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UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10KSB
Annual Report Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
For fiscal year ended December 31, 1999
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
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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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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
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
As of December 31, 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 December 31, 1999, the following shares of the Registrant's
convertible preferred 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
fast casual dining experience for its customers providing high quality Italian
food. Its operations encompass two segments from which the Company seeks to
generate revenue: operation of restaurants and sale of frozen foods.
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 alter
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 suspending operations at all six restaurants: Hard Ball Cafe, Pizza Etc.,
Lakeland, Home of the Calzone, Lake Wales, and Bartow's, 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.
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The Company revamped its Lakeland restaurant and incorporated a fast self
service upscale concept. This restaurant operates under the name "Mama Mia" and
focuses on providing high quality Italian food in a casual dining environment.
Mama Mia restaurant reopened on November 13, 1999. The Company in September 1999
opened an additional restaurant in New York operating under the name
"Floridino's Cafe" which provides sandwiches, soups, salads and personal size
pizza. The goal of this new restaurant is to serve authentic Italian cuisine in
a fast food environment.
The Company maintains and operates the restaurant in New York City, through its
wholly owned subsidiary "Floridino's Inc.", under the name Floridino's Cafe.
The goal of this new restaurant is to serve authentic Italian cuisine in an
upscale fast food environment. The format 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.
Floridino's Inc. and Zoop Soups were acquired by the Company in November 1998
and merged into Floridino's, Inc., a wholly owned subsidiary of the Company.
Zoop Soups specializes in creating soup recipes provided to Floridino's Cafe.
The Company intends to market its Zoop Soups items to the general public and to
also have Zoop Soups items offered at its other restaurants in Florida.
The Company has recently opened two (2) additional restaurants. A location in
Delray Beach opened on January 2000. The second restaurant in Lake Wales was
delayed due to problems in obtaining requisite permits and opened in March 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 casual self-service upscale concept.
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.
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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.
The Company also franchises its concept to individuals interested in operating a
business under the Floridino's name. The franchise concept 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 from franchising is generated through the sale of
franchises and franchise fees. They have distinct royalty fee schedules which
range from payments of two (2%)
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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 fast casual upscale
concept in its franchise stores for the purpose of generating 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 Company is committed to developing a strong franchise system byseeking
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.
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FROZEN FOOD PRODUCTS 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.
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 segment 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 for future expansion. Subject
to additional demand for the Company's products, construction is to begin in the
third quarter of 2000 to convert this newly acquired property 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, subject to funding. Upon completion of the new facility the existing
manufacturing area will be refurbished to strictly manufacture Pazzo rolls and
Pizzas.
The Company on January 17, 2000 acquired all of the outstanding shares of common
stock of Triton Prestige Products, Inc. for 50,000 shares of common stock.
Triton is now a wholly owned subsidiary of Floridino's. Triton has been
operating since July 1999. Its primary business is to provide frozen pizza
products to institutions, schools and governmental entities for consumption in
their cafeterias. Floridino's believes that Triton can generate sales of
$1,500,000 during the next year based upon Triton's current capacity. The Triton
brands of products are sold under the Triton brand name and label.
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CONSULTANTS
Any relationship 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
frozen food 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 received 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
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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 granting of the
warrants is contingent upon the satisfactory performance of the Ephraim Group at
the discretion of the chairman of the board.
The Ephraim Group's has overseen the management of the frozen foods division,
has been responsible for employee production and hiring, and had 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 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 $456,000 to acquire new
machinery and modernize its plant during fiscal 1999.
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 two 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.
No specific plans to hire consultants have been made beyond the general plan
currently disclosed.
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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. 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 comparable to competitive products being
targeted.
The Company 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 compete for a share
of the incremental dollars consumers spend in dining out. Floridino's
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seeks to separate itself by 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 participated 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 eight (8) subsidiaries all 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 which opened in March 2000;
Floridino's of Delray Beach, Inc., a Florida Corporation, which operates the
Company's Delray Beach restaurant which opened on December 26, 1999; and
Floridino's of Lakeland, Inc., a Florida Corporation, which operates the
Lakeland restaurant.
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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 concept 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 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.
The Company on January 17, 2000 acquired all of the outstanding shares of common
stock of Triton Prestige Products, Inc. in exchange for 50,000 shares of common
stock. Triton is now a wholly owned subsidiary of Floridino's. Triton has been
operating since July 1999. Its primary business is to provide frozen pizza
products to institutions, schools and governmental entities for consumption in
their cafeterias. Floridino's believes that Triton can generate sales of
$1,500,000 during the next year based upon Triton's current capacity. The Triton
brands of products are sold under the Triton brand name and label.
The Company previously operated the following subsidiaries: 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 of Bartow, Inc. Operation of these
subsidiaries have been closed by the Company as they failed to realize
sufficient profit and reflect the Company's efforts to reorganize its
operations.
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
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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 December 31, 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. Item 3. DESCRIPTION OF PROPERTY
As of December 31, 1999, the Company held ownership to five (5) parcels of land
situated in the State of Florida as follows:
i. A parcel at 300 Cypress Gardens Road, Winterhaven Florida, valued at
$375,000 and possesses encumbrances of $180,000. The land is
approximately 31,320 square feet and is the site of one of the
Floridino's restaurant in Winterhaven. The site also contains five
residential units in the rear of the restaurant.
ii. A parcel of land 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 sold in January
2000.
iii. A parcel at 3560 Cypress Gardens Road, Winter Haven, Florida, is
valued at $139,000 and possesses encumbrances of $120,000. This is the
location of the company's corporate offices and is approximately 2,520
square feet.
iv. The parcel at 8135 Highway 33N, Lakeland, Florida is located adjacent
to the company's frozen food processing plant.
v. 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 on the property
adjacent to the plant which is 7,000 square feet.
On a consolidated basis, the Company's fixed assets associated with equipment
and fixtures as of December 31, 1999 are as follows:
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Equipment $572,180
Leasehold Improvements 942,512
Buildings 859,000
Vehicles 17,232
Furniture 2,885
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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 14, 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". The
Company has assigned no value to trade marks and service markes in its
financial statements at December 31, 1999.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings outside of the ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders.
Part II
ITEM 5. Item 1. 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:
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High Low
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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
Third quarter ...................................$7.875 $5.625
Fourth quarter ..................................$8.875 $6.00
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The source of the bid information provided in this section are the quotations as
provided by the OTC. The quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
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 3,472,700 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.
As of December 31, 1999, there were approximately 125 shareholders of the
Company.
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ITEM 6. SELECTED FINANCIAL DATA
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For the Year
Ended
Dec. 31, 1999
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Cash and Cash Items $ 359,449
Marketable Securities 471,250
Notes and Accounts Receivable 0
Allowances for doubtful accounts 0
Inventory 52,354
Other Current Assets 0
Total Current Assets 883,053
Property, plant and equipment 2,713,816
Accumulated depreciation (274,729)
Total assets 3,366,317
Total current liabilities 1,432,771
Bonds, mortgages and debt
Net of current portion 1,367,368
Preferred stock 250,000
Common stock 7,657
Other stockholders' equity 308,581
Total Liabilities and
Stockholders' equity 3,366,317
Net Sales of Tangible
Products 858,052
Total Revenues 893,193
Cost of Tangible Goods Sold 619,082
Total Costs and Expenses
Applicable to sales
and revenues 1,677,873
Other costs and expenses 0
Provision for doubtful accounts 0
Interest and amortization of
Debt discount 67,920
Income before taxes and
and other items (1,061,568)
Income tax expenses 0
Income/loss continuing
operations (1,061,568)
Discontinued operations 0
Extraordinary items 78,533
Cumulative Effect - changes in
Accounting principles 0
Net Income or loss (983,035)
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION
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 two segments from which the Company seeks
to generate revenue: operation of restaurants and franchising, and the
production and sale of frozen foods.
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 fast service image and ambiance to attract customers.
The Company in the past year has raised funding of approximately $2.1 million
though the sale of equity and debentures 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
restaurants. 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 of its existing restaurants. After a period or
reconstruction, it reopened and then implemented its new concept at restaurants
in Lakeland, Florida and New York, New York.
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The Company opened two additional restaurants in Del Ray Beach, Florida and Lake
Wales, Florida in the first quarter of fiscal 2000. Funding of the Company's
reconstruction and revamping has been undertaken primarily through the private
sale of equity and debentures in the Company. The funds were used to repay
previous debts of the closed restaurants, acquire new property and equipment and
machinery for the development of the Company's frozen food concept and for the
reconstruction costs associated with the development of the Company's
restaurants adhering to management's new theme. 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 parcels of real estate held by the
Company. Additionally, the Company believes that its newly developed concept and
operations will attract investors. At this time, the Company has no line of
credit with any financial institution. However, the Company believes that its
new operations will generate sufficient revenue during the next twelve months to
enable the Company to secure a line of credit with a financial institution, if
needed.
As noted by our auditors report dated March 22, 2000 on the financial statements
as of December 31, 1999, there is a substantial doubt raised about the ability
of the Company to operate as a going concern based upon the substantial losses
that the Company has incurred. As noted, the Company's addressed this issue by
closing all unprofitable restaurants during fiscal year 1999. The Company raised
approximately $2.1 million during the year in order to implement management's
plan to reorganize the Company and to redirect the Company's focus to future
profitability.
During the year ending December 31, 1999, the Company raised $1,000,000 in a
private offering of common stock, $750,000 in a debenture offering, and $346,500
upon the exercise of common stock warrants. The Company used these proceeds to
satisfy approximately $166,000 of the outstanding long-term debt attributable to
the closed restaurants. At December 31, 1999, $159,112 of loans attributable to
the closed restaurants remains unpaid. The loans are secured by restaurant
equipment and the Company is currently in the process of negotiating the
resolution of this debt.
In addition, the Company used $320,000 of the proceeds to purchase the land
adjacent to the food processing plant in order to satisfy future expansion
plans. In addition, management executed its option to buy the plant structure in
the fourth quarter of fiscal year 1999 for $225,000. The Company expended
approximately $1.4 million dollars during the year to upgrade the plant facility
and to reconstruct and upgrade restaurant space.
Management's reorganization efforts were substantially completed by the fourth
quarter of 1999. The plant had been reconstructed to satisfy the needs of the
expected demand for the Company's product and USDA requirements. A testing phase
of the Company's frozen food products was completed in the fourth quarter of
1999 and the results were excellent. The frozen food segment began operations in
January 2000 and the initial results are encouraging.
18
<PAGE>
In addition, the improvement of the New York restaurant and the Lakeland
restaurant was completed and the restaurants were reopened in the latter part of
fiscal 1999. The restaurants were reorganized to conform to management's vision
of a fast, self-service, casual Italian food restaurant. The Company opened two
additional restaurants under this new theme in early fiscal 2000.
As of December 31, 1999, the Company's restaurant equipment was used to secure
capital leases and bank loans in the amount of $182,558. In addition, the
Company's real estate assets were used to secure approximately $914,000 of short
and long-term debt.
As a result of the successful implementation of management's reorganization
plans in 1999, the Company expects to achieve self sufficiency in fiscal year
2000 as a result of the positive cash flows achieved from the frozen food
processing plant segment and the reopened restaurants.
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. 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.
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
19
<PAGE>
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 an 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 of a significant
increase in the cost of labor. As of December 31, 1999, the Company had 55
employees. Within the coming year, and as the Company opens additional
restaurants and expands its frozen food segment, the Company expects to 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 upon the
successful implementation of its new fast casual self service restaurant concept
and the ability to produce quality frozen food products at its production plant.
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:
20
<PAGE>
- 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.
The Company's operating history, including its losses and revenues, primarily
reflect its operations for the past year. For the year ending December 31, 1999
the Company had $ 893,193 in revenue and a net loss of $ 983,035. As of December
31, 1999 the Company had a net shareholder equity of $566,238.
I. Segment Reporting Disclosures
The Company operates two business segments: restaurants and 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 concept
that emphasized a "fast casual, 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. The
Company's 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. In the
first quarter of fiscal year 2000, a restaurant was opened in Del Ray Beach,
Florida and a restaurant was opened in Lake Wales, Florida.
The food processing plant was completed in 1999 and began operations in January
of 2000. During 1999, the processing plant was being reconstructed to conform to
USDA guidelines and to the requirements of expected demand for the Company's
products.
21
<PAGE>
Please see the discussion and analysis that follows.
Restaurant Segment: Results of Operations
Gross sales for the year ending December 31, 1999 for the restaurant division
decreased to $860,099 or 48% from gross sales for the similar period in 1998.
Consequently gross profit for the year also decreased to $288,727 or 55% as
compared to the similar period in 1998. As expected, this decrease was due to
the closing of four unprofitable restaurants in 1999, thereby decreasing gross
sales revenues. The 1998 sales figures include the gross sales for all the
restaurants for a full year while 1999 sales figures includes the results of the
New York restaurant and the Lakeland restaurant for the months that they were
effectively opened. After a period of construction, Floridino's, Inc., was
opened in September 1999. Floridino's of Lakeland was closed for the month of
October 1999 for reconstruction and reopened in November 1999.
Selling, general, and administrative costs for this segment decreased to
$820,308 as compared to $1,070,888 for the similar period in 1998, or 23%. This
decrease is attributable to closing of the unprofitable restaurants in 1999
resulting in overhead savings. During the period of reconstruction for the New
York restaurant, management decided to retain many of its employees. Management
concluded 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. The Company spent
approximately $200,000 in salaries and rents during the reconstruction period in
1999. An additional $97,000 was spent during 1999 on severance pay and lease
terminations of the unprofitable restaurants that were closed.
The restaurant segment showed a loss from continuing operations of $531,581 as
compared to a loss of $434,562 for a similar period in 1998. However, 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.
22
<PAGE>
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 in early 1999 and began operations in January 2000.
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 year ending December 31, 1999, the processing segment incurred losses
from continuing operations of $515,488. The significant components of this cost
were approximately $258,000 for plant salaries and consulting fees, $178,000 for
supplies, rent and utilities, and $48,000 in depreciation expense. The plant
staff have been on salary since the first quarter of 1999, and throughout the
reconstruction period. The reconstruction was completed during the last quarter
of 1999. The gross sales and cost of sales figures generated reflect the results
of test sales performed in late 1999 for potential customers of the Company's
products. During the last quarter of 1999, the Company succeeded in passing all
phases of the product testing phase and began actual operations in January 2000.
Management is encouraged by the initial results achieved by this segment.
Consolidated Company
On a consolidated basis, gross sales decreased from $1,669,271 in 1998 to
$893,193 in 1999, or 46%, as a result of management's plan to reorganize the
restaurant segment. Gross profit as a percent of sales decreased in 1999 from
38% to 30%. This decrease is a result of management's efforts to move from a
full service restaurant concept to a fast, self-service concept. Historically, a
full service restaurant has higher profit margins and less volume while the
self-service restaurant has lower profit margins but higher volume.
On a consolidated basis, corporate overhead increased to $1,677,873 through
December 31, 1999 from $1,134,787 for the similar period in 1998. The main
components of this increase were $250,000 in professional fees and consulting
costs attributable to the Company's restructuring, $100,000 in payroll reflected
the hiring of plant personnel, and $150,000 in rent on the new plant facility.
23
<PAGE>
The Company has recognized an unrealized gain on short term marketable
investments of $380,321 and a realized gain on short term marketable investments
of $29,793 as a result of its investment in shares of Cantebury Investing Inc.
(CITI). The investment is made for speculative purposes and is classified as a
trading security as per SFAS 115. The Company intends to sell this investment
during fiscal 2000.
Interest expenses has increased to $67,920 in 1999 as compared to $29,322 in
1998 mainly as a result of the increase in capital leases the Company has
entered into in 1999, the interest accrued on the convertible debentures, and
the assumption and acquisition of mortgages on real estate assets acquired.
After interest expense and the recognition of the favorable settlement of the
Company's long term debt of $78,533, the Company realized a net loss of $983,035
or $.16 per share as compared to a loss of $519.187 or $.19 per share for a
similar period in 1998.
Discussion of Financial Condition- Liquidity and Capital Resources
At December 31, 1999, the Company had working capital deficit of $549,718 as
compared to a deficit of $855,053 at December 31, 1998. On a consolidated basis,
the Company had cash balances totaling $359,449 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 for $1 million and the
issuance of $750,000 in convertible debentures in September and October of 1999
and $346,500 raised by the exercise of common stock warrants and the acquisition
of long term debt of approximately $500,000 less property and equipment
purchases of approximately $1,089,000 and the payment of long term debt of
approximately $166,000 and operating losses of approximately $983,000.
Total current liabilities increased to $1,432,771 at December 31, 1999 as
compared to $897,464 at December 31, 1998. The substantial increase in current
liabilities is primarily due to the increase of approximately $595,000 of debt,
currently due, incurred as a result of of the reconstruction of the New York
restaurant.
The net property and equipment of the Company increased $1,927,065 during fiscal
1999 to $2,439,087 at December 31, 1999. The main components of this increase
were approximately $225,000 for the purchase of the plant, $456,000 in the
acquisition of plant assets for the processing segment, $318,000 for
construction costs for the restaurant segment, $639,000 in three buildings
acquired from an officer of the firm in return for preferred stock, and the
purchase of land adjacent to the plant for $320,000. In addition, the Company
decided to write off the book value of approximately $55,000 of restaurant
equipment of the closed restaurants.
24
<PAGE>
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, but as of the date of this filing, no contract to sell
this property has been achieved.
Capital lease financing obligations increased to $127,558 at December 31, 1999
from $49,200 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 debt increased to $1,444,678 at December 31, 1999
as a result of the costs of reconstruction and the assumption of real estate
mortgages in the preferred stock transaction noted above and $500,000 in real
estate mortgages acquired in the last quarter of 1999.
Stockholders equity increased to $566,238 at December 31, 1999 from a deficit of
$370,560 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, $250,000 of
preferred stock issued to an officer of the firm in exchange for liabilities
owed to the officer, and the recognition of $233,333 as a favorable conversion
feature from the debenture offering, and $346,500 in proceeds from the exercise
of common stock warrants.
Management expects the Company to realize the benefits of its reorganization
efforts in fiscal year 2000. Management feels that the completion of the
processing plant in 1999, the closing of unprofitable restaurants, the reopening
of restaurants under the new fast, self service, casual theme will enable the
Company to become profitable in fiscal year 2000. 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.
25
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Floridino's International Holdings, Inc. and its Subsidiaries
We have audited the accompanying consolidated balance sheet of Floridino's
International Holdings, Inc. ("the Company") and its Subsidiaries as of December
31, 1999, and the related consolidated statements of operations, shareholders'
equity, and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. The statements of operations, shareholders'
equity, and cash flows of Floridino's International Holdings, Inc. and its
Subsidiaries for the year ended December 31, 1998, were audited by other
auditors whose report dated October 12, 1999, expressed a qualified opinion on
those statements regarding an uncertainty as to the Company's ability to
continue as a going concern.
We conducted our audit 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 significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, based on our audit, 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, 1999, and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
As more fully discussed in Note 2 to the 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 maters are also described in Note 2 to the financial
statements. The financial statements do not contain any adjustments that might
result from the outcome of this uncertainty.
Berkovits & Company, P.A.
March 22, 2000
26
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash $359,449
Investments in marketable equity securities 471,250
Inventory 52,354
----------
Total Current Assets $883,053
Property and Equipment, net 2,439,087
Other Assets
Deposits and other assets 42,547
Organizational costs(net of amortization) 1,690
----------
Total Other Assets 44,237
TOTAL ASSETS $3,366,377
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $490,924
Accrued expenses 61,200
Notes payable to banks 159,112
Current portion of obligations under capital leases 21,669
Current portion of long term debt 699,866
----------
Total Current Liabilities $1,432,771
Capital lease obligations 105,889
Long term debt 744,812
Convertible debentures (9% payable semiannually) 516,667
SHAREHOLDERS' EQUITY
Common stock, par value $.001; authorized
25,000,000 shares; issued and outstanding
7,657,000 shares at December 31, 1999 $7,657
Preferred stock, 200,000 shares authorized;
50,000 shares issued and outstanding, convertible
to 50,000 shares of common stock, no par value,
nonparticipating 250,000
Additional Paid in Capital 2,469,846
Accumulated Deficit (2,161,265)
----------
Total Shareholders' Equity 566,238
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,366,377
==========
</TABLE>
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.
27
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
REVENUES
Food and Beverage Sales $ 858,052 $1,577,564
Franchise revenues 35,141 59,500
Royalty revenues - 32,207
--------- --------
Total Revenues 893,193 1,669,271
Less cost of goods sold 619,082 1,032,945
--------- ---------
Gross Profit 274,111 636,326
OPERATING EXPENSES:
General Administrative 1,519,886 996,232
Cost of store closing 157,987 138,555
---------- ---------
Total Operating Expenses 1,677,873 1,134,787
---------- ---------
Net loss from continuing
operations (1,403,762) (498,461)
OTHER INCOME (EXPENSES):
Unrealized gain on short
term investment 380,321 --
Other income 29,793 8,596
Interest expense (67,920) (29,322)
---------- ----------
Total other income (expenses) 342,194 (20,726)
LOSS FROM OPERATIONS BEFORE
INCOME TAX PROVISION AND
EXTRAORDINARY ITEM (1,061,568) (519,187)
EXTRAORDINARY ITEM:
Gain on early extinguishment
of debt (net of $40,457
tax credit) 78,533 --
----------- ----------
LOSS FROM OPERATIONS BEFORE
INCOME TAX PROVISION (983,035) (519,187)
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Provision for Income taxes -- --
----------- ----------
NET LOSS $ (983,035) $ (519,187)
=========== ===========
Net Loss per common share:
Basic:
Loss from continuing operations $(0.22) $(0.19)
Gain from extraordinary item $0.01 $0.00
Net loss per share $(0.16) $(0.19)
Weighted average shares
outstanding 6,273,134 2,698,974
============ ===========
</TABLE>
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.
29
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss $(983,035) $(519,187)
Adjustments to Reconcile
Net Income Items Not
Requiring the use of cash:
Depreciation and
Amortization 245,771 91,214
Compensation expense paid
By issuing common stock 90,000 --
Unrealized gain on short
Term Investment (380,321) --
Bad debt expense 14,255 --
Cost of store closings 157,987 --
Changes in Assets and Liabilities
Royalties Receivable 11,826 424
Inventory (37,271) 3,452
Short term investments (90,929) -
Other Assets 42,528 (7,729)
Deferred franchise fee revenue -- (59,500)
Accounts payable 180,369 45,048
Accrued expenses (74,872) 66,091
---------- ----------
NET CASH USED BY OPERATIONS (823,692) (380,187)
INVESTING ACTIVITIES:
Payments of bank overdrafts (19,903) 18,759
Purchase of land adjacent to
Plant (320,000) 0
Purchase of
Property and Equipment (769,032) 39,501
---------- ----------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (1,108,935) 58,260
---------- ----------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
FINANCING ACTIVITIES:
Obligations to Banks 159,112 --
Proceeds from issuance of
convertible debentures 750,000 --
Increase (decrease) in loan
to stockholder (152,799) 131,728
Issuance of common stock upon
Exercise of warrants 346,500 261,000
Issuance of common stock 1,000,000 --
Payment of long term capital
lease obligations (49,206) (24,280)
Payment of long term debt (335,608) (31,019)
Proceeds of
long term debt 558,575 --
---------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,276,574 337,428
---------- ----------
NET INCREASE IN CASH DURING
THE PERIOD 343,947 15,502
CASH BALANCE AT BEGINNING OF
FISCAL YEAR 15,502 --
CASH BALANCE AT END OF
THE PERIOD 359,449 15,502
========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid during
the period 67,920 29,322
Acquisition of fixed assets by
capital leases 127,564 49,200
Acquisition of fixed assets by
long term debt 495,227 --
Acquisition of fixed assets by
the assumption of long term
debt and issuance of preferred
stock 509,535 --
Stock issued for acquisition of
fixed assets -- 87,079
Stock issued for acquisition
of subsidiary -- 337,442
</TABLE>
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.
31
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
Common Stock Preferred Stock Paid in Accumulated
Shares Amount Shares Amount Capital Deficit Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1,1998 2,518,000 $2,518 - - $119,631 $(659,043) $(536,894)
Issuance of common stock
upon exercise of
warrants 261,000 261 - - 260,739 - 261,000
Issuance of common
stock for the purchase
subsidiary 1,680,000 1,680 - - 335,762 - 337,442
Issuance of common
stock for equipment 500,000 500 - - 86,579 - 87,079
Net Loss - - - - - (519,187) (519,187)
- ------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1998 4,959,000 4,959 - - 802,711 (1,178,230) (370,560)
Issuance of common
stock upon exercise of
warrants 558,000 558 - - 345,942 - 346,500
Issuance of common stock
for compensation 140,000 140 - - 89,860 - 90,000
Issuance of common stock
for secondary offering 2,000,000 2,000 - - 998,000 - 1,000,000
Issuance of preferred
stock - - 50,000 250,000 - - 250,000
Proceeds from debentures
attributed to favorable
conversion feature 233,333 233,333
Net loss (983,035) (983,035)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Common Stock Preferred Stock Paid in Accumulated
Shares Amount Shares Amount Capital Deficit Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1999 7,657,000 $7,657 50,000 $250,000 $2,469,846 $(2,161,265) $566,238
==========================================================================================
</TABLE>
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.
33
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
Note 1 - Nature of Operations and Summary of Significant
Accounting Policies
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 company's operations are located in New York
City, New York and throughout Florida. The consolidated statements of the
Company include the following wholly owned subsidiaries:
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.- an Italian food manufacturer
located in Lakeland, Florida incorporated in July 1998.
Floridino's Express, Inc.- a restaurant located in Lake Wales, Florida that was
incorporated in January 1999.
Toho Holdings, Inc.- a company incorporated in 1999 to hold title to the real
estate and lease agreements of the consolidated companies.
Floridino's , Inc.- a restaurant located in New York, New York, formerly Zoop
Soups Inc. This restaurant was reopened in September 1999 after a period of
reconstruction.
Floridino's of Lakeland- a restaurant located in Lake Wales, Florida
incorporated in September 1997. This restaurant was opened in January 1998,
closed for reconstruction in October 1999, and reopened in November 1999.
Lake Wales- a restaurant located in Lake Wales, Florida that was closed in
September 1998.
Del Ray- a restaurant incorporated in November 1999 located Del Ray Beach,
Florida that was opened in January 2000.
34
<PAGE>
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 which normally
occur prior to the start of the operations. 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.
Cash and cash equivalents-Cash equivalents include highly liquid short-term
investments with an original maturity of three months or less. Trading
securities are not considered cash equivalents and are shown separately as
investments in marketable securities.
Investment in Marketable Securities-Investment in marketable securities
represents the purchase of common stock of a publicly trade company. As per
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities", the Company classifies this
investment as a "trading security" and accordingly, the investment is recorded
at fair market value at December 31, 1999 and an unrealized gain of $380,321 has
been reflected as "other income" in the statement of operations.
The Company utilizes the specific identification method in determining holding
gains and losses on investments in marketable securities.
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. The
following is a summary of the estimated useful lives used in computing
depreciation expense:
35
<PAGE>
<TABLE>
<S> <C>
Equipment 5 years
Leasehold improvements 5-10 years
Vehicles 5 years
Buildings 30 years
Furniture & fixtures 5 years
</TABLE>
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 on current operations, the realization of a
tax-deferred asset will not be utilized. Therefore, a deferred tax asset has not
been reflected in the accompanying financial statements as of December 31, 1999.
Extraordinary items-During the year ending December 31, 1999, the Company had
extinguished certain long term debt before its scheduled maturity date. The
difference between the carrying value of this debt and the settlement value of
the debt extinguished has been recognized as an extraordinary item in the
consolidated statement of operations, net of the related tax effect.
Fair Values of Financial Instruments-The carrying amounts of all cash and cash
equivalents, 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.
Recent 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.
36
<PAGE>
Concentration of credit risk-Financial instruments which potentially subject the
Company to concentration of credit risk consist primarily of cash deposits and
investments in marketable securities. The Company had cash demand deposit
accounts of approximately $100,000 in domestic banks at year-end which were not
insured. In addition, the Company has investments in a common stock of
approximately $471,000 at year-end. The market for this stock is not highly
liquid due to the small float of the stock.
Note 2-Going Concern Considerations
The accompanying consolidated financial statements have been presented in
accordance with generally accepted accounting principles, which assumes the
continuity of the Company as a going concern. However, during the years ending
December 31, 1999 and December 31, 1998, the Company continues to experience
certain going concern and liquidity problems. The Company has incurred net
losses of $983,035 and $519,187 for the years ending December 31, 1999 and
December 31, 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 and completed in
1999, closed all unprofitable restaurants. The Company plans to reopen new
restaurants under new management with more emphasis on a "casual fast
food/self-service" theme. During 1999, after a period of reconstruction and
reorganization, the Company opened New York Floridino's and Lakeland. The
Express and Del Ray restaurants were opened in January 2000.
During the year ended December 31, 1999, the Company raised approximately $2.1
million through a Regulation D 505 offering, the exercise of common stock
warrants, and a convertible debenture offering. These funds were used to satisfy
some of the Company's long-term debt, reconstruct and improve current restaurant
space, and to complete the construction of Specialties, its food manufacturing
plant, and purchase of real estate and investments.
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 3-Closed Restaurants
Through December 31, 1999, the Company had completed its plans to close the
operations of unprofitable restaurants. The costs associated with these closings
are reported in the caption "Cost of Store Closing" in the statement of
operations. The restaurants that were closed by management through 1999 are as
follows:
37
<PAGE>
Floridino's Pizza Etc., Inc.
Hard Ball Cafe, Inc.
Floridino's Home of the Calzone, Inc
Floridino's of Bartow, Inc.
The costs associated with the closing of these restaurants are $157,987 and
$138,555 for fiscal years 1999 and 1998, respectively.
Note 4-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 5-Commitments and Contingencies:
The Company is committed to various non-cancelable leases for restaurant space.
At December 31, 1999, total future minimum lease payments under operating leases
is as follows:
<TABLE>
<S> <C>
2000 $353,188
2001 338,024
2002 342,334
2003 335,544
2004 341,008
Thereafter 914,400
----------
Total future minimum lease payments $2,624,498
==========
</TABLE>
Rent expense was $224,817 and $179,111 for fiscal years 1999 and1998,
respectively.
The Company is the lessee of certain equipment accounted for as capital leases
in 1999. The assets and liabilities of the capital leases are recorded at the
lower of the present value of the minimum lease payments or the fair value of
the asset purchased. The assets are being amortized over the term of the
lease or the estimated useful life of the asset, whichever is less.
38
<PAGE>
Minimum future lease payments for capital leases as of December 31, 1999 is as
follows:
<TABLE>
<S> <C>
2000 $ 45,706
2001 46,777
2002 46,777
2003 39,024
2004 12,420
--------
Total future minimum lease payments 190,704
Less amounts representing interest (63,146)
Present value of net minimum lease ---------
payments $ 127,558
=========
</TABLE>
Interest rates on capitalized leases range from 17% to 27% imputed based upon
the lower of the Company's incremental borrowing rate at the inception of the
lease or the lessor's implicit rate of return.
Note 6-Common Stock Transactions
During fiscal year ending December 31, 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 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 in return for services
rendered by outside consultants.
In July 1999, the Company completed a Regulation D 505 offering resulting in net
proceeds to the Company of $1,000,000 and the issuance of 2,000,000 shares of
common stock.
Note 7-Convertible Debentures
In the last quarter of fiscal year 1999, the Company received proceeds of
$750,000 by issuing convertible debentures. The debentures mature in September
2001 and October 2001 and carry an interest rate of 9%. The debentures are
convertible into common stock at a 40% discount, from the preceding five day
average market price of the stock at the date conversion. Accordingly, $233,333
of the proceeds of the debenture offering has been allocated to additional paid
in capital in the statement of financial position.
Note 8-Convertible Preferred Stock
As more fully discussed in Note 10, the Company issued 50,000 shares of
preferred stock to the president of the Company in exchange for real estate
assets transferred to the Company. The net fair market value of the real estate
at the date of the transaction was $250,000, as determined by management.
39
<PAGE>
The preferred stock is convertible into 50,000 shares of common stock beginning
in May 2000.
Note 9-Long term debt
The following comprises long term debt as of December 31, 1999:
<TABLE>
<CAPTION>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
<S> <C>
Notes payable to an unrelated party at a rate of $64,114
of 9% due May 21, 2000 and October 10, 2000
The loan is secured by a building owned by the Company
Monthly payments of $718.
Mortgages payable to a financial institution 500,000
at an interest rate of 9% due in December 2002.
The mortgages are secured by the land and a
building owned by the Company. Monthly
payments of $11,251 consisting of interest only.
Mortgage payable to an individual at an interest 84,000
rate of 9% secured by a building owned by the
Company. The loan is due January 2000. Monthly
payment of interest only of $750. The loan is
currently being renegotiated.
Mortgage payable to an individual at an interest 126,801
rate of 10% secured by a building owned by
the Company. The loan is due in June 2007.
Monthly payments of $2,023.
Mortgage payable to an individual at an interest 139,276
rate of 9% secured by the processing plant
owned by the Company. The loan is due in June 2007.
Monthly payments of $1,773.
Unsecured note payable to a contractor at an 237,207
interest rate of 8.25%. Balloon payment due
October 2000.
Unsecured notes payable to entities controlled 258,020
by the majority shareholder and chairman of
the board at an interest rate of 8.25%. Balloon
payments are due in January 2000 and October 2000.
Other notes payable due to individual suppliers 35,260
with no stated interest rate ----------
Total debt 1,444,678
Less current maturities 699,866
----------
Long term debt $ 744,812
==========
</TABLE>
40
<PAGE>
A schedule of maturities of long term debt by fiscal year is as follows:
<TABLE>
<CAPTION>
Year Amount
<S> <C>
2000 $ 699,866
2001 262,192
2002 286,934
2003 26,881
2004 29,861
Thereafter 138,944
----------
Total $1,444,678
==========
</TABLE>
Note 10-Related Party Transactions
The Company is indebted to its majority shareholder and chairman of the board
for the cost of certain reconstruction of the New York restaurant incurred
during 1999. Unsecured promissory notes payable of $258,020 to entities
controlled by the chairman were entered into on August 31, 1999 and carry an
interest rate of 8.25%. The notes mature in fiscal year 2000 and are included
in the current portion of long term debt in the statement of financial
condition.
In May 1999, the Company assumed title to three properties and their
corresponding mortgages from the President of the Company. The estimated fair
market value of the net equity of the properties at the date of the transaction
was $250,000. The President was issued 50,000 shares of non-participating
preferred stock in consideration for this transfer. The preferred stock is
convertible into common stock beginning in May 2000 and has no liquidation
preferences.
41
<PAGE>
Note 11-Segments
The segments of the Company follow the same accounting policies as the
consolidated group. The following is a summary of the Company's segment
information for fiscal years 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Gross Sales
Restaurants $860,099 $1,669,271
Food processing 33,094 -
-------- ----------
Total gross sales $893,193 $1,669,271
Gross Profit
Restaurants $288,727 $636,326
Food processing (14,616) -
-------- ----------
Total gross profit $274,111 $636,326
Income (loss) from continuing operations
Restaurants ($531,581) ($434,562)
Food processing (515,488) -
Corporate (356,693) (63,899)
-------- ----------
Total from continuing
operations ($1,403,762) 498,461
Depreciation & amortization
Restaurants $170,586 $69,931
Food processing 47,666 -
Corporate 27,519 21,283
-------- ----------
Total depreciation &
amortization $245,771 $91,214
Interest expense
Restaurants $44,295 $19,509
Food processing 12,307 -
Corporate 11,318 9,813
-------- ----------
Total interest expense $67,920 $29,322
Total Assets
Restaurants $892,024 $566,368
Food processing 510,839 -
Corporate 1,963,514 74,830
---------- ----------
Total assets $3,366,377 $641,198
========== ==========
</TABLE>
42
<PAGE>
The following table provides the Company's geographic information for gross
sales and assets:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Gross sales- restaurants
New York $ 578,392 $ -
Florida 281,707 1,669,271
-------- -----------
Total gross sales $ 860,099 $1,669,271
Gross sales- processing
New York $ - $ -
Florida 33,094 -
--------- ----------
Total gross sales $ 33,094 $ -
Total Assets
New York $ 664,776 $349,729
Florida 2,701,601 291,469
--------- ----------
Total assets $3,366,377 $641,198
</TABLE>
The company does not have any customers who represent greater than 10% or more
of consolidated gross sales.
Note 12-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 during the fiscal year. The effects of
convertible debentures preferred stock, and common stock warrants have not been
included since their inclusion would be anti-dilutive.
Note 13-Income taxes
At December 31, 1999 and December 31, 1998, the Company had $1,412,694 and
$533,353 of net operating loss carry forwards which expire in years 2005 and
2004. No portion of the net operating loss carryforwards has been recognized as
a deferred tax asset at December 31, 1999 and December 31, 1998. The following
is a reconciliation between net loss per the statement of operations and taxable
loss at December 31, 1999 and December 31, 1998:
43
<PAGE>
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net loss ($983,035) ($519,187)
Allowance for unrealized
gain on investment (402,531) -
Allowance for timing
difference in
depreciation expense (27,128) (14,166)
------------ ----------
Taxable loss ($1,412,694) ($533,353)
Deferred tax asset $480,315 $181,340
Allowance for tax
recoverability (480,315) (181,340)
------------ ----------
Deferred tax asset
recognized $ - $ -
============ ==========
</TABLE>
The statutory federal tax rate of 34% was used to calculated deferred tax
assets.
Note 14-Subsequent events
In February 2000, the Company purchased 100% of the issued and outstanding
common stock of Triton Prestige Products Inc., a food manufacturer located in
Palm City, Florida, by issuing 50,000 shares of common stock.
The financial statements of Triton Prestige Products at the time of the
transaction are as follows:
44
<PAGE>
Statement of Financial Condition
At Acquisition
Unaudited
<TABLE>
<CAPTION>
Assets
<S> <C>
Current assets:
Cash $ 970
Accounts receivable 47,565
Inventory 39,281
--------
Total current assets 87,816
Leasehold improvements net
accumulated depreciation 4,521
Security deposit 9,704
Other asset 4,000
--------
Total assets $106,041
========
Liabilities and Stockholders'
Current liabilities:
Accounts payable $ 46,264
Loans payable 102,500
--------
Total current liabilities 148,764
Common stock 500
Accumulated Deficit (43,223)
Total liabilities and stockholders' $106,041
========
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
From Inception through date of Acquisition
Unaudited
<S> <C>
Gross sales $ 325,222
Less cost of sales (298,544)
---------
Gross profit 26,678
Less general administrative expenses (67,651)
---------
Loss from operations (40,973)
Other expenses: Interest (2,250)
---------
Net loss ($43,223)
=========
</TABLE>
45
<PAGE>
Note 15-Year 2000 Statement
The Company has actively addressed 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 in fiscal
1999. As of the date of this report, the Company has experienced no disruption
of business due to the Year 2000 issue.
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 addressed
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 continues to monitor this very
closely.
Note 16-Notes payable to banks
The Company is currently in default on $159,112 of equipment loans to banks. The
debt had matured in fiscal 1998 and 1999 and is included in current liabilities
under the caption, "Notes payable to banks" in the financial statements. These
notes carried interest at the prime rate plus 2% and were secured by equipment.
The Company is currently negotiating with the bank to settle this debt.
46
<PAGE>
Note 17-Property and Equipment
The major categories of property and equipment at December 31, 1999 are as
follows:
<TABLE>
<S> <C>
Land $ 320,000
Equipment 572,180
Leasehold improvements 942,519
Vehicles 17,232
Buildings 859,000
Furniture and fixtures 2,885
Total property and equipment 2,713,816
---------
Less accumulated depreciation (274,729)
Net property and equipment $2,439,087
==========
</TABLE>
The category for equipment includes $127,558 in of equipment acquired under
capital lease agreements. The amount of accumulated amortization of capital
leases is included in accumulated depreciation and was $17,678 for 1999.
Depreciation expense was $245,771 and $91,214 for the years ended 1999 and 1998,
respectively. During 1999 the Company wrote off approximately $55,000 of
restaurant equipment associated with the closed operations. The equipment was
pledged as security for bank loans (See Note 16) and is being held in storage
until resolution of such claims.
47
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company on January 17, 2000 dismissed the certified public accounting firm,
Infante, Lago and Company, as a result of the departure of Jesus Lago, the
partner overseeing the audit and financial reporting of the Company. Mr. Lago
has become a partner of the certified public accounting firm of Berkovits and
Company, P.A., located in the State of Florida, and the Company has elected to
retain this firm for the purpose of conducting future audits of the Company and
for providing financial reports for the Company.
The decision to dismiss Infante Lago and Company was based solely on the
departure of Mr. Lago from that firm and did not stem from any disagreement
between the Company and Infante Lago on any matter of accounting principles,
practices, financial statements, disclosure or auditing practices or procedures.
No such disagreements existed between the Company and Infante Lago prior to
their dismissal.
The engagement of the accounting firm of Berkovits & Company has commenced on
January 17, 2000.
The Company on December 17, 1999 filed a Form 8-K reflecting this change. The
Form 8-K is incorporated by reference herein and investors are directed to that
filing for disclosure purposes.
Investors are further advised that the principal accountant's report on the
financial statements for either of the past two years did not contain an adverse
opinion or disclaimer of opinion, or was modified as to uncertainty, audit
scope, or accounting principles. Additionally, the decision to change
accountants was approved by the board of directors of the company.
48
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
<TABLE>
<CAPTION>
Position(s) Held and
Name Age Duration of Service Family Relation
- ---------------- --- ------------------- ---------------
<S> <C> <C> <C>
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
</TABLE>
All directors hold office until the next annual meeting of stockholders, held on
June 15th 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.
49
<PAGE>
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;
50
<PAGE>
(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.
51
<PAGE>
Item 6. EXECUTIVE COMPENSATION
The following table summarizes the total compensation awarded or paid by the
Company to its president, for the fiscal year ended December 31, 1999. No other
executive officer of the Company had a total annual salary and bonus in excess
of $100,000 for fiscal 1999. Accordingly, Floridino's President is the only
named officer of the Company under SEC rules.
Summary Compensation Table
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g)
(h) (i)
<S> <C> <C> <C> <C> <C> <C> <C>
Name and Other Restricted Sec.
All
Principal Annual Stock Underly.
LTIP Other
Position Year Salary Bonus Compen. Award Options
Payouts Comp.
Michael
Floridino
President 1999 $75,000 0 0 0 0
William
Keeler CEO 1999 $20,000 0 0 0 0
</TABLE>
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 December 31, 1998 and 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.
52
<PAGE>
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 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the information, to the best knowledge of the
Company as of December 31, 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.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ---------------- -------------------- --------
<S> <C> <C>
William Keeler 3,000 0.00%
5836 Spruce Creek Drive
Fort Orange, Florida
Michael Floridino 999,700 13.06%
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) 144,000 1.88%
494 LaGuardia Place
New York, New York 10012
William Scott 40,000 0.52%
95 Madison Avenue
Morristown, New Jersey
Lokee LLC* 142,000 1.85%
494 LaGuardia Place
New York, New York 10012
Raffles Toho Ltd.* 464,000 6.06%
494 La Guardia Place
New York, New York 10012
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ---------------- -------------------- --------
<S> <C> <C>
All Directors and Named
Executive Officers as
group 3,472,700 45.35%
PREFERRED SHARES
Michael Floridino 50,000 100.00%
3560 Cypress Gardens Road
Winter Haven, Florida 33884
</TABLE>
*- see footnotes
(1) As of December 31, 1999, Nick Pirgousis and Frank Dolney each own a fifty
(50%) percent interest in Toho Ventures Ltd., which holds 1,680,000 shares of
the Company. The corresponding amount of shares beneficially owned by Nick
Pirgousis and Frank Dolney each include the 840,000 shares of the Company they
each beneficially own through Toho Ventures Ltd.
(2) As of December 31, 1999, Nick Pirgousis was the sole beneficial owner of
Raffles Toho Ltd., which owns 464,000 shares of the Company. The corresponding
amount of shares beneficially owned by Nick Pirgousis includes the 464,000
shares of the Company owned beneficially through Raffles Toho Ltd.
(3) As of December 31, 1999, George Pirgousis was the sole beneficial owner of
Lokee LLC which owns 142,000 shares of the Company. The corresponding amount of
shares beneficially owned by George Pirgousis includes the 142,000 shares of the
Company owned beneficially through Low Key Holdings.
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.
54
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) In May 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. The valuation of
the liabilities on the properties was $440,000.
(b) During the course of the year to August 31, 1999, the Company received
funding for reconstruction of the Company's operations from Raffles Toho Inc.,
the total sum of approximately $258,020. Raffles Toho is wholly owned by the
Chairman of the Board of Directors of the Company, Nick Pirgousis. 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 August 31, 1999
for $65,388.00 possesses a balloon payment due on January 1, 2000.
INDEBTEDNESS OF MANAGEMENT:
(a) In May, 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.
55
<PAGE>
(b) During the course of the year to August 31, 1999, the Company received
funding for reconstruction of the Company's operations from Raffles Toho Inc.,
the total sum of approximately $258,020. Raffles Toho is wholly owned by the
Chairman of the Board of Directors of the Company, Nick Pirgousis. 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 August 31, 1999
for $65,388.00 possesses a balloon payment due on January 1, 2000.
PART IV
Item 14. 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.
<TABLE>
<CAPTION>
EXHIBIT
<S> <C>
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
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
<S> <C>
10.7 Standard Franchise Agreement
10.8 Consulting Agreement
21 Subsidiaries of Company
27 Financial Data Schedule
</TABLE>
(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.
57
<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: April 13, 2000
By: /s/ Nick Pirgousis
- ----------------------
Chairman of the Board
58
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 359,449
<SECURITIES> 471,250
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 52,354
<CURRENT-ASSETS> 883,053
<PP&E> 2,713,816
<DEPRECIATION> (274,729)
<TOTAL-ASSETS> 3,366,317
<CURRENT-LIABILITIES> 1,432,771
<BONDS> 1,367,368
<COMMON> 7,657
0
250,000
<OTHER-SE> 308,581
<TOTAL-LIABILITY-AND-EQUITY> 3,366,317
<SALES> 858,052
<TOTAL-REVENUES> 893,193
<CGS> 619,082
<TOTAL-COSTS> 1,677,873
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,920
<INCOME-PRETAX> (1,061,568)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,403,762)
<DISCONTINUED> 0
<EXTRAORDINARY> 78,533
<CHANGES> 0
<NET-INCOME> (983,035)
<EPS-BASIC> (.16)
<EPS-DILUTED> (.16)
</TABLE>
