. The land size is approximately 7
closed acres and the company has entered into a Contract to
purchase the plant and the land which the plant is situated for
the sum of $225,000.
On a consolidated basis, the Company's fixed assets associated
with equipment and fixtures are as follows:
Equipment - $588,709
Leasehold Improvements 735,116
Vehicles 167,258
Furniture 8,781
The Company also is the owner of various trademarks and service
marks which are utilized by the Company in the course of its
business. These are as follows: The service mark "Home of the
World's Largest Calzone" bearing ser. no. 74-468,809 and filed
December 143, 1993; The service mark "Floridino's" bearing ser.
no. 74-468,810 and filed December 13, 1993; "The service mark
"Zoop Soups"; The trademark and design of "Floridino's, Home of
the World's Largest Calzone" and the trademark and design of
"Everything's Going Pazzo at Floridino's".
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the information, to the best
knowledge of the Company as of June 30, 1999, with respect to
each person known by the Company to own beneficially more than
5% of the Company's outstanding common stock, each director of
the Company and all directors and officers of the Company as a
group. The Company also provides beneficial ownership
information with respect to each of its executive officers.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ---------------- -------------------- --------
William Keeler 3,000 0.00%
5836 Spruce Creek Drive
Fort Orange, Florida
Michael Floridino 999,700 13.02%
3560 Cypress Gardens Road
Winter Haven, Florida 33884
Hynford Holdings Ltd. 500,000 6.53%
Cable Beach Court - STE #1
Nassau, Bahamas
Toho Ventures Ltd. 1,680,000 21.94%
494 LaGuardia Place
New York, New York 10012
George Pirgousis (3) 286,000 3.74%
494 LaGuardia Place
New York, New York 10012
Nick Pirgousis(1) (2) 1,304,000 17.03%
494 LaGuardia Place
New York, New York 10012
Frank Dolney(1) 840,000 10.97%
494 LaGuardia Place
New York, New York 10012
William Scott 40,000 0.53%
95 Madison Avenue
Morristown, New Jersey
Low Key Holdings 142,000 1.88%
494 LaGuardia Place
New York, New York 10012
Raffles Toho Ltd. 464,000 6.13%
494 La Guardia Place
New York, New York 10012
All Directors and Named
Executive Officers as
group 3,470,000 45.32%
PREFERRED SHARES
Michael Floridino 50,000 100.00%
3560 Cypress Gardens Road
Winter Haven, Florida 33884
(1) As of December 1, 1999 Toho Ventures Ltd., is owned equally
by its two directors, Nick Pirgousis and Frank Dolney, who are
also beneficial owners of all the outstanding shares of the
Company belonging to Toho Ventures Ltd.
(2) As of December 1, 1999, Raffles Toho is wholly owned by a
Director of the Company, Nick Pirgousis, who is the beneficial
owner of all the outstanding shares of the Company belonging to
Raffles Toho Ltd.
(3) As of December 1, 1999, Low Key Holdings is wholly owned by a
Director of the Company, George Pirgousis, who is the beneficial
owner of all the outstanding shares of the Company belonging to
George Pirgousis.
Rule 13d-3(d)(1)(i) under the Securities Exchange Act of 1934,
regarding the determination of beneficial owners of securities,
includes as beneficial owners of securities, among others, any
person who directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or
shares voting power and/or investment power with respect to such
securities; and, any person who has the right to acquire
beneficial ownership of such security within sixty days through a
means, including, but not limited to, the exercise of any option,
warrant, right or conversion of a security. Any securities not
outstanding that are subject to such options, warrants, rights or
conversion privileges shall be deemed to be outstanding for the
purpose of computing the percentage of outstanding securities of
the class owned by such person, but shall not be deemed to be
outstanding for the purpose of computing the percentage of the
class by any other person.
The Company has been advised that each of the persons listed
above has sole voting, investment, and dispositive power over the
share indicated above. Percent of Class (third column above) is
based on 7,657,000 shares of common stock outstanding as of the
date of this filing.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Position(s) Held and
Name Age Duration of Service Family Relation
- ---------------- --- ------------------- ---------------
William C. Keeler 46 Chief Executive Officer None
Michael Floridino 41 President None
Frank Dolney 43 Secretary/Treasurer None
Nick Pirgousis 44 Chairman of Board Brother of
George Pirgousis
George Pirgousis 58 Director Brother of
Nick Pirgousis
William A. Scott 55 Director None
All directors hold office until the next annual meeting of
stockholders, held on April 1st of each year, and until their
successors have been duly elected and qualified. There are no
agreements with respects to the election of directors.
Set forth below is certain biographical information regarding the
Company's executive officers and directors:
William Keeler, Chief Executive Officer, has over twenty years of
successful, progressive experience in the food industry including
work in retail restaurants and wholesale distribution. He
started his career as the franchise owner of five Kentucky Fried
Chicken units, then became Territory and District Sales Manager
and Director of Corporate Produce sales for White Swan Food
Service, moved on to become District Sales Manage and District
Sales Director of Sysco, and advanced from Regional Sales Manager
to Vice President of Sales at Rykoff Sexton US Food Services.
Most recently Mr. Keeler worked as Vice President of Sales and
Marketing for Bari Importing Corp, where he supervised all
marketing aspects of Corporation, increased Sales and Profits
last year over 20%. Installed a new shelter program, instituted
a new commission program, instituted a new sales software
program, designed an equipment program bringing new customers and
opening new opportunities for the Sales Force.
Michael Floridino, President, is the Founder of the Company. He
has been in the restaurant business nearly his entire life. At
the age of 18, he held numerous management positions in
restaurant chains, covering all aspects of operations, engaging
in site selection, training, food suppliers and administration.
In 1988, Mr. Floridino moved to Winter Haven, Florida and founded
the first Floridino's. He is the owner and originator of the
recipes of Floridino's which have been handed down to him through
his family and perfected by him. Mr. Floridino's expertise lies
within the food development and restaurant operations business.
Frank Dolney, Secretary/Treasurer, graduated in 1979 with a
Bachelors of Business Administration in Finance and Economics.
After graduation, Mr. Dolney took a position with Merrill Lynch
Pierce Fenner & Smith as Asst. Operations Manager. In the last
eighteen years Frank has worked as an investment executive in the
areas of portfolio management, private placements and tax
strategy. From 1990 to 1995, Mr. Dolney worked with AT Broad &
Company in New York as investment executive in which he
identified corporate finance and merger and acquisition
candidates for top management.
Nick Pirgousis, Chairman of the Board of Directors, opened his
first restaurant at the age of 18 in New York City. He has since
owned, operated and managed restaurants in New York including the
Park View Restaurant, Zoop Soups and Silver Spurs, of which he is
still an owner. Mr. Pirgousis maintains a hand-on style of
management and has been involved in every aspect of the growth of
the Company. He has also overseen the growth of a number of
establishments in the food and beverage industry as a consultant
utilizing his restaurant expertise to advise on the operation and
management of each entity.
William Scott a director also serves as accountant of the
company. He is a certified accountant in the State of Florida for
over twenty two years and has an extensive financial and
accounting background. During his first seven years as an
accountant, Mr. Scott worked for Price Waterhouse & Co.
Subsequent to that, he commenced his own private accounting firm
which he has devoted most of his time to.
George Pirgousis, the brother of Nick Pirgousis, has been a
restauranteur for the past thirty five years. His expertise is
the daily operations of restaurants with a strong emphasis in
purchasing and inventory control.
Each director is elected at the annual meeting of Stockholders
and each Director elected holds office until a successor has been
elected and qualified, or until his prior resignation, removal,
or death. The following sets forth the dates since which each
director has served: Nick Pirgousis: January 7, 1999; George
Pirgousis: January 7, 1999; Frank Dolney: January 7, 1999;
William Scott: March 10, 1999; Michael Floridino: June 1997.
To the best knowledge of management, during the past five years,
no present or former director or executive officer of the
Company:
(1) filed a petition under the federal bankruptcy laws or any
state insolvency law, nor had a receiver, fiscal agent or similar
officer appointed by a court for the business or present of such
a person, or any partnership in which he was a general partner at
or within two years before the time of such filing, or any
corporation or business association of which he was an executive
officer within two years before the time of such filing;
(2) was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations and
other minor
offenses);
(3) was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him
form or otherwise limiting, the following activities:
(i) acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, associated person of any of the
foregoing, or as an investment advisor, underwriter, broker or
dealer in securities, or as an affiliated person, director of any
investment company, or engaging in or continuing any conduct or
practice in connection with such activity; (ii) engaging in any
type of business practice; or (iii) engaging in any activity in
connection with the purchase or sale of any security or commodity
or in connection with any violation of federal or state
securities laws or federal commodity laws;
(4) was the subject of any order, judgment, or decree, not
subsequently reversed, suspended, or vacated, of any federal or
state authority barring, suspending, or otherwise limiting for
more than 60 days the right of such person to engage in any
activity described above under this Item, or to be associated
with persons engaged in any such activity;
(5) was found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have
violated any federal or state securities law, and the judgment in
subsequently reversed, suspended, or vacate;
(6) was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any federal commodities law, and the judgment in such
civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
The Company's Common Stock is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in connection therewith, directors,
officers, and beneficial owners of more than 10% of the Company's
Common Stock are required to file on a timely basis certain
reports under Section 16 of the Exchange Act as to their
beneficial ownership of the Company's Common Stock.
Item 6. EXECUTIVE COMPENSATION
SUMMARY
The following table summarizes the total compensation awarded or
paid by the Company to its president, for the fiscal year ended
December 31, 1998. No other executive officer of the Company
had a total annual salary and bonus in excess of $100,000 for
fiscal 1998. Accordingly, Floridino's President is the only
named officer of the Company under SEC rules.
<TABLE>
Summary Compensation Table
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Restricted Sec. All
Principal Annual Stock Underly. LTIP Other
Position Year Salary Bonus Compen. Award Options Payouts Comp.
Michael
Floridino
President 1998 $75,000 0 0 0 0 0 0
The Company has not had a bonus, profit sharing, or deferred
compensation plan for the benefit of its employees, officers or
directors. The Company has no plans at the present to compensate
its directors.
The Company has not issued any shares of its common or preferred
stock to any employee. It has issued shares to The Ephraim Group
and to William Scott as consultancy services rendered to the
Company.
COMPENSATION TABLE: None
CASH COMPENSATION
There was no cash compensation paid to any director or executive
officer of the Company during the two fiscal years ended
June 30, 1999, with the exception of Michael Floridino who
received cash compensation in the sum of $75,000.00 in
conjunction with his position as president of the Company.
BONUSES AND DEFERRED COMPENSATION: None.
COMPENSATION PURSUANT TO PLANS: None.
PENSION TABLE: None.
OTHER COMPENSATION: None.
COMPENSATION OF DIRECTORS: None.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT:
There are no compensatory plans or arrangements of any kind,
including payments to be received from the Company, with respect
to any person which would in any way result in payments to any
such person because of his or her resignation, retirement, or
other termination of such person's employment with the Company or
its subsidiaries, or any change in control of the Company, or a
change in the person's responsibilities following a change in
control of the Company.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
WITH MANAGEMENT AND OTHERS.
(a) On October 28, 1998, the Company issued 1,680,000 shares of
restricted common stock, subject to Rule 144, to Toho Ventures
Ltd., in exchange for 200 shares of common stock of Zoops Soups,
Inc., representing 100% of the outstanding and issued stock in
the company; and 200 shares of common stock of Floridino's, Inc.,
representing 100% of the outstanding and issued stock in the
company. This consummated an acquisition of the two entities
which became fully owned subsidiaries of the Company. Toho
Ventures Ltd., is a company whose majority shareholder is Nick
Pirgousis, the Chairman of the Board of Directors of Floridino's
International Holdings Inc.
(b) On February 23, 1999, the Company issued 50,000 shares of
preferred restricted common stock to Michael Floridino, the
Company's president, in connection with the purchase of three (3)
parcels of real estate located at 1810 3rd Street, S.E., Winter
Haven, Florida, 300 Cypress Gardens Blvd, Winter Haven, Florida
33880, 3560 Cypress Gardens Road, Winter Haven, Florida 33884.
For additional consideration to Michael Floridino, the Company
assumed the liabilities and encumbrances on each of those
properties. The property provided by Michael Floridino was the
Fair Market Value in accordance with inquiries and appraisals
made by the Company through various real estate brokers in the
Winter Haven, Florida area. The total market value of the three
properties, not reduced by mortgages, liens and encumbrances, was
approximately $639,000.
(c) During the course of the year to August 31, 1999, the Company
received funding from Raffles Toho Inc., the total sum of
approximately $238,020. Raffles Toho is wholly owned by the
Chairman of the Board of Directors of the Company, Nick
Pirgousis. The funds were advanced to assist the Company in the
payment of its administrative and operating expenses from time to
time. The advance of such funds is evidenced by three Promissory
Notes. The terms of the notes provide for interest to be
assessed at an annual rate of 8.25%. The individual notes held
by Raffles Toho, issued on August 31, 1999, are for $120,435.00
and $72,197.00. These have a balloon payment due on September 1,
2000 and have been extended to October 31, 2000. A third
individual note issued on December 31, 1998 for $45,388.00
possesses a balloon payment due on January 1, 2000.
(d) During the course of the year to August 31, 1999, the
Company received funding from Toho Partners, LLC, by two notes,
totaling $60,000. Toho Partners is wholly owned by the Chief
Executive Officer of the Company, Nick Pirgousis. The funds were
advanced to assist the Company in the payment of its
administrative and operating expenses from time to time. The
advance of such funds are evidenced by two Promissory Notes. The
terms of the notes provide for interest to be assessed at an
annual rate of 8.25%. The first note issued by Toho Partners on
December 31, 1998 was for $20,000.00 and has a balloon payment
due on January 1, 2000. The second note issued by Toho Partners
on August 31, 1999 was for $40,000.00 and has a balloon payment
due on September 1, 2000 and has been extended to October 31,
2000.
(e) One of the suppliers to the Company's restaurants,
Rockets Red Glare, is twenty (20%) percent owned by Nick
Pirgousis. The company receives ready made food products from
Rockets Red Glare which is supplied to Floridino's Cafe in New
York. The products are provided on terms more favorable to the
Company and assist the Company in operating Floridino's Cafe at a
profit. It should be noted that should this relationship cease,
the profitability of Floridino's Cafe would be significantly
diminished and its ability to operate at profit levels would be
jeopardized.
INDEBTEDNESS OF MANAGEMENT:
(a) On October 28, 1998, the Company issued 1,680,000 shares of
restricted common stock, subject to Rule 144, to Toho Ventures
Ltd., in exchange for 200 shares of common stock of Zoops Soups,
Inc., representing 100% of the outstanding and issued stock in
the company; and 200 shares of common stock of Floridino's, Inc.,
representing 100% of the outstanding and issued stock in the
company. This consummated an acquisition of the two entities
which became fully owned subsidiaries of the Company. Toho
Ventures Ltd., is a company whose majority shareholder is Nick
Pirgousis, the Chief Executive Officer of Floridino's
International Holdings Inc.
(b) On February 23, 1999, the Company issued 50,000 shares of
preferred restricted common stock to Michael Floridino, the
Company's president, in connection with the purchase of three (3)
parcels of real estate located at 1810 3rd Street, S.E., Winter
Haven, Florida, 300 Cypress Gardens Blvd, Winter Haven, Florida
33880, 3560 Cypress Gardens Road, Winter Haven, Florida 33884.
For additional consideration to Michael Floridino, the Company
assumed the liabilities and encumbrances on each of those
properties. The property provided by Michael Floridino was the
Fair Market Value in accordance with inquiries and appraisals
made by the Company through various real estate brokers in the
Winter Haven, Florida area. The total market value of the three
properties, not reduced by mortgages, liens and encumbrances, was
approximately $600,000.
(c) During the course of the year to August 31, 1999, the Company
received funding from Raffles Toho Inc., the total sum of
approximately $234,925. Raffles Toho is wholly owned by the
Chief Executive Officer of the Company, Nick Pirgousis. The
funds were advanced to assist the Company in the payment of its
administrative and operating expenses from time to time. The
advance of such funds is evidenced by three Promissory Notes.
The terms of the notes provide for interest to be assessed at an
annual rate of 8.25%. The individual notes held by Raffles Toho,
issued on August 31, 1999, are for $117,340.00 and $72,197.00.
These have a balloon payment due on September 1, 2000. A third
individual note issued on December 31, 1998 for $45,388.00
possesses a balloon payment due on January 1, 2000.
(d) During the course of the year to August 31, 1999, the
Company received funding from Toho Partners, LLC, by two notes,
totaling $60,000. Toho Partners is wholly owned by the Chief
Executive Officer of the Company, Nick Pirgousis. The funds were
advanced to assist the Company in the payment of its
administrative and operating expenses from time to time. The
advance of such funds are evidenced by two Promissory Notes. The
terms of the notes provide for interest to be assessed at an
annual rate of 8.25%. The first note issued by Toho Partners on
December 31, 1998 was for $20,000.00 and has a balloon payment
due on January 1, 2000. The second note issued by Toho Partners
on August 31, 1999 was for $40,000.00 and has a balloon payment
due on September 1, 2000.
TRANSACTIONS WITH MANAGEMENT:
One of the suppliers to the Company's restaurants, Rockets
Red Glare, is twenty (20%) percent owned by Nick Pirgousis. The
company receives ready made food products from Rockets Red Glare
which is supplied to Floridino's Cafe in New York. The products
are provided on terms more favorable to the Company and assist
the Company in operating Floridino's Cafe at a profit. It should
be noted that should this relationship cease, the profitability
of Floridino's Cafe would be significantly diminished and its
ability to operate at profit levels would be jeopardized.
Floridino's International, Inc. and Floridino's Pizza Etc., Inc.
rent real property from a Floridino's International Holdings,
Inc.'s shareholder, and President, Michael Floridino. There is
no formal lease agreement between this shareholder and the
Company or its wholly owned subsidiaries, Floridino's
International, Inc. and Floridino's Pizza Etc., Inc. Total rent
paid to the shareholder during the years ended December 31, 1998,
and 1997, approximated $26,000 and $32,000, respectively.
The transactions described were on terms that are at least as
favorable to the company as would be expected to be negotiated
with unaffiliated third parties and no preferences have been
given to any of the parties with whom the Company has transacted.
Item 8. LEGAL PROCEEDINGS
There are no legal proceedings outside of the ordinary course of
business.
Item 9. MARKET PRICE OF AND DIVIDENDS FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock has been traded on the OTC Bulleting
Board under the symbol "FDNO". The following table sets forth,
for the periods indicated, the high and low sale prices for the
shares of common stock as reported by OTC:
High Low
------ -------
Fiscal Year Ended December 31, 1997:
Fourth Quarter ..................................$6.00 $5.00
Fiscal Year Ended December 31, 1998:
First Quarter....................................$5.50 $5.25
Second Quarter...................................$5.50 $4.00
Third Quarter....................................$5.75 $5.375
Fourth Quarter...................................$5.50 $5.00
Fiscal Year Ended December 31, 1999:
First Quarter....................................$6.0625 $5.00
Second Quarter...................................$6.125 $5.00
No dividends have been declared to date by the Company. The
Board of Directors may declare and pay dividends upon the
outstanding shares of the Company, from time to time and to such
extent as they deem advisable, in the manner and upon the terms
and conditions provided by statute and the Company's Certificate
of Incorporation. Before payment of any dividend there may
be set aside out of the net profits of the Company such sum
or sums as the directors, from time to time, in their absolute
discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interests
of the corporation, and the directors may abolish any such
reserve in the manner in which it was created.
Shares owned by insiders, officers and directors totaling
2,831,700 are deemed "restricted securities" as that term is
defined under the Securities Act; and in the future these shares
may be sold under Rule 144, which provides in essence, that a
person holding restricted securities for a period of one year may
sell every three months an amount equal to the greater of (a) one
percent of the Company's issued and outstanding common stock or
(b) the average weekly trading volume of the common stock during
the four calendar weeks prior to such sale.
Item 10. RECENT SALES OF UNREGISTERED SECURITIES
(a) On November 1, 1998, the Company issued 1,680,000 shares of
restricted common stock, subject to Rule 144, to Toho Ventures
Ltd., in exchange for 200 shares of common stock of Zoops Soups,
Inc., representing 100% of the outstanding and issued stock in
the company; and 200 shares of common stock of Floridino's, Inc.,
representing 100% of the outstanding and issued stock in the
company. This consummated an acquisition of the two entities
which became fully owned subsidiaries of the Company. The
issuance of 1,680,000 shares to Toho Ventures was exempt from
registration under Section 4(2) of the Securities Act of 1933 as
it was a private offering of shares by the issuer to one
accredited sophisticated investor with no immediate distribution
by the purchaser. The estimated value of the consideration
received for the October 1998 issuance was approximately
$337,000.
(b) On November 16, 1998, the Company issued 500,000 shares of
restricted common stock to Hynford Holdings Inc., a Bahamian
Corporation, towards the purchase of various production
machinery, auxiliary, plant and restaurant equipment owned by
Hynford Holdings. The issuance of 500,000 shares to Hynford
Holdings, Inc., was exempt from registration under Section 4(2)
of the Securities Act of 1933 as it was a private offering of
shares by the issuer to one accredited sophisticated investor
with no immediate distribution by the purchaser. The estimated
value of the consideration received for the November 1998
issuance was approximately $87,000.
(c) On May 1999, the Company issued 50,000 shares of
preferred restricted common stock to Michael Floridino, in
connection with the purchase of three (3) parcels of real estate
located at 1810 3rd Street, S.E., Winter Haven, Florida, 300
Cypress Gardens Blvd, Winter Haven, Florida 33880, 3560 Cypress
Gardens Road, Winter Haven, Florida 33884. For additional
consideration to Michael Floridino, the Company assumed the
liabilities and encumbrances on each of those properties and
other liabilities associated with the Company's business
activities. The issuance of 50,000 shares of preferred
restricted common stock to Michael Floridino was exempt from
registration under Section 4(2) of the Securities Act of 1933 as
it was a private offering of shares by the issuer to one
accredited sophisticated investor with no immediate distribution
by the purchaser. The estimated value of the consideration
received for the May 1999 issuance was approximately $250,000.
(d) The Company in May 1999 conducted a private placement of
2,000,000 shares of common stock pursuant to Rule 505 of
Regulation D of the Securities Act of 1933. The total offering
price for the May 1999 offering was $1,000,000 and all the shares
offered by the Company, that being 2,000,000 shares, were sold.
The offering was made to accredited investors and as of June 30,
1999 was not fully completed. The offering was exempt from
registration as the securities were placed pursuant to the
exemption provided by Regulation D of the Securities Act of 1933.
The private placement of 2,000,000 shares of common stock was
exempt from registration pursuant to Rule 505 of Regulation D of
the Securities Act of 1933 as it was a private placement of
shares to accredited investors for a total aggregate value less
than $5 million.
(e) The Company in October 1997 conducted a private placement of
20,000 units with each unit consisting of 25 shares of common
stock and 45 stock purchase warrants. The units were offered at
a price of $5.00 per unit and all units offered were fully
subscribed to raising the sum of $100,000.00 for the Company.
The strike price of the warrants for the October 1997 private
placement was $1.00 and the shares issued under the exercise of
such warrants were made to accredited investors. The offering
was exempt from registration as the securities were placed
pursuant to the exemption provided by Rule 504 of Regulation D of
the Securities Act of 1933. The private placement of 20,000
units each consisting of 25 shares of common stock and 45 stock
purchase warrants was exempt from registration pursuant to Rule
504 of Regulation D of the Securities Act of 1933 as it was a
private placement of securities to accredited investors by a
company with a valid business plan which was for a total
aggregate value less than $1 million.
(f) In July 1997, the Company acquired all of the outstanding
stock in Floridino's Pizza Etc. Inc., Floridino's of Lake Wales,
Inc., Hard Ball Cafe, Inc., Floridino's Home of the Calzone,
Inc., and Floridino's International, Inc., and a majority of the
outstanding shares of common stock in Floridino's of Bartow,
Inc., in a business combination accounted for as a pooling of
interests. The Company issued 1,800,000 shares of stock having
a $.001 par value per share to Michael Floridino in exchange for
his interest in those corporations. Subsequently during 1999,
Michael Floridino sold approximately 800,300 shares of common
stock to parties not affiliated with the Company through private
transactions. The sale of these shares were exempt from
registration pursuant to Section 4(1) of the Securities Act of
1933.
(g) In December 1997, 18,000 shares of common stock were
purchased under the warrants sold in the October 1997 private
placement. The issuance of these shares was exempt from
registration pursuant to Rule 504 of Regulation D of the
Securities Act of 1933 as it was undertake pursuant to a private
placement of securities to accredited investors by a company
with a valid business plan which was for a total aggregate value
less than $1 million.
(h) In December 1998, 261,000 shares of common stock were
purchased under the warrants sold in the October 1997 private
placement. The issuance of these shares was exempt from
registration pursuant to Rule 504 of Regulation D of the
Securities Act of 1933 as it was undertake pursuant to a private
placement of securities to accredited investors by a company
with a valid business plan which was for a total aggregate value
less than $1 million.
(i) During 1999, 558,000 shares of common stock were purchased
under the warrants sold in the October 1997 private placement.
The issuance of these shares was exempt from registration
pursuant to Rule 504 of Regulation D of the Securities Act of
1933 as it was undertake pursuant to a private placement of
securities to accredited investors by a company with a valid
business plan which was for a total aggregate value less than $1
million.
(j) Pursuant to its Consulting Agreement with the Ephraim Group,
and Bill Scott, the Company issued in July 1999, 100,000 shares
and 40,000 shares of restricted common stock to these
consultants. The issuance of these shares were exempt from
registration pursuant to Section 4(2) of the Securities Act of
1933 as these shares were issued by the Company without any
public solicitation or offering and were accepted without any
intent to distribute.
(k) In October 1999, the Company issued a convertible preferred
promissory note with a face amount of $750,000.00 at 9.0%
interest, with a maturity date of October 31, 2001, pursuant to
Regulation D 505 of the Securities Act of 1933. The note was
fully subscribed to by one accredited investor. Registration of
the sale of this security was exempt pursuant to Regulation D 505
of the Securities Act of 1933 as well as Section 4(2) as it was
conducted in a private placement to an accredited investor and
the aggregate amount raised was under $5 million.
Item 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED
The Company is authorized under its certificate of incorporation
to issue 25,000,000 shares of $.001 par value common stock and
200,000 shares of preferred stock, no par value. All of the
common shares are entitled to one vote on any matter brought
before the shareholders including the election of directors. The
preferred stock may be issued in series and the board of
directors is specifically vested with the authority to establish
and designate series of preferred and fix rights, preferences,
privileges and restrictions of any series of the preferred stock,
including without limitation, those relating to any dividend
rights and terms, conversion rights, voting rights, redemption
rights, liquidation preferences and sinking fund terms.
The Board may out of funds legally available therefor, at any
regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when it deems expedient. Before
declaring any dividend there may be set apart out of any funds of
the Corporation available for dividends, such sum or sums as the
Board from time to time in their discretion deem proper for
working capital or as a reserve fund to meet contingencies or for
equalizing dividends or for such other purposes as the Board
shall deem conducive to the interests of the Corporation.
Item 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Indemnification of the Directors and Officers of the Company is
authorized pursuant to the Company's Articles and By-laws and to
the fullest extent permitted by Florida law. It is possible that
the Company will be required to pay certain judgments, fines and
expenses incurred by an officer or director, including reasonable
attorneys' fees, as a result of actions or proceedings in which
such officers and directors are involved by reason of being or
having been an officer or director provided that said officer or
directors acted in good faith.
Under Florida Law, a corporation shall have power to indemnify
any person who was or is a party to any proceeding (other than an
action by, or in the right of, the corporation), by reason of the
fact that he or she is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other
enterprise against liability incurred in connection with such
proceeding, including any appeal thereof, if he or she acted in
good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, or
conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably
believed to be in, or not opposed to, the best interests of the
corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
<PAGE>
<PAGE>
Item 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL INFORMATION
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Directors
Floridino's International Holdings, Inc.
We have audited the accompanying consolidated balance sheets of
Floridino's International Holdings, Inc. ("the Company") and its
subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' deficit and
cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Floridino's International Holdings, Inc.
and its subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for
the years then ended, in conformity with generally accepted
accounting principles.
As more fully discussed in Note 2 to the consolidated financial
statements, there are significant matters concerning the Company
that raise substantial doubt as to the ability of the Company to
continue as a going concern. Management's plans with regard to
these matters are also described in Note 2 to the consolidated
financial statements. The consolidated financial statements do
not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the
event the Company cannot continue in existence.
Infante Lago & Company
North Miami, Florida
Dated: October 12, 1999
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998 AND 1997
<CAPTION>
<S> <C> <C>
1998 1997
ASSETS
Current Assets
Cash $15,502 -
Royalties receivable 11,826 12,250
Inventory 15,083 18,535
Other Assets 69,906 8,191
---------- ----------
Total Current Assets $112,317 $38,976
Property and Equipment
Equipment 345,266 222,874
Leasehold Improvements 323,077 57,811
Office and Other Equipment 56,925 55,694
---------- ----------
Total Property and Equipment $725,268 $336,379
Less: Accumulated Depreciation (213,246) (130,408)
----------
- ----------
Property and Equipment 512,022 205,971
Other Assets
Organizational costs, net 6,859 13,671
---------- ----------
TOTAL ASSETS $631,198 $258,618
========== ==========
LIABILITIES
Current Liabilities
Outstanding checks in excess of
Bank balance $ 19,903 $1,144
Accounts payable and accrued expenses 310,555 255,288
Accrued Payroll taxes and related
expenses 93,989 27,898
Deferred franchise fee revenue - 59,500
Loans payable - stockholder 152,799 21,071
Loans payable - supplier - 24,280
Current portion of obligations under
capital leases 6,490 -
Current portion of long term debt 313,728 89,872
---------- ----------
Total Current Liabilities $897,464 $479,053
Long term debt, net of current portion 71,584 326,459
Obligations under capital leases net
Of current portion 42,710 -
STOCKHOLDERS' DEFICIT
Common stock, par value $.001;
25,000,000 shares authorized,
4,959,000 shares issued and outstanding
at December 31, 1998 and 2,518,000
issued and outstanding at
December 31, 1997 $ 4,959 $2,518
Additional Paid in Capital 792,711 109,631
Accumulated Deficit (1,178,230) (659,043)
------------ ----------
Total Stockholders' Equity (380,560) (546,894)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $631,198 $258,618
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be
read in conjunction with the auditor's report.
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONDENSED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
</TABLE>
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
REVENUES
Food and Beverage Sales $1,577,564 $1,478,196
Franchise Fees 59,500 34,000
Food rebates 27,783 13,501
Royalty Fees 32,207 49,298
Equipment Sales Income - 23,468
Miscellaneous Income 8,596 19,601
---------- ----------
Total Revenues 1,705,650 1,618,064
COSTS OF SALES:
Costs of goods sold 573,966 514,767
---------- ----------
Gross Profits 1,131,684 1,103,297
OPERATING EXPENSES:
General Administrative 666,098 666,110
Payroll and related expenses 725,682 567,497
Depreciation and amortization 91,214 28,588
Interest Expense 29,322 31,842
---------- ----------
Total Operating Expenses 1,512,316 1,294,037
LOSS FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES (380,632) (190,740)
Provision for Income taxes - -
LOSS FROM CONTINUING OPERATIONS (380,632) (190,740)
DISCONTINUED OPERATIONS
Loss from operations of Bartow
to be disposed (122,880) (65,602)
Estimated loss on disposal
during phase-out period (15,675) -
---------- ----------
NET LOSS $(519,187) $(256,342)
========== ==========
LOSS PER SHARE:
Basic:
Loss from continuing
operations $ (0.14) $ (0.07)
Loss from discontinued
operations (0.05) (0.03)
Net loss per share (0.19) (0.10)
Weighted average shares
outstanding 2,698,974 2,518,000
=========== ===========
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be
read in conjunction with the auditor's report.
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss $(519,187) $(256,342)
Adjustments to Reconcile
Net Loss to Net Cash
Used in Operating
Activities:
Depreciation 84,402 30,645
Amortization 6,812 1,831
Changes in Assets and
Liabilities
Increase/(Decrease) In:
Royalties Receivable 424 4,652
Note Receivable - Shareholder - 37,715
Inventory 3,452 (205)
Other Assets (61,715) 4,551
Organizational Costs - (12,449)
Increase/(Decrease) In:
Outstanding checks in excess
Of bank balance 18,759 (33,182)
Accounts payable 55,267 48,784
Accrued payroll taxes and
related expenses 66,091 6,433
Deferred franchise fee
revenue (59,500) 10,500
---------- ----------
NET CASH USED IN
OPERATING ACTIVITIES (405,195) (157,067)
CASH FLOW FROM
INVESTING ACTIVITIES:
Additions to property and
Equipment (390,453) (40,391)
---------- ----------
NET CASH USED IN
INVESTING ACTIVITIES (390,453) (40,391)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term debt - 81,885
Principal payment on
long-term debt (31,019) (37,978)
Proceeds from capital leases 49,200 -
Issuance of common stock 685,521 118,200
Purchase of minority interest - (10,000)
Loans payable - stockholder 131,728 21,071
Loans payable - supplier (24,280) 24,280
---------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 811,150 197,458
---------- ----------
NET INCREASE/(DECREASE) CASH 15,502 -
CASH AT BEGINNING OF YEAR - -
---------- ----------
CASH AT END OF YEAR $15,502 $ -
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest expense 29,322 43,007
Stock issued for purchase
of equipment 87,079 -
Stock issued for acquisition
of subsidiary 337,442 -
---------- ----------
$453,843 $43,007
=========== ===========
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be
read in conjunction with the auditor's report.
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Total Total
Number of Common Additional Accumulated Shareholders'
Shares Stock Paid in Cap Deficit Equity
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE
JANUARY 1, 1997 1,800,000 $1,800 $ 2,149 $(402,701) $(398,752)
Issuance of common
stock in private
placement 500,000 500 99,500 - 100,000
Issuance of common
stock in lieu of
payment for services 200,000 200 - - 200
Purchase of minority
interest in Bartow Inc. - - (10,000) - (10,000)
Issuance of common
stock due to exercise
of warrants 18,000 18 17,982 - 18,000
Net Loss - - - (256,342) (256,342)
----------------------------------------------------------------
BALANCE
DECEMBER 31, 1997 2,518,000 2,518 109,631 (659,043) (546,894)
================================================================
BALANCE
JANUARY 1, 1998 2,518,000 2,518 109,631 (659,043) (546,894)
Issuance of common
stock in connection
with acquisition of
subsidiaries 1,680,000 1,680 335,762 - 337,442
Issuance of common
stock for the purchase
of equipment 500,000 500 86,579 - 87,079
Issuance of common
stock in connection
with exercise of
warrants 261,000 261 260,739 - 261,000
Net Loss - - - (519,187) (519,187)
----------------------------------------------------------------
BALANCE
DECEMBER 31, 1998 4,959,000 4,959 792,711 1,178,230 380,500
================================================================
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be
read in conjunction with the auditor's report.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX (6) MONTH PERIOD ENDED JUNE 30, 1999
<CAPTION>
30 30
JUNE JUNE
1999 1998
---------------------------
<S> <C> <C>
REVENUE:
FOOD AND BEVERAGE SALES $ 277,261 $984,469
FRANCHISE FEE REVENUE 19,497 20,099
ROYALTIES 22,347 19,040
---------------------------
TOTAL GROSS SALES $ 319,105 $1,023,608
LESS: COST OF SALES (189,616) (323,805)
---------------------------
CONSOLIDATED GROSS PROFIT: $129,489 $ 699,803
OPERATING EXPENSES:
SELLING, GENERAL AND ADMINISTRATIVE (330,815) (308,060)
PAYROLL AND RELATED EXPENSES (278,311) (402,041)
DEPRECIATION AND AMORTIZATION (94,182) (34,588)
OTHER INCOME (EXPENSE):
UNREALIZED GAIN ON SHORT TERM
INVESTMENT 57,596 0
INTEREST EXPENSE (11,072) ( 8,046)
---------------------------
NET INCOME/LOSS FROM OPERATIONS (527,294) ( 52,932)
INCOME TAX PROVISION 0 0
---------------------------
NET INCOME/LOSS FROM CONTINUING
OPERATIONS $ (527,294) $ ( 52,932)
DISCONTINUED OPERATIONS - LOSS
FROM OPERATIONS DISPOSED (47,650) 0
NET LOSS (574,944) ( 52,932)
Net loss per common share:
Basic:
Loss from continuing operations ($0.10) ($0.02)
Loss from discontinued operations ($0.01) $0.00
Net Loss per share ($0.11) ($0.02)
Weighted average of common shares: 5,310,717 2,518,000
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX (6) MONTH PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
30 31
JUNE DECEMBER
1999 1998
-------------------------
<C> <C> <C>
CURRENT ASSETS
CASH $ 313,695 $ 15,502
INVESTMENT IN MARKETABLE SECURITIES 156,096 0
ROYALTIES RECEIVABLE 24,755 11,826
MERCHANDISE INVENTORY 18,535 15,083
OTHER CURRENT ASSETS 86,231 69,906
__________________________
Total Current Assets $ 599,312 $ 112,317
OTHER ASSETS:
PROPERTY & EQUIPMENT 880,980 402,191
LEASEHOLD IMPROVEMENTS 720,975 323,077
LESS ACCUMULATED DEPRECIATION (305,712) (213,246)
ORGANIZATIONAL COSTS
(NET OF ACCUMULATED AMORTIZATION) 5,144 6,859
-------------------------
TOTAL ASSETS $1,900,699 $ 631,198
=========================
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
BANK OVERDRAFTS $ 0 $ 19,903
ACCOUNTS PAYABLE & ACCRUED EXPENSES 433,372 310,555
ACCRUED PAYROLL & RELATED EXPENSES 33,701 93,989
LOANS PAYABLE TO STOCKHOLDERS 0 152,799
CURRENT PORTION OF LEASE OBLIGATIONS 96,778 6,490
-------------------------
Total Current Liabilities $1,098,841 $897,464
LONG TERM DEBT:
LEASE OBLIGATIONS 205,883 42,710
LONG TERM NOTES AND MORTGAGES 612,443 71,584
SHAREHOLDERS EQUITY:
COMMON STOCK, PAR VALUE 0.001,
25,000,000 SHARES AUTHORIZED, ISSUED
AND OUTSTANDING 5,617,000 AT JUNE 30,
1999 AND 4,259,000 AT DECEMBER 31, 1998 $ 5,617 $ 4,959
PREFERRED STOCK, 50,000 SHARES
ISSUED AND OUTSTANDING, CONVERTIBLE
TO 50,000 SHARES OF COMMON STOCK AT
$5.00 PER SHARE, ON PAR, NONCUMULATIVE 250,000 0
ADDITIONAL PAID IN CAPITAL 1,481,089 792,711
ACCUMULATED DEFICIT (1,753,174) (1,178,230)
-------------------------
TOTAL STOCKHOLDERS' EQUITY(DEFICIT) $(16,468) $(380,560)
-------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 1,900,699 631,198
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX (6) MONTH PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
30 30
JUNE JUNE
1999 1998
-------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ (574,944) $ ( 52,932)
ADJUSTMENTS TO RECONCILE NET INCOME
ITEMS NOT REQUIRING THE USE OF CASH
DEPRECIATION AND AMORTIZATION 94,182 34,588
UNREALIZED GAIN ON SHORT TERM INVEST. (57,596) 0
CHANGES IN OTHER OPERATING ASSETS AND
LIABILITIES:
ROYALTIES RECEIVABLE (12,929) (82,734)
INVENTORY ( 3,453) 3,753
SHORT TERM INVESTMENTS (98,500) 0
OTHER ASSETS (16,325) 13,303
BANK OVERDRAFTS (19,903) 42,881
ACCOUNTS PAYABLE & ACCRUED EXPENSES 122,817 (1,686)
ACCRUED PAYROLL AND RELATED EXPENSES (60,288) 19,690
CURRENT PORTION OF LEASE OBLIGATIONS 90,288 9,562
CURRENT PORTION OF LONG TERM DEBT 81,357 (7,652)
-------------------------
NET CASH PROVIDED BY (USED BY)
OPERATIONS (455,294) (21,227)
INVESTING ACTIVITIES:
PURCHASE OF PROPERTY AND EQUIPMENT ( 35,353) 0
-------------------------
NET CASH PROVIDED (USED BY)
INVESTING ACTIVITIES ( 35,353) 0
FINANCING ACTIVITIES:
INCREASE (DECREASE) IN LOANS
PAYABLE TO STOCKHOLDERS (152,799) 0
INCREASE IN LEASE OBLIGATIONS 163,173 0
ISSUANCE OF COMMON STOCK UPON
EXERCISE OF WARRANTS 346,500 0
ISSUANCE OF COMMON STOCK THROUGH
SECONDARY OFFERING 342,536 0
INCREASE (DECREASE) IN LONG
TERM BORROWINGS 89,430 121,004
-------------------------
NET CASH PROVIDED (USED BY)
INVESTING ACTIVITIES 788,840 121,004
NET INCREASE (DECREASE) IN CASH
DURING PERIOD 298,193 99,777
CASH BALANCE AT BEGINNING OF PERIOD 15,502 0
CASH BALANCE AT END OF PERIOD $ 313,695 $ 99,777
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Floridino's International Holdings, Inc., the "Company", was
incorporated on June 25, 1997, in the State of Florida to
develop, own, operate and franchise family style neighborhood
Italian restaurants.
During July of 1997, the Company acquired all of the outstanding
stock in Floridino's Pizza Etc. Inc., Floridino's of Lake Wales,
Inc., Hard Ball Cafe, Inc., Floridino's Home of the Calzone,
Inc., and Floridino's International, Inc., and a majority of the
outstanding shares of common stock in Floridino's of Bartow,
Inc., in a business combination accounted for as a pooling of
interests. The Company issued 1,800,000 shares of stock having a
$.001 par value per share to Michael Floridino in exchange for
his interest in those corporations, under an exchange intended to
qualify as a tax free exchange under Section 368 of the Internal
Revenue Code. The acquired companies are primarily engaged in
restaurant and restaurant franchising operations. The
accompanying financial statements for the year ended December 31,
1997 are based on the assumption that the companies were combined
for the full year, and financial statements of the prior year
have been restated to give effect of the combination.
Details of the results of operations of the individual companies
for the period before the combination that are included in the
consolidated statements of operations and accumulated deficit are
as follows:
Six months ended
June 30, 1997
Revenue Net Loss
Floridino's Pizza Etc., Inc. $214,922 $ (4,223)
Floridino's of Lake Wales, Inc. 128,172 (42,610)
Hard Ball Cafe, Inc. 253,433 (27,022)
Floridino's Home of the Calzone, Inc. 234,979 599
Floridino's International, Inc. 89,649 (14,472)
Floridino's of Bartow, Inc. 144,264 (57,723)
-----------------------
$1,065,419 $(145,451)
=======================
Floridino's of Lakeland, Inc. ("Lakeland") was incorporated in
September 1997, in the State of Florida to own and operate
restaurants. In November 1997, Lakeland acquired the assets and
assumed the liabilities of Floridino's of Lake Wales Inc.'s
restaurant operation, and opened a new restaurant. The Company
owns 80% of the outstanding shares of common stock in Lakeland.
On November 1, 1999, the Company acquired all of the outstanding
stock of Floridino's of New York, Inc. and Zoop Soups, Inc. for
1,680,000 shares of common stock. The acquisition described
above was accounted for by the purchase method of accounting for
business combinations. Accordingly, the accompanying consolidated
statements of operations do not include any revenues or expenses
related to these acquisitions prior to the respective closing
dates. No goodwill was recognized due to management's inability
to determine the future benefits to be derived. The accompanying
consolidated financial statements for the year ended December
31,1998, include the earnings/(deficits) for these companies as
of the date of acquisition.
On July 13, 1998, Floridino's Specialties, Inc. ("Specialties")
was formed. Specialties is a development stage company primarily
engaged in the manufacturing and marketing of frozen foods.
CONSOLIDATION POLICY
The accompanying consolidated financial statements include the
accounts of the Company and all of its wholly owned and
majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
REVENUE AND COST RECOGNITION
The Company recognizes revenue from food and beverage sales as
the service is provided. Revenue from franchise sales is
recognized, net of allowance for uncollectible amounts, when
substantially all significant services to be provided by the
Company have been performed. Expenditures are recorded on the
accrual basis whereby expenses are recorded when incurred, rather
than when paid.
USE OF ESTIMATES
The preparation of the financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Estimates
also affect the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
INVENTORY
Inventory is stated at the lower of cost (first-in, first-out
method) or market and primarily consists of food products.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is
computed by the straight-line method over the estimated useful
lives of the respective assets that range from five to ten years.
Expenditures for maintenance and repairs are charged to expense
as incurred; major replacements and improvements are capitalized.
When items of property or equipment are sold or retired, the
related cost and accumulated depreciation are removed from the
accounts and any gain or loss is included in income.
INCOME TAXES
The Company accounts for income taxes under the accrual method,
which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based
on the difference between the financial statements and tax bases
of assets and liabilities using enacted tax rates for the year in
which the differences are expected to reverse.
The significant component of the net deferred tax asset at
December 31, 1998, consists of the net operating loss
carryforward that can be utilized to offset future taxable
income. Management believes that, based on earnings through and
subsequent to December 31, 1998, it cannot determine at this time
whether a deferred tax asset can be realized in the near future.
Therefore, a deferred tax asset has not been reflected in the
accompanying financial statements as of December 31, 1998. As of
December 31, 1998, the Company has net operating loss carry
forwards for federal income tax purposes. At this time,
management is unable to determine the amount of net operating
loss carry forwards available to offset future profits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value for financial instruments under SFAS NO.
107, Disclosures about Fair Value of Financial Instruments, are
determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be
determined with precision. The estimated fair value of the
Company's financial instruments, which include cash, accounts
receivable and long-term debt approximates the carrying value in
the consolidated financial statements.
ORGANIZATION COSTS
Organizational costs consist of costs incurred as a result of the
Company's private offering. These costs are being amortized over
sixty months.
ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities",
was issued in June 1998 and is effective for fiscal quarters
beginning after June 15, 1999. This statement establishes
accounting and reporting standards for derivative instruments and
for hedging activities and requires that entities recognize
derivative instruments as either assets or liabilities in the
statement of financial position and measure these instruments at
fair value. Management has concluded that the adoptions of SFAS
No. 133 will not have a material impact on the financial position
of the Company or its results of operations.
RECLASSIFICATIONS
Certain assets in the 1997 financial statements have been
reclassified to conform to the 1998 financials statement
presentation.
NOTE 2. SUMMARY OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
GOING CONCERN CONSIDERATIONS
The accompanying consolidated financial statements have been
presented in accordance with generally accepted accounting
principles, which assume the continuity of the Company as a going
concern. However, during the years ended December 31, 1998 and
1997, the Company experienced, and continues to experience,
certain going concern and liquidity problems. The Company has
incurred net losses of $519,187 and $256,343 for the years ended
December 31, 1998 and 1997. The Company's consolidated financial
position reflects a working capital deficiency of $785,147 at
December 31, 1998. These conditions raise substantial doubt as to
the ability of the Company to continue as a going concern.
Management's plans with regard to this matter encompass the
following actions:
The Company plans to raise equity funds from private placements
of its common stock.
From the proceeds of these anticipated offerings, the Company
plans to pay outstanding liabilities, continue to explore selling
franchises, develop divisions for their restaurant operations,
and expand the frozen food division.
The eventual outcome of the success of management's plans cannot
be ascertained with any degree of certainty. The accompanying
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
LITIGATION
The Company and its subsidiaries are defendants in various
lawsuits filed by numerous suppliers for services rendered. The
Company has accrued the amounts of the proposed settlements in
the accompanying consolidated financial statements, as well as
the amounts of potential outstanding claims disclosed by the
Company's outside legal counsel.
FRANCHISE OPERATIONS
The following is a description of the most significant risks
facing a franchisor and how the Company mitigates those risks:
Legal/Regulatory Risk - the risk that changes in the regulatory
environment in which the franchisor operates creates additional
expenses not anticipated by the franchisor in pricing its
products. That is, regulatory initiatives designed to regulate
franchisor's disclosures to its franchisee. The Company mitigates
this risk by monitoring proposed regulatory legislation and by
assessing the impact of new laws.
Credit Risk - the risk that a franchise will default on fees owed
to the Company. The Company minimizes this risk by adhering to a
conservative selection process of franchises and by maintaining
sound franchise agreements with each franchisee, and by providing
for any amounts deemed uncollectible.
Interest Rate Risk - the risk that interest rates will change and
cause a decrease in the value of a franchisor's investment. To
the extent that liabilities come due more quickly than assets
mature, a franchisor might have to sell assets prior to maturity
and potentially recognize a gain or a loss. The Company mitigates
this risk by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities.
NOTE 3. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998 and
1997:
1988 1997
HARDBALL CAFE INC.
Note payable, Colonial Bank, payable in
monthly installments of 1.5% of the outstanding
balance, including interest at a fixed annual
rate of 9.25%. In 1997, the loan was secured
by personal assets owned by a stockholder of
the Company. The loan was refinanced in 1998. $ - $21,427
Note payable, First Union Bank, payable in
monthly installments of $500, including interest
at the prime rate as published by the Wall Street
Journal, plus 2%. The loan is secured by
restaurant equipment and has a balloon payment of
approximately $37,000, plus interest, due on
November 20, 1999. 42,259 42,356
Note payable, First Union Bank, payable in
monthly installments of $40, including interest
at a fixed annual rate of 12%. The loan is
unsecured. 2,300 2,556
FLORIDINO'S OF LAKE WALES, INC.
Note payable, First Union Bank, payable in
monthly installments of $350, including interest
at the prime rate as published by the Wall Street
Journal, plus 2%. The loan is unsecured and has a
balloon payment of approximately $17,400, plus
interest, due on February 2, 2000. 20,476 21,570
Note payable, Colonial Bank, payable in monthly
installments of $775, including interest at the
prime rate as published by the Wall Street
Journal, plus 2%. The loan is secured by
restaurant equipment and was due in full on
December 23, 1997. The Company retired the debt
in 1999. 46,241 38,650
Note payable, payable in monthly installments
of $475, including interest at a fixed annual
rate of 8% - 5,410
Floridino'S INTERNATIONAL INC.
Note payable, Colonial Bank, payable in monthly
installments of $522, including interest at a
fixed annual rate of 11.25%. The loan is secured
by equipment and has a balloon payment of
approximately $24,100, plus interest, due on
June 8, 2000. 33,987 36,172
Note payable, First Union Bank, payable in
monthly installments of $166, including interest
at the prime rate as published by the Wall Street
Journal, plus 2%. The loan was retired in 1988. - 885
Note payable, Lanier, payable in monthly
installments of $128, including interest at a
fixed annual rate of $4. The loan was retired
in 1998. - 323
Note payable, Honkamp Krueger & Co., P.C., payable
in monthly installments of $541, including interest
at a fixed annual rate of 9%. The loan is secured
by property owned personally by a stockholder of
the company, and has a balloon payment of
approximately $48,800, plus interest due on
May 21, 2000. 51,060 52,215
Note payable, Honkamp Krueger & Co., P.C., payable
in monthly installments of $177, including interest
at a fixed annual rate of 9%. The loan is secured
by property owned personally by a stockholder of
the company, and has a balloon payment of
approximately $11,100, plus interest due on
October 10, 2000. 13,190 13,855
Note payable, David Mills, payable in monthly
installments of $200. The loan is non-interest
bearing. The loan was retired in 1998. - 2,100
FLORIDINO'S OF BARTOW, INC.
Note payable, Colonial Bank, payable in monthly
principal installments of $655, plus interest at
the prime rate as published by the Wall Street
Journal, plus 2%. The loan is secured by
restaurant equipment and has a balloon payment
of approximately $33,000 plus interest, due on
July 23, 1999. 38,359 48,577
Note payable, Citrus & Chemical Bank, payable in
monthly installments of $184, including interest
at a fixed annual rate of 9.5%. The loan is
secured by equipment and is due in full on
March 29, 1998. 752 752
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
Note payable, former shareholder, payable in
monthly installments of $500, including interest
at a fixed annual rate of 8%. The loan is due in
August 1999. 3,591 9,063
Note payable, vendor, payable in monthly
installments of $1,500, including interest at
a fixed annual rate of 13%. The loan is
unsecured. 9,884 -
Note payable, individual, payable on demand.
Interest is payable monthly at a fixed annual
rate of 8%. The loan is unsecured. 16,510 -
FLORIDINO'S PIZZA ETC., INC.
Note payable, Colonial Bank, payable in monthly
installments of $212, including interest at a
fixed annual rate of 9.75%. The loan is secured
by a second mortgage on property owned by a
stockholder of the company and is due in full
on February 28, 2001. 5,133 7,070
Note payable, First Union Bank, payable in
monthly installments of $500, including interest
at the prime rate as published by the Wall
Street Journal, plus 2%. The loan is secured by
a second mortgage on property owned by a
stockholder of the Company and has a balloon
payment of approximately $37,000, plus interest,
due on November 20, 1998. 43,161 43,909
Note payable, First Union Bank, payable in
monthly installments of $231, including interest
at the prime rate as published by the Wall
Street Journal, plus 2%. The loan is secured by
vehicles and is due in full on March 3, 2000. 5,133 6,945
Note payable, First Union Bank, payable in
monthly installments of $332, including interest
at the prime rate as published by the Wall
Street Journal, plus 2%. The loan is secured
by personal property owned by a stockholder of
the Company and is due in full on December 20,
2000. 7,705 10,290
Note payable, Ledwig, payable in monthly
installments of $529, including interest at a
fixed annual rate of 10%. The loan is secured
by restaurant equipment and is due in full in
October 1999. 5,535 10,602
Note payable, First Union Bank, payable in
monthly installments of $500, including interest
at the prime rate as published by the Wall Street
journal, plus 2%. The loan is secured by
restaurant equipment and a vehicle owned by a
stockholder of the company, and has a balloon
payment of approximately $36,000, plus interest,
due on November 20, 1998. 40,036 41,604
----------------
385,312 416,331
Less: Current Maturities 313,728 89,872
----------------
Long Term Debt 71,584 326,459
================
NOTE 4. LEASE OBLIGATIONS
The Company leases certain restaurant and office space, and
certain equipment, under operating leases. Most of the Company's
operating leases are for a period of three or five years with
renewal options.
At December 31, 1998, total future minimum lease payments under
operating leases are as follows:
Year ended December 31,
1999 $126,721
2000 45,894
----------
Total future minimum lease payments $172,615
The Company is the lessee of certain computer equipment under
capital leases expiring in 2003. The assets and liabilities
under capital leases are recorded at the lower of the present
value of the minimum lease payments or the fair value of the
asset. The assets are amortized over the lower of their related
lease terms or their estimated productive lives. There was no
amortization of assets under capital leases for 1998 and 1997.
Computer equipment held under capital leases was $49,200 and $0
for 1998 and 1997, respectively.
Minimum future lease payments, under capital leases as of
December 31, 1998, for each of the next five years and in the
aggregate are:
Year ended December 31,
1999 $ 15,900
2000 15,900
2001 15,900
2002 15,900
2003 15,900
Thereafter -
------------
79,500
Less: Amount representing interest (30,300)
------------
Present value of net minimum lease payment 49,200
Less: Current portion (6,490)
------------
Obligations under capital leases net
Of current portion $ 42,710
============
Interest rates on capitalized leases vary from 19% to 21% imputed
based on the lower the of Company's incremental borrowing rate at
the inception of each lease or the lessor's implicit rate of
return.
NOTE 5. FRANCHISE AGREEMENTS
Under the provisions of the franchise sales agreements, the
Company agrees to provide services to assist the franchise in
setting up and operating a restaurant. The service provided
includes assistance in site selection, training personnel,
implementation of an accounting system, design of quality control
programs, and operating assistance.
During the year ended December 31, 1997, Floridino's
International, Inc. sold five franchises. There were eight
franchise outlets in operation as of December 31, 1998 and nine
as of December 31, 1997.
The Company defers recognition of franchise fee revenue until
they have fulfilled all of their required services stipulated in
the franchise agreements. There were no amounts recorded for
deferred revenue from franchised outlets at December 31, 1998,
and $59,500 recorded at December 31, 1997.
NOTE 6. RELATED PARTY TRANSACTIONS
Floridino's International, Inc. and Floridino's Pizza Etc., Inc.
rent real property from a Floridino's International Holdings,
Inc.'s shareholder, and President, Michael Floridino. There is
no formal lease agreement between this shareholder and the
Company or its wholly owned subsidiaries, Floridino's
International, Inc. and Floridino's Pizza Etc., Inc. Total rent
paid to the shareholder during the years ended December 31, 1998,
and 1997, approximated $26,000 and $32,000, respectively.
NOTE 7. COMMON STOCK AND WARRANTS
PRIVATE OFFERING
During July of 1997, the Company initiated a private offering.
The offering consisted of 20,000 Units, each Unit consisting of
25 shares of common stock, and 45 redeemable common stock
purchase warrants, at a price of $5.00 per Unit. Each stock
purchase warrant included in the Units is exercisable into one
share of the Company's common stock at a price of $1.00 per share
during the nine month period after the closing of the offering.
These warrants were extended until December 6, 1998.
Accordingly, the Company issued 500,000 shares of common stock
and 900,000 warrants as a result of the private offering. The
Company issued an additional 200,000 restricted shares of common
stock in lieu of payment for services rendered in connection with
the private offering. The common stock and warrants constituting
a Unit may be separately transferred at any time after issuance.
In December 1997, 18,000 shares of common stock were purchased
under the warrants.
In 1998, the Board voted to extend the warrants through March of
1999. In 1998, 261,000 warrants were exercised at $1.00 per
share.
RESTRICTED STOCK
Until such time as a public market exists for the common stock of
the Company, the shares owned by insiders, officers and directors
totaling 3,470,000 are deemed "restricted securities" as that
term is defined under the Securities Act; and in the future these
shares may be sold under Rule 144, which provides in essence,
that a person holding restricted securities for a period of one
year may sell every three months an amount equal to the greater
of (a) one percent of the Company's issued and outstanding common
stock or (b) the average weekly trading volume of the common
stock during the four calendar weeks prior to such sale.
NOTE 8. DISCONTINUED OPERATIONS
The Company discontinued the operations of its subsidiary in
Bartow, Florida, which resulted in an after tax loss of $122,880
in 1998 and $65,602 in 1997. The subsidiary's long-term debt was
assumed by the Company. (See Note 3).
NOTE 9. SUBSEQUENT EVENTS
RESTAURANTS
During 1999, in order to streamline operations, all unprofitable
restaurants existing in 1998 were closed. The only restaurant
remaining in Florida is the North Lakeland operation. The North
Lakeland store is being renovated and will be fully operational
by the end of October 1999. This store will be a full service
restaurant.
The Floridino's New York and Zoop Soups operation have been
merged into one restaurant. The new restaurant, located at
Broadway and 23rd Street, in Manhattan, New York, will serve as
the test store for the Company's new urban concept. The 23rd
Street location has been opened since September 1, 1999.
The Company is opening two express concept restaurants in Lake
Wales and Delray, Florida. The "Floridino's Fast Italian"
concept restaurants are under construction and are targeted to
open on December 1, 1999.
FROZEN FOOD DIVISION
During 1999, Floridino's Specialties Distribution, Inc., the
frozen foods division, expanded and renovated its manufacturing
facility. The division has secured USDA approval to commence
production. It is anticipated that the plant will begin to
fulfill orders in November of 1999. The division will private
label product for restaurant chains and will sell its own brand
through food brokers and super markets.
COMMON STOCK AND WARRANTS
During 1999, the remaining warrants issued under the July 1997
private placement were exercised. In total, 837,000 of the
original warrants have been exercised. The remaining 63,000
original warrants have lapsed. The exercise price of $1.00 per
share was paid for the issuance of 135,000 shares of common
stock. An additional 423,000 shares were issued at $0.50 per
share.
In July of 1999, the Company raised $1,000,000 in capital through
a Regulation D 505 private placement offering. Two million
shares of common stock were sold at $0.50 per share.
Additional shares of stock, totaling 140,000, were issued to
individuals in partial payment for services rendered and/or to be
rendered, during 1999.
FRANCHISE OPERATIONS
The Company is in the process of updating its Uniform Franchise
Offering Circular (UFOC). The Company plans to market several
new franchise concepts to potential franchisees in the second
quarter of 2000.
DEBT REDUCTION
A substantial portion of the capital raised through private
placement offerings has been utilized to restructure and reduce
the Company's long-term debt. All of the loans payable to
Colonial Bank have been satisfied in 1999. Currently, all
obligations to First Union Bank are being negotiated. It is the
opinion of outside counsel, that the obligations to First Union
will be satisfied for approximately 50% of the principal amounts
owing. The accompanying financial statements do not include the
effects of this uncertainty.
NOTE 10. YEAR 2000 READINESS STATEMENT (UNAUDITED)
The Company is actively addressing the issues related to the date
change in year 2000. This is necessary because many computer
systems were programmed using only two digits to contain the year
in the date fields. On January 1, 2000, many of these programs
will fail to perform date calculations correctly and produce
erroneous results. This could temporarily prevent the Company
from processing business transactions. The Company began efforts
to address this issue.
Currently, all computer systems including both IT and non-IT
systems and work is underway to remedy those systems deemed to be
year 2000 non-compliant. The non-IT systems are primarily
systems with embedded processors such as telephones and security
systems. The remediation of the IT and non-IT systems is
expected to be completed by the end of 1999. The Company has
obtained letters of certification from its mission critical
computer systems and software vendors.
The costs associated with the remediation efforts have been
internally generated. Any external costs, projected to be
incurred, to achieve compliance will be funded from the Company's
existing working capital and are not expected to be material in
nature.
There are significant risks associated with the year 2000 issues.
Many of these risks such as those associated with electrical
power or telecommunications are outside the reasonable control of
the Company. Although the Company believes its remediation and
contingency planning efforts adequately identify and address the
year 2000 issues that are within the Company's reasonable
control, there can be no assurance that the Company's efforts
will be fully effective. Due to the significant risks, the
Company's management is monitoring these efforts very closely.
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
ASSETS
Current Assets
Cash $187,480 $15,502
Investment in marketable securities 259,429 0
Royalties receivable 16,304 11,826
Inventory 12,535 15,083
Other Assets 64,813 69,906
---------- ----------
Total Current Assets $540,561 $112,317
Property and Equipment:
Equipment 1,403,748 402,191
Leasehold Improvements 735,116 323,077
Less accumulated Depreciation (348,691) (213,246)
Land 320,000 0
Organization costs (net of
amortization) 3,215 6,859
---------- ----------
TOTAL ASSETS $2,653,950 $631,198
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank overdrafts $ 0 $19,903
Accounts payable and accrued expenses 380,113 310,555
Accrued Payroll and related expenses 105,931 93,989
Loans payable - stockholder 0 152,799
Convertible Debentures payable 500,000 0
Current portion of lease obligations 93,917 6,490
Current portion of long term debt 268,920 313,728
---------- ----------
Total Current Liabilities $1,348,881 $897,464
Long term debt:
Lease Obligations 139,499 42,710
Long term notes and mortgages 606,374 71,584
STOCKHOLDERS' EQUITY
Common stock, par value $.001;
25,000,000 shares authorized,
7,657,000 shares issued and outstanding
at September 30, 1999 and 4,259,000 at
December 31, 1998 $ 7,657 $4,959
Preferred stock, 50,000 shares issued
and outstanding, convertible to 50,000
shares of common stock at $5 per share,
no par, no dividend, non-cumulative 250,000 0
Additional Paid in Capital 2,226,513 792,711
Accumulated Deficit (1,924,973) (1,178,230)
------------ ----------
Total Stockholders' Equity 559,197 (380,560)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $2,653,950 $ 631,198
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be
read in conjunction with the auditor's report.
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
NINE AND THREE MONTHS ENDING SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1988
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES
Food/Beverage Sales $ 415,907 $1,277,397 $ 138,646 $ 292,928
Franchise Fees 24,121 59,500 4,625 39,401
Royalty Fees 28,943 27,154 6,596 8,114
---------- ---------- ----------- ----------
Total Revenues 468,971 1,364,051 149,866 340,443
Costs of goods sold (287,845) (469,128) (98,229) (145,323)
---------- ---------- ----------- ----------
Gross Profits 181,126 894,923 51,636 195,120
OPERATING EXPENSES:
Selling, general
and administrative (567,253) (364,720) (236,438) (56,660)
Payroll and
related expenses (355,831) (520,206) (77,521) (118,165)
Depreciation
and amortization (139,089) (72,203) (44,907) (37,615)
OTHER INCOME(EXPENSE):
Unrealized gain on
short term invest. 160,929 0 103,333 0
Interest Expense (16,833) (11,926) (5,761) (3,880)
---------- ---------- ---------- ---------
NET INCOME(LOSS) FROM
CONTINUING OPERATIONS (736,952) (74,132) (209,658) (21,200)
EXTRAORDINARY ITEM:
Gain or early
extinguishment of debt 63,634 0 63,634 0
LOSS FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES (673,318) (74,132) (146,024) (21,200)
Provision for Income taxes 0 0 0 0
---------- ---------- ---------- ----------
NET INCOME(LOSS) BEFORE
DISCONTINUED OPERATIONS (673,318) (74,132) (146,024) (21,200)
DISCONTINUED OPERATIONS:
Loss from operations
disposed during the
period (73,425) 0 (25,776) 0
---------- ----------- --------- ----------
NET LOSS $(746,743) $(74,132) $(171,799) $(21,200)
========== ========== ========= ==========
NET LOSS PER SHARE:
Basic:
Loss from
continuing operations $ (0.13) $ (0.03) $(0.03) $(0.01)
Gain from
extraordinary items 0.01 0.00 $ 0.01 $ 0.00
Loss from discontinued
operations (0.01) 0.00 $ 0.00 $ 0.00
Net loss per share (0.13) (0.03) $(0.03) $(0.01)
Weighted average shares
outstanding 5,799,974 2,618,000 6,837,879 2,618,000
=========== ========== ========= =========
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be
read in conjunction with the auditor's report.
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDING SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
September 30
1999 1998
--------------------------------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss $ (746,743) $ (74,132)
Adjustments to Reconcile Net
Income Items not requiring the
Use of Cash:
Depreciation and amortization 139,089 72,203
Compensation expense paid by
Issuing Common Stock 90,000 0
Unrealized gain on Short
Term investment (160,929) 0
Changes in Other Assets and
Liabilities:
Royalties Receivable (4,478) 7,595
Inventory 2,548 18,536
Short Term Investments ( 98,500) 0
Other Assets 5,093 (7,409)
Deferred franchise fee revenue 0 (59,500)
Accounts payable and accrued exp. 69,558 5,850
Accrued payroll and related exp. 11,941 38,033
Current portion of lease obligations (184,713) 112,636
------------ ------------
Net cash provided by (used by)
Operations (877,135) 113,812
CASH FLOW FROM
INVESTING ACTIVITIES:
Purchase of land (320,000) 0
Purchase and acquisition of property
and Equipment (55,153) (26,174)
------------ ------------
Net Cash provided by (used by)
Investing Activities (375,153) (26,174)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of convertible
Debentures 500,000 0
Increase (decrease) in loans payable
To stockholders (152,799) 44,861
Payment of Bank Overdrafts (19,903) (1,144)
Increase of common stock upon exercise
of warrants 346,500 200,000
Issuance of common stock through
Secondary offering 1,000,000 0
Payment of Long Term Debt (249,532) (311,809)
------------ ------------
Net Cash Provided by (Used By)
Investing Activities 1,424,266 (68,092)
NET INCREASE/(DECREASE) CASH 171,978 19,546
CASH AT BEGINNING OF YEAR 15,502 0
------------ ------------
CASH AT END OF THE PERIOD $ 187,480 $19,546
============ ============
SUPPLEMENTAL DISCLOSURES:
Interest paid during the period $ 14,951 $11,926
Income taxes paid during the period 0 0
Compensation Expense 90,000 0
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be
read in conjunction with the auditor's report.
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1999
Note 1 - Nature of Operations
Floridino's International Holdings, Inc. (the Company) was
incorporated on June 25, 1997 in the State of Florida to
develop, own, operate, and franchise family style Italian
restaurants. The consolidated statements of the Company include
the following subsidiary companies:
Floridino's Pizza Etc., Inc.- a restaurant located in
Winterhaven, Florida that was closed in October 1999.
Hard Ball Cafe, Inc.- a restaurant located in Winterhaven,
Florida that was closed in April 1999.
Floridino's Home of the Calzone, Inc.- a restaurant located in
Lakeland, Florida that was closed in May 1999.
Floridino's International, Inc.- a restaurant franchiser
located in Winterhaven, Florida.
Floridino's of Bartow, Inc.- a restaurant located in Bartow,
Florida that was closed in December 1998.
Floridino's Specialties Distributions, Inc.- a food
manufacturing plant located in Lakeland, Florida.
Floridino's Express, Inc.- a restaurant incorporated in 1999
located in Lake Wales, Florida.
Toho Holdings, Inc.- a company incorporated in 1999 to hold
title to the real estate and lease agreements of the consolidated
companies.
Floridino's of Westbrook, Inc.- a restaurant located in
Westbrook, Maine that was closed in February 1999.
Floridino's, Inc.- a restaurant located in New York, New York,
formerly Zoop Soups Inc. This restaurant was reopened in 1999
after a period of reconstruction.
Floridino's of Lakeland, Inc. - a restaurant located in Lake
Wales, Florida incorporated in September 1997. This restaurant
was closed in late 1998 and reopened after construction in 1999.
Note 2- Summary of Significant Accounting Policies
Consolidation- The accompanying consolidated financial
statements include the accounts of the company and all of its
wholly owned and majority owned subsidiaries. All significant
inter-company balances have been eliminated.
Revenue and Cost Recognition- The Company recognizes revenue
from food and beverage sales as the service is provided. Revenue
from franchise sales is recognized, net of allowance of
uncollectible amounts, when substantially all significant
services provided by the Company have been performed.
Expenditures are recorded on the accrual basis whereby expenses
are recorded when incurred, rather than when paid.
Use of Estimates- The preparation of the financial statements
in conformity with generally accepted accounting principles
requires management to make reasonable estimates and assumptions
that affect the reported amounts of the assets and liabilities
and disclosure of contingent assets and liabilities and the
reported amounts of revenues and expenses at the date of the
financial statements and for the period they include. Actual
results may differ from these estimates.
Investment in Marketable Securities- Investment in marketable
securities represents the purchase of shares of a NASDAQ listed
stock valued at the market at September 30, 1999. The unrealized
gain on this investment is recorded in "Other Income" in the
statement of operations.
Inventory - Inventory is stated at the lower of cost (first-in,
first-out method) or market and primarily consists of food and
beverage products.
Property and Equipment- Property and equipment are stated at
cost. Depreciation of property and equipment is provided using
the straight-line method over the estimated useful life of the
asset. Improvements made to leased property are depreciated on a
straight-line basis over the estimated useful life of the
improvement or the period of the lease remaining, whichever is
less.
Expenditures for major repairs and renewals that extend the
useful life of the asset are capitalized. Minor repair
expenditures are charged to expense as incurred.
Income Taxes- The Company accounts for income taxes under the
accrual method established by Statement of Financial Accounting
Standards No. 109, which requires recognition of deferred tax
assets and liabilities for the expected futures tax consequences
and events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the
financial statements and tax bases of assets and liabilities
using enacted rates for the year in which the differences are
expected to reverse.
Management believes that based upon earnings through September
30, 1999, the realization of a tax-deferred asset through future
earning offsets of current losses cannot be determined.
Therefore, a deferred asset has not been reflected in the
accompanying financial statements as of September 30, 1999.
Extraordinary items- During the nine months ending September
30, 1999, the Company extinguished certain long term debt. The
difference between the carrying value of this debt and the fair
value of the debt at the date of extinguishment is recognized as
an extraordinary item in the consolidated statement of operations
as a "gain on early extinguishment of debt".
Fair Values of Financial Instruments- The carrying amounts of
all cash, accounts receivables, short term investments,
inventories, accounts payable, and other obligations reported in
the statement of financial position are estimated by management
to approximate fair value.
Organization Costs - Organization costs consist of costs
that were incurred during the formation of the Company and are
being amortized of a period of sixty months.
Note 3- Going Concern Considerations
The accompanying consolidated financial statements have been
presented in accordance with generally accepted accounting
principals, which assumes the continuity of the Company as a
going concern. However, during the nine months ending September
30, 1999 and September 30, 1998, the Company experienced, and
continues to experience, certain going concern and liquidity
problems. The Company has incurred net losses of $746,743 and
$74,132 for the nine months ending September 30, 1999 and
September 30, 1998. This condition raises substantial doubt to
the ability of the Company to continue as a going concern.
Management's plans with regard to this matter is as follows:
The Company through a plan formalized in fiscal year 1998,
closed the restaurant segment that had proven to be unprofitable.
The Company had planned to develop a new restaurant segment under
new management with more emphasis on a "fast food/self-service"
theme. As of September 30, 1999, Lakeland and Floridino's of New
York began operations under this new format. Express is expected
to open in January 2000.
In addition during the nine months ending September 30, 1999, the
Company raised proceeds of approximately $1.85 million dollars
through a Regulation D 505 offering, the exercise of common stock
warrants, and a convertible debenture offering. These funds were
and are being used to satisfy the Company's debt, reconstruct and
improve current restaurant space and to complete the construction
of its food manufacturing plant.
The eventual outcome of the success of management's plans
cannot be ascertained with any degree of certainty. The
accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Note 4- Discontinued Operations
Through September 30, 1999, the Company has completed its plans
to discontinue the operations of unprofitable restaurants. The
results of operations for these closed restaurants are included
in "Loss from Discontinued Operations" in the consolidated
statement of operations. The restaurants that were closed by
management through September 30, 1999 are as follows:
Floridino's Pizza Etc., Inc.
Hard Ball Cafe, Inc.
Floridino's Home of the Calzone, Inc
Floridino's of Bartow, Inc.
Floridino's of Westbrook, Inc.
Note 5- Litigation
The Company and its subsidiaries are defendants in various
lawsuits filed by various suppliers for services rendered. The
Company has accrued the amounts of the proposed settlements in
the accompanying consolidated financial statements, as well as
the amounts of potential outstanding claims disclosed by the
Company's outside counsel. Management believes that the eventual
disposition of these lawsuits will not have a material impact on
the consolidated financial statements.
Note 6- Commitments and Contingencies:
The Company leases office space and certain equipment under
operating and capital leases. At September 30, 1999, total
future minimum lease payments under operating and capital leases
is as follows:
September 30th,
2000 $109,058
2001 $ 90,278
2002 $ 58,200
2003 $ 30,000
Thereafter $197,500
Total future minimum
lease payments $485,036
Note 7- Common Stock Transactions
During the nine months ending September 30, 1999, the balance
of warrants outstanding from an offering completed in July 1997
were exercised or expired. During the period, 558,000 warrants
were exercised resulting in net proceeds to the Company of
$346,500 and the issuance of 558,000 shares of common stock. The
balance of the outstanding warrants (63,000) expired on March 31,
1999.
In August 1999, the Company issued 140,000 shares of common
stock in return for services rendered by two consultants.
Management has valued these services at $90,000.
In July 1999, the Company completed a Regulation D 505 offering
resulting in net proceeds to the Company of $1,000,0000 and
the issuance of 2,000,000 shares of common stock.
Note 8- Convertible Debentures
In September 1999, the Company received net proceeds of
$500,000 of a $750,000 debenture offering resulting in the
issuance of convertible debentures. Each debenture is
convertible into common stock within one year of purchase at a
40% discount from the preceding five day average of the
prevailing market price of the stock at conversion. The
debentures are payable within one year of purchase with interest
computed at 9.00% payable semi-annually.
Note 9- Convertible Preferred Stock
In May 1999, the Company issued 50,000 of preferred stock to an
officer of the Company in exchange for real estate transferred to
the Company. The fair market value of the real estate at the
date of the transaction was $639,000 and mortgages and liens on
the properties assumed were $389,000. The preferred stock is
convertible into 50,000 shares of common stock at $5 per share
beginning in May 2000.
Note 10- Long Term Debt
The Company has signed promissory notes in connection with
certain reconstruction costs and lease termination agreements
incurred in 1999 and in addition has assumed certain long
term real estate mortgages associated with the transfer of
preferred stock discussed in Note 9. There are no sinking fund
requirements associated with the long term debt. The following
is a listing of long term debt as of September 30, 1999.
Monthly
Rate Amount Maturity Payment
Capital Leases 9.50% $139,499 2002-2009 $4,306
Notes Payable 8.25% 473,025 10/31/99 0
Mortgages 9.00% 133,349 2007 2,773
Totals 745,873 7,079
The notes payable were entered into on August 31, 1999 and a
balloon payment for principle and interest is due in October
2000. Notes payable of $234,210 are due to the Company's
majority shareholder and chief executive officer and are more
fully disclosed in Note 12.
Note 11- Related Parties
The Company is indebted to its majority shareholder and
chairman of the board for the cost of certain reconstruction and
lease agreements associated with the New York restaurant incurred
during 1999. The notes payable were entered into on August 31,
1999 and carry an interest rate of 8.25%. At September 30, 1999,
the Company had notes payable to the majority shareholder and
chairman of the board of $238,020 due on 10/31/00 for the
reconstruction costs. This debt is included in "Long term notes
and mortgages" on the statement of financial position. In
addition, the Company had notes payable to the majority
shareholder and chairman of the board of $65,388 due 1/1/00 for
eight months of unpaid lease payments on the restaurant located
in New York City. These notes payable are included in "current
portion of long term debt" on the statement of financial
position. The notes payable are due by a "balloon payment" of
principle and interest at the maturity date.
Note 12- Subsequent Events
In October 1999, the Company completed its debenture offering
initiated in September 1999 resulting in additional proceeds to
the Company of $250,000. The debentures contain the same terms
and provisions discussed in Note 8.
Note 13 - Segments
The following is a summary of the Company's segment information
for the nine months ended September 30, 1999:
Processing
Restaurants Franchising Plant Consolidated
Gross Sales $388,243 $ 53,065 $ 27,664 $468,972
Gross Profit
(Loss) 154,768 53,065 (26,707) 181,126
Income (Loss)
before taxes
and extraord.
Item (298,112) 47,425 (486,265) (736,952)
Depreciation
Expense 0 0 139,089 139,089
Interest
Expense 15,719 0 1,114 16,833
Total Assets 365,080 117,243 2,171,627 2,653,950
Note 14 - Other Comprehensive Income
The Company has no other comprehensive income for the nine months
ending September 30, 1999.
Note 15 - Earnings Per Share
The Company applies SFAS No. 128, Earnings per share. In
accordance with SFAS No. 128, basic net income per share has been
computed based on the weighted average of common shares
outstanding.
<PAGE>
<PAGE>
Item 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
No changes in and disagreements with accountants on accounting
and financial disclosure.
Item 15. FINANCIAL STATEMENTS, EXHIBITS AND
REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS
The Following financial statements are filed as part of this
registration statement:
Balance Sheet
Statement of Loss
Statement of Cash Flows
Statement of Shareholders' Equity (Deficit)
Selected Financial Data
(B) EXHIBITS AND INDEX OF EXHIBITS
The following exhibits are included in Item 13(c). Other
exhibits have been omitted since the required information is not
applicable to the registrant.
EXHIBIT
3 Certificate of incorporation and by-laws
10.1 Agreement between Michael Floridino and Company
dated May 20, 1999
10.2 Promissory Note Between Floridino's Inc. and
Raffles Toho Inc.
10.3 Promissory Note Between Floridino's Inc. and
Raffles Toho Inc.
10.4 Promissory Note Between Floridino's Inc. and
Toho Partners, LLC
10.5 Promissory Note Between Floridino's Inc. and
Raffles Toho Inc.
10.6 Promissory Note Between Floridino's Inc. and
Toho Partners, LLC
10.7 Standard Franchise Agreement
21 Subsidiaries of Company
27 Financial Data Schedule
(C) REPORTS ON FORM 8-K
A report on Form 8-K was filed on December 15, 1999 and it is
incorporated to this Form 10SB-12G/a by reference herein.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
- ----------------------
(Registrant)
Date: December 21, 1999
By: /s/ Nick Pirgousis
----------------------
Chairman of the Board
Exhibit 3 - BY LAWS
BY LAWS
OF
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
ARTICLE I - OFFICES
The principal office of the corporation shall be established
and maintained at 3560 Cypress Gardens Road, in the City of
Winter Haven, County of Polk, State of Florida. The Corporation
may also have offices at such places within or without the State
of Florida as the board may from time to time establish, or as
the business of the Corporation may require from time to time.
ARTICLE II - SHAREHOLDERS
1. ANNUAL MEETINGS
The annual meeting of the Shareholders of this Corporation
shall be held on the 1st day of April of each year or at such
other time and place designated by the Board of Directors of the
Corporation. Business transacted at the annual meeting shall
include the election of Directors of the Corporation and all
other matters properly before the Board. If the designated day
shall fall on a Sunday or legal holiday, then the meeting shall
be held on the first business day thereafter.
2. SPECIAL MEETINGS
Special meetings of the Shareholders shall be held when
directed by the President or the Board of Directors, or when
requested in writing by the holders of not less than 10% of all
the shares entitled to vote at the meeting. A meeting requested
by Shareholders shall be called for a date not less than 10 nor
more than 60 days after the request is made unless the
Shareholders requesting the meeting designate a later date. The
call for the meeting shall be issued by the Secretary, unless the
President, Board of Directors, or Shareholders requesting the
meeting shall designate another person to do so.
3. PLACE
Meetings of Shareholders shall be held at the principal
place of business of the Corporation or at such other place as
may be designated by the Board of Directors.
4. NOTICE
Written notice to each Shareholder entitled to vote stating
the place, day and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than 10 nor more than 60 days
before the meeting. If any Shareholder shall transfer his stock
after notice, it shall not be necessary to notify the transferee.
Any Stockholder may waive notice of any meeting either before,
during or after meeting, by a writing signed by the Shareholders
entitled to the notice.
5. QUORUM AND VOTING
The majority of the Shares entitled to vote, represented in
person or by Proxy, shall constitute a Quorum at a meeting of
Shareholders, but in no event shall a Quorum consist of less than
1/3 of the shares entitled to vote at the meeting.
After a Quorum has been established at a Shareholders
meeting, the subsequent withdrawal of Shareholders, so as to
reduce the number of shares entitled to vote at the meeting below
the number required for-the Quorum, shall not effect the validity
of any action taken at the meeting or any adjournment thereof.
If a quorum exists, action on a matter, other than the
election of directors, is approved it the votes cast by the
holders of the Shares represented at the meeting and entitled to
vote on the subject matter favoring the action exceed the votes
cast opposing the action, unless a greater number of affirmative
votes or voting by classes is required by the Florida Business
Corporation Act or the Corporation's Articles of Incorporation.
6. PROXY
Every Shareholder entitled to vote at a meeting of
Shareholders, or to express consent or dissent without a meeting,
or his duly authorized attorney-in-fact, may authorize another
person or persons to act for him by Proxy. The Proxy must be
signed by the Shareholder or his attorney-in-fact. A Proxy shall
be effective when received by the Secretary of the Corporation or
other person authorized to tabulate votes. No Proxy shall be
valid after the expiration of eleven months from the date
thereof, unless otherwise provided in the Proxy.
ARTICLE III - DIRECTORS
1. BOARD OF DIRECTORS
The business of the corporation shall be managed and its
corporate power exercised by a Board of Directors, each of whom
shall be of full age. it shall not be necessary for Directors to
be Stockholders or residents of the state of Florida.
2. ELECTION AND TERM OF DIRECTORS
Directors shall be elected at the annual meeting of
Stockholders and each Director elected shall hold office until
his successor has been elected and qualified, or until his prior
resignation, removal, or death. Unless otherwise provided in the
Articles Of incorporation, Directors shall be elected by a
plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present.
3. VACANCIES
If the office of any Director, member of a committee or
other officer becomes vacant, including a vacancy resulting from
an increase in the numbers of Directors, the remaining Directors
in office, though less than a quorum, by a majority vote, may
appoint any qualified person to fill such vacancy, who shall hold
office for the unexpired term and until his successor shall be
duly chosen.
4. REMOVAL OF DIRECTORS
Any or all of the Directors may be removed with or without
cause by vote of a majority of all of the stock outstanding and
entitled to vote at an annual -meeting or special meeting of
stockholders called for that purpose.
5. NUMBER OF DIRECTORS; NEWLY CREATED DIRECTORSHIPS
The authorized number of directors shall not be less than 5.
The number of Directors may be increased by amendment of these
By-Laws, by the affirmative vote of a majority in interest of the
Stockholders, at the annual meeting or at a special meeting
called for that purpose, and by like vote the additional
Directors may be chosen at such meeting to hold office until the
next annual election and until their successors are elected and
qualify.
6. RESIGNATION
A Director may resign at any time by giving written notice
to the Board, the President or the Secretary of the Corporation.
Unless otherwise specified in the notice, the resignation of such
officer shall take effect upon receipt thereof by the board, and
the acceptance of the resignation shall not be necessary to make
it effective.
7. QUORUM OF DIRECTORS AND VOTING
A majority of the Directors shall constitute a quorum for
the transaction of business. If at any meeting of the board
there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time until a quorum
is obtained, and no further notice thereof need be given other
than by announcement at the meeting which shall be so adjourned.
If a quorum is present when a vote is taken, the affirmative vote
of a majority of Directors present shall be the act of the Board
of Directors.
8. PLACE AND TIME OF BOARD MEETINGS
The board may hold its meeting at the office of the
corporation or at such other places, either within or without the
State of Florida as it may from time to time determine.
9. NOTICE OF MEETINGS OF THE BOARD
A regular annual meeting of the Board may be held without
notice at such time and place as it shall from time to time
determine. Special meetings of the Board shall be held upon
notice to the Directors and may be called by the President upon
three days notice to each Director either personally or by mail,
wire or fax; special meetings shall be called by the President or
by the Secretary in a like manner on written request of two
Directors. Notice of a meeting need not be given to any Director
who submits a waiver of notice whether before or after the
meeting or who attends the meeting without protesting prior
thereto or at its commencement, the lack of notice to him.
10. REGULAR ANNUAL MEETING
A regular annual meeting of the Board shall be held
immediately following the annual meeting of Stockholders at the
place of such annual meeting of Stockholders.
11. EXECUTIVE AND OTHER COMMITTEES
The Board, by resolution, may designate two or more of
their members to any committee. To the extent provided in said
resolution or these By-Laws, said committee any exercise the
powers of the Board concerning the management of the business of
the corporation.
12. COMPENSATION
No compensation shall be paid to Directors, as such, for
their services, but by resolution of the Board, a fixed sum and
expenses for actual attendance, at each regular or special
meeting of the Board may be authorized. Nothing herein contained
shall be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV - OFFICERS
1. OFFICERS, ELECTION AND TERM
a) The Board may elect or appoint a Chairman, a President,
one or more vice Presidents, a Secretary and a Treasurer, and
such other officers as it may determine, who shall have such
duties and powers as hereinafter provided. If specifically
authorized by the Board of Directors, an officer may appoint one
or more officers or assistant officers.
b) All officers shall be elected or appointed to hold
office until the meeting of the Board following the next annual
meeting of Stockholders and until their successors have be-en
elected or appointed and qualified.
c) Any two or more offices may be held by the same person.
2. REMOVAL, RESIGNATION, SALARY, ETC.
a) Any officer elected or appointed by the Board may be
removed by the Board with or without cause.
b) In the event of the death, resignation or removal of an
officer, the Board in its discretion may elect or appoint a
successor to fill the unexpired term.
c) An officer may resign at any time by delivering a
written notice to the corporation.
d) The salaries of all officers shall be fixed by the
Board.
e) The Directors may require any Officer to give security
for the faithful performance of his duties.
f) Any vacancy in any office may be filled by the Board of
Directors.
3.DUTIES
The officers of this Corporation shall have the following
duties:
The President shall be the chief executive officer of the
Corporation, shall have general and active management of the
business and affairs of the Corporation subject to the directions
of the board of Directors, and shall preside at all meetings of
the Shareholders and Board of Directors.
In absence of the President or in the event of his death,
inability or refusal to act, the Vice-President (or in the event
there is more than one vice-President, the Vice-Presidents in the
order of their appointment) shall perform the duties of the
President, and when so acting, shall have all the powers of and
be subject to all the restrictions upon the President.
The Secretary shall have custody of, and maintain, all of
the corporate records except the financial records; shall record
the minutes of all meetings of the Shareholders and Board of
Directors, send all notices of all meetings and perform such
other duties as may be prescribed by the Board of Directors or
the President.
The Treasurer shall have custody of all corporate funds and
financial records, shall keep full and accurate accounts of
receipts and disbursements and render accounts thereof at the
annual meetings of Shareholders and whenever else required by the
Board of Directors or the President, and shall perform such other
duties as may be prescribed by the Board of Directors or the
President.
ARTICLE V - STOCK CERTIFICATES
1. ISSUANCE
Every holder of shares in this Corporation shall be entitled
to have a certificate representing all shares of which he is
entitled. No certificate shall be issued for any share until
such share is fully paid.
2. FORM
Certificates representing shares in this Corporation shall be
signed by the President or Vice President and the Secretary or an
Assistant Secretary and may be sealed with the seal of this
Corporation or a facsimile thereof.
3. TRANSFER OF STOCK
The Corporation shall register a stock certificate presented
to it for transfer if the certificate is properly endorsed by the
holder of record or by his duly authorized attorney.
4. LOST, STOLEN OR DESTROYED CERTIFICATES
If the shareholder shall claim to have lost or destroyed a
certificate of shares issued by the Corporation, a new
certificate shall be issued upon the making of an affidavit of
that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed, and at the discretion of the Board of
Directors, upon the deposit of a bond or other indemnity in such
amount and with such sureties, if any, as the Board may
reasonably require.
ARTICLE VI - BOOKS AND RECORDS
1. BOOKS AND RECORDS
This Corporation shall keep correct and complete books and
records of account and shall keep -minutes of the proceedings of
its Shareholders, Board of Director and committees of Directors.
This corporation shall keep at its registered office or
principal place of business a record of its Shareholders, qiving
the names and addresses of all Shareholders and the number of the
shares hold by each.
Any books, records and minutes may be in written form or in
any other form capable of being converted into written form
within a reasonable time.
2. SHAREHOLDERS' INSPECTION RIGHTS
If he gives the Corporation written notice of his demand,
made in good faith and stating the purpose thereof, at least 5
business days before the date on which he wishes to inspect and
copy, a shareholder shall have the right to examine, in person or
by agent or attorney, during regular business hours for any
proper purpose, the Corporation's relevant books and records of
accounts, minutes and records of Shareholders and to make extract
therefrom.
3. FINANCIAL INFORMATION
The Corporation shall furnish its shareholders annual
financial statements, which may be consolidated or combined
statements of the Corporation and one or more of its
subsidiaries, as appropriate, that include a balance sheet as of
the end of the f iscal year, an income statement for that year,
and a statement of cash flows for that year. If f inancial
statements are prepared for the Corporation on the basis of
generally accepted accounting principles, the annual financial
statements for the shareholders also m,ast be prepared on that
basis.
If the annual financial statements are reported upon by a
public accountant, his report must accompany them. If not, the
statements must be accompanied by a statement of the President or
the person responsible for the corporation's accounting records:
1. stating his reasonable belief whether the statements
were prepared on the basis of generally accepted accounting
principles and, if not, describing the basis of preparation; and
2. describing any respects in which the statements were
not prepared on a basis of accounting consistent with the
statements prepared for the preceding year.
The Corporation shall mail the annual financial statements to
each shareholder within 120 days after the close of each fiscal
year. Thereafter, on written request from a shareholder who was
not mailed the statements, the Corporation shall mail him the
latest annual financial statements.
ARTICLE VII -DIVIDEND
The Board may out of funds legally available therefor, at any
regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when it deems expedient. Before
declaring any dividend there may be set apart out of any funds of
the Corporation available for dividends, such sum or sums as the
Board from time to time in their discretion deem proper for
working capital or as a reserve fund to meet contingencies or for
equalizing dividends or for such other purposes as the Board
shall deem conducive to the interests of the Corporation.
ARTICLE VIII - CORPORATE SEAL
The seal of the corporation shall be circular inform and bear
the name of the corporation, the year of its organization and the
words "CORPORATE SEAL, FLORIDA." The seal may be used by causing
it to be impressed directly on the instrument or writing to be
sealed, or upon adhesive substance affixed thereto. The seal on
the certificates for shares or on any corporate obligation for
the payment of money may be facsimile, engraved or printed.
ARTICLE IX - EXECUTION
All corporate instruments and documents shall be signed or
countersigned, executed, verified or acknowledged by, such
officer or officers or other person or persons as the Board may
from time to time designate.
ARTICLE X - FISCAL YEAR
The fiscal year shall begin the first day of January in each
year.
ARTICLE XI - NOTICE AND WAIVER OF NOTICE
Whenever any notice is required by these By-Laws to be given,
personal notice is not meant unless expressly so stated, and any
notice so required shall be deemed to be sufficient if given by
depositing the same in the post office box in a sealed post-paid
wrapper, addressed to the person entitled thereto at his last
known post office address, and such notice shall be deemed to
have been given an the day of such mailing. Stockholders not
entitled to vote shall not be entitled to receive notice of any
meetings except as otherwise provided by statute.
Whenever any notice is required to be given under the
provisions of any law, or under the provisions of the Articles of
Incorporation of the Corporation, or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time state therein,
shall be deemed equivalent thereto.
ARTICLE XII - CONSTRUCTION
Whenever a conflict arises between the language of these By-
Laws and the Articles of Incorporation, the Articles of
Incorporation shall govern.
ARTICLE XIII - ACTION WITHOUT A MEETING
1. ACTION BY SHAREHOLDERS WITHOUT A MEETING.
Any action required or permitted to be taken at a meeting of
the shareholders may be taken without a meeting, without prior
notice, and without a vote if one or more consents in writing,
setting forth the action so taken, shall be signed and dated by
the holders of the outstanding stock entitled to vote with
respect to the subject matter thereof and having not less than
the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to
vote thereon were present and voted, and shall be delivered to
the Corporation for inclusion in the minute book.
2. ACTION BY DIRECTORS WITHOUT A MEETING.
Any action required or permitted to be taken by the Board of
Directors or a committee of the Board at a meeting may be taken
without a meeting if all the members of the Board or the
committee take the action, each director or committee member
signs a written consent describing the action taken, and the
consents are filed with the records of the Corporation.
ARTICLE XIV - AMENDMENTS
These By-Laws may be altered or repealed and BY-Laws may be
made at any annual meeting of the Stockholder5 or at any special
meeting thereof if notice of the proposed alteration or repeal to
be made be contained in the notice of such special meeting, by
the affirmative vote of a majority of the stock issued and
outstanding and entitled to vote thereat, or by the affirmative
vote of a majority of the board at any regular meeting of the
board or at any special meeting of the board if notice of the
proposed alteration or repeal to be made, be contained in the
notice of such special meeting.
Exhibit 10.2 Promissory Note Between Floridino's Inc. and
Raffles Toho Inc.
PROMISSORY NOTE
On the 31st day of August 1999, Floridino's Inc., agrees to pay
Raffles Toho, Inc., One Hundred seventeen thousand three hundred
forty dollars and no cents ($117,340.00) at the rate of 8.25
percent per annum. A balloon payment will be due on the 1st day
of September, 2000.
____________________________
Nick Pirgousis, President
Floridino's Inc.
Exhibit 10.3 Promissory Note Between Floridino's Inc. and
Raffles Toho Inc.
PROMISSORY NOTE
On the 31st day of August 1999, Floridino's Inc., agrees to pay
Raffles Toho, Inc., Seventy two thousand one Hundred ninety seven
dollars and no cents ($72,197.00) at the rate of 8.25 percent per
annum. A balloon payment will be due on the 1st day of September,
2000.
____________________________
Nick Pirgousis, President
Floridino's Inc.
Exhibit 10.4 Promissory Note Between Floridino's Inc. and
Toho Partners, LLC
PROMISSORY NOTE
On the 31st day of August 1999, Floridino's Inc., agrees to pay
Toho Partners, LLC, forty thousand dollars and no cents
($40,000.00) at the rate of 8.25 percent per annum. A balloon
payment will be due on the 1st day of September, 2000.
____________________________
Nick Pirgousis, President
Floridino's Inc.
Exhibit 10.5 Promissory Note Between Floridino's Inc. and
Raffles Toho Inc.
PROMISSORY NOTE
On the 31st day of December, 1998, Floridino's Inc., agrees to pay
Raffles Toho, Inc., forty five thousand three hundred eighty
eight dollars and no cents ($45,388.00) at the rate of 8.25
percent per annum. A balloon payment will be due on the 1st day
of January, 2000.
____________________________
Nick Pirgousis, President
Floridino's Inc.
Exhibit 10.6 Promissory Note Between Floridino's Inc. and
Toho Partners, LLC
PROMISSORY NOTE
On the 31st day of December 1998, Floridino's Inc., agrees to pay
Toho Parnters, LLC, twenty thousand dollars and no cents
($20,000.00) at the rate of 8.25 percent per annum. A balloon
payment will be due on the 1st day of January, 2000.
____________________________
Nick Pirgousis, President
Floridino's Inc.
Exhibit 10.7 FLORIDINO'S STANDARD FRANCHISE AGREEMENT
THIS AGREEMENT is made and entered into this ________ day of
______________,19 ____, by and between FLORIDINO'S INTERNATIONAL,
INC., a Florida corporation, with its principal office at 3560
Cypress Gardens Road, Winter Haven, Florida 33884 ("COMPANY"),
and _________________________________ with his principal address
at ___________________________________________
__________________________________________("FRANCHISEE").
1. PREAMBLES AND ACKNOWLEDGMENTS
A. PREAMBLES
The COMPANY has developed specialty restaurants, known as
"Floridino's Restaurants", that sell and serve calzones, pizzas,
pastas, salads, Italian sandwiches, beers, wines, sodas, and
other Italian, Italian-American, and American foods and
beverages. The Floridino's Restaurants are identified by certain
service marks, trade names, logos, trade dress, and other
commercial symbols, including, without limitation, the
"Floridino's" service mark and trade name and the "Home of the
World's Largest Calzone" service mark ("Marks"). The Floridino's
Restaurants are operated pursuant to formats, specifications,
standards, methods, and procedures required or approved by the
COMPANY ("System"), all of which may be improved, further
developed, or otherwise modified from time to time by the
COMPANY. The COMPANY grants to persons who meet the COMPANY's
qualifications, who have selected a location approved by the
COMPANY, and who are willing to undertake the investment and
effort, a franchise to operate a Floridino's Restaurant at such
location, offering the products and services required or approved
by the COMPANY and using the Marks and the System.
B. ACKNOWLEDGMENTS
FRANCHISEE acknowledges that he has read this Agreement and the
COMPANY's franchise offering circular and that he understands and
accepts the terms, conditions, and covenants contained in this
Agreement as being reasonably necessary to maintain the COMPANY's
high standards of quality and service at all Floridino's
Restaurants in order to protect and preserve the goodwill
associated with the Marks and the System. FRANCHISEE further
acknowledges that he has conducted an independent investigation
of the franchise contemplated by this Agreement and recognizes
that, like any other business, the business of operating a
Floridino's Restaurant may evolve and change over time, that an
investment in the franchise contemplated by this Agreement
involves risks, and that the success of the franchise
contemplated by this Agreement will be largely dependent upon the
abilities and efforts of FRANCHISEE. The COMPANY expressly
disclaims the making of, and FRANCHISEE acknowledges that he has
not received or relied upon, any-warranty or guarantee, express
or implied, as to the revenues, profits, or financial success of
the franchise contemplated by this Agreement. FRANCHISEE further
acknowledges that he has not received or relied on any
representation about the franchise contemplated by this Agreement
by the COMPANY, or its directors, officers, employees, or agents,
that are contrary to the disclosures made in the COMPANY's
franchise offering circular. FRANCHISEE represents to the
COMPANY, as an inducement to its entry into this Agreement, that
FRANCHISEE has made no misrepresentations in obtaining the
franchise contemplated by this Agreement.
2. FRANCHISE
A. FRANCHISE GRANT
Subject to the provisions of this Agreement, the COMPANY grants
to FRANCHISEE a franchise ("Franchise") to operate one (1)
Floridino's Restaurant ("Restaurant"), offering the products and
services required and approved by the COMPANY and using the Marks
and the System, at the following location:
The COMPANY's approval of the foregoing location does not
constitute a representation, warranty, or guarantee by the
COMPANY that the Restaurant can be successfully operated at such
location.
B. FRANCHISE TERM
The term of the Franchise shall commence upon the date of
execution of this Agreement by the COMPANY and shall expire on
the last day of the month that includes the tenth (10th)
anniversary of such date, unless otherwise terminated prior
thereto by operation of law or in accordance with any provision
of this Agreement.
C. FRANCHISE RENEWAL
Provided FRANCHISEE is in full compliance with all provisions of
this Agreement, any and all other agreements between the COMPANY
and FRANCHISEE, and any and all applicable laws and regulations,
and upon not less than six (6) not more than twelve (12) months
written notice to the COMPANY of his intention to do so,
FRANCHISEE shall have the right to renew the Franchise for
successive periods of ten (10) years each upon the payment to the
COMPANY of a renewal fee in an amount equal to twenty-five
percent (25%) of the franchise fee then most recently received by
the COMPANY for a comparable new franchise and the execution of
the then current form of standard franchise agreement used by the
COMPANY prior to the expiration of each such-successive term.
D. TERRITORIAL RIGHTS
Provided FRANCHISEE is in full compliance with all of the
provisions of this Agreement, any and all other agreements
between the COMPANY and FRANCHISEE, and any and all applicable
laws and regulations, the COMPANY agrees that it will not
operate, or permit any person other than FRANCHISEE to operate,
any Floridino's Restaurant at any location within two and
one-half (2.5) miles of the Restaurant during the term of the
Franchise. The COMPANY (on behalf of itself and its affiliates)
retains the right, in its sole discretion and without granting
any rights to FRANCHISEE, (i) to itself operate, and permit
persons other than FRANCHISEE to operate, Floridino's Restaurants
at such locations greater than two and one-half (2.5) miles from
the Restaurant as the COMPANY deems appropriate and (ii) to
distribute anywhere the products and services required and
approved by the COMPANY for Floridino's Restaurants under the
Marks and other marks through dissimilar channels of trade (such
as, food store, supermarket, factory, hospital, nursing home,
school, arena, and stadium sales).
3. CONSTRUCTION AND OPENING OF THE RESTAURANT
A. ACQUISITION OF PREMISES OF THE RESTAURANT
FRANCHISEE has purchased or leased, or will, within thirty (30)
days after the date of the execution of this Agreement, purchase
or lease the premises at which the Restaurant is to be operated.
Any lease or sublease of such premises shall contain such terms
and provisions as are reasonably acceptable to the COMPANY and,
at the COMPANY'S option, shall (i) be collaterally assigned to
the COMPANY (with the consent of the lessor, if required) by a
collateral assignment agreement in form and substance reasonably
acceptable to the COMPANY to secure performance of any and all of
FRANCHISEE's liabilities and obligations to the COMPANY; or (ii)
contain substantially the following provisions:
(a) Anything contained in this Lease to the contrary
notwithstanding, Lessor agrees that without its consent, this
Lease and the right, title, and interest of Lessee hereunder may
be assigned by Lessee to Floridino's International, Inc., a
Florida corporation, or its designee, provided that Floridino's
International, Inc. shall execute documents evidencing that it
will be bound by all of the obligations of Lessee arising under
this Lease from and after the time of such assignment.
(b) Lessee hereby agrees that Lessor may, upon the written
request of Floridino's International, Inc., disclose to
Floridino's International, Inc. all reports, information, or data
in Lessor's possession respecting, sales made in, upon, or from
the leased premises.
(c) Lessor shall give written notice to Floridino's
International, Inc. (concurrently with the giving of such notice
to Lessee) of any defaults by Lessee under this Lease and
Floridino's International, Inc. shall have, after the expiration
of the period during which Lessee may cure such default, an
additional fifteen (15) days to cure, at its sole option, any
such default and, upon the curing of such default, the right to
enter upon the leased premises and assume Lessee's rights under
this Lease as if this Lease had been assigned by Lessee to
Floridino's International, Inc.
B. CONSTRUCTION OF THE RESTAURANT
The COMPANY shall provide to FRANCHISEE prototype plans and
specifications for a Floridino's Restaurant reflecting the
COMPANY's requirements and suggestions for dimensions, exterior
design, interior design and layout, decor, building materials,
equipment, fixtures, furniture, and signs.
Promptly after purchasing or leasing the premises at which the
Restaurant is to be operated and having been provided with the
above-described plans and specifications, FRANCHISEE shall do or
cause to be done the following:
(i) prepare and submit to the COMPANY for approval, which shall
not be unreasonably withheld, final plans and specifications for
the Restaurant, specifically noting any proposed modifications to
the COMPANY's prototype plans and specifications, all such
modifications being subject to prior written approval by the
COMPANY;
(ii) obtain all licenses, permits, and certificates required for
construction and operation of the Restaurant;
(iii) construct all required improvements to the premises,
purchase and install all required equipment, fixtures,
furniture, and signs, and decorate the premises in compliance
with the plans and specifications approved by the COMPANY and all
applicable ordinances, building codes, permit requirements, and
lease or deed requirements and restrictions;
(iv) establish filing, accounting, and inventory control systems
conforming to requirements of the COMPANY;
(v) obtain a certificate of occupancy for the Restaurant; and
(vi) purchase, in accordance with the COMPANY's specifications,
an opening inventory of ingredients, foods, beverages, plates,
glasses, cups, utensils, menus, napkins, and other supplies
required f or operation of the Restaurant.
The COMPANY shall make reasonable efforts to provide consultation
services in connection with the construction of the Restaurant
upon written request therefor from FRANCHISEE, but the ultimate
responsibility for such construction remains with FRANCHISEE.
C. OPENING OF THE RESTAURANT
FRANCHISEE agrees that he will not open the Restaurant for
business without a certificate of occupancy and the COMPANY's
prior written approval. FRANCHISEE agrees to complete the
construction of and open the Restaurant for business within one
hundred twenty (120) days after he purchases or leases the
premises of the Restaurant, subject to such extensions of time as
the COMPANY may grant, in its sole discretion.
D. RELOCATION OF THE RESTAURANT
If FRANCHISEE's lease for the premises of the Restaurant
terminates, with or without the fault of FRANCHISEE, or if in the
judgment of the COMPANY and FRANCHISEE there is a change in the
character of the location of the Restaurant sufficiently
detrimental to its business potential to warrant its relocation,
the COMPANY may, in its sole discretion, grant permission for
relocation of the Restaurant to a new location approved in
writing by the COMPANY. In the absence of such permission to
relocate, this Agreement and the Franchise shall automatically
terminate upon the loss of the right to continue to occupy the
premises of the Restaurant. Any approved relocation shall be at
FRANCHISEE's sole expense and FRANCHISEE shall reimburse the
COMPANY for any and all costs and expenses incurred by the
COMPANY in connection with such relocation. FRANCHISEE agrees
that the premises at any such new location shall be acquired and
the Restaurant shall be constructed and opened at such premises
in accordance with the then current standards and specifications
for a Floridino's Restaurant and in accordance with the
provisions of Paragraphs A, B, and C of this Section 3.
4. TRAINING AND ASSISTANCE
A. TRAINING BY THE COMPANY
The COMPANY shall provide, and FRANCHISEE (or if FRANCHISEE is a
partnership or corporation, a managing partner or officer who
shall have been approved by the COMPANY) and any proposed
managers of the Restaurant shall complete, an initial training
program on the operation of a Floridino's Restaurant at such
places and times as the COMPANY may designate. The initial
training program shall consist of at least twenty (20) days of
training covering such topics and using such instructional
methods as the COMPANY, in its sole discretion, shall determine
to be appropriate.
If, during the initial training program, the COMPANY determines,
in its sole discretion, that any proposed manager of the
Restaurant is not qualified to manage the Restaurant, the COMPANY
shall notify FRANCHISEE thereof and FRANCHISEE may select a
substitute manager for attendance at such training program. If,
during the initial training program, the COMPANY determines, in
its sole discretion, that FRANCHISEE (or if FRANCHISEE is a
partnership or corporation, its managing partner or officer) is
not qualified to operate the Restaurant, the COMPANY shall have
the right to terminate the Franchise, effective upon delivery of
written notice thereof to FRANCHISEE. Upon such termination, the
COMPANY shall promptly refund (without interest) the franchise
fee paid pursuant to Paragraph A of Section 8 hereof, and
FRANCHISEE shall accept such refund as its only remedy with
respect thereto.
The COMPANY shall have the right to require that FRANCHISEE (or
if FRANCHISEE is a partnership or corporation, its managing
partner or officer) and all managers of the Restaurant complete
supplemental and refresher training programs during the term of
the Franchise, to be provided at such places and times as the
COMPANY may designate. The COMPANY shall have the right to
assess FRANCHISEE reasonable charges for such training programs.
FRANCHISEE shall be solely responsible for all travel, lodging,
and living expenses incurred in connection with the attendance by
FRANCHISEE (or if FRANCHISEE is a partnership or corporation, its
managing partner or officer) and all managers of the Restaurant
at the initial training program and any supplemental or refresher
training programs.
B. START-UP ASSISTANCE
The COMPANY shall provide FRANCHISEE the services of one (1) or
more of its employees for twenty-one (21) days commencing one (1)
day prior to the scheduled date of opening of the Restaurant to
assist FRANCHISEE with the start-up and initial operation of the
Restaurant.
C. OPERATING ASSISTANCE
The COMPANY may advise FRANCHISEE of operating problems of the
Restaurant disclosed by reports submitted to or inspections made
by the COMPANY. Further, the COMPANY may provide to FRANCHISEE
such guidance and assistance in connection with the operation of
the Restaurant as is deemed appropriate by the COMPANY. Such
guidance and assistance as the COMPANY does provide may be
provided, in the sole discretion of the COMPANY, in the form of
bulletins and other written materials, telephone consultations,
and consultations at the offices of the COMPANY or at the
Restaurant in conjunction with inspections of the Restaurant.
Additional guidance and assistance may be made available to
FRANCHISEE, at the written request of FRANCHISEE and in the sole
discretion of the COMPANY, at per then fees and charges
established by the COMPANY.
D. OPERATING MANUAL
The COMPANY shall loan to FRANCHISEE during the term of the
Franchise one (1) copy of an operating manual, which may consist
of one (1) or more manuals and other written materials
("Operating Manual"), pertaining to the operation of Floridino's
Restaurants, containing a description of the foods, beverages,
and other products and services required and approved by the
COMPANY, formats, specifications, standards, methods, and
procedures required and approved by the COMPANY, and information
relative to other obligations of FRANCHISEE hereunder. The
COMPANY shall have the right to add to, and otherwise modify, the
Operating Manual to reflect changes in required and approved
foods, beverages, and other products and services and required
and approved formats, specifications, standards, methods, and
procedures for Floridino's Restaurants. FRANCHISEE shall keep
his copy of the Operating Manual current. The master copy
maintained by the COMPANY at its principal office shall be
controlling in the event of a dispute relative to the contents of
the Operating Manual. FRANCHISEE shall not at any time copy any
part of the Operating Manual, or disclose its contents to any
third party, without the written approval of the COMPANY.
5. MARKS
A. OWNERSHIP AND GOODWILL OF THE MARKS
FRANCHISEE acknowledges that the COMPANY is the owner of the
Marks, that FRANCHISEE has no interest whatsoever in the Marks,
and that FRANCHISEE's right to use the Marks is derived solely
from this Agreement and is limited to the operation of the
Restaurant pursuant to and in compliance with this Agreement and
the formats, specifications, standards, methods, and procedures
required and approved by the COMPANY. Any other use of the Marks
by FRANCHISEE shall constitute an infringement of the rights of
the COMPANY in the Marks. FRANCHISEE agrees that all use of the
Marks by FRANCHISEE, and any goodwill established thereby, shall
inure to the exclusive benefit of the COMPANY, and FRANCHISEE
acknowledges that this Agreement does not confer any such
goodwill or other interest in the Marks upon FRANCHISEE. All
provisions of this Agreement applicable to the Marks shall apply
to any additional or substitute service marks, trade names,
logos, trade dress, commercial symbols, and other identifying
characteristics of Floridino's Restaurants hereafter authorized
for use by FRANCHISEE pursuant to this Agreement.
B. LIMITATIONS ON FRANCHISEE'S USE OF THE MARKS
FRANCHISEE agrees to use the Marks as the sole identification of
the Restaurant, provided that FRANCHISEE shall identify himself
as the independent owner thereof in the manner required by the
COMPANY. FRANCHISEE shall not use any Mark as part of any
corporate, partnership, or organizational name or with any
prefix, suffix, or other modifying words, terms, designs, or
symbols, or in any modified form, nor may FRANCHISEE use any Mark
in connection with the sale of any food, beverage, or other
product or service that is not required or approved by the
COMPANY or in any other manner not expressly authorized in
writing by the COMPANY. FRANCHISEE agrees to display the Marks
prominently and in the manner required by the COMPANY at the
Restaurant, on stationery, business forms, signs, and uniforms
required or approved by the COMPANY, and in connection with
advertising and promotional materials required or approved by the
COMPANY. Further, FRANCHISEE agrees to give such notices of mark
registrations as the COMPANY specifies and to obtain such
fictitious or assumed name registrations as may be required under
applicable law.
C. NOTIFICATION OF INFRINGEMENT AND CLAIMS
FRANCHISEE shall notify the COMPANY immediately in writing of any
apparent infringement of, or challenge to FRANCHISEE's use of,
any Mark, or any claim by any person of any rights in any Mark,
or any similar trademark, service mark, trade name, logo, trade
dress, commercial symbol, or other identifying characteristic of
which FRANCHISEE becomes aware. FRANCHISEE shall not communicate
with any person other than the COMPANY and its counsel in
connection with any such infringement, challenge, or claim. The
COMPANY shall have sole discretion to take such action as it
deems appropriate and have the right to exclusively control any
litigation, U.S. Patent and Trademark Office proceeding, or other
administrative proceeding arising out of any such infringement,
challenge, or claim or otherwise relating to any Mark, including
any claim of unfair competition relating thereto.
FRANCHISEE may not, without the written approval of the COMPANY,
in its sole discretion, commence or prosecute, or seek leave to
intervene in, any litigation or other proceeding, including any
arbitration proceeding, in which FRANCHISEE purports to enforce
any right to recover any element of damage arising from the use
or infringement of any of the Marks or from any unfair
competition relating thereto. FRANCHISEE agrees to execute all
instruments and documents, render such assistance, and do such
acts and things as, in the opinion of the COMPANY's counsel, may
be necessary or advisable to protect and maintain the interests
of the COMPANY in any such litigation, U.S. Paten and Trademark
Office proceeding, or other administrative or arbitration
proceeding or to otherwise protect and maintain the interests of
the COMPANY in the Marks.
D. DISCONTINUANCE OF USE OF THE MARKS
If it becomes advisable at any time, in the COMPANY's sole
discretion, for the COMPANY and/or FRANCHISEE to modify or
discontinue use of any Mark, and/or use one (1) or more
additional or substitute service marks, trade names, logos, trade
dress, commercial symbols, or other identifying characteristics
of Floridino's Restaurants, FRANCHISEE agrees to comply with the
COMPANY's directions with respect thereto within a reasonable
time after notice thereof by the COMPANY. FRANCHISEE shall be
solely responsible for all expenses associated with his
compliance with the COMPANY's directions.
6. CONFIDENTIAL INFORMATION
A. THE COMPANY'S CONFIDENTIAL INFORMATION
The COMPANY possesses certain trade secrets and other
confidential information relating to the System, including,
without limitation, formats, specifications, standards, methods,
procedures, information, and knowledge of and experience in
operating Floridino's Restaurants ("Confidential Information").
The COMPANY will disclose the Confidential Information to
FRANCHISEE in providing FRANCHISEE training, in the Operating
Manual, and in guidance and assistance provided to FRANCHISEE
during the term of the Franchise. FRANCHISEE acknowledges and
agrees he will not acquire any interest in the Confidential
Information other than the right to use it in the operation of
the Restaurant during the term of the Franchise, and that the use
or duplication of the Confidential Information in any other
business would constitute unfair competition. FRANCHISEE
acknowledges and agrees that the Confidential Information is
proprietary to the COMPANY and is disclosed to FRANCHISEE solely
on the condition that FRANCHISEE agrees, and FRANCHISEE does
hereby agree, that he will (i) not use the Confidential
Information in any other business or capacity; (ii) maintain the
absolute confidentiality of the Confidential Information during
and after the term of the Franchise; (iii) not make unauthorized
copies of any portion of the Confidential Information disclosed
in written form; and (iv) adopt and implement all reasonable
procedures required from time to time by the COMPANY to prevent
unauthorized use or disclosure of the Confidential Information,
including, without limitation, restrictions on disclosure thereof
to FRANCHISEE's employees and the use of nondisclosure and
noncompetition clauses in employment agreements with such
employees if the COMPANY so directs.
B. FRANCHISEE'S OTHER BUSINESS INTERESTS
FRANCHISEE acknowledges and agrees that the COMPANY would be
unable to protect the Confidential Information against
unauthorized use or disclosure and encourage a free exchange of
ideas and information among the COMPANY and all owners of
franchised Floridino s Restaurants if any owner or manager of a
franchised Floridino s Restaurant is permitted to have any
interest in or involvement with any Italian or Italian-American
restaurant, other than a Floridino's Restaurant. Therefore,
during the term of the Franchise, neither FRANCHISEE (or any
partner, shareholder, director, or officer of FRANCHISEE if
FRANCHISEE is a partnership or corporation), any manager of the
Restaurant, nor any member of his (or their) immediate families,
shall have any interest in or involvement with, as an owner,
investor, partner, director, officer, employee, consultant,
representative, or agent, or in any other capacity, any Italian
or Italian-American restaurant, other than a Floridino's
Restaurant. This prohibition shall not preclude any such person
from owning less than five percent (5%) of the outstanding shares
of stock of any publicly held corporation owning or operating any
such restaurant so long as such person is not involved in the
operation of such restaurant.
C. FRANCHISEE'S INVENTIONS AND IMPROVEMENTS
FRANCHISEE agrees that the COMPANY shall have the perpetual right
to use and authorize other persons to use, and FRANCHISEE shall
fully and promptly disclose to the COMPANY, all inventions,
improvements, ideas, concepts, methods, and procedures relating
to the operation of Italian or Italian-American restaurants
conceived or developed by FRANCHISEE and/or his employees during
the term of the Franchise.
7. RELATIONSHIP OF THE PARTIES - INDEMNIFICATION
A. RELATIONSHIP OF THE PARTIES
It is understood and agreed by the parties hereto that this
Agreement does not create a fiduciary relationship between them,
that the COMPANY and FRANCHISEE shall be independent contractors,
and that nothing in this Agreement is intended to make either
party a general or special agent, legal representative,
subsidiary, joint venturer, partner, employee, or servant of the
other for any purpose. FRANCHISEE shall identify himself in all
dealings with customers, lessors, contractors, suppliers, public
officials, and others as the owner and operator of the Restaurant
under a franchise from the COMPANY, and shall place such notices
of independent ownership and operation on forms, signs
stationery, advertising, and other materials, as the COMPANY may
require.
The COMPANY has not authorized or empowered FRANCHISEE to use the
Marks other than as provided by this Agreement. FRANCHISEE shall
not employ any Mark in signing any contract, lease, mortgage,
check, purchase agreement, negotiable instrument, or other legal
obligation without the prior written approval of the COMPANY or
employ any Mark in a manner that is likely to result in liability
of the COMPANY for any indebtedness or obligation of FRANCHISEE.
Except as may otherwise be specifically provided in this
Agreement, neither the COMPANY nor FRANCHISEE shall make any
express or implied agreements, guarantees, or representations, or
incur any debt, in the name of or on behalf of the other, or
represent that their relationship is other than franchiser and
franchisee. Neither the COMPANY nor FRANCHISEE shall be
obligated by or have any liability under any agreements or
representations made by the other that are not expressly
authorized hereunder, nor shall the COMPANY be obligated for any
damages to any person or property directly or indirectly arising
out of FRANCHISEE's ownership, construction, or operation of the
Restaurant. The COMPANY shall have no liability for any sales,
service, use, value added, excise, gross receipts, property, or
other taxes, whether levied upon FRANCHISEE, the Restaurant, or
the COMPANY, in connection with FRANCHISEE's ownership,
construction, or operation of the Restaurant.
B. INDEMNIFICATION
FRANCHISEE agrees to indemnify and hold the COMPANY, and its
subsidiaries, affiliates, stockholders, directors, officers,
employees, agents, and assignees, harmless from and against, and
to reimburse them for, any loss, liability, taxes, or damages
(actual, consequential, and incidental) and all reasonable costs
and expenses of defending any claim brought against any of them
or any action in which any of them is named as a party
(including, without limitation, reasonable accountant, attorney,
and expert witness fees, costs of investigation and proof of
acts, court costs , other litigation expenses, and travel and
living expenses) that any of them may suffer, sustain, or incur
by reason of, arising from, or in connection with FRANCHISEE's
ownership, construction, or operation of the Restaurant. The
indemnities and assumptions of liabilities and obligations herein
shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of the Franchise.
8. FRANCHISE FEES
A. FRANCHISE FEE
FRANCHISEE shall pay to the COMPANY a franchise fee in the amount
of ________________ ($______) payable upon the execution of this
Agreement. If FRANCHISEE has paid to the COMPANY a development
fee for the Restaurant prior to the execution of this Agreement,
such development fee shall be fully credited to the franchise
fee. The franchise fee shall be fully earned by the COMPANY upon
the execution of this Agreement and shall be nonrefundable,
except as expressly provided in Paragraph A of Section 4 hereof.
B. ROYALTY AND SERVICE FEE
FRANCHISEE agrees to pay to the COMPANY a monthly royalty and
service fee based on the following percentages of the Gross
Revenues, as defined in Paragraph C of this Section 8, payable by
the tenth (10th) day of each month in respect of the Gross
Revenues for the preceding month:
Four percent (4.0%) of the Gross Revenues for each month during
the period commencing on the date of execution of this Agreement
by the COMPANY and expiring on the last day of the month that
includes the first (1st) anniversary of such date;
The COMPANY may, in its sole discretion, institute an electronic
funds transfer system for payment of the royalty and service fee
each month during the term of the Franchise. If the COMPANY
institutes such a system, FRANCHISEE agrees to execute all
documents required to authorize his bank to electronically
transfer funds from his account to the COMPANY's account at its
bank as payment of the royalty and service fee each month upon
presentation by the COMPANY of a statement of the Gross Revenues
and the royalty and service fee due and owing in respect of the
Gross Revenues for the preceding month.
C. DEFINITION OF "GROSS REVENUES"
The term "Gross Revenues" shall mean the total amount of all
sales of foods, beverages, and other products and services sold
at, from, and otherwise in connection with the operation of the
Restaurant, including delivery, special event, and other off
premises sales, whether for cash, on credit, or otherwise, but
shall not include any sales, service, value added, or excise
taxes paid or accrued by FRANCHISEE.
D. INTEREST ON LATE PAYMENTS
All royalty and service fees, advertising contributions, amounts
due for purchases by FRANCHISEE from the COMPANY or its
affiliates, and other amounts that FRANCHISEE owes to the COMPANY
or its affiliates shall bear interest after the due date at the
applicable maximum legal rate for open account business credit,
but not to exceed one and one-half percent (1.5%) per month.
FRANCHISEE acknowledges that this Paragraph D shall not
constitute the COMPANY's agreement to accept such payments after
they are due or a commitment by the COMPANY to extend credit to,
or otherwise finance FRANCHISEE's operation of, the Restaurant.
Further, FRANCHISEE acknowledges that his failure to pay all
amounts when due shall constitute grounds for termination of the
Franchise, as provided in Paragraph B of Section 14 hereof,
notwithstanding the provisions of this paragraph.
E. APPLICATION OF PAYMENTS
The COMPANY shall have sole discretion to apply any and all
payments received from FRANCHISEE and any and all indebtedness
of the COMPANY to FRANCHISEE to any and all past due indebtedness
of FRANCHISEE for royalty and service fees, advertising
contributions, and purchases from the COMPANY and its affiliates
in such amounts and in such order as the COMPANY deems
appropriate.
9. IMAGE AND OPERATING STANDARDS
A. BUILDING MATERIALS, EQUIPMENT, FIXTURES, FURNITURE, AND
SIGNS
FRANCHISEE acknowledges and agrees that the COMPANY would be
unable to maintain its high standards of quality and service at
all Floridino's Restaurants and protect and preserve the goodwill
associated with the Marks and the System if any franchisee is
permitted to use any building materials, equipment, fixtures,
furniture, or signs other than those required or approved by the
COMPANY in the construction or operation of his Floridino's
Restaurant. The COMPANY shall provide FRANCHISEE with a list of
required or approved building materials, equipment, fixtures,
furniture, and signs and may issue revisions thereto. The
COMPANY's requirement or approval of building materials,
equipment, fixtures, furniture, and signs may be given in the
form of specifications and in the requirement or approval of
specific types and brands. FRANCHISEE agrees that he will not,
without the prior written approval of the COMPANY, use or
authorize his employees or contractors to use, any building
materials, equipment, fixtures, furniture, or signs that are not
on such list in the construction or operation of the Restaurant.
FRANCHISEE may purchase required and approved building materials,
equipment, fixtures, furniture, and signs from the COMPANY or any
other supplier that can provide the same.
B. CONDITION OF THE RESTAURANT, EQUIPMENT, FIXTURES, FURNITURE,
AND SIGNS
FRANCHISEE agrees that he will maintain the condition and
appearance of the Restaurant and all equipment, fixtures,
furniture, and signs used in the operation of the Restaurant in
accordance with the specifications of the COMPANY. FRANCHISEE
shall not alter the Restaurant and/or any equipment, fixture,
furniture, or sign used in the operation of the Restaurant
without the prior written approval of the COMPANY. If the
Restaurant and/or any equipment, fixture, furniture, or sign used
in the operation of the Restaurant is damaged by fire or any
other casualty, FRANCHISEE shall, within thirty (30) days
thereafter, repair the Restaurant and/or such equipment, fixture,
furniture, or sign in accordance with the specifications of the
COMPANY if such repair is commercially practical or commence
reconstruction of the Restaurant and/or replace such equipment,
fixture, furniture, or sign if such repair is not commercially
practical. If the Restaurant and/or any equipment used in the
operation of the Restaurant is destroyed by fire or any other
casualty, FRANCHISEE shall, within thirty (30) days
thereafter, commence reconstruction of the Restaurant and/or
replace such equipment, fixture, furniture, or sign. Upon
commencement of reconstruction of the Restaurant, FRANCHISEE
shall thereafter proceed with such reconstruction with reasonable
diligence until such reconstruction has been completed and the
Restaurant reopened in accordance with the provisions of
Paragraphs B and C of Section 3 hereof. As an alternative to
reconstruction of the Restaurant if the Restaurant has been
damaged to the extent that repair is commercially impractical or
destroyed, FRANCHISEE may terminate the Franchise by written
notice to the COMPANY.
C. FOODS AND BEVERAGES
FRANCHISEE acknowledges and agrees that the COMPANY would be
unable to maintain its high standards of quality and service at
all Floridino's Restaurants and protect and preserve the goodwill
associated with the Marks and the System if any franchisee is
permitted to offer any foods, beverages, and other products and
services other than those required and approved by the COMPANY in
connection with the operation of his Floridino's Restaurant.
FRANCHISEE agrees that he will offer all foods, beverages, and
other products and services required by the COMPANY in the
Operating Manual and will not, without the prior written approval
of the COMPANY, offer any food, beverage, or other product or
service that is not approved by the COMPANY in the Operating
Manual in connection with the operation of the Restaurant.
FRANCHISEE further agrees that he will not offer any food,
beverage, or other product or service that is required or
approved by the COMPANY in the Operating Manual at any location
other than the premises of the Restaurant without the prior
written approval of the COMPANY.
D. INGREDIENTS AND OTHER SUPPLIES
FRANCHISEE acknowledges and agrees that the COMPANY would be
unable to maintain its high standards of quality and service at
all Floridino's Restaurants and protect and preserve the goodwill
associated with the Marks and the System if any franchisee is
permitted to use any ingredients, foods, beverages, plates,
glasses, cups, utensils, menus, napkins, or other supplies other
than those required or approved by the COMPANY in the operation
of his Floridino's Restaurant. The COMPANY shall provide
FRANCHISEE a list of required or approved ingredients, foods,
beverages, plates, glasses, cups, utensils, menus, napkins, and
other supplies and shall from time to time issue revisions
thereto. The COMPANY's requirement or approval of ingredients,
foods, beverages, plates, glasses, cups, utensils, menus,
napkins, and other supplies may be given in the form of
specifications and in the requirement or approval of specific
types and brands. FRANCHISEE agrees that he will not, without
the prior written approval of the COMPANY, use or authorize his
employees to use, any ingredients, foods, beverages, plates,
glasses, cups, utensils, menus, napkins, and other supplies that
are not on such list in the operation of the Restaurant.
FRANCHISEE must purchase required and approved ingredients,
foods, beverages, plates, glasses, cups, utensils, menus,
napkins, and other supplies from suppliers as are required or
approved by the COMPANY.
E. FORMATS, SPECIFICATIONS, STANDARDS, METHODS, AND PROCEDURES
FRANCHISEE acknowledges and agrees that each and every detail of
the operation of the Restaurant is important to the COMPANY and
the franchised owners of other Floridino's Restaurants.
FRANCHISEE agrees to cooperate with the COMPANY in maintaining
high standards in his operation of the Restaurant and,
accordingly, agrees to comply with all formats, specifications,
standards, methods, and procedures (whether contained in the
Operating Manual or any other written or oral communication to
FRANCHISEE) that the COMPANY may, in its sole discretion, require
for Floridino's Restaurants. Required formats, specifications,
standards, methods, and procedures required in the Operating
Manual or otherwise communicated to FRANCHISEE in writing shall
constitute provisions of this Agreement as if fully set forth
herein. All references herein to this Agreement shall include
all such required formats, specifications, standards, methods,
and procedures.
F. RECOMMENDED RETAIL PRICES
The COMPANY may recommend or suggest retail prices for the foods,
beverages, and other products and services sold at, from, and
otherwise in connection with the operation of the Restaurant.
All such recommendations or suggestions are based on the
COMPANY's experience relating to the various factors that
determine appropriate prices, but such recommendations or
suggestions are not binding upon FRANCHISEE. FRANCHISEE shall
have the right to charge whatever retail prices for such foods,
beverages, and other products and services he determines to be
appropriate.
G. STATIONERY AND BUSINESS FORMS
FRANCHISEE shall use only such stationery and business forms as
are required or approved by the COMPANY. FRANCHISEE may purchase
such stationery and business forms from any supplier that can
produce such stationery and business forms using the Marks in
accordance with the COMPANY's specifications.
H. UNIFORMS
When serving customers at the Restaurant or promoting the
Restaurant, FRANCHISEE and his employees shall wear such uniforms
or other items of clothing as may be required or approved by the
COMPANY. All such uniforms or other items of clothing shall be
maintained by FRANCHISEE and his employees in a clean and
attractive manner. FRANCHISEE may purchase such uniforms or
other items of clothing from any supplier that can provide such
uniforms or other items of clothing in accordance with the
COMPANY's specifications.
I. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES
FRANCHISEE shall obtain and maintain in force all licenses,
permits, and certificates required for the operation of the
Restaurant and shall operate the Restaurant in full compliance
with all applicable laws, ordinances, and regulations.
FRANCHISEE agrees that he will not take any action, or fail to
take any action, that may cause any license, permit, or
certificate required to operate the Restaurant to be revoked,
suspended, or restricted, and FRANCHISEE shall be solely
responsible for compliance with all applicable laws, ordinances,
and regulations pertaining thereto. FRANCHISEE shall immediately
notify the COMPANY of steps taken or threatened to be taken by
the issuing authority to revoke, suspend, or restrict any such
license, permit, or certificate. FRANCHISEE shall notify the
COMPANY in writing within five (5) days of the commencement of
any action, suit, proceeding, or investigation, or of the
issuance of any order, writ, injunction, award, or decree, by any
court, agency, or other governmental authority that may adversely
affect the operation of the Restaurant.
All advertising and promotion by FRANCHISEE shall be completely
factual and shall conform to the highest standards of ethical
advertising. FRANCHISEE agrees to refrain from any business or
advertising practice that may be injurious to the COMPANY or the
goodwill associated with the Marks, the System, and Floridino's
Restaurants. FRANCHISEE shall at all times give prompt,
courteous, and efficient service to the customers of the
Restaurant. Franchisee shall, in all dealings with the customers
and suppliers of the Restaurant and the public, adhere to the
highest standards of honesty, integrity, fair dealing, and
ethical conduct.
J. MANAGEMENT OF THE RESTAURANT
The Restaurant shall at all times be under the direct,
day-to-day, full-time supervision of FRANCHISEE (or if FRANCHISEE
is a partnership or corporation, a managing partner or officer
who shall have completed the initial training program), subject
to the requirements of the Operating Manual. FRANCHISEE shall at
all times faithfully, honestly, and diligently perform his
obligations hereunder and exert his best efforts to promote and
enhance the business of the Restaurant. FRANCHISEE (and the
partners, directors, shareholders, and officers of FRANCHISEE if
FRANCHISEE is a partnership or corporation) and the managers of
the Restaurant shall not engage in any other business or other
activity, directly or indirectly, that substantially conflicts
with FRANCHISEE's obligations hereunder.
K. HIRING, TRAINING, AND SUPERVISION OF EMPLOYEES
FRANCHISEE shall hire all employees of the Restaurant and shall
be exclusively responsible for the terms of their employment and
compensation. FRANCHISEE shall implement a training program for
his employees in compliance with the COMPANY's requirements.
FRANCHISEE agrees to maintain at all times a staff of trained
employees sufficient to operate the Restaurant in compliance with
the COMPANY's standards. FRANCHISEE (or if FRANCHISEE is a
partnership or corporation, its managing partner or officer) or a
manager of the Restaurant who shall have completed the initial
training program or other training satisfactory to the COMPANY
shall be on the premises of the Restaurant at all times during
the hours of its operation to supervise all other employees on
duty.
L. INSURANCE
FRANCHISEE shall at all times during the term of the Franchise
maintain in force, at his sole expense, fire and casualty
insurance for the Restaurant and commercial general liability
insurance against claims for bodily and personal injury, death,
and property damage caused by or occurring in connection with the
operation of the Restaurant. Such insurance coverage shall be
maintained under policies of insurance containing minimum
protection in such amounts as may be specified by the COMPANY in
the Operating Manual. FRANCHISEE shall carry workers'
compensation insurance covering all of his employees as required
by the laws of the applicable state. All insurance policies
shall be issued by one or more insurance carriers acceptable to
the COMPANY. All liability insurance policies shall name the
COMPANY as an additional insured, shall contain a waiver of the
insurance carrier's right of subrogation against the COMPANY, and
shall provide that the COMPANY will receive thirty (30) days
prior written notice of termination, expiration, or cancellation
of any such policy.
FRANCHISEE shall provide to the COMPANY annually a copy of the
certificate or other evidence of the renewal or extension of each
insurance policy. If FRANCHISEE at any time fails or refuses to
maintain in effect any insurance coverage required by the
COMPANY, or to provide satisfactory evidence thereof, the
COMPANY, at its option and in addition to its other rights and
remedies hereunder, may obtain such insurance coverage on behalf
of FRANCHISEE, and FRANCHISEE shall promptly execute any
application or other form or instrument required to obtain any
such insurance and pay to the COMPANY, on demand, any costs and
premiums paid or incurred by the COMPANY. FRANCHISEE's
obligation to maintain the insurance described herein shall not
be limited in any way by reason of any insurance maintained by
the COMPANY, nor shall FRANCHISEE's performance of such
obligations relieve FRANCHISEE of any obligations under Section 7
hereof.
M. CREDIT CARDS
FRANCHISEE shall at all times have arrangements in existence with
VISA, MasterCard, American Express, and such other credit card
issuers or sponsors, check verification services, and electronic
funds transfer systems as the COMPANY designates from time to
time in order that the Restaurant may accept customers' credit
cards, personal checks, and other forms of non-currency payment.
If the COMPANY designates a processor for all credit card
transactions at Floridino's Restaurants during the term of the
Franchise, FRANCHISEE agrees to use that processor for all credit
card transactions at, from, or in connection with the operation
of the Restaurant.
10. ADVERTISING
A. BY THE COMPANY
Recognizing the value of uniform advertising to the goodwill and
public image of Floridino's Restaurants, the COMPANY may
institute, maintain, and administer a central advertising fund
("Fund") for such advertising or public relations programs as the
COMPANY, in its sole discretion, may deem necessary or
appropriate to advertise or promote Floridino's Restaurants. The
COMPANY shall direct all such programs, with sole discretion over
the creative concepts, materials, endorsements, and media used,
and the placement and allocation of advertisements in such media.
The COMPANY shall have the right to determine, in its sole
discretion, the composition of all geographic areas for the
development and implementation of such programs. FRANCHISEE
shall contribute to the Fund an amount designated by the COMPANY,
in its sole discretion, not to exceed one and two percent (2.0%)
of the Gross Revenues, payable monthly together with the royalty
and service fee due hereunder.
FRANCHISEE agrees that the Fund may be used to meet all costs of
maintaining, administering, directing, and preparing national,
regional, or local advertising and public relations materials and
programs, including, without limitation, costs for preparing and
conducting television, radio, magazine, billboard, newspaper, and
other media programs and activities, costs associated with
conducting market research, and costs for providing promotional
brochures and advertising materials to Floridino's Restaurants.
The COMPANY may spend in any fiscal year an amount greater or
less than the aggregate contributions of Floridino's Restaurants
to the Fund in that year and the COMPANY may make loans to the
Fund bearing reasonable interest to cover any deficits of the
Fund and cause the Fund to invest any surplus for future use by
the Fund.
The Fund shall be accounted for separately from the other funds
of the COMPANY and shall not be used to defray any of the
COMPANY's general operating expenses, except for such reasonable
salaries, administrative costs, and overhead as the COMPANY may
incur in activities reasonably related to the administration or
direction of the Fund and its programs (including, without
limitation, conducting market research, preparing advertising
materials, and collecting and accounting for contributions to the
Fund). A report of the operations of the Fund shall be prepared
annually by the COMPANY and shall be made available to FRANCHISEE
upon request.
FRANCHISEE understands and acknowledges that the Fund is intended
to maximize general recognition of the Marks and the goodwill and
public image of Floridino's Restaurants for the benefit of all
Floridino's Restaurants and that the COMPANY undertakes no
obligation in developing, implementing, or administering
advertising or public relations programs to ensure that
expenditures that are proportionate or equivalent to FRANCHISEE's
contributions are made for the Restaurant or that any Floridino's
Restaurant benefits directly or pro rata from the placement of
advertising through the Fund.
B. BY FRANCHISEE
In addition to making the advertising contributions required
under Paragraph A of this Section 10, FRANCHISEE agrees to list
and advertise the Restaurant in the principal (as determined by
the COMPANY) regular (white pages) and classified (Yellow pages)
telephone directories for the market area within which the
Restaurant is located in such directory categories as are
specified by the COMPANY using the COMPANY's standard forms of
listing and classified directory advertisements. If such
classified directory advertisements include other Floridino's
Restaurants operating within such market area, the cost of such
advertisements shall be reasonably apportioned among all
Floridino's Restaurants included therein in proportion to the
annualized total Gross Revenues of each such Floridino's
Restaurant for the preceding year.
In addition to making the advertising contributions required
under Paragraph A of this Section 10, FRANCHISEE shall be
obligated to expend not less than an additional two percent
(2.0%) of the Gross Revenues in connection with local advertising
and promotional activities in such media (including any secondary
regular and classified telephone directories) and by such methods
as FRANCHISEE may determine to be appropriate, subject to the
approval of the COMPANY, which shall not be unreasonably
withheld. Prior to their use by FRANCHISEE, samples of all local
advertising and promotional materials not prepared or previously
approved by the COMPANY shall be submitted to the COMPANY for
approval, which shall not be unreasonably withheld. If written
disapproval is not received by FRANCHISEE within fifteen (15)
days from the date of receipt by the COMPANY of such materials,
the COMPANY shall be deemed to have given the required approval.
FRANCHISEE shall not use any advertising or promotional materials
that the COMPANY has disapproved.
C. FRANCHISEE'S PARTICIPATION IN LOCAL ADVERTISING COOPERATIVE
The COMPANY may, in its sole discretion, designate geographical
areas for which it has determined, on the basis of television
coverage, newspaper coverage, or other criteria that it may
establish, in its sole discretion, that the establishment of a
local advertising cooperative may be appropriate for all
Floridino's Restaurants located within each such area. If the
owners of seventy-five percent (75%) of the franchised
Floridino's Restaurants located within any such area that
includes the Restaurant concur with the COMPANY's judgment that a
local advertising cooperative would be appropriate, FRANCHISEE
shall be obligated to participate in the cooperative for such
area ("Local Advertising Cooperative"). The Local Advertising
Cooperative shall be formed by all of the owners of the
Floridino's Restaurants within such area and shall operate
pursuant to such by-laws and in such form as the members thereof
may determine, on the basis of one (1) vote for each Floridino's
Restaurant within such area. Pursuant to the by-laws adopted by
the Local Advertising Cooperative, FRANCHISEE shall contribute to
the Local Advertising Cooperative an amount of the Gross Revenues
designated thereby, not to exceed one and one-half percent (1.
5%) of the Gross Revenues. FRANCHISEE's obligation to expend
funds directly on local advertising and promotional activities
pursuant to Paragraph B of this Section 10 shall be reduced as
necessary such that the total amount of the Gross Revenues that
FRANCHISEE is required to expend for local advertising and
promotional activities, including direct local advertising and
promotional activities by FRANCHISEE and contributions to the
Local Advertising Cooperative by FRANCHISEE (but excluding any
expenditures made for advertising in telephone directories as
required by Paragraph B of this Section 10), shall not exceed two
percent (2%).
11. RECORDS AND REPORTS
A. ACCOUNTING AND RECORDS
During the term of the Franchise, FRANCHISEE shall, at his
expense, (i) implement record keeping and accounting systems
conforming to the requirements required by the COMPANY and (ii)
maintain at a location required or approved by the COMPANY and
preserve for no less than three (3) years from the date of their
preparation, or for such longer period as may be required by any
applicable law, ordinance, or regulation, full, complete, and
accurate books, records, and accounts for the Restaurant and all
supporting documents pertaining thereto. FRANCHISEE shall use
only cash registers with "non-resettable totals" in the operation
of the Restaurant. If requested by the COMPANY, FRANCHISEE shall
use in the operation of the Restaurant cash registers and
associated computer hardware and software that permits the
COMPANY to electronically poll and capture all transaction data
entered into such cash registers.
B. REPORTS AND TAX RETURNS
FRANCHISEE shall provide to the COMPANY the following:
(i) within ten (10) days after the end of each month,
(a)a statement relating to the Gross Revenues for such month and
(b) a year-to-date profit and loss statement, a year-to-date
source and use of funds statement, and a balance sheet as of the
end of the month preceding such month; and
(ii) within sixty (60) days after the end of each year, an annual
profit and loss statement, an annual source and use of funds
statement, and a balance sheet as of the end of such year, which
shall be reviewed by an independent certified public accountant
if requested by the COMPANY.
FRANCHISEE shall provide to the COMPANY upon its request such
other written and electronic reports and such other information
as the COMPANY shall designate. All such financial statements,
written reports, and information shall be on forms approved by
the COMPANY and signed and verified by FRANCHISEE. FRANCHISEE
shall provide to the COMPANY upon its request exact copies of all
state sales tax returns and such portions of FRANCHISEE's federal
and state income tax returns as reflect the operation of the
Restaurant.
12. INSPECTION AND AUDITS
A. THE COMPANY'S RIGHT TO INSPECT THE RESTAURANT
To determine whether FRANCHISEE is complying with this Agreement,
the COMPANY shall have the right at any time during business
hours, and without prior notice to FRANCHISEE, to view and
inspect the operation of the Restaurant. FRANCHISEE shall fully
cooperate with representatives of the COMPANY making any such
inspection and shall permit representatives of the COMPANY to
take photographs, movies, and videotapes of FRANCHISEE and/or his
employees during their service of customers and to interview his
employees and customers.
B. THE COMPANY'S RIGHT TO EXAMINE BOOKS AND RECORDS
The COMPANY shall have the right at any time during business
hours, and without prior notice to FRANCHISEE, to examine or
audit, or cause to be examined or audited, the books, records,
and accounts of the Restaurant and all supporting documents
pertaining thereto. FRANCHISEE shall fully cooperate with
representatives of the COMPANY and independent accountants hired
by the COMPANY to conduct any such examination or audit. If any
such examination or audit shall disclose an understatement of the
Gross Revenues, FRANCHISEE shall pay to the COMPANY, within
fifteen (15) days after receipt of the examination or audit
report, the royalty and service fees and any advertising
contributions due on the amount of such understatement, plus
interest (at the rate and on the terms provided in Paragraph D of
Section 8 hereof) from the date originally due until the date of
payment. Any contention that the COMPANY or its independent
accountants have miscalculated any sum then due shall not excuse
FRANCHISEE from making full payment of all sums then determined
to be due, with all disputed sums to be paid as provided herein
and a refund to be made by the COMPANY within ten (10) days of
any final determination that a lesser sum than FRANCHISEE has
paid pursuant hereto was properly due to the COMPANY. Further,
if any such examination or audit is made necessary by the failure
of FRANCHISEE to provide reports, records, financial statements,
or other documents or information as herein required, or failure
to provide such reports, records, financial statements,
documents, or information on a timely basis, or if an
understatement of the Gross Revenues for any month is determined
by any such examination or audit to be greater than two percent
(2%), FRANCHISEE shall reimburse the COMPANY for the cost of such
examination or audit, including, without limitation, the charges
of any independent accountants and the travel expenses, room and
board, and compensation of employees of the COMPANY. The
foregoing remedies shall be in addition to all other remedies and
rights of the COMPANY hereunder or under applicable law.
13. ASSIGNMENT
A. BY THE COMPANY
This Agreement and the Franchise are fully assignable by the
COMPANY and shall inure to the benefit of any assignee or other
legal successor to the interest of the COMPANY herein.
B. FRANCHISEE MAY NOT ASSIGN WITHOUT APPROVAL OF THE COMPANY
FRANCHISEE understands and acknowledges that the rights and
duties created by this Agreement are personal to FRANCHISEE and
that the COMPANY has granted the Franchise in reliance upon the
individual or collective character, skill, aptitude, attitude,
business ability, and financial resources of FRANCHISEE or its
owners. Therefore, except as otherwise provided in Paragraphs D
and E of this Section 13, neither the Franchise, nor the
Restaurant, nor any interest in the Restaurant, nor any part or
all of the ownership of FRANCHISEE may be voluntarily,
involuntarily, directly or indirectly, assigned, sold,
subdivided, subfranchised, or otherwise transferred by FRANCHISEE
or its owners (including, without limitation, by merger or
consolidation, by issuance of additional securities representing
an ownership interest in FRANCHISEE, by operation of law, or, in
the event of the death of FRANCHISEE or an owner of FRANCHISEE,
by will, declaration of or transfer in trust, or the laws of
interstate succession) without the prior written approval of the
COMPANY, and any such assignment or transfer without such
approval shall constitute a breach hereof and shall convey no
rights to or interests in the Franchise or the Restaurant.
C. CONDITIONS FOR APPROVAL OF ASSIGNMENT
If FRANCHISEE and its owners are in full compliance with this
Agreement, the COMPANY shall not unreasonably withhold its
approval of an assignment, provided that the proposed assignee
is, in the opinion of the COMPANY, of good moral character and
has sufficient business experience, aptitude, and financial
resources to own and operate the Restaurant and otherwise meets
the COMPANY's then applicable standards for new franchisees, and
further provided that the following conditions are met prior to,
or concurrent with, the effective date of the assignment:
(i) all obligations of FRANCHISEE and its owners incurred in
connection with this Agreement have been assumed by the assignee;
(ii) FRANCHISEE shall have paid such royalty and service fees,
advertising contributions, amounts owed for purchases by
FRANCHISEE from the COMPANY and its affiliates, and any other
amounts owed to the COMPANY and its affiliates that are then due;
(iii) the assignee agrees to complete the initial training
program then required of new franchisees;
(iv) if required, the lessor of the premises of the Restaurant
has consented to FRANCHISEE's assignment or sublease of the
premises to the assignee;
(v) the assignee (and, if the assignee is a partnership or
corporation, its partners or shareholders) shall, at the
COMPANY's option, have executed and agreed to be bound by (a) an
assignment and assumption agreement satisfactory to the COMPANY
whereby the assignee assumes the obligations of FRANCHISEE under
this Agreement, or (b) the form of franchise agreement and any
ancillary agreement as are then customarily used by the COMPANY
in the grant of new franchises for Floridino's Restaurants, which
shall provide for the same royalty and service fees and
advertising contributions required hereunder and a term equal to
the remaining term of the Franchise;
(vi) FRANCHISEE or the assignee shall have paid to the COMPANY
an assignment fee in an amount equal to twenty-five percent (25%)
of the franchise fee then most recently received by the COMPANY
for a comparable new franchise to defray expenses incurred by the
COMPANY in connection with the assignment, including, without
limitation, training of the assignee, legal and accounting fees,
credit and other investigation charges, and evaluation of the
assignee and the terms of the assignment;
(vii) except to the extent limited or prohibited by applicable
law, FRANCHISEE (and each of its partners or shareholders if
FRANCHISEE is a partnership or corporation) shall have executed a
general release, in a form satisfactory to the COMPANY, of any
and all claims against the COMPANY and its affiliates, officers,
directors, employees, and agents;
(viii) the COMPANY shall have approved the material terms and
conditions of such assignment and shall have determined that the
price and terms of payment are not so burdensome as to adversely
affect the operation of the Restaurant by the assignee;
(ix) FRANCHISEE (and each of its partners or shareholders if
FRANCHISEE is a partnership or corporation) shall have executed a
noncompetition covenant in favor of the COMPANY and the assignee
agreeing that, for a period of two (2) years commencing on the
effective date of the assignment or from the effective date of
any injunction required to enforce the provisions of the
covenant, whichever is later, he will not have any direct or
indirect interest as an owner, investor, partner, director,
officer, employee, consultant, representative, or agent, or in
any other capacity, in any Italian or Italian-American restaurant
within five (5) miles of the Restaurant or any Floridino's
Restaurant in operation or under development as of the effective
date of the assignment; and
(x) FRANCHISEE (and each of its partners or shareholders if
FRANCHISEE is a partnership or corporation) shall have entered
into an agreement with the COMPANY agreeing that any and all
obligations of the assignee to make installment payments of the
purchase price to FRANCHISEE (and each of its partners or
shareholders if FRANCHISEE is a partnership or corporation) shall
be subordinated to the assignee's obligations to the COMPANY and
its affiliates, including, without limitation, any royalty and
service fees and advertising contributions.
The COMPANY's approval of an assignment shall not constitute a
waiver of any claims it may have against the assignor, nor shall
it be deemed a waiver of the COMPANY's right to demand exact
compliance with any of the terms or conditions of this Agreement
by the assignee.
D. DEATH OR DISABILITY OF FRANCHISEE
Upon the death or permanent disability of FRANCHISEE (or the
managing partner or officer of FRANCHISE if FRANCHISEE is a
partnership or corporation), the executor, administrator,
conservator, or other personal representative of such person, or
the remaining partners or directors, shall appoint a competent
manager within a reasonable time, not to exceed thirty (30) days
from the date of death or permanent disability. The appointment
of such manager shall be subject to the COMPANY's prior written
approval, and such manager shall, if requested by the COMPANY,
attend and satisfactorily complete the COMPANY's then required
initial training program at FRANCHISEE's expense. If the
Restaurant is not being managed by a COMPANY approved manager
within such thirty (30) day period, the COMPANY is authorized,
but shall not be required, to immediately appoint a manager to
maintain the operation of the Restaurant for and on behalf of
FRANCHISEE until an approved assignee or manager shall be able to
assume the management and operation of the Restaurant. The
COMPANY's appointment of a manager of the Restaurant shall not
relieve FRANCHISEE of his obligations hereunder, and the COMPANY
shall not be liable for any debts, losses, costs, or expenses
incurred in the operation of the Restaurant or to any creditor of
FRANCHISEE for any products, materials, supplies, or services
purchased by the Restaurant during any period that it is managed
by the COMPANY appointed manager. The COMPANY shall have the
right to charge a reasonable fee for such management services and
to cease to provide such management services at any time.
Upon the death or permanent disability of FRANCHISEE (or the
managing partner of officer of FRANCHISEE, if FRANCHISEE is a
partnership or corporation), executor, administrator,
conservator, or other personal representative of such person
shall transfer his interest within a reasonable time, not to
exceed twelve (12) months from the date of death or permanent
disability, to a person approved by the COMPANY unless FRANCHISEE
is a partnership or corporation and a new managing partner or
officer approved by the COMPANY, subject to the satisfactory
completion of all then required training for such managing
partners or officers, has been appointed within such period, and
subject to the transfer or assignment of such interest within
thirty (30) days of the completion of any applicable probate or
administration proceedings with respect to the estate of such
person. Such transfers, including, without limitation, transfers
by devise or inheritance, shall be subject to all the terms and
conditions for assignments and transfers contained in Paragraph B
and C of this Section 13. Failure to comply with the
requirements of this paragraph shall constitute grounds for
termination under Paragraph B of Section 14 hereof.
E. ASSIGNMENT TO A CORPORATION
Upon thirty (30) days prior written notice to the COMPANY, the
Franchise may be assigned, by an agreement in form and substance
approved by the COMPANY, to a corporation that conducts no
business other than operating the Restaurant, that is actively
managed by FRANCHISEE and for which FRANCHISEE owns and controls
all of the equity and voting power of all issued and outstanding
capital stock. Such an assignment shall not relieve FRANCHISEE
of his obligations hereunder, and FRANCHISEE shall remain jointly
and severally liable for all obligations hereunder. The articles
of incorporation, by-laws, and other organizational documents of
such corporation shall recite that the issuance and assignment of
any interest therein is restricted by the terms of Paragraphs B,
C, D, and E of this Section 13 and all issued and outstanding
stock certificates of such corporation shall bear a legend
reflecting or referring to such restrictions.
Any person who becomes a shareholder of FRANCHISEE during
the term of the Franchise shall execute an agreement in a form
provided or approved by the COMPANY undertaking to be bound
jointly and severally by all provisions of this Agreement and any
shareholder owning more than five percent (5%) of the beneficial
interest in such corporation shall execute a personal guarantee,
in the form attached hereto as Exhibit A or any form then
required by the COMPANY, of all obligations of FRANCHISEE to the
COMPANY and any affiliated corporation, partnership, or other
business entity. FRANCHISEE shall provide to the COMPANY at any
time upon a request a certified copy of the articles of
incorporation and a list, in such form as the COMPANY may
require, of all shareholders (of record and beneficially)
reflecting their respective interests in FRANCHISEE.
F. THE COMPANY'S RIGHT OF FIRST REFUSAL
If FRANCHISEE (or its partners or shareholders if FRANCHISEE
is a partnership or corporation) shall at any time determine to
sell or to transfer for consideration the Franchise, the
Restaurant, any interest in the Restaurant, or any ownership
interest in FRANCHISEE, other than to any individual or entity
already owning an interest therein, FRANCHISEE (or its partners
or shareholders if FRANCHISEE is a partnership or corporation)
shall obtain a bona fide, signed written offer from a responsible
and fully disclosed purchaser and shall submit an exact copy of
such offer to the COMPANY. The COMPANY shall have the right,
exercisable by written notice delivered to FRANCHISEE, (or its
partners or shareholders if FRANCHISEE is a partnership or
corporation) within thirty (30) days from the date of delivery of
an exact copy of such offer to the COMPANY, to purchase the
Franchise, the Restaurant, such interest in the Restaurant, or
such ownership interest in FRANCHISEE for the price and on the
terms and conditions contained in such offer, provided that the
COMPANY may substitute cash for any form of payment proposed in
such offer and shall have not less than thirty (30) days within
which to close any such transaction, or such longer period as may
have been provided by the terms and conditions of such offer. If
the COMPANY does not exercise its right of first refusal,
FRANCHISEE (or its partners or shareholders if FRANCHISEE is a
partnership or corporation) may complete the sale to such
purchaser pursuant to and on the terms of such offer, subject to
the COMPANY's approval of the purchaser as provided in Paragraphs
B and C of this Section 13, provided that if the sale to such
purchaser is not completed within one hundred twenty (120) days
after delivery of such offer to the COMPANY, or if there is a
material change in the terms and conditions of such offer, the
COMPANY shall again have the right of first refusal provided
herein.
14. TERMINATION OF THE FRANCHISE
A. BY FRANCHISEE
If FRANCHISEE is in substantial compliance with this Agreement
and the COMPANY materially breaches this Agreement and fails to
cure such breach within thirty (30) days after written notice
thereof is delivered to the COMPANY, FRANCHISEE may terminate the
Franchise. Such termination shall be effective ten (10) days
after delivery to the COMPANY of written notice that such breach
has not been cured and FRANCHISEE elects to terminate the
Franchise. A termination (or purported or attempted termination)
of the Franchise by FRANCHISEE, other than in strict compliance
with the foregoing provisions or the provisions in Paragraph B of
Section 9 hereof shall be deemed a termination by FRANCHISEE
without cause and a material breach of this Agreement by
FRANCHISEE.
B. BY THE COMPANY
The COMPANY shall have the right to terminate the Franchise by
delivery of a written notice to FRANCHISEE stating that the
COMPANY elects to terminate the Franchise as a result of any of
the breaches set forth below. Such termination shall be
effective upon delivery of such notice of termination or, if
applicable, upon the failure to cure (to the COMPANY's
satisfaction) any such breach, by the expiration of any period of
time within which such breach may be cured in accordance with the
provision set forth below, without the necessity of any further
notice from the COMPANY to FRANCHISEE. It shall be a material
breach of this Agreement if FRANCHISEE (and/or, when applicable,
any of its partners, shareholders, directors, or officers if
FRANCHISEE is a partnership or corporation):
(i) fails to acquire the premises for the Restaurant as provided
in Paragraph A of Section 3 hereof, construct the Restaurant as
provided in Paragraph B of Section 3 hereof, open the Restaurant
for business as provided in Paragraph C of Section 3 hereof, or
satisfactorily complete the initial training program as provided
in Paragraph A of Section 4 hereof;
(ii) abandons, surrenders, or loses the right to occupy the
premises of the Restaurant (except as otherwise permitted in
Paragraph D of Section 3 hereof) or fails to actively operate the
Restaurant;
(iii) has made any material misrepresentation or omission in his
application for the Franchise, or is convicted of or pleads no
contest to a felony, or is convicted of or pleads no contest to
any crime or offense that may adversely affect the reputation of
Floridino's Restaurants or the goodwill associated with the Marks
and the System;
(iv) surrenders or transfers control of the operation of the
Restaurant (including entering into a management arrangement with
any person not a party to this Agreement), makes an unauthorized
direct or indirect assignment or transfer of this Agreement, the
Franchise, the Restaurant, any interest in the Restaurant, or
any ownership interest in FRANCHISEE or fails or refuses to
effect an assignment, transfer, or appointment of an approved
manager in accordance with Paragraph D of Section 13 hereof;
(v) makes any unauthorized use of the Marks or unauthorized use
or disclosure of any of the Confidential Information;
(vi) terminates (or purports or attempts to terminate) the
Franchise, other than in strict compliance with Paragraph B of
Section 9 hereof or Paragraph A of this Section 14,
(vii) fails to timely pay royalty and service fees, advertising
contributions, amounts due for purchases from the COMPANY or its
affiliates, or other payments due the COMPANY;
(viii) fails to maintain insurance in strict compliance with
Paragraph L of Section 9 hereof;
(ix) fails to comply with any other provision of this Agreement
or any mandatory format, specification, standard, method, or
procedure required by the COMPANY, or to timely pay amounts due
to persons other than the COMPANY or its affiliates; or
(x) fails on three (3) or more separate occasions within any
twelve (12) consecutive month period to submit when due financial
statements, reports or other data, information, or supporting
records, to pay when due the royalty and service fees,
advertising contributions, amounts due for purchases from the
COMPANY or its affiliates, or other payments due to the COMPANY,
or to pay amounts due to other persons, or otherwise fails to
comply with this Agreement, whether or not such failures to
comply are cured after notice thereof is delivered to FRANCHISEE.
FRANCHISEE shall have the right to cure a breach under
subparagraph (vii) or subparagraph (viii) within ten (10) days
after delivery of the COMPANY's notice of termination pursuant
thereto and shall have the right to cure a breach under
subparagraph (ix) within thirty (30) days after delivery of the
COMPANY's notice of termination pursuant thereto.
15. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION
A. PAYMENT OF AMOUNTS OWED TO THE COMPANY
FRANCHISEE agrees to pay to the COMPANY, within fifteen (15) days
after the effective date of the expiration or termination of the
Franchise, such royalty and service fees, advertising
contributions, any and all amounts owed for products purchased by
FRANCHISEE from the COMPANY and its affiliates, interest due the
COMPANY on any of the foregoing, and any and all other amounts
owed to the COMPANY and its affiliates that are then unpaid.
FRANCHISEE shall contemporaneously with such payment provide a
complete accounting of all such amounts owed to the COMPANY and
its affiliates.
B. THE MARKS
FRANCHISEE shall, upon the expiration or termination of the
Franchise:
(i) not directly or indirectly at any time or in any manner
identify himself as a current or former franchisee or licensee of
or as otherwise associated with the COMPANY, identify any
restaurant as a current or former Floridino's Restaurant, use the
Marks, any colorable imitation thereof, or other indicia of
Floridino's Restaurants in any manner or for any purpose, or use
for any purpose any trademark, service mark, trade name, logo,
trade dress, or other commercial symbol that suggests or
indicates a connection or association with the COMPANY;
(ii) promptly remove or paint over all signs, decals, and
lettering displaying the Marks at the Restaurant and take such
other actions as required or approved by the COMPANY to
distinguish the Restaurant from Floridino's Restaurants; promptly
destroy or deliver to the COMPANY (at the COMPANY's option,
exercisable within ten (10) days after the termination) all
menus, advertising materials, stationery, business forms, and
other materials displaying the Marks or otherwise identifying or
relating to Floridino's Restaurants
(iv) promptly take such action as may be required to cancel all
fictitious or assumed name registrations relating to his use of
the Marks;
(v) promptly notify the telephone company and all listing
agencies of the expiration or termination of FRANCHISEE's right
to use any telephone number and any regular, classified, or
other telephone directory listings associated with the Marks and
authorize transfer of the same to or at the direction of the
COMPANY; and
(vi) provide to the COMPANY within thirty (30) days after the
effective date of the expiration or termination evidence
satisfactory to the COMPANY of FRANCHISEE's compliance with the
foregoing obligations.
If requested by the COMPANY during the term of the Franchise,
FRANCHISEE shall execute dated letters to telephone companies and
telephone directory listing agencies directing termination and/or
transfer of FRANCHISEE's right to use telephone numbers
associated with the Marks that the COMPANY may utilize upon
the expiration or termination of the Franchise. FRANCHISEE
acknowledges that as between the COMPANY and FRANCHISEE, the
COMPANY has the sole right to and interest in all telephone
numbers and directory listings associated with the Marks, and
FRANCHISEE authorizes the COMPANY, and hereby appoints the
COMPANY and any officer of the COMPANY as his attorney in fact to
direct the telephone company and all listing agencies to transfer
the same to the COMPANY or at its direction should FRANCHISEE
fail or refuse to do so, and the telephone company and all
listing agencies may accept such direction or this Agreement as
conclusive of the exclusive right of the COMPANY in such
telephone numbers and directory listings and its authority to
direct their transfer.
C. CONFIDENTIAL INFORMATION
FRANCHISEE shall, upon the expiration or termination of the
Franchise, immediately cease to use in any business or otherwise
the Confidential Information disclosed to FRANCHISEE pursuant to
this Agreement and return to the COMPANY all copies of the
Operating Manual and other written forms of the Confidential
Information that have been loaned or provided to him by the
COMPANY.
D. COVENANT NOT TO COMPETE
If the Franchise expires or is terminated by the COMPANY in
accordance with the provisions of this Agreement or by FRANCHISEE
without cause, FRANCHISEE agrees that, for a period of two (2)
years commencing on the effective date of the expiration or
termination, the date on which FRANCHISEE ceases to operate the
Restaurant, or the effective date of any injunction required to
enforce the provisions of this paragraph, whichever is later,
FRANCHISEE (and its partners or shareholders if FRANCHISEE is a
partnership or corporation) will not have any interest as an
owner, partner, director, officer, employee, consultant,
representative, or agent, or in any other capacity, in any
Italian or Italian American restaurant (i) on the premises of the
Restaurant or (ii) within five (5) miles of the Restaurant or any
other Floridino's Restaurant in operation or under development as
of the effective date of such expiration or termination.
E. THE COMPANY'S RIGHT TO PURCHASE FRANCHISEE'S ASSETS
Upon the expiration or termination of the Franchise by the
COMPANY in accordance with the provisions of this Agreement or by
FRANCHISEE without cause, the COMPANY shall have the option,
exercisable by giving written notice thereof within thirty (30)
days from the date of such expiration or termination, to purchase
from FRANCHISEE all of the tangible assets of FRANCHISEE used in
the operation of the Restaurant (including, without limitation,
all equipment, fixtures, furniture, signs, and inventory of
ingredients, foods, beverages, plates, glasses, cups, utensils,
menus, napkins, and other supplies, but excluding any unamortized
portion of the franchise fee, cash, short term investments, and
accounts receivable) and, if assignable, an assignment of all
leases, subleases, agreements, licenses, permits, and
certificates required for operation of the Restaurant. The
COMPANY shall have the unrestricted right to assign this option
to purchase.
The purchase price for the tangible assets of FRANCHISEE used in
the operation of the Restaurant shall be the lesser of the (i)
total purchase price paid by FRANCHISEE for such tangible assets,
less depreciation for federal income tax purposes through the
date of the expiration or termination of the Franchise as
previously elected by FRANCHISEE, or (ii) fair market value of
such assets on the date of the expiration or termination of the
Franchise. Should the COMPANY and FRANCHISEE disagree as to the
purchase price of such tangible assets, such disagreement shall
be resolved pursuant to the arbitration provisions of Section 18
hereof, with the COMPANY and FRANCHISEE responsible for their
respective costs and attorney fees incurred in connection
therewith. No amount shall be paid by the COMPANY to FRANCHISEE
for the assignment of all leases, subleases, agreements,
licenses, permits, and certificates that may be assigned.
The purchase price for the tangible assets of FRANCHISEE used in
the operation of the Restaurant shall be paid in cash at the
closing of the purchase, which shall take place not later than
thirty (30) days after the determination of the purchase price,
at which time FRANCHISEE shall: (i) deliver instruments
transferring good and marketable title to the tangible assets
purchased, free and clear of all liens and encumbrances, to the
COMPANY or its nominee, with all sales and other transfer taxes
paid by FRANCHISEE and (ii) assign to the COMPANY or its nominee
all leases, subleases, agreements, licenses, permits, and
certificates that may be assigned. If FRANCHISEE cannot deliver
clear title to all of the tangible assets purchased or there are
other unresolved issues, the closing of the sale shall be
accomplished through an escrow. The COMPANY and FRANCHISEE
shall, prior to closing, comply with any applicable bulk sales
provisions of the Uniform Commercial Code as enacted in the
applicable state. The COMPANY shall have the right to set off
against and reduce the purchase price by any sums then due to the
COMPANY or any of its affiliates.
If the COMPANY exercises the foregoing option to purchase the
tangible assets of FRANCHISEE used in the operation of the
Restaurant, the COMPANY shall have the right (but shall not be
required) pending determination of the purchase price and the
closing of such purchase to operate the Restaurant for its
exclusive benefit at its expense, subject to its having assumed
all liabilities associated with its operation of the Restaurant
and having executed a written indemnification agreement by which
FRANCHISEE is held harmless for events occurring after the
COMPANY commences operation of the Restaurant.
F. CONTINUING RIGHTS AND OBLIGATIONS
All rights and obligations of the COMPANY and FRANCHISEE that
expressly or by their nature survive the expiration or
termination of the Franchise shall continue in full force and
effect subsequent to and notwithstanding its expiration or
termination and until they are satisfied or by their nature
expire.
16. ENFORCEMENT
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS
Except as expressly provided to the contrary herein, each
section, paragraph, term, and provision of this Agreement, and
any portion thereof, shall be considered severable and if, for
any reason, any such portion of this Agreement is held to be
invalid, contrary to, or in conflict with any applicable present
or future law or regulation in a final, unappealable ruling
issued by any court, agency, or other tribunal of competent
jurisdiction in a proceeding to which the COMPANY is a party,
that ruling shall not impair the operation of, or have any other
effect upon, such other portions of this Agreement as may remain
otherwise intelligible, which shall continue to be given full
force and effect and bind the parties hereto, although any
portion held to be invalid shall be deemed not to be a part of
this Agreement from the date the time for appeal expires, if
FRANCHISEE is a party thereto, otherwise upon FRANCHISEE's
receipt of a notice of non-enforcement thereof from the COMPANY.
If any applicable and binding law or rule of any jurisdiction
requires a greater period of notice of any proposed termination
of the Franchise than is required hereunder, or the taking of
some other action not required hereunder, or if under any
applicable and binding law or regulation of any applicable
jurisdiction, any provision of this Agreement or any format,
specification, standard, method, or procedure required by the
COMPANY is invalid or unenforceable, the period of notice and/or
other action required by such law or rule shall be substituted
for the comparable provisions hereof, and the COMPANY shall have
the right, in its sole discretion, to modify such invalid or
unenforceable provision, format, specification, standard, method,
or procedure to the extent required to be valid and enforceable.
FRANCHISEE agrees to be bound by any promise or covenant imposing
the maximum duty permitted by law that is subsumed within the
terms of any provision hereof, as though it were separately
articulated in and made a part of this Agreement, that may result
from striking from such provision, or any format, specification,
standard, method, or procedure required by the COMPANY, any
portion or portions that a court or other tribunal of competent
jurisdiction may hold to be unenforceable in a final decision to
which the COMPANY is a party, or from reducing the scope of any
promise or covenant to the extent required to comply with such an
order. Any modification to this Agreement contemplated by this
paragraph shall be effective only in such jurisdiction or
jurisdictions as are specifically included within the authority
of the court or other tribunal rendering the decision giving rise
to such modification, unless the COMPANY elects to give such
modification greater applicability, and this Agreement shall be
enforced in all other jurisdictions without regard to any such
modification.
B. WAIVER OF OBLIGATIONS
The COMPANY may by written instrument unilaterally waive or
reduce any obligation of or restriction upon FRANCHISEE under
this Agreement, and FRANCHISEE may by written instrument
unilaterally waive or reduce any obligation of or restriction
upon the COMPANY under this Agreement, effective upon delivery of
written notice thereof to the other or such other effective date
stated in the notice of waiver. Whenever this Agreement requires
the COMPANY's prior approval or consent, FRANCHISEE shall make a
timely written request therefor, and such approval shall be
obtained in writing.
The COMPANY makes no warranties or guarantees upon which
FRANCHISEE may rely, and assumes no liability or obligation to
FRANCHISEE, by granting any waiver, approval, or consent to
FRANCHISEE, or by reason of any neglect, delay, or denial of any
request therefor. Any waiver granted by the COMPANY shall be
without prejudice to any other rights the COMPANY may have, will
be subject to continuing review by the COMPANY, and may be
revoked, in the COMPANY's sole discretion, at any time and for
any reason, effective upon delivery to FRANCHISEE of ten (10)
days prior written notice.
The COMPANY shall not be deemed to have waived or impaired any
right, power, or option reserved by this Agreement (including,
without limitation, the right to demand exact compliance with
every term, condition, and covenant herein, or to declare any
breach thereof to be a default and to terminate the Franchise) by
virtue of any custom or practice of the parties at variance with
the terms hereof; any failure, refusal, or neglect of the COMPANY
to exercise any right under this Agreement or to insist upon
exact compliance with FRANCHISEE's obligations hereunder
(including, without limitation, any format, specification,
standard, method, or procedure required by the COMPANY) ; any
waiver, forbearance, delay, failure, or omission by the COMPANY
to exercise any right, power, or option, whether of the same,
similar, or different nature, with respect to other Floridino's
Restaurants; or the acceptance by the COMPANY of any payments due
from FRANCHISEE after any breach of this Agreement.
Neither the COMPANY nor FRANCHISEE shall be liable for loss or
damage or deemed to be in breach of this Agreement if its failure
to perform its obligations results from: (i) transportation
shortages, material or energy shortages, or the voluntary
foregoing of the right to acquire or use any of the foregoing in
order to accommodate or comply with the orders, requests,
regulations, recommendations, or instructions of any federal,
state, or municipal government or any department or agency
thereof; (ii) compliance with any law, ruling, order, regulation,
requirement, or instruction of any federal, state, or municipal
government or any department or agency thereof; (iii) acts of
God; (iv) acts or omissions of the other party; (v) fires,
strikes, embargoes, war, or riot; or (vi) any other similar event
or cause. Any delay resulting from any of the said causes shall
extend performance accordingly or excuse performance, in whole or
in part, as may be reasonable.
C. SPECIFIC PERFORMANCE/INJUNCTIVE RELIEF
Nothing herein contained shall bar the COMPANY's right to obtain
specific performance of the provisions of this Agreement and
injunctive relief against threatened conduct that will cause it
loss or damage under customary equity rules, including applicable
rules for obtaining restraining orders and preliminary
injunctions. FRANCHISEE agrees that the COMPANY may have such
injunctive relief, in addition to such further and other relief
as may be available at equity or law, and the sole remedy of
FRANCHISEE, in the event of the entry of such injunction, shall
be the dissolution of such injunction, if warranted, upon hearing
duly had (all claims for damages by reason of the wrongful
issuance of any such injunction being expressly waived hereby).
D. RIGHTS AND REMEDIES ARE CUMULATIVE
The rights and remedies of the COMPANY hereunder are cumulative
and no exercise or enforcement by the COMPANY of any right or
remedy hereunder shall preclude the exercise or enforcement by
the COMPANY of any other right or remedy hereunder or that the
COMPANY is entitled by law to exercise or enforce.
E. COSTS AND ATTORNEY FEES
If a claim for amounts owed by FRANCHISEE to the COMPANY or any
affiliate is asserted in any legal proceeding before a court of
competent jurisdiction or arbitrators, or if the COMPANY is
required to enforce this Agreement in a judicial or arbitration
proceeding, the COMPANY shall be entitled to reimbursement of its
costs and expenses, including reasonable accounting and legal
fees.
F. GOVERNING LAW/CONSENT TO JURISDICTION
Except to the extent governed by the United States Trademark Act
(Lanham Act, 15 U.S. C. Sections 1051, et. seq.), any other
applicable federal law, or any applicable state franchise law,
this Agreement and the Franchise shall be governed by the laws of
the State of Florida, the state in which the COMPANY is
headquartered, all financial obligations of FRANCHISEE are
required to be paid, and this Agreement is deemed to have been
executed.
G. BINDING EFFECT
This Agreement is binding upon the parties hereto and their
respective heirs, personal representatives, assigns, and
successors in interest, and shall not be modified except by
written agreement signed by both the COMPANY and FRANCHISEE. If
FRANCHISEE is a corporation, each shareholder or other owner of
more than five percent (5%) of the beneficial interest in
FRANCHISEE shall execute a personal guarantee in the form of that
which appears in Exhibit A attached hereto.
H. CONSTRUCTION
The preambles to this Agreement are a part of this Agreement,
which constitutes the entire agreement of the parties, and there
are no other oral or written understandings or agreements between
the COMPANY and FRANCHISEE relating to the subject matter of this
Agreement as of the date of this Agreement other than as may be
specifically referenced herein.
Except as otherwise expressly provided herein, nothing in this
Agreement is intended, nor shall be deemed, to confer any rights
or remedies upon any person or legal entity not a party hereto.
The headings of the several sections and paragraphs hereof are
for convenience only and do not define, limit, or construe the
contents of such sections or paragraphs.
The term "FRANCHISEE" as used herein is applicable to one or more
persons, a partnership, or a corporation, as the case may be, and
the singular usage includes the plural and the masculine and
neuter usages include the other and the feminine. If two or more
persons are at any time FRANCHISEE hereunder, their obligations
and liabilities to the COMPANY shall be joint and several.
References to "FRANCHISEE" and "assignee" which are applicable to
an individual or individuals shall mean the owner or owners of
the equity or operating control of FRANCHISEE or the assignee if
FRANCHISEE or the assignee is a partnership or corporation.
This Agreement may be executed in multiple copies, each of which
shall be deemed an original.
Time is of the essence in this Agreement.
17. EFFECTIVENESS OF AGREEMENT
The delivery of an unexecuted copy of this Agreement and any
accompanying franchise offering circular to FRANCHISEE shall not
be deemed to be an offer to grant a franchise or enter into an
agreement that FRANCHISEE may accept by the execution of such
copy. No franchise shall be deemed to have been granted by the
COMPANY to FRANCHISEE and no agreement shall be deemed to have
been reached between the COMPANY and FRANCHISEE until the COMPANY
has delivered a fully executed copy of this Agreement to
FRANCHISEE and the franchise fee required to be paid by Paragraph
A of Section 8 hereof has been received by the COMPANY.
18. ARBITRATION
All disputes between the COMPANY and FRANCHISEE arising from
or in any way related to this Agreement or to business dealings
between the COMPANY and any affiliated corporation, partnership,
or other business entity and FRANCHISEE shall be submitted to
binding arbitration pursuant to the Commercial Arbitration Rules
of the American Arbitration Association, with such arbitration to
take place in Winter Haven, Polk County, Florida, unless the
COMPANY shall specifically agree in writing to the conduct of
such arbitration proceeding in some other location.
Nothing in this section shall be deemed to preclude the COMPANY
from filing litigation in any court of competent jurisdiction for
injunctive relief to enforce the provisions of this Agreement
either during the term or upon the expiration hereof, nor shall
the commencement of any such litigation be deemed to constitute a
waiver of the COMPANY's right to arbitrate any dispute otherwise
subject to this section. In any such action seeking injunctive
relief, the remedies available to the COMPANY shall be limited to
such injunction as the court deems appropriate and neither the
COMPANY nor FRANCHISEE may assert any monetary claims or other
causes of action or affirmative defenses in such litigation,
without regard to any otherwise applicable rule of civil
procedure requiring the assertion of any such claim as a
compulsory counterclaim or affirmative defense. Upon the
completion of any arbitration contemplated by this Section 18,
either the COMPANY or FRANCHISEE may apply to any court of
competent jurisdiction for such order as may be deemed
appropriate to modify, vacate, or confirm any award of the
arbitration panel entered pursuant to this Section 18.
19. NOTICES AND PAYMENTS
All written notices permitted or required to be delivered by
the provisions of this Agreement or of the Operating Manual shall
be deemed so delivered at the time delivered by hand, one (1)
business day after sending by telegraph, telefax, or a comparable
electronic system, or three (3) business days after being placed
in the U.S. mail by Registered or Certified Mail, Return Receipt
Requested, postage prepaid, addressed to the party to be notified
at its most current principal business address of which the
notifying party has been notified.
All payments and reports required by this Agreement shall be
directed to the COMPANY at the address listed in the first
paragraph of this Agreement or to such other persons and places
as the COMPANY may direct from time to time. Any required
payment or report not actually received by the COMPANY during
regular business hours on the date due or properly placed in the
U. S. mail and postmarked by postal authorities at least three
(3) business days prior thereto shall be deemed delinquent.
IN WITNESS WHEREOF, the parties hereto have executed sealed, and
delivered this Agreement in counterparts on the day and year
first above written.
FLORIDINO'S INTERNATIONAL, INC. FRANCHISEE:
Sign: _________________________ Sign: _______________________
Print: ________________________ Print: ______________________
Title: ________________________ Title: ______________________
Date: _________________________ Date: _______________________
ACKNOWLEDGEMENTS
STATE OF _____________________
COUNTY OF ___________________
The foregoing franchise agreement was acknowledged before me this
day of _____________, 19____, by _______________________ as
____________________________________________, of Floridino's
International, Inc., a Florida corporation, on behalf of the
corporation. He or she is personally known to me or has produced
______________as identification and did take an oath.
NOTARY PUBLIC:
Signed: _______________________
Print: _________________________
(Seal) My Commission Expires:
STATE OF _______________________
COUNTY OF ______________________
The foregoing franchise agreement was acknowledged before me this
_______day of _______, 19 ____________, by _________________.
He or she is personally known to me or who has produced as
identification and did take an oath.
NOTARY PUBLIC:
Signed: _______________________
Print: _________________________
(Seal) My Commission Expires:
5465-001-289008
EXHIBIT A
PERSONAL GUARANTEE
In consideration of the granting of a franchise to construct,
own, and operate a Floridino's Restaurant to [name of
corporation] or of the approval by Floridino's International,
Inc., a Florida corporation, of the assignment of a previously
granted franchise to operate a Floridino's Restaurant to (name of
corporation], the undersigned, as the owner of more than five
percent (5%) of the beneficial interest in (name of corporation],
hereby guarantees all obligations, financial and otherwise, of
[name of corporation] to Floridino's International, Inc.
(including its successors and assigns) and any affiliated
corporation, partnership, or other business entity (including its
successors and assigns), and agrees to pay any such financial
obligation immediately upon demand therefor irrespective of
whether any demand has yet been made upon [name of corporation]
and irrespective of the ability of [name of corporation] to
satisfy any then existing financial obligation to Floridino's
International, Inc. (including its successors and assigns) or any
affiliated corporation, partnership, or other business entity
(including its successors and assigns).
The obligations of the undersigned are to be joint and several
with any other guarantor of the obligations of [name of
corporation] to Floridino's International, Inc. (including its
successors and assigns) and any affiliated corporation,
partnership, or other business entity (including its successors
and assigns) and it is specifically understood that the failure
of Floridino's International, Inc. (including its successors and
assigns) or any such affiliated corporation, partnership, or
other business entity (including its successors and assigns) to
attempt to recover on the guarantee of any other individual with
respect to the obligations of (name of corporation] shall not
constitute a defense to any claims against the undersigned
arising from this guarantee.
Sign: ___________________________
Print: ___________________________
Date: ____________________________
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-TYPE> 9-MOS OTHER
<FISCAL-YEAR-END> [BLANK] [BLANK]
<PERIOD-END> SEP-30-1999 SEP-30-1998
<CASH> 187480 19546
<SECURITIES> 259429 0
<RECEIVABLES> 16304 4655
<ALLOWANCES> 0 0
<INVENTORY> 12535 0
<CURRENT-ASSETS> 540561 53472
<PP&E> 2138864 362553
<DEPRECIATION> 348691 202611
<TOTAL-ASSETS> 2653950 213414
<CURRENT-LIABILITIES> 1348881 619789
<BONDS> 745873 14650
0 0
250000 0
<COMMON> 7657 2718
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<TOTAL-LIABILITY-AND-EQUITY> 2653950 213414
<SALES> 468971 1364051
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<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 16833 11926
<INCOME-PRETAX> (673318) (74132)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (673318) (74132)
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<EXTRAORDINARY> 63634 0
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<NET-INCOME> (746743) (74132)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR OTHER
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 15502 0
<SECURITIES> 0 0
<RECEIVABLES> 11826 12250
<ALLOWANCES> 0 0
<INVENTORY> 15083 18535
<CURRENT-ASSETS> 112317 38796
<PP&E> 725268 336379
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<BONDS> 71584 326459
0 0
0 0
<COMMON> 4959 2518
<OTHER-SE> (385519) (549412)
<TOTAL-LIABILITY-AND-EQUITY> 631198 258618
<SALES> 1577564 1478196
<TOTAL-REVENUES> 1705650 1618064
<CGS> 573966 514767
<TOTAL-COSTS> 1512316 1294037
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 29322 31842
<INCOME-PRETAX> (380632) (190740)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (380632) (190740)
<DISCONTINUED> (138555) (65502)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (519187) (256342)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 313695 0
<SECURITIES> 156096 0
<RECEIVABLES> 24755 94984
<ALLOWANCES> 0 0
<INVENTORY> 18535 14782
<CURRENT-ASSETS> 599312 134867
<PP&E> 1601955 312239
<DEPRECIATION> 305712 144234
<TOTAL-ASSETS> 1900699 302872
<CURRENT-LIABILITIES> 1098841 511215
<BONDS> 818326 468534
0 0
250000 0
<COMMON> 5617 2518
<OTHER-SE> (272085) (679395)
<TOTAL-LIABILITY-AND-EQUITY> 1900699 302872
<SALES> 277261 984469
<TOTAL-REVENUES> 319105 1023608
<CGS> 189616 323805
<TOTAL-COSTS> 703308 744689
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 11072 8046
<INCOME-PRETAX> (527294) (52932)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (527294) (52932)
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<CHANGES> 0 0
<NET-INCOME> (574944) (52932)
<EPS-BASIC> 0 0
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</TABLE>
Exhibit 21
SUBSIDIARIES OF FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
AS OF SEPTEMBER 30, 1999
ORGANIZED UNDER PERCENTAGE OF
THE LAWS OF VOTING POWER
---------------------------------------
Floridino's Inc. New York 100%
Toho Holdings, Inc. New York 100%
Floridino's Express Inc. Florida 100%
Floridino's of Delray Beach, Inc. Florida 100%
Floridino's of Lakeland, Inc. Florida 100%
Floridino's Specialties Inc. Florida 100%
Floridino's International, Inc. Florida 100%
